Property--Adverse Possession, Land Conveyance, Recording System, Foreclosure

Front 1

Adverse possession

Back 1

Possession, for statutorily required period of time, if certain elements are met, ripen into title.

Adverse possessor using land in violation of real covenant takes the title free of the covenant (even if knowledge).

Elements: COAH (NY state of mind)

(1) continuous: uninterrupted for statutorily required period

--ejectment action: true owner must pursue judgment to completion, NOT mere bringing action. BUT SOL OK so long as bringing suit before SOL.

--SOL does not run against: (a) holder of future interest until interest becomes possessory, and (b) owner disability at start of adverse possession (i.e. infancy, insanity, imprisonment)

---NY: 10 years

(2) open and notorious (possession ordinary holder would make)

(3) actual and exclusive: literal and not sharing with true owner (or partial and color of title purporting to give title)

(4) hostile--possessor does not have owner's consent

NY DISTINCTION: must have good faith belief that land hs indeed his (bad faith if knows he is occupying another's land)

Tacking

(1) allowed if vertical privity with previous owner non-hostile nexus (anything but adverse possession)

(2) not allowed if ouster

Front 2

Conveying land: purchase and sale of real estate generally

Back 2

Every conveyance of real estate involves a 2-step process:

(1) land contract (endures until closing)

(2) closing (where deed becomes operative document)

Front 3

Land contract for conveying land

Back 3

The land contract (1) must satisfy the statute of frauds, with (2) the seller making 2 implied promises. (3) The risk of loss is on the buyer, UNLESS NY.

Statute of frauds requires:

(1) in writing signed by both parties

(2) contain essential terms of price and land, with some consideration.

---if land described is more than actual land, P may seek specific performance with pro-rata reduction for the deficiency.

(3) EXCEPTION to statute of frauds if 2 of 3 satisfied:

---Buyer takes possession

---Buyer pays part of price

---Buyer makes substantial improvements

Seller's 2 promises:

(1) Marketable title at closing, free from threat of litigation. Fails in 3 instances:

---defect in chain of title

---Encumberances on fee simple (i.e. servitudes or mortgages, BUT seller can satisfy mortgage at closing with proceeds from the sale)

---zoning violations

(2) Will not make material false statements

---silence is not golden (liable for lies and omissions)

(3) NO promise of implied warranty or habitability, EXCEPT for new home by builder-vendor

Risk of loss:

(1) MBE: once K signed, buyer owns land subject to condition of his paying the purchase price, and thus buyer bears risk of loss unless K states otherwise.

(2) NY: risk of loss remains on seller until buyer has title or takes possession, so long as buyer is without fault

Front 4

The closing--definition and general considerations

Back 4

Deed is the controlling document taht passes title from seller to buyer.

(1) Passing title: lawful execution and delivery

(2) 3 types of deeds

Front 5

In the closing, what is required for lawful passing of title?

Back 5

Passing title: lawfully executed and delivered

(1) Lawful execution:

---Deed in writing signed by grantor: (a) no consideration required, (b) court presumes blank name = person taking delivery has authority to fill in name of grantee

---Description of land is good enough to ascertain what description means with research (i.e. "all" OK, but "some" is ambiguous even with research)

(2) Delivery: (a) physical delivery OR (B) present intent to be bound

---Present intent to be bound: whether grantor had the present intent to be immediately bound, regardless whether deed itself physically handed over (parol evidence admissible)

---Oral conditions not contained in deed are void, but Escrow permitted: may attach conditions before title automatically passes

---Void if:

(a) Grantee dead or expressly rejects deed

(b) Fraud, duress

---once deed delivered, cannot be canceled or taken back.

Front 6

In the closing, what are the types of deeds?

Back 6

(1) Quitclaim (worst): Grantor (a) no covenants and not even promising he has title to convey (b) only promises he has marketable title at closing (off the hook post-closing)

(2) General Warranty Deed (best): warrants against all defects in title, and contains all 6 of the following covenants:

---Present covenants (breach only at time of delivery, thus SOL begins at delivery)

(a) Seisin: grantor owns estate

(b) Right to convey: Grantor has power to transfer with no restraint (i.e. restraing on alienation) and no disability.

(c) No encumberances: no servitudes or mortgages on land

---Future covenants (no breach until grantee disturbed in possession, thus SOL does not run until then)

(a) quiet enjoyment: grantee won't be disturbed by 3rd party's lawful claim of title

(b) warranty: grantor will defend grantee against lawful claims of title asserted by others

(c) future assurances: grantor will do what's needed to perfect title

(3) Statutory special warranty deed: 2 promises grantor makes only on behalf of self, not on behalf of predecessors in interest:

(a) Has not conveyed estate to anyone other than grantee, and

(b) estate free of encumbrances by grantor

NY DISTINCTION: called bargain and sale deed

Front 7

What problem does the recording system always involve, and what are the general rules?

Back 7

Every recording system involves double dealer who sells parcel to A then sells same parcel to B.

2 Bright line rules:

(1) Notice jurisdiction: B wins if BFP, regardless whether she records before A

(2) Race-notice jurisdiction: B wins if BFP and recorded properly before A.

NY IS RACE-NOTICE

Front 8

What is a BFP, and what is required?

Back 8

BFP is one who

(1) buys for substantial money consideration (not nominal) and

---Heirs/donees may be ok under shelter rule

(2) without notice.

3 forms of notice: AIR

(1) Actual: B actually learns of A

(2) Inquiry: duty to reasonably inspect:

---inquiry notice when instrument references unrecorded transaction or grantor's deed unrecorded

(3) Record notice: B on record notice when A's deed recorded properly within chain of title

3 chain of title problems for record notice:

(1) Shelter rule: one who takes from BFP prevails against anyone that BFP would have prevailed against. (i.e. O to A no record, O to B BFP records. B conveys to C, C wins against A)

(2) Wild deed: 2 situations that do not provide record notice because O conveyed without (Nullity):

---O sells to A no record, A sells to B and B records, but nullity because O-A not recorded. If O later sells to C BFP and records, C wins.

---O does not have title but sells to A, O later acquires title and sells to B. B wins against A (A has estoppel by deed claim, below)

(3) Estoppel by Deed: If grantor conveys realty he has no interest in to A, grantor estopped from denying validity of that conveyance if he later acquires that interest. A can then take title from grantor or sue him for damages. EXCEPTIONS:

---Does NOT apply to quitclaim deeds.

---A can ONLY go after grantor for damages, not any successors to grantor's title or other subsequent BFP (see wild deed example)

Front 9

What is a Mortgage, and what are the general considerations?

Back 9

Mortgage is the (1) conveyance of a security interest in land by the mortgagor/debtor, (2) intended by parties to be collateral for the repayment of a debt to mortgagee/creditor

Requires: Writing to satisfy statute of frauds, but parol evidence allowed to show parties' intent

(Functional equivalents: note, mortgage deed, security interest in land, deed of trust)

Equitable mortgages:

(1) Absolute mortgage: still a mortgage when parties understand blackacre is collateral for debt, but O hands mortgagee a deed instead of executing note or mortgage deed.

(2) Sale-leaseback: O sells property for cash then leases back from purchaser for long period of time with option to repurchase

Parties' rights:

(1) Mortgagor debtor: right to (a) title and possession, (b) unless foreclosure

---If creditor sells blackacre to BFP, BFP owns the land, O's only recourse is to proceed against creditor for fraud and sale of proceeds.

(2) Mortgagee creditor: has a lien = right to look to land if default

(1) Transfer of interest

(2) Redemption

(3) Foreclosure

(4) Foreclosure effect on various interests, priorities

Front 10

What happens when mortgagee transfers his intereset in land that is mortgaged?

Back 10

All parties to mortgage can transfer their interest--mortgage automatically follows properly transferred note.

Creditor mortgagee can transfer either:

(1) endorsing note and deliveree to transferee, or (2) executing separate document of assignment:

HOLDER IN DUE COURSE: If note is endorsed and delivered, transferee can become holder in due course (HDC) and foreclose on the mortgage if:

(1) note negotiable (promise to pay specific amount) and payable to mortgagee

(2) endorsed and signed by mortgagee

(3) original note delivered to transferee (not photocopy)

(4) transferee pays more than nominal value for note

(5) transferee takes note in good faith without notice of illegality

DEFENSES AGAINST HDC:

(1) NOT personal defenses against original mortgagee:

---(a) lack of consideration, (b) fraud, (c) unconscionability, (d) waiver, (e) estoppel

(2) BUT HDC may be subject to real defenses maker might raise: MAD FIFiiii

---material alteration

---Duress

---Fraud in factum (lie about what instrument is)

---Incapacity

---illegality

---infancy

---insolvency

Front 11

What happens when mortagor debtor transfers his interest in land that is mortgaged?

Back 11

The lien remains on land so long as mortgagee properly records (buyer on notice, thus not BFP). If Mortgagee does not record:

(1) notice state: buyer wins if BFP

(2) race-notice: first recorder wins.

Who is personally liable on the debt:

(1) If grantee "assumes" the mortgage: grantee signs assumption agreement for the mortgage:

---Grantee primarily liable to lender

---O remains secondarily liable, UNLESS grantee and mortgagee modifies mortgage and sicharges O

(2) IF grantee takes "subject to mortgage": no signing of assumption agreement

---only O is personally liable, grantee is not

---BUT mortgage remains on the land, thus may be foreclosed

Front 12

What is redemption, and when does the mortgagor have a right to redemption?

Back 12

Redemption in equity

(1) Debtor has right to redeem land and free it of mortgage at any time prior to foreclosure sale, BUT NOT after valid foreclosure

(2) Right CANNOT be waived (clogging)

(3) Redemption via paying off (missed payments + interest + costs)

(4) Acceleration clause: allows mortgagee to declare full balance due when default: mortgagor must pay (full balance + interest + costs) to redeem

Statutory redemption

(1) NOT recognized in NY

(2) gives mortgagor statutory right to (a) redeem for fixed period after foreclosure sale (typically 6 months to 1 year), and (b) possess land during statutory period

(3) Redemption amount usually foreclosure price rather than original debt

Front 13

What is foreclosure, and what is the scheme of distribution?

Back 13

Foreclosure is property (1) sold to satisfy debt in whole or part, (2) via proper judicial action.

Possession before foreclosure:

(1) Title theory: Mortgagee has both title and possession before foreclosure

(2) Lien theory: Mortgagee has only title, BUT mortgagor is owner of land until foreclosure

Foreclosure action requires all necessary parties:

(1) Debtor

(2) All creditors junior to the foreclosing creditor

---Otherwise junior mortgages remain on land

Distribution: each claimant entitled to FULL satisfaction before subordinated lienholder may take

(1) First priority: attorneys fees, foreclosure expenses, accrued interest

(2) Senior liens--FIRST creditors to RECORD

(3) junior liens (should bring deficiency action if not fully satisfied)

(4) Foreclosure does not affect interests senior to the mortgage being foreclosed. Thus, foreclosure of junior mortgage = senior mortgage remains on land, and buyer should bid FMV of land less the senior mortgage.

Purchase Money Mortgage (PMM):

(1) A mortgage given to secure loan enabling debtor to acquire land = PMM, taking security interest in O's real estate holdings "whether now owned or hereafter acquried"

(2) PMM's have superpriority over the property that is financed (priority for land over other creditors that lent O money not for that land).

(3) If more than 1 PMM:

---seller's PMM priority over other 3rd party PMM (i.e. PMM of later buyer of encumbered land)

---more than 1 3rd party PMM = first in time

Priority modification:

(1) Senior creditor may agree to subordinate its priority to junior creditor

Front 14

What are the miscellaneous other considerations for property?

Back 14

(1) possessor's rights

(2) lateral support

(3) water rights

(4) Eminent domain/zoning

Front 15

What are the land possessor's rights?

Back 15

Right to (1) be free from trespass and (2) nuisance

Trespass:

(1) invasion of land by physical object

---compare to nuisance: non-physical suffices (i.e. odors, nuisance)

(2) remove trespasser by ejectment

Nuisance: (1) unreasonable and (2) substantial interference with another's use and enjoyment of land.

---Compare to trespass: requires invasion by physical object

---NO hypersensitive P or specialized use

Front 16

What is the rule for lateral support?

Back 16

When (1) P's land is improved and (2) adjacent D landowner's excavation causes improved land to cave in:

(1) excavator liable ONLY if negligent, UNLESS:

(2) strict liability if P proves his improvements on land (shrubs, structures, buildings, etc) did not contribute to land's collapse

Front 17

What are the rules for water rights?

Back 17

Allocation of water:

(1) riparian doctrine: water belong to those who own the land bordering the watercourse (riparians)

---riparians share right to reasoanble use, thus liable if unreasoanble interferance with other riparians

(2) Prior appropriation doctrine: water intiially belongs to state, but individual can acquire right to divert and use regardless if riparian, so long as use is productive or beneficial

---Rights determined by priority: first in time = right in right

---must be productive or beneficial (i.e. agriculture)

Ground water:

---Water (1) beneath surface of earth and (2) not confined to known channel

---Surface owner entitled to: (1) reasonable use that (2) is NOT wasteful

Surface water:

---Water (1) coming from rain, springs, melting snow, and (2) have not yet reached natural watercourse/basin

---Landowner may (1) make changes to combat flow of surface water, but (2) many courts prohibit unnecessary harm to others' land

---Natural flow theory: owners cannot alter natural drainage patterns, but most states soften to allow reasonable changes.

---Reasonable use theory: balance utility against gravity of harm

Underground water:

Landowner (1) allowed reasonable (not malicious or waste) use of groundwater for (2) beneficial purpose on overlying land.

Front 18

What are the rules for eminent domain and zoning?

Back 18

Eminent Domain: Government's 5A power to take private property for public use for just compensation

(1) Explicit taking: government condemnation

---remedy = just compensation

(2) Implicit/regulatory taking: regulation not intended to be taking but has same effect via economic wipe out on investment

---Remedy = (a) compensate owner for land FMV or (b) terminate regulation and pay for damages while regulation in effect

Zoning: Government police powers to enact statutes reasonably controlling land use

(1) Variance: allowed if administrative action or zoning board determines: BOTH (a) undue hardship and (b) variance will not decrease neighboring property values

(2) nonconforming use: existing use now deemed nonconforming by new zoning

---CANNOT eliminate all at once unless just compensation (otherwise unconstitutional taking)

(3) Exactions: govenrment required amenities in exchange for granting permission to build (i.e. O must provide new streetlights for permission to build residential building)

---MUST be reasonably related in nature and scope of the impact of proposed development (otherwise unconstitutional)