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193 Cards in this Set
- Front
- Back
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Fee Simple Absolute
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Largest estate recognized by law. Can be sold, divided, devised, or inherited and has an indefinite or potentially indefinite duration. Today, fee simple presumed in the absence of express contrary intent (words of inheritance no longer necessary).
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Defeasible Fees
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Defeasible fees are fee simple estates that can be terminated upon the happening of a stated event.
(1) Fee simple determinable (2) Fee simple subject to condition subsequent (3) Fee tail (4) Life estate (5) Estate for years, periodic estate, estate at will, tenancy at sufferance |
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Fee Simple Determinable (FSD)
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Terminates upon happening of stated event and automatically revers to grantor. Created by language like "for so long as" or "until." Can be conveyed but grantee takes subject to limitation.
Always followed by possibility of reverter! Possibility of reverter - future interest retained by grantor. Transferable, descindible, and devisable. Watch for statements of motive: "for purpose of" or "to be used for." These are NOT fee simple determinable words. |
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Fee Simple Subject to a Condition Subsequent
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Estate in which grantor reserves right to terminate estate upon happening of stated event. Doesn't automatically terminate like FSD does. Grantor must take some action. Created by conditional language like "but if" or "provided that."
Right to terminate is called right of entry. Must be expressly reserved. Some courts hold these rights aren't transferable inter vivos, but most states agree they are devisable and all states agree they are descindible. |
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Fee Simple Subject to Executory Interest
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Like fee simple subject to condition subsequent, but with a twist. Instead of reverting to grantor, passes to third party. Third party has executory interest.
Example: "To A and his heirs for so long as liquor not sold on premises; in that event, to B." B has an executory interest. |
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Fee Tail
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Estate where inheritability is limited to lineal heirs. Created by words "to A and the heirs of his body." Most jurisdictions have abolished, and an attempt to create one results in a fee simple.
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Life Estate (LE)
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Estate measured by life or lives of one or more persons. May be created by operation of law (i.e. dower) or by conveyance.
Legal life estates - dower and curtesy. Usual LE is measured by life of grantee (to B for life). May be implied by language like "to C after life of B." LE par autre vie: measured by life other than grantee's (to C for the life of B) or if B ocnveys his life estate (B, holder of LE, conveys interest to D). LE can be determinable, subject to condition subsequent, and subject to executory interest. Usually indefeasible otherwise. |
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Rights and Duties of Life Tenant
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Entitled to any ordinary uses and profits of land, but cannot do anything injuring the interests of holders of future interest. Those injured may sue for damages or to enjoin.
Exploitations of natural resources limited to situations when: (1) necessary for repair/maintenance of land, (2) land suitable only for such use, or (3) grantor permitted, expressly or impliedly. Open mines doctrine: If mining was done prior to LE, can continue, but only with those open mines. Life tenant obligated to: (1) preserve land and structures in reasonable stat of repair, (2) pay interest on mortgages (not principle), (3) pay ordinary taxes, and (4) pay special assessments for public improvements of short duration. Not obligated to insure for benefit of remaindermen and not responsible for damages by third party tortfeasor. Ameliorative waste is OK if: (1) market value of future interests not diminished, and either (2) remaindermen don't object, or (3) substantial and permanent change in neighborhood conditions (e.g, change from residential to 90% industrial) deprived property of reasonable productivity and usefulness in current form. If LE interest renounced, future interest accelerated and becomes possessory immediately. |
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Dower and Curtesy
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Common law interests of a spouse in the real property of the other spouse. Interests couldn't be defeated by conveyance or by creditors. Most states have abolished in favor of a statutory right to a portion of a spouse's estate.
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Ameliorative Waste
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A change that benefits the property economically. Was actionable at common law, but now life tenant may alter or even demolish buildings in certain situations.
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Future Interests
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A present, legally protected right in property giving holder right or possibility of future possession of an estate. Possibility of reverter, right of entry, remainder, executory interests, and class gifts.
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Reversion
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Estate left in a grantor who conveys less than she owns. Arises by operation of law - doesn't have to be expressly reserved.
Reversion is alienable, devisable, and inheritable. Holder can sue for waste and for tortious damage to the reversionary interest. Vested, so not subject to Rule Against Perpetuities. |
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Remainder
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Future interest in a third person that can become possessory on the natural expiration of preceding estate. Cannot divest in a prior estate, and cannot follow a time gap after the preceding estate. Must be expressly created in the instrument creating the preceding possessory estate.
Examples: A to B for life, then to C and his heirs. C has remainder. A to B for life, then to C and his heirs one day after B's death. C has no remainder. Remainder can NEVER cut short a preceding estate. If that happens, it's an executory interest, not a remainder. |
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Indefeasibly Vested Remainder
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Vested remainder - one created in an existing and ascertained person, and not subject to a condition precedent. Has right to immediate possession upon normal termination of preceding estate.
Indefeasibly vested remainder is vested remainder that is not subject to divestment or diminution. |
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Vested Remainder Subject to Open
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Vested remainder created in a class of persons (e.g., children) that is certain to become possessory, but is subject to diminution (by birth of additional class members). More kids = more shares = smaller shares.
Example: A to B for life then to children of C. B and C are living, and C has one child, D. D has vested remainder subject to open. |
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Vested Remainder Subject to Complete Divestment
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Vested remainder subject to a condition subsequent.
Example: A to B for life, then to C and his heirs, but if C dies unmarried, then to D and his heirs. C has vested remainder subject to complete divestment by D's executory interest. |
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Contingent Remainder
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Those remainders created in unborn or unascertained persons or subject to a condition precedent.
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Remainder Subject to Condition Precedent
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Condition is precedent if it must be satisfied before remainderman has a right to possession.
Examples: A to B for life, then to C and his heirs if C marries D. C's remainder is contingent. A to B for life, then to C and his heirs if C marries D, otherwise to E and his heirs. C and E have alternative contingent remainders. A to B for life, then to C and his heirs, but, if C marries D, then to E and his heirs. C has a vested remainder subject to complete divestment by E's executory interest. |
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Unborn or Unascertained Persons
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Remainder is contingent because until the remainderman is ascertained, no one is ready to take possession if the preceding life estate ends.
Example: A to B for life, then to children of C. If C is childless at the time, the remainder is contingent. |
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Destructibility of Contingent Remainders
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At common law, contingent remainder destroyed if failed to vest before or upon termination of preceding freehold estate. Most states have abolished, and previously destroyed interest would be converted to executory interest and interest would revert to grantor until executory interest can be exercised.
Merger: When one person acquires all present and future interests except a contingent remainder, under common law, contingent remainder is destroyed (but only if those successive interests NOT created by same instrument creating contingent remainder). |
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Rule in Shelley's Case
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At common law, if same instrument created a LE in A and gave remainder only to A's heirs, remainder was not recognized, and A took LE and remainder. Abolished in most states.
Example: A to B for life, then to C for life, then to heirs of B. Rule would give B a LE and transform remainder in B's heirs to a remainder in B. No merger, though, because C's remainder in LE is vested. |
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Doctrine of Worthier Title
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Remainder in grantor's heirs is invalid and becomes a reversion interest in grantor.
Example: A to B for life, then to A's heirs. B has LE, and A has reversion. Generally treated as a rule of construction, and applies only to inter vivos transfers (not wills) and only if word "heirs" is used. |
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Executory Interests
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Future interests in third parties that either divest a transferee's preceding freehold estate ("shifting interests") or follow a gap in possession or cut short a grantor's estate ("springing interests").
Examples: A to B and his heirs when B marries C. B has springing interest, because he divests grantor's estate. A to B for life, then to C and his heirs, but if C predeceases B, to D and his heirs. D has shifting interest, because divests transferee's preceding estate. Executory interests NOT vested, so subject to Rule Against Perpetuities, but executory interests not destructible. |
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Transferability of Remainders and Executory Interests
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Vested remainders are fully transferable, descendible, and devisable.
At common law, contingent remainders and executive interests not transferable inter vivos, but most courts today hold that they are freely transferable. Contingent remainders and executive interests are descindible and devisable, provided survival is not a condition to the interest's taking. Where language is ambiguous, preference is for vested remainders subject to divestment rather than contingent remainders or executive interests. Policy favors early vesting of estates. Any future interest that is transferable is subject to involuntary transfer (i.e., reachable by creditors). |
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Class Gifts
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"Class" is a group of persons having common characteristic (e.g., children, nephews). Share is determined by number in class. Class gift in remainder may be vested subject to open (when at least 1 class member exists) or contingent (where all group members unascertained). Survivorship not necessary unless express condition.
Under rule of convenience, in absence of express contrary intent, a class closes when some member of class can call for distribution of her share (i.e., no one born after that time can share, but persons in gestation at time of closing would share). Examples: T to W for life, then to A's kids. Class closes at W's death. T to A's kids who attain age of 21. If any are 21 at T's death, class closes then. Otherwise, closes when one kid reaches 21. Certain terms imply condition of survivorship: widow, issue, heirs, next of kin. |
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Trusts
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Fiduciary relationship with respect to specific property wherein trustee holds legal title to property subject to enforceable equitable rights in a beneficiary. Creator of trust is settlor who must own property at time of trust creation and must have had intent to create trust. Rule against perpetuties applies to equitable future interests of beneficiaries. Trusts can be created by will (testamentary trust), inter vivos transfer of trust property (res), or inter vivos declaration that settlor is holding res in trust. Settlor may bequeath property to trust created inter vivos.
Charitable trust must have a charitable purpose. Rules for charitable trusts differ from private trusts in three ways: (1) Charitable trust must have indefinite beneficiaries, (2) It may be perpetual (RAP doesn't apply), and (3) Cy pres doctrine, which allows court to select alternative charity when purpose of settlor becomes impractical or impossible, applies. Charitable trusts may be enforced by action of state attorney general. |
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Rule Against Perpetuities (RAP)
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No interest in property is valid unless it must vest, if at all, not later than 21 years after some life in being ("measuring life") at the creation of the interest. If there is any possibility that interest might vest more than 21 years after a life in being, interest is void. RAP applies to contingent remainders, executory interests, vested remainders subject to open (class gifts), options to purchase (not attached to a leasehold), rights of first refusal, and powers of appointment.
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When Perpetuities Period Begins to Run
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The time the interest is created and the perpetuities period beings to run depends on the instrument and interest created: For interests granted by will, runs from date of testator's death; for deeds, date of delivery. Period runs on an irrevocable trust from date created; runs on a revocable trust from date it becomes irrevocable.
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"Must Vest" Requirement (RAP)
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An interest vests for purposes of RAP when it becomes:
(1) possessory, or (2) an indefeasibly vested remainder or a vested remainder subject to total divestment. Key: When interest could possibly vest - not when likely to vest or even when it did. RAP doesn't apply to grantors' interests. |
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"Lives in Being" (RAP)
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Unless other measuring lives are specified, one connected with vesting of interest is used. Any lives may be denominated measuring lives, provided they are human and of reasonable number.
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Interests Exempt from RAP
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RAP doesn't apply to vested interests except vested remainders subject to open. Vested remainders, reversions, possibilities of reverter, and rights of entry are exempt.
Charity-to-Charity exception - RAP doesn't apply to disposition from one charity to another. Options to purchase held by current tenant are exempt. |
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Effect of Violating RAP
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Violation of RAP destroys only the offending interest. Exception is rare case of "infectious invalidity" where testator would probably have preferred entire gift to fail.
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RAP Pitfall - Executory Interest Following Defeasible Fee
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Generally, an executory interest that follows a defeasible fee (e.g., to A for so long as no liquor is consumed on premises, then to B) violates RAP and executory interest is stricken. An executory interest following a defeasible fee is valid only if the condition is specific to fee holder or expressly limited to perpetuities period.
In this case, B's interest is stricken and grantor has possibility of reverter. If had said "to A, but if liquor is ever consumed on premises, to B", B's interest AND condition would be stricken and A gets a fee simple. |
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RAP Pitfall - Age Contingency Beyond Age 21 in Open Class
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Violates RAP.
Example: To X for life, then to those of X's kids who attain age of 25. Remainder in X's kids violates RAP and is void. Some states have enacted RAP reform legislation that would reduce such age contingencies to 21 so gift won't fail. |
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RAP Pitfall - Fertile Octogenarian
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A woman is conclusively presumed to be capable of bearing children, regardless of her age or medical condition. Thus, a disposition "to A for life, then to A's kids for life, then to A's grandkids in fee," is invalid as to A's grandkids, despite the fact that A is 80 years old. Some states have adopted RAP reform legislation raising a presumption that women over a certain age (e.g., 55) cannot bear children. Also, medical testimony regarding woman's child-bearing capacity is admissible in these states.
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RAP Pitfall - Unborn Widow(er)
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Because a person's widow(er) is not determined until his/her death, it may turn out to be someone who has not in being at the time of the disposition.
Example: O to A for life, then to A's widow for life, then to A's surviving issue in fee. In absence of a statute to the contrary, gift to issue invalid because A's widow might not be in being when itnerest created. Remainder to A's kids would be OK because class closes at A's death. Some states, when necessary to sustain a gift, raise a presumption that spouse or widow(er) in being at time of transfer. |
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RAP Pitfall - Administrative Contingency
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A gift conditioned on an administrative contingency (e.g., admission to probate) violates RAP. Example: a gift "to my issue surviving at distribution of my estate" would be invalid, because estate might be administrated past RAP period. Some state RAP reform legislation eliminates this problem by raising presumption that transferor intended that contingency should occur, if at all, within 21 years.
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Options and Rights of First Refusal
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Generally, an option to purchase or right of first refusal that is structured so that it might be exercised later than the end of the RAP period is void. Exception: RAP doesn't apply to options to purchase held by lessee.
Example: A to B with clause: "B, heirs, and assigns promise that upon finding ready, willing, and able buyer for Blackacre, will offer to A, heirs, or assigns on same terms." VOID - could easily be exercised after 21 years. RAP doesn't apply to current tenant, but applies to former tenant or any party current tenant transfers to. |
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Application of RAP to Class Gifts
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"Bad as to One, Bad as to All" Rule: If interest of any class member may vest too remotely, whole glass gift fails. For class gift to vest, class must be closed and all conditions precedent satisfied.
"Gift to Subclass" Exception: Each gift to subclass may be treated as separate gift under rule. Example: Income to A for life, then to A's kids for their lives. Upon death of each of A's kids, corpus to be distributed to that kid's issue, per stirpes. Gifts to A's kids' living issue (at time of disposition) OK. Gifts to afterborn kids of A violates RAP. Per capita gift exception: A gift of fixed amount to each member of class is not treated as class gift under RAP. |
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Statutory Reforms of RAP
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In many states, statutes modify RAP. "Wait and see" statutes determine interest's validity upon termination of preceding LE - if interest ACTUALLY vests or fails within RAP period, it's good. If not, void. Some states have statutes dealing with common pitfall cases. Other statutes provide alternative vesting periods, and some allow court reformation of invalid interests to carry out donor's general intent. These reforms irrelevant for bar purposes, unless referred to in question.
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Rule Against Restraints on Alienation
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Generally, any restriction on transferability of a legal (as opposed to equitable) interest VOID.
Three types of restraints on alienation: (1) Disabling restraints (attempts to transfer are ineffective); (2) forfeiture restraints (attempt to transfer forfeits interest); and (3) Promissory restraints (attempt to transfer breaches a covenant). Disabling restraint on any type of legal interest is VOID. All absolute restraints on fee simple VOID. But restraints on fee simple for limited time and reasonable purpose likely to be upheld (lifetime of co-owners so no one will have to reside with a stranger). Valid restraints: (1) forfeit and promissory restraint on LE; (2) forfeiture restraint on transferability of future interest; (3) reasonable restraint in commercial transaction; (4) rights of first refusal; and (5) restraint on assignment and sublease of leaseholds (e.g., requires landlord's consent). |
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Concurrent Estates
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An estate in land can be held concurrently by several persons, all of whom have the right to enjoyment and possession of the land.
Joint tenancy, tenancy by the entirety, tenancy in common. |
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Joint Tenancy
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Right of survivorship. When joint tenant dies, survivors don't get land - her concurrent interest is freed.
Creation: Four unities - time, title, interest, possession. Interests of joint tenants must be equal in every way. Must be identical interests created at the same time by the same instrument, and with the same right of possession. Must be equal shares. Modern law requires a clear expression of a right to survivorship as well. |
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Severance of Joint Tenancy
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Voluntary or involuntary conveyance by a joint tenant of her undivided interest destroys joint tenancy. Transferee takes as tenant in common. When more than two joint tenants, conveyance by one destroys joint tenancy only to extent of conveyor's interest.
Judgment lien doesn't destroy joint tenancy until actually sold at foreclosure sale. Mortgage won't sever unless foreclosed and property is sold. Courts are split on whether an executory contract by all joint tenants works as severence. Will cannot effectuate severance because testator's interest vanishes at death. Conceptually, one joint tenant who murders other should not lose right of survivorship. In some jurisdictions, statutes change this result; in others, a constructive trust is imposed for decedent's estate. |
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Tenancy by the Entirety
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A marital estate akin to joint tenancy. Common law - arises presumptively in any conveyance to husband and wife. Only death, divorce, mutual agreement, or execution by a joint creditor of both husband and wife can sever a tenancy by the entirety. An individual spouse cannot convey or encumber tenancy by the entirety property. Deed or mortgage executed by only one spouse is ineffective.
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Tenancy in Common
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A concurrent estate with no right of survivorship. Tenants can hold different interests in the property, but each is entitled to possession of the whole. Interests are alienable, devisable, and inheritable. Today, multiple grantees are presumed to take as tenants in common, not as joint tenants.
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Rights and Duties of Co-Tenants
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No single co-tenant has exclusive right of possession of any part. Co-tenant out of possession can't bring action unless "ousted."
In most states, co-tenant in possession has right to retain profits from her own use of property. She need not share with other co-tenants absent ouster or agreement to contrary. Must share net rents from third parties and net profits gained from exploitations of land, like mining. Any co-tenant has right to judicial partition, either in kind (physical devision) or by sale and division of proceeds. Although, generally, this right may be exercised at any time, restraints on partition by co-tenants valid, provided they are limited to a reasonable time. Joint tenant or tenant in common may encumber her interest, but may not encumber interests of co-tenants. If one tenant in common mortgages her interest, mortgagee can only foreclose on her interest. Foreclosure sale will sever joint tenancy, and mortgagee runs risk that joint tenant will die before foreclosure, extinguishing interest. Co-tenant who pays more than her pro-rata share of necessary repairs is entitled to contribution from other co-tenants, provided she notified other co-tenants of need for repairs. No right of contribution for cost of improvements unless partition. Contribution can be demanded for taxes or mortgage payments paid on entire property. Reimbursement to co-tenant in sole possession limited to extent expenditures exceed rental value of her use. A confidential relationship exists among co-tenants. E.g., one tenant's acquisition of an outstanding title or lien that may affect estate is deemed to be on behalf of other tenants. It is difficult for one co-tenant to adversely possess against other co-tenants. |
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Leasehold
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An estate in land under which the tenant has a present possessory interest in the leased premises and the landlord has a future interest (reversion).
Tenancy for years, periodic tenancies, tenancies at will, tenancies at sufferance. |
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Tenancies for Years
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Continues for a fixed period of time. Usually created by written leases. Statute of Frauds requires writing if for more than one year.
Ends automatically at termination date. In most leases, landlord reserves right of entry, which allows him to terminate lease if tenant breaches any of the lease's covenants. In many jurisdictions, landlord may terminate lease upon tenant's failure to pay rent, even without reserved right of entry. Tenant may also terminate by surrendering tenancy (if landlord accepts). Same formalities required for creation of leasehold are required for surrender. |
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Periodic Tenancies
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Continues for successive periods (e.g., month to month) until terminated by property notice by either party.
Periodic tenancy can be created by: (1) express agreement (L leases to T from month to month); (2) implication (L leases to T at rent of $100 payable monthly); or (3) operation of law (T remains in possession after lease expires, and L treats as periodic tenancy; or lease is invalid, but T goes into possession). Automatically renewed until proper notice of termination given by either party. Propert notice generally is one term (e.g., one month for month-to-month) and timed to terminate lease at end of a period (30th or 31st for month-to-month). For year-to-year, 6 months notice required. |
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Tenancy at Will
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Terminable at will of L or T. Generally, tenancy at will must be created by an express agreement that lease can be terminated at any time. Absent such agreement, periodic rent payments will cause court to treat as periodic tenancy. If lease only gives L right to terminate, similar right will be implied for T. However, if only T has right to terminate, one will NOT be implied for L.
May be terminated without notice by any party with power to do so, or may be terminated by operation of law (death, commission of waste, etc). |
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Tenancies at Sufferance
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Arises when T wrongfully remains in possession after expiration of a lawful tenancy.
Lasts only until L takes steps to evict T. No notice of termination is required. |
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Hold-Over Doctrine
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If T continues in possession after right of possession has ended, L may (1) evict him, or (2) bind him to a new periodic tenancy. Generally, terms and conditions of expired tenancy govern new one. However, if L notifies T before lease expires that occupancy after termination will be at increased rent, T, by holding over, is held to have acquiesced to new terms (even if T actually objected to terms). Exceptions: (1) T only in possession a few hours after termination or leaves a few articles of personal property, (2) delay is not T's fault (serious illness), or (3) seasonal lease.
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Lease
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A contract that governs L-T relationship. Covenants in the lease are generally independent (i.e., if one party breaches a covenant, other party can recover damages but must still perform his promises and cannot terminate the L-T relationship). Doctrines of actual and constructive eviction and implied warrant of habitability are exceptions to this rule. Also, many states have created a statutory exception allowing L to terminate the lease for non-payment of rent.
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Types of Waste
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(1) Voluntary (Affirmative) Waste - T intentionally or negligently damages the premises or exploits minerals on the property.
(2) Permissive Waste - T fails to take reasonable steps to protect premises from damage. T liable for all ordinary repairs, excluding ordinary wear and tear. If duty shifted to L, by lease or statute, T has duty to report deficiencies promptly. (3) Ameliorative waste - T alters leased property thereby increasing its value. Generally, T is liable for cost of restoration. Modern exception: T permitted to make this type of change if T is long-term T and change reflects change in neighborhood. |
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T's Duty to Repair
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T cannot damage (commit waste on) leased property. If leased premises are destroyed without fault of L or T, no waste involved. In absence of lease language, or a statute to the contrary, neither party has a duty to restore the premises, but T has duty to keep paying rent. In most states, statutes/case law now give T option to terminate lease in this situation, even in the presence of an explicit covenant to repair. If T specifically covenants to make repairs, duty will be higher than duty implied by law of waste. T has duty to repair even ordinary wear and tear unless expressly excluded, but no duty to repair structural failures or damage from fire or other casualty unless expressly included. T with duty to repair is liable under such a covenant for all other defects, including reconstruction if the premises are destroyed.
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Duty Not to Use Premises for Illegal Purpose
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If T uses premises for illegal purposes, L may terminate lease or obtain damages and injunctive relief. Occasional unlawful conduct by T doesn't breach this duty.
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Duty to Pay Rent
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Common Law: Rent due at end of leasehold term. However, leases usually contain a provision making rent payable at some other time. Most states today have statutes providing that if the leasehold terminates before time originally agreed on, T must pay a proportionate amount of the agreed rent.
L not allowed to retain a security deposit beyond damages actually suffered. If a rent deposit is denominated a "bonus," L can retain it after T is evicted. If T effectively conveys (surrenders) his leasehold interest back to L, duty to pay rent ends. |
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L's Remedies
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At common law, breach of lease, such as failure to pay rent, resulted only in a cause of action for money damages; a breach did not give rise to right to terminate lease. Most modern leases give non-breaching party right to terminate. Thus if T is on premises and fails to pay rent, L may bring suit for rent due or may evict under state's unlawful detainer statute. Only issue in unlawful detainer proceeding is whether T has right of possession - T can't raise counterclaims.
If T unjustifiably abandons property, majority view is that L has duty to mitigate damages by seeking new T. If L repossesses and relets, T's liability depends on whether L accepts surrender. If surrender not found, T liable for difference between promised rent and fair rental value of property (or difference between promised rent and rent received from reletting). If surrender found, T free from rental liability accruing after abandon. Note: L's resumption of possession for himself constitutes acceptance of surrender. |
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L's Duties
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Subject to modification by lease, statute, or implied warranty of habitability, general rule is that L has no duty to repair or maintain the premises.
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Duty to Deliver Possession of Premises
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Statutes in most states require L to put T in actual possession of the premises at the beginning of the lease term (i.e., L in breach if he hasn't evicted a holdover T by beginning of lease term).
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Duty of Quiet Enjoyment
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Every lease has implied covenant that neither L nor paramount title holder (e.g., prior mortgagee who forecloses) will interfere with T's quiet enjoyment and possession of premises. Can be breached in three ways:
(1) Actual Eviction - L or paramount title holder excludes T from entire leased premises. Terminates T's duty to pay rent. (2) Partial Eviction - T physically excluded from part of leased premises. Partial eviction by L relieves T of duty to pay rent for entire premises, and T still keeps possession of remainder. Partial eviction by paramount title holder results in T paying rent only for portion he still possesses. (3) Constructive Eviction: L does something (or fails to provide a service he has a legal duty to provide) that renders property uninhabitable, T may terminate lease and seek damages. Conditions must be result of L's actions, and T must vacate premises within reasonable time. |
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Implied Warranty of Habitability
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Most jurisdictions imply a covenant of habitability into residential leases. This warranty is non-waivable. The L's duty is tied to standards of local housing codes. In event of a breach, T may:
(1) terminate lease; (2) make repairs and offset the cost against future rent; (3) abate the rent in an amount equal to fair rental value in view of defects; or (4) remain in possession, pay full rent, and sue for damages. Doesn't apply to commercial Ts - only residential. |
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Retaliatory Eviction
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In many states, L may not terminate lease or otherwise penalize T in retaliation for T's exercise of her legal rights, including reporting housing or building code violations. Many statutes presume a retaliatory motive if L acts within 90-180 days of T exercising rights. To overcome presumption, L must show valid, non-retaliatory reason for his actions.
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Assignments and Subleases
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Absent an express restriction in the lease, a T may freely transfer her leasehold interest, in whole or in part. A complete transfer of the entire remaining term is an assignment. If T retains any part of remaining term (other than a right to reenter upon breach), transfer is a sublease.
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Consequences of Assignment
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An assignee stands in the shoes of the original T in a direct relationship with L, i.e., assignee and L are in "privity of estate," and each is liable to the other on all covenants of the lease that "run with the land."
Covenant runs with the land if the original parties to the lease so intend and if the covenant "touches and concerns" the land (benefits the L and burdens the T, or vice versa, with respect to their interests in the property). Because covenant to pay rent runs with the land, assignee owes rent directly to L. After assignment, the original T is no longer in privity of estate with L but remains liable on the original contractual obligation to pay rent (privity of contract). If the assignee reassigns the leasehold interest, his privity of estate with L ends, and he has no liability for subsequent assignee's failure to pay rent. |
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Consequences of Sublease
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A sublessee is T of original lessee, and usually pays rent to original lessee, who then pays L. A sublessee is not personally liable to the L for rent or for the performance of any of the covenants in the main lease, unless the sublessee expressly assumes the covenants.
L may terminate the main lease for non-payment of rent or breach of other covenants if the lease so states or the power is given by statute. The sublease automatically terminates with the main lease. Also, many states allow a L who does not receive rent to assert a lien on personal property found on the premises; this applies to a sublessee's property as well as that of the original T. A sublessee cannot enforce any covenants made by L in the main lease, except a residential sublessee may be able to enforce the implied warranty of habitability against the L. |
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Covenants Against Assignment or Sublease
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Lease covenants restricting assignment and sublease are strictly construed against the L. Thus a covenant prohibiting assignment does not prohibit subleasing and vice versa.
A valid covenant against assignment is considered waived if the L was aware of the assignment and did not object (e.g., by knowingly accepting rent from the assignee). Once the L consent to one transfer, waives the covenant as to future transfers unless he expressly reserves it. If a T assigns or sublets in violation of a lease provision, the transfer is not void. L, however, usually may terminate the lease or sue for damages. |
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Assignments by L
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L may assign the rents and reversion interest he owns. Usually done by deed when L conveys building to new owner. T's consent NOT required. Once T's given reasonable notice of the assignment, they must recognize and pay rent to the new owner as their L. The benefit of all T covenants that touch and concern the land runs with L's estate to the new owner.
The burden of L's covenants that touch and concern the land run with L's estate to the assignee; thus, the assignee is liable for the performance of those covenants. The original L also remains liable on all of the covenants made in the lease. |
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Condemnation of Leaseholds
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If the entire leasehold is taken by eminent domain, T's liability for rent is extinguished because both the leasehold and reversion have merged in the condemnor and there is no longer a leasehold estate. The lessee is entitled to compensation. However, if the taking is temporary or partial, T is not discharged from the rent obligation, but is entitled to compensation (i.e., a share of the condemnation award) for the taking.
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L's Liability
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At common law, L had no duty to make premises safe. Today, there are several exceptions:
(1) Concealed dangerous condition (latent defect) (2) Public use (3) Repairs (4) Furnished short-term residence (5) General duty of reasonable care |
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Concealed Dangerous Condition (Latent Defect)
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If, at the time lease is entered into, L knows (or should know) of a dangerous condition that T could not discover by reasonable inspection, L must disclose (not repair) it. Otherwise L will be liable for any injuries resulting from the condition. If T accepts the premises after disclosure, she assumes the risk for herself and others; L is no longer liable.
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Public Use
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L is liable for injuries to members of the public if, at the time of the lease, he:
(1) knows or should know of a dangerous condition; (2) has reason to believe the T may admit the public before repairing the condition; and (3) fails to repair the condition. |
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Repairs
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Although L not liable for injuries from dangerous conditions arising after T takes possession, if L undertakes such repairs, he owes a duty of reasonable care. L also has a duty of reasonable care in maintaining common areas. If L covenants to repair (e.g., housing codes), he is liable for injuries resulting from failure to repair or negligent repair.
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Furnished Short-Term Residence
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L who rents a fully furnished premises for short period (e.g., summer cottage) is under stricter duty. He is liable for injuries resulting from any defect whether or not he knew of the defect.
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General Duty of Reasonable Care
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Modern Trend: Many courts are now holding that L owes a general duty of reasonable care toward residential Ts, and will be held liable for injuries resulting from ordinary negligence if he had notice of a defect and opportunity to repair it.
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T's Liability
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The duty of care owed by a T, as an occupier of land, to third persons is discussed in torts.
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Fixture
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A fixture is a chattel that has been so affixed to land that it has ceased being personal property and has become part of the realty. A fixture passes with ownership of the land.
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Chattels Incorporated Into Structure
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When items are incorporated into the realty so that they lose their identity (e.g., bricks, concrete), they are fixtures, as are items that are identifiable but whose removal would cause considerable damage (e.g., plumbing, heating ducts).
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Common Ownership Cases
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A common ownership case is one in which the person who brings the chattel to the land owns both the chattel and the land (e.g., X installs a furnace in his home). An item is a "fixture" if the objective intention of the party who made the "annexation" was to make the item part of the realty. This intention is determined by the nature of the article, the manner of attachment, amount of damage that would be caused by its removal, and the adaptation of the item to the use of the realty.
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Constructive Annexation
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An article of personal property that is so uniquely adapted to the real estate that it makes no sense to separate it (e.g., keys to doors, custom curtain rods) may be considered a fixture, even if it is not physically annexed to the property.
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Divided Ownership Cases
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Chattel is owned and brought to the realty by someone other than the landowner.
L-T: An agreement between L and T is controlling on whether annexed chattel is a fixture. Absent agreement, T deemed to lack intent to permanently improve the property, and thus may remove his annexed chattels if removal would not damage the premises or destroy the chattel. Annexed chattels must be removed by end of lease term and T is responsible for repairing any damage caused by removal. Same rules apply in life tenant - remainderman situation, except life T must remove annexations before end of tenancy. Licensees treated much like Ts, whereas trespassers normally lose their annexations. Thus, absent a statute, an adverse possessor or good faith trespasser cannot remove fixtures. |
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Third-Party Cases
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Generally, mortgagee has no greater rights than mortgagor. Thus, chattels annexed by mortgagor's T are generally not within the lien of the mortgage except where the mortgagee is without notice of T's rights.
Suppose a landowner affixes a chattel to the land. Seller of chattel retains a security interest in chattel and landowner mortgages land. If landowner then defaults on both chattel and mortgage payments, as between the seller and the mortgagee, the general rule is that the first to record his interest wins. However, under the UCC, seller wins if "fixture filing" is recorded within 20 days after chattel is affixed to the land. Seller must compensate mortgagee for damage or repair caused by removal. |
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Easement
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Easement holder has right to use another's tract of land for a special purpose, but no right to possess or enjoy the land. Presumed to be of perpetual duration unless grant specifically limits the interest.
Most easements are affirmative, meaning the holder is entitled to make affirmative use of the servient tenement. Negative easements, which entitle the holder to compel the possessor of the servient tenement to refrain from engaging in an activity on the servient estate are generally confined to only four types of easements: (1) for light, (2) for air, (3) for lateral and subjacent support, and (4) for flow of an artificial stream. Negative easements are really restrictive covenants. |
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Easement Appurtenant
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Easement is appurtenant when it benefits the holder in his physical use or enjoyment of another tract of land. Thus, for an easement to be appurtenant, there must be two tracts: the dominant tenement (the estate benefited by the easements), and the servient tenement (the estate subject to the easement right). An easement appurtenant passes with the transfer of the benefited land, regardless of whether it is mentioned in the conveyance. The burden of the easement also passes automatically with servient estate unless the new owner is a BFP with no actual or constructive notice of the easement.
Cannot be conveyed apart from dominant tenement unless conveyed to owner of servient tenement to extinguish the easement. |
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Easement in Gross
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The holder of an easement in gross acquires right to use the servient tenement independent of his possession of another tract of land; i.e., easement benefits the holder, rather than another parcel. An easement in gross for the holder's personal pleasure (e.g., right to swim in the pond on Blackacre) is not transferable, but one that serves an economic or commercial interest (e.g., right to erect billboards on Blackacre) is transferable.
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Express Grant (Easement)
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Any easement must be in writing and signed by the holder of the servient tenement unless its duration is brief enough (commonly one year or less) to be outside a particular state's Statute of Fraud's coverage. A grant of easement must comply with all the formal requisites of a deed.
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Express Reservation (Easement)
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Easement by reservation arises when grantor conveys title to land, but reserves the right to continue to use the tract for a special purpose.
Cannot reserve easement for someone else - only for grantor. |
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Implication (Easement)
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Created by operation of law. It is an exception to the Statute of Frauds. Two types of easements by implication:
(1) Easement implied from existing use ("quasi-easement"): May be implied if prior to the division of a single tract an apparent and continuous use exists on "servient" part that is reasonably necessary for enjoyment of "dominant" part and court determines parties intended the use to continue after division of land. (2) Easement implied without existing use: (a) Subdivision plat - When lots sold in subdivision with reference to recorded plat or map showing streets leading to lots, buyers have implied easements to use streets to access lots. (b) Profit a prendre - Holder has implied easement to pass over surface of land and to use as reasonably necessary to extract product. Easement by Necessity: Arises when landowner sells portion of his tract and by this division deprives one lot of access to public road or utility line. Owner of servient parcel has the right to locate the easement. |
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Prescription
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Acquiring an easement by prescription is analogous to acquiring property by adverse possession. To acquire a prescriptive easement, the use must be:
(1) open and notorious (i.e., discoverable upon inspection); (2) adverse (without owner's possession); and (3) continuous and uninterrupted; (4) for the statutory period. Generally, prescriptive easements cannot be acquired in public land. |
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Scope of Easements
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In the absence of specific limitations in the grant, courts assume the easement was intended to meet both present and future needs of the dominant tenement (e.g., easement may widen to accommodate new, wider cars). IF, however, dominant parcel is subdivided, the lot owners will not succeed to the easement if to do so would unreasonably overburden the servient estate. Does not automatically terminate the easement - must seek injunctive relief.
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Termination of Easements
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(1) Stated Conditions: Original grant specifies.
(2) Unity of Ownership (Merger): Same person acquires ownership of easement and servient estate. Even later separation will not revive. (3) Release: Can be terminated by deed of release from easement owner to owner of servient tenement. (4) Abandonment: Easement holder demonstrates by a physical action an intent to permanently abandon easement. (5) Estoppel: If owner of servient estate changes his position in reasonable reliance on representations made or conduct by owner of the easement, easement terminates by estoppel. (6) Prescription: To terminate an easement by prescription, there must be an adverse, continuous interruption of use for prescription period (usually 20 years). (7) Necessity: Expires as soon as necessity ends. (8) Condemnation and Destruction: Condemnation of servient estate extinguishes all easements. Courts are split as to whether easement holders are entitled to compensation. Involuntary destruction of a structure in which there is an easement extinguishes the easement. Voluntary destruction of such a structure does not. |
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Licenses
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License privileges holder to go upon the land of another. But, unlike an easement, a license is not an interest in land; merely a privilege, revocable at the will of the licensor. A license is personal to the licensee, and thus is inalienable. Any attempt to transfer a license results in revocation by operation of law.
License becomes irrevocable in the following circumstances: (1) Estoppel - if a licensee invests substantial amounts of money or labor in reliance on a license, licensor is estopped to revoke. Because easement by estoppel, lasts until holder receives sufficient benefit to reimburse for expenditures. (2) License coupled with interest - Irrevocable as long as interest lasts. For example, vendee of a chattel may enter seller's land to remove chattel, and future interest holder may enter and inspect land for waste. |
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Profits
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Entitle holder of a benefit to take some resources (e.g., soil, timber, materials, fish, etc) from servient estate. Implied in every profit is an easement entitling benefit holder to enter servient estate to remove the resources. All of the rules governing creation, alienation, and termination of easements are applicable to profits. In addition, a profit may be extinguished through surcharge (misuse that overly burdens the servient estate).
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Real Covenant
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A real covenant, normally found in a deed, is a written promise to do something on the land or a promise not to do something on the land. Run with the land at law, which means subsequent owners may enforce or be burdened by covenant.
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Requirements for Burden to Run - Real Covenant
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(1) Must intend successors in interest to be bound by covenant.
(2) Subsequent purchaser must have actual, inquiry, or record notice of covenant at time of purchase (only protects purchasers for value). (3) At time promisor entered into covenant with promisee two must have shared interest in land independent of covenant. i.e., grantor-grantee, mortgagor-mortgagee (Horizontal Privity). (4) Successor in interest must hold entire durational interest held by covenantor at time he made covenant (Vertical Privity). (5) Must touch and concern the land. Negative covenants do if they restrict the holder of servient estate in his use of parcel. Affirmative covenants do if they require holder of servient estate to do something, which increases his obligations in connection with enjoyment of land. |
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Requirements for Benefit to Run - Real Covenant
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(1) Covenanting parties must have intended that successors in interest to covenantee be able to enforce covenant.
(2) Benefits of a covenant run to assignees of original estate or any lesser estate; i.e., any succeeding possessory estate may enforce the benefit. (Vertical Privity) (3) Benefit of a covenant touches and concerns the land if the promised performance benefits the covenantee and her successors in their use and enjoyment of the benefited land. |
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Remedy and Termination - Real Covenant
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Remedy: Award of money damages, collectible from defendant's general assets. If injunction is sought, promise must be enforced as equitable servitude.
May be terminated by: (1) Written release; (2) Merger of benefited and burdened estates; or (3) Condemnation of burdened property. |
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Equitable Servitude
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Covenant that, regardless of whether it runs with the land at law, equity will enforce against the assignees of the burdened land who have notice of the covenant. Usual remedy is an injunction.
Difference between real covenant and equitable servitude is only the remedy sought. Money damages = real covenant. Injunction = equitable servitude. |
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Creation of Equitable Servitude
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Created (usually) by covenants contained in writing satisfying the Statute of Frauds. One exception: Negative equitable servitudes may be implied from a common scheme for development of a residential subdivision. Reciprocal negative servitudes will be implied only if, at time sales of subdivision lots began, developer had plan that all parcels would be subject to restriction. May be evidenced by: (1) recorded plat, (2) general pattern of restrictions, or (3) oral representations to early buyers. To be bound by a covenant not in her deed, grantee must have had notice of the covenants in the deeds of others in the subdivision.
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Types of Notice
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(1) Actual - direct knowledge of covenants
(2) Inquiry - neighborhood appears to conform to common restrictions (3) Record - prior deed with covenant in grantee's chain of title |
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Requirements for Burden to Run - Equitable Servitude
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A successor of promisor is bound if:
(1) covenanting parties intended that the servitude be enforceable by and against assignees; (2) successor of the promisor has actual, inquiry, or record notice of the servitude; and (3) covenant touches and concerns the land. NO PRIVITY NEEDED! |
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Requirements for Benefit to Run - Equitable Servitude
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Benefit of equitable servitude runs with the land, and thus, is enforceable by the promisee's successors if:
(1) original parties so intended; and (2) servitude touches and concerns the benefited property. NO PRIVITY NEEDED! |
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Equitable Defenses to Enforcement - Equitable Servitude
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Court will not enforce an equitable servitude if:
(1) person seeking enforcement is violating a similar restriction on his own lands (unclean hands); (2) benefited property acquiesced in a violation of servitude by one burdened property; (3) estoppel; (4) benefited party fails to bring suit within reasonable time (laches); or (5) neighborhood has changed so significantly that enforcement would be inequitable. |
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Termination - Equitable Servitude
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Like other nonpossessory interests, an equitable servitude may be extinguished by:
(1) written release from benefit holders; (2) merger of benefited and burdened estates; or (3) condemnation of burdened property. |
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Party Walls and Common Driveways
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Courts will treat walls erected partly on property of each of two adjoining landowners as belonging to each owner to extent it rests upon her land. Courts will also imply cross-easements (mutual) of support with result that each party can use wall or driveway and neither can unilaterally destroy it.
Creation: Written agreement required by statute of frauds, but "irrevocable license" can arise from detrimental reliance on a parol agreement. Can also result from implication or prescription. Burdens/benefits run to successive owners of each parcel. |
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Adverse Possession
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Title to real property may be acquired by adverse possession. Title by adverse possession results from operation of statute of limitations for trespass. If owner does not, within statutory period, take action to eject a possessor who claims adversely to the owner, title vests in possessor.
Title to government owned land and land registered under a Torrens system cannot be acquired by adverse possession. |
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Requirements of Adverse Possession
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(1) Running of statute of limitations begins when true owner can first bring suit. Filing suit will not stop period from running - suit must be pursued to judgment.
(2) Open and notorious possession - must be sufficiently apparent to put the true owner on notice of trespass. (3) Actual and exclusive possession - not sharing with true owner or the public. Will gain title to land ACTUALLY occupying (in most situations). (4) Continuous possession - intermittent periods of occupancy not enough. Constant use not required as long as possession is of a type that usual owner would make. May also tack on periods of adverse possession by predecessors, but must have privity. (5) Payment of property taxes generally not required (but is considered good evidence). (6) Hostile - must enter without owner's permission. in case of co-Ts, must oust or make explicit declaration that T is claiming exclusive dominion. Where a grantor stays in possession of land after conveyance, presumed to be there with permission of grantee (same with L & T). |
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Disability - Adverse Possession
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Statute of Limitations doesn't begin to run if true owners was under some disability to sue when the cause of action first occurred. Typical disabilities: minority, imprisonment, insanity. Only disability of owner existing at the time that the cause of action arose is considered.
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Adverse Possession and Future Interests
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Statute of limitations doesn't run against a holder of future interest until interest becomes possessory.
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Effect of Covenants in True Owner's Deed - Adverse Possession
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If an adverse possessor uses the land in violation of a restrictive covenant in the owner's deed for the limitations period, she takes free of the restriction. If, however, the possessor's use complies with such a covenant, she takes title subject to the restriction.
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Land Sale Contracts
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Must be in writing and contain signature of party to be charged and essential terms (requirements of Statute of Frauds). Part performance removes it from the Statute of Frauds.
Courts presume that time is not of the essence in real estate contracts, and thus closing date is not absolutely binding, and party late in tendering own performance can still enforce contract if she performs within a reasonable time after closing. Time is of the essence if: (1) contract so states, (2) circumstances indicate was parties' intent, or (3) one party gives another notice as such. Party who fails to tender performance on closing date (if time is of the essence) is in breach and may not enforce the contract. Even if time is not of the essence, party late to tender is still liable for incidental losses. Buyer's obligation to pay and seller's obligation to convey are concurrent conditions. Neither party in breach until other performs (even if closing date passes). If neither performs, closing date extended until one does. A party need not perform if other party has repudiated contract or it is impossible for other party to perform. |
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Doctrine of Equitable Conversion
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Once contract is signed, equity regards buyer as owner of property. Seller's interest is considered personal property. Legal title is considered to be held in trust for the buyer, though still with seller. Right to possession follows legal title, so seller is entitled to possession until closing.
If property destroyed (without fault of either party) before closing, majority rule places risk on buyer. Some states, however, have enacted Uniform Vendor and Purchaser Risk Act, placing risk on seller unless buyer has title or possession at time of loss. (Even though risk on buyer, seller must credit any casualty insurance proceeds toward purchase price buyer required to pay). If party to land sale contract dies before contract completed, seller's interest passes as personal property and buyer's interest passes as real property. |
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Marketable Title
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Need not be perfect title, but must be free of questions presenting unreasonable risk of litigation. Must be free from defects in chain of title (variation in land description, etc).
Adverse Possession - title acquired this way is unmarketable. Mortgages, liens, restrictive covenants, easements, and significant encroachments render title unmarketable, generally. But a beneficial easement, if visible or known to buyer, doesn't make title unmarketable. Zoning restrictions themselves don't render title unmarketable, but existing violation of zoning ordinance does. Buyer cannot rescind contract prior to date of closing based on marketable title. |
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Remedy for Unmarketable Title
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Buyer most notify seller that title is unmarketable and give him reasonable time to cure defects. If seller fails to cure, remedies include rescission, damages, specific performance with abatement, and quiet title suit. BUT if closing occurs, contract and deed merge, and seller if off the hook.
Note: Quitclaim deed does NOT affect. |
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Remedies for Breach of Land Sale Contract
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Nonbreaching party entitled to damages (difference between contract price and fair market value on date of breach, plus incidental costs) or, because land is unique, specific performance with abatement of purchase price.
Liquidated damages: If buyer defaults, earnest money equals liquidated damages. Courts routinely uphold if amount is reasonable in light of seller's anticipated and actual damages. |
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Seller's Liabilities for Defective Property
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Warranty of Fitness or Quality: ONLY in sale of a new home.
Seller of existing buildings may be liable to buyer for defects like a leaky roof, flooding basement, or termite infestation, or on any of several theories: (1) misrepresentation (fraud) - liable for defects about which seller made (knowingly or negligently) false statement to buyer if buyer relied on statement and it materially affected the value of the property; (2) Seller liable for defects, even without making statements, if took steps to conceal; (3) Failure to disclose if: (a) knows/has reason to know of defect; (b) defect is not apparent and seller knows buyer is unlikely to discover upon ordinary inspection; and (c) defect is serious and would likely cause buyer to reconsider purchase if known. Person may sue builder for negligence in performing building contract. Some courts allow ultimate vendee to sue, despite lack of privity. General disclaimer in sales contract (i.e., "as-is" or "with all defects") not sufficient to overcome seller's liability for fraud, etc. Specific disclaimer (i.e., "seller not liable for leaky roof") will likely be upheld. |
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Real Estate Brokers and Disclosure
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Sellers agents, but should disclose material information if they have knowledge of it.
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Deed Formalities and Requirements
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Must be in writing, signed by grantor, and reasonably identify parties and land involved.
Most other formalities (seal, consideration, etc) are generally unnecessary. Land description is sufficient if provides good lead to identity of property. If too indefinite, grantor retains title. Parol evidence admissible of good lead, but not admissible if description is inadequate. Where description is inconsistent or conflicting, methods of description are given the following priority: natural monuments (e.g., oak tree), artificial monuments (e.g., buildings), courses (angles), distances, name, and quantity. Presumptively, title to land passes to center of right of way or water boundary. Can be rebutted by language in the deed. |
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Variable Boundary Line Cases
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In variable boundary line cases, slow and imperceptible change in course of river or stream changes boundary; accretion (slow deposit of soil on land abutting water) belongs to abutting owner; avulsion (sudden change of watercourse) changes nothing.
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Reformation of Deeds
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Deed will be reformed if it doesn't represent parties' agreement because of:
(1) mutual mistake; (2) scrivener's error; or (3) unilateral mistake caused by misrepresentation or other inequitable conduct. |
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Delivery of Deed
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Delivery = grantor's intention to make deed presently effective even if possession is postponed. May be satisfied by manual delivery, notarized acknowledgment by the grantor, recording, or anything else showing intent. Parol evidence admissible to show intent to deliver, but not to show delivery was conditional.
Deed to dead person is void - conveys no title. Fact that grantor was unaware of the death is irrelevant. Title remains in grantor. Title passes upon delivery. Cannot cancel or take back. Returning deed has NO EFFECT. To give land back, must use new deed to reconvey. |
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Conditional Delivery of Deed
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Retention of control or interest by grantor (e.g., right to revoke) indicates lack of intent to pass title. Thus, if grantor executes deed but does not deliver during his lifetime, no title passes. Failure to record delivered deed doesn't affect passage of title even if parties believe deed is ineffective until recording. Properly executed and delivered deed providing title will not pass until grantor's death is valid and creates future interest in grantee.
If deed is absolute on its face, but delivered with oral condition, condition is disregarded and delivery is absolute. |
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Transfer to Third Party With No Conditions
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If grantor gives a deed to third party with instructions to give it to the grantee, there is valid delivery. If grantor fails to give instructions, the validity of the delivery depends on whether the third party could be considered grantor's agent. If so, there is no delivery.
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Transfer to Third Party With Conditions (Commercial Transaction)
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Valid conditional delivery occurs when grantor gives deed to third party with instructions to give it to grantee when certain conditions occur (e.g., if grantee pays purchase price before certain date). Parol evidence is admissible (in this case) to show delivery is conditional.
Grantor may revoke only if: (1) condition has not yet occurred, and (2) there is no enforceable written contract to convey. If grantor wrongfully acquires deed from escrow holder prior to performance of condition, title doesn't pass and grantee cannot give good title to subsequent purchaser. Title usually passes when condition occurs, but if justice requires it (e.g., grantor dies or becomes incompentent) and there is an enforceable contract to convey, title may "relate back" to time when grantor gave deed to third party. Rights of intervening BFPs are protected. |
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Transfer to Third Party With Conditions (Donative Transaction)
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When grantor gives deed to third party to give to donee when condition occurs, main issue is whether grantor can revoke deed before condition occurs. Where condition is not grantor's death, delivery is irrevocable and creates a springing executory interest in donee. Where condition is grantor's death, most courts follow same reasoning, but some hold deeds revocable unless there is an enforceable contract to convey.
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Acceptance - Deed
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Acceptance by grantee is required in order to complete a conveyance. Most states presume acceptance. Acceptance relates back to date deed was delivered into escrow (unless this would defeat rights of intervening third parties).
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Dedication - Deed
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Land may be transferred to public body (e.g., city, county) by dedication. An offer may be made by written or oral statement, submission of map or plat showing dedication, or opening the land for public use. To be effective, a dedication must be accepted, which can be done by formal resolution, approval of map/plat, or actual assumption of maintenance of improvements.
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Covenants in General Warranty Deed
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(1) Seisin
(2) Right to Convey (3) Against Encumbrances (4) Quiet Enjoyment (5) Warranty (6) Further Assurances |
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Covenant of Seisin
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Grantor covenants she has the estate she purports to convey. Must have title and possession at time of grant.
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Covenant of Right to Convey
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Grantor covenants she has right to convey (authority). Title alone will satisfy.
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Covenant Against Encumbrances
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Grantor covenants against existence of physical (e.g., encroachments) or title (e.g., mortgages) encumbrances.
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Covenant of Quiet Enjoyment
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Grantor covenants that grantee will not be disturbed in possession by third party's lawful claim of title.
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Covenant of Warranty
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Grantor covenants to defend against reasonable claims of title by third party, and to compensate grantee for any loss sustained by claim of superior title (identical, essentially, to quiet enjoyment).
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Covenant of Further Assurances
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Grantor covenants to perform acts reasonably necessary to perfect title conveyed (not usual, but frequently given, covenant).
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Breach of General Warranty Deed Covenants
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Seisin, right to convey, and against encumbrances are breached, if at all, at time of conveyance. Quiet enjoyment, warranty, and further assurances are future covenants and are breached only upon disturbance of grantee's possession.
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Damages and Remote Grantees - General Warranty Deed Covenants
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If successive conveyances by general warranty deed, and last grantee evicted by lawful claim of title, he may sue anyone up the line. Some states allow him to recover to the extent of consideration received by defendant-covenantor. Other states limit recovery to the less of what he paid or what defendant-covenantor received.
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Statutory Special Warranty Deed
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In many states, use of the word "grant" in a deed creates by implication two limited assurances against acts of the grantor (not her predecessors):
(1) that grantor has not conveyed the same estate or any interest therein to anyone other than grantee; and (2) that the estate is free from encumbrances made by the grantor. |
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Quitclaim Deed
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Releases whatever interest grantor has. No covenants of title are included or implied.
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Estoppel by Deed
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If grantor purports to convey an estate in property that she does not then own, her subsequent acquisition of the estate will inure to the benefit of the grantee. Applies where conveyance was by warranty deed or where deed purported to convey a particular estate. Not usually applicable to quitclaim deeds. Most courts hold that title inures to the benefit of grantee only as against grantor. If grantor transfers her after-acquired title to a BFP for value, BFP will prevail over original grantee.
Remedies: Original grantee can accept title or sue for damages for breach of covenant. |
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Recording Acts
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Common Law: 1st in time, 1st in right.
Recording Acts (Modern): Generally protect all BFPs from secret interests previously created and provide a mechanism for "earlier" grantees to give notice through recordation. These statutes require a grantee to record his deed to put subsequent purchasers on notice of his interest. Recording is not essential to validity of deed, but can be essential to protect grantee against a BFP. Proper recordation gives constructive notice of the first conveyance to everyone, so there can be NO subsequent BFPs. Any instruments creating or affecting an interest in land can be recorded, provided it is acknowledged by the grantor before a notary public. Three major types: Notice, race-notice, or race statutes. |
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Notice Statutes
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Subsequent BFP prevails over a prior grantee who failed to record. Key is that subsequent purchaser had no actual or constructive notice at the time of the conveyance. Subsequent BFP protected whether she records or not.
Example: O to A on January 1. A doesn't record. O to B on January 15 for valuable consideration. B has no notice of prior transfer. B prevails. It is IRRELEVANT whether A recorded after January 15 and before B did, because B had no notice at the time of conveyance. |
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Race-Notice Statutes
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Subsequent BFP is protected only if she takes without notice AND records before prior grantee.
Example: O to A on January 1. A doesn't record. O to B on January 15 for valuable consideration. B has no notice of prior transfer. A records on January 18. B records January 20. A prevails because B didn't record first. |
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Race Statutes
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Whoever records first wins. Notice is irrelevant. VERY few states have such statutes.
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Bona Fide Purchaser (BFP)
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To be a BFP, person must:
(1) be a purchaser, (2) without notice (actual, constructive, or inquiry), AND (3) pay valuable consideration. |
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Who is Protected by Recording Acts?
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Only BFPs are protected under notice and race-notice statutes.
Judgment creditor: Majority of courts hold that they're not protected by recording statute against a prior unrecorded conveyance by defendant. Purchaser from heir: Protected against prior unrecorded conveyances by now-deceased record owner. Transferees from BFP (Shelter Rule): Will prevail against any interest that transferor-BFP would have prevailed against. True even if transferee had actual notice of prior unrecorded conveyance. Doesn't however, help a transferee who previously held title; she cannot "ship through" a BFP to get good title. Purchaser under installment land contract: In most states, only protected to extent of payment made. In a dispute with prior claimant, court may award purchaser share of property as tenant in common equal to proportion of payments made, lien on property to extent of amount paid, or entire property subject to lien on property to extent of balance still owed. |
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Actual Notice
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Includes knowledge obtained from any source (e.g., newspaper, word of mouth).
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Record Notice (Chain of Title)
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Subsequent purchaser charged with notice of only those conveyances that are recorded and appear in chain of title.
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Wild Deeds (Record Notice)
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A recorded deed that is not connected to the chain of title. It doesn't impart constructive notice because subsequent purchaser could not feasibly find it.
Example: A to B. B doesn't record. B to C. C records. A to D. D doesn't have notice of C's claim. |
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Deeds Recorded Late (Record Notice)
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Deed recorded after grantor is shown by record to have parted with title through another (subsequent) instrument is not constructive notice in most states (but is in some "race-notice" jurisdictions).
Example: A to B on March 1. A to C on April 1. C records on April 10. B records on April 15. C to D on May 1. If D has no actual or inquiry notice of prior transfer, he will prevail. Most states would hold that B's deed was recorded late and was not in D's chain of title. |
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Deeds Recorded Before Grantor Obtained Title (Record Notice)
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Split of authority on whether recorded deed, received from grantor who had no title when conveyed but who afterwards obtains title, imparts constructive notice to subsequent purchasers. Most courts say it does not, and BFP will win on grounds that it's not in his chain of title. Minority view protects prior grantee over BFP on an estoppel by deed theory.
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Deed in Chain Referring to Instrument Outside Chain (Record Notice)
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Reference to another instrument in a recorded document that is in the chain of title may impart constructive notice of the instrument referred to - even if it is unrecorded or not itself in chain of title.
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Restrictive Covenants - Deeds from Common Grantor (Record Notice)
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Courts are split on whether deeds to adjacent lots or lots in a subdivision, executed by same grantor and containing restrictions and easements involving the subject lot, are within the chain of title of the subject lot. The better view is that they are not.
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Inquiry Notice
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Under certain circumstances, a purchaser is required to make reasonable inquiries. He is charged with knowledge of whatever the inquiry would have revealed, even if he made none. References in recorded instruments to unrecorded transactions, unrecorded instruments in chain of title, and possession unexplained by the record put a purchaser on inquiry notice. The mere fact that a quitclaim deed was used does not charge purchaser with inquiry notice.
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Valuable Consideration
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To be protected by recording statute, subsequent grantee must prove that he is a purchaser, not a donee. Consideration need not be adequate, but must be of some pecuniary value (love and affection is not valuable consideration). Note that property received as security for an antecedent debt is insufficient. Protected as BFP only AFTER consideration is paid.
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Title Search
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In a tract index jurisdiction, searcher looks at page indexed by block and/or lot describing property and any instruments affecting it. In a grantor and grantee index jurisdiction, searcher establishes a chain of title by searching back in time in the grantee-grantor index. From that point, he then searches forward in time in grantor-grantee index to see if any grantor conveyed an interest to someone outside the backward chain.
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Effect of Recordation
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Gives prospective subsequent grantees constructive notice of existence and content of recorded instruments. Also raises presumption of valid delivery and authenticity. However, doesn't validate an invalid deed or protect against interests arising by operation of law (e.g., dower, adverse possession). To this extent, BFPs still in jeopardy. Instrument considered recorded when filed with recorder's office, regardless of whether it is thereafter properly indexed. Subsequent purchaser charged with notice of mis-indexed instrument, but has cause of action against recorder's office.
Unacknowledged instrument not entitled to recordation, and as such, doesn't give constructive notice. Subsequent grantee must have actual notice of deed (i.e., discover it in title search) to be bound by it. Where acknowledgment is defective for reasons not apparent on face of instrument, better view is that imparts constructive notice. |
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Ademption (Wills)
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If property is specifically devised/bequeathed in testator's will, but testator no longer owns at time of death, gift fails. Ademption applies only to specific bequests, which can only be satisfied by the delivery of a particular item - they cannot be satisfied by money. A gift of land is always a specific devise. If testator specifically devises property then sells/gives away a part of that property, only that portion is adeemed; remainder passes to devisee.
Most states don't apply this to proceeds of a contract for sale of land that was executory at time of testator's death; i.e., devisee gets proceeds in place of land. These statutes take precedence over equitable conversion doctrine. Also, ademption doesn't apply when contract is entered into by representative of incompetent testator. When property is damaged/destroyed before testator's death, but insurance proceeds not paid until after death, ademption doesn't usually apply. Beneficiary of specific bequest takes the insurance proceeds. Similarly, ademption usually doesn't apply to property condemned by government where taking before death but compensation paid after death. |
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Exoneration (Wills)
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At common law and in most states, the devisee of specific property is entitled to have the land "exonerated" by the payment of liens and mortgages from the testator's residuary estate. There is a growing trend toward abolition of exoneration doctrine.
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Lapse (Wills)
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A lapse occurs when the beneficiary of a gift in a will dies before testator. Under common law, if lapse occurred, gift was void. However, nearly all states now have statutes that prevent lapse by permitting gift to pass to predeceasing beneficiary's living descendants under certain circumstances.
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Anti-Lapse Statutes (Wills)
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Many anti-lapse statutes only apply when the named beneficiary is a descendant of the testator. Others apply only if beneficiary is more remotely related, such as descendant of testator's grandparent. Others apply to any relative, and others to any beneficiary at all. Anti-lapse statute substitutes predeceased beneficiary's descendents - doesn't pass as estate. So property will never pass to predeceased beneficiary's spouse under anti-lapse statute.
If beneficiary already dead when will is executed, anti-lapse statute usually doesn't apply. Gift will lapse and fail. If class member within coverage of anti-lapse statute predeceases testator leaving surviving issue, anti-lapse statute will apply and issue will take share. Anti-lapse statute doesn't apply if there is a contrary will provision (i.e., gift is contingent on beneficiary surviving testator). |
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Crops/Emblements (Wills)
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Generally, the conveyance of land includes all crops growing on it. However, exceptions exist for:
(1) crops that have already been harvested or severed from the land, and (2) crops planted by a T during term of tenancy. For title to crops to remain in a T, tenancy must have been of uncertain duration and have terminated without fault on the part of T. |
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Mortgage
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Debtor/notemaker is mortgagor. Lender is the mortgagee. On default, mortgagee can realize on mortgaged real estate only by having a judicial foreclosure sale conducted by the sheriff.
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Deed of Trust
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Debtor/notemaker is trustor. He gives a deed of trust to a third party trustee, who's usually closely connected to the lender (beneficiary). On default, lender instructs trustee to foreclose the deed of trust by sale.
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Installment Land Contract
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Installment purchaser obtains legal title only when the full contract price has been paid off. Forfeiture clauses, allowing vendor upon default to cancel contract, retake possession, and retain all money paid, are common.
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Absolute Deed
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If given for security purposes, can be treated by th court as an "equitable" mortgage to be treated as any other mortgage (i.e., creditor must foreclose by judicial action).
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Transfer of Mortgage by Mortgagee without Note
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Some states hold that the transfer of the mortgage automatically transfers the note as well, unless mortgagee-transferor expressly reserves the rights to the note. In these states, transferee of mortgage can then file an equitable action and compel a transfer of the note as well. Other states hold that because note is principal evidence of debt, transfer of mortgage without note is void.
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Transfer of Note without Mortgage by Mortgagee
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The note can be transferred without the mortgage, but mortgage will automatically follow properly transferred note, unless mortgagee-transferor expressly reserves rights to mortgage. No separate written assignment of mortgage is necessary.
Note may be transferred by either endorsing it and delivering to transferee, or by a separate document of assignment. Only if the endorsement and delivery method is used can the transferee become a holder in due course (HDC - see Negotiable Instruments). HDC takes note free of any personal defenses of maker, but is still subject to real defenses. |
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Transfer by Mortgagor
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Grantee of mortgaged property takes subject to mortgage. If grantee signs assumption agreement, he becomes primarily liable to lender, while original mortgagor is secondarily liable as a surety. If no assumption agreement, grantee not personally liable on loan, and original mortgagor remains primarily liable. However, if grantor doesn't pay, loan may be foreclosed, wiping out grantee's investment. Once grantee assumes, if he and mortgagee modify the mortgage, the original mortgagor is off the hook completely.
Due on sale clauses, appearing in most modern mortgages, allow lender to demand full payment of loan if mortgagor transfers any interest in property without lender's consent. |
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Theories of Title
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Most states use either lien theory or title theory.
Lien Theory: Mortgagee considered holder of a security interest only, and mortgagor deemed owner of land until foreclosure. Mortgagee may not have possession before foreclosure. Title Theory: Legal title in mortgagee until mortgage is satisfied or foreclosed, and mortgagee entitled to possession upon demand at any time. Intermediate Theory: Legal title in mortgagor until default, and upon default, legal title in mortgagee. Mortgagee may demand possession when default occurs. |
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Possession Before Foreclosure
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When mortgagor defaults on debt, mortgagee can foreclose on mortgage. Mortgagee may wish to take possession of property, or begin receiving rents from property before foreclosure.
Mortgagee may take possession if mortgagor gives consent or if mortgagor abandons property. Most mortgagees don't wish to take possession because of risks of liability. Risks involve: duty to account for rents, duty to manage property in prudent manner, and potential tort liability for those injured on property. Most mortgagees attempt to intercept rents before foreclosure by getting receiver appointed by court to manage property. Courts will generally appoint receivers for rental property upon showing: (1) waste is occurring, (2) value of property is inadequate to secure debt, and (3) mortgagor is insolvent. |
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Foreclosure
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Almost all states require foreclosure by sale, under which property is sold to satisfy the debt in whole or part. While all states allow judicial sale, some states allow non-judicial sale under a power of sale (usually with respect to deeds of trust). Foreclosure sales are usually conducted by auction, and lender is permitted to bid at the sale.
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Redemption
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Redemption in Equity: At any time prior to foreclosure sale, mortgagor may redeem property by paying amount due. If note/mortgage contains an acceleration clause, full balance of note/mortgage must be paid to redeem. This right cannot be waived in mortgage itself.
Statutory Redemption: About 1/2 states allow mortgagor to redeem property for some fixed period (e.g., six months, one year) after the foreclosure sale has occurred. |
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Priorities (Foreclosure)
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Mortgage's priority is usually determined by the time it was placed on property. Foreclosure doesn't destroy any interests senior to interest being foreclosed. It generally destroys all junior interests, but failure to include junior interest holder in a foreclosure action results in preservation of a party's interest.
Priority may be changed by: (1) operation of recording statute if prior mortgagee fails to record, (2) subordination agreement between senior and junior mortgagee, (3) purchase money mortgage, (4) modification of senior mortgage (junior mortgagee has priority over modification), or (5) granting of optional future advances by mortgagee with notice of a junior lien (junior lien has priority over advances). Purchase money mortgage (PMM) is mortgage given in exchange for funds used to purchase property. PMMs are given either to seller as part of purchase price or to third party lender. PMMs have priority over non-PMMs executed at about same time even if non-PMM was recorded first. Between two PMMs, seller's mortgage over third party's mortgage. If two third party PMMs, priority determined by chronological order. Usually 2 PMMs have notice of each other, so recording acts are no help. |
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Proceeds of Sale (Foreclosure)
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Proceeds are applied first to the expenses of sale, attorney's fees, and court costs; then to pay principal and accrued interest on foreclosed loan; next to pay any junior interests in order of their priority; and finally to mortgagor.
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Deficiency Judgments (Foreclosure)
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If proceeds are insufficient to satisfy mortgage debt, mortgagee retains a personal cause of action against mortgagor for the deficiency.
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Installment Land Contracts (Foreclosure)
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Most installment contracts provide for forfeiture as vendor's remedy for default, but courts use following theories to avoid that harsh result:
(1) Equity of Redemption - several states give contract purchaser grace period to pay accelerated full balance of contract and keep land after default. (2) Restitution - Number of decisions, while granting forfeiture, have required the vendor to refund to the purchaser any amount by which his payments exceed vendor's damages. Waiver - If pattern of vendor accepting late payments, constitutes waiver of right to strict performance in some states. To reinstate, vendor must give notice and reasonable time to make up late payments. A few states treat as mortgage, thus requiring judicial foreclosure sale. Vendor must choose ONE remedy - damages or performance - and forgo all others. |
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Rights to Lateral and Subjacent Support of Land
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Lateral: Ownership of land includes the right to have the land supported in its natural state by adjoining land. Landowners is strictly liable if his excavation causes adjacent land to subside (slip or cave in). Adjacent landowner is strictly liable for damage to buildings caused by excavation only if it is shown that land would NOT have collapsed in its natural state. Otherwise, negligence must be shown.
Subjacent: Underground occupant of land (e.g., mining company) must support the surface and buildings existing on date the subjacent estate was created. Liability for subsequently erected buildings requires negligence. |
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Watercourses: Riparian Doctrine
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Water belongs to those who own land bordering the watercourse. Riparian rights attach to all contiguous tracts held by same owner, as long as one abuts the water. Riparian owners can use water only in connection with Riparian parcel.
Natural Flow Theory: Riparian owner's use resulting in substantial or material diminution of water's quantity, quality, or velocity is enjoinable. Reasonable Use Theory: Most common theory. All Riparians share right of "reasonable use" of the water. To determine reasonable use, courts balance utility of owner's use against gravity of harm. 6 Factors: alteration of flow, purpose of use, pollution, extent of use, destination of water taken, and miscellaneous conduct that may give rise to litigation. Natural vs. Artificial Use: Under either theory, natural uses (human uses like consumption or gardening) prevail over artificial uses (irrigation, manufacturing). |
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Watercourses: Prior Appropriation Doctrine
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Individuals acquire rights by actual use. Appropriative rights are determined by priority of beneficial use. If there is a decrease in flow, priority is accorded in terms of time of appropriation. An appropriative right can be lost by abandonment.
Note: Watercourses = streams, rivers, lakes, etc. |
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Ground Water (Percolating Water)
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Absolute Ownership Doctrine: Followed by about 12 Eastern states. Owner of overlying land can take all the water she wishes for any purpose.
Reasonable Use Doctrine: Followed by about 25 states. Like absolute ownership, but exporting only allowed if it doesn't harm other owners with rights in that aquifer. Correlative Rights Doctrine: CA only. Owners of overlying land own underground water basin as joint Ts, and each is allowed a reasonable amount for his own use. Appropriative Rights Doctrine: Followed in some Western states. Priority of use (not ownership of overlying land) is determinative. |
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Surface Waters (Rainfall, Seepage, Etc.)
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Landowner can use within her boundaries for any purpose she desires. Questions on this usually involve liability for changing natural flow by drains, etc.
Natural Flow (Civil Law) Theory: Followed by about 1/2 the states. Owners cannot alter natural drainage patters. Note: this rule has been "softened" in most states to allow reasonable changes. Common Enemy Theory: Followed by most other states. Owner can take any protective measure to get rid of the water. The rule has been modified by many courts to prohibit unnecessary damage to others' lands. Reasonable Use Theory: Growing trend to apply this theory. Involves balancing the utility of the use against the gravity of the harm. These rules involve ONLY redirecting surface water. Landowner can capture as much as he wishes (like with a dam or barrel). |
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Right in Airspace
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Right to airspace above a parcel is not exclusive, but the owner is entitled to freedom from excessive noise.
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Right to Exclude
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Possessor of real property has the right to exclude others. His remedies for invasion include actions for:
(1) trespass (land invaded by tangible physical object); (2) private nuisance (land invaded by intangibles like odor or noises); (3) continuing trespass (land repeatedly invaded by trespasser); and (4) ejectment or unlawful detainer to remove a trespasser or T. This action can be joined with a demand for money damages. |
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Cooperatives
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Title to land and buildings is held by a corporation that leases individual apartments to its shareholders. Because of their economic interdependence, and because the individual owners are regarded as Ts, a direct restraint on alienation of an individual interest is valid.
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Condominiums
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Each owner owns interior of his individual unit plus an undivided interest in the exterior and common areas. Because condo unit ownership is treated as fee ownership, the ordinary rules against restraint on alienation apply.
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Zoning
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State may enact statutes to reasonably control the use of land for the protection of the health, safety, morals, and welfare of its citizens. Zoning power is based on state's police power and is limited by Due Process and Equal Protection of 14th Amendment, and "no taking without just compensation" of 5th Amendment. Cities and counties can exercise zoning power only if so authorized by a state enabling act.
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Non-Conforming Use (Zoning)
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Use that exists at the time of passage of a zoning act that does not conform to the statute cannot be eliminated at once.
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Special Use Permit (Zoning)
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One that must be obtained even though the zoning is proper for the intended use. It is often required for hospitals, funeral homes, drive-in businesses, etc.
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Variance (Zoning)
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A departure from the literal restrictions of a zoning ordinance granted by administrative action.
Tip: Zoning ordinances generally invalid if no reasonable relation to public welfare, are too restrictive, are discriminatory as to a particular parcel, are beyond the grant of authorization, violate due process, or are racially discriminatory. |
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Unconstitutional Takings (Zoning)
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A regulation that denies owner of all economic use of land constitutes a taking (unless use was prohibited by nuisance or property law when owner acquired property). If regulation leaves property with very little economic value, court will balance: (1) social goals of regulation, (2) diminution in value of property, and (3) owner's reasonable expectations for use of the property, to see if taking occurred.
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Unconstitutional Exactions (Zoning)
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Local governments often demand, in exchange for zoning approval for a new project, that the landowner give up some land for public purpose, such as street widening. However, such demands are unconstitutional under 5th and 14th Amendments unless government proves:
(1) government demands are rationally connected to an additional burden the project will place on public facilities or rights, and (2) the dedication is reasonably related in nature and extent to the impact of the proposed development. |
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Remedy for Unconstitutional Takings and Exactions (Zoning)
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If regulation constitutes a taking, government will be required to either compensate the owner for the property or terminate the regulation and pay the owner damages for the temporary taking.
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