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Property Outline
Professor:
Megan Ballard
ACQUISITION OF PROPERTY RIGHTS A. First Possession of Property Rights 1. Acquisition by Labor Locks Labor Theory: People own their bodies and their selves. When people labor they are putting themselves into their labor, making their products of their labor an extension of themselves. Property is thus gained by the fruits of labor. 2. Acquisition by Discovery The discovery Rule: The sovereign who first takes over a land, gains title to the land over any other peoples or nation who come to the land thereafter, or any individuals already occupying (but not holding title to) the land. Relevant cases: Johnson v. M’Intosh: Plaintiffs purchased land from natives. Defendant received his deed for the same land from the United States. The court held because the land had been discovered by the settlers, ultimately only the sovereign of the settlers, the United States, could authorize the sale of the land. The natives lived on the land as occupants, but not owners, and were not authorized to make such a sale. Questions to consider: How could the US discover the land if there were already occupants? The Justice in this case upholds the lower court’s decision despite moral qualms, why? 3. Acquisition by Capture Common Law Capture Rule: In regards to wild animals, the first person to capture or kill the animal is the rightful owner. Relevant Cases: Pierson v. Post: Plaintiff was in pursuit of a fox when Defendant observed the fox and killed it, taking it for his own. The court held pursuit was not enough to establish ownership of the pelt based on historical rulings. Dissenting Opinion: Hunting has changed, so the law needs to change, the labor of pursuit justifies ownership, it’s not a fair or just ruling. Keebel v. Hickeringill: Defendant maliciously scares away ducks on Plaintiff’s decoy pond. P sues. The court held one man cannot disallow another full enjoyment of another man’s property. but had defendant been acting in legitimate competition this would have been okay. It is in the public good to encourage hunting/business. Questions to Consider: What do Keeble and Post have in common? How does the rule of capture relate beyond animals? What about oil? 4. Acquisition by Creation (ideas and expressions) Page 1 of 27 2012 SPRING
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Patent: protect process or products which are novel, useful, and nonobvious. Patents last for 20 years from the date of application. Copyright: protect the expression of ideas in books, articles, music, artistic works, and more. Must be original, but does not need to be novel. Protection begins the day the idea is put into tangible medium and last usually for 70 years past death of author. Trademark: words and symbols indicating the source of a product or service. These last so long as the word or symbol does not become generic or abandoned. Relevant Cases: International News Service v. Associated Press: AP stole news off the INS board. The court held INS owned news and upheld an injunction preventing AP from taking it off boards. The reasoned it was in the interest of public policy and a creation argument. INS used a labor argument. Cheney Brother v. Doris Silk Co.: The court held plaintiff could not patent a silk pattern since it was not unique enough. 5. Acquisition by Creation (persons and persona) Property in persona-­‐ a person may have the right to property of their persona if they are famous. The person has a “right to publicity” of their name, identity, voice, image, etc. However, this is not really a property right, it’s more of an interest. Property in the Human Body??? People can’t sell themselves into slavery. However, the law has permitted the sale of some body parts, usually those which are replenishable or abundant, like hair, blood, sperm, or eggs. Other body parts, like kidneys or other organs, are not for sale. Generally, the law has recognized a right for people to control what happens to their body parts, but not a right to profits gained off of body parts. Relevant Cases: Moore v. Regents of the University of California: the California Supreme Court held that a patient whose cells were removed during an operation and later cultivated into a patented cell line without his knowledge, had no property-­‐based claim against his physicians. Questions to Consider: What justification did the court use in Regents? What potential policy problems does the decision either way bring up? How can Locke’s labor theory be used to argue either side of the Regents? 6. Right to Exclude A person has the right to exclude others from their property, and the state will preserve this right through punitive damages in order to protect and make valuable the peoples right of exclusion. Exceptions: 1) The Government 2) If the exclusion would hurt the civil rights of others Relevant Cases Jacque v. Steenberg Homes, Inc. : Plaintiff sued Defendant for punitive damages when D crossed P’s land in order to make a delivery to a neighboring property, which would otherwise Page 2 of 27 2012 SPRING
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be impossible. The court held punitive damages may be allowed in an exclusion case in order to preserve the right of exclusion. State v. Shack: Migrant aid workers attempted to enter a farm where migrant workers were staying to provide medical care and other services when the men were told they could not meet with the workers, except in the owner’s office. After an altercation the men were removed by police. The court held the right of exclusion does not extend to those working on behalf of the government or extending the civil rights of others. B. Subsequent Possession of Property Rights 1. Acquisition by Find Finder-­‐ a person who holds title to lost property. True Owner-­‐ the person who originally owned the property Generally a finder holds title to found property over any other person, except the true owner. First in Time-­‐ The first one to find the property is the Finder. What if you find lost property which was attached to property that was not your own? The On-­‐In Rule: Property which is attached to or embedded in a piece of property belongs to the land owner, not the finder. Mislaid v. Lost? Property which is intentionally laid in a place, but is left behind is not lost, but mislaid. Usually this is in reference to a public place, at which point the shop owner becomes a bailer to the property. A person who finds lost property has a right to the property against anyone except the true owner, except when the property was found in or on land which the finder does not have title to the land, or the finder is in privity with the land owner as an employee. Relevant Cases: Amory v. Delamirie: a “chimney sweeper’s boy” found a jewel and took it to a goldsmith, who refused to return it; the court concluded that the boy had title to the jewel, not the goldsmith. Hannah v. Peel: tenant leased a room and found something valuable in the windowsill. The court held the tenant held title to the property since it was not on or in the landlords land. Bridges: A shop owner is given a note found on the floor of the shop, after trying to find the true owner and not, the finder laid claim to the note. The court held the finder, not the shop owner had a claim. Southstaffiture: Finder is a hired hand to clean the pool and finds some rings that were covered by land. The court says the land owner has the title to the rings because: Elwes : The lessee of a land is developing the land for gas and minerals, and finds an ancient buried boat. The court finds for the land owner as title to the land. McAvoy v. Madina: Shop owner is given a purse found laying on a table. The finder tries to lay claim to the purse. The court holds the purse was mislaid since it was placed on a table intentionally and then forgotten, therefore the shop owner has a bailment with the true owner. Questions to Consider: Is there a good reason to distinguish lost and mislaid property? How do we apply finder rules on the whole? Page 3 of 27 2012 SPRING
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2. Acquisition by Adverse Possession (Chattel) Remember that adverse possession requires that the statute of limitations for replevin has run out, usually five or six years, but when does the statute of limitations begin? Note the different rules by which the SOL may be delayed in toling: • Discovery Rule-­‐ A cause of action will not accrue until the property, and its wrongful possessor, is discovered and the true owner practices due diligence that a reasonably prudent true owner would have used in discovering the possessor of the property. • Demand Rule – SOL begins to run when the true owner makes a demand for the return and the possessor refuses to return. • The Guggenheim Rule: The SOL for replevin (claim and delivery) does not begin to run until a true owner makes a request for the property and a good faith purchaser refuses. Until such a time it is not wrong for a good faith purchaser to possess the stolen property (meaning until that time the good faith purchaser would not be able to take advantage of adverse possession until after contacted by the true owner and the requisite time passed from then)!NY courts reject this rule because they do not believe it allows enough protection for the true owner. The burden of research and investigation into artwork purchases should be on the buyer. But, an unreasonable delay in searching for the lost work might count against the true owner. Relevant Cases: O’Keeffe v. Snyder: Plaintiff’s painting was stolen from a gallery. Defendant alleged they adversely possessed the painting, so it was rightfully theirs. The court ruled defendant did not adversely possess the painting since the SOL did not begin tolling until the painting was discovered by plaintiff, since plaintiff practiced due diligence to find the painting. 3. Acquisition by Adverse Possession Adverse Possession: a method of transferring interest in land without the consent of the prior owner (the true owner), and even in spite of the dissent of such owners. Adverse possession is made possible by a running out the statute of limitations. How do you prove adverse possession? -­‐ Hostile Possession-­‐ occupancy of a piece of real property coupled with a claim of ownership, o The Connecticut Doctrine (MAJORITY) -­‐ the very nature of the possession is proof of intention, so there is no reason to inquire into the mind of the possessor, i.e., a person can adversely possess by mistake. o The Main Doctrine (minority)-­‐ it must be the intention of the occupant to claim ownership of the land. -­‐ Actual Possession -­‐ control over what happens to the land -­‐ Open and Notorious Possession-­‐ property is possessed openly in the public and not secretly, must be sufficient to give notice to a reasonably attentive property owner (objective) -­‐ Exclusive Possession-­‐ only a single party possessed the land without question (subjective). -­‐ Continuous Possession (equal to or beyond the statute of limitations)-­‐ Continuous possession may be established so long as the property is used in a similar manner to similar Page 4 of 27 2012 SPRING
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properties continuously (i.e. the possessor of a summer home does not need to possess the home for more than the summers continuously). Tacking-­‐ A method by which continuous possession may be established for the time of the statute of limitations. If the previous possessors possessed the land adversely, the time they possessed the land may be added to the time the current possessor has possessed the land, but only if the previous and current possessors were in privity. If Adverse Possession can’t be established, what now?! The Balancing of Hardships test-­‐ If vacating the property would cause significant damages to adjoining property, such that it would be unstable or no longer capable of being built upon by reason of zoning or restriction, the true owner of the property may be forced to convey the property for fair market value. Relevant Cases: Brown v. Gobbel: Plaintiff wanted to build a road on a strip of land which they owned by deed, but was possessed by their neighbors, Defendant. The court found the Defendants adversely possessed the 2” strip of land. Mannillo v. Gorski: Defendants built cement steps which encroached onto Plaintiffs land. The court held, although it was a mistake, the property could still be held hostilly, but the property was not held openly and notoriously. However, the court found for the Defendant based on the Balancing of Hardships test. Howard v. Kunto : Due to a mistake in the deed, Defendant’s summer home was built on land which was not their own. Plaintiff claims Defendant did not continuously possess the property because D only occupied the property during the summers. The court held continuous possession can be established as long as the property is possessed in the same manner as similar neighboring properties. Relevant Questions: What is the policy behind adverse possession? 4. Acquisition by Gift Gift: In order to gift or donate property there must be donative intent, delivery to the donee, and acceptance by the donee. Intent-­‐an irrevocable intent to transfer ownership Intent requires the donor to be of sound mind. Delivery may be explicit, symbolic, or constructive. Constructive deliver requires handing over something that will provide access to the property, like a key or code. Symbolic deliver requires handing over something that represents the property, like a piece of paper declaring the gift. The traditional rule is that if manual delivery is possible, it must be committed. However, that rule has deteriorated over the years, so long as the intent is clear. How do intent and delivery work together? Often if intent is perfectly, 100% sound, courts tend to ease on the circumstances of delivery, but when intent is shakey, there is stronger qualifications on the delivery. Page 5 of 27 2012 SPRING
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Gifts are irrevocable once made. Inter Vivos or Causa Mortis? – Inter Vivos means the gift was made during life. Causa Mortis means the gift was made in anticipation of death. Relevant Cases: Newman v. Bost: The evidence showed an intention of donor to give the property in his house to a donee, to whom donor gave the keys, saying, “What is in this house is yours.” Held a constructive delivery of all the furniture, locked or unlocked by the keys, but not of other furniture in the house. Gruen v. Gruen: Wife contested a gift of a painting her dead husband “gave” to her step son, but did not intend the son to have the painting until after his death. The court held a letter stating the intent was enough to constitute deliver, since it was the most practical form of delivery in this situation, and delivery must meet the needs of the particular situation. CO-­‐OWNERSHIP OF PROPERTY AND MARITAL PROPERTY 1. Common Law Concurrent Interests Tenancy In Common-­‐ Parties have separate, but undivided interests in property. There is no survivorship. (i.e. the interest in the property passes to someone else in death). Joint Tenancy-­‐ Parties have wholly and undivided interests in the property. There are survivorship rights. (i.e. when one party dies the interest passes to no one). There are four unities requires to create a joint tenancy: 1. Time-­‐ must vest to all parties at exact same time 2. Title-­‐ must acquire title by the same means 3. Interest-­‐ equal and undivided 4. Possession-­‐ each possess the property as a whole, but may voluntarily give possession to the other A joint tenancy may be unilaterally severed if one party vests the property (even if they vest it to themselves). Joint Tenancies and Tenancies in common may be partitioned by the court if disputes arise. Partitioning: Partition in kind: physical division of the land between the parties Partition in Sale: division of the proceeds by judicial sale of the land between the parties Partition by kind is preferable to partition by sale, but partition by sale of property owned by tenants in common may be ordered only when the physical attributes of the land are such that a partition in kind is impractical or inequitable and the interest of the owners would be better promoted and protected by a partition by sale. How do we determine practicability and equitability? - How many pieces we have to divide, and if the property is easy to divide. - Where the use of the property was located. - The size. Page 6 of 27 2012 SPRING
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The shape-­‐ the property was rectangular How do we determine if sale would protect the interests of the owners better? How the property is used by the owner. Ouster-­‐ Refusal to allow one party full enjoyment of a piece of property. If one party is ousted, the other party may be required to pay rent to the other party. Establishing Ouster-­‐ A party must demand possession of the property; to come and go as they please and to use the property as they please, and be denied possession. Constructive Ouster? – Some jurisdictions have, where it would be impossible for joint use of the property because of space or circumstances. Other Rights and Duties of co-­‐owners-­‐ Carrying charges: charges needed to upkeep the property as joint owners, include: Taxes and mortgages-­‐ Co-­‐owners usually have a duty to share these. Necessary Repairs -­‐ No rights to contribution, but you might get credit in a partition action or an accounting action. This is because it is too uncertain how much repairs are going to be or even if the repairs are necessary. Minority Rule-­‐ Some states allow co-­‐owners to compel a contribution, if the other owner was notified in advance. Also the rule WA follows. Improvements: No rights to contribution, but they may receive credit to recapture the cost or the realized value, unless they have diminished the interest of the other party. Tenancy by the Entirety-­‐ Created in marriage (plus the four unities). It must be created AFTER marriage. At any point before marriage, it does not count. Usually, no action can be taken in regards to the property unless both parties agree. Relevant Cases: Riddle v. Harmon: Mr. and Mrs. Riddle owned a property in joint tenancy. Before Mrs. Riddle died she conveyed her interest in the property to herself and then disposed of it by will. Mr. Riddle challenges the estate. The court held joint tenancies could be unilaterally severed. Harms v. Sprague: One party to a joint tenancy took a mortgage out using the property as collateral without the consent of the other party. When the first party died the lender attempted to collect off the property claiming the mortgage severed the joint tenancy. The court held a mortgage of a single party in a joint tenancy does not sever the joint tenancy and a lien against the property cannot be upheld. Delfino v. Vealencis : When a dispute arose between co-­‐owners the trial court ordered partition by sale. The court held the TC erred, and partition by sale should only be used when absolutely necessary. Spiller v. Mackereth: The court here held co-­‐owner was no entitled to rent simply because she delivered a letter stating rent was due or because the other owner installed locks. In order to collect rent she must show ouster. 2. Marital Interests Tenancy by the Entirety-­‐ See above: Lenders cannot collect on marital property from the debt of one spouse. Page 7 of 27 2012 SPRING
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Common law System v. Community Property System: Common Law System: The rights to property in marriage depend on who acquired the property. The person who acquired the property holds the title to the property separate from the other party. Elective/Forced Share: Because at death the property of one spouse would pass according to either the will or the laws of the state, the surviving spouse may elect to take a percentage of the estate, but forfeit whatever was willed to them. Community Property System: property is shared half and half. Each spouse contributes equally, and everything is owned equally what comes into a marriage. Separate Property – Everything owned before marriage and property acquired to a party by will, gift, bequest, devised or decent after marriage, and profits gained on said property. Note that labor is an investment into property. If there is separate property, and the other spouse invests labor, they may have a property right. Community property-­‐ Anything obtained during marriage that is not separate property. Commingle-­‐ mixing up separate and community property. Say I have $10,000 of separate property and I invest it in a community property money market. Tracing-­‐ Separating out the commingled property Finally, at death the decedent spouse may transfer by will one half of the community property; the other half belongs to the surviving spouse. Equitable Division of Property: Divorce " -­‐ upon divorce all property (regardless of the property system used), the property is divided equally. Relevant Cases: Sawada v. Endo: the court held that an estate by the entirety was not subject to claims of creditors of one spouse during their joint lives so that conveyance of land held by tenants by the entirety to their sons after the accident was not in fraud of the husband's judgment creditor. In re Marriage of Graham: The court ruled that a spouse who contributed to their partner’s education did not “own” part of the MBA, since an MBA is not property. However, the spouse is not without remedy. Questions to Consider: Why does it matter which system a state uses? In Graham, why is an MBA not property? Can you articulate reasons why it might not be? LEASEHOLDS: LANDLORD-­‐TENANT LAW 1. The Leasehold Estates and the Lease Page 8 of 27 2012 SPRING
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The Lease?? – = a tenant-­‐landlord relationship, which carries with it certain rights, duties, and liabilities. An agreement where one person agrees to divest possession, and the other agrees to accept possession. It can involve rent, It can involve a contract. Statute of fraud says any lease over a period of a year must be in writing. o Not A License – temporary and revocable permission to enter the land or property. Entirely unilaterally revocable. The property is not divested. Term of Years – a lease which extends for a specific amount of time, either set, or computed. The tenancy ends at the end of the term. No notice is required to terminate. Periodic Tenancy – a tenancy which continues periodically at regular intervals (for example month-­‐month) until either the tenant or the landlord end it. Under common law, half a year notice is required for termination of a year to year lease. For a period tenancy of less than one year, notice must be given in an amount of time at least equal to the period. However, now, statute usually determines the amount of time the notice period was. In WA it’s 20 days. The death of the landlord has no effect on this tenancy. Tenancy at Will-­‐ A tenancy which occurs for a period of time, so long as the landlord and the tenant agree. Either the landlord or the tenant may terminate the tenancy with no notice. However, other provisions for who may terminate the tenancy may be stated in the lease. The death of either tenant or landlord will terminate the tenancy. Tenancy at Sufferance-­‐ The Holdover Doctorine-­‐ Holdovers: When a tenant remains in possession of the estate after termination of the tenancy. The tenant has “held over” his stay. The landlord has two options: 1. Eviction (+damages) the tenant as a trespasser 2. Consent (implied or express). Agree to a new tenancy. If there is an implied tenancy, what kind of tenancy is it? Most jurisdictions think it is a Term of years. What is the length of the tenancy? Depends of the jurisdiction. There ought to be case law which establishes. Relevant Cases: Garner v. Gerrish: Tenant believed he had a tenancy terminable at will, which expressly stated a unilateral right to terminate by the tenant, but not the landlord. The landlord died, and the estate attempted to evict the tenant. The court said this lease created a new tenancy of a “terminable life tenancy on behalf of the tenant”? Note the criticism of this court for simply creating new kinds of estate, and Ballard’s skepticism of this. 2. Selection of Tenants (Discrimination) The Fair Housing Act Primary Prohibitions: §3604: Page 9 of 27 2012 SPRING
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Prohibits discrimination in the sale, rental and financing of dwellings based on race, color, religion, sex or national origin, handicapped persons, or persons on the basis of family status. It shall be unlawful to: a. Refuse to sell or rent… b. Discriminate in terms, conditions…. c. Make, print, publish…. d. Represent…. e. For profit to induce… f. Handicap Exemptions to §3604: §3603(b): 1) Nothing in section 3604 applies to: Single family homes provided that… [no more than] three such single-­‐family houses at any one time… provided further that [there is only] one such sale within any twenty-­‐four month period… provided that…[ there is no interest in any further property aside from the three allowed by owner]… [and that] That after December 31, 1969, the sale or rental of any such single-­‐family house shall be excepted from the application of this subchapter only if such house is sold or rented…. [and no use of] real estate broker, agent, or salesman, or of such facilities or services. EXCEPT: 3603(b)(1)-­‐ “without publication, posting, or mailing….in violation of §3604(c))… . 2) rooms or units in dwellings containing living quarters occupied or intended to be occupied by no more than four families living independently of each other, if the owner actually maintains and occupies one of such living quarters as his residence. Mrs. Murphy Cases 3. Delivery of Possession – What if the former tenant is still there?! The American Rule v. The English Rule o The English Rule: every lease implies a duty to hand over actual possession. o The American Rule: recognizes the lessee’s legal right to possession, but implies no such duty upon the lessor as against wrongdoers, absent an explicit covenant. o The courts here split, there is no majority rule. Relevant Cases: Hannan v. Dusch : Lessee brought suit to recover damages from lessor. After signing a lease, the lessee discovered former tenants, which the lessor refused to evict, occupied the property. The court ruled for the American rule, and stated landlord had not duty to deliver. Questions to Consider: Why might the courts favor one rule over the other? Due diligence of the tenant? Fairness to the tenant? Responsibility of the landlord? False representations through no representation? Caveat emptor? 4. The Tenant Who Defaults In Possession -­‐ The Self Help Doctrine: The Common Law Rule: self-­‐help to retake property may be used if: 1)The landlord is legally entitled to possession, or where a tenant breaches a lease containing a reentry clause and 2)the landlords means of reentry are peaceable Page 10 of 27 2012 SPRING
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Modern Rule: Any self-­‐help reentry against a tenant in wrongful possession is wrongful under the growing modern doctrine that a landlord must always resort to the judicial process to enforce his statutory remedy against a tenant in wrongful possession. Abandonment of Possession -­‐ Surrendor: If the tenant abandons their lease, and gives notice of the surrender, and the landlord accepts the surrender, the landlord has an obligation to attempt to mitigate damages before they may recover from the surrendering tenant. o What constitutes adequate attempt to mitigate? Publishing notice of opening, showing the property to potential tenants, not turning away tenants asking after the property, only reducing the price after attempting unsuccessfully to rent at a lower price. Relevant Cases: Somer v. Kridel: defendant abandoned his lease because of a broken off engagement. Landlord did not rent the apartment even after a potential tenant specifically asked after defendant’s unit. Court ruled for defendant. Riverview Royalty v Perosia: Defendant broke his lease. Plaintiff waited several months before showing the unit. Court ruled for defendant. Questions to Consider: What is the public policy behind requiring landlords to mitigate abandoned leases? What happens if the tenant does not give notice or surrender? What happens if landlord attempts to mitigate and fails? 5. Rights, Duties and Remedies Quiet Enjoyment-­‐ actual interference by the landlord. Initially at common law the claim was limited only to breach by the landlord due to ouster (the tenant had to abandon the property). It was expanded to include beneficial enjoyment later. Constructive Eviction-­‐ any act or omission of the landlord which renders the premises substantially unsuitable for the purpose of which they are leased or which seriously interferes with the beneficial enjoyment of the premises is a breach of the covenant of quiet enjoyment and constitutes a constructive eviction. The defect must be reoccurring or permanent. There must be notice of the defect and reasonable time to remedy the defect. You do not actually need to abandon the property. Usually, tenant may sue for damages while still paying rent. Constructive Eviction by Omission: The omission must be of a duty the landlord had. If the landlord didn’t have a duty, he has no omission. + all other requirements present. How do we get a duty when none is explicitly stated. Implicit Duties at Common Law: # To disclose latent defects # Maintain common areas # Undertake repairs carefully if he agrees to repair # If apartment is furnished, to maintain the premises # Not to fraudulently misrepresent property # Abate moral nuisances Page 11 of 27 2012 SPRING
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Illegal Lease-­‐ A condition that violates a major housing code, which existed when the lease was signed, (minor violations don’t count), landlord has notice of violation and reasonable time to correct. Tenant does not need to vacate the premises to recover. The tenant may withhold rent, but may be required to pay rent = to the value of the property in its current condition. Implied Warranty of Habitability-­‐in the rental of any residential dwelling unit an implied warranty exists in the lease weather oral or written, that the landlord will deliver over and maintain, throughout the period of the tenancy, premises that are safe, clean, and fit for human habitation. Cannot be waived under any circumstances. The tenant must show the landlord was given notice of the defect and given reasonable time for correction. Damages will be the difference between the value of the dwelling and the value as it exists. An additional remedy may be withholding of rent Relevant Cases: Reset Realty Corp v. Cooper – Landlord was unable to recover rent because the court held he constructively evicted tenant by failing to repair water leakage preventing tenant from using the property as a business office, which he was given notice of and reasonable time to repair. Hilder v. St. Peter: Slum lord keeps property in abhorrent conditions, including broken windows, broken locks, damaged ceilings, and more. After being given notice of defects in apartment landlord promised to fix, but did not. The court ruled for tenant, even though she did not abandon the apartment, since she had an implied warranty of habitability. Questions to Consider: What are the policies behind expanding tenant rights? Implied warranty of habitability? What changes in society lead to the reform? What are the substantial differences in each doctrine? When may they be applied and what are their remedies? TRANSFERS OF LAND 1. Buying and Selling: An outline of the process a. Buyer and Seller contemplate i. Buyer 1. Buyer has to determine price range 2. Research eligibility for mortgage 3. Look at listings/consider a buyer's agent 4. Consider price of comparable properties ii. Seller 1. Find real estate agent 2. Negotiate agreement with agent 3. Establish price -­‐ consider comps 4. Complete property disclosure statement 5. List on MLS b. Buyer offers – REPSA ( a section of the contract, which states buyer promises a marketable title, there may be listed some exceptions.) i. Complete REPSA -­‐ to seller 1. Inspection 2. Either party can get specific performance under part performance and e
stoppel ii. Seller considers offer Page 12 of 27 2012 SPRING
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c. Seller accepts -­‐ seller sings -­‐ executory period begins d. Executory Period e. Closed/Deed 2. Contract of Sale Statutes of Fraud: Docterine which requires contracts for the sale of land to be in writing, signed by the parties, include a description of the property, and a statement of or mention of the method by which price is devised. Exceptions to the Statutes of Fraud: Partial Performance: enforcement of an oral contract when one party performed partially based on an oral representation. Estoppel-­‐ Serious injury or injustice would occur from the non-­‐enforcement of an oral contract. Adverse possession. Marketable Title: If the seller cannot convey a marketable title, the buyer is entitled to rescind the contract. Marketable title is a title not subject to such reasonable doubt as would create a just apprehension of its validity in the mind of a reasonable, prudent and intelligent person, one which such person guided by competent legal advice, would be willing to take and for which would be willing to pay fair value. Free from encumbrances and any reasonable doubt of the titles validity. Defines the rights between buyer and seller during the executory period. Once the contract is signed, each party is entitled to specific performance, but equity regards the seller as only having an interest in real property, and the buyer is the owner Caveat Emptor: The buyer is under no duty to disclose anything about the house, the buyer must do the due diligence. Some states (about 1/3) have abandoned CE and taken on full disclosure states (duty to disclose latent defects that materially affect the value). Many of these states have statues listing conditions which must be disclosed. Exceptions to Caveat Emptor An Affirmative Representation: Lies Facts that would materially impair the value of the home, but buyer would not find in due diligence (like ghosties) Subjective test: had the buyer known…. Objective test: had a reasonable buyer known…. Latent Defects: defects which are not readily apparent Implied warranty of quality-­‐ carved out for newly constructed homes where buyers would not have an opportunity to do due diligence. Exception for second owners, who identify a latent defect within a reasonable time. 3. The Deed What is a deed? A document that affects the sale of real property. Statutes of Fraud: Because of the statutes of fraud a deed must be in writing. It must include a description of the property, a statement of price (or the method by which price will be determined), and it must be signed by each of the parties. Page 13 of 27 2012 SPRING
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Delivery of Deed: Like a gift, a deed must be delivered properly. There must be: Delivery Intent to transfer title Acceptance Two ways of delivery: 1. To the party directly. In this instance title will transfer at the time of acceptance. 2. In Escrow. If title is intended to transfer on a condition precedent, the deed must be delivered to a third party and it must irrevocable. Because of the problems created over the years from abuse of the conditional deed some states have developed Transfer on Death Deeds: 12 states have adopted legislation which allows deeds which transfer on death. The deed is transferred during life, and is recorded during life, but comes into effect at death. The owner may revoke or amend the deed during life, without consent. The deed transfers at death without entering probate. Relevant Cases: Sweeney v. Sweeney: One brother rights a deed to transfer land to the other. The deed is recorded. Then another deed is written granting the first brother the title to the land upon the death of the second. This deed is not recorded, but it given to the second brother, who then delivers it to a lawyer, where the deed is lost. The first brother dies, and the wife of the first brother claims the property. The court says because the deed was not delivered to a third party it was technically delivered to the first brother, making the land his, and thereby his wife’s. Rosengrant v. Rosengrant: Aunt and uncle wish to deed their home to their nephew and draw up the deed at the bank while Aunt and uncle are alive. They then leave the deed there, but it contains the inscription of both the uncle and the nephew’s name. The court says this make the deed revocable, and therefore invalid. Questions to Consider: What is the purpose behind the statutes of fraud? What is the purpose behind the strict requirements for conditional deeds? Why reform those requirements with on death deeds? How is deeding something like gifting something? 4. The Mortgage Note – a written promise by one party (the maker) to pay money to antoher party (the payee) or to bearer. A two party negotiable instrument, unlike a draft (which is a three party instrument). Mortgage-­‐ A lien against property that is granted to secure an obligation (such as debt) and that is extinguished upon payment or performance according to stipulated terms. In a mortgage, the lender can seek deficiency judgment in the case of foreclosure, where the house sale brings in less than the amount due. Trust-­‐ Unlike a mortgage, the borrower can execute a deed of trust to give to a third party. Similar to a mortgage it secures the note by giving an interest to the lender. There is no deficiency judgment. Alternative to a mortgage. Default-­‐ the mortgagor defaults, failure to make payments on the mortgage. Page 14 of 27 2012 SPRING
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Right of Redemption-­‐ The right of a mortgagor in default to recover property before a foreclosure sale by paying the principal, interest, and other costs that are due. A defaulting mortgagor with an equity of redemption has the right, until the foreclosure sale, to reimburse the mortgagee and cure the default. This was meant to protect mortgagors who would simply seize the property as soon as default occurs. Forclosure – A legal proceeding to terminate mortgagor’s interest in property, instituted by the lender (the mortgagee) when the mortgagor defaults, either to gain title or to force a sale in order to satisfy the unpaid debt. Any surplus is paid to the mortgagor. What is actually being foreclosed? The borrowers right of redemption. Judicial Sale-­‐ a sale regulated by a judicial process. It may be costly, and provides less freedoms than the power of sale. Power of Sale-­‐ A foreclosure process by which, according to the mortgage instrument and a state statute, the mortgaged property is sold at a non-­‐judicial public sale by a public official, the mortgagee, or a trustee, without the stringent notice requirements, procedural burdens, or delays of a judicial foreclosure. Power of sale is authorized in more than half the states. At common law the lender could only foreclose through a judicial action. Alternative to judicial sale. Statutory right of redemption-­‐ In many states the mortgagor has the right, within six months of the foreclosure sale, and the mortgagor becomes entitled to any surplus from the sale proceeds above the amount of the outstanding mortgage. PRIVATE LAND USE AND CONTROL: 1. Easements: The right to make use of land Kinds of Easements: Appurtenant Easement: Where the use of the easement is by neighboring property owners. Servient Party: The party which owns the land. The party is burdened. Dominant Party: The party which makes use of the land, the party that benefits. In Gross: The right to make use of the land regardless of ownership relationship. Think like telephone poles. There is not dominant estate. Easement by Grant: just like it says, an easement which is granted to another. Easement by Reservation: a right reserved by the original owner. Easements may be reserved by the original owner on behalf of a third party. Implied Easements: 1. Easement by Estoppel: An easement will be enforceable if a user had permission to use the property through a license, they made improvements to the property based in good faith reliance, and the licensee has knowledge or a reasonable expectation of the reliance. 2. Prescriptive Easement: Hostile, Exclusive, Continuous, Actual, Open and Notorious use of the property for a time beyond the SOL will create an easement. Note: unlike adverse possession: You may substitute the word Use for Possess Exclusivity may be concurrent with the general owner, but not the general public. 3. Easement implied by prior use: An easement will be found where the land was at one time held in common, the use was apparent and continuous prior to the time Page 15 of 27 2012 SPRING
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the land was divided, and the use was reasonably necessary at the time of the division. By Grant: Where the original owner sells the dominant estate By Reservation: Where the previous owner sells the servient estate 4. Easement implied by necessity: An easement will be found when there was a common owner, and there was an absolute necessity to use the land, which existed at the time of severance. Scope of an Easement Scope of an easement is determined by the intent of the original parties. To determine intent we must look first to the written instrument. Scope of an implied easement will generally include anything reasonably necessary to fulfill enjoyment, absent evidence otherwise. Termination: Abandonment: None use is not enough to establish abandonment, there must either be an unequivocal intent to abandon, or use inconsistent with the purpose of the easement. Relevant Cases: 2. Covenants: Real Covenant: a promise concerning the use of land that benefits and burdens the original parties to the promise and also their successor, and is enforceable in an action for damages. Difference between a Covenant and An Easement??? Easements allow the use of land by a non-­‐owner, which still involves burdens and benefits, whereas covenants impose burdens and benefits which regulate the use of land by an owner. Termination of Covenants: Abandonment-­‐ there is so many general violations of the covenant it shows the intent of the covenant is no longer being served. Release-­‐ if all parties of the covenant agree to release the covenant. Changed conditions-­‐ a covenant becomes unenforceable when conditions in the area of the burdened land have so substantially changed that the intended benefits of the covenant cannot be realized. In other words, the covenant would deprive the recipients of ANY of the intended benefits. Reciprocal Negative Easement: The courts will recognize an implied covenant when there are multiple properties which are joined, and some of the properties have a covenant, but others do not, if: 1. Common grantor of two or more properties 2. intent of the grantor to establish a common scheme of development 3. the plan must be for the benefit that of the remaining lots, the plan must implemented in uniform restrictions (which may be filed as a plat map or individual deeds), 4. There must be notice of the plan to the grantee, inquiry notice counts. Page 16 of 27 2012 SPRING
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3. 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 and is enforceable by injunction. What is the difference between an equitable servitude and a real covenant? Real covenants provide burdens and benefits on the use of property which are recoverable in damages. Equitable servitudes are the same, but are recoverable in injunctions. 4. Transferability and Assignments of Easements and Covenants A two sided coin, you have to look at burden and benefits separately. Easements Real Cov. Equit. Serv. Burden 1. Intent of the original Intent of the original parties Intent. Touch and parties for the easement for burden to run. The Concerns. Notice. Runs to be assignable. agreement touches and Written. with the 2. Notice to the burden concerns the land. Vertical land party. Constructive privity or the original parties counts. and the successors. Horizontal privity between the original parties. Notice. Written Benefits Appurtenant: Intent of the Intent of the original parties Intent. Touch and original parties for the benefit to to run. Benefits touch and Concerns. Notice. be transferable. Look for the concern the land. There must Written. intent in the written agreement have been relaxed vertical first. privity. Notice. Written. In Gross: (Miller) Intent of the original parties for the benefit to be assignable or if the easement is for commercial purposes it will be assignable. Intent: Mosley Rule: look to the language and the circumstances of the written agreement. Touch and Concerns: Mosley Test: have a logical is related to the use and enjoyment of the benefits and burdens with the land. Neponsit test: Affects the value, add or subtracts from, of the property. Horizontal Privity: The original owners must have a special relationship. Some states: Promisor and promisee that have a mutual, simultaneous interest in the land. Some states: Only within a grantor and a grantee relationship. Vertical Privity: Page 17 of 27 2012 SPRING
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The relationship between an original party and their successors, but only if the successor succeeds to the entire estate in land held by the original party, and the succession is in the same kind of estate (FSA ! FSA, but not FSA!life estate) Constructive Notice/Inquiry Notice/Actual Notice: 5. Zoning Laws -­‐ The Standard Zoning Enabling Act Empowers municipalities to regulate and restrict the height, number, and size of buildings and other structures, the percentage of lots that may be occupied, the size of yards, court and other open spaces, the density of population, and the location and use of buildings, structures, and land for trade, industry, residence, or other purposes. -­‐ How does the court determine if a state is allowed to based on a constitutional analysis? The rational basis test: A state law will be upheld if it can be shown that it was executed to promote a legitimate state interest (the state’s police power) and that the law itself is rationally (or substantially related to that legitimate interest. Due process and equal protection??? Zoning will be upheld if it was not arbitrary and unreasonable, having no substantial relation to the public health, safety, welfare, or morals. -­‐
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The Euclidian Zoning System Uses are separated because some are harmful to others. The system is divided into districts graded from highest to lowest use, where the highest use is residential, single-­‐family homes. Zoning areas are cumulative o Alternatives Form-­‐based zoning/smart growth zoning-­‐ uses the form of the building and structure to determine if the structure should be allowed, assumes form dictates use. Be prepared to discuss the problems with the Euclidian system Exceptions to zoning laws: Variance: allows some land owners to ignore zoning laws if it would cause them a substantial hardship, unless it would cause a detriment to the public welfare. Special Permits: special uses sometimes built into the ordinance i.e. churches, hospitals, schools. -­‐
Non-­‐Conforming Uses and Ways to Deal with them: non-­‐conforming land which was in use before the zoning ordinance was put into place. o Allow them to exist and hope they eventually die out through an act of god, abandonment, or natural death. o Establish reasonable amortization periods: i.e. land use may continue for X amount of years, but must gradually be phased out. Property Rule Statements: Tenants Duties: Page 18 of 27 2012 SPRING
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A tenant has a duty to third parties on the premises. The tenant is responsible for keeping the premises. The tenant is liable for injuries sustained by third parties that the tenant invites on the premises, even where the landlord has expressly promised to make repairs. The tenant has a duty to repair the premises. When the lease is silent on the duty to repair the tenant must maintain the premises in its current state and make ordinary, minor repairs. The tenant must also not commit waste, meaning the tenant must not abuse or use the property in a destructive way. The tenant has a duty to repair when the tenant has expressly covenanted in the lease to maintain the property in good condition for the duration of the lease. At common law, historically the tenant was liable for any loss, including those outside his control. Today, the majority view is that the tenant is not at fault for destruction of the property outside their control. There are three kinds of waste that a tenant could commit. Voluntary is the willful destruction of the premises. Permissive waste is the neglect of the premises; a failure to take reasonable care of the premises. Ameliorative waste means the tenant has made changes to the property which increased the value of the property. Ameliorative waste may relate to a fixture. A fixture is a thing that was once moveable chattel, that by virtue of its annexation to reality objectively show intent to permanently improve the property. When a tenant removes a fixture she commits voluntary waste. A tenant must not remove a fixture, even if it was the tenant who affixed it. Fixtures pass ownership with the land. In order to tell if chattel is a fixture any express agreement concerning the matter will control. In the absence of an agreement, the tenant may remove a chattel that she has installed so long as the removal will not cause substantial damage. If the removal would cause substantial damage, the tenant objectively shows intent to install a fixture. Additionally, if the thing is uniquely adopted to the real estate, then there is constructive annexation, and the item is a fixture. The tenant has a duty to pay rent. If the tenant breaches this duty and is in possession of the premises the landlord has two options. The landlord may follow a judicial eviction or continue the relationship and sue for rent. If the landlord chooses to evict, they are nonetheless entitle to rent from the tenant, who is not a tenant is sufferance, until the tenant vacates. The landlord must not engage in self-­‐help, such as changing the locks, or forcibly removing the tenant or their possessions. Self-­‐help is not legal, and punishable civilly and criminally, including possible jail time. If the tenant is not in possession of the property, and the tenant breaches the duty to pay rent, the landlord has three options. The landlord can choose to treat the abandonment as an act of surrender and accept the surrender, taking back the property. Surrender is an act that shows the tenant wants to give up their leasehold. However, if the tenant’s unexpired term is greater than one year, the surrender must be in writing because of the statutes of fraud. Secondly, the landlord could choose to ignore the abandonment and hold the tenant responsible for unpaid rent, just as if the tenant were still there. This option is available only in a minority of states. The landlord could re-­‐let the premises on the wrongdoer tenant’s behalf, and hold the wrongdoer tenant liable for any deficiency in rent, if any. The majority rule states that a landlord has a duty to mitigate, that is they must at least make reasonable efforts to re-­‐let before suing for rents. Landlord’s duties The landlord has a duty to deliver possession of the premises. The majority rule requires that the Page 19 of 27 2012 SPRING
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landlord put the tenant in physical possession of the premises. Thus, if at the start of the tenant’s lease a prior holdover tenant is still in possession, the landlord has breached the duty and the new tenant can recover damages. The minority rule is a tenant only has a legal right to possession, and the landlord is not responsible for holdovers. The landlord has a duty to uphold the implied covenant of quiet enjoyment for any kind of lease, residential or commercial leases. The tenant has a right to lawful possession, quiet use, and enjoyment without interference from the landlord. The landlord can breach the covenant by actual eviction, or by constructive eviction. Constructive eviction requires three elements. The first is substantial interference, or interference caused by the landlord’s action or failure to act. The interference need not be permanent, just chronic. The second is that the tenant must notify the landlord and the landlord must fail to respond meaningfully. Lastly, the tenant must vacate the premises within a reasonable time after the landlord fails to repair the defect. The landlord has a duty to uphold the implied warranty of habitability for residential premises. The duty requires that the landlord ensure that the premises is fit for basic human habitation. Standards for habitability can be found in housing codes and case laws. If the implied warranty of habitability is broken, the tenant can take one of four actions. The tenant can move out and terminate the lease. The tenant can repair the defect and then deduct the costs of reasonable repairs from future rents. The tenant can reduce rent or withhold all rent until the court determines a fair value for rent. Typically the tenant must hold the rent in escrow to show good faith, and notify the landlord. This shifts the burden on the landlord to resolve the problem. Lastly, the tenant can remain in possession, pay rent, and affirmatively seek damages. In the tenant reports the landlord for a housing code violation, the landlord is barred from penalizing the tenant. Assignments and Subleases Unless a lease expressly forbids a tenant from transferring their interest, a tenant is free to do so in one of two ways. A tenant can make an assignment, and transfer the entirety of their remaining interest to a third party. The tenant may also make a sublease, where they transfer less than the entirety of their remaining interests to a third party, i.e. the tenant will take back their interest at some point before the interest terminates. If the third party does not pay their rent obligations, the landlord can sue the third party in circumstances where there is privity. In a sublease there is not privity between the landlord and the third party, so the landlord can only sue the initial tenant for rent obligations. In an assignment there is privity between the landlord and the third party, so the landlord can sue either the third party or the initial tenant. Servitudes Servitudes are nonpossessory interests in land that bind parties and their successors. In servitudes, the dominant estate is the estate that benefits by the servitude. The servient estate is burdened by the easement. Easements Easements are the grant of a nonpossessory property interest that entitles its holders to some form of use or enjoyment of another’s land, called the servient tenement. Easements can be affirmative or negative. Most easements are affirmative, or the right to go onto and do something on the servient land. Negative easements entitle holders to prevent the servient landowner from doing something that would otherwise be permissible. Servient easements come in the form of four categories: light, Page 20 of 27 2012 SPRING
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air, support (not to excavate support of a building), and water (not to divert water from an artificial stream). Negative easement can only be created expressly, by writing signed by the grantor. Easements are either appurtenant to land or held in gross. An easement is appurtenant when it benefits its holder in his physical use or enjoyment of their own property; it requires two parcels. An easement is in gross if it confers upon its holder only some personal or pecuniary advantage that is not related to his own enjoyment or use of his land. Here the servient tenement is burdened, but there is no benefited or dominant tenement. An appurtenant easement passes automatically to a new owner of the dominant tenement, regardless of whether it is even mentioned in the conveyance. The burden of the easement appurtenant also passes automatically with the servient estate, unless the new owner is a bona fide purchaser without notice of the easement. Notice can be actual, inquiry, or record. An easement in gross is not transferable unless it is for a commercial purpose. An affirmative easement is created in one of four ways. An easement can be expressly granted. If the easement is to endure for more than one year it must be in writing and comply with the formal elements of a deed. This is known as a deed of easement and is required because of the statutes of fraud. An easement by implication is created if there was previous use that was apparent and the parties expected it would continue because it was reasonably necessary to the dominant land’s use and enjoyment. An easement by necessity will be implied if the grantor conveys a portion of his land in which there is no way out except over some part of the grantor’s remaining land. An easement by prescription can be acquired by satisfying the elements of adverse possession. The use must be continuous for the statutory period, open and notorious, actual, and hostile. Most jurisdictions require possession be exclusive. The scope of an easement is determined by what the parties intended for use at the time the easement was created. The dominant easement may not use the easement beyond its scope. An easement can be terminated in any number of ways. An easement can be terminated by estoppel if the servient owner materially changes his or her position in reasonable reliance on the easement holder’s assurance that the easement will not be enforced. An easement created by necessity expires as soon as the necessity ends. However, if the easement, attributable to necessity, was nonetheless created by express grant it wont end when the need ends. Destruction of the servient, other than the willful conduct of the servient owner will end the easement. Condemnation of the servient estate by imminent domain will end the easement. A written release, given by the easement holder to the servient owner will end the easement. The easement will be terminated if the easement holder demonstrates by physical action an intent to never use the easement again; if the easement is abandoned. The easement is extinguished when title to dominant estate and title to servient estate become vested in the same person, i.e. merger. The servient owner may extinguish the easement by interfering with it in accordance with the elements of adverse possession. Lastly, the terms of the deed of easement can stipulate conditions for termination. License A license is a mere privilege to enter someone’s land fir a delineated purpose. Licenses are not subject to the statues of fraud, and do not need to be in writing. They are freely revocable, at the will of the licensor, unless estoppel applies to bar revocation. Estoppel will apply to bar revocation only when the licensee has invested substantial money or labor (or both) in reasonable reliance on the license’s continuation. Page 21 of 27 2012 SPRING
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Tickets are considered freely revocable licenses. An oral easement creates a license that is freely revocable. Profits The profit entitles its holders to enter the servient land and take from it soil or some natural substance from the land (oil, timber, etc.). The profit shares all rules of easements. Covenants and Equitable Servitudes The covenant is a promise to do or not do something related to land. It is unlike the easement because it is not the grant of a property interest, but rather a contractual limitation or promise regarding land. A negative covenant (restrictive covenant) is a promise to refrain from doing something related to land. An affirmative covenant is a promise to do something in relation to land. The difference between a covenant and an equitable servitude is dependent on damages. A real covenant will result in damages or an injunction, an equitable servitude will result only in an injunction. A covenant parlance requires one tract of land that is burdened and another that is benefited. For the burden to run with the original promise must be in writing, the original parties must have intended the burden would run, the burden must touch and concern the land, and there must be horizontal and vertical privity. To touch and concern the land the promise must affect the parties’ legal responsibilities ad landowners not simply as members of the public at large. Horizontal privity revers to the nexus between the burdened and benefited; it requires they be in succession of the estate, meaning that they were in a grantor/grantee, landlord/tenant, or mortgagor/mortgagee relationship. Vertical privity refers that the nexus between the burdened or benefited and their successors; it requires some non-­‐hostile nexus, such as s contract, devise, or dissent (not adverse possession), and the successor must have had notice when they took the land (actual, inquiry or record). For the benefit to run, the original promise must have been in writing, there must have been intent that the benefit would run, the benefit must touch and concern the land, and there must be vertical privity. An equitable servitude is a promise that equity will enforce against successors. It is accompanied by an equitable servitude. To create an equitable servitude that will bind successors the original promise must be in writing, there must be intent to bind successors, the equitable servitude must touch and concern the land, and the burdened party needs notice. There need not be any privity. An implied equitable servitude can be created through the general scheme doctrine. This applies when at the sale of property the subdivider had a general scheme of residential development including the defendant’s lot, and the defendant lotholder had notice of the promise in earlier deeds (actually, inquiry or record). Inquiry notice here means the neighborhood seems to conform to common restrictions. A defense to enforcement of the equitable servitude are changed circumstances that are so pervasive that the entire area or sub division has changed; mere pockets of limited change are not good enough. Page 22 of 27 2012 SPRING
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Concurrent Estates There are three forms of concurrent estates. The concurrent estate of a joint tenancy occurs where there are two or more owners with the right of survivorship. The tenancy by the entirety is a tenancy created between a husband and wife, without survivorship rights. A tenancy in common is a tenancy with two or more owners without the right of survivorship. The right of survivorship means that the successor of a deceased individual has the right to acquire the property rights of the deceased owner. Joint Tenancy The joint tenancy does not include a right of survivorship. The joint tenancy can be transferred during the lifetime of the owner, but is not divisible or descendible. The joint tenancy is created by all parties making taking their interest at the same time, by the same title, with identical interests (equal), and identical rights to possess the land. These are called the four unities. Grantors must clearly express the right of survivorship, since joint tenancies are disfavored by the court. A joint tenancy can be created by the use of “straw”, that is, when a sole owner of a property wishes to create a joint tenancy in themselves and another, they can convey the property to a third party, a “straw”, who then conveys the land back the original owner and the other with a right of survivorship. (B !A, then A! B & C with a right of survivorship). A joint tenancy can be terminated in three different ways. if joint tenant sells or transfer their interest during their lifetime, which destroys the four unities, creating a tenant in common in the new tenant, and, to the extent that there were more than two joint tenants in the first place, the joint tenancy remains intact as to those parties. In equity, a joint tenant’s mere act of entering into a contract for the sale of their share will sever the joint tenancy as to the contracting parties’ interest. This is because of the doctrine of equitable conversion, which provides that equity regards as done which ought to be done. A joint tenancy can be terminated by partition. There are three different kinds of partition. The first is by voluntary agreement. The second is partition in kind, which is a judicial action for a physical division of the property if it is in the best interest of all parties. The third is a force sale, which a court will order if it is in the best interest of all parties, at which point, the land will be sold and the proceeds divided evenly among all parties. Lastly, a joint tenancy can be severed by mortgage. One joint tenant’s execution of a mortgage lien on his or her share will sever the joint tenancy as to that now encumbered share only in a minority of states, this is called the title theory of mortgage. By contracts, the majority of states follows the lien theory, whereby a joint tenant’s execution of a mortgage on his or her interest will not sever the joint tenancy. Tenancy by the Entirety A tenancy by the entirety can only be created between married partners who take as a fictitious one person, with a right of survivorship. In those states that recognize the tenancy, it arises presumptively in any conveyance made to a married partners, unless clearly stated otherwise. The tenancy by the entirety is very protected. Creditors of only one spouse cannot touch the tenancy, and unilateral conveyances are not permitted. Tenancy in Common Page 23 of 27 2012 SPRING
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In a tenancy in common each cotenant owns an individual part, and each has the right to posses the whole. Each interest is descendible, divisible and alienable. There are no survivorship rights. The presumption favors Rights and Duties of Co-­‐tenants Each co-­‐tenant is entitle to possess and enjoy the whole. Absent outset, a co-­‐tenant in exclusive possession is not liable to the other co-­‐tenant for rents. A co-­‐tenant who leases all or part of the premises is accountable to their co-­‐tenants for providing them their fair share of the rental income. Each co-­‐tenant is responsible for his or her fair share of carrying costs, such as taxes or mortgage interest, based upon the undivided share that they hold. In the case of damages, if one tenant repairs damages they have a right to contributions for reasonable and necessary repairs for the other tenants, provided that they have notified the others of the need for repairs. On the other had, during the life of the co-­‐tenancy there is no right for contributions to improvements. However, at partition, the improving party is entitle to a credit equal to any increase in value caused by their efforts, or, if the improver decreased the property value, they bear full liability for these changes. A cotenant must also not commit waste (permissive, voluntary, or ameliorative). A joint tenant or tenant in common additionally has the right to bring an action for partition. In regards to adverse possession, unless an adverse possessor has ousted all co-­‐tenants, he cannot acquire title to the exclusion of the other co-­‐tenants. This is because the hostility element of adverse possession is absent. There is not hostility because there was no ousting. Adverse Possession Adverse possession is the taking of property through possession if the property for a statutorily prescribed period of time, if certain elements are met; the possession ripens into title. There are four elements. There must be continuous possession for the given statutory period. The possession must be open and notorious; the sort of possession that the usual owner would make under the same circumstances. The possession must be actual, not hypothetical or fictitious. Lastly, the possession must be hostile, that is the possessor does not have the permission of the owner, this is an objective standard. One adverse possessor may tack on to his time to a predecessor adverse possessor’s time, so long as there is privity, which is satisfied by any non-­‐hostile nexus, such as blood, contract, deed or will. Tacking is not allowed when there has been an ouster of the previous adverse possessor. The statute of limitation will not run against a true owner who is afflicted by a disability at the inception of the adverse possession. Common disabilities include insanity, infancy, and imprisonment. Land Conveyance: The Sale of Land Land contracts are subject to the statues of fraud, and must be in writing, signed by the party against whom enforcement is sought, describe the land, and state some consideration. The one exception to the statute of frauds is the doctrine of part performance. If two of the three Page 24 of 27 2012 SPRING
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requirements are fulfilled, an oral contract for the sale of land is enforceable. The requirements are: taking possession of the land, paying all or part of the purchase price, or making substantial improvements. In equity, once the contract is signed, the buyers is the owner of the land, subject to the condition of payment. Therefore, the buyer bears the loss in the event of a destruction not of the fault of the purchaser or the seller. A sale in land carries with it the implied promise of marketable title. Title must be free from reasonable doubt, meaning it is free from lawsuits and the threat of litigation. Title by adverse possession is unmarketable title, and the owner must provide good record of title. Title is not marketable if it there are any servitudes or mortgages against the land, unless the buyer has waived them. However, the seller can settle mortgages with the proceeds of the sale. Title is not marketable if the property violates any existing zoning laws. The seller has an implied promise not to make any false statements of material fact. This includes a failure to disclose latent material defects. Even if a contract contains a general waiver of liability, this will not exclude the seller from liability for fraud or failure to disclose. The land does not carry a warranty for fitness or habitability (caveat emptor), except in the case of workmanlike construction for the sale of a new home by a building vendor. The controlling document at closing is a deed. The deed passes legal title from the seller to the buyer through a lawful execution of the deed. The deed must be in writing and signed by the grantor. The deed need not recite consideration,, nor must consideration pas to make deed valid. The deed must contain a description of the land, which just an unambiguous description of the land; a good lead. The deed must be delivered. Delivery can be satisfied by the grantor physically or manually transferring the deed to a grantee, by mail, an agent, or messenger. However, deliver does not require an actual, physical transfer of the instrument itself. The standard of delivery is a legal standard of present intent: did the grantor have the present intent to be immediately bound irrespective of whether or not the deed itself has been physically handed over. If a recipient reject the deed, this defeats delivery. If a deed, absolute on its face, is transferred to the grantee with an oral condition, the oral condition drops out (is void). A deed delivered by escrow is permissible. The grantor may deliver an executed deed to a third party, known as a depositary, with instructions that the deed be delivered to the grantee once a condition is meet. Once the conditions are met, title transfers to the grantee. If the grantor dies, or becomes incompetent, or is otherwise unavailable, the title will still pass once the condition are met. Covenants for title imply different levels of the same kinds of promises. The quitclaim deed contains no covenants. The grantor is not even promising that they have title to convey. This is the worse deed a buyer could hope for. The general warranty deed is the best deed a buyer could hope for. It warrants against all defects of title, including those attributed to the grantors predecessors. Generally there are three warranties present at the beginning of the deed, where the SOL begins to run from the instance of delivery: The covenant of seisin, under which the grantor warrants he owns the estate he now claims to convey. Page 25 of 27 2012 SPRING
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The covenant of the right to convey, in which the grantor promises that he has the power to make the conveyance (not a minor, has capacity). And, the covenant against encumbrance, where the seller promises there are no servitudes or liens against the land. The general warranty deed includes three covenants which apply to the future, meaning the covenant is not breached, if ever, until a grantee is disturbed in possession. Thus, the statutes of limitation do not run until that future date. The covenant of quite enjoyment is the grantor’s promise that the grantee will not e disturbed in possession by a third parties lawful claim of title. The covenant of warranty promises to defend the grantee against lawful or superior claims of title asserted by others (it will indemnify losses). The covenant for further assurance is the grantor’s promise to perform whatever future acts to perfect the title if it later turns out to be imperfect. The statutory special warranty deed is provided by statutes in many states. The grantor promises he has not conveyed the state to anyone other than the grantee, and the title is free from encumbrances made by the grantor. The notice rule a conveyance of an interest in land shall not be valid against any subsequent purchaser for value, without notice thereof (or a BFP), unless the conveyance is recorded. (in other words the last BFP to take the land, regardless of the order of recording) The race notice rule states that any conveyance of an interest in land shall not be valid against any subsequent purchaser for value, without notice thereof, whose conveyance is first recorded. (in other words the first BFP to record) A bona fide purchaser is one who purchases the property for value , without notice that someone else got there first. Notice may be actual, inquiry, or record. Whether the subsequent purchaser exams the land or not, they are on inquiry notice. They buyer of real estate has a duty to inspect the premises. If another buyer is in possession, then the subsequent purchaser is on notice, regardless of if they bothered to inspect or not. Inquiry notice may also take place is a recorded instrument makes reference to an unrecorded transaction, and reasonable follow up would have revealed the transaction. Any time a deed is properly recorded, there is record notice. In a minority of jurisdictions there are race statutes, in which the first purchaser to record takes. There are two exceptions to the notice statutes. The shelter rules states if any subsequent purchaser takes title from the grantor who has good title, the grantor can shelter the grantee by conveying good title. The wild deed rule states that a deed that does not have record notice because a previous purchaser did not record the deed, but then conveyed it again, attaching only their name to the record of title. Security Interests in Real Estate: A security interests is a property interest over assets to security the interest of an obligation. There are three general kind: mortgages, installment land contracts, and deeds of trust. A mortgage and a deed of trust both require two separate agreements: a promissory note and an agreement creating a security interest. This is the mortgage and or deed of trust agreement. Typically a mortgage or a deed of trust terms include a debtors agreement to pledge the real property as collateral to secure payment of the note, and terms that safe guard the lenders security. Page 26 of 27 2012 SPRING
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A mortgage is a conveyance of an interest in real property as security for the payment of money borrowed. It requires a debtor (mortgagor) and a lender (mortgagee). When a lender is a third party that is lending funds to allow the buyer to purchase the property, the mortgage is a purchase money mortgage. If the debtor defaults on loan payments or violates other material terms of the mortgage, the lender can sell the property and use the proceeds to pay off the note. Most states require a judicial foreclosure sale for a mortgage. A deed of trust is a conveyance of an interest in real property to a trustee which holds it as security for the repayment of money borrowed. The deed of trust requires a debtor (trustee), a lender (beneficiary), and a trustee (third party that holds the deed of trust). If the debtor defaults on a loan payment of violates other material terms of the deed of trust, the lender can instruct the trustee to sell the property and use the proceeds to pay off the note. Most states allow the lender to choose either a judicial foreclosure sale, or a non-­‐judicial foreclosure sale. The nonjudicial foreclosure sale option is available so long as the DOT contains a power of sale clause. Page 27 of 27