Property II - Kelly
\
A. Servitude- legal device that creates a right or an obligation that “runs with the land” or with an interest in land rest
§1.1
1. a right or an obligation runs with the land if it “passes automatically to successive owners or occupiers of the
land or the interest in land with which the right or obligation runs”
2. gives up freedom to do whatever you want to do on your land but allows you to control how your neighbors
treat their land and your will protect your investment in prop value
3. non-possessory right to control use of another’s land
I.
Servitudes are both negative and affirmative
II.
Restricted Servitudes are created in 3 ways
A.
Negative Esmt
B.
Restrictive Covenants
C.
Equitable Servitudes
III.
Issues law of Servitudes
1.
Formal Requirements of right to run with land- enforceable informally created
expectations
2.
Ambiguous meanings of servitudes
3.
Substantive Requirements for validity of servitudes
a. Determine when land use restrictions are immediately void as against public policy
b. Determine when rights or obligations, agreed to and based by owners, will not run with land for future
owners
4. How can servitudes be modified or terminated
B. Easement- permission is intended to be permanent or irrevocable – type of servitude (aka right of way across
someone’s prop)- right to another’s land
1. affirmative easement- right to do something on someone else’s land
2. burdened land aka servient estate
3. restrictive servitude can be created in 3 forms- negative easements, restrictive covenants, and equitable
servitudes traditionally
1
4. ex: B FSA to prop and a benefit if B has an easement over A’s prop- A has a burden A has lost her right to exclude
B from the road so A has FSA and a burden
5. core characteristics: right to land use, statute of frauds applies(writing is technically required), non-revocable and
usually permanent, transferable, if “appurtenant” easement is attached to the land not person and cannot be
severed from land ownership package
C. Covenant- obligation on ones own land- type of servitude
1. law of covenants was created in England and called real covenants – enforceable by damages – when technical
and substantive rules limited the ability of owners to create or enforce such covenants the equity cts developed
law of equitable servitudes – used injunctive relief
2. affirmative covenant- promise I will do something
3. negative covenant- promise I won’t do something
4. ex: if A has a trailer and there is a covenant A has a burden of diminished freedom over own land use and B has
a benefit of string of control over A’s land use
D. License- permission that is informal and revocable at will by owner of land – not servitudes
1. not transferable inherited or devisable by will
2. Licenses are revocable at will, no writing is required and many are implied by circumstances
3. Revocable licenses are not transferable and can not be inherited or left by will
4. License coupled with an interest- when one sells prop to another on their own land they give permission to
enter the land and remove the new prop
5. core characteristics: Permission to enter, need not be in writing, terminable at will of grantor, non-transferable
(except tickets)
6. possessory of real prop grants non-owner right to enter land
7. becomes trespass when licensee refused to leave after asked
8. 4 circumstances when license cannot be freely revoked
a. A license coupled with an interest- ex: on land to buy car
b. Theater ticket
c. Esmt by estoppel
d. Constructive trusts
E. Easements by Estoppel (Irrevocable Licenses) pg 320
1. cts may prevent a real prop owner from revoking a license if the owner grants the licensee the right to invest in
improving prop or otherwise induces the licensee to act in reasonable reliance on the license
2. the owner is estopped from denying continued access to his land for whatever period is deemed just under the
circumstances – converts a revocable license to an irrevocable easement
3. what you get –
4. Holbrook v Taylor pg 321-briefed- there is a easement by estoppel when
a. LO induces licensee to act in reliance on access to prop (by granting permission or acquiescing) and
b. the LE acts in reasonable reliance on the permission (invests money or labor or other)and
c. irrevocable license and lasts “so long as its nature calls for” (prob perm)
F. Constructive Trusts pg 323
1. trust is a prop arrangement in which an owner called the settlor, transfers prop to another person called the
trustee with instructions to manage the prop for the benefit of a third party called the beneficiary
2. trustee has legal title beneficiary has equitable or beneficial title
3. most are created expressly by a trust document or a will
4. sometimes cts treat a prop arrangement as if the grantor had created a trust regardless of intent aka
constructive trusts
a. found to exist by operation of law or by construction of the court regardless of any lack of express
agreement between or intent on the part of the parties
5. Rase v Castle Mountain Ranch Inc pg 323-briefed
a. Held that cabin owners had an equitable lien on prop
2
b. Cabinowners remedies- either LO pay full market price or give another 50 yr license
G. statute of frauds is adopted in all juris requires a writing to transfer most interests in real prop which easements
are considered by the statute – must be in writing to transfer real prop and be enforceable
1. several exceptions easements by estoppel, easements by prescription, implication from prior use and necessity,
constructive trust
H. Doctrine of Estoppel- your conduct has estopped you from having a claim of denial of an easement – unclean hands
I. Easements by Estoppel may be recognized in 2 diff contexts
1. oral easements- grantor may purport to convey an easement but fail to comply with formalities by doing it
orally, or not within specific requirements, or ambiguous deed reference
a. enforce intent and especially if grantee invests substantially in reasonable reliance on this representation
b. may also be granted if grantor committed fraud by deceiving grantee
2. Irrevocable licenses-recognition of an easement by estoppel is likely to contradict the original intent of the
grantor as above cases use was permissive yet both cases cts refused to allow it to be revoked to protect the
interests of the licensee in relying on the relationship with the owner
J. Prescriptive Esmt
1. If scope of non-owner’s actions is limited rather that general may be granted a prescriptive esmt – limited right
to use prop of another
a. Only affirmative esmt can be acquired by prescription
b. Same elements as adverse poss except actual use instead of actual possession- and doesn’t have to be
exclusive
2. open and notorious- must be sufficiently visible and obvious to put a reasonable owner on notice that her prop
is being occupied by a non-owner
3. exclusive- the use is of a type that would be expected of a true owner of the land in question and that the
adverse claimant’s possession cannot be shared with the true owner-may require showing of true owner being
excluded
4. tacking- succeeding periods of possession by diff persons may be added together – only if they are in privity with
one another, meaning that the original adverse possessor purported to transfer title to the prop to the
successor
5. adverse- use be nonpermissive – lack of permission is presumed – true owner must show permission evid
6. Hostility/adverse
a. No permission by TO(Majority view)
1. generally presumed (BOP on TO to overcome presumption)
2. did TO expressly grant permission? If yes= no hostility
3. did TO expressly deny permission? If yes =hostility
4. if silence or ambiguity as to permission = presumed hostile(acquiescence fits this situation)
5. if public access the prop presumed permissive
b. Some state also evaluate trespassers state of mind (Minority view) : Either
1. good faith required: TO must be not be aware they are trespassing(look for mistake or color of
title) OR
2. bad faith required: TP must intentionally trespass
7. ouster- make an explicit statement of intent to take possession of the entire prop by adverse possession from a
co-owner
8. 4 approaches exist to evaluate the adverse possessor’s state of mind
a. objective test based on possession-majority- no permission
b. subjective tests based on
1. a claim of right- prove by claimant’s conduct
2. intentional dispossession and – must be aware occupying other’s prop and intend to oust or
dispossess the true owner – vastly rejected because it rewards wrongdoers
3. good faith- only innocent possessors those who mistakenly occupy prop owned by someone else
can acquire ownership by adverse possession
3
9. objective test makes state of mind irrelevant while subjective force adverse possessor to prove a particular
attitude and to show non permissive
10. Sol varies from state to state
11. cts generally hold that adverse possession of gov prop does not exist
12. prescriptive easement elements are the same as those for adverse possession except you must show adverse
use rather than possession- open, notorious, adverse, continuous, and uninterrupted use of the claimed esmt
for the statutory perioda. exclusive not required as it is for AP. Exclusivity is possession that is not shared with TO- an esmt can be
shared with TO
13. adverse possession claims result in transfer of title to adverse possessor- prescriptive esmt claims result in the
right to continue the kind and amount of use that persisted during the statutory period
14. negative esmt can not be acquired by prescription in US
a. must be trespassing
b. lawful use of one’s prop does not place true owner on notice that she must bring a lawsuit to protect rights
c. interfere too much with free development of land
15. Policy/Rationale for AP/PE
a. TP Conduct
1. Reward land use by claimant
2. Reliance on TO non-action
b. TO conduct
1. Recognize implicit Waiver/ acquiescence by TO
2. To inaction causes loss
K. 2 Types of Implied Esmt- Implied by prior use(aka Quasi-Esmt) and Necessity
L. Easements Implied from Prior Use pg 332
1. implied esmt are recognized in particular kinds of relationships despite the absence of express contract to create
an esmt
2. sometimes they effectuate the intent of the parties as manifested in their conduct
3. other times may contradict the actual intent and be implied by law as a result of a public policy judgment about
the fair or efficient allocation of prop rights in context of relationship
4. exception to SOF
5. Most are right of way
6. Esmnt implied by Prior Use
a. Overall: Consider Grantors intent v Claimants interests v societal interests
b. Elements of Rule
1. Common ownership of land prior to severance
2. Use before severance
a. Of one part of the land that benefits another part of the land
b. That is apparent and continuous
3. Claimed esmt is necessary and beneficial to enjoyment of land
a. Necessary= “reasonably convenient” & important to the enjoyment of the land - is an elastic
concept
M. Easements by Necessity pg 339
1. Overall: Consider Grantors intent v Claimants interests v societal interests
2. Elements of Rule
a. Common ownership of land prior to severance
b. Claimed esmt is “necessary” at time of severance
1. Necessary- w/out esmt no effective use of the land could be made
2. look for landlocked parcel(land surrounded by strangers(outsiders to the transaction of land)) &
access only via grantors prop
4
3. lasts as long as necessity does
3. if option of priv landowner roadway still necessity because its public access you would need not to be a
landlocked
4. the elements have to be met at time of sale of prop
5. Finn v Williams pg 339-briefed
a. Where an owner of land conveys a landlocked land a way by necessity exists over grantor – there was a
dormant implied esmt of necessity since there was no public road access to prop
b. esmt runs with the land
c. has to exist at time of sale
6. policies underlying the esmt by necessity doctrine
a. to effectuate the intent of the parties
b. and to promote the efficient utilization of prop
c. law presumes the common owner intended the esmt
II. Creation by Express Agreement pg 344
A. Writing pg 345
1. Esmt must be in writing due to statute of frauds exceptions: prescriptive esmt, esmt by estoppel, implication,
and necessity, and constructive trusts
2. Created by deed normally only signed by grantor – attaches to prop
3. A transfer of an esmt is analogous to a sale of prop
4. Treated as a grant of interest in real prop
5. Can buy and sell esmt
III. Rule Against Reserving an Easement in a Third Party pg 345
A. Some states traditionally held that O may not sell a parcel of prop to A while reserving a esmt over A prop in B
B. Many cts have changed the traditional rule allowing reservation of an esmt in 3rd party
C. Can simply convey the prop to the party who is intended to own the esmt the party then conveys the prop to the
ultimate grantee reserving an esmt over the prop for herself
D. kind of pointless technicality
IV. Validity: Substantive Limitations on the Kinds of Easements that can be created
A. Limits on Negative Easements pg 346
1. Cts trad limited the number of neg esmt that could be created by contract to several kinds
a. the right to lateral support of ones building
b. rights to prevent both light and air from being blocked by construction on neighboring land
c. and the right to prevent interference with the flow of an artificial stream such as an aqueduct
d. this was because used to not have recording devices in England
2. US always had a records system – never recognized neg esmt by prescription
3. New esmt – conservation esmt- to prevent devel of land held for environmental purposes – historic esmtpreventing destruction or alteration of buildings that have historical or architectural importance- solar esmt- to
protect access to sun for solar energy
B. No Affirmative Easements to Act on One’s Own Land pg 347
1. Trad law of esmt did not allow creation of an affirm obligation to do something on someone’s own land for the
bene of other owners
C. Running with the Land pg 348
1. Esmt attaches to the land ownership and burdens or benefits current and successor owners
2. Esmt by estoppel, prior use, and necessity generally run
a. If intended to and if they are reasonably necessary to enjoy these dominant estate
D. Requirements for the Burden to run with the Land pg 348- servient estate is burden w/esmt
1. In writing (in deed or referenced in a deed)
2. Intended to run (expressly stated or implied)
3. Notice
a. actual notice -subsequent owners know of existence
5
b. inquiry notice - visible signs of uses by non-owners which suggests that a reasonable buyer should
investigate further whether there is an esmt
c. record/constructive notice -if in chain of title and properly recorded- a proper title search would reveal the
existence of an esmt
E. Requirements for the Benefit to run with the Land (Appurtenant versus In Gross) pg 349- dominant estate is
benefited by esmt
1. Test: Bene runs w/ land if it’s grantor intended it to
2. Intent can be express or implicit
3. If ambiguous, ask if esmt useful apart from ownership of land or is it primarily useful to anyone who owns the
parcel? If the latter likely to run
4. Presumption is that Esmt is appurtenant and in gross is disfavored
5. Esmt is appurtenant- if both the bene and burden run with land ownership
a. automatically transfer as they run with land ownership
b. cannot be severed from land ownership (you cannot unbundle the sticks)
c. if benefit runs with land is it treated as if it were attached to the land even if dominant parcel is then
subdivided
d. enforceable by future owners of benefitted land- flows to successors
e. esmt appurtenant limited to neighbors or nearby
6. Esmt in gross- if burden attaches to land, but bene does not (it is personal and or bene is unrelated to land
ownership) ex: utility co
a. generally transferable, if intended to be
b. depends on nature of esmt and intent of grantor
c. esmt in gross anyone can have
d. if it does not run with land it is not attached to a particular parcel and there is no dominant estate
e. enforceable by beneficiary of esmt
7. if esmt is unclear must look to surrounding circumstances and policies for intent of grantor
V. Interpretation of Ambiguous Easements: Scope and Apportionment
A. Scope of Esmt
1. What kind of use is permissible?
2. Is it divisible among multiple new users?
a. depends on grantors intent
b. presumed if appurtenant
c. if in gross, is easmt exclusive to holder? If yes its apportionable
d. consider societal interests to fill in gap in grantors intent
3. what are physical parameters of esmt?
4. Is Esmt use a “surcharge” on the estate? (Is it an unreasonable additional burden?)
a. grantors intent?
B. balance interests of easement holder in free development v. interests on servient estate holder in security
C. Cox v Glenbrook Company pg 353-briefed
1. ct asks what is the scope of the esmt? Test: grantor’s intent
a. Can use of the esmt be subdivided? development is a natural occurrence and an appurtenant esmt will run
to even subdivided owners of the original land esmt ran with- assumed unless explicitly stated in deed
b. Can esmt be widened? look to grantor’s intent in deed “as now located” Where width of a right of way is
not specified in the grant it is limited to the width as it existed at the time of the grant
c. Is there a “surcharge” on the servient estate? (will esmt be overburdened) won’t know till people move in
and there is evid
2. clearly an appurtenant esmt by deed
3. General rule is owner of an esmt may prepare, maintain, improve or repair the way in a manner and to an
extent reasonably calculated to promote the purposes for which it was created
VI. Easements in Gross
A. Henley v Continental Cablevision of St Louis County Inc pg 358
6
1. where the servient owner retains the privilege of sharing the benefit conferred by the esmt it is said to be
common or non-exclusive – divided utilization of the rights granted are presumptively allowable
2. The owner of an esmt may license or authorize third persons to use its right of way for purposes not inconsistent
with the principal use granted- allowed to add whatever deemed necessary at anytime
3. commercial in gross esmt is presumed to allow to be share and esmt holder decides
4. non-commercial in gross esmt look for grantors intent
B. to see if owner of an esmt is misusing ask
1. whether the use is of the kind contemplated by the grantor
a. what kind of activities are encompassed
b. ex: general right of way may be used for any purpose including utilities in majority
1. minority- general right of way are limited to specific purpose contemplated at time of grant
c. grantors keep what don’t give away- when can’t speak for themselves ct must decide whether broad or
narrow interpretation should apply
2. whether the use is so heavy that it constitutes an unreasonable burden on the servient estate not contemplated
by the grantor
a. when the grantors intent is ambiguous the cts must balance the interests of the esmt owner in freedom to
develop his prop against
b. the interest of the servient estate owners in security from having their prop overly burdened in a way that
they could not anticipate or should not have to
3. and whether the esmt can be subdivided
a. question of divisibility of an esmt
1. when nonexclusive- meaning grantor or owner of the servient estate has reserved for herself the
right to use the esmt in conjunction with the grantee generally held nonapportionable
2. when exclusive- meaning grantor has no right to use the esmt in conjunction with the grantee
generally apportionable
VII. Modifying and Terminating Easements pg 364
A. esmt lasts forever unless terminated by
1. an agreement in writing(release)
2. by their own terms
3. by merger-when the holder of the servient estate becomes the owner of dominant estate
4. by abandonment – owner of esmt by conduct indicated an intent to abandon esmt (mere non-use is not
enough) or
5. by adverse possession or prescription by the owner of the servient estate or a 3rd party
6. or cts because of frustration of purpose – impossible to accomplish or no longer serves intended purpose or
7. many states have “marketable title acts” may require that esmt be re-recorded periodically (30-50 yrs) to be
binding
a. purpose – limits how far back a buyer must look in the chain of title to determine the validity of seller’s title
and existence of esmt and other encumbrances on land
B. can modify but if not practical then terminate
VIII. Limits on Esmt Creation
A. No easements in 3rd party (traditional rule some states retain)
B. Negative easements cannot be created by prescription
1. Don’t lose power to do something because haven’t done it yet
2. Ex: ocean view parcel on water empty and one behind has house parcel on water doesn’t lose power to build (or
block view) because it hasn’t done it yet
C. Only the following easements on OWN LAND have been recognized so far
1. lateral and subadjacent support
2. right to water flow (depends on state law)
3. conservation (prevent development)
4. historic preservation (this could be affirmative too)
5. right to light & view not being blocked (must be express-not in common law)
7
IX.
X.
XI.
XII.
XIII.
a. this right will arise only by K (or perhaps government regulation) not by common law
b. except possibly for solar energy easement
Rights and Obligations of Original Covenanting Parties
A. Basic idea: if you no longer own the land to which the covenant is attached, you will no longer be burdened or
benefited by the covenant
B. Policy Against Enforcement of Covenants In Gross-The benefit cannot be enforced by someone who does not own
land to which the covenant is attached
C. Exceptions:
1. Homeowners Associations
2. Government
3. Charity
Running Covenants
A. Running with the land means that covenant attaches to land ownership and burdens or benefits whoever owns
land
B. For Both Burden & Benefit To “Run” the Covenant must be:
1. In Writing
2. Intended to Run*
3. Notice to Burdened Party
a. ^same 3 as Running Esmt
4. It Touches & Concerns Land*
5. Privity of Estate* (Required for Real Covenant not for Equitable Servitude)
6. *Must analyze separately for burdened & benefited estate
7. *First analyze Burdened prop then Benefited prop
a.
really only looking for intent to run, touch and concern, and privity of estate
b. others will be yes if found yes for burdened prop
Writing Requirement
A. Writing Should be in “Formal” Document:
1. In deed to each parcel bound or benefited
2. In original deed(s) attaching covenant
3. referenced in a later deed
4. Stated in Declaration of Restrictions or a Plat(Map)
B. If writing requirement not clearly satisfied consider:
1. Equitable Estoppel based on
a. Seller’s conduct/ inducement
1. other writing evidencing promise (ex. sales literature; ads)
2. Oral representations
b. buyer’s reliance
c. & “inequity” if no covenant
Notice Requirement
A. Either of the three kinds of notice is sufficient
B. Actual: LO in fact knows of covenant
1. was told or otherwise was aware
C. Inquiry: visible signs from observing the property would indicate property is burdened
1. unlikely since most covenants are restrictive (and hard to see that something is NOT being done), but perhaps.
2. Ex: a uniform pattern of use could suggest residential only covenant
D. Record/Constructive: a proper title search would reveal the existence of an covenant
Intent to Run
A. All depends of grantor’s intent
B. Yes if deed says “magic words”:
1. “covenant to grantor/ee heirs or assigns”
2. intended to bind future owners
8
XIV.
XV.
XVI.
XVII.
XVIII.
3. intended to run with the land
C. If deed is silent, consider:
1. presumption of intent to run if touches & concerns land
2. facts & circumstances test to determine intent:
a. is the covenant primarily beneficial if it does run?
b. does benefit increase value of dominant estate
Touch and Concern
A. Main idea: what kinds of restrictions legitimately will create a corresponding benefit to land
B. Traditional Test: does covenant have to do with land use? consider:
1. Does it affect the quality, value or mode of enjoying the burdened and benefited property
2. Does it affect the parties interests as Landowners (is it most useful if attached to land ownership?)
3. if there is intent to run; likely T&C
C. Similar, but distinct from intent to run which looks at intention of parties; this says, regardless of intent; is this a
legitimate restriction?
D. Modern Test: Is Covenant Reasonable? (more later)
Horizontal Privity of Estate
A. Basic idea: law is willing to impose restrictions on land use only if there is some corresponding benefit to someone
else’s land use.
B. So there must be a shared connection to the land at time promise is made
C. Look for a transaction b/w the parties (a transfer of a property interest)
1. mutual (simultaneous): grantor/ee have shared interest for a period of time. Grantor retains some interest in
the property
a. EX: lease; easement
2. instantaneous: a shared interest for a fleeting moment:
a. EX: a sale; a gift; a mortgage
D. Example of no horizontal privity:
1. no transaction at all. Just neighbors making an agreement but not selling property to one another
2. OR the timing is off: a promise made at a time other than when there is transfer of property
Vertical Privity of Estate
A. Basic idea: focuses on relationship between the original promising parties & successor owners. Seeks to ensure that
successors have a sufficient connection to the land burdened or benefited by the covenant.
B. Strict Vertical Privity
1. look for transfer of property interest with no future interest retained.
2. leases will not qualify
C. Relaxed Vertical Privity
1. exists if successor is possesser even if not “owner”
2. leases do qualify
D. Examples of No Vertical privity:
1. just a neighbor who is not in chain of title of burdened/benefited parcel
Whitinsville Plaza v Kotseas pg 376
A. met 4 qualities touch and concern was most looked into – decided reasonable covenants against competition may
be considered to touch and concern and run with the land when they serve a purpose of facilitating orderly and
harmonious development for commercial use – might be unenforceable if unreasonable restriction of trade under
fed or state antitrust laws or state common law
B. anti-competitive covenant touch and concern burdened land because limit land use and touch and concern benefit
land because they enhance the market value- reasonableness in time, space, and public interest
Defining the Issue
A. Whether the cov ran with the land to bind succeeding owners of the prop that the original parties may have
intended to restrict to certain uses or whether the bene could be enforced by a succeeding owner of the dominant
estate intended to bene from the restriction
B. Whether the cov was unenforceable either because
9
1. Violated public policy
2. Deemed unreasonable
C. What the remedy should be
1. Injunctive relief- ordering the owner or possessor of the servient estate to comply with the covenant or
2. Award of damages for the harm caused by violation of the covenant or Both
XIX. Implied Reciprocal Negative Servitudes in Residential Subdivisions pg 394
A. Common grantor/developer
B. General scheme (or plan of development)
1. Multiple conveyances
2. deeds out w/ substantially uniform restrictions
3. Other Evid
a. recorded plat showing restrictions
b. observance of neighbors conformity
c. declaration- stating covenant are intended to be mutually enforceable
4. Absence of a Common plan
a. Only some deeds are restricted
b. Restrictions are not uniform
C. Record notice? By looking at deeds to other prop showing restrictions on other prop?
D. Evans v Pollock - pg 395 briefed
1. grantor is giving out deeds to 29 prop- first 2 prop no restrictions kept for himself – the 29 included restrictions
ex: residential only, voting rights in community
2. Implied Reciprocal Negative Servitudes- to protect the buyers against developer since he never made a promise
to restrict the land he held onto- imagine that at first promise developer reciprocated it
E. Sanborn v McLean pg 399
1. grantor never makes promise- some do and some don’t – one wants to put a gas station on land- 53/91 58% of
lots restriction for residential- was patchwork though through the total 91- ct said was enough for general
scheme – all 91 were residential even though not all restricted they were behaving that way- pattern was a
common plan
F. Riley v Bear Creek Planning Committee pg 399
1. built a snow tunnel without permission from architectural committee- Is implied reciprocal neg servitudes going
to help buyer?- knew there were certain restrictions but wasn’t recorded till day after they bought house- timing
is off not in deed no horizontal privity – would prob be enough if Cal recognized Implied Reciprocal Negative
Servitude since saw the covenants just was a mistake by title co that they weren’t on the deed- Cal doesn’t
recognize so P won
G. knowledge of Grantor intent is not admissible under Parol Evid Rule
XX. Interpretation of Ambiguous Covenants
A. Blevins v Barry-Lawrence County Assoc for Retarded Citizens pg 406- briefed
1. Ct will look to intent of the parties but if a doubt arises will be read in favor of free use of the prop Defined residential purposes as one in which people reside or dwell, or which they make their
homes as distinguished from one which is used for commercial or business purposes
2. beyond doubt operation of a group home has all the char of a residential as opposed to commercial
use – surrogate family arrangement
3. Part about single or double fam only is a restriction on use – home is neither a single nor double
family dwelling – but in plain terms applies only to structures not to use
10
4. Does not address meaning of a family does not intend to alter the structure of the residence on its
lot
B. cts traditionally interpreted ambiguous covenant in the manner that would be “least burdensome to the free use of
the land”
1. covenants should also be construed against the drafter
C. also want rights of owners to be free from control by others and the free alienability of land
D. today touchstone seems to be intent of the grantor – must be express but may be by extrinsic evid where
ambiguous
1. where neighbors rely on the prop next to them being restricted the free use of land has changed to favor
security and reliance interests
2. reciprocal covenants increase value and attractiveness of prop
E. restrictive covenant that discrim against persons with disabilities may violate fed civil rights statutes including ADA
and Fair Housing Act
XXI. Modifying and Terminating Covenants
A. Changed Conditions
B. El Di Inc v Town of Bethany Beach pg 411-briefed
1. Commercial use has gone 82 yrs without challenge – prescription
2. Where a fundamental change has occurred in the intended character of the neighborhood that renders the
benefits underlying imposition of the restrictions incapable of enjoyment
3. The practice of brown bagging has also gone unchallenged for at least 20 yrs – consumption of alcohol is now
tolerated in town -Now they can control availability and consumption of alcohol on the premises
4. Del SC reversed and found for P
C. covenants will not be enforced if condition have changed so drastically inside the neighborhood restricted by the
covenant that enforcement will be of no substantial benefit to the dominant estates Rest of Prop §564
1. change must be so radical as to defeat the essential purpose of the covenant or to render the covenant
valueless to the parties
D. The changed conditions doctrine is likely to apply to changes outside the restricted subdivision only when those
changes have so adversely affected so many lots in the subdivision that enforcement is pointless – focuses on bene
to dominant
E. Rest Third alters the changed conditions doctrine in several crucial ways
1. Extends to easmt
2. Uses termination rules to substitute for controls that had been traditionally applied through the touch and
concern test
3. Suggests modification of the covenant in lieu of termination if modification will allow the covenant to serve its
original purpose – only terminate if modification is not feasible
F. Remedies are chosen on the basis of their appropriateness under the circumstances
1. Alternative to complete nonenforcement- to allow violation upon payment of damages to dominant estate to
compensate for breach
G. Relative Hardships pg 416
1. this doctrine focuses on the servient estates opposed to the changed conditions which focuses on whether the
covenant remains a substantial benefit to dominant estate
2. will not be enforced if the harm caused by the enforcement, that is the hardship to the owner of the servient
estate, will be greater by a considerable magnitude that the benefit of the owner of the dominant estate
a. even if benefit small if hardship great the ct may refuse to enforce
b. if the bene is substantial the cts are unlikely to apply if even the hardship is substantial
3. factor to consider in determining the availability and selection of appropriate remedies – may make it
unenforceable but may be responsible for damages to benefiter- modern also look to maybe modify
H. Relative Hardship and Changed Conditions only apply to covenants not esmt
I. Other Equitable Defenses pg 417
1. If P has…may not be able to enforce now
a. Violated the covenant himself (unclean hands) or
11
b. Has tolerated previous violations of the covenant by the owner of the servient estate (acquiescence) or
c. Has tolerated violations of the covenant by owners of other restricted parcels in the neighborhood covered
by the covenant (abandonment)
2. Estoppel- orally represent to the owner of servient estate that they will not enforce the covenant may be
estopped from asserting her interests in enforcing if the servient owner relied
3. Laches- if has been ignored or breached for a substantial period of time ct may find that unexcused delay in
enforcing prompted reliance on the failure to object and enforcement now would be unconscionable
a. look for language in instrument
4. Merger- will terminate if dominant and servient are same owner
5. Release- agreement in writing of all parties to terminate or release the prop
6. Prescription – open and notorious violation of the covenant without permission for the stat period may
terminate the covenant
XXII. Common Interests Communities
A. Sometimes absent a declaration provision homeowners in a subdivision who share common areas can create a HOA
B. Homeowners Assoc and Condominimus pg 425
1. very common for a developer of a subdivision to create a homeowners assoc or as rest 3rd calls them “common
interest community assoc”- these are empowered to enforce the covenant or restrictions
2. res and comm. condo complexes similarly create condo assoc that have same power
3. last 30 yrs- up and coming
4. they are created by a declaration filed by the developer prior to sale of the first lot and each of new owners is a
member
5. the members are empowered to vote for members of a board, usually called the board of trustees or managersto manage common interests
6. not all residents are entitled to vote only members and the weight depends on prop interest
7. assoc may also be empowered to collect dues and fees from owners to maintain common areas – also can
create bylaws or rules for use of common areas – and appearance and use of lot
8. Condos- each unit owned in fee simple by an indiv while common areas owned as tenants in common by all
people in building
9. votes are normally proportional to percentage of building they take up – also usually elect a board – also
normally set up by filing a declaration with local recorder and then use deeds to refer to declaration
10. some states regulated these organizations by regulating some basic structure of assoc
11. Rest Common interest communities is based on the fact that owners are burdened and benefited by servitudes
that require them to pay fees
12. 2 conflicts are common – between unit owners and developer over management contract and between unit
owners themselves
C. Cooperatives pg 427
1. distinguished from condos in that the entire building is owned by a single nonprofit coop corp.- indiv owners buy
shares and then lease their unit form the corp.
2. indiv pay rent(periodic upkeep fees) and then corp. pays mortgage – more fragile because if one unit fails to pay
others must make up difference or risk foreclosure – less common
D. Architectural Review Committee
1. Whether they have a duty as an agent of HOA to act reasonably in administering the aesthetic controls imposed
by the covenants
2. Some cts hold they have plenary power
E. Restraints on Alienation pg. 450
1. common law – strong presumption that prop owners should be able to transfer their interests
2. covenants are strictly regulated and often held invalid
3. restraints on alienation of fee interests in land were traditionally held to be absolutely void on the formalistic
ground that they were repugnant to the fee
4. were viewed as incompatible with the very idea of ownership
5. restraints on alienation of lesser interests in land, such as leaseholds were generally upheld
12
F.
G.
H.
I.
6. modern trend to uphold reasonable and make invalid unreasonable
a. promote efficiency by allowing prop to shift easily to a more valued use
b. promote liberty by freeing current owners from undue restrictions
c. promote equality both by promoting dispersal of ownership and preventing arbitrary or exclusionary
interests
d. interests in grantors in controlling future use or enhancing value of units
e. interests in neighbors in complying with covenants
7. 5 types of restraints on alienation
a. direct restraint on transfer
b. servitudes requiring the consent of grantor or assoc
c. rights of first refusal
d. leasing restrictions
e. restraints designed to keep housing affordable by low-moderate income families
8. Public Policy against Unreasonable Restraint on Alienations
a. Free alienability of prop fosters economic growth and comm. Development
b. Where restrain does not impede improvement of prop or its marketability it is not illegal but where
restraint is conditioned upon restrainer obligation to purchase prop at fair market value it is valid
Consent of the Assoc pg 455
Aquarian Foundation v Sholom House Inc pg 455-briefed
1. condo declaration requires written consent of any sale, lease, assignment, or transfer of a unit interest - This
restraint would only be reasonable if assoc would have to buy unit from owner if rejects or suggest a buyer
2. here only upon violation of the covenant is the assoc required to buy it –so reverter clause is illusory
Rights of First Refusal or Preemptive Rights pg 458
1. Wolinsky v Kadison pg 458-briefed
a. P believes violated fid duty since the declaration delineates the scope of the board’s authority and then
each member has duty to implement the will of the members of assoc without exceeding its bounds -Fid
relationship exists where there is special confidence reposed in one who in equity and good conscience is
bound to act in good faith with due regard to the interests of the other
b. The duty requires strict compliance with bylaws and declaration – so when procedures are governed they
should be abided by
2. Test for reasonableness are
a. whether the reason for exercising the right is rationally related to the protection, preservation or proper
operation of the prop and the purposes of the assoc as set forth in its governing instruments and
b. whether the power was exercised in a fair an nondiscrim manner
3. P has enough to move forward with coa
4. Options are the opposite of a preemptive right
The Rule Against Unreasonable Restraints on Alienation- Rest
1. Test: Does limitation effect ability to transfer prop? If so is reasonable? Balance the bene of restraint v harm
from restraint
a. Consider the purposes of the restraint
b. Is application of the rule likely to effectuate those purposes (will it likely achieve those purposes?)
c. Consider whether exercise of power is arbitrary or impermissibly based on malice or discrim
2. 3 types of restraints
a. Disabling restraints- forbids the owner from transferring interest –worst kind- can’t ever sell to anyone
b. Promissory restraints- grantee promises not to alienate his interest in prop
c. Forfeiture restraints- FI that will vest if the owner attempts to transfer interest
3. uniformly all held void – policies being promoting dispersal of ownership of prop and preventing concentration
of land in passive family dynamics, encouraging indiv autonomy by vesting control of resources in current
owners, and promoting social utility and efficiency by allowing property to be transferred to its most valued use
4. partial restraints may be held up if do not unduly limit the ability to transfer or have a legitimate purpose – so if
are reasonable or the assoc will buy preemptively
13
J.
Restrictions on Leasing pg 466
1. Woodside Village Condominium Assoc Inc v Jahren pg 466- briefed
a. not good law in Fl anymore but still is in other states
b. D bought resid condo with certain restraints by the declaration
c. after awhile P amended declaration multiple times and was trying to force amend on old buyers - ct goes
for P
d. renting the prop was very attractive attribute in Fl due to tourism – here they were worried about the
transient residents
e. post purchase rule changes will be enforceable against buyers who bought before amendment
2. Majority Rule -most cts agree that leasing restrictions in condo declarations can be retroactively imposed on
owners who purchased units before those restrictions were adopted
3. Breene v Plaza Tower Assn ND 1981- came down other way from Woodside with similar facts – restrictions can’t
be imposed retroactively on buyers before- want to protect the right to transfer and other rights of property
owners (so it depends on what they are restricting if paint color may allow it- where leasing is going to inhibit
right to transfer)
4. rest 3rd §6.10 requires unanimous consent for declaration amendment that “prohibit or materially restrict the
use or occupancy or units” or “that deprive owners of significant prop or civil rights”
K. Anticompetitive Covenants pg 472
1. only if “reasonably limited in time and space and product line and consonant with public interest” and that
“serve a purpose of facilitating orderly and harmonious development for comm. use” Mass SC in Whittinsville
plaza- many cts have adopted
2. most recent cases over shopping center leases and proceed not under common law but fed antitrust policy
3. rule of reason requires the ct to examine the circumstances to determine whether the operation of the
covenant actually effectuates an unreasonable restraint on competition – first by defining relevant product or
service market and then the effective geographic area in which competition is likely to be present – then
compare anticompetitive effect of the covenant with its pro-competitive effect
4. Sherman Antitrust Act and not reasonableness requirement but SC has adopted the rule of reason as a standard
for scrutinizing most business relations under the Sherman Act by:
a. Facts peculiar to business in which restraint applied
b. Nature of restraint and its effect
c. History of restraint and reason for its adoption
d. We will weigh the benefits to competition against competitive evils in practice and question
5. Traditional approach was problematic because it was formalistic and limited too greatly the kinds of covenants
that could be created
6. Modern approach has replaced touch and concern with reasonableness test
a. Recognition of covenant as desirable prop rights
b. Still realizing that they can be meddlesome interferences with the free use of prop
7. This approach is that covenant are enforceable “unless unreasonable”
a. Have strong presumption of validity must violate public policy
8. Rest 3rd recognizes that servitudes that are invalid because they violate public policy include but are not limited
to those that are arbitrary, spiteful, or capricious, or that unreasonably burden a fundamental constitutional
right or are unconscionable
L. O’Buck v Cottonwood Village Condominium Assoc Inc pg 483
1. bought condo with antennae – condo complex due to roof leaking and appearance and wear on roof – P upset
now with cable would be more expensive since pay for cable per tv and have 4 tvs
2. Balancing Test Rule- In evaluating the reasonableness of a condo assoc rule, it is necessary to balance the
importance of the rule’s objective against the importance of the interest infringed upon- sort of ends means
evaluation(compelling state interest and rule is substantially related to accomplishing the goal
M. Neuman v Grandview at Emerald Hills Inc pg 485
1. Deferred to coop- right to religious ceremony practice in community auditorium was blocked by the majority in
retroactive covenant placed in declaration
14
2. Since its not the gov can’t say freedom of religion allows - private v private
3. Fl statute which says have right to assemble – ct said even if it does include religious ceremonies- condo allowed
to ban the ceremonies since reasonable because there may be conflicting groups who want regular time so
easier to just ban all ceremonies
N. Business Judgment Rule- from Levandusky v One Fifth Ave Apt Corp
1. Generally applicable to boards of directors of for-profit corp- rule immunizes officers and board members from
liability if they act “in good faith and in the exercise of honest judgment in the lawful and legitimate furtherance
of corporate purposes. So long as the board acts for the purposes of the cooperative, within the scope of its
authority and in good faith, courts will not substitute their judgment for the boards.”
2. Give deference to the board- lenient to the community interest- as long as in good faith
O. Overall Regulation of Covenants for Reasonableness
1. Balance Importance of Rule’s Objective v Interests Infringed Upon
2. Covenants in existence and with notice pre-purchase have presumption of validity
3. Validity of post purchase covenants/rules are evaluated more rigorously
4. Consider community interests
a. ex: economic interests- effect on marketability- reliance/security/freedom in regulating community life
5. Consider individual owners interests
a. economic interest- including marketability- reliance/security/freedom from regulations
6. Consider societal interests
XXIII. Real Estate Transactions
A. Attorney’s Role pg 743
1. Attorn in Real Estate Transactions are not the norm
2. 60% are done without attorn
3. Often handled by title company who have lawyers produce documents
4. Concern about real estate brokers practicing law
B. Brokers pg 744
1. 3 types of Broker listing agreements
a. Exclusive right to sell- broker has right to collect commission on prop sold to anyone – even if found by
owner
b. Exclusive agency- get commission if sold by own efforts or of another broker- but not if sold by owner
c. Open or nonexclusive- broker entitled to a commission only if she is the first person to procure a buyer who
is ready, willing, and able to buy – if anyone else finds a buyer no commission
2. Most people have better success with a real estate agent but selling house on own is increasing - Broker
normally retained by seller
3. Buyers believe broker is for them but because they kind of represent both should recognize retained by sellergood thing for buyer to retain broker on own- won’t cost more the commission will be split between the 2
brokers
4. Dual agency is a problem- representing both sides may be conflict of interest
a. If agree as a mediator or full disclosure may work
C. Sales Contracts
1. Buyer makes deposit often 10% of purchase price and promises to pay rest of purchase price at closing
D. Executory Period pg 749
1. Time most likely to have a conflict
2. Entered in purchase agreement and now is time until closing
3. Buyers obligations after entering purchase agreement
a. Sellers ability to convey marketable title
b. Buyers ability to get adequate financing for rest of purchase price
c. Inspections on premises for structural defects, termites, or envir hazards
4. Period of information sharing and may have reasons to get out of deal or change
5. Time to get loans and mortgages – enter 2 separate agreements with bank or lending agency
a. Mortgage- security interest so if default on loan can sell home to pay debt
15
6. Time to inspect home
E. Closing pg 750
1. Had a contract now going to replace/merged with a deed
2. Transfer ownership of prop in a deed
a. If need to sue later it will be breach of warranty not contract
b. If want something in contract to continue in deed make clear in deed
F. Formalities Statute of Frauds vs Part Performance and estoppel
1. Burns v McCormick pg 758
a. Statute of frauds in play since not in writing but if part performance has been established then doesn’t
apply
b. Here it applies because Part Performance can’t be established
c. Part Performance Doctrine for Real Estate Transactions - In order to enforce an oral agreement affecting
rights in land, there must be performance “unequivocally referable to the agreement, performance which
alone and without the aid of words of promise is unintelligible or at least extraordinary unless as an
incident of ownership, assure, if not existing
1. just looking at behavior is there no other explanation, other than a contract, of what occurredhere no- other explanation is because they were family could have been doing this
2. Must be only reasonable explanation for conduct would be because of the contract
G. Ways to Avoid SOF – part performance, estoppel(built into part performance), constructive trust
1. The Part performance doctrine allows an oral sales contract to be enforced if the buyer has taken substantial
steps to complete the transaction
a. Today rely on to suggest a contract
1. Payment of all or a substantial part of the purchase price
2. Taking possession of the prop and
3. Making substantial improvements on the land
2. Estoppel- alternative- when the seller makes a promise on which the buyer relies substantially
a. Unfair to allow the seller to claim no promise if it would detriment the buyer who reasonably relied on the
promise to convey
1. The existence of a clear and definite promise which the promisor should reasonably expect to
induce action by promise
2. Proof that the promisee acted to its detriment in reasonable reliance on the promise and
3. A finding that injustice can be avoided only if the court enforces the promise
3. Constructive Trust- may be applied to prevent unjust enrichment when “prop has been acquired in such
circumstances that the holder of legal title may not in good conscience retain the beneficial interest
H. In general writing must contain
a. Identify the parties to the contract and show that a contract has been made by them or offered by the
signatory to the other
b. Indicates the nature of the contract and its subject matter
c. States the essential terms of the promises to be performed under the contract
d. Must be signed by the party to be charged
2. Binder- sometimes will have a short contracts that will bind to negotiate signed by both parties
a. Some cts enforce and some don’t
I. What constitutes a Breach?- Basis in Misrepresentation, Suppression, and Nondisclosure
1. Misrepresentation consists of an affirmative statement by the seller or broker to the buyer of a fact
a. That is known to be false
b. Material to the transaction
c. Is reasonably relied on by the buyer in deciding to purchase and
d. Causes damage as a prox result of the lie
2. Suppression – as long seller does not affirmatively lie about the condition of the premises buyers are generally
charged with notice of what an inspection of the premises would have revealed
16
3.
4.
B.
C.
D.
a. Some cts began to make exceptions for if the seller acted to conceal the defect or otherwise suppress
knowledge of it by a potential buyer
b. Traditionally held that sellers are under no obligations to disclose defects in the house they are selling
1. Held to caveat empower let the buyer beware – still maj rule for apparent defects
2. Generally held to what an inspection of the premises would have revealed
Nondisclosure- Recent trend to require sellers and brokers to disclose info about latent defects known to the
seller and not readily discoverable by a buyer
a. Failure to do so constitutes fraud and will entitle the buyer to rescind the sale or obtain damages
b. Most states impose liability for nondisclosure of nonobvious info that a reasonable buyer would want to
know about and that might affect the terms of the transaction –especially market value of the prop or
induce the buyer to back out of the deal
c. Murder scene must be disclosed – since reputation and history can have a significant effect on the value of
realty
d. More than half the states have passed legis requiring sellers to disclose defects in real prop to prospective
buyers – obligations vary widely
When specific clause that states in signing this not relying on oral representation no coa for fraud based on
earlier oral statements
a. Some cts reject this rule though and go with dissent in that case
Warranty of Habitability pg 776
1. Exists well established in new homes from builders not in old
2. Many builders will waive this though in sales contract
Marketable Title
1. Marketable title was one free from reasonable doubt but not from every doubt
a. Adverse possession title ok if can be clearly established – likelihood to be successful
2. 2 Major Defects which make a title unmarketable
a. Encumbrances are prop interest in persons other than the grantors that seriously affect the value
or usability of the prop
1. Ex: poss interests, esmt, covenants liens
b. Chain of title defects are mistakes or irregularities in the documents or procedures by which title
has been transferred or encumbered over time
1. Ex: Prior deed forged or misdescription of prop
2. Ex: building done without permit on prop must be disclosed to future buyers
3. Buyer must undertake reasonable efforts to obtain financing and the buyer was not contractually justified
in simply changing her mind about a house
Remedies for breach of the Purchase and Sale Agreement
1. Buyer’s Remedies pg777
a. Specific Performance- injunction ordering the seller to convey prop
b. Damages- measured in most states by the difference between the parcel’s market value at time of
breach and contract price, return of deposit and any other add expenses
1. English rule- some states refuse to give buyer the expectation damages just deposit and
add expenses
c. Recission- buyer may seek to rescind and recover the deposit
d. Vendee’s Lien – rarely used sell prop to raise funds to pay back the deposit
2. Seller’s Remedies pg 778
a. Specific Performance- force buyer to comply with terms of contract by buying – would force buyer
to be in position would have been if performed – inability to find another buyer or mutuality
(same options in remedies)
b. Damages- measure by contract price minus the market price at time of breach
c. Rescission and forfeiture of down payment- usually in purchase and sale agreement
17
d. Vendor’s lien- rarely used- prop belongs equitably to buyer who is obligated to purchase and
presumes the seller a lien on buyers equitable title so sold to satisfy and pay rest of purchase price
to seller
E. Risk of Loss during the Executory Period: Equitable Conversion pg 778
1. Default Rule- Many cts hold risk of loss is on the buyer under doctrine of equitable conversion – treat
buyer as if transaction is complete
2. Buyer equitable owner during exec period despite seller may retain possession until closing
3. Seller more likely to have insurance so rule criticized and seller in best position to exercise care to avoid
the loss
4. Contract will normally contract around default rule
5. Ct will use Doctrine of Constructive Trust- seller will have to transfer insurance proceeds to buyer
6. In practice most agreements place on vendor
7. If die before closing
a. If seller dies before closing buyer can force the sale of the home from estate
1. Specific performance- real prop is unique and money damages can’t replace
b. If seller dies and has will that says real prop to a person and a person who gets personal prop –
person that gets prop gets nothing and the person in will who gets all personal prop gets proceeds
from sale
c. If buyer dies- since buyer already owns prop seller can force sale on estate
d. If buyer dies with financing- relieved of liability since in good faith now dead can’t get financing
but estate can force sale due to equitable conversion (treat buyer as if transaction is complete)
1. Seller can get damages not specific performance
XXIV. Deeds and Title Protection
A. Formalities
B. Essential Terms pg 779
1. The deed must
a. Identify the parties
b. Describe the prop being conveyed
c. State the grantor’s intent to convey the prop interest in question and
d. Contain the grantor’s signature
2. The deed need not be recorded to transfer title, delivery of the deed to the grantee is sufficient
3. Most deeds are and should be recorded to protect the grantee’s rights
4. The description must be sufficiently precise to locate the boundaries of the prop
a. May be defined in official surveys, plats, or by metes and bounds
5. Plat- map produced by a private developer (not a gov official) that describes the lots being created in a
subdivision
a. Plat is generally approved by a local agency before being filed in the recording office
6. Metes and bounds- starts as a defined point (usually described by a natural or artificial monument) and
identifies the direction and distance of the first border, then the second border and so on until returning to the
original point
a. In effect it tells someone how to walk around the border of the prop
C. Delivery pg 780
1. Normally not a problem because normal transaction occurs with everyone sitting around
2. For validity- On delivery must have immediate intent to transfer
a. Family transfers can be troublesome
b. Ex: mom writes deed and then gives to daughter says here when I die you have prop
c. Not valid delivery
d. Other possibility some cts have said mom has LE and daughter has remainder
3. Must be delivered to the grantee to effectuate a transfer of ownership
4. Ensure that the grantor intends to part with the property and to clarify who owns it
18
5. When prop is sold this requirement usually raises no problems since few people will hand over money for
nothing in return- gets problematic when comes to prop as gifts from family
a. Sometimes a person obtains physical possession of a deed and may even record when the owner does not
intend to transfer ownership – gives rise to a presumption that grantor intended to transfer
b. Sometimes a person records a deed with a notary tells someone of it puts it in a safe deposit box and never
changes will –has deed been delivered if they never saw it
6. Some cts are reluctant to find delivery unless the deed has been physically handed over to the donee or to a
third person who has instructions to deliver
7. Constructive delivery- writing a deed and engaging in conduct that demonstrates an intent to transfer is
sufficient to constitute delivery
XXV. Title Covenants
A. Warranties of Title pg 781
1. Present Covenants –breached if at all at closing and that is when SOL start to run
a. Covenant of seisin- grantor’s promise that he owns the prop interest
1. And are accurate about what interest you own
b. Covenant of right to convey- grantor’s promise that he has the power to transfer the interest
1. Usually when own something have right to transfer
2. Possible to breach but unusual
c. Covenant against encumbrances- grantor’s promise that no mortgages, leases, liens, unpaid prop taxes, or
esmt encumber the prop other than those in deed
1. At least that I have disclosed everything and you have found everything
2. Future Covenants- breaches after closing SOL starts when the grantee’s possession is disturbed
a. Covenant of warranty- promise to compensate for any monetary losses incurred by grantor’s failure to
convey the title promised
1. General warranty deed- all defects no matter who caused them
a. Best for buyer
2. Special warranty deed- limits to defects in title caused by grantor’s own acts but not acts of
previous owners
a. Most common
3. Quitclaim deed- no warranty
a. Best for seller- buyer normally won’t accept
b. Covenant of Quiet Enjoyment – possession will not be disturbed by any other claimant with a superior
lawful title
c. Covenant for further assurances- rare- requires seller to take further steps to cure defects in the grantor’s
title
3. Most states set these out in statutes and can be incorporated by citing that statute
B. Remedies for Breach of Warranty of Title pg 783
1. Most widely used covenant is the covenant of warranty
a. Runs with the land
C. Damages- the cost of removing the encumbrance or difference between value without encumbrance and with it
XXVI. Recording Acts
A. At common law was first in time first in right
B. A subsequent purchaser who has no notice of a prior conveyance and who records his interest will prevail over any
prior unrecorded interest
C. Do not require that a deed be recorded for a conveyance to be legally valid
1. Valid against the grantor upon delivery with or without recording
D. Function of recording is to adjudicate disputes between multiple claimants to the same prop by defining priorities
1. Typically recording office uses a grantor-grantee index listing alpha and chronologically
2. Most acts define how far must go back to ensure good title
XXVII. Types of Recording Acts pg 786
A. Seller has no interest in recording transfer- no legal requirement
19
B. Default Rule- First in time(SOF, delivery, acceptance) First in Right unless next person is Bona fide Purchaser under
relevant statute will that person be able to win
1. Race Statutes- person who records first prevails – even if knew about an earlier conveyance to someone else
2. Notice Statutes- a subsequent purchaser prevails over an earlier purchaser only if the subsequent purchaser did
not have notice of the earlier conveyance – protects any purchaser without notice against prior unrecorded
interests even if the purchaser does not record first
a. Innocent recorder will be able to get prop(had no notice) BFP
3. Race-notice statutes- a subsequent purchaser prevails over prior unrecorded interests only if she 1. Had no
notice of the prior conveyance at the time she acquired her interest and 2. Records before the prior instrument
is recorded
a. About half of the states have notice statutes and half have race-notice statutes
C. Chain of title Problems
1. Rule- rerecording an interest once title passes is less of a burden than requiring prop purchasers to check
indefinitely beyond the chain of title
2. Doctrine of Estoppel by deed- by conveying land don’t own to a grantee if get rights to land later automatically
vest grantee rights in deed
3. Shelter Doctrine- allows a bona fide purchaser to convey prop to a third party even if the third party is on notice
of an earlier conveyance
4. Fraud- the recording acts are intended to protect bona fide purchaser from fraud by assuring them that they will
obtain good title to the prop even if the seller has previously sold to someone else
5. Bona Fide Purchaser- must be later in time; purchaser(for value so donee doesn’t have this opportunity) ; who
qualifies under relevant state statute
6. These rules apply to all transfers in prop – leases, mort, covenant, esmt, and liens
7. duly- record in a way to give constructive notice to future buyers
D. Zurstrassen v Stonier pg 793- briefed
1. forged deed is void and thus creates no legal title nor affords protection to those claiming under it
2. Elements of waiver
a. The existence at the time of the waiver of a right, privilege, advantage, or benefit which may be waived
b. The actual or constructive knowledge of the right and
c. The intention to relinquish the right
3. A waiving party must possess all of the material facts in order to constitute a waiver
4. Ratification occurs where a party with full knowledge of all the material facts makes an affirmative showing of
his or her express or implied intention to adopt an act or contract entered into without authority
E. McCoy v Love pg 796-briefed
1. Fraudulent inducement to a deed
2. Not forged she signed it- here innocent parties protected
F. Notes and Questions pg 797
1. If deed is void conveys no interest to the grantee and the grantee has no power to convey title to another –
bona fide purchaser not protected
2. If deed is voidable by the TO who was the victim of foul play than a subsequent bona fide purchaser will be able
to obtain good title – and victim’s sole remedy will be suit for damages for fraud or conversion against
wrongdoer
3. Forged deeds are absolutely void
4. Deeds obtained through fraud are generally voidable
G. Marketable Title Acts pg 798
1. Limiting searches to a reasonable period often 30-40 yrs
2. When a person has a record title for the designated period of time all prior claims or interests are extinguished
3. To preserve prior claims owners must rerecord their interest or file a notice claim every 30 yrs or so after the
recording of the initial deed
XXVIII. Debtor Protection Legislation pg 799
A. To borrow money from a bank to buy real estate entails 2 contracts
20
1. Note- constitutes the borrower’s promise to repay the principal amount of the loan with interest, in the
amounts and at the times specified
2. Mortgage- to obtain greater security for the repayment of the note the lender will require an indiv to execute a
mortgage on the prop – will get home if default
B. Forced sale in default is called foreclosure or foreclosing the mortgage
1. Lender is the mortgagee and buyer mortgagor
2. Mortgagor’s interest in the prop is called the equity of redemption or equity
C. Mortgage is a security device not a transfer of possession
D. 8 Protections generally accorded to mortgagors
1. Statutory right of redemption- post foreclosure right
a. Might have to wait to see if defaulter can afford to buy house back for what it went for at foreclosure
b. This is so bank won’t low bid at foreclosure
2. Equity of redemption- pre-emption right- mortgagor’s right to pay off the rest of the loan before foreclosure and
avoid loss of the prop
a. Some allow for catch-up to where you should be Reinstatement-allows mortgagor to keep the prop by
paying only the amounts then in default not the entire remaining amount of the loan
3. Notice of Foreclosure proceedings- The mortgagee must give the mortgagor notice of foreclosure proceedings it
has commenced when through judicially supervised sale or private sale by the mortgagee
4. Foreclosure proceedings- requiring a judicially supervised sale provides procedural protection for the mortgagor
by requiring the mortgagee to prove the existence of the note and the mortgage and to prove that the
mortgagor defaulted- the mortgagor may be able to prove that she did not default under the terms of the
mortgage
5. Public notice of foreclosure sale- the public nature of the sale also increases the possibility of having several
potential buyers bid at the foreclosure sale thus possibly raising the price and preventing a deficiency judgment
6. Mortgagor’s right to bid- gives chance to buy back the prop and increase the likelihood that the mortgagee will
bid the fair market value
7. Judicial supervision of the price- if bid low and then shortly after sell high may be able to sue for unjust
enrichment
8. Anti-deficiency statute- whatever value at foreclosure is will satisfy the debt
a. Can’t get any more from mortgagee
XXIX. Regulating the Foreclosure Process
A. Central Financing Services Inc v Spears pg 803-briefed
1. Unjust enrichment A sale of a mortgaged prop within 12 days of the foreclosure sale at a price 2.5 times the bid
of the mortgage is so inadequate it would be impossible to state it to a man of common sense without
producing an exclamation at the inequality of it
2. Don’t have to set aside sale just fashion remedy
3. Rule- Mere inadequacy of price is not sufficient to set aside a foreclosure sale unless price is so inadequate as to
shock the conscious of the court
4. Windfall which is unjust not the sale- 4000 minus owed
B. Installment Land Contracts pg 806
1. Juris are split in how to treat damages here
2. Alternative financing arrangement
3. Buyer makes a down payment to the seller and signs a single contract with the seller
4. After the debt repaid the seller will convey title to buyer
5. Allows for regain of prop in default and allows the seller to keep the payments already made as liquidated
damages for breach of contract
6. Usually people with bad credit low income families can’t get a mortgage
C. Forfeiture
D. Stonebraker v Zinn pg 806-briefed
1. Normal clause for liquidated damages
21
a. If the purchasers fail to make any of the monthly payments above called for, when due…and said default
continues for a period of sixty days, or if the purchasers shall abandon said property, the vendors shall have
the right at their option, to rescind and cancel the present sale and declare this contract as null and void
thereafter and the amount of the purchase price paid by the purchasers hereunder shall be considered and
treated as rent and liquidated damages due to the vendors for the use of the said premises during the time
this contract was in effect and for failure to perform or comply with the terms of the contract and the
vendors shall have the right to take possession of said real estate without further demand or notice.
b. When parties may properly contract for liquidated damages:
1. Where the damages are uncertain and not readily capable of ascertainment in amount by any
known or safe rule whether such uncertainty lies in the nature of the subject or in the particular
circumstances of the case, or
2. where from the nature of the case and tenor of the agreement, it is apparent that the damages
have already been the subject or actual fair estimate and adjustment between the parties
c. When determining amount forfeited whether it is grossly disproportional to installments made cts take into
account not only the loss of fair rental value to the vendor but also costs involved in sale, depreciation, and
attorn fees and other directly related expenses arising from abandonment
E. Making Mortgage Protection Nondisclaimable
1. If the amount is more of a penalty to buyer the ct will disgorge the profit from seller and pay to buyer
a. If the amount is a fair difference then court will leave it alone
F. Sebastian v Floyd pg 808-briefed
G. Notes and Questions pg 809
1. Universal mortgage foreclosure protection- installment land contracts are equivalent to mortgages and
therefore must be governed by the same rules
2. Another approach extends mortgage protection only to some installment land contracts
a. Depends on the amount the vendee’s equity in the prop, the length of the default period, the willfulness of
the default, whether the vendee has made improvements, whether prop adequately maintained
b. Some hold that should be a case-by-case determination if buyers accumulated equity in the prop would be
consistent with generally accepted principles of fairness and equity
c. If they have paid most of the payments then it would be a substantial injustice to forfeiture
d. Some states hold that a buyer has no right of redemption under installment land contracts
1. Only would be able to complain liquidated damages is a penalty
e. Some believe these people with installments need most protection since low income and have trouble
getting mortgage – stuck with whoever will lend them money
22