Absolute ownership of potentially infinite duration
Freely alienable.
Freely devisable
Freely descendible.
No accompanying future interest
The fee tail.
How to create:
To A and the heirs of his body
Distinguishing features
It has been abolished in mostly all states
It would pass directly to the grantee's lineal descendants, no matter what.
Today, the attempt to create a fee tail creates a FSA.
Accompanying future interest:
The grantor could have a reversion.
If held by someone else than the grantor, that third party could have a remainder.
The defeasible estates
The fee simple determinable
NYD:
It is called a fee on limitation
.
How to create:
To A for so long as, during, until
You must use clear, durational language.
Distinguishing features:
If the even occurs, the estate is automatically forfeited.
Devisable, descendible, alienable.
The condition is also transferred.
YOU may convey less but NEVER convey more.
Accompanying future interest:
Possibility of reverter
The fee simple subject to condition subsequent:
NYD
It is called a fee on condition.
How to create
To A, but if X event occurs, grantor reserves the right to reenter and retake
You must have durational language + the grantor reserves the right to reenter and retake the land.
Distinguishing features
It is NOT automatically forfeited once the condition is breached.
The grantor must act upon it the breach.
Accompanying future interest
NYD:
Right of acquisition
MBE:
Right of entry, and power to terminate.
The fee simple subject to executory limitation
The forfeiture works for someone else than the grantor.
How to create:
To A, but if A event occurs, then to B
Distinguishing features
Forfeiture is automatic in favor of someone else than the grantor.
Accompanying future interest
Shifting: when it passes without the passing of time
Springing: gap in the time line.
Two important rules of construction: often tested.
Words of mere desire, hope, or intention are insufficient to create a defeasible fee.
Courts hate restrictions. If no clear durational language, they will find a FSA.
Absolute restraints on alienation are void
It is an absolute restriction on the power to sell/ transfer that is not linked to any reasonable time limited purpose
The life estate
How to create
It must be measured in explicit lifetime terms and NEVER in term of years
A to life.
Accompanying future interest
Reversion in grantor
Remainder in someone else than grantor.
The life estate pur autre vie:
Measured by the life of someone else than the life tenant.
Distinguishing features
The life tenant's entitlements are rooted in the important doctrine of waste.
Two important rules:
The life tenant is entitled to all ordinary uses and profits from the land
The life tenant must not commit waste.
He must not injure the future interest holders
Waste:
Voluntary or affirmative waste
Actual overconduct that causes a decrease in value to the premises
Acts of aggression.
Voluntary waste and natural resources
The life tenant must not consume or exploit natural resources on the property, unless
Prior use,
prior to the grant, the land was used for exploitation.
He continues unless otherwise stipulated.
Prior use and the open mine doctrine: if mining was done, the life tenant may continue to mine but he is limited to the mines already opened, unless otherwise stipulated.
Repairs:
He may consume the resources to make reasonable repairs.
Grant:
The life tenant was expressly granted the right to exploit.
Exploitation
The land is only suitable for exploitation purposes.
Permissive waste, or neglect:
The land is allowed to fall into disrepair/ fails to take reasonable measures to protect the land
The life tenant must do no more, no less that is necessary to maintain the land
Permissive waste and the obligation to repair
The life tenant has to keep the premises into reasonable good repair.
Permissive waste and the obligation to pay all ordinary taxes:
The life tenant is obligated to pay all ordinary taxes on the land, to the extent of income or profits from the land.
If there is no income or profit, the life tenant is required to:
Pay all ordinary taxes to the extent of the premises fair rental value.
Ameliorative waste
The life tenant must not engage in acts that will enhance the property's value, unless:
All the future interest holders are known and consented.
Future interests
Future interests capable of creation in the grantor
The possibility of reverter
FSD
The right of reentry:
Fee simple on condition subsequent
The reversion
Future interests in transferees
A vested remainder
The indefeasibility vested remainder
The vested remainder subject to complete divestment
The vested remainder subject to open
The difference between vested and contingent remainders
A remainder is a future interest in a grantee that is capable of becoming possessory upon the expiration of a prior possessory estate created in the same conveyance in which the remainder is created.
A remainder never follows a defeasible fee
It follows a life estate or a term of years.
A remainder is vested if it is both created in
An ascertained person, and
Is not subject to any condition.
A remainder is contingent if it is created in
an unascertained person, or
is subject to a condition precedent, or
both
The remainder may be contingent because it is created in as yet unborn or unascertained persons
The remainder may be contingent because it is subject to a condition precedent.
There is a condition precedent when the condition appears before the remainder is created
Contingent remainders and
The rule of destructibility of contingent remainders
C.L.:
A contingent remainder was destroyed if it was still contingent at the time the preceding estate ended
Today:
It has been virtually abolished in every state.
NYD:
It has been abolished.
The rule in Shelley's case:
C.L.:
The rule only applies in one setting ONLY:
To a for life, then on A's death, to A's heirs" A is alive:
The life estate in A and the contingent remainder in A's heir's would merge, giving A a FSA.
This is a rule of law, not a rule of construction.
Today:
Virtually all states have abolished the rule
NYD
Abolished it.
The doctrine of worthier title
It is still available in most states.
It comes up in ONLY one setting.
TO A for life, then to O's heirs, o is alive.
The attempt to create a future interest in O's heirs is void.
O has a reversion.
A has a life estate
It is a rule of construction, NOT a rule of law.
NYD:
Has abolished it.
Distinguish the three kinds of vested remainders:
The indefeasibly vested remainder:
The holder of this remainder is
Certain to acquire a possessory interest at some point in the future without any condition attached.
The vested remainder subject to complete defeasance
The remainderman is known. His taking is not subject to a condition precedent. His taking is subject to a condition subsequent.
He might be cut short due to the occurrence of an event.
The condition will be after the language creating the remainder.
The vested remainder subject to open:
Not all members are known.
At least one of the group is qualified to take possession
But the class is subject to partial diminution because additional takers not yet known may come in.
A class is open or closed
Open:
If others can enter
Closed:
When maximum membership has been determined so that persons born thereafter are shut out.
It is closed when any member can demand possession.
Distinguish remainders from executory interests:
An executory interest holder follows a defeasible fee holder.
FSD, fee subject to condition precedent.
It is a future interest created in a transferee ( third party) which is not a remainder and which takes effect by either cutting short some interest in another person (shifting) or in the grantor of his heirs ( springing)
Shifting executory interest
It ALWAYS follows the defeasible estate
He is divesting the remainder.
Always look to see if it violated the rule against perpetuities.
Springing executory interest
It divests the grantor.
It never violates the rule against perpetuities since we will know at the end of A's life if the condition is met or not.
The rule against perpetuities:
The rule:
If there is no possibility that the given interest may vest more than 21 years after the death of a measuring life.
It potentially applies ONLY to contingent remainders, executory interests and certain vested remainders subject to open and to charity to charity gift.
It does NOT apply to:
Any interests in the grantor
To vested remainders except for the one subject to open.
Four steps:
Classify the future interest
What are the conditions precedent to the vesting of the future interest
Find a measuring life
See if the interest vest later than life in being + 21 years
Two bright lines
A gift to an open class that is conditional on the members surviving to an age beyond 21 violates the rule.
Many shifting executory interests violate the rule.
One without limit in time violates the rule.
NY Perpetuities reform statute:
Try to save the gift in certain situations:
Reduce age contingency to 21 years where necessary to save disposition
Reference to spouse presumptively refers to person in being
Disposition upon a contingency:
Presumption is that creator intended the contingency to occur, if at all, within 21 years/
Presumption as to child-bearing capacity
Made under 14 cannot sire a child.
Female under 12 or over 55 cannot have a child
Possibility of adoption is disregarded
Medical testimony as to child-bearing capacity is admissible
If miracle child appears, disposition is nonetheless valid, even as to miracle child.
The wait and see doctrine
MBE:
The validity of the future interest is determined based on the facts as they now exist at the conclusion of the relevant life.
The cy pres doctrine under the Uniform Rule against perpetuities
As near as possible
It gives the court the power to reform a transfer so that it satisfies the rule while closely matching the grantor's wishes.
NYD:
It has rejected the cy pres doctrine and the wait and see doctrine concerning the perpetuities rule.
Concurrent estates
The joint tenancy
Distinguishing features
Hold by the whole and the part
The right of survivorship
It is transferable inter vivos.
It is NOT devisable or descendible.
Creation of the joint tenancy:
NYD:
No need of a straw man.
T-TIP
Unity of title, unity of time, identical interest and right to possess the whole
Grantor must express the right of survivorship
If not, a tenancy in common is created.
Under MBE, you need a straw man if you want to create a joint tenancy between yourself and someone else.
Title to straw man, then straw man transfers title to both with right of survivorship
Severance of a joint tenancy
Severance and sale
A join tenant can sell or transfer her interest during her life time:
She can do secretly.
It severs the joint tenancy as to the seller's interest. If more than two join tenants, the remaining join tenants are still joint tenants and the buyer is a tenant in common.
In equity, a joint tenant's mere act of entering into a contract for the sale of her share will
Sever the joint tenancy as to that contracting party's interest.
Severance and partition
By voluntary agreement:
Partition in kind:
It is an equitable judicial proceedings where the court physically divides up the estate.
It only occurs if it is in the best interest of the parties
Forced sale:
It is an equitable judicial proceedings where the court orders a forced sale.
Only if it is in the best interest of all parties.
Severance and mortgage
Rule:
One joint tenant's execution of a mortgage or a lien on his or her share will sever the joint tenancy as to that now encumbered share only on:
The minority of states to follow the title theory of mortgage
Majority of states:
Lien theory
It does not sever the tenancy.
NYD:
Follows the lien theory of mortgage.
The tenancy by the entirety
NYD:
Recognizes it.
Creditors:
One spouse may mortgage his interest and his creditors may enforce that interest, so long as the remaining tenant's rights, including the right of survivorship, are not compromised.
How to create:
Only by husband and wife who share the right of survivorship
This is a very protective form of co-ownership
Creditors of only one spouse cannot touch the tenancy
Unilateral conveyance
Neither tenant acting alone can defeat the right of survivorship by unilateral conveyance.
The tenancy in common
Features:
Each co-tenant owns an individual part and each has a right to the whole
Each interest is descendible, devisable, and assignable.
MBE:
The presumption favors it.
Any conveyance to more than one that does not tell you the form of co-ownership is presumptively a tenancy in common.
Rights and duties of co-tenants
Possession
Right to possess the whole
If a co-tenant excludes another from possession of any part of the premises he has committed ouster.
Rent from co-tenant in exclusive possession
Absent ouster, a co-tenant in exclusive possession is not liable to the others for rent.
Rent from third parties:
A co-tenant who leases all or part of the premises to another must account to his co-tenants.
Adverse possession
You need hostility
Ouster
Carrying costs:
Each is responsible for his fair share
Tax payments, mortgage interest payments.
Repairs
The repairing co-tenant has a right to contribution, so long as the repairs are reasonable and so long as she notified the others for the need for repairs.
Improvements:
During the life of the co-tenancy there is no right to contribution for improvements.
At partition:
The improved party gets a debit for decrease in value
The improved party gets a credit for increase in value.
Waste
A co-tenant must not commit waste
A co-tenant may bring an action for waste during the life of the co-tenancy.
The three type of waste.
Partition
A joint tenant or tenant I common has a right to bring an action for partition.
Landlord/tenant law
The four leasehold or nonfreehold estates
The tenancy for years ( term of years)
This is a lease for a fixed determined period of time.
If the termination date is unknown you don't have a tenancy for years.
No notice of termination is necessary.
A term of years greater than one year
Must be in writing to be enforceable under the statute of frauds
The periodic tenancy
This is a lease which continues for succeeding periods or intervals until either landlord or tenant give proper notice of termination
It can be created expressly.
It can arise by implication
Land is leased with no mention of duration but a provision is made for the payment of rent at set intervals
An oral term of years in violation of the statute of frauds creates
An implied periodic tenancy measured by the way rent is tendered.
The holdover:
In a residential lease, if landlord elects to holdover tenant who has wrongfully stayed on past the conclusion of the original lease
NYD:
It creates an implied month to month periodic tenancy.
The new tenant may bring an action to evict the old tenant or avoid the lease ad recover any consideration paid to the landlord, unless the lease contains express provision to the contrary.
Where a tenant who holds a lease of indefinite duration notifies the landlord of an intention to quit the premises, and then fails to deliver possession, the tenant must pay the landlord double the rent otherwise payable, as long as he is in possession.
How to terminate:
NOTICE.
Usually written notice is necessary.
Notice at least equal to the length of the period or interval itself unless otherwise agreed
Commercial lease:
Year to year: 6 months
NYD
One month outside NYC, 30 days in NYC.
The tenancy at will
This is a tenancy for no fixed period of duration
Both parties have the right to terminate at will
Unless the parties expressly agree to a tenancy at will, the payment of a regular rent will cause the court to treat the tenancy as an implied periodic tenancy
Termination:
By either party at any time
NYD
30 days notice required.
The tenancy at sufferance
Creation:
When a tenant has wrongfully held over the expiration of the original lease.
It lasts until the landlord evicts or elects to hold the tenant to a new term. He is still entitled to rent
NYD:
Acceptance of rent subsequent to the expiration of the term creates an implied month-to-month periodic tenancy, unless otherwise agreed.
Tenant's duties
Tenant's liability to third parties
He is responsible for keeping the premises in reasonable good repair.
He is liable for injuries sustained even though landlord may have expressly promised to make the repairs.
Tenant's duty to repair
Tenant's duty to repair when the lease is silent
Tenant needs only to keep the premises in reasonable good repair.
Tenant must not commit waste
Ameliorative waste
Must not alter the premises even if it increases in value.
Permissive waste
No neglect
Voluntary waste
No overt harmful actions
The law of fixtures:
The tenant must not remove a fixture
When a tenant removes a fixture, she has committed voluntary waste.
Definition
It is a once movable chattel that by virtue of its annexation to realty manifests the intention permanently to improve the realty.
Ex:
Heating system, custom made storm windows, furnaces, lighting installations
Fixtures pass with ownership of the land
Express agreement controls.
In the absence of agreement:
The tenant may remove a chattel that she has installed so long as removal does not cause substantial harm to premises.
Tenant's duty to repair when tenant has expressly covenanted in the lease to maintain the property in good repair for the duration of the lease
At C.L.:
Tenant would be responsible even if premises destroyed by no fault of his.
Today: vast majority of states:
May terminate
NYD:
If the premises are destroyed through no fault of his, tenant may quit the premises and surrender possession without any duty to pay rent, unless the contract expressly provides otherwise.
Tenant's duty to pay rent.
Tenant breaches and is in possession
The landlord only options are
To evict through proper judicial proceeding, or
Choose not to evict and sue for the rent due.
The landlord must NEVER engage in self-help
NYD:
If landlord engages in self-help, tenant is entitled to treble his damages.
Tenant breaches his duty but is out of possession:
Surrender:
Landlord can choose to treat the tenant's wrongful abandonment as an implied offer of surrender
Lease is terminated if accepted.
if the unexpired term would have been greater than one year, surrender must be in writing due to the statute of frauds.
Ignore the abandonment
The landlord can hold the tenant liable for each month rent, as if she were still.
Re-let:
Landlord may re-let on behalf of the tenant holding her liable for any deficiency.
NYD:
No need to mitigate.
Landlord's duties
Duty to deliver possession
Landlord must put the tenant in actual physical possession of the premises.
If not, landlord is in breach
Landlord is liable to the new tenant for damages.
The implied covenant of quiet enjoyment
In every residential and commercial lease.
Quiet use without interference of the landlord
Breach by actual wrongful eviction:
Breached it.
By constructive eviction:
Substantial interference
Because of some fact of failure to act attributable to landlord.
It means recurring significant interference incompatible with the tenant's use and enjoyment.
Notice
Tenant must give notice of the problem and landlord must fait to correct the situation within a reasonable time.
Goodbye:
The tenant must leave the premises to claim constructive eviction.
The landlord is not liable for the other tenants' conduct unless:
Landlord has a duty NOT to permit nuisances.
Landlord does a duty to control common areas
The implied warranty of habitability
It only applies to residential premises.
It is NOT waivable.
The tenant can remain
Standard is often supplied by the local housing code or independent judicial conclusion
Tenant's entitlement when implied warranty of habitability is breached:
Move out and terminate lease
Repair and deduct
Reduce rent to an amount equal to the premises fair rental value in view of the defect or
Withhold until court determines fair rental value.
Remain in possession, pay full rent and affirmatively seek money damages.
Retaliatory eviction: if tenant lawfully reports landlord for housing code violations:
Landlord is barred from penalizing the tenant.
The assignment vs. the sublease:
In the absence of some prohibition in the lease, the tenant may freely transfer his interest in whole (assignment) or in part (sublease).
In the lease, the landlord can prohibit the tenant from assigning or subletting without landlord's prior written approval.
However, once landlord consents to one transfer by tenant
He waives the right to object to future transfers by that tenant, unless he expressly renews the right.
NYD
Unless the lease provides otherwise, a residential tenant may not assign without landlord's written consent.
Landlord cannot unreasonably withhold consent to assign, and tenant's sole remedy is to seek release from the release.
A tenant in a residential building having four or more units has the right to sublease subject to landlords' written. Consent to sublease cannot be unreasonably withheld.
The assignment:
An assignment arises when the 1st tenant transfers his entire leasehold interest in the 2nd tenant.
As a result:
Landlord and 2nd tenant are in privity of estate
They are responsible to each other for all promises in the original lease that run with the land
Not in privity of contract unless MBE says that the 2nd tenant expressly assumed the performance of all promises in the original lease
Landlord and 1st tenant are no longer in privity of estate,
However remain in privity of contract,
Tenant 1st will always be secondarily liable.
The sublease
It arises when 1st tenant transfers less than the full interest he has.
Landlord has no relationship to sublessee.
Neither privity of estate nor privity of contract.
Tenant 1st and tenant 2nd are liable to each other.
Landlord's tort liability
The common law of caveat lessee
Let the tenant beware
The landlord has no duty to make the premises safe.
5 exceptions to C.L.:
Common areas
Landlord is responsible for maintaining all common areas safe.
Latent defects rule
Landlord is under a duty to warn tenant of all hidden defects of which landlord has knowledge or reason to know.
Assumption of repairs:
While under no duty to make repairs, once undertaken, landlord must complete them with reasonable care.
If landlord is negligent, he is liable.
Public use rule
The landlord who leases public space and who should know because of the nature of the defect that tenant won't repair, then landlord is responsible for any defects on the premises
Short term lease of furnished dwelling:
Landlord is responsible for any defective condition.
Servitudes
Easements
Definition:
The grant of a non-possessory property interest that entitles its holder to some limited use or enjoyment of another's lands ( servient tenement).
Easement can be affirmative or negative
Most are affirmative.
Negative easements
In four categories:
Light,
Air
Support,
Stream water from an artificial flow.
They can only be granted in writing expressly by grantor.
An easement is either appurtenant to land or is held in gross
Appurtenant:
When it benefits its holder in his physical use or enjoyment of his property.
It involves two parcels of land
Dominant
Servient.
Gross:
If it confers upon its holder only some personal or pecuniary advantage that is not related to his use or enjoyment of his land.
There is only one parcel of land:
The servient tenement.
Transferability:
The appurtenant easement passes automatically with the dominant tenement, regardless of whether it is even mentioned in the conveyance.
The burden also passes automatically unless the new owner is:
A BFP without notice of the easement.
The easement in gross does not pass automatically unless it is for commercial purposes.
Creation of an easement
Grant:
The statute of frauds applies: must be in writing.
Implication
The previous use was readily apparent, and
The parties reasonably expected that the use would continue
NYD adds
The use affected the value of the estate benefited and is necessary to the reasonable use of the estate.
Necessity:
The landlocked setting.
If the grantor conveys a portion of his land with no way out, except over grantor's remaining land.
Prescription:
Analogous to adverse possession
Continuous,
Open and notorious
Actual
Claim of right
Hostility.
MBE:
Statute of limitations: 20
Permission defeats the acquisition of an easement by prescription
NYD:
10 years statute of limitation.
The scope of an easement
It is fixed by the terms that created it.
The easement holder unilateral expansion of the easement is NOT allowed.
Termination of an easement
Estoppel:
The servient tenement owner materially changes his position in reasonable reliance on the easement holder assurances that the easement will no longer be enforced.
Necessity
Easement created by necessity expires as soon as the necessity ends.
However, if the easement, attributable to necessity, was nonetheless created by grant, it will not end automatically once the necessity ends.
Destruction
Of the servient tenement other than through willful conduct of the servient tenement.
Condemnation of the servient tenement
If the govt. condemns the premises through eminent domain.
Release
Given by the dominant tenement to the servient holder.
The statute of frauds applies.
Abandonment:
The easement holder must demonstrate by physical action:
The intention never to make use of the easement again
Merger doctrine:
Unity of ownership.
If the two parcels unit, then the easement is extinguished.
If the two parcels are separated later, the easement is not automatically revived.
Prescription
The easement holder loses by analogy to adverse possession.
The license
Freely revocable mere privilege to enter another's land for some delineated purpose
Newspaper carrier, theater tickets holder.
It can be created orally
The classic license cases:
The ticket case:
Freely revocable.
Neighbors talking over the fence
It is not enforceable, it violates the statute of frauds, and oral easement creates a freely revocable license.
Estoppel will apply to bar revocation only when the licensee has:
Invested substantial money or labor or both in reasonable reliance on the license continuation.
The profit
It entitles its holder to enter servient land and take from it the soil, or some substance of the soil
The profit shares all the rules of the easement.
The covenant:
Definition:
It is a promise to do or refrain from doing something related to land.
Covenants can be negative: restrictive covenants:
Equitable servitude or covenant?
On the basis of the relief that is sought.
Equitable servitude:
Injunction.
Covenant:
Damages.
One tract is burdened, the other is benefited.
When will the covenant run with the land?
Whether those who succeed the originally promising parties bound by the promise and have the covenant succeed in being transformed into a property interest.
Always doe the burden first
Writing:
The original promise must have been in writing.
Intent:
The original parties must have intended covenant would run with the land
Touch and Concern:
Promise must affect the parties legal relations as landowners and not simply as members of the community at large.
Horizontal and vertical privity
Horizontal privity refers to the nexus between the original parties.
They enjoyed a grantor/grantee relationship or they were each other mortgagor/mortgagee or landlord/tenant.
Vertical privity refers to the nexus between the original party and the buyer of the same land.
It requires some non-hostile relationship between those two.
Only time, there is no vertical privity is when the subsequent landowner acquired the land via adverse possession.
Notice
The subsequent owner must have had some notice of the promise when she acquired.
Second, do Benefit:
Writing
Intent
Touch and concern
Vertical privity
You don't need horizontal privity for the benefit to exist.
The equitable servitude ( injunctive relief)
It is a promise that equity enforces against subsequent successors
To create an equitable servitude that will bind successors
Writing:
Original promise must have been in writing
Intent:
Original parties must have intended that the promise would bind successors
Touch and concern
Must have affected the parties as landowners
Notice
Actual, inquiry, record
NOT Privity
The implied equitable servitude: the general or common scheme doctrine:
When the sales began, the subdivider had a general scheme of residential development, which included the lot now in question.
The defendant must have had some notice of the promise contained in those prior deeds.
Actual, literal knowledge.
Inquiry:
The lay of the land conforms to some common restriction.
Record notice
Imputed to buyers on the basis of the public records themselves
A subsequent buyer is not on record notice of prior deeds transferred to others by a common grantor.
Equitable defenses of an equitable servitude
Changed conditions:
Must be so pervasive that the entire area essential character has been changed.
Adverse possession
Basic concept:
Possession can sometimes ripen into title.
Elements:
Continuous
Uninterrupted possession for the appropriate statutory period.
NYD
10 years
open and notorious
the sort of possession that the true owner would make. Must be visible.
Actual
Entry must be literal
Constructive or hypothetical is not sufficient
Claim of right: an objective standard:
Objective possessor is acting as if he holds this land as against the whole world.
Hostile
Possessor does not have the true owner's permission to occupy the land.
Tacking:
One adverse possessor may tack on to his time, his predecessors time, so long as he is in privity with the predecessor.
Needs privity:
Ouster defeats privity.
Disabilities:
Statute of limitations will not run against a true owner afflicted by a disability at the start of the adverse possession.
Infancy, insanity, imprisonment.
Land conveyancing: the purchase and sale of real estate
A two step process:
The land contract
The closing.
The land contract:
Statute of frauds:
It must be in writing
Standard:
The party against whom enforcement is sought must sign it.
It must describe the land
It must state some consideration
When the amount of land recited in the land is more than the actual size of the parcel
Buyer's remedies:
Specific performance with a pro rata reduction in the purchase price.
Exception:
Part performance doctrine: any two of the three following
Buyer takes possession of the land and pays all or substantial part of the purchase price, or
Buyer takes physical possession and makes substantial improvements.
The Risk of loss:
Apply the doctrine of equitable conversion:
Equity regards as done that which ought to be done.
Once the contract is signed, the buyer is deemed owner of the land
If, in the interim between contract and closing, the land is destroyed through no fault of either party,
The buyer bears the risk of loss unless the contract says otherwise.
NYD:
So long as destruction is without fault, the risk of loss remains on the seller until buyer has title or takes possession.
Two implied promises in every land contract:
Seller promises to provide marketable title
The standard
Title free from reasonable doubt.
Three circumstances will render title unmarketable
Adverse possession
Even if only one portion of land is AP.
Encumbrances
Servitudes, mortgages,
Unless the buyer waives them.
Seller has a right to satisfy an outstanding mortgage or lien at closing, with proceeds of the sale. Thus, the buyer cannot claim title is unmarketable because it is subject to a mortgage prior to closing, so long as the parties understand that the closing will result in the mortgage being satisfied or discharged.
Zoning regulations
Seller promises not make any false statement of material facts
The majority of states now also holds sellers liable for:
Failing to disclose any latent material defects
Liable for silence, omission
If the contract contains a general disclaimer of liability
It will not excuse the seller from liability for fraud or failure to disclose.
The land contract contains no implied warranties of fitness or habitability
Caveat emptor
Exception:
Warranty exists for new residential home.
The closing
The controlling document is the deed.
Unless otherwise specified, acceptance of a deed discharges all of seller's contractual obligations, and leaves buyer only with remedies on any covenant contained in the deed.
How does the deed pass legal title from seller to buyer?
Lawful execution of a deed
The standard
The deed must be in writing signed by the grantor.
It does not have to recite consideration but it must reasonable identify the parties and the land
The description of the land
It just has to be unambiguous.
Some of my land: NOT okay
The delivery requirement:
The delivery requirement could be satisfied when grantor physically or manually transfers the deed to the grantee.
Delivery does not necessarily actual physical transfer of the instrument itself.
Delivery is a term of art
Only means that grantor has PRESENT INTENT to be immediately bound.
Recipient's express rejection of the deed defeats delivery.
If a deed, absolute on its face, is transferred to grantee with an oral condition
The oral condition drops out, because it is barred by the parol evidence rule
Delivery by escrow is permissible
With conditions:
Upon the occurrence of the condition, title will pass
With no condition:
Waiting for later instructions:
Title has not passed.
Retention of interest by grantor or conditional delivery
If dies before conveyance
It fails
Express condition that grantor dies:
Creates a future interest
Covenants for title and the three types of deed
The quitclaim
Contains no covenants, makes no promises, it not even promising that grantor has title in the first place.
The general warranty deed
Warrants against all defects
The covenant of seisin: present covenant: breached when title passes
Grantor promises that grantor owns the land
The covenant of right to convey: present covenant
Grantor promises that he has the power to make the conveyance
The covenant against encumbrances: present covenant
Grantor is promising that there are no servitudes or liens on the property.
The covenant for quiet enjoyment: future covenant: breached in the future
Grantor promises that grantee will not be disturbed in possession by some third parties lawful claim.
The covenant of warranty: future covenant
Grantor promises to defend grantee against any lawful claim of title asserted by others.
The covenant for further assurances
Grantor simply promises to perform whatever future acts are necessary to protect title.
The statutory special warranty deed: two promises
He has not conveyed the land to anyone other than the grantee.
Estate is free from encumbrances made by the grantor.
NYD
Sale and bargain deed.
The recording system:
The paradigm:
Grantor conveys land to A. later; grantor conveys the same land to B.
Who wins between a and b?
Two bright line rules:
If B is a BFP, and we are in a notice jurisdiction, B wins, regardless of whether or not she records before A does.
If B is a BFP and we are in a race-notice jurisdiction, B wins if she records properly before A does.
A BFP
Is one who purchased the land for value, and
Is without notice that someone else got the land first.
Two routine value questions:
The bargain basement sale
So long as B remits substantial pecuniary consideration, she is a purchaser for value.
The case of the doomed donee:
A donee is NEVER a BFP.
Notice
Actual notice:
Literal knowledge.
Inquiry notice
Form of constructive notice
B is on inquiry notice of whatever an examination of the land would reveal.
Buyer of real estate has a duty to inspect the premises.
If a recorded instrument makes reference to an unrecorded transaction:
Grantee is responsible for making reasonable follow-up inquiries.
On notice for what the follow-up would have revealed.
Record notice
Another form of constructive notice
The record statutes:
The notice statute
A conveyance of an interest in land shall not be valid against any subsequent purchaser for value, without notice thereof, unless the conveyance is recorded.
The notice-race statute
Any conveyance of an interest in land shall not be valid against any subsequent purchaser for value, without notice thereof, whose conveyance is first recorded.
If A has properly recorded:
B will be on record notice
Not a BFP.
Chain of title
To be on proper record notice,
The deed must be recorded in the chain of title.
It is the sequence of recorded instruments capable of giving record notice
The wild deed: A does not record and then sells to B, B records
The a-b deed is not in the chain of title.
It contains a missing link
Thus, it is a wild deed
No record notice possible in this case
The deed is a nullity
Estoppel by deed
One who conveys realty in which he has no interest is estopped from denying the validity of the conveyance if
He subsequently acquires the interest that he had previously transferred.
Mortgages
Paradigm
C, a creditor, is thinking of lending O $XO offers land as collateral
Creation
A mortgage is a conveyance or security interest in land.
There must be a debt.
The creditor is called the mortgagee; the debtor is called a mortgagor.
Voluntary transfer of a security interest in debtor's land to secure the debt.
The mortgage must be in writing to satisfy the statute of frauds.
Legal mortgage
The equitable mortgage.
Instead of executing a mortgage writing, O hands the creditor the deed to the land that is absolute on its face.
This is an equitable mortgage.
As between O and the creditor, parol evidence is freely admissible
If the creditor sells the land to a BFP, O's only recourse is to proceed against the creditor for fraud in order to recover the proceeds of the sale.
The rights of the parties:
Unless there is foreclosure:
O has title and a right to possession
Creditor has only a lien on the land.
Transfer of rights:
A mortgage automatically follows a properly transferred note.
The creditor can transfer by
Endorsing the note and delivering it to the transferee; or
Executing a separate document of assignment.
If the note is endorsed and delivered to the transferee, the transferee is entitled to become
The holder in due course.
He takes the note free of any personal defenses, that the note would be otherwise be subject to in the hands of the original creditor.
Personal defenses include:
Partial or total failure of consideration
Fraud in the inducement
Unconscionability
Waiver of estoppel.
The holder in due course may foreclose the mortgage despite the personal defenses.
The holder in due course is still subject to real defenses
Infancy,
Other incapacity,
Duress,
Forgery
Insolvency
To be a holder in due course, the following must be met:
The note must be negotiable,
Payable to the named mortgagee
Original note must be endorsed
Signed by the named mortgagee
Original note must be delivered to transferee
A photocopy is NOT okay.
The transferee must take the note in good faith
No notice of any illegality
The transferee must pay value for the note.
More than a nominal amount.
If the debtor sells the land which is now mortgaged:
The liens remains on the land so long as the mortgage instrument has been properly recorded
Recording statutes also protect mortgages.
Whatever the record statutes:
There will be notice of the recording, the mortgagor usually wins.
If sell, then mortgagor records:
It will depend on the recording statute
Notice:
The buyer is not on record notice
He wins
Race-notice
The buyer is the on notice since the mortgagor recorded first.
He loses.
Who is liable on the debt if O, sells the land?
If B assumed the mortgage:
Both O and the buyer are personally.
B is primarily liable
O remains secondarily liable.
If B takes subject t the mortgage
B assumes no personal liability
O is personally liable.
If the mortgage instrument was recorded properly, it sticks with the land.
If o cannot pay, creditor can look to the land for satisfaction.
Foreclosure
By appropriate judicial proceeding at foreclosure land is sold, proceeds go to satisfy the debt.
No right to self-help.
What if the proceeds are less than the amount of the debt?
The mortgagee can bring a personal action against the debtor for a deficiency judgment.
What if there is a surplus:
Pay off the junior liens in the order of their priority.
If anything is left, then to the debtor.
How does it work:
If less:
Off the top: any attorney fees, and expenses of the forclosure and accrued interest on the first mortgagee. ALWAYS assume zero on MBE.
Pay off first mortgagor, then the junior liens until nothing is left.
The junior mortgagee who wasn't paid in full:
He can get a deficiency judgment against the debtor
If surplus
See above for the rule.
Effect of foreclosure on various interests:
Foreclosure will terminate interests junior to the mortgage being foreclosed but will not affect senior mortgages.
The junior mortgages are:
Necessary parties to the foreclosure action.
The debtor is also and must be joined
Specifically if the creditor wished to have a deficiency judgment against him.
Failure to include a necessary party results in:
A preservation of that party's interest, despite the foreclosure and sale.
The lien remains with the land.
Foreclosure does not affect any interest senior to the mortgage being foreclosed.
The buyer takes subject to the mortgage
The buyer is not personally liable for the senior debt,
But, as a practical matter, if that senior lien is not paid, the senior creditor will foreclose on the land.
Priorities:
As a creditor, you must record
If no recording, no priority.
Once, you recorded,
Priority is determined by first in time, first in right.
The purchase money order mortgage
Sometimes the creditor gets to cut the line
When you loan money to finance the purchase of the land.
First priority as to the parcel he recorded
It is super-priority.
Subordination agreements:
By private agreement, a mortgagee with enhanced priority may agree to subordinate his priority to a junior creditor.
Redemption
Redemption in equity
Equitable redemption is universally recognized up to the date of sale
At any time prior to the foreclosure sale:
The debtor has the right to redeem the land or free it of the mortgage.
NY recognizes it.
Once a valid foreclosure has taken place :
The right to equitable redemption is cut off.
It is exercised by paying off the amount owed together with any accrued interest and costs.
Acceleration clause:
Permits the mortgagee to declare the full balance due in event of default.
No waive of the right to redeem is possible.
That would be clogging the equity of redemption.
If it is in the instrument itself.
Statutory redemption:
Statutory redemption gives the mortgagor a statutory right for some fixed period after the foreclosure sale has occurred.
The price to be paid is usually the foreclosure sale price.
The mortgagor will have the right to possession of the land during that statutory period
When the mortgagor redeems
It nullifies the foreclosure sale
NYD
Does not recognize it.
Lateral support
If land is improved by buildings and an adjacent landowner's excavation causes that improved land to cave in,
the excavator will be liable ONLY if
He acted negligently
Strict liability will attached only if:
It can be shown that because of defendant's actions, plaintiff's improved land would have collapsed even in its natural state.
Water rights
The riparian doctrine: first major system to determine the allocation of water in watercourses.
Water belongs to those who own the land bordering the watercourse.
These people are called riparian owners.
The share the right to reasonable use
One riparian owner is liable if his use unreasonably interferes with another's.
The prior appropriation doctrine
Water belongs initially to the state
But the right to use it can be acquired by an individual.
One does not have to be a riparian owner to acquire the right,
Instead, rights are determined by
Priority of beneficial use
First in time, first in right
Groundwater
Water beneath the surface of the earth that is not confined to a known channel.
Sometimes called percolating water.
Surface owner can make reasonable use of groundwater,
Use must not be wasteful.
Surface waters
Rain and springs or melting snow not yet reached its natural watercourse.
Common enemy rule
A landowner may make any improvements or changes on his land to fight the flow of surface waters
Owner must refrain from doing unnecessary harm to others.
Possessor's rights
Trespass
The invasion of land by tangible physical object that interferes with the right of exclusive possession
To remove a trespasser
You bring an ejectment action
Private nuisance
Substantial, intentional and unreasonable interference with another's use of land
Noise, odors etc…
Eminent domain
Definition
It is the 5th amendment taking clause
Take private property for public use.
So long as just compensation is provided.
Explicit takings
Govt. condemnation
Implicit or regulatory takings:
The remedy for a regulatory taking
Landowner must seek injunction to evaluate the ordinance, or
Sue for damages
Zoning
Derivative of the states police power.
State may zone to protect general health, safety, and welfare.
The variance
Principle means to achieve
Proponent of variance must show undue hardship and that to grant the variance won't work, detriment to surrounding property values
The nonconforming use
A one lawful use that is now nonconforming
Because of a new zoning ordinance
The nonconforming use cannot be eliminated all at once.
