Property

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Leasehold Estate

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a legal interest that entitles the tenant to immediate possession of designated land, for either a fixed period of time (e.g., five years) or for so long as the tenant (or lessee) and the landlord (or lessor) desire

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Term Of Years

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An estate that lasts for some fixed period of time or for a period computable by a formula that results in fixing calendar dates for beginning and ending, once the term is created or becomes possessory. Must be calculable.

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Creation of a Term of Years

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1.Creation:
a.At common law, there was no limit on the number of year permitted
b.Statute of Frauds requires that a lease creating a tenancy for more than one year be in writing.
c.You can create a conditional term of years: “to A for 10 years or until [some condition]”
d.The tenant or landlord does not have to give notice of the term ending; it automatically ends when the term ends

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Termination of a Term of Years

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1.Termination:
a.Death of the landlord or tenant has no effect on the duration of a term of years
b.A unilateral power to terminate a lease can be engrafted on a term of years
c.The Term of Years expires on the date of termination and therefore no notice is necessary to end the lease

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The Periodic Tenancy

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a lease for a period of some fixed duration that continues for succeeding periods until either the landlord or tenant gives notice of termination. Periodic tenancy is automatically renewed.

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Example of Periodic Tenancy

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1.Examples:
a.“to A from month to month”
b.“to B from year to year”

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Creation of Periodic Tenancy

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1.Creation – Periodic tenancies can be created in three ways:
a.By express agreement
b.By implication – implied if the lease has no set termination but does provide for the payment of rent at specific periods
c.By operation of law – when a tenant holds over or if the lease is invalid and the tenant nonetheless goes into possession

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Termination of a Periodic Tenancy

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1.Termination
a.At common law, half a year’s (6 months) notice is required to terminate a year-to-year tenancy.
b.For any periodic tenancy less than one year, notice of termination must be given equal in length of the period, but not to exceed six months. (ex. if periodic tenancy is from month to month must give at least a full month’s notice)
c.Many states have shortened the length of notice required to terminate periodic tenancies and have permitted a month-to-month tenancy to be terminated at any time following thirty days’ notice
d.Death of the landlord or tenant has no effect on the duration of a periodic tenancy.
e.The soonest you can end a periodic tenancy is at the end of the period. Even if you give notice, you’re still bound by the lease.

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Tenancy at will

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a tenancy of no fixed period that endures so long as BOTH landlord and tenant desire.

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Termination Rights of Tenancy at will

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a.To be a tenancy at will, both the landlord and the tenant must have the right to terminate the lease at will.
b.If the lease gives only the landlord the right to terminate at will, a similar right will be implied in favor of the tenant so that the lease creates a tenancy at will
c.If the lease is only at the will of the tenant, courts usually do not imply a right to terminate in favor of the landlord. Rather, most interpret the conveyance as creating a life estate or fee simple, either or which is terminable by the tenant.
d.If the Statute of Frauds is not satisfied, the conveyance is a tenancy at will

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Creation of Tenancy at Will

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a.Regular rent payments typically convert a tenancy at will into a periodic tenancy unless the parties have expressly agreed otherwise
b.At common law, there was no limit on the number of year permitted
c.Language—“We are creating a tenancy at will”

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Termination of a Tenancy at Will

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1.
a.Notice
i.At common law, the lease terminated automatically upon notice
ii.Modern statutes ordinarily require a period of notice in order to terminate
b.Terminates by operation of law if:
i.Either party dies
ii.The tenant commits waste
iii.The tenant attempts to assign
iv.Landlord transfers his interest
v.Landlord executes a term lease to a third person

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Tenancy at Sufferance

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arises when a tenant remains in possession (holds over) after termination of the tenancy

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Landlord's options for a Tenancy at Sufferance

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1.The landlord confronted with a holdover has two options:
a.Eviction (plus damages)
b.Consent (express or implied) to the creation of a new tenancy (of at the most 1 year)
2.When a tenant holds over, the landlord chooses whether to evict him or hold him to another lease. Once the landlord chooses to treat a holdover as a trespasser or to hold him to a new term, the landlord may not change his mind.
3.Most jurisdictions treat the new lease as a periodic tenancy.
4.As a general rule, a tenancy from year to year is created by the tenant’s holding over after the expiration of a term for years and the continued payment of the yearly rent reserved.
5.In most jurisdictions, holding over gives rise to a periodic tenancy; in the balance, it results in a term
6.Some statutes specify the length of the holdover tenancy

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Lease

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a contract containing the promises of the parties. It governs the relationship between the landlord and tenant over the term of the lease. Covenants in a lease are generally independent.

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What type of property are leaseholds classified as?

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Personal Property

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Statute of Frauds

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Commonly, American statutes provide that leases for more than one year must be in writing. All but a few jurisdictions permit oral leases for a term less than a year, those that do not usually hold that entry under an oral lease plus payment of rent creates a periodic tenancy that is not subject to the Statute

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LANDLORD DUTIES and
TENANT REMEDIES

Covenant of Quiet Enjoyment and Constructive Eviction

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There is implied in every lease a covenant that neither the landlord nor anyone with paramount title will interfere with the tenant’s quiet enjoyment and possession of the premises.

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In what ways may a tenant's covenant of quiet enjoyment be breached?

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3 ways: Actual Eviction, Partial Actual Eviction, Constructive Eviction

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Actual Eviction Definition

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Actual Eviction—a wrongful actual eviction by the LL breaches the Covenant of Quiet Enjoyment

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Constructive Eviction Definition

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occurs when wrongful conduct of the landlord substantially interferes with the tenant’s use and enjoyment of the leased premises. Occurs when the LL fails to perform a duty that the LL owes the tenant and the tenant is essentially deprived of the beneficial enjoyment of the leased premises where they are rendered unsuitable for occupancy for the purposes for which they are leased.

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Constructive Actual Eviction

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a. there must be an act or omission of the landlord or of anyone who acts under authority or legal right from the landlord, or of someone having superior title to that of the landlord:
i.which renders the premises substantially unsuitable for the purpose for which they are leased OR
ii.which seriously interferes with the beneficial enjoyment of the premises, is a breach of the covenant of quiet enjoyment of the premises
b.Second, the tenant must give the landlord notice of the interference and reasonable time to correct it. If the breach continues, the tenant may vacate within a reasonable time
c.If there has been a breach, then there is constructive eviction of the tenant. The tenant can:
i.Leave, and then she is not liable for any further rent – the tenant must vacate within a reasonable time.
1.NOTE: A tenant’s right to claim a constructive eviction will be lost if he does not vacate the premises within a reasonable time after the right comes into existence.
2.What constitutes a reasonable time depends upon the circumstances of each case.
3.The tenant is relieved of any liability for future rent and entitled to recover damages – to compensate both for losses realized while in possession and for losses realized while in possession and for losses resulting from a higher rent for equivalent replacement premises.

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What does covenant of quiet enjoyment provide?

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Allows a tenant to have quiet and peaceable use of the leased premises.
It is implied if not expressly stated in the lease
Protects against acts/omissions of a landlord which seriously interfere with permissive use of the property
There is a “no noise” provision the landlord has control over the problem

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Covenant of quiet enjoyment and 3rd parties

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RULE: The landlord’s obligation under a covenant of quiet enjoyment does not extend to acts of other tenants or third parties unless such acts are performed on behalf of the landlord or by one claiming paramount title.

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exclusive possession and LL right to entry

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-RULE: A tenant’s right to exclusive possession of the property suspends the landlord’s right of entry, along with his ability to abate a nuisance on the property, during the term of the lease.

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Breach of landlord's obligations and tenant's remedies

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(1) Terminate the lease and recover damages; or
(2) Continue the lease and obtain equitable and legal relief including
a) the recovery of damages
b) an abatement of the rent
c) the use of the rent to eliminate interference
d) the withholding of the rent

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Partial Eviction

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Actual partial eviction occurs when the landlord physically retakes possession of a portion of the premises from the tenant.
-A tenant is entirely relieved of the duty to pay rent when the landlord takes a substantial portion of the premises.
-In determining substantiality the Court should consider the extent to which the repossession interferes with the tenant’s use and enjoyment of the land.

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Rules for Actual Partial Eviction

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 Interference with the tenant’s use of and enjoyment is a factual question considering things such as size of parcel taken in relation to the entire property and the particular use of the taken parcel.

-RULE: The tenant is not relieved entirely of an obligation to pay rent by an actual/partial eviction unless the eviction is from substantial part of the premises
-RULE: Relief generally used is rent abatement for the portion of the leased property affected

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Subleases and Assignments

Privity

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Privity of estate and privity of contract exists between the Lessor and the Lessee at the time the lease is created. Privity is important because a landlord can only sue a tenant with whom he is in privity with (either privity of estate or contract). Must track the privity from the original lease then determine if it is an assignment or sublease.
-Privity of Estate is mutual (e.g., lease of land) or successive (e.g., selling of land) interest in property.
-Privity of Contract exists between parties in a contract with each other (such as Landlord/Tenant)

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Sublease

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Sublease – A sublease may be generally defined as a transaction whereby a tenant grants an interest in the leased premises less than his own, or reserves to himself a reversionary interest in the term. There is always some sort of remaining time left on the lease, even just a day. In a sublease, the Landlord and first tenant (T1) are in privity of contract and privity of estate.
1.Landlord can sue T2 in a sublease only if T2 has expressly agreed to be bound by the original promises in the lease, and the jurisdiction recognizes 3rd party beneficiaries
2.There is no Privity of Estate or Contract between landlord and sub-leasor because the sub-leasor does not have an interest of the entire estate. (There is privity between the tenant and the sub-leasor however)
3.If your lease is silent on subleasing, you are free to sublease without the permission of the landlord
4.T2 is not personally liable for any covenants; nor can he enforce the landlord’s covenants—if you sublease the apartment, the sub-leasor cannot sue the landlord for breach of any of the covenants.
5.T1, original tenant, is liable for all the rent and all the covenants and he can enforce these against the landlord.

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Assignment

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Assignment – An assignment conveys the whole term, leaving no interest nor reversionary interest in the grantor or assignor. The existing tenant conveys the entire remainder of the lease to a new tenant. Arises when the lessee transfers his entire interest under the lease – duration of the term. In an assignment, the Landlord and first tenant (T1) are in privity of contract while the Landlord and second tenant (T2) are in privity of estate
1.Landlord can sue T1 or T2 in an assignment
2.T1 is only off the hook in an assignment if there has been a novation (an agreement in which the Landlord would release the original tenant from all obligations set forth in the lease)
3.Privity of Estate is destroyed in an assignment
4.T2 is liable to the LL for all of the covenants that run with the land because in an assignment T2 is in Privity of Estate.
5.T1 remains liable for the rent and the other covenants in the lease because there is Privity of Contract between the landlord and the original tenant.

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Refusal by a landlord to sublet or assign:

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1.Under common law – a landlord can withhold consent for sublease or assignment for any reason
2.Minority and Restatements – must apply a reasonableness standard to deny an assignment or sublease
3.What is a reasonable reason to refuse a sublease or assignment?
a.Economic reasons
b.Financial stability of the assigned
c.Proposed use of the premises

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Rule in Dumpor’s Case

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A landlord can waive the right to insist on approving a sub-leasor or sub-tenant and once this is waived it cannot be reinstituted into a contract—once this is waived, it is forever waived
-NOTE: To prevent the Rule in Dumpor’s Case from applying, a landlord can make a provision in the lease stating that the tenant must receive permission from the landlord each time before he subleases
-NOTE: Prohibition against an assignment DOES NOT imply prohibition against a sublease and vice versa.
-NOTE Many American Jurisdictions have rejected this rule

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Delivery of Posession

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There is always an implied covenant between lessor and lessee that the landlord will assure the tenant the legal right to possession (at the beginning of the term, there will be no legal obstacle to tenant’s right of possession).

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For delivery of actual possession w/out an express covenant, there are 2 rules:

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1.Majority View - English Rule: implies a covenant requiring the lessor to put the lessee in possession because that’s what you expect when you enter into a lease (Restatement favors)

Minority View – American Rule: recognizes the lessee’s legal right to possession, but implies no such duty upon the lessor against wrongdoers or to put tenant in actual possession

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Delivery of Possession
and Express Covenants

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-If parties expressly covenant, then there is no problem and we don’t need to decide and apply these rules

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When does a tenant abandon possession?

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1.A tenant abandons the property when the tenant:
a.Vacates the premises without justification,
b.Lacks the present intent to return, AND
c.Defaults in the payment of rent

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LL remedies when a tenant abandons possession

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When a tenant wrongfully abandons the premises and renounces the lease, in the absence of statutes or lease provisions to the contrary, the landlord may:
(a) Landlord can do nothing and sue for rent at is comes due
(b) Landlord can accept the surrender = the lease is terminated (relieves tenant of liability)
(c) Landlord can retake possession on behalf of the tenant for the purposes of mitigating damages (this is not accepting surrender but it says that the landlord is going to take possession and then go try to find someone else to fill the lease)
(d) Landlord can treat the tenant’s conduct as an anticipatory breach of contract, and can sue for damages both past and present (damages are what the tenant owes landlord under the lease and then what the landlord would get for the land under the Fair Rental Act)

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Surrender

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1.Surrender means that a tenant gives up the entire lease term. If there is an offer of a surrender and the landlord accepts the surrender, the lease is terminated and the landlord has no further obligations under the lease
a.If the landlord did not accept the surrender, but the tenant abandoned, the fear on the part of the landlord was that if the he tried to re-rent it, it would be seen as an implied acceptance of the surrender

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Duty to Mitigate

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1.At common law there was no duty to mitigate
2.Majority Rule – The Landlord has a duty to mitigate his or her loss, in a situation where a tenant abandons the premises

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Damages after abandonment

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tenant abandons his estate in real property, but still liable in contact.

reletting at higher rate does not bar an action

surrender and acceptance by operation of law=conduct inconsistent with rights of tenant.

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Implied warranty of habitability

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landlord will deliver the premises in habitable condition and maintain them in that condition during the lease term
1.Focuses on health and safety:
a.Premises are safe, clean, and fit for human habitation
b.Covers all latent and patent defects in the essential facilities of the residential unit
c.Essential facilities are facilities vital to the use of the premises for residential purposes
d.A tenant who enters into a lease agreement with knowledge of any defect in the essential facilities cannot be said to have assumed the risk, thereby losing the protection of the warranty

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Can IWH be waived?

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1.The warranty cannot be waived by any written provision in the lease or by oral agreement (majority view)

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Breach of IWH

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Standard and breach
a.Generally, the standard applied is the local housing code if one exists; if there is none, the court asks whether the conditions are reasonably suitable for human residence.
b.Breach occurs when the leased premises are uninhabitable in the eyes of a reasonable person
c.Housing code violations and their violation are compelling but not conclusive

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What must tenant do to show breach of IMH

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1.To bring an action, tenant must show that she notified the landlord of the deficiency or defect not known to the landlord and allowed a reasonable time for its correction

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Remedies if the landlord breaches the implied warranty of habitability:

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1.
a.Tenant may move out and terminate the lease
b.Tenant may make repairs and offset the cost against future rent
c.Tenant may reduce or abate rent to an amount equal to the fair rental value in view of the defects in the property.
d.If landlord sues the tenant, the tenant can raise the defense of a breach of the implied warranty of habitability

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Caveat Emptor

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Caveat Emptor: A purchaser of property has no right to rely upon the representations of the vendor, or seller of the property as to its quality, where the purchaser has a reasonable opportunity to examine the property, judging for himself as to its qualities
NOTE: If there is fraud or misrepresentation, caveat emptor does not apply

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Implied Warranty of Suitability:

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-There is an implied warranty of suitability by the landlord in a commercial lease that the premises are suitable for their intended commercial purpose.
 This warranty means that at the inception of the lease there are no latent defects in the facilities that are vital to the use of the premises for their intended commercial purpose and that these essential facilities will remain in a suitable condition
 If however, the parties to a lease expressly agree that the tenant will repair certain defects, then the provisions of the lease will control
RULE: A commercial tenant desires to lease premises suitable for their intended commercial use. A commercial landlord impliedly represents that the premises are in fact suitable for that use and will remain in suitable condition. Therefore, a commercial tenant’s obligation to pay rent and the landlord’s implied warranty of suitability are mutually dependent

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Breach of IWS considerations

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a.Nature of the defect and its effect on the tenant’s use of the premises
b.Length of time the defect persisted
c.Age of the structure
d.Amount of the rent
e.Area in which the premises are located
f.Whether the tenant waived the defects
g.Whether the defect resulted from any unusual or abnormal use by the tenant

-Typically jurisdictions follow the Implied Warranties over the Doctrine of Caveat Emptor***

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PA RULES for IWH

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PA RULES

Implied Warranty of Habitability – Applies to residential leases and cannot be waived. A breach can support a claim for a cause of action for intentional infliction of emotional distress. The Superior Court held that it will not be applied to commercial leases, but that has not been addressed by the PA Supreme Court.
1.Everything else applies in PA
a.Focus is on health and safety
b.Housing violations are relevant but not determinative
2.Remedies:
a.Vacate, pay no rent
b.Stay, repair, deduct
c.Repair costs cannot be more than the dwelling

Landlord-Tenant Act – There is old case law where the Supreme Court recognized landlord’s right to self-help, however, more recent cases, not at the supreme court level, have said that self-help is no longer available in PA because of the landlord-tenant act. In PA a landlord has no duty to mitigate damages when a tenant abandons. This is clearly a minority position and that ruling was based on a case where a commercial lease was at issue.

-In a given situation a tenant can argue CONSTRUCTIVE EVICTION and BREACH OF IMPLIED WARRANTY OF HABITABILITY

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Land Sale Transactions

Statute of Frauds

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tatute of Frauds – the real estate contract of sale must typically be in writing, signed by the party to be charged, and state a price in order to comply with the Statute of Frauds. The writing must include: a description or the property, identification of the parties to the contract, and the price and manner of payment (if agreed upon).

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Exceptions to Statute of Frauds

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a.Part Performance Doctrine – In most states, courts may enforce oral agreements where parties have made part performance pursuant to the agreement. Two of the following are required:
1.Possession of the land by the purchaser
2.Making substantial improvements
3.Payment of all or part of the purchase price by the purchaser
b.Doctrine of Estoppel – Estoppel applies when unconscionable injury would result from denying enforcement of the oral contract after one party has been induced by the other seriously to change his position in reliance on the contract. May also apply when unjust enrichment would result if a party who has received the benefits of the other’s performance were allowed to rely upon the Statute.
1.P must prove reliance
2.P must prove irreparable injury unless the contract is enforced
3.Defense at law

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Marketable Title

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Title reasonably free from doubt, i.e., title that a reasonably prudent buyer would be willing to accept. It need not be a “perfect” title, but the title must be free from questions that might present an unreasonable risk of litigation. Generally this means an unencumbered fee simple with good record title.

A title may be regarded as “unmarketable” where a reasonably prudent man, familiar with the facts, would refuse to accept title in the ordinary course of business and it is not necessary that the title actually be bad in order to render it unmarketable.

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What renders title unmarketable?

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1.
a.Violation of a zoning ordinance
b.Tract of land with no legal access
c.Encumbrances: Anything which constitutes a burden upon the title, such as a right-of-way, a condition which may work a forfeiture of the estate, a right to take off timber, or a right of dower. Encumbrances burden title, but do not prevent title from being conveyed. There is no perfect title however with an encumbrance, i.e., there is no FSA.

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Encumbrances that MAY affect title:

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a.
1.Building Codes—can exist without affecting marketable title
2.Zoning Codes—zoning code that limits use to certain activity will not render title unmarketable
3.Restrictive Covenants—same as zoning codes
4.Easements—if nothing about in the lease, then mere existence renders title unmarketable
-RULE: A vendor is not required to convey land free from any burden of easements, rather the vendee may not be required to accept land burdened by easements that effect marketable title.
-A conflict occurs only when the nature of the easement is so burdensome as to prevent conveyance of marketable title
5.Lease—mere existence renders title unmarketable
6.Liens—mere existence renders title unmarketable
7.Mortgages

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Covenants not to engage in particular activities

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RULE: A lessor may exact from a lessee a covenant not to engage in particular commercial activities in which the lessor or other of his lessees are already engaged, or a lessee may exact from the lessor a covenant not to engage in nor permit subsequent lessees of land retained by the lessor to engage in particular commercial activities in which the primary lessee contemplated pursuing.
 Landlord can include such a clause in a lease—Tenant can exact similar promise from landlord
 The effect of such a covenant is to create a limited geographic monopoly. As such, it is a restraint on trade and will be enforced by the courts only if the covenant is positively expressed. Even then, it will be narrowly construed

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Subsequent lessees and covenants not to engage in particular activities

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RULE: Non competition covenants are enforceable by a lessee against a subsequent lessee of the common lessor where the subsequent lessee of adjoining property has prior knowledge of the covenant.
RULE: Subsequent lessee MUST have notice of a covenant not to compete (if lessee does not have any knowledge of the covenant then it is unenforceable)

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3 Types of Notice

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3 Types of Notice:
(1) Actual Notice
(2) Constructive Notice If the instrument is recorded at the County Recorders Office, it provides notice to the entire world, whether or not someone actually looks at the item or not
(3) Inquiry Notice Sometimes there are circumstances that exist that should cause a person to look further

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Title Companies

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RULE: A seller contracts to deliver a title that a reputable insurance company would approve and insure, he breaches his contract when the title company refused to insure title unconditionally and without exception.
RULE: The title company’s approval, however, must be unequivocal unless the exceptions are those stated in the contract.

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Specific Performance

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RULE: Generally, where it is out of the power of the defendant to perform the agreement, such fact necessarily constitutes a sufficient reason why the court should refuse to decree specific performance, that is, to enter a decree which would be nugatory, because of the impossibility of enforcing its execution

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Mutuality Doctrine

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Mutuality Doctrine: If a Court is willing to grant specific performance for a buyer, then the ability to get specific performance must be mutual (between buyer and seller). Courts will never force a buyer to buy property if they default—if this does happen a seller will usually seek damages, keep the down payment, etc

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Earnest Money

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Earnest Money: Deposit paid (often in escrow) by a prospective buyer of real estate to show a good faith intention to complete the transaction and ordinarily forfeited if buyer defaults

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Fixtures/Trade Fixtures

Fixture:

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Fixture: An article which was once a chattel, but which, by being physically annexed or affixed to the realty, has become accessory to it and part and parcel of it
-Personal property that is physically annexed to the realty so that it becomes part of the land

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Fixture Test

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Fixture Test: What Constitutes a fixture?
1.Actual annexation to the realty, or something appurtenant thereto
2.Appropriation to the use or purpose of that part of the realty with which it is connected
3.Intention of the party making the annexation, to make the article a permanent accession to the free-hold—this intention being inferred form the nature of the article affixed, the relation and situation of the party making the annexation, the structure and mode of annexation, and the purpose of use for which the annexation has been made.***This is the most important prong
Reasonable man standard

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Annexation Test

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Annexation: Equipment physically attached to the building through permanent connections as by means of cement, plaster, nails, bolts, or screws

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Adaptation

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Adaptation: Equipment that is designed or modified for the building and the building is designed or modified for the equipment

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Trade Fixtures

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Trade Fixture: Ordinarily installed or attached to the freehold by the tenant for his own use and for the purpose of promoting his business, and with no intention of his part or on the part of anyone that such trade fixtures shall become, as a result of mere annexation, a part of the freehold

No intent to remain after the owner/tenant leaves (however they can be firmly attached)

Can be intended to be used to promote business or sale

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Law of Fixtures

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A fixture is an article of personal property which has been so annexed to realty that it is regarded as part and parcel of the land.
1.Chattels used in connection with real estate fall into one of three categories:
a.chattels that are not physically attached to realty are always personalty
b.chattels which are annexed to realty in such a manner that they cannot be removed without materially damaging either the realty or the chattels are always fixtures
c.chattels that are physically connected to the real estate but can be removed without material injury to either the land or the chattels

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Rules of Fixtures

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1.Rules of fixtures:
a.If all the stuff is annexed to the ground, so that it is a fixture, then as a tenant, you get the interest of the fixture for the duration of the lease.
b.When the fixture is installed by the lessee, then it becomes the lessee’s property
c.When a fixture is attached to the leased property by the lessor, the fixture becomes part of the leasehold estate and cannot be removed during the duration of the lease.
2.Status as a fixture or as personalty depends upon the “objective intent of the owner to permanently incorporate the chattel into real property, as evidenced by the proven facts and surrounding circumstances entered into evidence”

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Factors of Fixtures

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1.
2.Factors the court may consider in making this determination include:
a.the length of time which the chattels have been attached to the realty
b.whether the chattels are essential to the purpose for which the realty is used
c.whether the parties to the lease treated the chattels as part of the leasehold estate
d.any other objective manifestations of intent

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Trade Fixtures

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An article annexed to the leasehold by the tenant to enable him to carry on the trade, profession, or business contemplated by the lease agreement or in which he is engaged while occupying the premises, and which can be removed without material or permanent injury to the leasehold.
Advertisements are not trade fixtures

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EQUITABLE CONVERSION

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the court uses this doctrine (equity regards as done that which ought to be done) to determine whether buyer or seller bears the risk of loss and whether the heirs of a deceased seller inherit the seller’s real estate or personal property

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Equitable conversion rules

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1.The buyer is regarded as the owner from the date of the contract; he is equitable owner of the sale and bears the risk of loss (MAJORITY) (minority states that whoever is in possession bears the risk of loss)
2.The seller has a claim for money secured by a vendor’s lien on the land
3.The seller is also said to hold the legal title as trustee for the buyer—seller’s interest is treated as one in personal property rather than in real property because the seller’s true interest is in the proceeds; the legal title is security for the buyer’s payment
4.Risk of loss – from the time of the contract of sale of real estate the burden of fortuitous loss is on the purchaser. Treats the purchaser as the owner from the time of the contract.
5.Inheritance – if the seller dies, the seller’s interest is personal property (right to the purchase price), and the buyer is treated as owner of the land.

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Equitable conversion burdens

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Can remedy the situation of who bears the loss by including a clause in the sales contract which expressly states who has the risk of loss through closing.

Examples:
-Sales contract says noting about who bears the risk of loss. One week after enter the sales contract a hurricane comes and the house is destroyed. Under equitable conversion the seller is entitled to sales proceeds and the buyer is the equitable owner of the land and gets NO house
 IMPORTANT to put who bears the risk of loss in sales contract

-Say have sales contract and after executing this the seller dies. Under equitable conversion the seller gets the proceeds and the buyer gets the property. But what if in will X seller leaves his son “all his real property” and his daughter “monetary proceeds”—he dies owning sales proceeds, but not the actual land therefore son gets nothing and daughter gets the sales proceeds

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BROKER’S COMMISSION

MAJORITY RULE:

Back 75

A broker has not earned his commission unless he produced a buyer who is ready, able, and willing to buy on terms satisfactory to the seller. (whether or not the sale closing has occurred)

Front 76

Broker's Commission

Minority Rule

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minority rule: (NJ follows this) When a broker is engaged by an owner of property to find a purchaser for it, the broker earns his commission when:
He produces a purchaser ready, willing, and able to buy on the terms fixed by the owner
Purchaser enters into a binding contract with the owner to do so and
Purchaser completes the transaction by closing the title in accordance with the provisions of the contract—if the contract is not consummated because of lack of financial ability of the buyer to perform, there is NO RIGHT to commission against the seller
THERE HAS TO BE A CLOSE ON THE SALE—seller won’t have money to pay commission until they get the sales proceeds from the sale; therefore, broker won’t get commission until the house is sold

Front 77

Property Defects

Implied Warranty of Workmanlike Quality

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the warranty implied for new construction (that a buyer cannot inspect) is that the new house is designed and constructed in a reasonably workmanlike manner and suitable for human habitation. Privity of contract is not necessary, therefore subsequent purchasers can rely on the warranty.

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Elements of Warranty of Workmanlike Quality

Back 78

a.That the house was constructed to be occupied by the warrantee as a home;
b.That the house was purchased from a builder-vendor who has constructed it for the purpose of the sale;
c.That when sold, the house was not reasonably fir for its intended purpose or had not been constructed in a good and workmanlike manner;
d.That at the time of purchase, the buyer was unaware of the defect and had no reasonable means of discovering it; and
e.That by reason of the defective condition the buyer suffered damages

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Is privity of contract necessary to sue a builder or contractor?

Back 79

Hell naw. You fo' real? Latent Defects Biotch. (Privity of contract is not necessary for a subsequent purchaser to sue a builder or contractor under an implied warranty theory for latent defects which manifest themselves within a reasonable time after purchaser and which cause economic harm. (Modern Trend))

Front 80

Latent Defects

Back 80

Must not be discoverable in a reasonable inspection.

Limited to a reasonable period of time.

Front 81

What is an installment land sales contract?

Back 81

Contract for deed. It is a contract where the seller agrees to do financing on the buyer's part.

Front 82

When does title transfer under an installment land sales contract?

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Title does not transfer until the proceeds are paid to the seller. If the buyer defaults the seller sues for forfeiture, buyer loses all money paid and title to the property.

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Liability for sale of existing land and buildings

Misrepresentation

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(fraud--requires proof that
1) the seller made a false statement of fact to the buyer
2) buyer relied on the statement
3) materially affected the value of the property

Front 84

Active concealment

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the seller is liable, without making any statement, if the seller took steps to conceal a defect in the property.

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Failure to disclose

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Sellers are liable for failure to disclose if
1) the seller knows or has reason to know of the defect
2) the defect is not obvious or apparent, and the seller realizes that the buyer is unlikely to discover it by ordinary inspection
3) the defect is material (serious), and would probably cause the buyer to reconsider the purchase

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Material fact

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a fact which is significant enough to influence the bargain; if one of the parties had known this fact, their position in the land transfer would have changed.

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Tests for materiality

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objective test-whether a reasonable person would attach importance to it in deciding to buy
subjective test-whether the defect affects the value or desirability of the property to the buyer.
Which one is majority view?

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Mortgages

Back 88

financial institutions lend money for real estate purchases requiring the borrower to execute a note and a mortgage, creating personal liability, but allowing the lender to reach the real property in case of default.

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Mortgagee v. Mortgagor

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The person who receives the mortgage (buyers and debtors) are the mortgagors.

The lender is the mortgagee.

Yes it seems ass backawards, but that's the way it is.

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Deficiency judgments

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mortgagees seek deficiency judgments against borrowers for the difference between outstanding debt and the price the property brings at the forclosure sale.

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Mortgages and encumbrances

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Mortgage creates a real property interest that is an encumbrance on the property.

encumbrance-anything that constitutes a burden on the title-burdens title, but does not prevent title from being conveyed. No FSA.

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mortgagors interest in the property is known as:

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equity-fair market value of the property less the balance due on the not is the borrower's equity

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Redemption

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right of the borrower to have an additional period of time to pay up.

sometimes statutory

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Lien Theory

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Lien Theory jurisdictions (majority)-mortgage creates a lien (an encumbrance)--debtor still owns the land, mortgagee has a security interest.

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Does a mortgage under lien theory sever a joint tenancy?

Back 95

No. It is not a conveyance, it only gives a security interest.

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title Theory jurisdictions

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(minority rule) (Pa Rule)
When mortgagee gives mortgagor a mortgage, they are conveying title to the mortgage.

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Does a mortgage under title theory make a difference in joint tenancy?

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Yes. If joint tenant, and give the bank a mortgage on title, you have severed joint tenancy and it is now a tenancy in common.

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Due on sale clause

Back 98

When mortgagor (debtor) sells property, this means that they have to pay off the mortgage to the mortgagee (lender)

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"subject to the mortgage"

Back 99

if convey using this language, you are liable for property, not personally liable on the note

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"assumes the mortgage"

Back 100

if convey using this language, you are still liable on the note.

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Foreclosure

Back 101

method by which a mortgagee can foreclose on a debtor's right to the property

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types of foreclosure

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1. judicial sold through court and requires filing of a complain, service of process, notice, and hearing.
2. Power of sale foreclosure-non judicial public sale-mortgagee has power to sell on default.
3. purchase money mortgage-mortgage that a buyer gives the seller, when the property is conveyed, to secure the unpaid balance of the purchase price.

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a debtor has some rights during foreclosure:

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right of redemption-mortgagor/debtor has the right to redeem the mortgage anytime up until the foreclosure sale
Statutory right of redemption-can pay up to certain period of time after the sale, and mortgagor cannot waive the right to redeem

Front 104

Installment land sales contracts

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financing by the seller, buyers pay through installments

legal title in seller, equitable title in buyer

buyer's payments cannot be forfeited where there would be an inequitable disposition of property and exorbitant loss of money by buyer.

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Foreclosure on a delinquent mortgage

Back 105

mortgagee executing power of sale must use good faith and due diligence to obtain a fair price at the foreclosure sale of mortgagor's property-Fiduciary!

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Bad faith

Back 106

intentional disregard of a duty or with purpose to injure

difference between the fair market value and the price obtained at the foreclosure sale

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Due diligence

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whether a reasonable man in the lender's place would have adjourned the sale or taken other measures to receive a fair price.

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When damages will be awarded to a mortgagor for foreclosure on a delinquent mortgage:

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bad faith-difference b/w mkt value and value obtained at sale
lack of due diligence-difference b/w fair price, and price obtained at foreclosure sale.

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Who is a guarantor?

Back 109

one who guarantees the payment of the loan

mortgagee's duty of good faith and due diligence is that of a fiduciary

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Affirmative negligence and breaches of fiduciary duty

Back 110

where a breach of a fiduciary duty owed a guarantor or mortgagor by a mortgagee is the result of affirmative negligence, the defense of commercial unreasonableness cannot be waived.

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examples of affirmative negligence

Back 111

1) actions taken by a mortgagee that would discourage other buyers
2)misrepresentations in advertising property which discourage potential buyers

Front 112

Equitable mortgages

Net lease

Back 112

a lease in which the lessee pays rent plus property expenses (such as taxes or insurance)

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Statutory redemption

Back 113

the staturoty right of a defaulting mortgagor to recover property, within a specified period, after a foreclosure or tax sale, by paying the outstanding debt or charges.
1) purpose: to protect against the sale of property at a price far less than value
2) applies only to mortgages for residential property
3) occurs only after foreclsoure

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Lawfully conveyed deed

Back 114

1.the deed must be in writing, names of grantor and grantee, language of grant—“I convey, I grant”, signed by the grantor, and comporting with all statutory prerequisites
2.Acknowledgement (notary acknowledges that the grantor is the person who actually signed the deed) is required to record deed, however the deed it valid between the parties without acknowledgement
3.And Delivered – could be satisfied when the grantor physically or manually transfers the deed to the grantee. However, delivery does not necessarily require actual physical transfer of the instrument itself. The test is whether the grantor had the present intent to be immediately bound, irrespective of whether or not the deed itself has been literally or physically handed over.
a.When the grantor hands the deed to the grantee upon receipt of the purchase price, the grantor intends to make an immediate transfer of title to the grantee

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Use of escrow to deliver

Back 115

a.
1.The grantor intends to transfer title when all conditions are fulfilled
2.Date of delivery is the date that the deed is handed to the escrow agent
3.The title of the grantee will ‘relate back’ to the date the grantor handed the deed to the agent
4.Grantor cannot recall or revoke the deed once it is in the hands of a third party

1.Deliveries can only be conditional if the grantor delivers the deed into the hands of a third party. Conditional delivery to a grantee vests absolute title in the grantee.

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Forged deeds

Back 116

1.The grantor whose signature is forged to a deed prevails over all persons, including subsequent bona fide purchasers from the grantee who do not know the deed is void
2.Most courts hold that a deed procured by fraud is voidable by the grantor in an action against the grantee, but a subsequent bona fide purchaser from the grantee who is unaware of the fraud prevails over the grantor
3.As between two innocent persons, one of whom must suffer by the act of the fraudulent third party, the law generally places the loss on the person who could have prevented the loss to the other

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3 Types of Deed in Common Use:

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1.Quit Claim Deed (QCD) – Contains no warranties of any kind. Merely conveys whatever title the grantor has, if any, and if the grantee of a quitclaim deed takes nothing by the deed, the grantee cannot sue the grantor.
2.Special Warranty Deed (SWD)– Contains warranties only against the grantor’s own actions but not the acts of others. Two promises:
a.Grantor promises that he has not conveyed this estate to anyone other than this grantee
b.Grantor promises that the estate is free from encumbrances made by the grantor
3.General Warranty Deed (GWD) – Warrants against ALL defects in title, no matter when they occur—Gives MAXIMUM

Front 118

6 covenants in general warranty deed, and types

Back 118

A. Present
1. covenant of seisin
2. covenant of right to convey
3. covenant against encumbrances
B. Future
1. covenant of general warranty
2. covenant of quiet enjoyment
3. covenant of further assurances
3.

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Covenant of seisin

Back 119

a.Covenant of Seisin – Grantor warrants that he owns the estate that he purports to convey
i.Remedy available for breach of the covenant of seisin - return of all or a portion of the purchase price; proportionate to the purchaser’s loss
ii.English Rule: The covenant of seisin does run with the land, and is broken the moment the conveyance is delivered, becoming a chose in action held by the covenantee.
iii.American Rule: Most American courts hold that the covenant of seisin DOES NOT run with the land
iv.In cases where a grantor conveys land that he does not own, but to which he later acquires title, the doctrine of estoppel by deed prevents the grantor from denying that he had title at the time of the conveyance

Front 120

covenant of right to convey

Back 120

a.Covenant of Right to Convey – Grantor warrants that he has the right to convey the property
In most cases, this serves the same purpose as the covenant of seisin, but it is possible for a person who has seisin not to have the right to convey
Example – trustee may have legal title but be forbidden by the trust instrument to convey it

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covenant against encumbrances

Back 121

a.Grantor warrants that there are no encumbrances (servitudes, mortgages, interests in the property less than the fee) on the property
i.Encumbrance Every right to or interest in the land which may subsist in third persons, to the diminution of the value of the land, but consistent with the passing of the fee by the conveyance.

Front 122

Majority rule for covenant against encumbrances

Back 122

i.Majority Rule - Seller’s latent violation of a restrictive land use statute at the time of transfer does not constitute a violation of the warranty against encumbrances. The majority rule is that hazardous waste does not violate the covenant against encumbrances either
ii.RULE: A property grantor’s Covenant Against Encumbrances operates in praesenti, and cannot be breached unless the encumbrance existed at the time of the conveyance

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Remedies for the covenant against encumbrances

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i.Remedies available for the breach of the covenant against encumbrances:
1.If the encumbrance is easily removable, the measure of damages is the cost of removal
2.If the encumbrance is not easily removable, the measure of damages is the difference in value between the land with the encumbrance and without the encumbrance

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latent violations of land use violations and encumbrances

Back 124

RULE: Latent violations of state or municipal land use regulations that do not appear on the land record, that are unknown to the seller of the property, as to which agency charged with enforcement has taken no official action to compel compliance at the time the deed was executed, and that have not ripened into an interest that can be recorded on the land record, do not constitute an encumbrance such that the conveyance breaches the grantor’s deed warranty against encumbrances.
 Latent violation of a land restriction is not a breach of covenant against encumbrances.

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Statute of limitations and present covenants

Back 125

***RULE: Present covenants are breached, if at all, at the time the deed is delivered. Thus, the Statute of Limitations for a breach of a present covenant accrues from the moment the deed is delivered.

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Future covenants

Back 126

1.Future covenants – these “run with the land” to future successors in interest as long as there is privity. Future covenants are breached, if ever, when someone with paramount title tries to disturb the current owner’s possession. FUTURE COVENANTS RUN WITH THE LAND!

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covenant of general warranty

Back 127

– Grantor warrants that he will defend against lawful claims and will compensate the grantee for any loss that the grantee may sustain by assertion of superior title

Front 128

covenant of quiet enjoyment

Back 128

– Grantor warrants that the grantee will not be disturbed in possession and enjoyment of the property by assertion of superior title
This is for all practical purposes is virtually identical with the covenant of general warranty
This can be breached by interferences with covenantee’s right of possession creating a constructive eviction
RULE: Covenant of General Warranty and Covenant of Quiet Enjoyment are breached only when there is an actual or constructive eviction of covenantee by paramount title holder; therefore, there must be some action by paramount title holder in order for covenantee/grantee to sue for breach of Covenant of Quiet Enjoyment.

Front 129

covenant of further assurances

Back 129

Grantor warrants that he will execute any other documents required to perfect the title conveyed

Front 130

When are the future covenants breached?

Back 130

Future covenants are not breached until the grantee or his successor is evicted from the property, buys up the paramount claim, or is otherwise damaged. Thus, the Statute of Limitations for a breach of a future covenant accrues only when the eviction or damage occurs.

Front 131

warranty deed covenants

Back 131

GWD- conveys all 6

Front 132

bargain and sale deed

Back 132

SWD because it warrants only against acts of grantor

Front 133

quit claim deed

Back 133

contains no warranties whatsoever

Front 134

constructive eviction and cov of quiet enjoyment

Back 134

covenant of quit enjoyment can be breached by interference with the covenantee's right of possession creating a constructive eviction.

Front 135

test for constructive eviction

Back 135

1) right to possession is interfered with by an assertion by the other party
ex: forced to buy the superior title to keep from actually being physically evicted from property
ex: when an owner is enjoined from using the property in a way that violates an earlier restrictive covenant on the property

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Deed delivery

Back 136

1) must be transferred with intent that they are presently operative
2) physical possession of a duly executed deed is not conclusive proof that it was legally delivered (presumption can be overcome, especially by evidence such as if the grantor remains on the land)

Front 137

conditional delivery

Back 137

1) must be irrevocable
2)vests absolute title in the grantee

Front 138

title searches

recording: what does it do?

Back 138

provides notice to the world that there is an interest related to a specific piece of property

doesn't make deed valid.

Front 139

What must be done for a deed to be recorded?

Back 139

It must be acknowledged and certified

notary acknowledgment is a near universal requirement for recording.

Front 140

3 functions of recording

Back 140

1) help others who owns land in the county
2) preserves important documents in a secure place
3) protects purchasers for value and lien creditors against prior unrecorded interests.

Front 141

Indexes

Back 141

1)Tract index-ID numbers
2)grantor grantee index-most common method-surnames

Front 142

Indexes v. Recording

Back 142

any document not indexed as required by statute but still recorded with the court recorders office, imparts constructive notice to the whole world.

Front 143

How far back do you have to check?

Back 143

1) some jurisdictions back to sovereign
2) others, 60 years
3) agencies of federal government, back to the original source

Front 144

constructive notice and indexing.

Back 144

a person is charged with constructive notice of whatever would be revealed by a proper search.

Front 145

constructive notice to subsequent purchasers requirement of description

Back 145

an assigned interest must be sufficiently described on the recorded instruments that affect title to the particular tract of land

Front 146

recording acts

Back 146

recording acts protect subsequent purchasers from prior unrecorded interests. good faith purchasers must be bona fide, meaning must pay money, and have no knowledge of prior title.

Front 147

3 types of recording acts

Back 147

race, notice, and race-notice

Front 148

race

Back 148

only exists in NC and LAW- the first to record will prevail over subsequent recorders, regardless of whether a subsequent purchaser has actual knowledge of a prior purchaser's claim

Front 149

Notice

Back 149

half of states-As between successive parties with interest in the same property, the subsequent purchaser will prevail over the prior purchaser if they are a bona fide purchaser, and if they have no knowledge of the prior interest.

under notice, a subsequent purchaser only needs to be a bona fide purchaser with no notice. you do not need to record.

Front 150

Shelter rule

Back 150

applies to notice and race notice jurisdictions. A person who takes from a bona fide purchaser protected by the recording act has the same rights as his grantor.

Front 151

Race-notice

Back 151

used in roughly the other half of states.
1.a subsequent purchaser is protected against prior unrecorded instruments only if he or she:
i.Is without notice of the prior instrument, AND
ii.Records before the prior instrument is recorded
Therefore, you must be a bona fide purchaser without notice and you must record before the prior purchaser records

Front 152

Zimmer rule

Back 152

(only applies in race-notice jurisdictions) – It has been held that a race-notice statute protects the subsequent purchaser who first records his own conveyance only if all prior conveyances in his chain of title are also recorded. Therefore, subsequent BFP must prove that he recorded 1st and all of the deeds in his chain of title also recorded.

Front 153

Example of Zimmer rule

Back 153

Example: O conveys to A, who does not record. O then conveys to B, who is a bfp. B enters his deed into the records, but the deed has a defective acknowledgment. B then conveys to C, who is also a bfp. C records. Then A records.
 Even though C has no notice of A’s interest and recorded before A, C will not prevail over A because the invalid acknowledgement means the O to B deed, which is in C’s chain of title, was not “recorded.” The same result would occur if B never recorded his deed.

Front 154

Defective acknowledgment and subsequent purchasers

Back 154

RULE: If a party sees a defective acknowledgment on a deed, that party has actual notice.

RULE: If the defective acknowledgment of a recorded deed is OBVIOUS/PATENT (i.e. no signature), there is no constructive notice. Clearly defective does not provide constructive notice.

RULE: If the defective acknowledgment is LATENT (i.e. forgery, notary not made in presence of the parties), then there is constructive notice.

Front 155

Pa is what type of jurisdiction:

1. race?
2. notice?
3. race notice?

Back 155

pa is a race notice jurisdictions

Front 156

What type of language makes it a race notice jurisdiction?

Back 156

"any deed, shall be adjudged fraudulent and void as to any subsequent bona fide purchaser unless such deed shall be recorded before the recording of the deed which such subsequent purchaser shall claim.

Front 157

Chain of title

Back 157

a.While “chain of title” generally refers to the recorded sequence of transactions by which title has passed from a sovereign to the present claimant, the term is also used to describe the period of time in which records must be searched and the documents that must be examined within that time period.

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Wild Deed

Back 158

Deeds gone wild: They take their shirts off as they just reached the age of 18, and are on spring break for the first time.

or...

A recorded deed not connected to the chain of title.

Front 159

general rule for wild deeds

Back 159

They do not provide constructive notice to a subsequent purchaser.

Front 160

Common grantors and constructive notice of the restrictions

Back 160

A subsequent purchaser from a common grantor (owner of multiple lots) in a subdivision has constructive notice of the restrictions on the rest of the subdivision, and thus acquires title subject to those restrictions.

the courts are split, saying that this burden of title searching is too excessive.

Front 161

what happens if a deed doesn't contain the name of a grantee?

Back 161

it is a nullity until the name is inserted. If the grantee, under express or implied authority inserts his own name, the deed becomes operative, without re-execution of the acknowledgment.

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Restrictions on land from a common grantor to a subsequent purchaser.

Back 162

A subsequent purchaser from the common grantor acquires title subject to the restrictions in the deed to the earlier purchaser.

Front 163

Who is protected by recording acts

Back 163

1. Purchasers-people who get by gift or will are not protected
2. a.minority rule – Where a buyer receives notice of an outstanding interest subsequent to paying some, but not all, of the full purchase price, the buyer is not considered a bona fide purchaser.
b.MAJORITY RULE - A seller need not be paid in full before the buyer can be considered a bona fide purchaser. The buyer is entitled to take possession of the property even though he has not yet fully paid the price. The buyer should not be punished for failing to pay in full at the time of contracting, and there should be no difference whether the seller takes a note or the buyer utilizes a mortgage.

Front 164

Pro Tanto RULE:

Back 164

Protect buyer to the extent of the payments made prior to notice, but no farther

Front 165

Doctrine of merger by deed

Back 165

Under the doctrine of merger by deed, if the terms of the real estate contract are fulfilled by delivery of the deed, the two instruments merge. Unless the deed contains a reservation, the deed supercedes all contract provisions and becomes the only binding instrument between the parties. However, where there are contract provisions which delivery of the deed does not fulfill, the contract remains in force until it has been fully performed.

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Lis Pendens

Back 166

The jurisdiction, power, or control acquired by the Court over property while a legal action is pending. Notice recorded in chain of real property to warn people/parties/subsequent purchasers that the property is the subject of a litigation suit.

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Notice
3 types

Back 167

A.
i.Actual Notice – actual knowledge of a prior interest or claim
ii.Record/Constructive Notice – constructive notice of any interest or claim that a reasonable search of the records would have revealed
iii.Inquiry Notice – constructive notice of information that would have been attained by a reasonable investigation of the premises

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rece-notice recording acts and inquiry notice

Back 168

a.Subsequent grantees are held to have inquiry notice of the contents of prior recorded deeds in the chain of title for purposes of a race-notice recording act.

Front 169

lost or misplaced deeds and inquiry notice

Back 169

Recitals in a recorded deed that refer to a lost or misplaced deed provide notice and confers a duty to investigate through diligent inquiry the contents of an earlier deed and the interests conveyed therein.

Front 170

Actual possession and inquiry notice

Back 170

A.Actual possession is constructive notice to all the world, or anyone having knowledge of said possession of whatever right the occupants have in the land. Such possession, when open, visible, and exclusive, will put upon inquiry those acquiring any title to or a lien upon the land so occupied to ascertain the nature of the rights the occupants really have in the premises
i.Actual possession gives constructive notice to the world of any right which the person in possession is able to establish.
ii.Such possession, when open, visible, and exclusive, will put upon inquiry those acquiring any title to or a lien upon the land so occupied to ascertain the nature of the rights the occupants really have in the premises.

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Title insurance

Back 171

contract of indemnity under which the insurer for a valuable consideration agrees to indemnify the insured in a specified amount against loss through defects of title to, or liens or encumbrances upon realty in which the insured has an interest.

Front 172

what does title insurance do?

Back 172

A.Title insurance guarantees that the insurance company has searched the public records and insures against any defects in the public records, except as otherwise provided for in the particular policy. This insurance creates liability only to the insured and will not run with the land to subsequent purchasers. Landowners only have to pay title insurance once when they purchase the property.
B.Title Insurance insures good title. If the owner has title insurance and there is a defect, he may sue under both title insurance and warranty.

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Exceptions to title insurance.

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i.Losses arising from governmental regulations affecting the use, occupancy, or enjoyment of the land, unless a notice of enforcement or violation is recorded in the public records
ii.Claims of persons in possession not shown by the public records
iii.Unrecorded easements, implied easements, and easements arising by prescription
iv.Defects that would be revealed by a survey or inspection

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Wow, title insurance sucks.

When is title insurance company liabile?

Back 174

-not for quantity of land
-not negligence, only under policy in searching records, but if company agrees to conduct search and provide insured with abstract of title in addition to title policy, then liable

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Does a title insurance company have a duty?

Back 175

a.Duty of a title insurance company depends on the agreement between insurer and insured. If there is no proof of a voluntary assumption of the duty, then there is no duty other than to provide the insurance.
b.There is a split in jurisdictions of those who impose blanket negligence liability without a showing of a duty, and those like this case that require proof of an assumption of the duty.

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Does title insurance insure the land itself?

Back 176

A.Title insurance policies are intended to protect the condition of an owner’s title to land, and not provide coverage for the physical condition of the land itself.
a.Similarly, a title insurance company will not be held liable for a failure to disclose any land-use restrictions, since such restrictions are not considered encumbrances on title and do not make title unmarketable
b.However, an exculpatory clause against negligence in a policy may not, because unfair and unconscionable, bar a claim based on a breach of an assumed duty to search an disclose

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monuments v. distances

Back 177

RULE: A fundamental principle in the interpretation of a real estate description is that calls to monuments will prevail over the stated distance in the course leading to that line. (Monuments are more reliable than distances—ex. Say property line is 15ft to the steel fence in the backyard; It will be to the steel fence in the backyard, doesn’t matter if its really only 10ft to the steel fence—always trust calls over distances.)

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Do hazardous substances on the property create an encumbrance on title?

Back 178

Lick Mill Creek Apts v. Chicago Title Insurance:
RULE: The presence of hazardous materials on land did not constitute an “encumbrance” on title covered by title insurance policy, even though state and federal agencies could impose liens upon the property for the violation of environmental laws.
RULE: Title insurance provision extending coverage in the event title was other than as described did not provide coverage cost of cleaning up hazardous waste. (Note, policy covered marketability of title and defect to market value of land)
 Rationale Court used was from Hocking Case: “One can hold perfect title to land that is valueless; one can have marketable title to land while the land itself is unmarketable.”
FEDERAL LAW: Present owner of property is responsible to clean up the property of hazardous chemicals whether or not they are the people responsible for the damages.