Real Property

Front 1

Present (Possessory) Estates - 4 categories of Freehold Estates

Back 1

(1) Fee Simple absolute
(2) Fee Tail
(3) The Defeasible Fees (3 kinds)
(4) Life Estate

Ask:
(1) What language will create the estate?
(2) Once identified, what are the estate's distinguishing characteristics? [Is it devisable, descendible, alienable?]
(3) Which future interests, if any, is the estate capable of?

Front 2

Devisable

Back 2

Can pass by will

Front 3

Descendible

Back 3

Can pass by the statutes of intestacy if holder dies intestate (without a will)

Front 4

Alienable

Back 4

Capable of being transferred inter-vivos (during holder's lifetime)

Front 5

Fee Simple Absolute

Back 5

Largest estate known to the law and is of potentially infinite duration

Create - "To A" or "To A and his heirs"

Distinguishing Characteristics - absolute ownership of potentially infinite duration. It is freely devisable, descendible, and alienable.

Accompanying future interests? NO (If A is alive, he has no heirs - just powerless prospective heirs)

Front 6

Fee Tail

Back 6

Create? "To A and heirs of his body" very specific

Distinguishing characteristics? abolished in US, but when it was recognized, the fee tail would pass directly to grantee's lineal (blood) descendants no matter what.

Today, the attempted creation of a fee tail creates instead a fee simple absolute.

Accompanying future interest? When it was recognized, yes - called a reversion if in O the grantor, the grantor, and a remainder if in a third party.

Front 7

Defeasible Fees (3 kinds)

Back 7

(1) Fee Simple Determinable
(2) Fee Simple Subject to Condition Subsequent
(3) Fee Simple Subject to Executory Limitation

Front 8

Fee Simple Determinable

Back 8

Create: "To A for so long as, during, until"

Grantor must use clear durational language.

If the stated condition is violated, then forfeiture is automatic.

Distinguishing Characteristics: Like all defeasible fees, it is devisable, descendable, and alienable, but ALWAYS SUBJECT TO CONDITION. You can convey less than what you started with, but never more.

Accompanying future interest? Yes - it is the possibility of reverter in the grantor. (only estate that has this)

FSDPOR

Front 9

Fee Simple Subject to Condition Precedent

Back 9

Create: "To A, but if X occurs, grantor reserves the right to reenter and take"

Here, grantor must use clear durational language AND carve out the right to reenter.

Distinguishing Characteristics: Estate not automatically terminated, but it can be cut short at the grantor's option if the condition occurs. Only comes to close IF grantor chooses to exercise his option when condition is breached.

Hence, accompanying future interest is Right of Reentry (power of termination).

Front 10

Fee Simple Subject to Executory Limitation

Back 10

Create: "To A, but if X event occurs, then to B."

Distinguishing Features: This estate is just like the fee simple determinable only now, if the condition is broken, the estate is automatically forfeited in favor of someone other than grantor.

Accompanying future interest? Yes, shifting executory interest.

Front 11

Two Important Rules of Construction for Defeasible Fees:

Back 11

(1) Words of mere desire, hope, or intention are insufficient to create a defeasible fee.
(a) Courts disfavor restrictions on the free use of land.
(b) Thus, courts will not find a defeasible fee unless clear, durational language is used.

Examples of non-deafeasible language: "for the purpose of"; "with the hope that"; "with the expectation that" - these would be interpreted as (or A is vested with) fee simple absolute instead.

(2) Absolute restraints on alienation are void.
- absolute restraint on alienation is an absolute ban on the power to sell or transfer, that is not linked to a reasonable time-limited purpose.

Examples: "To A so long as she NEVER attempts to sell."

Note - a restraint, such as "to A so long as she does not attempt to sell until the year 2001, when clouds on the title will be resolved," is ok - because it it is seemingly linked to a reasonable, time-limited purpose."

Front 12

Life Estate

Back 12

This is an estate that must be measured in explicit, lifetime terms, and NEVER terms of years.

Create: "To A for life." A has a life estate and is known as a life tenant.

Contrast with "To A for 50 years, if she lives that long," or "To A for life, but in no event more than 10 years," both of which create the term of years (a leasehold interest), and NOT a life estate.

Front 13

Life Estate pur autre vie

Back 13

a life estate measured by a life other than grantee's.

example: "To A for the life of B."

Front 14

Life Estate Distinguishing Characteristics

Back 14

The life tenant's entitlements are rooted in the important Doctrine of Waste.

Two general rules:
(1) The life tenant is entitled to all ordinary uses and profits from the land.

(2) The life tenant must not commit waste (must not do anything to hurt the future interest holders).

Front 15

Doctrine of Waste

Back 15

Tenant must not commit waste (must not do anything to hurt the future interest holders).

Three species of waste:
(1) Voluntary or Affirmative Waste - conduct that causes a drop in value.
(2) Permissive Waste or neglect - occurs when land is allowed to fall in disrepair.
(3) Ameliorative Waste - life tenant must not engage in acts that will enhance the property's value, unless ALL of the future interest holders are known and consent.

Front 16

Voluntary (Affirmative) Waste

Back 16

over conduct that causes a drop in value

General rule (with respect to natural resources): the life tenant must NOT consume or exploit natural resources on the property (such as timber, oil, or minerals), unless one of four exceptions applies (PURGE).

Front 17

4 PURGE Exceptions to Voluntary Waste Natural Resources General Rule

Back 17

(1) PU - Prior Use - meaning that prior to the grant, the land was used for exploitation. Here, the life tenant may continue to exploit, unless otherwise agreed.

(2) R - Reasonable Repairs - The life tenant may consume natural resources for reasonable repairs and maintenance.

(3) G - Grant - The life tenant may exploit if expressly granted that right.

(4) E - Exploitation, meaning this land is suitable ONLY for exploitation (quarry).

Front 18

Prior Use and the Open Mines Doctrine

Back 18

If mining was done on the land before the life estate began: the life tenant may continue to mine but is limited to mines already open. Thus, the life tenant must not open any new mines.

Front 19

Permissive Waste (neglect)

Back 19

Occurs when land is allowed to fall in disrepair.

(a) Permissive Waste and the Obligation to Repair - the life tenant must simply MAINTAIN the premises in reasonably good repair. (not a high standard)

(b) Permissive waste and the obligation to pay all ordinary taxes: the life tenant is obligated to pay all ordinary taxes on the land, to the tenant of income or profits from the land. If there is no income or profit, the life tenant is required to pay all ordinary taxes to the extent of the premises fair rental value.

Front 20

Life Estate's Accompanying Future Interest?

Back 20

If held by O, the grantor: Reversion.

If held by a third party, it is a remainder.

Front 21

Future Interests

Back 21

Six Categories: classified by whether retained by grantor or instead by transferee.

Front 22

Future Interests Capable of Creation in the Grantor

Back 22

Possibility of Reverter - accompanies only the Fee Simple Determinable

Right of Reentry - accompanies only the Fee Simple Subject to Condition Subsequent

Reversion (Default) - future interest that arises in a grantor who transfers an estate of lesser quantum than she started with, other than a FSD or FSSCS.

Front 23

Future Interests in Transferees

Back 23

If our future interest is held by someone other than grantor (3rd party), it has to be either:

(1) Vested Remainder
(2) Contingent Remainder, or
(30 Executory Interest

Front 24

Three Tasks in Assessing Future Interests in Transferees:

Back 24

(1) Distinguish vested remainders from contingent remainders;

(2) Distinguish the three kinds of vested remainders from each other; and

(3) Distinguish all remainders from executory interests.

Front 25

What is a remainder?

Back 25

A remainder is a future interest created in a grantee that is capable of becoming a possessory upon the expiration of a prior possessory estate created in the same conveyance in which the remainder is created.

Sociable, patient, polite

(1) Sociable - never travels alone. Always accompanies a preceding estate of known, fixed duration. That preceding estate is usually a life estate or a term of years.

(2) Patient and polite - meaning it never follows a defeasible fee. Remainderman cannot cut short or divest a prior transferee. In other words, if your present estate is a defeasible fee, your future interest is NOT a remainder. Instead, it will be executory interest held by someone other than O.

Front 26

Difference between vested and contingent remainders:

Back 26

Remainders are either vested or contingent.

Vested - if it is BOTH created in an ascertained person AND is not subject to any condition precedent.

Contingent - if it is created in an unascertained person OR is subject to a condition precedent, or both.

Front 27

Remainder that is contingent because it is created in as yet unborn or unascertained persons:

Back 27

"To A for life, then to B's first child." A is alive. B, as yet has no children.

"To A for life, then to B's heirs." A is alive. B is alive. Because a living person has no heirs, while B is alive his heirs are unknown. Therefore, contingent remainder.

"To A for life, then to those children of B who survive A." A is alive. We don't yet know which, if any, of B's children will survive A. - Contingent Remainder

Front 28

Remainder that is contingent because it is subject to a condition precedent:

Back 28

A condition is a condition precedent when it appears BEFORE the language creating the remainder or is woven into the grant to remainderman - what the remainderman must do in order to gain admission to Blackacre.

"To A for life, then, if B graduates from college, to B." A is alive. B is now in high school. Before B can take, he must graduate from college. He has not yet satisfied this condition precedent. B therefore has: contingent remainder. O has reversion. (If B never graduates, O or O's heirs take.)

If B graduates from college during A's lifetime: B's contingent remainder is transformed automatically into an indefeasibly vested remainder.

"To A for life, and, if B has reached the age of 21, to B." A is alive. B is 19 years old. Again, B must satisfy a condition precedent before B can take. B therefore has: contingent remainder. O has reversion. If B never reaches 21, the estate reverts back to O or O's heirs.)

If B attains the age of 21 during A's lifetime; B's contingent remainder is transformed automatically into an indefeasibly vested remainder.

Front 29

Contingent Remainder Rules

Back 29

(1) Rule of Destructibility of Contingent Remainders - At common law, a contingent remainder was destroyed if it was still contingent at the time the preceding estate ended. Today, the Destructibility Rule has been abolished. Thus, if B has not yet met the condition, O or O's heirs simply hold the estate subject to B's springing executory interest. Once B meets condition, B takes.

(2) Rule in Shelly's Case - At common law, the rule would apply in one setting only: O conveys "To A for life, then, on A's death, to A's heirs." A is alive. Rule of Law, not construction (thus would apply even in the face of contrary grantor intent). Today - virtually abolished.

(3) Doctrine of Worthier Title - still viable in most jurisdictions - also known as the rule against a remainder in grantor's heirs. It applies when O, who is alive, tries to create a future interest in his heirs (as yet unascertainable). Rule of Construction (Grantor's intent controls).

Example: O, who is alive, conveys "To A for life, then to O's heirs." If the Doctrine of Worthier Title did NOT apply, A has a life estate and O's heirs have contingent remainder, because O is still alive and a living person has no heirs.

Instead, because of the DWT, the contingent remainder in O's heirs is VOID. Thus, A has a life estate and O has a reversion. The doctrine endeavors to promote the free transfer of land.

Front 30

Distinguish the 3 types of Vested Remainders:

Back 30

(Note - only remainders can be vested)

(1) Indefeasibly Vested Remainder

(2) Vested Remainder Subject to Complete Defeasance (total divestment)

(3) Vested Remainder Subject to Open

Front 31

Indefeasibly Vested Remainder

Back 31

Holder of this remainder is certain to acquire an estate in the future, with NO conditions attached.

Example: "To A for life, remainder to B." A is alive, B is alive. A has life estate. B has IVR.

What if B predeceases A? At common law, B's future interest passes by his will or intestacy to heirs.

Front 32

Vest Remainder Subject to Complete Defeasance (total divestment)

Back 32

has a string attached

Here, remainderman exists. His taking is NOT subject to any condition precedent (no prerequisite). However, his right to possession could be cut short because of condition subsequent.

Note difference b/t condition precedent, which creates a contingent remainder, and a condition subsequent, which creates a vested remainder subject to complete defeasance.

To tell the difference, apply the the "Comma Rule": When conditional language in a transfer follows language that, taken alone and set off by commas, would create a vested remainder the condition is a condition subsequent, and you have a vested remainder subject to a complete defeasance.

Front 33

Vested Remainder Subject to Open

Back 33

Here, a remainder is a vested in a group (category/class) of takers, at least one of whom is qualified to take.

But - each class member's share is subject to partial diminution (get smaller) because additional takers can still qualify as class members.

Example - "To A for life, then to B's children." A is alive. B has two children, C and D.

What do C and D have? Vested remainders subject to open.

Front 34

A class is either open or closed.

Back 34

A class is open if: it is possible for others to enter.

A class is closed when: its maximum membership has been set.

Front 35

How will you know when the given class has closed?

Back 35

Apply the common law rule of convenience:

The class closes whenever any member can demand possession.

"To A for life, then to B's children." A is alive. B has two children, C & D. When does class close?

At B's death, and also, according to the rule of convenience, at A's death, no matter that B is still alive. Why? That's when C and D can demand possession. It is called a rule of convenience because it establishes a clear, bright line lever (though harsh).

Once A dies, a child of B born or conceived thereafter will NOT share in the gift (shut-out).

Exception - The womb rule - a child of B in the womb @ A's death will share with C & D.

What if C or D predeceases A? At common law (and in absence of statutes), their share goes to their devisees or heirs.

Front 36

What is an executory interest? (distinguish from remainders)

Back 36

(do not wait their turn - Dr. Evil)

It is a future interest created in a transferee (a third party), which is NOT a remainder. It takes effect by either cutting short some interest in another person ("shifting") or in the grantor/his heirs ("springing").

Front 37

Shifting executory interest

Back 37

It always follows defeasible fees and cuts short someone other than grantor (third party).

Front 38

Springing Executory Interest

Back 38

cuts short O, the grantor.

Front 39

Rule Against Perpetuities ("RAP")

Back 39

Rule - Certain kinds of FUTURE INTERESTS are void if there is any possibility, however, remote, that the given interest may vest more than 21 years after the death of a measuring life.

4-step Technique for Assessing Potential RAP Problems.

Front 40

4-Step Technique for Analyzing Potential RAP Problems: Step 1

Back 40

(1) Determine which future interests have been created by conveyance. The RAP potentially applies ONLY to contingent remainders (unascertained or subject to CS), executory interests, and certain vested remainders subject to open.

It DOES NOT APPLY to
- any future interest in O, the grantor
- any indefeasibly vested remainders
- or vested remainders subject to complete defeasance (total divestment)

Front 41

Step 2

Back 41

Identify the conditions precedent to the vesting of the suspect future interest.

Front 42

Step 3

Back 42

Find a measuring life. Look for a person alive at the date of the conveyance and ask whether that person's life or death is relevant to the condition's occurrence.

Front 43

Step 4

Back 43

Ask: Will we know, with certainty, within 21 years of the death of our measuring life, if our future interest holder(s) can or cannot take? If so, the conveyance is good. If not (if there is any possibility, however remote, that the condition precedent could or could not occur more than 21 years after the death of a measuring life), the future interest is void.

Front 44

Two Bright Line Rules of Common Law RAP

Back 44

(1) A gift to an open class that is conditioned on the members surviving to an age beyond 21 violates the common law RAP. (bad to one, bad to all - entire class gift is void).

(2) Many shifting executory interests violate the RAO. An executory interest with no limit on the time within which it must vest violates the RAP.

Charity-to-Charity Exception - a gift from one charity to another does NOT violate the RAP.

Front 45

RAP Reforms

Back 45

(1) Wait and See (or second look) doctrine - under this majority reform effort, the validity of any suspect future interest is determined on the basis of the facts AS THEY NOW EXIST, at the end of the measuring life. This eliminates the "what if" or "anything is possible" line of inquiry.

(2) USRAP - Codifies the common law RAP and, in addition, provides for an alternative 90 year vesting period. (apply rap or apply 90 year vesting).

NOTE - both reforms embrace:
(a) the cy pres doctrine (as near as possible) - if a given disposition violates the rule, a court may reform it in a way that most closely matches grantor's interest while still complying with the RAP.

and

(b) The reduction of any offensive age contingency to 21 years (to enable grant to survive).

Front 46

Concurrent Estates (co-ownership)

Back 46

Three forms:
(1) Joint Tenancy
(2) Tenancy by the Entirety
(3) Tenancy in Common

Front 47

Joint Tenancy - Distinguishing Characteristics

Back 47

Distinguishing Characteristics of a Joint Tenancy:

(1) Right of Survivorship - meaning that when one joint tenant dies, his share goes AUTOMATICALLY to the SURVIVING joint tenants.

(2) A joint tenant's interest is alienable (can sell or otherwise transfer during lifetime). It is NOT devisable (by will) or descindable (heirs).

Front 48

Joint Tenancy - Creation

Back 48

(1) 4 unities (T-TIP):
T - at the same TIME
T - by the same TITLE
I - with identical INTERESTS
P - with rights to POSSESS/use the whole

(2) Grantor must clearly express the right of survivorship (b/c joint tenancies are disfavored - allow takers to avoid the system of probate - costly, tedious time consuming mechanism by which one's estate is disposed of at one's death).

(3) Use of a "straw." (Two step process to satisfy four unities. Step 1 - grantor conveys to straw (middleman). Step 2 - Straw conveys back to both grantor and other person as JTWROS. - allows all four unities to be there, including time and title)

Front 49

Joint Tenancy - Severance

Back 49

SPAM: Sale, Partition, And Mortgage

Front 50

JT - Severance and Sale

Back 50

(1) A joint tenant can sell or transfer her interest during her lifetime. May do so secretly (without others' knowledge or consent). Disrupts unities, though, and severs joint tenancy as to seller's interest. Thus, buyer is tenant in common. To extent started out with more than two JT in first place, the joint tenancy remains intact as between the other, NON-transfering joint tenants.

(2) In equity, a joint tentant's mere act of entering into a contract for the sale of her share will sever the joint tenancy as to the contracting party's interest.
- This is because of the Doctrine of Equitable Conversion, which provides that "equity regards as done that which ought to be done."

Front 51

JT - Severance and Partition

Back 51

Three Variations:

(1) By voluntary agreement - co-owners agree to end joint tenancy

(2) Partition in Kind - Court action for physical division of Blackacre IF in the best interest of ALL parties.
- Works best with sprawling acreage. Susceptible to easy division.

(3) Forced Sale - Court action if in best interest of ALL parties where Blackacre is SOLD and proceeds divided proportionately.
- Works best with homestead, commercial building, etc.

Front 52

JT - Severance and Mortgage

Back 52

Minority Title Theory Rule - One joint tenant's execution of a mortgage or a lien on his or her share will sever the joint tenancy as to that now encumbered share ONLY IN THE MINORITY OF STATES.

Majority Lien Theory Rule - whereby a joint tenant's execution of a mortgage on his or her interest will NOT SEVER the joint tenancy.

Front 53

Tenancy By the Entirety

Back 53

"Can't Touch This" - Marital Interest

Create: marital interest. Can only be created between married partners with the right of survivorship.

In the states that recognize TBE, it arises presumptively in any conveyance to married partners UNLESS clearly stated otherwise.

Very protected form of co-ownership. Remember - "Can't touch this"
- Creditors of only one spouse cannot touch this tenancy.
- Unilateral conveyance is not permitted (can't do). Neither tenant, acting alone, can defeat the right of survivorship by unilateral conveyance to a third party.

Front 54

Tenancy in Common

Back 54

Three Features:
(1) Each co-tenant owns an individual part and each has a right to possess the whole.

(2) Each interest is descendible, devisable, and alienable. There are NO survivorship rights between tenants in common.
- Presumption favors Tenancy in Common.

Front 55

Rights and Duties of Co-Tenants (9)

Back 55

(1) Possession - Each cotenant is entitled to possess, use, and enjoy the whole (regardless of contribution). If one co-tenant wrongfully excludes another co-tenant from possession of the whole or any part, he has committed wrongful ouster.

(2) Rent from co-tenant in exclusive possession. Rule - absent ouster, a co-tenant in exclusive possession is NOT liable to the others for rent.

(3) Rent from third parties - A co-tenant who leases all or part of the premises to a third party must account to the other co-tenants, providing them their fair share of the rental income (by contribution).

(4) Adverse possession - Unless he has ousted the other co-tenants, one co-tenant in exclusive possession for the statutory adverse possession period CANNOT ACQUIRE title to the exclusion of the others. Why? the hostility element is absent. No hostility b/c no ouster.

(5) Carrying Costs - Each co-tenant is responsible for his or her fair share of carrying costs (such as taxes and mortgage interest payments), based upon his or her undivided share (contribution).

(6) Repairs - The repairing co-tenant enjoys a right to contribution for "reasonable and necessary repairs," provided that she told the others of the need.

(7) Improvements - During the life of the co-tenants, there is NO right to contribution for "improvements." This is because one co-tenant's so-called "improvements" might be another's nightmares. Note, however, that at partition (severance), the improving co-tenant is entitled to a credit equal to an increase in value due to her efforts but will bear full liability for any drop in value.

(8) Waste - A co-tenant must not commit waste. (See Doctrine of Waste slides) - A co-tenant can bring an action for waste during the life of the co-tenancy.

(9) Partition - A joint tenant or tenant in common has a right to bring an action for partition.

Front 56

Landlord/Tenant Law - Four Leasehold (Nonfreehold) Estates

Back 56

(1) The Tenancy for Years (Estate for Years or Term of Years)

(2) Periodic Tenancy

(3) Tenancy at Will

(4) Tenancy at Sufferance

Front 57

Tenancy for Years

Back 57

This lease is for a fixed period of time (could be for a day or actual years).

When you know the termination date from the start, you have the tenancy for years.

Because a term of years states from the outset when it will terminate, no notice is needed to terminate.

A term of years greater than one year must be in writing to be enforceable because of the statute of frauds.

Front 58

Periodic Tenancy

Back 58

This is a lease which continues for successive intervals until L or T give proper notice to terminate. (open-ended)

The periodic tenancy can be created expressly (year to year, week to week) or can arise by implication, in any one of three ways:
(a) Land is leased with no mention of duration but provision is made for the payment of rent at set intervals;

(b) An oral term of years in violation of the statute of frauds creates an implied periodic tenancy measured by the way/when rent is tendered.

(c) The holdover - In a residential lease, if L elects to holdover a T who has wrongfully stayed on past the conclusion of the original lease, an implied periodic tenancy arises measured by the way rent is now tendered.

Front 59

How to Terminate a Periodic Tenancy

Back 59

Notice, usually written, MUST be given.

How much notice? at common law (and default), at least equal to the period itself unless parties have otherwise agreed. (thus, month-to-month would need 1 months notice).

Exception - if tenancy is from year-to-year or greater, only 6 months notice is needed.

By private agreement, the parties may lengthen or shorten these common-law prescribed notice provisions. (Freedom of Contract) - but the periodic tenancy must end at the conclusion of a natural lease period (end of the month).

Front 60

Tenancy at Will

Back 60

This is a tenancy for no fixed duration. (To T for so long as L or T desires- rare).

Unless the parties expressly agree to tenancy at will, the payment of regular rent will cause a court to treat as implied periodic tenancy

The Tenancy at Will may be terminated by either party at any time. However, a reasonable demand to vacate (quit the premises) is usually required.

Front 61

Tenancy at Sufferance

Back 61

It is created when T has wrongfully held over past the expiration of the lease. We give this wrongdoer a leasehold estate (the tenancy at sufferance), to permit L to recover rent.

Shortlived - The tenancy at sufferance lasts only until L either evicts tenant or elects to hold T to a new tenancy.

Front 62

Tenant's Duties

Back 62

(1) T's liability to third parties;
(2) T's duty to repair; and
(3) T's duty to pay rent.

Front 63

T's Liability to Third Parties

Back 63

(tort law)

T is responsible for keeping the premises in reasonably good repair. T is liable for injuries sustained by 3rd parties T INVITED, even where L expressly promised to make all repairs. (does not matter that T may seek indemnification/reimbursement from L, which T should and quickly do so)

Front 64

T's Duty to Repair

Back 64

T's Duty to Repair when the lease is SILENT:

Standard - T must maintain premises and make ordinary repairs.

T must not commit waste
- Voluntary (overt, harmful acts)
- Permissive Waste (neglect)
- Ameliorative Waste (alterations that increase the premises' value)

Front 65

Law of Fixtures

Back 65

Walks with the law of waste

When a tenant removes a fixture, he commits voluntary waste.

Front 66

What is a fixture?

Back 66

A fixture is a once moveable chattel that, by virtue of its annexation to realty, objectively shows the intent to permanently improve the realty.

Front 67

T-L Fixtures General Rule

Back 67

T must not remove a fixture, no matter that she has installed it.

Fixtures pass with ownership of the land - must stay put.

Common examples:
Heating systems
Custom storm windows
Furnace
Certain lighting installations

Front 68

How to tell when a tenant installation qualifies as a fixture:

Back 68

(1) Express agreement controls, or
(2) In the absence of an agreement, T may remove a chattel that she has installed so long as removal does not cause substantial harm to the premises.

If removal will cause substantial damage, then, in objective judgment, T has shown the intent to install a fixture - the fixture must stay put.

Front 69

T's Duty to Repair when T has expressly covenanted in the lease to maintain the property in good condition for the duration of the lease:

Back 69

At common law, historically, T was responsible for ANY loss to the property, including any loss due to force of nature/acts of God.

Today, the majority view is that T may terminate the lease when the premises are destroyed without T's fault.

Front 70

T's Duty to Pay Rent

Back 70

(1) Rules for when T breaches this duty and is in possession of the premises.

(2) Rules for when T breaches this duty but is OUT of possession (SIR).

Front 71

When T breaches duty to pay rent but is still in possession of premises,

Back 71

the L's only options are to evict through the courts or continue the relationship and sue for rent due. If the L moves to evict, she is nonetheless entitled to rent from the T, who is now a T at sufferance, vacates.

L MUST NOT engage in self-help, such as changing locks, forcibly removing T, or removing any of T's possessions.

Self-help is flatly outlawed and is punishable civilly and criminally. (L could go to jail for this.)

Front 72

When T breaches duty to pay rent but is out of possession,

Back 72

SIR:

(1) Surrender
(2) Ignore
(3) Re-let

Front 73

Surrender

Back 73

L could choose to treat T's abandonment as an implicit offer of surrender, which L accepts (more peaceful.)

What is surrender? T shows by works or actions that she wants to give up this lease.

If unexpired term is greater than one year, surrender MUST be in writing to meet statute of frauds. Letter to accept signed by L to T's last known address is sufficient.

Front 74

Ignore

Back 74

Ignore the abandonment and hold T responsible for the unpaid rent, just as if T were still there. This option is available ONLY in MINORITY of states. (b/c of Re-letting)

Front 75

Re-Let

Back 75

L may re-let the premises on the wrongdoer T's behalf and hold him or her liable for any deficiency (MAJORITY RULE)

Majority rule -
L must at least try to re-let (good-faith). This is a mitigation principle.

Front 76

Landlord's Duties (4)

Back 76

(1) Duty to Deliver Possession
(2) Implied Covenant of Quiet Enjoyment
(3) Implied Warranty of Habitability
(4) Retaliatory Eviction

Front 77

Duty to Deliver Possession

Back 77

English Rule (Majority) - requires that L put T in actual, physical possession of the premises. Thus, if at the start of T's lease a prior holdover T is still in possession, L has breached and the new T gets damages.

American Rule (MINORITY) - b/c of frontier, L was often far way. Thus, T had to handle holdovers. Rule - does not require that L put T in actual, physical possession. It requires only that L provide T with legal possession.

Front 78

Implied Covenant of Quiet Enjoyment

Back 78

Fundamental - applies to both residential and commercial leases:

T has a right to quiet use and enjoyment of the premises without interference from L.

Ways to breach:
(1) Breach by actual wrongful eviction - this occurs when L wrongfully evicts T or excludes T from premises.

(2) Breach by Constructive Eviction (SING)

Front 79

Breach by Constructive Eviction (SING)

Back 79

SING

(1) Substantial Interference - due to L's actions or failure to act, there is a chronic problem (does not have to be permanent)

(2) Notice - T MUST notify L of the problem and L must fail to act meaningfully.

(3) Goodbye - Get out - T must vacate premises within reasonable time after L fails to fix problem.

Front 80

Is landlord liable for acts of other tenants?

Back 80

Generally, NO.

But - 2 exceptions:
(1) L must NOT permit a nuisance ont he premises.
(2) L must control common areas.

Front 81

Implied Warranty of Habitability

Back 81

Fundamental - applies ONLY to residential leases, not commercial (habitability of residential)

Standard - premises must be fit for BASIC HUMAN dwelling, meaning bare living requirements must be met.

Appropriate standard may be supplied by local housing code or independent court conclusion (case law.

Sorts of problems that tend to trigger - no heat in winter, no plumbing, no running watter.

T's entitlements when IWH breached: 4 options - Mr3:

M - Move Out and End Lease

R - Repair and deduct: allowable by statute in a growing number of states. T may make the reasonable repairs and deduct costs from future rent.

R - Reduce Rent or withhold all rent until the court determines fair rental value. Typically, T must place withheld rent into escrow to show good faith.

R - Remain in Possession, pay rent, and affirmatively seek money damages.

Can stay - broader than constructive eviction.

Front 82

Retaliatory Eviction

Back 82

If T lawfully reports L for housing code violations, L is barred from penalizing T, by for example, raising rent or ending the lease or harassing or taking other reprisals.

Front 83

Assignment vs Sublease

Back 83

In the absence of some prohibition in the lease, a T may freely transfer his or her interest in the whole (assignment) or in party (sublease).

In the lease, L can prohibit T from assigning or subletting without L's prior written approval.

However, once L consents to one transfer by T, L waives the right to object to future transfers by that T, unless L expressly reserves the right.

Front 84

The Assignment (transfer of interest in whole)

Back 84

T1 has 10 months remaining on a 2 yr term of years. T1 transfers ALL 10 months to T2. This is an assignment.

Therefore, L and T2 are in privity. This means that L and T2 are liable to each other for ALL of the covenants in the original lease that "run with the land." (promise to pay rent, paint, repair, etc)

L and T2 are NOT in privity of Contract unless T2 expressly assumed all promises in original lease.

As a result, L and T1 are NO longer in Privity of Estate but remain in Privity of Contract. Thus, L and T1 are secondarily liable to each other.

Front 85

Sublease (transfer of interest in part)

Back 85

L and sublessee are NEITHER in privity of estate nor privity of contract. L and T1's relationship remains wholly intact. T2 is responsible only to T1 and vice versa.

Front 86

Landlord's Tort Liability

Back 86

(1) The common law of caveat lessee - "let T beware", meaning in tort law, landlord was under NO duty to make the premises safe (in presence of personal injury).

(2) 5 most important exceptions to common law: CLAPS

Front 87

CLAPS

Back 87

C - Common areas: L must maintain ALL common areas (hallways & stairwells)

L - Latent defects rule: L must WARN T of hidden defects of which L has knowledge or reason to know (simply a duty to warn, not duty to repair)

A - Assumption of repairs: a landlord who voluntarily makes repairs MUST complete them with reasonable care. If L makes repairs negligently, L is liable. (Nice L finish last)

P - Public Use Rule - L who leases public space (such as convention hall or museum) and who should know, because of the nature of defect and the length of lease (presumptively short) that T will not repair, is liable for any defects on the premises.

S - Short term lease of furnished dwelling - L is liable for any defects onsite which harm T.

Front 88

Servitudes (see chart)

Back 88

Injunction or Damages
(1) Affirmative Easements (PING)
(2) Negative Easements (LASS)

Damages:
(3) Real Covenants (WITHN or WITV)

Injunction ONLY:
(4) Equitable Servitudes (WITNes)
(5) Reciprocal Negative Servitudes (Common Scheme Doctrine)

Front 89

Land Conveyancing - The purchase and sale of real estate:

Back 89

Every conveyance of real estate consists of a two-step process:

Step I: Land Contract (which endures until step II)

Step II: Closing, where the deed becomes operative document.

Front 90

Land Contract

Back 90

Land Contract and Statute of Frauds:

Standard - the land contract
(1) must be in writing signed by the party to be bound (defendant) and
(2) must describe the property and
(3) state some consideration.

When the amount of the land recited in the land contract is MORE than the actual size of the parcel, buyer (B)'s remedy is specific performance with pro rata reduction in purchase price.

Exception to SOF: Doctrine of Part Performance.

Front 91

Doctrine of Part Performance

Back 91

Exception to land contract writing - statute of frauds: If, on your facts, you have two of the following three, the doctrine is satisfied and equity will decree specific performance of an ORAL CONTRACT for the sale of land:
(a) B takes possession
(b) B pays all or part of the purchase price
and/or
(c) B makes substantial improvements.

[very narrow exception]

Front 92

Problem of Risk of Loss (ROL)

Back 92

Apply the Doctrine of Equitable Conversion (equity regards as done that which ought to be done) - thus, once the K is signed, B owns the land subject of course to the condition that he pay the purchase price at closing.

One important result - Destruction: If in the interim between contract and closing. Blackacre is destroyed through no fault of either party - B bears ROL unless the K says otherwise. B's land and B's loss from moment K is signed.

Front 93

Two Implied Promises in Every Land Contract:

Back 93

(1) Seller promises to provide marketable title (at the closing), and
(2) Seller promises not to make any false statements of material fact (fraud).

Front 94

Marketable Title

Back 94

Standard - title free from reasonable doubts, free from lawsuits, and threat/spector of litigation.

Three circumstances will render title unmarketable:
(1) Adverse Possession - Even if part of title rests on adverse possession, it is unmarketable. S must be able to provide good record title.

(2) Encumbrances - Marketable title means unencumbered fee simple. Thus, servitudes and mortgages render title unmarketable, unless B has waived them. Note - S has right to satisfy an outstanding mortgage or lien AT CLOSING, with the proceeds of the sale. Thus, B cannot claim title is unmarketable b/c it is subject to a mortgage prior to closing, so long as the parties understand (intend) that the closing will result in the mortgage being satisfied or discharged.

(3) Zoning Violations - title is unmarketable when Blackacre violates a zoning ordinance - making it subject to threat of litigation.

Front 95

S promises not to make any false statements of material fact:

Back 95

Majority - now also hold S liable for failing to disclose latent material defects. S is liable for material lies and material omissions. Silence is no longer golden.

If contract contains a general disclaimer of liability (for example, "property sold as is" or "with all faults") - won't excuse S from liability for fraud or failing to disclose.

Front 96

Land contracts contain No Implied Warranties of:

Back 96

fitness or habitability. The common law norm is: Caveat Emptor (Buyer Beware).

Exception:
The implied Warranty of Fitness and Workmanlike Construction applies to the sale of new homes by builder-vendor.

Front 97

Closing

Back 97

Controlling document new the deed (which passes legal title from seller to buyer).

Front 98

How does Deed pass legal title from seller to buyer?

Back 98

It must be "LEAD." - Lawfully executed and delivered.

Front 99

Lawful execution of deed

Back 99

standard - deed must be in writing (containing an unambiguous description of property - good lead), signed by grantor.

Deed need not recite consideration, nor must consideration pass to make a deed valid.

Front 100

Description of the land

Back 100

does not have to be perfect.

Law requires only an unambiguous description - a good lead.

Front 101

Delivery Requirement

Back 101

satisfied when grantor physically or manually transfers deed to grantee.

permissible to use mail, agent, or messenger.

DOES NOT require actual, physical transfer of the instrument itself, meaning the standard delivery is a LEGAL standard and is a test solely of present intent.

Ask - Did grantor have the present intent to be immediately bound? (irrespective of whether or not the deed was handed over)

Recipient's express rejection of the deed DEFEATS DELIVERY.

Front 102

If a deed absolute on its face, is transferred to grantee with an oral condition, then:

Back 102

the oral condition drops out - it is not provable and delivery is complete.

Front 103

Delivery by escrow:

Back 103

is ok. Grantor may deliver an executed deed to a third party, known as an escrow agent, with instructions that the deed be delivered to grantee once certain conditions are met. Once conditions are met, then title passes automatically to grantee.

Advantage of escrow - If grantor dies or becomes incompetent or is otherwise unavailable before the express conditions are met, then title still passes from escrow agent to grantee once conditions are met.

Front 104

Covenants for title and three types of deed:

Back 104

(1) Quitclaim
(2) General Warranty Deed
(3) Statutory Special Warranty Deed

Front 105

Quitclaim Deed

Back 105

The quitclaim contains no covenants (no promises). Grantor isn't even promising he has title to convey in the first place. This is the worst deed buyer could hope for.

NOTE: Grantor does implicitly promise in the land contract to provide marketable title at closing. Very short lived - any problems post closing, and quitclaim seller is off the hook.

Front 106

General Warranty Deed

Back 106

Best deed buyer could hope for

Very generous - warrants against ALL defects in title, including those due to grantor's predecessors. Typically contains SIX covenants.

Front 107

Six Covenants of General Warranty Deed

Back 107

Three present covenants (means a present covenant is breached, if ever, AT THE TIME OF DELIVERY - SOL begins to run from the instant of delivery):

(1) Covenant of Seisin
(2) Covenant of Right to Convey
(3) Covenant Against Encumbrances

Next Three are Future Covenants, meaning it is NOT breached, if ever, UNTIL grantee is disturbed in POSSESSION - SOL will not begin to run until that future date:
(1) Covenant for Quiet Enjoyment
(2) Covenant of Warranty
(3) Covenant of Future Assurance

Front 108

Present Covenants of GWD

Back 108

(1) Covenant of Seisin - Grantor promises he owns this estate (vested with title)

(2) Covenant of Right to Convey - Grantor promises he has the POWER to make this transfer, meaning no temporary restrains on grantor's power to sell/alienation (age, etc.) (vested with power to make transfer).

(3) Covenant Against Encumbrances - Grantor promises no servitudes or mortgages on Blackacre.

Front 109

Future Covenants of GWD

Back 109

(1) Covenant of Quiet Enjoyment - Grantor promises grantee won't be disturbed in possession by a 3rd party's lawful claim of title (not a dirty double-dealer). Why not? b/c there are NO 3rd parties with lawful claims.

(2) Covenant of Warranty - Grantor promises to defend grantee should there be any 3rd party claims of title (although he promised in CQE that there would not be any).

(3) Covenant for Further Assurances - Grantor promises to do whatever is necessary in the future to perfect title if it turns out to be imperfect (ex: happen to sign in blue ink and county requires black ink).

Front 110

Statutory Special Warranty Deed

Back 110

Provided by statute in many states, this deed contains two promises that grantor makes ONLY on behalf of HIMSELF (not predecessors):

(1) Grantor promises he has not conveyed Blackacre to anyone other than grantee; and

(2) Blackacre is free from any encumbrances made by grantor.

Front 111

The Recording System

Back 111

[usual model: case of the dirty double dealer]

Two Brightline Rules:
(1) If B is a Bona Fide Purchaser (BFP), and we are in a NOTICE jurisdiction, B wins regardless of whether or not she records before A does.

(2) If B is a BFP and we are in a RACE-NOTICE jurisdiction, B wins IF she records properly before A does.

Recording statutes exist to protect ONLY BFPs and mortgagees (creditors). Rather selective - doesn't extend to just anyone - must prove status.

Front 112

A Bona Fide Purchaser (BFP) is:

Back 112

one who

(1) purchases Blackacre for VALUE; and

(2) without notice that someone else got there first (in our model, "A")

Front 113

Two routine VALUE fact patterns:

Back 113

(1) Bargain Basement Sale

(2) Case of the Doomed Donee - recording statutes DO NOT protect donees (gift), heirs, or devisees, unless Shelter Rule applies.

Front 114

Three Forms of Notice a buyer may potentially be charged with:

Back 114

AIR

(1) A - Actual Notice

(2) I - Inquiry Notice

(3) R - Record Notice

Front 115

Actual Notice

Back 115

prior to B's closing, B learns of A.

Front 116

Inquiry Notice

Back 116

(a) Whether he looks or not, B is on inquiry notice of whatever an exam (inquiry) of Blackacre would how.

Buyer of real estate has a duty to INSPECT before transfer of title to see, for example, whether anyone else is in possession. If another is in possession, B has inquiry notice, regardless of whether buyer actually bothered to inspect. Thus, in our model, if A was in possession, B would be on inquiry notice of that fact (whether he actually inspected or not), thereby defeating B's status as BFP.

(b) If a recorded instrument makes reference to an unrecorded transaction, grantee is on inquiry notice of whatever a reasonable follow-up would show.

Front 117

Record Notice

Back 117

B is on record notice of A's deed if at the time B takes, A's deed was recorded properly.

In our model, if A has NOT recorded or did not record properly, whether B wins depends on which recording statute jurisdiction we're in. In a notice state, B wins. In a race-notice state, B must be a BFP and win race to record in order to "win" Blackacre.

Front 118

Recording Statutes

Back 118

Exam will not tell us - must know the language.

(1) Notice Statute

(2) Race-Notice Statute

Front 119

Notice Staute

Back 119

"A conveyance of an interest in land (O to A) shall not be valid against any subsequent purchasers for value (B), without notice thereof (B), unless the conveyance is recorded.

If at the time B takes, he is a BFP, he wins. It will not matter that A may ultimately record first before B does. It also will not matter that B never records.

Front 120

Race-Notice Statute

Back 120

"Any conveyance of an interest in land (O to A) shall not be valid against any subsequent purchaser for value (B), without notice thereof (B), whose conveyance is first recorded (B).

To prevail, B must (1) be a BFP, and (2) win the race to record.

Front 121

Record Notice and Chain of Title

Back 121

Note that in either jurisdiction, B's status as a subsequent BFP will be defeated IF A had promptly and properly recorded before B takes. In other words, A's proper recordation puts later buyers on RECORD NOTICE, thereby defeating their status as BFPs.

Also, to give record notice to subsequent takers, the deed must be recorded properly within the CHAIN OF TITLE, which refers to that sequence of recorded documents capable of giving record notice to later takers. In most states, the chain of title is established through a title search of the grantor-grantee Index.

Front 122

3 discrete Chain of Title Problems:

Back 122

(1) Shelter Rule
(2) Wild Deed
(3) Estoppel by Deed

Front 123

Shelter Rule

Back 123

One who takes from a BFP will prevail against any entity that the transferor-BFP would have prevailed against. In other words, the transferee "takes shelter" in the status of her transferor, and thereby "steps into the shoes" of the BFP even though she otherwise fails to meet the requirements of BFP status.

Example: O conveys to A, who does not record. Later, O conveys to B, a BFP who records. B then conveys to C, who is a mere donee or who has actual knowledge of the O to A transfer. In the contest between A vs C, who wins?

C wins in both a notice and race-notice state, because of the Shelter Rule. C steps into the shoes of B, who was a BFP who recorded first. (Shelter Rule aims to protect B, the BFP by making it easy for B to transfer).

Front 124

Wild Deed

Back 124

Outlaw - Doesn't even exist.

Rule - If a deed, entered on the records (A to B) has a grantor unconnected to the chain of title (missing link - O to A), the deed is a wild deed. It is incapable of giving record notice of its existence. (Deed is a nullity to system).

Example - O sells Blackacre to A, WHO DOES NOT RECORD. Then, A sells to B. B records the A to B deed. The A to B deed, although recorded is NOT connected to the chain of title because the O to A link is missing from the records. Therefore, the A to B deed is a wild deed and is null and void.

Assume O, our initial grantor and dirty double dealer, then sells to C. Assume that C has no actual or inquiry knowledge of the O to A or A to B conveyence. C records. O has skipped town. In the contest of B vs C, who prevails? C wills in both states. C wins in notice state b/c at the time C took, she is a BFP (for value without notice). C wins in race-notice state b/c at the time she took she is a BFP who won race to record. Remember, B's recording is a nullity - wild deed - as if never recorded at all.

Front 125

Estoppel by Deed

Back 125

Rule - one who conveys realty in which he has no interest is ESTOPPED from DENYING the validity of that conveyance if he later acquires the previously transferred interest.

Front 126

Mortgages - How does one create a mortgage?

Back 126

A mortgage is the conveyance of a security interest IN LAND intended by the parties to be COLLATERAL.

Mortgage is the union between two elements:
(1) debt; and
(2) voluntary lien in debtor's land to secure the debt

Debtor - mortgagor
Creditor - mortgagee.

Mortgage must typically be in writing to satisfy Statute of Frauds. This is the legal mortgage - evidenced/authenticated by a writing - also called Deed of Trust, Mortgage Deed, the Note, Security Interest in Land, or Sale Leaseback)

Front 127

What is an Equitable Mortgage?

Back 127

where parties, instead of executing a note or mortgage deed, debtor hands creditor a deed to Blackacre that is absolute on its face.

As between debtor (landowner "O") and creditor, parole evidence is admissible to show parties' true intent.

However, if Creditor proceeds to sell Blackacre (fraudulently of course) to BFP X, then X owns the land. Debtor O's only recourse is to sue creditor for fraud and sale proceeds.

Front 128

Once mortgage has been created, what are the respective parties' rights?

Back 128

Unless and until foreclosure, Debtor-Mortgagor has title and right to possess.

Creditor-Mortgagee has a lien (right to look at Blackacre in event of default).

All parties to a mortgage can TRANSFER their interests. The mortgage automatically follows a properly transferred note.

Front 129

How can Creditor-Mortgagee transfer his interest?

Back 129

By (1) Endorsing the note and delivering it to transferee (order paper)

or

(2) Executing a separate document of assignment.

If the note is endorsed and delivered (order paper), the transferee is eligible to become a HOLDER IN DUE COURSE.

Front 130

Holder in Due Course (HDC)

Back 130

takes free of any personal defenses that could have been raised against original mortgagee-creditor BUT IS STILL SUBJECT TO "REAL" DEFENSES that the maker might raise.

Front 131

Personal Defenses - HDC NOT subject to these:

Back 131

HDC NOT subject to these:
Lack of Consideration
Fraud in the Inducement
Unconscionability
Waiver
Estoppel

(Thus, HDC may foreclose the mortgage despite any such personal defenses.)

Front 132

Real Defenses - HDC still subject to these:

Back 132

MAD FIFI(4) (can attack at any time):

Material Alteration
Duress
Fraud In the Inducement
Incapacity
Illegality
Infancy
Insolvency

Front 133

To be a holder in due course, the following criteria must be met:

Back 133

(1) the note must be negotiable, meaning made payable to the named mortgagee;

(2) the original note must be endorsed, signed by the named mortgagee;

(3) the original note must be delivered to the transferee (photocopy unacceptable - too susceptible to fraud);

(4) the transferee must take the note in good faith without notice of any illegality; and

(5) the transferee must pay value for the note, meaning some amount that is more than nominal.

Front 134

Mortgages and the Recording System

Back 134

If O, the debtor-mortgagor, sells Blackacre (which is currently mortgaged), the lien remains on the land, so long as the mortgage was PROPERLY RECORDED.

All recording statutes apply to mortgages as well as deeds. Thus, a later buyer takes subject to the properly recorded lien - does not matter which jurisdiction buyer is in. In a notice state, Buyer is on record notice of the lien (whether he bothered to check the records or not), and in a race-notice state, Buyer is subject to the lien because buyer is on record notice and bank won the race to record. If property sold BEFORE bank properly records, then it will matter which state buyer is in. If bank recorded before buyer records, buyer loses in a race-notice. However, in a race state, B wins so long as he was BFP at time he took (rule - in a notice state, a subsequent BFP prevails over a prior grantee or mortgagee who has not yet properly recorded at the time BFP took).

Front 135

Who is personally liable on the debt if O, our debtor-mortgagor, sells Blackacre to B?

Back 135

If B has "assumed" the mortgage, then both O and B are personally liable. B is primarily liable and O is secondarily liable.

If B takes "subject to" the mortgage, then B assumes NO personal liability. Only O is personally liable. However, if B recorded, the mortgage sticks with the land. Thus, if O defaults, the mortgage may be foreclosed.

Front 136

Foreclosure: Assuming the mortgagee-creditor must look to the land for satisfaction (on outstanding debt), how must he/she proceed?

Back 136

The mortgagee must foreclose by proper judicial action. At foreclosure, the land is sold. The sale proceeds go to satisfying the debt.

Front 137

What if the proceeds from the sale of Blackacre are LESS than the amount owed?

Back 137

Then mortgagee-creditor brings a deficiency action against debtor.

Front 138

By contrast, what if there is a SURPLUS?

Back 138

Junior liens are paid off in order of their PRIORITY, and the remaining surplus, if any, goes back to debtor.

Front 139

Effect of foreclosure on various interests:

Back 139

Foreclosure will:
terminate - junior interests
not affect - senior interest.

This means, junior lienholders will be paid in descending order with the proceeds from the sale, assuming funds are leftover after full satisfaction of superior claims. Junior lienholders should be able to proceed for a deficiency judgment. But, once foreclosure of a superior claim has occurred, with the proceeds distributed appropriately, junior lienholders can no longer look to Blackacre.

Front 140

Necessary Parties

Back 140

Those with interest subordinate to those of foreclosing party is a necessary party.

Debtor-mortgagor is a necessary party and must be joined, particularly if creditor wishes to proceed against debtor for a personal deficiency judgment.

Failure to include a necessary party results in the preservation of that party's claim, despite the foreclosure sale. Thus, if a necessary party is NOT JOINED, his mortgage remains on the land.

Front 141

Foreclosure sale's buyer liability

Back 141

Remember, the foreclosure sale does not affect any interest senior to the mortgage that is being foreclosed. Thus, the buyer at the sale takes SUBJECT TO such interest. This means that buyer is NOT personally liable, but, as a practical matter, if the senior creditor is not paid, sooner or later the senior creditor will foreclose against the land.

Therefore, a foreclosure sale buyer has a strong incentive to PAY OFF SENIOR CREDITOR.

Front 142

Priorities

Back 142

A creditor must record to get priority. Until creditor properly records, it has no priority.

Once recorded, priority is determined by the norm of FIRST IN TIME - FIRST IN RIGHT. (Bright Line Rule)

EXCEPTION - purchase money mortgage.

Front 143

Purchase Money Mortgage

Back 143

is a mortgage given to secure a loan that enables the debtor to acquire the encumbered land.

The purchase money mortgagee has a "superpriority" - first priority as to parcel financed.

Front 144

After-Acquired Collateral Clause (Floating Lien)

Back 144

permissible clause in mortgages/security agreements - "whether no owned or hereafter acquired"

Mortgagee holds a valid security interest in all after acquired property subject to a purchase money mortgagee who would have first priority in parcel that it financed.

Front 145

Subordination Clause/ Agreement

Back 145

(commercial settings) - permissible - means that a senior creditor may privately agree to subordinate his priority to a junior creditor.

Front 146

Redemption

Back 146

(1) Redemption in Equity

(2) Statutory Redemption

Front 147

Equitable Redemption

Back 147

Equitable redemption is universally recognized up to the date of sale. At any time prior to the foreclosure sale, the debtor can try to redeem the land.

Once a valid foreclosure has taken place, the right to equitable redemption is gone.

Front 148

How is the right of equitable redemption exercised?

Back 148

by paying off the missed payment(s) plus interest and costs.

Front 149

What if the mortgage or note contained an ACCELERATION CLAUSE?

Back 149

An acceleration clause permits the mortgagee to declare the full balance due immediately and payable in full in the event of default.

If the mortgage contains an acceleration clause, the full balance plus accred interest plus costs must be paid.

Front 150

May a debtor-mortgagor waive the right to redeem in the mortgage instrument itself?

Back 150

No - this is known as "clogging the equity of redemption" - prohibited

Front 151

Statutory Redemption

Back 151

Recognized in 50% of states (half) - it gives the debtor-mortgagor a statutory right to redeem for some fixed period AFTER the foreclosure sale has occurred (typically six months to one year).

Where recognized, statutory redemption applies after the foreclosure (after the fact).

The amount to be paid is usually the foreclosure sale price, rather than the amount of the original debt.

In most states, to recognize statutory redemption, the mortgagor will have the right to possess Blackacre during the statutory period.

Front 152

Effect of Redemption

Back 152

When a mortgagor redeems, the effect is to nullify the foreclosure sale (un-do).

Front 153

Statutory Redemption

Back 153

Recognized in 50% of states (half) - it gives the debtor-mortgagor a statutory right to redeem for some fixed period AFTER the foreclosure sale has occurred (typically six months to one year).

Where recognized, statutory redemption applies after the foreclosure (after the fact).

The amount to be paid is usually the foreclosure sale price, rather than the amount of the original debt.

In most states, to recognize statutory redemption, the mortgagor will have the right to possess Blackacre during the statutory period.

Front 154

Effect of Redemption

Back 154

When a mortgagor redeems, the effect is to nullify the foreclosure sale (un-do).

Front 155

Lateral Support

Back 155

If land is improved by buildings and an adjacent landowner's excavation causes that improved land to CAVE IN, the excavator will be liable ONLY IF negligent.

Strict liability does not attach to the excavator's actions unless plaintiff shows that, because of defendant's actions, plaintiff's improved land would have collapsed even in its natural state (very high burden).

In other words, for strict liability to apply, plaintiff must show that the improvements on his land (for example, the shrubs, fountain, and structure) did not contribute to his land collapse. (clear showing)

Front 156

Water Rights

Back 156

Two major systems for determining allocation of water in water-courses, such as streams, rivers, and lakes:

(1) Riparian Doctrine

and

(2) Prior Appropriation Doctrine

Front 157

Riparian Doctrine

Back 157

Water belongs to those who own the land bordering the water course.

These people are known as riparians, who share the right of reasonable use of the water.

Thus, one riparian will be liable if his or her use UNREASONABLY interferes with others' use.

Front 158

Prior Appropriation Doctrine

Back 158

The water belongs initially to the state, but the right to divert it and use it can be acquired by an individual, regardless of whether or not he happens to be a riparian owner.

Rights are determined by priority of beneficial use. The norm for allocation is FIRST IN TIME, FIRST IN RIGHT. Thus, a person can acquire the right to divert and use water from a water course merely by being the first to do so. Any productive or beneficial use of the water, including use for agriculture, is sufficient to create the appropriate right.

Front 159

Groundwater Rights

Back 159

Groundwater defined: Also known as percolating water - Water beneath the surface earth that is not confined to a known channel.

Rule - A surface owner is entitled to make reasonable use of groundwater, but the use must NOT be wasteful.

Front 160

Surface Water Rights/ Common Enemy Rule

Back 160

Surface Water defined - Those which come from rain, springs or melting snow, and which have not yet reached a natural watercourse or basin.

Common Enemy Rule - Surface water is considered a common enemy (nemesis). Hence, a landowner may change drainage or make any other changes/improvements on his land to combat the flow of surface water.

Many courts have modified this rule to prohibit unnecessary harm to others' land.

Front 161

Possessor's Rights

Back 161

The possessor of land has the right to be free from trespass and nuisance.

Hypersensitive plaintiffs lose.

Front 162

Trespass

Back 162

The invasion of land by tangible, physical object.

To remove a trespasser, one brings an action for ejectment.

Front 163

Private Nuisance

Back 163

A substantial and unreasonable interference with another's use and enjoyment of land.

NOTE: unlike trespass, nuisance does NOT require tangible, physical invasion. Thus, odors and noise could give rise to a nuisance but not a trespass.

Front 164

Eminent Domain

Back 164

Defined: Government's Fifth Amendment Power to take private property for public use in exchange for just compensation.

Explicit takings = governmental condemnation

Implicit/Regulator takings = a governmental regulation that, although not intended to be a taking, has the same effect.

Front 165

Remedy for Regulatory Taking

Back 165

Government must either:
(1) justly compensate owner, or

(2) terminate regulation and pay owner for damages that occurred while regulation was in effect.

Front 166

Zoning

Back 166

Defined - Pursuant to its state and local police powers, government may enact statutes to reasonably control land use.

Variance - principal means to achieve flexibility in zoning (a departion from restriction): Proponent must show:
(1) undue burden and
(2) variance will not decrease neighboring property values.

The variance is granted by administrative action - typically, a zoning board.

Front 167

Nonconforming Use

Back 167

A once lawful, existing use that is now deemed nonconforming by a new zoning ordinance. It cannot be eliminated all at once unless just compensation is paid. Otherwise, it could be deemed an unconstitutional taking.

Front 168

Unconstitutional exactions:

Back 168

Defined - exactions are those amenities government seeks in exchange for granting permission to build.

To pass constitutional scrutiny, these exactions must reasonably relate both in nature and scope to the impact of the proposed development. If they are not, these exactions are unconstitutional. (exactions are inherently suspect - might be government extortion)