Property Outline 2015

PART ONE: Recognition and Allocation of Property RightsRecurring Questions in Property

1. Is there a “property interest” at issue?2. If it is property, what type of property interest is it and how is that type of property interest

created or acquired?3. Who owns the property interest? How are competing ownership claims decided?4. What “property rights” does ownership in this property entail, and with what limits/scope and

duties?5. What is required to make a valid transfer of this property interest?6. How long does the property interest last? How can the property interest be terminated?7. How are property rights in this kind of property enforced?

I. Theories of Morality/Theories of Efficient Allocationa. Priority/First in Time Discovery

i. First person there is the owner.1. Still issues here since some resources come out of nowhere (ex: natural resources,

intellectual property)2. While it may explain how property rights evolved, it does not adequately justify

existence of property rights and private property.3. M’Intosh Rule: Discovery of land gives the exclusive right to settle, possess, and

govern the new land, and the absolute title to the soil, subject to certain rights of occupancy only in the natives.

b. Lockean Labor Theory: You own yourself, your mix your labor with un-owned property, and you leave as much and as good for everyone else. (Rose story)

i. Must be productive laborii. Problem is this is subjective (ex: Indians hunting and gathering viewed as unproductive and

illegitimate; in M’Intosh, collecting food was not enough to establish mixing labor)iii. Compare to Radin and fetishism

1. Critique: your fetish is my important way of life2. Defense: utilitarianism: unhealthy relationship does not have the best effect for all.

c. Utilitarian Theoryi. Classic: property is a means to an end: private property exists in order to maximize the

overall happiness/utility of citizens. It is a convention that promotes social utility.1. Critique: impossible to assess happiness.

ii. Law and Economics: Happiness stated above can be measured in dollars, and private property exists in order to maximize the overall wealth of society. (Controversial)

d. Conquest Theoryi. M’Intosh : after being conquered, Indians only have a right of occupancy, not ownership of

the land; conquest required deference to the conqueror’s system. Thus no right to own, only to occupy after conquest.

e. Capture (wild animals, minerals, groundwater) Theoryi. Pierson v. Post : Killing nuisance versus hunt for sport—two people hunt the fox, one is in

pursuit for hunting and the other happens to kill it. Who gets it?1. MUST have:

“Unequivocal intention to appropriate to own use”Deprivation of natural libertyCertain control

2. Constructive possession – don’t need contact to have control of the property3. Why not just order them to share? Issues in dividing property, plus high costs;

however, argument that it would give people incentive to “swoop in” doesn’t really

hold water since they already have an incentive (they get to swoop in and maybe get the whole thing)

ii. JUSTIFICATION FOR CAPTURE THEORY: encourage killing of animals for societal benefit, create clear bright line standard for determining ownership.

iii. Ghen v. Reich (whale case; putting lance in whale signals ownership and right to claim the whale once it is beached; finders fee to whoever finds it on the beach)—industry custom

iv. Keeble (decoy pond with ducks) – D was maliciously interfering with P’s lawful activity (decoy pond); different from the competitive/productive interference in Pierson, this interference is unproductive and interferes with Keeble’s right to exercise dominion.

v. Capture of OTHER resources1. Fugitive resource doctrine: principles adduced from wild animal property law have

been applied to such fugitive resources as oil and gas.2. NO ONE owns animals/oil/etc. in natural habitat; can only own through physical

possession.vi. Possession in general—Must have:

1. Intent to possess 2. Actually controlling or holding the property

f. Demsetzi. Changes in technology or opening of new markets create

1. Changes in economic values, which increase2. Internalization AND lead to property rights.

ii. Changes may not be conscious but come about through social mores or common law precedents. Property rights are an instrument that helps us form expectations about our dealings with others. They are socially constructed, and the main allocative function of property right is the internalization of beneficial and harmful effects (externalities).

iii. Thus, property rights emerge b/c of the emergence of new or different beneficial and harmful effects. They emerge to internalize externalities when the gains of internalization become larger than the cost of internalization.

iv. Externalities occur whenever some person makes a decision about how to use a resource.II. Creating Property Formally and Informally

a. Custom (parking spot, lobster gangs, gold mining)i. Often becomes law

ii. Custom broadly adopted when it’s easy to learn and inferb. Lobster gangs of Maine

i. Customary rules to punish violators: cut lines, destroy traps, violenceii. Norms enforceable because fisherman are repeat players – see each other every day;

violence, social sanctions, reciprocal favors, overlapping social ties so easier to figure out who commits wrongs, sense of cultural homogeneity

iii. Giving way to formal regulatory mechanisms by the state c. California Gold Fields

i. No familial connections – gave way to contracts system for monitoringii. Only English speaking whites included in the system

iii. First in time + labor theory: labor justified claims; lack of labor justified taking them away; labor theory not sufficient explanation bc would have allowed person with 50 person crew to show up and mine the land more efficiently; this did not happen

iv. Contracts allowed for efficient parcel sizev. Contracts made in 1849 were less effective by 1851 increased violence without formal

law backing themd. Bundle of Rights: What Sticks Are Present in the Bundle?

i. Right to useii. Right to exclusive possession (right to exclude: see public policy and FHA for exceptions)

iii. Right to dispose or transfer (destroy)

iv. Right to exclude and destroy are not absolute.III. Property in Persons

a. Radin: Property and Personhoodi. To be a person, individual needs some control over resources in the external environment

ii. Property v. liability rules: fungible—personal (entitlement)iii. Fetishism: unhealthy relationship to propertyiv. Hegel: person has no concrete existence until will acts on outside worldv. Which property is worthy of protection? **not all object-loss is equally important

vi. Welfare rights: redistribution? Takings implications? (hasn’t developed this way)b. White v. Samsung

i. SC holds that Vanna White has a case against Samsung for using her likeness in an advertisement; protected not only her face and likeness, but things related to it (dress, letters, wheel of fortune board, etc.)

1. Celebrities rely on ID to make money; therefore, court erred in dismissing right of publicity claim.

ii. Why do we protect not only her likeness, but things related to it?1. We are trying to avoid moral and economic harm—interest in protecting not only her

name and likeness, but things related to it as well, because we define the boundaries of protection by the THING we are interested in protecting. All related stuff is part of the THING.

c. Moore v. Regentsi. Facts : Moore’s spleen cells enabled growth of valuable cell lines. Doctors didn’t tell him

they patented a cell line based on his cells worth billions of dollars. Had spleen removed, took his blood and his sperm. Fair amount of participation required. Undergoing treatment for hairy cell leukemia. Treatment had ended but the research continued – underwent tests and procedures that he was led to believe were important to his treatment, although some were done with research in mind. He had no idea which was which

ii. Court of Appeals : property as dominion; doctors had fiduciary duty to the patient, no informed consent

iii. CA Supreme Court : reverses. No cause of action for conversion (wrongful exercise of ownership rights or interference with right of possession of personal property of another person) Moore had no right of possession in his cells because he did not intend to retain them. Defines property as something you own or have a right of possession.

1. Would chill research, moral issues better left to the legislature, can still make claims based on breach of fiduciary duty

2. Conflict between Moore’s right of possession of his body parts (like Locke’s theory that we own ourselves or at least our labor) and scientist’s right to own the unique cells from Moore’s voluntarily discarded spleen

3. Principle: everyone owns his or her body until something is extracted4. Everyone has cells, produce the same material; not unique

iv. Concurrence : v. Dissent (Mosk): majority opinion gives patients only the right to refuse consent and the right

to prohibit the commercialization of this tissue. It does not give them the power to consent to that commercialization on the condition that he shares in the proceeds.

d. Commoditization of Organ Salesi. Labor theory of value : doing something with organs etc. in some cases contributes almost all

the value 1. BUT starting with the products of other peoples’ bodies indicates people may own

their own body partsii. Peggy Radin: property for personhood

1. If stuff is intertwined w/ personhood, claims to ownership should be recognized2. If something is uncompensable, might suggest a moral wrong

IV. Adverse Possessiona. Adverse Possession Generally/Real Property

i. Argument for Adverse Possession1. Social utility2. Don't want to leave land fallow—implies concept of labor (not using it, losing it)3. Personhood – by working the land, indicating that land is somehow connected to

person4. Respect for passage of time—related to conquest; person acting like owner to be the

owner.ii. Elements of Adverse Possession

1. Actual entry with exclusive possession (critical date) giving you exclusive possession (exclusive in sense that don’t share with the landowner – can have visitors and even rent it out)

a. Initiates SOLb. True owner has right to exclude and include: can give permission to come into

house as a tenant or a visitor (exercising right to include)c. Not required to pay taxes unless required by statute (IF REQUIRED BY

STATUTE—must talk about this)2. Open and notorious

a. Goal to provide notice to landownerb. Want to prevent people from “sitting on their rights”c. Possessor must be visible to any inspector of propertyd. Open and notorious if the type of occupation a true owner would make

i. Note: “appropriate for the area” means that if you are a cultural outlier, behavior may not be recognized by other people as indicating ownership

e. Mannillo v. Gorski: (minor encroachments)—Court rejects Maine rule on grounds that it rewards dishonest encroachers and disadvantages those who make honest use of land.

3. Adverse and Under Claim of Right (Hostility Requirement)a. Claim of Right—the term often used to describe the element of

hostility/adversityb. Must occupy the land without consent of the owner and with intention to remain c. Adverse possessor does not have permission to be there, also claims right to

stay thered. Maine Doctrine: Adverse possession requires an intentional tortious taking.

“would’ve acted different had possessor known they weren’t the owner”=no APe. Three Tests to Determine Owner’s Consent:

i. Good faith occupation —adverse possessor must have genuine, good faith belief that she owns the occupied property.

1. Negligence would get rid of this option2. Could argue that it’s under-inclusive; could invite perjury; hard

to do state of mind inquiriesii. Bad faith/aggressive trespass —occupier knows the property is not

her own but intends to claim in nonetheless1. Also may be issues with figuring out state of mind

iii. Objective standard (majority view) – 1. Lack of permission to enter; 2. Whether occupier’s acts and statements objectively appear to be claims of ownership

1. Act itself is hostility2. Probably requires an intent to act as the owner3. Consistency, easily administrable

4. Continuousa. Must occupy continuously, without interruption, during limitations periodb. Must occupy property as continually as would a “reasonable and true owner of

the property”c. When possessor gives up possession with no intent of returning, continuity

destroyedd. Two LIMITS to Continuity:

i. Disability:1. Tolling of SOL if the owner is disable from bringing an action

to recover possession at the time the cause of action accrues2. Owner may bring suit for some specific period after the

disability ceases, even though normal SOL period expiredii. No adverse possession allowed against GOVERNMENT:

1. Gov’t has monitoring problems that individuals do not have2. Agency costs3. Government lands generally benefit citizens

OWNER’S INTENT = IMPORTANT!iii. Maine Doctrine: occupier is not possessing adversely if she occupied under a good faith, but

mistaken, belief that the land is hers, but she would not have occupied if she had known the true facts.

iv. Color of Title : even if you have a bad deed, can still give you the rights to the entire parcel claimed in the deed

1. Defective deed or other writing that purports to deliver title to the possessor, but which the possessor does not know to be invalid

2. Possessors who enter under color of title satisfy the adversity element3. Adverse possessors who enter under color of title are deemed to possess all the land

described in the defective deed, so long as it consists of a single parcel, and the possessor has occupied a significant portion of the parcel.

4. Possessor lacks color of title if he does not believe, in good faith, that his defective deed is valid

v. Van Valkenburgh v. Lutz (122)1. Facts: Around 1916, Lutz takes over adjoining land, builds a house, farms, uses it for

firewood. Also builds a garage that extends onto the property. Does this for longer than the statute of limitations, was 15 years. Feud between them developed. Valkenburgh’s bought the land at a tax sale and tried to kick them off. (tax sale should have solved the problem because government would have solved the problem because the government would have owned free and clear). Lutz agrees to clear the stuff off the law, but claims easement on part of the property. Ruling here doesn’t affect the easement. No res judicata because elements of easement differ from adverse possession.

2. Court of Appeals : reverse finding of adverse possession for Lutz’s. Adverse under claim of right not met because Lutz’s lawyer said they knew someone else technically owned the property.

3. No exclusive possession – did not use it in manner that an owner would use land because treated it like a junkyard

4. No mental state will suffice to be adverse under claim of right to majority5. Dissent : argument for objective rule; only mental state we should require is an intent

to claim the property as his own

vi. Mannillo v. Gorski (136)

1. Facts: Gorskis make improvements to their house over the years, including stairs and concrete walkway. Stairs encroach on the neighbor’s property by 15 inches. Mannillio realizes the mistake several years later and sues.

2. Holding: Party may acquire land through adverse possession if that party had a mistaken belief that she had title to the property. In order to constitute “open and notorious” possession for minor encroachments, the true owner must have actual knowledge of a minor encroachment along a common border.

3. Summary : The Gorski’s renovations to their home included the accidental encroachment of a stairstep on to 15 inches of their neighbor’s land. Although the 15-inch encroachment had been right there, in plain sight for over 20 years, the court found that it was so minor an encroachment that it could not be seen as an encroachment with the naked eye, and that actual notice, not constructive notice, must be demonstrated in order to prevail under the open and notorious element. To hold otherwise would have amounted to requiring a survey of your property every time your neighbor undertook a home improvement project.

vii. Tacking: when privity of estate (voluntary transfer from first possessor to second possessor of either an estate in the land or actual possession of it) exists between prior possessor and present possessory, tacking is permitted

1. Can tack time to satisfy the statutory period2. Can also tack strips of land

b. Adverse Possession of Chattelsi. Thief cannot validly transfer a good title

ii. Bona Fide Purchaser Rule1. O’Keefe v. Snyder

a. Facts : O’Keefe painting missing since 1946, but O’Keefe does not report until 1972. Does discuss the theft with the art world. Painting in Frank’s possession for years, then sold to Synder in a conventional trade. Snyder claims bona fide purchaser for value.

b. NJ Supreme Court Holding : Limitations period for recovery of personal property starts to run at the earlier of

i. (1) When the loss occurs (except where there is fraud or concealment, or

ii. (2) Diligent Discovery Rule: when the owner first discovers, or through reasonable effort should have discovered, the cause of action (including the identify of the possessor)

iii. Focus on conduct of true owner – encourages owners to report their losses and undertake reasonable investigation

iv. Whether O’Keefe satisfied the diligent discovery rule is a question for the jury

c. Note : Void vs. voidablei. Void: thief can never pass good title, so BFP cannot get good title.

BFP could get new title; still a limitations periodii. Voidable: fraudster has the voidable title; if you catch the fraudster

before he sells the item, you get the item back + criminal/civil liability. BFP can get good title if didn’t know seller was a fraudster. Victim only has remedy against the wrongdoer; cannot get the thing back

V. Gifts and Transfersa. Gifts

i. Elements:1. Donative Intent

a. Donor must intend to transfer title

b. No gift if just intending to transfer possession without title2. Delivery (Manual, Constructive (e.g.: giving a key), or symbolic (written instrument)

a. Rule : anything that can be manually delivered has to be (preference for manual deliver) (Bost)

b. Gruen : one does not have to redeliver once the requirements are met3. Acceptance

ii. Gifts causa mortis1. Revocable if donor recovers; highly scrutinized by the courts (potential interference

with probate laws—we want people to make wills; people on death beds more susceptible to undue influence and fraud, wills are better indications of intent

2. Newman v. Bost : On his deathbed, Jack gives Julia all the keys to his household furniture, saying he intends of her to have everything in the house. Delivery of the keys constitute constructive delivery because it is impracticable to make physical delivery under the circumstances.

a. Delivery of keys does not constitute constructive delivery of life insurance policy locked in drawer because it was not impracticable to deliver the life insurance policy itself

b. Issue: whether delivery is an independent element or a double check on donative intent.

iii. Gifts Inter Vivos1. Gruen v. Gruen : Father gives son letter saying wishes to give him a valuable painting

for his 21st birthday, but father wants to retain possession for the remainder of father’s life.

a. Holding: a valid gift inter vivos was made of a remainder interest in the painting, a property right that would automatically become possessory upon the father’s death. Father manifested donative intent because it gave a presently existing property right. Letter sufficient to constitute symbolic delivery. Son manifested acceptance by telling his friends about the painting and keeping the letter for 17 years.

b. An inter vivos gift is not valid if the donor manifests intention to transfer ownership in the future.

b. Voluntary Transfers by Salei. Contracts to buy Land

1. Seller makes promises to convey the property and convey marketable title (title that can be transferred to someone else)

ii. Duties of Seller 1. Common Law: Absent a fiduciary relationship, seller has no duty to disclose known

defects in the property but does have a duty to refrain from intentional misrepresentations (outright lie about property’s condition)

2. Disclosure of Self-Related Conditions: Sellers are obligated to disclose conditions that are

i. 1) Created by sellerii. 2) Materially impair property value, AND

iii. 3) Are not likely to be discovered by a reasonably prudent buyer using due care

3. Disclosure of Latent Material Defects:a. Seller must reveal all latent material defects, which are defects that:

i. Materially affect the value/desirability of the propertyii. Known to the seller (or only accessible to the seller), and

iii. Not known to nor “within reach of diligent attn./observations” of buyer

b. Note : There are some things that might decrease the value of property but nonetheless we, as a society, are unwilling to call material (ex: some statutes requiring disclosure of murder in the house, etc.)

4. Shield Laws/Stigma Statutes: several states have enacted statutes shielding sellers from failure to disclose a psychological or prejudicial factors that might affect market value (ex: murder, rape, AIDS, etc.)

5. Disclosure of Hazardous Waste Material:a. Strawn v. Canuso : NJSC held that builder has duty to disclose suspected

presence of toxic waste in a landfill nearby—threat or risk has to be disclosed because it is rooted in the land

6. Stambosky v. Ackley (ghost case): PURCHASE AGREEMENT = DUTY TO DISCLOSE

a. Buyer from city puts in offer on house; wants to rescind offer because owner had gone to great lengths (writing stories, etc.) to further the reputation that the house was haunted

b. Duty to Disclose: In states that otherwise adhere to caveat emptori. When a condition:

1. Created by seller2. Materially impairs the value of the contract and3. Defects are not likely to be discovered by a prudent buyer

exercising due carea. Is peculiarly w/in knowledge of seller ORb. Is unlikely to be discovered by prudent purchaser

exercising due careTHEN NONDISCLOSURE IS A BASIS FOR RECISSION.

ii. INVOLVES PURCHASES, not leases.7. Johnson v. Davis : SILENCE as misrepresentation: seller must reveal defects like:

a. Extremely leaky roof that poured water into the home; not disclosedb. When the seller of a home

i. Knows facts thatii. Materially affect the value of the home AND

iii. Are not readily observable ANDiv. Are not known by the buyer

SELLER HAS DUTY TO DISCLOSE THEM TO BUYER (no req that seller created the problem)

v. “Materially affected” standard is pretty high. Must be real problem1. Probably does not apply to landlord/tenant issues

8. Van Kamp v. Bradford : Seller/seller’s agent failed to disclose fact that rape had been committed against former lessee’s teenage daughter. Buyer was single mother with teenage daughter; suffered from mental anguish when her house was burglarized; she received threatening phone calls, and there were other rapes in the neighborhood.

a. Issue: are seller/agent liable?b. Holding/Reasoning:

i. When viewed in conjunction with a potential misrepresentation or concealment on the part of defendant Bradford regarding the relative safety of the home, the latent nature of the defect at issue here renders the defense of caveat emptor inapplicable

ii. Fiduciary relationship between real estate agent and client = client entitled to rely on representations of the realty agent.

iii. Duties of Buyer :

1. Caveat emptor: old common law rule—buyer beware; buyers ought to use diligence and care to examine a property for themselves

a. LARGELY ABANDONED TODAY, because it is hard to distinguish between intentional misrepresentation and nondisclosure

VI. Mortgagesa. Introduction

i. Terminology1. Deed = document transferring an interest in land; document itself2. Title = ownership interest in land, thus “what is the state of the tile?” means “who

owns what interests in this land?3. Mortgage = nonpossessory interest in land; mortgagee owns a legal interest in the

land, but it does not entitle the mortgagee to possession of the land; the land secures a debt

4. Note = the debt. The note provides the terms of the debt; borrower is personally liable for the amount in the note

5. In case of default: when the note is linked to the mortgage, the lender can go after the land too

6. Interest = legal term used to say there is some legal right between you and the land’ may not have a right to enter the land, but have a right to benefit from the land in some way

7. Ownership = right to possessory interest; to go on the land, go in the house, live in the house

8. Equity = net value of the house or the land, once you subtract the amount you’ve borrowed tied to the land

9. Deficiency Judgment = lender goes after the borrower personally, not the property10. Lien = a right to keep possession of property belonging to another person until a debt

owed by that person is discharged; mortgagor is entitled to possession until foreclosure

ii. Old Mortgage Market1. Could only secure loan for 80% of purchase price 2. Lenders were less likely to default because they would lose the 20% equity they

invested in the home3. Leaves room for foreclosure costs and accounts for some fall in the housing market

iii. New Mortgage Market1. “Giant pool of money problem”: lenders were chasing returns, so more willing to take

bigger risks by taking on the full value of the home2. 80% minimizes some of your risk, if you are sure that property values will rise 10%

each year, a 100% loan is also less risky because if you need to foreclose 10 years from now, there will still be extra value in the house

iv. Basic Examples 1. Example 1

a. Factsi. $150,00 sales price

ii. $20,00 cash down paymentiii. $100,000 first mortgage from Bank 1iv. $30,000 second mortgage from bank 2

b. In foreclosure, sold for $100,000i. Bank 1 gets the $100,000

ii. Bank 2 and homeowner get nothingc. Bank 1 is the senior mortgage holder, so their claim is satisfied in full first.

v. Inadequate Sale Price at Foreclosure

1. Must be commercially reasonable notice of sale2. Will not be void just because less than fair market value3. Rule : Sale price will stand unless it is so far below market value that it “shocks the

conscience” or fraud or overbearing unfairness is present vi. Klem v. Washington Mutual Bank

1. Facts: trustee, acting on bank’s behalf, sells the foreclosed property for a dollar more than the borrower’s debt

2. Issues: a. (1) Notice of sale was falsely datedb. Permitted an earlier sale without valid reasonc. Court held that false notarization is a crime and undermines the integrity of

institutions upon which we must rely for the faithful fulfillment of the notary’s oath

i. General Standard of Notice: commercially reasonabled. (2) Trustee failed to exercise its discretion to postpone the sale

i. Trustee has fiduciary duty to the lenderii. Should have postponed the sale, but in reality is actually captured by

WaMue. (3) Reasonable offer on the table to buy the house. Bank still did not act to

postpone the salei. If bank is able to buy the house for $83,000 to themselves, they still

have the house, and are able to sell it to someone else for the actual value

ii. Probably incompetence and WaMu being overwhelmedf. (4) The Sale Price

i. According to the state, valued at at least $250,000, but sold for $83,000

ii. This is really low, but probably does not shock the conscience g. (5) The Numbers

i. Homeowner borrowed $75,000, but owes $83,000 bc of lots of fees3. Holdings: Trustee is required to be a neutral third party and has an unwaivable duty

of good faith. It is an unfair or deceptive act or practice under the CPA for a trustee of a nonjudicial foreclosure to fail to exercise its authority to decide whether to delay a sale,” as is the practice of falsely notarizing a notice of sale

b. Subprime Mortgagesi. Lots of terrible loans doomed to end in default

ii. Holder in Due Course Doctrine 1. A homeowner who believes that a lender deceived him about the terms of a loan can't

press such claims against the purchaser of a mortgage, such as a mortgage-backed securities trust.

2. The holder-in-due-course doctrine protects pension funds and the like from having to worry about any misbehavior by home lenders because one a secondary market for the mortgage has developed, people believed they could be washed clean from fraud etc. if there’s a piece of paper formatted the right way

3. Holder in due course entitled to enforce bad loans even if they were fraudulently obtained

4. BUT if trust waits to complete paperwork transferring a loan to a pension fund until after the loan goes into default, the holder-in-due course protection evaporates, and anyone who tries to foreclose could face defenses from the borrower that he or she was lied to when seeking the loan

iii. McGlawn v. Pennsylvania Human Relations Commission

1. Facts : McGlawn arranged for loans to be made. Made his money from brokers fees. The mortgages intentionally targeted people who were likely to default on their loans as a function of what the loan terms were (reverse red lining). Without ability to pay, lender is essentially looking forward to taking the asset and selling it bc only way to get paid back.

2. Bad Features of the Loans :a. Interest rate is adjustable instead of fixed, so may be artificially lowered early

on and produces payment shock when rate goes upb. Requires no documentation and McGlawn encouraged people to lie about how

much they could afford/monthc. Prepayment penaltiesd. Balloon payments – at the end of a certain period, remainder of the payment

becomes due3. Holdings : Ps had to show (1) engaged in predatory and unfair loan practices and (2)

showing D either intentionally targeted based on race or that there was a disparate impact on the basis of race. Showed this – McGlawn liable

c. NOTE ON BONA FIDE PURCHASERS: i. Bona Fide Purchaser is a subsequent purchaser who pays valuable consideration for an

interest in real property, without any notice of an interest that 3rd party already holds in land

1. SUBSEQUENT PURCHASER2. FOR VALUE3. WITHOUT NOTICE OF PRIOR INTEREST.

VII. RecordingCannot sell what you don’t ownThe Recording Act protects subsequent bona fide purchasers

Note: donees and devisees by gift or will are not protected against unrecorded interest, even if they don’t know about them

a. Owner vs. Record Owner i. Unrecorded deed is valid, but vulnerable (depending on the recording statute) to subsequent

eventsb. Types of Indexes

i. Grantor/Grantee Index – alphabetical list by surname; includes dates, names, description, citation to location in public record

ii. Tract Index: every transaction for one parcel in one locationc. Types of Recording Statutes ( PROTECT BFPS!)

i. Race Acts (largely defunct)1. Protects recorded interests over non-recorded interests2. The earliest to record prevails (race to record first)

ii. Notice Acts1. Subsequent bona fide purchaser without notice of a prior unrecorded transfer prevails

over the prior purchaser who has failed to record (AKA prior unrecorded interests are not protected against subsequent bona fide purchasers for value as long as the latter do not have notice of the previous purchase)

2. True even if the subsequent purchaser has not recorded3. BFP MUST BE INNOCENT 4. Example : “No conveyance is valid against a subsequent bona fide purchaser who has

no notice of the conveyance, unless the conveyance is recorded.”iii. Race Notice Acts

1. Only protects bona fide purchasers who record before the prior purchaser and has actual notice

2. Encourage recording and eliminate disputes over which of two conveyances was first delivered

3. Subsequent BFP for value, in order to be protected against prior unrecorded interests, must both not have notice and record first.

4. Example : “A conveyance of an interest in real estate shall not be valid as against any person who first records his subsequent interest, pays substantial value and takes without notice of the prior interest, unless the interest in real estate is recorded in the registry of deeds for the county or district in which the land to which it relates lies.”

iv. Shelter Rule: Protection given to BFP under recording act extends to all takers from the BFP, even if the taker knows of prior unrecorded conveyances.

Note: when the recording statute does NOT apply, we use common law – you can only give what you have (EX: GIFT SITUATIONS)

SOMEONE WHO RECEIVES PROPERTY AS A GIFT IS NOT A BFP (non-BFP can only get whatever the conveyer had to give)A non BFP recording would still put another interested party on constructive notice (once on inquiry notice, cannot be a BFP)Donees are not only allowed but encouraged to record their interests they are just not protected against prior unrecorded interests.

d. Types of Notice i. Actual notice – other person is aware, often because of possession of the property; can be

gained from document in deed record, or personal observation 1. You do have notice (in document, you heard about it, or you saw)

ii. Constructive Notice1. (1) Record notice – always on constructive notice of what’s in the record; duty to

search the record2. (2) Inquiry notice – knowledge of the facts would cause a reasonable (ordinary

prudent person) person to inquire into a possible conflicting interest (ex: Rose’s example of manure on the land; should have inquired)

a. Could have notice of it if you went and lookedb. Sanborn v. McLean (Ds tried to build gas station in residential area; court

implied a restrictive negative easement – Ds has constructive notice of the easement bc nature of the residential neighborhood should have put D on notice that a reciprocal negative easement may have existed – duty to inquire about restrictions in the neighborhood)

e. Exam Tip: To Answer a Notice Statute Question:i. Identify type of statute (race, notice, or race notice)

ii. Analyze each conveyance.1. Is the new party a BFP or a donee?

a. If BFP apply the statutei. Notice constructive, inquiry, actual

b. If donee apply the common law (can only give what you have)

f. Marketable Title Acts i. Any claim inconsistent with the record title to land is extinguished after a certain period of

time (usually 40-60 years)ii. Even a forged deed can be a good root of title after the statutory period

g. Problems that Arise in Title Searches i. The Wild Deed: deed with a gap in the chain of title. Person with a wild deed has a duty to

record the transfers back to the last record holder or their recording doesn’t count.ii. The Naming Problem

1. Different names, misspellings, improper entry, etc.iii. Interests that Don’t Really Exist, but Are Recorded

iv. Easements h. Policy Issues

i. De Soto Article on Virtues of Title (Malawi)1. Without formal title, people in developing countries cannot enter the formal economy

by using assets as collateral to raise cash2. Argues should give squatters formal title so they can prove they own the land.3. This makes assets fungible so they have collateral to raise loans, do business with

strangers, and meaningfully participate in the economy4. Note: other problem with formal title = exploitation by the wealthy

ii. Greece: half of the buildings don’t have title, and have been sold to people illegally. iii. Point: what we need in our system, and any system we’re trying to change, is not perfect

certainty, but certainty sufficient to go forward. Concerned not with certain certainty, but with fairness, predictability, whether satisfying the formal law is enough, or need to do other things (bribing officials, making sure you have actual notice)

VIII. Mortgage Troubles and Recording a. Perspectives on Homeownership

i. Homeownership as Personhood1. Makes you a person, in particular a man

ii. Homeownership as Fundamentally Commercial1. Toqueville: build and sell, build and sell2. K. Jackson: stands for notion of ownership

iii. Homeownership as a Chain Around Your Neck1. Have to make mortgage payments – so things you can’t do/risks you can take2. Harder to switch jobs – lower levels of labor mobility

b. US Bank v. Ibanezi. Facts : Purported chain of title Rose Mortgage (originator) Option One Mortgage Corp

(record holder) Lehman Brothers Bank, FSB Lehman Brothers Holdings Inc. (seller) Structure Asset Securities Corporation (depositor: creator of PSA) US Bank National Association, as trustee for the Structure Asset Securities Corporation Mortgage Pass-Through Certificates, Series 2006-Z. Problem: Mortgage (and note) is somewhere, services don’t have documents on hand to prove it, but they’re the ones responsible for initiating foreclosures if there’s a default

ii. Issue : whether the two securitization trusts could prove a chain of title for the mortgages they were attempting to foreclose on?

1. No – without clear chain of title, no standing to foreclose iii. Reasoning :

1. (1) Holds that a PSA could suffice as a valid assignment of the mortgages if the PSA (pooling and sale agreement) is executed and contains a schedule that sufficiently identifies the mortgage in question must be a complete chain of title

2. (2) Assignments in blank are not allowed for land in MA3. (3) Mortgage does not actually follow the note without further action to reunite them.

iv. Rule : to foreclose in Massachusetts, a securitization trust needs to prove a complete chain of title, from origination to securitization, unambiguously associating the broken loan with the trust through the PSA

c. A Mortgage has Two Partsi. Note

1. A promise to repay debt: governed by contract/commercial law2. Has the terms of the debt, including late fees and how interest is calculated3. Can be replaced by a “Lost Note Affidavit” – but that’s supposed to be for special

circumstances

4. Not ideal because might say how do I know the terms in this loan are the same as the one I actually signed

ii. Mortgage1. Connection between the debt and the land, instead of just linking to the person who

borrowed2. A lien, governed by real estate law3. Should be filed and recorded4. Gives the lender the right to take the collateral (the house) if the note isn’t paid

iii. In theory, these should not get separated, but they doiv. Problems Arising from Separation:

1. Security interests would be securing nothing (no debt behind it, nothing secured)2. Mortgage with no associated debt3. Many states have adopted strong rules that the mortgage follows the note

v. Restatement 3d. of Property: in general a mortgage is unenforceable if it is held by someone who has no right to enforce the secured obligation (if the mortgagee transfers the mortgage to A and the note to B, neither can foreclose unless A can foreclose on B’s behalf)

1. The [necessary[ trust or agency relationship may arise from the terms of the assignment, from a separate agreement, or from other circumstances. Courts should be vigorous in seeking to find such a relationship since the result is otherwise likely to be a windfall for the mortgagor and frustration of B’s expectation of security.

d. Stewarti. Wells Fargo charged $125for each broker price opinions to judge that value of the home. The

are was under exclusion at the time the alleged opinions occurred, so they could not have done them.

e. Wells Fargo v. Fordi. Original loan from Argent (predatory lender)

ii. Not endorsed to Argentiii. Purported assignment of mortgage 5 days after execution (unrecorded)iv. But…Wells Fargo’s representative didn’t indicate the source of the information that WF was

the owner and holder of the note and mortgage and the purported assignment of mortgage v. If WF knew that the note was only actually transferred once Ford was in default – not holder

in due course, so Ford gets all her defenses. Wells Fargo can still foreclose, but she can now interpose her fraud defenses

f. HSBC v. Sene (Bad Faith)i. Lots of documents that can contradict each other in chain of title – two versions of notes, lots

of things saying that people foreclosing didn’t have power to act?ii. Original loan from ResMae to Marie Sene

iii. HSBC seeks to forecloseiv. Evidence of illegal backdatingv. Courts have gone so far as to cancel the mortgages all together

g. MERS (Mortgage Electronic Registration System)i. Outside recording system

ii. Seeks to solve Ibanez problem by recording mortgage in own nameiii. Banks purport to keep records with MERS about who really owns what

h. Culhane v. Aurora Loan Services of Nebraska (D. Mass)i. MERS doesn’t always report proper name of landowners if MERS says owner is Bank of

America, easy to loose track of what’s actually in the trustii. Have stopped initiating foreclosures in MERS name – now record transfer from MERS to

foreclosing entity, foreclosing entity goes into court itselfi. Landmark National Bank v. Kesler

i. First mortgage from Landmark, recordedii. Send from Millennia, MERS recorded as nominee

iii. 2nd transferred to Sovereign, assignment unrecordediv. Default on 1st

v. Millennia is notified; no one notifies MERS and the property is sold at foreclosurevi. If they fail to notify a party who should have been notified, the sale should be set aside –

should Sovereign be able to set the sale aside?1. In cases like this - MERS says we have an interest in the property; in other cases

when someone wants to sue person with interest in property, MERS says no – just acting on behalf of someone else – sue them

2. Until recently, courts have let MERS get away with having an interest when that’s help, and not having one when it’s not

vii. Kansas Supreme Court Held : because MERS’s position was that it didn’t have an interest of its own, it was not entitled to be notified so Sovereign was out of luck

PART TWO: Varieties of Permissible InterestsGENERALLY:

DIFFERENT TYPES: (1) Freehold Estate(2) Future Interests(3) Coownership (joint tenancy, tenancy in common, tenancy by entirety)(4) Leaseholds (term of years, periodic tenancy, tenancy at will)

a. “Can live” suggests landlord tenant relationship over freehold estate

Three Variables Duration of Title Timing of Possessory Interest (present interest or future interest) Nature of the Interest (absolute or defeasible [might happen to end interest])

Determining the Type of Interest: Cannons of construction (White v. Brown)1) You are presumed to convey your entire interest2) Restraints on alienation are disfavored3) Give meaning to all clauses4) Construe ambiguity contra proferentem (construe against the interests of the party who

created the ambiguity) 5) Avoid forfeiture- Construe a conveyance according to its purpose

o That purpose is often in conflict with the law’s preference for simple grants

I. Freehold Estatesa. Types of Freehold Estates

i. Fee Simple (O to A and her heirs)—unlimited duration1. Present possession, complete possessory interest2. Duration is absolute3. Fully alienable and descendible

a. Intestacy: surviving spouse entitled to some share; if no surviving spouse, goes to issue; if child is dead, child’s children take shares

b. Per stirpes: each branch of family is to receive equal share of estatec. Rule: CANNOT create new variables on a freehold estate

ii. Fee Tail (O to A and the heirs of her body)—until line runs out1. Present possession; duration until A dies without issue2. Inalienable3. Descendible only to issue

iii. The Life Estate (O to A for life)—until measuring life dies

1. Present possession2. Followed by reversion or remainder; alienable BUT NOT descendible3. Since all interests have to add up to a fee simple, something will always follow a life

estate4. Limitations: cannot do affirmative waste; can do permissive waste like not pay taxes

iv. Defeasible Fee (O to A for 10 years)—until the term expires1. Present possession2. Duration: determinable, uncertain3. Ownership subject to termination4. Fully alienable and descendible

a. Subject to uncertainty re: termination if triggering event is still possible.b. Condition for termination may limit class of potential takers.

5. Can decrease value of land and interfere with alienability. v. Alternative to Life Estate: The Trust

1. Beneficiary (or beneficial owner of trust)2. Trustee (legal owner of trust)

a. Power of saleb. Fiduciary duty to maximize the value of the estate (estate generally not home)c. End run around the problem of spendthrift son/daughter: put all money in trust,

keep it out of their hands, trustee wil disperse amounts as neededd. Trustee is usually a banke. Trust can be liquidated if no longer has enough assets to support itself

3. Don’t want people to control property from the grave—switching to trust is a good way to do this because it protects family wealth without locking up property and preventing assets from moving freely.

b. White v. Brown : How to tell what type of interest an owner is grantingi. “I wish Evelyn white to have my home to live in and not be sold. I also leave my personal

property to Sandra White Perry. My house is not to be sold.”1. Presume grantor intended to dispose of entire estate—mentioned property, presume

wanted to get rid of the entire interest they own (presumption against partial intestacy)2. Restraints on alienation of a fee simple are disfavored; from majority’s perspective,

this means that many restraints on alienation of a fee simple are invalid so courts won’t enforce.

3. Try to give effect to every part of the document—all clauses of the grantII. Future Interests

a. Rules For Analyzing Future Interestsi. Rule of construction: each clause in grant denotes a separate estate or interest

ii. Rules of logiciii. All estates and interests must add up to a fee simpleiv. Estates and interests therefore generally come in matching pairs

1. Life estate – reversion and/or remainder2. FSD/FSCS/FSEL possibility of reverter/right of entry/executory interest

b. Kinds of Future Interests :i. Interests Retained by Grantor

1. Reversion (waits patiently – follows xxxx)2. Possibility of Reverter (waits patiently – follows determinable; divests fee simple

determinable automatically)a. Contingent on condition precedent b. Alienable and descendible in most states

3. Right of Entry (interrupts – follows subject to a condition subsequent; capable of divesting fee simple subject to condition subsequent if exercised)

a. Contingent on condition precedent

b. Alienable and descendible in most statesii. Interests in the Grantee

1. Remaindera. Vested (ascertained [born and identified] taker or condition precedent)

i. Vested subject to divestment (might be divested before becoming possessory)

ii. Vested remainder subject to open (some people are ascertained, but some still might be added to the class – ex: usually some children are alive, but more could still be born)

b. Contingent (unascertained taker or condition precedent [or both])i. Alternate Contingent Remainder (follow the same estate and their

conditions precedent are the opposite of each other, so that the vesting of one precludes the vesting of another)

2. Executory Interest (follows determinable or subject to an executory limitation)a. Automatically divests preceding estate (fee simple subject to executory limitation)b. Always contingent on condition precedent; fully alienable and descendible

iii. Rule Against Perpetuities Rationale: Solution to issue of wanting to honor autonomy of property owners, but also caring about people in the future who also have autonomy interests in using property freely that may be restrained by very old grantsThe Rule: No interest is good unless it must close and vest or fail not later than twenty-one years of some life in being at the creation of the interest.

1. A future interest is void the moment it’s created if: a. It is in a grantee (a remainder or an executory interest)b. It is either contingent (given to an unascertained taker or subject to a condition

precedent or both) or subject to open; and c. It might still exist and still be contingent or subject to open longer than 21 years

after the death of the last person alive at the time of the conveyance d. Note : Must account for all contingencies no matter how improbable

2. Applying RAPa. Step 1 : Draw vertical lines to separate the different interests. Identify the state of

the title according to the conveyanceb. Step 2 : Look for any future interests in a granteec. Step 3 : If you find any future interests in a grantee, check each one to see if it is

contingent or open. If so, it’s vulnerable. Underline it.d. Step 4 : Identify the necessary factual developments for vesting and closing, and

write them beside the conveyance.e. Step 5 : Circle all of the lives in being.f. Step 6 : See if the interest might still be contingent or open longer than the

lifetimes of everyone you circled plus 21 years. Look for a validating life.g. Step 7 : If the contingent interest violates the Rule, strike the whole interests, and

revise your classification of the title.h. If there is another contingent or open interest in a grantee, repeat this procedure.

3. RAP Danger Signsa. The condition is not personal to someoneb. There is an identified age or time period of more than 21 yearsc. An interest is given to a generation after the next generation (ex: grandchildren)d. A conveyance requires that a holder survive someone who is merely described

rather than namede. An identified event that would normally happen well within 21 years, but might

not

f. The holder won’t be identified until the death of someone merely described rather than named

g. Use restrictions h. Commercial Transactions

III. Co-OwnershipFour Unities of Joint Tenancy Required for Creation

-Interest-Time-Title-Possession

a. Three Types of Concurrent Interestsi. Tenancy in Common

1. Common ownership; each co-tenant has an equal share of the same piece of property2. Default Rule : each co-tenant has an equal right to possess the whole property and to

share equally in rents and appreciation in value 3. Can sell, share, or devise without consent of the co-tenant 4. Descendible and may be conveyed by deed or will 5. No survivorship rights between tenants in common6. Any net rents or proceeds from the rent are divided by share, but each co-tenant has the

right to possess the entire property (ex: A owns 50% interest and B and C each own 25% interest, A would receive 50% of any net rents, but all three would have equal rights of possession)

7. Presumption in favor of tenancy in common ii. Joint Tenancy

1. When a joint tenant dies, her interest ends2. Last surviving tenant owns the property outright 3. When one joint tenant conveys or sells the land, severs the joint tenancy and converts it

into a tenancy in commona. BUT if there are multiple joint tenants, it only coverts the conveying tenants

interest to a tenancy in common4. Often used as a will substitute – avoids slow and expensive probate process5. “A to B as joint tenants with right of survivorship and not as tenants in common” would

be the preferred language6. How to Sever :

a. Conveyance, even to yourselfb. Mortgage doesn’t severe (Harms; majority rule) and doesn’t survive the death of a

joint tenant (Harms; majority rule). A lender would be foolish to give a mortgage to a joint tenant w/o the other joint tenant co-signing.

c. Adverse possession (if only against one, would make AP and non-APed tenant tenants in common)

iii. Tenancy by Entirety 1. Form of joint tenancy available only to a husband and a wife (engaged does not count)2. Each tenant has right of survivorship 3. CANNOT be severed by unilateral action of one spouse (so conveying one’s interest

does not destroy tenancy by entirety or right of survivorship)4. Recognized by about half the states; Hawaii and New Jersey permit creation of tenancy

by the entirety between same-sex partners who are not permitted to marry each other5. If divorced: automatically covered into tenancy in common

b. Riddle v. Harmon (324)i. Facts : Francis Riddle conveyed from herself as a joint tenant to herself as a tenant in common

bc she wanted to get the land away from her husband. Probably didn’t just convey it to

someone else bc she wanted the benefits of ownership and, as long as it was in her name, her husband probably wouldn’t notice (possible DV)

ii. Rule (modern trend) : Joint tenant can sever the joint tenancy and become a tenant in common this way (don’t need a straw buyer)

iii. Problems Here : no notice1. (1) Jack probably didn’t know joint tenancy as severed so his interest would pass at his

death through intestacy or the residual clause of his will 2. (2) Frances could sever the joint tenancy by executing a deed, not recording it, and

telling another unscrupulous friend about the deed. Then, wait to see if Jack dies first, then secretly destroy the deed

iv. California Rule : deals with problem 2; if a joint tenancy is recorded, severance is only effective against the non-severing tenant if the severance is recorded either before severing tenant’s death or in some limited circumstances within 7 days of that death

c. Harmes v. Sprague (330)i. What counts as severing a joint tenancy?

ii. Facts : William and John Harms owned property as joint tenants with right of survivorship. John took out a mortgage on the property. John moved in with Charles Sprague, to whom he devised all his property. John died.

iii. Issue : Did the mortgage sever the joint tenancy? iv. Holding/Majority Rule : (1) there was no severance [majority view]; (2) William owned the

farm entirely free of the mortgage to Carl and Mary Simmons [more division here]v. Reasoning : mortgage only burdened John’s interest. Because John’s interest died with him,

leaving only the previously unencumbered interest of William as the surviving title, the mortgage had died with John

vi. Problems : penalizes the unsophisticated lender (savvy lender will never lend to sophisticated joint tenant on joint tenant interest as a security interest) and delivers a windfall to the surviving alternative

d. Rights and Duties of Concurrent Owners to Each Other i. Partition

1. Unresolvable conflicts: partition a. By sale: disfavored; should only be ordered if parties can prove (Delfino):

i. (1) Physical partition is impossible or extremely impractical, orii. (2) Physical partition is not in the best interests of all parties (economic

costs/gain involved, subjective costs imposed on a tenant in possession)b. In Kind: physical division of the property; preferred method,

e. Delfino v. Vealencisi. Facts : On one acre, Vealencis owns a house and operates garbage removal business – has done

this since the 1920s. The rest of the lot is vacant, but Delfinos and Vealencis were tenants in common. Delfinos wanted to develop the property into single family residences, so wanted partition by sale even though the property was capable of partition in kind.

ii. Court Held : Even though total value of the property would be maximized by the sale, not in the best interests of all parties (Vealencis) to sell the property. Value of continued possession to Helen was sufficient for court to order partition in kind

1. Favored unless: (1) physically impracticable, or (2) against the co-owners’ interestsf. Rents, Profits, Possession

i. Does tenant in possession have to pay rent?ii. Majority Rule: cotenant in exclusive possession has no liability for her share of the rental

value of possession unless:1. Other cotenants have been ousted (tenant in possession prevents/bars physical entry by

a cotenant or denies cotenant’s claim to title)2. Cotenant in possession owes a fiduciary duty to other tenants3. Cotenant in possession has agreed to pay rent

g. Rent from Third Partiesi. Cotenant who receives rent from third parties is obligated to account to his cotenants for those

rentsii. If there is a joint tenancy between two people, and through duty to mitigate one of the joint

tenants had to relet the premises, joint tenant would get:iii. ½ of the rent minus ½ of the costs the joint tenant incurred in mitigating iv. Profits from the Land

IV. Leaseholdsa. Four Categories of Leaseholds

i. Term of Years Tenancy1. Exists for specific period of time and terminates as per the lease terms.2. EX: O leases Blueacre from G from May 1, 2015 until June 1, 2015. (Exp 6/1/15)

ii. Periodic Tenancy1. Lasts for initial fixed period and then automatically continues for additional equal

periods until either landlord or tenant terminates tenancy by giving advance notice.2. Problems arise when parties fail to reach a complete agreement; may arise by

implication based on conduct of the parties, even in absence of express agreement.3. Termination:

a. Common law: either landlord or tenant must give noticeb. Statutory: statutes now govern termination; most stick to standard 30 day notice

ending month to month tenancyiii. Tenancy at Will

1. No fixed duration, endures only so long as both landlord and tenant desire.2. Often emerges by implication3. Complexities arise when only one party can terminate; may be TAW, may be

determinable life estate.4. Termination:

a. Common law: ends whenever landlord/tenant choosesb. Statute: regulates termination of TAW, many provide it can end by advance

notice after 30 days—statutory form of periodic tenency now.iv. Tenancy of Sufferance

1. Exists when a person in rightful possession of land (tenant) wrongfully continues in possession after that right ends. (“Holdover tenant”)

2. Modern rule: usually courts make them pay for shorter term or other fixed amount.b. Approaching a Tenancy Problem

i. What type of tenancy?1. If term of years, is it determined already (e.g., ends May 1st) or determinable (e.g., ends

when it is no longer used as farm)?2. If Periodic, what is the period? What notice is required?

a. Majority rule is to assume year to year; 2. Look at how rent is calculated in the void lease; 3. Look at way rent is actually paid; 4. Notice clause in lease

b. Moving out enough to provide constructive notice; most statutes stick to 30 days, if notice is too late, tenant only responsible for next period

3. If TAW, what notice is required?a. Did lease stipulate only one party can terminate? (If so, more like LE)b. Did one party abandon (tenant)? Did landlord give notice? Death? Modern rule:

notice required, usually 30 days.4. If TAS, which rule do you use?

a. Minority rule: new tenancy is periodic (ex—month to month) (don’t want to lock tenant into paying for whole year b/c contrary to public policy)

b. Majority rule: term is created (term is either way that rent is computed in original lease, or length of original term/period, but no more than 1 year)

i. Only lasts until landlord evicts/recovers damages or tenant bound to new term

c. Hannan v. Duschi. Facts : Dusch leased property to Hannan for a 15-year term, beginning 1/1/28. When date

arrived, the old tenant never moved out and Hannan was unable to take actual physical possession.

ii. Holding : Landlord’s legal obligation was to deliver the legal right to possession to the new tenant, not the actual physical possession (American Rule)

1. English Rule: landlord has an implied-in-law obligation to deliver actual physical possession (more dominant today)

d. Subleases and Assignments i. Assignment – makes the assignee and landlord liable to each other for performance of the

lease obligations that run with the leasehold estate ii. Sublease – subtenant is only liable to the tenant for the sublease obligations, and the subtenant

has no claim against the landlord for failure to perform his lease obligations; no privity of estate or privity of contract

1. Conveys some of a tenant’s interest to a third party. A lessee reserves the right to re-enter the premises after the sub-lessee has completed their term

2. If sublessee stops paying rent, landlord can evict but must sue original tenant for rent3. If landlord terminates a tenant’s interest, they terminate the sublessee’s interest. But if

the tenant abandons their interest, the sublessee keeps their interest.e. Ernst v. Conditt

i. Facts : Ernst leads land to Rogers for 53 weeks under a lease that required Ernst’s consent to any assignment or sublease. Rogers took possession, built a “GoCart” track on the premises, then agreed to sell business to Conditt. Ernst and Rogers signed an agreement by which the term of the lease was extended, and Ernst consented to “subletting” of premises to Conditt upon “express condition” that Rogers would remain personally liable for performance of the lease. Conditt stopped paying rent. Conditt claimed not liable for payments because assignment was a sublease

ii. Holding : parties intentions’ should control this question; parties intended an assignment 1. Rogers parted with his entire interest in the lease2. Conditt acquired every iota of Roger’s interest and paid rent directly to Erns

f. Commercial Leases i. Tenant cannot assign or sublet without landlord’s consent

ii. Kendall v. Ernest: Landlord cannot arbitrarily withhold consent – discretionary power should be exercised in accordance with commercially reasonable standards

1. RULE: where a commercial lease provides for assignment only with the prior consent of the lessor, such consent may be withheld only where the lessor has a commercially reasonable objection to the assignee or the proposed use

a. Necessity of permitting reasonable alienation of commercial space has become paramount in increasingly urban society

b. Rest. 2nd adopts rule “A restraint on alienation without the consent of the landlord of a tenant’s interest in leased property is valid, but the landlord’s consent to an alienation by the tenant cannot be withheld unreasonably, unless a freely negotiated provision in the lease gives the landlord an absolute right to withhold consent”

c. Implied duty of good faith and fair dealing inherent in every contract – neither party shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract

V. Bad Tenants, Bad Landlordsa. Modern Moves in Landlord-Tenant Law

i. (1) General contract theory requires mitigation, and leases are enough like contracts that we should apply the contract rule

ii. (2) Not general contract theory – incompatible with idea of freedom of contract…Court has begun to imply a lot of duties from a landlord to tenants. (old theory that estate is none of landlords business less persuasive; already landlord’s business in a lot of places)

iii. (3) Procedural move in allocating burden of proof: ordinary contracts – breaching party has burden to show that damages could have been mitigated; here, landlord has burden to show reasonable attempts to re-let

1. Landlord is in a better position to find someone to re-let2. Hybrid of contract theory – not pure contract theory

b. Landlord Self Help

Common law: landlord was entitled to use reasonable force to oust the tenant himselfMinority of states absolute forbid landlord self help

i. Berg v. Wiley1. Facts : Wiley leased premises for Berg to use for a restaurant, under lease that required

Berg to obtain written permission from Wiley to alter the structure, obligated Berg to operate her restaurant lawfully, and gave Wiley the right to retake possession upon default. Berg’s restaurant cited for health code violations. Wiley notified Berg that if violations not corrected in two weeks, he would retake possession. Wiley entered the restaurant and changed the locks.

2. Holding : Wiley’s self help repossession was wrongful as a matter of law a. Self help always carries the risk of violence or other breach of peaceb. Common law response was that peaceful self-help was valid, but self-help that

involved breach of the peace was wrongfulii. Is self-help a good idea?

1. (1) Landlords will pass on the cost of judicial repossession proceedings to tenants who comply with the lease terms

2. (2) Self-help results in no reporting of the action to credit bureaus nor creation of public records, the existence of which materially impede the defaulting tenant in a search for replacement premises

iii. Landlord’s Options to Protect Himself1. More specific provisions in the lease2. Double the rent if holdover3. Large security deposit4. Credit checks5. Co signor’s on rent6. Arbitration agreement

c. Abandoned Property

i. Landlord assumes abandonment at his peril (actual notice saying “I’m leaving” is best)ii. If tenant abandons the leasehold premises in the midst of valid lease term, tenant is regarded as

having offered to surrenderiii. Landlord can:

1. (1) Accept the offered surrender and terminate the lease2. (2) Reject the surrender by leaving the premises untouched, thus preserving the

landlord entitlement to rent as it comes due for the remainder of the term3. (3) Retake possession and relet the premises for the benefit of the tenant

iv. Sommer v. Kridel1. Facts : Kridel leased an apartment from Sommer for a two-year term. Kridel wrote

Sommer that his impending marriage would not occur and that as a result, he had neither a need for the apartment nor the funds to pay the rent. Explicitly offered to

surrender the lease and agreed to forget it the 2 months rent he had prepaid. Sommer did not reply and refused to show apartment to prospective tenants who were read, willing, and able to rent it.

2. Holding : Landlord has duty to mitigate damages once a tenant has abandoned a. Imposed burden of proof on landlord to show that he had exercised reasonable

diligence to re-let the apartment and that in doing so he had treated the abandoned apartment as one of his vacant stock

b. Lost volume argument does not apply because generally people rent apartments for particular reasons; each piece of property is unique

c. Don’t have to accept less than FMV or substantially alter his obligations as established by the pre-existing lease

v. NOTE: Restatement POLICY against mitigation – abandonment of property is an invitation to vandalism so the law shouldn’t encourage abandonment

d. Mitigating Damagesi. Restatement:

1. Against mitigation2. Abandonment of property encourages vandalism3. If you believe no mitigation rules will deter renters from abandoning, then restatement

makes senseii. Lost Volume

1. Not renting one apartment doesn’t necessarily mean that the person was going to buy a different one – lost volume seller argument doesn’t necessarily apply

2. Goes back to idea that property is unique 3. Saving Grace for Landlord: just have to make reasonable efforts

iii. Reletting on Tenant’s Account1. Agreed rent is $1000 a month2. Fair market value is $800 a month3. Landlord rents for $500 a month, and seeks remaining $500 a month in damages.4. Assume that the landlord didn’t incur any costs in procuring new tenant5. Appropriate reward to the landlord for the defaulting tenant?

a. If landlord had mitigated correctly and received fair market value for the apartment, would have been making $800/month. Landlord’s duty was to mitigate to that amount.

b. Gap between $500 and $800 is the landlord’s faultc. Proper gap is gap between $800 and $1000 because it is not the landlord’s faultd. So he should get $200

iv. Landlord Remedies --At common law, a landlord could use self-help (changing locks) to evict a tenant as long as it wasn’t violent. Now, a landlord can only use the judicial process to evict (in most states). Landlord can’t put right to self-help in lease.

--Restrictions on self-help developed parallel with increasingly efficient actions for ejectment

If a tenant surrenders their interest, landlord has options:1. Treat the lease as continuing and do nothing, and sue tenant on the covenant to pay rent

a. Tenant cannot unilaterally terminate the leaseb. When landlord sues, must show mitigation (majority rule).

i. Duty to mitigate is to make reasonable efforts to mitigate; depends on the facts and circumstances of the situation

ii. Sommer - Duty to mitigate requires treating abandoned apartment as one of your stock (take proper steps to advertise, don’t refuse to sell). The cost of seeking new tenants goes into damages

iii. Landlord need not attempt to relet using a lease fewer or more lenient covenants or for a use substantially different from the abandoning tenant’s use – not need landlord relet at below market rent

2. Treat the lease as continuing and relet the premises for the tenant’s account, reserving the right to sue the tenant for any unpaid balance of the rent.

a. If a landlord re-lets on tenant’s account (doesn’t accept surrender) for more than the old tenant paid, get nothing in suit. If they rent for less, damages are difference between the fair market value and what new tenant pays

3. Landlord can accept the surrender of the lease, and relet on landlord’s accounta. Accept surrender and seek damages or reject it and seek rent b. Determine acceptance or rejection from landlord’s intent in retaking possession

e. Covenant of Quiet Enjoyment:[ANALYZE THROUGH CONSTRUCTIVE EVICTION OR IMPLIED WARRANTY OF HABITABILITY as a unit, NOT SEPARATELY]

i. Implied Covenant of Quiet Enjoyment: landlord promises the tenant shall have quiet and peaceful possession of premises for the term, as against the landlord, any person holding through the landlord, or any person with a title superior or paramount to the landlord

1. Tenant may :a. (1) Stay in the unit and sue for damages

i. Measure of Damages = difference between rent reserved in the lease and fair rental value of use that was actually received

b. (2) Vacate and treat the situation as a constructive eviction 2. Includes things like : failure to supply hot water/heat when contracted to do so, failure to

make major repairs, to provide essential services/habitable premises, to properly maintain heating/air condition facilities, obtain necessary permits, to control vermin/insects/rodents, to police the activities in the hallways or in other apartments

ii. Elements: implied covenant of quiet enjoyment allows tenants to lawfully vacate the property after giving the landlord notice of the disturbance and a reasonable opportunity to cure if

1. Landlord breached a duty owed to the tenant2. That caused a substantial interference with the tenants enjoyment of the property or

rendered it unfit for the purpose for which it was leased and3. Tenant vacates within reasonable period of time after the landlord fails to ameliorate

the problemiii. OR tenant can sue for damages

1. Every tenant has the right to quiet enjoyment of the leased premises 2. Covenant only breached when landlord’s positive conduct destroyed tenant enjoyment 3. Tenants duty to pay rent conditioned upon landlord’s performance of obligation to

refrain from wrongful actual or constructive evictioniv. Covenant of Quiet Enjoyment Breached By :

1. Actual eviction – tenant who has been totally ousted from physical possession of the leased premises either by the landlord or something with better title than the landlord, so tenant is no longer to pay rent and may elect to terminate the lease

2. Actual partial eviction – actual physical ouster of the tenant from any part of the premises crucial to the use of the whole; relieves the tenant of the obligation to pay any rent at all until and unless the tenant is restored to possession of the entire leasehold property

3. Constructive eviction – landlord substantially interferes with the tenant’s use and enjoyment of the leased property, so much so that the intended purposes of the tenant’s occupation is frustrated; tenant may terminate lease and move out

f. Constructive Eviction

i. Occurs When: Landlord so substantially interferes with the tenant’s use and enjoyment, or causes or allows inhospitable conditions to persist that the tenant is justified in vacating the premises, even though the landlord’s actions or inactions fall short of actual eviction

ii. Elements :1. intentional (actual or inferred) acts or failures to act by the landlord that breach a duty

owed to the tenant anda. Actual Intent to Force to Move: things like turning off heat, water, or electricity

allow tenant to show that landlord acting with intent to force the tenant to moveb. Failure to Act: landlord has duty to act or cure a problem and fails to do so within

a reasonable time after tenant notifies the landlord 2. that substantially interfere with the tenant’s enjoyment of the premises, or render the

premises unfit for the purpose for which it was leased; and3. the tenant vacates the premises4. within a reasonable time after the landlord’s actions (10 days was reasonable in Reste

Realty) TENANT REQUIRED TO VACATE

a. Mere disagreement with landlord, inconvenience or dissatisfaction will not sufficeb. May have duty to act when third party creates uninhabitable condition (ex:

abortion clinic where police would not disperse crowd on property without landlord’s signature)

g. Village Commons v. MCPO (Indiana state court case)i. Landlord wouldn’t fix leaky premises and tenant claimed constructive eviction. Landlord

defended on the grounds that there was a provision in lease agreement that prevented MCPO from suing/claiming constructive eviction.

1. Holding: they were actually and constructively evicted, because the leaks were continuous and the landlord warned the tenant not to keep files in certain areas to protect from flooding.

h. Third Party Actions: Landlord Responsible?i. Noisy neighbors: yes if noisy tenants are under the purview of the landlord; traditional rule was

that landlord not liable for other tenants’ behavior, but courts are increasingly holding landlords responsible

ii. Burglaries and vandalism: if landlord puts in locks and security, probably not constructive eviction bc did everything possibly could have

iii. Tenant as Abortion Doctor: Protestors in lobby and parking lot (property of the landlord). Constructive eviction – failure to act in response to request for a assistance can e enough when landlord has ability to control the property

i. Implied Warranty of Habitabilityi. Definition: requires that rental premises be offered and maintained in a physical condition that

provides safe, decent, and habitable housing for tenant; tenants obligation to pay conditioned on this

1. Implied regardless of whether in the leasea. Landlord must have notice of the defective conditionb. Defect must be substantial, considering its violation of the applicable housing

code, its effect on tenant’s health or safety, the length of time it has existed, and its seriousness

c. Violations of housing code are usually prima facie proof of a violation of IWOH, allowing for rescission/rent abatement equal to property’s value below what it was warranted

d. Landlord must have been given reasonable time to repair the defect and have not done so

ii. Traditional Rule: landlord has no implied obligation to warrant that property is suitable for the intended purposes of the tenant, so long as the tenant has a reasonable opportunity of examining the property and judging for himself as to its qualities

1. Somewhat broken down2. Most jurisdictions don’t extend this to commercial leases

iii. Modern Trend: imply warrant of habitability in residential leases; still minority trend j. BUT : Common law rule that landlords had no particular duties to tenants

i. Exceptions to this:1. Duty to disclose latent defects, which are defects that:2. (1) the seller is aware of or ought to be aware of3. (2) the purchaser is not likely to discover through reasonable inspection, and 4. (3) that materially alters the value 5. Short term leases of furnished dwellings – duty to provided habitable premises6. Duty to maintain common areas in a building when open property is open to all tenants7. Some jurisdictions: duty on the landlord to abate immoral conduct

k. Hilder v. St. Peter (VT state case)i. Facts : really bad landlord made lots of broken promises. (sewage leaks, clogged toilet, broken

lock, broken window, broken light)ii. Court Holds : Caveat lessee put aside; conditions resulted in breach of implied warranty of

labiality.1. Obligation to pay rent is dependent on the landlord’s obligation to provide and maintain

habitable premises. 2. If the premises aren’t habitable, tenant is relieved of duty to pay rent (at least in amount

necessary to compensate them for the violation.)3. Cannot be waived

l. Remediesi. Terminate and leave

ii. Stay and withhold rent until repairs are madeiii. Stay and repair then sue for the cost of repairsiv. Stay and recover damages (rent abatement or deduction, sometimes damages for discomfort

and annoyance)

VI. Easements and Servitudes

SERVITUDESIntroductionTerminology

Servitudeso Current interests in land owned by someone elseo Never intended to become possessoryo Rights to make specific uses or to prohibit specific uses by the person who does own the

possessory interest Easement: Right to enter another’s land Profit: Right to enter another’s land and remove something Real Covenant or Equitable Servitude:

o Restriction on use of another’s land (ex: for residential use only)o Affirmative obligation on another landowner (ex: have to pay into homeowner’s association)

Servient Estate: land that is burdened Dominate Estate: land that benefits Appurtenant: attached to a dominant estate In gross: personal to the owner

Two ways to own non-possessory interests (§1.1 com. b)o Appurtenant: attached to a dominant estate

Benefit/burden attaches to each parcel Interest transfers with property Runs with the land – whoever moves in has the right to enforce

o In Gross: personal to the owner Ex) even if the home owner’s association doesn’t possess any parcels – can still sue

parcel owners for paying fees Homeowner’s association doesn’t have to own any land to enforce

Creation of Servitudes

(1) Writing satisfying Statute of Frauds (main way) (required for neg easement) (2.7) Estoppel (2.9—we tried to make a servitude—and 2.10—she said there was a servitude already) Implication (2.11) Implied from prior use (subset of servitudes created by implication) (2.12) From necessity (rare) (2.15) Prescription (similar to adverse possession) (2.16)

Distinguish: Licensees Limited grant of permission Written, oral, or implied from conduct Permission by the owner to come on the property for a specific purpose Not an interest in land Revocable at will (might be damages for revoking, but can still be kicked off) Inalienable unless contrary intent appears Important factor in distinguishing: whether the agreement gets an exclusive right to use any definite

spaceo If NO: probably a licenseo If YES: maybe an easement

Example: movie ticket is a classic license – can kick you out and movie theatre is a definite space If intend to make a non-revocable transfer, probably intend a servitude

Distinguish: Possessory Estate Example: to the railroad for use as a right of way

o Fee because the railroad is the OWNER, not an easement for the railroad to go acrosso Retains no interest in the grantoro VERSUS: To the railroad so long as it is used as a right of way (fee simple determinable, so

property will transfer back) It is readily possible to abandon an easement, but difficult to abandon a fee Factors to Determine Easement vs. Fee:

o Market Rates in the Areao Public Policy Implications

Cut through lots of properties, restricting alienability? If user abandons, can the property be easily reassembled/put back into use? (if yes, bias

in favor or easement) Restraints on alienation Allow many more restrictions when leasehold or easement vs. fee More restrictions, probs more like an easement

Distinguish: Lease Transferring possession is essential to a lease – easement holder only has right to use Considerations:

o Uses permitted : more limited to a specific use, more likely to be an easemento Specificity of a location : more specific the location, more likely it is to be a lease because holder

of an easement wants to do something rather than possess a specific spaceo Periodic Payments : if rent is reserved, periodic payments are likely to indicate a leaseo Duration: lease is usually limited in time in one way or another; easement is usually unlimited

Legal Consequences of Easement vs. Leaseholdo Statute of Frauds : servitude is an interest in land, so it is within SoF; lease can fall within short

term lease exception, so the writing requirement is differento Possessory Actions : ONLY a tenant, not an easement holder, can bring possessory actions such a

trying to eject someone who is wrongly on the land, or suing for trespass/nuisance

Rest. 3d PROP-SERV §1.2

NOTE: if there is more than one regulation in a question about common interest communities/general plans TALK ABOUT BOTH

1.1: Servitude Defined; Scope of RestatementA legal device that creates a right (benefit) or obligation (burden) that runs with the land (appurtenant) or an interest that does not run with the land (in gross). The estate that enjoys the benefit is the dominant estate; the burdened land is the servient estate. (§1.1)

Comment a: Servitudes Created Rights and Obligations that Run with the Land Comment b: Interests that Run with the Land Pass Automatically to Successors Comment c: Servitude Benefits and Burdens; Dominant and Servient Estates

1.2 Easement and Profit Defined Comment a: Historical Note on Classification of Servitudes Comment c: Easements and Profits May be Exclusive or Nonexclusive Comment d: Easements and Profits are Not Possessory Interests in Land Comment h: Negative Easements are Restrictive Covenants

Non-possessory interest that can allow the owner to enter the property or put something on the property Profit – right to enter another’s land and remove resources Burden of an easement or profit is always appurtenant or in gross (spurious easement). Courts favor

appurtenant. Most easements are affirmative. Negative easements are restrictive covenants (gives the holder the right

to prevent the possessor of a servient estate from doing some act on the servient estate) Created by:

o Conveyanceo Acquiescence o Prescription

1.3 Covenant Running with Land, Affirmative, Negative, and Restrictive Covenants Defined Comment a: Covenants Running with the Land Comment d: A Covenant is a Servitude if Either Side Runs with the Land

Comment e: Types of Covenants: Affirmative, Negative, Restrictive

2.1 Creation of a Servitude

2.9 Exception to the Statute of Frauds Exception when one party changes its position in justifiable reliance on the existence of the servitudes

o “The consequences of failure to comply with the Statute of Frauds…do not apply if the beneficiary of the servitude, in justifiable reliance on the existence of a servitude, has so changed the position that injustice can be avoided only by giving effect too the parties intent to create a servitude”

How determine justifiable reliance?o Probably have to say “easement” or “servitude”

Here: parties intend to create a servitude

2.10 Servitudes Created by Estoppel Easement can be created by estoppel when substantial change of position that can be reasonably

foreseen and the change in position actually occurredo Requires strong objective evidence of substantial change in position

Misrepresentation that a servitude already exists (1) “Permissive” – courts should be extremely careful before finding if this applies because want to

encourage neighborliness and make it hard for permission to become right

2.11 Servitudes Created by Implication Comment a Comment f

2.12 Servitudes Implied from Prior Use Comment a: Rationale Comment b: Servitude rights that can be implied from prior use An easement from prior use can be implied when “prior to a conveyance severing the ownership of land

into two or more parts, a use was made of one part for the benefit of another Special Treatment for latent unknown easements in underground utilities – servitude will continue

if it’s either:o Apparent, oro If it’s for underground utility

Example: something that is reasonably developed and apparent (path across a high way) may well be an easement by implication

2.15 Servitudes Created by Necessity Access easement by necessity will be implied if and only if a tract is divided to deprive a portion of it

from access to a public road. Easement is implied over the portion with public accesso (1) Unity of Ownershipo (2) Necessity [strict]o (3) Necessity arises at time of severance

Key : access problem has to be created by the transfer that also allegedly creates the servitude. If it arises for other reasons (ex: road that was operational closing down after the transfer), the owner is out of luck

End when the necessity ends Comment c: Severance of rights arising out of common ownership is required

2.16 Servitudes Created by Prescription: Prescriptive UseA prescriptive use of land that meets the requirements set forth in 2.17 creates a servitude. A prescriptive use is either

(1) a use that is adverse to the owner of the land or the interest in the land against which the servitude is claimed, or

o Not permissive(2) a use that is made pursuant to the terms of an intended but imperfectly created servitude, or the

enjoyment of the benefit of an intended but imperfectly created servitudeo We made an agreement and screwed it up

Comment a: Rationale Comment b: Definitions and Scope Comment c: Relationship between uses described in (1) and (2)

o Exception to the statute of frauds requires change of positiono Prescription does noto CANNOT acquire a prescriptive easement to have your neighbor refrain from some act under (1) o If a burdened estate is transferred before the prescriptive period has arrived: CANNOT get

prescriptive rights unless a use is open and notorious as to the successor for the balance of the prescriptive period

Comment e: Prescriptive Users Comment f: Adverse Uses, Subsection (1) Comment g: Presumptions as to Initial Character of Use

Note: in relations between neighbors, we presume a license unless estoppel kicks in (encourages neighborliness)

Prescription Adverse Possession Actual and not dependent on a like right of

others Open and notorious Adverse and under claim of right: not

permissive (or: imperfectly created servitude)

Continuous For statutory period

Actual and exclusive

Open and notorious Adverse and under claim of right Continuous For statutory period

2.17: Servitudes Created by Prescription: Requirements Comment d: Servitude Benefits that can be Acquired by Prescription Comment e: No Prescription Against the Government

3.1 Validity of Servitudes: General RuleA servitude created as provided in Chapter 2 is valid unless it is illegal or unconstitutional or violates public policy.

Servitudes that are invalid because they violate public policy include, but are not limited to:(1) a servitude that is arbitrary, spiteful, or capricious;(2) a servitude that unreasonably burdens a fundamental constitutional right;(3) a servitude that imposes an unreasonable restraint on alienation under § 3.4 or § 3.5;(4) a servitude that imposes an unreasonable restraint on trade or competition under § 3.6; and(5) a servitude that is unconscionable under § 3.7.

Rule: any servitude that makes sense as a restriction on land can be valid; freedom of contract should ordinarily control

Comment a: Historical Note and Rationale Comment d: Unconstitutional Servitudes Comment f: Sources of Public Policy Comment g: Arbitrary, Spiteful, and Capricious Servitudes are Invalid Comment h: servitudes that unreasonably burden fundamental constitutional rights are invalid

o To determine unreasonable burden: The purpose of the servitude Its importance to the beneficiaries The strength of the challenger's consent to acquire the property despite the burden of the

servitude The extent to which it interferes with the fundamental right are relevant considerations

3.4 Direct Restraints on Alienation (MUST BE REASONABLE)- Transfers, rights of first refusal, options, etc. - Example: The deed provides that A has no power to transfer or create any encumbrance on Blackacre prior to O’s death.

Comment b: Scopeo Direct restraints on alienation are valid unless unreasonable o Includes: all types of transfers, including leases, prohibitions on transfer without the consent of

another, prohibitions on transfer to particular persons, requirements of transfer to particular persons, options to purchase land, and rights of first refusal.

Comment c: Determining Reasonablenesso Determined by balancing the utility of the purpose served by the servitude against the harm that

is likely to flow from its enforcement Comment d: Restrains on Transfer Without Consent Comment f: Rights of First Refusal Comment i: Nature of the Property: Conservation, Historic, and Charitable Properties

Rest. 3d PROP SERV §7.6

1.7 General Plan Development Defined Comment a: General-plan developments and common interest communities

1.8 Common Interest Community Defined

2.14 Servitudes Implied from General Plan (1) Implied Benefits: Each lot included within the general plan is the implied beneficiary of all express and implied servitudes imposed to carry out the general plan.

(2) Implied Burdens:(a) Language of condition that creates a restriction or other obligation, in order to implement the general

plan, creates an implied servitude imposing the same restriction or other obligation.(b) A conveyance by a developer that imposes a servitude on the land conveyed to implement a general

plan creates an implied reciprocal servitude burdening all the developer's remaining land included in the general plan, if injustice can be avoided only by implying the reciprocal servitude.

Comment a: Rationale Comment b: Historical Note Comment e: Effect of Servitude Implied Under Subsection (2)

Comment f: General Plan Comment i: Subsection (2)(b): Implied Reciprocal Servitude Burdens

Sanborn v. Mclean: Ps buy land, look at their record title and don’t find a servitude. Try to build a gas station. Community claims there was an implied easement on their land.

(1) Court implies a reciprocal negative easement (servitude) will be implied on lot 86 and all the other lots bc the common grantor (McLaughlins) had a general plan to develop a residential development. As soon as first lots were conveyed with restrictions on, all the remaining ones had the restrictions automatically.

(2) Evidence of General Plan from:o Plan with restrictionso Advertising brochureso Oral representationso OR restrictions in the deedso Doesn’t matter if the restrictions are not identical; what matters most is that evidence has to show

the grantor is intending to benefit the other lot owners

3.5 Indirect Restraints on Alienation and Irrational Servitudes (MUST BE RATIONAL)Example: The deed provides that in the event A transfers Blackacre to another, A will pay O $10,000. The side payment = indirect restraitn

May decrease the number of people who want to buy the land; price restrictions and ban on improvements indirectly restrain alienability

Comment a: Rationale Comment b: Servitudes lacking rational justification REPORTERS NOTE: why different than Nahrstedt

o Rules adopted my amendments/board of common interest communities are subject to higher reasonability standard

3.7 Unconscionability Comment c: unconscionability

7.1 Modification, Extinguishment, and Termination of Servitudes: General Rule A servitude may be modified or terminated by agreement of the parties, pursuant to its terms, or under

the rules stated in this Chapter. Care should be taken in describing various factual situations to indicate whether a servitude has actually

been terminated, or whether only some, but not all, of the beneficial interests have been extinguished. Until all benefits have been extinguished, the servitude burden persists as modified

Comment b: Modification or Termination by Agreement Comment c: Modification or Termination Pursuant to Terms of Servitude

7.4 Modification or Extinguishment by AbandonmentA servitude benefit is extinguished by abandonment when the beneficiary relinquishes the rights created by a servitude.

Comment a: Rationale Comment c: Evidence of Intentional Relinquishment of Rights is Required

7.5 Termination by MergerA servitude is terminated when all the benefits and burdens come into a single ownership. Transfer of a previously benefited or burdened parcel into separate ownership does not revive a servitude terminated under the rule of this section. Revival requires re-creation under the rules stated in Ch. 2.

7.6 Modification or Extinguishment by Estoppel

7.7 Modification or Extinguishment by Prescription Comment c: Adverse Possession of Dominant or Servient Estate

7.10 Modification and Termination of a Servitude Because of Changed Conditions (1) When a change has taken place isnce the creation of a servitude that makes it impossible as a

practical matter to accomplish the purpose for which the servitude was created, a court may modify the servitude to permit the purpose to be accomplished. If modification is not practicable, or would not be effectice, a court may terminate the servitude. Compensation for resulting harm to the beneficiaries may be awarded as a condition of modifying or terminating the servitude.

(2) if the purpose of a servitude can be accomplished, but because of changed conditions the servient estate is no longer suitable for uses permitted by the servitude, a court may modify the servitude to permit other uses under conditions designed to preserve the benefits of the original servitude.

Comment a: Rationale Comment c: Test and Application Comment d: Conservation Servitudes

Western Land v. Truskolaski: City wants to rezone subdivision with residential restrictions to build shopping center; neighbors sue

o Could refuse an inunction and thus leave the servitude owners only with damages (which would still be important) if the area surrounding the subdivision and changes in the subdivision itself had changed so much that the values (low noise, low traffic, avoidance of crime, place for children to claim) to be gained by the restrictive covenants could no longer be obtained by the subdivision. Changed conditions are not enough here.

o RULE – as long as the original purpose of the covenants can still be accomplished and substantial benefit will inure to the restricted area by their enforcement, the covenants stand even though the subject property has a greater value if used for other purposes

Rick v. West (project zoned for residences fails. Want to build a hospital, but West won’t release the covenant)

o Rule : West has the right to insist on enforcement, not merely the right to get damages, even though that would increase social welfare overall, at least as long as the restriction is not outmoded and it affords real benefits to the benefitted party.

7.12 Modification and Termination of Certain Affirmative Covenants Comment a: Rationale

Pocono Springs: Court holds clear record title that is unchallenged by others cannot be abandoned. Therefore, MacKenzie’s are permanently liable for the HOA dues.

7.14 Extinguishment of Servitude Benefits Under Recording ActThe benefit of an unrecorded servitude, including a servitude created by prescription, implication, estoppel, or oral grant, is subject to extinguishment under an applicable recording act, except that, unless the statute requires a different result, the following servitude benefits are not subject to extinguishment:

(1) an appurtenant benefit created by oral grant under § 2.9, by estoppel under § 2.10, by prescription under § 2.16, or by necessity under § 2.15, if extinguishment of the benefit would result in depriving the dominant estate of rights of way for access or utilities necessary to reasonable enjoyment of the land within the meaning of § 2.15;

(2) an appurtenant benefit for underground utilities implied on the basis of prior use under § 2.12(4);

(3) a servitude that would be discovered by reasonable inspection or inquiry.

Servitudes created by estoppel or necessity cannot be extinguished by a recording act if they would deprive the dominant estate of rights of way for access

Comment a: Rationale Comment b: Scope

7.15 Application of Recording Act to Modification or Termination of a Servitude Comment a: Rationale

7.16 Servitudes not Terminable Under Marketable Title Acts Comment a: Scope and rationale

SERVITUDES AND PLANNED COMMUNITIESRest. 3d PROP SERV §8.5

3.1 Validity of Servitudes: General RuleA servitude created as provided in Chapter 2 is valid unless it is illegal or unconstitutional or violates public policy. [note: very hard to win claim that servitude violates the Constitution]

Comment d: Unconstitutional Servitudes Comment h: Servitudes that Unreasonably Burden Fundamental Constitutional Rights are Invalid Comment j: Unreasonable Servitudes, Narrowly Defined, Are Invalid

o Illustration 22 specifically references cats Look at

Purpose of the servitude Importance of the restriction Importance to the beneficiaries The level of consent to acquire despite the burden The extent of the interference with the fundamental right Probably the behavior should affect the value if the land if it’s going to be reasonable. Prohibition on unmarried couples living together is invalid according to the restatement (3.1(d)

illustration 6)

Nahrstedt: cat case where P claimed the covenant was unreasonable as enforced against her. Holding: the restriction was rational and she had notice of the restriction

o Reasonable (rst would say rational – CA court just defines differently) bc people may have chosen to live there bc lack of animals; other buyers entitled to rely on restrictions if found in founding documents

o Rule : Restrictions can be valid if found in foundational declaration even if found invalid if later adopted by rules; If there is a blanket rule, application will not be assessed on an individual basis; whether its reasonable in its own terms is the inquiry

6.4 Powers of a Common Interest Community: In General Comment

6.5: Power to Raise Funds: Assessment, Fees, and Borrowing Comment c: Allocation of Assessments Comment e: Assessment Obligation is Independent of Association Duties to Owners or Side Deals with

Developer Comment f: User Fees and Service Charges

6.7 Power to Adopt Rules Governing Use of Property Comment b: Rationale Comment c: Rules Governing Use of Common Areas Comment d: Implied Power to Regulate Use of Individually Owned Lots or Units When Necessary to

Protect Common Property

6.9 Design Control PowersHOAs have power to regulate nuisances. If not a nuisance, statute or declaration must give HOA power to regulate

Restrictions on design must be explicitly authorized by declaration or statute Design control adoptions require supermajority consent If new design control would affect specific owner, would need their explicit consent Very difficult to add new things, except things like

Comment a: Rationale Comment b: Scope and Relation to Other Sections Comment c: Validity and Interpretation of Express Design Controls Comment d: Discretionary Design Controls Must be Reasonably Exercised

6.10 Power to Amend the Declaration(1) Except as expressly limited by statute or the declaration, the members of a common-interest community

have the power to amend the declaration subject to the following requirements:(a) Unless the declaration specifies a different number, an amendment adopted by members holding a majority of the voting power is effective

(i) to extend the term of the declaration,(ii) to make administrative changes reasonably necessary for management of the common

property or administration of the servitude regime,(iii) to prohibit or materially restrict uses of individually owned lots or units that threaten to

harm or unreasonably interfere with the reasonable use and enjoyment of other property in the community.

(b) Unless the declaration specifies a different number, an amendment adopted by members holding two-thirds of the voting power is effective for all purposes except as stated in subsections (2) and (3).

(2) Amendments that do not apply uniformly to similar lots or units and amendments that would otherwise violate the community's duties to its members under § 6.13 are not effective without the

approval of members whose interests would be adversely affected unless the declaration fairly apprises purchasers that such amendments may be made. This subsection does not apply to nonuniform modifications made under circumstances that would justify judicial modification under § 7.10.

(3) Except as otherwise expressly authorized by the declaration, and except as provided in (1), unanimous approval is required

(a) to prohibit or materially restrict the use or occupancy of, or behavior within, individually owned lots or units, or

(b) to change the basis for allocating voting rights or assessments among community members.

Comment a: Rationale Comment c: Implied Amendment Powers: Minor Changes Comment d: Implied Amendment Powers: Prohibition of Nuisance Comment f: Non-uniform, Unfair, and Unreasonable Amendments Require Approval from those Whose

Interests are Adversely Affected, Subsection (2) Comment g: Unanimous Consent Required for Amendments that Deprive Individual Owners of

Significant Property or Civil Rights

Appel v. Presley Cos . (New Mexico)o Facts : lots are restricted to single-family homes. Covenants create an architectural control

committee with the power to “make amendments and/or exceptions” to the restrictions. Committee voted to remove the restrictions from the last 9 lots and allow smaller homes/townhouses. Owners of single-family homes sued the HOA saying you violated our duty to us.

o Holding : court refused to read “amendments and/or exceptions” literally as the power to make any possible amendment or exception; instead, looked at effects to determine whether reasonable exercise of power to make decisions, or whether destroyed the benefit of the existing covenants which were that they would be single family houses

6.12 Judicial Power to Excuse Compliance with the Governing Documents Comment a: Rationale Comment c: Excessive Quorum and Supermajority Requirements

PART THREE: The Nature and Extent of OwnershipI. Public Access, Public Trust

a. Bundle of Rights Revisited: RIGHT TO EXCLUDEi. Some right to exclude is necessary for there to be transferability of property rights; need right

to include someone and right to exclude, otherwise you aren’t transferring anything of valueii. Jacques v. Steenberg Home :

1. Court found trespass and upheld landowner’s right to bar an unwanted trespasser from moving a mobile home across Jacque’s land, declaring that a person has the right to exclusive enjoyment of his own land for “any purpose that does not invade rights of others”

a. Court found “willful disregard” for right to excludeb. Not for any good reason, other than Steenberg wanted to deliver home

iii. State v. Shack :1. Court found no trespass, because of the statute giving workers living on farms rights

to see doctors and other officials2. Migrant workers=community within but apart from local scene; man’s right to real

property is not absolute.a. Shack is different from Jacques because defendants in shack had right to see

the migrant workers. There was permission—license, at the very least—for these people to come onto the property to see the workers.

iv. Eyerman :1. Lady wants home destroyed upon her death. Neighbors sought injunction and Ct of

Appeals grants it, saying that “only capricious” destructive condition of the will is not going to be executed; the proceeds from selling house still go to estate as planned.

a. Policy and other Issues:i. Dead hand

1. Does death matter? Would we not grant the injunction if she was alive?

ii. Public has an interest in people having the power to destroy property if it affects surrounding property

iii. Dissent’s point: ‘public policy’ is just too vague. The testator and relatives have agreed to the razing of the property, so why don’t we want to honor her wishes?

b. Larger Restrictions: Public Easement vs. Public Trusti. Public Easement:

1. Rare because courts presume license instead of adversity2. Could theoretically happen anywhere people walk; however, public prescriptive

easements are very uncommon because licenses defeat prescription, and courts are very aggressive about presuming that public prescription is by license and not by claim of right.

ii. Public Trust Doctrine:1. USE FOR OPEN ACCESS RIGHTS2. Government does not own it outright, but owns easement on land on behalf of public

in order to allow access to resources for common pursuits (swimming, etc.)3. Private owners consent/adversity is irrelevant4. Private owner ultimately traces title back to the state and state couldn’t grant land not

subject to the public access; state does not own property outright, but subject to duties as trustee to the public. Trustee has power to alienate property on behalf of beneficiary—gov should have power to alienate property on behalf of public,

iii. Carol Rose Article on Joseph Sax1. Rose says : public trust is about preserving commerce (transportation, communication,

commerce, to some degree public speaking…voluntary exchange…connection ability is what the government is obligated to maintain) considers commerce anything that brings people together

a. The existence of channels of communication and of commerce that are open to everyone makes private property more valuable by providing you a way to meet other people who are interest in it – that’s what public trust is about

2. Sax’s Explanation for why government sometimes bad trustee: concentrated interests capture the government, greater public interests are ignored because they are more diffuse

a. Government, as a trustee of the public beach, must: i. (1) Hold the property as available for use by the general public

ii. (2) Not sell the propertyiii. (3) Maintain the property for particular types of use

b. Public can use the beach for: recreation, hiking, picnicking, fishing, swimming, etc. (not exhaustive, but no inherent right to sleep on the beach)

iv. Raleigh Avenue Beach Ass’n v. Atlantis Beach Club: a private beach club must permit the public to enter and use its private dry sand beach. Club barred from charging any fees to transient users but was permitted to charge reasonable fees for its beach-maintenance services to those who remain on the beach for extended periods of time

1. Considered the relation to dry sand beaches in the area, the nature and extent of the public demand, the usage of the dry sand by the owner

c.

II. Unlawful Discriminationa. Racially Restrictive Covenants:

i. Shelley v. Kraemer: racially restrictive covenant signed by 30 of 39 owners, covering 47 of 57 parcels; 5 of non signing owners were AA, and AAs had lived in the neighborhood.

1. Holding: Court cannot directly or indirectly give effect to private biases. Covenant struck down.

2. Carol Rose Analysis: upholding racially rest. Covenants would have amounted to a holding that people in general would agree that such covenants increased the value of the land, thus making covenants rational. Courts couldn’t endorse this without becoming complicit in racial discrimination themselves. As a matter of law, race does not affect the value of land.

b. Fair Housing Act~Fair Housing Act of 1968: Discrimination in selling or renting housing is illegal.FHA recognizes intent to discriminate and disparate impact i. Covers

1. Race2. Color3. Religion4. Sex5. Familial Status (do you have kids or not)6. National origin

a. Failing to advertise in the local language can constitute discrimination. Look for intentional targeting, whether reasonable efforts were made.

7. Disability (1988 Amendment) - §3604(f)(3)

a. Disability (defined by ADA): An impairment that substantially limits major life activities, or one that is viewed as such.

b. FHA requires reasonable affirmative accommodation of handicap.i. Can’t refuse to permit reasonable modifications if the modifications are

necessary and the handicapped person will pay for them.ii. Can’t refuse to make a reasonable exception to rules or policies.

iii. Buildings built after 1988 must be handicap accessible.iv. Note: waiver of a restrictive covenant is an appropriate remedy for

someone with a disability – covenant remains in force for non-disabled residents

c. Landlord can demand restoration of the premises to their pre-modification state at the end of the lease as a condition of leasing.

ii. Doesn’t Cover 1. Marital status (although some states do to protect those who cohabitate)2. Sexual Orientation (some states do)3. Profession (except in NYC, some cities)

iii. Can’t Do1. Refuse to sell or rent after a bona fide offer from a protected class

a. Prima facie case of discrimination:i. Refusal to rent

ii. To a person who is a member of a protected classiii. Who applied for the available propertyiv. Was qualified (could pay the rent)v. Was turned down while the property remained available

b. Disparate treatment is intentional discrimination; disparate impact is a neutral practice that has a disparate effect on a minority group.

c. Refusal to renew a lease would also be illegal, but if you rented to them in the first place there is probably a non-racist reason you aren’t renewing.

d. Organizations frequently send testers out to determine if a landlord’s stated neutral justifications hold up (e.g. if landlord doesn’t rent to Jews because they’re lawyers, send a non-Jewish lawyer and a Jewish non-lawyer).

2. Refuse to negotiate (or otherwise make unavailable or deny)3. Publish any ad that indicates any preference, limitation, or discrimination (3604(c))

a. An ad can violate the FHA even if the underlying restriction doesn’t.b. Describing yourself (e.g. I am white) is read as indicating a preference.c. Phrasing something as an amenity (chapel attached) is OK; phrasing

something as preferential or exclusionary (chapel across the street) is not.d. Publishers may rely on an advertiser’s representation that they are only

looking for a roommate to get to use the roommate exception (acc. HUD).e. Publishers are ordinarily liable under the FHA.

i. The Communications Decency Act shields online publishers like Craigslist from liability, although they must disclose their users’ information when asked.

4. Steer prospective buyers (brokers).iv. What can you do

1. Set credit check, cosigner requirements that are reasonably tied to rent demands.2. Set maximum occupancy limits (even through zoning). Must be “plain and

unmistakable” (Edmonds) or it will be treated as a land-use restriction (subject to FHA).

3. Commit sex discrimination in college towns (HUD under enforces).v. Once the plaintiff shows disparate treatment or disparate impact (don’t need to show

subjective intent), defendant must show rational and necessary business purpose. If

defendant gives neutral justification, plaintiff must show that that is pretext (for disparate treatment) or that the disparate impact outweighs the justification (for disparate impact).

1. Some courts say that a neutral justification automatically defeats a disparate impact claim, but most weigh the justification against the degree of injury to the protected class.

2. Gov’t must show bona fide compelling gov’t purpose with no less discriminatory alternative if they are defendant.

vi. City of Edmonds v. Oxford House, Inc. – opened group home for 10-12 adults recovering from alcoholism and drug addiction; city issued citations – violation of zoning rule that defines who may live in a single-family swelling

1. Restriction on the number of unrelated adults who can live together 2. Issue: is it a density restriction or a familial status restriction? 3. Holding – City’s family composition regulation was not exempt from FHA as a

maximum occupancy restriction; 4. RULE: if its not a density restriction it is not absolutely exempt from familial status

and disability parts of the FHAa. If it can be overcome by showing occupants related by blood then its not a

density restriction it’s a restriction on who can live together as a family (and triggers familial status and disability provisions)

b. Since an unlimited number of family members could live together it was not enacted to set a maximum occupancy

c. Congress clearly wanted to allow density restrictions; has to be a density restriction – cannot be a restriction as to people who aren’t a family but allows any number of people who are a family to live together

c. Exceptions to FHAi. Mrs. Murphy Exception (§3603(b)(1)

1. For sale by owner: any single-family home sold or rented by an owner if the owner does not own >3 single-family houses at any one time

a. Can’t be sold using a broker or discriminatory advertisement (can use attorneys, title companies, etc.)

2. Your Dwelling: rooms or units in dwellings containing living quarters occupied or intended to be occupied by no more than 4 families living independently of each other, if the owner actually maintains and occupies one of the living quarters in his residence

3. Roommate Exception (9th Circuit): FHA does not cover roommates because they aren’t looking for a “dwelling.” Roommates.com can have discriminatory dropdown menus

ii. Reasonable accommodation is one that does not impose undue burdens on neighborhood (ex: traffic, noise, exterior appearance, effects to neighborhood)

d. Choosing Roommates i. According to HUD: tenant seeking a roommate can discriminate on the grounds of sex, but

not raceii. Communications Decency Act §230:

1. No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.

2. Saves Craigslist but not websites like ChristianRoommates.come. 1866 Civil Rights Act (§1982)

i. “All citizens…shall have the same right…as is enjoyed by white citizens…to inherit, purchase, lease, sell, hold, and covey real and personal property)

ii. Dormant for years, revived in 1968 and still used today.iii. Narrower than FHA because it requires showing intent to discriminate (disparate treatment).

iv. Broader than FHA because it does not have exceptions (not shot through with exemptions)v. “Race” must be read as it was understood in 1866 (includes national origin, religion)

vi. Probably requires an intent to discriminate III. Judicially Imposed Limits: Nuisance

a. What is Nuisance? Morgan v. High Penn Oili. Nuisance = Substantial, non-trespassory invasion of the use/enjoyment of land caused by:

1. Negligent, reckless, or ultrahazardous activities OR2. Activities that are intentional and unreasonable

ii. Nuisance defined: An act or condition on D’s land that substantially or unreasonably interferes with P’s use and enjoyment of P’s land (High Penn Oil: nauseating fumes from refinery=nuisance; use is a nuisance when intentional and unreasonable)

1. Intentional: means acting to cause invasion knowing invasion is resulting, OR acting with substantial certainty that invasion will occur (High Penn Oil)

2. Substantial interference: persons of normal sensitivities would consider interference to be substantial (reasonable person)

3. Unreasonable: DEPENDS on who defines it.a. High Penn Oil : threshold for unreasonableness is sufficient invasion of

another’s use and enjoyment of their landb. Rst 2d. of Torts §826 : finds unreasonableness when:

i. (a) The gravity of harm inflicted by the use outweighs its social utility or

ii. (b) The intentional use causes serious harm and the actor could compensate that harm without going out of business

iii. Other Factors Considered1. Gravity of harm inflicted, weighed against social utility of D’s conduct (equities)2. Gravity of harm sufficiently greater than P should have to bear w/o compensation?3. Where there is serious harm, and financial burden of compensation for the harm

would still allow the conduct to continue (Boomer: cement company causes harm, but still wants to operate; ordered company to pay damages b/c it can do so w/o going out of business)

4. Harm to P is sufficiently grave and D could avoid interference in whole/part without undue hardship

5. P’s use is well suited to character of the locality, but D’s is unsuited.iv. REMEMBER: “Use your own so as not to injure another’s property.”

b. Types of Nuisancei. Private Nuisance

1. Affects a single individual or definite small number of persons in the enjoyment of private rights not common to the public

2. Only Private Owners can bring private nuisance suits.ii. Public Nuisance

1. Unreasonable interference with a right common to the general publica. Factors:

i. Does it interfere with public health, safety, peace, comfort or convenience?

ii. Is the conduct proscribed by statute (ex: health and safety code)?iii. Is the conduct continuing? Has it produced permanent/long-lasting

effects?b. Only a member of the public who has suffered a special injury can bring

public nuisance suit (although courts have been flexible with this requirement)iii. Nuisance vs. Trespass

1. Nuisance is not a physical invasion of land like trespass. Nuisance is gas or smelly sriracha air; water or animals are trespass. This is because of its collective nature—water and animals will likely only pass onto one other lot, but gas/smelly air travels

2. Intension trespass is treated like battery (right to exclude); intentional nuisance subject to balancing test (Penn Central!)

c. Remedies for Nuisancei. Deny relief and let nuisance continue

ii. Give plaintiff injunctive relief (Estancias, High Penn Oil)1. Estancias (noisy air conditioner units on apartment building case): default rule to stop

a nuisance under common law was injunctive relief2. Giving an injunction lets parties calculate the damages at the bargaining table

(Estancias)3. Rst 2d: restricts use of injunctions (promotes damages) out of concern that injunctions

give P too much control – but damages give all of the difference between cost and damages to D

4. Injunctions keep Ps from having to keep suing (Estancias), but courts can award an injunction that can be vacated if damages are paid (Boomer)

iii. Let activity continue if D pays damages (Boomer)1. Boomer damages rule is still competing with Estancias default injunction rule2. If you don’t trust a court to enjoin, why trust them to calculate damages?3. Slight injury encourages damages; great injury encourages injunction

iv. Abate the nuisance if P pays damages (Del Webb)1. Coming TO THE NUISANCE does not bar a nuisance suit (would unduly stunt

development), but it is a relevant factor in awarding relief. (Del Webb)d. Estancias (TX case):

i. An apartment complex’s industrial air conditioner located fifty-five feet from a residence was a nuisance and enjoined operation of the air conditioner

ii. Court arrived at this decision even though the residence was valued at $25,000 and it would cost over $150,000 to move the air conditioner

iii. Considered subjective value of quiet enjoyment of one’s home as having more inherent value than the operation of an apartment complex

iv. Note : ZONING AND NUISANCES1. If the use Is permitted by zoning, it cannot be a per se nuisance2. However, the method of operation may still be unreasonable and thus violative

Aside: Pierson v. Post: foxes found to be nuisances; probably extends to other overpopulated creatures/game animals (like feral pigs) that cause harm to property/persons

e. Del Webb (AZ Supreme Court)i. Enjoined the operation of a feed lot, but required a developer to pay “a reasonable amount of

the cost of moving or shutting down” the feed lotii. Reasoning: developer had come to the nuisance because the feed lot had been in operation

prior to the development’s expansion that led to the nuisance complaintf. Note: Right to Farm Statutes (Del Webb)

i. Use has to stay substantially the same – cannot make significant changes then claim that protected

ii. Just at the point that these are occurring, feed lots were changing into modern things we say today – intensity and volume going up

iii. Spur may have still been subject to this rule even with Right to Farm Statute

IV. Legislatively-Imposed Limits: Zoninga. Zoning Generally: Euclid and Beyond

i. Euclid v. Ambler Realty 1. Village of Euclid enacted use districts, height districts, etc. and Plaintiff who

challenged them argued that zoning, in reducing what he could do with his land, reduced the value of his land—effectively a nuisance.

a. Lower court upheld this, holding that if racial zoning is wrong, use zoning is2. SC Reverses:

a. We must protect residential areas and residentsb. There are legitimate state interests—promotion of safety/security/reduce

accidents/decrease noise/preserve environment, etc. that justify zoning3. Considerations:

a. Isn’t this discrimination in disguise—economic discrimination? Doesn’t it still discriminate against minorities and poor people, just indirectly?

b. Euclid is used to justify a wide variety of restrictions, despite SC suggesting it should be a narrow holding.

ii. Euclidean Zoning1. Arose in 20th century as legislative alternative to nuisance and covenants2. Four Principles:

a. 1. Different uses harm each other, so segregation of uses shoves undesirable uses into undesirable areas (no pigs in the parlor)

b. 2. Protect the single family home—creates additional benefits (city expands)c. 3. Low-rise development (houses w/ setbacks, lawns are good)d. 4. Medium density population

iii. Justifications for Zoning1. Originally based on nuisance control. Apartment buildings=nuisance because

overcrowding; large buildings diminish light and trees and green spaces, lead to traffic, noise, and undesirable residents

a. Zoning=congestion on roads to get rid of congestion at homeb. Deferred to legislature because judges can only solve issues at tail end

(nuisance), and even so, many ‘problems’ that people wanted gone were not nuisances under law

2. Other justifications: solves externalities that bargaining (servitudes) and judges (nuisance) can’t; raises property values (but does it really?)

3. Social engineering, property values (Stoyanoff)a. Property value justification assumes that ordinance has empirical effect. In

practice, the best evidence of empirical impact is neighbors complainingb. Also reflects social constructs. Sex offenders can reduce property value even

though they are not a nuisance and don’t run with the land.iv. Validity under Euclid

1. Whether law advances health/safety/morals/general welfare (legitimate interest)?a. In Euclid, legitimate state interests were furthered by zoning (see above)

2. If yes, are the means chosen to achieve the legitimate state interest rationally related to the interest?

a. No if provision is arbitrary and capricious (has no relation to promotion of the claimed legit state interest, has no basis)

3. If yes, person challenging ordinance given opportunity to prove that zoning ordinance at issue is not sufficiently narrow in its reach

v. Standard Zoning Enabling Act:1. Adopted at one time or another in all states; still in effect in some of them2. Zoning=exercise of police power

vi. Houston as a Case Study

Houston is the only major city without zoning (but with many other restrictions like minimum lot sizes, prevailing lot sizes, parking and set back requirements, wide streets and large mileage)

1. (1) Allows zoning in accordance with comprehensive plan that enhances the police power

a. Comprehensive plan can be a statement of objectives and development standards with a zoning map

b. Some states accept the zoning ordinance itself (or its preamble)2. (2) Requires creating a zoning board and appeals (adjustment) board

a. Board proposes comprehensive plan, the city council enactsb. The Board can then pass amendments while the appeals board grants

variances3. (3) FHA regulations for mortgage underwriting were incorporated into mortgages

vii. Discriminatory Issues with Zoning: Concepts Under Attack1. “Segregation of Uses is Desirable”

a. Segregating favorable uses away from ‘unfavorable’ ones (ghettos, etc.)2. “Wholesome housing is key aim of zoning, to which everything else is subsidiary”

a. Considered single family home with yard; intended to preserve “small town social values.” Good planning intended to preserve the status quo

viii. New Urbanism1. Opposite of Euclidian Zoning2. Automobile sprawl is harmful to health/env; reduces mobility; need public transit3. Should instead configure spaces differently to get more utility and mobility overall4. Mixed use buildings promote community interaction and end sprawl5. Aims an addressing social harms of segregation, car pollution.

b. Exceptions to Zoningi. Nonconforming uses

1. Destruction or intentional abandonment of non-conforming use terminates it2. Substantially discontinuing terminates; can’t try to keep it on a technicality3. Right to maintain a non-conforming use runs with the land and can expand to meet

natural changes4. Vested rights doctrine protects a proposed use from zoning change if sufficient

commitments have been made in reliance on the old zoning (you have plans but not permits)

5. Estoppel can protect a non conforming use if the user reasonably and in good faith relied on a defective permit, but it’s usually a losing case (ex: Parkview Associates: case where court refused to apply estoppel and required apartment building had to remove top 12 floors of building in area only zoned for 19 stories after mistake in granting permit)

6. Amortizationa. PA Northwestern v. Zoning Hearing Board

i. Amortization of porn shop required within 90 days due to zoning ordinance.

ii. Can use this to make argument against zoning: it allows taking without compensation, puts all uses in jeopardy, extinguishes property owner’s rights on timetable not of the owner’s choosing (can pass law right after you open your porn shop)

b. Providing a reasonable period of time during which owners can maintain pre-existing uses, and after which they have to terminate (retroactively extinguish non-conforming uses within a specified time period)

c. Half of jurisdictions allow amortization, including CAii. Vested Rights: can “grandfather in” certain uses if sufficient commitments have been made.

1. You have a right to stay in non am-state, or you get to stay long enough to amortize. Important to figure out WHEN you have vested rights (if no VR, gotta leave now)

2. But what is the limit? Construction? Permits obtained? Reliance?c. Variances

i. Standard : Must Show1. (1) Undue Hardship (without variance there is no effective use of the property)

a. Hardship cannot be created or peculiar to the ownerb. Knowingly buying the property subject to a use restriction is not self-inflicted

if the previous owner could have gotten a variance (don’t blame successor-in-interest for previous owner’s failures)

c. Undue hardship needs to be related to the land (fact that individual cannot use land for reasons specific to the individual is not going to count as undue hardship)

d. Commons v. Westwood Zoning Board of Adjustment: NJ SC reversed denial of a variance bc “undue hardship” means that, absent a variance, the property may not effectively be used, a condition that Commons had established by his efforts to either sell the land to his neighbors or acquire additional adjacent land to conform to the ordinance’s area requirements

2. (2) Lack of Detriment (granting the variance won’t imping on the public good or the intent of the zoning plan)

ii. ADA and Variances: ADA should obviously trump zoning laws, but issue is whether allowing variance is “reasonable accommodation.”

1. Self-inflicted hardships: should we give variance to building that violated ADA ramp requirements, to let them expand to have ramp, or make builders tear down?

2. If it causes UNDUE BURDEN to the REGULATORY AUTHORITY, then ACCOMODATION IS NOT NECESSARY (deemed unreasonable).

iii. Use Variances Analysis : 1. Substantially incompatible with the ordinance?2. Affected in a unique way by the regulation?3. Suffer unnecessary hardship if the variance is denied?4. The grant will not be detrimental to the public welfare?

These are independent requirementsiv. Other Notes

1. Variance must run with the land (can’t be based on hardship personal to owner)2. Many boards require drawing up plans before applying for a variance – boards can

condition variance on modifications to the plan3. A current non-conformity is not grounds for an additional non conformity4. The burden of proof is higher for use variance than area variances, but telling the

difference between the two is sometimes difficult (few variances are use variances)a. Area Variances: purchase with knowledge is a factor but not dispositive in

whether there is undue hardshipb. Use Variances: if purchase with knowledge of use restrictions, usually courts

say buyer is out of luck 5. Boards grant many more variances than they deny (special interest politics or bribery)6. Courts rarely overturn denials of variances (Commons is an exception)7. Americans with Disabilities Act trumps zoning for buildings built after 1992

a. DOH requires variances for reasonable accommodations to be granted, although lack of detriment helps show reasonableness

b. Your excuse for not giving variance better be good (aesthetic won’t cut it, traffic/safety maybe)

d. Variations of Zoningi. Special Exceptions

1. Within the original zoning plan itself that promote the purpose of the zoning plan (ex: residential areas with special exceptions for schools, churches, certain businesses, etc.)

2. Legislature decides some uses are appropriate as long as specific standards are met 3. Rules for planned uses, standards for the variance

ii. Rezoning/Spot Zoning1. Amendments to the original zoning plan2. Presumptive Deference: traditional approach is to presume that the zoning

amendments are valid until the challenger has proven otherwise; many jurisdictions don’t scrutinize this more heavily bc if it is really zoning done by a body entrusted with broad decisions, should be treated with initial Euclidean-like deference

iii. Contract Zoning1. Developer gets rezoning to allow his proposed use in exchange for building a public

amenity like a school2. Mostly used in developments

iv. Aesthetic Zoning 1. Only allowed by some states – design standards must be part of the comprehensive

zoning plan 2. IF you give aesthetic controls Euclid deference, certain amount of arbitrariness is OK

if you’re solving a problem – constitutional limits though a. Vagueness (Anderson v. City of Issaquah): a reasonable person must be able

to figure out the standard. Cannot just say “drive around the block,” especially if ordinance requires diversity’ you should be able to do what your neighbors did and be OK

i. NOT VAGUE: Stoyanoff: court upheld rejection of owner’s “monstrosity of grotesque design” bc it was reasonably related to preserving land use values and the prevailing aesthetic sense of the community

b. Freedom of Speech (City of Ladue v. Gilleo): zoning laws that regulate free speech in a content neutral fashion are invalid if they are either:

i. (1) Broader than reasonably necessary to achieve a significant government purpose other than speech regulation, or

ii. (2) So restrictive that they fail to leave open ample alternative channels of communication

1. Architectural design is not itself “speech” protected by the 1st amendments

2. Noncommercial residential signs get the most protection iii. City of Ladue v. Gilleo : even though Ladue’s regulation was content

neutral, unanimously voided bc it “near total prohibition” on signs failed to leave open enough alterative means of communication banned entire medium of communication

3. Nuisance abatement and police power do not justify aesthetic controlsa. Zoning upheld in Berman v. Parker bc ugliness (slums in that case) can be as

bad as actual nuisances e. Exclusionary Zoning

i. Exclusionary Zoning: Seeks to exclude unwanted people, but sometimes not for statutorily or constitutionally prohibited reasons (so it’s allowed).

ii. Freedom of Association and Family Occupancy1. Cannot define which family members can live together (Moore v. East Cleveland)2. However, CAN define other restrictions on who can live in a house (Belle Terre)

3. Related persons: Freedom of Association and Due Process protect freedom of choice in matters of marriage and family choice (strict scrutiny therefore applies when analysis ordinances that try to regulate this)

a. Moore : Court doesn’t allow ordinance barring grandmother from living with son and grandsons

4. Unrelated Persons: Zoning laws that prohibit/interfere w/ ability of unrelated persons to live together are presumed valid and subject only to minimal scrutiny (Rational Basis Review!)

a. Belle Terre : Court applies minimum scrutiny because the law did not substantially burden deeply rooted liberty of family members to arrange themselves in living situations.

i. Law was rationally related to legitimate government objectives of residential tranquility and low residential density.

5. States can interpret ordinances to include the proposed use and avoid the constitutional issue: McMinn; Baker: interpretations of family as functional rather than biological unit; people can associate together if they exhibit characteristics of permanence and intimacy that traditionally ID family units

f. Responses to Exclusionary Zoning1. (1) Stay out entirely – US Supreme Court

a. Zoning valid under Euclid2. (2) Strong Involvement – Mt Laurel

a. Principle: Anyone good enough to work in the city is good enough to live in the city

b. Every developing community must presumptively make possible housing for all incomes (fair share)

c. If city meets the heavy burden of showing the peculiar hardship of providing this housing, they can be exempted

i. Local zoning cannot just service local welfare, has to serve all state citizens because zoning power come from the state, not the municipality

d. The city’s fair share decreases if there are fewer poor people in the region or if city has already built a large chunk of low/moderate income housing

e. Challenger must show facial problem (housing not available – disparate impact). City must then meet heavy burden to show why housing is not available

f. Fiscal and environmental reasons are not enough – tax base defense can only be relevant, not the sole justification for restrictive housing policies

ii. (3) Builder’s Remedy (Mt Laurel II)1. Mt Laurel II extended duty to all communities, not just developing ones2. Builders of low income housing may construct such housing despite local refusal to

permit construction iii. (4) Regional Contribution Agreements

1. NJ legislative response: created administrative agency to enforce “fair share” provision

2. Suburbs can, with council approval, compensate cities for agreeing to absorb portion of suburb’s fair share obligation

iv. (5) Inclusionary Zoning: encouraging poor people to live in the same neighborhood as rich people by conditioning grants to developers on building some affordable housing

1. Usually only applies to residential developments with more than 5 units2. Some cities allow developer to pay a fee instead of doing inclusionary zoning

v. Modern Trend is away from voluntary inclusionary zoning and towards mandatory inclusionary zoning (although the city still gives developers benefits like quicker approval and lower fees)

1. Affordable housing must look like market price housing (avoids stigma, keeps the neighbors happy) – increases maintenance costs

2. Developers use covenants to set sale price as a percentage of the market price, give income controls, set occupancy requirements, create a sliding scale [you get a higher percentage of the increased equity of you stay longer], forbid sublease/assignment

3. Tension between goals of giving people upward mobility and giving poor people opportunity to live in decent neighborhoods – giving too much of the equity will reduce supply of affordable housing

V. Takingsa. Takings Generally

Fifth Amendment: “Nor shall private property be taken for public use, without just compensation”

Rule: The government has the power to take private property for public use by eminent domain. No governmental seizure of private property may occur, even if just compensation is paid, unless it is for public use

-----SCOTUS give tons of deference to legislature – public use basically means any taking rationally related to any conceivable public purpose is permissible

i. Justifications for Takings 1. State owned property before you did, conveyed subject to takings (Hugo Grotius)2. Takings are part of our feudal inheritance, like landowning itself3. Taking is an inherent attribute of sovereignty (most common justification)4. Taking is useful as an ant-monopoly device to prevent holdouts (Posner)

ii. Justifications for Compensation 1. Compensation is not a moral imperative2. Compensation fully indemnifies landowner3. Compensation protects private investment; don’t need to take out insurance (Posner)4. Some argue this view will lead to overinvestment in property, but query whether any

people actually behave this way (buying land recklessly without eminent domain in mind)

5. Disincentivize state from taking (Madison protected wealthy landowners)6. Forces the state to internalize costs of takings

iii. Theories of Takings 1. Joe Sax: Government should have to pay when it is enterprising (e.g. building road),

but not when it is arbitrating. Controlling spillover effects is a form of arbitration.2. Michelman: 3 variables in takings calculations: efficiency gains of the taking (E),

demoralization costs of not compensating- both to landowner and other people who worry about their land after seeing landowner taken (D), settlement costs of compensating (S).

a. The government should not take if D>E and S>E.b. If D>S, government must compensate for its taking.c. If S>D, government need not compensate for its takingd. This is well and good in theory (and explains why permanent physical

occupation is a taking), but difficult to calculate in practice.3. Ackerman: The Ordinary Observer would not view reducing value as “taking”

something. He/she would view permanent physical occupation as taking something.4. Richard Epstein: Any government modification of the right to possess, use, or

dispose of land is a taking. This is an extreme libertarian position.5. Fischel: Trust larger government’s regulations more than smaller government’s

regulations because individual voices are greater in small governments.

6. Rubenfeld: A government action is only a taking if using the property would further the government’s interest more than it being destroyed would. Textualist reading of “public use.”

a. The government didn’t want the coal in Mahon to be destroyed, so it was a taking.

b. The government would be perfectly happy to have the brickmaking business in Hadacheck be destroyed, so it was not a taking.

c. Blowing up a bag at an airport is not a taking.d. Any theory of taking that leads to taxes or blowing up a bag at an airport

being takings must be wrong. If taxes were a taking, there would have to be an average reciprocity of advantage (you prefer a share of a battleship to your money).

e. One way to do this is to claim that real property is special.f. One way to differentiate taxes is to say that takings take that property, while

you can come up with the money for taxes however you like.iv. (1) Public Use

1. Berman: “urban renewal” scheme in which blighted property was condemned and transferred to a private developer was a public use

2. Kelo: as long as a condemnation was part of a “comprehensive development plan” that had been subjected to “thorough deliberation,” the Court would defer to the judgment of the government officials

3. 43 states reacted to Kelo by tightening eminent domain, but only some declared taking for economic development completely off limits.

4. Ends Based Test: end is a public purpose; whether it’s for the public to actually physically use (ex: road; transit hub)

5. Means Based Test: need to take property to accomplish government’s aim (Note: if ends are unacceptable, means should be as well)

a. Note: seizing drugs for use as evidence at trial is not a taking even when the drugs expire, because prosecution is a public good (goes for all property evidence)

v. (2) Just Compensation: fair market value + incidental moving costs 1. Inherently undercompensates for things like emotional attachment 2. Compensation will probably increase if politically powerful or threaten to sue3. Rule: if only part of the land is taken, just compensation will include the fair market

value of the land taken and the fair market value of the damage to the remainder of the land that foreseeably follows BUT if taking increases the value of remaining land, the government does not get to offset that cost

a. Rationale: Offsetting cost would discriminate against the land owner whose land is taken, even though the neighbor would get to benefit

b. NOT the uniform rule (ex: New Jersey)4. Constitutional basis: outright appropriations in neither necessary nor sufficient for a

taking (some things that do not have to be compensated for)a. A to B transfer – off limits after Kelob. A’s house becomes public park – can be done but must be compensatedc. Cops destroy A’s house – not a taking; don’t require compensation

i. Ex: firefighters set your house on fire as a fire break – not a takingii. Ex: bust through the door to chase a criminal, not a taking

iii. Not really about taking the property, but it’s about achieving some other objective that the property just happens to be in the way of

b. Regulatory Takings: How much regulation of property is too much?i. Assuming public use/not otherwise unconstitutional, you would determine whether the

regulation falls within one of the categorical rules:

1. (1) permanent physical occupation; 2. (2) nuisance control [but see Lucas]; 3. (3) total wipeout [if so check if Lucas exceptions apply]. 

If none of the categorical rules apply, then apply Penn Coal/Penn Central balancing.

ii. Per Se Rules1. (1) A permanent physical occupation is a taking

a. Even if damage is minimal (ex: $1 cable boxes on apartment building), compensation is still required

2. (2) Stopping a nuisance never requires compensation (Hadacheck – brickmaker case)

a. If it is reasonable for the legislature to conclude that an activity is a nuisance, you had no right to do it in the first place (not in your title)

b. Unless government caused a nuisance, does not matter how it came to bec. Hadacheck: court never explicitly declared brickyard a nuisance, but rather

held that bc the ordinance allowed Hadacheck to remove his clay (but not make bricks) there was no taking. City was seeking to regulate a noxious use, even if it might be lawful

d. Wide latitude for the government to regulate activities as nuisances as long as it has a reasonable belief that the activities will cause harm to nearby properties

e. BUT SEE : Lucas: all affected properties been shown to be causing a nuisance according to the common law of the 19th century?

3. (3) If government regulation leaves the owner with no economically viable use of her property, and the regulation does not abate a common law nuisance, a taking has occurred

a. Rationales: (a) severity of such regulations impeach the usual assumption that gov’t regulation of property is for the advantage of everyone, including affected property owners; (b) effect of these regulations is to achieve public benefits by imposing costs of such benefits entirely upon affected property owners

4. (4) Personal Property: seizing property as evidence of a crime is not a taking (confiscatory nontaking)

a. Not compensable bc it is a state action to prevent public harm b. Apparently subject to Penn Central analysis

iii. Underlying Rules1. (1) Must balance public benefits and private costs aka if a regulation goes too far,

it is a taking (Mahon)2. A regulation is not a taking if it substantially advances a legitimate state objective3. (1) Public benefits from the regulation must outweigh the private costs 4. (2) Regulation must not be arbitrary5. (3) Property owner must be permitted to earn reasonable return on an investment

propertyiv. Test : Factors to consider in determining whether a regulation goes too far

1. Economic Impact2. Extent of the interference with distinct investment backed expectations: taking exists

when a claimant is deprived of distinctly perceived, sharply crystallized, investment-backed expectations

3. Character of the governmental action (physical invasion? Nuisance-like activity?v. (2) Conceptual severance - when a regulation wipes out an entire property right that has

been recognized by the market)

1. Penn Coal v. Mahon: court held that Kohler Act, prohibited underground coal mining that would cause surface subsidence, “went too far” so it was a taking. Law made it commercial impracticable to mine coal, which had the same effect for constitutional purposes as appropriate or destroying the right to mine coal

2. Destroyed a legal right, so it was a taking 3. Brandeis Dissent : Kohler Act prohibited a noxious use. Diminution in value was not

absolute – the appropriate measure should not be the decline in value of the coal alone, but the value of the whole property

vi. Penn Central Analysis: considers1. The character of the government action

a. Physical invasions and occupations by the governmentb. Misuse of regulatory authority of governmentc. Uncertainty in application of regulations (hard to know how to comply/plan

for use/equal enforcement)i. Average reciprocity of advantage: as long as some benefits s are accrued

to the regulated party, reciprocity demands are metd. Importance of the governmental actione. Likelihood that the regulation will work to abate the nuisance like condition

2. The economic loss suffered by the party regulateda. Transferable development rights (TDRs) mitigate financial burden

3. The frustration of the distinct investment backed expectations (DIBEs)4. Example: Grand Central primarily created as a method of profiting from railway

transportation, and ability to build offices above = added bonus 5. Less concern over ability to profit from additional aspects of an operation6. If private covenants bar the activity, unlikely that DIBE exist

vii. Lucas v. South Carolina Coastal Council: total wipe out situations1. Rule: If a regulation effects a total wipeout of a property interest, then it is a taking

unless the activity being banned was not part of the title in the first place based on background common law principles of property law and nuisance law

2. Rejected the idea of conceptual severance and said that you have to consider the impact of the regulation on the value of the ENTIRE parcel as opposed to on just the regulated part

3. Note : explicitly limited to real property (NO PERSONAL PROPERTY) by Scalia 4. ABOUT NUISANCE: if land was only valuable for a use that was a nuisance, a total

wipeout was legitimate 5. Lucas: no theoretically productive use remained, regardless of the monetary

economic situationa. As long as something productive could be done, whether or not it would be

profitable to do it at this point in time, no total wipeout has occurred viii. Palazzo:

1. Timing of regulations matters because we make DIBE in reliance on new regulations2. Background principle – something that adheres in everyone’s title to land

a. Inherent thing that trumps right of possessionb. Laws that have always been around since there has been property lawc. Riparian Right: water rights, etc.d. Adverse possession, prescription, implied easements = background principlese. Palozzo: law does not become a principle for subsequent owners just by

enactingi. 1870: would have allowed destruction of house to fight a fire, but would

not allow wetlands regulations because it was not something they knew about, so not a background principle

ix. Note : forcing sex-offenders to leave their home is a regulatory taking; forcing them to leave their business is not; living in your home is distinct investment-backed expectation; being at your business isn’t as long as you can hire someone else to run it

No Go Zone Free Zone Pay Zone

Regulation Violates some other constitutional rule (1st amendment, second amendment, etc.)

Ordinary exercise of police power (Hadacheck, Penn Central)

Regulatory Taking (Penn Coal, Lucas)

Appropriation Impermissible A-to-B transfer (A’s house to B)

Confiscatory nontaking (evidence seized; cops destroy A’s house

Eminent domain (Kelo; A’s house becomes public park)

c. Exactions (Nollan/Dolan)

i. Nollan v. California Coastal Commission1. Rule : 2. (1) Nexus between government purpose and means used to achieve them (exaction

you’re seeking has to be substantially related to the purpose you’re seeking it for – cannot just equivocate meaning of access)

a. (Requiring a public easement over beach property to grant permit to build on that property is not rationally connected to the development ban’s purpose of protecting the public’s view of the beach)

3. (2) Effectiveness: exaction must substantially advance that government purpose

ii. Dollan v. City of Tigard1. In addition to the essential nexus between the condition and the governmental

purpose, there must be “rough proportionality” between the two2. City must make some sort of “individualized determination” that the exaction is

related both in nature and extent to the impact of the proposed developmentiii. Nollan/Dolan: applies to impact feesiv. Bc the justification for Nollan/Dolan is not just that the owner is required to give up an

interest in land, court said – justification is that they might be extracting something from the owner that the owner is not required to give