PROPERTY
I. What is “Property”?
 “Property” is a term used to express a "bundle of rights” that people have over certain
things such as land (real property) or personal items (chattel).
o These rights include: (1) right to transfer, (2) use, (3) exclude, and (4) destroy.
 In general, property is considered as a “legal right”, but in some cases a “natural right
theory” may lurk in the background.
II. Why do we have it? Theories of Property:
A. First Possession
 Ancient theory that justifies ownership of property on a first-come-first-serve
basis. More describes how property arose and not why.
B. Labor Theory
 Locke's theory of property, which justifies ownership based on the fusing of one's
labor with land or chattel to change or improve it.
C. Utilitarian Theory
 Property is justified by the stability it provides to society which incentivizes
people to develop and innovate without fear that others will be able to take or
destroy their work.
D. Civic Republican Theory
 Property ownership is justified on the theory that a functioning republic requires
ownership of property to give independence from the sovereign and bargaining
power.
E. Personhood Theory
 Property ownership is justified by the quasi-philosophical assertion that an
individual someway grows alongside his property (“puts down roots in it”), which
is an interest that ought not be subverted easily.
F. Case: Samsung v. White -- right of publicity and labor theory
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Rule: The name or likeness need not be strictly used in order to violate the rights of
publicity of a celebrity – the use of “identity”, determined by the particulars of the
case, can suffice.
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Facts: Here, the court found that the Robot Vana White violated her “right of
publicity” and extended the “right of publicity” to refer to the use of the
“identity” of the Vana White for the purpose of generating revenue or general
commercial interest.
Notes: Right of Publicity is broader than “name or likeness” requirement.
o Labor theory justification
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III. Property Rights
A. Right to Transfer
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General Rule: In general, the law favors the right to transfer property rights from
one person to another (alienation), but may limit this right in certain
circumstances.
Limitations:
 Who
 Insane or incapacitated people
 What
 Rights, corneas and other irreplaceable body parts.
 How
 Will (must be written)
Davis v. Davis – restraints on alienation
 Rule: Restraints on alienation of property are generally disfavored, only allowed
if reasonable, and completely void for policy reasons if unlimited.
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Facts: Ungrateful children remaindermen sue mother because she is
renting out home, arguing that deed completely prohibits leasing. Court
holds that this restraint on alienation is unlimited and so per se in violation
of public policy.
 Notes:
Impression Products Inc. v Lexmark
 Rule: Under the patent-exhaustion doctrine, a patent holder cannot place a
post-sale reuse or resale restriction on an authorized sale of the patented
item.
 Facts: Lexmark tried to put restraints on resale/reuse of cartridges to avoid
second-hand sellers but could not because their patent was exhausted by
the first sale.
 Notes: Policy reasons?
Johnson v. M’Intosh -- conquest right
 Rule: Land transfer titles are only valid when made under the authority of
the sovereign.
 Facts: John Marshall defends the U.S. Government's right to be the sole
buyer of Native American land, granting Natives only a right to occupy.
 Notes: Badass
Moore v. Regents of California – no right to own excised cells
 Rule: A doctor that excises cells from a patient and uses them without patient
consent for medical research is not liable for conversion tort.
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Facts: A doctor took cells from a patient and used them to create a very
profitable cell line that could benefit many with its research, and the
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patient sued arguing that he did not consent to their use and so never
transferred the right, meaning he is entitled to payment. Court held that
once they left his body he had no right over them, mostly on policy
grounds for promoting innovation.
Notes: “Accession” is the process whereby a raw material is used -- with
the good faith belief of ownership -- to produce something valuable and
distinct and the owner of the original raw material cannot claim ownership
rights over the new, distinct thing.
Moore does not apply when there is a fundamentally wrong act that is
used to get the cells.
B. Right to Exclude
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General Rule: In general, owners of property have the important and fundamental
right to exclude others from their property.
o Subject to privileges
Jacque v. Steenberg Homes – punitive damages for baby trespass!
o Rule: An intentional trespass that does not cause actual monetary damages and
leads only to nominal award of damages can give rise to punitive damages out of
a need to protect fundamental property right of exclusion, deter such conduct,
and preserve the integrity of the legal system.
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o Facts: The RV salesman who used a guy's property in direct defiance of
his orders was subject to 100k in punitive damages even though he did not
actually cause any harm – this is because of how sacred the right to
exclude is and how much the court wants to promote the policy of no
trespassing.
o Notes:
State v. Shack -- right to flourish!
o Rule: A right to exclude from property may not allow for an owner to isolate
workers/denizens from necessary government or humanitarian aid or family
visits.
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o Facts: Immigrants had human rights for medical care and to know their
rights, and the right to exclude is not so broad as to deprive them of this.
o Notes: Supported by “utilitarian theory.”
Trespass note:
o Must be voluntary somehow, and necessity can negate
C. Right to Use
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General Rule: Individuals have a right to use their property in whatever way they
desire unless it harms the interests of another person or is against public policy.
Sundowner
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o Spite Fence Rule: No property owner has the right to erect and maintain an
otherwise useless structure for the sole purpose of injuring his neighbor. (need
malice)
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o Facts: Motel owner built massive wall of 18 feet that had no clear purpose
o Notes:
Prah v. Maretti – shadow nuisance
o Rule: A property owner's rights to restrict sunlight to a neighbor may in some
circumstances be limited by private nuisance doctrine.
o Facts: A man sued another because the construction of his home would
block sunlight upon which he relied for solar energy. This is a claim upon
which relief can be granted but the guy still have to prove relief.
o Notes: This was just to get over a 12(b)(6).
D. Right to Destroy
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General Rule: In general, an owner of property has a right to destroy, but this
right may be tempered by any impact it has on others, policy interests, and
weakened in will/executory situations.
Eyerman v. Mercantile Trust Co. -- a dead hand limit
o Rule: The senseless destruction of property that serves no apparent good
or purpose is against public policy and is disfavored and may outweigh
executory interests of will.
o Facts: Woman died and in her will instructed that her residence, in the
exclusive and historic Kingsbury Place, be razed and the land sold. Her
neighbors brought suit, arguing that this affects their property values and
is a private nuisance and is against public policy.
o Notes: Dissent felt that the sacred right to have will executed was defiled
by the opinions of unelected judges.
 Not the same if the person was alive
CHAPTER II – Owning Real Property
B. Adverse Possession of Land
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Elements:
o (1) Actual
 Using the land as a reasonable, ordinary owner would.
 (Recreation v. intensive use)
o (2) Exclusive
 Using the land to the exclusion of the owner – not jointly alongside the
owner. (Visit v Use)
o (3) Open and Notorious
 The adverse possessor must use the property as would a reasonable
owner so as to put the true owner on notice of the claim upon a
reasonable inspection.
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 In cases of chattels, concealment becomes the standard often.
o (4) Hostile
 Majority View: Under the majority view, the subjective intent of the
adverse possessor is irrelevant – it only matters that he is using the
land without the permission of and contrary to the rights of the true
owner.
 Minority View: Under the minority view, the subjective intent of the
adverse possessor matters, and, depending on the jurisdiction, it might
require (1) good faith or (2) bad faith.
o (5) Continuous
 An adverse possessor must continually use the land as would a
reasonable owner under the circumstances based on its character,
location, and nature. It need not be uninterrupted
 Look out for “sporadic” and “infrequent” use.
o (6) Statutory Period
 Average: 5-10 years (rarely 15).
 Warning: The statutory period may toll if there is incapacity (age or
insansity)
Note: One who believes someone is illegality using their land may file for ejectment.
Public Policy Justifications
o Prevents frivolous claims
 e.g., Guy thinks he can capitalize on some ancient ambiguity and
decides to sue over a land. This makes him think “yea it wouldn't even
get off the ground – it was too long ago”
o Correcting title defects
 A has a defective title and B has a defective title but B has been using
the land in a way as to satisfy the elements of adverse possession, so
he wins the tie breaker.
o Encouraging development
 Stagnant owners of land who never use, look at, or care about the land
may lose it to industrious go-getters who want to make something of
it.
 This may cut the other way nowadays as we care about
environment.
o Protecting personhood
 As Holmes says, one may “grow roots” in their home, and it seems a
crass violation to deprive them of it.
Gurwit – firewood enough, low standard
o Rule: An occupant may gain adverse possession of wild and uncultivated
lands through infrequent use of such lands provided they meet the other
elements of adverse possession.
o Facts: Guy was using land contiguous with his own that he believed his at
first, but his use was limited and infrequent – posting a sign, cutting firewood,
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letting his kids play, later paying taxes, and sued for adverse possession,
winning.
o Notes: Taxes sometimes required, not always.
Van Valkenburgh v. Lutz -- strict approach contra Gurwit!
o Rule: A party takes adverse possession of a property owned by another when
he takes actual possession of it, encloses it and/or makes improvements to it,
for statutory period of years.
o Facts: Unlike in Gurwit, the court took a very strict approach here and found
that the elements had not been satisfied. Here he placed boundary sticks,
gardened, cleared space, kids played. But
o Notes: Try to reconcile Gurwit and VV.
Tioga – implied hostility toward all – without permission (objective)
o Rule: If an occupant has stayed within land beyond the statutory time
prescribed by the state, and all other elements are met, his possession of the
land is implied to be “hostile”.
o Facts: A company took possession of a street which they thought belonged to
the government but which in reality belonged to a supermarket. They locked it
and used it to satisfy AP elements for the statutory period, but lower court said
the law required hostility toward the owner (bad faith) – and here, the
company was hostile toward someone who was not the owner. The Supreme
Court disagreed, holding that intent was irrelevant and “hostility toward all
will” be implied by one's adversely possession land without owner
permission.
o Notes: This is the flagship case of the objective view of hostility.
Howard v. Kunto – privity tacking!
o Rule: In meeting the time period requirement for adverse possession,
successive owners of a property may add their occupancy times together
where they share privity in the ownership interest.
o Facts: In this case, an owner had a defective survey instrument which caused
him to think that his property was the plot on which he lived rather than the
plot to the side, which was his. He only used during the summer, and he was
the successor in ownership of the land. The court found his use was
continuous and his time could be tacked.
o Notes: Infrequent use, tacking
 Tacking: A party may “tack” their times together provided there is
privity, accomplished through transfer of a deed.
Hypos: Adverse possession of life estate hypo (Chapter 2 9)
o You can adversely possess a life estate but once that ends via death all rights
revert to fee simple absolute owner
o Adverse possession with color of title of part of parcel gives rights to full
parcel – but not separate parcel
C. Adverse Possession of Chattel
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General Rule:
o Traditional, common-law approach: In general, people can adversely possess
personal property through much the same means as with realty. However, this
element may lead to difficult, unjust results because of how moveable it is.
 Policy: Some argue that AP should be abandoned for chattel.
Adjustments
o Rule of Discovery: The statute of limitations is tolled until the true owner
becomes aware, or should become aware with reasonable efforts, of the location
of the item and the identity of its possessor.
 Thieves can adversely possess here.
o Rule of Demand and Refusal: Some states, such as NYC, require that the true
owner discover and demand the return of the item and be met with a refusal
before the statute of limitations begins running.
o To remedy the risk of adverse possession thieves, the U.C.C. §2-403 disallows
transfer of title by a thief. When a good is sold by a merchant.
 Does not apply to entrustment or bounced check
Reynolds v. Bagwell -- traditional adverse possession violin
o Rule: Personal property can be adversely possessed as long as the elements were
satisfied within the statutory period.
o Facts: An expensive violin was stolen and later purchased legally by a father of a
daughter, who then used the violin for lessons over the course of several years
before it was discovered by the true owner. The court granted ownership to the
family because the elements were satisfied – even the contested “open and
notorious” element.
o Notes: This is the traditional, common-law rule applied.
O’Keeffe v. Snyder – modern adverse possession approach with tolling
o Rule: To adversely possess personal property, the statutory period will only begin
running once the owner knows or should know who has the property and where.
o Facts: Vagina painting girl lost her painting and then brought suit two decades
later when it was found. Appeals court applied traditional rule and she lost.
Supreme Court said that the statute of limitations should not have begun until she
found it pursuant to the rule of discovery approach, but even so she will still
probably fail once this rule is applied. Remand.
o Notes: The husband sold it accidentally theory.
D. Extent of Ownership
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Traditional: A property owner has unlimited rights over his airspace and subsurface land
-- his land ownership goes up to the heavens and down to the deep hells.
o Most courts hold that rights go deeper than 500 and higher than 200 – cling to
some version of ad coelum doctrine.
Modern: A property owner has ownership rights over the space immediately above their
property and immediately below, with the boundaries being fixed usually based on the
possibility of use.
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Airspace Rights:
o Case: United States v. Causby
 Rule: Government use of airspace above the property of an individual may
constitute a taking under the 5th amendment, violating property rights, if
that use interferes with the owner's ability to use and enjoy the land.
 Facts: Government flew WW2 planes above a guys land and it was loud
and annoying.
 Note:
Subsurface Rights:
o Case: Chance v. BP Chemicals
 Rule: Subsurface rights are not unlimited, and a trespass on them might
require some evidence of foreseeable interference with use.
 Facts: BP was injecting stuff deep into the ground and P was arguing that
it had migrated to his land thus violating his property rights under the ad
coelum doctrine.
 Note:
 A person trying to adversely possess a parcel that has been severed
must use the severed property – so drilling if subsurface.
Right to Support
o Adjacent/lateral (pg. 140)
Hypos:
o Drone flies over property, maybe interferes (silent but ugly?), depends on which
doctrine.
CHAPTER III – Owning Personal Property
E. Finders and The Rule of Capture
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The Rule of Capture:
o General Rule: In general, the first possessor of an item on unowned land becomes
the owner of that item, where “possession” is defined as the bringing of the item
under complete control of the owner, granting almost certainty that the item will
not escape.
o Pierson v. Post
 Majority Rule: In order to claim ownership rights over a wild animal, the
pursuer must either have physically caught the animal or have mortally
wounded or trapped the creature, while not ceasing pursuit or changing
intent to capture, thus depriving it of its liberty and almost certainly
leading to its capture.
 Minority Rule: A pursuer with a reasonable prospect of catching the
animal has a property interest in that animal for policy reasons.
 Policy Arguments:
 For majority, the argument is one of administrability – by requiring
capture, we avoid millions of suits between vying hunters.
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o Admin Counter:
 For the minority, in favor of investment and the enterprise of
hunting (shaping).
o Shaping Counter:
o State v. Shaw – no absolute control required
 Rule: A man may acquire ownership rights in wild animals by merely
bringing them under his control with reasonable certainty that they will
not escape. The law does not require absolute control.
 Facts: Men came to river and took fish out of it that were almost
completely covered by the net of another person. The court ruled that the
owner of the nets did have property rights over the fish.
o Popov v. Hayashi – pre-possessory interest/equity
 Rule: Facts: When a person completes a significant portion of the steps to
achieve possession of an item, but is thwarted due to the unlawful conduct
of another, that person is entitled to a pre-possessory interest of the item.
 Facts: Bonds his 73rd home run into the stands and P caught it briefly
before being pushed to the ground or losing his balance. D was on the
floor and saw the ball and picked it up and put it in his pocket. P now
suing D for conversion of his property.
 Notes: Legally, Popov should have lost but they adopted a more flexible
rule by distinguishing this case from the whaling cases – for equity.
Rule of Capture and Minerals/Resources
o In general, minerals not under the control of any person are considered “wild” and
can be claimed according to the majority rule of capture.
o In Baatz v. Columbia Gas Transmission, a Court found that a company that had
injected gas into their subsurface which had migrated to the subsurface of their
neighbor did not commit trespass because they no longer owned the gas. The
neighbor, in fact, could have drilled down and claimed it.
Equitable Division
o Sometimes courts will be Solomon – but requires clean hands.
FINDERS
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General Rules of Found Items: Title is relative
o (1) Lost Property
 Property is lost when the owner unintentionally and involuntarily parts
with it, and does not know where it is.
 E.g., wallet falls out of back pocket
o (2) Mislaid Property
 Property is mislaid when the owner intentionally leaves it somewhere but
then unintentionally leaves it there.
 Wallet left on counter of bar.
o (3) Abandoned Property
 When an owner knowingly relinquishes all right, title, and interest to it.
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 Couch on the side of the road, golf club in lake.
o (4) Treasure Trove
Armory v. Delamirie -- the jewel
o Rule: A finder of a lost item has certain interests in the item which give him rights
in the item against all but the true owner.
o Facts: A chimney sweep found a jewel, took it to a jeweler, and got it appraised.
Then he wanted it back and the jeweler returned it without the jewels in it.
o Notes:
Hannah v. Peel – the brooch
o Rule: A person who finds an item that has no known owner will gain ownership
rights in that item against everyone except the true owner, even when that item
was found on someone else's land, unless the item was a fixture or part of that
land, the finder was an employee who found the item while in the course of
employment, or the owner was (1) holding the land to the exclusion of others, (2)
was exercising de facto control over the item.
o Facts: P, while living in leased out house of D, found a brooch that did not belong
to D and the true owner was unknown.
o Note: Court relied on several cases to reach this holding. (1) Bridges (holding that
the bank notes found on the floor of owner shop belonged to finder because shop
was open to all, no de facto control, not a fixture); (1) South Staffordshire Water
(holding that some rings found in excavation site of company by employee
belonged to employer because of employment rule and fixture rule); and Elwes
(holding that an antique boat found in ground was property of employer because
the land was held to exclusion of others and owner was present and exercising
control over the land at the time).
McAvoy v. Medina – the wallet
o Rule: In cases of mislaid items, a finder may not immediately acquire rights to it
when it was left on the property of another – at this point it belongs to the owner
of the locus in quo.
o Facts: P found a wallet in the store of D, and gave to D in case the true owner
came by. The owner never did come by and P demanded the wallet – but the court
held that the owner of the establishment had a better claim because he had
possession of the item and there were policy reasons to leave it with him.
o Note:
 Watch out for property found outside stores
o Hypo: Hypo on paying consideration for a found item brought it to store but
finder wants back can't get back from bona fide buyer.
Benjamin v. Lidner Aviation -- finder's fee
o Rule: For mislaid property, the owner of the location where it was found has a
valid claim to the property against all but the true owner – but the finder may be
awarded a fee.
o Facts: Guy finds lots of money in paneling of airplane and wants to keep it even
though the bank owns the plane. Court found the money was mislaid, meaning the
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bank owns it pursuant to McAvoy – but dissent argued it could have been
abandoned and so possessed by finder.
o Note:
Bailments:
o Definition: The transfer and delivery by an owner or prior possessor of possession
of personal property to another either for the purpose of safe keeping, repair,
transportation or for some limited purpose and an anticipated return of the same
and substantially in the same condition.
o In general, found items create an involuntary bailment, whereas items lent to
other parties create voluntary bailments.
o Bailments are either (1) mutually beneficial or (2) unilaterally beneficial
 If a bailment is mutually beneficial, then the bailee has only a duty to
exercise reasonable care.
 E.g., Aidan lends Grace his boxing gloves for safe-keeping but
allows her to use them for training.
 In general, courts do not allow waivers of ordinary negligence in
mutually beneficial bailments.
 If a bailment is to the unilateral benefit of the bailee, then the bailee must
exercise extraordinary care with the item.
 E.g., Aidan lends Alex his car so that he can drive to his interview
with law firm.
 If a bailment is to the unilateral benefit of the bailor, then the bailee must
only avoid gross negligence or bad faith.
 E.g., Jake gives Armen his drugs because he fears a police raid.
Comments: Replevin, Trover
F. Gifts
General Rule on Gifts: In general, gifts involve the transfer of property rights from one person to
another, and they can usually not be revoked. Gifts may be either (1) inter vivos, (2)
testamentary, or (3) causa mortis.
1. Inter Vivos
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A gift inter vivos is a gift from one living person to another which has (1) donative intent,
(2) delivery, and (3) acceptance
o (1) The donor must intend an immediate transfer of property.
o (2) The property must be delivered to the donee, such that the donor parts with
dominion or control.
 If actual delivery is not reasonable or feasible at the moment of the
transfer, then delivery can be constructive or symbolic.
 Delivery can be accomplished by agent or third party
 Delivery is not necessary if the donee was already in possession of the
item.
o (3) The donee must accept the property.
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 Acceptance of any item of considerable value is automatically assumed.
Inter vivos gifts are generally not revocable
Gruen v. Gruen -- painting constructive delivery
o Rule: A donor may give a valid inter vivos gift of chattel while retaining a life
estate in it and not physically ever giving it to the donee before death of donor.
o Facts: Son was gifted a painting from his father but the father kept a life estate in
the painting. The father passed and now the bitch step mom won't give it up,
claiming that the father kept full ownership rights and never delivered it and so
that it was not a valid gift inter vivos.
o Note:
2. Gift Causa Mortis
Rule: Gift causa mortis must have (1) donative intent (2) delivery (3) acceptance (4) made in
anticipation of imminent death.
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It is active upon donation, but revocable at any time prior to death
It applies only to personal property, not realty.
It is an available alternative to the probate system (testamentary gifts) -- therefore it can
supplant a provision in a will.
In Re Oaks -- mental illness --> suicide
o Rule: In some circumstances, such as when a mental illness can be said to directly
cause it, suicide will not preclude a valid gift causa mortis.
o Facts: Man gave all worldly belongings to wife before he died by suicide. The
estate now argues that the gift causa mortis was invalid because it was a death by
suicide
o Note:
3. Other Gifts/Misc
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Testamentary Gifts
o These gifts involve promises to transfer interests in the future which only transfer
upon the death of the donor.
o Writing rule??
Check Rule: The majority rule is that no gift occurs until the check is cashed because
until then the donor retains dominion and control of the funds. Until the check is cashed,
it is merely an unenforceable promise to make a future gift.
Test trick: Watch out for trick where some can be constructive delivery and others no
CHAPTER VI: Concurrent Ownership and Marital Property
General Rule: Under Common Law, people may concurrently own interests in land, meaning
that they each, individually, own all the land. When a dispute arises as to the use of the land,
there are various remedies available in common law.
Types of Concurrent Estates:
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1. Tenancy in Common
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Each tenant as an undivided, fractional interest
This interest is freely alienable, devisable, and descendible
There is a right to use the entire parcel, even if the interest is lesser.
Lesser and greater interests will be accounted for in any liquidation, division of profits,
etc.
This is the presumed tenancy of two unmarried people unless specified otherwise in the
instrument.
No right of survivorship
2. Joint Tenancy
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Similar authority over the land as above, but with a right of survivorship
Not devisable or descendible
Can lease/sublet particular share during the lifetime without disrupting
Requires the four unities:
o (1) time – must get the interest at the same time
o (2) title – through the same instrument
o (3) interest – the same shares in the estate, equal in size and duration.
o (4) possession – must have equal right to use and enjoy whole property
This tenancy is severed and reverts to tenancy in common if party transfers interest.
Magic words:
Hypo:
o Fred is the owner of Forestacre and the father of twin daughters, Mia and Nada,
and a son, Ben. Fred devises Forestacre to "Mia and Nada as joint tenants with
right of survivorship.” Two years after Fred dies, Mia dies in a car accident. Mia's
will reads: "All my property goes to my brother, Ben.” Who owns Forestacre?
 Nada Owns
o Hal, Sam, and Ted own Greenacre as joint tenants. Hal sells his interest to Xin
without notifying either Sam or Ted. One day later, Sam dies intestate as a result
of a tragic chain saw mishap, leaving Yap as his only heir. The next day, Ted dies.
Ted’s will leaves Ted’s entire estate to Zoe. Who has what interest in Greenacre
 X and Z, 1/3 and 2/3 TIC.
3. Tenancy by the Entirety
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Requires the four unities + a valid marriage
Can only be ended by death, divorce, or the agreement of both spouses – unlike the easily
severable JT. No unilateral right infringement.
Under majority rule, allows for the shielding of individual spousal interest from
creditors.
o In a majority of jurisdictions that recognize tenancies by the entirety, one spouse
cannot unilaterally encumber his interest. Neither spouse has a separate divisible
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interest in the property that can be conveyed to third parties or reached by
creditors.
Magic words:
James v. Taylor – joint tenancy must be clearly specified
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Rule: In order to establish a joint tenancy, the conveyance must clearly specify this so as
to defeat the statutory presumption, particularly the right of survivorship.
Old lady gave property to three kids in deed – which said “jointly and severally” to
children and successors. Two kids died and last one argued that this meant he was sole
owner pursuant to will. Grandkids said mere tenancy in common so they get the property
interest as well. Another resident wanted JT to inherit by survivor.
Note:
o Use of straw person not needed anymore – if you own a house, you can convey to
yourself and another person no problem.
Severance:
Tehnet v. Boswell – joint tenancy and lease




Rule: A joint tenant may grant certain rights in the joint property without severing the
interest (lease, mortgage, etc). But when the joint tenant dies his interest dies with him
and any encumbrances placed by him on the property become unenforceable against the
survivor.
Facts: P owned JT with Johnson. Johnson secretly leased out his interest for 10 years to
D. Johnson then died and P sued to get the whole property, arguing that the lease was not
a full transfer of interest so the joint tenancy had never been severed now P was true
owner pursuant to right of survivorship. Court agreed.
Note:
o In most jurisdictions, lease does not survive the cotenant's death. Contrast with
Alexander v Boyer; compare to Swarzbaugh v. Sampson
Mortgages? Title or Lien Theory Fork
o
o
o
Is it transfer of title or lien on property to secure repayment?
If a transfer of mortgage is a transfer of title, then JT severed.
If transfer of mortgage is a mere lien, then joint tenancy survives and courts then courts
split on whether it survives the death of joint tenant. Harms v. Sprague; Brant v.
Hargrove.
Partition:
Any tenant in common or joint tenant has the right to sue for partition. In general..
Ark Land Co. v. Harper –partition in sale v. partition in kind (preferred)

Rule: In a partition proceeding in which a party opposes the sale of property, the
economic value of the property is not the exclusive test for determining whether to
14



partition the land in kind or by sale – longstanding ownership and sentimental attachment
must also be considered.
Facts: Company P bought 67% of interest in land of family and they could not agree on
what to do with land so P sued for partition by sale – which court granted. Appellate
court reversed. Narrow construal of statutes...
Policy arguments: Personhood arguments (Chuck v. Gomes Hawaii court) v. Economic
arguments (Johnson v. Hendrickson)
Agreements not to partition? Fork
o Traditionally, no, because a restraint on fee alienation
o Modern rule, yes, if reasonable in duration and purpose
Cotenant Rights and Duties
Esteves v. Esteves -- exception to co-tenant “occupancy charge”



Rule: When on a final accounting following sale of property owned as tenants in
common, the tenant who had been in sole possession of the property demands
contribution toward operating and maintenance expenses from his co-owner, fairness and
equity dictate that the one seeking that contribution allow a corresponding credit for the
value of his sole occupancy of the premises
Facts: Three family members bought a house. After about a year, one moved out. Then
during the next 18 years, the 2 who stayed paid everything and did all the work and then
sold the house for 114 grand. They demanded that the one who left pay ½ of the costs
they incurred. He demanded that that cost be offset by the market value of their
“occupancy” during those 18 years which he did not benefit from and they did. Court
found no remedy for occupancy but provide a remedy in equity for him.
Note:
o In general, absent an ouster out-of-possession co-tenants cannot charge
“occupancy” charge to in-possession tenants, since they have the right to occupy
and simply choose not to.
 If ouster, then the tenant-in-possession is liable for the pro rata share of
the would-be rent.
o All profits made by the land must be split proportionate to the interests of each
co-tenant.
 The co-tenants split the value added not the costs (restitution not reliance)
o All regular costs of operation must be shared by co-tenants proportionate to
their interests
 Majority: this does not apply to voluntary, unnecessary addition (pools,
sheds)
 But at partition, all tenants will receive the value that they added to the
property.
o In general, a co-tenant who personally pays for mortgage and taxes on a property
may seek immediate contribution for this from co-tenant.
15
o A co-tenant who performs necessary repairs likely can only seek contribution in a
later accounting
Hypo: 10 years ago, Daniela, Aidan, Sean, and Sandra became owners of Greenacre as joint
tenants. Greenacre consisted of a four-bedroom Spanish colonial home on a two-acre lot on a hill
overlooking the Caribbean Ocean in Santa Marta, Colombia. Daniela and Aidan were a married
couple, as were Sean and Sandra. Daniela and Aidan obtained their interests in Greenacre with
the idea that it would be their retirement residence. They worked and lived in the neighboring
department of Antioquia and have not visited Greenacre these past ten years. Sean and Sandra
immediately took up exclusive possession of Greenacre and have remained there ever since. Five
years ago, Aidan conveyed all his interest in Greenacre to his mistress, Angelica. Early last year,
Daniela tragically passed away and Sandra mortgaged her interest to her brother, Pipe. This
jurisdiction has a five-year statutory period for adverse possession of land and follows the lien
theory of mortgages. Who owns Greenacre?
H. Marital Property
1. Common Law Foundation


Jure Uxoris
Dower
o Dower provides the surviving spouse a life estate in 1/3 of all the freehold land
which was owned by the decedent spouse and inheritable by his issue.
2. Separate Property System

(1) Rights during the marriage
o
o


General Rule: The property is separately owned by the spouse who acquires it.
Creditors isolated to one or the other, but cannot go after husband property for debt of
wife.
(2) At Divorce
o Most employ equitable distribution (considering income, standard of living, age, needs,
etc.)
o Some apply to things bought with earnings of either spouse, not things acquired before
(but some allow that too)
o Judicial discretion is broad here.
(3) At Death
o Will distribution OR
o Forced Share – usually ½ or 1/3 -- and cannot usually be avoided by a gift before death.
The woman gets her forced share or agrees to will provision.
3. Community Property System
(1) During the marriage


All earnings and assets acquired with those earnings are owned equally between
spouses.
Property acquired before or after by gift or inheritance remains separate property.
16

o Property acquired by devise or descent during the marriage is the separate
property of the donee spouse.
Each spouse holds indivisible share in community property
(2) Divorce

Upon divorce, all community property is divided – usually equally but sometimes with
equity in mind.
(3) At Death

No forced share option – the spouse is entitled to one half of the community property. The
dead spouse can do whatever with their half.
Tenancy by the Entirety -Sawada v. Endo – creditors can’t get em!



Rule: In most jurisdictions that recognize tenancies by the entirety, one spouse cannot
unilaterally encumber his interest. Neither spouse has a separate divisible interest that can
be reached by creditors or conveyed to third parties.
Facts: D caused an accident to P and then conveyed his property to his son (presumably
to hide it from P). The creditors went after the land but the courts found that they had no
right since the land was held in the entirety and so was not subject to the claims of
individual creditors.
Note: This is confusing. Compare to?
Guy v. Guy – do you have any such certificate?



Rule: Under the majority rule, a professional degree is not property.
Facts: H paid for W's expenses while she got a law degree and then they got divorced and
the judge valued her degree within her marital assets.
Note:
Gazvoda v. Wright – get married!



Rule: Traditionally, a couple must be married in order to receive the division of asset
remedies under property law.
Facts: M and W lived together 16 years, she helped him start business and raise kid but
eventually they separated and she tried to get marital division. The court held that the
woman was entitled to quasi-contractual remedies but not to division remedies under
property law because the couple was not married.
Note: Under the modern approach, one cohabitant can have enforceable rights in the
property of the other, even without an express contract. Undertaking a way of life in
which two people commit to each other provides the consideration.
Obergefell v. Hodges –
17



Rule: Under the Due Process and Equal Protection Clauses of the Fourteenth
Amendment, states must issue marriage licenses and recognize lawful out-of-state
marriages for same-sex couples.
Facts:
Note:
Commingling Community property
W buys a house through an installment land contract, W pays 1/3 of the price before marriage,
and the 2/3 after marriage.



Inception of Title Rule: (Texas and majority of states)
o Character of the property is determined by the time the property was acquired or
the contract of purchase was signed.
Vesting Rule:
o Character is determined at the time title passed to the acquiring spouse
Pro rata Share rule:
o The community payments ‘buy in’ a pro rata share of the title, community takes a
pro rata portion of the property measured by the % of principal debt reduction
attributable to CP.
CHAPTER VII: Landlord/Tenant
The landlord-tenant relationship is based upon an ancient, common-law relationship in England
between feudal lords and serfs who enjoyed their land. A landlord transfers only his possessory
interest to the tenant – but this interest carries with it certain rights and duties.
A. Creating the Tenancy
General Rule: In general, a landlord may choose or refuse to sell or lease his property to anyone
for any reason or no reason at all.
Discrimination Limitation


Civil Rights Act (CRA)
o It is illegal under federal law to discriminate based on race and this prohibition
applies to all types of property.
Fair Housing Act (FHA) -- 42 U.S.C. §3604
"(a) To refuse to sell or rent after the making of a bona fide offer, or to refuse to negotiate for the sale or
rental of, or otherwise make unavailable or deny, a dwelling to any person because of race, color, religion,
sex, familial status, or national origin.
(b) To discriminate against any person in the terms, conditions, or privileges of sale or rental of a
dwelling, or in the provision of services or facilities in connection therewith, because of race, color,
religion, sex, familial status, or national origin.
(c) To make, print, or publish, or cause to be made, printed, or published any notice, statement, or
advertisement, with respect to the sale or rental of a dwelling that indicates any preference, limitation, or
18
discrimination based on race, color, religion, sex, handicap, familial status, or national origin, or an
intention to make any such preference, limitation, or discrimination. . . .
(f)(1) To discriminate in the sale or rental, or to otherwise make unavailable or deny, a dwelling to any
buyer or renter because of a handicap of—
(A) that buyer or renter. . . .
(2) To discriminate against any person in the terms, conditions, or privileges of sale or rental of a
dwelling, or in the provision of services or facilities in connection with such a dwelling, because of a
handicap of—
(A) that person. . . .
(3) For the purposes of this subsection, discrimination includes—
(A) a refusal to permit, at the expense of the handicapped person, reasonable modifications of existing
premises occupied or to be occupied by such person if such modifications may be necessary to afford such
person full enjoyment of the premises except that, in the case of a rental, the landlord may . . . condition
permission for a modification on the renter agreeing to restore the interior of the premises to the condition
that existed before the modification, reasonable wear and tear excepted;
(B) a refusal to make reasonable accomodations in rules, policies, practices or services, when such
accomodations may be necessary to afford such person equal opportunity to use and enjoy a dwelling. . . ."

o It is unlawful to discriminate for sale, leasing, etc. based on:
o It is unlawful advertise preference or limitation (how broad is this? roomates?)
o It is unlawful to discriminate based on incapacity/handicap by
 Failing to modify or make exceptions
o Exceptions:
 Single-family dwelling owned by unsophicsticated owner
 Roommate/shared space dwelling (but then can discriminate based on race
even?)
Niethamer v. Brenneman Property – aids big time!
o Rule: A landlord may not reject a tenant for reasons inconsistent with the FHA,
and to detect the elusive “discrimination intent”, the test used to measure this is
the “burden-shifting test”.
o Facts: Man applied to live in apartment but was denied. Claimed b/c aids. Won
because the court put the burden on D to provide legit reason to reject P.
B. Selecting the Estate – non freehold estates

Term of Years
o This tenancy has a fixed duration that is agreed upon in advance
o A term of years cannot be terminated by either party during the term. Tenant’s
notice of intent to terminate has no legal effect. Tenant is liable for the entire
term.
o Once the term ends, the tenant's possessory right automatically expires and
landlord may retake possession (either by self-help or litigation)
19




In most jurisdictions, a lease for a period longer than one year is
enforceable only if it complies with the Statute of Frauds.
Periodic Tenancy
o A tenancy that is automatically renewed for successive periods unless the landlord
or tenant terminates with advance notice
o The notice period expands based on the length of the period.
o E.g., “per year”
Tenancy at Will
o A tenancy with no fixed ending point
o At common law, no notice was required; now, notice usually required for at least
equal to the time between rent payments.
Tenancy at Sufferance
o Wrongful occupation after expiration of possessory right.
o FORK: The common law gave the landlord two options in this situation: (1) treat
T as a trespasser and evict him and sue for reasonable value of rent during
holdover; or (2) renew T’s tenancy for another term. Today most states have
abolished or limited the second option, in order to avoid unfairness to the tenant."
Keydata Corp. v. United States – delivery (legal or physical?)



Rule: Under the majority (English) rule, a landlord who leases a property to a tenant must
deliver actual possession of the premises to the tenant.
Facts: Key Data gave rights to Wyman to lease land and they leased to Nasa. Nasa
overstayed its lease and became tenant at sufferance. P wanted to get in but Nasa still
there. P argued that they were owed actual delivery of the lease. The government argued
that the legal right to possession was sufficient.
Note
o Under minority (American) rule, incoming tenant is tasked with duty of removing
holdover because landlord already fulfilled the duty of offering legal possession.
o If landlord fails to do this, then the incoming tenant may
 Terminate the lease and sue landlord for damages caused by holdover or
 Affirm the lease, withhold rent until the holdover leaves, then enter and
sue for damages.
Condition of the Premises
In general, there are three basic approaches that may apply when the premises are not sufficiently
maintained by a landlord.
1. Traditional, Common-Law Approach:


Without explicit clause in the lease demanding that the landlord repairs damages, it is the
duty of the tenant, under the doctrine of permissive waste.
If there is such a clause, and the landlord fails, the duty to pay rent is not affected, since
that is a separate duty at common law.
20
2. Constructive Eviction


Majority view:
o A wrongful act or omission
 E.g., a duty arising from an express clause in the lease; a statutory duty;
a duty to maintain common area; a duty to perform promised repairs;
or a duty to avoid a nuisance.
o By the landlord
o That substantially interferes with the tenant's beneficial use and enjoyment of the
premises
o Higher, narrower standard than Implied Warrant of Habitability. If this is not met,
then proceed to IWH and apply that.
Procedure:
o Give notice
o Wait a reasonable time
o Vacate premises if not fixed (Majority) Or
o Stay on premises but withhold rent (minority)
 Most say no. This only available for IWH.
Fidelity Mutual Life Insurance Co. v. Kaminsky – maintaining the premises/constructive eviction



Rule: A landlord’s failure to act in the face of repeated requests to protect a tenant’s quiet
enjoyment of the premises can constitute a constructive eviction.
Facts: The doctor was leasing a unit for abortion practice and protest people harassed and
he reported and they did nothing so he stopped paying and then left.
Notes: A tenant who suffers from a landlord's failure to actually deliver the premises
cannot likely withhold rent upon gaining possession, but should instead seek relief in
court for the reliance.
3. Implied Warrant of Habitability
General: The IWH is a guarantee that the premises are offered and a promise that they will be
maintained in a physical condition that provides safe, clean, habitable housing that complies with
municipal codes.
Wade v. Jobe – implied warrant of habitability



Rule: An implied warrant of habitability inheres in all residential leases and can justify
the withholding of rent unless the condition is fixed.
Facts: The residential landlord had been notified of sewage, terrible water issues, etc.
Never solved problem. D stopped paying rent and eventually left. P tried to recover
unpaid rent.
Note:
o
21
o Implied, meaning that it cannot be contracted out of and any contract that attempts
to is void for public policy.
o The implied warranty extends to conditions caused by any source other than the
tenant, unlike the constructive eviction doctrine.
o Applies to both oral and written leases.
o Landlord offer to end lease does not save from breach.
o Hypo: Jet noise issue yes breach – ants in kitchen hypo no breach – air
conditioning in Arizona apt yes
Transferring Tenant Interest
In general, the law allows for landlords and tenants to transfer their interests in the spirit of free
alienation. This can be done either by (1) assignment or (2) sublease. This can be determined by
the objective test (majority), or the subjective test (minority)
1. Assignment


Objective Test
o If a transferor transfers the full remainder of their possessory interest in the
premises, retaining no automatic reversionary interest, then the transfer is an
assignment.
o Even if the transferor transfers the full remainder of their interest but retains a
contingent right of re-entry, it is still an assignment.
Subjective Test
o A transfer may be either a lease or a sublease depending on what the parties
intend.
2. Sublease


Objective Test:
o If a transferor transfers any amount of possessory interest less than the full, it is a
sublease.
Subjective Test:
o A transfer may be either a lease or a sublease depending on what the parties
intend.
22
How to approach assignment/sublease problems on exam:




Find the category: assignment or sublease?
o Objective or Subjective Fork
What are the consequences that result from either?
o If assignment, then the assignor reserves only privity of contract with the
landlord and the assignee has privity of estate – meaning that both are liable to the
landlord through different mechanisms.
o If sublease, then the sublessee has no privity of contract or estate with the
landlord (but only with the sublessor) -- therefore, the landlord cannot hold him
liable for rent.
Can the landlord block the transfer? How?
o Majority v. Minority Consent Fork
Policy fork?
Ernst v. Conditt – transfer of tenancy
23




Rule: One who takes an assignment of a lease becomes primarily liable for rent to the
lessor through privity of estate – but the assignor still is secondarily liable to the lessor
through privity of contract.
One who makes an assignment of a leasehold interest is secondarily liable to the lessor
under the terms of the lease through privity of contract.
Facts: P leased land to Rogers, who then wanted to give his interest to D. They all got
together and contracted and ended up created a document that purported to be a sublease
that made Rogers personally liable for all rent. D stopped paying rent and then was
brought to court by P for the money.
Note:
Hypo:

Laura owned a retail store. She leased it to Tana for a 10-year term in return for $2,000
per month in rent. Three years later, Tana entered into an agreement with Susan, by
which Tana “transferred all of my interest in the premises to Susan for five years” in
return for $3,000 per month in rent. One week later, Susan entered into an agreement
with Wesley, by which Susan “transferred all of my interest in the premises to Wesley” in
return for $4,000 per month in rent. The next month no one paid rent to Tana. Under the
majority approach, who is liable to Tana for rent?
Consent:
Landlords may require consent before any attempt to transfer tenancy. This consent requirement
may take different forms. In general, any prohibition on transfer of tenancy is construed strictly
so as to favor alienation rights.
(1) Sole discretion clause
(2) Reasonableness clause
(3) No standard in lease (silent clause)
Kendall v. Ernest Pestana – silent consent clause restraining alienation



Rule: Where there is a “silent consent clause” concerning alienation of leased property,
the lessor may require consent but cannot deny the lessee the chance to alienate unless he
has a good faith reason.
Facts: Guy owned an airplane hangar, and he wanted to sell to P but was told no
arbitrarily by the lessor. P sued, claiming it was an unlawful restraint on the freedom of
alienation. D felt he had absolute right to refuse for whatever reason.
Note: This case stands for the minority view – the traditional still allows for absolute
approval. (Fork)
Ending the Tenancy
1. Abandonment
24
Restatement (Second) of Property §12.1
When one "vacates the lease property without justification and without any present intention of
returning and he defaults in the payment of the rent". Under traditional, common-law approach, a
landlord has no duty to mitigate damages, and can wait until the termination of the lease and sue
for the full backpay.

Not the same as constructive eviction (good test trick)
`Sommer v. Kridel – duty to mitigate



Rule: In the context of residential leases, for reasons of fairness, the contracts duty to
mitigate damages will apply to landlords whose tenants have abandoned the property, and
they bear the burden of showing that they took reasonable efforts to do so.
Facts: Tenant just moved out and abandoned the property and the landlord left it open for
two years and then sued the tenant for the whole rent. The court found the LL had a duty
to mitigate and did not carry his burden and so could not sue for the full rent.
Note: Soldiers called to war do not “abandon” property. This is the majority approach.
(old rule of no mitigation duty?)
2. Security Deposits
General Rule: Most states have adopted legislation which regulates the security deposits such as
the California Statute (Pg. 485).
3. Eviction
Traditional v. Modern Rule
Traditional: A landlord is free to terminate a tenancy for any reason or none.
Modern: Cannot terminate for discrimination or retaliation.
Elk Creek Management Co. v. Gilbert -- retaliation



Rule: A landlord unlawfully retaliates against a tenant when the landlord evicts the tenant
after the tenant in good faith complains about conditions of the property.
Facts: Tenant was evicted and claimed that landlord only did it as retaliation because
tenant was complaining about issues with the apartment.
Note: xxx
Berg v. Wiley – modern trend against self-help



Rule: While the traditional rule allows landlords to evict tenants physically, the growing
modern trend is to require the use of the judicial process.
Facts: LL physically entered a breaching tenant property and locked them out, taking
sweet justice into his own hands.
Note:
25
Hypos:

Landlord Phyllis leases tenant Aidan a term of years lease of one year. After living there
for two months, he gives the rest of his lease to Weston. In the conveyance it says “to
Weston I sublease the remaining ten months of my term of years.” A then moved to
Colombia, where he routinely received payments from W until one day W stopped
sending them because he claimed that he had complained multiples times about a leaky
faucet and A refused to fix. A felt that it was not his obligation to fix the leaky faucet and
W still owed him for rent. P, upset, wants to recover rent owed here. What are the
respective rights and duties of each party?
CHAPTER V. ESTATES AND FUTURE INTERESTS
A. Modern Freehold Estates
1. Fee Simple Absolute
Cole v. Steinlauf

Rule: Under the traditional common law, a conveyance must contain the stipulation that
the property goes to the grantee “and his heirs” for it to create a fee simple.
26


Facts: During a land sale, plaintiffs stipulated that they could renege from deal if there
was an issue with the conveyance of the deed. Their lawyer found the deed has been
conveyed “to his assigns forever” and did not have the word “heirs” which was the
common law requirement to grant a fee simple.
Note: No words of limitation, presumed in absence.
2. Life Estate
White v. Brown



Rule: A conveyance will be presumed to be a fee simple unless clear language otherwise
expresses the intent to grant a different type of estate.
Facts: Lady devised a will that granted the real estate to one party “to live in but not to
sell". One party took this to mean a life estate meaning that upon the death of the lady the
property then goes through intestate succession – the other party took it as a fee simple
with attempt to restrict alienation, meaning it now belongs to heirs because of intestate
succession.
Note: In general, a life estate is measured by the life of the original grantee. Unless the
life estate is granted pur autre vie – usually when an original LE holder grants LE to
another.
o Unlike an ordinary life estate which is neither devisable nor descendible, a life
estate pur autre vie continues for the length of the measuring life.
o Often leaves a reversion in grantor.
o A life tenant has a duty not to commit waste with the property.
Woodrick v. Wood – waste, executory interest



Rule: A holder of a remainder interest in a parcel of property may not prevent the life
tenant of that property from destroying a structure on the property if destroying the
structure would not decrease the property's value.
Facts: P had a remainder interest in the land of which D had a life estate. D wanted to
destroy a barn on the land whereas P wanted to protect it, arguing that it constituted
impermissible waste.
Note: Put a clear exposition of waste doctrine either here or somewhere else
Waste:
Under Common Law, all waste was permissive. Under the modern, majority rule, waste that
increased property value is not recognized.



Voluntary waste: results from an affirmative act that significantly reduces the value of the
property (e.g., demolishing a valuable house). This is sometimes called affirmative waste.
Permissive waste: results from failure to take reasonable care to protect the estate (e.g.,
failing to make minor repairs or to pay property taxes).
Ameliorative waste: results from an affirmative act that leads to a substantial change in
the property and increases its value (e.g., building a swimming pool).
27
3. Fee Tail


A freehold estate the duration of which is determined by the lives of the lineal
descendants – eldest sons – of a particular person.
o Does not follow the regular process of intestate succession.
o “The heirs of his body”
Allowed today in only four states: Delaware, Maine, Massachusetts, and Rhode Island.
4. Fee Simple Defeasible – a fee simple that could continue forever or be undermined by a future
occurrence.


Fee Simple Determinable
o A fee simple estate that automatically ends when a certain event or condition
occurs, giving the right of possession to the transferor.
o Characterized by words of duration: so long as, while, until, and during.
o E.g., to “A and his heirs until a Democratic president is elected.
o The future interest becomes possessory immediately and automatically upon the
occurrence of a condition.
o Freely alienable, devisable, and descendible. But the condition applies to all
transferees.
o Future Interest: possibility of reverter
Fee Simple Subject to a Condition Subsequent
o Created in a transferee which may be terminated at the election of the
transferor when a certain condition or event occurs. If the condition happens, this
estate does not end automatically; rather, the transferor has the power to terminate
the estate by taking action.
 “On the condition that”, “provided that”, “but if”.
 Future Interest: right of entry
 Trick: any attempt to condition a fee simple by completely restraining
alienation is void for public policy and the transferee will just get the fee
simple absolute.
o E.g., Rigney
o Since courts dislike forfeitures, when confronted with vague granting language,
courts tend to construe such language as creating a fee simple subject to a condition
subsequent followed by a right of entry rather than a fee simple determinable followed by
a possibility of reverter.

Fee Simple Subject to an Executory Limitation
o Future Interest: executory interest
o Mahrenholz v. County Board of School Trustees of Lawrence County
 Rule: Deed language granting land for an ambiguous purpose and
otherwise reverting the land to the grantor creates a fee simple
determinable with a possibility of reverter.
 Facts: Pg. 315
28

Note: The word “only” was a limitation rather than a condition – so it was
determinable rather than subject to condition subsequent.
o Metropolitan Park District v. Unknown Heirs of Rigney
 Rule: After the breach of a condition subsequent, the grantor’s right to
declare forfeiture expires if he fails to exercise it within a reasonable time.
 Facts: Owner of land conveyed city the land with fee simple determinable
subject to condition subsequent – the condition that the land always be
used for water purposes. When it was violated, Rigney did nothing for 60
years. This was too long, the court ruled.
 Note:
 All future interests held in third parties which follow fee simple
defeasibles are executory interests.
 Policy -- productive use of land.
Restraints on Alienation:

Disabling restraint: A restraint that prevents the transferee from transferring her interest;
example: O conveys “to B, and any conveyance by B is void.”

Forfeiture restraint: A restraint that leads to a forfeiture of title if the transferee attempts to
transfer her interest; example: O conveys “to B, but if B ever tries to sell the estate, then to D.
Promissory restraint: A restraint that stipulates that the transferee promises not to transfer her
interest; example: O conveys “to B, and B promises that she will not sell the estate.”

B. Modern Future Interests
In some jurisdictions, [future interests other than reversions?] cannot be conveyed by an inter
vivos transfer to a third party. The modern and majority rule, however, is that the
right of entry is transferable inter vivos.
1. Future Interests Retained by the Transferor



Reversion
o A transferor retains a reversion when he conveys an interest of a lesser quantum
than his initial fee simple.
o Life estate, term of years.
Possibility of Reverter
o Follows a fee simple determinable.
o Is automatic
Right of Entry
o Follows a fee simple subject to condition subsequent
o Is not automatic – requires the transferor to take possession.
o Must be exercised within a reasonable amount of time. (Rigney).
2. Future Interests Created in a Transferee
29


Remainders: A future interest in a transferee that (1) is capable of becoming possessory
immediately upon the expiration of the prior estate; and (2) does not divest (or cut short)
and interest in a prior transferee. Follows life estates or term of years.
o Indefeasibly Vested Remainder
 (1) Created in an ascertainable person and (2) not subject to any
condition precedent other than the natural termination of the prior estate.
o Vested Remainder Subject to Divestment
 A vested remainder that is subject to a condition subsequent.
 E.g., to Anna for life, and then to Lauren unless she has children.
o Vested Remainder Subject to Open
 A vested remainder held by one or more members of a class which may be
expanded in the future.
 While vested, this remainder is treated as speculative and so may trigger
the RAP.
o Contingent Remainder
 A remainder that is either (1) given to an unascertainable person or (2)
subject to a condition precedent.
 O conveys to “B for life, and then to the heirs of D” (1)
o Heirs can only be heirs after the person dies. Must be
contingent.
 O conveys to “X for life, and then to P if P becomes prime
minister. (2)
o Here, P's getting possession is contingent on this event but
does not cut X's estate short.
 Always leaves a reversion in transferor.
 The difference between this and VR subject to open may depend on facts
– does person have any kids? One?
Executory Interests: A future interest in a transferee that must divest another estate or
interest to become possessory.
o Springing Executory Interest
 An executory interest that follows an interest in the transferor.
 E.g., From Aidan “to Lauren for life, then one year after she dies, to
Anna”
 E.g., From Aidan “to Lauren and her heirs, until Trump passes away, and
then one year later, to Amelia”.
o Shifting Executory Interest
 An executory interest that follows an interest in the transferee.
 E.g., From O “To Anna and her heirs, unless she marries, then to Lauren.”
 Way more common
Rules Furthering Marketability
30
Because of the speculative and risky nature of buying property encumbered with contingent
remainders, vested remainders subject to open, and executory interests, the common law
developed various rules to limit them and to improve the marketability of land.




Rule in Shelley’s Case
Doctrine of Worthier Title
Doctrine of Destructibility of Contingent Remainders
Rule Against Perpetuities
o No interest is good unless it must vest, if at all, no later than 21 years after the
death of some life in being at the creation of the interest.
o Strategy RAP:
1. Identify interest created
2. Note if any interests are contingent remainders, executory interests, or vested
remainders subject to open
3. List the lives in being at creation of interest

At time of conveyance or at death of testator of will.
4. Give birth to any after-born persons


A tactic only necessary when heirs, offspring, issue, relatives are implicated in
the transfer.
Always good to give birth to kids close to the death.
5. Kill off all of the lives in being (at creation) at some future point and add 21 years from
this date.
6. Is there any possibility that the interest will vest beyond the RAP period? If so, then it
is void. Strike the interest with blue pencil and proceed as if it were not there.
7. If it must vest, if at all, within the RAP line, then valid.

Hypos:
 Jayce makes the following conveyance: “I convey my fee simple
absolute in Greenacre to Omar for life, then to Stella for life, then
to the heirs of Omar.”
 O conveys “to A if A goes to Saturn”
o Valid because it must either fail or vest within the RAP line.
 O conveys “to A if anyone goes to the planet Saturn”
o Invalid because there is a possibility that it vests after the
RAP line.
 X conveys “to Z for life, and then to Q's first child to reach the age
of 22”
o
 Unborn Widow
 Fertile Octogenarian
31


To Kenny for life, then to the first child of Chef to reach age of 23.
Chef has two children alive already (1 and 3 years old)
Oren holds a fee simple absolute. Oren conveys "to Ted for life,
then to Ted's first child to graduate from high school and his
heirs.” Ted has a 15-year-old son, Ken, presently in the 11th
grade. This jurisdiction applies the common law Rule Against
Perpetuities. (Yes violates) -- explain
o Jee v. Audley
 Rule: Under the rule against perpetuities, a bequest that does not vest
within a life or lives in being at the time of the testator’s death plus 21
years is invalid.
 Facts: Old English stuff
 Note:
 Even if a future interest violates the traditional RAP, it could eb
valid if you are in a jurisdiction that follows (1) the Wait-and-see
approach or (2) the Cy Press doctrine.
o (1) Under this approach, courts consider whether or not the
interest actually vested within the perpetuities period – if
so, then it is valid and if not, then it isn't.
o (2) Under this approach, the court can merely re-write the
contract to conform to the probably intent of the parties and
avoid the voidness.
 Tricks, Traps, and Foibles:
o Any time a remainder is contingent upon an ascertainable
remainderman himself satisfying a condition by something
that requires him being alive, the RAP is not violated
because it would be impossible for the remainderman to
satisfy the condition more than 21 years after he dies. He
must be alive to do it.
o Any time categories are given, be suspicious.
o For MCQs that suggest a possible RAP violation. Try all
other options before beginning analysis of RAP option.
o Any time the vesting of an interest is conditioned on
something occurring in the passive voice – be suspicious of
a RAP violation because anyone/thing could cause this
occurrence many years after death.
o If you see a widow, always consider how a remarriage
would affect.
o Any time a city/organization is a transferee, be suspicious.
All the LIB could die and the institution can still own the
land and super late vesting is likely.
RAP Timeline Template
32
CHAPTER VIII. Selling Real Property
A. The Purchase Contract
1. The Statute of Frauds
As a general rule, an oral agreement for the sale of an interest in real property is not enforceable.
To be enforceable, the agreement must be recorded in writing (not necessarily formal), usually
including the (1) names of the parties, (2) the price of the purchase, and (3) the description of the
property. It also must have the signature of the parties to the transaction.



Trick: A contract that fails to meet the statute of frauds is not void, but merely cannot be
enforced.
Rule: An informal writing (like a check) can only be enforced against the party if they
have signed it (assuming it meets other requirements)
Hypo:
o The sneaky hand-back deed that doesn't satisfy SOF.
There are three main ways to describe a property.
1. Government Survey
 Majority approach in the United States
 Uses Public Survey System
2. Metes and Bounds
 Go three paces from where you smell bear pee
3. Subdivision Map
Exceptions to Statute of Frauds:
33


Partial Performance: "An oral contract for the sale of real property may be enforced if the
buyer: (1) takes possession; (2) pays at least part of the purchase price; and (3) makes
improvements to the property".
o Jdx Split: Courts differ on how many of these elements are required.
Estoppel: "An oral contract may be enforced if: (1) one party acts to his detriment in
reasonable reliance on another’s oral promise; and (2) serious injury would result if
enforcement is refused".
Hickey v. Green – estoppel exception to statute of frauds
Rule: An oral land-transfer agreement may be specifically enforced, even though it violates the
Statute of Frauds, if the party seeking enforcement detrimentally relied on the validity of the
contract and injustice can be avoided only by specific performance.
Facts: D agreed orally to sell a home to P for 15k. P gave her a deposit of 500 and then sold his
house and then was told by D that she was no longer going to sell it to him. He sued for specific
performance and the trial court granted it. D appealed.
Note:
2. Marketable Title
In every contract for the sale of real property, the seller expressly or impliedly promises that she
will deliver marketable title (also known as merchantable title), unless the contract specifies
otherwise. Generally, marketable title is defined as title reasonably free from doubt as to its
validity.
A title may be unmarketable for various reasons. A title is generally unmarketable if:
(1) The seller's property interest is less than what he purports to sell
(2) the seller's title is subject to an encumbrance; or
(3) there is reasonable doubt about either (1) or (2).
Encumbrances may include: CC&Rs, easements, leases, liens, mortgages, options, general land
use restrictions and water rights.
A chart showing how private interests and governmental restrictions in land affect marketability.
34
Lohmeyer v. Bower – marketable title
Rule: While the mere existence of a municipal ordinance restricting a property in some way does not
inhibit marketability, a violation of a municipal ordinance in the construction of a property may constitute
an “encumbrance” that voids the transfer of title.
Facts: P contracted with D to buy property, but later discovered some flaws such as a violation of a
municipal ordinance and the house was one story not two as said in contract. P tried to rescind; D refused.
P sued for rescission and D for specific performance.
Note:
 Marketability is a default standard but can be changed through contract to other standards,
including insurable or record.
 In most jurisdictions, marketable title not required until the closing.
 Title can remain marketable even with encumbrances, if those encumbrances are disclaimed in
the conveyance with a “subject to” line.
 Exam trick: Marketable title is not the same as habitable premises or valuable premises
 Hypo:
o A zoning ordinance that makes a property really restricted and unvaluable does not make
title unmarketable
3. Equitable Conversion
During the executory period of a real estate contract, damage to the property can occur which
will, depending on the approach taken by the jurisdiction, fall on either the buyer or the seller.
Three approaches
1. Under the majority doctrine of equitable conversion, "the buyer is seen as the equitable owner
of the property once the contract is signed, while the seller is viewed as the equitable owner of
the purchase price. Thus, the buyer is still obligated to pay the purchase price even if the
property is destroyed".
2. Massachusetts Rule: The seller bears the risk of the loss (few states).
35
3. Uniform Vender and Purchaser Risk Act: The party with the right to possession at the time of
the damage bears the risk of the loss. (Modern trend)
Bush Grocery Kart, Inc. v. Sure Fine Market – Allocating Risk of Loss
Rule: Adopting the UVPRA, the court held that in the absence of a right of possession, a vendee
of real property that suffers a material casualty loss during the executory period of the contract,
through no fault of his own, must be permitted to rescind and recover any payments he had
already made.
Facts: P signed a contract to buy a property from D, but a dispute ensued over the bargaining
practices, during which time a hail storm damaged the property to the tune of 60K. P added this
issue to the suit, arguing that D was liable, and D rebutted that P was.
Note:
4. Duty to Disclose
A seller of real property may have a duty to disclose information about the state of the property
depending on the approach adopted.
1. Under the traditional, caveat emptor approach, sellers did not have to disclose defects to the
buyer, because it was on the buyer to discover or inquire about them. The seller was only liable
in the case of material misrepresentation, active concealment, or non-disclosure in a fiduciary
relationship. (Minority view)
2. Under the modern view, "the seller of residential real property is obligated to disclose defects
he knows about that (a) materially affect the value of the property and (b) are not known to or
readily discoverable by a buyer."
3. Stambovsky Approach
Stambovksy v. Ackley – ghost case
Rule: If a seller creates a condition that materially impairs the value of a contract and is within
the knowledge of the seller or unlikely to be discovered by a prudent purchaser exercising due
care, nondisclosure of the condition constitutes a basis for rescission of the contract.
Strawn v. Canuso – disclosing off-site defects for professionals
Rule: A professional seller of residential real estate, or a broker representing that seller, has a
duty to disclose to a prospective buyer off-site condition that objectively materially affects the
value or desirability of the real estate. (Strong Rule).
Facts: Housing development advertised as lovely; people did not disclose that it was .5 miles
from toxic waste dump which flowed into it. He refused to disclose.
Note:
Hypos:
36





HIV/Murder
Buyer duty to disclose
“As is” clauses
Sex offender/public registry probably no duty
Guy selling house horrible neighbors yea duty
B. The Closing
The “Closing” is the point at which the purchase contract is performed. At this point, the seller
delivers the deed to the buyer.
1. The Deed
In general, a deed is effective only when delivered to grantee and accepted. An undelivered deed
has no legal effect, even if it is singed by grantor. In determining delivery, there must be both
intent and manifestation of intent to deliver.
Rosengrant v. Rosengrant – void for reserved right of retreival
Rule: A property transfer is only valid if the transferor intends for the transfer to take effect
immediately upon delivery of the deed and with no reservation of the right of retrieval
Facts: Parents owned a farm. They had no children, but had several nieces and nephews. When
woman became sick, nephew (defendant) took care of them. For this, parents sought to transfer
their farm to him. They brought him to a bank where Man handed the deed to D, which the
banker said was necessary to make the transfer legal. Parents instructed Jay to give the deed to
the bank for safekeeping. They instructed D to record the deed upon their death. Parents
continued to live on the property. When they died, D recorded the deed. However, other family
members (plaintiffs) challenged the transfer of the property to D for failure to properly deliver
the deed. The trial court agreed. D then appealed.
Note:
Vasquez v. Vazquez -- death escrow
Rule: If a grantor actually delivers a deed to a third person and, without reserving a right to recall
it, instructs the third party to deliver it to the grantee upon the grantor’s death, delivery is
complete.
Facts: Lady executed a deed in secret with atty to give land to X, then later died and her will
devised the property to Y.
Note: Distinguish from Rosengrant. Why was the delivery effective here but not there?
Hypos: Effective deed?
(1) “I have now transferred Greenacre to you. Give the deed back to me, and I will keep it in my
bedside drawer until you graduate from law school.”
 Yes, watch out for give back trick.
(2) “I want you to have Greenacre, but I want to live there until I die.”
37
 Yes
(3) “Here’s my deed to you. Please hold it safe until I talk with my wife, and then you can record
it when I say it’s OK.”
 No (like Rosengrant) -- condition
(4) “Place the deed in our safety deposit box, and when I die Greenacre will be yours.”"
 No, this is like will.
2. Remedies for Breach
At the time for closing, one party may get cold feet and renege. What remedies are available for
the victim? How can they be determined?



Courts can offer money damages equal to the difference between the market value of the
property and the contract price, restitution damages, or specific performance.
Specific performance is harder to get, because it must be shown that money damages are
inadequate
Since land is generally considered to be unique, specific performance is often available to
buyers.
Gianni v. First National Bank – specific performance as a buyer right subject to exceptions
Rule: Absent oppression or fraud, a buyer of real property is entitled to a specific performance of
a valid contract for the sale of real property as a matter of right – the court may use discretion to
ignore this under the circumstances.
Facts: Guy bought condominium, but then the company failed and couldn't produce. P sued for
SP. Court held that the guy was entitled to SP as a matter of law but remanded to the TC to give
D a chance to establish why equity prevents SP.
Note: The trial court would need to consider (1) impossibility, (2) availability of adequate legal
remedy, (3) economic hardship.
 For (2) and (3) there is a nice fork in the facts – argue both sides of adequacy and
hardship issue
C. Title Assurances
Three basic approaches to title assurance – best to combine.
1. Title Covenant: Grantor makes a promise that he can convey title in the deed
2. Title Opinion: Lawyer/other professional investigates and opines on legitimacy of title
3. Title Insurance: Title insurance company insures buyer
1. Title Covenants
Different title covenants come with different deeds. The three main deed types are:

General Warranty Deed – most protective
38
o


The grantor warrants title against all title defects whether they arose before or after he
obtained title.
Special Warranty Deed
o The grantor warrants title against only title defects that arose after he obtained title
Quitclaim Deed
o The grantor offers no warranty about title, and so buyer gets whatever there is.
o In some states, receipt of QC deed removes BFP status; in others, it puts the recipient on
inquiry notice. In most states, however, this does not remove BFP status or put on notice.
These deeds come with an assortment of various types of covenants – some present and some future.
Present Covenants: Function like implied covenant of marketable title, and made at the closing with any
breach taking effect at the closing. Breached or not at the conveyance, immediately.



Covenant of Seisin
o A promise that the grantor owns the estate he purports to convey; for example, this
covenant is breached if the grantor purports to convey a fee simple but only owns a life
estate.
 Maj: Doesn't run to future grantees.
Covenant of Right to Convey
o A promise that the grantor has the right to convey title; for example, this covenant is
breached if the grantor is a trustee who lacks the authority to transfer title to the trust
property.
Covenant against Encumbrances
o A promise that there are no encumbrances on the title, other than those expressly listed in
the deed; for example, this covenant is breached if there is a prior mortgage on the
property.
Future Covenants: Becomes breached, if at all, after the closing at some future occurrence – superior
claims or resultant damage.
 Covenant of Warranty
o A promise by the grantor that he will defend the grantee against any claim of superior
title.
 Covenant of Quiet Enjoyment
o A guarantee that the grantee will not have her enjoyment of the land disturbed by any
with superior title.
 Covenant of Further Assurances
o A promise that the grantor will take all reasonable steps to cure title defects that occur at
the time of the closing.
Measuring Damages in Breach
 The measure of damages for breach of a title covenant is normally determined by the purchase
price paid by the grantee plus interest. However, the standard for breach of the covenant against
encumbrances is the lesser of (1) the amount necessary to remove the encumbrance or (2) the
amount by which it reduces property value.
Brown v. Lober – future covenant of quiet enjoyment
39



Rule: The mere existence, without more, of a superior title does not constitute a breach of the
covenant of quiet enjoyment.
Facts: A sold 1/3 interest in land to B, but both parties that it was a full conveyance. Later, when
B discovered it possessed only a 1/3 interest in the land, he wanted to sue A for a breach of the
covenant of seisein, but could not because the SOL had expired. So, B tried to bring a breach of
the covenant of QE, but it failed because the owner of the 2/3 interest had not interfered with B's
use of the land and so no constructive eviction had taken place.
Note: Browns should have purchased title insurance, too.
2. Title opinion based on search of public records
To use public records to ensure good title, there is generally a two-step process:
1. Locate the documents

Usually through Grantor-Grantee index, involving an investigation of the chain of title beginning
going all the way to the sovereign done on both sides of the transaction.
2. Evaluate them
In evaluation title legitimacy, courts employ a variety of regional rules.




Old, common law “first-in-time" rule: The first party to receive the deed has valid title against
all who come after.
The Race Doctrine:
o The person that first records their deed in the proper jurisdictional manner has the valid
title against all others.
The Notice Doctrine
o The subsequent bona fide purchaser who lacked notice of another's claim to title has the
valid title against others
o Policy: Diligent buyer who investigates, finds nothing, buys and uses will be protected
against lazy prior buyers who don't record
o Improperly recorded titles =/= notice
The Race-Notice Doctrine
o The subsequent bona fide purchaser who first records has title.
Luthi v. Evans – notice in determining bona fide purchaser



Rule: A clause that does not provide a sufficiently detailed description of the property conveyed
fails to provide constructive notice to a subsequent purchaser – meaning that subsequent
purchaser is bona fide and his interest can take priority.
Facts: A deed was indexed in an ambiguous way (controversial catch-all provision) and notice
was not effective on a later buyer.
Note:
Messersmith v. Smith – improperly recorded deeds


Rule: The recording of a title instrument that does not meet the recording act’s statutory
requirements does not provide constructive notice of the transfer to subsequent buyers.
Facts:
40


Note: (Like Zimmer rule) Zimmer rule: no acknowledged interest if invalid acknowledgment
pursuant to statutes.
Unlike a deed that merely fails to comply with basic statutory requirements, an undelivered deed
or a forged deed is void, transferring no interest to the grantee. Thus, any subsequent grantees in
that chain of title, including bona fide purchasers, receive nothing. See Brock v. Yale Mortgage
Corp., 700 S.E.2d 583 (Ga. 2010). In contrast, a deed that is induced by fraud is voidable by the
grantor; but if the grantee conveys title to a bona fide purchaser, the subsequent purchaser
prevails.
The Shelter Rule: A bona fide purchaser is allowed to transfer his protection to a later grantee, even if
this later grantee is aware of the prior interest.
F. What Constitutes Notice?



Actual Notice
o Knowledge of a prior interest
Record Notice
o Knowledge of any prior interest that could be obtained by a search of the public records
Inquiry Notice
o Knowledge of any prior interest that would have been obtained by an investigation of
suspicious circumstances by a reasonable person.
Raub v. General Income Sponsors of Iowa – BFP basics


Rule: A bona fide purchaser is entitled to have its purchase upheld if it is not on reasonable notice
to make inquiry into whether the grantor obtained the property fraudulently.
Facts: A lady was defrauded by the bank into selling her home to bank. She still lived there as life
tenant. Bank sold home to third party, and third party did not know that property was encumbered
by life tenant. Court held that the third party was a BFP, because mere presence of prior owner
living on property was not enough to give notice of title defect.
3. Title Insurance


The main method of covenant in the U.S. today. If buyer suffers loss from a title defect that
existed on the effective policy date, then he gets compensation (unless not covered by exemptions
or exclusions)
An exclusion is a type of flaw that the company is unwilling to cover. An exemption is a
particular flaw of the property that the company does not include in the policy.
Riordan v. Lawyers Title Insurance Corp. -- marketable title =/= valuable property


Rule: Title insurance for lack of a right of access to the property and unmarketability of title does
not cover losses caused by lack of only practical access or physical defects.
Facts: P owned real property and the only way to get there was by horse/trail. They claimed this
violated their coverage to build a road and drive to their property – is this a violation? Were they
due this privilege? Can plaintiffs prove loss or damage?
IX. Financing Real Property
41
Introduction: Since almost all real property purchases require credit, certain laws apply to facilitate this
process and contribute to the national economy.
A. Creating the Obligation
The first step is to create the obligation, whereby the borrower subjects himself to the loan and promises
to repay it.
The most common method is the promissory note.
Promissory note:






Has intrinsic value
Provides details
May contain “acceleration clause,” allowing lender to demand full payment if buyer misses on
payment
If agreement says buyer assumes loan, then he takes on personally liability to repay it.
If agreement says buyer takes subject to the loan, then he is not personally liable but can still lose
his property/interest upon failure to pay.
Where put amortized/non-amortized distinction?
B. Providing the Security – Security Instruments
1. Mortgage – technically, a fee simple subject to a condition subsequent.




The traditional security instrument by which a borrower (mortgagor) conveys and interest
in real property to the lender (mortgagee) as security for the performance of an
obligation, usually payment of a promissory note.
Once the borrower repays the loan in full, the mortgage is extinguished
If the borrower defaults on the mortgage payments, the property will be sold at a
foreclosure sale.
Must comply with Statute of Frauds
Theory Split: States are split on what “interest” a mortgagee really receives



Title Theory: Some states follow the common law view that the mortgage is a transfer of
title from the borrower to the lender. In theory, the lender has the right to possession of
the property before default, but in practice this right is rarely exercised (minority)
Intermediate Theory: In a few states, the lender holds title but not right to possession until
default.
Lien Theory: In most states, the mortgage creates a lien or security interest, not
conveying title, meaning that the lender (mortgagee) does not have title until the
foreclosure sale.
2. Deed of Trust – a mortgage by a different name


“The deed of trust is a three-party relationship. In form, the borrower (the trustor) conveys real
property “in trust” to a third party (the trustee) for the benefit of the lender (the beneficiary). The
text creates an express power of sale.”
A deed of trust is not a trust nor is there a trustee.
3. Installment Land Contract
42


This is a payment of a fee over a specified time period, with the last payment serving to complete
the purchase. Under common law, this could lead to very unjust outcomes, as one missed
payment – even if the last one – could justify canceling the whole contract and the owner keeping
the payments.
Seller retains title until payment complete, then transfer.
Slone v. Calhoun – equitable title



Rule: An installment-land-contract provision stating the buyer forfeits her property interest
upon default of payment is unenforceable.
Facts: RV land property dispute (re-write)
Note: The forfeiture clause was unfair and so the court treated it (in equity) like a mortgage,
arguing that she had equitable title. The courts abhor a forfeiture!
4. Equitable Mortgage

Where a transaction or sale of property in form is functioning like a mortgage in fact, the courts
may apply the doctrine of equitable mortgage to remedy the injustice.
Zaman v. Felton – equitable mortgage/O’Brien factors



Rule: To determine whether a purported land sale and subsequent leaseback are in fact an
equitable mortgage, a trial court applies an eight-factor framework considering both the form
of the transaction and the circumstances surrounding the parties.
o (1) intention to continue ownership
o (2) substantial disparity between purchase price and market value
o (3) existence of option to repurchase
o (4) homeowner's continued possession of the property
o (5) homeowner's continued duties to bear ownership responsibilities (maintenance,
taxes)
o (6) disparity in bargaining power and sophistication
o (7) evidence showing irregular purchase process – including no public sale or
appraisal, investigation of title
o (8) financial distress of homeowner, including foreclosure and prior failed attempts to
get loans
Facts: Chick “sold” house to another, with a buy back provision that essentially made the
interest super usurious and the court found it was really a mortgage.
Note:
o Yet another attempt to circumvent the mortgage laws to prey on needy people.
C. Foreclosing on the Security
1. Borrower's Rights Before Foreclosure
Q: What can a borrower do to avoid losing the home once a foreclosure process has been initiated?

Reinstatement: As a general rule, a borrower can avoid foreclosure by paying the missed
payments before the lender accelerates the loan. Some states also allow the borrower to reinstate
for a limited period after acceleration occurs. (Restatement)
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
Equity of Redemption: All states allow the borrower to avoid foreclosure by paying the loan in
full (plus any incurred costs) after default but before the sale occurs.
o Can’t clog it!
2. Judicial Foreclosure



The traditional, exclusive, and dominant procedure in 1/3 of jurisdictions
(1) Gather necessary parties and file for foreclosure (2) if no objection by interest holders, then
default judgment. With DJ, (3) send notice of time and place of sale. During sale, lender can bid
with credit, all others bit with cash. Unless the court cancels the sale for equity reasons, the sale is
confirmed and the highest bidder is transferred quitclaim deed and homeowner loses equity of
redemption (i.e., right to pay it all off).
Junior interest holder without notice not affected.
3. Nonjudicial Foreclosure



The modern, majority approach in 2/3 of states
Quicker and cheaper – preferred by lenders
Junior interest holder without notice not affected
4. Results of the Foreclosure
General Principles:



When a foreclosure sale occurs, there are certain rules for how the money is distributed when
there are multiple interests in the home.
o The lender whose mortgage was created first has priority under the first-in-time rule
unless a subsequent purchaser or lender is protected under the state’s recording act (either
race/notice/race-notice).
o Remember that (a) a subsequent bona fide purchaser or encumbrancer may be protected
against prior interests and (b) the shelter rule may also protect a subsequent party.
Principle 1: Foreclosure eliminates or “wipes out” the mortgage being foreclosed and all junior
interests, but does not affect senior interests."
Principle 2: Foreclosure sales proceeds are distributed first to the foreclosing lender, and then to
junior interests in order of priority; any surplus proceeds go to the borrower.
5. Special Mortgage Priority Rules


In three situations, there are specialty rules which govern the distribution of foreclosure money.
Purchase Money Mortgage
o This is a mortgage where the proceeds of the loan are used directly to but realty rather
than for other purposes like improving the home.
o PMM takes priority over other liens/interests on the property purchased through the buyer
 E.g., If A buys a house from B in part paid for by a promissory note secured with
a mortgage for the amount remaining to buy the house, B's mortgage interest
takes priority over other interests in the property – such as, for example, if A's
spouse had a community property interest.
 Policy reasons:
 We want people to be able to buy and productively use land, so we want
to incentivize lenders to feel confident in loaning money for house
44


purposes especially. Therefore, mortgages for the express purpose of
buying a home (PMM) are extra secure because in the event of
foreclosure, that mortgage will take priority even over prior interests.
Future Advance Mortgage
o This is a mortgage that contains a clause that states that the mortgage will also serve as a
security for any future loans given by lender to borrower.
o In most states, if the mortgage obligates the lender to make such an additional loan, the
new loan takes priority from the date of the mortgage(that first loan date). But if making
such a loan is merely optional and the lender has notice that a third party has acquired
an interest in the property after its original loan was made, then the new loan takes
priority only as of the day it is made.
 Policy:
 Here, the idea is that if a mortgage obligates a lender to make future
loans, then those loans ought to be protected with the same fervency as
the original loan (so they take priority from when the first was given); if
however, the loan was made at the discretion of the lender, then it takes
priority from the moment it was made because it was his choice and risk.
Deed in lieu of foreclosure
o After default, homeowner could avoid foreclosure by transferring title to lender, but this
might not be advisable for lender because he would take it subject to any other interests.
D. Exercising Rights After Foreclosure
1. Protecting the Borrower
Q: What sorts of rights to the homeowners have after foreclosure?


Statutory Right of Redemption
o In about half the states, a borrower has the right to redeem the property, recovering it
from the person who won the bid, within a set time such as a year
 Minority view: No fundamental right of redemption.
o In some states, only applies to home or farm
o Done by paying full purchase price plus interest/costs
Setting Aside the Sale
o In most states, nonjudicial sale can be set aside if it “shocks the conscience”
o Or if there's a significant procedural irregularity
 No notice, suppression of bidding
o Generally, requires both.
o Same basic standards can apply in judicial sale jdx.
2. Protecting the Lender

The Deficiency Judgment
o A legal remedy that a lender can employ when the results of the foreclosure sale fail to
satisfy what the lender is owed.
o This can sometimes be unfair. For example, a lender could artificially manipulate the
foreclosure sale to be the only bidder, bid really cheap and get it, then sue the borrower
for the deficiency and still have the real value of the home which was much higher
o For this reason, courts have adopted some “anti-deficiency legislation”
45

Fair Value approach – lender can only ask for deficiency judgment that is equal
to the difference between loan and fair market value of home. (not learned in
class)
Wansley v. First Nat’l Bank of Vicksburg – commercially reasonable



Rule: The sale of real estate by a trustee of a deed of trust will be upheld and accepted for
deficiency judgment purposes if the sale is commercially reasonable in all respects.
Facts: Trustee was not dependent in the two-brother farmer situation.
Note:
X. Private Land Use Planning
A. Easements




A non-possessory right to use the land of another. Easements were developed at common
law to encourage the productive use of land.
License:
o Revocable permission to use land for a specific purpose
Profit
o Right to use land for the purposes of extracting natural resources (usually treated
like an easement)
Conveying Easements:
o Easements appurtenant are transferred with the land. Under majority, easements
in gross are transferrable for commercial purposes; whereas modern trend allows
transfer unless contrary intent.
1. Creating Easements
An easement may either be (1) in gross or (2) appurtenant. An easement is (1) if it grants the
interest to a particular individual, whereas it is (2) if it applies to the owner of a particular parcel.
In most jurisdictions, (1) is not transferrable unless it serves a commercial purpose. The modern
trend, however, allows for transfer even if for personal purposes.

Express Easement
o By grant: This applies when a servient owner grants an easement to the dominant
owner.
o By reservation: This arises when the dominant owner grants the servient land to
the servient owner, but retains or reserves an easement over that property.
Easements Imposed by Law
Easement by Prior Use: An easement may be implied in some cases based on prior use when
there is (1) severance of title to land held in common ownership, (2) an existing, apparent, and
continuous use of one parcel for the benefit of another at the time of severance; and (3)
reasonable necessity for that use at the time of severance.

Not terminated when necessity ends?
46

In general, a dominant estate that is severed into multiple parts will reserve the same
easement for each owner of the divided parts. Unless the burden of the easement created
by the severance becomes way too big.
Emanuel v. Hernandez – Easement by Prior Use



Rule: Rule: If an easement implied by prior use did not arise at the moment the property
was severed, a change in circumstances after the severance cannot create such an
easement.
Facts: Property divided, one family wanted implied easement because of drive way use
longstanding, problem was there was no evidence of such use when the property was
severed way back when.
Hypo:
o
Olive loved to fly radio-controlled model airplanes on her property Airacre. Almost
every day for 10 years, she stood on a hill located on the west half of Airacre and spent
two hours steering an airplane through the airspace between 30 and 40 feet over all of
Airacre, having it perform various aerial tricks. Elmo, another model airplane enthusiast
who was familiar with Olive’s weekend flying activity over both the west half and the
east half of Airacre, purchased the west half of Airacre from her as a perfect site to fly his
own model planes. Last weekend, when Elmo stood on his land attempting to fly his
model airplane through the airspace over the east half of Airacre, Olive protested; she
told Elmo: “Never fly airplanes over my land again!” Elmo now claims to have an
implied easement by prior existing use over the east half of Airacre. What is the most
likely outcome?
Easement by Necessity: An easement by necessity may be implied in some cases based on prior
use when there is (1) severance of a property held in common ownership and (2) necessity at the
time of the severance. Under the strict, common-law approach, there must be absolute
necessity. Under the Restatement, there must be “reasonable necessity”; and under Berge, there
must be a lack of practical access. (Fork) The easement lasts until the necessity ends.

Traditionally, the easement only applied to physical access to landlocked property, but
there may be a movement toward allowing access to electricity now.
o Water and air access do not defeat strict necessity.
Berge v. State of Vermont – Easement by Necessity



Rule: Water access alone is not sufficient access to defeat an easement by strict necessity
claim, because it is not practical access.
Facts: Owner divided property, didn't specify easement but left the other person's
property inaccessible by anything other than boat. Court found this was not sufficient and
created easement by necessity.
Hypo:
o A severs land and conveys half to B. Prior to the severance, B had asked C if he
could use C's land to access a road once B buys A land and C had said yes. Now
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C says you cannot use his road. A has a road, but otherwise B property totally
landlocked. Can B use A road for necessity? (NO, because at time of severance C
had said yes and there was no necessity to use A road!)
Prescriptive Easement: A prescriptive easement arises when a person uses the land (1) openly
and notoriously, (2) adversely and hostility, (3) continuous, and (4) for the prescriptive period. In
most states, (2) requires only a lack of permission; however, intent may be relevant in some
states, such as Virginia. Most states will presume adversity unless there is circumstantial
evidence to the contrary.
O’Dell v. Stegall – prescriptive easement




Rule: A person claiming a prescriptive easement has the burden of proving his use of the
land was adverse.
Facts: Guy wanted PE for his use of gravel land, but he couldn't show adverse “intent”.
Note:
o In most jdx, exclusivity not required!
Hypo:
o Golf Balls
Easement by Estoppel (irrevocable license): Arises when a landowner (1) allows another to
use his land, thus creating a license; the licensee (2) relies in good faith on the license, usually
by making physical improvements or by incurring significant costs; and the licensor (3) knows or
reasonably should expect such reliance will occur." (4) Injustice can only be cured by
recognizing easement.
Kienzle v. Meyers – Easement by Estoppel




Rule: An easement by estoppel exists where a property owner induces another to change
position in reliance on a supposed easement, even if the property owner did not mislead
the other party.
Facts: Two friends owned adjacent properties. They came to agreement that they would
install sewer pipe. Then new owners bought each property. One party then wanted to
terminate the license. But there was too much reliance so they called it an easement by
estoppel.
Note:
o Public Prescriptive Easement Debate
o Public Trust Doctrine
o This is the majority view
Hypo:
o Mobile home purchase not reliance?
2. Interpreting Easements
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When interpreting an easement, courts look to the original common meaning of the terms at the
time they were used with the goal of understanding the intent of the parties. Under this view, an
easement may not change its nature based on changes in circumstances; however, it may expand
its intensity, manner, and scope. A minority view (such as the one in the Dissent of Marcus),
advocates for a broad construal of the language of easements to account for modern changes.

Relocating easement (Traditional v. Restatement view)
Marcus Cable Associates v. Krohn
Rule: An express easement may only be used for the purposes specified in the easement’s terms
according to their common meaning at the time of the grant.
Facts: Easement granted “electric lines” and party tried to extend to TV cables. Court said no.
Hypo:


Cars v. Wagons
New, nearby parcel doesn't get the benefit if appurtenant.
3. Terminating Easements
Easements may be terminated by (1) abandonment, (2) prescription, (3) condemnation, (4)
estoppel, (5) merger, (6) misuse, (7) release.
Preseault v. United States – Abandonment



Rule: An easement is terminated if the easement is no longer used for the original
purpose but is used in a way that is inconsistent with the easement's original use and that
was not reasonably foreseeable at the time it was established.
Facts: Railway to hiking park easement
Note:
o Some jdx say that mere non-use is enough to satisfy abandonment and therefore
termination of the easement.
(2) Prescription
 If the owner of the dominant land blocks usage of the servient land for the easement
purpose in a way that satisfies prescription, it is terminated.
(3) Condemnation
 Terminates the easement and owner of the easement due just compensation.
(4) Estoppel
 If owner changes his position based on statement that easement will no longer be used.
(5) Merger
 If one person gets the easement and the title to land, it merges and vanishes.
(6) Misuse
 In some jdx, if holder seriously misuses the property, he may forfeit it.
(7) Release
49

The holder may release the easement to the servient owner through a writing that
complies with SOF.
Hypo:


A owns Silveracre and gets easement from B to specifically cross from Silveracre to a
road bordering B's Goldacre. A later acquires Bronzeacre and hopes to be able to cross
Goldacre from there too. Can he? (The second parcel trick).
A owns Blackacre and has an easement appurtenant to use B's Whiteacre. A then severes
his land into 5 lots, and sells each lot to different people. Do those people all have an
easement to use B's land? (The divided land easement assumption trick)
4. Negative Easements
An easement that entitles the dominant owner to prevent the servient owner from performing an
act on the servient land.


E.g., conservation easement
An easy, cost-friendly way to preserve land but may interfere with PUOL.
B. Land Use Restrictions
Historically, the desire to restrict land arose in order to make particular settlements more
valuable and enticing – to ensure uniformity and marketability. The key thing to remember here
is that we are concerned not only with the enforceability between the parties (something easily
handled by privity of contract) -- but with the enforceability of covenants respecting successors.
On final, either apply the doctrine he says or check for RC, ES, Restatement Servitude.
1. Traditional Approach
a. Real Covenant – “covenants that run with the land”
A real covenant is a promise concerning the use of land that benefits and burdens the original
parties to the promise and their successors. The traditional remedy for breach of a real covenant
is money damages.
50
(2) Intend

Usually found expressly in the document (“assign"). But may be inferred from the circumstances.
o E.g.,
(3) Touch and Concern

Relate to the enjoyment, occupation, use of the land.
o Restrictions on use, almost always.
o Purely money obligations maybe
 Yes, for HOA fees, tenant rent
 No, for promise not to sue or allow black people
(4) Notice

Actual, Inquiry, or Record
(5) Horizontal Privity – the relationship between the original parties
In the United States, there is a split of authority on what satisfies this.



Mutual Interests: In most jdx, mutual simultaneous interests are required – including
landlord/tenant or easement holder and landowner.
Successive Interests: In many jdx, a grantor-grantee relationship may satisfy it.
In a minority of states, there is no requirement for horizontal privity
Note: If parties just have a contractual agreement, i.e., two landowners made a deal about the land, then
no HP and therefore no Real Covenant unless in a “no requirement” jdx.
(6) Vertical Privity
Vertical privity concerns the relationship between an original party to the promise and his successor.
Some states no longer require vertical privity. The states that retain this element usually distinguish
between the burden and the benefit.

Burden: Vertical privity exists only if the successor receives the entire estate that the original
promisor held. If promisor A holds a fee simple absolute and conveys it to B, this requirement is
met.
o Look for “assigns”
o If promisor on burden side gives less than the full estate, the successor cannot sue.
o Higher standard for the burden side because it is the person getting screwed.

Benefit: On the benefit side, a less demanding test is used. Vertical privity is found if the
successor receives either the original promisee’s entire estate or a smaller estate.
o If promisee C holds a fee simple absolute and transfers a term of years tenancy to D,
vertical privity exists
In some cases, you only need burden to run, some cases benefit. If they want to sue each other –
both!

Deep Water Brewing v. Fairway -- real covenant
51


Rule: Washington adopts traditional RC standard.
Facts: Lakeview facts, questionable if it satisfied RC standard.
Hypo:

Aidan conveys Muscleacre to William in fee simple but reserved for himself an easement
to use the large stones on Muscleacre for training. In the conveyance, Aidan also
specified that William and any future possessor of the land must not move the large
boulders from the parcel. Eventually, Aidan grew too strong for the meager boulders on
Muscleacre and moved to Yarnell, Arizona in search of a challenge. He conveyed his
easement to Alex, who began to use the boulders for the same purpose. After several
more years of enjoyment, William decided to move elsehwere and granted a life
estate/fee simple land to Owen. Owen, irritated by the large boulders, decided to clean
them all up. Alex was furious and sued Owen. What are the parties respective rights?
b. Equitable Servitudes
An equitable servitude is a promise concerning the use of land that benefits and burdens the
original parties to the promise and their successors. At common law, an Equitable Servitude
arises when there is a conveyance of realty which satisfies (1) the SOF, shows (2) intent to bind
successors, (3) touches and concerns the land, and, if on the burden side, (4) notice as well. The
remedy for breach of an equitable servitude may be specific performance/injunction.

The Restatement merged real covenants and equitable servitudes into one doctrine
called “servitude” -- which arises when there is (1) intent, (2) the conveyance satisfies
SOF, and it is not arbitrary, unconscionable, or unconstitutional or against public
policy/law.
Gambrell v. Nivens -- equitable servitude


Rule: A restrictive covenant binds remote grantees as an equitable servitude if the
covenant touches and concerns the land, the original parties intended that the covenant
run with the land, and the remote grantee had notice of the covenant.
Facts: Residential lot promise, used for wedding chapel, court granted injunction.
52
Hypos:

(1) A and B own adjacent vacant lots in a residential subdivision. They enter into a
written agreement promising “on behalf of ourselves and our successors” that no
structure higher than 30 feet may be built on either lot; they sign and record the
agreement. B sells her lot to C, who now plans to build a house that will be 35 feet high.
A sues C.

(2) D and E purchase homes in a 20-lot subdivision. D’s property and 16 of the other lots
contain express restrictions in their chain of title that all houses in the subdivision must be painted
in “earth tones, such as beige or brown.” The restriction is not in E’s chain of title. All houses in
the subdivision are painted beige or brown. E now leases her property to F for a 99-year term,
without telling her about the restriction. F plans to paint the house bright blue. D sues F."
3. Discriminatory Covenants
Shelley v. Kramer – discrimination



Rule: State court enforcement of a racially restrictive covenant constitutes state action
that violates the Equal Protection Clause of the Fourteenth Amendment.
Facts: No black people allowed in property.
Note: While it was struck down on constitutional purposes, could also argue policy
because PUOL and it didn't touch and concern!
4. Common Interest Communities
Definition: A common interest community (CIC) is a planned residential development (a) where
all properties are subject to comprehensive private land use restrictions and (b) which is
regulated by a homeowner's association.



CCRs are restrictions on use that can be enforced either as real covenants or equitable
servitudes.
All owners must pay assessments to maintain.
Owners of property own fee simple, usually undivided interest in common areas,
membership interest in association.
a. Enforcing Restrictions
CCRs are enforceable under modern law. But there are some defenses.
DEFENSES
Violating Law or Public Policy
Under the Restatement View:

Restatement § 3.1: a servitude is valid unless it is “illegal or unconstitutional or
violates public policy.” Under this approach, a servitude violates public policy if it: (1) is
arbitrary, spiteful, or capricious; (2) unreasonably burdens a fundamental constitutional
53
right; (3) imposes an unreasonable restraint on alienation; (4) imposes an unreasonable
restraint on trade or competition; or (5) is unconscionable.
Nahrstedt v. Lakeside




Nahrstedt Rule: California law provides that common interest development use
restrictions are enforceable unless unreasonable or violates a fundamental public policy.
To determine this, courts look at whether it is arbitrary because the burdens it imposes on
the use of the land are excessive when compared to the benefit.
Facts: Cat restriction was not unreasonable therefore it was valid.
Dissent rebuttal:
o The home is a castle and I should be able to do whatever within it.
Note: Interpreting CCRs
o Strict v. Reasonable/Intent View
Hypo:

TV hypo
o If a restriction banned used of televisions in all homes as part of the CC&R,
would it be invalid?
 Restatement Rule:
 Nahrstedt Rule:
Abandonment
Fink v. Miller – wood shingles



Rule: A covenant is abandoned when there are readily observable violations of sufficient
number, nature, and severity as to lead an average person to conclude that the property
owners neither adhere to nor enforce the covenant.
Facts: People joined a community that had CC&Rs requiring wood shingles, but began to
build fiberglass shingles. They argued that because 23/88 people in community stopped
following the roofing rules, the CC&R was “abandoned”. The court agreed
Note: Was there notice here? On the roofs!
Changed Conditions
Vernon Township Fire Department v. Connor – let the firefighters drink!



Rule: A restrictive covenant is not invalidated by non-conforming activity that takes
place outside the restricted tract.
Facts: Alcohol selling on premises, argument was that circumstances have changed so
covenant doesn't make sense. Restriction was not abandoned, because they had not yet
begun selling alcohol and no enforcement. It was not arbitrary under Nahrstedt Rule but
maybe Restatement. The issue here was changed circumstances.
Note:
54
o
o
Rule 2: For a “changed conditions defense” to enforcement of CC&Rs, the
original purpose of the restriction must have been materially altered or destroyed by
changed conditions such that a substantial benefit no longer extends to all of the
appellants by enforcement of the restriction.
Compare to: In El Di, Inc. v. Town of Bethany Beach, 477 A.2d 1066 (Del. 1984), the
Delaware Supreme Court invalidated an alcohol ban due to changed conditions. The
restricted tract was originally developed as a church-affiliated residential area, but had
evolved into a tourist resort over the years. Is Vernon Township consistent with El Di?"
B. Governing the Development
HOAs govern Common Interest Communities (CIC). Sometimes, residents of such CICs find
themselves in opposition to a particular action of the HOA. In such cases, residents may
challenge HOA discretionary actions in court, but courts may apply either: (1) the highly
deferential business-judgment rule or (2) the less deferential reasonableness rule.
Schaefer v. Eastman Community Center – we’re shuttin’ it down!



Rule: An association governing a planned community may exercise all powers of the
community except those the governing documents reserve to community members or
expressly contravene.
Facts: The HOA closed down an amenity – Snow Hill – and the residents challenged this
action, arguing that it was nowhere among the HOA's enumerated powers to do so. The
court held that the HOA could do anything not granted to residents or contradicted
elsewhere in the document.
Note:
o Standard of Reasonableness when challenging HOA actions.
 If HOA is like legislature, then judiciary will be very deferential because
they can be voted out
 If HOA is a corporation, then judiciary may be more deferential because
they have fiduciary duties?
CHAPTER XI: LAND USE REGULATION
Introduction: Where previously we discussed private land use planning, we now move to regulating land
usage through the government.
A. Nuisance Law – judicial control of land
Definition: A nuisance is a non-trespassory invasion of another's interest in the private use and enjoyment
of land. Unlike trespass, a person with a non-possessory interest in a land can still bring a nuisance action.
To establish a nuisance claim, a plaintiff must show that the act is (1) intentional, (2) non-trespassory, (3)
unreasonable, and is a (4) substantial interference with (5) the use and enjoyment of the land.
55





Intentional: The defendant’s conduct is intentional if he acts for the purpose of causing the harm
or he knows that the harm is resulting or is substantially certain to result from his conduct.
Non-trespassory: The interference must not involve any physical entry onto the land of another.
For example, noise, vibration, light, and odors are all viewed as nontrespassory invasions.
Unreasonable: Jurisdictions differ about the meaning of this element. Some states follow the
gravity of the harm test: the defendant’s conduct is unreasonable if it causes substantial harm,
regardless of the social utility of the conduct. Many states use the Restatement standard: conduct
is unreasonable if the gravity of the harm outweighs the utility of the conduct. Restatement
(Second) of Torts § 826(a). A number of states use multi-factor tests that fall somewhere between
these two approaches.
Substantial interference: There must be a “real and appreciable invasion of the plaintiff’s
interests,” involving “more than slight inconvenience or petty annoyance.”
Use and enjoyment of land: The defendant’s conduct must interfere with the use and enjoyment
of land, e.g., causing physical damage to the property or personal injury to occupants."
o E.g., Bird feeding, concerts, radiation, wind turbine
o Homeless shelter hypo
Boomer v. Atlantic – Semen plant/ (Gravity of the Harm approach followed)



Rule: Majority Rule Below.
Facts: Cement plant fucking with houses and junkyard. Court followed trad rule that said any
nuisance action that is nuisance and that shows substantial harm is good. Remedy was not
injunction but payment of permanent damages. In doing this, the court went against the traditional
rule.
Note:
o Majority Rule: Defendant causing a nuisance should be able to compensate the plaintiff
for the damages and continue causing the nuisance.
 Policies supporting: Lowest cost and most efficient social solution, best for
industry and economy
o Traditional Rule: A defendant causing a nuisance ought to be enjoined from doing so.
 Policies opposing: plaintiffs first in time, human health and wellbeing, traditional
property rights.
Thomsen v. Greve – Restatement Approach, wood heater




Rule: Intentionally interfering with others’ use and enjoyment of their home by subjecting them
to odor and smoke is a nuisance.
Facts: Smoke and odor from stove annoyance or nuisance? Court held that it was a nuisance
because the value of allowing them to use wood stove was not as high as protecting one's right to
enjoy their home. Here, conduct was intentional and significant. The benefit to Greves was small,
whereas the harm to Thomsens was great.
Note:
Restatement “Balancing Approach”
o § 826 – An intentional invasion of another's interest in the use and enjoyment of land is
unreasonable if the gravity of the harm outweighs the utility of the actor's conduct. In
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o
determining the gravity of the harm from an intentional invasion of another’s interest in
the use and enjoyment of land, the following factors are important:
 (a) the extent of the harm involved;
 (b) the character of the harm involved;
 (c) the social value that the law attaches to the type of use or enjoyment invaded
 (d) the suitability of the particular use or enjoyment invaded to the character of
the locality; and
 (e) the burden on the person harmed of avoiding the harm.
In determining the utility of conduct that causes an intentional invasion of another’s
interest in the use and enjoyment of land, the following factors are important:
 (a) the social value that the law attaches to the primary purpose of the conduct;
 (b) the suitability of the conduct to the character of the locality; and
 (c) the impracticability of preventing or avoiding the invasion.”
B. Basics of Zoning – legislative control of land
Introduction: As the United States industrialized, a need emerged to section off areas for residential living
for health and safety reasons. Zoning was the government's answer.
1. The Constitutionality of Zoning
Village of Euclid v. Amber Realty Co. -- the germ of evil
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Facts: The Ohio village restricted all non-residential building and people sued and the suburbs
were born because the court found that there was a rational basis for police powers reason behind
this and the state had that right. They didn't want to only build in single-family dwelling and
some of their land fell on that area.
Rule: Municipal zoning regulations are constitutional, unless they are clearly arbitrary and
unreasonable, having no substantial relation to the public health, safety, morals, or general
welfare. (Rational Basis Standard).
Note:
o Assumptions of Euclid:
 Separation of uses is desirable
 Single-family home most important use
 Lot-by-lot development
 We need cars
 Planners can anticipate market forces
 There will be little or no need to change the zoning plan over time
 Nonconforming uses will wither away with time
o Compare to: Nectow v. City of Cambridge, where the Supreme Court recognized that a
zoning law could be unconstitutional as applied to an individual property. Because the
facts demonstrated that “no practical use” could be made of plaintiff’s property for
residential purposes—the only permitted use—the Court held that the zoning did not in
fact promote the public health, safety, or welfare.”
o Pre-existing uses that do not conform to ordinances cannot be removed by the ordinance
under the 4th amendment.
 A diminution in property is NOT a taking – unless it effectively erases all
economic value of the land
Hypos:
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o
o
Felon-Free Zone
Swimming Pool Requirement
2. The Typical Zoning Ordinance
3. Non-Conforming Uses
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When a prior existing use of a parcel does not conform to a newly enacted zoning ordinance, it is
given protection in order to avoid the Constitutional objection of the 5th Amendment Takings
Clause. This non-conforming use benefit may be passed on to buyers and continue for years.
The right usually vests once the use can be fully enjoyed, but some jdx allow it to vest upon
partial completion of project.
There are legal ways to terminate a non-conforming use, including
o Nuisance,
o Eminent domain
o Destruction
o Amortization
 Most jurisdictions allow a city or county to eliminate a prior nonconforming use
without any payment to the property owner if it allows a reasonable period of
time for the use to continue before it is terminated. Courts have routinely upheld
amortization periods for billboards in the range of two to three years.
o Abandonment.
 Fork: mere non-use or non-use + manifest intent to leave.
Trip Associates, Inc., v. Mayor of Baltimore
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Facts: A club that had been used for exotic dancing was in an area that was recently rezoned to
prohibit such things. It then wanted to increase the number of nights that it held exotic dancing,
and the court questioned whether this was permissible and held that it was because it was a mere
increase in frequency.
Rule: Increasing the frequency of a valid, nonconforming use of property is a permissible
intensification of the use rather than an unlawful expansion of the use.
Note:
C. Rigid Zoning or Flexible Zoning
1. Zoning Amendments
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
Majority Rule: A re-zoning ordinance is valid as long as there was a rational basis for the
decision. (Same as in Euclid)
Minority "Change or Mistake” Rule: A re-zoning ordinance is valid (a) if conditions in the zone
have significantly changed or (b) a mistake was made in the original zoning ordinance"
Smith v. City of Little Rock – hot, juicy redhead
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Rule: Rezoning a previously residential property in a residential neighborhood is not inherently
arbitrary and capricious (same as Euclid test)
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
Facts: The Wendy's was rezoned into a residential neighborhood. They claimed “spot zoning” but
courts disagreed.
Note:
o Spot Zoning Factors
 (1) Singles out a small portion of land for different treatment
 (2) Primarily for the benefit of the private owner rather than the public
 (3) Done in a manner inconsistent with the general community
 How wide is the spot? (fork)
2. Variances
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A variance is an authorized deviation from the literal terms of the zoning ordinance in order to
avoid special hardship arising from physical conditions on a particular tract of land.
Detwiler v. Zoning Hearing Board – weird lot shape
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Rule:
o
(1) That there are unique physical circumstances or conditions, including irregularity,
narrowness, or shallowness of lot size or shape, or exceptional topographical or other
physical conditions peculiar to the particular property and that the unnecessary hardship
is due to such conditions.
o (2) That because of such physical circumstances or conditions, there is no possibility
that the property can be developed in strict conformity with the provisions of the
zoning ordinance and that the authorization of a variance is therefore necessary to enable
the reasonable use of the property.
o (3) That such unnecessary hardship has not been created by the applicant. (self-inflicted)
o (4) That the variance will not alter the essential character of the neighborhood or district
in which the property is located, nor substantially or permanently impair the appropriate
use or development of adjacent property, nor be detrimental to the public welfare.
o (5) That the variance will represent the minimum variance that will afford relief.
Facts: Millers want to build home on land but can't because lot is oddly shaped and the setbacks
requirement would make it impossible. They request a variance. Detwiler's don't want them to
build and sue. Court rules for Millers, using 5 factors from the Pennsylvania Test.
Note:
o Variance has a stringent standard
o Area v. Use variance
o Slides
Hypo:
o Backyard ravine house
C. Conditional Use Variance

A conditional use (or special exception) is a use that is permitted in the zone if certain conditions
specified in the zoning ordinance are met. It is typically utilized to regulate uses that might cause
aesthetic, noise, traffic, or other problems in a neighborhood, such as airports, junkyards,
landfills, and office buildings. Unlike a variance, the conditional use is a use authorized by the
ordinance—but one that must be regulated on a case-by-case basis to avoid injury to existing
nearby uses.
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D. How Far Should Zoning Use Go?
1. Aesthetic Regulation
State ex rel Stoyanoff v. Berkeley – no hideous pyramids!
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Rule: Zoning regulations that restrict certain houses based on aesthetic considerations alone may
be constitutional if done for the public welfare – even if it doesn't affect market value.
Facts: Georgian/French Colonial style neighborhood tried to put a pyramid monstrosity and
neighborhood developed an Architecture Board to say no. Builder argued it was arbitrary. Court
disagreed.
Note:
2. Family Use Zoning
The Constitutionality of Family Zoning Established
In Village of Belle Terre v. Boraas, 416 U.S. 1 (1974), the Supreme Court upheld such a “family” zoning
ordinance against due process and equal protection attacks. (pg.793)
Moore v. City of East Cleveland – the grandma case
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Rule: The right of related family members to live together is fundamental and protected by the
Due Process Clause, and necessarily encompasses a broader definition of “family” than just
members of the nuclear family – therefore, it cannot be so easily overcome by RB test.
Facts: Grandma Moore told she couldn't live with the grand kids because of family zoning
ordinance.
Note:
o This case does not use RB or SS test – but the in-between test of Moore.
Hypos:
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Musician ban? -- maybe!
Nazi party? -- probably not
3. Growth and Controls Exclusion
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Growth Control Zoning: If a community can demonstrate that they are restricting access based on
legitimate, non-discriminatory reasons, then it will be valid.
Exclusionary Zoning: If a community uses zoning which in effect discriminates against a class of
people, it will not be upheld.
NAACP v. Mount Laurel – discriminatory effect
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Rule: A developing community must make a variety of housing options available and cannot
foreclose the opportunity for low and moderate income because of the discriminatory effect.
Facts: Restrictions put in place which basically limited types of buildings that could be built in
area. Low- and moderate-income families couldn't live there. NAACP sued
Note:
o In Village of Arlington Heights v. Metropolitan Housing Development Corp., 429 U.S.
252 (1977), the Supreme Court ruled that a zoning ordinance with a discriminatory effect
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o
did not violate the Constitution. Notice that the Mount Laurel court based its decision on
the New Jersey state constitution. A number of jurisdictions have endorsed the Mount
Laurel approach."
Disparate impact may not be enough
Permitted use, conditional use, or special exception, assessory use are types of zoning uses (pg. 782)
CHAPTER XIII: EMINENT DOMAIN
The Fifth Amendment: The Fifth Amendment imposes two restrictions on government’s power to take
private property by eminent domain: (a) property may be taken only for a public use; and (b) just
compensation must be paid to the owner.
A. Defining Public Use
General Rule: The public use requirement is clearly satisfied when government takes land so that it may
be physically used by the public or by government employees. More broadly, the Supreme Court has held
that the requirement is satisfied if a taking serves a public purpose. Furthermore, taking private property
for the primary purpose of economic redevelopment pursuant to a comprehensive plan satisfies the public
use requirement. The standard is a rational basis.
Traditional:
Traditionally, “public use” was defined as use by the public, such as railroads, public parks, etc.
Hawaii Housing Authority v. Midkiff – public purpose
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Facts: Can Hawaii take property from lessors and give to lessees to spread around the ownership?
Yes, because there was a rational basis for doing so.
Rule: A state may use the eminent domain process to take property that is heavily concentrated in
the hands of a few private landowners and redistribute it among the general population of private
individuals.
Note:
o Incidental damages? Probably not
o Emotional value considered? No
o If owner is old? No
o If land taken damages value of severed parcel? Yes
o Compare to Berman (blight case)
B. Scope of Public Use
Kelo v. City of New London – economic development as public use
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Rule: A state’s use of eminent domain to condemn property from private individuals and
redistribute it to other private individuals constitutes a “public use” under the Fifth Amendment if
it is rationally related to a conceivable public purpose.
Facts: Kelo didn't want to sell his nice home for the Pfizer development. He could lose it to
eminent domain.
Note:
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If the taking predominantly favors a private individual with only incidental public use
benefit, then it fails the test. The degree of incidental nature of the benefit matters
(Kennedy Concurrence.)
Hypos:
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Limousine parking beneficial to big casino
Mika is the owner of a national beer company whose headquarters is located in City X. Mika's
business brings hundreds of jobs and millions in tax revenues to City X and the state. Mika
decides she wants to buy Paul's house, a lovely historic structure uniquely located on the river
flowing through City X. Paul refuses, thinking that he can hold out for a much higher price. Mika
tells City X that unless it condemns Paul’s house so that she can buy it for fair market value,
Mika will move to another town. City X begins condemnation proceedings.
C. Just Compensation
Just compensation is generally defined to mean fair market value—the amount that a willing buyer would
pay a willing seller on the open market. An inherent problem in calculating fair market value in a
condemnation action is that the government seeks to buy from an unwilling seller."
CHAPTER XIV: TAKINGS
General Rule: While government may regulate an owner’s use of her property under the police power, a
regulation that goes “too far” is an unconstitutional taking. The Takings Clause is designed to prevent
government from forcing certain owners to bear public burdens which in fairness and justice should be
shared by the public as a whole.
A. Theory and Foundation
In general, a government regulation is not a taking. However, when a regulation “goes too far,” it is
treated as a taking and therefore requires just compensation.
Mugler
Hadachek
B. Modern Doctrine
Pennsylvania Coal v. Mahon – regulatory takings recognized
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Rule: While the use of property may be regulated, overregulation will be considered a taking if it
“goes too far.”
Facts:
Note:
o Average Reciprocity of Advantage
o Mere diminution in value is not enough
Hypo:
o Perry owned a 100-acre tract of undeveloped land in Glade County (“County”) which
was zoned for commercial use; he hoped to build a shopping center on the land.
Scientists discovered that the northernmost two acres of the property were part of the
habitat of the Midwestern Spotted Toad, an endangered species under state law. The
County accordingly rezoned those two acres into the “Endangered Species Preservation
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Zone.” The only uses permitted in this zone are “growing native plants, bird watching,
and nature study.” Perry’s appraiser concluded that the rezoning lowered the value of the
two acres to zero. Which outcome is most likely?
C. The Penn Central Standard
Penn Central Co. v. City of New York – the balancing test
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Rule: In determining whether a state regulation constitutes a taking under the Fifth and
Fourteenth Amendments, courts should consider (1) the economic impact of the regulation on the
owner, the (2) extent to which the regulation has interfered with the owner’s reasonable
investment-backed expectations, and the (3) character of the government action involved in the
regulation.
Facts: Law in NY allowed them to designate certain places as landmarks. PC owned Grand
Central when it was designated as landmark. They tried to develop more on GC but were denied
pursuant to landmark law. They sued, calling it a taking. NY SC gave injunction, appeals
reversed.
Note:
o Terms:
 Economic Impact:
 This factor considers the extent of the economic loss suffered by the
landowner as a result of the regulation, usually measured by diminution
in market value. But the Penn Central court suggests that “diminution in
property value” caused by a land use regulation that is “reasonably
related to the promotion of the general welfare” is not a taking. For
example, it notes that the 87½% diminution in value in Hadacheck did
not result in a taking.
 Investment-Backed Expectations
 The focus here is on the owner’s reasonable expectations when he
invested in the property.
 Character of the Action
 The decision notes that a taking will more readily be found when the
interference stems from a physical invasion by the government, rather
than from a government program that promotes the common good.
o Defining Property: Brandeis v. Holmes
 In applying the Penn Central test, the court considers the whole parcel, not
simply the portion which is affected by the regulation. However, determining
what constitutes the whole parcel requires a balance of factors, including the
treatment of the land under state and local law, the physical characteristics of the
land, and the prospective value of the land.
D. Three Categorical Tests – Per Se Takings
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After a decade of using the balancing test, courts developed a number of categorical approaches that were
triggered in certain circumstances.
1. Permanent Physical Occupation
Loretto v. Teleprompter Manhattan
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Rule: A permanent physical occupation authorized by government is a taking requiring the
payment of just compensation without regard to the public interests that it may serve or the fact
that it only has a minimal economic impact on the property owner.
Facts: The government installed tv cable lines on a guy's apartment. The court found this to be a
taking because it was a permanent invasion.
Note:
o Under Penn Central, this would not have been a taking because the burden was so slight
and the benefit and character so good.
o Implicates the right to exclude
Cedar Point Nursery – new test?


Rule: A physical invasion of your property by the government by way of easement is a taking
which requires just compensation.
Facts: The state of California imposed a regulation on a strawberry farmer's land, requiring that
unions be allowed to enter 120 days a week for 4 hours every day. The farm sued, arguing that
this constituted a categorical taking under Loretto. The court agreed 6-3.
o Majority: This is a physical taking, which is all that matters, but it is also arguably
permanent because it is an easement without end.
o Minority: This is inconsistent with Loretto because it is not permanent.
2. Loss of All Economically Beneficial or Productive Use
Lucas v. South Carolina – the beach case
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Facts: The government regulated a man's beach property, saying he couldn't build a home on it.
He sued and it was found a taking per se because the very purpose for which he bought the land
was frustrated.
Rule: A state regulation that completely deprives private property of all its economic value
constitutes a taking under the Fifth and Fourteenth Amendments that requires the payment of just
compensation to the property owner, unless the economic activity prevented by the regulation is
not part of the owner’s initial title or property rights when acquiring the property.
Note:
o Temporary regulatory takings do not satisfy Lucas, because the value of the whole
property cannot be destroyed by temporary taking.
o The Denominator Rule
Wetlands
3. Exactions: Essential Nexus and Rough Proportionality
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
An exaction is a taking if either (a) there is not an essential nexus between the exaction and a
legitimate state interest or (b) the exaction is not roughly proportional to the impact of the
project."
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