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Property II

 

I.                     Cotenancies and Marital Interests

a.       Types of tenancies

                                                               i.      Tenancy in Common

1.        Each co-tenant is the owner of a separate and distinct share of the property with an undivided interest in the whole

2.        Each has a right to possess and enjoy the property

a.        One tenant can go into possession of the whole unless another objects

b.       If in conflict over possession, court may partition

3.        Not survivorship rights – passes to devisees and heirs

4.        This is default type of tenancy

                                                              ii.      Joint Tenancy

1.        Each owns an undivided interest

2.        Surviving tenant has a right to the whole estate – survivorship rights

a.        The interest does not pass to the survivor but the deceased portion is extinguished upon death

b.       Cannot be devised by will or reached by creditors upon death

3.        Can be created in real or personal property

4.        Four Unities Required

a.        Time: interest must be created at the same time

b.       Title: must acquire title by the same instrument or jointly by adverse possession

c.        Interest: equal in size and duration

d.       Possession: right to possession of the whole

5.        Cannot be conveyed to self

a.        If want to create a joint in Hand W, H can use a strawman

6.        Has to be created by express words

7.        Severance

a.        Break any of the four unities

b.       Convey interest – this only severs the portion that was conveyed

c.        Sue for partition

                                                                                                                                       i.      Although have to have equal interest, court can partition unequally according to consideration of each party

d.       Mortgages

                                                                                                                                       i.      Title Theory: mortgage has the effect of conveying the legal title to the mortgagee, and the mortgagor has an equity of redemption entitling the mortgagor to get legal title back upon payment of the mortgage – mortgage destroys the unity of interest and severs the joint tenancy

                                                                                                                                      ii.      Lien Theory: most states hold that the mortgagee does not have legal title, but rather a security interest called a lien – mortgage does not sever the tenancy but the states differ on whether the surviving joint tenant takes ½ subject to the mortgage if the debt is not paid off before the debtor joint tenant dies

e.        Jurisdictions are split but some hold that if one joint tenant leases her interest in the property, it may sever joint tenancy

                                                                                                                                       i.      Tenants can agree among themselves that one may have the right to exclusive possession and it does not sever the tenancy

f.         Joint tenants can agree to hold as tenants in common and this severs the tenancy

                                                            iii.      Tenancy by the entirety

1.        Can only be created bt H and W

2.        Requires the same four unities as joint in addition to marriage

3.        Surviving spouse has survivorship rights

4.        Most states presume tenancy by the entirety when H and W – others as joint or in common

5.        Even if purchased two weeks prior to marriage, not tenancy by the entirety

6.        Severing can only be done by divorce or death – partition is not an option

a.        Divorce

                                                                                                                                       i.      Common law: on divorce the husband’s property belonged to the husband and the wife’s to the wife – husband had obligation of paying alimony for life – whoever held title kept possession

                                                                                                                                      ii.      Modern law: division is closer to 50/50

                                                                                                                                    iii.      Uniform Marriage and Divorce Act: equitably apportion bt the parties the property and assets belonging to either or both however and whenever required – consider prior marriages, length of marriage, earning capacity, and child-care responsibilities

                                                                                                                                    iv.      Division of talent and academic degrees

1.        In re Marriage of Graham: increased earning power from a professional degree is not “property” and therefore is not divisible on divorce

2.        Elkus v. Elkus: earning power increased during marriage by acquiring a professional degree or celebrity status is property subject to equitable division – the supporting spouse is awarded a share in the value of his/her investment in human capital

b.       Divorce

                                                                                                                                       i.      Common Law: for personal property, widows got 1/3 if surviving issue and ½ if not – widowers got everything – real property applied dower and curtesy

1.        Dower: for surviving wife for all freehold (not leasehold) land which husband seized during marriage

a.        A life estate in 1/3 of each parcel of qualifying land

b.       Attaches to land at the moment of marriage

c.        W has interest but not yet possessory until H dies

d.       Any purchaser from, or creditor of, H takes subject to it unless W releases

e.        If W predeceases H then it is extinguished

2.        Curtesy: for surviving husband only if issue were born of the marriage – life estate in all of W’s land (not just 1/3)

3.        Dower abolished in all jurisdictions except AR, DC, IA, KY, MI, and OH

a.        Wherever dower abolished, so is curtesy

b.       In MI, dower is given but not curtesy

                                                                                                                                      ii.      Modern Elective/Forced Share

1.        Almost all states give the surviving spouse an elective share in the decedent’s property owned at death

2.        Usually ½ or 1/3

3.        Applies to all property except owned in joint tenancy or life insurance policies

4.        Surviving spouse has the option of taking a forced share or taking what the decedent spouse left by will

5.        GA does not have a forced share

b.       Joint Tenancy Bank Accounts

                                                               i.      Either party on the account can withdraw the amount deposited and the survivor takes whatever sum is remaining in the account when the other joint tenant dies

                                                              ii.      Convenience Account: the caretaker can lawfully write checks to pay bills during the depositor’s life, but the caretaker has no rights of survivorship

                                                            iii.      Presumption is joint tenancy – convenience account has to be shown by clear and convincing evidence

                                                            iv.      Majority holds parties belongs to the parties in proportion to the net contributions of each to the sums on deposits – creditors can only reach the amount on deposit proportionate to that person’s contribution

c.       Relations Among Concurrent Owners

                                                               i.      Partition

1.        Can be brought by any tenant in common or joint tenant

2.        Partition in Kind

a.        Court physically partitions the land into separate tracts

b.       Once separated, tenants own in fee simple

c.        If the separate tracts are not equal in value, the court will require one tenant to make a cash payment (owelty) to the other tenant to equalize the values

d.       This type of partition is generally favored by the courts

3.        Partition Sale

a.        Property is sold and the sale proceeds divided equally among the cotenants

b.       Presumption is that tenants are entitled to equal shares

c.        Rebuttable presumption if shares are not actually equal

4.        Houses, apartments, and commercial property usually partition by sale

                                                              ii.      Accounting and Ouster

1.        Majority Rule: a co-tenant not in possession must establish ouster by a co-tenant in possession in order to request his share of the reasonable rental value (accounting of the rents) from the co-tenant in possession – this promotes active use of the land

a.        Ouster: an act by on co-tenant that deprives another co-tenant the right to possession – has to actually refuse to admit the other onto the property – ways to establish:

                                                                                                                                       i.      Adverse possession: statute of limitations starts running if one tenant refuses entry to the other – open and notorious is difficult to establish (can be done by over-hunting the land, chopping down too many trees, paying all of the taxes, not accounting for revenue, etc.)

                                                                                                                                      ii.      One co-tenant attempts to enter the common property and is denied (changing the locks) – must make a physical attempt to enter

2.        Minority Rule: the co-tenant in possession must account to the co-tenant not in possession for the latter’s share of the reasonable rental value of the property

3.        Each co-tenant has the duty to pay her share of taxes in order to protect the property from a tax foreclosure sale – cannot stop paying taxes then buy the property at a tax sale free and clear

4.        Co-tenants are not considered fiduciaries to one another

                                                            iii.      Marital Property Interests

1.        Common Law: H owned everything that W had – H had the right of possession, and H’s creditors could reach W’s property but H was liable for W’s torts

2.        Pre-existing Duty Rule: performance of a preexisting legal duty cannot serve as consideration

3.        Creditors

a.        Approaches from Sawada

                                                                                                                                       i.      Group 1: one person, usually the husband, can subject the property to creditors

                                                                                                                                      ii.      Group 2: Creditors can reach the co-tenancy subject to the right of survivorship

1.        If the co-tenant who did not incur the debt outlives the one who did incur the debt, then the creditor is out of luck

2.        Creditors can only reach survivorship rights if the non-debtor spouse dies first

                                                                                                                                    iii.      Group 3: The property may not be subjected to the debts of one spouse only (Hawaii)

                                                                                                                                    iv.      Group 4: The right of survivorship can be reached by creditors, but the present interest cannot (the converse of group 2)

b.       NY Approach: essentially marry the creditor and non-debtor spouse – creditor steps into the shoes of the debting spouse

c.        Seizure by Government/Government as Creditor

                                                                                                                                       i.      Federal drug laws provide for the forfeiture to the gov’t any property used in sale of illegal drugs

1.        Allows for innocent owner defense – innocent party not just uninvolved but completely clueless to the activity

                                                                                                                                      ii.      Some state laws provide for forfeiture of property used in committing various offenses with no exemption of an innocent owner’s interest

1.        Innocent owner defense not constitutional compelled

2.        Owner should bear consequences of misuse when entrusting others

d.       Community Property System

                                                               i.      Eight states have this system: AZ, CA, ID, LA, NV, NM, TX, WA

                                                              ii.      Rests on the notion that the marriage is a community partnership, both contribute to the material success of the marriage, and both should share equally in the material acquisitions

                                                            iii.      Consists of earnings of either spouse during the marriage and property acquired through earnings – property owned by either spouse before marriage or acquired during marriage by gift, descent, or devise is separate property

                                                            iv.      Once characterized as community property, all income and proceeds of sale of the property are community property also – if new assets are purchased with community funds, the new assets are community property

                                                             v.      Once spouse cannot change community property into separate property wo the other’s consent

                                                            vi.      In ID, LA, and TX, the income from separate property is community property – in other states, the income from separate property retains its separate status

1.        If doubt, presumption is community property

                                                          vii.      No tenancy by the entirety, dower, or curtesy

                                                         viii.      Each partner is a kind of fiduciary to the other

                                                             ix.      Character of property does not change when you move form one state to another

                                                              x.      Mixing (community and separate property) Approaches

1.        Inception of Right: the character of the property is determined at the time W or H signed the contract of purchase – community is only entitle to a return of community payments plus interest

2.        Time of Vesting: title does not pass to W or H until all the installments are paid

3.        Pro Rata Apportionment: community payments “buy in” a pro rata share of the title

e.       Unmarried Partners and Nontraditional Couples

                                                               i.      Unmarried Partners

1.        Common Law Marriage: an unmarried man and woman who hold themselves out to the public as married and conduct their affairs as a married couple are treated as if they were lawfully married – abolished in most states

2.        An express contract bt unmarried partners providing how the couple’s property will be divided on separation or death is enforceable in most states – in some states the contract can be oral (does not give them status rights under law such as elective share)

a.        Contracts for meretricious relationships will not be recognized

b.       In some states, a contract to share property or to support one partner can be implied from the conduct of the parties

3.        Policy: a state might not enforce contract bt unmarried partners if it wants to avoid constructively resurrecting the common law marriage or wants to encourage marriage

                                                              ii.      Nontraditional Couples (Same Sex)

1.        VT: civil union is similar to the institution of marriage

2.        WA: currently dealing with what happens to property after the death of one member of a same sex couple

3.        Defense of Marriage Act: denies many marital benefits to same sex couples – raises serious constitutional issues not yet ruled on

II.                   Landlord-Tenant

a.       Types of tenancies

                                                               i.      Tenancy for a Term of Years

1.        Any tenancy for a defined period of time

2.        Lasts for some fixed period of time or for a period of time computable by a formula that results in fixing calendar dates for beginning and ending once the terms is created or becomes possessory – can be a term of days, months, years, etc.

3.        Expires at the end of the state period wo either party giving notice

                                                              ii.      Periodic Tenancy

1.        Month to month, year to year, etc.

2.        Renews until notice is given

3.        Old common law rule was 6 months notice required, now typically 30 days

a.        Common law rule was notice equal to the length of the period itself (week, month, etc.) with a maximum of 6 months for a year term

4.        Fixed duration that continues for succeeding periods until either the ll or t gives notice of termination

5.        All terms and conditions for the tenancy are carried over and are applicable in each subsequent period unless there are express provisions to the contrary

6.        Can be created by express agreement or implication

7.        At common law, and in most jurisdictions today, if an annual rent is specified, the estate if from year to year, even though the rent required to be paid in monthly installments

                                                            iii.      Tenancy at Will

1.        No stated duration that endures only so long as both ll and t desire

2.        Either ll or t can terminate at any time, but both must be able to terminate

3.        Can arise expressly or by operation of law where the intended tenancy fails

4.        At common law, neither ll nor t had to give any notice for termination

a.        Today, most states require some sort of notice to terminate

b.       Usually 30 days notice is required but often imposed on ll but not on t

5.        If leasehold has no certain duration but is terminable at will by one party, the courts are split as to what is created

a.        Tenancy at Will: some courts imply a power of termination in both parties

b.       Determinable Life Estate: a life estate subject to a condition like paying rent

                                                            iv.      Tenancy at Sufferance/Holdovers

1.        When a tenant rightfully in possession wrongfully remains in possession (holds over) after termination of the tenancy, he is a tenant at sufferance

2.        Not really a tenant at all bc he is not holding with the permission of the ll

3.        Since original possession was not wrongful, also not a trespasser

4.        Lasts only until the ll evicts the tenant or elects to hold the t to another term

5.       Holdover Doctrine

a.        Allowing ll to hold the holdover another term is justified as a deterrent

b.       Some criticize this as imposing a penalty disproportionate to fault

6.        In most jurisdictions, holdover tenancy gives rise to a periodic tenancy – the rest results in a term of years – in either case, limited to one year

a.        Restatement: holding over results in a periodic tenancy measured by the way rent is computed, up to a maximum period of one year

7.        Except wrt length, the new tenancy is governed by the provisions in the old lease, including provisions for paying rent and any covenants

a.        If the ll notifies the t that he must pay higher rent if he holds over, the holdover t may be liable for the higher rent unless he notifies the ll that he refuses to pay

b.       Silence by the tenant is usually deemed implied consent to an increase in rent

b.       The Lease

                                                               i.      Traditionally: rests on a conception that the lease is a conveyance of property and that the tenant has purchased leasehold estate in land

1.        Traditional rule is that the t has bought an estate in land and assumes the risks of caring for the estate

2.        T has the duty of maintenance

3.        Ll has only the right to reenter and repossess the land on breach of a covenant by t

                                                              ii.      Modern: considered contract law

1.        Contains promises, usually called covenants, bt the parties – pay rent, taxes, insurance, repair, use property for certain purposes

2.        Covenants are deemed to be mutually dependent

c.       Housing Discrimination

                                                               i.      Civil Rights Act of 1866: bars racial and ethnic discrimination (only) in the sale or rental of property (not just housing)

1.        Civil Rights act of 1866 does not have any exemptions for a single family dwelling or for Mrs. Murphy – does apply to sales and rentals by an owner of a single family dwelling or by Mrs. Murphy – a racial or ethnic minority denied admittance to single family dwelling or small boarding/apartment house must sue under Civil Rights Act rather than FHA

                                                              ii.      Fair Housing Act (Title VIII of the Civil Rights Act of 1968)

1.        § 3604: make it unlawful to refuse to sell or rent a dwelling (only) to any person bc of race, color, religion, sex, familial status (persons w children except in senior citizen housing), national origin, or handicap (sex added in 1974, familial status and handicap added in 1988)

2.        § 3604(c): prohibits advertising or making any public statement that indicates a discriminatory preference – a statement to a t or prospective t that the ll will not rent to persons protected under the act violates the act

3.        § 3601: private clubs, dwellings for religious organizations, and certain specified persons are exempt from the FHA – purpose of these exemptions is to protect some types of close personal relationships from what is thought to be an invasion of privacy

4.        § 3602(h): Definition of handicap

a.        A physical or mental impairment which substantially limits one or more of such person’s major life activities

b.       A record of having such an impairment, OR

c.        Being regarded as having such an impairment, but such term does not include current, illegal use of or addiction to a controlled substance

5.        § 3603 (b)(1): exempts a person leasing or selling a dwelling he owns if he:

a.        Does not own more that 3 such dwellings, AND

b.       Does not use a broker, AND

c.        Does not advertise or say anything in a manner that indicates his intent to discriminate

d.       This subsection only applies to only one sale wi any 24 month period

6.        § 3603(b)(2): (Mrs. Murphy Exemption) exempts a person offering to lease a room or an apartment in his building of four units or less, one unit of which he occupies, and he does not advertise in a discriminatory manner

                                                            iii.      Proving Discrimination

1.        To prove a violation of the FHA or Civil Rights Act, pl must first establish a prima facie case – pl must show:

a.        Member of a statutorily protected class, AND

b.       Applied for and was qualified to rent the designated dwelling, AND

c.        Denied the opportunity to inspect or rent the dwelling, AND

d.       Opportunity remained available for others (helps that the dwelling was rented to someone else)

2.        If pl makes a prima facie case, the burden shifts to def to produce evidence that the refusal to rent was motivated by legitimate reasons having nothing to do w pl race, religion, ethnic origin, sex, disability, or familial status – if one of the protected statuses is even one of several motivating factors, the statute is violated

3.        Once def introduces evidence of his alleged legitimate reasons, the burden shifts back to the pl to show that the alleged legitimate reasons are pretextual

4.        If disabled, requires reasonable accommodations – not just all accommodations requested

d.       Delivery of Possession

                                                               i.      English Rule: the ll has the duty to deliver actual possession, as well as the right to possession at the beginning of the term

1.        If the previous tenant has not moved out when the new t lease begins, and the ll does not remove the person wi a reasonable period of time, ll is in default

2.        Policies

a.        New t bargained for the use of the property, not a suit against the prior t

b.       Ll more likely to know if the previous t will move out and is in a better position to pressure him to do so

c.        Ll is usually much more familiar with eviction procedures that t and can evict the holdover at less cost

d.       More efficient to put the duty on ll

3.        Remedies

a.        T can terminate the lease and recover damages for having to obtain housing elsewhere

b.       T can affirm the lease, refuse to pay rent for the portion of the term he was out of possession, and recover damages

c.        Damages could include items such as costs of renting other premises in excess of the rent specified in the lease

                                                              ii.      American Rule: ll has no duty to deliver actual possession at the commencement of the term, and hence is not in default under the lease when the previous t continues to wrongfully occupy the premises

1.        Ll must deliver legal (rather than actual) possession, then t must go after holdover

2.        This is actually the minority view

3.        Policies

a.        Ll should not be liable for the tortious act of the holdover

b.       Lease conveys a leasehold estate to the t, so it is up to the t to take possession of the property if he wants it

c.        T has the right to evict the holdover by summary proceedings and needs no additional remedy from the ll

d.       These policies do not address the fundamental issues of fairness and efficiency

4.        Remedies

a.        Incoming t generally has the same rights against the holdover the ll would have

b.       Incoming t can sue to evict the holdover and recover damages, or the incoming t can treat the holdover t as t for another term with rent payable to the incoming t

                                                            iii.      GA follows the English rule

e.       Subleases and Assignments

                                                               i.      Sublease

1.        Arises when lessee is coming back before the end of the term of the lease (even if for only one day)

2.        An interest less than the whole is conveyed

3.        T becomes ll of the sublessee

4.        Sublessee is not in privity with the ll so cannot sue or be sued by ll

a.        Not personally liable to the ll for rent

5.        At common law, a transfer by the tenant is a sublease if the tenant retains a reversion in the property after the transfer

6.        If a t retains a right of entry upon default in rent, some cases hold that the transfer is a sublease

a.        This is contrary to the common law rule that holds it is an assignments since no reversion was retained

                                                              ii.      Assignment

1.        Gets the rest of the term of the lease – original lessee is not coming back

2.        Entire interest is conveyed

3.        If the tenant assigns his leasehold, assignee comes into privity of estate w the ll, which means that the ll and the assignee are liable to each other on the covenants in the original lease that run with the land

a.        Similarly, if the ll assigns the reversion, the assignee and the t are in privity of estate

4.        Privity of Estate

a.        Concept used in the assignment context to circumvent the fact that ll and assignee are not in privity of contract w each other

b.       Generally, ll can sue for rent any person who is either in privity of contract w ll as to the rent obligation, or who has come into privity of estate w ll so as to be bound by the rental covenants fo the lease

5.        Although the assignee is liable for the rent, the original t also remains liable for the rent, in the event the assignee fails to pay bc the original t contracted w the ll

a.        Assignment terminates his interest in the leasehold, but does not affect his contractual liability to the ll

b.       Original t is said to be a surety of the assignee’s obligation to pay rent

6.        Mere fact that ll consents to the assignment and accepts rent from the assignee is not an implied release of t

a.        Ll can assent to an assignment, release t, and in exchange for the release, the assignee might undertake the promises in the lease

b.       This is a novation

c.        T is now out of the picture, and there is both privity of contract and estate bt ll and the assignee

                                                            iii.      Restraints

1.        Absent any covenant to the contrary, a leasehold is freely transferable by the t – it may be assigned or sublet wo the ll consent

2.        Many ll insist that the lease contain a covenant against transfers by the t

a.        Such a covenant is valid, but, being a restraint on the transfer of land, it might b e strictly construed against the ll

b.       A covenant not to assign does not prevent the tenant from subleasing, and a covenant not to sublease does not prevent an assignment

3.        If the lease contains a covenant requiring ll consent, and it does not contain a standard for withholding consent, there is a jurisdictional split regarding an implied standard for withholding consent

a.        Majority Rule: ll can do whatever he wants

b.       Minority Rule: ll must withhold consent in a commercially reasonable manner – this requirement does not apply to residential leases – can contract around this rule (adopted by the restatement)

                                                                                                                                       i.      Not commercially reasonable for personal taste, convenience, sensibilities, or other things external to the agreement

f.        Ll rights and duties

                                                               i.      Right to Enter

1.        Growing number of jurisdictions prohibit self-help in recovering possession and require ll to resort to a statutory remedy such as summary proceedings

2.        A lease may provide that ll is authorized to use self help in retaking possession on the t default

a.        Most courts hold such a provision valid

b.       Minority hold the provision void as violating public policy against self help

3.        Common Law: ll could use a much force as necessary to expel the t

4.        Modern Law

a.        Few states hold ll may use reasonable force to expel the t wo court process of any kind

b.       Some jurisdictions hold that ll can enter only by peaceable means

                                                                                                                                       i.      Changing the locks and locking out the t has been held forcible (Berg v. Wiley)

5.        Georgia

a.        Entelman v. Hagood: favors tenant in action for trespass in residential lease w no provision

b.       Rucker v. Wynn: favors ll with lease provision in commercial lease

                                                              ii.      Summary Proceedings

1.        Every state has a summary proceeding process, but can be a very slow process which is what drives some ll to self help

2.        Statutes usually require that before bringing summary action, ll must give the t notice to quit but the required notice may be very short bc it is assumed the t knows he is holding over unlawfully

3.        Many jurisdictions today prohibit retaliatory eviction

                                                            iii.      Abandonment/Duty to Mitigate Damages

1.        Common Law: ll may, but need not, mitigate damages – ll has three options

a.        Terminate the lease

b.       Let the premises lie idle and sue the t for the agreed-upon rent as it comes due

c.        Retake possession and attempt to relet the premises, holding the original t liable for any deficiency that may occur

2.        Old Rule: if ll chooses to stand by and do nothing, the common law rule holds that ll does not have a duty to mitigate damages by finding another tenant

3.        Modern Rule: In a growing number of states, probably a majority, ll has a duty to mitigate damages (Sommers v. Kridel)

a.        Put in open stock

b.       Reasonable Diligence

4.        GA follows the common law rule

                                                            iv.      Rent Acceleration: to avoid the rule that ll must wait to sue for rent as it falls due, a rent acceleration clause is often inserted into the lease – provides that th rent for the balance of the term shall become payable in full on t default of payment of rent or some other obligation – usually held valid

                                                             v.      Security Deposits

1.        Commonly require t to make a security deposit at the time the lease is executed to assure t performance – ll promises to return this money to t at the end of the term if t has not breached any covenant

2.        Example of a moral hazard: t has an incentive to, at the start of the last month of tenancy, tell ll to keep the security deposit in lieu of the last month’s rent – ll has an incentive to nickel and dime t when assessing damages

g.       Tenants Rights When in Possession

                                                               i.      Quiet Enjoyment/Constructive Eviction

1.        Constructive Eviction: Where, through the fault of the ll, there occurs a substantial interference w the t use and enjoyment of the leased premises, t may terminate the lease, vacate the premises, and be excused from further rent liability

2.        Common Law: viewed the promises expressed in leases as independent, such that a breach by the ll gave a tenant a cause of action for damages, but not the right to suspend rent payments or terminate the tenancy

3.        Notice

a.        If t knows of the interference prior to taking possession, and subsequently takes possession, t has waived the interference

b.       Usually, prior to claiming constructive eviction, t must give notice to ll of the objectionable conduct and ll must fail to remedy the situation wi a reasonable time

4.        T must vacate premises

a.        T cannot claim constructive eviction unless and until he vacates the premises

b.       T may be able to stay in possession and bring an equitable action for a declaratory judgment that ll actions constitute constructive eviction

                                                                                                                                       i.      Such declaratory relief permits t to know, before vacating the premises, whether he is justified in vacating

c.        If t vacates the premises on constructive eviction, this action terminates the lease – t has no further rent liability

d.       Restatement view: rejects the requirement that t must abandon the property before claiming constructive eviction – gives t a right to

                                                                                                                                       i.      Terminate, OR

                                                                                                                                      ii.      Stay on and receive damages or a rent abatement or employ certain self held remedies

5.        Fault of ll

a.        Interference w t quiet enjoyment must result from some act or failure to act by ll

                                                                                                                                       i.      Whether acts of other tenants or 3rd persons will suffice depends on whether ll can control the behavior and can be regarded as at fault in not controlling it

                                                                                                                                      ii.      As a general rule, ll is not responsible for one t causing annoyance to another t even though the annoying conduct would be constructive eviction if done by ll himself and even though ll can legally control the other’s conduct

b.       Modern Trend (minority view): holds ll responsible for other t acts if ll has the legal ability to correct the conditions and fails to do so

6.        Where constructive eviction might arise

a.        Failure to supply heat so that the apt becomes unlivable on cold days

b.       Main waste pipe of apt building permitted to become and remain clogged w sewage for a long period of time causing offensive odors and danger to health

c.        Allowing part of an apt building to be used for lewd purposes such that the rest of the building is unfit for occupancy by a respectable family

d.       Allowing plumbing to become so old and worn out as to emit strong and unhealthy odors

7.        Latent/Patent Defects

a.        Latent: not readily apparent at the time the lease is signed – probably can be grounds for constructive eviction

b.       Patent: readily apparent at the time the lease is signed – probably cannot be grounds for constructive eviction

                                                              ii.      Illegal Leases

1.        If the rental agreement is illegal bc the housing code forbids renting property in substandard condition, t has no duty to pay rent, but t must pay the reasonable rental value of the premises

2.        If the premises are unsafe or unsanitary, the lease is illegal and unenforceable by operation of law

3.        T under an illegal lease is a tenant at sufferance, and ll is entitled to the reasonable rental value of the premises, given their condition

                                                            iii.      Implied Warranty of Habitability

1.        Rather than moving out and claiming constructive eviction, t can claim breach of the implied warranty of habitability for basic health and safety problems

2.        Violations of public housing codes may be evidence of breaches of the warranty

3.        Covers all defects, latent and patent

4.        This is not waivable by the t – cannot contract around this warranty

5.        Does not apply to commercial leases

6.        T can terminate the lease and leave (and recover damages), stay and not pay rent, stay and pay rent then sue for damages, or fix the problems and deduct the cost from the rent

7.        T may also defend, in an action by ll for rent, that the agreed rent is not due bc of ll breach

8.        T has a duty of notice – reasonable time to repair after notice given

9.        Adopted in a large majority of jurisdictions

10.     Often, smaller ll who cannot afford improvements will declare bankruptcy – if t obtains judgment, will not be able to reach ll assests – thus sometimes, t victory is empty

11.     Warranty applies to patent defects whereas quiet enjoyment may not – warranty allows t to stay whereas have to vacate for constructive eviction

                                                            iv.      Retaliatory Eviction

1.        Ll cannot evict if he has a retaliatory motive

2.        Whether ll primary motivation is retaliatory is a question of fact

a.        Burden of proving motive is on t

b.       Burden shifts to ll if t can show ll action was:

                                                                                                                                       i.      Discriminatory against t, AND

                                                                                                                                      ii.      Followed t reporting violations

3.        A tenant in default in payment of rent cannot assert a retaliatory eviction defense

a.        However, t is not in default if acting legally in withholding rent

                                                             v.      Ll Tort Liability

1.        Common Law: ll were liable for t injuries only when ll negligently breached the limited duties that arose form the handful of exceptions to the general no duty rule – exceptions include:

a.        Duty to keep premises habitable for short term leases of furnished dwellings

b.       Duty to disclose latent defects in the premises of which ll knew or should have known and as to which t could not be held to have notice

c.        Duty to maintain common areas used by all the tenants in a building

d.       Duty to undertake carefully any repairs ll promised or volunteered to make

e.        Duty to abstain from fraudulent misrepresentations as to the condition of the leased premises

f.         In some jurisdictions, duty to abate immoral conduct and other nuisances that occurred on property owned by ll if they affected the leased premises

2.        Majority: neither impose strict liability nor recognize a general duty of care on the part of the ll – they only recognize the common law exceptions such as those listed above

3.        A few jurisdictions have cited the implied warranty of habitability as a reason to impose a general standard of care (negligence standard) on ll under all circumstances

                                                            vi.      Tenants’ Obligations When in Possession

1.        T has a duty not to commit waste by changing the premises substantially, thus affecting ll future interest

a.        Regards voluntary waste

2.        T duty to repair

a.        Common Law: t had an implied duty to make minor repairs, a duty that arose out of his duty not to commit waste

b.       Modern View: t implied duty to repair no longer makes sense – ll is generally in the best position to maintain the property

c.        In jurisdictions that follow the common law rule, a covenant that excepts fair wear and tear amounts to no more that the common law duty

d.       Explicit covenants to repair regularly except, in addition to fair wear and tear, damage by fire or other casualty: current trend exception relieves t from liability even wrt fire damage brought about by t negligence

3.        Continuation of rent after premises destroyed

a.        Common Law: unless the lease provided otherwise, t still had to pay rent (still has an interest in the land even though building is gone)

                                                                                                                                       i.      When t only rents part of the building, common law recognizes and exception bc T does not have any interest in the soil and the building itself is the only consideration for the lease

b.       Modern Law: Do not have to continue paying rent bc purpose for lease has been frustrated

III.                 Real Estate Transaction

a.       Contract of Sale

                                                               i.      Statute of Frauds

1.        Must be a signed writing – signed by parties to be bound

2.        Exceptions

a.       Partial payment/performance: good enough evidence that contract exists

b.      Estoppel: one party seriously changed his position in reliance of contract and unconscionable injury would result if contract not enforced

3.        Can be formal or informal writing – can consist of several documents

4.        Must contain all essential terms: parties, description, terms and conditions

                                                              ii.      Implied Warranty of Marketable Title

1.        Unless a provision in the contract to the contrary, implied that the seller must furnish the buyer with good and marketable title at closing

2.        Can contract around this rule

3.        Warranty made even though conveyance by quitclaim deed (wo any warranties of title)

4.        Marketable Title: there is no reasonable probability that the buyer will be subjected to suit

5.        Insurable Title: insured by a title insurance company and marketable title not required

6.        Good Record Title: seller must offer a marketable title based on recorded documents alone, not adverse possession

7.        Unless marketable title “of record” is called for, many states hold that marketable title can be based on adverse possession – in a few states, marketable title cannot be shown by adverse possession unless a quiet title action has eliminated the record owner’s rights

8.        Encumbrances

a.       Generally, marketable title means an unencumbered fee simple

b.      Easements that benefit the property might not constitute encumbrances

                                                                                                                                       i.      Majority of states hold such easements are encumbrances

                                                                                                                                     ii.      Few states hold that an open and visible easement for the benefit of the property known to the buyer before he makes the contract is not an encumbrance

c.       Restrictions on the use of property, imposed by private covenant, makes title unmarketable – if contract expressly states that the property has been purchased for a particular use and such use is permitted by the private covenants, title may be held marketable

d.      Parties can contract around encumbrances

e.       Zoning laws and subdivision restrictions generally do not make title unmarketable

                                                                                                                                       i.      If zoning restrictions are imposed after the buyer signed the contract, and these restrictions would materially interfere w or frustrate the buyer’s contemplated use of the property, many courts will refuse to enforce the contract against the buyer

                                                                                                                                     ii.      If the property is in violation of a zoning ordinance or subdivision law, and correction of the violation can be demanded by the government, the title is usually held unmarketable

9.        If the contract for sale expressly provides that time is of the essence the seller has until the closing date to clear up title problems

a.       Title defects cannot be cured after that date wo the buyer’s consent

b.      If contract does not state time is of the essence, the seller has a reasonable time as established by a court or by agreement of the parties

                                                            iii.      Equitable Conversion

1.        Rule: if there is a specifically enforceable contract for the sale of land, equity regards as done that which ought to be

a.       Buyer is viewed in equity as the owner from the date of contract – equitable title

b.      The seller has a claim for money secured by a vendor’s lien on the land – legal title as trustee

2.        From the time of the contract of sale, the burden of fortuitous loss falls on the buyer, even though the seller retains possession

a.       Most courts follow this view

b.      Some courts have declined to apply equitable conversion and have held that the loss is on the seller until legal title is conveyed

c.       In some other states, the risk of loss is placed on the party in possession

3.        If the buyer has the risk of loss, and the seller has insurance, in most states the seller holds the insurance proceeds as trustee for the buyer

4.        The parties may contract around equitable conversion – parties should include a “risk of loss” clause in the contract and buy insurance accordingly

                                                            iv.      Duty to Disclose Defects

1.        Caveat Emptor: seller did not have the duty to disclose any defects in the condition of the premises unless a defect was fraudulently concealed

a.       Also includes exceptions for fiduciary relationships, active concealment, and partially disclosing a defect

b.      Still a rule in many states

2.        Most states now hold that the seller must disclose all known material defects to the buyer

a.        Many states have statutes requiring sellers to give buyers a written statement disclosing facts about the property

3.        Sometimes courts will have required sellers to reveal the existence of off-site conditions that might affect market value (hazardous waste, noisy neighbor, crimes in the neighborhood)

4.        Generally, real estate broker can only be held liable for fraudulent misrepresentation, although some states give real estate brokers a duty to disclose material defects known to the broker but unknown and unobservable to the buyer

5.        Generally, parties can contract around the default rules of implied duties

                                                             v.      Implied Warranty of Quality

1.        Arises after sale/closing has taken place

2.        Most courts now imply a warranty by builders that the buildings are free from defective materials and are constructed in a sound and workmanlike manner

a.        Policies

                                                                                                                                       i.      Builder has a greater ability to prevent defects

                                                                                                                                      ii.      Home buyer relies on builder’s skill

                                                                                                                                    iii.      Unequal bargaining power

                                                                                                                                    iv.      Importance to society of soundly constructed housing

3.        Hybrid bt tort and contract law

a.        Tort Theory: warranty runs to all persons who buy the product, cannot be waived or disclaimed and statute of limitations runs from the time of discovery of the defect

b.       Contract Theory: runs only to those in privity of contract with the builder, can be disclaimed, and statute of limitations runs from the date of conveyance

c.        Courts have not consistently applied either theory

4.        Subsequent Purchasers

a.        Subsequent purchasers of a house may have difficulty in recovering from the builder on a contract theory bc lack of privity

b.       On a tort theory, they may have difficulty bc both negligence liability and strict liability are usually limited to physical injury and not mere economic loss

c.        Bc the builder is placing a defective house in the stream of commerce, and owes a duty of care to those who subsequently buy it, about ½ the courts that have considered the question have held that the builder has liability to them regardless of lack of privity

5.        Some courts allow buyers to disclaim/waive the implied warranty

6.        It is unsettled whether the implied warranty of quality applies to commercial buildings

                                                            vi.      Deed

1.        Types of deeds

a.        Quitclaim Deed

                                                                                                                                       i.      Conveys the right, title, or interest (if any) that the seller has in Blackacre

                                                                                                                                      ii.      Does not warrant anything

                                                                                                                                    iii.      Useful in allowing a land transaction to clear an apparent defect in title, where the grantor is not pursuing the claim

                                                                                                                                    iv.      This is why you can sell someone the Brooklyn Bridge – quitclaim deed to the Brooklyn Bridge conveys nothing

b.       Special Warranty Deed

                                                                                                                                       i.      Limits liability: warranties only cover defects arising during the grantor’s tenure, and not defects occurring prior to that time

                                                                                                                                      ii.      The grantor guarantees only that he has done nothing to make title defective

                                                                                                                                    iii.      Contains all six of the covenants subject to the limitation

c.        General Warranty Deed

                                                                                                                                       i.      Gives broader warranty to the seller

                                                                                                                                      ii.      Warrants against defects arising before as well as during the time grantor had title

                                                                                                                                    iii.      Price is usually not recited in the deed bc it raises the base for property taxes and affects the property values

2.        Warranties in Warranty Deed

a.        Present Covenants

                                                                                                                                       i.      Seisin: I own it – grantor says he owns what he is conveying

                                                                                                                                      ii.      Right to Coveny: I can convey it – power to make conveyance

                                                                                                                                    iii.      Against Encumbrances: There are not any (except the following …) – no easements, covenants, mortgages, liens or other encumbrances

b.       Future Covenants

                                                                                                                                       i.      General Warranty: I will defend you against lawful claims – claimant must win to be lawful

1.        Grantor will defend on behalf of the grantee any lawful claims existing at the date of conveyance

2.        Will compensate the grantee for any loss sustained by the assertion of superior title

3.        This covenant and the covenant of quiet enjoyment amount to the same thing for all practical purposes

                                                                                                                                      ii.      Quiet Enjoyment: you will not be disturbed by anyone with superior title – treated the same as general warranty

                                                                                                                                    iii.      Further Assurances: I will execute any other document to perfect your title – perform whatever acts are reasonably necessary to perfect to buyer’s title if it turns out to be imperfect

3.        Present Covenants v. Future Covenants

a.        Present Covenants

                                                                                                                                       i.      Breached when made, if at all

                                                                                                                                      ii.      No eviction or disturbance of grantee’s possession is needed in order to establish a breach

                                                                                                                                    iii.      Statute of limitations run from the day the deed is given

b.       Future Covenants

                                                                                                                                       i.      Not breached until the grantee is actually or constructively evicted sometime in the future

                                                                                                                                      ii.      Mere existence of a superior title does not constitute a breach – grantee has no cause of action unless disturbed in some way

                                                                                                                                    iii.      Constructive eviction might occur when grantee is forced to buy from someone who has superior title

                                                                                                                                    iv.      Statute of limitations does not begin to run until disturbed

4.        Scope of Covenant against encumbrances

a.        Breached if there is a private encumbrance on title such as an easement or mortgage

b.       Not breached by existence of public land use controls such as zoning ordinances or building codes

c.        Not breached by a latent violation of a public land use control which the public authorities may never discover or enforce

5.        Running with land

a.        Present Covenants

                                                                                                                                       i.      American Rule (majority): present covenants do not run with the land and cannot be enforced by remote grantees – at the time of breach, the covenant becomes a chose in action in the grantee and the chose in action is impliedly assigned

                                                                                                                                      ii.      English Rule (minority): the chose in action is impliedly assigned by the original grantee to a subsequent grantee

b.       Future covenants generally run with the land

6.        Delivery of Deed

a.        Must be intent, delivery, and acceptance

                                                                                                                                       i.      Delivery: words or conduct of the grantor that shows intent to make the deed operative and to pass an interest immediately to the grantee

                                                                                                                                      ii.      Physical delivery not mandatory – intent is what matters

b.       Delivery presumed when

                                                                                                                                       i.      Handed to the grantee

                                                                                                                                      ii.      Acknowledged by the grantor before a notary

                                                                                                                                    iii.      Recorded

                                                                                                                                    iv.      Presumption is rebuttable by extrinsic evidence

c.        Death

                                                                                                                                       i.      If the grantor intended the deed to be legally effective before death, then validly delivered

                                                                                                                                      ii.      If the intent was to be effective upon/after death, then no good – cannot be substituted for a will

d.       After there has been an effective delivery of a deed in fee simple, title has passed ot the grantee and a return of the deed to the grantor has no effect as a cancellation or reconveyance

e.        Conditional Delivery: a deed to be delivered if a condition is later fulfilled can be made valid upon occurrence of the condition if it is held in escrow by a 3rd party – conditional delivery to a grantee vests absolute title in the grantee

f.         Escrow

                                                                                                                                       i.      Donative escrow: grantor is giving the land to the grantee, but desires to postpone the grantee’s right to possession until a later date, usually the grantor’s death

1.        If, in the escrow instructions, the grantor retains power to recall the deed, the escrow is invalid

                                                                                                                                      ii.      Commercial Escrow: seller hands a deed naming the buyer as grantee to an escrow agent with instructions to hand the deed to the grantee when the grantee hands over the purchase price

1.        Most courts hold that the grantor may recall the deed while still in the escrow agent’s hands

                                                                                                                                    iii.      Escrow cannot be revocable

                                                                                                                                    iv.      Relation Back Doctrine

1.        In escrow cases there is a 1st delivery to an escrow agent and a 2nd delivery to a grantee

2.        Although title does not pass to the grantee until the 2nd delivery, upon that delivery title will relate back to the 1st delivery so that the law assumes it passed at the 1st delivery

                                                          vii.      The Mortgage

1.        In general

a.        Consists of two documents

                                                                                                                                       i.      Note: evidences the debt – sometimes called a bond

                                                                                                                                      ii.      Mortgage: agreement that the land will be sold if the debt is not paid and the lender reimbursed from the proceeds of the sale – gives the lender security, gives the lender recourse against the land

                                                                                                                                    iii.      In many states, only one document is used containing both the note and the mortgage

b.       Usually recorded – once recorded, any subsequent purchaser or creditor takes subject to it

c.        Equity: borrower’s interest in land (short for equity of redemption)

d.       Mortgages can be taken out for purchase money for property, for home improvement, for children’s education, etc.

e.        Lenders often insert due-on-sale clauses into their mortgages

                                                                                                                                       i.      Provides that at the mortgagee’s election, the entire mortgage debt is due upon sale of the morgagor’s interest

                                                                                                                                      ii.      Protects the mortgagee from assignment to an unsatisfactory credit risk, and allows the morgagee to force the new buyer to refinance at a higher interest rate (if the rates have increased)

2.        Foreclosure

a.        Property will be some, and from the proceeds the lender will be paid the amount of the debt and anything left over goes to the borrower

b.       Deficiency Judgment: if, on foreclosure sale, the land does not bring in enough to pay the debt, the lender can sue the borrower on the note for the deficiency

c.        Mortgagor can transfer his interest subject to the mortgage

                                                                                                                                       i.      The new buyer takes the land subject to the lien, but the new buyer is not personally liable for the debt

                                                                                                                                      ii.      If the debt is not paid, mortgagee can foreclose on the land, but the mortgagee cannot sue the new buyer on the debt

d.       Mortgagor can transfer his interest to a new buyer who assumes the mortgage

                                                                                                                                       i.      New buyer becomes personally liable on the debt

                                                                                                                                      ii.      Mortgagee can sue either the new buyer or the original mortgagor for the debt

                                                                                                                                    iii.      New buyer and original mortgagor are both subject to a deficiency judgment

                                                                                                                                    iv.      New buyer is primarily liable so if the mortgagee collects from the original mortgagor then he can sue the new buyer

e.        Mortgagee has a fiduciary like duty to protect mortgagor’s equity in a foreclosure sale

f.         Second morgagee’s rights are subject to the rights of the 1st mortgagee

g.       Types of prices in a foreclosure sale

                                                                                                                                       i.      Upset Price: minimum price below which property will not be sold

                                                                                                                                      ii.      Fair Market Value: what a willing buyer would pay a willing seller

                                                                                                                                    iii.      Fair Price: the price resulting from due diligence by the mortgagee

3.        What constitutes a mortgage

a.        Installment Land Contract: agreement by the buyer to buy land and pay for it over a period of years, maybe 10 or 20 – seller agrees to deliver title at the end of the period

b.       Rent to Own

IV.                 Title Assurance

a.       Recording System

                                                               i.      Title Searches

1.        Tract Index: easier than grantee-grantor search

a.        Indexed by block and lot

b.       Can see prior recorded instruments conveying, mortgaging, or otherwise dealing with the land

c.        Looks at everything that has been recorded as to a specific tract

2.        Grantor-Grantee Index: More complicated than tract search

a.        Use grantee index to discover from whom each previous owner took title (establishes chain of title)

b.       Use grantor index to ascertain what transfers each owner made during his tenure on the land

c.        Work backwards to find grantors and forwards to find encumbrances

d.       Problems

                                                                                                                                       i.      H and W might have different last names

                                                                                                                                      ii.      Some grantors have numerous entries (construction company)

                                                              ii.      What is recorded

1.        Every kind of deed, mortgage, contract to convey, or other instrument creating or affecting an interest in land

2.        Lis pendens – pending suit that may affect property

                                                            iii.      Surveying

1.        History

a.        Land divided into townships

b.       Townships divided into 36 sections

c.        Sections subdivided into quartersections of 160 acres each

d.       After the Civil War, freedmen got quartersection of a quartersection (40 acres) – this gave rise to the expression 40 acres and a mule

e.        Surveys were not entirely reliable – paid by the mile

f.         Survey gives the legal description of the land that goes in the deed

2.        Other sources for the description of the land in a deed

a.        Reference to natural or artificial monuments and reference to directions and distances (metes and bounds)

                                                                                                                                       i.      When descriptions in conflict uses a hierarchy or monuments

                                                                                                                                      ii.      Hierarchy: natural monuments (trees), artificial monuments (surveyor’s stakes), references to adjacent borders (Smith’s property line), direction (northwest), distance (30 feet), area (5 acres), place names (Quinn farm)

b.       Reference to a government survey, recorded plat, or some other record

c.        Reference to the street and number or name of the property

                                                            iv.      Mother Hubbard Clauses

1.        Provision in a deed that attempts to sweep wi it other parcels not specifically described

2.        Generally not valid against subsequent purchasers of the undescribed land bc it is an undue burden to require a title searcher to read all conveyances of other lots by an owner of the subject lot to see whether the conveyances affect the subject lot

                                                             v.      Misspelled Names

1.        Idem Sonans: name spelled as it sounds

2.        Older cases said as long as name spelled as it sounds then okay for constructive notice

3.        Recent cases hold that the instrument does not give constructive notice unless it identifies the party by correct name (idem sonans not allowed)

                                                            vi.      Generally, instruments must be notarized in order to be recorded

b.       Recording Acts

                                                               i.      Race Statutes

1.        Priority is determined solely by who records first – notice is irrelevant

2.        First in time, first in right

                                                              ii.      Notice Statutes

1.        Subsequent bona fide purchaser prevails over a prior grantee who fails to record if subsequent purchaser has no actual or constructive notice of a prior claim at the time of the conveyance

2.        Shelter Rule: If a subsequent purchaser would prevail bc of lack of notice, and then conveys to the other, the other steps into his shoes and would prevail also

                                                            iii.      Race Notice Statutes

1.        Protect only subsequent purchasers wo notice of the prior claim and who wins the race to record

2.        Only bona fide purchasers for value are qualified to run in the race

3.        Exist in about ½ the states

4.        GA is race notice

c.       Chain of Title Problems

                                                               i.      Do not arise in a jurisdiction that has a tract index

                                                              ii.      Chain of title includes those documents of which the purchaser has constructive notice – all documents found in the standard title search are in the chain of title

                                                            iii.      Wild Deed: recorded deed to the property that is not recorded wi the chain of title – sometimes this term is used in a narrower sense, meaning a recorded deed from a grantor who is not connected to the chain of title

                                                            iv.      If a deed entered on the records has a grantor unconnected to the chain a title, such a deed is not recorded wi the chain and does not give constructive notice

                                                             v.      Some hold that bc the burden of title search would be excessive, deeds out to other lots from the common grantor are not in the grantee’s chain of title, and the grantee is not bound by them

1.        Others charge the grantee w constructive notice of all deeds out from a common grantor, not just the deeds to his particular tract and the grantee is thus bound by the common restriction

                                                            vi.      Estoppel by Deed

1.        If a grantor who does not have title later acquires it, it passes by operation of law immediately to the grantee

a.        Ayer v. Philadelphia & Boston Face Brick and Tefft v. Munson

b.       Under this theory, another must search title prior to the time each previous grantor acquired title to ascertain whether estoppel applies against the grantor

2.        The majority of cases, especially recent, go the other way

a.        These cases emphasize the cost of searching title under the name of every owner for may years prior to the date the owner received title, looking for a possible prior deed given by the owner

b.       This cost does not seem justified in view of the fact that a grantee could easily make sure his deed is recorded after the previous deed

d.       Bona Fide Purchaser

                                                               i.      To attain the status of bona fide purchaser, and be protected by the recording acts, a person must:

1.        Be a purchaser (or mortgagor, or creditor if the statutes allow), AND

2.        Take without notice (including actual, record, or inquiry) of prior instruments, AND

3.        Give a valuable consideration

                                                              ii.      Donees: generally, donees do not come wi the protection of the recording system bc they do not give a valuable consideration

                                                            iii.      Valuable Consideration: to be protected under the recording acts, a purchase must give valuable consideration

1.        Must be more than merely nominal, but it does not have to equal the market value of the property

2.        Love and affection is not valuable consideration, but labor and materials spent on improving the property might be

                                                            iv.      Partial Payment

1.        Where the purchaser has paid only part of the purchase price and has given a note to the grantor for the balance, most courts protect the purchaser to the extent of payments he made

2.        Depending on the equities, courts will either give the subsequent purchaser a lien on the land for the amount paid or give the prior grantee a lien to the extent of the balance still owed the grantor by the subsequent purchaser

a.        Under the first alternative, the subsequent purchaser loses the land, but receives his money back (Daniels v. Anderson)

b.       In a minority of states, a purchaser who gives cash and notes in payment of the purchase price is fully protected as a subsequent bona fide purchaser (Lewis v. Superior Court)

3.        Pro Tanto Rule (Daniels v. Anderson)

a.        Relaxes harsh rule that a purchaser who receives notice of an outstanding interest after partial payment gets none of his consideration back

b.       Protects the buyer to the extent of the payments made prior to notice, but no further

c.        Three methods to apply rule

                                                                                                                                       i.      Most common: award the land to the holder of the outstanding interest and award the buyer the payments that he made

                                                                                                                                      ii.      Award the buyer a fractional interest in the land proportional to the amount paid prior to notice

                                                                                                                                    iii.      Allow the buyer to complete the purchase, but to pay the remaining installments to the holder of the outstanding interest

e.       Notice

                                                               i.      Actual Notice: if a subsequent grantee actually knows of the prior instrument, he has actual notice and is not a bona fide purchaser

                                                              ii.      Constructive Notice

1.        Record Notice: If an instrument is properly recorded, any subsequent purchaser has record notice and is not a bona fide purchaser

2.        Inquiry Notice: Under certain circumstances, a purchaser is required by law to make reasonable inquiries – he is charged w notice of whatever the inquiry would reveal even though no inquiry was made

f.        Title Insurance

                                                               i.      Bought by one premium paid at the time the policy is issued

1.        Premium based on the amount of insurance purchased

2.        Amount of insurance purchased is ordinarily the purchase price of the policy for homeowner’s insurance and the amount of the loan for lender’s policies

                                                              ii.      Has no fixed term and continues for as long as the insured maintains an interest in the property

                                                            iii.      Creates liability to the insured only and does not run with the land to subsequent purchasers

1.        Subsequent purchaser must take out a new policy if the purchaser wants title insurance

                                                            iv.      Two basic forms

1.        Mortgagee’s Policy: insures the mortgage lender and not the homeowner

2.        Owner’s Policy: taken out by a homeowner who desires title insurance

                                                             v.      Standard policy excludes losses arising from government regulations affecting the use, occupancy, or enjoyment of land – also excludes claims of persons in possession not shown by the public records, as well as unrecorded easements, implied easements, and easements arising by prescription – also defects that would be revealed by a survey or inspection

                                                            vi.      Almost all institutional mortgage lenders require title insurance at the borrower’s expense

V.                   Nuisance

a.       Categories

                                                               i.      A nuisance is an unreasonable, unprivileged interference with a person’s use and enjoyment of his land

1.        Relief from nuisance was awarded at common law under the basic maxim that one must use his property so as not to injure that of another

2.        Considered a tort so the notion of balancing the costs of the activity against its utility – property tort

                                                              ii.      Private Nuisance

1.        Involves interference with the private use and enjoyment of nearby property

2.        Either:

a.       Intentional and unreasonable, OR

b.      Unintentional but negligent, reckless, or resulting from an abnormally dangerous activity

3.        Cannot sue claiming a private nuisance unless he has property interest that is affected or alleges bodily harm as the result of the activities complained of

4.        Types

a.       Nuisance per se: an activity that is a nuisance no matter how reasonable the def conduct

b.      Nuisance per Accidens: an activity that is unreasonable under the particular facts – usually depends on location

c.       Tendency of courts that have found nuisances per se is to limit them to unduly hazardous activities, unlawful activities, or highly objectionable uses in the particular district

                                                            iii.      Public Nuisance

1.        Interference is with a common right to the general public

2.        Widespread in its range or indiscriminate in its effects

3.        Underlying test is the same as for private nuisance:

a.       Intentional and unreasonable, OR

b.       Conduct that is negligent or abnormally dangerous

4.        Suit is usually brought by the attorney general

a.        Private individual may act against a public nuisance only if he can show that the nuisance is specially injurious to him

                                                                                                                                       i.      Does not have to own affected land but must show that the damage is of a different kind than the damage to the public at large

                                                                                                                                      ii.      Special Injury

5.        If a use is authorized by statute or ordinance, it is not a public nuisance and cannot be enjoined

6.        Types

a.        Intentional Nuisance: intentional and unreasonable act that continues over time and is known to interfere w another’s enjoyment of the land

                                                                                                                                       i.      Primary factor is the unreasonableness

                                                                                                                                      ii.      Unreasonableness balances the gravity of the harm against the utility of the conduct based upon the particular facts of the case

b.       Unintentional Nuisance: when the risk of harm makes the conduct unreasonable

                                                                                                                                       i.      Unreasonableness here refers to the actor’s conduct as well as the gravity of harm

                                                                                                                                      ii.      The utility of the conduct is seldom a factor

b.       Tests

                                                               i.      Threshold Test: If the annoyance reaches a certain level, then a nuisance (Jost v. Dairyland Power)

                                                              ii.      Balancing Test (Restatement): consider whether the gravity of the harm outweighs the utility of the actor’s conduct

1.        Factors relevant to gravity of harm

a.        Extent of the harm involved

b.       Character of the harm

c.        Social value that the law attaches to the type of use or enjoyment invaded

d.       Suitability of the particular use or enjoyment invaded to the character of the locality

e.        Burden on the person harmed or avoiding the harm

2.        Factors relevant to the utility of the conduct

a.        Social value that the law attaches to the primary purpose of the conduct

b.       Suitability of the conduct to the character of the locality

c.        Impracticability of preventing or avoiding the invasion

3.        Problem with this approach is that it gives no standard for wighing the various factors against one another

c.       Nuisance v. Trespass

                                                               i.      Physical invasion of another’s land can be either a trespass or nuisance

                                                              ii.      Cause of Action

1.        Trespass is an actionable invasion of a possessor’s interest in exclusive possession of land

2.        Nuisance is an actionable invasion of a possessor’s interest in the use and enjoyment of land

                                                           iii.      Burden of Proof

1.        In trespass, pl is entitled to relief on showing an intentional, unprivileged physical intrusion

a.        No showing of substantial injury is required

b.       Court does not balance the equities in trespass

c.        Requires no proof of harm

2.        In nuisance, pl must show:

a.        Unreasonable conduct, AND

b.       Substantial injury, AND

c.        In most jurisdictions, that the equities balance in pl favor

                                                            iv.      Remedies

1.        Trespass: pl is entitle, usually as a matter of right, to damages for past conduct and an injunction against future trespass

2.        Nuisance: court may, in its discretion, give damages for past conduct or permanent damages for future conduct or an injunction – more flexible than for trespass

d.       Nuisance Factors for Balancing Test

                                                               i.      Depreciation of property value: not enough be itself to constitute a nuisance – important factor in proving substantial injury to pl

                                                              ii.      Discomfort: objectionable noise, odors, or smoke are frequently the interference complained of – standard of unreasonable interference is measured by the sensibilities of the average person

1.        Sunlight: older cases held that cutting off a neighbor’s sunlight by building next to the property line was not a nuisance – may change as a result fo the development of solar collectors

2.        Spite Fences: can be enjoined as a nuisance bc conduct has no social value when it is erected solely to harm the neighbor and of no economic benefit to the erecting party

                                                            iii.      Fear of Harm: Significant factor in declaring a nuisance (storage of explosives, mental hospital, etc.)

                                                            iv.      Character of the Neighborhood: Pig in a parlor problem

1.        Residential areas are often given a preferred status and are protected against incompatible uses

2.        Zoning ordinance is admissible in court to show community policy wrt desirable land use wi a neighborhood – however, that it is consistent with zoning is not controlling in an action for private nuisance (specific activity may be carried out in such a manner as to constitute an unreasonable interference with the particular adjoining purposes)

                                                             v.      Social Value of the Conflicting Use: primary objects of nuisance law is to avoid the more serious harm – if great social value, court reluctant to find nuisance

                                                            vi.      Priority in Time: If def use was first, pl can to the nuisance and a less appealing case bc he could have avoided the harm

e.       Lateral and Subjacent Support

                                                               i.      Lateral Support: support that land receives from the adjacent land

1.        Landowner is strictly liable if he changes his land use so as to withdraw lateral support from neighbor and cause neighbor’s land to slip or fall in

2.        If an excavator builds a retaining wall to support the adjoining parcel, he and his successors in interest have the duty thereafter to maintain the wall

3.        Neighbor is under strict liability duty to provide lateral support to property in its unimproved state, but only a negligence duty to provide support to buildings on the land

4.        Duty to support buildings on land

a.        Majority View: strict liability for withdrawal of lateral support to a neighbor’s property does not extend to buildings on the neighbor’s land

b.       Minority View: An adjacent landowner has the same strict liability for failing to support neighboring buildings as he has wrt the land

                                                              ii.      Subjacent Support

1.        Whenever mineral estates are severed from the surface, the surface occupant has a right of subjacent support against the mineral owner

2.        Right differs from the right to lateral support in that the mineral owner must support the land with the buildings existing on it when the mineral estate is severed (responsible for land and buildings)

f.        Nuisance Remedies

                                                               i.      Enjoin def

1.        Injunctions can be for sale

2.        Injunction is an equitable remedy that requires balancing the equities

                                                              ii.      Give pl damages

1.        May refuse an injunction but grant damages instead

2.        Has the effect of giving the right to pl but forcing a sale of it to def through damages

                                                            iii.      Enjoin def and give def damages

1.        This has the effect of giving the right to pl but forcing the pl to pay the def for it

2.        Tends to bring about efficient resource allocation bc pl is forced to back up his claim for a judicially enforced transfer with cash

3.        May not be feasible when there are many pl and high transaction costs

                                                            iv.      Refuse any remedy to pl

                                                             v.      Remedies Grid

 

Liability Rule (judicially determined damages)

Property Rule (right gets assigned and parties determine price)

Pl Wins

Boomer

Estancias

Def Wins

Spur

No liability and the nuisance continues (maybe Osborne)

 

VI.                 Easements, Covenants, and Servitudes

a.       Easements

                                                               i.      Grant of an interest in land that entitles a person to use land possessed by another

                                                              ii.      Types

1.        Affirmative Easement: (positive easement) has the right to onto the land of another (the servient land) and do some act on the land – most easements are affirmative

2.        Negative Easement: can prevent the owner of the servient land from doing some act on the servient land

                                                            iii.      Tenements

1.        Dominant Tenement: the land benefited

2.        Servient Tenement: land burdened – usually (does not have to be) adjacent to the dominant tenement

                                                            iv.      Gross v. Appurtenant

1.        Easement Appurtenant: easement benefits its owner in the use of another tract of land it is appurtenant to the owner’s land (dominant tenement)

a.        Attaches to the dominant tenement and passes with the tenement to any subsequent owner of the tenement

b.       Cannot be separated from the dominant tenement and turns into an easement in gross, unless the owners of the dominant and servient tenements make a new agreement permitting that

2.        Easement in Gross: easement does not benefit its owner in the use and enjoyment of his land, but merely gives him the right to use the servient land

a.        Term used to signify that the benefit of the easement is not appurtenant to the other land

b.       Does NOT mean that the easement is personal to the holder and cannot be assigned

                                                                                                                                       i.      However, if inherited or assigned to many people, they may be difficult to locate so court restrict assignment

                                                                                                                                      ii.      Although some cases hold commercial easements in gross are not assignable, the general rule is that the benefit of a commercial easement is assignable (commercial easements in gross are those that have primarily economic benefit rather than personal satisfaction)

c.        Usually can be assigned if the parties so intend

d.       Easement is not considered part of the dominant tenement but is merely being used by the owner of the dominant tenement – attaches to the person instead of the land

3.        If easement is ambiguous, courts generally construe it as creating an easement appurtenant to the land rather than an easement in gross

                                                             v.      License v. Easement

1.        License: permission to go on land belonging to the licensor – can be oral or in writing and is revocable at the will of the licensor

2.        Easement: grant, not mere permission

b.       Creation of Easements

                                                               i.      Creation by Express Grant

1.        Must satisfy the statute of frauds – written instrument signed by the grantor

2.        Can be created to endure for a person’s life, period of years, or forever

3.        A grant of limited use, or for a limited, or of an identified space wo clearly marked boundaries creases and easement

a.        A sale for less than the fair market value of a fee simple indicates an easement

b.       If the owner of the servient land pays taxes, and the used space is not separately assessed, this indicates an easement

                                                              ii.      Creation by Reservation

1.        Easement can be reserved by the grantor over the land granted – if the grantor conveys land, reserving an easement, the land conveyed is the servient tenement

a.        At common law and in a majority of states, an easement cannot be reserved in favor of a 3rd party

b.       A minority of states would allow easements to be reserved in favor of 3rd parties

2.        Exception v. Reservation

a.        Exception cannot vest an interest in the 3rd party and the excepted interest remains in the grantor

b.       Treated the same today

3.        Regrant Theory: A deed from O to A purporting to reserve an easement in O was treated as conveying a fee simple to A, who by the same instrument regranted an easement to O

a.        A was treated as the grantor of a reserved easement

                                                            iii.      Creation by Estoppel

1.        A license may become irrevocable under the rules of estoppel

2.        If the licensee has constructed substantial improvements on either the licensor’s land or the licensee’s land, relying on the license, in may states the licensor is estopped from revoking the license

a.        Theory is that it would be unfair to the licensee to permit revocation after he spends money in reliance

3.        Restatement: irrevocability exists only for whatever time is required to enable the licensee to reap the fruits of his expenditures – some courts have held that irrevocability is limited to the life of the pertinent structure of improvement – few courts hold that an irrevocable license is like and easement and is capable of lasting forever

4.        Minority of courts hold that the licensor will not be estopped from revoking the license

a.        Easement falls wi the statute of frauds (license can be oral)

b.       In fairness, a writing should be required so that the good neighbor who gives casual permission wo thinking of the permanent damage to his land will not be bound

5.        Requiring a writing

a.        Shepard v. Purvine: OR Supreme Court holds that easement does not require and writing and an easement by estoppel can be created

b.       Henry v. Dalton: RI Supreme Court requires a writing so no estoppel created

                                                            iv.      Creation by Implication

1.        If, prior to the time a tract of land is divided into 2 lots, a use exists on the servient part that is reasonably necessary for the enjoyment of the dominant part and which the court finds the parties intended to continue after the tract is divided, an easement may be implied by operation of law

2.        Can be implied only over land granted or reserved when a tract is divided into two or more parcels

3.        Easement in gross will NOT be implied

4.        When the tract is divided, a use of one part of the tract must exist from which it can be inferred that an easement permitting its continuation was intended

a.        Such previous use must be apparent (or at lease inferable from apparent circumstances), AND

b.       Continuous (not sporadic)

c.        Both of these requirements make it more certain that the parties knew about the easement and intended for it to continue

5.        Easement must be necessary for the enjoyment of the claimed dominant tenement

6.        Quasi-easement: existing use of the land before the land is divided for sale

a.        Not a legal easement bc O cannot have an easement on his own land

b.       Can arise as an easement only when O divides the land

                                                             v.      Creation by Necessity

1.        Implied if the owner of a tract of land divides the tract into 2 lots and by this division deprives one lot of access to a public road

2.        Requirements

a.        Common grantor, AND

b.       The necessity must exist at the time the common grantor severed the 2 estates

3.        Must be strictly necessary and not just a more convenient route of access

4.        Does NOT require an existing use at the time a tract is divided into 2 lots

5.        Owner of the servient parcel has the right to locate the easement, provided it is reasonably convenient

6.        Might be implied in situations where an easement for something other than road access is claimed (not yet been granted in courts)

a.        Easement for a sewer or for light and air

b.       Courts have refused to imply on the ground that sewage can be removed by truck and buildings can be equipped with artificial light and air

7.        Lasts only as long as is necessary – terminates when the necessity ceases

                                                            vi.      Creation by Prescription

1.        Usual elements required for adverse possession must be shown for this creation:

a.        Open and Notorious Use: must be made wo any concealment

b.       Under a claim of right: not w permission of the owner of the land

c.        Continuous use: does not necessarily mean constant

d.       Uninterrupted use: prescriptive period ends when the owner of the land interrupts

2.        Public easement by prescription

a.        Majority View: can acquire if members of the public use the private land in a manner meeting the requirements for prescription

                                                                                                                                       i.      If the public uses the land for a roadway, the presumption is that the use is adverse, just as it is for an individual claim of easement

                                                                                                                                      ii.      Conversely, if the public uses vacant, undeveloped land, the presumption is that the use is permissive – does not give notice to the owner

                                                                                                                                    iii.      Difficult to acquire for use other than roadway

b.       Minority View: in some states, the general public cannot acquire prescriptive rights in private property – owner’s cause of action runs against the specific trespassing individuals and not against the public at large

3.        Beaches

a.        Most states

                                                                                                                                       i.      The beach from the water to the mean high-tide line (wet sand area) is in public trust

                                                                                                                                      ii.      Dry sand portion bt the mean high-tide line and the vegetation is subject to private ownership

                                                                                                                                    iii.      Public access requires both a way of access form inland to the coast and a lateral easement up and down the beach

b.       Medieval doctrine

                                                                                                                                       i.      If the public has used the beach for so long that the memory of may runneth not to the contrary, the public has a customary right to use the beaches

                                                                                                                                      ii.      This applies to the dry sand area

c.       Scope of Easements

                                                               i.      General Rule: depends on the intention of the parties

1.        Express: court will look at the language of the instrument, together w the surrounding circumstances in order to determine intent

2.        Easements of Way: strong public policy that land have access necessary to make it useful under contemporary conditions

3.        Implied

a.        Existing use: scope is generally the same as express

b.       Easement by necessity: extent of necessity determines scope

4.        Prescription: the uses that give rise to the easement can continue, but there is no basis for assuming the parties intended the easement to accommodate future needs

                                                              ii.      Subdivision of dominant tenement

1.        General Rule: if the dominant estate is subdivided each lot has a right to use easements appurtenant to the dominant estate

2.        Limitation: the servient estate is not to be burdened to a greater extent than was contemplated at the time the easement was created and is necessary to accommodate normal development of the dominant estate

3.        Use of an easement may grow commensurate with the normal growth of the dominant tenement, but no further

                                                            iii.      Use for benefit of nondominant land

1.        Black Letter Law: an easement granted for the benefit of lot 1 cannot be used for the benefit of lot 2, even though the same person owns lots 1 and 2

2.        The dominant owner cannot increase the scope of the easement by using it to benefit a nondominant tenement – can only use the easement for the parcel it was meant to benefit

                                                            iv.      Change in location

1.        Generally cannot move an easement – can only be moved through mutual consent

2.        It is a trespass if the easement is moved wo permission of the servient owner – same for widening an easement

3.        Restatement: servient owner can relocate the easement or make reasonable changes in its dimension when necessary to permit normal development of the servient estate, provided the changes do not unreasonably interfere w the easement holder’s use, and provided the servient owner pays for the changes

                                                             v.      Use by Servient Owner: has the right to use the servient land in ways that do not unreasonably interfere with the easement

                                                            vi.      Division of Easements in Gross

1.        Nonexclusive Easement: one that is enjoyed both by the easement holder and the servient owner – absent authority in the grant, the easement holder cannot divide the right among others who use it independently

2.        Exclusive Easement: the holder has the exclusive right to enjoy the easement – owner of an exclusive easement can divide it or transfer it to others who can use it independently, unless the original grant prohibits this

3.        One Stock Rule for profit in gross

a.        Problem: even though a profit, like an easement, can be divided among several people, overuse of the profit by these persons (each seeking to maximize his wealth) can lead to the depletion of natural resources

b.       Majority View: one stock rule regulates the problem

                                                                                                                                       i.      When two or more persons own a profit in gross, they must use the profit as one stock – neither can operate independently of the other

                                                                                                                                      ii.      One owner can veto use by the other bc consent of all is required

                                                                                                                                    iii.      Has been applied to easements in contexts where overuse of the easement may result in destroying the resource (Miller v. Lutheran Conference & Camp)

c.        Minority View: a reasonable test is used to govern how much the competing owners can use the easement

                                                          vii.      Maintenance of easement: generally, the dominant tenement owner must maintain the easement

d.       Termination of Easements

                                                               i.      Utility of Title: if the title to the easement and the title to the servient tenement come into the hands of one person then easement extinguished

1.        Cannot be revived by subsequent separation of the tenements into two ownerships

                                                              ii.      Act of the Dominant Owner

1.        Release: owner of an easement may release the easement to the servient owner by a written instrument (not oral bc of statute of frauds)

a.        If the owner of an easement orally releases it to the servient owner, and the servient owner expends money in reliance on the oral release the easement owner is estopped to plead statute of frauds

2.        Nonuse: mere nonuse of an easement does not extinguish the easement – not extinguished no matter how long the nonuse continues

3.        Abandonment: Although oral release nor nonuse alone is sufficient, if the owner of an easement acts in such a way to indicate and unequivocal intent to abandon the easement, then considered abandoned

a.        Such acts can include an oral release or nonuse coupled w failure to maintain the easement, or permitting the easement to be blocked by others, or establishing a substitute easement elsewhere

4.        Alteration of dominant tenement: if granted for a particular purpose, and an alteration of the dominant tenement makes it impossible to achieve the purpose any longer, the easement is extinguished

5.        Easement by Necessity: terminates when the necessity ends

                                                            iii.      Acts of the Servient Owner

1.        Destruction of Servient Tenement: easement in a structure is terminated if the building is destroyed wo fault of the owner of the servient estate

a.        If the building is destroyed by the intentional act of the servient owner, the easement is not extinguished, and a court may require the servient owner to create in any new building an easement for use of the dominant owner

b.       However, one state holds an easement can be destroyed by the intentional destruction of the building by the servient owner

2.        Prescription: if the servient owner interferes w an easement in an adverse manner, the servient owner can extinguish the easement by prescription

a.        Requisite elements of adversity are the same as for the creation

b.       However, where an easement has been created but no occasion has arisen for its use and the servient owner fences his land, the servient owner is not deemed to act adversely until the dominant owner demands that the easement be opened and the servient owner refuses to do so

                                                            iv.      Change of Conditions: an easement cannot be extinguished by a change of conditions in the neighborhood

e.       Negative Easements

                                                               i.      Definition: gives the easement holder the right to prevent the servient owner from using his land in some way

                                                              ii.      Limited Types: are rare and are generally not permitted unless one of four types recognized by early English law

1.        Light

2.        Air

3.        Subjacent or lateral support

4.        Flow of an artificial stream

                                                            iii.      Scenic easements and solar easements are two new types of negative easements recognized in recent years

                                                            iv.      Cannot arise by prescription

f.        Real Covenants

                                                               i.      Covenants are a private means of land use planning – covenant is a promise to do or not to do a certain thing

1.        Affirmative Covenant: promise to affirmatively do something

2.        Negative Covenant: promise to refrain from doing something

                                                              ii.      If promise is breached, promissee or successor may want one of two things:

1.        Money damages (must sue in law)

2.        Injunction or decree requiring specific performance of the promise (must sue in equity)

                                                            iii.      Real Covenants v. Equitable Servitude v. Condition

1.        Real Covenant: covenant that runs with the land – enforceable at law by a successor owner of the promisee’s land, and also against the promisor’s land – must be in writing

2.        Equitable Servitude: covenant enforceable in equity by or against successor to the land of the original parties to the contract

3.        Condition: provides for forfeiture upon breach of the condition, whereas a covenant is enforceable only by an award of money damages (real covenant) or an injunction (equitable servitude)

                                                            iv.      Benefit and Burden

1.        Burdened tract is analogous to the servient tenement under the law of easements, and the benefited tract is analogous to the dominant tenement

2.        Easements run to successive owners of the tracts involved bc easements are interest in land – covenants did not start out as interest in land, but rather only as promises concerning the use of land so courts laid out different rules for when these promises run to successors

3.        Burden (Spencer’s Case)

a.        Express:

                                                                                                                                       i.      A covenant relating to something not in esse (not yet in being) will not bind assignees of the covenantor unless the convenantor expressly agrees not only for himself but all “for his assignees” (expressly), so as to show the intent to bind successors

1.        The requirement of expressly stating when not in esse has been abolished in almost all states for the covenants running with a fee simple – must only show an intention to bind assigns

                                                                                                                                      ii.      A covenant relating to some in esse (currently in being) will bind the assigns wo expressly mentioning them, if there is other evidence suggesting such intent

b.       Touches and Concerns the Land: for the burden of the covenant to run, it must touch and concern the land

c.        Privity of Estate: must be present for a covenant to run

4.        It is easier to prove that the benefit runs than to prove that the burden runs bc courts do not want the dead hand of the past to burden or encumber land for a long time – courts limited the running of the burden through privity

5.        Horizontal Privity v. Vertical Privity

a.        Horizontal Privity: privity of estate bt the original covenanting parties

b.       Vertical Privity: privity of estate bt one of the covenanting parties and a successor in interest

6.        Horizontal Privity

a.        Restatement (1st)

                                                                                                                                       i.      Horizontal privity is not required for the benefit to fun but it is required for the burden to run

                                                                                                                                      ii.      In order to have horizontal privity, there must be either a mutual or successive relationship bt the promisor and promissee for the burden of a covenant to run at law:

1.        Successive Relationship (Majority View): most courts define horizontal privity to be successive (grantor-grantee) relationship

2.        Mutual Relationship (Minority View): MA and a few other states took the position that horizontal privity means that both parties have a mutual relationship in the same land, apart from the covenant

b.       Restatement (3rd): Takes the position that horizontal privity of estate is not required for a covenant to run to sucessors – law is moving in this direction but many jurisdictions use the 1st’s approach

7.        Vertical Privity

a.        Traditional authorities appear to agree that vertical privity of estate is required for a covenant to run

b.       Restatement (1st)

                                                                                                                                       i.      For the burden to run, the successor must have an estate of the same duration as the promisor had – if the promisor had a fee simple, so must the successor

                                                                                                                                      ii.      The benefit runs to a successor of any interest in the land, and not only to a successor of the whole estate

c.        Restatement (3rd)

                                                                                                                                       i.      Discards the vertical privity doctrine and instead draws a distinction bt negative and affirmative covenants

                                                                                                                                      ii.      Negative covenants are treated like easements for succession purposes – they run to all subsequent owners and possessors of the burdened and benefited property

                                                                                                                                    iii.      Affirmative covenants, required the burdened owner to perform an act are treated differently – the burdens and benefits run to persons who succeed to estates of the same duration as were held by the original parties to the covenant

                                                                                                                                    iv.      Special rules for lessees: must perform only covenants that are more reasonably performed by the lessee than the by the ll

                                                                                                                                     v.      Special rule for life tenants: succeed to burdens, but the life tenant’s liability for performance is limited to the value fo the life estate (becomes less as the life tenant gets older)

g.       Equitable Servitudes

                                                               i.      Definition: is a covenant, whether or not running w the land at law, that equity will enforce against assignees of the burdened land who have notice of the covenant – usual equitable remedy granted is an injunction against violation of the covenant

                                                              ii.      Actual or constructive notice is required in order to be enforced

                                                            iii.      Equitable Servitudes v. Real Covenants

1.        Remedies

a.        If a promisee seeks damages from an assignee, the promisee must go into law and attempt to enforce the promise as a real covenant

b.       If the promisee seeks and injunction or specific performance, the promisee must go into equity and ask for enforcement of an equitable servitude

c.        People have begun enforcing equitable servitudes rather than covenants bc they prefer injunctions to damages

d.       The two are not mutually exclusive – can get injunction and damages

2.        Creation

a.        Real covenant must be in writing

b.       In many states, an equitable servitude will be implied

c.        Generally, and equitable servitude must also be in writing

3.        Privity of Estate

a.        Equitable servitude

                                                                                                                                       i.      Horizontal and vertical privity not required for the burden to run

1.        Analogous to an easement in that it is enforceable against any person who interferes

                                                                                                                                      ii.      When someone other than the original promisee is enforcing the benefit, some states say must show that he acquired title to his pand from the promisee, either before or after the original covanent was made

b.       So for equitable servitude: horizontal privity does not matter and vertical privity is not required for the burden to run but is required for the benefit to run

4.        Touch and Concern and Notice

a.        Real covenants and equitable servitudes both require that the covenant touch and concern the land

b.       Neither is enforceable against a subsequent bona fide purchaser wo notice of the covenant

c.        Equitable servitudes require actual or constructive notice

5.        Restatement (3rd)

a.        Abolishes any distinction bt real covenants and equitable servitudes

b.       Applies the same rules as real covenants

                                                            iv.      Property Theory of Servitudes

1.        Facilitates the holding that, after the original promisor has conveyed the burdened land, the promisor cannot be sued in law or in equity

2.        The original promisor has lost control of the land when she assigns her entire interest, and it would be unfair to penalize her for the conduct of some future owner

3.        Also supports the holding that, if the government condemns the burdened land, the gov’t must pay the benefited owner damages for loss of the servitude

4.        Can run with the land, need a writing to be created, and lack of consideration does not make a difference

h.       Creation of Covenants and Servitudes

                                                               i.      Statute of frauds requires a writing with one exception:

1.        Negative equitable servitudes may be implied from a general plan for development of a residential subdivision (usually based on equitable estoppel)

                                                              ii.      Implied Servitudes

1.        Elements:

a.        General Plan: usually must exist at the time the developer sells the first burdened lot wi the general plan and must exist prior to def deed

b.       Notice: def had notice of the covenant containing the restriction

2.        Reciprocal and Negative Easement

a.        Implied must be reciprocal

b.       Must be a negative or restrictive covenant, forbidding some use of land

c.        Court will not imply affirmative covenants

3.        Some courts refuse to imply negative reciprocal servitudes in a residential subdivision, and instead require a written instrument identifying the burdened lot

4.        Real covenants have not been implied by courts at all

5.        Modern courts tend to uphold agreements if for the benefit of the community

6.        Enforcement by 3rd party beneficiaries

a.        Majority View: any 3rd party beneficiary can enforce a covenant in law or in equity if the contracting parties so intend, although no magic words are required

b.       Minority View: privity of estate survives as a requirement for enforcing an equitable servitude – person seeking to enforce the covenant must trace his title to the original promisee

                                                            iii.      Touch and Concern Requirement

1.        For the burden to run with the burdened land in equity as well as at law, the covenant must touch and concern the burdened land

2.        For the benefit to run with the benefited land, the covenant must touch and concern the land for both

3.        Cost-benefit function

a.        The function of the touch and concern requirement is to permit courts to stop covenants from running when the social utility of the covenant is outweighed by the fettering of the burdened property

b.       Restatement (1st): the burden will not run if the burden imposed is obviously greater than the benefit given – there must be such a relation bt benefit and burden that the performance of the promise has, in the particular case, some reasonable prospect of promoting land utilization as a whole

4.        Negative Covenants

a.        Covenants not to do a physical act touch and concern the land

b.       Affect the burdened owner in the physical use of his land

c.        Covenants containing building restrictions touch and concern the land

5.        Noncompetition covenants

a.        Restricts the promisor in the physical use he may make of his land so touches and concerns

b.       Benefit of a covenant not to compete clearly enhances the value of the covantee’s land but is debatable whether it affects him in the physical use of his land – but a majority of the courts hold the enhancement of commercial value is enough to say it touches and concerns

6.        Affirmative Covenants

a.        Most permit to run both in law and equity, and they are usually held to touch and concern the land

b.       However, if it imposes a substantial burden on property that receives no benefit from it and fetters land in perpetuity, a court may find it does not touch and concern

c.        If the act is to be performed off the burdened land, wo benefiting the burdened land, the covenant does not touch and concern the burdened land

7.        Covenants to pay money

a.        For some improvement that benefits the promisor by enhancing the value of his property touch and concern even though the improvements are on other land

                                                                                                                                       i.      Typically, these covenants provide that the landowner will pay a certain sum each year to maintain common spaces

                                                                                                                                      ii.      If the formula for calculating the sum is reasonably clear, a covenant to pay an annual fee is enforceable against assigns

8.        Restatement (3rd)

a.        Supersedes the touch and concern requirement with other tests for enforceability against successors

b.       Unenforceable at Inception: whether the servitude arrangement violates public policy

                                                                                                                                       i.      Imposes an unreasonable restraint on alienation

                                                                                                                                      ii.      Imposes an indirect restraint on alienation that lacks a rational justification

                                                                                                                                    iii.      Imposes an unreasonable restraint on trade

                                                                                                                                    iv.      Unconscionable

                                                                                                                                     v.      Consider: legitimacy and importance of the purposes to be served, the fairness of the arrangement, and the degree of interference w personal autonomy and freedom from discrimination

c.        Unenforceable on Account of Subsequent Events

                                                                                                                                       i.      The covenant should be an initially valid covenant that becomes an appropriate case for termination when the developer receives a reasonable return on the investment and has sufficient revenues to assure the other lots of water

                                                                                                                                      ii.      Most affirmative covenants to pay money arising out of commercial transactions will be initially enforceable and will become unenforceable only when one of the following termination rules become applicable               

1.        After a reasonable time if it does not specify the total sum due or a definite termination point

2.        In exchange for services or facilities provided to the burdened estate may be modified or terminated if the obligation becomes excessive in relation to the cost of providing the services or facilities or to the value received by the burdened estate

3.        These do not apply to obligations to a community association or to reciprocal obligations imposed pursuant to a common plan of development

9.        Covenant with Benefit in Gross – if benefit is in gross, the burden will not run

a.        For servitudes

                                                                                                                                       i.      Majority View: when does not touch and concern land (bc in gross), burden will not run

                                                                                                                                      ii.      Minority View: some courts hold that the burden of a covenant will run even though the benefit is in gross

b.       Real Covenants: if a covenant will not run in equity bc the benefit is in gross, neither ill a covenant run at law

c.        Restatement: burden will run, both in law and equity, where the benefit is in gross

i.         Covenants and Servitudes: Limitations on Enforcement

                                                               i.      Generally, a covenant will be construed so as to carry out the intention of the parties in light of the purpose of the covenant

                                                              ii.      Single-Family Dwelling Covenant

1.        Cases are not in agreement as to whether a group home constituted a single-family dwelling

a.        Most recent cases take a functional approach and ask if the particular group home functions with a traditional family housekeeping structure and atmosphere

2.        Enforcement of a residential covenant against a group home for the disabled, even if the term single family is construed to exclude group homes, is a violation of the FHA

                                                            iii.      Racial Restrictions

1.        Prohibiting use of the property by a person of a particular race cannot be enforced by the courts

2.        Judicial enforcement of racial covenants would be an action by the state that deprives a person of equal protection of the law

3.        Although the covenant is not void, it cannot be publicly enforced

j.         Covenants and Servitudes: Termination

                                                               i.      Merger: if the title to the land benefited and the title to the land burdened come into the hand of one person, real covenants and equitable servitudes merge into the fee simple and cease to exist

                                                              ii.      Estoppel: if a benefited party acts in such a way as to lead a reasonable person to believe that the covenant was abandoned, and the burdened party acts in reliance thereon, the benefited party may be estopped to enforce the covenant

                                                            iii.      Relative Hardship: as a general rule, a court of equity may deny an injunction when the hardship to the def is great and the benefit to the pl is small – but where the right to the benefit of a servitude is clear, the defense is disproportionate harm and benefit is usually not persuasive

                                                            iv.      Change in Conditions in Neighborhood

1.        Most frequently asserted defense

a.        If this is shown, equity will refuse to enforce the covenant

b.       For the defense of a change of conditions to succeed the change must be substantial

2.        Court might refuse to enforce a restrictive covenant if the neighborhood has abandoned it, but the level of abandonment must be substantial and not sporadic

3.        Restatement: allows courts wide latitude to change servitudes when conditions have changed

4.        It has been suggested that efficiency and fairness would be better served by giving the owners of benefited lots damages rather than an injunction – MA statue takes this position when conditions are met

                                                             v.      Abandonment

1.        An affirmative covenant, such as paying money, cannot be abandoned

2.        Restatement: provides for modification or termination of affirmative covenants when the obligation is in perpetuity or becomes excessive – this does not apply to community associations or reciprocal obligations imposed in a common plan

                                                            vi.      Eminent Domain: the majority rule is that the gov’t must pay damages to the owner of the benefited land

k.       Covenants and the Creation of Common Interest Communities

                                                               i.      Include: condos, co-ops, subdivisions with homeowners associations

                                                              ii.      Condos

1.        Ownership: each unit is separately owned in fee simple by and individual owner – common areas are owned by the unit owners as tenants in common

2.        Financing and Taxes: each owner obtains own mortgage and is responsible for own taxes

3.        Use: can be adapted to commercial and residential use

4.        Owner’s Association: ass’n makes and enforces rule, manages common areas, and sets maintenance charges

5.        Owner’s Obligation: liable for a monthly charge to maintain common facilities and insure against casualty and liability

6.        Enforcement: may be covered by the state condo statute – if not, enforcement raises all the legal problems associated with the enforcements of covenants

7.        Destruction: Condo statute should state what happens if the building is destroyed

                                                            iii.      Rules of Conduct

1.        Originating documents may provide for certain rules of conduct – test of validity is reasonableness

2.        Restrictions in originating documents

a.        Have a strong presumption of validity

b.       Strike only if arbitrary or violation of public policy or constitutional rights

c.        Generally not struck down unless unreasonable ab initio (at the time they were adopted), especially if they are part of the original condo plan

3.        Restrictions Subsequently Adopted

a.        Must be reasonable

b.       Court may give a less deferential review than it gives to a covenant in originating documents

c.        Reliance interest of the buyers is not as strong for subsequent changes

d.       Courts may balance the importance of the new rule’s objective with the importance of the individual interest infringed upon