Real Property Law School Outline


1. FIRST POSSESSION: Acquisition by Discovery, Capture, or Creation

 

Acquisition by Discovery

 

Johnson v. M’Intosh – Title by discovery (or conquest). Possession v. title

  1. Indians had no right to transfer title to their lands. Discovery (by Europeans) gave title to Europeans, which then passed to the States. Native Americans had no right of possession b/c they just roamed.
  2. Indians only had right of occupancy (non-transferable).
  3. Started idea of property as a ‘bundle of rights’.
  4. Chain of title – link or chain of successive occupants or owners of land from the original owner of the land all the way through the present owner
    • Indians –> European countries –> United States –> D
      • Through principle of discovery, Indians were dispossessed of land when Europeans discovered the land
      • Discovery gave exclusive title (or absolute or ultimate title) to those who made it (the Europeans)
      • US endorsed the principle of discovery
      • Europeans viewed the Indians as mere occupants of the land
  1. Rule: Indians have a right to possession that can only be extinguished by purchase or conquest by the U.S. government. U.S. Government has “complete ultimate title.”
  1. Indian inhabitants are to be considered merely as occupants, to be protected while in peace, in the possession of their lands, but to be deemed incapable of transferring the absolute title to others.
    • An absolute title to lands cannot exist, at the same time, in different persons, or in different governments. An absolute must be an exclusive title, or at least a title which excludes all others not compatible with it.
    • Government and Indians can’t both have an absolute or complete title. US Government has ownership with Indian occupancy only.
  1. Ultimate Title (US government had ultimate title, not the Indians)
    • Power to convey (sell the land)
    • Power to grant lands
    • Extinguish through purchase or conquest (power to extinguish the Indian land claims)
    • Gave US sovereignty over Indian nations
  1. Discovery v. Conquest
    • Discovery: acquisition by the sighting or finding of hitherto unknown or uncharted territory. It is frequently accompanied by a landing and the symbolic taking of possession, acts that give rise to an inchoate title that must subsequently be perfected, within a reasonable time, by settling in and making an effective occupation.
    • Conquest: taking of possession of enemy territory through force, followed by formal annexation of the defeated territory by the conqueror.
    • During the so-called classical era of discovery, prior possession by aboriginal populations was commonly thought not to matter.
  1. Locke’s Labor Theory – right of the first possessor is imposed by the law of nature. Every man has property in his own person. The products of his labor are his. Through his labor, product (in this case land), being altered and improved, becomes his property.
    • Law of accession: when one person adds to the property of another by labor alone – who is entitled to the value of the product?
    • The Indians did not “perfect” their property rights because they did not labor and improve upon the natural state of the lands that they occupied

 

Acquisition by Capture

 

Pierson v. Post – Pursuit v. capture

  1. Pursuit alone does not establish property rights in a wild animal. Mortal wounding (or depriving animal of his natural liberty) is required. First in time of possession. Holding promotes certainty in ownership, which should encourage hunting, and peace and order.
    • Disadvantages in certainty – inflexibility may lead to improper results as well as inefficiency
    • First in time is the governing principle but both sides could claim first in time
  1. Rule: Occupancy requires that a wild animal’s natural liberty be taken away.
  1. Rationale:
    • Justinian principle (Roman law): Possession of wild animal entails actual possession by bringing animal under control and depriving it of its natural liberty.
    • Policy concern: If first sight and pursuit were sufficient to establish property rights, conflict would ensue from too many competing claims
    • peace and order through less litigation.
  1. Dissent: If we allow people to come and deliberately interfere while a hunter is in pursuit, hunters will no longer want to participate in the sport. Hunting as a sport should be promoted because it contributes towards eradicating those “noxious beasts.”
    • Should have been decided by the arbitration of sportsmen, not Roman law

 

  1. Two forms of reasoning
    • Formalistic: somewhat mechanical application of precedent to facts of case (i.e. cases, statutes, codes)
    • Instrumental: application of policy concerns to facts of the case (i.e. peace and order, productivity, certainty, etc.)
  1. Benefits of certainty in a property system
    • Less internal anxiety
    • Furthers subsequent transactions
    • Increase productivity
    • Less litigation
    • Decrease in administrative costs
  1. Disadvantages of certainty in a property system
    • Unfairness
    • Injustice
    • Cultural and technological changes
    • Interference with policy goals
    • Inefficiency

 

Ghen v. Rich – Custom, rather than occupancy, determines possession

  1. The killing (and marking) of a whale establishes firm possession, which cannot be appropriated by a finder. Not usual to decide a case according to custom, but necessary in whale cases. No other way to establish certainty for whale hunters, and they wanted to promote the whale industry.
  1. Court allowed usage to determine title to whale
  1. Could’ve used corporeal possession rule as applied in Pierson but didn’t – why?
    • practical to use custom – efficient & reasonable
    • custom is useful to industry
    • custom is specific to industry (small, specialized industry of very limited application so won’t upset the standards and it has a long lineage within the industry)
    • acquiescence of community to custom
  1. Relying on custom may be socially counter-productive
    • conflict between interest of industry and public interest (legal system purpose to mediate)
    • may be incorrect to assume community’s acquiescence to custom as opposed to law
    • customs may not always be “good” or efficient
    • Legal rules allow for less lobbying, more uniformity
    • Legal rule allows for more stability over time – don’t have to re-hear cases when custom changes
    • How to signal to third parties that they can be bound by a particular custom – in what situations should the community be bound by a custom and then not. Seems to only be ok when it is universal
  1. Could the court have reached the same result without custom, relying on Pierson? Of course! Whale had been instantly killed.
    • Court circumvents Pierson and relies on the customs of whalers
  1. Should the custom of hunters have decided Pierson?
    • Difficult to reach certain results over time
    • Custom is a very gray area
  1. How should a court decide what is the best?
    • What is most socially productive is what is used by the court
    • Custom may not be a socially viable theory

 

Keeble v. Hickeringill – Healthy competition v. malicious interference (duck pond)

  1. Interference by Non-Competitor: (malicious) disrupts efficient use of resources and must be stopped.
  2. If a person merely seduces away business from a competitor, that is healthy competition and OK. He can interfere as long as he intends to capture the animal.
    • But if he violently or maliciously interferes with another’s business, he is liable for damages. Creative alternative to arguing about possession- gave Keeble a right to maintain cause of action, since there is no property in wild animals once they leave your property.
    • Distinguishable from Pierson (Pierson didn’t know about malicious interference with trade):
      1. interference w/trade (occupation, profession, way of getting livelihood) v. interference w/sport with just hunting foxes
        1. BUT – still Post maliciously interfered – have a property interest even if you don’t have possession yet. Property interest even if no possession if interloper is malicious
    • trespass to land
    • intent of the person interfering is essential to the outcome
    • What shapes the meaning of possession? Notions of constructive possession and public policy and effective capture v competitive system of capture
    • Possession is more of a legal conclusion and the goal is more the examine the means to the end

 

Policies and Theories

Cohen Essay Theories/ Economic Theory

  1. Property is necessarily public not private.
  1. Sovereignty is a concept of political or public law and property belongs to civil or private law
  1. Property means the legally granted power to withhold from others. As such, it is created by the state and given its only content by legal decisions that limit or extend the property owner’s power over others. Thus, property is really an (always conditional) delegation of sovereignty, and property law is simply a form of public law.
  1. Realism had effectively undermined the fundamental premises of liberal legalism, particularly the crucial distinction between legislation (subjective exercise of will) and adjudication (objective exercise of reason.) Inescapably it had also suggested that the whole liberal worldview of (private) rights and (public) sovereignty mediated by the rule of law was only a mirage, a pretty fantasy that masked the reality of economic and political power. Since the realists, American jurists have dedicated themselves to the task of reconstruction
  1. Strictly Utilitarian
  1. Efficiency
  1. Internalizing Cost
  1. 4 Theories: advantages/disadvantages
    • Occupancy
    • Labor
    • Economic
    • Personality
  1. Doctrines
    • Discovery – Johnson
    • Capture – Pierson
  1. Policy Concerns of Property Rights
    • Legal certainty
    • Peace and order
    • Promoting productive competition
    • Domestication of wild animals
    • Protecting reasonable reliance interests
    • Discouraging Trespass

 

Demsetz Essay – Toward a Theory of Property Rights

  1. Important b/c economic analysis has had a big impact in property law
  2. Basic argument about a movement of society from communal to private, once a society realizes externalities are present
  3. Important to recognize that not everyone agrees the economic efficiency should be the overall goal of a society
    • Legal Economists think it is most important
    • Others argue that personality & human freedom is the goal of society
      • Function of private property is to protect the individual’s autonomy & political freedom from the government
    • Is private property always more efficient than communal ownership? No
      • More private ownership is not always the right way to go, leads to a gridlock situation, some argue
        1. Too much division leads to people having a difficulty in innovating and investing in an industry b/c one person can always veto it – (fenced off, shared boundaries)
    • Why is Demsetz different from Locke? D is utilitarians – communities form then move to private property models when they discover the economic benefits of those models. Private property has utility
      • Cohen’s economic justification for property follows this
      • Communal property interferes with resource allocation so move to private property
    • Locke, on the other hand, says that private property predates society. Private property exists prior to society.

 

  1. Property rights emerge b/c of the “emergence of new or different beneficial and harmful effects.” They emerge to “internalize externalities when the gains of internalization become larger than the cost of internalization.”

Three ideal types of ownership:

    • Communal (all members of community can exercise this right; neither citizen nor state can interfere). Must negotiate over costs of externalities–how much each tribe member will hunt beaver, e.g.
    • Private (owner can exclude others)–greatly reduces negotiation costs
    • State (state can exclude anyone from using the property)

 

  1. Constructive possession: gives a landowner the same thing as actual possession, over wild animals that are on their property. (Also gives possession over things you are unaware of.) Result they want is to stop trespassing.
  2. Wild Animals
    • You lose property rights if a wild animal wanders off.
    • You keep rights to domesticated animal, or a wild animal that intends to return to its captor, even when it wanders off. (animus revertendi)
    • Escaped wild animals are free again unless they are not native to the area.
    • Note, universally accepted custom: if your female wanders off and mates with someone else’s male and has offspring, ownership of offspring goes to owner of mother (nurturer).
  3. Relativity of title: T trespasses on O’s land to capture a wild animal, and cages it on T’s land. Then T1 trespasses on T’s land and steals it for himself. Then: T’s title is relatively better than T1, but O’s property is relatively better than T.
  4. Riparian land doctrine: Riparian rights are ‘attached’ to the riparian land and cannot be transferred to a nonriparian owner. Reasonable use permitted.
  5. Government regulation: Gov’t acts like a trustee- has ‘police power’ to regulate, control, and prevent exploitation of natural resources (not true ownership though).
  6. Fugitive resources: oil & gas are similar to wild animals. Rule of capture applies b/c it gives incentive to produce oil and gas. Led to overproduction, so they put some controls on it.

 

Acquisition by Creation: to reward labor

Any expenditure of physical or mental effort resulting in the creation of a physical entity, gives ownership rights to that entity. Rooted in ownership of own body/labor. Goal is a balance between promoting healthy competition, and encouraging creativity& progress.

1. Accession

2. Property in One’s Persona

3. Right to Exclude (and exclusive possession) as essence of Private Property

a. Limited to not endanger well-being of others

b. Consider reasonable expectations of parties/balance interests of parties

trespass = direct force, usually strict liability

trespass on the case = indirect force, usually negligence

    • Intellectual Property: created by and existing only in the mind. Includes copyrights, patents, and trademarks and ideas in persona.
    • Common Law: absent a recognized property right, one’s property is limited to chattels that embody his invention, others may imitate at their pleasure.
    • Cheney Bros. v. Doris Silk (fabric designs copied)
    • International News Service v. Associated Press

 

Int’l News v. Associated Press: Copycats

  1. There are no property rights to news relative to the public. But for as long as the news has commercial value, there can be property rights relative to a competitor. Labor and investment is sometimes protected by the unfair competition act.
  2. News is information and information is a public good so only a quasi-property right
  3. A quasi-property right in the news as it is “stock in trade to be gathered at the cost of enterprise, organization, skill, labor and money, and to be distributed and sold to those who will pay money for it”.
    • Basically, The Court said that while there is no copyright on the ‘facts, there is an economic value to ‘news’, and as such a company can have limited proprietary interest in it against a competitor (but not the public) who takes advantage of the information.
    • They said that it was an unauthorized interference with the normal operation of complainant’s legitimate business.
  1. The US Supreme Court upheld the common law rule that there is no copyright in facts and developed the common law doctrine of misappropriation through the tort of unfair competition
  1. Reasoning:
    • labor theory – news was acquired through labor of AP
    • incentive theory (economic utility argument) – no one would be in the business of news if it wasn’t protected
    • Permit copying but not methods that will destroy competition – need to keep incentives to produce
  1. Counter-argument
    • How is this different from Cheney? (Couldn’t you say that this is just lifting content, with imitating a design still requires some skill)

 

Cheney Bros v. Doris Silk: Imitation

  1. You can only recover for things which are patented or copyrighted. Encourage competition, without taking away incentive for creativity. Int’l News holding only applied to news. Congress is only org that can create a monopoly. Patents, trademarks, copyrights give a ‘limited monopoly’ that try to encourage creativity.
  1. Rule: Unless the cl or the patent or copyright statutes give protection from appropriation, a person’s property interest is limited to the chattels which embody his creations.
  1. Reasoning:
    • concern about monopoly
    • judicial deference to the Legislature – institutional control & court stepping outside of their boundaries (but in INS, court recognized a new property right)
    • competence
    • democratic consideration
  1. Counter-arguments:
    • labor theory – design was fruit of their labor (justice; fairness)
    • incentive theory (economic utility argument) – if we don’t protect creation it will stifle productivity; compare to INS and Livingston dissent in Pierson v. Post (why bother going through all of this if someone could come in at the last minute & swoop it up) & Ghen & in the Keeble case
    • Loss of profit would discourage people in business – insufficient incentives
    • Compare with INS case – argument about incentives – the cost of the service would be prohibitive if the reward were to be so limited. No single news could sustain expenditures

 

Benefits to imitation:

  1. Incentives may still exist despite allowing copy cats:
    • Localized benefits
    • Lead time advantage
    • Intangibles: reputation, perceptions of quality
    • Authority
    • Path dependency (want the first one out there, not the knock off)
    • Free copying
  1. Imitation spurs competition – important to public interest (Smith v. Chanel)
    • lower costs
    • comparable quality

 

Cyberspace

    1. Role of Technology/Digital Media
      1. possession v. title – when you buy a CD do you have it or own it?
      1. disclosure to consumers

 

Property in One’s Persona: Right of Publicity includes name, likeness, etc. You don’t have to be a celebrity to have it (originally you did). Right is transferable and inheritable after death. Idea is ‘you can’t reap where another has sown’.

  1. Recall Locke’s Labor theory – “ . . . every man has a property in his own person . . . Whatsoever then he removes out of the state that nature has provided . . . he has mixed his labor with, and joined to it something that is his own, and thereby makes it his own property.”
    1. Conversion – wrongful exercise of ownership rights over the property of another

 

Moore v. Regents of the University of California

  1. No property right to excised cells, so no cause to sue for conversion when cells are used in research. But he can sue for lack of informed consent. Court didn’t want to extend conversion liability- wanted to promote certainty of ownership for the sake of medical research, otherwise anyone in research could be held liable.
  2. Conversion = wrongful exercise of ownership over personal property rights of another. (personal, not real property)
  3. Bundle of Rights: right to possess, sell, use, exclude, transfer. Property is an abstraction. It refers not to things, materials or otherwise, but to rights or relationships among people with respect to things.
  4. Gifts v sales: partial market-inalienability.
  1. Holding: Plaintiff had no expectation of retaining property interest in his bodily tissues after removal and tinkering with, and therefore has no property interest in cell line. (No cause of action for conversion)
  1. Reasoning:
    1. These cells were not unique in terms of structure or function so there is nothing in terms of a unique publicity interest that will be furthered
    1. No law supports claim – would have to establish ownership of the cells – Moore didn’t expect to retain ownership in the cells, so no retention of ownership interest
    1. Statutory limits on property interests in body parts
    1. Cell line is distinct from cells (tinkered with) – inventive effort was work of researchers
    1. Policy concern – protect scientific progress for public good (conversion is a strict liability crime so then everyone who touched the cells could be liable)
    1. Theories:
      1. Labor – scientist created something entirely new by adding their labor to tissue
      1. Incentive – promote productivity

Should conversion liability be extended?

    1. There are three reasons why it is inappropriate to impose liability for conversion.
      1. First, a fair balancing of the relevant policy considerations against extending the tort. Cells are valuable so they should remain public property
      2. Second, problems in this area are better suited to legislative resolution (ct’s institutional role)
      3. Third, the tort of conversion is not necessary to protect patients’ rights.
    1. For these reasons, we conclude that the use of excised human cells in medial research does not amount to a conversion.”
    2. “Liability based upon existing disclosure obligations, rather than an unprecedented extension of the conversion theory, protects patients’ rights of privacy and autonomy without unnecessarily hindering research.
  1. Dissent: it was argued that, even if Moore could not sell his tissues, he still retained a property interest in them. For example, if you have a hunting license, you are forbidden from selling the dead animals, but you still ‘own’ them.
    1. Property that cannot be legally sold but can be given away is called market-inalienable
    1. Property rights are a bundle of rights (wants to broaden the notion of property)
      1. Use
      1. Possession
      1. Exclusion
        1. Jacques case – right to exclude is hollow unless enforced by state; avoid “self-help” issues
        1. Shack case – owner’s right to exclude cannot be used to injure the rights of another
      1. Transfer
      1. Dispose
    1. Fairness/unjust enrichment by defendant
    1. Respect for the human body – shouldn’t encourage defendants to exploit a patient’s tissue for economic gain (policy concern)

 

  1. Compare INS to Moore: Result in Moore been the same if INS court decided?
    1. Economic utility – same result – cells are valuable so remain common property
    1. Labor theory – same result again because he didn’t labor to create cells, they have been tinkered with
    1. But could also go the other way – maybe more of a property interest in cells than in facts
      1. Moore is the first in time, first possessor
    1. Assign ownership to a sole entity to promote desirable economic activity?
    1. Labor theory for other side – he worked to produce those cells so they are his
      1. Narrow conception of labor theory – mainly focused on the person – property in his own person (Moore wins)
      1. Broad conception – its not just what’s in your body, it’s that mixed with the labor that creates the property interest (Moore loses)

 

Smith v. Chanel, Inc.

    1. The Court found that it was legal for Smith to claim in advertisements that its product was the equivalent of Chanel’s.

 

Jacque v. Steenberg Homes

  1. Private landowner’s rights to exclude others from his land is one of the most essential sticks in the bundle of rights that are commonly characterized as property. Every person has a right to exclusive enjoyment of his own property for any purpose which does not invade the rights of another person.
  2. The individual has a strong interest in excluding trespassers from his land. Society has an interest in punishing and deterring intentional trespassers beyond that of protecting the interests of the individual landowner. Society has an interest in preserving the integrity of the legal system. Private landowners should feel confident that wrongdoers who trespass upon their land will be appropriately punished. When landowners have confidence in the legal system they are less likely to resort to self-help remedies.

 

State v. Shack

  1. “Title to real property cannot include dominion over the destiny of persons the owner permits to come upon the premises. Their well-being must remain the paramount concern of law.
  2. “A man’s right in his real property of course is not absolute. Rights are relative and there must be an accommodation when they meet. Hence it has long been true that necessity, private or public, may justify entry upon the lands of another.

 

The Reliance interest in property (Singer):

  • When owners grant rights of access to their property to others, they are not unconditionally free to revoke such access. Non-owners who have relied on a relationship with the owner that made such access possible in the past may be granted partial or total immunity from having such access revoked when this is necessary to achieve justice.
  • When people create relations of mutual dependence involving joint efforts, and the relationship ends, property rights (access to or control of valued resources) must be redistributed (shared or shifted) among the parties to protect the legitimate interests of the more vulnerable persons.
  1. Property rights are redistributed from owners to non-owners:
    1. To protect the interests of the more vulnerable persons in reasonably relying on the continuation of the relationship
    1. To distribute resources earned by the more vulnerable party for contributions to joint efforts
    1. To fulfill needs of the more vulnerable persons.

 

 

Subsequent Possession: Acquisition of Property by Find, Adverse Possession, and Gift

Acquisition by find

  1. Trover: Action to recover money damages for unlawful conversion of property.

Replevin: Action for return of actual property (not money).

Bailment: rightful possession by a bailee who is not true owner (bailor).

    1. Voluntary: Bailor consents to give bailee the object. Can only sue that bailee for object, others are immune.
    2. Involuntary: Like a finder. Bailee can be held liable if he was negligent.

If item is:

  1. Abandoned: goes to finder
  2. Lost on business property: goes to finder. (Bridges)
  3. Lost in a private home: goes to property owner
  4. Lost on another’s land: goes to property owner, as long as he was in possession of the land (constructive). Otherwise goes to finder (Hannah v. Peel), unless he was in employee of property owner. (Water Co.)
  5. Mislaid (intentionally placed and accidentally left): goes to property owner (deemed bailee). Goal is to get item back to true owner. (McAvoy v. Medina)
  6. (Found under the soil: goes to property owner (just like minerals) No chance of finding true owner. Elwes.

Rule of finder: title of the finder is good as against the whole world but the true owner

    1. Rights b/n finders – prior possessor prevails over subsequent possessor (relative claim)
  1. Four reasons to protect first finder
    1. peace/security
    1. discourage stealing/encourage honesty (reward honest finders) – moral
    1. return to true owner more likely – utilitarian
    1. efficient means of establishing ownership – quiet title

 

Armory v. Delamirie – Finder Has Property Rights

Finder acquires property rights by possession, and may maintain an action against anyone except true owner. Finder is like an involuntary bailee. If true O comes back, he can sue finder for the value (b/c finder converted it). But he may also sue the wrongdoer- wrongdoer may have to pay twice. Then wrongdoer can sue the finder (He would be subrogatedto the rights of the true owner b/c he paid for it). BUT: If true owner had entrusted his jewel to a bailee in a voluntary bailment, and if present possessor has paid the bailee damages, then the true owner can’t sue present possessor again.r

  • Valuation: awards to sweep full value of jewel. Goldsmith is liable and must pay in damages the full value of the jewels
    • By awarding sweep full value of the jewel, he gets more than his interest was worth b/c the value of the jewel should be discounted by the probability that the true owner is going to show up and demand to get the property back
    • What would have happened if Delamirie paid Armory for the jewel, then the true owner of the jewel shows up and sues Delamirie for replevin? Doesn’t Delamirie get kind of screwed?
      • This is one reason why courts prefer you to sue for replevin than for trover. That causes fewer problems, since if Delamirie just gave the jewel back to Armory, then the true owner could sue Armory and things would be simpler.
      • If Delamirie can never own 100% of the jewel (since he’ll have to give it back to the new owner), why should he have to pay Armory for 100% of the value?
  • Replevin and trover are actions involving personal property. The action similar to replevin in real property cases is an action for possession (ejectment), and the action similar to trover is an action for damages (trespass).
  • The courts appear to be more reluctant to give the prior possessor of land, who has no title, permanent damages than to put the prior possessor back into possession.

 

Hannah v. PeelFinder v. Property Owner

Finder of a lost object has property rights against all others EXCEPT the true owner or a prior possessor. Owner of land does not always own unattached things on his land. Expectations as owner are lowered if you don’t live there- you do not have constructive possession. Also, court is rewarding finder’s honesty.

Holding: Possession becomes vested in the finder against all but the rightful owner when the item is found by a person who is not the agent of the owner of the property where the item was found, and the owner does not actually physically possess the property where the item was found.

Reasoning: The court likened this to Bridges and decided that the owner of the house never physically possessed the brooch, and never had knowledge of the brooch before it was found. Thus, the owner did not necessarily have possession of everything lying unattached on his property, specifically this brooch.

  • It is clear that the brooch was never the D’s in that he never had prior possession. He had no knowledge of it, until it was brought to his notice by the finder.
  • It is clear that the brooch was lost, that it was found by the P, that its true owner has never been found
  • Defendant never had possession of brooch
  • Plaintiff’s motives were honorable
  • Item was lost in ordinary sense
  • Bridges case: depends on where the object is found – private v public place. Bank notes still went to the finder.
  • Hannah: object found in a private home but still awarded to finder
  • S Staffordshire case: awarded the found object to the owner of the house b/c the object was “attached” to the land. Distinction between this case & the Bridges case is that the owner has possession to anything attached to or part of the land
  • So it could go to Peel if Hannah found it while digging a ditch because Peel would have owned everything found under the soil of the owner
  • Elwes case: original lessor of the land got possession of the boat over the lessee. Saw it as part of the land. Facilitating return to the true owner would be easier

 

McAvoy v. Medina

Holding: When an item of property is deliberately placed by the owner on the premises of a shop owner and then forgotten, it is not “lost” in the ordinary meaning of the word, it is mislaid, and the shop owner retains possession against all but the true owner, even if the shop owner is not the finder.

Reasoning: The wallet was not dropped, and it did not appear to be “lost” by negligence, but rather it appeared that the true owner had intended to pick it back up again but had forgotten. Placing the wallet on the table would be an ordinary thing to do in a barber shop, and so the barbershop owner should keep it until the customer that left it returned.

  • Abandoned Property: items intentionally/voluntarily left w/no intent to reclaim — goes to finder.
  • treasure trove = any money or coin, or bullion hidden in earth w/intent to reclaim.
  • English common law: went to king; abandoned treasure went to finder.
  • Modern American law – usually awarded to finder and not state or owner of premises (not all states follow this rule)

 

 

Adverse Possession

  • If, within the statute of lim, true O does not bring action against Adverse Possessor, then title transfers to Adverse Possessor and O is barred from bringing an action in ejectment. Possessor must file quiet title action to get record (if he wants to sell it later).
  • Adverse possessions functions as a method of transferring interests in land without the consent of the prior owner.
  • Purpose: To protect title when records are unavailable. To bar stale claims. To reward productive use of land. To honor expectations of possessors.
  • The policy is to reward those using the land in a way beneficial to the community.
  • The great purpose is automatically to quiet all titles which are openly and consistently asserted, to provide proof of meritorious titles, and correct errors in conveyancing.
  • Elements- ECHO
  • Actual entry giving exclusive possession –
  • actual Entry giving exclusive possession: Triggers statute clock. Can’t be shared.
  • substance: actual physical occupation
    1. protected by substantial enclosure or
    1. usually cultivated or improved
  • purpose:
    1. pinpoint trigger of statute of limitations and
      1. Make sure the statute of limitations is triggered (need a date for court to pinpoint)
      1. When the cause of action for trespass for the owner of the property starts
    1. delineate possessor’s claim
  • Such possession and dominion “as ordinarily marks the conduct of owners in general in holding managing and caring for property of like nature and condition” (Howard v. Kunto – summer beach house)
  • Notoriety (open and notorious)
  • Open and notorious: Gives reasonable notice to owner. Must be appropriate to land, what reasonable owner would do. Paying taxes, usual improvements. Must be visible to naked eye.
  • substance: looking for acts of entry that would reasonably inform the true owner of occupation (serves an informational function)
  • purpose:
    1. give true owner opportunity to discover and act upon adverse possessor (take action again adverse possessor) and
    1. penalizes true owners that “sleep” on their rights (sleeping theory of adverse possession)
  • Encroachment of 15 inches did not satisfy open and notorious requirement; actual knowledge as opposed to constructive knowledge was necessary (Manillo v. Gorski)
    1. Plaintiff could not have known in truth w/o survey
    1. True owners should not have to be on constant alert
  • Adverse and under claim of right
  • Hostile and adverse:
  • Objective test (most jurisdictions): Don’t look at possessor’s intent. Actions must look like a claim of right. Just has to be w/o permission.
  • Subjective test: Possessor must have good faith belief that he owns land. A squatter could not adversely possess a land under this test.
  • Color of title: Claim founded on a written instrument. Meets adversity requirement (but not required for adversity).
  • Boundary disputes: Majority uses objective test. Maine doctrine says mistake doesn’t count as adverse; that would reward wrongdoers and encourage lying.
  • substance: must be claiming land exclusive of anyone else
    1. Have to be challenging the true owner – adverse possessor is hostily claiming ownership of land
  • purpose: reward honest and productive occupants (earning theory).
    1. Make sure there is no question in actual owner’s mind as to the intent of the adverse possessor
  • Aggressive trespass not necessary to claim adverse possession – court rejects Maine Doctrine (Manillo v. Gorski – 15 inch encr.)
    1. Main Doctrine awards wrong doer and penalizes good faith actors
    1. Adverse possession should only be concerned w/ the statute of limitations – trigger point
    1. Lowers boundaries for adverse possession
  • Continuity (continuous possession for the statutory period)
  • Continuous and uninterrupted:
  • Degree of occupancy that an average owner would make.
  • Seasonal use counts, as long as attitude is continuous.
  • If possessor abandons property, statute of lims stops.
  • Tacking: an adverse possessor can tack on years from previous adverse possessor, as long as there is privity (voluntary transferring of possession).
  • substance: pattern of occupation that would normally be seen in the acts of a true owner (doesn’t have to be literally continuous)
    1. Reflects earning theory & sleeping theory
  • purpose:
    1. ensures that owner has enough time to discover claim and act on it
    1. promote earning policy
  • Tacking permitted if successive occupants are in privity

  • Theories:
  • Sleeping Theory – a true owner that sleeps on their rights to property should not be rewarded
  • Objective standard used here not so much state of mind
  • Earning Theory – adverse possessor that makes actual productive use of the land should be rewarded (productive use → valid claim). More of an objective standard
  • Reliance Theory – possessor has come to expect access to property and true owner by not acting has fed those expectations
  • Quiet title Theory – locate title in one individual where you might have conflicting ideas about who owns what. Keeps peace and order – quiet title in a possessor who displays elements of ownership
    • Concerned about certainty, not so much state of mind
  • Approaches to adversity
  • Objective – what are the objective acts that suggest hostility
  • state of mind is irrelevant
  • once there is an entry, true owner has a cause of action
  • Good faith
  • state of mind is “I thought I owned it.” “My claim is adverse b/c I thought I owned it.”
  • w/o honest claim it is trespass and as such shouldn’t be rewarded.
  • Aggressive trespass
  • state of mind is “I knew I didn’t own it but I intended to make it mine.”
  • policy is to quiet title – allows courts to clear the records

 

  • Downside to Adverse Possession
  • Legal sanctioning of trespass
  • violating moral norms
  • increasing transaction costs
  • Pro-development bias – consider environmental impact of development
  • Infringes upon true owner’s autonomy
  • Libertarian argument – involuntary transfer of someone’s property rights and the law should not do that and we definitely shouldn’t put in affirmative doctrines that have that effect
  • Legal sanctioning of trespass
    1. violating moral norms
    1. increasing transaction costs
  • Anti-development argument – adverse possession has a pro-development bias – consider environmental impact of development
  • Built in prejudice towards using property when sometimes it would be best NOT to use property
    • Infringes upon true owner’s autonomy – if someone is someplace first on land, then second possessor shouldn’t be able to come in and infringe upon property interests
  • Constructive Adverse Possession – claimant with color of title in actual possession of part of the land described in deed or other document is deemed to be in constructive possession of the entire parcel described in the deed
    1. Purchasers of land are subject to adverse possession claims
    1. Once title is acquired through adverse possession it cannot be lost by abandonment or orally relinquishing claim – written deed necessary

 

CONTINUOUS, UNINTERRUPTED POSSESSION:

reflects Sleeping Theory and Earning Policy

also Attachment Theory (Holmes)

  • Seasonal Use
  • Abandonment
  • Tacking by Successive APR: only ifprivity of estate b/tw APRs.
    1. Technical View: Some courts have held that privity is satisfied only if deed required covers actual lot possessed.
    1. Written Instrument Required: SOF requires written instrument of transfer of land. Oral transfers are not allowed and will not satisfy privity requirement.
  • Oustercannot tack
  • Reentry of ousted APR can toll his AP.
  • Abandonment: Tacking not permitted.
  • Tacking on Owner’s Side: SOL runs against owner and all of his successors in interest. Thus, if owner transfers property to another, APR’s possession is transferred as well and runs against new owner. This also requires privity.
  • Most friendly to TO (in order from most to least friendly):
    1. Demand rule
    2. Discovery Rule
    3. Adverse Possession
    4. Theft Rule

 

Van Valkenburg v. Lutz – NY Statute, Specific reqs for ‘adverse’

When no color of title, must have ‘substantial enclosure’ or be ‘usually cultivated and improved’

The majority opinion:

1. Under New York law, to acquire land by adverse possession not founded on a written instrument there must have been an actual occupation under claim of title. Only the premises actually occupied are held adversely. In order to show actual occupation it must be proved either that there was a substantial enclosure or that the premises were usually cultivated or improved.

  • Similarly, the garage encroachment, extending a few inches over the boundary line, fails to supply proof of occupation by improvement. Lutz himself testified that when he built the garage he had no survey and thought he was getting it on his own property, which certainly falls short of establishing that he did it under a claim of title hostile to the true owner.

Dissents: There is no doubt the record contains some evidence the premises were occupied by Mr. Lutz for 15 years under a claim of title, for he used the land as anyone would have if they had actual title to the land: he tilled it, cleared it, raised chickens on it, and even stored things on it.  Additionally, his acquiescence to the title claim by AP’s after the foreclosure sale should not dismiss his previous stay on the land in question.  He had property which was bottle-necked by this traveled way, and he needed and used this way to get to and from both properties.  Title on the record in this case, since no one owned the land when the Lutzes first settled there, shouldn’t matter if Lutz himself took the area in question as his.

  • Lutz used enough of the land, some for fire wood, some for his produce business, and some for raising chickens and storage.

 

Mannillo v. Gorksi (1969) – Maine v. Objective; Minor encroachment (minority view)

Holding: A 15” encroachment is not ‘open and notorious’; no actual notice to O.

Note: NJ got rid of Maine doctrine in favor of objective test, with one exception: minor encroachments not visible to naked eye do not satisfy ‘open and notorious’ unless owner has actual knowledge.

  • Issue #1: There are two doctrines on this issue:
    1. The Maine Doctrine holds that it must be the intention of the occupant to claim ownership of the land. (A subjective standard).
      • Adverse friendly
      • There must be an intention to claim title to all land within a certain boundary on the face of the earth.
      • Ignorance or mistake is pretty iffy.
      • Wiggins thinks its consistent with adverse possession logic
    2. The Connecticut Doctrine holds that the very nature of the act is proof of intention, so there is no reason to inquire into the mind of the possessor. (An objective standard).
      • Hostility can be based on mistake
    1. These two different doctrines depend on what you’re trying to get at –
    2. The New Jersey Supreme Court found that the Connecticut Doctrine made more sense and that hostility was not an absolute requirement for adverse possession.
  • Issue #2:However, the Court was unwilling to throw out the requirement for “open and notorious” possession.
    1. Two standards courts use to assess whether O had actual notice of entry
      • Actual knowledge – knowledge that is positively proved to have been given to a party directly & personally.
      • Constructive knowledge: presumed knowledge – P knew or should have known. It is presumed. Information or knowledge of a fact that is imputed by the law b/c P could have discovered is investigating properly & diligently
    1. In most adverse possession cases, the adverse possessor is taking an entire parcel of land, and it’s pretty obvious they are taking it. In this case, a small encroachment on a few inches of land is not evident to the naked eye and requires a land surveyor to adjudicate.
      • The owner must have “actual knowledge” of the encroachment.
        • Presumptions of knowledge applies in these contexts. Only where TO has actual knowledge, can it said to have been open & notorious
        • Application difficulties – actual knowledge depends on how strictly you read it – actual knowledge could mean anything from a friend alleging an encroachment v an actual surveyor coming out and telling the TO
    1. But for big adverse possession cases where possession is clear & immediately visible, use constructive knowledge.

 

RESOLVING BOUNDARY DISPUTES –

Once adverse possessor claims ownership of land – he is the TO – no exceptions! b/c must take place by deed to claim O of real property so AP would now have deed to land. Title to land can’t just be abandoned or orally relinquished

Agreed boundaries: if there is uncertainty between neighbors as to the true boundary line, an oral agreement to settle the matter is enforceable if the neighbors subsequently accept the line for a long period of time.

Acquiescence: long acquiescence – though for a period of time shorter than the statute of limitations – is evidence of an agreement between the parties fixing the boundary line.

  • Estoppel: when one neighbor makes representations about (or engages in conduct that tends to indicate) the location of a common boundary, and the other neighbor then changes her position in reliance on the representations or conduct. The first neighbor is then estopped to deny the validity of his statements or acts. Estoppel has also been applied when one neighbor remains silent in the face of expenditures by another that suggests the latter’s notion of the boundary’s location.
  • Privity: a voluntary transfer of an estate or possession
  • Mistaken Improvers: Innocent improver, someone who mistakenly builds on land belonging to another, should have his plight eased. In that case, by forcing a conveyance (at market value) of land from the owner to the improver. A variation is to give the landowner the option to buy the improvement.

Amkco test:two parts

    1. The P has to show that it would suffer irreparable harm if removal were denied.
    2. But even if irreparable harm is proved, still the relief might be denied under a balancing test that compares the hardship to the P if removal is denied to the hardship to the D if it is granted. If this relative hardship test precludes removal of the encroachment, the encroaching party acquires either title or an easement in the land and pays damages accordingly.

 

Howard v. Kunto(1970) – Seasonal=Continuous; Tacking. Wrong deed case.

Holding: Seasonal use is ‘continuous’ if it is as a normal owner would use the property. Adverse possessors can tack on time of previous adverse possessors, as long as there is privity(common legal interest, reasonable connection btwn consecutive owners). Expanded basis for privity. In the interest of certainty.

  • Summer occupancy of a summer home is sufficient to satisfy the continuity argument b/c how would a TO otherwise possess the property?
    1. Reflects earnings theory of AP
  • Continuity: if an area is only capable of rational use for a small period of the year, can still claim AP over land
    1. Mathematical tacking Q

Extent of Land Acquired by AP:

  • w/o Color of title: claim extends only to land as she actually occupied
  • w/ COT: On theory that APR intends to control all land described in instrument, APR is in constructive AP of part of tract she does not actually possess.

Interests Not Affected by AP:

  • Future Interests: SOL does not run against remainder existing at time of entry by APR, b/c holder of remainder has no COA against APR. But, even if APR enters after transfer, he may still keep SOL f/being interrupted by remainderman taking possession if he puts remainderman on actual notice that he is claiming AP. But, if APR enters prior to transfer, AP runs against TO and all of his successors in interest.

Remaindermen cannot file suit to evict an APR b/c SOL does not begin to run against a FI holder until her interest becomes possessory

Rules: To establish privity in adverse possession cases, it must be established that the adverse possessor’s predecessors had intended to always convey title to the adversely possessed land.  Such privity in contract may be used in the tacking process to prove adverse possession.

  • A purchaser may tack the adverse use of its predecessor in interest to that of his own where the land was intended to be included in the deed between them, but was mistakenly omitted from the description.

 

  • Statute Clock: starts runningat the time of A’s entry.
  • If A is ousted by B, then waits some time to sue, his clock is up when it originally would have been, plus the time he waited. If he abandons, clock starts anew. No privity btwn A and B.
  • For extensions, only disabilities of the owner at time of A’s entry count. No tacking. Must be recognized by state (insanity, minority). Extension clock starts running when disability is cleared or O dies.
  • Life estate: A enters. Later O dies, leaving a life estate to B, remainder to C. If clock runs out before B dies, then C never gets anything.
  • Life estate: O dies, leaving life estate to B, remainder to C. Then A enters. A only adversely possesses what B has- a life estate. When B dies, A’s interest is gone, and clock starts anew.
  • Encroachment: Old law says unless statute of limitations has run, P can make D tear it down. Modern law says D can pay P a sum. If intentional, they have to tear it down.

 

 

 

 

 

AP of Chattels

Three different rules governing AP of chattels

a. Theft Rule: COA accrues against TO at time of theft. Least friendly to TO and most friendly to bona fide purchaser of stolen goods.

b. Discovery Rule (CA):COA: accrues when TO discovers, or reasonably should have discovered thru due diligence where stolen goods are/basis of COA. (date of injury vs. date of discovery of injury)

did P use due diligence in trying to recover item?

    1. Was there an effective method to alert the world?
  • Conflicting interests b/n protecting the rights of Bona Fide Purchasers and the true owner
    1. voidable title: transferee can only transfer the interest that he has in the property – no authorization to transfer good title
    1. entrustment: where the buyer of goods from a reputable dealer of goods in kind is protected in his purchase
    1. Market overt rule: if object is purchased in “open market” purchaser protected.
  • Consider:

1. Due diligence of TO in recovery attempts

2. Whether there was an effective method to give notice to world of theft – when did owner know, or should have known about her COA

3. could constructive notice be given? Was a method where reasonably prudent purchaser of art would be on constructive notice that seller was not TO?

majority of courts: SOL does not begin to run against TO of stolen goods as long as owner uses due diligence in looking for them.

Burden Shifting: Unlike AP of land, conduct of owner, not possessor is controlling.

  • Tolling of statute of limitations
    1. Disabilities (i.e. age of minority, unsound mind, imprisoned)
  • Constructive Adverse Possession: If claim is under color of title, adverse possession of part gives constructiveadverse possession of entire tract deeded.
  • Adverse Possession against Gov’t: Majority does not allow.

 

O’Keeffe v. Snyder (1980) – Adverse Possession of Chattels

Holding: Discovery rule: statute clock starts running when O knows, or reasonably should know, that property is gone; as long as O uses due diligence to find property.

Purpose of sol: to stimulate to activity and to punish negligence and to promote repose by giving security and stability to human affairs.

Note: Court wants to encourage people to register art, to stop art theft. Too hard to show ‘open and notorious’ for chattels, so they apply discovery rule instead: shifts burden from adverse possessor to the owner. Also dissuades art thieves from stealing the art

  • Permits the tacking of periods of possession, but only so long as the possessors are in privity with each other.
    1. Who should the law protect when have two innocent parties? How should the law resolve the conflict?
      • Look to intuitive notions of fairness – which party most deserves protection
      • Use an efficiency calculus – cheapest cost avoider – risk of loss should fall on party who can most efficiently bear that risk w/o a lot of external costs to society & to others
  • Demand Rule: -Coa accrues when the TO makes a demand to return the art. Most friendly to TO, least friendly to bona fide purchaser.
  • 3rd Party BF Purchaser: not wrongful.
  • Thief: in NY, SOL runs in favor of thief at time of theft b/c thief’s possession is considered wrongful f/start.
  • Burden on Buyer: NY rule put risk of buying stolen goods on buyer

 

 

 

 

 

Acquisition by GiftVoluntary transfer of possession to the donee with the manifested intention to make a gift to the donee.

  • Rules protect innocent possessors
  • Requirements
    1. Intention
    1. Delivery – requires objective act
      • manual – if an object can be handed over, it must be
      • constructive – allowed for gifts causa mortis (i.e. handing over a key or some object that will open up access to the subject matter of the gift)
      • symbolic – delivery is handing over something symbolic of the property given; not allowed for gifts causa mortis (i.e. written instrument declaring a gift of the subject matter: “I give my piano to Jenny”)
    1. Acceptance – implied for larger gifts
  • Causa Mortis – Made in anticipation of immediate death/peril. If donor survives that illness or peril, gift is automatically revoked.
    1. Need intention to make the gift, and delivery of the thing given
      • The intention to make the gift need not be announced in express terms, but may be inferred from the facts attending the delivery – what the donor said and did. It must be clear that he knew what he was doing and that he intended a gift.
    1. allows a person to give property in an informal manner
      • Fear of impending death
      • Death as a condition subsequent
      • Witness
      • Revocability
    1. To be construed narrowly – conflicts with the spirit of the statute of wills that requires testamentary transfers of property (signed and witnessed)
  • Inter Vivos – a present intent to make a gift (includes present intent to give a future right of possession); doesn’t have as many restrictions as causa mortis
    1. An inter vivos gift is one where there is immediate irrevocable transfer of ownership. It is different from a will, which only awards ownership after death.
      • You can’t make an inter vivos gift and still retain life estate. Property transfer must be immediate. Otherwise the transfer is invalid unless it’s part of a will.
    1. Among the living. Requires 1) donative intent, 2) delivery, and 3) acceptance. Once you have these, gift is irrevocable except for engagement rings (depending on jurisdiction and who broke it off).
    1. If donee is already in possession of the property redelivery is not necessary (in causa mortis it is)
    1. Where intent to make a present and irrevocable transfer of title or right of ownership, there is a present transfer of some interest and the gift is effective immediately

Elements of Inter-vivos:

  • Intent: Intend to make an irrevocable present transfer of ownership
    • Must pass title presently.
    • Need knowledge of gift (ins papers inside bureau- no knowledge, no gift).
    • Need ownership of item when gift is made (can’t say, I give you winnings from the lotto ticket I will buy tomorrow)
  • Delivery:
    • Reasons: ritual, evidentiary, and protective
    • Constructive: allowed when actual manual delivery is permitted. Handing over the means to property (like keys); relinquishing dominion and control.
    • Symbolic: Handing of something that represents the thing (e.g. a written note). Only OK when size or parties’ situation makes manual delivery impracticable.
    • Revocable: No gift if donor can take it back (like a check, or with another key she kept). Gift is still in dominion and control of O.
    • Agency: No gift until O’s agent actually delivers gift. But if O delivers to A’s agent, there is a gift.
    • If you already have possession when O says, ‘keep it’; no need to redeliver.
    • If you get a gift but lend it back to O, you still own it. O is bailee now.
    • Joint tenancy in safety deposit box is not necessarily enough to constitute delivery. If donor does not visit box after he gives one of the keys away, case for gift is stronger.
  • Acceptance: Law presumes this when gift is beneficial to donor.

 

Newman v. Bost – Constructive Delivery

    • Were causa mortis gifts of 1) insurance policy, 2) household furniture, and inter-vivos gifts of 3) piano, 4) bedroom furniture, valid?
      • 1) Questioned intent. Could have manually handed it but didn’t. Did he know it was there? No gift. 2) Also said no real delivery. She only got what the key opened- the bureau & any other item the keys unlocked. 3) She cant show real delivery of piano. Prove delivery of piano at new trial. His statement showed intent but can’t really show constructive delivery of piano (since ct wouldn’t allow symbolic) 4) She gets her furniture as it was in her room, over which she had dominion and control.
      • Intent was the biggest consideration in this case
      • Key could have been seen as a symbolic delivery
      • If he could have manually delivered the gifts, he must in order for it to be a valid gift
      • Says that symbolic delivery and even some constructive delivery shouldn’t be allowed b/c then wills would be useless (no symbolic delivery of gifts either inter vivos or causa mortis)
      • For delivery, need some sort of physical manifestation
  • Two main policies in play
  • Judges are trying to sustain gifts where they are
    • Reasonably confident of the competence of the donor and
    • Reasonably convinced that the donee is the natural object of the donor’s generosity
  • Judges are trying to encourage compliance with wills in the interest of certainty – give away property in a manner consistent with normal and clear-cut standards

 

Gruen v. Gruen – Present right to a future interest

  • Dad gave son a painting, but reserved a life estate for himself. Court recognized a valid inter-vivos gift of a present right to a future interest. Delivery by letter was OK; sufficient to transfer the right. When someone tells you that they are giving you something when they die, it is said that they are retaining life estate.
    • When you set up a life estate, you are actually selling (or giving) part of the property interest to someone else. The part that they get is known as the remainder. A person can sell or give away the remainder to someone else.

Holding: A remainder is a present ownership interest and protects future interests as well. It was just a present legal interest that doesn’t become possessory until later.

  • Had Gruen Sr. written to his son and said, “I give you the painting when I die,” that would not be a valid gift. That would be part of a will.

 

  • Remainder: present legal interest that may or may not become valid in future
  • Promise is just a hope of a gift and has no legal control – unenforceable
  • Testamentary: Not effective until death of donor. 1) Must be in a will, 2) Will must be executed with formalities required by jurisdiction. Causa mortis over-rides testamentary because they become final at the moment the donor dies.

 

 

SYSTEM OF ESTATES

 

I. Possessory Estates

  • Estate system is a temporal interest in property that:
    • Is, or may become, possessory
    • Is defined in terms of duration
  • Note: you CANT convey a greater interest than what you have.
  • Note: non-estate property interests affect or burden the land, but are not possessory: zoning laws, easements, servitudes.

 

Types of Estates

Freehold: when you have ownership rights

  • Fee simple: ‘to A and his heirs’ (common law) or ‘to A’ (modern law)
    • Absolute: The whole bundle of rights, indefinitely. Devisable, inheritable, alienable. No reversion: Escheats to the state if you run out of heirs.
    • Fee simple defeasible:
      • Determinable: ‘so long as’, ‘while’, ‘until’, or ‘otherwise to revert’. If condition is breached, property automatically goes back to grantor. The condition ‘determines’ the fee. Grantor has granted the entire fee simple, and only retained a conditional interest, a possibility of reverter. Must include words limiting duration– words stating grantor’s motive, ‘conveyed for the purpose’, convey a fee simple absolute.
      • Subject to condition subsequent: ‘right to re-enter’. Condition must be breached, AND grantor must act to exercise his right of entry or power of termination to terminate grantee’s interest. Note: conditional is preferred to determinable.
      • Subject to an Executory Interest: ‘but if X, then to B’. If condition is breached, it goes to a third person. B has executory interest.
    • Fee tail: ‘to A and the heirs of his body’. Has potential of enduring forever, but ends when you run out of lineal descendants. Grantor retains reversion.
    • Life Estate: ‘to A for life’. Grantor retains reversion. A reversion is an estate.

Nonfreehold

  • Leaseholds: possession only, no ownership
    • Term of years
    • Periodic Tenancy
    • Tenancy at Will

 

A. Fee Simple – alienable (it can be transferred), divisible (conveyed by will) & inheritable (transferred by intestate system when there is no will)

I. Fee Simple Absolute

  • Words of Purchase and Words of Limitation:WOP identify person in whom estate is created. WOL describe type of estate created.
  • Ex: O conveys Blackacre “to A and her heirs.” Words “to A” are WOP identifying A as taker. Words “and her heirs” are WOL indicating FS.
  • Creation of a Fee Simple: At common law, (“and his heirs”). Any other language, i.e., “to A in fee simple” created a LE.
  • Heirs Have no Present Interest
  • Modern Law: deed/will presumed to pass largest estate grantor or testator owned.
  • Transferability: If no will, inherited by owner’s heirs.
  • Heirs:not synonym for children.
  • Next of Kin: synonymous w/heirs
  • Typical Statute:
  • Spouse: takes 1/2, other 1/2 goes to issue, or if no issue, to decedent’s parents or if no parents to spouse.
  • Issue: includes children, grandchildren, great grandchildren and all further descendents. Synonymous w/ “descendants.”
  • Children: spouse takes 1/2, and children divide 1/2. If no spouse, children take all in equal shares.
  • Representation: If child predeceases decedent, leaving issue, issue represent child and take child’s portion by right of representation. This is called per stirpes distribution.
  • Grandchildren: do not take if their parents are alive. Generally, grandchildren share only under principle of representation.
  • Adopted Children: treated as child of adoptive parents and, in some states, as a child of natural parents as well.
  • Nonmarital Children: Child born out of wedlock was filius nullius, child of no one, and could inherit f/ neither mother nor father at common law. Today, inherits f/ mother and, if paternity is established, f/ father.
  • Parents: If issue, parents do not take. If spouse and no issue, parents take 1/2 and spouse 1/2. If no spouse and no issue, parents take all.
  • Collateral Relatives: all blood kin except ancestors and descendants. If no spouse, issue, or parent, collateral relatives take.
  • Escheat: If FS owner dies w/o a will and w/o heirs, FS escheats to state.
  • Devisee and Legatee Defined: If will, persons who are devised land are devisees. Those bequeathed personal property are legatees. Difference is that heirs take when decedent leaves no will and devisees and legatees take under will.

Fee Simple Examples

  • To A and his heirs

Fee simple to A. Note B has nothing yet.

  • In 1600: To A for life, then to B forever

Forever’ not close enough; need ‘and his heirs’; this is a series of life estates

  • To A for life, remainder to heirs of B

Heirs of B’=‘to heir of B and his heirs’. Purchase and limitation: Fee simple to C.

  • Intestate succession: If you don’t leave a will, statutes will figure it out for you. Once you’ve looked down and up and down and up and cant find any heirs, the property ‘escheats’.

O has two kids, D and S. S marries W; they have 3 kids D1, S1, and D2. S dies testate and leaves all prop to W. Later D has S2. O dies intestate.

– Common Law: Primogeniture says all O’s prop goes to S’s eldest son.

– Modern Law: even though S is dead, you still divide the prop in 2. Half to D, half to S’s side. S’s half will further divide into 3 for all his kids. W gets nothing.

 

II. The Fee Tail: Inheritable (transferred by intestate system when there is no will), but not alienable (it cannot be transferred), nor divisible (cannot be conveyed by will)

1) lasts as long as grantee or any of his descendants survives; 2) inheritable only by grantee’s descendants. Will cease if 1st FT tenant has no lineal descendants to succeed in possession.

  • Creation: At common law, “to A and the heirs of his body.” At expiration, land reverts to grantor or grantor’s heirs or, if specified in instrument, will go to some other branch of family. Every f/t has remainder or reversion after it.
  • Characteristics: FT originally had 2 important characteristics:
  • During Tenant’s Life: tenant in FT could alienate his possessory interest, which ended upon his death, but could not effect rights of his issue to succeed to land upon his death.
  • On Tenant’s Death: FT can be inherited only by issue (lineal descendants) of original grantee, and not by collateral kin. FT cannot be divested by will.
  • Types of FT: grantor could tailor FT more specifically. Ex: FT male, FT female, FT special inheritable only by issue of grantee and specific spouse.
  • FIs Following FT:
  • Reversion: O conveys BA “to A and the heirs of his body.” A has FT; grantor has reversion.
  • Remainder: O conveys WA “to A and the heirs of his body, and if A dies w/o issue, to B and her heirs.” A has FT; B has vested remainder in FS to become possessory on expiration of FT.
  • Disentailing: Today FT can bar the entail by converted into FS by deed (straw) executed during life, but cannot bar the entail by will.
  • 1485 – method developed to “bar the entail.” By bringing collusive lawsuit known as common recovery, f/t tenant in possession could obtain court decree awarding him f/s, cutting off all rights of his issue and extinguishing any reversion or remainder. 400 years later, common recovery was abolished and f/t tenant could disentail by conveying f/s by deed to another. Only f/t tenant in possession could disentail
  • Statutes Under Modern Law: FT exists in only Delaware, Maine, Mass, RI. But, in these states, FT tenant can at any time disentail and convey FSA by deed as explained above.
  • FT Abolished in Most States: except 4 mentioned. If FT is conveyed by transfer stating “to A and the heirs of his body” in states that have abolished it:
  • LE: A few states hold A has LE or, what amounts to same thing, an unbarrable FT for A’s life, w/remainder in FS to A’s heirs. This is minority view.
  • FS: large majority of states hold A has FS, but states split on subsidiary point.
    1. FSA: 1/2 of states provide that A has FSA b/c A could disentail and convey FS anyway so law treats A as having done so. Any gift over (remainder) on A’s death w/o issue is void.
    1. FS w/A Strange Condition: other 1/2 of states say that A has FS, but any remainder to become possessory on failure of issue is given effect ifA leaves no descendants at his death.
    1. Ex: O conveys BA “to A and the heirs of his body, and if A dies w/o issue, to B and her heirs.” In 1/2 of states, A takes FSA, and A’s issue and B take nothing. In other 1/2, A takes FS, and A’s issue take nothing, but B takes FI that will become possessory if at A’s death no issue of A are alive. If A leaves issue at his death, B’s interest then disappears (or, using the technical word “fails”).

 

III. Life Estate: very common today, particularly LEs in trust.

  • 2 Types of Life Estates
  • For Life of Grantee: usually measured by grantee’s life. On A’s death, land reverts back to grantor.
  • Pur Autre Vie: Where estate is measured by life of someone other than owner of LE. It is created by conveyance by O “to A for the life of B.” The estate still end on A’s death. If B dies before A, LE pur autre vie descends to B’s heirs. Also, this estate can arise if A, a life tenant, conveys her LE to B. B has LE pur autre vie and A is the measuring life.
  • A conveys BA “to B for the life of C.”. If B dies before C, property does not revert back to A.
  • In a Class: LE can be created in a class such as “to the children of A for their lives, remainder to B.”
  • Defeasible LEs: Like FS, LE can be created so as to be Det., SCS or subject to an executory limitation.
  • A conveys BA “to B for so long as he may choose to live on the property.” B has LE Det. on his deciding to live elsewhere.
  • Construction Problems: If unclear what estate is created, courts must use facts and intent of grantor to determine.
  • Ex: “To my wife, W, so long as she remains unmarried.” Does this create FS Det or a LE Det? Majority view:FS Det, even though FS cannot be forfeited after W’s death.
  • Ex: “To my wife, W, to be used as she shall see fit, for her maintenance and support.” Does this give W a FS or LE w/ power to consume the principle? Majority view:FS: “for her maintenance and support” merely state reason or motive for gift.
  • White v. Brown (holographic will: written by grantor in own hand and not witnessed)
    • If LE – can’t sell house without permission of others invested in house. Not a problem if its FS.
    • Held: At CL, presumption that testator conveyed only LE. If ambiguity, then statutory presumption, will disposes entire estate — FS. Ultimate decision – FS.
    1. Once we assume there is an ambiguity, drop in a statutory presumption. Statute says that where a layman uses language that is inexact, pass the largest amount of estate so no clouds on title – just say it is a fee simple.
    2. Ct also discusses other cases with similar situations b/c ct has a problem with the phrase “have the house to live in” but says its FS b/c no gift over but a willed over.
    3. “Not to be sold:” Ct just strikes this down
  • Since property in bad condition, to protect other’s interests, sell it
  • Dissent: Read the will in its entirety – The language of the T does not state any fee simple. T said ‘not to be sold’. T desire P to have limited estate in the property. T made outright gift and did not violate the rule by restricting P’s title. So it was life estate.
  • Traditional rule of construction – reading a will in its entirety & construing it to give effect to all of its language says it’s a LE – “to live in & not to be sold”
  • Seems inconsistent with common sense & logic
  • Distinguishes cases relied upon by majority – those had no restraints on alienation
  • Apt rule of construction – if testator shows elsewhere that they know how to create an estate and then they use different language here, then she must have had something different in mind
  • Umbrella point: dissent doesn’t concede an ambiguity
  • Apt Rule of Construction
  • Traditional Rule of Construction: must be read in entirety to discern intent.

Tools to Discern Intent

  • text
  • rules of construction
  • Statutory presumptions.
  • Context and nature of property (rarely used as a stand-alone method).
  • Relationship of the parties.
  • Sophistication of the testator.
  • Nature of the property.
  • Moral/fairness claims.
  • Alienability of LE: free to transfer, lease, encumber or alienate estate I/V. Transferee gets no more than life tenant had – estate ends at expiration of measuring life.
  • Limited Utility of Legal LE: legal LE is of limited utility b/c inflexible way of providing for successive ownership.
  • Hassles: if one remainder is a minor, or dies leaving minor heir, consent cannot be given w/o lawsuit and appointment of guardian ad litem to represent minor.
  • Equitable Life Estate: trust is better b/c more flexible
  • Life Tenant as Trustee
  • Someone Else As Trustee
  • Creation: O can devise BA “to X in trust for H for life, remainder to O’s children.”
  • Legal LE Should Be Avoided

 

 

 

  Fee Simple Absolute Fee Tail Life Estate
Alienable Yes No Yes
Inheritable Yes Yes No
Deviseable Yes No No

 

  • Waste:concurrent or consecutively (present and future interests) ownership. Law of waste meant to avoid uses of property that fail to maximize property’s value.
  • Definition: Waste is conduct by life tenant that permanently impairs value of land or interest of person holding title or having some subsequent estate in land.
  • Rationale:
  • Land Should Pass Unimpaired
  • Fairness
  • Types of Waste:
  • Affirmative (Voluntary) Waste:actively causes permanent injury.
  • Permissive (Involuntary) Waste: waste via negligence. Not doing repairs. Letting the property deteriorate.
  • Ameliorating Waste:use of land is substantially changed, but the change increases value of land. When a life tenant is not allowed to change the property in order to increase the property.
  • Remedies For Waste: remaindermen may enjoin threatened waste by life tenant or recover damages. If ultimate future owner of land is not now ascertained, damages may be impounded by court pending determination of ultimate takers.
  • Sale of Property by a Court
  • Ifremaindermen are ascertained, adult and competent, can consent to sale and general rule: a court will not give life tenant relief in this case. The parties can bargain among themselves about sale and division
  • Equitable Intervention: order sale of property if sale is necessary for best interests of all parties.
  • If remaindermen cannot legally consent to sale, b/c one or more is unascertained, under age, or incompetent court may order sale if sale is in best interests of remaindermen.
  • Statutes: many states authorize court to sell FS in land under specified conditions, upon petition of life tenant. These statutes reflect trend to loosen restrictions on legal LE, and to permit life tenant to have land sold and have proceeds held in trust.
  • Proceeds Divided: If LE then life tenant gets portion of value attributable to her life expectancy.
  • Limited Sale: Courts must balance interests of all parties involved in order to find out best interests of parties. Courts normally view judicial sale as drastic remedy.
  • Partition: when concurrent ownership, conflicts are resolved by partition sale.

Baker v. Weedon: (wife w/no kids and estranged grandkids)

    1. Rule: judicial sale is proper when it is necessary for the best interest of all the parties
    1. Could also let Life tenant & remaindermen figure it out themselves
    1. LE cannot sell FS unless all other persons w/interest give consent.If court orders sale, destroys remainder interest.
    1. Intergenerational (Problem 1 w/LE) Equity – she took care of the farm

Valuation (Problem 2 w/ LE): Judicial valuations highly speculative.

Problem 3 w/ LE: subjectivity of life tenant’s reasonable needs

Problem 4 w/ LE:JD problem/cost of subsequent monitoring

    1. Again the Value of a Trust: more flexible than legal LE w/ remainder.
  • Holding: The court makes a new rule which declares that though unproductivity is a factor for waste, the interests of all parties who own an interest must all be examined before forcing a sale, and the future interests have to be weighed as well.

Reasoning: Deterioration and waste are not the only factors to examine whether a sale is proper.

  • The courts should also examine the best interests of the parties.
  • In this case, though the present estate needs the money validly, and the remainders agree; the interests for the future are just as valuable, and therefore a full sale is not in their best interests.
    • The court recommends a partial sale or other equitable remedy that can be proposed.
    • Equitable remedy short of the entire sale of the farm

 

seisin = possession of a particular kind with a particular consequence

Chief significance of freehold estates at common law was that freeholder had seisin. Before 1536, freehold estate could be created or transferred only by ceremony: feoffment w/ livery of seisin. Seisin was transferred by symbolic act such as handing over clod of dirt.

 

  • Leasehold Estates: nonfreehold possessory estates. Leases originally were regarded as personal contracts b/tw lessor and lessee outside tenurial system; leases were personal property.
  • Do not have seisin.
  • When a lease is involved, the landlord holds seisin, the tenant merely has possession.
  • Rule Against Restraints on Alienation:

Restatement 2d of Property – an absolute restraint on f/s is void. A partial restraint (e.g., limiting conveyance to certain persons or time limit on restraint) is valid if, under all circumstances of case, restraint is reasonable in purpose, effect, or duration. A forfeiture restraint is valid.

  • Direct/total Restraints:
  • Forfeiture Restraint: if grantee attempts to transfer interest, it is forfeited to another. (but, forfeiture restraints may be upheld in proper cases – e.g., restraints that limit permissible transferees)
  • Disabling Restraint:withholds f/grantee power of transferring interest.

In general, a restraint on right of a life tenant to transfer his estate will be upheld – unless imposed by disabling rather than promissory or forfeiture restraints

    1. Promissory Restraint: a grantee promises not to transfer interest. If valid, it is enforceable by contract remedies of damage or injunction.
  • Restraints on FS:
    1. Total Restraints:Any total restraint on FS is void. In preceding examples, grantee has FSA.
    1. Partial Restraints: restrict power to transfer to specific persons, or by specific method, or until specific time. Older view: partial restraints on alienation are to be treated like total restraints and void. But, some exceptions:
      1. Restraints on Use of Property: makes property less alienable but have almost always been upheld.

Partial restraints on fee interest qualified as to time are invalid (most courts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Present Estate Examples Duration Correlative Future Interest Correlative Future Interest in Third Party
Fee Simple Absolute To A and his heirs” Forever None None
Fee Simple Determinable To A and his heirs so long as . . .” “until . . .” while . . .” As long as condition is met, then automatically reverts to grantor Possibility of Reverter See Fee Simple Subject to an Executory Interest, below
Fee Simple Subject to Condition Subsequent To A and his heirs, but it . . .” “upon condition that . . .” “provided however . . .” Until happening of named event and reentry by the grantor – no automatic forfeiture Right of Entry See Fee Simple Subject to an Executory Interest, below
Fee Simple Subject to an Executory Interest To A and his heirs for so long as . . . , and if not . . . , to B”

 

To A and his heirs but if . . . to B”

As long as condition is met, then to third party

 

 

Until happening of event

See Fee Simple Determinable above

 

 

See Fee Simple Subject to a Condition Subsequent above

Executory Interest

 

 

 

Executory Interest

Fee Tail To A and the heirs of his body” Until A and his line die out Reversion None (but remainder is possible)
Life Estate (may be defeasible) To A for life” or “To A for the life of B”

 

To A for life, then to B”

 

To A for life, but if . . ., to B”

 

 

Until the end of the measuring life

 

Until the end of the measuring life

 

Until the end of the measuring life or the happening of the named event

Reversion

 

 

None

 

 

Reversion

None (but see below)

 

 

Remainder

 

 

Executory Interest

 

 

Future Interests

 

FUTURE INTERESTS: interest is NOW, possession is the only thing postponed.

  • A presently existing interest that may or may not become possessory in the future.
    1. Future Interests in Transferor
    1. Reversion: follows a grant of a lesser estate than what the grantor owns. Fee simple fee tail life estate leasehold. Implied, automatic. Fully alienable, devisable, inheritable. Note: You always have a reversion after a contingent remainder, but it may or may not become possessory. But there is no reversion after a vested remainder in fee simple.
      1. Interest left in an owner when he/she carves out of his/her estate a lesser estate and does not provide who is to take the property when the lesser estate expires.
      1. May or may not be certain to become possessory in the future
        1. O grants “to A for life” – certain
        1. O grants “to A for life, then to B and her heirs if B survives A” – not certain
      1. Transferable in life and descendible and deviseable at death
    1. Possibility of Reverter: follows a fee simple determinable. Implied and automatic. Common law: only inheritable. Modern: fully transferable.
      1. Future interest remaining in the transferor or his heirs when a fee simple determineable is created
      1. O conveys Blackacre “to A so long as it is used for _____ purpose”
    1. Right of Entry: follows a fee simple subject to condition subsequent. “if X, then O has a right to re-enter”. Not automatic, O must exercise his right to re-enter. Waivable. Common law: only inheritable. Modern: only inheritable or devisable, not transferable inter vivos.
      1. Owner transfers an estate subject to condition subsequent and retains power to cut short or terminate estate
      1. O conveys Blackacre “to A, but if it ceases to use the land for _____ purposes, O has the right to re-enter and retake the premises.”

 

    1. Future Interests in Transferee/ Interests in Grantee
    1. A remainder or executory interest can be transferred back to the grantor, but the name originally given the interest does not change
    1. Remainder – certain to become possessory upon termination of prior estate (waits politely until termination of prior estate)
      1. Remainder: Must be capable to move into possession at the natural termination of the prior estate. Follows a fee tail, life estate, or term of years, NOT fee simple. Must be created at the same time as the supporting estate is created, in the same instrument. Can never cut short or divest a preceding estate.
        1. Vested Remainder: a taker is known, and remainder is not subject to an unfulfilled condition precedent. Descendable, devisable, transferable inter vivos. Remainderman can sue possessor for waste, get injunction or damages. If remainderman is in a class of persons subject to increase, it is a vested remainder subject to open/partial divestment. If there is a condition subsequent, it is a vested remainder subject to complete divestment.
        1. Vested Remainder
        1. given to an ascertained person and
        1. not subject to a condition precedent
        1. may be indefeasibly vested – remainder is certain of becoming possesssory in the future and cannot be divested – O conveys “to A for life, then to B and her heirs.”
        1. vested subject to open or vested subject to partial divestment if later-born children are entitled to share in gift – O conveys “to A for life, then to A’s children and their heirs.”
        1. Contingent Remainder: when either a) a taker is unknown, unascertained, or unborn, OR b) if remainder is subject to an unfulfilled contingent requirement. If the contingent part is met before the termination of the prior estate, the remainder becomes vested. If there are two mutually exclusive contingent remainders, they are alternative contingent remainders. Note: you will never have a contingent remainder following a vested remainder- only an executory interest.
        1. given to an unascertained person, or
        1. it is made contingent upon some event occurring other than natural termination of prior estate
        1. O conveys “to A for life, then to the heirs of B.” B is alive, heirs are unascertained
        1. O conveys “to A for life, then to B and her heirs if B survives A.” B’s possession is conditioned upon surviving A
    1. Executory Interest: a future interest in a transferee that is not ready to take at the natural termination of the preceding estate.
      1. Future interest in a transferee that, in order to become possessory, must:
        1. divest or cut short some interest in another transferee, or
        1. divest the transferor in the future
        1. if transferor wants to create a future interest in a transferee after a defeasible fee, it will necessarily be an executory interest
        1. Springing executory interest: follows a gap in time, or divests a grantor.
        2. Shifting executory interest: cuts short a prior estate, divests a grantee.

 

 

Co-ownership & Marital Interests

 

partition = privilege of each co-owner to transform a concurrent estate into estates held in severalty.

 

  • Joint TenancyJTs own an undivided share of property and surviving co-tenant has right of survivorship of entire estate.

right of survivorship (ROS). Each T seised per my et per my tout (per the share or moiety and by the whole). Each owns undivided whole of property. Joint tenants each own the entirety of the estate therefore entire estate goes to the survivor

    1. no interest passes
    1. interest cannot be devised or inherited
  • Severance:
    1. Severed by destruction of any of the four unites
    1. Mortgages
      1. title theory: mortgage is a transfer of title and therefore severs the JT
        1. severance is temporary; once the mortgage is paid JT is restored
      1. lien theory: mortgage is a lien and therefore JT is not severed (Harms v. Sprague)
        1. vanishing theory: lien needs to be attached to an interest – if interest is extinguished lien vanishes
    1. May be severed by the unilateral act of any one tenant
    1. Parties may agree to partition
      1. Four Unities Required:

i. time – interest of each JT must be acquired or vest at same time

ii. title = All JTs must acquire title by same instrument or by a joint A/P

iii. interest – all must have equal undivided shares and identical interests of duration.

iv. possession – Each must have an equal right to possess whole of property. After a JT is created, however, one JT can voluntarily give exclusive possession to the other JT. (The unity of possession is essential to a TIC as well; none of the other 3 unities is.)

    1. Conveyance by H to H and W:At common law, such a conveyance violated unities of time and title, so used strawman to convey to H and W in JT to preserve 4 unities of JT. Today, more intent-based approach, so most states permit direct conveyance f/one spouse to both spouses as JTs in 1 deed.
    1. Creation:Common lawpresumed that any conveyance to 2 or more persons created a JT, absent contrary language. A conveyance to spouses was presumed TBE. In most states today, a conveyance to 2 or more persons (including spouses) creates a TIC. Presumption in English common law favoring JTs over TICs has been abolished.

A conveys BA “to A (herself) and B, as joint tenants”. This was not effective to create a JT at CL b/c no unity of time and title – need a straw.

    1. Overcoming Presumption: Today, JT can be created only by express words indicating intent. “to A and B as joint tenants with ROS– but, no express mention of survivorship is necessary if intent is clear
    1. Severance: Modern law holds if 4 unities exist when JT is created but are later severed, JT turns into TIC when unities cease to exist – ROS is destroyed.
    1. Conveyance by JT: JT has right to convey her interest but by doing so she severs JT w/ respect to that share.
    1. By Will: JT cannot be severed by will. Must be severed I/V.
    1. Mortgage by JT: In title theory states, a mortgage conveys title and thus severs tenancy. In lien theory states (majority), a security interest, rather than title, is conveyed and a mortgage does not sever a JT.
      1. Harms v. Sprague (at death of bro, lien theory)

vanishing theory = property right of mortgaging JT is extinguished at moment of death.

    1. Agreement Among JTs: JTs can agree that one T has right to exclusive possession w/o severance. However, severance occurs if they agree to hold as TIC although none of 4 unities is broken; intent controls.
    1. Other Situations:Divorce does not terminate a JT, unless parties agree. Where one JT murders another a severance occurs in most states, creating a TIC. Other JDs hold that no severance occurs; rather courts award victim’s heirs everything except murderer’s life interest in ½ the estate. In simultaneous death cases, usually 1/2 each goes to estates of JTs.
    1. Unilateral (single-party) Severance okay (but at CL – needed straw)

Riddle v. Harmon (wife secretly deeded self and husband TIC by straw)

    1. Avoidance of Probate: JT avoids probate since no need to change title at a JT’s death.

in community property states (like CA), a couple can jointly own community property

a community property owner cannot convey comm. prop. I/V, but can devise by will

 

Riddle v Harmon

Rule: A joint tenant may sever a joint tenancy by conveying his interest in the property to himself without the use of a third person “strawman.”

  • A joint tenant can unilaterally sever a joint tenancy without the use of an intermediating third party by conveying his property interest to himself.

Feoffee: The person to whom a fee, or interest in land, is conveyed; the grantee.

Feoffor: The person who conveys a fee to another person; the grantor.

Feoffment: The granting of an interest in land under English common law.

Jus Accrescendi: The right of the surviving joint tenant or tenants to take the whole estate upon the death of one or more of the other joint tenants; the right of survivorship.

 

Harms v Sprague

Rule: A mortgage does not sever a joint tenancy, and the surviving joint tenant takes the interest of a deceased joint tenant without being encumbered by the mortgage.

Issue: 1. Is a joint tenancy severed when one joint tenant mortgages his interest in the property? 2. Does such a mortgage become a lien on the property after the death of the mortgagor?

Rationale: 1. No. A lien on a joint tenant’s interest in property will not effectuate a severance of the joint tenancy, absent the conveyance by deed following the repayment of a mortgage debt. In a mortgage situation, the title of the mortgagee (lender) really only exists between the mortgagee and mortgagor (borrower), so no title transfer occurs between them. Thus, a mortgage is, in essence, a lien, and a lien on the mortgagor’s interest in property does not sever the joint tenancy. Because the mortgage did not sever the joint tenancy, the inherent right of survivorship still exists. William Harms’ right of survivorship became operative upon the death of his brother.

  • 2. No. A surviving joint tenant acquires the share of the deceased joint tenant through the conveyance which granted the joint tenancy in the first place. The property right of the deceased joint tenant, John Harms, was extinguished at the moment of his death. At that moment, the lien of the mortgage ceased to exist as well.

Analysis: Not all Js follow this logic. Some courts hold that a surviving joint tenant would have to take on the deceased joint tenant’s interest subject to any mortgage against it. This position would be fair to the mortgagee, who would otherwise lose the financial security in the transaction.

Lien: A claim secured by property for payment of a debt.

Mortgagee: person that loans money to another in exchange for that person’s title to the land being used as the security for the load; the person who “receives” the mortgage.

Mortgagor: person who gives legal title or a lien to a mortgagee in order to secure a mortgage loan; the borrower, or debtor, in a mortgage transaction.

Mortgage: an interest in land which provides security for the payment of a debt, such as a loan, or the performance of a specific duty.

Promissory note: a written promise to pay a specific sum of money at a given time, or on demand, to a specific persons.

Redemption: The right to repurchase land and free it from the foreclosure of a mortgage.

Title Theory: theory of mortgage law that states that until a mortgage is satisfied, or foreclosed, a mortgagor retains the right to possession of the property and legal title to the property belongs to the mortgagee.

 

  • Tenancy in CommonEach tenant has separate but undivided interest in property, including right to possession of whole. No survivorship rights. Equal shares not necessary for TIC, and co-tenants can own diff types of estates.
    1. Alienability: alienable, inheritable, devisable.
    1. Presumption: Today, TIC is presumed whenever a conveyance is made to 2 or more persons who are not husband and wife.
  • Partition (also available to JT)
    1. Partition in sale: all of the land is sold and the proceeds are distributed among the co-tenants according to interest rights
    1. Partition in kind: land is divided among co-tenants according to interest rights
    1. Black letter law (general approach) – favors partition in kind; partition in sale should only be ordered when:
      1. physical attributes of the land are such that a partition in kind is impracticable or inequitable, and
      1. the interests of the owners would better be promoted by a partition by sale (Delfino v. Vealencis)
    1. Modern Practice – courts in a majority of jurisdictions decree a sale in partition because:
      1. all parties wish it, or
      1. convinced that sale is the fairest method of resolving conflict
  • Constructive preference for TIC when language is unclear

 

  • Tenancy by Entirety –inheritable, alienable, and deviseable. 4 unities + marriage required. There is right of survivorship. They do not hold by the moieties; rather, both are seised of entirety, per tout et non per my.

moiety = half; a ½ interest. Sometimes used to mean any portion or fractional interest.

    1. Nature of the Tenancy: can be created only b/tw husband and wife, holding as 1 person. It is similar to JT except that severance by one tenant is impossible; thus, ROS cannot be destroyed unilaterally. Divorce acts as a partition and terminates TBE b/c it terminates marriage.
      1. Creation: At CL a conveyance to husband and wife created TBE. CL remains as presumption in many states but some states presume a TIC while others presume a JT.
  • Partition: fairness and efficiency (Concurrent Estates)
  • Creation:
    1. similar to JT except “fifth unity” is required – marriage
    1. right of survivorship in both spouses
  • Severance:
    1. Can only be severed by divorce – absent some agreement to contrary, parties usually become tenants in common
    1. Unilateral act of one party cannot defeat other party’s right of survivorship; only husband an wife together can do so
  • Benefits and burdens of co-ownership
  • Remedies
    1. Partition
    1. Ouster
      1. majority rule: at common law, have to try to enter and be barred from entering
        1. encourages efficient use of land
      1. minority rule: demand rent; in the absence of common law ouster, tenant must pay rent to the absent co-tenant or vacate premises
        1. promotes fairness and forestalls partition
      1. infeasible entry rule – interpret ouster broadly; any demand is considered entry, therefore any refusal of demand is refusal of entry

 

 

Partition/Accounting

 

  • Two main policy goals:
    1. Fairness – fair distribution of benefits & burdens of being cotenants
    2. Efficiency – promoting the efficient use of the property

 

PARTITION

One way to resolve ownership conflicts. Partition ends the cotenancy. Either party can request it. Court favors partition in kind unless it is infeasible, impractical, or not in the best interest of the parties. Should sell only in extreme instances. BUT, although courts usually say that partition in kind is preferred, more often than not it is the opposite that occurs. The present trend has been to order sale in partition in a great majority of cases. This is usually done in deference to the wishes of all parties involved, or because the courts believe that sale of the property is actually the fairest means of ending any conflict between them.

    1. Partition by sale, by far the most common method.
    2. Partition in kind: can split land up, or ordered sharing of personal property (6 months to A, 6 months to B) with right of survivorship.

Note: A contract promising never to partition the land is void- direct restraint on alienability. But an agreement not to partition until clouds on the title are cleared is good- makes land more alieanable.

  • Available to JT & TIC, but not Tenants by entirety (should be dealt with thru divorce proceedings)

 

Ouster & Accounting

  • Ouster: in an absence of an agreement to pay rent, a cotenant in possession does not have to pay other cotenants for use & occupation of the property
    1. But when one joint tenant rents the property w/ no consent from the other party – other party can’t cancel the lease
      1. Recourse:
        1. Partition the part leased to the tenant
        2. Ouster – a cotenant in exclusive possession must pay rent to cotenant out of possession if there is an ouster so if the one ousted the other from the premises
          • One cotenant making a demand for physical entry into property and having that demand refused
          • Defined narrowly with an actual demand and an actual refusal and then can demand rental payments
          • Minority position – cotenant in exclusive possession has to pay rent to out of possession cotenant
    1. Accounting – comes up when one cotenant rents the property or portion of property to a third party
      1. Simply lawsuit where the party not part of the rental agreement sues the other saying, you have to share the rent with me
      2. Goes beyond to rent to items removed from property – like selling trees on a property – gets proceeds that reflect his share

 

Accounting

    1. An equitable proceeding – concurrent ownership can give rise to a variety of expenditures – for taxes and mortgage payments, maintenance and repairs, improvements – and a cotenant making such expenditures might seek to recoup some or all of them through a partition action or an action for an accounting (brought independently or incident to a partition action) or an action for contribution from the other cotenants.
    1. Rents & profits: a cotenant who collects from third parties rents and other payments arising from the co-owned land must account to cotenants for the amounts received. Absent ouster, however, accounting is usually based only on actual receipts, not fair market value.
    1. Taxes, mortgage payments, and other carrying charges – a cotenant paying more than his share of taxes, mortgage payments, and other necessary carrying charges generally has a right to contribution from the other cotenants, at least up to the amount of the value of their share in the property.
    1. Repairs and improvements – as to necessary repairs, a cotenant making or paying for them has no affirmative right to contribution from the other cotenants in the absence of an agreement. The reason behind the rule is said to be that the question of how much should be expended on repairs, their character and extent, and whether as a matter of business judgment such expenditures are justified, are ones too uncertain for the law to settle.
    1. Improvements- the general rule is that the interests of the improver are to be protected if this can be accomplished without detriment to the interests of the other cotenants. If property is divided pursuant to a partition, the improved portion is awarded to the improving cotenant if such a distribution would not diminish the interests of the other cotenant as they stood prior to the making of the improvements.

 

Delfino v Vealencis

  • Assertion that courts have a bias towards partition in kind rather than partition by sale b/c sale of property without someone’s consent is an extreme remedy that should be granted only with a clear & compelling reasons
  • Modern courts have moved closer to that a partition by sale is preferred
  • Impetus is the consent of the parties or b/c it is the fairest way to approach the question

Rule: A partition by sale should only be ordered if the physical attributes of the land in question are such that a partition is impracticable or inequitable, and the interests of the owners would be promoted by a partition by sale.

 

Spiller v Mackereth

Rule: In the absence of an agreement to pay rent, a cotenant in possession is not liable to his cotenants for the value of his use and occupation of the property unless there is ouster of a cotenant.

Rationale: Ouster can refer to either the beginning of the running of the statute of limitations for adverse possession or the liability of an occupying cotenant for rent to other cotenant.

  • The adverse possession aspect of the word is precluded here as P has acknowledged the existence of the cotenant relationship by filing a bill for partition.
  • With regard to liability for rent, ouster is evidenced when an occupying cotenant refuses a demand of other cotenants to be allowed into use and enjoyment of the land.
  • Here, D’s letter only demanded that P vacate or pay rent, and did not state any desire of D to enter the premises. The letter was insufficient because P, as an occupying cotenant holds title to the whole property and may rightfully occupy it until D, another cotenant, asserts possessory right. D claims P’s use of new locks amounts to ouster. However, there is no evidence that the locks were used to do anything other than secure P’s merchandise insider. There is also no evidence that D or any other cotenants asked for the keys to the locks or were prevented from entering the building because of the locks. Without evidence that P intended to exclude the other cotenants, P is not liable for rent.

Analysis: Some Js take the view that a cotenant in exclusive possession must pay rent to cotenants out of possession even when no ouster is established. This view may seem more fair to cotenants out of possession. When a cotenant occupies the property in question, it is essentially kept “off the market” and thus potential rent from a prospective renter is lost. However, the majority rule here would seem to encourage constructive use of property, as opposed to leaving it vacant and possibly unimproved until a new renter occupies the premises.

Ouster: the beginning of the running of the statute of limitations in cases of adverse possession; the liability of an occupying cotenant for rent to other cotenants.

Per my et per tout: “By the half and by the whole;” a term used to describe how each tenant in a tenancy in common or a joint tenancy holds a whole share of the property with regard to survivorship, but holds a share equal to other tenants with regard to the right to occupy.

 

Swartbaugh v Sampson

Each joint tenant has the right to convey or mortgage an equal share of the property, and can also pledge his interest in the property to another person. In addition, a joint tenant can make a lease to his share of the property, and such a lease would be valid as to his share. Even a lease to all of the joint property by one joint tenant would be valid and supportable contract as far as the lessor in the joint property is concerned.

  • A joint tenant cannot recover exclusive possession of joint property from a cotenant. Because D has effectively the same rights to the leased property that P had prior to the transaction, she cannot cancel the leases. P may fear that she may lose her interest in the premises by prescription. This fear is unfounded because a lessee cannot generally dispute a landlord’s title or claim adverse possession while holding the property under the conditions of a lease. There is no evidence that D is holding adversely to her, nor that P ever demanded entry into the premises.
  • Lease remains in effect so what does she do next?
    • Partition (but then stuck dealing with someone she doesn’t like)
    • Ouster – could collect from D 1/2 the reasonable rental value if she can show she has been ousted
      • Try to enter premises and then be physically barred from entry
      • If she gets ousted, then sue Sampson for half the reasonable value of property
    • Accounting – goes along with the lease but is entitled to 1/2 the rents received. Sue husband to recover those rents
  • But, if her husband dies, entitled to her husbands half and not subject to the lease and has authority to evict the leasee

Analysis: Although P could attempt to prove ouster if D resists her attempts to enter, she would only be entitled to one-half the reasonable rental value of the land. This may result in more money for P, but she would not be able to remove him or the boxing arena from the land. This would also lead to questions of who would be responsible for paying her the full value of the rent; should it be D or D, for agreeing to such a low monthly rent in the beginning? She may also consider trying a partition action as a remedy, but such measures would, in the end, give her a smaller parcel of land than the one she started with.

Mechanic’s lien: a claim created by state law which attaches to property and enables persons to have priority in receiving payment for work they performed in building, improving, or repairing a building or structure on that property.

Moiety: half of something; extent to which a joint tenant is said to hold an interest in property (“hold by moieties”).

Prescription: a person’s acquisition of the right to use property by virtue of his continuous use of that property.

 

 

Tradition, Tension and Change in Landlord-Tenant Law

 

  • The Leasehold Estates – nonfreehold estates
  • Term of Years: an estate that lasts for some fixed period of time or for a period computable by a formula that results in fixing calendar dates for beginning and ending, once the term is created or becomes possessory
  • no notice of termination necessary (self contained)
  • creation – “To A for 10 years”
  • termination – Expires at the end of the stated period w/out either party’s giving notice
  • can be terminable earlier upon happening of some event or condition
  • Periodic Tenancy: lease for a period of some fixed duration that continues for succeeding periods until either the landlord or tenant gives notice of termination
  • If notice is not given, period is auto extended for another period.

common law – 6 months notice required to terminate a year to year tenancy. For PT less than a year, not to exceed 6 months. Termination has to be on final day of period (month), not in middle

  • Death of LL or T has no effect on duration of a term of years or periodic tenancy, but it does on TAW.
  • Oral leases – void if for longer than 3 yrs – Statute of Frauds
  • Creation
  • To A from month to month”
  • To A, w/rent payable on the first day of every month”
  • Operation of Law → Landlord elects to bind a holdover T for an additional term
  • Through non-compliance w/SOF → TAW becomes PT upon paying of rent
  • Termination
  • Ends by notice from one party at least equal to the length of the time period (one full month for a month-to-month tenancy)
  • Exception – only six months’ notice required to terminate a year-to-year tenancy
  • Modern Law and CA allows 30 days notice to terminate
  • Tenancy at Will: Tenancy of no stated duration that lasts as long as both parties desire

unilateral power to terminate a lease can be engrafted on a TOY or a PT.

ends when one of parties terminate it. Also ends at death of one of parties. Modern statutes generally require 30 days (or time = interval b/tw rent payments) notice for termination.

  • Creation
  • To T for and during the pleasure of L.”
  • To T for as many years as T desires.”
  • some courts may interpret this as a determinable life estate
  • Termination
  • usually ends after one party displays an intention that the tenancy should come to an end – notice generally required
  • may also end by operation of the law (i.e. death of a party, attempt to transfer interest)
  • Tenancy at Sufferance: tenant wrongfully holds over after the termination of the tenancy
  • Common law gave LL 2 options: 1) eviction (plus dgs); 2) consent (express or implied) to creation of new tenancy
  • Creation – B’s lease expires, but B continues to occupy the premises
  • Termination – terminated when the LL 1) evicts (sues for damages) the T or 2) elects to hold the tenant over for another termination (consent may be express or implied)
  • Remedy must be elected within a reasonable time – election is irrevocable

Crechale & Polles, Inc. v. Smith(if treat holdover T as trespasser, cannot later hold T liable for new lease term)

  • If holdover, can either evict or make it PT for month-to-month
  • Term of years lease
  • CL says that if tenant holds over on a lease that is more than one year, should give rise to a one year lease implied periodic tenancy
    • More certainly for landlord
    • Incentivize tenant to not hold over
  • Other option is the modern approach and what the Smith court does – thinks CL view is too rigid
    • LL quit letter was a clear termination, however, once the LL cashed the first check, an implied periodic tenancy developed on a month to month basis
    • Still relies on holdover doctrine in an implied rather than express fashion
      • Judicially constructed expressions of intent
  • Other option is an express periodic tenancy – LL failure to evict the T & failure to impose a penalty after the holdover period resulted in an express periodic tenancy – express consent on part of landlord
  • Statute enacted to address the length of holdover tenancy – CA says not to exceed one month

Rationale: Since P accepted rent for the first month over, he has effectively held D over on a month-to-month basis. However, he cannot hold D over for a new term.

 

With acceptance of lease – Conveyance v Contract: tension in acceptance of lease as a conveyance (view it in property law w/ landlord holding leasehold interest & T holding a usage interest w/ property rights) vs. as a contract (see it as any other bargained product b/w two parties, import notions of good faith, implied & express duties, remedies)

 

The Lease: conveyance and contract

  • If L gives T a written lease for a butcher shop in L’s supermarket, and property is taken in eminent domain and the market is torn down, T is entitled to compensation for the value of the leasehold (absent contrary agreement) b/c pure condemnation of entire property extinguishes the lease.
    • A lease transfers a possessory interest in land, so it is a conveyance that creates real property rights
    • A lease contains # of promises/covenants, so it is a contract too, creating contract rights.
  • Start with general principle that LL can do whatever he pleases with his property
    • Liberty – owners have a right to refrain from renting to anyone whose presence on the property would impair the property’s economic value
    • Discrimination among tenants is sometimes a good thing as long as its rational
      • LL can treat a distinguishing characteristic of a certain group as a signal of a disfavorable trait (ex: refuse to rent to lawyers b/c lawyers will raise a lot of issues)
  • Exceptions are rooted in statutes & laws that make it illegal to discriminate based on certain characteristics.
    • Moral justification – wrong to treat some people differently based on a characteristic
    • Efficiency – irrational discrimination interferes with the economic & efficient use of the market (ex: black person will pay more for rent than white person, makes more sense to rent to black person)

 

Selection of Tenants (Herein of unlawful discrimination)

2 types of discrimination:

  • Irrational discrimination – some discomfort f/associating w/member of a group. Immoral and interferes w/efficient operation of markets
  • Rational discrimination –using a trait on the part of a group as a proxy for a negative/unfavorable characteristic (i.e. all members of a group will be a bad credit risk)

general rule: L rents to whoever he pleases

exceptions: CRA, FHA, and state and local laws

Civil Rights Act: 42 USC §1982must show discriminatory intent/motive

Money damages are usually remedies.

Only refers to racial distinctions, not all distinctions of FHA (does not prohibit discriminatory advertising)

  • Civil Rights Act
  • Narrower than FHA because
    1. It reaches only racial discrimination
    1. Does not deal with discrimination in the provision of services and facilities
    1. Does not prohibit discriminatory advertising
  • Broader because it contains none of the exemptions found in the FHA
  • All citizens of the U.S. shall have the same right, in every State and Territory, as is enjoyed by white citizens thereof to inherit, purchase, lease, sell, hold, and convey real and personal property.”
    1. Applies to all types of property
    1. Intent was to put newly emancipated black Americans on the same footing as white Americans with respect to property rights
    1. Bars all racial discrimination public and private

Fair Housing Act§§3601-3619, 3631: only a discriminatory effect must be shown, discriminatory motive is not necessary

  • Imposes the most significant constraints on landlord discrimination
  • Covers gender discrimination, racial, religious, familial status and national origin discrimination
  • Covers discriminatory advertising
  • Applies only to residential housing
  • Exceptions: (§3603b1)
  • A person who does not own more than 3, single family residences may discriminate in the sale or lease of his single family residence so long as he neither uses a broker nor advertises in a manner that reveals his discriminatory intent
  • A LL may discriminate in the rental of residential housing so long as the LL is an owner and occupant of the house or apartment building and it consists of four units or less
  • Prima Facie Case for violation requires: (п’s burden of proof)
  • the person claiming the violation belongs to a protected class under the FHA
  • they are otherwise qualified to rent the property, and
  • there is a discriminatory effect (motive not necessary like CRA)
  • Rebuttal – ∆ is entitled to explain and show appropriate and neutral reasons for the discriminatory effect (business purpose or economic motive)
  • If ∆ is successful in rebuttal, burden of proof shifts to п to prove that reasons are merely pretextual
    • Principle of Reasonable Accommodation: п brings a prima facie case under the FHA then LL can still claim that he cannot reasonably accommodate п’s special needs LL does not need to make accommodations to anyone whose condition could create a direct threat to other tenants or would create substantial property damage
  • Usually injunctive relief for remedies

 

 

Delivery of Possession

 

Subleases and Assignments

 

  • Sublease : transaction whereby a tenant grants an interest in the leased premises less than his own, or reserves to himself a reversionary interest in the term. To transfer a portion of a lessee’s interest in a lease to another.
  • Assignment: to give to another one’s entire interest in a lease; conveys whole term leaving no interest nor reversionary interest in the grantor or assignor
  • Creation – conveyance of whole term creates an assignment; no reversionary interest
  • Privity of estate – related to assignment v. sublease
  • terminated by assignment
  • Privity of contract – looking to whether lessee or sublesse has expressly assumed liability
  • Novation – only thing that can sever privity of contract is express release
  • Consent Clauses
  • Default Rule: where a commercial lease provides for assignment only with the prior consent of the lessor, such consent may be withheld only where the lessor has a commercially reasonable objection to the assignee or the proposed use
  • Does not apply to residential leases
  • Lease as conveyance arg.
    1. restraints on alienation must serve reasonable ends
    1. unreasonable restraints unlikely to produce fairness or productivity in an urban society
  • Lease as a contract arg. – allows courts to apply general principles of contract, good faith and fair dealing
  • clause is for the protection of the landlord in its ownership and operation of the particular property, not for his general economic protection.
  • Post Kendall drafting strategies
  • absolute discretion clauses – under Restatement absolute discretion clauses are valid if equal bargaining power b/n parties
  • termination recapture clauses
    1. tenant required to give LL written notice of intended transferee and terms of transfer
    1. LL may cancel lease w/tenant and re-let to intended transferee
    1. Tenant has no right to profit realized by LL as a result of re-let
  • express conditions in the lease
  • Delivery
  • American rule: LL is not bound to put the tenant into actual possession, but is bound only to put him in legal possession
  • in cases of holdover tenants, remedy is against the wrongdoer and not the LL
  • Rationale:
  • freedom of contract
  • incentive to lease
  • assessment that the holdover tenant is committing a wrong against the incoming tenant
  • equal rights argument – VA statute gives incoming tenant standing
  • Remedy – may sue holdover tenant for damages and possession
  • English rule: in the absence of stipulations to the contrary, there is in every lease an implied covenant on the part of the LL that the premises shall be open to entry by the tenant at the time fixed by the lease for the beginning of his term
  • Rationale:
  • it is unreasonable to suppose that a tenant would knowingly contract for a lawsuit
  • LL in a better position to know about a holdover and deal with it (superior risk bearer)
  • implied covenant based on expectations (actual/legal possession)
  • Remedies:
  • tenant may terminate lease and sue for damages
  • partial possession → abatement in rent and damages
  • delayed → not obligated to pay for term kept out of possession
  • Exculpatory clause: clause excusing LL from liability for failure to deliver possession for reasons specified in clause

 

Implied Covenants English American
Legal Y Y
Physical Y N
Quiet Enjoyment Y Y

 

Ernst v. Conditt

  • Why does P think he can sue D under the terms of the lease? P’s theory is that D came to their agreement, it was an assignment, so liable to P. D argues that the instrument was a sublease b/c of the language in the terms of the lease & b/c Rogers remained personally liable, had an implied right of entry
    • Ct says its an assignment b/c the entire term was transferred evidenced by the intentions of the parties. “Plainly appearing from the context of the instrument and the facts and circumstances surrounding the execution of it the parties thereto intended an assignment rather than a sublease.”
    • Ct downplayed the words of the lease as the circumstances surrounding the situation outweigh that
    • Two approaches to whether a transfer is a sublease or assignment
      • Formalistic – assignment is when lessee transfers entire interest under the lease
      • Intent – look at what the parties intended by use of actual words & context & circumstances
    • D is liable to P b/c P & D are in privity of estate
  • Privity of Estate: a relationship b/w successors or relationship between successive interests in property. A relationship that is based on successive ownership or possession
  • Privity of Contract: look for a relationship that arises out of a contractual arrangement
    • Contractual liability arises b/c D should be liable to P on privity of contract grounds
    • Rogers is receiving value and in consideration of the promise to faithfully perform all conditions of the within lease – that is his consideration. Makes a promise so D assumes the covenants in the original lease.
    • P becomes a third party beneficiary of the contract b/w Rogers & D so D liable to P.

Rationale: An assignment allows the land owner to recover from the assignee. A sublease does not allow the land owner to recover from the sub-lessees. At common law, the following rule was used to determine whether a lessee assigned or sublet the premises: An assignment conveyed the entire interest in a lease; it left nothing to the original lessee. A sublease granted an interest that was less than that owned by the original lessee; the original lessee retained a reversionary interest.

  • The modern method of determining whether there has been an assignment or sublease is to ascertain the intention of the parties. Under the common law rule, D is liable to P because he took Rogers’ entire interest in the land. The fact that the modified contract between Rogers and P held Rogers to be personally liable to P does not matter for the following reason: the liability of Rogers to P is not determined by an agreement between Rogers and D. Also, the fact that the modified agreement between Rogers and P contained the word “sublet” does not matter. P’s consent to “sublet” has been held to be only a consent to one other than the original lessee to go into possession; it authorizes both a subletting and an assignment. In any case, D is liable to P under the modern rule. By the terms of the agreement between Rogers and D, Rogers retained no reversionary interest; he conveyed all that he had. Thus, Rogers has assigned his lease.

 

Kendall v. Ernest Pestana, Inc.

  • LL can’t arbitrarily withhold consent
  • Must be commercially reasonable to restrict sublease
  • Viewing a lease as a conveyance means that courts have to balance interests of LL in who takes possession of the premises
  • Judge reasonableness by judging nexus of LL ‘s concern and ownership (preservation of property) and occupation of property
  • View lease as a contract, incorporate general standards of good faith and fair dealing

Rule: Court declares that lessor must act reasonably: a lessor may not arbitrarily withhold consent to an assignment

Rationale: The law favors the free alienability of property, including a leasehold. However, alienability may be restricted by contract so as to protect the lessor. Such contracts are construed against the lessor, especially when the act of assigning terminates the lease. Such contracts are construed against the lessor, especially when the act of assigning terminates the lease. The majority rule allows the lessor to arbitrarily withhold consent. Even in the majority states, however, the lessor may waive his right or be estopped from asserting it.

  • A growing trend asserts the following rule: A lessor may withhold consent only when he has a commercially reasonable objection to the assignment. We adopt this rule for the following reasons:
  • Public policy favors free alienability
  • The relationship between lessor and lessee has become more impersonal. As a result, the lessor is just as likely to find a high quality tenant in the assignee as the lessee
  • The lessor’s interests are protected by the fact that the lessee remains contractually liable to the lessor
  • A lease is increasing viewed as a contract. As a result, since the lessor his discretion in withholding consent, the lessor can withhold consent only in good faith.
  • The lessor may withhold consent in the following circumstances, for example:
  • The property is ill-suited for the proposed use
  • The proposed use is illegal
  • The proposed use requires altering the premises.
  • The lessor cannot withhold consent solely on the basis of personal taste. Nor may he demand higher rent in exchange for consent. This is because the original lease already exhibits an agreement between lessor and lessee, and lessor may not attempt to get more than he bargained for.
  • There are four reasons advanced for allowing arbitrary withholding of consent:
  • Lessor has picked his tenant and he should not have to look elsewhere for the rent. This is unpersuasive because lessor may still refuse consent if it is reasonable. If an assignee is a poor financial risk, lessor may reasonably withhold consent. Moreover, the original lessee is still liable to the lessor
  • The lessee could have bargained for a contract clause the provided that consent could be withheld only if reasonable; the court should not place this in the contract. This is rejected because the fact that the parties agreed to a consent requirement must mean that they contemplated that the lessee give some reason for withholding consent
  • The court must follow the rule because of stare decisis. Rejected, because the court has never ruled on this issue before
  • The lessor has a right to realize the increased value of his property by demanding higher rent. Rejected because the lessee took the risk that property prices would fall. He is also entitled to any gain should prices rise. The lessor, as well as the lessee, must live with the risk incurred as a result of the contract made.

 

 

The Tenant Who Defaults

 

  • Defaulting Tenants
  • Tenant in possession
  • Self help – courts discourage; prefer resorting to judicial process
  • Raises issues of breach of peace and order
  • Other remedies available to landlords
  • Even in jurisdictions that do allow it, very strict about the amount of force allowed; requires:
    1. that LL be legally entitled to possession (holdover or tenant breaches a lease containing a re-entry clause), and
    1. LL’s means are peaceable
  • Mitigation
  • Eviction
  • Actual eviction: a tenant who has been totally ousted from physical possession of the leased premises by the LL or someone w/better title is no longer obligated to pay rent and may terminate the lease
  • Actual partial eviction: if there is an actual eviction from part of the premises, tenant is relieved of all liability
  • Restatement Rule rejects the common law rule providing that tenant may receive an abatement in the rent but may not w/hold all rent
  • Constructive Eviction: any act or omission of the LL which renders the premises substantially unsuitable for the purpose for which they are leased, or which seriously interferes w/the beneficial enjoyment of the premises constitutes constructive eviction

if, through LL’s fault, T’s QE to premises is substantially interfered with, T may treat lease as terminated and vacate premises — T is no longer liable for rent

theory: LL has so interfered w/T’s right of possession that he might as well have evicted T

necessary elements are:

i) substantial interference: T’s use & enjoyment of premises must be substantially interfered with

but, if T knows of interference when signed lease, court may hold he waived interference

ii) notice to LL: T must give notice to LL of defect & give LL a reasonable time to remedy problem

iii) T must vacate: T cannot stay on & refuse to pay rent –must vacate w/in a reasonable time

iv) fault: interference w/T’s enjoyment & use of premises must be fault of LL

he must act, or fail to act, to T’s damage

4) damages: after vacating, T can recover damages for add’l cost of substitute premises, lost profits, increased expenses proximately caused by eviction, etc.

 

Landlord’s Duties:

  • To deliver possession at the beginning of the lease:
    • Legal possession:

Before T takes possession, if T learns that T1 also has a lease, T has right to terminate. But if T finds out after he has entered, he can’t sue L or abandon, until T is actually evicted by paramount title.

  • Actual possession:

Under English, majority rule, L has to deliver actual possession too. L must remove previous T. T can refuse to pay rent, sue L for damages. (Under American, minority rule, L just had to deliver legal possession. T must get rid of, or sue, old tenant.)

 

Berg v. Wiley: Wiley changed the locks on property that he leased to Berg.

Rule: Court gives additional rights to tenants: Landlord may not use self-help to evict tenant

Rationale: There is ample evidence to support the jury’s finding that Berg did not abandon the premises. At common law, a landlord could use self help if:

  • The landlord is legally entitled to possession, such as when a tenant is a hold-over
  • The landlord’s means are peaceable.

Analysis: Because P had possession of the premises, the law gave her much protection. There are various reasons for protecting possessors on rental land:

  • It discourages the forcible taking of possession. The laws always wants to deter violence
  • It protects families from being left with nowhere to go. Note, however, the protection of possessors comes at the expense of the landlord, who may be legally entitle to possession. As a compromise, some state forbid self-help to evict a residential tenant, but allow self-help for the eviction of a commercial tenant.

 

Sommer v. Kridel (cancelled wedding T, P’s failure to respond to D’s letter exhibits acceptance, thus terminating tenancy and any obligation of rent. Reasonable efforts = treat it as if it one of his vacantstock (vague)

  • Fairer to equate leases to contracts
  • Efficiency argument – more likely property will get back into circulation faster if LL has duty to mitigate
  • Reduces chances of damages
  • LL use reasonable diligence in attempting to re-let the premises & LL bears bop on that issue
  • Practical workings of mitigation rule:
  • T leases from L for one yr at 1,000/month. Two months later, T abandons:
    • L reasonably tries to rent but to no avail – gets $10,000 & court costs for all months minus the two T paid for
    • L re- lets one month later to X at 1,000 month, gets 1,000 since he missed one month of rent
    • L does nothing to mitigate – Uniform Residential Landlord Tenant Act says LL can’t recover any rent. Caselaw has modified this in some Js – if LL does nothing to mitigate, rent recovery is reduced by the amount the LL could have obtained through mitigation
  • Still places that have no mitigation rule – LL different options: LL terminate lease, obtaining another T while holding the original T liable, permitting the premises to remain vacant while collecting the agreed-upon rent from the original tenant
  • Arguments:
    • Lease as property – once T accept possession of premises, T is stuck with property and they bear consequences of not following through with duty
      • T purchased an interest in real estates so stuck with it
    • Fairness argument – LL should not be forced into a personal relationship with a new T he doesn’t wish to accept. Shouldn’t be obliged to accept another T b/c he didn’t bargain for that. (Problem is rule of reasonable though – just use reasonable diligence, not just take any old T)
    • Efficiency argument – no duty rule – inefficiency of courts having to determine what is reasonable to mitigate on a case by case basis

Rule: If the landlord has many vacant apartments, he must treat the abandoned apartment as one of his vacant stock and make reasonable efforts to re-let it. Since the landlord is in a better position to demonstrate that his efforts were reasonable, he shall have the burden of showing a reasonable effort to re-let.

 

Riverview Realty Co. v. Perosio (in conjunction w/Sommer — Burden of proof on LL)

minority view/mitigation rule (Sommer rule)based on antitrust law

1) conceptual: lease as a contract leads to L having a duty to mitigate when T has surrendered/ abandoned premises prior to expiration of lease

options

1) L can terminate the lease — all future obligations are terminated

2) L can mitigate damages — no termination of lease

majority view: based on property law

L is under no duty to mitigate damages caused by a defaulting T

Restatement: abandonment of property is an invitation to vandalism, & law should not encourage such conduct by putting a duty of mitigation of damages on L

surrender: terminates a lease, provided that L accepts T’s offer to end tenancy – if L resumes possession, L is held to have auto waived rights to hold T liable for remaining rent.

absent an agreement or statute, eviction terminates the LL-T relationship and excuses T f/ further rent

if T abandons, T remains liable, but recover reduced of L made no efforts to mitigate

 

Under theory of nuisance, remedies would include injunction or damages.

 

  • Quiet Enjoyment and Constructive Eviction – rendering of premises substantially unsuitable for which the premises were leased

dependent/independent distinction of CQE

in contract law, covenant promises are considered dependent promises

in property law, LL/T obligations are independent of each other: T pays rent, L maintains premises

independent CQE on basis that the promises in a lease are dependent on each other (contract law)

1) quiet enjoyment: T has right to “quietly enjoy” premises; L cannot interfere w/this right

this covenant is implied in every lease

even at common law, where general rule was caveat lessee, breach of this covenant absolved T f/ responsibility to pay rent

this covenant can be breached by either actual or constructive eviction

COA: Independent Covenant of QE (Reste case) (not predicated on exceptions in caveat lessee)

Remedies: sue for breach of contract for damages equal to value of property w/and w/o breach (T must stay in possession)

COA: Exceptions to Caveat Lessee

includes: implied duty to make and keep premises habitable for short-term leases; duty to disclose latent defects LL knew or should know and which T could not be held to have notice; maintain common areas; repairs; can’t fraudulently misrepresent condition of premises; any express obligations in lease; abate immoral conduct and nuisances (not all JDs)

Remedies: sue for breach of contract for damages (T must stay in possession) or withhold rent

COA: Express Promise (explicit clause in lease) Common Law

Remedies: stay in possession and sue for breach of contract for damages

if breach is substantial, T can leave premises on theory of constructive eviction and have no liability for future rent plus you can get damages to compensate your loss

this is how Reste changed things (Reste JDs)

justification for QE: dependent contractual covenants

Reste expands QE beyond original bounds

 

Reste Realty Corp v Cooper

  • Contract theory is the move towards warranty of quiet enjoyment
  • Throw out the idea that the promises that LL & T make are independent of each other
  • Property law: LL provides place to live, T pays rent – 2 independent promises
  • Contract/Property law: Those obligations of LL & T are dependent obligations/promises
    • Consideration – each party has to promise to do something and those promises are dependent on each other. Can’t separate otherwise have no contract
    1. LL not providing suitable premises, LL is failing in providing consideration & allows for T to not pay rent
    2. If really bad, T can vacate the premises & escape liability for rent as well – Constructive eviction theory

 

Landlord’s Other Duties:

  • To provide habitable premises
    • At CL, L had no duty to maintain and repair the premises. Exceptions: short term furnished lease, latent defects known to L, bldg still under construction. If parties agreed L had a duty to repair, it was still deemed independent of T’s covenant to pay rent.
    • Majority rule now, implied covenant in every lease, non-waivable. L has a duty to deliver habitable premises and maintain them in habitable shape. Applies to urban dwellings and the surrounding areas. Covers all latent and patent defects.

L mustdisclose known defects prior to leasing (leaks, ants, etc.).

– If T knows of minor interference and still takes possession, T has waived it. Substantial interference not waiveable.

T must notify L before claiming constructive eviction, and allow time for remedy; if L fails and T then repairs, T may deduct the cost from rent.

– If T doesn’t abandon, can keep lease and recover damages: diff btwn value as warranted and value as-is. Punitive damages can also be awarded.

  • To determine habitability: Some courts look at housing code violations, some look at fit for human habitability: does it impact health and safety?

– Modern tenants want modern technology: A/C is sometimes seen as required. But like not having a doorman is not breach of habitability.

Note:Cov’ts of habitability are rarely implied in commercial leases if it appears the commercial T has bargained for continuing maint by L.

Illegal Lease– If conditions are so bad that they violate housing code, it’s an illegal lease; T is a TatSuff and only has to pay reasonable rental value. T can move in and not pay rent. Bad place is better than streets.

The Implied Warranty of Habitability – move toward IWH now

  • Implied warranty of habitability

most courts now imply, in every noncommercial lease, covenant that premises be delivered to T in habitable shape

a) commercial leases: some courts have extended this implied covenant to commercial leases

b) standards applied

c) waiver: IWH cannot be waived by T – waiver is held as violation of public policy

breach of IWH – Remedies

1) Possession/Damages: remain in possession and keep paying rent – not as effective as abatement. Sue for reimbursement for that rent & damages as affirmative COA (1 of 2 most common remedies)

2) Rescission – voiding of the contract

  • T terminates lease and sues for damages
  • Not liable for future rent

least used choice; not common b/c Ts are usually not in a position to leave

3) Reformation – the reworking of a contract

  • Remain in possession and w/hold rent (1 of 2 most common remedies)

LL sues 1st to recover both possession & rent, T will warranty as a defense (T takes a big risk b/c T can be liable for unpaid rent and can be evicted

  • T wins: rent is reduced & T can remain in possession by paying the reduced rent
  • LL wins: T can be evicted & T liable for rent while T remained in possession

– Restatement approach – abatement of rent

– tort approach – damages for discomfort and annoyance or for infliction of emotional harm, and punitive dgs

Argument against IWH: Warranty over time will reduce the quantity of affordable housing b/c LL have so many costs imposed on them

 

Hilder v. St. Peter (extreme living conditions – T sued for rent paid during tenancy)

new rule IWH = In rental of any residential dwelling unit an IWH exists in lease, oral or written, that LL will deliver over and maintain throughout tenancy, premises that are safe, clean and fit for human habitation. Covers essential facilities, latent defects, and is not waivable.

To claim breach and recover dgs or withhold rent, T must show:

1. LL had notice of defect and failed to repair it within reasonable time.

  • Defect existed at time rent was withheld

2. Defect affected habitability.

Standards of breach of IWH:

  • housing codes. Breach = failure to comply w/ housing code
  • substantial compliance w/ housing code. Breach = only a substantial violation.
  • fitness for human habitation standard – impact on health & safety
  • reasonableness standard

measure of dgs = diff in value b/tw apt as warranted and value of apt in as it actually exists

problem w/ term “fair rental value – FRV” (Kline)

    • Damages =
      • Hilder: dwelling as warranted (promised) – actual value of the dwelling
      • Kline: differences b/w the agreed upon rent and the actual value of the dwelling
      • Problem with this is that the differential b/w the two could be non-existent
        1. Sorts of dwellings don’t have a fair rental value & hard to discern value in a certain market and if the agreed upon rent is about the same as the way it should be – low damages
        2. Damages problem is that it allows backdoor waivers – T made an agreement, knew it was crappy but law doesn’t allow waivers of IWH so T could still sue even though he knew of the conditions
      • Remedy: change it to dwelling as warranted by law or what the LL advertised so not agreed upon rent, but advertised rent
  • The T may recover for discomfort and annoyance, and he may repair the defect and deduct the expense from the rent. The T may also withhold rent until damages are calculated.
  • The burden of brining suit will then be on the LL, who can better afford to bring the action.
  • The P may pursue punitive damages.

Legal advantages T has under IWH that T doesn’t have under CQE:

  • remedies – in both Reste and non-Reste JDs, T can withhold rent and remain in possession.
  • damages (slight) – can only get punitive dgs in JDs with a broad interpretation of Reste
  • duty of LL – IWH imposes a continuing duty on LL to provide suitable premises. In non-Reste JDs, LL has a continuing duty only wrt limited obligations, like maintaining common areas.

Risk: If can’t show substantial breach, then LL can evict.

diff b/tw CQE and IWH: what are the specific differences and similarities b/tw the 2, and what are their elements?

IWH applies mainly to residential tenancies – not extended generally to commercial tenancies (some talk of change but not happened yet)

cannot be waived

tends to rely on municipal building codes to set a baseline for conditions

remedy: T can both remain in position and withhold rent

independent CQE – refers to both residential and commercial tenancies

can be waived by a commercial lessee

operates independent of building codes, has its own baseline f/industry/social economic/geographic norms remedy: T must vacate if want to withhold rent (remedy 3)

 

 

Real Estate Transactions

  • Contract of Sale – functions as an agreement

land transfer process is governed by 2 important SEPARATE documents/legal arrangements: contract of sale and deed

Agreement

Contract of Sale: evidence of agreement b/tw contractor and contractee (“meeting of the minds”) that the agree to pay for & binds them

Formalities (compliance of SOF)

Warranties

Seller’s Duties

Conveyance

Deed: evidence of an intent at conveyance/transfer (effectuates a transfer of the land) & evidence of intent to be bound by the terms

Formalities (compliance of SOF)

Types of Warranties and Covenants

typical sale of house involves: (1) seller lists property w/real estate broker, who receives commission (usually 6%) if broker sells property. (2) after negotiating price and other matters, seller and buyer sign a contract for sale, which will call for deal to be closed at some future time (usually 60 days). Contract requires buyer to make a down payment (called earnest money) that buyer forfeits if he backs out of contract w/o good reason. (3) b/tw signing of contract and closing, parties/agents investigate seller’s title, ensuring it is good. Buyer/agents inspect property for defects, and if buyer is not paying all cash, arrange financing f/a lender. (4) At closing, buyer receives and records seller’s deed in county courthouse. If buyer has arranged a loan, buyer executes a mortgage to bank or other lender, which is also recorded. Seller receives a check for purchase price.

The Contract of Sale: involves two steps

1) contract to sell/purchase property is signed; it includes specified date for the 2nd step

2) closing, when seller gives buyer deed to property and buyer gives seller the agreed-upon consideration

 

  • Formalities

1. Contracts need marital status b/c if seller is married, spouse might have some interest in the property that can’t be conveyed w/o spouse’s consent. Statutory dower – forced share of marital property that comes into play when one spouse dies.

2. Titles matter b/c they affect the interests (JTs v TiC ex)

a. Statute of Frauds: contracts for the sale of land must be in writingto prevent fraud

  • Purposes:
  • Anti fraud
  • Evidentiary – easier for courts to uphold the contract with actual proof
  • Cautionary – ensures that people don’t make deals without formal writing
  • Requirements:
  • Signed by party to be bound
  • Description of real estate
  • Price (consideration)
  • when not confined by express language, courts have applied SOF more as a principal rather than a statute

Exceptions to SOF:

1. part performance = allows specific enforcement of oral agreements when particular acts (payment of $, taking possession) have been performed by one of parties to the agreement when seeking specific performance.

    1. Requirements:
      1. Acts of the parties substantially satisfy evidentiary requirements of SOF (i.e. taking possession and paying all or part of purchase price, or making valuable improvements)
      1. Detrimental reliance on contract (i.e. selling other property to pay)
        1. Attempt to reach an equitable result and discourage opportunistic behavior

2. Estoppel = applies where unconscionable injury would result f/ denying enforcement of oral contract after one party has been induced by other seriously to change his position in reliance on contract or unjust enrichment would result.

c. Specific Performance: since all real property is unique, courts will use their equity powers to compel a buyer/seller to go through w/a deal, rather than award damages

d. Oral revocation: most states hold that SOF applies only to making of a contract affecting an interest in land and will thus allow subsequent oral modification or revocation of contract

e. Time of Performance: unless contract specifies time is of the essence, if contract is not performed on date called for in agreement, each party has a “reasonable” time in which to complete its performance

  • Specific Performance

Hickey v. Green(oral agreement (no SOF) D backed out, did not cash $500 check, P sued for specific performance)

Rule: Where there is a clear oral promise, partial payment, plus an act made in reliance, a land transfer is sufficient to overcome the Statute of Frauds requirement that contracts for the sale of land must be in writing.

  • Theory at issue here is the detrimental reliance and it is not satisfactory reliance on the contract b/c Green admitted to making the promise; doesn’t deny that there was an oral contract but argues that it wasn’t reduced to writing.

Part Performance Doctrine: only when seeking remedies of equity like specific performance

Courts all recognize this doctrine under one of two theories:

1) satisfactory evidence of contract theory: SOF can be ignored if there (past) behavior/conduct that was unequivocally referable to oral agreement. Is it so tied to the oral agreement such that all previous conduct could only support that there was a contract. Used when the making of a promise is not proved.

2) detrimental reliance (or estoppel) theory – amount of reliance by the buyer that makes courts reasonably certain that the other party has acted to his detriment on reliance of those acts

    1. Detrimental reliance is justified on 2 points:
    2. Sufficient evidence, proof of contract – evidentiary standpoint
    3. Equitable function – if someone has so changed his position based on promise, it would be unfair not enforce agreement.
    4. reliance = payment of purchase (alone wouldn’t be enough), taking possession, making valuable improvements that are irreparable, providing collateral services like maintenance of the property, etc. (None of this occurs in the Hickey case but ct still remands case to decide if specific performance but see Walker case which decides oppositely – actions of buyer was purely collateral & wasn’t necessarily induced by the seller)
    5. Ps reliance was reasonable b/c sold their own house. If they were held to that deal, Ps might suffer loss that may not be remedied by money damages.
    6. Fraud – if there is fraud, maybe order specific performance

Restatement (2nd) of Contracts, section 129 (1981): A contract for transfer of an interest in land may be specifically enforced despite failure to comply w/ SOF if it is established that the party seeking enforcement, in reasonable reliance on contract and on the continuing assent of the party against whom enforcement is sought, has so changed his position that injustice can be avoided only by specific enforcement.

    1. Requires that the party seeking specific enforcement must show reasonable reliance and that he has so changed his position that injustice can be avoided only be specific performance.

provides vague standards that is subject to judicial manipulation

this is the standard rule

in Hickey, court stretched rule to save buyer

but in Walker: no reasonable reliance b/c not foreseeable by sellercollateral act (act that is beside the contract, not w/in contract).

shows movement away f/rigid application of Restatement

Operative policy is to prevent opportunistic behavior.

 

  • Marketable Title: a title not subject to such reasonable doubt as would create a just apprehension of its validity in the mind of a reasonable, prudent and intelligent person, one which such persons, guided by competent legal advice, would be willing to take and for which they would be willing to pay fair value
  • Implied warranty in sale is that seller must convey marketable title to the buyer for the contract to be valid.
  • It is the default rule – parties can change it in the contract. “I take the property as is.”
    1. Title does not have to be perfect, but it does not have to be defective to be unmarketable:
      1. defect must be substantial in character
      1. purchaser may suffer injury as a result of the defect
    1. If contract is silent as to the standard, constructive presumption of marketable title

Lohmeyer v Bower

Rule: Marketable title to real estate is title that does not expose the buyer to litigation. Exposed to private as well as public lawsuits.

Rationale: A buyer may not rescind a contract to purchase land where the encumbrance on the title is the result of a municipal ordinance. A buyer may rescind a contract based on the existence of private covenants. A marketable title to real estate is one which is free from unreasonable doubt, and a title is doubtful if it exposes the party holding it to the hazard of litigation.

Analysis: There is a different standard for marketable title in the case of ordinances than there is for private covenants. In other words, if a zoning ordinance required houses in a certain area to be of a certain type, a buyer, absent an agreement otherwise, cannot rescind the contract. On the other hand, if there is a private covenant running with the land that houses must be of that type, a buyer may rescind.

    1. Marketable title v. Perfect Title
      1. settled expectations – people want a contract in which they wouldn’t expect litigation; market title good enough because there are other more important factors to consider
      1. prevent opportunistic behavior – prevent using title issue to mask other “shady” considerations
      1. systemic considerations – can’t expect perfection; eliminates non-serious defects from consideration
    1. Insurable Title – seller can protect him/herself by buying an insurance policy; policy protects buyer from transaction because if problems w/title do arise, insurance protects against loss
      1. buyer is only insured in instant transaction but not in future transactions
      1. parties can vary the scope of protection by using insurable title
      • Marketable title still better b/c when buyer then sells the property, he has to deal with any sorts of restrictions or lawsuits down the road. Future purchaser may not be ok with insurable title
    1. Adverse Possession
      • title resting in AP, where clearly established (by seller) will be held marketable
      • where seller’s claim is grounded in adverse possession seller can take whatever steps necessary to perfect the record title
        1. action to quiet title: place judgment from the action in the record
        1. action to cancel an outstanding encumbrance
        1. demonstrate the insurability of title
        1. problems:
          1. not res judicata to those not party to lawsuit
          1. not as marketable
    1. Record Title
      • “I seller warrant to provide record title.” If there are any titles based on adverse possessions will not be covered
    1. Lack of access to land affects market value not marketability of title (Sinks v. Karleskint)
    1. Private Restrictive Covenant – mere existence of PRC makes title unmarketable
      • Practical – M Title would pass under title search; PRC would be found in ordinary search
      • Formalistic – PRC considered an interest in land and an enforceable promise
    1. Municipal Zoning Ordinance – mere existence of MZO does not make title unmarketable; must be actual violation
      • Practical – MZO impractical to find in title search because they are not recorded in the same manner
      • Formalistic – MZO not an interest in the land
      • Economic – costs of title search would be unmanageable if zoning ordinances were included

 

  Mere existence Violation
Private Restrictive Covenant Title unmarketable (private claim) Title unmarketable
Municipal Zoning Ordinance Title not unmarketable (public claim) Title unmarketable

 

    1. Time is of the essence – unless parties expressly provide that time is of the essence, the court will give the parties a reasonable time for performance.
    1. Duty to Disclose Material Defects: 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 (Johnson v. Davis)
      • objective test – whether a reasonable person would attach importance to it in deciding to buy or
      • subjective test – whether the defect affects the value or desirability of the property to the buyer
      • Caveat Emptor: assumption that buyer has the ability to inspect premises for defects (courts are more willing to relax caveat emptor when defect decreases market value of the property)
      • Duty to disclose material latent defects (based on superior knowledge of the seller) – good faith and fair dealing
      • Statutory requirements – many states have statutes requiring seller to deliver to prospective buyers a written statement disclosing facts about the property
      • Off site physical condition v. transient social condition
      • Material defects include:
        1. Noise problems
        1. Psychological or prejudicial factors (murder in house) → stigma statutes, Meghan’s Law
        1. Hazardous waste disposal – strict liability for cleanup costs of a hazardous waste site upon any current owner or operator of a site, any prior owner or operator of a the site at the time it was contaminated
          1. Innocent landowner defense available if person who purchased land after contamination did not know or have any reason to know of the contamination

 

The Duty to Disclose Defects

Duty to Disclose

General Rule

(1) if seller knows of facts materially affecting value of property (2) and if facts are not readily observable and are not known to buyer — then seller has duty to disclose to buyer (new and used property)

(i) objective test of materiality: would a reasonable person attach importance to it in deciding to buy?

(ii) disclosure forms

(iii) statutes (legal and contractual responses)

Theories

1) misrepresentation/reliance

2) ethical: silence is unethical (and unfair) in the face of an inquiry or in regard to a known defect

3)economic: cheapest cost avoider

Scope: on-site and off-site

Implied warranty/Q.

Rules v. Standards

Judicial v. Legis.

 

On-site defects

Stambovsky v. Ackley, (haunted house)

doctrine of caveat emptor (buyer beware) imposes no duty on vendor to disclose any info concerning premises unless confidential or fiduciary relationship b/tw parties of some conduct by seller that constitutes “active concealment.” A maxim that a purchase must judge, test and examine the quality of an item for himself.

seller had done a lot to create defect (ghosts) so she had duty to disclose

there was an “as is” clause; refers to tangiblephysical matters, not things of paranormal matters

clause does not apply to matters that are particularly in the knowledge of seller

  • Ask what a reasonable person would think needs to be disclosed

Rule: Where a seller has created a condition that materially alters the value of the contract for sale of real property, and the condition is uniquely within the knowledge of the seller and unlikely to be discovered by a careful buyer, failure to disclose that condition creates a basis for rescission as a matter of equity.

Dissent: This court should not overturn the doctrine of caveat emptor because of the purported existence of ghosts.

Analysis: The court’s decision rests upon the idea that the policy reasons for the doctrine of caveat emptor are not met in the case of a haunted house. The court finds that the existence of ghosts is a material issue in the sale. And the court implies that it would be undesirable to require all buyers to bring in mediums or psychics to every house they purchase. For this reason, to best provide protection for the buyer and to avoid ridiculous consequences, the court is willing to make a substantial inroad into the destruction of the doctrine of caveat emptor.

 

Material Defect Known to Seller (caveat emptor is steadily being eroded)

defect must be “material” to be actionable

2 tests of materiality:

1) objective test of whether a reasonable person would attach importance to it in deciding to buy, or

2) subjective test of whether the defect “affects value or desirability of property to buyer”

    1. Impose liability for nondisclosure b/c it is a misrepresenation of the property
      • Buyer relied on the nondisclosure – Reliance

several states have enacted “stigma statutes” which shield sellers f/a failure to disclose psychological or prejudicial facts that might affect market value (such as murder or death)

    1. In CA: seller must disclose, among other things, any neighborhood noise problem or other nuisances.

• “innocent land owner defense” is available f/CERCA (amended in 1988 by SARA) to one who buys property after site is contaminated and does not know/have reason to know that hazardous substance was released on property

CERCLA (Comprehensive Environmental Response, Compensation, and Liability Act) imposes duty on buyer to make “all appropriate inquiry” into previous ownership if buyer is to escape cleanup liability

CERCLA – imposes s/l for cleanup costs of a hazardous waste site upon any current owner or operator of a site containing hazardous waste, any prior owner of the site at time it was contaminated, any generator of hazardous waste, and transporters of hazardous substances.

usually, “as is” clause in a sales contract will be upheld if defects are reasonably discoverable and no fraud

clause is not binding if fraud or concealment of info by seller

 

Johnson v. Davis (lie w/leaky roof – rejected doctrine of caveat emptor; not to be used to take advantage of P’s ignorance)

Rule: if seller knows facts materially affecting value of home that are not readily observable, seller has duty to disclose. Seller of real property have a duty to disclose to prospective buyers material facts affecting the value of the property, when those facts are not known or readily observable to the buyer.

common law: no liability for nonfeasance

Ds failure to tell Ps of latent defect would not be actionable

but, failure to disclose material fact when intended to induce false belief is close to an affirmative representation

Rationale: Where the failure to disclose a material fact is calculated to induce a false belief, the distinction between concealment and affirmative representations is tenuous. The doctrine of caveat emptor, however, relieves a seller from liability for concealing material facts. This notion is out of date and undesirable. A seller should not take advantage of a buyer’s ignorance. Therefore, where a seller of a home knows of facts that are material to the value of the property, and where these facts are not readily observable to the buyer, the seller has a duty to disclose these material facts.

 

merger doctrine = contract merges into deed, and once deed is accepted, it is deemed the final act of parties expressing terms of their agreement. B can’t sue S on contract terms after deed has been executed and delivered. Can only sue based on deed.

fallen into disfavor, many ways to get around it

not applicable to facts at hand unless question states otherwise

  • All obligations of the seller that accompany the contract are independent obligations of the property obligations. Buyers can sue sellers on property and contractual issues
  • Contract issues and deed issues are separate and can sue on both now.

 

Off-site defects

Memo regarding Strawn case (sex offender moving to neighborhood)

what legal analysis?

1) Materiality: is it sufficiently material?

a reasonable person would attach importance to the info in deciding to buy

court should take judicial notice.

2) not known to buyer? buyer usually does not know

3) readily observable by buyer? buyer usually does not know

4) seller knowledge?

5) (off-site) physical condition? yes, sex offender’s presence in neighborhood is physical

arguments distinct Strawn

sex offender may be considered transient social condition; not rooted in land like toxic wasteland in Strawn

recommendations for State Board to limit their personal liability in this situation:

3) brokers could lobby for Megan’s Law (posting at police station) for this purpose

if issue goes to State SC and court rules in favor of extending such a duty to seller and real estate brokers,

after Strawn case, home-sellers in NJ went to legislature to pass a statute to make all city gov’ts to disclose all factors that may offset property value

home-sellers simply need to say: “there’s list of conditions at police station, go look” to absolve liability

 

Warranties from Seller

common law: rigidly applied doctrine of caveat emptor

many modern courts overruled CL and held there is implied warranty that bldg is fit for use contemplated by both parties

this warranty is often implied in housing that was fairly recently constructed

Uniform Land Transactions Act: not yet adopted by any state but likely to be influential on judicial decisions

Uniform Land Transactions Act §2-309(b) (1975) provides 2 implied warranties against those who are in “business of selling” real estate

1) warranty of suitability: property is suitable for its intended purpose; arises in case of used and new buildings

2) warranty of quality: applies to new construction only

broader than warranty of suitability in that defects may not be so serious as to make property unsuitable for its intended purpose, but may nonetheless breach IWQ.

IWQ runs w/ land to subsequent buyers

 

Implied Warranty of Quality

Suits on IWQ can only arise after closing has taken place and Π has accepted deed.

    1. Privity of contract is not necessary for a subsequent purchaser to sue a builder or contractor under an IWQ for latent defects which manifest themselves within reasonable time after purchase and which cause economic harm
      • п must show defect caused by ∆’s workmanship
      • standard – workmanlike manner and in accordance with accepted standards
    1. Implied warranties are not created by an agreement b/n the parties but are said to be imposed by law on the basis of public policy
    1. Arise by operation of law because of the relationship b/n the parties, nature of the transaction, and the surrounding circumstances
    1. Policy motives:
      • intended to protect innocent buyers
      • equally applicable to subsequent purchasers
      • latent defects will not manifest for a considerable period of time
      • increasingly mobile society
      • subsequent purchaser has little opportunity to inspect and little experience and knowledge about construction
      • builder already owes a duty to construct a home in a workmanlike manner
      • want to discourage sham sales
      • as better risk bearers

 

Implied warranty of (workmanlike) quality

Lempke v. Dagenais, (poor construction of garage)

privity of contract is not necessary b/cIWQ is independent (of contract), and has a life of its own. Basic expectation by P2 that dwelling will be suitable.

Rule: A subsequent purchaser of property may recover f/ one performing defective contractor services for prior owner if work contained latent defects not apparent at time of purchase (under theory of breach of IWQ)

  • IWQ is notgenerallywaiveable. Limitations: must be latent defect not discoverable by reasonable inspection, and must be within a reasonable time; IWQ only available when P2 is suing a builder/vendor; P has burden to show that defect was caused by D’s workmanship.

Rationale:

  • Privity:
  • The implied warranty is a public policy doctrine that exists independently of any legal theory or of any agreement between the parties. The purposes of implied warranties are to protect purchases from latent defects in their houses. To so protect purchasers, we hold that the privity requirement of implied warranty of quality should be abandoned, where a subsequent purchaser suffers economic loss from the latent defect. To hold otherwise would leave innocent homeowners without a remedy. It would not be fair to relieve the contractor from liability for unsound workmanship simply because a house has changed hands. Finally, the builder is in a better position to prevent the damage from occurring.
  • There are several overriding policy reasons behind implied warranties that support extension of the doctrine to successors in title. First, latent defects in a house often do not manifest themselves for a long period of time. Second, society is changing. People are less likely to stay in one place for long periods. Therefore, the ordinary buyer is not in a position to discover latent defects. Third, subsequent purchasers have little opportunity to inspect, and they have little knowledge about construction. In today’s society, people rely on the craftsmanship of builders. Fourth, there is no unfairness to the builder, because he has a duty of workmanship to the owner. Fifth, insulating only the first buyer might encourage “sham” first sales to protect contractors from liability.
  • Issue of whether the extension of the implied warranty of workmanship and quality to successors in title should extend to purely economic loss.
  • Most courts that have allowed recovery for economic loss have done so because of the difficulty of drawing the line between property damage and economic loss. We agree with these courts, finding the distinction between economic loss and personal injury or property damage is arbitrary. Note that there are limitations on our holding. We do not expect builders to act as insurers. The extension of the doctrine is limited to latent defects, where the buyer did not and, with an adequate inspection, should not have reasonably known of the defect. Additionally, the extension is limited to a reasonable period, and the P bears the burden of showing the defect was a result of the builder’s poor workmanship. The duty to builders is to perform competently, according to acceptable standards.

 

  • Remedies

3 remedies available to the non-defaulting party, whether the buyer or the seller:

    1. Money (damages)
      • Compensatory – Loss of bargain (K price – Open market price)
        1. Difference between the contract price and the fair market value of the property at the time of the breach (Jones v Lee)
        1. Most but not all jurisdictions recognize
      • Special Damages – May also be allowed if they meet the standard.
        1. Jones: cost of inspecting solar system and interests on seller’s mortgage loan.
      • Punitive damages: very rare
    1. Recession
      • Retention of the deposit (sellers) or restitution of the deposit (buyers)
    1. Specific Performance – if money damages are inadequate, court may grant specific performance as an equitable remedy

 

Loss of the bargain rule: the doctrine that damages for a breach of a contract should put the injured party in the position it would have been in if both parties had performed their contractual duties.

 

Jones v Lee

Rule: Under the loss of the bargain rule, a seller’s damages are measured by the difference between the purchase price and the market value of the property at the time the contract was breached.

Rationale: When a purchaser defaults on a real estate contract, the seller generally has three options (see above). Here, P elected to seek damages. New Mexico law follows the loss of the bargain rule, under which the seller’s damages are measured by the difference between the purchase price and the market value of the property at the time the contract was breached. The evidence here clearly demonstrated the purchase price of the property was $540,000. The P failed, however, to present evidence that the market value of the property was $610,000 at the time of the breach. While the parties stipulated by contract that the market value was $610,000 at the time of the contract, no evidence was offered that the value of the home remained $610,000 when the breach occurred.

  • Special damages may be recovered for those losses that are the natural and probable consequences of the breach and were known or reasonably foreseeable by the parties at the time of the contract. Included in the special damages awarded by the court are charges for an inspection of the solar system, a consultation on the solar system, and the heating warranty incident to the sale of the home. Because these charges were contemplated by the terms of the contract, the court correctly found them a reasonably foreseeable consequence of the breach. Likewise, the additional mortgage interest P paid due to the delay in selling the home is a reasonably foreseeable damages.

 

Kutzin v Pirnie: (minority rule)

Rule: If a party justifiably refuses to perform on the ground that his remaining duties of performance have been discharged by the other party’s breach, the party in breach is entitled to restitution for any benefit that he has conferred by way of part performance or reliance in excess of the loss that he caused by his own breach.

Rationale: At common law, when a buyer made a partial payment toward the purchase of real property and breached the contract without lawful excuse, he was not entitled to recover the deposit regardless of the actual damages suffered by the seller. More recently, however, a judicial recognition of the unfairness of the common law rule has emerged. Under this modern movement, a buyer is entitled to restitution of any deposit unless:

  • The seller has not rescinded the contract and maintains a right of specific performance against the buyer
  • The buyer has not shown that the deposit exceeds the seller’s actual damages
  • The contract expressly provides that the seller may retain the deposit in the event of a breach, and the facts demonstrate that the retention serves as liquidated damages and not a penalty or forfeiture.
  • Section 374 of the Restatement (second) of Contracts illustrates this principle: “If a party justifiably refused to perform on the ground that his remaining duties of performance have been discharged by the other party’s breach, the party in breach is entitled to restitution for any benefit that he has conferred by way of part performance or reliance in excess of the loss that he had caused by his own breach.”

To the extent that New Jersey law follows the common law rule, it is overruled and the modern trend of the Restatement is adopted. Applying this rule, D is entitled to restitution of any portion of the deposit exceeding P’s actual damages, given the absence of a liquidated damages or forfeiture clause in the contract.

 

 

The Deed (document that makes the transfer happen) — Conveyance

1. Requirements

2. Warranties of Title

3. Breach of Covenants

 

Delivery: to make a deed effective, deed must be delivered w/ intent that it be presently operative

 

Warranties of Title (deed and warranties are intended for buyer to get a legally effective title)

3 types of deeds:

1. General Warranty Deed (GWD) = warrants title against defects, whether they arose before or after grantor took title

 

6 covenants in GWD:

present covenant of seisin – grantor owns land/estate

present covenant of right to convey – it’s possible for person w/ seisin not to have right to convey, for ex. a trustee.

present covenant against encumbrances – encumbrances = mortgages, liens, easements, restrictive covenants, etc.

 

encumbrance = every right to or interest in the land which may subsist in 3d persons, to the diminution of value of the land, but consistent w/ the passing of the fee by conveyance.

 

future covenant of general warranty – grantor will defend against lawful claims and compensate grantee for any loss grantee may sustain by assertion of superior title

future covenant of quite enjoyment – identical to covenant of general warranty; often omitted f/ GWDs

future covenant of further assurances – grantor will execute any other documents required to perfect title

 

present = can only be broken at time deed is delivered. COA on present breach usually subject to SOL starting f/ date of delivery of deed.

future = not breached until grantee or successor is evicted, buys up the paramount claim, or is otherwise damaged.

 

2. Special Warranty Deed = warrants only against grantor’s own acts but not acts of others. Ex. – If defect is a mortgage on land executed by grantor’s predecessors in title, grantor is not liable.

3. Quitclaim Deed (QCD) = no warranties of any kind

 

habendum clause = (“to have and to hold”) usually in modern deeds. Not necessary, but may limit the estate granted. Used in feudal times to declare which lord held land and by which services.

 

The Deed:

forgery – forged deed is void. Grantor whose signature is forged to a deed prevails over all persons, including subsequent BFPs f/grantee who do not know deed is forged.

fraud – deed procured by fraud is voidable by grantor in an action against grantee, but a subsequent BFP (bona fide purchaser) f/ grantee who is unaware of fraud prevails over grantor. (2 innocent persons; law places loss on person who could have best prevented loss to the other)

indenture – (pre-Xerox) deed made f/ sheepskin torn into 2 pieces, one for grantor and one for grantee, which fit together to prove authenticity.

 

Present vs. Future Covenants

Brown v. Lober, (mineral rights — good example of limitations of usefulness of warranty deeds)

  • Sued under the future covenant of quiet enjoyment
    1. Argue a breach of covenant b/c they can’t sell their right to the minerals b/c someone else is claiming superior title and so their title is damaged and that is constructive eviction
    2. BUT – the ct rules that the covenant of quiet enjoyment wasn’t breached b/c there was no interferences with the Brown’s right of possession of the minerals
    3. Simply by someone having a superior title out there doesn’t constitute a breach of that warranty
    4. To sue on this – need some actual claim to possess the land from the rightful owner
  • Didn’t sue under a present covenant b/c the sol had expired. Present covenant is breached when the deed is transferred
  • Also could have sued under covenant of general warranty
  • Couldn’t argue AP of minerals b/c they hadn’t done anything with the minerals – they hadn’t adversely possessed them

Rule: mere existence of a superior title does not constitute a breach of CQE.

  • A covenant of quiet enjoyment can be breached by constructive eviction, but unless the covantee’s right of possession is interfered with, there is no constructive eviction, and, therefore, no breach of the covenant.

General rule: easement which is a burden upon estate granted and which diminishes its value is a breach of CAE, regardless of whether grantee knew about it.

Intention to exclude encumbrance should be manifested in deed itself.

Rationale: No one tried to remove the minerals from the ground or do anything else to inform the community that the mineral interest was being exclusively used or enjoyed. The mineral estate of the land in this case was vacant. Likewise, the Ps could have taken peaceable possession of it at any time, without any hindrance from anyone else. Until the Ps met such resistance in exercising this right of possession, there is no breach of the covenant of quiet enjoyment. Granted, there is a breach of the covenant of seisin involved here that results from the Bosts’ deed to the Ps, but the Ps did not raise a suit as to this issue within the 10 years’ sol. Moreover, the fact that Consolidated Coal modified the contract with the Ps does not constitute a breach of the covenant of quiet enjoyment.

Analysis: One way a person can be constructively evicted is by being forced to buy superior title to keep from actually being physically evicted from the property. Another form of constructive eviction occurs when an owner is enjoined from using the property in a way that violates an earlier restrictive covenant on the property. If any of these situations were to arise, then to owner’s right of possession would be considered disturbed, and thus a future covenant would be breached. Because some form of eviction is needed for breach, even if not an actual loss of possession, the sol against bringing an action to challenge the breach would not run until the date of the eviction. Not that, in this case, there was no eviction, so the sol was never really an issue.

 

Latent land use violation

Frimberger v. Anzellotti, (wetland violation – D didn’t know)

  • Claim a breach of a present warranties under doctrine of encumbrances
  • Certainty in title
  • Rule: latent violation of a land use statute/regulation existing when conveyance is made is not a breach of CAE so Frim cannot get damages. Policies: concern for certainty in title– latent violation can’t be uncovered by title search or physical examination of property; cheapest cost avoider was lawyer.
  • A latent violation of a restrictive land use statute does not constitute a violation of the warranty against encumbrances.
  • Smart growth laws – stop suburban sprawl; comprehensive regulation.

Rationale: D did not know of the defect in the property; they were discoverable only by consulting the DEP. Additionally, prior cases in Conn have held that for a title to be rendered unmarketable, the defect must subject the P to a real and substantial probability of litigation and loss. Here, the DEP, the entity charged with enforcement of the regulations, has taken no official action, and has even granted P with a means to remedy his problem. Although the trial court awarded damages based on projected costs, there is no true means of awarding damages here, because P has not yet been subjected to any real injury. Finally, P, an attorney and land developer, could have taken steps to protect himself before buying the property. He could have required a survey to ensure compliance, or he could have inserted protective provisions in the deed to protect him from liability for violations. The court based its finding on its determination that D breached the warranty against encumbrances. Because we have found he did not breach the warranty against encumbrances, there was no innocent misrepresentation.

Analysis: Recall the case of Lohmeyer, where the court found that a prospective buyer could rescind his agreement upon a finding that the property violated a local zoning ordinance. These cases appear to be inapposite. In that case, the court allowed the buyer to rescind the contract because he was subject to a real and substantial probability of litigation or loss at the time of the conveyance. This case can be distinguished for two reasons. One, the state and municipal violations at issue here are latent; in other words, they do not show up on land records and are not known by the seller. Secondly, the agency charged with enforcement has taken no official action. Based on the facts of Lomeyer and the language of the court’s opinion here, it appears that both of these conditions must be met to be protected from rescission.

 

Executory Contract (contract that is not finished yet) Present Covenant (Closing Stage)
title unmarketable Covenant Against Encumbrances
Violation of zoning ordinance = title unmarketable broader applicability; B can rescind (latent) violation of zoning ordinance is not an encumbrance (this is where people sue for breach, looking for damages)
Violation of building code does not make title unmarketable; B can’t rescind. violation of building code is not an encumbrance, no breach of CAE

 

Why difference for violation of zoning ordinance?

– standard for unmarketable title is relaxed after sale had closed and is final.

contract stage – Court trying to figure out when B should be able to rescind. B/S can limit losses at this stage by correcting violation or finding another buyer.

Post-closing – Court has to figure out when B should be able to sue for breach of relevant covenant. Extent of S’ liability is almost unlimited, b/c B has no incentive to keep dgs low. S can’t mitigate by finding another B.

How do we determine b/tw zoning ordinances and building code? go to books to see what they’ve called it. If it is a zoning ordinances look at analysis in Lohmeyer. If it is a building code buyer can’t rescind.

 

Damages:

  • Breach of Present covenant of seisin the return of all or a portion of purchase price, should use actual purchase price to avoid litigation
  • CAEdifferent, if encumbrance is easy to fix, measure of damages would be cost of removal

if encumbrance is not easy to fix, diff of value of land w/ and w/o encumbrances

damages are calculated on date of breach (date of delivery would be date of closing

 

 

Remote grantees

Chose in action – a right of bringing an action or right to recover a debt or money.

Covenant of Seisin – An assurance to the purchaser that the grantor has the very estate in quantity and quality which he purports to convey.

Seisin – possession of real property under claim of freehold estate.

Assignment: Transfer by a party of an intangible property rights

 

Rockafellor v. Gray, (implied assignment to H&G)

  • Is Dixons chose of action impliedly decided to H&G? Yes (but this is the English, minority rule)

Amount of damages is determined by amount of consideration b/w original grantor and original grantee ($4,000).

Rule: The covenant of seisin does run with the land, and is broken the moment the conveyance is delivered, becoming a choose in action held by the covantee.

  • If breached at all, breached when delivered – present covenants do not run with the land b/c it can be breached at conveyance

b/c on day Connelly conveyed land to Dixon, he had no title and no possession of premises, cov of seisin was breached

covenant ran w/ land to H & G, Dixon’s successors

Rationale: Although most American courts hold that the cov of seisin does not run with the land, we adopt the English rule. The English Rule states that the covenant of seisin does run with land, and is broken the instant the conveyance is delivered, and then becomes a chose in action held by the covenantee in the deed. A deed by the covenantee operates as an assignment of such chose in action to a remote grantee. The remote grantee, on the basis of that assignment can then maintain an action against the grantor in the original deed. The cov of seisin exists as a chose in action.

SC previously adopted minority rule (English/minority rule says present covenant runs w/land, and is broken the instant conveyance is delivered) and held that a warranty of seisin (present) runs w/ land to remote grantee and is broken the instant a defective conveyance is delivered (American/majority rule says that present covenant does not run w/land but w/interest holder)

what’s the issue w/damages?

Connelly in fact received no consideration for that $4,000 deed (recited consideration was $4000, actual consideration (Connelly’s benefit) was 0)

damages are actual purchase price; limited to amount paid by original grantee to original grantor ($4,000) + interest

H&G cannot recover amount it paid to Dixon ($7,000)

amount of recited consideration ($4000) sets damages in this case

proof of actual consideration would be admissible only in suit b/tw grantor (Connelly) and original grantee (Dixon)

why?

reliance argument that court offers: right to rely on the consideration ($4000) cited

typically deeds contain specified nominal consideration

consideration a necessary element for contract, but not for deed

so don’t have to specify consideration

Connelly could have avoided lawsuit by stating a nominal ($10 p. 612) consideration

2 important points

1) implied assignment theory

2) damages rule necessarily restricts attractiveness of avenue for remote grantee

future covenant runs w/land to all successors in interest of grantee (ALWAYS, whether minority/English/Rockafeller or majority/American/non-Rockafeller rule), present covenants don’t (according to majority American rule)

present covenants don’t run w/land, if breached they are breached at moment of conveyance

express consideration in deed is only a factor when remote grantee is suing original grantor for breach of cov of seisin

recited consideration is original purchase price (purchase price of a house), actual consideration is $ that actually exchanged hands (down payment on a house)

 

Remedies for breach of covenants: (present and future)

1) general rule: grantee’s purchase price + interest + costs

2) CAE (present covenants) – $ paid to remove defect or comp. for decrease in FMV caused by defect

3) breach of future covenants – remote grantee suing original grantor: damages = purchase price paid by original grantor

  • Original grantee suing original grantor purchase price plus interest. (breach of cov. of seisin, and QE)

4) breach of present covenants – remote grantee suing original grantor: (Rockafeller measure of damages:) limited to amount of consideration recited in deed f/original grantor to original grantee

  • Original grantee suing original grantor amount B would have to pay to remove encumbrance.
    1. What if B doesn’t want to give up E difference b/tw value w/ encumbrance and value w/o encumbrances.

 

 

PRIVATE LAND-USE CONTROLS: EASEMENTS, LICENSES, COVENANTS, & EQUITABLE SERVITUDES

 

5 types of land-use rights:

Easement (Affirmative) A is given the right to enter upon B’s land.
Profit A is given the right to enter upon B’s land and remove something attached to land.
real covenant or equitable servitude (Negative Easement) A is given the right to enforce a restriction on the use of B’s land.
“” A is given the right to require B to perform some act on B’s land.
“” A is given the right to require B to pay money for upkeep of specified facilities

 

  Easement License Lease
Legal Interest Use Use Possession
Revocable? NO, but you can terminate an E Yes, but see Holbrook, irrevocable through estoppel NO, but can be terminated

 

Easements: legal interest that gives you right to use property, licenses, equitable

  • A nonpossessory right to use land that is under the possession of someone else

Historical Background

profits a prendre = rights to take off the land things that were thought of a “part” of the land (e.g., timber, minerals, wild game and fish)

Creation of Es

E & Profit = interest in land. Governed by SOF. Creation of E generally requires written instrument signed by party to be bound.

  • Non possessory interest for use of land; because it is an interest it falls w/in scope of SOF (must be written)
  • Affirmative: the right to enter or perform an act on the servient land
  • Negative: forbidding one landowner from doing something on his land that might harm the neighbor

Easements: interest in property: non-possessory right to use land that belong to someone else

must be in compliance w/Statute of Frauds

Appurtenant vs. Gross

ExpressEasements by Reservation or Grant

Implied

Prior existing use

Necessity

Prescription

 

Easement: A nonpossessory right to use land in possession of someone else

License: Not an interest in land and no required writing; revocable but still an interest in land

NEED:

  • Invitation to access (express or implied)
  • Expenditure of $ or labor on part of licensee in good faith reliance on that invitation
  • Knowledge or a reasonable expectation on part of licensor that reliance will occur
    • some courts tweak: doesn’t need knowledge as long as there is a reasonable expectation
    • a right to use
    • usually revocable (when irrevocable, more like an easement)

 

  • easements vs. licenses
  • most imp: licenses are not an interest in land, easements are
  • in formalistic understanding, licenses can be revoked at any time, easements can not
  • an easement may terminate, but it is irrevocable

Licenses

  • Not an interest in land. Does not have to be written. A right granted to allow someone to conduct an activity which he could not perform lawfully without the license. Right is unassignable and revocable at the will of the licensor.
  • A license becomes irrevocable by:

Estoppel: Majority: if licensee has made substantial improvements on licensor’s or licensee’s land in reliance on the license. Very similar to easement, just not written (Holbrook). Minority: License is still revocable. Must be written.

A license coupled with an interest becomes irrevocable: e.g. when you own a car on someone’s lot. Also, a profit. Similar to easement, but not written.

Irrevocable for however long licensee needs to reap the fruits of his expenditures.

  • Restatement 3rd comment e: normally the change in position that triggers application of the rule stated in this subsection is an investment in improvements either to the servient estate or to other land of the investor
  • Where license includes the right to make improvements, the licensor may not revoke the license after the licensee has exercised the privilege and made improvements at considerable expense (Holbrook v. Taylor – right of way)
  • License continues for so long a time as the nature of the license calls for

 

  • Creation
    1. Invitation to access (can be express or implied)
    1. Expenditure of $ or labor in reliance of invitation (must be good faith)
    1. Knowledge on part of licensor that reliance will occur; reasonable expectation is sufficient

Easement Appurtenant

    1. Transferable – attaches to the dominant tenement and goes with it to successive owners
      1. easement appurtenant to one parcel of land may not be extended by the owner of the dominant estate to other parcels owned by him – misuse of easement (Brown v. Voss)
    2. Attached to land
    3. Benefits owner in use of land

 

  • Easement in grosspersonal, does not attach to the land, no dominant tenement
  • Transferable
  • assignable where the parties to its creation evidence their intentions to make it assignable; or where commercial (Miller v. Lutheran – bathing rights of camp)
  • Not attached to land
  • Benefits owner personally

common law rule (rejected by Willard) = A reservation allows a grantor’s whole interest in property to pass to a grantee, but revests a newly created interest in grantor; (grantor could not, by reservation, vest an interest in land to benefit a 3rd party)

majority of JDs follow the common law b/c .

certainty

it’s easy to apply common law rule, so why change it

reliance

These arguments have been rejected b/c courts have moved f/ formalism to intent.

Intent analysis – look at instrument, context

language/text of deed — easement of appurtenant: attached to land

court favors easement appurtenant over easementin gross if ambiguous (may look to constructional preference and fairness)

duration: F/S determinable

this is an easement of appurtenant in F/S determinable

must determine duration b/c easement is an interest in land (in relation to estates)

reservation = a provision in a deed creating some new servitude which did not exist before as an independent interest.

exception = a provision in a deed that excludes f/the grant some pre-existing servitude on land.

Difference b/tw reservation and exception isn’t really important anymore.

regrant theory = an E “reserved” by the grantor is not a reservation, but a regrant of an E by grantee to grantor.

  • A deed from “O to A and her heirs, reserving an E in O,” was treated as if it were 2 deeds. The deed grants A a f/s; then A is treated as granting an E back to O.

 

reservations in favor of 3rd parties

Willard v. First Church of Christ, Scientist, (church parking on Sundays)

SC focuses on intent of grantor: should override formalistic and policy arguments.

  • Also a determinable fee so it is an easement apertantent in fee simple determinable
    • Seems to run with the land so “for church purposes” could apply to the use by a dif church’

Rule: A grantor can reserve an easement in property for a person other than the grantee

Rationale: We reject the old common law rule that stated that such a reservation of an interest was not possible. The main objective should be carrying out the intent of the grantor. Thus, property grants are to be treated in the same way as contracts. Dealing with grants under the more rigid feudal approach would lend to unfair results. This is because the original grantee has likely paid a reduced price on the property in exchange for allowing certain use of the property to continue. P has not presented any evidence that he or any others have relied on the common law rule when purchasing property. Neither can P claim he was prejudiced b/c the lot had not been used by the D for an extended period of time. Indeed, the D used lot 20 for parking throughout the period when P was trying to buy it.

Analysis: most Js today hold that an easement of this kind cannot be held in favor of a third person, as was done in Willard, generally because a third party would have no interest in the land begin conveyed from which the third party could reserve an easement in the first place. Many legal commentators are critical of the predominate’s ban on third party easements, which the Third Restatement of Property also refused to adopt. While the question is by no means completely resolved, grantors may avoid this problem of reservation by simple making explicit grants of the given property and of the desired easement in one deed.

  • Easement appurtenant –Refers specifically to property; attached to land, viewed as part of land; attached to a dominant tenement English and American law as to whether a grantor, particularly one who owned a neighboring parcel of land, could maintain an easement on the granted property after its conveyance. Over the years, these concerns have been eased, and it is generally settled that such an easement can be reserved in the instrument of conveyance (e.g., a deed),. Likewise, most Js today hold that an easement of this kind cannot be held in favor of a third person, as was done in Willard, generally bc a third party could reserve an easement in the first place. Many legal commentators are critical of the predominant ban on third party easements, which the Third Restatement of Property also refused to adopt. While the question is by no means completely resolved, grantors may avoid this problem of reservation by simply making explicit grants of the given property and of the desired easement in one deed.

if DT is subdivided, easement appurtenant attaches to each separate parcel unless this extension would overburden ST

 

Implied Easements:

  • Prior existing useVan Sandt case (sewer case)
    • Elements
      • Severance of title to land that is held in common ownership at one time.
      • Has to be an existing, apparent, and continuous use when severance occurred.
      • There has to be a reasonable necessity for use at time of severance
    • Intent: In most of these cases where an E wasn’t specifically mentioned, it was no doubt the intent of grantor for the use to continue probably a mistake or an oversight.
  • Easement by necessityOthen Case (eroded/muddy road)
    • Requirements:
      • Severance of title in land held in common ownership
      • Strict necessity has to exist at time of severance

A is not entitled to an easement unless A’s and B’s parcels were formerly one and the division caused A’s parcel to be landlocked

    • Strict (not reasonable) necessity — land must be landlocked and does not touch public road
    • Distinctions f/ prior existing use.
      • No prior existing use required for EBN.
      • Strict vs. reasonable necessity
      • E for prior existing use continues indefinitely, EBN only continues so long as it is necessary.
    • Rationale: intent of grantor grantor usually grants whatever is necessary for grantee to use and enjoy land. Economic don’t want land to be landlocked, not used to its fullest extent.
  • Prescriptive easement(Similar to AP)
    • Requirements:
      • Use was open and notorious
      • Use was adverse and under claim of right
      • Use was continuous and uninterrupted for statutory period
    • Differences f/ AP
      • Doesn’t give absolute title just right to use land
      • Exclusivity requirement relaxed – Claimant has to prove they are using it, independent of use of others.
        • Not requiring a show the claimant is only entity using the road, unlike AP. Need to show that your use is independent of the use of others. (not using road in conjunction with something else; right is linked to others – like using it to get to a country club
  • Public Prescriptive Easements
  • May be obtained by long continuous use by the public under a claim of right (adverse right being claimed by general public, not individuals)
  • Implied dedication: landowner evidences an intent to dedicate and the state accepts by maintaining the land used by the public
  • Public trust doctrine: the ownership dominion and sovereignty over land is vested in the State in trust for the people – collision b/ right to exclude and public rights 

 

equity

Van Sandt v. Royster, (sewer case)

  • Prior existing use Easement
  • Implied easement arises b/c there was an apparent and continuous use of lot 19 of sewer line that parties would expect to continue when lot was divided

Rule: The implication of an easement will depend on the circumstances under which the conveyance of land was made, including the extent to which the manner of prior use was or might have been known by the parties; each party will be assumed to know about reasonably necessary uses which are apparent upon reasonably prudent investigation; an easement may be implied for a grantor or grantee on the basis of necessity alone.

Court held Π had notice of easement when he purchased land. Court says apparent and existing use that parties expect to use once land is divided — easement implied f/a prior existing use.

Quasi-Easement = an owner may make use of one part of his land for benefit of another part of his estate. “Quasi” b/c an owner can’t have an E in his own land.

distinction b/tw English and American approach

Eng: for implied reservation of an easement, must show strict necessity b/c an implied reservation contradicts a grant

if you want to prove an implied grant, need reasonable necessity (b/c does not contradict conveyance)

Courts only imply E by reservation in cases of strict necessity.

America: most reject Eng rules and adopt modern streamlined approach:

if a party want to prove easementimplied f/prior existing use, must have:

1) severanceof title to land held in common ownership (unified parcel then divided)

  • Van Sandt meets requirement – held in common ownership then severed

2) existing apparent and continuous use when severance occurs (at the time of the severance – not later)

apparent can be discoverable upon reasonable inspection

  • Continuous – no breaks or lack of continuance

3) reasonable necessity for the use at time of severance

reasonable necessity means use is convenient or beneficial to use and enjoyment of the one trying to retain easement

express easements disappear when dominant and servient tenements come into same ownership. It will not be revived by a severance of the united title into the former DT and ST.

Strict scrutiny: Absolutely necessary to the use and the enjoyment of the dominant estate

Reasonable: Convenient and official

 

RS Comment: effect of prior use as a circumstance in implying, upon a severance of possession by conveyance, an E results f/ inference as to intention of parties. To draw such an inference, prior use must have been known to parties at time of conveyance, or, at least, have been w/in possibility of their knowledge at the time. Each party to a conveyance is bound not merely by what he intended, but also to what he might reasonably have foreseen the other party to the conveyance expected. Parties to a conveyance may, therefore, be assumed to intend continuance of uses known to them which are in a considerable degree necessary to the continued usefulness of land.

 

easement by necessity

Othen v. Rosier, (muddy road)

Rule: An easement can be created by implied reservation only when it is shown that there was unity of ownership between the alleged dominant and servient estates, that the easement is a necessity and not a convenience, and that the necessity existed at the time the two estates were severed; an easement by prescription can only be acquired if the use of the easement was adverse.

court says no easement by necessity b/c must show

((1)must show unity of ownership b/tw DT and ST) or severance of title to land held in common ownership

P did not show road was (2) a strict necessity for implied easement, but perhaps merely convenience (w/o easement, land would be entirely landlocked & useless)

P did not show (3) strict necessity existed at time of severance of 2 estates

adopts strict necessity b/c intent and efficiency

for P, license argument

built house w/reliance to use road, but TX follows NY view, where license is revocable so great risk

Most courts, like the court in Othen, require strict necessity but some courts have granted an EBN where access to the land exists but it is claimed to be inadequate, difficult, or costly.

 

fiction of the lost grant = If a use was shown to have existed for more than 20 years, it was presumed that a grant of an E had been made and that the grant had been lost. The presumption of grant could not be rebutted by evidence that no grant had in fact been made.

Lost grant theory draws a confusing distinction b/tw acquiescence and permission.

owner is presumed to consent or acquiesce in the use. But, if the use is by permission of the owner, it’s not adverse.

To secure and EBP under lost grant theory, you must show that the use was not permissive and also that the owner acquiesced. Letter disapproving use rebuts any claim of acquiescence or grant.

In a JD following the fiction of the lost grant, to prevent an EBP from being acquired, the owner must effectively interrupt or stop the adverse use.

 

public prescriptive E = can be obtained by a long continuous use by public under a claim of right. Landowner must be put on notice, by the kind and extent of use, that an adverse right is being claimed by general public, not by individuals.

  • Essentially the same as AP – but right to use land owned by someone else

theory of implied dedication = used by some courts to find public Es rather than prescription. Owes something to the lost grant fiction, b/c it seeks a substitute for a grant in an implied dedication. Can be used where landowner evidences an intent to dedicate and the state accepts by maintaining land used by public.

 

easement by prescription

Matthews v. Bay Head Improvement Association, (access to beach)

Court held that public has a right to gain access through and to dry land area not owned by a municipality but by a quasi-public body (D). This right is ancillary (supplementary) to public’s right to enjoy tidal lands.

Rule: public must be given both access to and use of privately-owned dry sand areas of beach as reasonably necessary.

right to exclude is not absolute

public trust doctrine = ownership, dominion & sovereignty over land flowed by tidal waters, which extend to the mean high water mark, is vested in the state in trust for people. (public uses: navigation, fishing, and recreational, including sunbathing)

What’s the proper scope of PTD?

  • Matthews – restrict PTD to recreational, public uses
    • Commercial uses would not be an accepted scope
  • Other cts limit recreation even more narrowly to things like fishing and river navigation
  • General Q of scope – how firmly we hold to this exclusionary right? Is it frozen in time or is it something that needs to be redefined and to take into account competing social concerns?
  • What is the nature & purpose of private property?
  • Arguments for Public trust Doctrine
  • Important to preserve certain resources for public use
  • Private property ownership can lead to exploitation of the resource in ways that don’t serve the public good
  • Private ownership tends to promote unequal access
  • Arguments against Public trust Doctrine
  • Public rights may not lead to conservation – property owned in common may lead to more
  • Private use may lead to a more highly valued property and better use of the property
  • Opening up access to everyone may unnecessarily interfere with the owners control and private property owner’s privacy

 

assignability of an easement in gross

Miller v. Lutheran Conference & Camp Assoc. (devisability of easements of lake use)

  • Is an easement in gross assignable/transferrable?
    • The easement is assignable b/c if you look at the intent as expressed, there was an exhibited intent to make the lake assignable down the road
    • Ct says obvious dif b/w easements for personal enjoyment as opposed to commercial – so personal easements may not be assignable
    • Easement to bathe was an implied easement that developed by prescription so evidence is less firm to prove its existence
    • Final (modern) take with Restatement is that it is transferable unless the parties intended otherwise
  • Rule: When two or more persons own an easement in gross, the easement must be used as “one stock,” meaning that any action involving the easement must be made with common consent of all the owners.

benefits/burdens of appurtenant easements (attached to land) pass auto in assignees of land to which they are appurtenant (if parties so intend and burdened party has notice of easement)

but, benefit may not be assignable if benefit is in gross (not attached to land – personal)

riparian owners = abutting owners

Old rule= EIG never assignable, regardless of intent.

Court in Miller held that EIG (easement in gross) was assignable (only in commercial economic uses; not when EIG is for personal enjoyment.) Intent of parties to make it assignable has to be clear.

  • Attempt to grant license to the Lutherans is a prescriptive easement
  • Updated RS say that E is assignable, whether personal or commercial unless stated otherwise.

issue of transferability, courts take following approaches

i) look at intent

ii) look at purpose/nature of easement: commercial or non-commercial (personal enjoyment)

iii) reclassify easement (appurtenant as opposed to in gross)

  • Allows you to have more flexibility if appurtenant

prescriptive EIG to bathe acquired f/R and F by commercial use

assignability is not an issue b/c both R and F acquired

question of divisibility

  • Divisibility is a matter of intent and a matter of the formal character of an EIG
    • Intent – no clear expression that there was an intent to grant the rights of subdivision
    • Formalistic – the easement is not divisible b/c easements just aren’t divisible

Court applies “one stock rule” – can be divided among diff owners, but all owners have to act as one; must be single collective: must get unanimous consent from all easement holders, F can veto D’s use of lake. Can’t be divided into separate shares.

analogy to TIC (tenant in common); treat EIG holders like TIC: TIC can do a physical partition, TIC can ask for partition sale

Modern trend is that intent of parties determines divisibility of EIG: Divisibility of E will lead to more efficient uses b/c entitlement will more quickly end up in hands of party that values it most

 

Appurtenant easement v easement in gross – AE – the burden on the servient tenement is limited by the needs of the dominant tenement. An EG has no such limitation; therefore American courts have attempted to prevent the burden on the servient tenement from increasing beyond what was intended by the original parties.

 

Scope of Es

an excessive or improper use of an easement normally justifies injunctive relief, as well as provable damages, but does not usually extinguish easement

1) express easements: scope of use permitted depends primarily on language used in easement

reasonable changes in the dominant estate may support changes in the use permitted

subdivision of DT may give each transferee right to use easement as long as burden is not thereby increased

an easement appurtenant to one parcel cannot be used for benefit of a separate parcel

2) easements by necessity: permitted use depends on extent of necessity

3) other implied easements: scope depends on quasi-easement use, changed by reasonably foreseeable changes in use of DT

4) prescriptive easements: scope normally limited to original use

 

Brown v. Voss, (attempt to expand scope of use of easement to non-dominant tenement)

  • Rule: If an easement benefits its owner in the use of a particular parcel of land, any extension of the easement to other parcels is a misuse of the easement.
  • Parties selection of remedies really makes a difference in the ct’s decision
    • Can an injunction be issued, therefore can an easement that is being used for the benefit of parcel B be used for the benefit of parcel C? Don’t grant an injunction or damages and send to trial ct to see whether it is appropriate
      • Factors – The P made no unreasonable use of the easement in the development of their property; if an injunction were granted to bar P’s access to tract C across the easements to a single family residence, Parcel C would become landlocked; also if grant injunction it would bar P’s access to tract C; Ps have acted reasonably in the development of their property
      • Ct should look at the value of the entitlement and the relative hardship of the parties – weigh the two
  • Court rejected black letter rule that easement cannot be extended to non-dominant land over objection to servient owner. Court alters bright line rule and formulated discretionary rule that requires a court to weigh various factorsb/c bilateral monopoly problem – not reaching an efficient bargain. Servient Tenant can be protected by damages, which lies in TC’s discretion fashion appropriate remedy (could be an injunction)

E cannot be extended to non-dominant land – Black letter law.

just go w/ injunction w/cases like these

2 big picture issues

1) better to have clear rules or general flexible standards? efficiency or fairness?

2) conflict b/tw property rules and liability rules

property: entitlement of property interest owners, transfers should be voluntary

liability: extended easement allowed if P pays damages

P could have avoided litigation altogether by:

put express restriction/limitation in deed: transfer will be used for DT and no other tenement/land

sometimes forfeiture clauses: easement is forfeited if used for non-dominant land

these aren’t really enforceable, just hopefully a deterrent

 

General Rule = location of an E, once fixed by parties, cannot be changed by ST w/o permission of DT

A prescriptive E is not as broad in scope as an E created by grant, by implication, or by necessity. Uses made of a prescriptive E must be consistent w/ the general kind of use by which E was created and be foreseeable evolution of old use.

Ex. – An EBP acquired by pedestrian traffic or by herding livestock w/ men and horses across land has been held not usable by motor vehicles.

 

termination of easements

f/commercial to recreational use

Preseault v. United States, (termination of easements (b/c of conversions))

  • Issue 1: Does the government use of land that goes beyond the scope of an easement constitute a taking of the servient estate? (Yes)
  • whether scope of easements were sufficiently broad in scope to permit use for a public recreational trail – assuming easements were still in effect in 1986 (No)
  • Issue 2: Is an easement terminated by mere nonuse? (No)
  • Easements: Created by eminent domain (gov seizing property) and the prior owners simply granted an easement (express grant)
  • What exactly gets created in these grants? FS absolute or an easement – language seems to create a FS but it is an easement – state law overrides the terms of the deed to give the RR a right to use the land (easement). Most cts probably would have said it was an FS
  • Rule: An easement is terminated by abandonment when nonuse is coupled with an act manifesting either a present intent to relinquish the easement or a purpose inconsistent with its future existence.
  • Governmental use of land that goes beyond the scope of the easement constitutes a taking of the servient tenement owner’s property.
  • The scope of an easement may be adjusted over time only if the change is consistent with the terms of the original grant.
  • An easement is not terminated by mere nonuse. In order to terminate an easement by abandonment, there must also be acts by the owner of the dominant tenement conclusively and unequivocally manifesting either a present intent to relinquish the easement or a purpose inconsistent with its future existence.
  • Ask what was the original purpose of the easement and how close is this new purpose to the previous one?

CL –scope of E may be adjusted for changing times to serve original purpose, so long as change is consistent w/ terms of original grant; allows expansion of E, but does not permit a change in use not reasonably foreseeable at time of establishment

foreseeability test: whether use was reasonably foreseeable at time of creation of easement

1) expectancy: to ensure new use was w/in reasonably expected by parties (servient owner)

2) fairness: would new use suppose burdens on servient owner – increased burdens as unduly unfair

court said no, not reasonably foreseeable in 1899 that it is used as a public trail/value of conservation

Restatement: more liberal: must look at purpose of easement: public use/enjoyment

 

issue 3:termination issues

1) by unification: dominant and servient tenements (ST) become one

  • E is terminated if it is released to owner of ST – but must be in writing

2) by prescription: if ST wrongfully/physically prevents easement f/being used for prescriptive period, easement is terminated or easement holder doesn’t use the easement

3) by abandonment: does not occur only by nonuse, must be unequivocal act showing intent to abandon

  • The ct says there was abandonment but it does not occur merely by nonuse – must a clear intent to abandon
    • RR removed all the RR equipment – physical relinquishment
    • Maybe not legally but physically abandoning
  • E is terminated if ST sale to a BFP

licence’s reliance

Holbrook v. Taylor, (road to landlocked mining property, and later house)

Court held T had acquired a right to use road b/c, by estoppel;license H gave T to use road became irrevocable.

Rule: A license cannot be revoked after the licensee has erected improvements on the land at considerable expense while relying on the license.

Rationale: An easement can be est by estoppel, even when the person making use of the property does not do so adversely, but with the permission of the property owner. It has long been recognized that a right to the use of a roadway over another person’s land may be est by estoppel/ the established rule in this state was set forth by this court in Lashley Telephone C v Durbin. As stated in that case, a licensor may not revoke a license which includes the right to erect structures and acquire an interest in the land similar to an easement after the licensee has exercise d the privilege of the license and erected improvements on the land at considerable expense. Here, it is clear that the Ps used the road with the consent, or at least the tacit approval, of the Ds. Moreover, the Os used the road to build and improve their $25,000 home, and widened and maintained the road at their own additional expense. These facts satisfy the requirements of the Lashey rule. Thus, the Ps license to use the road may not be revoked, and their P right to use the road may be revoked, and their (P) right to use the road has been established by estoppel.

Analysis: Essentially, the Court here took a presumably oral agreement for a use of land out of the realm of the SOF. The estoppel theory is one of the most widely used methods of avoiding the SOF. Some courts, particularly those in CA, have used even stronger terms to back estoppel in the past. These decisions have stated that allowing a grantor to revoke a license in such circumstances would work a fraud against the grantee. The doctrine of equitable part performance is also demonstrated in this case. Basically, the idea is that the act of improving the property is tangible evidence that the license, or oral easement actually exists. Thus, one would not need to rely on the oral statements of the licensor and licensee alone, but rather the improvements themselves would attest to the presence of the easement.

Estoppel: Term which denotes that one person is prevented from claiming a particular right b/c another person was entitled to rely on such conduct and has acted on that reliance.

equity argument: Important facts for estoppel were (All were with express or tacit approval of H.)

– T had been allowed to use road for some time

– T maintained and improved road

– T built $25,000 house on his lot

bilateral monopoly problem: stuck

in BM situation b/c D has injunction and no pressure f/outside to behave efficiently, efficient transfer is foreclosed

an easement may be established by

1) express agreement

2) implication

3) prescription

4) estoppel

only the last 2 are asserted by P

2. how long is this irrevocable license should be good for? For all time?

1st Restatement says no: once holder of benefit has recouped reliance interest that led to creation of license, license is terminated – addresses concern for certainty

3rd license created by estoppel is of indefinite duration (not necessarily mean forever) – more fuzziness

room for equity

courts have been moving toward softer law

negativeeasements: right of dominant estate owner to stop servient owner from doing something on servient land; to block the servient owner from doing something on the servient land

English courts started to recognized NE:

4 types:

1) light or air (will not block windows)

2) interference of airflow to your land in a defined channel

3) removing support of your buildingsubjacent or lateral support (will not dig so as to undermine neighbor’s house)

4) flow of artificial stream (will not interfere with aqueduct bring water to house)

– new types: easement of view, easement of solar.

– also conservation easement (will not interfere with historical things, etc)

Eng courts were rigid in not expanding NEs

Amer courts followed suit. Now and then a new type of NE is recognized.

problem: landowners responding to changes – wanted courts to create new NEs against current and future servient owners – wanted cts to enforce NE against successors of the promisor

Ct decided it was a good idea to enforce new easements/mutual promises against successors, but not going to call them NE, but rather call them real covenants (recognizing a K right – a promise lodged in real property) and equitable servitudes

  • There social and economic benefits to allowing parties to have these arrangements
    • Social
      • Promotes neighborliness, cooperation, good will and intangible aesthetic benefits
    • Economic
      • Helps minimize harmful impacts that arise from use, minimize externalities, allows multiple people to benefit from this, reduces transaction costs (parties can put a real covenant into a deed and have it be enforceable w/o having to redraft the deed every time the property changes hands), developers benefit from economies of scale to build larger, consistent-looking communities
  • Disadvantages
    • Promote static use of land, conformity and rigidity
    • Tendency on the part of cts to grant undue influence to prior landowners at the expense of current landowners – biasing the selection choices of prior holders where there might not be a need for it any more
    • Land use becomes inflexible
  • Ct won’t enforce it when disadvantages outweigh the advantages

 

conservation E = developed to preserve scenic and historic areas and open space. An owner of land can give a public body or a private charity a conservation E, preventing servient owner f/ building on land except as specified in grant. 

  • The catalyst for this wave of statutes was the Uniform Conservation Easement Act – purpose is to enable durable restrictions and affirmative obligations to be attached to real property to protect natural resources and the ensure that these restrictions are immune from certain common law impediments which might otherwise be raised.
  • Conservation E are perpetual in duration, are transferable, and can be in gross.
  • Uniform Environmental Covenant Act (2003) – environmental covenants impose activity and use restrictions on contaminated land and permit the contaminated land to be developed within the limits imposed by these restrictions
    • Façade preservation E: a device for preventing the façade of a house registered on the national Register of Historic Places from being altered.
    • Primary residence E – the owners of historic homes donate an E that restricts the owner, present or future, from using it as a vacation home.

 

Equitable Servitude

  • Burden
    • Promisor intent
    • Notice
    • Touch and concern
  • Benefit
    • Promisor intent
    • Touch & Concern
    • Relaxed vertical privity (only sometimes required)

 

Covenants are promises to do something (affirmative) or not do something (negative) on your land. (Not an interest like an easement). Real covenants and equit servitudes are diff from Ks: may be enforceable against assignees. But you still may have contractual remedies, e.g. damages or injunction.

– For a real covenant, a court of law can award damages,

– For an equitable servitude, a court of equity can order an injunction or SP)

 

Real Covenants (Covenants Enforceable at Law):

  • A real covenant must be created bywriting. Can’t be implied or arise by prescription. Only requires signature of promissor.
  • A real covenant runs with the landat law:

– Creates a personal liability of the promissor.

– Enforceable against a successor of the promissor by a successor of the promise.

– Enforceable only for money damages, from general assets of promissor.

– Diff from an equitable servitude, which is enforceable in equity. Can’t get an injunction or specific performance for a real covenant.

– Diff from a fee simple determinable or subject to condition: those provide for forfeiture upon breach of condition. Breach of covenant only results in damages.

 

  • To see if a real covenant is enforceable by or against an assignee, look at:

– for a BURDEN of a covenant to run at law (person burdened by cov: “A promises B not to build a factory on his lot – A is burdened, B benefits):

1) contracting parties must intend for successors to be bound (Promisor Intent)

2) must have BOTH horizontal PoE (Maj: grantor/grantee rel’shp btwn original promissor and promisee), AND STRICT vertical PoE (btwn promissor and his assignee).

3) covenant must touch and concern land

4) assignee must have notice of the covenant (Notice of Successor)

5) Must be in writing

– for a BENEFIT of a covenant to run at law (person benefitting from cov):

1) contracting parties must intend for successors to be bound,

2) requires relaxed vertical PoE only.

3) benefit must touch and concern promisee’s land. req is more lenient than for a burden.

4) Must be in writing

Intention- Look at language of deed or K. ‘these covenants must run with the land’. If unclear, look to purposes and circumstances. At CL, if covenant concerns something that does not yet exist, you need the word ‘assigns’, otherwise the burden will not run to assigns. At ML, it is no longer req’d.

 

Horizontal privity– Rel’shp between original parties.

– For a burden to run, original parties must be in PoE.

English view: Parties are in privity of estate (PoE) only if they are in an L/T rel’shp. Court wanted to limit restrictions on fee simples. So burden of covenant by fee owner doesn’t run at law to assignees; only enforceable in equity.

Majority (1st Restatement): Requires a grantor/grantee rel’shp btwn original parties making the promise. Or, promise must be contained in a conveyance of fee simple, in order for it to be enforceable at law against a successor. A transfers land to straw, B transfers land to straw then back to each other with a covenant benefitting each other’s land – so there is an interest in each other’s covenant that is created. A contract alone btwn original parties does not suffice!

3rd Restatement: A few states do not require PoE for a burden to run. Only need promissor intent, compliance with the SOF, and that the covenant not be illegal, unconst or violate pub policy

– For a benefit to run, horizontal PoE is not req’d btwn original parties.

 

Vertical privity– succession to an estate of the same duration/type as grantor had.

– For a burden to run, must have vertical PoE. The burden really ‘runs’ with the estate in land.

– For a benefit to run, vertical PoE is not req’d, just relaxed vertical privity. A successor to any interest in the land may sue on the benefit.

  • Relaxed vp – successive relationship b/w the promisor and the successor – doesn’t require the same interest in land so it could be a fee simple with B and then a life estate with C

Restatement of Servitudes says vertical PoE is not required for a burden or a benefit to run. Instead, negative covenants are treated like easements, which run with the land. But affirmative covenants only run to successors of estates of the same duration.

  • Neg cov – a restrictive cov – all owners and possessor of burdened land are bound by neg cov regardless of the extend of their interest or the manner in which they obtained their interest. Likewise, all owners & possessors of benefitted land are entitled to enforce the covenant
  • APRs – who have not yet gained title are liable on the affirmative covs burdening the property, but the benefits of affirmative covs run to APs who have not yet gained title to the property only under limited circumstances (the cov was to repair, maintain, or render services to the property, or that the benefit is one that can be enjoyed by the person in possession w/o diminishing the benefit’s value to the owner of the property and w/o materially increasing the burden of performance on the party obligated to perform the cov).

Exception: a homeowner’s association can sue on a benefit, even though it does not succeed to any interest in land; acts as agent of real successors.

 

Touch and concern: for a burden (or benefit) to run, burden (benefit) must touch and concern the burdened land. Same for benefit and benefited land.

 

Notice: For a bona fide purchaser (for value) to be bound by a real covenant, he must have notice. Someone who does not give value for the land may be bound by a real covenant (but not in equity) even without notice.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equitable Servitudes & :

  • A covenant running at equity. Remedy is injunction. For it to run to assignees, requires that the assignee has notice of the covenant.
  • Can be created for the benefit of a third party (unlike easements)
  • An equitable servitude is a covenant regarding the use of land that is enforceable in equity against subsequent possessors, even if the covenant itself is not enforceable at law. The traditional difference b/w this and a real covenant relates to the available remedies. When a real covenant is breached, the remedy is damages in a suit of law. When an equitable servitude is breached, however, the remedy is either on injunction or enforcement of a consensual lien, which secures a promise to pay money, in a suit in equity.

 

Tulk v. Moxhay: Beginning of new type of easement – equitable servitudes. Assignee tried to breach a covenant that original owner had made. Assignee purch’d land with notice of the covenant, at a discount; therefore he was bound by the covenant.

  • Rule: a covenant will be enforceable in equity against a person who purchases land with notice of the covenant.
  • Rationale: If D were allowed to build on the land, D would have effectively received unburdened land for the lower price of burdened land. Nothing could be more inequitable than allowing this, for D could then resell the unburdened land at a higher price, and thus would be unjustly enriched. If a covenant is attached to property by its original owner, no one with notice of that covenant can purchase that property and not be bound by the covenant
  • All requirements are also met so could sue for damages but presents a challenge for Eng cts b/c vertical & horizontal privity were defined only as a LL, T relationship. So, there would be no privity so can’t enforce as covenant at law. But should be able to enforce the injunction, not damages – this takes us into equity
  • The right to specific performance was deemed to give promisee an interest in the land.
  • ML and majority: An equitable servitude containing a negative promise is thought of as a negative easement.
  • Majority says equitable servitudes must be in writing, signed by the promisor. Acceptance by the grantee, of a deed signed by the grantor, binds the grantee as promissor. Exception: equitable servitudes may arise by implication from a general plan for development of a residential subdivision.
    • Negative servitude implied from general plan. Theory: equitable estoppel. E.g.: developer sells some lots with promise not to build gas station on lot, but then sells other lots, with no covenants, to gas company. If developer had a general plan of an exclusively residential area, and the gas company had notice of the other covenants, then court will construe an implied reciprocal negative easement. (Sanborn v. McLean). Requires evidence that: General plan is reasonably uniform, and it existed at time developer sold first burdened lot.
    • A servitude similar to a reciprocal negative easement (interest in land) is implied.
    • Minority (CA, MA) will not imply a recip neg servitude; must be written.
  • Reciprocal Negative Easement – an E created when the owner of two or more lots sells one with restrictions on it that benefit that land retained by the owner. This sale creates a mutual servitude, and while it is in effect, the original owner cannot use his retained land in any way that is forbidden to the buyer of the other lot.

Sanborn v McLean

  • Rule: An equitable servitude can be implied on a lot, even when the servitude is not created by a written instrument, if there is a scheme for development of a residential subdivision and the purchaser of the lot has notice of it.
  • Rationale: A negative (implied) servitude, such as a covenant restricting a lot to residential use, can be implied on a lot if a developer has set up a scheme for a residential subdivision and if the purchaser of the lot has notice of the covenants used to set up the scheme.
  • Here the McLaughlins imposed the restrictions on the Collingwood lots for the benefit of the lands they retained, namely to carry out the scheme of a residential district. Because they sold these lots with restriction in order to benefit themselves, the servitude became a mutual one, and so the McLaughlins were bound by the same restrictions as their buyers.
  • This restriction is thus considered a reciprocal negative E, and this E attached to lot 86 before the Ds acquired the lands. Such an E was still attached to lot 86 after the sale to the Ds and can still be enforced by P if the Ds had actual or constructive knowledge of it. Because the abstract of title to lot 86 showed that lot 86 was part of a much larger subdivision, and because the deeds resulting in reciprocal negative E were on record, the Ds were bound by constructive notice to follow that E. Furthermore, the general plan for the residential district had been observed by all lot purchasers, whether explicitly restricted or not, for over 30 years. The Ds could not have avoided noticing the strictly uniform residential use of the neighboring lots, and therefore were on inquiry notice to learn why all the lots conformed with each other. The least inquiry by the Ds would have revealed the E on lot 86.
  • D had inquiry notice of the restriction – should have been put to inquiry once he saw uniformly developed residential lots and once he saw that a majority of the lots had express restrictions – so he should have done more investigation. The fact that he didn’t is his fault and he should bear the burden of the lack of knowledge – not the neighbors
  • Some courts require constructive notice, not all the way to inquiry notice b/c holding a purchaser to notice of things that may be difficult to discover by inspection of the property is not fair.
  • Most Js imply negative restrictions from a common scheme. A few, however, strictly apply the Statute of Frauds in such matters. Courts in these Js say that an equitable servitude will not be implied from the presence of restriction on other lots in a subdivision, from a developer’s oral promise to impose such restrictions, or from a general scheme not included in the deed to the lot in question.
  • For an equitable servitude to be enforceable by of against assignees, requires:
    • Intent (no special wording req’d, just purpose and surrounding circums)
    • PoE:

Majority does not require PoE; any 3rd party beneficiary or an AP can sue to enforce a covenant if the parties so intend.

Minority req’s PoE when person trying to enforce does not own land that was once owned by the original promisee. E.g. purchasers in a subdivision can enforce a restriction imposed by the developer, bc they trace title from him. But a 3rd party (even a homeowners ass’n) who cannot trace title to developer, can not sue to enforce the restriction in equity. (Neponsit).

  • Touch and concern: for a burden to run, burden must touch and concern burdened land. Same for benefit. Same test for law and equity. Generally will touch and concern if it affects a party in the physical use and enjoyment of land, or if it enhances the value of land. Generally, it will not run if burden imposed is obviously greater than benefit given.

Negative covenants, promises not to do a physical act, affect burdened owner in physical use of his land. Also enhance the value of benefited land. So they touch and concern both lands.

– A covenant not to compete restricts promisor in phys use of burdened land; and enhances value of benefited land, so touches and concerns both lands (Majority).

Affirmative covenant: at CL, not enforceable in equity. At ML, majority permits affirmative covs to run in both law and equity, and are usually held to touch and concern, unless burden is hugely greater than benefit.

– If act is to be performed off the burdened land, w/o benefiting burdened land, then it does not touch and concern.

– A covenant to pay $$ for an improvement that benefits the promisor will touch and concern his land, even if improvements are to be made on other land. Covenant can be enforced against an assignee with an equitable lien (even if the burden doesn’t run at law). (Neponsit)

R2d of Servitudes: Supersedes touch and concern req. More specific tests for unenforceability, including reasonableness.

for a benefit in gross: Majority: it does not touch and concern land, so burden will not run in equity. (Caullett) Minority: recognizes easements-in-gross, so if an equitable servitude is analogous to an easement, then burden should run even if benefit is in gross. (Neponsit).

– if a covenant will not run in equity because the benefit is in gross, then it will not run at law either (Caullett). When a developer, reserves a right to construct a bldg on the deeded property, should purchaser be able to quiet title? Yes. A covenant must touch and concern land to be enforceable. if a covenant is of a personal nature, it is not enforceable.

  • Notice: for an assignee to be bound by burden of an equitable servitude, he must have notice of the covenant. (Not necessary for benefit).

Actual notice is sufficient,

– If covenant is in a deed within purchaser’s chain of title, then he has sufficient record notice.

– If all houses look the same, you are on inquiry notice to see if other deeds have covenant (then you would be on implied covenant. (Sanborn v. MacLean)

 

3 approaches for determining whether or not there is an Equitable Servitude:

1. Riley = (CA) an ES will not be implied f/ existence of restrictions on other lots in a subdivision, f/ an oral promise of developer to restrict the remaining lots, or f/ a general scheme of restrictions not included, by recitation or incorporation, in deed to the lot alleged to be burdened by servitude.

2. Existing Uniform Plan = look for scheme at time of sale of 1st lot only; don’t consider later evidence. Constructive notice standard, not inquiry notice. Tries to balance concerns of Sanborn and Riley.

3. Sanborn Approach (radical approach) – applies a standard of inquiry notice – a form of notice which says, “purchaser, you had knowledge of certain facts that should have put you notice of a uniform development scheme.” Imputed notice of existence of uniform plan.

 

Validity and Enforcement of Covenants

Equity imposes three requirements:

  • Intent that the benefit and/or burden of the covenant run to successors of the original parties
  • Notice on the part of purchasers of the original promisor
  • That the covenant touch and concern land
  • In addition, vertical privity may be required in some Js for the benefit (but not the burden) of a covenant to run in equity

 

affirmative covenant

Neponsit Property Owners’ Association, Inc. v. Emigrant Industrial Savings Bank (HOA wants dues f/bank)

Rule: An affirmative covenant to pay money for improvements or maintenance done in connection with, but not upon the land which is to be subject to the burden of the covenant does touch and concern the land, and a homeowners’ association, as the agent of the actual owners of the property, can rightfully enforce the covenant.

Rationale: The terms are not defined by statute, as they are meant to be determined by the court based on the facts of a given case. The key question to consider is to what degree the covenant substantially affects the legal right of the parties to the covenant. This distinguishes a covenant that runs with the land from a mere agreement between a promisor and promisee. Here, by paying the annual charge, an owner in the tract acquired an easement, or right of common enjoyment, with other property owners in roads, beaches, public spaces and improvements in those area. To fully enjoy these areas, the owners must help pay for their maintenance. Thus, the burden was inseparably attached to the land, held by the various owners, which enjoys the benefit, and so the covenant clearly touches and concerns the land. There was also concern over a possible lack of privity of estate between the P and D. The P never owned the roads or the public places mentioned in the covenant, and was created solely as the assignee of the property owners. It would be almost impossible to separate the interests of the P and the individual owners. There is essentially privity of estate between the P and D. An affirmative covenant to pay money for improvements or maintenance done in connection with, but not upon , the land does touch and concern the land, and a homeowners’ association, as the agent of the property owners, can rightfully enforce the covenant.

  • The court reasoned that normally the requirements for a covenant to run with the land are 1) that the parties intended that the covenant run with the land; 2) the covenant “touches” or “concerns” the land; and 3) there is privity of estate between the party claiming the benefit of the covenant, and the right to enforce it and the promisor who is under the burden of the covenant. However, since the enforcement of such covenants rests in equity, that blind adherence to the rule requiring actual privity would deprive the plaintiff in this case of what is equitable. The association existed only for the benefit of the property owners. Thus, it was a technicality that they did not actually hold any interest in the land as a corporation.

Notes: Traditionally, a covenant would not run unless it benefited land as well as burdening land. In other words, the covenant would not run with the land if it was “in gross”. This seems to be inconsistent with the rule allowing easements to run with the land against a subsequent purchaser, even though they were only for the benefit of one party. This may be explained by the fact that most easements are positive and limited in scope (like the laying or sewer lines), rather than negative (enjoining another property owner from doing something). 3. The defendant in the above case argued that the covenant did not “touch and concern” his land because the payment of the fee was to be used for maintenance of the neighborhood areas and not his land specifically. However, the court reasoned that the improvement of the surrounding lands did increase the value of the defendant’s land to some degree. Thus, although it did not technically touch the land, the purpose for the touch and concern rule was satisfied in that the covenant provided for the maintenance of common areas which increased the enjoyment of the defendant’s own land.

Analysis: Courts have almost always held that covenants that restrict the use of land do touch and concern the land, because such negative covenants substantially affect the value of the land. By contrast, courts have been hesitant to enforce affirmative covenants against successors for three reasons. First, courts do not like to compel parties to perform a series of acts that require long-term supervision. Second, an affirmative obligation that requires a party to maintain property or pay money may leave a successor with a sizable personal liability. Finally, such a covenant, with an unlimited duration, is similar to perpetual rent or some other feudal device.

A promise to pay money is an affirmative covenant

2 aspects:

1) touch and concern doctrine: burden/benefit of covenant/ES must relate to use, occupation and enjoyment of premises (neg cov are related, but affirm covs present probs for T&C)

Neponsit = A cov which runs w/ land must affect legal relations (advantages and burdens) of parties to the cov as owners of particular parcels of land.

cov in Neponsit T&C the land b/c it substantially affected the property owner’s legal interest in his property. Property owner received an E in common and a right of enjoyment in public improvements.

Rule moves away f/ physical touching to looking at the effects of the cov.

2) privity of estate

Neponsit HOAmust show burden runs w/bank (court says it does) and that benefit runs to Neponsit

both sides of covenant must be enforced

question: whether there’s vertical privity of estate b/tw Nep HOA and prior Nep Realty

Rule – Benefit of ES is enforceable only by one who has succeeded to some possessory interest of original promisee.

the test of whether a covenant runs w/land is whether it imposes a burden upon an interest in land that also increases the value of a different interest in the same or related land

 

 

Common Interest Communities – (Restatement (Third) of Property) – The distinctive feature of a common-interest community is the obligation that binds the owners of individual lots or units to contribute to the support of common property, or other facilities, or to support the activities of an association, whether or not the owner uses the common property of facilities, or agrees to join the association.

 

  • HOMEOWNERS’ ASSOCIATIONS – Has the power to raise funds reasonably necessary to carry out its functions. In most such communities, the power to levy assessments is enforceable by fines and a lien on the individual property.

 

1. condos: popular shared ownership; each individual owner has separate FS in unit, while exterior/land/common areas are owned by all Ts in TIC

  • Each unit has nonexclusive easement thru common areas to get to unit. Created by declaration or master deed. All states have condo statutes.
    • Rules of Conduct: Declaration of condo or master deed may include rules of conduct, or rules may be promulgated by board. Generally must be reasonable.

Restrictions in originating docs: very strong presumption of validity, court will enforce unless unreasonable: arbitrary, violate public policy, unconstitutional. Reasonableness must consider community as a whole, not just an indiv owner. Pet restrictions are usually ok to protect rights of other owners, unless harmfuleffects substantially outweigh benefit to condo as a whole. Also, unreasonable restraints on alienation are unenforceable.

Restrictions adopted later by board: Still must be reasonable, but court gives less deference to these than to covenants in originating docs.

  • Unit owners are liable for their share of common area expenses. These are covenants, to be enforceable against assignees must meet those reqs. Most statutes provide for imposition of a lien.
  • Indiv Os are liable for torts in their own areas, and in common areas.
  • Restrictions on Transfer:

– Direct restraints on transferring a FS are usually void, but courts are more tolerant of restraints on condo units. Rule is, restraint is valid if it a reasonable means of accomplishing valid objectives.

Illegal racial discrimination: Fair Housing Act prohibits discrimination for race, ethnic origin, religion, sex, family statue, or handicap. Condo must make reasonable accommodations for a guide dog under the act.

 

2. cooperatives: each individual has long-term renewable lease to the unit, and owns shares in the corporation that actually holds title to the land and improvements. Resident is a T of the corporation in which he has ownership interest.

  • Ts are both Ts and Os of the coop corp. Elect a board to operate bldg. Entire project subject to blanket mortgage. Each T responsible for repairs w/in each unit.
    • Both the lease and stock interest of each T are subject to restrictions on transfer.
    • Valid Restraints on Alienation: Coop owners own leaseholds, not FS.
  • prohibit transfer w/o consent of board
  • right of first refusal (preemptive option, must be reasonable)
    • transfer only to people who meet eligibility req.
  • Corp may terminate the lease if T fails to pay her share or violates rules of conduct (as long as rules are reasonable and not arbitrary).

 

Models of judicial review:

  • association as private actor – association doesn’t really act like a city, totally separate
  • Judicial review should be rather deferential
  • contract/consent model – Nahrestedt case
  • administrative agency model –

Mulligan/Panther case (sex offender case)

use restriction must be justified, not just w/respect to due process, but also substantive due process.

HOA places use/sale restriction; Mulligan challenges restriction

court says burden of proof is on board to show that the restriction is reasonable

Mulligan case involves vote of members of board (diff than declarations made at inception) – restriction arose out of a decision later made by board

follows distinction of RS

move toward more aggressive standard of judicial review

  • Appellate ct for the Nahrstedt case – case by case basis, bop on board to show reasonableness, reasonableness is the standard
    • Homeowner’s associations restrictions are vital to the functioning of the community & those restrictions serve imp functions
      • Attract buyer who prefer a planned environment – marketability
      • Those buyers have paid a premium on reliance of enforcement of those prohibitions
  • business judgment/ corporate board model

(Landon case) economic decision was made: to spot treatment instead of fumigation of entire house

  • Case was not an equitable servitude, this is an economic situation

as long as restrictions are passed w/ procedures that are sound, restriction is prima facie reasonable.

• “all that’s necessary in making financial decisions is that the board exercise its discretion, upon reasonable investigation, in good faith and w/regard for best interest of community association”

  • As long as homeowner’s associations are using sound business judgment and good faith – not appropriate for cts to review their judgments

burden of proof is on homeowner to show exercise of bad business judgment

  • local gov’t model

has not formally been adopted by any state to date

assumes that HOA is acting in substance as a state actor

thus HOA should be subject to constraints imposed on state (not private) actors (private actor model)

if they’re going to act like a state actor (police), then they should be subject to same types of standards/regulations that arise f/fed and state constitutions

courts now move closer to aggressive standard of judicial review

    1. aggressive association as state actor – Homeowners assoc can act as a state actor – the community as a whole is almost like a city – issue & propose rules, they vote, etc so they should be subject to

 

Nahrstedt v. Lakeside Village Condominium Assoc., Inc: (no cats allowed)

  • Pre-purchase use restriction here. But should level of review change if it was post-purchase use restrictions (see Villa de las Palmas case – post purchase use restrictions will be subject to the K model)
  • Member voted decisions should be subject to greater judicial scrutiny
  • Major issues to consider…
  • Protecting interests of people who voluntary agree vs protecting individuals from over-intrusive measures
  • Who resolves these disputes – judges or alternative channels of resolution
  • Social norm theory – in the absence of a hoa, some of these matters can be resolved by informal means – law gets involved, dampens down social norms (people in community ignore you b/c you have a cat, get rid of cat)
  • Condo association should pre-empt legal enforcement – talk to them informally if there is a problem
  • Are HOAs quasi gov or is it a private entity

Rule: The enforceability of restrictions on the ownership and possession of pets should be decided in a trial ct after evidence is heard as to whether the restriction was reasonable as applied to the particular facts of a case.

SC says cat restriction is not irrational

restrictions (must be reasonable)

homeowners must follow restrictions unless 1) wholly arbitrary, 2) violates public policy, 3) utilityanalysis: imposes burden on use of protected land that far outweighs any benefit

  • Bop on owner rather than association to prove the three aforementioned factors
    • Discourages lawsuits if bop on owner
    • Promotes stability & predictability
    • Give managers more confidence that passed restrictions won’t be overturned
  • Nothing in the P’s complaint that the restriction was arbitrary, violated public policy and the burdens do not outweigh the benefits to the community as a whole

SC moves closer to a contract/consent model: recorded declarations are contract b/tw owner and association – court should not insert itself into that contract/bargain (presumed consent)

burden of proof on owner, not on board

applies to those declarations that were recorded at inception of the planned community

 

  • Restatement (Third) of Property – distinction b/w servitudes imposing a direct restrain on alienation of property and servitudes imposing an indirect restraint.
    • Direct restraint – valid if reasonable. Clearly interfere with the operation of the free market economy. Include prohibitions on transfer w/o the consent of the association, rights of first refusal, and requirements that transfers be made only to persons meeting certain eligibility requirements.
    • Indirect restraint – invalid only if it lacks rational justification, a less demanding requirements than reasonableness. Include use restrictions or other restrictions (such as pet, paint color, or planting restrictions) that limit the potential market for the property. These restrictions do not clearly interfere with the free functioning of the market in land.

 

 

Zoning: is a public form of land use controls

  • Government’s plan for how land is going to be used and controlled
  • Helpful for private, large subdivisions, not urban areas or neighbor-to-neighbor inter-relations

 

Principles

Use seg.

Suprem./SFH

Low/medium density

Legislative Planning

Constitution

Contmp. Forces

Philosophical tensions

Amortization

 

Historical Background:

  • Law of Nuisance– Judicial Land use planning; If one is complaining about something, and sues for an injunction judge decides.
    • Source of legislative land use control is also nuisance law but it doesn’t help prevent incidences from occurring – just compensates after nuisance developed so zoning takes place prior to the formation of a nuisance
    • Problem, with nuisance is that it is not preventative, can’t sue until after nuisance has occurred.
  • Zoning is prospective – prevent problem before it happens.
  • Zoning is utilitarian– means to an end.
    • Method which society encourages development of jobs, housing, protecting natural resources, environment, and commerce defining the character of the community.

 

Euclid producedfour Principles for zoning: (social theory rests on these 4)

  • Segregation/separation of uses is desirable;Different uses harm each other if contiguous (utility)
  • Supremacy of single family home – promotes wholesome values.

should be encouraged b/c moral/ethical family values

  • Low/medium density is better than high density: preserve open space – necessary for healthy living results in height and use restrictions and lot size restrictions.
  • Legislative planning: rational planning/thinking ahead for a community is good

These principles are undergoing re-examination.

 

Factors that led to attack on the principles

  • Population growth
  • Scarcity land
  • Demand for smaller houses
  • Political activism
  • Development/ planning through referendum
  • Challenges to zoning ordinances today
  • Separation of Uses – led to sprawl b/c live in one area and then work far away (long commutes, empty streets – should be integration of uses
  • Supremacy of single family home – multiple uses (townhouses, apts) are needed and encouraged and should be mixed in – should be multi-family homes
  • Low/medium density – Also, scarcity of land and rising values of land
  • Rational planning – who is doing the planning (used to be professional planner and politicians) but now its everyone so more pressure for planners to open up process to public scrutiny so planning by ballot box is becoming more popular

Responses

  • Regionalism– – make better decisions about planning when we have municipalities coming together to discuss uses. Regional planning;decisions made in one city will affect traffic, costs, air, in another city.
    • Air quality, water supply, housing availability
  • Smart growth movement – urban growth boundaries are being devised to channel development to protect open space. Revising building codes to fill in cities
    • Discouraging sprawl, protect open space, favor high density over low density
  • Technology– home office possible shatters our classical understanding as residential communities and commercial communities. Also feeding the political activism.
    • Technology is fueling home office boom
    • Affecting politics of zoning – use of internet to rally troops, find out info that used to not be readily available

 

A. intro

1. zoning power: only the state has the power to zone

this power has been delegated to cities and counties by statutes called “enabling statutes

thus, all local zoning activity must abide by the enabling statutes

2. goals of zoning: orderly development of community; promotes economic growth, community health, welfare, safety

  • Politically elite think it protects property rights
  • Market forces started to conform to a public plan for orderly development to consider role of broader public good in decisions about the use of private property

3. how zoning works: one of fundamental characteristics of zoning is to segregate uses of land into geographic regions

thus, high rises may only be permitted downtown rather than in rural areas

it can be used to foster commercial districts as well as residential districts

for health and safety reasons, zoning can regulate the density of human population

this can be achieved by limiting building heights, providing for minimum and maximum years

4. constitutional considerations: as w/ other areas of law, zoning is affect by the Constitution

for instance, if zoning in area is going to be changed, due process requires landowners in area be given a hearing

zoning restrictions must be for a legitimate governmental objective

equal protection clause requires that all landowners who are similarly situated be treated equally, unless there is a legitimate reason for not doing so

as w/eminent domain, if zoning regulations amount to a taking, just compensation must be given by the state

a. taking

 

Village of Euclid v. Ambler Realty Co. (P’s parcel divided into 3 diff zones – reduced value by ¼: zoning did not violate due process)

Rule: Zoning ordinances are a valid exercise of the police power and thus do not violate the constitutional protection of property rights. They are a valid exercise of the police power.

SC made comprehensive zoning constitutional/justified zoning for 3 reasons

1) judgment that urban life is increasingly complex (great increase in population/concentration)

public restrictions on land use is now not unreasonable

  • Need controls on land use – move beyond rigid rules that say no city can take someone’s land under any circumstances

2) must consider circumstances and conditions of the area to judge validity of police power

3) court can analogize zoning practice to nuisance law

• “don’t use your property in ways to injure others”

public considerations in land use are important

if the validity of a legislative classification for zoning purposes is fairly debatable, the legislative judgment must be allowed to control

zoning laws are not presumptively valid

Protective Zoning: Protect property f/ industrial incursions, stabilizes property values, protect from vagrants.

Assumption before Euclid was that market forces should determine how land is used.After Euclid, market uses began to conform to a public plan of orderly development.

 

B. administration of zoning ordinances

1. intro: zoning ordinances present many opportunities for abuse and for objection by affected landowners

administration of zoning ordinances thus creates the potential for considerable litigation

2. comprehensive plans: enabling acts inevitably require the local zoning authority to adopt a comprehensive plan (which can be revised f/time to time)

the zoning must conform w/the plan

the plan serves to limit the local zoning board’s whims

 

3. Non-Conforming Uses

State zoning enabling acts exist

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