Property II Outline
Virginia Milstead
I.
Servitudes: agreements to increase the value of several parcels of land and create interests in the use of that
land. The three types are easements, profits, and covenants.
A. Easements: an easement is the right of one person to enter land in possession of another and make a limited
use of it—e.g., A has a legal right to walk across, lay pipes or string wires over Blackacre, which B possesses.
1. Types:
a. Affirmative easement: a right to use.
b. Negative easement: a right to keep the servient owner from doing something.
c. Profit: is one person’s right to enter land possessed by another and take from it either some
part of the land itself or some product of the land—e.g., A has a legal right to go onto
Blackacre, which B possesses, and remove sand, oil, gravel, marble, stone, grass, trees,
shrubbery, or fish.
i.
Keep in mind the difference between transferring, for instance, the coal itself,
which would give the landowner no rights over it, and transferring the right to use
the coal, which would allow the landowner the right to the coal as well. This
distinction depends on the difference in wording. If the coal itself is transferred,
there is usually an implied easement (absent language indicating otherwise) to come
onto the land to remove it.
2. Reservations / Exceptions:
a. A reservation is created when the grantor retains an easement in the property.
b. An exception is a provision in the deed that excludes from the grant some pre-existing
servitude on the land (an interest that a third party already has.)
c. Under the common law, a grantor could not reserve an interest in a third party: “the common
law did not allow reservation of interests in third parties when they were a stranger to the
deed.” However, after Willard v. First Church of Christ, Scientist, the court did allow
reservations creating interests in third parties. For practical reasons, this continued not to
be the best option. For instance, in this case, it would’ve been better if the church had had
their own deed showing their easement in the parking lot across the street. It is a better way
to record deeds. Analyze it both ways.
3. Classifications: appurtenant / in gross
a. Appurtenant: benefits the land. Every easement appurtenant requires two pieces of land
which are owned by two different persons, the dominant tenement (benefited estate) and the
servient tenement (burdened estate).
i.
It is said that the servient tract serves the dominant tract, but this really means
that the owner’s use of the dominant tract is enhanced by his being able to use the
right of way over the servient tract. Accordingly, the servient tract is burdened by
the easement. One ordinarily expects an easement to increase the market value of
the dominant tract, and decrease the market value of the servient tract.
ii.
When it is ambiguous based on the written instrument how the parties wish to
classify the easement, appurtenant is the default.
iii.
The default duration for an easement appurtenant is FSA. This language is a bit
incorrect since the easement is not a possessory estate. It is better to call it an
“easement in perpetuity.”
b. In gross: benefits the holder of the easement. There is only the servient tenement with this
classification of easement.
i.
The default duration for an easement in gross is life estate. The better language is
“easement for life.”
4. Creation of Easements
a. By deed: this is the preferred form of creating easements. It complies with the statute of
frauds and through this method it is easier to establish the intent of the parties.
b. License coupled with estoppel:
i.
Requirements: reasonable reliance (a change in position in reliance; a substantial
expenditure of money); and constructive knowledge of the reliance or implied
permission from the owner of the servient estate.
ii.
c.
What is the duration? Since the goal is simply to compensate for reliance, the
easement will last only until it takes to recoup the investment. After this has
happened, the parties will have to renegotiate.
iii.
A jurisdiction that is more lenient on the statute of frauds is more hospitable to
license coupled with estoppel. Some jurisdictions do not recognize license coupled
with estoppel because it isn’t the correct way to create an easement.
iv.
Example: Holbrook v Taylor: in this case, the owner of the servient estate watched
as the owner of the dominant estate drove by on the easement with trucks for
construction purposes. The owner of the dominant estate spent over $11,000 in
reliance on this license and therefore it was not revocable.
Implication:
i.
By prior existing use: this easement is based on the premise that had the parties
remembered, they would’ve made the easement express. In order to infer this intent,
the court requires that the prior use be 1) apparent, 2) necessary and 3) continuous.
1) “Prior” is prior to the severance of the quasi-dominant and quasi-servient
estate.
2) “Existing use:” A quasi-easement exists when one part of the land is used
for the benefit of another part. Existing use is of a quasi-easement in an
apparent, necessary and continuous way.
3) Presumed to be appurtenant b/c of the nature of the use required to
create it.
4) If the implied easement is in favor of the conveyee and is appurtenant to
the tract conveyed, it is called an implied grant; if the implied easement is
in favor of the conveyer and is appurtenant to the tract retained, it is
called an implied reservation. Implied grants are preferred and require
reasonable necessity. Implied reservations require strict necessity.
5) Default duration is in perpetuity.
6) Example: Van Sandt v. Royster: in this case, there was an implied
reservation in a easement under 2 tracts for a sewer. Had the defendant
retained the middle tract, it would’ve been an implied grant (to the tract
to the left).
ii.
By necessity: when it is necessary to the enjoyment of the claimant’s land and that
the necessity arose when the claimed dominant parcel was severed from the claimed
servient parcel.
1) Most typical example is land-lock. It is contrary to public policy to allow
land to be land-locked and thus the easement is created by law.
2) Requirements: 1) that there was unity of ownership of the alleged
dominant and servient estates; 2) that the roadway is a necessity, not a
mere convenience; 3) that the necessity existed at the time of severance
of the two estates.
3) Majority required strict necessity, while minority allow access where land
exists but is claimed to be inadequate, difficult or costly.
a) Navigable water-way issues give some courts trouble.
b) Cost is not a factor that courts consider when determining
necessity.
4) Duration: only so long as is necessary.
5) In some states, mainly in the west, only necessity is required, not prior
common ownership. Servient estate does receive payment.
6) Creates appurtenant since necessity is created by the land.
7) Example: Othen v. Rosier: where there was the road that went along the
side of the property. The problem was that they couldn’t prove that that
was where the easement went. The easement should go with the last
parcel to sever, thereby creating the necessity. They couldn’t prove they
wanted the easement over the correct parcel.
8) If there is more than lot over which it is appropriate to place the
easement, most courts give the owner of the dominant estate the first
5.
1
opportunity to locate the easement, which in most cases will be the most
convenient place.
9) Once the servient estate has been identified, it stays the servient estate.
d. Prescription: an easement by prescription arises by adverse use of the servient estate by the
dominant tenant for the period of the statute of limitation1. To mature such an easement
against a landowner, the use must be:
i.
Adverse as distinct from permissive:
1) There is a split of authority over whether the person claiming the
easement must prove adverse use or whether the undisputed use of an
easement for the prescriptive period raises a presumption of claim of
right and puts the burden on the party’s resisting the easement to prove
permissive use. In other words, adverse is assumed unless specific
permission is given.
2) The doctrine of interruption: you have to be aggressive to get them to
stop using it and to stop the running of the SOL.
ii.
Open and notorious
iii.
Continuous and without interruption: consistent with the use of the land / easement.
iv.
Exclusive: Means either 1) that use is distinguishable from the use made by the
general public; OR 2) landowner is not using the property in a way that would prevent
the claimant from enjoying the easement.
v.
For the prescriptive time:
1) The SOL accrues at the time the dominant and servient estates are
severed (or presumably when the use starts).
2) Ordinarily adverse use does not run against a future interest holder, but
when the adverse use involves taking the corpus of the property and the
remainderman has notice, then the prescription is effective against both
the remainderman and the possessory interest.
3) Tacking of successive periods of adverse use to satisfy the time period is
permissible in prescription cases.
4) Disabilities may extend the period of time for the acquisition of
prescriptive easements, in much the same way as they apply to adverse
possession.
vi.
Exclusive prescriptive easement is a way to get adverse possession in CA even if you
haven’t paid taxes. You don’t get title, but you do get exclusive possession.
vii.
Lost grant jurisdiction: assumes that you had the paperwork for the easement, you
just lost it. So all that the owner of the servient estate needs to do is tell you stop:
this is consistent with the idea that you did not in fact have the easement.
viii.
The question of whether it is appurtenant or in gross is fact sensitive.
ix.
The question of duration is fact sensitive—the default is in perpetuity.
x.
A prescriptive easement is not as broad in scope as an easement created by grant, by
implication or by necessity. The uses made of a prescriptive easement must be
consistent with the general kind of use by which the easement was created and with
what the servient owner might reasonably expect to lose by failing to interrupt
adverse use.
xi.
Exceeding permitted use of a created easement without interruption by the servient
estate owner may expand the easement proscriptively.
Scope of Easements
a. The extent of the rights acquired is to be determined from the terms of the grant properly
construed to give effect to the intention of the parties. Generally, an easement cannot be
unilaterally increased in size.
b. As a general rule, an easement appurtenant to one parcel of land may not be extended by the
owner of the dominant estate to other parcels owned by him, whether adjoining or distinct
tracts, to which the easement is not appurtenant. Therefore, they do not look at whether the
In most states (California is one exception) the doctrine of easement by prescription is a common law rule, not a statute, and
there is no explicit statute of limitation. However, the court adopts the period of time established by the adverse possession
statute of limitation as the prescriptive period.
6.
7.
burden is actually increased in the servient estate, they look at whether it is an impermissible
extension.
c. Easements in gross include reasonable ancillary use by the easement holder beneficial to the
use of the easement, unless the grant specifically limits it. The use cannot unreasonably
interfere with the enjoyment of the servient estate.
d. This can be fact sensitive, though. In Brown v Voss, the court allowed an extension of an
easement b/c it would involve considerable hardship to the plaintiffs not to and would
involved no damages to the defendant since the easement was used for the same purpose—a
single family dwelling. The dissent claimed that the “the benefit of the doctrine of balancing
the equities or relative hardship, is reserved for the innocent defendant who proceeds
without knowledge or warning that his structure encroaches upon another’s property or
property rights.” He claimed that since the plaintiffs knew they were building on parcel C and
should’ve known that the easement didn’t extend to that parcel, they are not innocent in their
hardship.
e. Reasonably foreseeable development is presumed to be included in the understanding of the
parties at the time they create the easement. What is reasonably foreseeable is what is
consistent with the development of the surrounding area and is fact sensitive. The goal is to
keep it from being over-developed and increase the burden on the servient estate.
f. If you violate the scope of the easement, it is a trespass.
i.
The remedy is either injunctive relief or damages. The court tends to consider the
equity of an injunction, and the problem with them denying the injunction is that it
essentially gives permission for someone to trespass, thereby transferring a
property interest, and the damages are usually not very great. It would be better to
grant the injunction and allow the parties to renegotiate. In that case, the payment
is voluntary instead of court imposed and probably very low.
g. Can an easement be moved after it is granted? If you are moving the location of the
easement, you are tampering with a property interest. The modern trend allows it to be
moved by the servient owner if it is fair and does not unreasonably burden the user of the
easement. Under the common law, both parties had to agree to move it—the intent of the
parties controls.
h. If an easement is for ingress and regress, and the intent of the parties is not known, parties
are generally allowed to run lines, plumbing under the easement, insofar as that is general
development. The book says that the interest is narrowly construed and that the general rule
is that you cannot, but this is changing.
i. The owner of the servient estate can continue to do whatever she wants with her property so
long as it does not unreasonably interfere with the rights under the easement.
Assignability of Easements
a. Easements appurtenant are generally assignable inasmuch as one can sell the land they own
and the easement will go with it. They are also alienable by deed or by will and they are
descendible.
b. Assignability of easements in gross
i.
The modern trend is to consider the intent of the parties. It is on the burden of a
party to prove that it is not assignable.
ii.
There is also a general rule of assignability for commercial easements, less so for
recreational easements.
Apportionability of Easements
a. This is best explained by example: B grants to A and her heirs the right to pasture four head
of cows on B’s Blackacre. A conveys to C and his heirs the right to pasture two head of cows
on Blackacre, A reserving her right to pasture two head of cows there. Because A’s
apportionment of her profit in gross is measurable (four head) and will not surcharge or place
any additional burden on the servient tract, Blackacre, and because it seems consistent with
the intent of the parties to the original conveyance, the profit in gross created by A is
apportionable. However, if A had simply reserved the right to pasture “my cattle” on
Blackacre, then there would be no limit to the number of cattle that could be pastured, and A
could not transfer a fraction of the right to another.
b. “One stock” doctrine: allows the apportionment of easements to the extent that the parties
use them as one person. This is seen in Miller v. Lutheran, where the heirs of one brother
couldn’t expand the camp b/c it was not in agreement with the other brother. When
something is owned as one stock, each owner must agree to the use. This agreement can be
subject to the law of waste.
8. Public Trust Doctrine: as applies to coastal regions, will give access to the water over land owned by
a municipality or privately. Matthews v Bay Head Improvement Assoc.: “Nonetheless, where use of
dry sand is essential or reasonably necessary for enjoyment of the ocean, the doctrine warrants the
public’s use of the upland dry sand area subject to an accommodation of the interests of the owner.”
The access must be reasonably necessary.
a. All navigable waterways were needed for public transportation. This was the basis for keeping
the beach public property.
b. The mean high tide mark to the water belongs to the public.
9. Recording Act: under the recording acts, if an easement (or profit) is created by grant, the deed is
not recorded, and the servient estate is conveyed to a bona fide purchaser for value without notice,
the easement is extinguished. However, the recording statutes generally do not apply to easements
(or profits) created by prescription.
10. Who maintains in case of damage?
a. The written instrument may give intent and it will be followed. If the parties have covenanted
who will maintain it, their intent will control.
b. What is the default rule if the intent is not known? It depends on who uses it. If the owner
of the servient estate doesn’t use it, the dominant owner must maintain it. If both use it, the
costs of maintenance are pro-rated and both parties are responsible for maintenance. The
party who uses the easement has the burden of maintaining.
c. These rules apply to damage or ordinary wear and tear.
11. Termination of Easements
a. An easement may terminate in either of two ways, by expiration of time determined at the
time of its creation, or by extinguishment, which is determined by events subsequent to its
creation.
i.
Termination:
1) For example: A grants to B the right to come onto A’s Blackacre and dig
and carry away gravel for a period of ten years. The profit terminates at
the end of the 10 year period.
2) A grants to B the right to pasture any number of B’s cattle on A’s
Blackacre during B’s lifetime. Upon B’s death, the profit terminates.
3) Another example is when the necessity ends in an easement created by
necessity.
ii.
Extinguishment
1) When an easement appurtenant exists and both the dominant and servient
estates come under the ownership of the same person. Called a merger:
a) If they are again owned by different people, are severed, the
easement has to be created again.
2) When an easement is appurtenant to another easement and the owner of
the dominant estate becomes owner of the servient estate.
3) When the owner of an easement in gross becomes the owner of the
servient estate on which the easement is a burden.
4) When the dominant tenant executes either a deed or a will releasing the
easement in favor of the owner of the servient estate. Actually called a
release.
5) When the dominant tenant has abandoned the easement and such
abandonment is evidenced by conduct showing an intention to relinquish
the right. Non-use of an easement without more will not establish
abandonment.
a) Preseault v. United States: the railroad had abandoned their
easement. There was affirmative conduct, tearing up the tracks
and the switches, etc.
6) When the servient tenant has used her land continuously and
uninterruptedly for the statutory period of prescription in a way
7)
8)
9)
B. Licenses
1.
inconsistent with and adverse to the easement and without consent to the
dominant tenant.
When the servient tenant, in reasonable reliance on the conduct of the
dominant tenant, uses her servient estate in a manner inconsistent with
the existence of the easement and it would be inequitable to permit
further use of the easement, the easement is extinguished by estoppel.
Under recording acts, see supra.
When the specific purpose of the easement becomes impossible of
performance. However, a court will not usually terminate an easement
merely because the steps necessary to continue use of the easement are
economically implausible.. It must be impossible to perform. This is the
flip side of the changed conditions doctrine of covenants.
A license is revocable. Because they are revocable, they are deemed a relationship between the
parties instead of a property interest:
i.
The grantor acting in a way inconsistent with license is an implied revocation.
ii.
Selling, dying are also ways to revoke a license.
2. A license coupled with an interest is not revocable. A license coupled with an interest is one that is
incidental to ownership of a chattel on the licensor’s land.
3. Default duration is a life estate.
C. Covenants: basically a negative easement, but since the courts don’t like negative easements, they developed
the law of covenants.
1. The first question is what kind of covenant it is: real or equitable, is the party seeking damages or
injunctive relief.
a. Enforceable at law (real covenants): when you are suing for damages.
i.
A written instrument that complies with the statute of frauds
ii.
Intent that the covenant shall run with the land. If the words “heirs and assigns” or
the word “successors” is used in the instrument the intention is usually clear that the
covenant is intended to run. But it is sufficient if the intention can be gleaned from
the terms, the purpose and the circumstances surrounding the making of the writing.
iii.
Touches and concerns the land: if the effect of the covenant is to increase the
utility of the land or to make it more valuable in the hands of the covenantee or to
curtail the use or utility of the land or make is less valuable in the hands of the
covenanter. This is opposed to the contract being personal.
1) The test is ambiguous, but generally asks whether the covenant in some
way restricts the use of land. However, in Neponsit Property Owners’
Ass’n, the court found that a covenant to pay a certain amount of money
each year for an association in order to maintain the area around the
neighborhood did “touch and concern” the land, even though “the burden
of a covenant which require the covenanter to do an affirmative act, even
on his own land, for the benefit of the owner of a ‘dominant’ estate, does
not run with his land.” They found that the substantial effect of the
covenant, even in light of its form, was to affect the land.
2) The Restatement 3d has done away with this requirement in exchange for
reasonableness analysis.
3) Consider both whether the burden touches and concerns the land, and
whether the benefit touches and concerns the land. Whichever is running,
that one must touch and concern.
4) The burden of a restrictive easement will not run in equity if the benefit
is in gross.
a) For example, in Caullett, there was an agreement between grantor
and grantee that the grantee would build a house and have him as
the building contractor. The court ruled that this benefit was in
gross, even if the house would touch and concern the land. When
the benefit is personal, it doesn’t run. Additionally, the court
found that the covenant was too ambiguous. The contract was too
vague to be enforceable.
5) Burdens in gross will run as long as the benefit is appurtenant.
There must be privity of estate:
1) Horizontal privity (at the time the covenant was created—between the
original parties not between the new ones): the relationship between the
original parties that formed the covenant. There is only horizontal privity
when the covenant is created when one original party transfers an interest
in land.
a) Instantaneous (or successive) privity: the transfer of the property
and the creation of the covenant must arise simultaneously. This
relationship exists as part of the same transaction.
b) Mutual is when there is a preexisting property relationship. Classic
mutual privity is landlord / tenant or easements. Concurrent estates
or possessory estates and future interest are other examples.
There has to be a shared or mutual property interest other than
the covenant for mutual.
c) Horizontal privity can be satisfied if the restriction is created in
connection with the conveyance of an estate in land. So, if it were
created like right before or something, it would still be enough to
establish privity.
2) Vertical Privity:
a) For vertical privity to arise, for the burden to run, the exact same
estate has to be conveyed. For the benefit to run, any estate that
is conveyed will do.
3) Both types of privity won’t be required for both the benefit and the
burden. You don’t have to show horizontal privity for the benefit to run,
but you do have to show vertical. Vertical can be established by
conveyance of any estate. For the burden to run, you do have to show
horizontal privity—successive or mutual privity, and the vertical privity
arises from the transfer of an estate of the exact same duration.
4) Restatement 3d approach: eliminate the requirement of horizontal privity
for a covenant to run. As for the degree of vertical privity, the
Restatement 3d rejects the burden-benefit distinction and instead adopts
a negative covenant distinction. Negative covenants run with the land
regardless of the degree of privity or even if the successive party takes
any interest. Affirmative covenants required the traditional degree of
privity, but vertical privity is expanded to include adverse possessors.
Enforceable in equity (equitable servitudes): when you are serving for injunctive relief.
i.
The covenant doesn’t run with the land, but that doesn’t mean that parties will be
allowed to use the land in a manner inconsistent with the contract entered into by his
vendor, and with notice of which he purchased. Moxhay.
ii.
Vertical privity isn’t required for the burden to run. It may be required for the
benefit to run.
iii.
Requirements: 1) Intent; 2) Touch and Concern; 3) Notice: this requirement can be
easily established if the covenant / deed is properly recorded. It will apply to
everyone after that as constructive notice. The notice requirement is satisfied by
actual, constructive, or inquiry notice.
iv.
b.
Horizontal
privity—
instantaneous
or mutual
Intent
Real
Covenant
Burden
Privity
Benefit
Touch and
concern
Vertical –
estate of the
same duration.
Horizontal
privity is not
required
Intent
Equitable
servitude
Notice
Best shown
through
recordation.
Don’t assume if
not told
Touch and
concern
Vertical—
estate of any
duration.
2.
Creation of Covenants
a. A real covenant must be created with a written instrument, signed by the covenanter. A real
covenant cannot arise by estoppel, implication, or prescription as can an easement.
b. Equitable servitudes can be created (implied) by a common scheme (majority view). Called the
common scheme doctrine. Sanborn v. McLean is a case in which all the houses were
residential and expensive, and it was obvious that the general plan was to keep the area
residential. The defendant was enjoined from building a gas station in the neighborhood.
i.
Requirements (from Sanborn):
1) “The owner of two or more lots”: the scheme must start with a common
owner.
2) “So situated as to bear the relation”. The restrictions don’t have to be
uniform or applied to every lot, there just needs to be a pattern.
However, variations in terms or incidence of the covenants may indicate
the common owner did not intend to create a scheme.
3) “Sells one with restrictions of benefit”. Common scheme doctrine can’t
begin until you find a sale with the covenant expressly made. You can go
back to the first lot sold.
4) “To the land retained”. The only estates with standing to sue are those
who were retained by the grantor as the benefited estates. However, the
common scheme doctrine can also be used to create standing because it
will make the original express covenant impliedly reciprocal. All the
benefited lots are likewise burdened. If you can show a common scheme,
standing is a non-issue.
5) “The owner of the lot or lots retained can do nothing forbidden to the
owner of the lot sold.” Another way to think about it is that when the
original express covenant was created, it related to the lots retained as
well.
ii.
In CA, however, an equitable servitude must be created by a written instrument
identifying the burdened lot; it will not be implied from the existence of restrictions
on other lots in a subdivision. However, it may be helpful to establish standing.
iii.
When an equitable servitude is implied via a common scheme, one last loose end is
that the party that did not have the covenant expressly in her deed may not have
had notice of the reciprocal covenants and would therefore qualify for protection
under the recording acts. Courts have solved this problem by stating that the Δ
should have inquiry notice, if the scheme is externally observable. For instance, the
Δ should notice that every house in the area is a one-story single family home.
Another solution is that there are subdivision ordinances that requires the developer
to record a subdivision plat, which creates constructive notice. Under jurisdictions
3.
4.
that require an expanded scope of the search of the grantor index, all conveyances
by that grantor are discovered.
iv.
Common scheme doctrine has two purposes: 1) imply an equitable servitude; 2) create
standing to sue.
Scope of Covenants
a. If it has become impossible or impracticable to locate the beneficiaries of a servitude held in
gross, a court may modify or terminate the servitude with the consent of those beneficiaries
who can be located, subject to suitable provisions for protection of the interest of those who
have not been located.
b. Public policy—and the Constitution—forbids covenants to exclude people from a neighborhood
based on race or other protected characteristics. Shelley v. Kraemer.
i.
In Hill, the court allowed a group home for AIDS sufferers to constitute a “single
family” for purposes of the covenant. Public policy strongly supports this reading of
the covenant. Additionally, even if the covenant was found to exclude group homes,
it would violate the FHA because it would discriminate based on handicap—these
homes are necessary for people suffering from AIDS. The discrimination would be
both disparate impact and failure to reasonably accommodate. This illustrates that
covenants are subject to public regulation.
c. Covenants don’t have to yield to zoning—zoning says what is permitted, and covenants can
narrow zoning provisions.
Termination of Covenants
a. By the terms of the covenant: many covenants by their terms continue for a specific
number of years or until the occurrence of some event. The deed creating the covenant
stipulates the event that causes the covenant to automatically terminate.
b. Change in circumstance: “As long as the original purpose of the covenants can still be
accomplished and substantial benefit will inure to the restricted area by their enforcement,
the covenants stand even though the subject property has a greater value if used for other
purposes.” Western Land Co. v. Truskolaski. If there has been a change in the neighborhood
that defeats the benefit (this affects damages—there are no damages if there is no benefit
to infringe upon). The focus is not on the surrounding lots, it is on the benefited lots. Keep in
mind that the benefited lots are those that are party to the covenant.
i.
Rick v. West: the hospital couldn’t be built because of one holdout.
ii.
The alternatives are eminent domain or for the owner of the burdened estate to try
to work it out with the owner of the benefited estate.
iii.
In the Restatement (Third) approach, they have substituted touch and concern with
a reasonableness doctrine that can be applied at the time of creation and later when
it is challenged as well.
c. Express release: To terminate by express release, you have to go to everyone who has
standing to sue. You buy release from your burden by buying your benefit back. Even if
someone, on a conceptual level, benefits from a covenant (like as a positive externality) that
doesn’t mean the person has standing to sue.
i.
New York permits people to have standing as third-party beneficiaries. This effects
the ability to terminate the covenant—there are that many more people whom you
have to get to agree to get out of the covenant.
d. Merger: Since a real covenant or an equitable servitude envisions rights and obligations
between landowners, once a common owner acquires both the benefited and burdened
property (and no one else owns benefited or burdened property), the covenant or servitude
terminates through merger. The covenant disappears and will not be retrieved even if the
common owner subsequently sells part of the property.
e. Unclean hands: Courts will not allow a landowner to violate a covenant and at the same time to
enjoin another landowner from violating that same covenant. The Π cannot enforce the
covenant is he has unclean hands. A Π’s relatively minor infraction, however, will not
foreclose an action against a neighbor’s more egregious violation of the same covenant.
f. Abandonment: Can terminate by abandonment—an implied release. Functions as a waiver—the
burdened estate violates the covenant and the benefited does nothing.
i.
g.
h.
II.
Pocono Springs: they tried to abandon the land so that they wouldn’t have to pay the
association fees on land that was worthless to them. The court ruled that they
couldn’t abandon real property.
ii.
A court will find abandonment only when the violations are so pervasive as to indicate
an intent to abandon the restriction.
Laches: Can terminate by proscription. Land is used inconsistently with the covenant for a
long enough period of time…
Unreasonable covenants: Covenants may not be enforced if they are not reasonable.
Reasonability is determined by whether the burden a covenant imposes on affected
properties so substantially outweigh the benefits of the restriction that it should not be
enforced against the owner. They ask whether the covenants are arbitrary and bear no
rational relationship to the protection of the land. They ask this question in the
abstract, not as applied to the facts.
i.
Nahrstedt: they wouldn’t let her keep her cats. Since then, the legislature lets you
keep your pets.
Transactions – THE CONTRACT (not to be confused with the DEED)
A. A transfer of a real property interest must comply with the statute of frauds. It must create a contract for
the sale and additionally, a deed.
1. SOF requires a writing signed by the party to be charged / bound.
a. The writing only needs to identify the object of the contract with reasonable certainty. It
should identify the parties with reasonable certainty. If the price has been agreed upon,
that price must also be set forth in the writing. If the parties have not agreed on the price,
that doesn’t mean there can’t be a contract. The courts will imply a reasonable fair market
price. The writing doesn’t have to be of a particular type.
2. Promissory estoppel: If the Π reasonably and detrimentally relies in a way that could bring about
injustice, on the promises of a Δ, that may excuse the need for a writing. The court may order
specific performance.
a.
In Hickey v. Green, the parties had an oral agreement for the sale of land. The buyers
quickly sold their home, which was to be expected since they told the seller they planned to
sell their home. After this happened, the seller entered into a contract with another for a
larger sale price. The buyer sued for specific performance, and it was granted.
3. Partial performance: Requires 1) possession; 2) payment in full or part; 3) improvements. You must
have possession AND either payment or improvements.
a. In Hickey v. Green, there was no part performance because they had not attained possession.
B. The seller must deliver marketable title.
1. If the seller cannot convey 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 persons,
guided by competent legal advice, would be willing to take and for which they would be willing to pay
fair value.”
a. This is opposed to “perfect title,” which is title with no defects at all. Most titles are not
perfect.
b. “Reasonable doubt” means as to the person’s right to sell or the possibility that there will be
litigation and loss of rights.
c. Three types of defects: recorded encumbrances, unrecorded encumbrances, and chain of
title defects.
2. What defects in the title render is unmerchantable / unmarketable?
a. Municipal restrictions (zoning, applicability of any law or government regulation) existing at
the time of the execution of a contract for the sale of real estate, are not such
encumbrances or burdens on title as may be availed of by a vendee to avoid his agreement to
purchase on the ground they render his title unmerchantable. Lohmeyer
i.
However, a present violation of an ordinance can effect marketable title.
b. Recorded encumbrances: Rules respecting restrictions upon the use of land or the location
and type of building that may be erected thereon fixed by covenant or other private
restrictive agreements constitute encumbrances rendering the title to land unmerchantable.
If the recorded encumbrances are disclosed in the contract, they will not render the title
unmarketable. Only undisclosed recorded defects.
i.
What is the
relationship
between this
rule and
easement
implied by
necessity?
3.
4.
Lohmeyer. In this situation, such restrictions limited the house to being two floors.
This house had only one.
ii.
One exception to the disclosure requirement is that visible easements don’t have to
be disclosed. Visible easements are so apparent upon inspection that the purchaser
saw or should have seen the easement and is, therefore, to have contemplated
purchasing the property subject to the easement. Many states have rejected the
exception for visible easements, however, and look solely to whether the sales
contract disclosed the easement.
c. Unrecorded defects: The court reasoned that as to unrecorded defects, the defect must
“be of substantial character and one form which [the grantee] may suffer injury. Mere
immaterial defect which do no diminish in quantity, quality or value the property contracted
for, constitute no ground upon which the purchaser may reject the title. Facts must be
known at the time which fairly raise a reasonable doubt as to the title; a mere possibility or
conjecture that such a state of facts may be developed at some future time is not
sufficient.”
d. Chain of title defects: problems that go to the chain of title bring into question the validity
of the person’s ownership / title.
i.
The fact that the grantor has failed to quiet title doesn’t necessarily mean that the
title is not marketable. Conklin v. Davi. The test to determine whether it does is 1)
that the outstanding claimants (true owner before AP) could not succeed were they
in fact to assert a claim, and 2) that there is no real likelihood that any claim will
ever be asserted.
ii.
Can contract otherwise, see notes, infra.
iii.
Chain of title defects are fact-sensitive questions, not per se.
iv.
Any serious flaw or missing link in the deed records makes the title unmarketable.
e. Landlocked property: courts favor access to property. Thus, even though technically not a
title defect, a court will find title to be unmarketable if there is no access to the property—
i.e., if the property is landlocked (unless the sales contract discloses the lack of access, or, in
some jurisdictions, if the purchaser was aware of the access problems when he or she signed
the sales contract).
f. Other types of defects, not related to title, such as the inability of the buyer to get funding
or problems with the house, must be put in the contract as grounds for voiding the contract.
Remedies for Breach of Sales Contract
a. The seller is given a reasonable time to cure defects, and if litigation ensues, that time is
extended to final judgment of the litigation. You can always put a clause in the contract that
says “time is of the essence.” That means the seller has to deliver the quality of title called
for by the date of closing.
b. It becomes the buyer’s unilateral option whether or not to accept the recorded encumbrances
(if the contract requires marketable title). Keep in mind that this is after a contract is
formed. You find out what the encumbrances are, you can get out of the contract.
c. The parties can waive their right to object to these encumbrances if it is explicit in the
contract. In other words, the parties can contract for whatever quality they want.
d. The purchaser may choose to go forward with the closing and seek specific performance of
the contract. Additionally, if the seller partially breaches the contract—does not disclose a
title defect, encumbrance, or acreage, for example—the purchaser can seek an abatement of
the purchase price.
e. If the purchaser breaches—generally refuses to close—the seller like the purchaser can seek
specific performance; but while courts do order specific performance at the seller’s request,
they often limit the seller to monetary damages.
f. A purchaser may decide not to seek specific performance, or a court may decide against
ordering specific performance. In such cases, a court should award monetary damages (loss
of bargain damages) equal to the difference between the fair market value and the agreed
contract price.
Types of title
a. Different types of title include perfect title, marketable title, marketable title subject to all
easements and restrictions of record (or not of record), insurable title, marketable and
insurable. Insurable title is title that you can get an insurance company to guarantee the
worth of your title. With insurable title, whether or not the restrictions are acceptable
would be subject to the judgment of the insurance company.
b. Can ask for record title too: that if the seller is AP, that they have quieted title.
C. Equitable Conversion: relates to risks relating to the improvements.
1. If there is a specifically enforceable contract for the sale of land, equity regards as done that
which ought to be done. The buyer is viewed in equity as the owner from the date of the contract;
the seller has a claim for money secured by a vendor’s lien on the land.
2. Insurance
a. Destruction of the improvement is not the grounds for getting out of the contract. That’s
why the buyer should buy insurance.
b. The American rule has the seller hold the insurance proceeds in trust for the buyer if the
seller has insurance. The seller keeps the insurance in constructive trust for the purchaser.
The English rule lets the seller keep the insurance proceeds, based on the idea that the seller
had a personal contract with the insurer.
3. Modern trends: majority rule is still equitable conversion.
a. Where the improvement is an important part of the contract and the damage is substantial,
the buyer can void the contract or get a reduction in purchase price. (Massachusetts rule; the
majority minority rule). This is called abatement.
b. Other courts have held that the risk of loss is on whomever is in possession.
c. Others have declined to apply equitable conversion b/c it is inconsistent with the parties’
expectations.
d. Others have simply shifted the risk of loss to the seller. The courts consider the destruction
failure of consideration.
4. Inheritance: some courts have applied equitable conversion to situations in which the seller dies
during escrow, and have treated the heirs’ interest as an interest in personal property.
D. Duty to disclose defects: this material, rather than dealing with the quality of title, relates to the quality of
the improvement.
1. Requirements: Where a condition
a. Materially impairs the value [or desirability] of the contract
b. Peculiarly within the knowledge of the seller or unlikely to be discovered by a prudent
purchaser exercising due care with respect to the subject transaction,
c. Nondisclosure constitutes a basis for rescission as a matter of equity. “ Stambovsky (ghost
case)
2. Types of defects:
a. Example: Johnson v. Davis: the roof fell in after the seller represented that the roof was in
good condition. The seller only has to disclose those defects she knew of.
b. Physical defects on the property: termites, cockroaches, that the house is built on a filled-in
swamp
c. External, off-site conditions: nearby hazardous waste disposal sites or earthquake faults,
noisy neighbors, underground gas pipelines, or proposed developments.
3. Under common law, the seller just couldn’t engage in affirmatively misrepresent or actively conceal
defects—no fraud. The rest was covered by caveat emptor.
a. Requirements for proving fraud (in a caveat emptor state): 1) a representation of fact; 2)
which is material to the sale; 3) made falsely, with knowledge of its falsity, or with such utter
disregard and recklessness as to whether it is true; 4) with the intent of misleading the
purchaser into relying on the misrepresentation; 5) the seller justifiably relies on the
representation; and 6) the purchaser suffers some injury proximately caused by his reliance
on the misrepresentation (or injury would result if the purchaser goes through with the
purchase).
4. When on the timeline: Disclosure should come before the contract is signed, not during escrow. If
something comes up during escrow, the buyer can rescind the contract. If something that should’ve
been disclosed shows up post-closing, you can get damages.
5. In CA, the duty to disclose also falls upon the seller’s agent, who has a duty to inspect the property.
6. Disclaimers: A seller can contract out of the duty to disclose, if 1) the “as-is” clause is clear and 2)
the buyer knows what she’s doing. You can engage in nonfeasance, but not misfeasance.
E. Implied Warranty of Workmanship / Quality
1. Requirements:
a.
b.
c.
d.
Rule statement: A
homeowner has a cause
of action for breach of
warranty of quality when
1) a latent defect 2)
manifests within a
reasonable time without
substantial change in the
work 3) as a result of
the fault workmanship of
a merchant of housing
and 4) causes economic
harm. Privity of contract
is not a requirement.
III.
2.
3.
Latent defect
Manifests within a reasonable time after the purchase
Causes only economic harm.
This is regardless of whether there is privity between the merchant and homeowner. Lempke.
(garage caving in).
e. The owner must show that the defect was caused by the workmanship.
f. The house hasn’t undergone any substantial changes.
g. The merchant is a “merchant of housing,” a builder, subdivider, or commercial vendor.
Justifications:
a. Latent defects often show up after the original purchaser has sold the property.
b. It should be foreseeable to builders that the property will be sold.
c. Subsequent purchasers don’t have the same chance at inspection at the time the builder
completes the work.
d. The builder will not be unduly taken unaware by the extension of the warranty—he was to
complete the work in a “workmanlike” way, either way.
e. Sham sales to defend against builder liability may be encouraged without extending the
warranty.
f. Builder is in better financial position to guard against defect.
Limitations
a. Only applies to residences, not commercial buildings, although some argue it should apply to
commercial buildings.
b. Doesn’t apply to old homes unless they have been refurbished.
c. Disclaimers are honored by most states if they are unambiguous, clear and conspicuous. The
“AS IS” clause is usually only honored as it applies to patent defects.
d. Express warranties do not override the implied warranty of quality.
The Deed: must have writing that complies with statute of frauds and delivery in order to transfer title. This
part of the material focuses on “closing.”
A. Statute of Frauds
1. Identify parties
2. Be signed by grantor
3. Can include price, doesn’t have to
4. Identify land.
B. Requirements for the transfer of title
1. Grantor intends to presently convey an interest in property
2. Grantor delivers the deed to the grantee
3. Grantee accepts the deed.
4. Has to comply with the statute of frauds, but there doesn’t have to be a price since land can be
conveyed as a gift, without consideration.
5. The deed doesn’t have to be recorded to be valid. It only has to be delivered. If you don’t record,
your deed is vulnerable, but you did take title if it was properly delivered. Execution of the written
deed is also not key—it is delivery. The deed is a physical symbol that represents title, but it is not
title.
C. Delivery
1. Key questions: is it for consideration or as a gift; is it two or three party-delivery (three party
involves an escrow agent)?
2. Intent to transfer title: Ultimately, a question of the intent of the grantor. The intent of
whether or not the grantor wants to relinquish his property rights. The mental state of the grantor
trumps the physical act of delivery. The delivery is just evidence of the state of mind and creates a
rebuttable presumption. Usually, however, absent other evidence, we presume that the intent was to
transfer. There is also a presumption that if the grantor records the deed, then she meant to
relinquish possession. These are rebuttable presumptions, however.
a. Parol evidence is allowed to determine the intent of the grantor.
b. In some states, a recorded deed forms an irrebuttable presumption the deed was delivered
when one of the parties to a later dispute qualifies for protection under a recording act.
3. Two-party delivery
a. Oral conditions on deeds in two-party deliveries are null and void.
b.
4.
5.
6.
Sweeney Administratrix v. Sweeney: man wants to cut his wife out from ownership of the
property when he dies (without properly divorcing her). So, he deeds the property to his
brother. He recorded the deed and handed it to his brother, constituting delivery. However,
he wants to keep the property in case his brother dies. So, they execute a second deed. The
man (Maurice) keep the second deed. It is in the hands of the grantee, so delivery is
presumed. Maurice then dies. So the question is whether it is still Maurice’s property or
whether it is John’s b/c the second deed wasn’t delivered. John argues that they didn’t
intend to deliver the deed. However, they did claim to want Maurice to have the property in
case John died. They argued that had they not delivered the deed, this purpose would not
have been fulfilled.
Commercial transactions
a. Once there is a contract, the court can enforce delivery of the deed. So delivery is not a
problem when dealing with sales of title for consideration when there is an enforceable
contract. There are more frequently delivery problems when transfer of title is a gift since it
can’t be forced with specific performance.
b. In a commercial escrow transaction, the delivery is truly conditional. The condition may be
the payment of the balance of the purchase price, the obtaining of certain quitclaim deeds,
the satisfaction of mortgages or other incumbrances, or the performance, or the
performance of other acts or conditions which may or may not take place. In all of these
cases, however, the performance of the condition is beyond the control of the grantor.
Control is vested either in the grantee or in third parties.
Requirements for third-party delivery:
a. Agent:
i.
The agent has to be independent. The escrow depositary is neither an agent or
trustee of either the grantor or the grantee; its duty is merely to carry out its
instructions.
ii.
If the agent isn’t independent: if she is the agent of the seller, there is no delivery.
If she is the agent of the buyer, there is immediate delivery.
b. Conditions:
i.
The delivery in escrow or conditional delivery must be to a third person, and requires
the manual handling over of the deed to the escrow depositary.
ii.
The condition controlling when the agent will deliver the deed has to be out of the
control of the grantor. It can be oral b/c it is only instructions to the agent.
c. Death of grantor:
i.
Commercial: For death of the grantor in a three-party situation, courts have created
the rule that the delivery from the agent would “relate back” and is treated as an
inter vivos delivery.
ii.
Donative: There is no “relating back” with a donative situation. However, the
modern trend says that there was a life estate w/ remainder created when the deed
was given to the agent. The common law said that it was testamentary and therefore
invalid. There is another theory that said that the grantor’s death terminates the
agent’s poew to deliver the deed, so delivery is impossible.
d. Example: Rosengrant v. Rosengrant: an elderly couple wants to give their farm to their
nephew, but not until they die. At the same time, they want to avoid probate. Probate is
expensive, so they are trying to save money and time. They come up with a written deed, but
the issue is delivery. Intent constitutes delivery. They hand the deed over, but they don’t
intend to immediately relinquish control at that time, so that delivery is useless. So the
question is whether when they handed it to the banker, they were making him an agent to
deliver it to the nephew at death. The problem was that the couple would still have access to
the deed to revoke it.
Modern trends construe in favor of delivery, while common law construed against delivery. Common
law is still more the general rule than the modern trend.
Requirements for Delivery
Donative / Third
party
-Independent
agent
--Condition
out of
control of
grantor
IV.
Death of
grantor –
assume life
estate /
remainder
Commercial / Third
party
--Usually valid
delivery, -inherently
conditional, -grantor must
give up all
control
Death
of
grantor
—
relates
back
Two party
Physical
delivery not
required;
determined
by intent,
parol
evidence
included
Mortgages: the financing part of the transaction comes before closing, but affects the deal post-closing.
A. Example: the price of the house is $300,000. You need to put 10-20% down. The down payment on the
contract is often less. The mortgage / financing question is how to come up with the down payment and how to
get the rest. Suppose you come up with $80,000. You have to borrow $220,000. With interest of 6.5% and a
monthly payment of $1,500, you pay $18,000 / yr, which times 30 is a total of $540,000. Most of that goes to
interest. The amount you have actually paid into the principal is your “equity.”
1. If you pre-pay, you will avoid the interest payments.
B. When you finance the purchase of real property, you execute a promissory note (promising to pay back what
you borrowed), and a mortgage.
1. Two theories: 1) title theory (common law) you would actually deed the property to the lender in
FSCS. 2) Lien theory—the house is security for the loan.
C. A bit of background / Overview
1. Under the title theory, if the buyer came into hard times and could not pay, if he had been paying
for a long time, they gave an “equitable right of redemption,” which would allow more time for the
buyer to get the money.
2. The problem that came with this was that the lender may have had to wait for a long time. The
term “foreclosure” meant foreclosure on the right of redemption. At some point, even under
equity, the buyer has to pay or lose the house. The legislature then came up with the “statutory
right of redemption.” (during the depression).
a. If the house, in foreclosure, is sold for less than the loan amount, antideficiency statutes
say that the banks only go after you for the house and have no other recourse. These
statutes usually result in higher down payment and interest rates.
b. If the foreclosure sale sells for much higher than the loan amount, you get some of your
equity back since they only take the amount of what is left in the loan. Under common law, if
you defaulted you lost your equity. If you default now, you have a right to your equity.
c. After foreclosure, you have a certain amount of time (3 mos. to 2 years; the norm is 1 yr.) to
buy it back. Therefore, foreclosure sales are usually for lower since buyers don’t want to buy
subject to the defaulting party coming back to get it. After the statutory period, it turns
into an FSA for the subsequent buyer. This is called the statutory redemption right.
D. The foreclosure process (foreclosing on the equitable right of redemption)
1. How it works: There is notice of the sale, which the lender runs. There is a conflict of interest in
that the lender only cares about getting her debt and the buyer wants it to sell for as much as
possible to get back some equity.
2. Requirements: The lender must conduct the sale with 1) due diligence; 2) good faith.
a. Due diligence is objective, asking what actions you actually performed. Must also comply with
statutory requirements.
b. Good faith is subjective, goes to the state of mind of the lender while she performed the
required actions.
c. Most basically, the lender has to act in the best interests of the seller.
3.
E.
F.
G.
H.
V.
Example: Murphy v. Financial Development Corp.: there are many statutory measures the lender
must comply with as well as duties imposed by the courts, set forth above. In this case, they used
good faith and followed all statutory requirements, but there was a due diligence problem since they
sold the property to themselves on a day with bad weather where they were the only ones there.
The seller would have like more people to be there. The lender cannot just worry about themselves,
but look for better foreclosure circumstances to increase the sale price. The measure of damages
is the actual sale price vs. the foreclosure price under optimal conditions. If there is a breach of
the duty of good faith, the difference is in the sale price and fair market value price.
4. Selling Price: If the low selling price “shocks the conscience” then it is per se an unreasonable price
and the requirements are not met.
5. Some jurisdictions only apply the “shocks the conscience” requirement and do not allow protest
simply because the seller acted fraudulently or did not comply with statutory requirements.
Installment land sale contracts
1. An arrangement whereby the seller contracts to convey title to the purchase when the purchaser
has paid the purchase price in regular installments over a fixed period of time.
2. They are treated similarly to mortgages:
a. Example: Bean v. Walker: the buyer defaulted in payments near the end of the period, and
the seller wanted to keep title and the payments made so far (which was provided for in the
contract). The court found that if a forfeiture would result in the inequitable disposition of
property and an exorbitant monetary loss, equity can and should intervene. The court didn’t
treat this as a contract, but as a property deal. They required a foreclosure sale and a
return of the equity. The courts didn’t allow them to simply end-run the protective scheme
by reclassifying the name of the instrument.
b. Some jurisdictions will enforce these as contracts: the buyer chose to waive the protections
of a mortgage and there is freedom to contract. Missouri is one of them.
Effect on title
1. Does a mortgage render title unmarketable? To the extent that there are creditors in line, those
creditors have a right to the property as security. Analytically, treat it the same way as an
easement—a recorded encumbrance.
2. Purchasers at foreclosure sales do not take subject to the mortgage (since the sale is satisfying the
mortgage).
First and second mortgages / junior property interests.
1. Second mortgages are taken subject to a first mortgage. The first has the right to sell the
quality of title that existed at the time the first was granted. Therefore, if in a foreclosure
sale there isn’t enough money to pay for both, the second mortgage goes with the person, not with
the land.
a. Antideficiency statutes don’t cover second mortgages.
2. When a first forecloses, if they wipe out everything that came subsequent, even easements would
be eradicated.
3. What happens if you default on the second mortgage but not the first? They only get the equity
from your first mortgage. The second mortgagee took interest in title existed at the time (with
a mortgage) therefore they only took interest in the equity. So when there is a sale, the second
gets the equity. The first maintains their security in the home b/c the new owner takes the
property subject to the mortgage. The purchaser become responsible for paying on the first
mortgage.
Purchasing subject to vs. assuming the mortgage
1. What’s the difference? Rather than getting a new mortgage with higher interest rates, people may
want to assume the mortgage to maintain the low interest rates. If you assume the mortgage, you
become personally liable. If you take it subject to the mortgage, the seller’s name is still on and the
bank can’t sue the buyer, only the seller. The seller is still personally liable for the assumed loan
unless they got an express release.
2. If he takes it subject to the mortgage, he just pays the equity. For example, assume that A buys a
house for $100,00 and executes a mortgage for $80,000. A sells the house for $150,000, subject
to the mortgage. The equity in the house is $70,00—the difference between the amount owed on
the mortgage and the selling price of the house. That much is paid to the seller; the rest is paid to
the mortgagee.
Title Assurance / Recording system
A. The recording system serves two purposes: 1) to allow the parties, during escrow, to be certain they are
getting the title they have been guaranteed; 2) post-closing, to protect parties against unrecorded defects by
distinguishing the competing, unrecorded, property claims. You have—as a general rule—to rely on the state of
the title as it is reflected in the recorder’s office.
B. Post-closing trumps
1. The party must qualify for protection under the recording act:
a. Majority: Must be a subsequent bona fide purchaser w/o notice.
This language
is VERY
b. Largest minority: Simply be a bona fide purchaser without notice and record first.
important.
2. Any party who did not record his/ her interest will be vulnerable to claims made by those who
qualify for protection under the recording act.
3. However, any parties who do record give notice to the whole world, and first-in-time rules apply.
C. How to search
1. Tract index: lists the property by parcel number (or address) and shows all the interests on one
page.
2. Grantor/grantee index:
a. Start w/ the present—the most recent grantee (probably the person you’re buying it from),
Wendel. Look and see who granted it to Wendel: Sarika. Then see who granted it to Sarika:
Troy. The see who granted it to Troy….ja nii edasi. Do this as far back as possible. It just
shows names of owners in FSA.
b. After getting the name of all the potential grantors, check the grantor index to see what
they granted to whom and when. This would show any “forks in the chain of title.” Start going
backwards in time, then go forward in time. This shows the substantive condition of the title.
c. Standard scope of search
i.
Check each grantor from the time the deed was executed. That is, when you look in
the books, if the grantor was granted the property in 1965, you will look in 1965.
That is the “date of execution of the deed” purporting to convey title.
ii.
When do we stop looking under that grantor? At the first recorded deed that
purports to transfer title in (FSA). Since with an unrecorded deed, there could be
problems and their might be another conveyance, which that person would have
qualified for protection under the recording act. (This takes you to what the
recording act of that jurisdiction requires for qualification). Someone with apparent
title can pass good title if the person w/ actual title didn’t record.
3. Assume that only one party records.
Timeline: Grantor
Start: date of
execution of
the deed to
grantor
Look in each year between,
for encumbrances-covenants, easements, etc.
Pay attention to dates of
execution. That’s when the
grantee has the power to do
something.
End: when there is
a recorded deed
that transfers title
-------------------------------------------------------------------------------------------------------------------------------------------
D. Requirements for Recordation (In order to create constructive notice).
1. The property should be identifiable by a brief description of the property.
a. Luthi v. Evans: the “Mother Hubbard” clause—simply stating “all interest” in X geographical
area (identifying by colloquium) is sufficient for a valid conveyance, but it is not sufficient to
put all parties searching the index on notice. It should be described with sufficient
specificity so that the specific land conveyed can be identified. The only situation where a
“Mother Hubbard” type description would be acceptable is if the searching party had actual
knowledge of the conveyance.
b. The general rule is to place the burden on the party in the best position to avoid the
problem.
c. You only have to research those deeds the index indicates affect the parcel of land you are
purchasing.
d.
If a party’s interest is defeated under the recording act, that person gets the money that
the grantor got for selling it to a second party. They are entitled to that compensation
instead of the grantor getting it twice.
2. The owner’s name should be spelled correctly and not confusing so the chain will link up.
a. In Orr v. Byers, the court considered whether the doctrine of idem sonans (the idea that a
misspelling is no big deal if the party is identifiable) should apply to records in the index.
They found that it was too impractical to ask the parties to look under every possible spelling.
b. If it is the recorder’s mistake, take the misrecorded deed as though it were properly
recorded. Under the modern trend however, it is the opposite. The recorder has qualified
immunity for mistakes.
c. A minority does apply idem sonans, although the majority, general rule is that it does not
apply.
d. Inquiry notice; if you are aware of facts that raise concerns over how it is recorded, good
faith requires you follow up. If you don’t, you will be charged with whatever would be found or
what actually occurred.
e. Hyphenated-names don’t give constructive notice. Changed names don’t give constructive
notice. The last names need to be identical. What about first names? Do they have to be
exact? If it is “sufficiently dissimilar” to record name of the owner it is not valid against
subsequent bona fide purchaser. However, there is a split in the jurisdictions. Some require
the burden on the searcher to look for predictive diminutives.
3. Don’t confuse what actually happened in the fact pattern and what a party claiming protection under
the recording act should actually know.
4. What about if there is a problem with the recording? The grantee takes the deed down to be
recorded but there is a mistake or the recording office neglects to record it? Most jurisdictions
put the loss on the grantee, not on the subsequent bona fide purchaser. Others put it on the SBFP.
E. Types of Recording Acts: if you are taking from someone with only apparent title, you can only get title if you
qualify for protection under the recording act.
1. Race statute: if a subsequent purchaser records first, then that purchaser is the owner, even if
she knew of a prior, unrecorded conveyance. The acts are not explicit that you have to be a
purchaser, but generally there is agreement that you have to be a purchaser.
2. Notice: a subsequent bona fide purchaser without notice of any prior conveyances qualifies under
the recording act.
a. Example: O conveys to A, who doesn’t record. O dies. O’s heir, H, conveys to B, who has no
notice of the conveyance to A. B records. B trumps b/c otherwise heirs could never receive
full consideration. They would never know whether the land was free.
b. Example: O conveys to A, who doesn’t record. O the conveys to B, who is a subsequent bona
fide purchaser w/o notice who doesn’t record. A then records and conveys to C. C is bona
fide purchaser w/o notice. B records. C records. Under race-notice C trumps b/c A
recorded first and therefore conveyed actual title. Under notice, C trumps b/c at the time
of C’s conveyance, he would have no notice of B’s recordation.
c. O to A. O to B. A records. B to C. B has actual title, but A is the recorded owner. The
shelter rule is invoked: once B trumped A, everyone who took title from B is protected. B
has actual title and can therefore convey his property to C. If B conveyed to O, however, O
would not be protected by the shelter rule b/c he knows better and otherwise there would be
too much potential for collusion. However, if A went on to convey to D, D would take title b/c
he would have no notice of B or B’s conveyance to C.
d. O to A. O to B. A records. A to C. B to D. C qualified as a BFP w/o notice and has actual title.
D would have notice that B didn’t have title b/c he would find the conveyance to A.
e. A recorded instrument of conveyance outside the chain of title does not impart constructive
notice to a subsequent purchaser or incumbrancer.
3. Race/Notice: if a subsequent bona fide purchaser without notice (at the time of giving
consideration / closing) doesn’t record before the previously granted deed, she does not qualify for
protection under the recording act. If after extending consideration, the subsequent purchaser
finds out about the previous conveyance, that is okay—the lack of notice has already been
established.
a. O to A. O to B. B to C. C records. A records. C records first, but does she have to record
just her deed or all the way back to the common grantor? B/c a title searcher would not find
4.
F. Chain of
1.
2.
B as a grantee. All deeds must be recorded back to the common grantor. If not, A still has
actual title. This is called the Zimmer rule.
b. O to A. A to B. B records. O to C. C records. In order for B to maintain title, B had to record
the conveyance to A. C would have no way of knowing of the conveyance to B b/c in searching
the grantee under O, he would not find A or B.
c. O to A. O to B. B to C. C records. B records. A records. This would work for the Zimmer rule
b/c the searcher would keep searching until they found B’s. Then they would go back and find
B to C. O to A would never be found. O to B would be the first conveyance from O that would
be found.
The deed must be validly acknowledged in order to be validly recorded (although not to transfer
title).
a. Whether the recording will be sufficient to create constructive notice depends on whether
the acknowledgement defect is latent or patent. If the defect is patent, it never should have
been accepted by the recorder and therefore will not give constructive notice. However, if
the defect is latent, it does give constructive notice to the whole world.
b. O to A. Patent defect in acknowledgement. A records (not giving notice). B wishes to
purchase from O and discovers the O to A deed with a patent defect in the acknowledgment.
B doesn’t qualify b/c he has actual notice.
c. Defect in acknowledgement rules apply to both notice and race-notice jurisdictions.
i.
Messersmith v. Smith
1) FACTS: Miss Messersmith conveys the property to her nephew, the Π,
but he does not record the deed immediately. After the conveyance but
before the recordation, Miss Messersmith conveyed a lease of ½ undivided
interest in minerals to Smith. Smith then conveyed the same to Seale.
Both deeds were recorded. Both Smith and Seale are Δs. The problem
was with the conveyance to Smith. There were two deeds. The first deed
was acknowledged (followed the procedure of appearing before the notary
and authenticating) but had an error in it. A second deed was executed,
but Miss Messersmith didn’t appear before the notary—it wasn’t validly
acknowledged.
2) DECISION: Usually, the fact that the Δs recorded first would mean that
they were entitled to protection under the recording act. This was a
race-notice jurisdiction, and they recorded first. However, Smith’s
recording was suspect. Even though on its face it was acknowledged, the
facts were shown to be the opposite (latent defect— no constructive
notice). Extrinsic facts can show invalid acknowledgment. In this case,
there were statutory requirements which weren’t met. In a race-notice
jurisdiction, therefore, without a proper recording, Smith didn’t take title
and therefore had none to convey. Smith didn’t qualify for protection
under the recording act b/c of the defect in the acknowledgment. Seale
would have to record the whole chain of title—the Zimmer Rule. (Of
course, Smith’s bad recording would be sufficient for constructive notice
since it’s only a latent defect to any subsequent purchasers, but since the
Court suspected fraud, they decided it wouldn’t).
Title Problems (In a tough situation, ask who was in the best situation to avoid the problem?)
O to A. A to B. B records. O to C. C records. C trumps b/c of the Zimmer Rule. B’s recording is a
“wild deed” b/c it can’t be traced back to a chain of title. Why protect B when B could’ve avoided
the problem?
Bd. of Educ. v. Hughes: Hoerger conveys to Hughes an incomplete deed. Hoerger conveys to Duryea
& Wilson a deed, which they did not immediately record. D & W conveys to Π a deed. Π records.
Hughes fills out the deed and records it. D & W records. Since the deed to Hughes wasn’t valid
until after the other deeds had been conveyed, he was a subsequent purchaser w/o notice who
recorded first. Π’s recording doesn’t match up the chain of title since it doesn’t match up with D &
W. A deed is not complete until the grantee’s name is filled out. A grantee can fill out a deed if
there is implied or actual permission from the grantor to do so.
a. O to H. O to D. D to Π. Π rec. H’s deed b/c valid. H rec. D rec. The court made it look like
this: O to D. D to Π. Π rec. O to H. H rec. D rec. Zimmer rule—H wouldn’t match up the
chain of title. This decision is a little nutty b/c H would not have searched again before he
recorded his deed. It might have been better to have his filling in the deed relate back, and
this is another approach.
3. Expanded Scopes of Search
a. Common grantor: General rule is you only have a duty to search for conveyances affecting the
property you’re interested in buying. Under the expanded scope, you should search all
deeds out by the common grantor during the standard time period. The expanded scope is a
minority rule.
i.
O BH to A, with easement across WH. A records deed to BH. O WH to B. In the
index it is only to BH and the easement doesn’t show up to WH. Under a standard
scope of the search, there would be nothing to create notice of the easement.
ii.
Guillette v. Daly Dry Wall, Inc.: this expanded scope rule is applied to a common
scheme / subdivision. This solves the notice problems with common schemes (better
than inquiry notice or the complications of registering the development plan).
b. Estoppel by deed: if a party w/o title to the land conveys it and subsequently gains title,
that original conveyance becomes effective. There does not have to be a law suit or
anything—it is an automatic transference of title and it relates back. Therefore, any
subsequent conveyances by the party who is now getting title also become effective. All
jurisdictions recognize estoppel by deed, but not all recognize the expanded scope of the
search.
i.
For example: A to B. O to A. B has title. (and other conveyances by B are valid)
ii.
If B records (after A to B), is there an expanded scope of the search which would
allow subsequent purchasers notice? A search that required examination of records
under the name of each owner prior to the date of the deed transferring title
to the owner would uncover B’s recordation. Jurisdictions that require this require
it to give effect to the doctrine of estoppel by deed. For the expanded scope, you
would have to look as far back as possible for this person to have prematurely
conveyed this property—normally about 50-70 years. You find date of execution of
the deed, and then you look for that grantee as a grantor starting 50-70 years
earlier. The majority still requires standard scope of the search. On an exam, only
worry about expanded scope of the search if you see estoppel by deed.
iii.
Estoppel by deed originally only applied with a general warranty deed, but now it also
applies to quitclaim deeds if the grantor represents that she has title.
c. (Idem Sonams—looking for other spellings)
d. Expanded back end (prior in time, but subsequent in recording (subsequent in time, but prior
in recording)—look for actual knowledge)
i.
O to A. O to B, who has knowledge of conveyance to A. B records. A records. B to C.
Under standard scope of the search, C is protected. However, A has done everything
she is supposed to do (but she should have recorded earlier). With the expanded
scope search, search up until the present. A few jurisdictions apply the expanded
scope. The expanded search would put subsequent purchasers on at least inquiry
notice.
G. Persons protected by the act: must be a bona fide purchaser.
1. This means donees are not protected.
2. Generally, if you have financed via mortgage, then you are a purchaser.
3. Installment purchase: since valuable consideration must be paid, the courts sometimes have to
consider what valuable consideration is and at what time someone becomes a purchaser.
a. If the purchaser makes first payment and before final payment has actual notice of the
competing interest, then that person is only entitled to protection inasmuch as she has paid.
i.
Daniels v. Anderson: the Daniels had a right of first refusal, which wasn’t recorded.
The property was sold to Zografos, and Zografos made several payments. Daniels
informed Zografos of his interest prior to Zografos’ final payment. The court ruled
that the Daniels’ interest trumped, and that they could buy from Zografos the full
purchase price plus taxes.
b. If the purchaser has made first payment and before final payment has only constructive
notice, this is not sufficient to defeat the purchasers’ interest.
i.
Lewis v. Superior Court: the Lewis’ made down payments. Fontana Films recorded
their lis pendens, but it was not indexed until the final payments had been made by
the Lewis’. The court held that it was illogical to expect someone to check for
recordings before every payment they made, which in effect is what would be
required if constructive notice were enough to defeat their status as bona fide
purchasers. This is a modern trend approach—a recording after the first payment
(not down payment) is made does not give notice.
c. Some courts say you are a purchaser when you’ve paid 100%; some when you’ve paid
substantially, some when you’ve paid a small amount. The level of protection a person will get
will depend on the court’s jurisdictions.
4. Options of what to do with A (first in time) and B (subsequent purchaser), when there is no notice.
a. A > B. A has to pay B for B’s payments, A can sue O to recover payments.
b. A > B, but B doesn’t have to make payments. B can sue O for payments made.
c. B > A, but B makes payments to A and A can sue O for payments made.
H. Inquiry Notice: A BFP has a duty of due diligence in ensuring he or she will be able to obtain title.
1. A party should be on inquiry notice of any deeds that are referred to by recorded deeds. Called
the “Doctrine of muniments of title.”
a. Harper v. Paradise: there was a deed that was lost and never recorded for a life estate and
remainder in heirs. There was a subsequent deed delivered recreating that conveyance which
referred to the original deed which was recorded. Subsequent purchasers claiming ownership
to property in fee simple. They want the whole title. Remaindermen claim they were first in
time. Purchasers claim they weren’t on notice that the original deed was for a life estate. The
court finds that they had inquiry notice since the recorded deed referred to the original
deed.
b. If you find an entry in the index that purports to effect your title, you need to read the
deed.
Is a BFP on inquiry
notice if he cannot
c. Sometimes people don’t want to record the whole lease, so they record a memorandum. Does
find any recording of
this put parties on notice of the contents of the lease? There is a split of authority. While
his grantor’s deed?
in the Howard Johnson case, the court found that McDonald’s wasn’t on notice of the noWould that indicate he
competition clause (even though it is customary for developers to include these clauses), the
doesn’t have title,
Mister Donut court found that the memorandum did create notice.
right?
d. A compromise position is to permit the doctrine to be used only when the reference contained
in the recorded instrument is sufficiently specific to enable the title searcher to find it—in
other words, if the reference is fatally vague, the purchaser won’t be charged with notice.
2. A party should be on inquiry notice if there is someone in visible, open and exclusive possession
or anything that would be revealed through due diligence in inspecting the property.
a. Waldorff Ins. and Bonding, Inc. v. Eglin Nat’l Bank: the owner of the condominium was in
possession. The fact that there were multiple people in possession didn’t matter. The
mortgagee should have known.
b. This comes from the duty to walk the land and inspect it. Duty of due diligence.
c. There is the duty to ask the party giving rise to the inquiry—B should ask A what she’s doing
there.
d. May also have inquiry notice when there are multiple people living in a house whether the
person selling actually has that right. However, there is a rule that says when the seller is
consistent with record title, you do not have to inquiry further. This is a fallback rule,
however. It would be better to inquire.
3. If you fail to inquire (exercise due diligence), you are charged with notice of the actual state of
affairs.
VI.
Title Insurance
A. Title insurance is another way that a purchaser of land seeks to protect himself. Since the indices do not
protect perfectly, title insurance comes in case someone asserts a superior right. They will pay you for the
price you paid for the land. It is possible to get a policy that will appreciate with the land.
B. The key is that although it seems like it is insuring you against defects in the title (recorded, unrecorded,
chain of title), it really just protects you against defects in public records, unless such defects are specifically
excepted from coverage. The standard policy excludes losses from government regulation, claims of persons in
possession not shown by the public records as well as unrecorded easements, implied easements and easement
by prescription. Standard policies also exclude defects that would be revealed by a survey or inspection.
VII.
C. Basically, therefore, all they are saying is that they have checked the chain of title and will protect you
against defects you couldn’t have found with an inspection.
D. Common law: title insurance doesn’t have a duty to disclose what they uncover (Chelsea Title: they knew the
land was less than he bought and didn’t tell him). Modern trend is that the insurance company owes a duty to
disclose that which raises concerns.
E. Title insurance does not protect you against hazardous waste or environmental problems, since these defects
go to use or value of the land, not title to the land. This can be altered by contract.
F. They only pay out 4% of claims.
Warranties of Title—What to do w/ problems post-closing, after recording act analysis.
A. Merger doctrine
1. The doctrine that after closing, the contract merges into the deed, and so the buyer can no longer
sue the seller under the contract. Can only sue on warranty contained in the deed.
2. There are many exceptions to this doctrine so that it has lost its influence. There has always been
an exception for fraud and contractual promises deemed collateral to the deed.
3. Other approaches, since b/c the merger doctrine doesn’t make sense under the modern landscape
with respect to the expectations of the parties.
a. The promises of the parties in the contract are now considered to be collateral to the deed,
falling into the long-time exception.
b. Do away with the merger doctrine all together.
c. Make specific contract provisions that the contract will survive the deed.
B. Warranties of deed:
1. Special warranty: when the seller warrants against all defects in title and only excepts out only
those defects that arose while she owned the property. What covenants are included? All 6 are
included, but only w/ respect to the grantor’s period of ownership. Grantor warrants that she did
nothing during her period of ownership to diminish title.
2. General warranty: the seller warrant against all defects and encumbrances except those
specifically excepted in the deed itself. Grantor also warrants against actions of prior owners.
a. In some states, the grantor must specifically name all 6 covenants usually accompanying this
deed. In others, deed including such words as “grant” or “convey” carry the six covenant with
them unless the deed expressly excludes them. In these states, if the grantor does not
expressly limit or exclude covenants, the covenants are implied.
3. Quitclaim deed: makes no warranty.
4. The property will sell more or less depending on what kind of warranty can come with the deed.
C.
Types
of Covenants in General Warranty Deed
On a fact
1. Covenant of Seisin—the grantor warrants that she owns the estate that she purports to convey.
pattern, consider
both seisin and
a. Measure of damages is difference in purchase price—not difference in market value. For
right to convey
example, if it turns out there are 20 fewer acres, out of a purchase of 100, there is the
breached. They
return of 1/5 of the purchase price, not the market value of 20 acres. Some states do allow
are the same.
the fair market price. If they do allow fair market price at time of discovery of the breach,
keep in mind that damages cannot exceed the amount paid to the grantor.
2. Right to Convey—the grantor warrants that she has the right to convey the property. The only time
this could be different from seisin is when there is a trust or when an AP can convey but not have
seisin.
3. Covenant against encumbrances—the grantor warrants that there are no encumbrances on the
property. Encumbrances include, inter alia, mortgages, liens, easements, leases, and covenants. Also
include improvements encroaching onto neighboring land. Recorded or unrecorded.
a. Mere knowledge of an encumbrance is insufficient to exclude it from the warranty. The
This does not
intention to exclude an encumbrance should be manifested in the deed itself. However, the
contradict Lohmyer.
modern trend is that visible easements—those involving open and notorious use at the time of
The same violation
the conveyance or those that produce actually physical conditions of the realty that are
that will make a
contract voidable in
apparent—do not violate the covenant against encumbrances.
Lohymer, will not be
b. Latent land use violations or government actions pursuant to an ordinance or other law are not
actionable under a
encumbrances (zoning, etc.) Frimberger v. Anzillotti. This is an exception to the rule that
warranty covenant
usually whatever is a breach pre-closing of marketable title is a breach post-closing, and to
later.
the extent it is asserted, it is a breach of a future covenant as well.
c. Measure of damages is for a removable encumbrance, the cost of removal. For a nonremovable encumbrance, it is the difference in value between the land with the encumbrance
and without the encumbrance. In all cases the damages are limited by the total price
received by the warrantor.
4. General warranty—the grantor warrants that she will defend against lawful claims and will
compensate the grantee for an loss that the grantee may sustain by assertion of superior title.
This includes attorney fees and damages resulting from claims of persons actually owning the
property, but only if the challenging party prevails against the grantee. The grantor did not
covenant to defend against unfounded claims.
a. Rights under this covenant do not arise until the grantee has been evicted by a party having
superior interest.
b. The grantee can only receive those reasonable attorney fees incurred to mount the
unsuccessful defense against the third party. Therefore, the grantee cannot receive
attorney fees incurred in a second suit to collect the attorney fees incurred in the first
Quiet enjoyment
actions; nor can the grantee collect attorney fess for suing the grantor for losses suffered
and general
warranty are
because of the paramount claim in the third party.
basically the
5. Quiet enjoyment—that the grantee will not be disturbed in possession and enjoyment of the
same. Like seisin
property by assertion of superior title.
and right to
a. Must be actual interruption of possession—which means possession has started and been
convey, they can
interrupted. Not that it could or that someone has superior title who might interrupt
be coupled and
possession. Actual breach must occur. In other words, for future covenants, the mere
both analyzed
existence of superior title and the inability to sell the interest (they could only sell 1/3 coal
together.
rights) b/c of the clouded title is not a breach. Brown v. Lober.
i.
They were suing the executor of the grantor’s estate—during probate, they have to
bring the suit now or be forever barred. That’s why they couldn’t wait for an actual
breach.
6. Further assurances—that the grantor will execute any other documents required to prefect the
title conveyed.
a. For example, a technical defect exists in a previously signed document and the parties need
to execute a corrected document. A grantor under the covenant of further assurances must
execute the new deed and cannot demand additional compensation from the grantor.
b. This is the only deed covenant that can be enforced by specific performance.
D. Present vs. Future:
1. The first three are present—either that are true upon the title the deed is delivered or they
aren’t. Therefore, the are violated, if ever, when the deed is delivered.
a. SOL begins to run upon the date of breach—the date of delivery of the deed. It is usually 10
years.
b. The mere existence of a superior interest in someone else will breach a present covenant.
Unlike in Lober, where there has to be an assertion of that superior interest to breach a
future covenant.
c. Do present covenants run with the land to remote grantees? Common law says that a cause
of action cannot be assigned. Therefore, if A delivers a deed to B with a breach of a present
covenant, and B later sells to C, C cannot sue A for the original breach. The modern trend
allows the cause of action to be impliedly assigned. C can sue A for breach of the covenant.
This isn’t the covenant running, but having the cause of action assigned.
i.
This only arises if the remote grantee buys a special or quitclaim deed.
ii.
The maximum the grantee can receive from a remote grantor will be the amount the
remote grantor received from a bona fide purchaser. The remote grantee is limited
to the lesser of the remote grantee’s actual damages, the remote grantor’s sales
price or the remote grantee’s purchase price.
iii.
The SOL still begins to run at the time of the breach—the conveyance to the original
grantee.
2. The second three are future—promises the grantor will do some future act. A future covenant is
not breached until the grantee or his successor is evicted from the property, buys up the paramount
claim, or is otherwise damaged.
a. SOL begins to run at time of eviction or when the covenant is broken in the future.
b. Future covenants do run with the land to remote grantees. Therefore, the remote grantee
can seek relief against any remote grantor in the chain of title who breached his or her deed
c.
covenants. As a corollary, a grantor who pays a grantee b/c of a warranty has recourse
against the prior warranting grantors (subject to SOL).
i.
Rockafellor v. Gray: why couldn’t they sue on the future covenants? No one had
taken possession of the land. At common law, future covenants run as long as some
legal title as passed or actual possession (privity of estate). Here, the court finds
the foreclosure sale invalid, which means no legal title was passed. They didn’t take
possession. So the future covenants didn’t run.
ii.
Modern trend: there only has to be privity of contract or deed, which is always
present. Future covenants always run unless there is an AP.
To be a breach of a future covenant, the superior interest must actually be a superior
interest—has to be a valid claim.
RUNNING OF COVENANTS TO REMOTE GRANTEES
Type of Covenant
Present
Common Law
Covenants don’t run and the cause of
action is not assignable
Covenants run as long as some legal title
passed or actual possession
Future
Modern Trend
Covenants don’t run, but the cause of
action is assignable. Watch for SOL
Covenants run as long as there is privity
of contract or a deed, which is almost
always.
3.
There are some situations in which the grantee can assert of breach of both future and present
covenants. If the SOL for present covenants hasn’t run and the grantee gets evicted by someone
with superior title, she can assert a breach of right to convey and quiet enjoyment.
E. Forged vs. fraudulent deeds
1. Someone without authority has signed someone else’s name.
2. Tricking someone into granting a deed by misrepresentation.
3. Either way, both types, as to the immediate grantee, can be undone.
4. As to remote grantees:
a. Forged deed: a thief can never pass good title—grantor gets it back.
b. Fraudulent deed: only voidable against the immediate grantee. Grantor can’t get it back.
VIII. Summary
A. Where are we on the timeline? Address issues chronologically. . .
B. Are there defects? Servitudes, mortgages? Competing interests?
C. Can purchaser rescind the contract?
1. Is it really a defect? Was the easement / covenant properly created and does it run with the land?
2. Marketable title analysis (recorded, unrecorded, chain of title defects)
3. Failure to disclose latent defect?
D. Post-closing:
1. Does SBFP trump the competing interest? Recording act analysis…does SBFP qualify for protection
under recording act?
2. If SBFP loses, can she sue on a deed warranty? Or Title insurance? If SBFP wins, prior owner can
sue grantor on constructive trust doctrine to regain consideration.
3. To the extent the type of deed is not given, analyze all three.