Property Outline
Prof. Berger
Spring 2009
Ethan Kent
PROPERTY OUTLINE
Chapter 1 – Justifications for Allocation of Property
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§ 1.01 – Acquisition through first possession .........................................................................................................4
[A] – Cases & Materials ........................................................................................................................................4
[B] – Law ...............................................................................................................................................................4
§ 1.02 – Acquisition by Labor and Investment ......................................................................................................4
[A] – Cases & Materials ........................................................................................................................................4
[B] – Law ...............................................................................................................................................................4
§ 1.03 – Acquisition by Governmental Fiat ...........................................................................................................5
[A] – Cases & Materials ........................................................................................................................................5
[B] – Law ...............................................................................................................................................................5
Chapter 2 – Limiting the Right to Exclude
6
§ 2.01 – Trespass ......................................................................................................................................................6
§ 2.02 – Limits on Property Owners’ Rights to Exclude ......................................................................................6
[A] – Cases & Materials ........................................................................................................................................6
[B] – Law ...............................................................................................................................................................7
§ 2.03 – Constitutional Limits on Rights to Exclude? ...........................................................................................7
[A] – Cases & Materials ........................................................................................................................................7
[B] – Law ...............................................................................................................................................................7
§ 2.04 – Adverse Possession & Prescriptive Easements ........................................................................................7
[A] – Cases & Materials ........................................................................................................................................7
[B] – Law ...............................................................................................................................................................8
Chapter 3 – Nuisance and Other Judicial Limits on Land Use in the Absence of Agreement
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§ 3.01 – Surface Water and Support .................................................................................................................... 11
[A] – Cases & Materials ...................................................................................................................................... 11
[B] – Law ............................................................................................................................................................. 11
§ 3.02 – Nuisance .................................................................................................................................................... 11
[A] – Cases & Materials ...................................................................................................................................... 12
[B] – Law ............................................................................................................................................................. 13
Chapter 4 – Servitudes: Regulation of Land Use by Private Agreement
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§ 4.01 – Easements ................................................................................................................................................. 15
[A] – Cases & Materials ...................................................................................................................................... 15
[B] – Law ............................................................................................................................................................. 16
§ 4.02 – Covenants ................................................................................................................................................. 17
[A] – Cases & Materials ...................................................................................................................................... 17
[B] – Law ............................................................................................................................................................. 19
Chapter 5 – Temporal Limitations on Property Rights
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§ 5.01 – Estates and Future Interests ................................................................................................................... 22
[A] – Cases & Materials ...................................................................................................................................... 22
[B] – Law ............................................................................................................................................................. 22
§ 5.02 – Rule Against Perpetuities ........................................................................................................................ 24
[A] – Cases & Materials ...................................................................................................................................... 24
[B] – Law ............................................................................................................................................................. 24
§ 5.03 – Waste......................................................................................................................................................... 24
[A] – Cases & Materials ...................................................................................................................................... 24
[B] – Law ............................................................................................................................................................. 24
§ 5.04 – Restraints Against Race and Marriage .................................................................................................. 25
[A] – Cases & Materials ...................................................................................................................................... 25
[B] – Law ............................................................................................................................................................. 26
Chapter 6 – Shared Ownership of Property: Family Ownership; Landlord-Tenant
27
§ 6.01 – Common Ownership and Marital Rights in Property .......................................................................... 27
[A] – Cases & Materials ...................................................................................................................................... 27
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[B] – Law ............................................................................................................................................................. 28
§ 6.02 – Landlord-Tenant: Regulating the Market for Shelter ......................................................................... 30
[A] – Cases & Materials ...................................................................................................................................... 30
[B] – Law ............................................................................................................................................................. 30
§ 6.03 – Duty to mitigate, Constructive Eviction, Summary Process ................................................................ 31
[A] – Cases & Materials ...................................................................................................................................... 31
[B] – Law ............................................................................................................................................................. 31
§ 6.04 – Implied Warranty of Habitability, Tort Liability of Landlord............................................................ 32
[A] – Cases & Materials ...................................................................................................................................... 32
[B] – Law ............................................................................................................................................................. 32
Chapter 7 – Transferring Property Rights: Real Estate Transactions
33
§ 7.01 – Structure of the Real Estate Transaction, Fraudulent Non-Disclosure .............................................. 33
[A] – Cases & Materials ...................................................................................................................................... 33
[B] – Law ............................................................................................................................................................. 33
§ 7.02 – Terms of the Deed, Chain of Title, Fraudulent and Forged Deeds ...................................................... 34
[A] – Cases & Materials ...................................................................................................................................... 34
[B] – Law ............................................................................................................................................................. 35
§ 7.03 – Mortgages. ................................................................................................................................................ 36
[A] – Cases & Materials ...................................................................................................................................... 36
[B] – Law ............................................................................................................................................................. 37
Chapter 8 – Zoning: Governmental Regulation of Land Use
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§ 8.01 – Power to Zone, Exemptions from Zoning Law ..................................................................................... 39
[A] – Cases & Materials ...................................................................................................................................... 39
[B] – Law ............................................................................................................................................................. 39
§ 8.02 – Challenges to Exclusionary Zoning, The Fair Housing Act ................................................................. 40
[A] – Cases & Materials ...................................................................................................................................... 40
[B] – Law ............................................................................................................................................................. 41
Chapter 9 – Takings: Governmental Power over Property, Constitutional Protection Against Gov’l Power 42
§ 9.01 – What purposes? ....................................................................................................................................... 42
[A] – Cases & Materials ...................................................................................................................................... 42
[B] – Law ............................................................................................................................................................. 42
§ 9.02 – Regulatory Takings and the Ad Hoc Test .............................................................................................. 42
[A] – Cases & Materials ...................................................................................................................................... 42
[B] – Law ............................................................................................................................................................. 43
§ 9.03 – Physical Invasions .................................................................................................................................... 44
[A] – Cases & Materials ...................................................................................................................................... 44
[B] – Law ............................................................................................................................................................. 45
§ 9.04 – Regulatory Deprivation ........................................................................................................................... 45
[A] – Cases & Materials ...................................................................................................................................... 45
[B] – Law ............................................................................................................................................................. 45
§ 9.05 – Forfeiture and Exactions ......................................................................................................................... 45
[A] – Cases & Materials ...................................................................................................................................... 45
[B] – Law ............................................................................................................................................................. 46
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Chapter 1 – Justifications for Allocation of Property
§ 1.01 – Acquisition through first possession
[A] – Cases & Materials
[1] – Pierson v. Post, 3 Cai. R. 175 (N.Y. 1805)
Summary: Hunter is pursuing an animal, other guy takes it. First hunter sues. Question presented is whether a
hunter chasing an animal has possessed it.
Holding: Possession of a wild animal (feræ naturæ) does not occur unless it is certainly captured or mortally
wounded.
[2] – Ellif v. Texxon Drilling Co., 210 S.W.2d 558 (Texas 1948)
Summary: Texxon sucked gas underlying both it and Ellif’s property out of a well but negligently caused a
blowout, wasting all the gas. The question presented was whether Texxon owed Ellif for the wated gas.
Holding: Although a reservoir of gas or oil underlying two properties is held in severalty, a party is liable to the
other for negligent waste of the gas or oil because the party who committed waste never possessed the gas or oil.
[B] – Law
[1] – Possession
To possess a wild animal, one must actually capture it or at least mortally wound or ensnare it. This rule is applied
by analogy to oil and gas, which migrates like a wild animal. There are policy concerns with this rule because it
creates an incentive to pump oil as quickly as possible, whether this is efficient or not.
A court, applying equitable division, split the proceeds from Barry Bonds’ 73rd home run ball between the person
who nearly caught the ball (but other fans knocked it out of his glove) and the person who came up with it.
[2] – Waste
Where oil or gas is held in severalty, its negligent waste is actionable.
§ 1.02 – Acquisition by Labor and Investment
[A] – Cases & Materials
[1] – Int’l News Serv. v. Associated Press, 248 U.S. 215 (1918)
Summary: INS routinely took news stories reported by the AP from various sources and published them in its own
newspapers. The material was not copyrighted, so there was no clear cause of action.
Holding: “[O]ne who gathers news, at pains and expense, for the purpose of lucrative publication, may be said to
have a quasi property in the results of his enterprise, as against a rival in the same business, and the appropriation of
those results at the expense and to the damage of the one and for the profit of the other is unfair competition against
which equity will afford relief.” Id., syllabus.
[B] – Law
[1] – Hot News Tort
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“The limited extent to which the INS rationale has been incorporated into the common law of the states indicates that
the decision is properly viewed as a response to unusual circumstances rather than as a statement of generally
applicable principles of common law. Many subsequent decisions have expressly limited the INS case to its facts. In
addition, in many of the decisions that invoke the misappropriation doctrine, other principles of unfair competition
law are more directly applicable.” Restatement (Third) of Unfair Competition § 38 (1995).
INS was a decision made under the Supreme Court’s pre-Erie federal common law authority and is thus not itself
binding on the states. See Sioux Biochemical, Inc. v. Cargill, Inc., 410 F. Supp. 2d 785, 805 (N.D. Iowa 2005);
Fashion Originators’ Guild, Inc. v. FTC, 312 U.S. 457, 468 (1941).
[2] – Intellectual Property
Trademark, patent, and copyright law is now all statutory. It is derived from U.S. Constitution, Art. I § 8, cl. 8:
Congress should “promote the progress of science and useful arts, by securing for limited times to authors and
inventors the exclusive right to their respective writings and discoveries.”
Trademark law (The Lanham Act, 15 U.S.C. §§ 1051–1127) controls the sale of particular goods and services in a
particular area to prevent consumer confusion, but the company, not the consumer, has standing to sue. Categories
and generic names can’t be trademarked, and trademarks can be lost through abandonment or by becoming generic.
Trademarks must be registered, and if so this provides constructive notice to the world.
Copyright Law is now governed by 17 U.S.C. §§ 101, et seq. Ideas and facts cannot be copyrighted, but the
expression of them can. Authors automatically have a right to what they create unless they “work for hire.”
Copyright lasts for the life of the author plus 70 years. Works for hire last the shorter of 95 years from date of first
publication or 120 from the date of creation (Mickey Mouse).
Patent Law is codified in 35 U.S.C. §§ 101, et seq. Patents are granted only after application by the inventor, subject
to four requirements: the subject matter must be patentable (e.g., a machine, a method of manufacture, the
composition of material); the invention must be novel, non-obvious, and useful. Business methods were formerly
unpatentable but now are.
§ 1.03 – Acquisition by Governmental Fiat
[A] – Cases & Materials
[1] – Johnson v. M’Intosh, 21 U.S. (8 Wheat.) 543 (1823)
Description: Johnson bought land from an Indian tribe, M’Intosh received a patent for the land from the U.S.
government. The question presented was which title was superior.
Holding: European conquerors have superior title to the territories they conquered within the U.S.; the Indians have
only a revocable right to occupy the land (possession but not title).
[2] – Squatters and Freed Slaves Materials
Description: Land claimants who settled frontier areas prior to their survey and freed slaves both attempted to
claim land that the government had not or would not parcel out. As in M’Intosh, the government is acting as the
grantor of property rights.
[B] – Law
M’Intosh is probably no longer good law. See Alabama-Coushatta Tribe v. United States, 28 Fed. Cl. 95, 114–15
(Fed. Cl. 1993).
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Chapter 2 – Limiting the Right to Exclude
§ 2.01 – Trespass
“Trespass is [1] an unprivileged [2] intentional [3] intrusion on property [4] possessed by another.” Casebook 112.
One does not commit trespass by being carried against one’s will onto the property of another. “A trespass is
privileged if (1) done with consent of the owner; (2) the entry is justified by necessity to prevent a more serious
harm to persons or property; or (3) the entry is otherwise encouraged by public policy.” Id.
“Liability for Intentional Intrusions on Land. One is subject to liability to another for trespass, irrespective of
whether he thereby causes harm to any legally protected interest of the other, if he intentionally
(a) enters land in the possession of the other, or causes a thing or a third person to do so, or
(b) remains on the land, or
(c) fails to remove from the land a thing which he is under a duty to remove.”
Restatement (Second) Torts § 158 (1965).
§ 2.02 – Limits on Property Owners’ Rights to Exclude
[A] – Cases & Materials
[1] – State v. Shack, 277 A.2d 369 (N.J. 1971)
Description: A public interest attorney and a healthcare worker entered the property of a farmer to offers services
to an injured migrant farm worker living on the property. The farm owner allowed the healthcare worker onto the
farm, but insisted that the lawyer could only talk with the farm worker in the farm owner’s presence; otherwise he
must leave the property. The attorney refused and the farm worker called the cops—the cops required a formal
trespassing complaint before removing the attorney. The attorney appealed his conviction, and the N.J. Supreme
Court reversed the conviction.
Holding: Under N.J. state law, “the ownership of real property does not include the right to bar access to
governmental services available to migrant workers and hence there was no trespass within the meaning of the penal
statute.” Id. at 371–72.
[2] – J.H. Desnick v. American Broadcasting Cos., 44 F.3d 1345 (7th Cir. 1995)
Description: ABC did story about Desnick, a “big cutter” ophthalmologist who it reported did unnecessary
surgeries, etc. ABC had received Desnick’s permission to do a story up to a point, but assured Desnick that it
wouldn’t do ambush interviews or undercover filming. ABC had seven undercover patients and covered Desnick’s
unsavory business methods. Desnick sued for trespass (inter alia), which the district court dismissed. The 7th Cir.,
Judge Richard Posner, reversed.
Holding: Although express consent to enter property may sometimes be rendered ineffective by misrepresentation,
the scope of the invitation must be determined with reference to the interest that the tort of trespass seeks to protect;
here, because the ophthalmic was open to the public, no right of privacy or other such interest was violated.
[3] – Title II of the Civil Rights Act of 1960 (42 U.S.C. §§ 2000a–2000a-6); Civil Rights Act of
1866 (42 U.S.C. §§ 1981 & 1982)
Title II protects people from discrimination in lodgings, eateries, and other venues (theaters, stadiums, etc). It
doesn’t apply to private clubs. The Civil Rights Act of 1866 extends equal rights to participate in lawsuits, contract,
security in person and property, and land transfer.
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[B] – Law
The scope of the invitation plays a large role in whether trespass lies. Trespass is more likely on private property,
which can usually only be entered onto in the case of an invitation. Invitations can be limited. Where property is
open to the public, there is a lesser right to exclude.
§ 2.03 – Constitutional Limits on Rights to Exclude?
[A] – Cases & Materials
[1] – Lloyd Corp. v. Tanner, 407 U.S. 551 (1972)
Description: Vietnam War protesters were asked to leave the property of a large shopping mall, which they did to
avoid arrest. The D. Or. issued an injunction preventing the mall from kicking the protesters out and the 9th Cir.
affirmed. The Supreme Court reversed, distinguishing Marsh, which allowed Jehova’s witnesses to handbill in a
company town and probably overruled Logan Valley, which extended Marsh to a shopping mall. See Geddie v.
Seaton, No. 3:06-CV-0895-R, 2006 U.S. Dist. LEXIS 55106, at *12–13 (N.D. Tex. Aug. 8, 2006). (In any event,
Logan Valley was formally overruled by Hudgens v. NLRB, 424 U.S. 507 (1976).)
Holding: “The First and Fourteenth Amendments safeguard the rights of free speech and assembly by limitations
on state action, not on action by the owner of private property used nondiscriminatorily for private purposes only . . .
property [does not] lose its private character merely because the public is generally invited to use it for designated
purposes; the Fifth and Fourteenth Amendment rights of private property owners, as well as the First Amendment
rights of all citizens, must be [balanced].” Tanner, 567 U.S. at 567, 569–70.
[2] – Materials on Beach Access
N.J. was the scene of an enormous fight over the right to beach access; this was eventually decided in favor of outof-towners seeking access to a city-owned beach.
[B] – Law
While the U.S. Constitution does not create a right to demonstrate at a shopping mall, some state supreme courts
have held that their state constitutions do. This can implicate takings issues; see §___, infra; Pruneyard Shopping
Center v. Robins, 447 U.S. 74 (1980) (holding that a state constitutional requirement that demonstrators be allowed
on mall property was not an uncompensated taking under the Fifth Amendment).
§ 2.04 – Adverse Possession & Prescriptive Easements
Elements of adverse possession: (1) continuous; (2) hostile; (3) actual; (4) notorious; (5) exclusive possession.
Elements of prescriptive easement: (1) continuous; (2) hostile; (3) actual; (4) notorious; (5) exclusive use.
[A] – Cases & Materials
[1] – Brown v. Gobble, 474 S.E.2d 489 (W. Va. 1996)
Description: Brown and Gobble were neighbors. The original boundaries of Brown’s property included a two-foot
strip of land that had been fenced into Gobble’s property at least 48 years before Brown challenged Gobble’s
possession of the strip. The Supreme Court remanded for more factfinding after clarifying the rule.
Holding: In W. Va. and majority of states, adverse possession must be shown by clear and convincing evidence but
may be established by tacking.
[2] – Nome 2000 v. Fagerstrom, 799 P.2d 304 (Alaska 1990)
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Description: Nome 2000 owns a plot of land that the Fagerstroms started using little by little (first building
materials, eventually a cabin), starting decades ago. The court found adverse possession over some parts of the
property.
Holding: The use necessary to establish the elements of adverse possession need only function to put the owner on
notice (open and notorious) and need only be as continuous, notorious, and exclusive as an average owner would.
[3] – Community Feed Store v. Northeastern Culvert Corp., 559 A.2d 1068 (Vt. 1989)
Description: Neighboring properties straddled a gravel lot. Community Feed Store had been using most of the lot
to allow delivery trucks to turn around for at least 27 years. After a survey, Northeastern realized that most of the
gravel lot belonged to it so it built a fence that prevented the trucks from turning around. The Vt. Supreme Court
found prescriptive acquisition and ruled the fence torn down
Holding: “The elements necessary to establish a prescriptive easement and adverse possession are essentially the
same under Vermont law: an adverse use or possession which is open, notorious, hostile and continuous for a period
of fifteen years, and acquiescence in the use or possession by the person against whom the claim is asserted.” Id. at
1070. “The extent of an easement created by prescription is fixed by the use through which it was created.” Id. at
1071 (citation and internal punctuation omitted).
[B] – Law
[1] – Justifications for Adverse Possession
Adverse possession may be argued to lower transaction costs associated with resolving questions of ownership.
This is probably wrong because adverse possession litigation is very expensive, maybe more expensive than
resolving as between two deeds. Another argument is that it frees up a valuable resource that is going to waste.
However, if money is thought to be a proxy for value, why not buy?
Holmes says protects the expectations of the possessor who has come to rely on it. Posner’s economic version: due
to the diminishing marginal utility of income, the joint welfare of the person who has lost interest in the property and
the person who now uses the property is maximized by adverse possession. However, it’s not clear that the adverse
possessor values the land the most.
Radin argues that it’s about the person getting more attached. She describes land as initially fungible (i.e., perfectly
replaceable with money), but that there is a moral dimension where the property becomes more personal over time.
Holmes argument is moral in nature as well, because reliance shouldn’t be upset. It’s morally wrong to foster
dependence and then cut it off, argues Singer.
What of land pirates? It seems as though there should be a good-faith standard. Three arguments for land pirates:
first, basing ownership on actual use makes things more certain than a standard like good faith. Second, failure to
object may indicate abandonment (I suppose that otherwise would go unnoticed). Third, the desire for repose
encourages lawsuits be brought within a reasonable time, even though land piracy may be wrong.
[2] – Continuous
Continuous requires only that the property be used as a normal owner would. Thus, where the typical use of the
property is seasonal, seasonal use is fine. If the original owner possesses the property during the statutory period,
the continuous element is defeated. The original owner must meet the same requirements as adverse possession
except for the “exclusive” prong.
It’s permissible to establish the “continuous” element through tacking—that is, adding the period of adverse
possession together so long as the adverse possessors were in privity.
[3] – Hostile
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This element requires that the person hold the land without the owner’s consent. A tenant cannot gain adverse
possession of the apartment she’s leasing, unless the tenant has, e.g., terminated the lease.
There are four approaches to the frame of mind required of an adverse possessor: “(1) an objective test based on
possession (the rule in most states); and subjective tests based on (2) a claim of right; (3) intentional dispossession;
and (4) good faith.” Casebook 195.
[4] – Actual
The adverse possessor must actually possess the land. This does not mean he must use the land at all times, merely
in a manner consistent with the normal usage of the land. Also, a putative adverse possessor can lease the land to a
tenant and still establish adverse possession.
[5] – Notorious
This element requires that the possession is such that a normally diligent owner would be put on notice. A person
cannot secretly possess, camping in an underground dugout and slipping in and out after dark, for example. Fences
and acts towards the outside world are helpful evidence.
[6] – Exclusive
Exclusive does not mean that only the adverse possessor can set foot on the property. Instead, it means that the
adverse possessor must act like a normal owner. Thus, he could invite guests onto the property, share joint
possession, etc.
[7] – Color of Title
Some states allow fewer years if the possessor is acting under the color of a faulty title. All states use the land area
described in the faulty title to establish the boundaries.
[8] – Burden of Proof
The burden of proof is on the adverse possessor and may be either a preponderance standard or a clear and
compelling evidence standard.
[9] – Nature of Title
One acquires by adverse possession the same quality but only the same quality as the other party holds. Thus, one
owns property in fee simple if that’s the original owner’s estate, but adverse possession would not, e.g., defeat a life
estate (wrong says Berger, right say a bunch of cases: McDonald v. Burke, 288 S.W.2d 363, 365–66 (Ky. 1955);
accord Restatement (First) Property ch. 15, Scope Note (1936); 19 A.L.R.2d 729 (West 2008) (citing numerous
cases applying this principal)). The title is only to the land actually occupied. See Nome 2000.
It is typically not possible to record adverse possession, although it is possible to record a judgment establishing title
like a quiet title proceeding.
[10] – Prescriptive Easements
Prescriptive easements have the same elements as adverse possession, but require use vice possession. One point is
that there are no negative prescriptive easements in the U.S. One cannot gain, e.g., air rights by “using” the absence
of a tall building for the statutory period.
[11] – Accession
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Accession occurs where a person inadvertently improves the property value of another. Most states have a good
faith requirement and will then apply a “disproportionate value” test—if the value added is wholly disproportionate
to the owner’s materials, the maker gains title. See Wetherbee v. Green, 22 Mich. 311 (1871) (holding that title
passed to the maker of hoops who improved the value of another person’s timber from $25 to $700 gained title).
Courts of equity will sometimes require compensation where, e.g., a person builds a house on another’s land. See,
e.g., Hardy v. Burroughs, 232 N.W. 200 (Mich. 1930).
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Chapter 3 – Nuisance and Other Judicial Limits on Land Use in the Absence of Agreement
§ 3.01 – Surface Water and Support
[A] – Cases & Materials
[1] – Armstrong v. Francis Corp., 120 A.2d 4 (N.J. 1956)
Description: A developer built a subdivision and set up the drainage so that it created a much heavier flow of water
through a downstream brook that passed by the plaintiffs’ homes, causing damage. The lower court required Francis
to build a pipe to relieve the heavy flow of water. Justice Brenan affirmed.
Holding: “[T]he ‘reasonable use’ rule lay[s] down the test that each possessor is legally privileged to make a
reasonable use of his land, even though the flow of surface waters is altered thereby and causes some harm to others,
but incurs liability when his harmful interference with the flow of surface waters is unreasonable.” Id. at 8.
[2] – Friendswood Dev. Co. v. Smith-Southwest Indus., Inc., 576 S.W.2d 21 (Tex. 1978)
Description: Landowners brought suit against other landowners, alleging that severe subsidence of their lands was
caused by defendants’ past and continuing withdrawals of vast quantities of underground water from wells on
defendants’ lands. . . . The Court of Civil Appeals reversed [the district court], holding that a cause of action in
nuisance and negligence had been stated.” West Synopsis. The Texas Supreme Court affirmed but only
prospectively, denying relief to these plaintiffs but establishing a rule. This case is similar to Ellif in that both dealt
with sucking out fluids and causing damage, but Ellif concerned the value of the gas sucked out and this concerns
the damage done by subsidence.
Holding: “[I]f the landowner’s manner of withdrawing ground water from his land is negligent, willfully wasteful,
or for the purpose of malicious injury, and such conduct is a proximate cause of the subsidence of the land of others,
he will be liable for the consequences of his conduct. The addition of negligence as a ground of recovery shall apply
only to future subsidence proximately caused by future withdrawals of ground water from wells which are either
produced or drilled in a negligent manner after the date this opinion becomes final.” 576 S.W.2d at 30.
[B] – Law
[1] – Rules—Surface Water
Common Enemy Rule: This is the common law doctrine. Property owners have absolute freedom to drain their
property. The consequences to downstream property owners are damnum absque injuria. To the extent that states
still observe this rule, it is often modified.
Natural Flow Rule: This is the civil law doctrine. Property owners may not divert water from its natural flow at all
without paying damages; this is a strict liability standard. This is a minority rule.
Reasonable Use Rule: See Armstrong. The question is whether the property owner caused an unreasonable
interference, “balancing the social benefit derived from development of defendant’s property, the availability of
cost-effective means to avoid or mitigate the harm, and the gravity of the harm to the plaintiff’s property.”
Casebook 237. This is the majority rule.
[2] – Rules—Support Easements
The scheme could be strict liability to any damage caused by undermining or it could be a negligence standard.
Both rules exist in various states.
§ 3.02 – Nuisance
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“A nuisance is a substantial and unreasonable interference with the use or enjoyment of land.” Casebook 271.
Thus, nuisance requires (1) a substantial harm with respect to (a) extent and (b) nature; that is (2) unreasonable; and
(3) interferes with the use and enjoyment of land.
Nuisance must be distinguished from trespass, although the two are related. Courts have split on whether
particulates settling on a property is a trespass or a nuisance. The right against trespass is absolute whereas the right
against nuisance is only against unreasonable interference.
[A] – Cases & Materials
[1] – Page County Appliance Center, Inc. v. Honeywell, Inc., 347 N.W.2d 171 (Iowa 1984)
Description: The plaintiff appliance store brought a nuisance action against a travel agency and the computer
companies that leased and serviced the computers the travel agency used for electrical interference with the
plaintiff’s TVs. The district court awarded compensatory and punitive damages for the plaintiff. The Iowa Sup. Ct.
reversed and remanded with instructions for a new trial, ruling that the trial court erred in its jury instructions.
Holding: “A fair test of whether the operation of a lawful trade or industry constitutes a nuisance is the
reasonableness of conducting it in the manner, at the place, and under the circumstances shown by the evidence.
Each case turns on its own facts and ordinarily the ultimate issue is one of fact, not law. The existence of a nuisance
is not affected by the intention of its creator not to injure anyone. Priority of occupation and location – ‘who was
there first’ – is a circumstance of considerable weight. [¶] When the alleged nuisance is claimed to be offensive to
the person, courts apply the standard of ‘normal persons in a particular locality’ to measure the existence of a
nuisance. This normalcy standard also is applied where the use of property is claimed to be affected. The plaintiff
cannot, by devoting his own land to an unusually sensitive use, make a nuisance out of conduct of the adjoining
defendant which would otherwise be harmless.” Id. at 175 (internal citations and punctuation removed).
[2] – Fontainebleau Hotel Corp. v. Forty-Five Twenty-Five, Inc., 114 So. 2d 357 (Fla. Ct. App.
1959)
Description: “Appellee hotel corporation brought a suit to enjoin appellant hotel corporations from continuing with
the construction of a 14-story addition to a hotel owned and operated by appellants. Appellee claimed that the
addition cast a shadow over the cabana, swimming pool, and sunbathing areas of a hotel owned and operated by
appellee. The trial court granted appellee a temporary injunction. . . . The appellate court reversed, holding that the
trial court erred[:] . . . because there was no legal right to the free flow of light and air, appellants were not using
their property to injure appellee’s lawful rights. The court found, therefore, that appellee failed to establish a cause
of action against appellants.” Lexis Synopsis. Reversed.
Holding: “There being . . . no legal right to the free flow of light and air from the adjoining land, it is universally
held that where a structure serves a useful and beneficial purpose, it does not give rise to a cause of action, either for
damages or for an injunction under the maxim sic utere tuo ut alienum non laedas, even though it causes injury to
another by cutting off the light and air and interfering with the view that would otherwise be available over
adjoining land in its natural state, regardless of the fact that the structure may have been erected partly for spite.”
114 So. 2d at 357.
[3] – Prah v. Maretti, 321 N.W.2d 182 (Wis. 1982)
Description: Prah builds a house with solar panels, Maretti plans to build something that will block the sunlight.
Lower court granted summary judgment for defendant, Prah appealed. The Ct. App. certified to the Sup. Ct. as an
issue of first impression. The Sup. Ct. reversed the summary judgment and remanded.
Holding: The owner of a house with solar panels can state a claim to be evaluated under a nuisance standard
against a neighbor whose construction obstructs the solar panels. (Minority rule.)
12
[B] – Law
Nuisance must generally be shown to be negligent, intentional, or abnormally dangerous. It must be substantial in
the sense of causing a substantial damage to a plaintiff with normal sensitivity. The Prah rule is a minority rule.
Restatement (Second) Torts § 826: Unreasonableness of Intentional Invasion
An intentional invasion of another's interest in the use and enjoyment of land is unreasonable if
(a) the gravity of the harm outweighs the utility of the actor’s conduct, or
(b) the harm caused by the conduct is serious and the financial burden of compensating for this and similar
harm to others would not make the continuation of the conduct not feasible.
Where the plaintiff came to the nuisance, she will be less successful. This is an assumption of the risk defense, but it
is not absolute. Damages are usually available, but an injunction will only issue if the plaintiff can show that the
harm to him outweighs the utility of the defendant’s conduct.
The casebook provides the following outline of private nuisance law (p. 280–81):

π may obtain an injunction against ∆’s conduct when: ∆’s conduct is unreasonable (causes more social
harm than good) and causes substantial harm to π

π may obtain damages but no injunction if: ∆’s conduct is reasonable (it causes more social good than harm
and therefore should be allowed to go forward), but the harm to π is substantial so that it is unfair to burden
π with the costs of ∆’s socially useful conduct

π is entitled to no remedy if:
o the harm to π is not substantial; or
o ∆’s conduct causes more social good than harm, and it is not unfair to impose the costs of ∆’s
activity on π; or
o the imposition of damages would put ∆ out of business and avoiding this result (because of the
social value of ∆’s conduct) is more important than preventing the harm to π

π is entitled to a purchased injunction if (Berger notes this is a thing law professors like to talk about but
that actually doesn’t exist): ∆’s conduct causes more harm than good; but it is fair to impose the cost of
shutting down ∆’s activity on π
Fairness includes (Casebook 278)



The character of the harm. Aesthetic harms will be viewed as less serious than health or safety concerns.
Distributive considerations. Is it fair to make an individual owner bear the costs of defendant’s socially
beneficial activity or should those costs be spread around to the owner causing the damage and its
employees and customers?
Fault. Is one of the owners engaged in a disfavored activity? Is the conduct appropriate for the area? Did
the plaintiff come to the nuisance?
Welfare includes (Id.)



Costs and benefits. The costs and benefits of allowing the harmful conduct must be compared with the
costs and benefits of prohibiting it.
Incentives. What effects will liability or immunity have on incentives to engage in the respective activities?
How will the distribution of the burdens and benefits of conflicting land uses affect incentives to invest in
safety or to engage in desirable economic activities?
Lowest cost avoider. Which party can more cheaply avoid the cost? Should this party also bear the burden
of paying the cost?
13
Public nuisance is “an unreasonable interference with a right common to the general public.” Casebook 281
(quoting Restatement (Second) Torts § 821B(1)). The trend in the law appears to extend standing to private
individuals (it used to be only public officials). Targets of public nuisance litigation have included pornographic
theaters, liquor stores, and flophouses.
14
Chapter 4 – Servitudes: Regulation of Land Use by Private Agreement
Servitude is the general term for a right or obligation related to another person’s land. Affirmative servitudes are
today generally called “easements.” Negative servitudes are today generally called “covenants.” Licenses can be
granted and rescinded at will.
Restatement (Third) Property (Servitudes) § 1.1
A servitude is a legal device that creates a right or an obligation that runs with land or an interest in land.
(a) Running with land means that the right or obligation passes automatically to successive owners or
occupiers of the land or the interest in land with which the right or obligation runs.
(b) A right that runs with land is called a “benefit” and the interest in land with which it runs may be
called the “benefited” or “dominant” estate.
(c) An obligation that runs with land is called a “burden” and the interest in land with which it runs
may be called the “burdened” or “servient” estate.
§ 4.01 – Easements
[A] – Cases & Materials
[1] – Finn v. Williams, 33 N.E.2d 226 (Ill. 1941)
Description: Finn found his property “landlocked” after he lost access to a road that his neighbors had previously
allowed him to use. The lower court ruled that Finn had a right-of-way easement of necessity over Williams’
property. Williams appealed and the Illinois Supreme Court affirmed.
Holding: “Where an owner of land conveys a parcel thereof which has no outlet to a highway except over the
remaining lands of the grantor or over the land of strangers, a way by necessity exists over the remaining lands of
the grantor.” Id. at 228.
[2] – Green v. Lupo, 647 P.2d 51 (Wash. Ct. App. 1982)
Description: The Greens sold to the Lupos property, and subsequently the Greens wound up with an easement over
a portion of the Lupo’s property. The Greens developed part of the land as a mobile home park and residents of the
park used the easement to ride motorcycles to the Lupos’ displeasure. The Lupos placed physical obstacles to deny
access to the easement. They claimed that the ambiguously worded easement was in gross and therefore could not
be conveyed. The Greens brought suit for specific performance; the lower court held that it was an easement in
gross; the Ct. App. reversed.
Holding: “There is a strong presumption in Washington that easements are appurtenant to some particular tract of
land; personal easements, easements in gross, are not favored”—thus, ambiguity in a conveyance will be resolved in
favor of an appurtenant easement. Id. at 54.
[3] – Cox v. Glenbrook Co., 371 P.2d 647 (Nev. 1962)
Description: Cox, owner of dominant property, plans subdivision, 60–80 owners will now use the resort’s small
access road. Cox seeks to improve the road. The lower court found that this would create an undue burden. The
Nev. Sup. Ct. ruled that it was too early to determine whether there would be an undue burden, modified the
judgment, and remanded.
Holding: “[T]he owner of an easement 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. The owner may not, however, by
15
such action, cause an undue burden upon the servient estate, nor an unwarranted interference with the independent
rights of others who have a similar right of use.” Id. at 653.
[4] – Henley v. Continental Cablevision of St. Louis County, Inc., 692 S.W.2d 825 (Mo. Ct.
App. 1985)
Description: Predecessor of Henley, the trustee of a subdivision, had granted easements for the installation of
electrical lines. The utility companies had licensed defendant cable company to install its lines as well. Henley sued
to compel removal of the lines and for money damages. The Ct. App. affirmed the lower court’s dismissal.
Holding: “[W]here the servient owner retains the privilege of sharing the benefit conferred by the easement, it is
said to be ‘common’ or non-exclusive and therefore not subject to apportionment by the easement owner.
Conversely, if the rights granted are exclusive of the servient owners’ participation therein, divided utilization of the
rights granted are presumptively allowable. This principle stems from the concept that one who grants to another
the right to use the grantor’s land in a particular manner for a specified purpose but who retains no interest in
exercising a similar right himself, sustains no loss if, within the specifications expressed in the grant, the use is
shared by the grantee with others.” Id. at 827.
[B] – Law
This is all cribbed from the Emanuel outline.
[1] – Types of Easments
There are positive and negative easements. A positive easement creates a right for the dominant owner, for example
crossing the person’s property. A negative easement restricts what the servient owner can do, for example, no
building above a certain height.
Easements may also be divided between appurtenant and in gross. An appurtenant easement is connected with the
land (i.e., it creates a dominant and servient tenement), whereas an easement creates a right over the servient
tenement not linked to a dominant tenement.
There are also profits, but these are now basically indistinguishable from easements under U.S. law.
[2] – Creation of Easements
Express creation: This occurs through a deed or will usually. It must meet the statute of frauds. It may be created
either by a reservation in the grantor—reserving a part of the transferred parcel, or by creation in a stranger to the
deed—creating an easement in the transfer for a third party. While creation in a stranger to the deed used to be
forbidden, courts now accept it.
Creation by implication: This needn’t meet the statute of frauds. It as several elements: (1) the land must be
divided up (i.e., it must have originated from one original grantor); (2) the use must have existed prior to the
severance; (3) the easement must be at least reasonably necessary. The level of necessity is higher if the grantor
seeks the implied easement because it’s assumed he drafted the conveyance. Other than in Prah-type situations,
light and air easements cannot be gained by implication.
Easement by necessity: The parcels must have originated from a common grantor at some point in the past. It is
not necessary that there have been a prior use. This is most common with landlocked parcels.
Easement by prescription: See § 2.04[B][10], supra.
Easement by estoppel: Where a person has allowed the use of an easement in a way that could reasonably be
foreseen to cause a material change in position and that change occurs, the grantor will be estopped from rescinding
the grant.
16
[3] – Scope of Easements
Prescriptive easement: The scope cannot substantially broaden or become more burdensome, although if acceded
to for the statutory period, this will lead to a larger prescriptive easement.
Development of dominant estate: The dominant estate can be developed in a manner that is normal and
foreseeable, provided this does not create an unreasonable burden on the servient estate. This is what’s going on in
Cox.
Use for benefit of additional property: You can’t use an easement to service more property, even if this is no
more burdensome. Thus, if you buy adjoining land and build another house, you can’t extend your driveway that
uses an easement en route to the main road (unless easement by necessity applies).
Servient owner’s right to relocate easement: It used to be impermissible for the servient estate holder to move the
easement. Today, although it’s still a minority view, courts are moving in the direction of allowing this if it’s not
overly burdensome. This would be important if a driveway ran through a part of a servient owner’s land that he
intended to build a building on.
[4] – Transfer and Subdivision of Easements
Transfer of burden: This isn’t a problem generally. The burden transfers like any other burden on land.
Transfer of benefit—appurtenant easement: The whole point of an appurtenant easement is that it transfers with
the land. If a parcel is split up and an easement benefits the whole property, it transfers unless this creates an
extreme increase in the burden to the servient owner. If it benefits only one or a few subplots, it only transfers to
those.
Transfer of benefit—easement in gross: It used to be that easements in gross were not transferrable. Now the
presumption is that they do transfer. Some courts allow only commercial easements to transfer. The majority view
is that easements in gross are transferrable unless (1) they were personal and (2) had no consideration.
Subdivision is more restricted. The easement generally cannot be put to separate uses. Exclusive easements (i.e.,
easements that the servient owner doesn’t get to use) are more likely divisible. This is the situation in Henley.
Subdivision is more likely to be permitted if the servient owner makes more money if there are more users.
[5] – Termination of Easements
Easements are terminated (1) by a writing releasing the easement (2) by the easement’s own terms (3) by merger
(one person owns both the easement and property) (4) by abandonment (5) by adverse possession (6) frustration of
purpose (7) failure to renew under statutes requiring renewing records of easements.
§ 4.02 – Covenants
There were traditionally three forms of restrictive servitudes: negative easements, restrictive covenants, and
equitable servitudes.
[A] – Cases & Materials
[1] – Davidson Bros., Inc. v. Katz & Sons, Inc., 579 A.2d 288 (N.J. 1990)
Description: Supermarket sold another property with a covenant restricting use as a supermarket. The city and
housing authority bought up the property and leased it to a supermarket chain because there was nowhere to shop in
the poor downtown area. Davidson sued for declaratory relief enforcing the covenant. The lower court granted
summary judgment for defendants. The N.J. Sup. Ct. reversed and remanded, announcing a new test. Problem: this
is making things messier.
17
Holding: The following factors should be considered in determining whether a covenant is reasonable: (1) “The
intention of the parties”; (2) “Whether the covenant had an impact on the considerations exchanged when the
covenant was originally executed”; (3) “Whether the covenant clearly and expressly sets forth the restrictions”; (4)
“Whether the covenant was in writing, recorded, and if so, whether the subsequent grantee had actual notice of the
covenant”; (5) “Whether the covenant is reasonable concerning area, time or duration; (6) “Whether the covenant
imposes an unreasonable restraint on trade or secures a monopoly for the covenantor”; (7) “Whether the covenant
interferes with the public interest”; and (8) “Whether, even if the covenant was reasonable at the time it was
executed, ‘changed circumstances’ now make the covenant unreasonable.” Id. at 295.
[2] – Whitinsville Plaza, Inc. v. Kotseas, 390 N.E.2d 243 (Mass. 1979)
Description: Trust company sold to defendant land with covenants restricting the type of business that could open
on the land. Trust company transferred ownership to plaintiff. Defendant leased land to a CVS, which was in
violation of the covenants. Plaintiff sued; the question was (1) whether the privity requirements were met and (2)
whether the anti-competitive covenants were enforceable. The Massachusetts Supreme Court reversed the
dismissal.
Holding: “The requirements for covenants to run with land are: that the covenants in question are evidenced by a
writing signed by the covenantor; that the language of the deed aptly expresses the intention of the original parties
that the covenants run with the land; that the deed also grants mutual easements sufficient to satisfy the requirement
that there is privity of estate; and that the restrictions were recorded with the deed. It is also essential that both the
benefit and the burden of a real covenant ‘touch and concern’ the affected parcels of land before it will be
considered to run with the land.” Lexis Headnote 5.
[3] – Evans v. Pollock, 796 S.W.2d 465 (Texas 1990)
Description: The original owners of a subdivision sold of many parcels and retained a few. The ones they sold had
restrictive covenants. The folks who inherited the retained parcels wanted to build a marina, private club, and condo
development, none of which would be permitted by the covenants on the remaining lots. The question is whether
the original owners’ land is bound by an implied reciprocal covenant. The Texas Sup. Ct. ruled that the lot might be
bound even if not all the lots were, reversing and remanding.
Holding: “[W]here a common grantor develops a tract of land for sale in lots and pursues a course of conduct
which indicates that he intends to inaugurate a general scheme or plan of development for the benefit of himself and
the purchasers of the various lots, and by numerous conveyances inserts in the deeds substantially uniform
restrictions, conditions and covenants against the use of the property, the grantees acquire by implication an
equitable right, . . . referred to as an implied reciprocal negative easement . . ., to enforce similar restrictions against
that part of the tract retained by the grantor or subsequently sold without the restrictions to a purchaser with actual or
constructive notice of the restrictions and covenants.” Id. at 466.
[4] – O’Buck v. Cottonwood Village Condominium Assoc., Inc., 750 P.2d 813 (Alaska 1988)
Description: The O’Bucks want to put up an antenna. The condo association passes a rule against this and the
O’Bucks sue. The question is whether this is a reasonable restriction.
Holding: Restricting the placement of an antenna is permissible for both structural and aesthetic reasons, and thus a
permissible restriction for a condominium association to pass.
[5] – Neuman v. Grandview at Emerald Hills, Inc., 861 So. 2d 494 (Fla. Dist. Ct. App. 2003)
Description: Condo owners used the condo association’s auditorium, claiming it was for a party but actually using
it for religious services. The condo owners amended the rules for the association to prevent religious services. The
questions presented was whether the restriction was reasonable, or if it violated the state’s prohibition on condo
restrictions against peaceable assembly.
18
Holding: It is reasonable to restrict religious practice in order to avoid controversy within a condominium complex,
and the purpose of the freedom of assembly statute is for political or public and not religious assembly.
[6] – Shelley v. Kraemer, 334 U.S. 1 (1948)
Description: Owners brought suit to prevent the sale of property subject to a racially restrictive covenant to a black
family.
Holding: Racially restrictive covenants are unenforceable because the state action required in so doing violates the
14th Amendment of the federal constitution.
[7] – Evans v. Abney, 396 U.S. 435 (1970)
Description: Senator Bacon from Macon devised property to the city to make a white people park. The question
was whether the charitable bequest could be tweaked under the cy pres doctrine so the park was not unconstitutional
under Shelley. The Supreme Court ordered the land returned to the Bacon family because the bequest could not be
reformed consistently with the intent of the bequest.
Holding: Where a public charitable bequest imposes unconstitutional racial restrictions, the doctrine of cy pres does
not allow the reformation of the bequest if this cannot be done consistently with the wishes of the devisor.
Dissent: Closing down the park is unconstitutional state action that violates Shelley and other cases.
[B] – Law
Although the Restatement (Third) Property seeks to combine all the burdens running with land to “covenants,” this
isn’t complete yet. The history comes from negative easements, which were extremely limited. Covenants came
next, but there were technical problems to do with privity in assuring that the covenant ran with the property (if the
buyer and seller never commonly held the property, the covenant might not transfer because they were never in
privity). This was resolved by going through courts of equity, which could grant equitable servitudes even absent
privity. Thus, the elements of covenants and equitable servitudes were similar but not identical.
[1] – Running with the land
Procedural
1.
2.
3.
4.
Covenant is in writing
Party to be bound has notice
Grantor intended for the covenant to run with the land on both sides
Privity of estate exists (?)  not required for equitable servitudes; other elements the same
Substantive
5.

The restriction touches and concerns both the dominant and servient estate
Running of burden
o The promise must be enforceable between the original parties
 Statute of frauds
 Consideration
 Racially restrictive covenants
o Original parties must intend for benefit to run with the land
 The word “assigns” is useful: “this restriction shall bind Homeowner, his heirs, assigns, and
successors in interest”
 “Assigns” is not necessary
o Touch and concern
19


Burden must touch and concern the servient estate—this seems to mean that the burden must
be appurtenant
 Example: A sells B part of A’s land, with the covenant that B’s yard must be kept
mowed. B sells to C. C must mow the yard because the burden touches and
concerns the servient estate.
o There must be “privity of estate” (horizontal and vertical)
 Horizontal privity
 There must have been a real estate transaction between parties
o A lease between A and B
o Where A owns Whiteacre and Blackacre and sells Whiteacre to B, there is
horizontal privity
 Traditional: horizontal privity is required for the burden to run
o Example: A and B are neighbors each owning property. A and B enter into
a contract whereby A pays B $100 to refrain from mowing his lawn on
weekend mornings before 9. B sells his house to C. A cannot enforce the
covenant because A and B were not in horizontal privity.
o Example: same facts but A sold the property to B with the covenant recited
in the conveyance. Now there’s horizontal privity, and when B sells to C, A
can sue C.
 Modern: eliminates the requirement of horizontal privity
o Example: A pays B not to mow, B sells to C. No horizontal privity, but
covenant runs with the land (Restatement (Third) rule).
 Vertical privity
 Requires the conveyancing of the same quality estate from grantor to grantee
(usually fee simple)
 Traditional: there must be complete vertical privity
o Does not include adverse possession
o Does not include a lesser estate, e.g. a life estate
 Modern / Third Restatement: vertical privity is not required for a negative
covenant but is required for an affirmative covenant (exception: this does not apply
to a lessee who can more reasonably perform the obligation than the owner)
o Example: A and B have a covenant against B’s early-morning lawn
mowing and horizontal privity. C adversely possesses B’s lawn. C still has
a covenant against lawn mowing.
o Example: A and B have a covenant that B will pay $10 a month for the
maintenance of the pond that adjoins their property but that A maintains. C
adversely possess B’s property. C does not have to pay the pond
maintenance.
o Notice to assignee
 An assignee must be put on notice that a covenant exists. Most jurisdictions have recording
acts, and so assignees are on constructive notice. Inquiry notice and actual notice are also
effective.
Running of benefit
o The promise must be enforceable between the original parties
o The original parties to the covenant must intend that it be enforceable by an assignee
o The benefit most “touch and concern” the promisee’s land
 Traditional: courts always used to require that the benefit be appurtenant
 Example: A sells to B who covenants that he will not run a store that competes with
A’s store across town. B sells to C. Although the burden touches and concern’s C’s
land, the benefit does not touch and concern A’s land (or so say some courts). Thus,
this would not be enforced.
 Restatement: allows enforcement in gross if the beneficiary can “demonstrate a legitimate
interest in enforcing the servitude.”
o Horizontal privity is sometimes required; vertical privity is generally not required
 Horizontal privity
20


Traditional:
o Example: A pays B $100 for a covenant that B will not mow the lawn on
weekend mornings before 9. A sells his house to D. D cannot sue because
there is no horizontal privity and the benefit doesn’t run.
o Example: A sells part of his land to B and recites the covenant in
conveyance. A sells to D. D can sue B because there was horizontal
privity.
 Modern:
o Example: first example, D can sue.
 First Restatement:
o Although horizontal privity was required for the burden to run, it’s not
required for the benefit to run. Very small minority rule.
Vertical privity
 Relaxed under all schemes
[2] – Implied Reciprocal Negative Servitudes
There are problems with privity when a person subdivides land and sells plots off. There is horizontal privity at the
time A, the original owner sells lot 1 to B. When A sells lot 2 to C, A and C are in vertical privity and A and B are
in horizontal privity. Thus, C can enforce the covenant against B because B was already around when C bought the
lot. However, B can’t sue C because C wasn’t around when B bought the lot. This might seem trivial, but C can’t
know all the people who might sue him.
Because of this mess, the courts created a third-party beneficiary theory for enforcing covenants against later buyers.
Where there is a common plan or scheme development, the covenants are enforceable throughout. They are also
enforced against the grantor as a grantor covenant.
[3] – Common Interest Communities
Homeowners’ associations and condominium associations often have boards, voting proportionate to area owned,
and enforce covenants. The property is individually owned excepting common areas. In contrast, a cooperative
vests ownership in a corporation and the tenants lease from the corporation, paying fees to cover upkeep and
management.
Community land trusts involve the sale of a building where the land trust actually owns the land. The buyer of the
building cannot sell to anyone but the land trust or to another poor person, and the price for resale is fixed. Limited
equity cooperatives work by limiting the price at which a coop shareholder can sell and give the coop right of first
refusal.
[4] – Racially Discriminatory Covenants
Shelley got rid of these. The reasoning is not airtight because it’s a bit dubious that enforcement of private property
rights is state action. If this is so, it doesn’t make sense that a racist private citizen is allowed to exclude people
from his house by calling the police. Thus, Shelley’s reasoning is probably limited to its facts—preventing racially
discriminatory covenants.
21
Chapter 5 – Temporal Limitations on Property Rights
§ 5.01 – Estates and Future Interests
Future interests have the following regulatory rules: “(1) the rule prohibiting the creation of new estates; (2) the rule
against unreasonable restraints on alienation; (3) the rule against perpetuities; (4) interpretive rule prohibiting
‘waste’ of the present estate; (5) the prohibition of invalid racial conditions; and (6) the rule against unreasonable
restraints on marriage.
[A] – Cases & Materials
[1] – Wood v. Board of County Comm’rs, 759 P.2d 1250 (Wyo. 1988)
Description: Land granted for a hospital had ambiguous language as between a fee simple absolute and a future
interest. The court determined it was a fee simple absolute
Holding: Future interests are constructed strictly.
[2] – Edwards v. Bradley, 315 S.E.2d 196 (Va. 1984)
Description: A will is ambiguous, but the testatrix’s intent can be realized only by reading it as creating a life
estate. Should the ambiguity be resolved in favor of a fee simple absolute or a life estate?
Holding: The construction effectuating the grantor’s intent is to be preferred, and because a will must be fit into
one of the existing estates, the plausible construction that satisfies the grantors intent will be used. “The intention of
the testatrix is to be upheld if the will can be reasonably construed to effectuate such intent and if it is not
inconsistent with an established rule of law.”
[B] – Law
[1] – Table of Future Interests
Present Interest
Fee simple absolute
Fee simple determinable
Fee simple subject to
condition subsequent
Fee simple subject to
executory limitation
Life estate
Words Often Used to
Create the Interest
“to A”
“and her heirs”
“so long as”
“while”
“during”
“until”
“unless”
“provided that”
“on condition”
“but if”
“until (or unless) . . ., then
to . . .,”
“but if . . ., then to . . .,”
“for life”
Future Interest
In Third Person
In Grantor
—
—
Possibility of reverter
—
Right of entry for
condition broken (or
power of termination)
—
—
Executory interest
Reversion
Remainder
[2] – Summary of Estates
Summary of estates (gray = rule against perpetuities)
22
I.
II.
No future interest: fee simple absolute
Defeasible fees
A.
Future interest in grantor or her heirs
1.
Automatic transfer
a)
Curent interest: fee simple determinable
b)
Future interest: possibility of reverter
2.
Transfer only if future interest owner asserts her interest
a)
Current interest: fee simple subject to condition subsequent
b)
Future interest: right of entry
3.
Future interest in third party
a)
Current interest: fee simple subject to executory limitation
b)
Future interest: executory interest
Life estates
A.
Current interest: life estate
B.
Future interest
1.
In grantor: reversion
2.
In third party: remainder
a)
vested remainders
(1)
absolutely vested remainder
(2)
vested remainder subject to open
(3)
vested remainder subject to divestment
b)
contingent remainders
(1)
condition precedent or
(2)
unascertained person
III.
[3] – Remainders, described
Contingent remainders: (1) The remainder will take effect upon the happening of an event that is not certain to
happen. Example: O to A for life, then to B provided that B is graduated from law school. Subject to the RAP.
(2) The remainder will go to a person who cannot be ascertained at the time of the initial conveyance. Example:
“O to A for life, then to the children of B” if B has no children at the time of the conveyance. Subject to the RAP.
Vested remainders: Remainders that transfer to identifiable persons without condition.

Absolutely Vested Remainder: The remainder is not subject to change. Example: “O to A for life, then
to B.”

Vested Remainder Subject to Open: A remainder that may be divided among persons who will be born
in the future. Example: “O to A for life, then to B’s children” if B has some children but might have more.
If the rule of convenience is observed, this will close the class when A dies. Subject to the RAP.

Vested Remainder Subject to Divestment: This is a vested remainder that may be destroyed by an even
that occurs after the conveyance. Example: “O to A for life, then to B, but if B fails to gain admission to
Harvard Law School, the property shall revert to O.”
[4] – Minutiae
Destructibility of Contingent Remainders: Contingent remainders where the contingency did not occur during
the life estate were destroyed. They could also be destroyed by “merger,” in which the same person owned both the
life estate and the remainder. The modern rule is that contingent remainders are indestructible.
Doctrine of Worthier Title: “O to A for life, then to the heirs of O”  “O to A for life, then to O.” This is (now)
not an absolute rule but a canon of construction. The present policy justification is that it aids alienability, because
the heirs of O may not be known until O’s death.
23
Rule in Shelley’s Case: “O to A for life, the to the heirs of A”  “O to A in fee simple absolute”; this can be
avoided by careful drafting (e.g. “O to A for 100 years if A lives so long, then to A’s heirs”) but is a rule of law, not
construction. It serves no purpose today and is abrogated by statute in many jurisdictions.
§ 5.02 – Rule Against Perpetuities
[A] – Cases & Materials
[1] – Central Del. County Auth. v. Greyhound Corp., 588 A.2d 485 (Pa. 1991)
Description: Conveyance specified that “[i]n the event that at any time hereafter said use shall be abandoned so
that the said tract shall cease to be used for said public purposes, then and in such event the Baldwin Locomotive
Works, its successors and assigns, shall have the right to repurchase, . . . upon the payment, either to the Central
Delaware County Authority . . . or to any successor in right thereto, or to the municipalities for which the said
vendee or its successors shall be acting . . . .” The question presented was whether this created a fee simple subject
to a condition subsequent, or if it instead created an option to purchase.
Holding: Where the future interest created a conveyance is susceptible to two interpretations, the one bringing the
conveyance into the ambit of the rule against perpetuities is to be preferred to allow the protection of the rule.
[2] – Texaco Refining & Marketing, Inc. v. Samowitz, 570 A.2d 170 (Conn. 1990)
Description: Texaco brought suit to compel specific performance of an option to purchase land that was part of a
long-term commercial lease. Samowitz argued that this was barred by the rule against perpetuities.
Holding: “[A]n option to purchase contained in a commercial lease, at least if the option must be exercised within
the leasehold term, is valid without regard to the rule against perpetuities.”
[B] – Law
§ 5.03 – Waste
[A] – Cases & Materials
[1] – Moore v. Phillips, 627 P.2d 831 (Kan. Ct. App. 1981)
Description: An old woman with a life estate let the house deteriorate. The remaindermen didn’t bring suit
(apparently to avoid trouble for the old woman). After she dies, they bring suit for waste. The question presented is
whether the doctrine of laches applies to prevent the claim against the estate.
Holding: Laches is an equitable doctrine, and where there is no prejudice from delay, no culpability on the part of
the plaintiffs, and good reasons for refraining from suit
[B] – Law
[1] – Applying the Rule Against Perpetuities
Step 1: Is the future interest an executory interest, a contingent remainder, or a vested remainder subject to
open?
Step 2: Find a validating life. This must be a life in being at the creation of the interst, and the interest must vest, if
at all, within 21 years of the death of the person.
Step 3: If the conveyance violates the Rule, strike out the portion of the conveyance that violates the rule.
24
[2] – Modifications to the Rule
Wait and See / Second Look: The court, rather than determining ex ante whether the perpetuities period will occur
without the interest definitively vesting or failing to vest, waits until the sooner of the interest vesting or the
perpetuities period, then the interest must either vest or be destroyed. This is the rule in the majority of states now,
either as described or under the Uniform Statutory Rule Against Perpetuities’ 90-year waiting period.
Equitiable Reformation / Cy Pres: This allows the court to rewrite the conveyance to comply with the RAP. For
example, “O to A for life, then to the first child of B to reach the age of 25” (B has no children yet) would be
reformed as “O to A for life, then to the first child of B to reach the age of 21.”
Charity to Charity: Courts don’t apply the Rule in transfers from charity to charity.
[3] – Statutory Limits on Future Interests
Statutory Cutoffs for Possibilities of Reverter and Rights of Entry: As these future interests are defined in the
grantor. However, under some statutes, the future interests are destroyed by statute after, e.g., 30 years.
Marketable Title Acts: Require that future interests be re-registered periodically to that a title search of a
reasonable period of time will discover all applicable future interests.
Uniform Statutory Rule Against Perpetuities: This does two things: (1) it makes the wait and see period for
RAP-regulated future interests 90 years, period; and (2) eliminates the RAP for most commercial transactions. It
applies the existing RAP against donative transfers.
Abolition of the Rule: Some states have either limited the rule entirely, allowing the creation of perpetual family
trusts. Other states have made the perpetuities period absurdly long (1000 years in S.D.).
[4] – Preemptive Rights and the RAP
Options to purchase were traditionally treated as executory interests. The USRAP eliminated this rule in about half
the states, but even so, courts can strike down unreasonable restraints on alienation. Courts might therefore strike
down fixed-price options with no time limit after a reasonable time. The Texaco court took a different tack based on
the idea that options to purchase within a lease make the lease more likely to be renewed, and for this reason did not
strike down the option.
The majority of courts still treat preemptive rights not held by condominium or homeowners’ associations on the
grounds that they restrict alienability.
[5] – Waste
Where a present interest holder (1) substantially reduces the value of the future interest (2) unreasonably, the future
interest holder has a cause of action for waste. Waste may be either voluntary or permissive. Some courts allow
“ameliorating waste,” i.e. “waste” that improves the value of the land.
Under changed circumstances, courts have allowed present interest holders to sell the land if that’s in the best
interest of the remaindermen. The better approach may be to set up a trust.
§ 5.04 – Restraints Against Race and Marriage
[A] – Cases & Materials
[1] – Lewis v. Searles, 452 S.W.2d 153 (Mo. 1970)
25
Description: A will gave land to a niece exclusively unless / until she married, then it divided equally between
nieces and nephews. The question presented was whether this was void as against public policy as a penalty for
marriage. The court determined that the provision of the will was valid.
Holding: Where a will transfers property until a person’s marriage, the provision will be upheld if an only if it is
designed to carry out a reasonable purpose and not upheld if capricious.
[B] – Law
The Restatement (Second) of Property (Donative Transfers) says that restraints on first marriages are unenforceable
unless designed to support the person until marriage and not unreasonably restrictive. Restraints on remarriage are
enforceable if the donator is a spouse or the restriction is reasonable. There is a strong presumption against
conditions that encourage divorce. The tension is between honoring the wishes of the donator and not fettering the
behavior of the donatee.
In Shapira v. Union National Bank, 315 N.E.2d 825 (Ohio Ct. Comm. Pleas 1974), A court upheld a will that would
require a son to be married to a Jewish woman in order to receive property.
26
Chapter 6 – Shared Ownership of Property: Family Ownership; Landlord-Tenant
§ 6.01 – Common Ownership and Marital Rights in Property
[A] – Cases & Materials
[1] – Olivas v. Olivas, 780 P.2d 640 (N.M. Ct. App. 1989)
Description: Husband and wife, tenants in common, began divorce proceedings and the husband moved out. The
lower court found that the husband chose to move out, but he argues that he was constructively ousted, and that he is
therefore entitled to rent from his wife. There was evidence that the husband moved out to live with a girlfriend
(“he was not pushed out but pulled”). The court affirmed the judgment below and denied rent.
Holding: Where a husband and wife live apart during divorce proceedings, the spouse who remains in the house
must pay rent to the other spouse only if there was “constructive ouster”—typically where the emotions of a divorce
make cohabitation impossible.
[2] – Carr v. Deking, 765 P.2d 40 (Wash. Ct. App. 1988)
Description: The father, a tenant in common with his son, leased property to Deking in a way that the son did not
want. The son sued to have the lease declared invalid. The court ruled that the lease was effective and that the son
has the choice, pending partition, of accepting the benefits and burdens of the lease.
Holding: “[A] cotenant may lawfully lease his own interest in the common property to another without the consent
of the other tenant and without his joining in the lease. The nonjoining cotenant is not bound by this lease of the
common property to third persons. The lessee ‘steps into the shoes’ of the leasing cotenant and becomes a tenant in
common with the other owners for the duration of the lease. A nonjoining tenant may not demand exclusive
possession as against the lessee, but may only demand to be let into copossession.” Id. at 43 (citations omitted).
[3] – Tehnet v. Boswell, 554 P.2d 330 (Cal. 1976)
Description: A joint tenant granted a lease with an option to purchase, unbeknownst to the other joint tenant.
Shortly thereafter the grantor died. The questions presented are (1) whether the lease and option severed the joint
tenancy and (2) whether, if not, the remaining tenant received the decedent’s share encumbered by the lease. The
court ruled that the surviving owner received the decedent’s share unencumbered.
Holding: (1) “Inasmuch as the estate arises only upon express intent, and in many cases such intent will be the
intent of the joint tenants themselves, we decline to find a severance in circumstances which do not clearly and
unambiguously establish that either of the joint tenants desired to terminate the estate.” Id. at 335. (2) “[A] joint
tenant may, during his lifetime, grant certain rights in the joint property without severing the tenancy. But when such
a joint tenant dies his interest dies with him, and any encumbrances placed by him on the property become
unenforceable against the surviving joint tenant.” Id. at 337.
[4] – Kresha v. Kresha, 371 N.W.2d 280 (Neb. 1985)
Description: Wife, who had been tenant in common with her husband, divorced and received property. The
husband had leased the property to the son. The mother attempted to eject the son. The court ruled for the son.
Holding: Receiving an interest that was encumbered by lease while held as a tenancy in common is “[i]n the final
analysis . . . not dissimilar to that presented in the acquisition of property from a fee owner which the purchaser
knows to be encumbered by an existing lease. In such a situation the purchaser acquires the property subject to the
lease.” Id. at 282.
[5] – Sawada v. Endo, 561 P.2d 1291 (Haw. 1977)
27
Description: A wife was involved in a car accident for which she was found liable in tort. The question presented
is whether the house, which she held as a tenant by the entirety with her husband, can be reached by the judgment.
The court applied the majority rule and concluded that it could not be.
Holding: “[A]n estate by the entirety is not subject to the claims of the creditors of one of the spouses during their
joint lives.” Id. at 1297.
[6] – O’Brien v. O’Brien, 489 N.E.2d 712 (N.Y. 1985)
Description: Guy gets a medical degree, then divorces his wife. The question is whether the wife is entitled to the
equitable division of his increased earning potential. The court applied the minority rule and said yes.
Holding: “[M]arital property encompasses a license to practice medicine to the extent that the license is acquired
during marriage.” Id. at 715.
[B] – Law
Tenancy in Common
Joint Tenancy
Tenancy by the Entirety
Default
Say “survive” in
conveyance
Marriage; created by
default in some states
Survivorship
No
Yes
Yes
Termination
Full
Full, but converts to a
tenancy in common
Only death or divorce
Unilateral Encumbrance
Full
Full but terminates on
death
Most states no; some states
full but termination on
death; some states full
Creation
[1] – Tenancy in Common
This interest gives the right to possess the entire parcel, no matter what the fractional interest. Tenancy in common
is inheritable. The conveyance to create a tenancy in common is “O conveys [or devises] Blackacre to A and B as
tenants in common, with a 1/3 interest in A and a 2/3 interest in B.”
Tenancies in common retain encumbrances when they are conveyed or devised. See Kreshna.
[2] – Joint Tenancy
Joint tenancy creates the right to possess the entire parcel, but generally requires that each joint tenant have the same
fractional interest. The primary difference is the right of survivorship: upon the death of a joint tenant, the
remaining tenants gain that person’s interest in equal share.
This appears to be quite a fragile interest—difficult to create and easy to destroy (although both must be done
intentionally). The requirements are unity of time, title, interest, and possession: “(1) the interest of each joint tenant
must be created at the same moment in time; (2) all joint tenants must acquire title by the same instrument or
title . . .; (3) all joint tenants must possess equal fractional undivided interests in the property and their interest must
last the same amount of time; and (4) all joint tenants must have the right to possess the entire parcel.” Casebook
571.
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Severance occurs by transfer, meaning that a joint tenant who sells her share destroys the joint tenancy with respect
to that share. The joint tenancy remains as between the other parties, and a tenancy in common between the new
owner and the others. One can use this technique to destroy a joint tenancy through a straw man.
An alternative is a dual life estate with alternative contingent remainders—this creates the equivalent of a joint
tenancy but that is not destroyed through transfer. Example: O to A and B as life tenants, with remainder in A if A
survives B, and a remainder in B if B survives A.
Most states allow the interest held by a joint tenant to pass free and clear to the remaining tenants upon the joint
tenant’s death. See Tehnet.
[3] – Partition
When cotenants have a dispute, a court can partition the property, either by dividing it or by ordering it sold and the
proceeds divvied up.
[4] – Benefits and Burdens of Cotenancy
Cotenants share the right to possess the property. One who chooses not to use the property is not owed rent by the
others unless that person has been ousted. Where someone is ousted, he is owed only pro rata for his share.
A cotenant can lease her share. If the other owners accede to the lease by not exercising their possessory rights, they
are entitled to a share of the lease. If not, the lessee stands in the shoes of the lessor.
Cotenants must pay the necessary expenses like property taxes, mortgage, etc, pro rata with their shares. They are
not required to pay for improvements (although some courts say they are required to pay maintenance). Cotenants
who have invested to improve the value of the property may be entitled to the benefits of the increased sale price at
partition.
[5] – Tenancy by the Entirety
This is similar to joint tenancy but only available to married couples, and only existing in about 20 states. Other
states consider them abolished by Married Women’s Property Acts.
The differences between joint tenancy and tenancy by the entirety are “(1) the co-owners must be legally married;
(2) the property cannot be partitioned except through a divorce proceeding; (3) in most states, the individual interest
of each spouse cannot be sold, transferred, or encumbered by mortgage without the consent of the other spouse, with
the result that the right of survivorship cannot be destroyed by transfer of the interest of one party; and (4) in most
states, creditors cannot attach property held through tenancy by the entirety to satisfy debts of one of the spouses.”
Casebook 575–76. Some states with tenancy by the entirety presume that this is the estate created by conveyance to
a married couple.
[6] – Marital Property
Separate Property: Majority Rule
The law in 41 states, “spouses own their property separately, except to the extent they choose to share it or mingle it
with their spouse’s property.” Casebook 595.
On divorce, the court will equitably distribute the marital property, using need, status, rehabilitation, contribution,
and in some states fault.
On death, the possessions will be distributed as provided for by will, but there may be a statutorily forced share that
cannot be contracted around.
29
Community Property: Minority Rule
Nine states consider all property other than property owned prior to the marriage and gifts or inheritance after the
marriage to become community property. Spouses have a fiduciary duty in managing the community property.
On divorce, some community property states mechanically split the property in half. More states use equitable
distribution.
On death, the surviving spouse has a vested right in half the property by dint of communal ownership. Thus, forced
share statutes are generally unnecessary because the person already owns half the property.
Antenuptial Agreements
These are presumptively valid. The Uniform Premarital Agreement Act guards against involuntariness and
unconscionability.
[7] – Homestead Acts
Homestead acts protect the survivors of a deceased spouse from the spouse’s creditors. The surviving spouse can
remain in the house for his life. Some states require registering a house as a homestead.
§ 6.02 – Landlord-Tenant: Regulating the Market for Shelter
[A] – Cases & Materials
[1] – Vasquez v. Glassboro Svc. Assoc., Inc., 415 A.2d 1156 (N.J. 1980)
Description: A migrant farmworker was fired and immediately evicted. The questions presented were (1) was he a
tenant under the statutory definition, and (2) what type of eviction is he owed.
Holding: (1) “Migrant farmworkers are not tenants, and there is no comparable statute providing for their summary
dispossession on termination of their employment.” Id. at 1166. (2) “In general, a summary action . . . should be a
more appropriate proceeding than a plenary action.” Id. at 1167–68.
[2] – Mass. Landlord-Tenant Statute
[B] – Law
[1] – Categories of Tenancies
Term of Years: This may be either simply a specified period of time or a specified time with a contingency.
Where a lease ends with the lessor retaking the property, the lessor has a reversion; if it’s to a third person, that
person has a remainder. The lessor cannot evict the lessee except for material breach of the lease. Death does not
terminate a term of years.
Periodic Tenancy: This type of lease renews automatically at the end of specified periods (e.g., month-to-month).
There is usually a notice requirement before terminating the lease. Eviction can occur by the landlord giving notice
that he does not plan to renew. Death does not terminate a periodic tendency (absent notice from heirs).
Tenancy at Will: This is like a periodic tenancy except that it can be terminated without notice. Most states have
done away with this by creating one-month notice statutes, which basically convert a tenancy at will to a month-tomonth tenancy.
30
Tenancy at Sufferance: A person who was a rightful tenant, but then wrongfully stayed on is a “holdover tenant.”
Unlike a trespasser, a holdover tenant is entitled to eviction process. The landlord might create a new periodic
tenancy by accepting payments (with the term set by the payment tendered).
[2] – Statute of Frauds
Typically the statute of frauds only requires a writing to create a lease of greater than a year. Otherwise, oral
agreements are sufficient to create month-to-month tenancies or tenancies for terms of under a year.
§ 6.03 – Duty to mitigate, Constructive Eviction, Summary Process
[A] – Cases & Materials
[1] – Sommer v. Kridel, 378 A.2d 767 (N.J. 1977)
Description: Two cases were combined in which landlords, with other tenants available, chose to let apartments sit
empty for the duration of the lease term. The question presented was whether to require mitigation.
Holding: Landlords in N.J. have a duty to mitigate the damages when a tenant leaves before the termination of the
lease, and the burden of proof that there were not suitable replacements is upon the landlord when he sues for rent.
[2] – Blackett v. Olanoff, 358 N.E.2d 817 (Mass. 1976)
Description: “[U]nbelievably loud, incessant, raucous, and penetrating” music issued from a club owned by the
same owner as an apartment building. Id. at 818, note 3. The tenants stopped paying rent, claiming constructive
eviction. The landlord claimed that the music from another building could not be charged to the landlord, and that
the defense of constructive eviction should fail. The court found that the landlord could control the noise and
affirmed the lower court’s judgment for defendants.
Holding: “[W]here a landlord has not intended to violate a tenant’s rights, but there was nevertheless a breach of
the landlord’s covenant of quiet enjoyment which flowed as the natural and probable consequence of what the
landlord did, what he failed to do, or what he permitted to be done.” Id. at 818–19.
[B] – Law
[1] – Landlords Rights and Duties
A licensee or trespasser may be ejected through self-help. A tenant can only be ejected after summary (or greater)
process. Whether a person is a licensee or tenant is a mixed question of law and fact, and is typically based upon
whether the grantor transferred exclusive possession.
If a tenant leaves before the end of the lease and stops paying, the landlord has several options. Under the majority
rule, landlords must generally mitigate the damages.
Accept the tenant’s surrender: In this situation, the landlord can sue to recover the difference between the rent he
was getting from the tenant and the fair market price (which difference is likely to be zero), plus the cost of the
search for a new tenant.
Re-let on the tenant’s account: The landlord can refuse to accept the surrender, then re-let on the tenants account.
Example: the tenant finds a month-to-month tenant to finish out the rent. The month-to-month tenant leaves after a
few months and the landlord can’t find a replacement. In this situation, the rent due after the replacement leaves and
during the pendency of the initial lease is the original tenant’s responsibility.
[2] – Constructive Eviction and Right of Quiet Enjoyment
31
Quiet enjoyment is implied into every landlord-tenant relationship. A tenant may withhold rent if he is either
actually evicted (locks changed, etc) or constructively evicted. The Restatement (Second) of Property (Landlord and
Tenant) § 6.1 defines the required interference as “more than insiginificant,” “performed on the property in which
the landlord has an interest, which conduct could be legally controlled by him,” and abandons the common law rule
that requires the tenant to abandon the property.
§ 6.04 – Implied Warranty of Habitability, Tort Liability of Landlord
[A] – Cases & Materials
[1] – Javins v. First Nat’l Realty Corp., 428 F.2d 1071 (D.C. Cir. 1970)
Description: Tenants withheld rent after numerous violations of the housing code occurred in the apartment. While
the common law had traditionally held that landlords have no duty to repair and there was no implication that rented
premises would be habitable. The question was whether to apply the housing code a standard to which landlords
were required to maintain property.
Holding: “[A] warranty of habitability, measured by the standards set out in the Housing Regulations . . . is implied
by operation of law into leases of urban dwelling units covered by those Regulations and that breach of this warranty
gives rise to the usual remedies for breach of contract.” Id. at 1072–73.
[B] – Law
The implied warranty of habitability is now the majority rule. Sometimes the standard is the municipality’s
housing code, sometimes it’s a reasonable standard. There is a tension between the implied warranty of habitability
and summary process, because summary process is a poor instrument through which to determine the condition of
an apartment (and therefore withholding of the rent was justified) where a landlord seeks to evict someone quickly.
Remedies: (1) Rescission (the right to move out); (2) rent withholding; (3) rent abatement; (4) repair and deduct; (5)
injunctive relief or specific performance; (6) administrative remedies; (7) criminal penalties; and (8) compensatory
damages.
A minority of states hold that the obligations under a commercial lease are independent, and thus rent withholding is
not an appropriate remedy. Because of this, constructive eviction still has vitality.
32
Chapter 7 – Transferring Property Rights: Real Estate Transactions
§ 7.01 – Structure of the Real Estate Transaction, Fraudulent Non-Disclosure
[A] – Cases & Materials
[1] – Johnson v. Davis, 480 So. 2d 625 (Fla. 1985)
Description: Sellers of a house answered were asked about peeling plaster and said it was minor problem and what
remained were stains. After moving in, water gushed in during a rainstorm. The buyers sought the refund of their
deposit. The question presented was whether there is a duty to disclose, the violation of which constitutes fraud.
Holding: “Where the seller of a home knows of facts materially affecting the value of the property which are not
readily observable and are not known to the buyer, the seller is under a duty to disclose them to the buyer. This duty
is equally applicable to all forms of real property, new and used. Id. at 629.
[B] – Law
[1] – Real Estate Transactions
Attorneys: Attorneys used to be significantly involved in real estate transactions. Today they’re not as necessary,
because brokers can do things like filling out forms, etc.
Brokers: Brokers traditionally represent the seller. They may have an exclusive right to sell (broker gets a cut of
the sale no matter what), exclusive agency (broker gets a cut unless the seller finds the buyer), or open (broker only
gets a commission if she finds the buyer) arrangement. Sellers’ brokers typically charge a percentage, often 5–7%,
for their services.
Courts may imply a fiduciary duty with respect to the buyer on the broker. Buyers who tempt the seller away from
the sale by the broker in violation of the seller’s agreement with the broker may be severally liable for the broker’s
commission under a minority rule.
More recently, sellers have begun hiring brokers as well, typically for a fixed fee, an hourly rate, or a percentage.
There can be conflicts if the same broker represents both sides, so there are statutory provisions requiring at least
disclosure under these circumstances.
[2] – Timetable
Sales Contract: When the buyer and seller reach an agreement, they will enter a sales contract. This will usually
be accompanied by a deposit. The obligations are usually contingent upon (1) seller’s ability to convey marketable
title; (2) buyer’s ability to get adequate financing; and (3) an inspection.
Executory Period: During the period between the execution of the sales contract and the closing, there are
typically inspections and the mortgage is arranged. Lawsuits sometimes arise during the executory period.
Closing: At closing, the buyer pays the seller by signing the loan agreement with the bank. The seller delivers the
deed, which is often immediately recorded.
After the Closing: Typically the deed replaces the sales agreement; if the parties want it to still have effect
afterwards, it must recite that the contract survives the deed. Thus, warranties made in the sales agreement would
need to be incorporated into the deed or be lost. However, some obligations survive the deed automatically,
preserving, e.g., an action for fraud.
[3] – Breaches of Obligations Arising from Sales Contract and During Executory Period
33
Fraud and Disclosure: Traditionally, misrepresentation constituted fraud. Misrepresentation is (1) an affirmative
statement of fact by the buyer to the seller; (2) that the seller knows to be false; (3) material to the transaction; (4)
that is reasonably relied on by the buyer in deciding to make the purchase; and that (5) causes damage as a
proximate result of the lie. See Casebook 770.
Nondisclosure of obvious defects is, per the majority rule, not fraud, provided the seller does not affirmatively lie to
the buyer. Some courts will find fraud where the seller acted to suppress discovery of faults by the buyer. The trend
now is towards requiring disclosure of latent defects known to the seller and not readily observable by a buyer.
The information that must be disclosed includes information “that a reasonable buyer would want to know and that
might affect the terms of the transaction—especially the market value of the property—or induce the buyer to back
out of the deal.” Casebook 771. One test is the market value test—whether the information would affect the market
value. Courts have found fraudulent disclosure where a murder took place and with a house that is said to be
haunted (!).
Some courts allow waiver / an ‘as-is’ clause to protect—this protects the seller from a subsequent lie by the buyer.
Other courts do not allow waiver of the requirement to disclose.
Seller’s Failure to Provide Marketable Title: Even adversely possessed property, if clearly established, is
marketable. The problems arise typically in two ways: (1) chain of title defects; and (2) encumbrances.
Seller’s Breach of Warranty of Habitability: New homes create an implied warranty of habitability; old homes
do not. It might be called “habitability,” “fitness,” “quality,” or “good workmanship.”
Buyer’s Failure to Make Good-Faith Efforts to Obtain Financing: Buyers must undertake reasonable efforts to
obtain financing. It is not permissible to use this as an excuse simply because you have changed your mind.
Risk of Loss During the Executory Period: Equitable Conversion: If the house burns down during the executory
period, the risk of loss according to many courts is on the buyer. This is because the buyer has the power have the
contract specifically enforced, so the law implies that the sale is complete. This is a widely criticized doctrine, and
some courts have repudiated it. In practice, the risk is typically placed on the seller by contract. In any event, the
seller cannot keep both the insurance proceeds and the purchase price.
§ 7.02 – Terms of the Deed, Chain of Title, Fraudulent and Forged Deeds
[A] – Cases & Materials
[1] – Sabo v. Horvath, 559 P.2d 1038 (Alaska 1976)
Description: “Seller conveyed the same piece of land twice—first to plaintiff and later to defendants. The seller’s
interest in the land originated in a patent from the U.S. Government under the Alaska Homesite Law. His
conveyance to plaintiff was prior to the issuance of patent, and his subsequent conveyance to defendants was after
the issuance of patent. The plaintiff recorded his deed; the defendants recorded their deed some time later. The court
reversed the judgment of the lower court and held that defendants were the true owners.” Lexis Overview.
Holding: “[A] purchaser has notice only of recorded instruments that are within his ‘chain of title.’ If a grantor . . .
transfers prior to obtaining title, and the grantee . . . records prior to title passing, a second grantee who diligently
examines all conveyances under the grantor’s name from the date that the grantor had secured title would not
discover the prior conveyance. The rule in most jurisdictions which have adopted a grantor-grantee index system of
recording is that a ‘wild deed’ does not serve as constructive notice to a subsequent purchaser who duly records.”
Sabo, 559 P.2d at 1043.
[2] – Zurstrassen v. Stonier, 786 So.2d 65 (Fla. Dist. Ct. App. 2001)
34
Description: Rolf forged a deed transferring his brother Klaus’ interest in property co-owned by the brothers to
Rolf exclusively. Rolf then sold the property twice. Klaus sued to quiet title in himself. The buyers claimed that
Klaus was barred by equitable estoppel and waiver from his claim. The Ct. App. ruled that there existed genuine
issues of material fact with respect to elements of both the equitable estoppel and waiver claims and remanded.
Holding: “A forged deed . . . is absolutely void and wholly ineffectual to pass title, even to a subsequent innocent
purchaser from the grantee under such forged deed.” Id. at 68 (citation omitted, internal punctuation and
capitalization altered). Thus, unless barred by other doctrines, a property owner whose interest is transferred by
forged deed has a claim even against an innocent purchaser.
[3] – McCoy v. Love, 382 So. 2d 647 (Fla. 1980)
Description: A flimflammer wrote up a deed that he tricked a little old lady into signing, conveyancing a larger
property interest than she intended to. The flimflammer then sold the interest to a third party. The court remanded
because it was undetermined whether the third party was a bona fide purchaser.
Holding: “Where all the essential legal requisites of a deed are present, it conveys legal title. Fraud in the
inducement renders such a legally effective deed voidable in equity.” Id. at 649.
[B] – Law
[1] – The Deed
“The deed must (1) identify the parties; (2) describe the property being conveyed; (3) state the grantor’s intent to
convey the property interest in question; and (4) contain the grantor’s signature. The deed need not be recorded to
transfer title; delivery of the deed to the grantee is sufficient. Most deeds are—and should be— recorded to protect
the grantee’s rights.” Casebook 779. A notary is usually required. The property may be described by official
surveys, plats, or metes and bounds.
The deed must be delivered. Obtaining physical possession of the deed may be sufficient to raise a presumption of
the intended transfer of the property, but getting your hands on the deed doesn’t automatically mean it’s your house.
Courts are split on precisely what this means. Courts might allow placing a will in a safety deposit box or leaving it
with an attorney.
[2] – Warranties of Title
Present covenants include the covenant of seisin (assures the seller really does own the land), covenant of the
right to convey (assures that the seller really can sell the property), and covenant against encumbrances.
Future Covenants: The covenant of warranty promises to compensate for monetary losses arising out of failure
to convey the title promised in the deed. This may be a general warranty deed, which covers against all defects of
title; a special warranty deed, which limits the guarantee to the grantor’s but not prior owner’s acts; and the
quitclaim deed, which merely assures that the grantor will make no claims against title.
The covenant of quiet enjoyment is substantially the same as the covenant of warranty. The covenant for further
assurances is not used much; it requires that the seller to take specific further steps to cure defects in title.
[3] – The Recording System
The purpose of the recording system is to adjudicate between disputes of ownership. This often arises with multiple
grantees. Estoppel by deed operates to transfer the grantor’s interest immediately where a person who has granted
property didn’t really own it but then comes into possession of it. The recording system isn’t perfect: it doesn’t have
lawsuits, wills being probated, divorce proceedings, tax information, or adverse possession.
35
Most recording systems use grantor-grantee indexes. You would search through the grantee index to find the the
grantor. You would then look up the grantor in the grantee index to find that person’s grantor, and so on, going back
as far as necessary. Then you’d switch to the grantor index and move forward, looking at the particulars of each
party’s grants (in this manner, you could find recorded encumbrances, multiple grants, etc).
[4] – Types of Recording Acts
States split about half and half between notice and race-notice statutes, with a small minority having race statutes.
Race Statutes: Where two people have bought the same property, whoever registers it first wins.
Notice Statutes: If you purchase after someone else but don’t know about them, you win, regardless of who records
when.
Race-Notice Statutes: If you have no notice and record first, you win. If you have notice and record first, you lose.
If you record last, you lose.
[5] – Wild Deeds, Fraud, and Forgery
Wild deeds: Wild deeds are not discoverable in the chain of title. This can happen because the deed is recorded
too early or too late. Sabo presented a deed recorded too early. Example: O sells to A before O owns the property
and A records. O receives title. Then O sells to B, who also records. Although the title goes directly to A when O
properly gets it (estoppel by deed), the deed is “wild.” When B does a record search, he won’t look at O’s activities
before O received title to the property. On the other hand, A is in a position to determine through a title search that
there’s something wrong with the title. Thus, B will prevail over A.
A deed is recorded too late in the following example: O sells to A but A doesn’t record. Then A sells to B, a bona
fide purchaser who does record. Now, O sells to Z, who does record. When Z did a title search, the conveyance
from A to B will be recorded, but it will not be indexed under O’s name and so Z would not know to look for A or
B. Thus, Z will prevail over B because B was in a position to see that something was wrong with the O to A
conveyance.
Shelter Doctrine: Once you’re far enough downstream from funny business with a deed, you’re protected. Thus, if
an owner conveys property twice, the bona fide purchaser who wins can now sell the property, even knowing about
the other bona fide purchaser, without any problems.
Fraud and Forgery: A forged deed is absolutely void. A fraudulent deed is voidable. Thus, if the victim of fraud
does not catch the problem before a bona fide purchaser buys the interest fraudulently conveyed, he loses his
chance.
[6] – Marketable Title Acts and Title Insurance
Marketable title acts set a limit on how far back one has to look in the chain of title. Title insurance makes sure that
if there’s a mistake in the chain of title, you aren’t out of luck.
§ 7.03 – Mortgages.
[A] – Cases & Materials
[1] – Commonwealth v. Fremont Inv. & Loan, 897 N.E.2d 548 (Mass. 2008)
Description: Before the foreclosure crisis hit in full force, the Mass. Attorney General tried to enforce consumer
protection policies against Fremont for loans described as “presumptively unfair” by seeking an injunction that
required court approval before such loans went into foreclosure. The characteristics the lower court considered
presumptively unfair were those that made the loan “doomed to foreclosure” and not refinanceable.
36
A loan “doomed to foreclosure” had (1) three years or less at an introductory rate; (2) a 3% or greater increase from
the introductory to the fully-indexed loan; and (3) resulted in a debt-to-income ratio of greater than 50% once fully
indexed. A loan was not refinanceable if the loan-to-value ratio was 100%, or if there was a prepayment penalty.
The court affirmed the lower court, upholding the injunction.
Holding: Massachusetts courts will issue an injunction against a presumptively unfair mortgage, i.e., a mortgage
that is “doomed to foreclosure” but for continually rising home prices, and that is unlikely to be refinanceable.
[2] – Countrywide Home Loans, Inc. v. First Nat'l Bank of Steamboat Springs, 144 P.3d 1224
(Wyo. 2006)
Description: The Ketchams took out a mortgage, then a second mortgage, and in time, refinanced the first
mortgage through a third mortgage. They defaulted. The third mortgagee argued that, by having taken over the first
mortgage it deserved to have priority over the second mortgagor. The court disagreed.
Holding: Wyoming does not apply the doctrine of equitable subrogation; instead it has a first-in-time statute for
mortgagee priority, and a later mortgagee is on notice of the earlier mortgages.
[3] – Bank of America v. Prestance Corp., 160 Wn.2d 560 (Wash. 2007)
Description: Sugihara took out three mortgages, the third to refinance the first. The mortgagee in the third position
argued that he was entitled to stand in the shoes of the first mortgagee. The court agreed.
Holding: “Equitable subrogation is a broad doctrine and should be followed whenever justice demands it and where
there is no material prejudice to junior interest. A liberal approach is in line with the doctrine’s equitable rationale
and is becoming the more accepted rule, in no small part because of the immense benefits it holds for homeowners.”
Id. at 28–29. “[S]ubrogation can be granted even if the payor had actual knowledge of the intervening interest. The
question in such cases is whether the payor reasonably expected to get security with a priority equal to the mortgage
being paid.” Id. at 21.
[B] – Law
[1] – Supplement on Mortgages
Description: Mortgages used to be confined to local banks, so especially in rapidly growing areas, there was a
dearth of home loans available to consumers. Mortgage backed securities (MBSs) helped get money into these sorts
of areas. In the early 1980s, banks began experimenting with adjustable rate mortgages (ARMs).
When you get a mortgage, you get a note (which is the actual loan) and a mortgage (which is the contract that gives
the lendor first crack at the property if you default). The mortgage company holds an interest called an “equity of
redemption” or “equity.”
Mortgages transfer with the land. Some mortgages have an “acceleration clause,” which requires the mortgage be
paid in full if a house is sold. Others have a balloon payment, which means that the payments throughout the life
of the mortgage were insufficient to cover the debt by the end, and the balance is due at the end of the mortgage.
A mortgage can be a purchase money mortgage, from the bank, or an installment land sale contract, which is
financed by the seller. The latter is useful where a buyer would not qualify for a loan.
Deficiency Judgment: When a house is sold at a bank sale, the majority rule is that the bank can receive a
deficiency judgment from the mortgagor, which is payment for the difference between the price of the house and the
debt. If it’s a private sale, a court may look at the fair market value of the house, so it’s in the interest of the
mortgagee to have a judicial sale.
37
Foreclosure Sale: The foreclosure sale itself is difficult to challenge, because the price must typically meet either
the “shocks the conscience” or “grossly inadequate” standard. Courts have upheld sales for 1/20 of the fair market
value—typically, not only must the price be absurd, but the process unfair as well (3 a.m. sale, e.g.). A mortgagee
often can simply tender the deed and be let off the hook for a deficiency judgment.
The normal foreclosure sale is judicial foreclosure, wherein the house is sold under court supervision and the
money goes first to the mortgagee, then to other lienholders, then the mortgagor. The junior interest cannot join this
without permission of the senior interest. Foreclosure by power of sale is more expedient than a judicial sale, but
raises the specter of private-party directed state action. Strict foreclosure is a minority rule (and the old standard)
that allows the bank simply to gain title to the house, and typically requires that the debt-to-value ratio be over
100%.
[2] – Equitable Subrogation
Some states use the doctrine of equitable subrogation to place a refinancing mortgagee in the shoes of the mortgagee
it refinances. The argument for this is that it avoids unjust enrichment of the junior mortgagees, who priced their
lack of first priority into their interest rate. Additionally, it makes refinancing easier. Against the rule is that the
refinancing mortgagee has notice of the junior interest and shouldn’t be able to skip line, and a later mortgagee can
always be assigned the senior interest.
38
Chapter 8 – Zoning: Governmental Regulation of Land Use
§ 8.01 – Power to Zone, Exemptions from Zoning Law
[A] – Cases & Materials
[1] – Town of Belleville v. Parrillo’s, Inc., 416 A.2d 388 (N.J. 1980)
Description: A restaurant, which was allowed to remain in business as a prior nonconforming use, became a
disco. The question presented was whether it continued to remain grandfathered into the new zoning ordinance.
The court ruled that it did not.
Holding: “The method generally used to limit nonconforming uses is to prevent any increase or change in the
nonconformity. Under that restrictive view our courts have held that an existing nonconforming use will be
permitted to continue only if it is a continuance of substantially the same kind of use as that to which the premises
were devoted at the time of the passage of the zoning ordinance. In that regard nonconforming uses may not be
enlarged as of right except where the change is so negligible or insubstantial that it does not warrant judicial or
administrative interference. Where there is doubt as to whether an enlargement or change is substantial rather than
insubstantial, the courts have consistently declared that it is to be resolved against the enlargement or change.” Id. at
391–92 (citations omitted).
[2] – Stone v. City of Wilton, 331 N.W.2d 398 (Iowa 1983)
Description: The Stones planned to build multi-family real estate. They incurred expenses for architectural and
engineering services to prepare the plans. Then the zoning changed so as to render their plans impossible to carry
out. They sued for injunctive relief against the changes, claiming they had vested rights. The court said no.
Holding: “The standard for determining if a property owner has vested rights in a zoning classification [is as
follows]: ‘It is impossible to fix a definite percentage of the total cost which establishes vested rights and applies to
all cases. It depends on the type of the project, its location, ultimate cost, and principally the amount accomplished
under conformity. Each case must be decided on its own merits, taking these elements into consideration.’” Id. at
403 (citation omitted).
[3] – Commons v. Westwood Zoning Board of Adjustment, 410 A.2d 1138 (N.J. 1980)
Description: An area was zoned so as to require that the frontage of any house built be at least 75 feet and the area
be at least 7500 feet. Most of the houses in the neighborhood were already built, and only two were built after the
change. A builder wanted to build on a 30 foot lot and applied for a variance that was denied. The N.J. Sup. Ct.
reversed and remanded.
Holding: The criteria for granting a variance are (1) an undue hardship—“the underlying notion that no effective
use can be made of the property in the event the variance is denied,” id. at 1142; and (2) “the grant of the variance
must not substantially impinge upon the public good and the intent and purpose of the zone plan and ordinance,” id.
at 1143. Where the hardship is self-created, the court will not grant a variance. When property could be zoned into
inutility, this implicates the takings doctrine.
[B] – Law
Zoning in General: States pass zoning enabling acts, delegating their police power to regulate property to
municipalities. Zoning boards establish a zoning plan for the municipality as a whole. Some courts and legislatures
allow contract or conditional zoning, wherein a developer is allowed to violate zoning laws in exchange for
agreeing to limitations or affirmative duties. Bilateral agreements—where the city makes a promise, too—are most
likely to be struck down. A variance can be distinguished from a special exception, which is a condition bypassing
a zoning rule available to all without special approval.
39
Review of Zoning Decisions: The courts offer review of zoning decisions. In Village of Euclid v. Ambler Realty
Co., 272 U.S. 365 (1926), the Supreme Court allowed zoning to go forward that decreased the value of a specific
property by 75% without compensation. Thus, the standards are pretty high. See § 9.04, infra. The standard of
review is arbitrary and irrational, that there be no substantial relationship to public welfare. Nectow v. City of
Cambridge, 277 U.S. 183 (1928).
The rules for prior nonconforming uses, vested interests, and variances are discussed in the cases above. Spot
zoning is illegal but difficult to prove.
§ 8.02 – Challenges to Exclusionary Zoning, The Fair Housing Act
[A] – Cases & Materials
[1] – Fair Housing Act
Wikipedia, Fair housing, http://en.wikipedia.org/wiki/Fair_housing (as of May. 10, 2009, 15:14 GMT):
While the Civil Rights Act of 1866 included language that could be construed as creating a fair housing policy, no
federal enforcement provisions were given. In 1948, the Supreme Court ruled that racially restrictive covenants in
real estate were unenforceable in court. The Civil Rights Act of 1964 also addressed the issue, but made few
provisions for enforcement.
The Fair Housing Act (Title VIII of the Civil Rights Act of 1968) introduced meaningful federal enforcement
mechanisms. It outlawed:




Refusal to sell or rent a dwelling to any person because of race, color, religion, or national origin.
Discrimination based on race, color, religion or national origin in the terms, conditions or privilege of the
sale or rental of a dwelling.
Advertising the sale or rental of a dwelling indicating preference of discrimination based on race, color,
religion or national origin.
Coercing, threatening, intimidating, or interfering with a person's enjoyment or exercise of housing rights
based on discriminatory reasons or retaliating against a person or organization that aids or encourages the
exercise or enjoyment of fair housing rights.
When the Fair Housing Act was first enacted, it prohibited discrimination only on the basis of race, color, religion
and national origin. In 1974, sex was added to the list of protected classes, and in 1988, disability and familial status
(the presence or anticipated presence of children under 18 in a household) were added (further codified in the
Americans with Disabilities Act of 1990). In certain circumstances, the law allows limited exceptions for
discrimination based on sex, religion, or familial status.
[2] – Huntington Branch, NAACP v. Town of Huntington, 844 F.2d 926 (2d. Cir. 1988)
Description: A municipality only permitted the development of multi-family homes in a small part of town that
was disproportionately lived in by minorities. A developer located a site on which to develop additional multifamily homes and optioned the site pending rezoning. The city refused to rezone, giving a variety of reasons. The
court ruled that rezoning was required.
Holding: “Under disparate impact analysis, as other circuits have recognized, a prima facie case is established by
showing that the challenged practice of the defendant actually or predictably results in racial discrimination; in other
words that it has a discriminatory effect. . . . Once a prima facie case of adverse impact is presented . . . the inquiry
turns to the standard to be applied in determining whether the defendant can nonetheless avoid liability under Title
VIII. . . . [T]here must be a weighing of the adverse impact against the defendant's justification. . . . [T]he
defendant must prove that its actions furthered, in theory and in practice, a legitimate, bona fide governmental
interest and that no alternative would serve that interest with less discriminatory effect. . . . [Other factors include]
whether there is any evidence of discriminatory intent on the part of the defendant [and] . . . whether the plaintiff is
40
suing to compel a governmental defendant to build housing or only to require a governmental defendant to eliminate
some obstacle to housing that the plaintiff itself will build.” Id. at 935–36.
[B] – Law
Once statistics demonstrate or a policy appears to create racially discriminatory effects, the burden shifts to the
government to prove a valid justification.
41
Chapter 9 – Takings: Governmental Power over Property, Constitutional Protection Against Gov’l Power
§ 9.01 – What purposes?
[A] – Cases & Materials
[1] – Kelo v. New London, 545 U.S. 469 (2005)
Description: The New London Development Company sought to redevelop an area of New London. They
intended to buy up the property in the area near a new Pfizer facility and convert it into a “small urban village” with
a waterfront hotel / convention center as well as restaurants and stores in order to revitalize New London. Several
homeowners objected to the use of eminent domain to transfer land to private companies. The court upheld the
state’s action.
Holding (Stevens): The state can condemn property and transfer it to private owners consistent with the takings
clause, because the takings clause allows property to be condemned for public purposes (not just public use); courts
must look for (1) a legitimate purpose and (2) rational means to achieve that purpose.
Concurrence (Kennedy): Yes, but be very careful about “incidental or pretextual public benefits.”
Dissent (O’Connor): All property is now vulnerable under the rubric of economic development. The better rule
and reading of precedent is to allow takings only to the extent that they remove affirmative harms thereby directly
achieving public benefits.
Dissent (Thomas): What part of “public use” don’t you understand? It’s use by the public (like a park).
[B] – Law
The Supreme Court set the limits of what is constitutional with Kelo; the states can (and many have) adopted more
stringent requirements through their state constitutions and statutes. Some states require that the public benefits
“substantially predominate” over the private use. Other courts require that the property be blighted, dangerous, etc.
Still others require that the taking be the only way to achieve the desire goal. Finally, some have adopted Justice
Thomas’ requirement in dissent that the use literally be public—a park, for example.
§ 9.02 – Regulatory Takings and the Ad Hoc Test
Takings clause requirements



Taking
o Ad hoc test—three-part test
 Reasonable, investment backed interests
 Economic impact
 Character of government action
o Per se—two categories
 Permanent physical invasion (Loretto)
 Regulatory deprivation of all economic value (Lucas)
Public Use
o Public purpose? (Kelo)
Just Compensation
[A] – Cases & Materials
[1] – Takings Clause, U.S. Const. amend. V
“. . . nor shall private property [1] be taken for [2] public use, without [3] just compensation.”
42
[1] – Pennsylvania Coal Co v. Mahon, 260 U.S. 393 (1922)
Description: Coal company wanted to dig coal that was necessary to hold up a house, but that it owned the
property rights to. The Kohler Act forbid undermining a house, irrespective of owning the requisite property
interests. The question was whether the Kohler Act was an unconstitutional taking. The Court held that it was.
Holding (Holmes): “Government hardly could go on if to some extent values incident to property could not be
diminished without paying for every such change in the general law. As long recognized, some values are enjoyed
under an implied limitation and must yield to the police power. But obviously the implied limitation must have its
limits, or the contract and due process clauses are gone. One fact for consideration in determining such limits is the
extent of the diminution. When it reaches a certain magnitude, in most if not in all cases there must be an exercise of
eminent domain and compensation to sustain the act. So the question depends upon the particular facts. The greatest
weight is given to the judgment of the legislature, but it always is open to interested parties to contend that the
legislature has gone beyond its constitutional power.” Id. at 413.
Dissent (Brandeis): The Act serves a legitimate public purpose and is well within the police power of the state.
[2] – Miller v. Schoene, 276 U.S. 272 (1928)
Description: Ornamental red cedar trees are susceptible to cedar rust, a disease that’s not so bad for cedar trees but
really bad for apple trees. The state of Va. had a law requiring that the owner of red cedars within two miles of any
apple orchard to cut the cedars down, and directing that a state official would do so if the owner wouldn’t. The
owner argued that this was a taking under the Fifth Amendment requiring just compensation. The Court said no.
Holding: A state may require ornamental trees to be cut down in order to protect apple orchards that are significant
to the state’s economy; this choice implicates the public interest and is therefore a legitimate exercise of state power
within the Fifth Amendment.
[3] – Penn Central Transportation Co. v. New York City, 438 U.S. 104 (1978)
Description: The owners of Grand Central Terminal in New York City wanted to build an office tower on top of
the building. The New York City Landmark Preservation Commission is permitted to designate historic landmarks,
and it rejected the plan. The plaintiffs sued, and the Supreme Court ruled that this was action permissible under the
ad hoc test.
Holding: “In engaging in these essentially ad hoc, factual inquiries, the Court’s decisions have identified several
factors that have particular significance. The economic impact of the regulation on the claimant and, particularly, the
extent to which the regulation has interfered with distinct investment-backed expectations are, of course, relevant
considerations. So, too, is the character of the governmental action. A ‘taking’ may more readily be found when the
interference with property can be characterized as a physical invasion by government than when interference arises
from some public program adjusting the benefits and burdens of economic life to promote the common good.” Id. at
124 (citations omitted).
[B] – Law
The ad hoc test turns on the following factors: (1) the economic impact of the regulation; (2) interference with
reasonable, investment-backed expectations; and (3) the character of the government action.
Implicit in the ‘character of the government action’ prong is the distinction between preventing an owner from
causing harm and requiring an owner to provide a benefit. This is usually arguable in either direction. In Schoene,
the owner of the cedar trees might argue that he was being required to help the apple orchards at his own expense.
The state argued that he was being required to prevent his trees from destroying apple orchards.
43
The greater the diminution of value, the more likely a court is to find a taking. Thus, the ‘economic impact’ prong is
sensitive to “denominator” questions. If a person has removed 90% of the coal from a mine but is then forbidden
from removing the rest, has he lost 100% of the value of the mine, or only 10%?
Average reciprocity of advantage is used differently in different cases. In Pennsylvania Coal it was used to
distinguish a case in which coal workers themselves were protected by coal being left in place, and so referred to an
advantage accruing directly and specifically to the person restricted by the law. In Penn Central, this is a much
looser concept referring to aesthetic protections giving a benefit to everyone, including the person restricted.
Character of government action
More likely to be held to be a
taking requiring compensation
More likely to be held to be a
legitimate application of the police
power not requiring compensation

A forced permanent physical
invasion of property
Extraction of a benefit for the
good of the community or a
forced transfer of property
rights from A to B

The regulation denies the owner
any economically viable use of
the land
The regulation destroys almost
all the value of the property in a
manner unjustified by a
sufficient public interest

It interferes with vested rights,
such as investment based on
reasonable reliance on prior
regulatory approvals or laws
unless those regulations can be
justified as preventing a
nuisance or other harm caused
by the property use
It interferes with an existing
present use of the property


Economic impact


Interference with reasonable
investment-backed expectations






Regulation of property use in a
manner that achieves an
average reciprocity of
advantage
A limitation on property use
designed to protect the
community from harm or to
respond to negative externalities
The regulation leaves the owner
with an economically viable use
of the land or a “reasonable
return on the owner’s
investment”
The diminution in value, even if
great, is justified by a
sufficiently strong public
interest in protecting the public
from harm
It imposes an opportunity loss—
preventing the owner from
realizing the benefits of a
contemplated future use
The change in the law is one
that could or should have been
anticipated such that the
owner’s reliance on the
continuation of the prior law
was unreasonable
The regulation of a contractual
relationship rather than a forced
transfer of property interest
from one person to another
§ 9.03 – Physical Invasions
[A] – Cases & Materials
[1] – Pruneyard Shopping Center v. Robins, 447 U.S. 74 (1980)
Description: The Cal. constitution had been interpreted to require shopping malls to tolerate political
demonstrations (contra Lloyd Corp., holding the federal Constitution didn’t require this). The shopping center
44
argued that this was a taking because the state was requiring the mall to allow people to use their property. The
court applied the ad hoc test and upheld the government’s action.
Holding: “The requirement that appellants permit appellees to exercise state-protected rights of free expression and
petition on shopping center property does not amount to an unconstitutional infringement of appellants' property
rights under the Taking Clause of the Fifth Amendment, appellants having failed to demonstrate that the ‘right to
exclude others’ is so essential to the use or economic value of their property that the state-authorized limitation of it
amounted to a ‘taking.’” Id., Syllabus 2(b).
[2] – Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419 (1982)
Description: A municipal law required that the landlords allow cable equipment to be installed on their property.
A landlord argued that this was a per se taking, and that he was entitled either to compensation or an injunction.
The Supreme Court held that it was a taking and remanded for the lower court to determine just compensation.
Holding: “[P]ermanent occupations of land by such installations as telegraph and telephone lines, rails, and
underground pipes or wires are takings even if they occupy only relatively insubstantial amounts of space and do not
seriously interfere with the landowner's use of the rest of his land.” Id. at 430.
[B] – Law
A permanent physical invasion is a per se taking, no matter how small it is. This is one of two per se takings that the
court uniformly has upheld. As Pruneyard shows, however, a temporary taking is not a per se taking, and instead is
to be evaluated under the ad hoc standard.
§ 9.04 – Regulatory Deprivation
[A] – Cases & Materials
[1] – Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1992)
Description: A land developer bought property to develop. Subsequently, South Carolina passed the Beachfront
Management Act, which forbid any construction beyond a baseline described with reference to the ocean. The
developer sued, claiming that this was a per se regulatory taking. The Supreme Court agreed.
Holding (Scalia): “From now on,” where state action denies all economic benefit of land, “there is a categorical
rule finding these regulations to be a taking unless the use they prohibit is a background common-law nuisance or
property principle.” Id. at 1046–47 (Blackmun, J., dissenting, describing the majority’s holding).
Concurrence (Kennedy): The trial court’s finding that this destroyed all economic benefit of the land is sort of
implausible, but we’ve got to accept their finding of fact, so I concur.
Dissent (Blackmun): The finding of fact below is implausible, and while Scalia suggests that this avoids the messy
business of distinguishing between avoiding a harm or creating a benefit, but the courts have to do this very thing in
the very standard-y analysis of nuisance.
[B] – Law
It is a per se taking where (1) a regulation denies all economic benefit of land and (2) the conduct is not prohibited
by background rules of nuisance or property.
§ 9.05 – Forfeiture and Exactions
[A] – Cases & Materials
45
[1] – Palazzolo v. Rhode Island, 533 U.S. 606 (2001)
Description: Palazzolo was a shareholder in a corporation that owned wetlands property and sought to fill them in
as part of a development project. The state then regulated the filling in of wetlands, and subsequently Palazzolo
gained full ownership of the property. After his proposals to develop the property got shot down, he sued, claiming
a per se regulatory taking. The lower court held that the claim wasn’t ripe (because he hadn’t gotten a “no” to all
possible proposals), that his buying the full interest in the land after the passage of the regulation barred his claim,
and that there remained economic value in the area away from the water (a “denominator” question). The Supreme
Court withheld judgment on the denominator question (asserting that it was waived below) but reversed the lower
court with respect to the other questions.
Holding: (1) Acquiring property after the passage of a regulation that the owner alleges is a taking does not
necessarily destroy the claim. (2) The claim of a regulatory taking may be ripe even if the regulatory body has not
denied all possible claims if it is sufficiently clear that the body will deny all claims.
[2] – Tahoe-Sierra Preservation Council, Inc. v. Tahoe Regional Planning Agency, 535 U.S.
302 (2002)
Description: A regional planning agency enacted a moratorium on new construction around Lake Tahoe for a
specified time period (which was subsequently extended). Property owners claimed that this was a taking because
the land could not be sold, and the question presented was whether the “denominator” question turned on the
temporal as well as the spatial. The Court ruled that there had not been a regulatory taking, and described its
reticence to formulate any broader per se rules.
Holding: (1) “The categorical rule that we applied in Lucas states that compensation is required when a regulation
deprives an owner of ‘all economically beneficial uses’ of his land. . . . [O]ur holding was limited to ‘the
extraordinary circumstance when no productive or economically beneficial use of land is permitted.’ The emphasis
on the word ‘no’ in the text of the opinion was, in effect, reiterated in a footnote explaining that the categorical rule
would not apply if the diminution in value were 95% instead of 100%. Anything less than a ‘complete elimination
of value,’ or a ‘total loss,’ the Court acknowledged, would require the kind of analysis applied in Penn Central.” Id.
at 330.
(2) “An interest in real property is defined by the metes and bounds that describe its geographic dimensions and the
term of years that describes the temporal aspect of the owner’s interest. Both dimensions must be considered if the
interest is to be viewed in its entirety. Hence, a permanent deprivation of the owner’s use of the entire area is a
taking of ‘the parcel as a whole,’ whereas a temporary restriction that merely causes a diminution in value is not.
Logically, a fee simple estate cannot be rendered valueless by a temporary prohibition on economic use, because the
property will recover value as soon as the prohibition is lifted.” Id. at 331–32.
[B] – Law
There are still denominator problems—is destroying 100% of the value of 50% of someone’s property a 100% or a
50% reduction in their property value? Does it matter if the property is or was owned by the same person?
Different people? It’s unclear.
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