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96 Cards in this Set

  • Front
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Life estate pur autre vie
life estate measured by the life of someone other than the life estate holder
Rights and Duties of Life Tenant - Waste
all life tenant can do is maintain the estate, and that means continuing the normal use of the land in its present condition

if life tenant does more than or less than merely maintain the estate, then life tenant is guilty of waste
Voluntary waste
any affirmative action beyond the right of maintenance causing harm to the premises

life tenant can only continue the normal use; any change of use is voluntary waste, and life tenant is liable to the holder of the future interest

Watch out: depletion of natural resources is waste unless the normal use of the land was to deplete them (eg, coal mine, granite quarry) - this is called open mines doctrine (sale of crops is not waste)
Permissive waste
where tenant has filed to maintain

tenant must do 3 things to avoid permissive waste:
1. repair: life tenant must keep property in repair, but is only responsible for ordinary repairs, not improvements
2. taxes: life tenant pays all taxes on the property (watch out: holder of future interest must make sure taxes get paid, because a tax sale terminates the future interest)
3. interest: life tenant pays any interest on any mortgage (holder of the future interest must pay the principal)

Life tenant's obligation is limited to the amount of income received from the land, or, if the life tenant is personally using the property, the reasonable rental value of the land

Insurance - life tenant does not have to insure the property
Ameliorative waste
special type of voluntary waste that occurs when the affirmative act alters the property substantially but increases the value of it

Rule: if changed conditions have made the property relatively worthless in its current use, the life tenant can tear it down without liability to the holder of the future interest
Class gifts
gifts to a class of unnamed persons

members of a class who predeceases the T are eliminated and do not recover; their gift lapses

once the class is established when the will is executed, the class stays open to accommodate those who later meet the definition of class member

Rule of Convenience: class closes when any one of the class is entitled to a distribution
Future Interests Retained by Grantor
1. Reversion - goes with life estates and term of years
2. Possibility-of-Reverter - goes with fee simple determinable (which ends automatically when the condition happens)
3. Right of Entry - goes with fee simple on condition subsequent
Future Interests Given a Grantee
1. Remainder
a. Vested remainder - nothing stands in the way of its becoming possessory on the expiration of the estate that comes before it
b. Vested remainder subject to open - where remainder interest is to a class whose members are not yet fully known the class remains open to allow for future persons who qualify as members of the class
c. Contingent remainder - something has to happen or be known before the remainder can become possessory (condition; grantee not in existence; identify of exact taker unknown)
2. Executory Interest
a. Shifting executory - operates by taking title from one grantee and giving it to another grantee
b. Springing executory - operates by taking title from grantor and giving it to grantee
Rule Against Perpetuities (RAP)
-Only estates RAP applies to: contingent remainders, executory interests, and vested remainders subject to open
-Rule: no interest is good unless it must vest, if at all, not later than 21 years after some life in being at the creation of the interest (if there is any chance that an interest might vest outside of a life-in-being + 21 years, that interest is void)
-Could everyone alive at the time of the grant die, and 21 years pass, before the interest might vest? If yes, it's void.
-Validity of grant is determined at time of creation; doesn't matter if interest actually does vest within time period of RAP
-Perpetuity saving clause: saves a grant from being voided by RAP by making sure vesting must occur within time period of the rule
-Charity to charity exception: RAP never violated if gift over is from one charity to another
Rule Against Perpetuities and Class Gifts
Gift over to a class following an earlier estate - 2 situations:
1. Age contingency in an open class: class is open and the gift over is contingent on a class member reaching a certain age
-if RAP operates to void the gift over to any member of the class because of the possibility that interest might vest outside the time period, then all members of the class lose, even those who already satisfy the condition and thus are already vested
2. Unborn spouse: gift over following a widow or widower's life estate, where gift over cannot vest until the widow/widower dies
-for the unborn spouse situation to arise, grant must be written so the vesting cannot occur until widow/widower dies
-if transfer is by will, judge from time of testator's death; if by deel, look at time of deed
Joint Tenancies
Two characteristics:
1. Right of survivorship
2. Right to partition

Creation of JT requires "four unities" of time, title, interest, and possession - must clearly make intention known (otherwise court construes it as tenancy in common)
Destruction of Joint Tenancies
Destruction of JT: partition or severance

4 ways to sever on exam:
1. Conveyance - One JT transfers his interest, turning it into a tenancy in common in the buyer; other JTs continue to hold their interests in JT
2. Mortgage:
-"Lien theory" majority state = no severance (when mortgage is executed, lien merely attaches to the title; title does not get transferred so no unity is disturbed)
-"Title theory" minority state = severance (when mortgage is executed, title actually passes from mortgagor to mortgagee; even though later title goes back to mortgagor, unity was disturbed)
3. Contract of sale - doctrine of equitable conversion means severance occurs when K of sale is signed; execution of a lease does not sever
4. Creditor's sale of the interest in the JT

TX Only: common law JT doesn't exist in TX; but right of survivorship can be had by K between parties
Tenancies-in-Common
Two characteristics:
1. Right to partition
2. No right of survivorship

Rights/Duties:
1. Possession - each cotenant has right to possess all the property consistent with the other cotenants' rights to also possess it all
2. Accountability - requirement that one cotenant may have to account to another for a share of profits the cotenant received
-General rule: one cotenant does not have to account to another cotenant for a share of the profits - 4 exceptions:
a. ouster - accounting is required if one cotenant is either keeping a cotenant of the property or claiming a right of exclusive possession
b. agreement to share
c. lease of the property by cotenant to a 3rd party
d. depletion of natural resources
3. contribution - right of one cotenant to force others to pay their share of some expenditure cotenant made
Tenancy for Years
Specified time - doesn't have to be for "years"

any estate measured by a fixed period of time, no matter how short, is a tenancy for years

statute of frauds: any tenancy for years over one year must be in writing (one year oral is ok; one year and a day oral is not)
Periodic Tenancy
repetitive estate, until one party gives valid notice (month-to-month; year-to-year)

1. Periodic tenancy by express agreement
2. Periodic tenancy by implication - where lease is silent as to its duration; if lease does not specify how long it is to last, then it is presumed to be a periodic tenancy measured by the lease payment
3. Periodic tenancy by operation of law - two situations:
a. oral lease violating Statute of Frauds - acceptance of rent by landlord creates a periodic tenancy by operation of law, even if lease itself violates S/F
b. holdover-tenants - if holdover tenant sends landlord a check for another period's rent, and L accepts it, there is a new periodic tenancy by operation of law

Termination of periodic tenancy occurs by giving proper notice - 2 requirements for valid notice:
1. Time - equal to the period (exception if tenancy is year to year, just 6 months; notice is required)
2. Right of effective day or termination: last day of a period
Tenancy at Will
Either party can terminate at any time, without notice

5 ways to terminate it:
1. Death of either party
2. Waste by tenant
3. Assignment by tenant
4. Transfer of title by landlord
5. Lease by landlord to someone else
Tenancy at Sufferance
Bare possession of a holdover tenant; at landlord's sole option, landlord can either:
1. hold tenant as a wrongdoing trespasser and sue to throw tenant off property and recover damages for the holdover; or
2. impose new periodic tenancy on tenant
-for residential property, new period will always be month-to-month
-for commercial property, new period is determined as follows:
a. if old expired tenancy was for a year or more, new tenancy is year-to-year
b. if the old tenancy was for less than a year, new tenancy is measured by the rent period of the old tenancy
-L cannot impose new tenancy on holdover T if it is not reasonable (for holdover T of just a few hours or if T was holding over due to circumstances beyond T's control, then L cannot impose new tenancy
-If L tells T of higher rent before expiration of lease, and T holds over after expiration, L can impose the new periodic tenancy on the holdover T at the higher rent
Tenant's Duties
if lease is silent on tenant's duties, tenant must:
1. pay rent
2. not commit waste

if lease says tenant must repair and maintain, T is liable for all damage to property, including even ordinary wear and tear unless that is specifically excluded from promise to repair (exception: tenant can terminate the lease if the premises are destroyed without tenant's fault)
Landlord's Remedies
-If T fails to pay rent, L can sue both for damages and to throw T off property
-If T unjustifiably abandons the leasehold, L has 2 choices:
1. Treat abandonment as an offer of surrender and accept the offer by retaking the premises; thus ending T's liability as of that date
2. Re-rent the premises on T's account and hold T liable for any deficiency (ie, mitigation of tenant's damages)
Landlord's Duties
1. To give T possession of premises when lease begins (if L cannot give possession, L has breached)
2. To deliver residential premise in a habitable condition
3. Implied covenant of quiet enjoyment
Implied Warranty of Habitability
There is an implied warranty of habitability in residential property: L must provide property that is reasonably suited for residential use

If L breaches implied warranty, T has 2 options:
1. T can move out and end lease
2. T can stay and sue for damages

TX only: no implied warranty of habitability in Texas; there is a statutory requirement that landlords repair conditions that materially affect the physical health/safety of an ordinary tenant
-T can move out; stay and repair and deduct the cost of repair; or sue landlord
-for commercial leases there is an implied warranty of suitability covering latent defects in the essential facilities of the leased property
Implied Covenant of Quiet Enjoyment
L breaches Implied Covenant of Quiet Enjoyment by:
a. total eviction of T, which terminates lease, ending T's obligation to pay rent
b.partial eviction of T, which does not terminate lease; T can stay and pays no rent to L (if partial eviction is by person not landlord, but someone with better title, R's rent is aportioned)
c. constructive conviction (where L fails to provide a service L is supposed to provide, thus making premises uninhabitable)
T excused if 3 requirements met:
1. L (not others) has to do it
2. Must be a substantial interference with the covenant of quiet enjoyment
3. Must be an abandonment of the premises within a reasonable time after the breach
Assignment
When T transfers everything, holding nothing back

TX only: while MBE tenants can assign or sublet unless the lease says otherwise, in Texas there is no right to assign/sublet unless landlord gives permission
Sublease
When T transfers a portion of the lease period, holding some time back

TX only: while MBE tenants can assign or sublet unless the lease says otherwise, in Texas there is no right to assign/sublet unless landlord gives permission
Assignments - Situation 1: L sues T: are successive tenants on a lease liable to the landlord?
-Lease is both a conveyance and a contract; these are separate and independent grounds of liability
-Liability on the conveyance comes out of privity of estate
-Liability on the contract comes out of privity of contract
-T is liable to L if there is either POE or POC
-Privity of estate - exists only between present L and present T
-Privity of K - exists where there is an agreement between parties, or where assignee "expressly assumes" the obligations under the lease
-In addition to rent, other covenants run with the land if they touch and concern the land - test: if performance of covenant makes land more valuable or more useful, then it meets the T& C test and runs with the land (ex. if fixing fence is in the lease, it runs with land; picking up landlord's mail would not)
Assignments - Situation 2: T sues L: if L sells to a successor landlord, can T sue the original landlord and any successor landlord on the lease?
-Original landlord continues to be liable to T because of privity of K
-Successor landlord is also liable,provided lease covenant runs with the land and there is either privity of K or privity of estate
Subleases
sublessee is not liable to L because no POC and no POE

sublessor is deemed to have kept the estate
Non-assignment Clause or Non-sublease Clause
"T may not assign/sublet without L's permission"

2 possible questions:
1. Valid and enforceable? yes, even though a restraint on alienation
-clauses are construed narrowly; non-assignment clause does not prohibit subleases, and vice versa
-violation of a non-assignment or non-sublease clause merely makes the attempted transfer voidable at the option of L, and if L does nothing, nothing happens
2. What is the effect of L's giving permission for an assignment? permission given once means the non-assignment/non-sublet clause is waived for all time, unless L states otherwise at the time of giving permission
-acceptance of rent by L gives permission for a transfer (so acceptance of rent from assignee where assignment was made in violation of the non-assignment clause means L has accepted the assignment and has waived the clause permanently)
Condemnation (Eminent Domain)
If the state takes property under a lease by its power of condemnation, there are 2 questions:
1. Is T excused from paying rent?
2. Will T share in condemnation award?

Partial taking - does not release T from obligation to pay full rent, but T gets an amount equal to the rent that will have to be paid over the remainder of the lease for the property taken

Full taking - extinguishes lease and T is excused from paying rent; T shares in condemnation award only to extent that the fair rental value of the lease excess the rent due under the lease
Landlord's Tort Liability - General rule at common law: no duty of landlord to T or to T's invitees of injuries on the premises during the life of the lease
5 Exceptions:
1. Latent defects - L is under a duty to disclose latent defects which L either knows or has reason to know of; latent defect is one T does not know of and a reasonable person in T's position would not discover (L doesn't have to repair, only disclose)
2. Short term lease of a furnished dwelling - L is liable for defects even if L neither knows nor has reason to know of them (short term - 3 months or less)
3. Common areas under L's control - if injury is an area subject to L's control, then L is liable if L failed to use reasonable care
4. Negligent repairs - L is liable for injury resulting from L's repair of a defect in the premises, even if L used all due care in making the repair (TX only: because L has statutory duty to repair, L can be liable in tort if the injured person is in the class of persons protected by the statute)
5. Public use exception - L is liable for injury from defects in the premises, if 3 requirements are satisfied: a) L must know or should know of major defects; b) L must know or should know that T will not fix the defect; and c) L must know or should know the public will be using the premises
Tenant's Tort Liability
T's liability to third parties

T is always liable to third party invitees for failure to correct dangerous conditions on the premises, regardless of whether L may be contractually liable or not
Fixtures
If attached item became a fixture, chattel cannot be removed by either seller or tenant - 4 factors:
1. Degree of attachment
2. General custom with this item
3. Degree of harm to the premises on removal (if T can remove item without substantial damage to the premises, then courts allow an inference that there was no intent that item was a fixture)
4. Trade fixtures, which are used in a trade or business, and they are not fixtures
-washers and dryers are never fixtures
-if T can remove the chattel, it must be removed before the end of the lease
-if owner can remove the chattel, it must be removed before closing
Easement (definition)
Non-possessory interest in land involving the right of use

2 Types:
1. Easement appurtenant
2. Easement in gross
Easement appurtenant
when the easement directly benefits the use and enjoyment of a specific piece of land

there are always two pieces of property with an easement appurtenant: the burdened property or "servient estate" and the benefited property or "dominant estate"
Easement in gross
where there is one dominant estate (example: utility easement - power lines, railroad tracks)
Creation of Easements
3 Ways:
1. Express easements
2. Easements by implication
3. Easements by prescription
Express easement
arises with an express grant of an easement ot someone else, or the reservation of an easement when land is sold to another

easement is an interest in land and must comply with the Statute of Frauds and with all the deed formalities

easements must be in writing, signed by the holder of the servient estate, and executed like a deed

note: easements of a year or less do not have to be in writing
Easements by implication
2 situations to look for:
1. Previous use by a common owner - implied easement exists if there is a previous use, by a common owner (someone who sells off a piece of his property to someone else), and the previous use is:
a. continuous
b. apparent (open and obvious, not hidden)
c. reasonably necessary
2. Absolute right of access situation - an implied easement by necessity exists when property is landlocked; implied easement by necessity exists even if requirements of previous use are not satisfied (landowner cannot be landlocked and can always get off the property); owner of servient estate can choose the location of the easement so long as the location is a reasonable one
Easements by prescription
4 requirements for easement by prescription:
1. Use must be adverse to the owner (just a trespass on the title of owner)
2. Use must be continuous and uninterrupted for the statutory period - seasonal use can be okay if appropriate under circumstances; time period on MBE is 20 years (TX only: time period for a prescriptive easement in TX is 10 years)
3. Use must be either visible and notorious or with the owner's knowledge
4. Use must be without the owner's permission - any grant of permission by the owner, even oral, will destroy the hostility and thus no EBP
Transferring the benefit of the easement
-if easement is appurtenant, it goes automatically along with the dominant estate, whether it is mentioned or not in the conveyance, and cannot be transferred separately from the dominant estate
-if the easement is in gross, then easements in gross that are commercial can always be transferred, but easements in gross that are personal cannot be transferred
-TX only: easements in gross cannot be transferred unless the language of the easement says so (exception: conservation easements can be transferred)
Transferring the burden of the easement
easements are always binding on subsequent holders of servient estates, even if the easement is not in their deeds, providing the subsequent holder had notice of the easement
Use of Easements
-Terms of the easements control on questions of use
-If easement is silent there are 2 presumptions:
1. It is presumed that the easement is perpetual (lasts forever unless otherwise stated)
2. Use presumed is that of reasonable development of dominant estate (kind that would have been reasonably contemplated by the parties when easement was created)
-easement can be used to benefit only the dominant estate, not other property; use to benefit other property is excessive use; remedy is to enjoin that use (not terminate easement)
Repair of Easements
-Holder of easement must keep the easement in repair and can always go on the servient estate to repair the easement, even if the grant of the easement does not specifically provide the right to enter and repair
-Holder of easement must make reasonable restoration of servient estate after repairs
-Holder of easement is obligated to make necessary repairs; holder of servient estate has no obligation of repair (unless easement says otherwise)
Termination of Easements
6 ways easements end for reasons outside easement terms:
1. Unity of ownership or merger: whenever both dominant and servient estate come together in the same owner, the easement is terminated (once an easement is terminated through unity of ownership, it is dead and never revives)
2. Valid release that complies with the statute of frauds and all deed formalities terminates an easement
3. Abandonment: intent to abandon must be manifested by taking some physical act on the property itself that would show intent to abandon (mere non-use, not matter how long it lasts, is not abandonment)
4. Termination by estoppel: must be representation of relinquishment by holder of dominant estate and change of position in reliance by holder of servient estate
5. Termination by prescription: owner of servient estate must stop the use of the easement and keep it stopped for the statutory period
6. End of necessity: once necessity that created easement by necessity ceases to exist, so does easement
-no implied easement for light or air
Licenses
Limited privilege of use and not a property interest - it is only a contract right and is revocable at the will of the licensor (licensor may have to pay K damages for wrongful revocation, but there are no property rights)

2 situations for exam:
1. tickets - are always licenses; tickets give no in rem (property) rights, only K rights; can always be revoked (ticket holder cannot force way on property), but K damages may be imposed
2. irrevocable license - license plus money spent on property furthering the license - 2 rules:
a. anytime an easement is created but fails due to the statute of frauds, there is a license
b. if money is spent on the property in furtherance of that oral license, the license becomes irrevocable and is just as good as an easement, and can be enforced under principles of estoppel
-in some jurisdictions the irrevocable license is called an easement by estoppel
Profits
Profit gives the right to go onto land and take a natural source away (coal, timber, etc)

along with a profit goes an implied easement to go on the land and get the resource and take it away
Restrictive Covenants
Give the right to restrict someone else's use of their land - 2 categories:
1. Covenants at law (when enforcing at law)
2. Equitable servitudes (when enforcing in equity)
-only thing that distinguishes them is the way they are enforced
-if P wants money damages, restriction is called a covenant at law
-if P wants injunction to enforce the restriction, it is called an equitable servitude
Covenants running with the land at law (P wants damages) - 4 requirements:
1. Intent that it run with the land
2. Notice to the person against whom enforcement is sought
3. Covenant must touch and concern the land - must make land more valuable or useful (covenants not to compete do T&C the land)
4. Privity - conveyance of the property from one party to another; two types of privity - horizontal and vertical
Privity - 2 Types
1. Horizontal privity always refers to the original parties of the covenant - for HP, you must have a conveyance of the property between the original parties
2. Vertical privity refers to those who subsequently obtain the property subject to the covenant (successor-in-interest) and original party from whom they got the property - for VP, successor-in-interest must take the full estate of the one up the line
What kind of privity is needed?
-if successor-in-interest is a defendant, then for plaintiff to get damages the burden must run and you need both horizontal and vertical privity

-if defendant is not successor-in-interest, then for benefit to run to a successor-in-interest plaintiff and let plaintiff get damages, you need only vertical privity
Equitable Servitudes (P wants injunction)
To enforce equitable servitude, you need:
1. Intent that the restriction be enforceable by successors-in-interest
2. Notice to the subsequent purchaser, and
3. Restriction must touch and concern the land
-No privity is required
Equitable Servitudes in Subdivisions: Mutual Rights of Enforcement - Reciprocal Negative Servitudes
2 requirements:
1. Intent to create a servitude on all the land in the subdivision (found in common building plan - facts showing restrictions in the deeds - so benefit of restriction attaches to all owners in subdivision)
2. Notice - 3 ways to get this:
a. Actual notice
b. Record notice, where restriction is in the direct chain of title
c. Inquiry notice, meaning you are held to know anything that a reasonable inquiry might have revealed (inspection of neighborhood)
Equitable Defenses to Enforcement (only for equitable servitudes)
1. Unclean hands defense (P did same thing as D)
2. Acquiescence (P let neighbor on other side do same thing)
3. Laches (P sat b while D built the office building and only now, after D finished it, does P complain)
4. Estoppel (P said earlier she did not mind if D put up an office building)
Termination of Equitable Servitude
Can always be done by release or by unity of ownership, but on exam look for termination by changed circumstances - however, it's all or nothing

you cannot void a restriction because of changed conditions in the area unless ALL lots in the subdivision are affected
Adverse Possession
HELUVA (must have all 6):
H - Hostile (being on property with no right to be there)
E - Exclusive (X must be excluding others from possessing the property)
L - Lasting (possession must last for statutory period - 20 years)
U - Uninterrupted (must be kind of continuous use ordinary owner would make)
V - Visible (out in the open; open and notorious)
A - Actual (must actually possess the land to get title; with 2 exceptions: constructive adverse possession and leasing of land not owned)

2 things not required:
1. Owner does not have to know trespasser is on land
2. X does not have to think that X owns the property; it is okay for X to be a trespasser and know it; no need for a claim of right by adverse possessor
Adverse Possession - TX time periods
4 time periods in Texas:
-if possessor is there under a color of title and has only narrow specified defects in title: 3 years
-if possessor is there under a color of title and pays all taxes: 5 years
-if possessor is just in bare possession of property with no color of title (naked trespasser): 10 years, but possession is limited to 160 acres (unless a larger area is fenced in)
-if possessor paid the taxes for the entire period, was on the property under a color of title, and true owner was under a disability: 25 years
Doctrine of constructive adverse possession
Exception to the rule that there must be actual possession: if someone goes on property under a color of title to a larger tract, but only actually possesses a part of the larger unit, constructive adverse possession can give title to the rest of the property
-"color of title" means a bad title; possessor is not a naked trespasser, but holds a claim of title that is no good

2 additional requirements:
1. amount actually possessed must bear a reasonable relation to the whole (not be only a small part) and
2. property must be unitary, that is, a seamless whole
Special rules for adverse possession - Leasing and Concurrent Owners and Governmental Land
1. Leasing land to someone else qualifies as possessing it for adverse possession purposes

2. Adverse possession against concurrent owners - can only occur when possessor excludes other cotenants from possession and the statute runs (exclusions starts the clock running, not the mere absence of the other cotenant)

3. No adverse possession against governmental land
Adverse Possession - Future Interest Situations
1. Life estate plus future interest: clock does not start to run against the holder of a future interest until the life tenant dies (until the interest has become possessory when life estate is over)
2. Fee simple determinable: happening of the condition starts the clock running for purposes of adverse possession
3. Fee simple on a condition subsequent: clock won't start to run until grantor exercises the right of entry
Adverse Possession - Tacking
Can tack periods of adverse possession, but the periods must pass directly from one adverse possessor to another, no gaps

can also tack periods of true ownership meaning that the adverse possession does not have to be against the present owner for the entire statutory period
Adverse Possession - Disability (being a minor, being insane, being in jail)
-if the owner is under a disability at the time the adverse possession begins, the adverse possession clock does not start to run until O is free of that preexisting disability
-if the disability arises after the adverse possession begins, it's an intervening disability, and it is ignored
-no tacking of disabilities

TX only: maximum tolling period for disabilities in TX is 25 years; after that time the clock starts to run even if the owner is still under a disability

TX only: just two disabilities in Texas - being a minor or being in the armed forces during time of war
Conveyancing - 2 steps
1. Contract of sale
2. At closing, the deed
Contract of Sale
K governed by regular K rules, plus these:
1. Statute of Frauds - any K of sale of an interest in property must be in writing and signed by the one who is sued
-only need some kind of signed writing, provided there is a description of property, names of parties, and price
-exception to S/F: doctrine of part performance
2. Legal effect of the K of sale between time of signing or K and closing -- 4 issues:
a. Risk of Loss
b. Death of a party before closing
c. Marketable title
d. Time of performance
Doctrine of Part Performance
-Exception to S/F
- 2 requirements:
1. Oral K must be certain and clear (no ambiguities) and
2. Acts of part performance must clearly prove up a K

-Look for claimaint in possession, and:
1. Paying full purchase price (or something close) or
2. Erecting improvements
-Finding at lest one of these situations will take it out of S/F, allowing specific performance of the oral K
Risk of Loss
If property is damaged or destroyed before closing, buyer loses: once K is signed, it is buyer's land and buyer's risk because equitable conversion (meaning title is in the buyer for all practical purposes) has taken place, even if the seller remains in possession and control

Note: this rule applies only if seller not at fault

TX only: risk of loss is on the person in possession at the time of the loss
Death of a party before closing
Equitable conversion preserves rights as set in the K, and death of a party before closing does not affect them

If seller dies before closing, buyer closes with seller's estate; seller's interest is personal property

If buyer dies before closing, seller closes with buyer's estate; buyer's interest is real property
Marketable title
Every land sale K has implied warranty that at closing, seller will give buyer a marketable title - not necessarily perfect, just one that a reasonable person would accept

Seller must give buyer 3 things:
1. Proof of title (abstract or copy of all deeds recorded in chain of title)
2. Title free of encumbrances (no easements, restrictive covenants, mortgages, options that are not mentioned in K)
-Existence of valid option to purchase is an encumbrance on the title and makes it unmarketable
-Zoning is not an encumbrance unless property is in violation of zoning ordinance
-Violation of housing or building codes is not an encumbrance
-Mortgage on property is not an encumbrance if mortgage is to be satisfied out of proceeds of the sale
3. Valid legal title on day of closing
-Where buyer finds out day before closing that seller does not have legal title, buyer cannot rescind because seller only needs to provide valid legal title the day of closing
Remedies of Buyer if Seller's Title is Unmarketable
-Buyer must notify seller and give seller reasonable time to cure the defect, even if that postpones closing
-If problem not corrected, buyer has 3 remedies:
1. Recession - buyer walks away
2. Damages
3. Specific performance - buyer takes what seller can give and price gets lowered to cover defect (if buyer goes to closing and accepts deed without problems being cured, then no recourse against seller based on the K - any action must then be based on what is in deed)
4. Time of performance - even if there is a closing day specified in K, time is not of the essence in land sales Ks, unless the K says so or the facts make clear that is what the parties expected; if time is not of the essence, then performance must be tendered within a reasonable time after the date for closing set in K (2 months late is ok); but, if K has a time of the essence clause, and it is violated, party who failed to perform on date can no longer enforce the K
Remedies for Breach of Sales Contract
1. Damages - measure is difference between K price and value of the land on the day of the breach
-Liquidated damages - buyer's deposit can be forfeited as liquidated damages so long as it is not more than 10% of sales price
2. Specific performance of a land sale contract - always available to both buyer and seller
Defects on the property
land not fit for ordinary purposes and buyer wants to rescind

General rule: buyer cannot recover: caveat emptor!

2 Exceptions:
1. Seller must disclose serious defects that seller knows of and are not obvious to buyer; seller cannot actively conceal defects
2. There is an implied warranty of merchantability or fitness for new homes sold by a seller (this warranty is very narrow)
Deed

Once deed is accepted, K merges into deed and is destroyed, and all K provisions (implied warranty of merchantable title) are lost unless included in deed (or K specifies that they survive)
2 requirements for passage of legal title from seller to buyer:
1. Execution - deed is subject to S/F (seller must sign deed); description of land need not be very specific, just be able to identify the property (if cannot, deed is void for vagueness, and nothing gets transferred); description by metes and bounds always controls over description by acreage (or any other description)
2. Delivery of deed - does not always mean physical transfer; legal test is solely a question of intent to pass title; if facts show intent to pass title, mere safeguarding of paper by grantor does not show lack of delivery; recording a deed raises a presumption of delivery (even if grantee never sees deed and knows nothing about it); once delivery occurs, title passes, and returning deed to grantor or tearing up deed has no effect; in showing intent of grantor re: delivery, can use any parol evidence; one presumption on delivery: if grantor dies and still has deed in grantor's possession, presumption of no delivery (can be rebutted by grantee)
Conditional Delivery
Grantor hands over deed, but tries to condition delivery on some event - 3 situations:
1. where condition is in deed (if deed says it will not become effective until death of grantor, this is a valid delivery of a future interest)
2. oral condition (if condition is made orally at time of delivery of the deed, disregard the oral condition)
3. making delivery conditional on grantee paying the purchase price (is valid provided grantor makes delivery to a 3rd party in escrow, with instructions to deliver grantee when condition is satisfied and oral instructions are ok; once deed goes to escrow agent, grantor cannot get deed back; as long as grantee satisfies the condition, grantee gets property no matter what subsequent change of mind grantor has; acceptance of deed by grantee is presumed unless the facts show otherwise - only way a grantee cannot accept is to reject; no consideration is needed for a deed - unlike the K of sale)
Covenants for Title
If grantor makes no promises regarding title, grantee gets Quit Claim Deed; grantee gets whatever grantor owns and grantor gets nothing

If grantor makes promises regarding title, they are covenants for title, and deeds with the 6 traditional covenants for title are called general warranty deeds
Covenants for Title - 6 covenants are placed in 2 categories
1. Present covenants: can sue immediately on these, thus they are personal to grantee and do not run with land; 3 present covenants:
a. Covenant of seison - represent promise of seller that seller has title and possession and can validly convey both
b. Covenant of the right to convey - same as covenant of seison
c. Covenant against encumbrances - grantor promises no easements, restrictive covenants, liens, etc
2. Future covenants: not breached immediately, but only later, when grantee is disturbed in possession (true owner shows up); because future covenant is breached only in future, it runs with land and can be enforced by all subsequent purchasers:
a. Covenant for quiet enjoyment - represent the promise of seller that seller will protect buyer against anyone who later shows up and claims title
b. Covenant of warranty - same as covenant for quiet enjoyment
c. Covenant of further assurance - "mop up" covenant; if seller forgot to do something to pass valid title, seller promises to do whatever necessary (ex. sign deed)
Damages for Breach of Covenant
if there is a breach of warranty, damages are limited to purchase price received by warrantor plus incidental damages
-don't fall for answer that would give plaintiff full recovery
Estoppel by Deed
If A deeds property to B that A does not own, and then A later does acquire title, then B will get title because grantor gave an implied covenant that title would be transferred to grantee

But if grantor transfers to a bonafide purchaser (BFP) after getting title, then the original grantee loses and cannot rely on estoppel by deed

In some states, including Texas, estoppel by deed is called the doctrine of after-acquired title
Deed to dead person
deed to dead person is invalid, although enforcement of K of sale can still be had by either the seller or the buyer's estate, and a new deed is made to the buyer's estate
Recording of Interests

Classic Recording Situation: O to A; later on, O to B, same farm
-Common law: first in time, first in right (A wins)
-Today, recording statutes may give title to B if requirements of statute met
-Recording acts can also protect subsequent mortgagees but recording acts do not protect judgment creditors
-Recording a deed is not necessary to make it valid; it is only done to give notice
-TX only: a deed can be recorded in TX if it is signed and signature is notarized, or if deed is signed by grantor and at least 2 witnesses
How Recording Works
-at recording office, clerk files copy of deed in book of deeds
-clerk indexes deed in 2 indexes: in the grantor index, the clerk lists transaction alphabetically by grantor, notes the grantee, gives a description of the property, and cites the volume and page of the book/microfilm where the copy of the deed can be found
-same info put in grantee index, filed alphabetically by grantee
Recording Acts

To determine if recording will protect earlier purchasers against subsequent purchasers, need to know what type of recording act is in effect
3 types of recording acts:
1. Notice acts - protect subsequent grantees who are BFPs, those who give value and who take without notice of the earlier transaction; recording is irrelevant except as it might give notice act; TX only: TX has a notice recording act
2.Race-notice acts - protect subsequent grantees who are BFPs for value who take without notice and are first to record
3. Pure race acts - notice is irrelevant; whoever records first wins; subsequent purchaser need not even be a BFP; that person can know all about the earlier sale and still win
Quick way to see what kind of act is on exam
1. If quoted act on exam has words "without notice" or "in good faith" n it, then it is either notice or race-notice
-If the words "first reported" or "reported first" appear in statute along "without notice" or i"n good faith," recording act is race-notice
-If those words are not present and there is "without notice" or "in good faith," act is notice act
2. If quoted act on exam does not use words "without notice" or "in good faith," it is a pure race act
BFP
BFP = bonafide purchaser for value, without notice

"for value" - 2 situations on exam:
1. Bargain basement sale - where subsequent purchaser pays absurdly low price; in absence of an explicit claim of fraud, any consideration that is out-of-pocket something is enough to be considered value; irrelevant that amount does not meet or come close to fair market value; one dollar is not enough
2. One who purports to take property as an heir, donee, or devisee cannot be BFP and can never defeat a claim of someone who has a prior conveyance from O; they have not given out-of-pocket anything
Shelter Rule Exception
anyone (even heirs, donees, devisees) can shelter under the rights of a BFP
"Without notice" - 3 kinds that can defeat a subsequent purchaser
1. Actual notice - is subsequent purchaser actually knew about prior unrecorded conveyance, that person loses; shelter rule exception can save subsequent purchaser who knew of earlier sale
2. Record notice - constructive notice that arises from record;not enough that deed was recorded at courthouse to give subsequent purchaser notice of it, it must be recorded in the chain of title (not too late)
3. Inquiry notice - two exam situations:
a. Where reading of deeds on record discloses an unrecorded transaction, subsequent purchaser has to check it out; subsequent purchasers are on notice of anything mentioned in a deed in the chain of title
b. Where subsequent purchaser fails to go out and examine the land and an examination would have shown someone on the land under a prior unrecorded right; subsequent purchaser must make inquiry of unexplained possessions or uses
Security Interests
Devices used to secure loan on real property - 3 types:
1. Mortgage - given by debtor (mortgagor) to a creditor (mortgagee); sheriff sells land at court-ordered foreclosure sale if mortgage not paid; 2 special situations treated as mortgages:
a. Absolute deed with separate promise of reconveyance situation (equitable mortgage)
b. Sale/lease with option to repurchase
2. Deed of trust - given by debtor to 3rd party trustee who holds it until the loan is paid off - if loan isn't paid, then trustee may either get court to order a sale, or trustee may sell property on trustee's own, at public auction
3. Installed land contract - debtor signs K promising to make payment and seller keeps title until loan is paid off; TX only: called a K for deed in Texas
Consequences of Having Mortgage or Deed of Trust - 6 specific items
1. Equity of redemption - at any time up to foreclosure sale, debtor can redeem property
2. Foreclosure must be by public auction sale, regardless of how the sale occurs, whether by court order or otherwise
3. If multiple mortgages, priorities are: 1st in time, 1st in right, unless changed by recording act
4. Foreclosures wipe out all junior interests (those that come later in time), but do not wipe out senior interests (those that come later)
5.Use proceeds of foreclosure sale in this order: pay cost of foreclosure, pay mortgage that was foreclosed, pay off junior interests, leftover goes to mortgagor
6. If mortgage is foreclosed and there is not enough money to pay off mortgage, let mortgagee sue debtor for balance due (TX only: deficiency judgments are limited to the difference between the debt and fair market value of property)
Recording acts and mortgages
apply recording act just as if dealing with a deed: later mortgages may take priority over earlier mortgages if the subsequent mortgagee had no notice of the earlier mortgage (notice act) or if the subsequent mortgage had no notice of the earlier mortgage and recorded the subsequent mortgage first (race-notice act)
TX only: validly perfected mechanics' and materialmen's lien can protect workers and suppliers to workers on real property; has priority over mortgages or other liens
Requirements to perfect MML:
1. affidavit must be filed with county clerk where property is located no later than the 15th day of the 4th calendar month after day the indebtedness accrues
2. affidavit must list the amount of the claim, the names/addresses of all relevant persons, general statement of work done and materials furnished
3. affidavit must give a legal description of the property sought to be charged with the lien
4. copy of the affidavit must be sent by certified or registered mail to owner within 5 days of filing
Consequences of Having Installment Land Contract
look for a forfeiture clause; says if debtor misses a payment, seller can cancel K, keep all money paid to date, and get property back (these clauses can be enforced)

TX only: in 2001, TX added several statutory protections to buyers under a K for deed (installment land K); two provisions are key:
1. sellers have to give buyers detailed notice of a prospective forfeiture
2. buyers have a statutory 60 day period to cure the default
Transfers of Security Interests
Each party can freely transfer his interest in the property

Mortgagor can transfer title to property and mortgage just tags along, and transferee takes subject to the mortgage; mortgagor continues to be personally liable on the note; unless grantee specifically guarantees mortgage, grantee is not personally liable on it, but mortgage still has to be paid or mortgagee will foreclose; after mortgagor's transfer of title to one who "assumes" the mortgage, mortgagor continues to be personally liable on note as a surety (so if assuming mortgagee does not pay, mortgagor must); any modification of the obligation by mortgagee and grantee discharges the original mortgagor of all liability

Mortgagee can freely transfer the note, and the mortgage tags along with the note; due on sale clauses: "if mortgagor transfers without the mortgagee's consent, full amount of loan is immediately due and payable" - they are enforceable
Fixture Filing
if fixture filing is not made as required by UCC Art 9 within 20 days of attachment, then security interest in chattel is subordinate to earlier mortgage on the real property

If fixture filing was properly done, supplier of chattel can remove it without regard to any earlier mortgage or other security interest in the property
Right of Support
2 ways land must be supported in its present state:
1. Lateral support - support from the sides; landowner has right to land supported by the adjoining landowners, and strict liability results if land is not supported; adjacent landowner is strictly liable for support of the adjacent land, and is also strictly liable for damage to improvements if the weight of the improvements didn't cause the collapse (if land would have collapsed anyway, even without those buildings on it)
2. Subjacent support - support of surface from bottom; strict liability results if surface is not supported; situation arises when holder of mineral rights removes minerals and surface subsides; holder of mineral rights is strictly liable for failure to support surface of land
Water Rights
1. Rivers and lakes
2. Water under the ground
3. Surface water
Rivers/Lakes
2 legal systems:
a. riparian rights (majority) - property borders on lake/stream; owner can use all water needed for domestic purposes; if use is non-domestic, owner limited to reasonable use - act reasonably toward owners downstream or on lake (can't impair quality/quantity)
b. prior appropriation (minority) - first in time takes: anyone, not just riparian owner, who makes beneficial use of water, has right to continue to use it, and that right is protected from those who come later, as long as use continues

TX only: permit regulatory system exists, with prior appropriation being main factor, and previous uses before new law can be continued
Water under the Ground (percolating water, well water, ground water)
landowner is entitled to reasonable use of ground water; landowner must use it on property and not export it elsewhere

TX only: follows rule of capture - landowner does not have to be reasonable - can take all water from a well on your property even if you take all water from your neighbor's well at the same time
Surface Water (runoff or flood water)
Two competing approaches:
1. Natural flow approach - court allows reasonable steps to deal with flood water; on exam, drainage pipes/ditches to divert flood water are okay; Texas follows this approach
2. Common enemy approach - can do anything with floodwater, whether reasonable or not