Property 2 Outline 04.09.13

Property 2 Reuben-Cooke, Spring 2012
I.
Leasehold Estates Chapter 6 p. 421 A. Leasehold Estates 1. Characteristics: a. Every leasehold estate has: 1.) Estate in tenant 2.) Reversion in landlord 3.) Exclusive possessory control of land by tenant 4.) Generally, contract between the parties B. Four Types of Leasehold Estates 1. Term of Years: A lease for a single, fixed term of any length. a. Characteristics: 1.) Fixed duration, any single fixed period, set forth clearly in the lease OR by reference to a formula that will produce a fixed calendar date for the beginning and ending of the leasehold. 2.) Ends automatically at the expiration of the term unless the parties agree to renew it. 3.) May be defeasible. Can be terminable upon the occurrence of some specified event or condition (Term of Years Determinable or Subject to Condition Subsequent). 4.) Death of landlord or tenant has no effect on the lease. 5.) Length: a.) Common Law: Any length b.) Modern Law: Some states have enacted statutes restricting length. 2. The Periodic Tenancy: A lease for a recurring period of time. a. Characteristics: 1.) Fixed duration set forth in the lease (month to month, year to year). 2.) Created by parties intentions or by operation of law. 3.) Automatically renews for the same period unless either party has given adequate advance notice of termination. b. Termination: A periodic tenancy is automatically renewed from period to period until proper notice of termination is given by either party. Many jurisdictions have statutorily prescribed the notice required to terminate a periodic tenancy. In general, the guidelines are as follows: 1.) The tenancy must end at the end of the natural lease period. 2.) For a tenancy from year to year, six months notice is required. 3.) For tenancies less than one year in duration, a full period in advance of the period in question is required by way of notice (e.g., for a month to month periodic tenancy, one full months notice is required). 4.) At the end of the period, it can be terminated by either party on notice and without cause. 5.) Modern Law: Defined by statute. Usually one month. 6.) Effective Notice: a.) Notice must be in writing. b.) Notice may be ineffective for intended move out date but not for later date. (1) Example: 30 day notice required but only 15 day notice given. This is not effective for the move out date but it is effective for a 30 day notice - Two weeks after actual move out date.
3. Tenancy at Will: A leasehold for no fixed time or period. a. Characteristics 1.) Lasts as long as both parties desire. 2.) May be terminated at any moment by either party. a.) Termination by Landlord: Notice b.) Termination by Tenant: Notice or abandonment. 3.) Unilateral termination not permitted. (Meaning only one party can terminate). a.) Determinable Term of Years: L to T for two years but T may terminate sooner if she wishes. b.) Determinable Periodic Tenancy: L to T from year to year but T may terminate whenever she wishes. c.) Tenancy at Will (at Common Law); Determinable Leasehold Life Estate (at Modern Law): L to T for so long as T desires. (See Garner v. Gerrish p. 423). 4.) Death of either party terminates a tenancy at will. 4. Tenancy at Sufferance: Created when tenants hold over by remaining in possession after their right to do so has expired. a. Characteristics: 1.) Tenant has no right to possession. 2.) Landlord does not consent to tenants continued occupation. 3.) What constitutes hold over? a.) Common Law: One second past the old term, but it must be voluntary. There is no holdover so long as the tenants continued possession is the product of circumstances beyond the tenants control. b.) Modern Law: b. Landlord must irrevocably exercise one of two options within reasonable time: 1.) Eviction and recovery of damages for the lost possession, or a.) Damages: Fair market value of the occupied premises plus damages for physical injury to the premises. 2.) Binding the tenant to a new term. a.) Type of new leasehold: 1.) Some states: periodic tenancy 2.) Some states: term of years for maximum of one year 3.) Some states: tenancy at will with tenant liable only for fair market value of premises. C. The Lease p. 428 1. Estate and Contract: A lease is a conveyance of a possessory estate in land and it is a contract. a. Estate: The traditional view: A lease is a conveyance of an estate in land. 1.) Characteristics: a.) Identifies the lessor and lessee; b.) Describes the leased land; c.) States the term of the lease; and d.) Sets forth the amount of the rent. e.) Must be in writing if for term of one year or longer (SOF)
f.) Unless the lease is to the contrary, a tenant may assign his entire leasehold to another person. 2.) Other factors: a.) Tenant purchased possession of an estate for a term. b.) Tenant bears responsibility and risk of its destruction. c.) Landlord obligated to deliver possession. d.) Tenant obligated to pay rent regardless because rent is price for possession only. e.) Landlord has the right to retake possession only if tenant defaults. f.) Courts today may treat commercial lease as estate rather than contract. b. Contract: The contemporary view: A lease is package of bilateral promises that are mutually dependent. 1.) Tenant may refuse to perform her promises (pay rent) if landlord fails to perform a promise. 2.) Courts today apt to treat residential leases as contracts in most respects. c. Lessees Rights: 1.) All legal rights of a possessor (may sue others for invasion of her possessory interest via ejectment or nuisance. d. Lease or License or Something Else? A lease gives the leaseholder the right to exclusive possession for the duration of the term, so long as the tenant performs the lease obligations. A lease has all the legal rights of a possessor and may sue others for invasion of his possessory interest via ejectment, trespass, or nuisance. The licensee (hotel guest) lacks these powers because they do not have a possessory interest in property. Courts consider the following factors: 1.) Intent of the parties 2.) Restrictions on use 3.) Exclusivity of possession 4.) Degree of control retained by the grantor 5.) Presence or absence of incidental services. 2. Statute of Frauds: SOF applies to all leases except short term (less than a year). a. Requirements: Lease must specify the following to satisfy the statute of frauds: 1.) Identity of the parties; 2.) amount of rent; 3.) description of property; 4.) length of term; b. Oral lease for term longer than the short term period is void and unenforceable BUT: 1.) Exceptions: a.) If Tenant takes possession anyway, a tenancy at will is created. b.) Once the tenant pays rent and landlord accepts a periodic tenancy created not subject to the statute. Cannot exceed 1 year; At least 6 month notice required.
D. Selection of Tenants 1. Fair Housing Act (FHA) Broad a. Discrimination in financing housing and in provision of brokerage services prohibited. 2. Land Use Restriction Agreements: a. Shelley v. Kraemer: State courts barred from enforcing racially restrictive land use agreements. b. Numerical occupancy limitations justified on ground of maintaining economic value of the property. c. No Pets: Pets as therapeutic tools the no pets policy will prevail unless there is a reasonable way to accommodate the pet.
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3.
Civil Rights Act of 1866 Narrow a. Jones v. Meyer: CRA of 1866 bars all racial discrimination private and public in sale or rental of property. b. Discrimination on basis of handicap barred by Act. (AIDS considered handicap for purposes of ACT.) c. Discrimination against unmarried couples permitted. d. Discrimination against gays permitted. e. Discrimination based on profession permitted.
E. Delivery Of Possession p. 438 1. Delivery of Legal Right to Possession: A landlord has an implied in law obligation to deliver to the tenant the legal right to possess the leased premises. If a third party has a better claim to possession than the landlord, the landlord will not be able to deliver to the tenant the legal right to possess. a. The obligation to deliver the legal right to possession consists of two promises: 1.) Power to demise: The landlord promises to have the power to grant to the lessee the interest he purportedly grants under the lease. 2.) Quiet enjoyment of possession: Every tenant has the right to quiet enjoyment of the leased premises. The promise is implied in law. There are two aspects of this obligation. a.) First, the landlord is obligated to delivery to the tenant the legal right of possession of the premises. b.) Second, the landlord has a duty to refrain from wrongful actual or constructive eviction of the tenant. b. Waiver by Tenant: 1.) Express 2.) Implied: Tenant has knowledge at the time he enters into the lease that there is a paramount title. c. No Waiver: 1.) Tenant ignorant of the paramount title when lease signed, later learns before taking possession, tenant is entitled to repudiate the lease without penalty. 2. Delivery of Actual Physical Possession: a. The English Rule (Majority): L obligated to give T both legal right to and actual possession of: The landlord has an implied-in-law obligation to deliver actual possession to the tenant on the first day of the lease term. Landlord better positioned to avoid or deal with holdovers. 1.) Tenant Remedies: a.) Terminate the lease, recover damages pertinent to having to find another place. b.) Adhere to the lease but withhold rent for the period out of possession and recover damages related to lost possession. Damages may also be storage costs. 2.) Partial Possession: Tenant entitled only to abate a proportionate share of the rent for the period of lost possession. 3.) Waiver: Some states permit parties to waive this right. b. The American Rule (Minority) L obligated only to give T legal right to possession: The landlord impliedly warrants only that the tenant will have a legal right to possession of the premises at the beginning of the term. The landlord has no implied obligation to deliver actual possession. The tenant has the legal right to possession only. Obtaining actual possession is up to the tenant. (Hannan v. Dusch, p. 438 the VA Supreme Court affirmed the American Rule). 1.) Tenants Remedies:
a.) Same rights against the holdover tenant that the landlord would have, absent the new lease. (evict and recover damages or renew the holdover for a new term, receiving rent from the holdover 2.) Landlords Remedies: a.) Customary remedies. 3.) Modification by Agreement: Parties may negotiate to include an express promise from the landlord. 3. Tenant Obligation to Take Possession: Not such obligation unless the lease obligates them to do so. The tenant remains obligated to pay rent but may leave the premises vacant absent an agreement to the contrary. F. Subleases and Assignments p. 442 1. Sublease: Lessee transfers anything less than his entire interest in the leasehold thereby retaining a reversion. Absent prohibition in the principal lease, a tenant is free to sublease at will. a. Privity of Estate: A sublease by a tenant does not create privity of estate between the landlord and subtenant. Subtenant is liable only to the tenant for the sublease obligations, and the subtenant has not claim against he landlord for failure to perform his lease obligations. b. Privity of Contract: A sublease by a tenant does not create privity of contract between the subtenant and the landlord. Only the tenant and the subtenant have a contractual relationship. c. Tenant Default: If the tenant or sublessor defaults on the principal lease, the landlord is entitled to terminate the principal lease. In so doing, the sublease is terminated. The subtenant then has not right to possession. 2. Assignment: The transfer of the partys entire interest under the lease. An assignment places the assignee in privity of estate with the other original party. Unless the lease is to the contrary, a tenant may assign his entire leasehold to another person. a. Privity of Estate: 1.) Assignment of leasehold: Assignee placed in privity of estate with the landlord, meaning the parties are liable to each other for performance of the lease obligations that run with the leasehold estate. (Basically, the tenant has possession but the landlord has a reversion). a.) Assignee liable on all covenants that run with the land: By virtue of assignment, the assignee falls into privity of estate with the landlord and he is liable on all covenants in the original lease which run with the land. A covenant to pay taxes is an example of such a covenant. b.) Covenants only run with the leasehold estate and thus are enforceable against the assignee if: (1) Intent: The original parties to the lease must intend that the promise bind assignees. (2) Privity: The assignee must be in either privity of estate or privity of contract with the party enforcing the promise or against whom the promise is sought to be enforced. (3) Touch & Concern: The promise must touch and concern the assigned estate (either leasehold or reversion). Meaning, its performance is integrally connected with the use or enjoyment of the estate. For an assignee to enforce a promise or to have a promise enforced against her, it must be shown that the benefit of the promise or the burden of the promise respectively touches and concerns the assignees estate. c.) Assignors Contractual Obligations: A personal promise does not run with the estate. The promisor remains obligated to perform even after assignment unless he is released
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from the obligation (i.e., novation). Assignment does not release the tenant from his personal contractual obligations to the landlord under the terms of the original leasehold agreement. Example :Tony agrees to .. rather than some term such as leassee or assignee obligations Tony to fulfill his contractual obligation even after assignment of the lease. 2.) Assignment of landlords reversion: Assignee placed in privity of estate with the tenant. 3.) Assignee Defaults: Landlord may sue assignee so long as the assignee remains in possession of the property. Once the assignee transfers their interest to another party the landlord may not sue the assignee for unpaid rent. b. Privity of Contract: Not destroyed by assignment. Contractual duties created by a lease continue to be personal obligations of the original parties to the lease even after assignment. 1.) Release and Novation: To destroy privity of contract the landlord and original tenant must agree to release each other from their contractual promises. a.) No Implied Release: A landlords consent to an assignment and acceptance of rent from the assignee does not constitute release. b.) Express Release Only: An express release + promise by the assignee to assume performance of the lease obligations = Novation. c. Promises Run Leasehold Estate and thus are enforceable against the assignee if: 1.) Intent: The original parties to the lease must intend that the promise bind assignees. 2.) Privity: The assignee must be in either privity of estate or privity of contract with the party enforcing the promise or against whom the promise is sought to be enforced. 3.) Touch & Concern: The promise must touch and concern the assigned estate (either leasehold or reversion). Meaning, its performance is integrally 3. Sublease OR Assignment?: a. Two Methods 1.) Substance of transaction: Did the tenant transfer her entire interest in the leasehold? 2.) Party Intent: a.) Ernst v. Conditt p. 442: The court looked to the parties intent and concluded they intended an assignment. The evidence was that Rogers parted with his entire interest in the lease; Conditt acquired every iota of Rogers interest and paid the rent directly to Ernst. b.) Jaber v. Miller: Jaber transferred his leasehold to Miller under instrument entitled assignment but which reserved in Jaber the right to re-enter if the assignee defaults. Rent was paid by the assignee. The court inferred from the use of the word assignment that that was what the parties intended to create despite evidence to the contrary. 4. Restrictions on Assignment or Sublease a. Limits on Landlord power to deny consent: 1.) Common Law: Landlord may deny consent to transfer for any reason or no reason at all. 2.) Modern Law: a.) Anti-discrimination statutes limit landlord power to deny consent. b.) Implied Obligation of Reasonableness: A landlord has an implied obligation to act reasonably when denying consent to a transfer. Usually limited to commercial leases.
(1) Kendell v. Ernest Pestana p. 450: Landlord denied consent to assignment unless the rent was increased. The court held that in a commercial lease a landlord may withhold consent to transfer only where the landlord has a commercially reasonable objection to the transfer. In this case however the landlords objection was unreasonable. If he wanted more rent, he should have negotiated that in the terms of the original lease. 3.) Rule in Dumpors Case: This rule terminates the prohibitions against assignment when the landlord consents to the assignment unless he specifically reserves the right to prohibit future assignments. By the same token, if the lessee/assignee pays rent to the landlord and such rent is accepted by him in spite of the fact that the transfer was in violation of the lease the landlord will be deemed to have waived his right to avoid the transfer. G. The Tenant Who Defaults 1. The Tenant in Possession: a. Landlord Remedies: 1.) Eviction: a.) Common Law: Not permitted (unless holdover tenant). Landlord can only sue for unpaid rent. b.) Modern Law: Statutes permit a landlord to terminate the lease and evict the tenant for nonpayment of rent. 2.) Summary Proceedings an alternative to ejectment and substitute for self-help. a.) Notice to Quit: Tenant given notice that the landlord will terminate the lease if the default is not cured within so many days. 3.) Ejectment: Traditional common law remedy. Not entitled to calendar preference as in the case of summary proceedings so rarely used. 4.) Landlord Self-Help: a.) Common Law: Landlord may use reasonable force to oust the tenant himself. But, selfhelp that involves a breach of the peace is wrongful. b.) Modern Law: (1) Self-Help Forbidden: Some Jurisdictions forbid self-help. (a) Berg v. Wiley p. 460: The court held that the only lawful means to dispossess a tenant who has not abandoned nor voluntarily surrendered but who claims possession adversely to a landlords claim of breach of written lease is by resort to judicial process. (2) Reasonably Forceful Self-Help: Some Jurisdictions permit landlords to use reasonable force to oust tenants. What constitutes reasonable? Only commercial or residential only? Some jurisdictions allow parties to contract this prohibition away. (3) Peaceable self-help: Some jurisdictions adhere to common law and allow peaceable self-help. Force defined very broadly which virtually prohibits self-help entirely. (4) Exceptions: Where there is no actual tenancy such as between a hotel and a guest, self-help permitted. Homeless shelters? 2. The Tenant who Abandons Possession: A tenant who abandons the leasehold premises in the midst of a valid lease term is regarded to have offered to surrender the lease. What constitutes abandonment? Lack of intent to return and to pay rent. a. Landlord Options:
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1.) Offer to Surrender the Lease: Terminates the lease if the landlord accepts it. Must be in writing. Tenant remains liable for unpaid back rent, property damages and security deposits plus damages created by abandonment. (transactional costs of finding a new tenant). 2.) Leave Premises Untouched:(Minority Rule) This rule rejects idea landlord has the responsibility mitigate damages. Tenant remains liable for payment of rent. 3.) Retake Possession and Relet the Premises on Tenants Behalf: A landlord may retake possession and relet the premises for the tenants account either voluntarily or pursuant to a duty to mitigate damages. a.) No Duty to Mitigate Damages (Common Law, Minority Position) The Landlord voluntary retakes possession and relets on the tenants account. Risk: Must avoid action that implies acceptance of the offered surrender. If landlord accepts surrender, tenants obligations on the lease cease. (1) The landlords intent inferred from his conduct: (a) Implied by reletting without tenants consent. (b) Implied by reletting without notice to the tenant. (c) Implied by reletting for a term longer than the abandoned term. (Majority). b.) Duty to Mitigate Damages: (Modern Law, Majority Position) A landlord is not free to do nothing after tenant abandonment but should be held to a duty to mitigate damages caused by the tenants abandonment. (1) Sommer v. Kridel p. 469: A landlord has a duty to mitigate damages once a tenant has abandoned. Burden of proof on landlord to show that he exercised reasonable diligence to relet the apartment. Whats reasonable? Effort that demonstrates the landlord wants to rent it. Simply do what he otherwise would do to rent the premises. b. Landlords Remedies and Security Devices 1.) Rent and Damages: a.) Nonpayment of Rent/ Breach of Lease Obligation: (1) If tenant in possession, landlord may terminate lease and recover possession. (2) Anticipatory breach: Absent statutory provision this is unavailable for NPR. If tenant abandons anticipatory breach may apply in jurisdictions extending their contract doctrine to leases. (3) If tenant abandons landlord may: (a) terminate lease; (b) find new tenant while holding original tenant liable for any deficiency that may result; (c) permit premises to remain vacant while collecting the agreed upon rent from the original tenant. 2.) Security Devices a.) Security Deposit: (1) Limited by statute (2) Must be placed in escrow account or trust (3) Must not be mingled with other funds H. Duties, Rights, and Remedies Regarding the condition of the leased premises p. 482 1. Landlords Duties; Tenants Rights and Remedies
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a. Common Law: No implied covenant as to the conditions of the premises. Absent some clause in the lease providing otherwise, the tenant took the premises as is. The landlord is under no obligation to warrant the apartments fitness. b. Quiet Enjoyment and Constructive Eviction 1.) Covenant of Quiet Enjoyment: a.) Quiet Enjoyment Includes two principal obligations: (1) First, the landlord is obligated to delivery to the tenant the legal right of possession of the premises. (2) Second, the landlord has a duty to refrain from wrongful actual or constructive eviction of the tenant. b.) Duties under this obligation include: (1) Duty to disclose latent defects in premises that exit at the time the lease was entered into, were or should have been known by the landlord and were not apparent upon reasonable inspection by the tenant. (2) Duty to maintain common area used by all tenants (3) Duty to undertake carefully any repairs landlord promised or volunteered to make. (4) Duty to abstain from fraudulent misrepresentation as to the conditions of the leased premises. (5) Duty to abate immoral conduct and or other nuisances that occurred on the property owned by the landlord if they affected the leased premises. 2.) Constructive Eviction: If the landlord substantially interferes with the tenants use and enjoyment of the leased property such that the intended purpose of the tenants occupation is frustrated a constructive eviction has occurred. The tenant may terminate the lease and move out and thereafter he will be excused from any further lease obligations. a.) Requirements: (1) Landlords wrongful act: Must not be that of a third party. The landlord must be under a duty to act. (2) Substantial Interference with Tenant Use and Enjoyment: The tenant must be so essentially deprived of the beneficial enjoyment of the leased premises that they are rendered unsuitable for occupancy for the purposes for which they are leased. (3) Complete Vacation of the Premises within a reasonable time b.) Tenant Remedies (1) Tenants rent liability stops (2) Lease is terminated upon justified vacation of the premises (3) Tenant entitled to recover damages caused by constructive eviction. c.) Substantial Inference Created by 3rd Party: (1) Minority: By permitting one tenant to interfere with anothers enjoyment, the landlord is himself responsible for that interference. (2) Majority: The landlord is not responsible for the interference with one tenant caused by another, even when the landlord knows about the interference and fails to act. d.) Case Examples: (1) Reste Realty Corp. v. Cooper p. 483: lessee of commercial office space, who complained about flooding from rainwater, hoped for relief from landlord, and tried
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to take care of water problem that accompanied recurring rainstorms, and who, when relief did not come and final blow put five inches of water in leased offices on day set for important meeting, gave notice of vacation to landlord, was not guilty of delay sufficient to establish waiver of constructive eviction (a) Constructive Eviction requires: The tenant must be so essentially deprived of the beneficial enjoyment of the leased premises that they are rendered unsuitable for occupancy for the purposes for which they are leased. (i) Breach of duty by landlord either at common law or of the lease (Interference by landlord, not others required) (ii) Breach is substantial and material (iii) Tenant vacates the premises within a reasonable period of time (1) Texas case, tenant operating abortion clinic in premises. Landlord knew about violent protests, had taken some action but failed to prevent the protests which the court found constructively evicted the tenants. (2) Other states (NC & OH) landlords implied covenant of quiet enjoyment does not extend to the acts of trespassers and wrongdoers. Requires interference by the landlord which deprives the tenant of the use and enjoyment of the premises. 3.) Partial (Actual or Constructive) Eviction: a.) Actual Eviction, even from only part of the premises, relieves the tenant of all liability for rent notwithstanding continued occupation of the balance. b.) Constructive Eviction from part of the premises does not relieve the tenant of all liability for rent in most jurisdictions. c. Illegal Lease: 1.) Brown v. Southall Realty: Lease is void if at the time of execution unsafe and unsanitary conditions exist in violation of the housing code. No longer current law; replaced by IWH or by statute. d. The Implied Warranty of Habitability: Javins 1.) Hilder v. St. Peter p. 493: In the rental of any residential dwelling unit an implied warranty exists in the lease whether oral or written that the landlord will deliver over and maintain throughout the period of the tenancy premises that are safe, clean and fit for human habitation. Includes latent or patent defects in the essential facilities of the residential unit. 2.) Elements of IWH include: a.) The landlord must provide premises that are fit for human inhabitation both at the inception of the lease and continuing through the lease term. 3.) Elements Under Javins: a.) Substantial violation (not de minimus and not caused by the tenant) b.) Violations constitute violations of the housing code regulations c.) Violations existed at the inception or arose during the tenancy d.) Landlord knew or reasonably should have known e.) Landlord had reasonable time to cure. f.) The conditions impacted the tenants use and enjoyment of the premises. 4.) Tenants Remedies: a.) Move out and terminate the lease b.) Make repairs and offset the cost against future rent
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c.) Abate rent d.) Seek damages e.) Punitive damages available where willfulness on part of landlord shown. 5.) Limitations: a.) Waiver not permitted. Not even for discount in rent. Against public policy. P. 502. b.) No assumption of the risk. c.) Not applicable to all residential leases and usually excludes single family residences, agricultural leases, long term leases. d.) IWH does not require that the premises be maintained in accord with tenants reasonable expectation but sets forth minimum standards to protect tenants against conditions that render residential premises uninhabitable. 6.) Examples: a.) Trash Removal: Ls failure to provide adequate sanitation removal, janitorial maintenance service materially impacts health and safety of tenants which constitutes breach of IWH. b.) Sex Offender: IWH does not impose duty on L to remove a registered sex offender. However there is an implied duty of good faith and fair dealing in every K which obliges the L to permit early termination of the lease by T where T cannot live there due to safety issues. P. 502. e. Retaliatory Eviction: p. 503 1.) Common Law: L free to terminate periodic tenancies, tenancies at will upon proper notice and to refuse to renew expired term of years for reasons irrelevant and even malevolent. 2.) Modern Law: Rebuttable presumption of retaliatory eviction where L seeks to terminate a tenancy, increase rent or decrease services within some given period (six months in DC) after good faith complaints or other action by tenant based on conditions of the premises. a.) Burdens: (1) Burden is on the L to rebut presumption. (2) Burden on T to show retaliation if action taken outside statutory period. f. Landlords Tort Liability 1.) Common Law: L liable for Ts injuries (as well as those of Ts guests on the leased premises) only where L negligently breached the limited duties that arise in connection with quiet enjoyment and constructive eviction. 2.) Modern Law: a.) Majority: Strict liability not imposed; no general duty of care on party of L. Common law exceptions applied. b.) Some/some: L held to a general standard of care under all circumstances. c.) Some/some: L held strictly liable for injuries caused by latent defects in the leased premises. 3.) Public Use Exception: L ordinarily not held liable for defects on premises within exclusive control of T unless: a.) L leased premises for use option to the public b.) The defect in question was in existence at the beginning of the lease (periodic tenancy begins each month)
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c.) L knew or should have known of the defect d.) L knew or should have known that T could not reasonably be expected to remedy or guard against injury from the defect. 4.) Latent Defects: Ls duty to T does not extend to curing dangerous conditions on the premises unless L expressly agrees to do so. a.) Exceptions: (1) A landlord may be liable in tort to the tenant, his guests, licensees, and invitees if at the commencement of the lease there is a dangerous condition which the landlord knows or should know about and the discovery of which would not likely occur by the tenant exercising due care. (2) A landlord in the lease of a completely furnished dwelling for a short period of time impliedly warrants the fitness of the premises and the furnishings. 5.) Common Area: If L knows or should have known about dangerous conditions (i.e. speed racers in apartment complex parking lot) L may be liable for allowing this dangerous condition to exist and persist on property he owns which affects the premises. Usually this applies where the common area is one which L encouraged T to use (play ground near road) or an area from which L derives economic benefit (parking lot). 6.) Intentional Tortfeasors: No liability for L unless L allowed the condition to exist and persist that made the tort foreseeable and failed to warn T. L is not liable for attacks by other tenants. There must be a nexis between Ls negligence and the intentional tort. 2. Tenants Duties; Landlords Rights and Remedies p. 505 a. Tenants Duties: 1.) Duty to not Commit Waste: Breached if T makes such a change as to affect a vital and substantial portion of the premises as would alter: a.) its characteristic appearance b.) the fundamental purpose of the erection c.) or the uses contemplated d.) or a change of such a nature as would affect the very realty itself, extraordinary in scope and effect or unusual in expenditure. 2.) Duty to Repair: (Negated by IWH): Duty to make minor repairs such as to keep building wind-tight, water-tight. Repair does not mean rebuild. a.) Tenants Covenant to Repair: A tenant who covenants to keep the leasehold premises in good repair is liable under such a covenant for all defects except normal wear and tear regardless of their cause. As a result, a tenant remains liable for all defects caused by himself, third persons, and even acts of god. 3.) Duty to Pay Rent: a.) After Destruction of Premises: (1) Common Law: Duty to pay rent continues even after leased premises destroyed unless the leased provided otherwise. Why? Interest in the soil remains. (a) Apartment Tenant Liable for Rent After Building Destroyed? No duty to pay rent after building in which T leased a room destroyed. T never had an interest in the soil. 4.) Tenant for Years:
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I.
a.) Duty to make such ordinary repairs on the leased property as will avoid serious injury to the property. Breach of this duty could make him liable for permissive waste. The Problem of Decent Affordable Housing p. 508 1. Statutory Adoption of IWH a. IWH as public policy to promote decent affordable housing 1.) Chicago Board of Realtors, Inc. v. City of Chicago p. 508: Chicago council enacted Residential Landlord and Tenant ordinance codifying IWH and establishing new landlord responsibilities and tenant rights. Dissent objected describing this as economic protectionism (requirement that deposits be kept in IL banks in interest bearing accounts) and will force landlords to be pickier about who they rent to thus not helping those most in need of affordable housing. The ordinance will increase the cost of housing for both L and T.
II.
Transfers of Land The Land Transaction Chapter 7 p. 517 A. Buying and Selling Real Estate 1. Steps: a. Purchase and Sale Agreement after buyer finds house and negotiates with seller 1.) Purchase and Sale Agreement (form contract) sets forth the a.) legal description of the property, b.) price, c.) provision for an earnest money deposit, d.) date for the closing or settlement (transfer of title) e.) Mortgage Contingency: protects purchase in case mortgage falls through, buyer can rescind contract and get deposit returned. f.) Inspection Contingency: Allows buyer to inspect premises and rescind if costs of repair exceed specified amount. 2.) Real estate contracts are executory and therefore title does not transfer immediately upon signing but at a later specified time. b. Signing c. Title Search: to be certain seller can convey Good and Merchantable Title (implied in contract unless otherwise specified). d. Inspection of premises e. Application for mortgage loan f. Bank issues Mortgage Commitment if buyer is approved which is good for specified period. g. Closing: 1.) Good and Merchantable Title transfer to buyer 2.) Funds transfer to seller and other interested parties. B. Brokers enlisted by sellers to help sell their property p. 529 1. Listing Agreements: Authorize broker to locate a buyer on the sellers behalf. Brokers are compensated at 6% to 8% of the actual sale price. a. Brokers Fiduciary Duty to the seller to exercise fidelity and good faith 1.) Licari v. Blackwelder p. 530: a.) A real estate broker (and his subagent) has a fiduciary duty to exercise fidelity and good faith and cannot put himself in a position antagonistic to his principals interest. b.) The broker has a legal obligation to make a full, fair, and prompt disclosure.
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2.) Scope of Duty: a.) A sellers broker who knows how much a buyer is willing to pay is obliged to tell the seller (his principal). b.) Broker has a duty to disclose material defects known to the broker and unknown to the buyer. 3.) Duel Agency permitted in some states but the broker must: a.) Inform the duel agency to both parties b.) Obtain the consent of both parties 2. Multiple Listing Services (MLS): Allows brokers and appraisers to share residential listing information. Only MLS members can access. Contains detailed information about all real estate available in given area. Antitrust concerns? Illegal restraint on trade? 3. Types of Listing Agreements: a. Open Listing least protective: Seller retains right to sell property herself or to use other broker without paying listing broker b. Exclusive Agency Listing intermediate protection: Broker is exclusive agent and the only agent who can sell the property for specified time period. Exclusive agent earns commission if property sold during specified time period even if sold by other agent. The seller can still sell the property herself and not pay the agent commission. c. Exclusive Right to Sell most protective: Owner must pay commission regardless of who sells the property during the specified period. 4. Payment of Commission: a. Traditional Rule: Broker earns commission upon bringing seller buyer who is ready, willing and able to buy. Broker entitled to commission even if sale falls through or if either the buyer or seller defaults. The owner can avoid the dangers of the traditional rule through contract. Commission can be conditional on actual sale of property. b. Minority View: Broker not entitled to commission until property sale closes. Broker entitled if seller backs out of deal but not if buyer defaults. C. The Contract Sale p. 541 1. The Statute of Frauds a. Historically: Except for leases for less than three years, no interest in land could be created or transferred except by an instrument in writing signed by the party to be bound. No action arising from a contract or sale of land or any interest in or concerning them unless the agreement or memo or note is in writing and signed by the party may be charged therewith. b. To Satisfy the SOF Today: A memorandum of sale must at minimum be 1.) signed by the party to be bound, 2.) describe the real estate, 3.) state the price. If no price named, court implies an agreement to pay a reasonable price. c. Exceptions: 1.) Part Performance: allows the specific enforcement of oral agreements when particular acts have been performed by one of the parties to the agreement. Such acts include a.) buyer taking possession AND b.) paying all or part of the purchase price OR c.) making valuable improvement.
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2.) Equitable Estoppel: Applies when unconscionable injury would result from denying enforcement of the oral contract after one party has been induced by the other to seriously change his position in reliance on the contract. Estoppel may also apply when unjust enrichment would result if a party who has received the benefits of the others performance were allowed to rely on the SOF. 4.) Hickey v. Green p. 542: A contract for the transfer of an interest in land may be specifically enforced notwithstanding failure to comply with the SOF if it is established that the party seeking enforcement in reasonable reliance on the contract and on the continuing assent of the party against whom enforcement is sought has so changed his position that injustice can be avoided only by specific performance. 5.) Return of Deed to Grantor: O gives A deed to blackacre and A accepts. Later O asks for the return of the deed. A gives the deed back. The return of the deed does not return blackacre to O. The conveyance must be in writing to comply with the SOF. 6.) Alternation of Deed: Even if done with the full knowledge and consent of all relevant parties a deed that was altered before recording by whiting out grantees name and replacing it with that of another person is ineffective to convey away interest in the property. Must draft a new deed. Any alternation of the deed by erasure or substitution of the name of the grantor is a material alternation and forgery and is absolutely void and wholly ineffectual to pass title. 7.) SOF and Electronic Transaction: E-Sign: A signature, contract or other record may not be denied legal effect, validity, or enforceability solely because it is in electronic form. (may depend on jurisdiction). 2. Marketable Title: a. Defined: A title not subject to such reasonable doubt as would create a just apprehension of its validity in the mind of a reasonable, prudent, and intelligent person, one which such person guided by competent legal advice would be willing to take and for which they would be willing to pay fair value. b. Implied Condition of a contract of the sale of land is that the seller must convey to the buyer a marketable title (MT). Buyer is entitled to rescind if seller cannot convey MT. Absent an agreement to the contrary the seller of realty is required to delver marketable title. c. Private Restrictions v. Municipal Restrictions 1.) Lohmeyer v.Bower p. 548: Prior to closing buyers sought to rescind the sale contract after discovering violation of curable violation of zoning ordinance and uncurable violation of restrictive covenant. Curing the restrictive covenant violation would require the buyers to buy a two-story house rather than the one story house they had agreed to buy. a.) Zoning ordinances do not constitute encumbrances which render a deed unmerchantable. Why? Easily found on the record. b.) Restrictive Covenants constitute encumbrances which render a deed un-merchantable. (Also liens and mortgages). Why? Not always on the record or difficult to discover without great expense. Encumbrances affect the value of the property to the buyer. c.) Remedies: (1) Buyer can rescind (2) Sellers exposure is contract price (3) Seller must return deposit
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(4) Seller must disclosed to next seller (5) Seller controls the amount of exposure. 2.) Risk of Loss p. 552 a.) Jurisdictional Split (1) Equitable Conversion: Most jurisdictions holder that if there is a specifically enforceable contract for the sale of land, equity regards as done that which ought to be done. In other words, the buyer bears the risk. Absent an agreement to the contrary allocating risk of loss of premises if destroyed between signing and closing the burden is on the buyer. Equitable conversion treats the buyer as owner although the seller retains possession. The buyer is deemed to hold equitable title as opposed to legal title. (2) No Equitable Conversion: Other jurisdictions hold differently: (a) Majority (of the Minorities): The risk of loss remains with the seller until: (i) The transfer of title to the premises OR (ii) The transfer of possession of the premises. (b) Massachusetts Rule: Loss is on seller if loss is substantial and an important part of the subject matter of the contract. If not, then abatement of the purchase prices would be a suitable remedy. (True Minority position according to Finz). b.) Jurisdictional Consensus (1) Party Who Damages Realty Bears the Risk: All jurisdictions agree that a party who damages realty bears the risk of the resulting loss. This means that if the destruction of the premises resulted from the buyers negligence, the buyer will not be relieved of his obligations under the contract. c.) Inheritance: When one party to a contract for sale of land dies. Is the decedents interest real property or personal property? If equitable conversion is applied the sellers interest is personal property. (the right to the purchase price) and the buyer is treated as the owner of the land. 3. The Duty to Disclose Defects a. Caveat Emptor Buyer Beware (now dead) 1.) Sambovsky v. Ackley p. 553: a.) Caveat Emptor: A buyer must act prudently to assess the fitness and value of his purchase. The buyer who fails to exercise due care is barred from seeking to rescind. b.) The seller has a duty to disclose that which the buyer is unlikely to discover on their own. c.) The seller of the haunted house had promoted the houses reputation but this reputation was not likely to be discovered by a reasonably prudent buyer. The reputation of the house materially impaired the value of the contract. 2.) Johnson v. Davis p. 557: Where the seller of a house knows of facts materially affecting the value of the property (leaking roof) which are not readily observable and are not known to the buyer the seller is under a duty to disclose them to the buyer. 3.) Harding v. Willie: Seller lied to buyer about leaking roof. The court permitted rescission under alternate theories: a.) Fraud: seller knew roof still leaked OR b.) Mutual Mistake: seller believed roof had been repaired.
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b. Majority Rule: Duty to disclose all known defects. Non-disclosure = fraud or misrepresentation. Buyers remedy is rescission or to sue for damages after closing. c. Nature of Defect: Must be Material in order to be Actionable 1.) Tests for Materiality: a.) Objective Test: Whether a reasonable person would attach importance to it in deciding to buy. a.) Subjective Test: Whether the defect affects the value or desirability of the property to the buyer. Examples: Neighborhood noise problems and other nuisances may be material defects 4.) Stigma Statutes: Shield sellers from failure to disclose psychological or prejudicial factors that might affect market value. Examples: a.) Murders within the house or former occupants died of aids. d. Brokers Duty to Disclose: Brokers may be held liable for: 1.) Intentional/Negligent misrepresentation of property conditions 2.) Innocent misrepresentation by non-negligently repeating statements made by seller to prospective buyers. a.) Elements of Innocent Misrepresentation: (1) One (2) Two (3) 3.) Negligently failing to uncover defects in a property. 4.) Examples of property conditions requiring disclosure: a.) Offsite as well as onsite conditions that are sufficiently material to affect the habitability, use, or enjoyment of the property and therefore renter the property substantially less desirable or valuable to the objectively reasonable buyer. e. As-Is Clause: Generally upheld if (1) defect are reasonably discoverable and (2) absence of fraud. 4. Merger Doctrine: a. Deed Supersedes Contract: When a buyer accepts the deed, the buyer is deemed to be satisfied that all the contractual obligations have been met. The contract merges into the deed which is the final act of the parties and expresses the terms of their agreement. The buyer cannot sue the seller on promises in the contract of sale that are not contained in the deed. 1.) Exceptions: a.) Fraud b.) Contractual promise deemed collateral to the deed 2.) No Warranties Survive Closing provision: Invalid if seller has misrepresented a material fact or committed fraud. The buyer and seller may however bargain about which if any contract warranties survive the closing and so provide in the contract. 5. The Implied Warranty of Quality a. Post-Closing: Suits alleging breach of the IWQ can arise only after the closing has taken place and the plaintiff has accepted the deed. 1.) Lempke v.Dagenais p. 564: a.) Issue of whether a subsequent purchaser of real property may sue the builder on the theory of IWQ for latent defects which cause economic loss absent privity of contract.
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b.) Holding: Privity of K is not necessary for a subsequent purchaser to sue a builder or contractor under an IWQ theory for latent defects which manifest themselves within a reasonable time after purchase and which cause economic harm. c.) IWQ is limited to latent defects which become manifest after the subsequent owners purchase and which were not discoverable had a reasonable inspection of the structure been made prior to the purchase. Also usually limited to the sale of houses. 6. Remedies for Breach of the Sales Contract a. Three Remedies for Non-Defaulting Party (Buyer or Seller): 1.) Damages (compensatory, special or liquidated, punitive) a.) General Rule: Party seeking damages for breach of sales K is the difference between the K price and the fair market value at the time of the breach. 2.) Retention of deposit (seller) a.) Minority View: Defaulting buyer entitled to restitution of the deposit money in excess of damages incurred. b.) General Rule: When a buyer breaches a K to purchase land the seller may elect to retain the down payment. Usually 10% of K price max in absence of liquidated damages clause. c.) Liquidated Damages Clause: Sellers electing to retain the deposit money in the presence of a liquidated damages clause have greater leeway. Not limited to 10%. 3.) Restitution of deposit (buyer) 4.) Specific Performance of K a.) Justification: Each piece of property is unique making damages inadequate. b. The defaulting buyer: 1.) Jones v. Lee p. 573: a.) Benefit of the Bargain Rule: When a buyer breaches an executory real estate contract the vendors measure of damages is the difference between the purchase price and the market value of the property at the time of the breach. Concept of efficient breach cost to party breaching does not exceed the cost to the injured party. b.) Market Value = Contract Price: Where the market value at the time of the breach equals the contract price the sellers are limited to recovery of nominal damages or forfeiture of any earnest money unless the sellers have established that they have also incurred special damages resulting from such breach. c.) Special Damages: Awarded where such damages were (1) the natural and probable consequence of the breach and (2) the breaching party knew or should have anticipated from the facts and circumstances that the damages would probably be incurred. 2.) Kutzin v. Pirnie p. 577 a.) Issue: Whether a seller is entitled to retain a deposit when a buyer breaches a K that does not contain a liquidated damages or forfeiture clause. b.) Common Law: Where a buyer makes a partial payment (deposit) on the purchase price but fails to fulfill the K without lawful excuse he cannot recover the payment even though the vendor may have made a profit by reason of the default. (rejected) c.) Restatement: The buyer is entitled to restitution of the deposit in excess of the loss that he has caused by his own breach. (adopted) c. Sellers Breach Due to Title Defect: Seller was unable to convey MT
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1.) English Rule (Flureau Rule): Limits the buyers recovery to his down payment plus interest and reasonable expenses incurred in investigating the title. Only if the seller has acted in bad faith or has assumed the risk of a failure to secure title will he be liable for ordinary contract damages. 2.) American Rule: Purchaser may recover expectation (benefit of the bargain) damages plus any other reasonably foreseeable special damages. d. Time of the Essence clause: In absence of such clause a court will give the parties a reasonable time for performance. Either party may fix the time for performance by giving notice to the other provided the notice leaves a reasonable time for rendering performance. 2. Pre-Closing v. Post-Closing a. Sellers Exposure: 1.) Pre-closing: exposure is less. Seller can control the extent of exposure. 2.) Post-closing: buyer controls the exposure. Can be more expensive for seller if buyer is making decisions. Because of increased exposure, latent conditions on property that are violations of statutes/municipal regulations are not considered encumbrances. D. The Deed 1. Warranties of Title a. History of the Deed: 1.) Charter of Feoffment: evidenced the fact and terms of feoffment. Used until mid-16th century. 2.) Statute of Uses (1536) allowed conveyance of legal interest in land by a bargain and sale deed without livery of seisin. 3.) SOF (1677) written instrument required for conveyance of an interest in land; abolished livery of seisen. 4.) Modern Deed (19th century) b. Types of Deeds: Absent an agreement to the contrary, a contract for sale of realty calls for the execution and delivery of whatever deed is customarily used in the area. Thus, if the use of general warranty deeds is customary, the homeowners tender of a quitclaim was a breach that would excuse the buyer from performance. 1.) General Warranty Deed: Warrants title against all defects in title whether they arose before or after the grantor took title. For example, if the defect is a mortgage on the land executed by the grantors predecessors in ownership, the grantor is still liable under a GW deed. a.) Generally includes six express warranties: (1) Covenant of Seisin: the grantor warrants that he owns the estate that he purports to convey. (2) Covenant of right to convey: The grantor warrants that he has the right to convey the property. (a person may has seisin but not the right to convey as with a trustee with legal title but is forbidden by the trust to convey it). (3) Covenant against encumbrances: The grantor warrants that there are no encumbrances on the property (mortgages, liens, easements, and covenants). (4) Covenant of general warranty: The grantor warrants that he will defend against lawful claims and will compensate the grantee for any loss that the grantee may sustain by assertion of superior title.
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(5) Covenant of quiet enjoyment: The grantor warrants that the grantee will not be disturbed in possession and enjoyment of the property by assertion of superior title. (identical to covenant of general warranty). (6) Covenant of further assurances: The grantor promises that he will execute any other documents required to perfect title conveyed. 2.) Special (Limited) Warranty Deed: It may contain the same six or fewer covenants of the general warranty deed. The only difference is that it contains warranties only against the grantors own acts but not the acts of others, meaning predecessors in ownership. (For example: if the defect is a mortgage on the land executed by the grantors predecessor in ownership, the grantor is not liable). 3.) Quit Claim Deed: Contains no warranties. Merely conveys whatever title the grantor has, if any. If the grantee of a quit claim deed takes nothing by deed, the grantee cannot sue the grantor. c. Requirements of a Deed: 1.) Identity of grantor & grantee 2.) Words of conveyance/grant 3.) Description of tract No conveyance is valid unless the description of the land sought to be conveyed is sufficient to identify the land. a.) Method of description: (1) Reference to natural/artificial monuments and from the starting point reference the direction and distances (metes and bounds). (2) Reference to government survey, recorded plat or other records. (3) Reference to street and number of tract. b.) Hierarchy of methods of description: (1) Natural monuments (trees) (2) Artificial monuments (surveyors stakes) (3) Reference to adjacent boundaries (4) Directions (5) Distances (6) Area (7) Place names c.) Rationale: rules help discover the intent of the parties who relied on visable landmarks rather than measurements of the eye. 4.) Signature of GRANTOR (unlike contract of sale which requires signature of both parties). 5.) Sometimes attestation or acknowledgement 6.) Consideration: customary for deed to reflect grantee paid some consideration to counter challenger asserting grant was anything but sale and certainly not a gift. Parities do not have to reveal the full amount paid. 7.) Seal: a.) Common Law: A deed is a sealed instrument required for the conveyance of a freehold. Where still required it is mere formality today. b.) Modern Law: Most states abolish distinction between sealed and unsealed. d. Forgery and Fraud Void v. Voidable
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1.) Forgery: A forged deed is void; grantor whose signature is forged to a deed prevails over all persons including subsequent bona fide purchasers from the grantee who do not know the deed is forged. a.) Signature obtained through deception is considered forgery. 2.) Fraud: A deed procured by fraud is voidable by the grantor in an action against the grantee. a.) BUT a subsequent bonafide purchaser (BFP) from the grantee who is unaware of the fraud prevails over the grantor. WHY? Because the law places the loss on the person who could have prevented the loss to another. Because the grantor introduced the deed into the stream of commerce he made it possible for a subsequent innocent purchaser to suffer loss. e. Present/Personal Covenants (Warranties): The covenants are not continuous and do not run with the land. These covenants are breached at the time of conveyance if they are breached at all. If follows then that such personal covenants never run with the land and therefore a subsequent grantee may not maintain a cause of action against the original grantor. 1.) Three Types: a.) Covenant of Seisin (1) Measure of Damages: Return of all or portion of the purchase price. b.) Covenant of Right to Convey c.) Covenant Against Encumbrances (1) Measure of Damages: (a) If Encumbrance Easily Removable: Cost of removal (b) If Encumbrance Not Easily Removable: Difference in value between land with encumbrances and land without. 2.) Breached, if ever, at time deed is delivered (closing). a.) Either grantor owns the property at that time or not. b.) Either there are encumbrances at that time or there are not. c.) Grantee has a cause of action only against his grantor, not his grantors grantor. 3.) SOL begins at date of delivery of deed. 4.) If breached, grantee has assignable cause of action for breach. f. Future Covenants (Warranties): Grantor promises to do some future act such as defending against claims of third parties or compensating the grantor for loss by virtue of failure of title. Not breached until grantee or successor is evicted from the property, buys up the paramount claim or is otherwise damaged. 1.) Three Types: a.) Covenant of General Warranty b.) Covenant of Quiet Enjoyment: No one with superior title will dispossess. c.) Covenant of Further Assurances: Grantor will do what needs to be done to perfect title. 2.) Breached, if ever, after the time deed is delivered. (post closing) 3.) SOL begins to run at time of eviction or when the covenant is actually broken at some future time. 4.) Future Covenants run with the land only if both title and possession taken by grantee. 5.) Brown v. Lober p. 591: a.) Until the other holding superior title takes possession there is not breach of the covenant of quiet enjoyment. Until that time, the buyer can enter the property and take
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peaceable possession of it. He has not at that time been prevented or hindered from the enjoyment of the possession by one having a better right. 6.) Adverse Possession: a.) A grantor cannot at some later date after conveying title claim title to the property conveyed against the grantees successor by way of adverse possession. b.) A grantors continued possession of transferred property alone will not ripen into a claim of adverse possession. In order to become an adverse possession he must establish through words and or conduct that possession is adverse. 7.) Frimberger v.Anzellotti p. 594: After receiving the property by warranty deed, found tidal wetlands violation of zoning or building restrictions. a.) The concept of encumbrances cannot be expanded to include latent conditions on the property that are in violation of the statutes or government regulations. The could have protected himself by having the property surveyed prior to closing or by inserting provisions in the K and deed indemnifying himself against potential latent violations. b.) Latent violations of land use regulations that do not appear on land records and are unknown to the seller of the property and the enforcement agency has taken no action to compel compliance do not constitute an encumbrance for purpose of deed warranty. 8.) Rockafellor v. Gray p. 600: a.) Damages cannot exceed amount of consideration in deed. b.) Parole evidence not admissible in suit with remote grantee. c.) The Covenant of Seisen: (1) Minority (English) Rule: Runs with land and when breached, becomes chose in action which runs with the land and passes to successive and remote grantees. Still however subject to SOL. (2) Majority Rule: Does not run with the land and therefore does not go to remote grantees. (3) Court held chose of action assignable to remote grantees even if intermediate grantees never took possession of the property. 9.) Estoppel by Deed: If a person without ownership purports to convey an estate that he or she does not have and he or she subsequently acquires title to that estate the doctrine of estoppel prevents the grantor from asserting his or her title against his or her grantee and causes the after-acquired title to pass directly to the grantee by operation of law. a.) EXAMPLE: A to B but A does not actually own the land. A subsequently acquires title to the land. A is estopped to deny that he had title at the time of the deed and that title passed to the grantee. Subsequently acquired title automatically passes to grantee. 2. Delivery a. Effective Delivery: A deed must be delivered with the intent that it be presently operative. Acceptance needed. The grantor must say or do things that demonstrate his intent to transfer immediately an interest in land to the grantee. Must be an inter vivos transfer. 1.) Sweeney v. Sweeney p. 606: a.) Conditional Delivery: Can only be made by placing the deed in the hands of a third person to be kept by him until the happening of the event upon the happening of which the deed is to be delivered over by the third person to the grantee.
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2.) Delivery without handing over: Physical act of handing over a paper deed to grantee not necessarily required. Intent is more important. a.) Presumed Delivery: (1) Physical transfer to the grantee (2) Notarial acknowledgement of the deed (3) Recording of the deed b.) Rebuttable presumption of no delivery: (1) Grantor retains physical custody of the deed c.) No Delivery (1) Grantor retains power to revoke (2) Deed deliverable only upon the grantors death 3.) Rosengrant v. Rosengrant p. 610: Grantor gave the deed to the grantee in the presence of the banker. Grantee then handed the deed to the banker. The banker put the deed in an envelope marked with both parties names. The grantor could have gone to the bank at anytime and retrieved the deed thus making delivery ineffective. The parties should have set up a revocable trust allowing the old folks to retain a life estate with a remainder in FS to their nephew. E. Financing Real Estate Transactions 1. Mortgages and the Mortgage Market a. Mortgage Markets:
1.) Primary Mortgage Market: Local savings and loan associations loan money in customer savings accounts secured with mortgage to home buyers. 2.) Secondary Mortgage Market: Fannie Mae/Freddie Mac created to establish secondary market in which mortgages could be bought and sold like stocks improving nationwide credit flow. 3.) Mortgage Backed Securities (MBS): Mortgage loans purchased and pooled together. Securities representing the pool are issued to investors. 4.) Prime Market: Provides loans to people with high credit scores. 5.) Subprime Market/ Alt-A Market: Provide loans to people with low credit scores and or unverified income. a.) Teaser Interest Rates: Low rates that only last the first few years of the mortgage followed by much higher rates for duration. b.) 100% of property valued borrowed. c.) Negative Amortization: Less than full interest accrued on debt paid leading to growth rather than decline of mortgage principal. Types of Mortgages: 1.) Fully Amortizing Fixed Interest Mortgage: Borrowers make constant monthly payments which include both interest and principal payments. Usually for 15 30 years. Interest payments decrease while principal payments increase. 2.) Adjustable Rate Loans: Begin with below-market interest rate that gradually increases according to index based on debt issued by the Fed Res Bank. Interest rate can fluctuate a limited amount each year. Has lifetime cap. Steps to Obtaining a Mortgage: 1.) Find house to purchase 2.) Choose type of mortgage loan most suitable a.) May have obtained pre-qual from lender for loan amount b.) Lender evaluates credit risk checking credit score, c.) Earnings, d.) Job security. 3.) Lender issues commitment to provide financing on specific terms and within specified period. Lender requires security in form of mortgage on the property purchased. Lender sets terms and requirements of mortgage.
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b.
c.
4.) Buyer signs standardized form a.) Buyer gives lender a note and a mortgage in order to borrow money. b.) Buyer signs promissory note creating personal liability c.) Lender requires buyer to execute mortgage d.) If buyer defaults, lender can have property sold foreclosure and apply proceeds of sale to the amount due on the note. e.) Equity: mortgagors interest in the property. Equity of Redemption
2. Mortgage Foreclosure a. Types of Foreclosure 1.) Strict Foreclosure: Mortgagor ordered to pay within a given period or be forever barred from exercising right of redemption. 2.) Foreclosure Sale: Officer of court sells the land at public sale; conveys title to the purchaser; proceeds of sale applied to debt to lender; excess amount paid to borrower. If sale does not bring enough to satisfy the debt the mortgagee can recover a judgment for the deficiency against the mortgagor. b. Six Rules of Foreclosure: 1.) Loan must be in default in order to foreclose (terms of default defined in mortgage agreement. 2.) Lien that is foreclosed and all junior interests are terminated by foreclosure. 3.) Senior liens are unaffected by foreclosure. 4.) Money travels downward, to junior interest holders and finally to the buyers. Senior interests do not receive money from foreclosure sale although the mortgagor remains liable for that debt. 5.) Only lenders who foreclose can obtain deficiency judgment. 6.) Mortgages and trust deeds create security interests in realty. Therefore, the priority of conflicting claims will be determined in accordance with the recording statute. c. Judicial Protection of Borrowers from Overreaching Lenders: 1.) Right of Mortgagor to Redeem from Mortgagee: Equity of Redemption. Lawsuit required to order foreclosure sale of property cutting off borrowers equity of redemption. Basically, mortgagor has until foreclosure to redeem the mortgage. Due process is required before the bank can order foreclosure. 2.) Right of Mortgagor to Redeem from Purchaser: at foreclosure sale, after borrowers equity extinguished. Statutory right to buy back title from the purchaser at judicial foreclosure sale for the sales price within a specified period after the foreclosure. 3.) Rights of Mortgagor under Deed Absolute: When the mortgagee under a deed absolute mortgage transfers to a bona fide purchaser, the mortgagor has no rights against the bona fide purchaser but he does have an action for redemption against the mortgagee for the value of the land, or at his election, the proceeds of the sale. d. Deficiency Judgments: 1.) Sale must be for fair price 2.) Foreclosure through Judicial Proceedings: Sale price not usually challengeable unless shocks the conscience of the court. 3.) Foreclosure by Private Sale: Courts may scrutinize the sale more closely. Did the mortgagee act fairly? e. Anti-Deficiency Statutes: Enacted in some states to protect borrowers from deficiency judgments.
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f.
Alternative to Judicial Foreclosure: 1.) Deed of Trust: (Majority of Jurisdictions): Borrower conveys title to the land to 3rd person or lender to hold in trust to secure payment of the debt to the lender. Trustee has power to sell the land if borrower defaults. Notice and public sale still required but quicker and cheaper than judicial foreclosure. 2.) Property Value Exceed Amount of Loan: a.) Mortgagor cannot pay its debt and the propertys value is above the amount of the loan he can sell the property and pay off the loan. 3.) Debt Exceeds Loan: a.) When the debt is greater than that the loan the mortgagor can offer the deed in lieu of foreclosure. g. Mortgagees Duty to Protect Mortgagors Interests: 1.) Murphy v. Fin. Dev. Corp. p. 621: a.) A mortgagee executing a power of sale is bound by the statutory procedural requirements AND by a fiduciary duty of good faith and due diligence to protect the interests of the mortgagor by trying to obtain a fair and reasonable price. b.) This duty includes adjourning the sale or establishing an upset price below which he will not accept any offer. (An appropriate upset price would be one which covers outstanding debt + minimum return on equity). c.) A Fair Price depends on the circumstances. Inadequacy of price alone is not sufficient to demonstrate bad faith unless the price is so low as to shock the judicial conscience. BUT it can be LESS than the fair market value. d.) Damages: (1) Where bad faith is found: Fair Market Value Sale Price = Damages (2) Where failure to exercise due diligence only: Fair Price Sale Price = Damages 2.) Two Standards for Invalidating Foreclosure Sale: a.) Shock the Conscience: Inadequacy of sale price is insufficient ground unless it is so gross as to shock the conscience of the court warranting inference of fraud. b.) Grossly Inadequate: Absent other defects in foreclosure process price must be grossly inadequate to invalidate the sale. h. Transfer of Property by the Mortgagor: 1.) Mortgagor can transfer interest in land by sale, mortgage or otherwise BUT land remains subject to the mortgage in the hands of the transferee. a.) Purchaser of the Equity may do so either (1) Subject to the Mortgage: (a) Purchaser does not assume any personal liability for the mortgage debt. (b) Mortgagor remains liable for the mortgage debt. (c) Purchaser agrees debt to be satisfied out of the land (d) If debt not paid, land will be sold and debt paid from prcess. (2) Assumes the Mortgage: (a) Purchaser promises to pay off the mortgage debt. (b) Mortgagor not relieved of duty to pay the mortgage unless lender consents in K (c) Mortgagor has the right to pay the debt and sue the assuming purchaser for reimbursement.
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III.
(d) Mortgagee can enforce promise made by the purchaser of the equity in assuming the mortgage. 3. Subprime Mortgage Crisis a. Lender Must First Consider Alternatives to Foreclosure 1.) Commonwealth v. Fremont Investment & Loan p. 630: a.) Four Factors Made Foreclosure Certain: (1) Adjustable Rate Mortgage with short intro rate period (2) Intro rate was below fully indexed rate (3) Borrowers had debt-to-income ratio exceeding 50% (4) Loan to value ratio 100% OR loan featured substantial prepayment penalty. b.) Lender had duty to determine whether the borrowers could actually made the scheduled payment under the terms of the loan. c.) Lender must look for alternatives to foreclosure before foreclosing on the property. 4. Mortgage Substitutes: The Installment Land Contract a. Vendee Entitled to Due Process 1.) Bean v. Walker: p. 640 a.) Vendor-Vendee occupy same position as mortgagee-mortgagor b.) Vendee may not be summarily disposed of the vendees equitable ownership without first bringing action to foreclose the vendees equity of redemption. Title Assurance Chapter 8 p. 645 A. The Recording System: Promotes efficiency and allows for potential purchasers to make educated decisions about whether or not to purchase the property. Ownership and possession permitted to be separate. The system protects ownership interests. 1. In General: a. Public Records Office: where are instruments affecting land titles (deeds, mortgages, liens, wills etc) are recorded. b. Title Search: A potential buyer should search the public records office to discover the evidence of title recorded in that office. 1.) Evidence of Title: a.) Who has fee simple title in the land b.) Whether land is encumbered with a mortgage or a servitude c. Title Registration: The state registers title and issues a title certificate to the owner which is reissued to each new purchaser of the property. d. Title Insurance: Private companies sill title insurance. 2. Recording Acts: Statutory requirement that land title records be maintained by recorder of deeds. a. Purpose:
1.) TO PROTECT PURCHASERS FOR VALUE NOT DONNEES

2.) Promote efficiency and allows for potential buyers to make educated decisions about whether or not to purchase a piece of property. 3.) Separates ownership from possession and protects ownership interests. 4.) Protects bona fide purchasers for value. 5.) Protects creditors. (Mortgagee protected over subsequent donnee) 6.) Gratuitous conveyances not protected because nothing of value was given in consideration. b. Land Title Records include:
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1.) Copies of documents filed with the recorder and the indexes to those documents. c. Validity of the Deed: 1.) Deed is valid and good against grantor upon delivery even without recordation. d. Equitable doctrine of Bona Fide Purchaser (BFP): 1.) A subsequent bona fide purchaser is protected against prior unrecorded interests. 2.) Purchaser must search the records to make sure there are no adverse prior recorded claims. 3.) Purchaser must record his deed to prevent subsequent purchaser from a previous owner from prevailing over him. e. Prior in Time, Prior in Effect: Controls unless a person can qualify for protection under the recording act. First in time exception: equitable title will give to legal title. f. Legally Recorded: Document copied into the record, document must be notarized and some states require it to show that the transfer tax was paid. 3. The Indexes a. Two Types of Indexes: 1.) Tract Index: documents indexed by a parcel identification number assigned to the particular tract. 2.) Grantor-Grantee Index: separate indexes indexing alphabetically and chronologically under grantee and grantors surname. Includes: a.) Grantor & Grantee b.) Description of land c.) Kind of instrument d.) Date of recording e.) Volume and page # where instrument can be found. b. Mother Hubbard Clauses (MHC) 1.) Luthi v. Evans: p. 651 Tours should have identified by name all interests actually covered in the MH clause and recorded those interests in the deed. a.) A MHC is validly enforceable and effectively transfers the entire property interest as between the parties to the instrument. b.) A MHC is not effective as to a subsequent purchaser and mortgagee unless they have actual knowledge of the transferee. c. Doctrine of Idem Sonans 1.) Orr v. Byers: p. 661 a.) The doctrine of Idem Sonans is that through a persons name has been inaccurately written the identity of such person will be presumed from the similarity of sounds between the correct pronunciation and the pronunciation as written. b.) Absolute accuracy in spelling names is not required in legal proceedings and if the pronunciations are practically alike the rule of idem sonans is applicable. c.) Idem sonans is inapplicable in circumstances where there written name is material. To be material, a variance in spelling must be such as has missed the opposite party to his prejudice. d.) The burden is on the judgment creditor to take appropriate action to ensure the judgment lien will be satisfied. d. Liens:
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1.) Judgment liens and tax liens become liens on all of the debtors land located in the county where the lien is filed. Liens are filed under the name of the debtor. 4. Types of Recording Acts a. Three Types 1.) Race Statutes: As between successive purchasers of property, person who wins the race to record prevails. a.) Actual knowledge of prior purchasers claim is irrelevant. b.) Off record inquiries eliminated c.) Minority only two states, NC & LA d.) Protects subsequent purchaser only if subsequent purchaser records first. e.) Shelter Rule a person who takes from a BFP protected by the recording act has the same rights as his grantor. Example: 1/90 A to B; 7/90 A to C. 8/90 B records. 9/90 B to D. 10/90 C records. 11/90 D learns about Cs deed and D records. In Race jurisdiction D will win over C because B recorded before C. D benefits from the shelter rule. D stands in Bs position whose claim is superior. D is asserting Bs title so her notice is irrelevant. Depending on the kind of deed C took from A, C may be able to recover for breach of that deed. 2.) Notice Statues: If a subsequent purchaser had notice of the prior unrecorded instrument the purchaser could not prevail over the prior grantee. To allow such would be a fraud on the prior grantee. a.) Protects subsequent purchaser against prior unrecorded instruments even through the subsequent purchaser fails to record. b.) Dependent on off-record inquiries to determine whether subsequent purchaser has notice. c.) Shelter Rule a person who takes from a BFP protected by the recording act has the same rights as his grantor. d.) Types of Notice: (1) Actual (2) Constructive (3) Inquiry: What would a normally prudent person do under the circumstances? Should they have looked further? Seeing a reference in the title to another matter not in the deed nonetheless puts the person on inquiry notice to look further. 3.) Race-Notice Statutes: Combination of Race & Notice a.) A subsequent purchaser is protected against prior unrecorded instruments only if the subsequent purchaser is: (1) Without notice of the prior instrument AND (2) Records before the prior instrument is recorded. b.) Punishes non-recording c.) Eliminates extrinsic evidence about which deed was recoded first. 4.) Messersmith v. Smith: p. 671The recording statute required a grantor to appear before the notary and acknowledge the executed deed in order for the deed to be entitled to be recorded. A phone call does not constitute appearing. The deed therefore could not be legally recorded. 5. Chain of Title Problems
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a. Chain of Title: The recorded sequence of transactions by which title has passed from sovereign to the present claimant. 1.) The chain must span the period of time for which records must be searched 2.) Includes the documents that must be examined within that time period (as defined by statute). 3.) Includes the series of recorded instruments that in the particular jurisdiction give CONSTRUCTIVE NOTICE to a subsequent purchaser. b. Constructive Notice: 1.) Board of Education of Minneapolis v. Hughes: p. 677 a.) A deed that does not name a grantee is a nullity and wholly inoperative as a conveyance until the name of the grantee is legally inserted. b.) The deed becomes operative if the grantee with either express or implied authority from the grantor inserts his name in the blank space left for the name of the grantee. c.) The authority of the grantor need not be in writing. d.) When a deed is recorded, if there is not a deed on file with a common grantor which would give the subsequent purchaser constructive notice of a prior deed, the subsequent purchasers deed prevails because it was filed first without notice. c. Grantee Bound by Restrictions Not Contained in Deed some/some 2.) Guillette v. Daly Dry Wall, Inc. p. 680 a.) A purchaser of a part of a restricted land takes the land subject to the restrictions. The defendants deed referred to a recorded subdivision plan and the plaintiffs deed referred to the same plan. The defendant could have searched for such a deed. b.) All the deeds from a common grantor are within the chain of title and a purchaser should check them. (some/some) 6. Persons Protected/Not Protected by the Recording System a. Protected Persons: 1.) Creditors 2.) Subsequent purchasers for valuable consideration 3.) Subsequent mortgagee 4.) Judgment affecting the title b. Persons not protected 1.) Donees 2.) Devisees c. Valuable Consideration Defined: Needed for protection of the recording act. 1.) More than nominal value 2.) Substantial amount 3.) An amount not grossly inadequate 4.) If the deed recites for $1 and other good and valuable consideration, burden on challenger to establish falsity or recital of consideration. d. A BFP is without notice of interests of others 1.) Daniels v. Anderson: p. 686 a.) A BFP takes title to real property without notice of the interests of others. b.) A buyer who has notice of an outstanding interest prior to payment of any consideration yet then pays consideration does so without protection.
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c.) When a buyer receives notice of an outstanding interest subsequent to paying some consideration but prior to paying full purchase price, courts apply a pro tanto rule which protects the buyer to the extent of the payments made PRIOR to notice but no further. 2.) Lewis v. Superior Court: p. 689 Lewis bought property without notice that a lawsuit involving the property existed. The lis pendens was not filed until after Lewis received title at closing. a.) Equity requires wrongdoers interest to be sacrificed first. Fontana was in position best able to avoid loss by timely recording the lis pendant. 3.) Alexander v. Andrews : Buyer protected only as to amount paid before prior purchasers deed was recoded. After that, buyer had constructive notice of prior purchaser before he paid the remaining consideration. 7. Inquiry Notice a. Three Types of Notice (as to prior claim) 1.) Actual Notice 2.) Record Notice: Constructive notice based on properly recorded instruments 3.) Inquiry Notice: Constructive notice based on facts that would cause a reasonable person to make inquiry into the possible existence of an interest in real property. a.) Examples: (1) Record reference to unrecorded instrument (2) Possession (3) Character of neighborhood (4) Immediate grantee of a quitclaim deed (5) Memorandum of Lease some courts hold that a Memo of Lease recorded in place of an actual lease gives constructive notice of contents of the actual lease. b. Inquiry Notice Record Reference to Unrecorded Instrument: 1.) Harper v. Paradise: p. 693 The 1928 deed makes specific reference to the 1922 deed thus giving Paradise constructive notice. Adverse possession doesnt work because all Maude had was LE so all the claimants had was LE. Maude then mortgaged against a LE, not FS. Property went to descendants upon Maudes death in FS. c. Inquiry Notice Possession: 1.) Waldorff Insurance and Bonding, Inc. v. Eglin Natl Bank: p. 697 Because Waldorff was in possession, Eglin was on notice that Waldorff might have a prior unrecorded claim. a.) If inquiry would reveal that the possessor occupies under an unrecorded conveyance from the record owner the subsequent purchaser has constructive notice of the claim by virtue of inquiry notice. 2.) Miller v. Green p. 701: Inquiry notice based on lessees activities on the land. Miller had hauled 60 loads of manure to the farm and had plowed two acres of the land. Hines had an obligation to inquire who had done these acts and whether the person had any claim to the land. 8. Marketable Title Acts a. Purpose: 1.) Limit title searches to reasonable period 2.) All claimants of interests in land must file a notice of claim every 30 40 years after the recording of the instrument of acquisition.
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IV.
3.) Clears pre-root interests, even those arising through forgery. 4.) Without a Marketable Title Act, a person doing a title search has a greater burden to make sure title is clear and thus will need to do a more expansive search. b. Validity of Pre-Root interests: Unless the act makes specific exceptions for pre-root interests, such interests are only valid if: 1.) They are referred to in the root of the title itself or some post-root recorded instrument. 2.) They are rooted anew during the marketable title act period. c. Statutory Exemptions: 1.) Easements 2.) Claims of the current possessor 3.) Restrictive covenants 4.) Mineral rights B. Title Insurance p. 714 1. Coverage and Limitations a. Coverage: guarantees that the insurance company has searched the public records and insures against any defects in the public records unless such defects are specifically excepted from coverage in the policy. b. Limitations: Does not cover 1.) claims or interests that are not part of the records, 2.) boundary disputes not on record, 3.) government land-use regulations. 2. Duty to Disclose Defects in Title: Some courts impose on title insurers a duty to disclose anything they known about the parcel in question that is material or an important breach of which is actionable in tort. a. Duty to Disclose Material Defects: 1.) Walker Rogge, Inc. v. Chelsea Title & Guaranty Co.: p, 715 Chelsea may have had a duty to disclose because it had twice before insured title to the tract and had copies of the deed with more accurate acreage and it handled the closing at which the previous price was based on the tracts acreage. b. Duty to Disclose Important Breach which is Actionable in Tort: 2.) Lick Mill Creek Apartments v. Chicago Title Insurance Co.p. 722: Lick Mills title was marketable but the land was unsalable. Any encumbrance was not due to a continuing defect of the claim to ownership of the title. Post-closing, courts are not going to impose this type of liability on the seller. a.) Unmarketable Title: based on serious problems with the claim of ownership b.) Unmarketable Land: based on serious problems with the physical condition or location of the property. Judicial Land Use Controls Chapter 9 p. 731 A. Torts Law of Nuisance Public and Private Nuisance Causes of Action (generally different plaintiffs) 1. Public Nuisance: a. Two Factors: 1.) Unreasonable Interference 2.) With a right common to the public b. Duty: runs to those exercising a right common to the general public but who suffer a kind of harm different than members of the general public.
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2. Private Nuisance: a. Two Factors: 1.) Unreasonable interference 2.) With use or enjoyment of a property interest in land b. Duty: runs to neighbors or those with an interest in the private use and enjoyment of land whose rights are invaded. 3. Factors to Consider: a. Defendants Conduct: 1.) Intentional: a.) Defendant acts with purpose of causing nuisance b.) Knows that nuisance is result of conduct c.) Knows that nuisance is substantially certain to result d.) *Showing Negligence is not required. 2.) Unintentional: a.) Behavior may be negligent, reckless or ultra hazardous. b. Utility of the Activity 1.) There may be a finding of nuisance even if gravity of the harm is outweighed by the utility of the conduct. a.) Carpenter v. Double R Cattle Co.: Court held the opposite: Interests of the community, utility of the conduct must be considered in determining the existence of nuisance. c. Extent of the Undersirability 1.) Winget v. Winn Dixie a.) Location & Operation b.) Whether the conduct is the normal and necessary incidents of operating the business c.) Fact that business is licensed or operating within the law is not dispositive d.) Decrease in property value DOES NOT give rise to liability if the activity is otherwise not a nuisance. 4. Remedy: a. Injunction: An injunction is a discretionary power and turns on the weighing of the equities. 1.) Boomer v. Atlantic Cement nuisance found but injunction denied. 2.) Spur Industries v. Del Webb Injunction may be issued on the condition that the plaintiff pays the costs of stopping or relocating. B. Property Law of Nuisance: 1. Background: a. Tort or Property? Sounds in both tort and property; 1.) Tort because nuisance liability arises from negligent or otherwise wrongful activities; 2.) Property because the liability is for interference with the use and enjoyment of the land. b. Sic Utere Tuo: One should use ones own property in such a way as not to injure the property of another. c. Nuisance Per Se: An activity, or an act, structure, instrument, or occupation which is a nuisance at all times and under any circumstances, regardless of location or surroundings d. Nuisance in Fact: Nuisance in fact is an act, occupation, or structure that is considered a nuisance in relation to its circumstances or surroundings. It is a nuisance arising, not from the essential nature of the operation or condition involved, but from the location of the premises, the surroundings, or the manner in which the operation is managed or conducted. It is also called as nuisance per accidens. An alleged nuisance in fact is an issue of fact to be determined by the jury, who will decide whether the thing (or act) in question created a nuisance, by examining its location and surroundings, the manner of its conduct, and other circumstances
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2. Substantive Law of Nuisance: a. Private Nuisance: Protects rights in the use and enjoyment of land. Only owners of interests in land can bring suit. 1.) Morgan v. High Penn Oil Co.:p. 731 a.) Private Nuisance: (1) When one makes an improper use of his own property and in doing so injures the land or some incorporated right of ones neighbor. (2) Any substantial non trespassory invasion of anothers interest in the private use and enjoyment of land by any kind of liability forming conduct. (3) Occurs when the person causing the nuisance knows or should know that nuisance is substantially certain to result from his conduct. b.) Intentional Nuisance: The person is liable for the resulting injury to others regardless of how carefully or skillfully he acted to avoid such injury where the person (1) Acts of the purpose of causing it OR (2) Knows that it is resulting from his conduct OR (3) Knows that it is substantially certain to result from his conduct. 2.) Restatement: In order to give rise to liability an intereference with the use and enjoyment of land must be: a.) Substantial AND b.) Intentional and unreasonable OR c.) The unintentional result of negligent, reckless or abnormally dangerous activity. 3.) Examples of Nuisance: a.) Halfway Houses and other facilities for parolees: some/some. Some courts find worry about future crime and declining property values sufficient for nuisance liability. Other courts disagree. b.) Proximity to a toxic waste dump: Where there is apprehension about groundwater contamination but no evidence that such contamination has occurred but property values have nonetheless declined as a result is insufficient for nuisance liability. c.) Stigma Damage: Proximity to dangerous area. Stigma damages are recognized only where the plaintiffs property has sustained actual physical injury as a result of defendants conduct. d.) Light & Air: Nuisance law protects ordinary uses, not abnormally sensitive ones. e.) Spite & Spam: Nuisance liability where a landowner builds a structure such as a spite fence of no use but to vex the neighbor. No liability for spam email yet. f.) Plain Old Ugly Aesthetic Nuisance: Unsightliness alone does not a nuisance make unless spite is the only motive. A junkyard in a residential area might be a nuisance if unreasonably operated an unduly offensive. 4.) Lateral and Subjacent Support: a.) Rights incident to land ownership include: (1) Freedom from trespass (2) Water rights (3) Right to lateral support (4) Right to subjacent support b.) Right to Lateral Support:
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(1) Imposes a duty on neighboring land to provide the support that the subject parcel would need and receive under natural conditions. (2) Ordinarily, no right to support structures on the land. (3) Causes of action for interferences with the right to lateral support does not arise until subsistence actually occurs or is threatened. (4) C/A runs against the excavator (may be a predecessor of the present possessor). (5) Liability is absolute (6) No need to show negligence UNLESS: The supported land had been built upon in such a way that subsistence would not have occurred but for the improvement. Then there is no liability without negligence where excavator gives notice of his plans. (7) Subsistence caused by extraction of fluids: No liability absent negligence. (8) Can be waived or expanded by grant of right to additional support. c.) Right to Subjacent Support: (1) Arises when one person owns surface rights and another person owns subsurface rights (mineral interests). (2) Law is the same as that of lateral support. b. Public Nuisance: Protects public rights. An unreasonable interference with a right common to the general public. 1.) Unreasonable: Whether conduct significantly interferes with: a.) Public health b.) Safety c.) Comfort d.) Convenience e.) Peace f.) Or is proscribed by statute or ordinance g.) Or whether conduct is of a continuing nature h.) Or whether conduct has produced a permanent or long lasting effect. 2.) Injury: a.) Must be a substantial harm caused by intentional and unreasonable conduct OR b.) conduct that is negligent, reckless, or abnormally dangerous. c.) Special Injury: Any member of the affected public can sue but usually only if the person bringing the suite can show special injury, meaning, an injury different from that suffered by other members of the public. 3. Remedies a. No Nuisance: Allow activity to continue by denying all relief. b. Nuisance: Enjoin and abate the activity 1.) Estancias Dallas Corp. v. Schulz: p. 739 Injury to slight compared to the injury to . a.) A finding of nuisance must be followed by a balancing of the equities in order to determine if an injunction should be granted. b.) Necessity of others may compel the injured party to seek relief by way of an action for damages rather than to abate the nuisance. c.) Where the injury to defendant is slight compared to the injury to plaintiff an injunction is appropriate.
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V.
c. Nuisance: Pay damages and continue the activity 1.) Boomer v. Atlantic Cement Co.: p. 743 operates cement plant near neighboring landowners. sought injunctive relief and damages from s pollution. a.) Where a large number of landowners are affected by a more valuable use that is on balance a nuisance, the court may protect the use right of the landowners by a liability rule instead of a property rule. The court may award damages to the affected landowners instead of enjoining the nuisance. The damages are permanent compensating now for all past and future injury. d. Nuisance or not: Enjoin the activity but award damages to the enjoined actor: 1.) Spur Industries Inc. v. Del E. Webb Development Co.: p. 750 operated feedlot, is a real estate developer. Injunction granted, but cost to be borne by the . The real estate developer must indemnify the feedlot owner for the reasonable costs of moving or shutting down the feedlot where the developer has with foreseeability brought into a previously agricultural or industrial area the population which makes necessary the granting of an injunction against a lawful business and for which the business has no adequate relief. 2.) Coming to the Nuisance: moving into the vicinity of a nuisance does not completely bar a suit for damages or injunctive relief but it is a relevant factor. a.) Whether knew of the nuisance prior to moving to the area b.) Whether could foresee future settlement in the vicinity c.) Whether bought property before the nuisance came into being but developed after. Private Land Use Controls Chapter 10 p. 763 A. The Law of Servitudes: 1. Servitudes: Interests in land created by private land use agreements. Such agreements usually include multiple parcels of land. a. Purpose: For the purpose of increasing the total value of all the parcels. b. Effect: To burden on parcel to the benefit of another parcel. Bind and benefit not only parties to the agreement but also successors in interest. Usually there is a dominant and servient relationship between the estates but the relationship may be reciprocal. 1.) Dominant Estate: Benefit goes to the dominant estate 2.) Servient Estate: Burden is on the servient estate. c. Two Major Types: 1.) Easements: A is given the right to enter upon Bs land. 2.) Covenants: a.) Real Covenants: Covenants enforceable at law. b.) Equitable Servitudes: Covenants enforceable in equity. d. Two Minor Types: 1.) Profits (Profit a prendre): A is given the right to enter upon Bs land and remove something attached to the land. Modern profits usually grant the right to take timber from land, to remove sand, gravel and minerals such as coal, oil, and gas from the land. USUALLY construed as in gross rather than appurtenant since the right conferred as substantial economic value by itself and thus is most efficiently utilized if it is easily transferable by itself rather than as an adjunct to some related property. Profits are freely assignable.
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2.) Licenses Simply permission to enter the licensors land. Licenses may be oral or written and are revocable at an time unless the licensor makes the license irrevocable either expressly or by his conduct. e. Merger: Benefit and burden come under single ownership destroying the servitude. 2. Easements: For limited purpose, no right to exclude others, non-possessory interest. If the location of an easement is precisely indicated by a written instrument such as the deed that created it neither the holder of the dominant estate nor the holder of the servient estate may relocate it without the consent of the other. a. Two Ways to Categorize Easements: 1.) Affirmative or Negative a.) Affirmative Easement: Grants use. b.) Negative Easement: Forbids use. Forbidding one landowner from doing something on his land that might harm a neighbor. Original negative easements include: (1) Light (2) Air (3) Sun (4) Stream 2.) Appurtenant or Gross a.) Appurtenant Easement : Gives the right to whomever owns a parcel of land that the easement benefits. Gives easement owner the right to make some specific use or restrict some particular use of land they do not own. (1) Attached to the land (2) Requires both a dominant tenement and servient tenement. (3) Easement attaches to and benefits the dominant tenement. (4) Transferrable (usually) with the dominant estate to successive owners. (5) Affirmative or negative. b.) Gross Easement: Gives the right to some person without regard to ownership of land. Gives easement owner the right to make some specific use or restrict some particular use of land they do not own. (1) Interest in an individual, not attached to the land (2) Involves no dominant estate because it does not benefit any land (3) Only involves servient estate (4) Alienability: (a) Commerical easements in gross are assignable (b) Non-commercial easements in gross are not assignable UNLESS the parties intend to permit assignment (5) Affirmative or negative. 3. Creation of Easements a. SOF Requirements: 1.) Requires written instrument signed by the party to be bound thereby 2.) Exceptions: a.) fraud, b.) part performance, c.) estoppel or
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b.
c.
d.
e.
d.) may be created by implication or by prescription. Easement by Grant: 1.) Willard v. First Church of Christ, Scientist: p. 768 Easement reserved in favor of third party (church) to use property as parking lot. Under common law easements reserved in favor of third party are void. Some states, such as CA in this case, allow for easements to be reserved in favor of third parties. The court must give effect to the intent of the grantor. 2.) Reservation v. Exception: a.) Reservation: provision in a deed creating some new servitude which did not exist before as an independent interest. (1) Regrant Theory: An easement reserved by the grantor was not a reservation at all but a regrant of an easement by the grantee to the grantor. One deed is treated as two. b.) Exception: provision in a deed that excludes from the grant some preexisting servitude on the land. Licenses: 1.) Defined: Oral or written permission given by the occupant of land allowing the licensee to do some act that otherwise would be a trespass. 2.) Revocable: Licenses are revocable, unlike easements which are not. a.) Exceptions: (1) Licenses coupled with an interest: Such licenses are those which are incidental of a chattel on the licensors land. O to A the right to take timber from Os land. A has an interest and an irrevocable license to enter the land and take the timber. (2) Equittable Easement: may arise from license which becomes irrevocable under estoppel. If a licensor grants a license on which the licensee reasonably relies to make substantial improvements on property, equity requires that the licensor be estopped from revoking the license. 3.) Holbrook v. Taylor: p. 774 Taylor used the access road to construct a substantial residence. Holbrook later blocked the road with a steel cable strung taut across it. The court held that Holbrook was equitable estopped from revoking the license. Easement by Implication Apparent Use 4.) Van Sandt v. Royster: p. 779 The use must be apparent but not necessarily visible. A prior use is apparent if it could be detected or even inferred from a reasonable inspection of the premises. The sewer line in this case was apparent because later buyers should have inferred the existence of some sewer by noting the existence and operation of plumbing fixtures and could have employed a skilled plumber to detect the actual location of the sewer. Even though the purchaser had not notice, if the easement is apparent to the purchaser, the easement will be implied. Easement by Implication Prior Use 1.) Requirements reflecting the intent or understanding of the parties: a.) Common Owner Two properties owned by one person who uses one of the pieces of property to serve the other piece of land. b.) Conveyance There must be a conveyance of one of the properties to another person, the other part being retained by the conveyor.
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c.) Intended Continuation The parties must intend, at the time of division, to continue the prior use. d.) Apparent usage The quasi-easement must be apparent at the time of the conveyance. e.) Continuous usage The use of the quasi-servient tenement must be permanently adapted to serve the needs of the quasi-dominant tenement. f.) Necessity: (1) Reasonable necessity Must be reasonably necessary to the convenient enjoyment of the quasi-dominant land if that tract is the property conveyed to the grantee OR (2) Strict necessity to the enjoyment of the quasi-dominant tenement if that tract is retained by the grantor. f. Easement by Implication Necessity Only permitted for ingress and egress benefiting landlocked parcel. 1.) Requirements: a.) Common Owner - Two properties owned by one person who uses one of the pieces of property to serve the other piece of land. b.) Landlocked Parcel: The easement can only be created when this common owner divides the property in such a way that creates the access problem. The easement is crated at the moment a parcel is landlocked and thus the easement burdens the last parcel split off by the common owner, the parcel that completes the landlocking. c.) Necessity at Severance - Easement must be necessary (strict or reasonable) to use the dominant estate. No prior use needed. d.) Duration: Lasts as long as necessity exists. If necessity is removed the easement is terminated. e.) Location: Once the servient estate is identified the owner of the servient estate is permitted to select a reasonably convenient location for the easement. 2.) Othen v. Rosier: p. 786 Othen had an easement implied by necessity across some property but it wasnt Rosiers. g. Easement by Prescription 1.) Requirements: a.) Adverse use under a claim of right that is b.) Open and notorious c.) Continuous for the prescriptive period d.) Exclusivity does not mean that the adverse user was the only user but instead means that the adverse users claim does not depend on the like right in others. The right cannot be in common with the public or somebody else. 2.) Othen v. Rosier: p. 786 The Texas Rule: In order to be exclusive, the party must have been the sole user and not shared it with anyone. Othen used the road in common with Rosier. Othens use was merely permissive, hence constituting only a license which could not and did not ripen into a prescriptive right. 3.) Lost Grant Theory: To secure a prescriptive easement the claimant must show that the use was not permissive and also that the owner acquiesced. 4.) Public Prescriptive Easements: a.) Majority: Public prescriptive easements can be obtained by: (1) long continuous use by the public
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under a claim or right. Requires notice to landowner by the kind and extent of use and adverse right is claimed by general public, not an individual. The burden is on the claimant to prove nature and extent of use is sufficient to establish notice to the landowner that the public is general rather than simply a group of individuals is claiming a use right. b.) Implied Dedication: The owner intends to dedicate his property to public use but the evidence of such intent is entirely inferred from: (1) Long standing public use and (2) The owners failure to halt the use c.) Custom: Long usage of beaches by the public is protected as customary right. Claimant must prove such public use had gone on so long that the memory of man runneth not to the contrary. Requires: (1) Immemorial usage without interruption that is (2) Peaceable, reasonable, certain and (3) Consistent with other customs. d.) Public Trust Doctrine: The water and beachfront below the mean high-tide mark is held by the state in public trust so that the public can use these tidal waters and lands for common seaside pursuit. e.) Raleigh Avenue Beach Association v. Atlantis Beach Club: p. 800 A private beach club must permit the public to enter and use its private dry sand beach. The club was barred from charging any fees to transient users but was permitted to charge reasonable fees for its beach-maintenance services to those who remain on the beach for extended periods of time. Factors considered: (1) Relation of dry sand to the foreshore (2) The extent and availability of public owned dry sand beaches in the area (3) The nature and extend of public demand (4) The usage of the dry sand by the owner 4. Assignability of Easements : a. Assignability of Appurtenant Easements: The benefits & burdens pass automatically to assignees of the land to which they are appurtenant if: 1.) The parties so intend 2.) The burdened party has notice of the easement b. Assignability of Easement in Gross: Where the benefit is in gross it may not but assignable. 1.) General rule: a.) Commercial Easements in Gross assignable b.) Non-Commercial Easements in Gross not assignable UNLESS the parties intent to permit assignment. 2.) Miller v. Lutheran Conference & Camp Association: p. 812 Fishing, boating, and bathing on Lake Naomi. Frank and Rufus, as partners, had acquired a bathing right by prescriptive use and the easement in gross so acquired together with the easement in gross to fish and boat was a commercial easement that was intended to be transferrable. BUT while the easements were transferrable, they were not divisible. 3.) Divisibility of Easement in Gross:
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(2) (3) (4) (5)
a.) One Stock Rule: largely rejected today. b.) Intent of the Parties: Courts permit division of easements in gross unless contrary to the intent of the parties creating the easement. 5. Scope of Easements a. Enlargement of the Dominant Estate: 1.) Brown v. Voss: p. 820 To what extent if any may a holder of a private road easement traverse the servient estate to reach not only the original dominant estate but a subsequently acquired parcel when those two combined parcels are used in such a way that there is no increase in the burden on the servient estate. Holding: a.) Brown only had the right to use the easement for the benefit of parcel B. b.) Browns use of the easement to benefit parcel C was a misuse. c.) But that misuse did not burden the servient estate any greater than it otherwise would have and went on for over a year and at considerable cost before Voss sought to intervene. d.) An injunction would cause Brown considerable hardship and is therefore not an appropriate remedy. 6. Relocation of Easement: a. General Rule: Once the location of an easement is fixed by the parties it cannot be changed by the servient owner without permission of the dominant owner. 7. Termination of Easements: Once an easement is extinguished, it cannot be revived. It must be created anew in one of the ways easements are formed. a. Eight Principal Ways: E~N~D~C~R~A~M~P p. 831 1.) Expiration/ Estoppel expiration of stated period or upon the occurrence of some event (defeasible fee). May end by estoppel if the servient owner reasonably relies upon a statement or representation by the easement owner. 2.) Necessity Ends 3.) Destruction 4.) Condemnation Eminent Domain exercised to take title to fee interest in the servient estate for a purpose that is inconsistent with the continued existence of the easement. 5.) Release SOF: must be in writing. 6.) Abandonment a.) Preseault v. United States: p. 831 Rails to trials case. The railway had abandoned its easement. Its conduct manifested an intent to abandon. (1) Rules: (a) The scope of an easement may be adjusted (1) in the face of changing times to serve the original purpose (2) so long as the change is consistent with the terms of the original grant. (b) Upon an act of abandonment the owners of the burdened estate is relieved of the burden of the easement. 7.) Merger a.) Brown v. Voss: After the trial, Brown defaulted on his purchase and Voss bought his parcels. Once unity of ownership was established, the easement was extinguished. 8.) Prescription; If the servient owner wrongfully and physically prevents the easement from being used for the prescriptive period the easement is terminated.
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B. Covenants Running with the Land 1. Covenants Enforceable at Law: Real Covenants a. Real Covenants: A promise about land usage that runs with an estate in land meaning that it binds or benefits subsequent owners of the estate. 1.) Two Types of Real Covenants: a.) Affirmative Covenant: a promise to use land in a specified fashion. Courts are reluctant to enforce and sometimes use the touch and concern to avoid enforcement. b.) Negative Covenant: a promise not to use land in a specified fashion. Such covenants nearly always touch and concern land and courts are more inclined to enforce. 2.) Elements of Real Covenants: a.) Benefit and Burden: A promise about land usage burdens some land and normally benefits other land. b.) Runs with the land: A real covenant runs with the estate in land, not the land itself. c.) Remedy: Damages 3.) Creation of Real Covenants: a.) SOF Only created by written instrument (i.e., a deed). Although the SOF requires the transfer of an interest in realty to be in writing and signed by the party to be charged, most courts hold that accepting and recording a conveyance containing restrictions in use of the land conveyed binds the grantee to those restrictions even though he or she did not sign the deed in which they appeared or agree to them in the contract of sale. b.) Real covenants cannot be created by implication or prescription 4.) Enforceability By or Against Successors: a.) Enforceability of the burden against a successor to the burdened estate requires: (1) Intent the original parties must have intended the burden to run. (a) Expressly stated in written instrument; or (b) Inferred from covenants purpose; or (c) Inferred from conduct of parties. (2) Horizontal Privity: (a) Traditional View: Horizontal privity of estate between the original parties is required for the burden to run. (b) Modern View: Most jurisdictions do not require horizontal privity of estate between the original parties in order for the burden to run. (3) Vertical Privity: (a) Traditional View: Vertical privity of estate between the original promisor and the successor to the burdened estate is necessary for the burden to run. It is necessary to prove that the successor acquired the exact same estate in land owned by the original contracting party. Anything less, the burden will not run. (4) Notice: (a) Actual (b) Constructive (record/inquiry) (5) Touch and Concern: The substance of the promise must touch and concern the burdened land. Touch and Concern may be understood as: (a) Tangible use and enjoyment of the land; or (b) Effects of the covenant:
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Does it depress the value of the burdened land and increase the value of the benefited land? (6) Burden in Gross: If the burden is in gross it is possible that the benefit will run. b.) Claiming the benefit by a successor to the benefited estate requires: (1) Intent the original parties must have intended the benefit to run. (a) Expressly stated in written instrument; or (b) Inferred from covenants purpose; or (c) Inferred from conduct of parties. (2) Horizontal Privitiy: Horizontal privity of estate between the original parties is NOT required for the benefit to run. (3) Vertical Privity: (a) Traditional View: Veritical privity of estate between the original promisor and the successor to the benefited estate is necessary for the benefit to run. The benefit will run to a successor of some interest in the benefited estate. It doesnt have to be the exact same estate in land. (7) Touch and Concern: The substance of the promise must touch and concern the benefited land. (8) Benefit in Gross: If the benefit is in gross it will not run. a. Third Party Beneficiaries to Real Covenants: Homeowners Assn have standing to enforce development covenants both in law and equity if they have been given enforcement power. The basis of such standing is the HAs status as the beneficiary of a third party beneficiary contract. 1.) Neponsit Property Owners Association Inc. v. Emigrant Industrial Savings Bank (NY 1938): p. 864 As part of a planned development, the developer sold lots subject to a covenant to pay money annually to a homeowners association for the purpose of maintaining private roads and sidewalks owned in common by all the owners. The court held that: (a) A homeowners association that did not succeed to any estate of the benefited promise was able to enforce the benefit of such a covenant on the theory that it was the corporate agent of the owners of the burdened estates. (b) The covenant touched and concerned the burdened estate because it affected the legal relations of the parties to the covenant as owners of particular parcels of land and not merely as members of the community in general. (c) The covenant to pay a fee to maintain common facilities touched and concerned the burdened property because the effect of the covenant was to impose burdens and advantages on estate holders in their unique capacity as landowners rather than as members of the general public. 2. Covenants Enforceable in Equity: Equitable Servitudes a. Equitable Servitudes: A covenant about land use that will be enforced in equity by an injunction against a success to the burdened estate who acquired it with notice of the covenant. 1.) One Type of Equitable Servitudes: a.) Negative Equitable Servitudes: A promise to refrain from using ones land in a specified fashion. 2.) Equitable Servitudes v. Real Covenants four differences: a.) Remedy: (1) Real Covenant damages
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(i)
(2) Equitable Servitude injunction or lien b.) Privity: (1) Real Covenants see above (2) Equitable Servitudes Neither horizontal nor vertical privity are required for either the benefit or the burden to run to successors of either estate. c.) Creation: (1) Real Covenants Must be created expressly in writing. (2) Equitable Servitudes may be created by implication. b. Origin of Equitable Servitudes 1.) Tulk v. Moxhay (1848): p. 854 Tulk sold Leicester Square to Elms who promised for himself and his heirs not to build on the square. With knowledge of the covenant, Moxhay purchased the square from Elms and then proposed to build on the square. Because there was no horizontal privity, Tulk could not enforce the covenant at law. Instead he sought an injunction in equity. Because the covenant was intended to bind successors, its substance touched and concerned the land and Moxhay had notice of it, it was enforceable in equity against Moxhay. c. Creation of Equitable Servitudes 1.) General Rule: SOF requires they be created in a writing signed by the promisor BUT acceptance of a deed containing a promise made by the grantee of the deed suffices even though the grantee does not sign the deed. 2.) Exception to the General Rule: Negative equitable servitudes may be created by implication when there is a common scheme of residential development. Not all jurisdictions permit the creation of equitable servitudes by implication but those that do require the following: a.) Requirements: (1) Common Scheme of Development - No covenant on lots conveyed before the common scheme begins. (2) Negative Covenant - Must limit the use of the property rather than require some positive acton the part of the owner of the burdened land. b.) Sanburn v. Mclean (Mich. 1925): p. 859 In the 1890s McLaughlin subdivided a tract of land in Detroit into building lots and started to sell them under deeds that restricted sue to single-family residences. Later he sold some lots without the restrictions. McLean bought one of these lots in 1910. McLean built a gas station on his lot and his neighbors sought to enjoin this use as a violation of the implied negative equitable servitude. (1) Holding: The court agreed that an injunction was proper reasoning that because the initial restrictions imposed by McLaughlin were for the benefit of the lands held by McLaughlin to carry out the scheme of the residential district and implied reciprocal servitude burdened McLaughlins retained property and that servitude was equitably enforceable against McLean who was on inquiry notice from the uniform residence character given the lots by the expensive dwellings thereon that his lot might be burdened by a covenant restricting it to residential use. d. Enforceability By or Against Successors: 1.) Enforceability of the burden or benefit against a successor to the burdened estate requires:
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a.) Intent: Same as with Real Covenants if the parties expressly or impliedly intended for the covenant to run to benefit or burden the successors, the equitable servitude created by the covenant will run. b.) Privity: Neither horizontal nor vertical privity of estate is required for either the burden or the benefit of an equitable servitude to run. c.) Notice: A purchaser who pays real value for an estate and has no notice of the servitude at the time is not bound by the servitude. Notice can be: (1) Actual Notice: (2) Constructive Notice: (a) Record Notice: If a servitude is anywhere in the chain of title, the buyer has constructive notice of the servitude. (b) Inquiry Notice: A few courts have ruled that a purchaser should inquire about he existence of servitudes if the neighborhood exhibits a common character. (Sanburn v. McLean the court held that McLean had inquiry notice of the implied reciprocal covenant for residential use because the neighborhood had strictly uniform residence character). d.) Touch and Concern: In order for either the benefit or the burden of an equitable servitude to run to successors in interest the substance of the covenant must touch and concern the benefited or burdened property. e.) Benefit: The promise must benefit neighboring land. 3. Defeasible Fees as Land Use Control Devices: 1.) Remedy for Breach of Defeasible Fee Forfeiture 2.) Remedy for Breach of Servitude Damages, injunction, or enforcement of a lien. 3.) Modern Usage infrequent except in gifts or for charitable purposes. 4.) Defeasible Fee used to create a right of enforcement in a 3rd party or in a person who owns no land. 4. Termination of Real Covenants and Equitable Servitudes: 1.) Principal Ways: a.) Expiration of the covenant b.) Condemnation Eminent Domain c.) Release express waiver or release d.) Acquiescence which arises when the plaintiff has failed to enforce the servitude against other breaches and then seeks to enforce the servitude against defendant. e.) Abandonment two tests: (1) Average Person Test: whether the average person would reasonably conclude that the use restriction has been abandoned. (2) Frustration of Purpose Test: whether the covenants purpose has been so frustrated that enforcement would seriously impair the value of burdened lots without producing any substantial benefit. f.) Merger unity of ownership of the benefit and burden by the same person g.) Changed conditions in the surrounding area h.) Equitable Estoppel if the party seeking enforcement has made knowingly false representations to a defendant ignorant of the true facts intending and inducing the
44
defendants reliance on the misrepresentation he will be estopped from enforcing the covenant. i.) Laches- the unreasonable failure to assert a known equitable right coupled with some prejudice to the defendant, will bar enforcement of an equitable servitude. The court will consider (i) the elapse of time and (ii) the sufficiency of the prejudice. j.) Unclean Hands the notion that a plaintiff must not be guilty of the conduct of which he complains may bar a person from enforcing a reciprocal servitude if guilty of the same violation. k.) Balance of Hardships a court may deny injunctive relief if the hardship imposed by the injunction is very large in relation to the benefits produced. 5. Common Interest Communities b. Two Types of Restraints: 1.) Direct Restraints a.) Common direct restraints include: (1) Prohibition on transfer without the consent of the assn (2) Rights of first refusal (3) Requirements that transfer be made only to persons meeting certain eligibility requirements b.) Enforceability (1) Invalid if unreasonable (2) Restatement: Balance the utility of the purpose served by the restraint against the harm that is likely to flow from its enforcement. 2.) Indirect Restraints a.) Common indirect restraints include: (1) Restrictions in use (no pets, limited choice of paint color, no signs etc.) (2) Restrictions that limit sales value of the property but do not directly interfere with free functioning of the market in land b.) Enforceability (1) Invalid only if the restriction lacks rational justification (2) Regulations subsequently adopted (not in deed or declaration of common interest development subjected to reasonableness standard. a. Covenants Recorded in the Master Deed: A condominium development will have a recorded master deed in which the use restriction that pertains to each unit is recited. A condo purchaser has constructive notice of such covenants. 1.) Nahrstedt v. Lakeside Village Condo Association (1994): p. 900 The recorded master deed recited that no animals shall be kept in any unit. Nahrestadt purchased a unit and moved in with her three cats. The homeowners association demanded their removal and Narhrestadt sought to prevent the enforcement of the covenant as being unreasonable. a.) Majority: The restriction was reasonable because: (1) It did not violate public policy (2) Was not wholly arbitrary (3) Did not impose a burden that far outweighs any benefit. (4) Narhstadt had constructive notice making it presumptively reasonable
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(5) Narhstadt failed to show that the covenants effect on the project as a whole was unreasonable, not just on the individual. b. Covenants Imposed by Homeowners Association: Covenants imposed by homeowners assn after the owners have acquired title are not presumptively valid. Such covenants are valid only if reasonable. 1.) Mulligan v. Panther Valley Property Owners Assn. p. 920 a.) Majority: (1) Original recorded covenants are given strong presumption of validity. (2) Covenants imposed by HO Assn after owners acquire title are valid only if reasonable. (3) Burden on the challenger to show unreasonable. (4) Plaintiff failed to show the rule prohibiting tier 3 sex offenders from living in Panther Valley is unreasonable. c. Cooperative Apartments: Condos are individually owned and financed separately from each other. Cooperatives are owned by a corporation. Each owner-lessee is obligated for a portion of the entire cost of owning the building. Courts defer to the business judgment of the directors of the corporation and will permit the directors to deny ownership to anyone for any reason except violation of civil rights laws. 1.) 40 West 67th Street Corp. v. Pullman (2003): p. 913 The BOD of a cooperative apartment corporation terminated the tenancy of a tenant-shareholder because of his objectionable conduct (false accusations, physical altercation). The court held the business judgment rule was the operative standard to access the validity of the boards action and noted that to trigger any heightened judicial scrutiny a plaintiff must show either that the boards actions were: a.) Ultra Vires b.) Did not legitimately further the corporations purposes or c.) Were taken in bad faith d. Summary of Standards of Review: 1.) Business Judgment Rule ( most deferential) see above 2.) Nahrstadt Reasonableness Rule (Intermediate) restrictions enforced unless they are wholly arbitrary, violate a fundamental public policy or impose a burden on the affected land that far outweighs the benefit. 3.) Florida Reasonableness Rule (least deferential) Not strong presumption of validity. Must balance the utility of restrictions purpose versus the harm resulting from its enforcement.
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REQUIREMENTS FOR THE RUNNING OF COVENANTS At Law Affirmative Negative Benefit Burden Benefit Burden Horizontal No Yes No Yes Privity Vertical Yes Yes Yes Yes Privity Notice to No Yes No Yes person being charged Intent for Yes Yes Yes Yes covenant to run Touch and Benefit Burden Benefit Burden Concern the land In Equity Affirmative Benefit Burden Negative Benefit Burden No No No Generally not enforced by the courts. If a court does enforce an affirmative covenant in equity, the requirements for a negative servitude apply. No, generally presumed
Yes, generally implied by a common plan or scheme
No No, generally presumed Yes
Attenuated Attenuated benefit burden
Neponsit Group Assignment

The Associations Brief The Associations Brief addressed three primary issues. First, a covenant must Touch and Concern the land in order for it run with the land, meaning for it to bind successors in i nterest. This means that the effect of the covenant is to create a benefit for the covenantee by making their land either more valuable or useful while creating a burden for the covenator by making restricting the use or utility of their land. Thus, the benefit touches and concerns the land of the coventee while the burden touches and concerns the land of the covenantor. In the 80 years preceding this case the NY Court of Appeals had not once addressed this issue although the lower Appellate Division had. In one such case the court had held that a covenant to pay a proportionate share of maintenance costs did touch and concern the land. Based on this lower court persuasive holding the Association concluded in its brief that the assessment covenant in the present case would also meet the touch and concern doctrines requirements. The second issue addressed another restriction on the content of covenants running with the land. This restriction holds that affirmative covenants could not bind successors in interests. An affirmative covenant is one which compels the covenantor (holder of the servient estate) to both submit to a restriction in the use of his property and also to do an act for the benefit of the covnenantee (holder of the dominant estate). The prohibition against affirmative covenants being enforced against successor landowners stands for two propositions. First, affirmative covenants can become obsolete over time and result in burdening the title with an obligation subsequent landowners would never agree to. Second, there are other effective and less burdensome means for landowners to accomplish their mutual objectives. Restrictive covenants are the preferred method of accomplishing legitimate landowner objectives. This restriction posed a problem for the Association because the assessment covenant could be viewed as an affirmative covenant since it required the lot owners to do an act, to pay the annual fee. The challenge the for the Association then was to persuade the court of appeals that the covenant was either not an affirmative covenant or that it fell into an exception to the general prohibition. The Association argued that the objective of the assessment covenants was to prevent freeriding and thus to preserve the common areas for all the members lot owners. The assessment then could be understood as a restrictive covenant rather than an affirmative covenant and thus should survive judicial scrutiny. The third issue is the Associations position that even if the Court of Appeals concluded that the assessment covenant did no t run with the land and therefore not enforceable at law, that the covenant was nonetheless enforceable in equity. The Associations supported its argument by the following factors: The Associations intention to establish restrictions for its benefit Emigrant had constructive, if not actual notice of the covenant The Association and its assignor, Neponsit, had complied with the covenant. Under such circumstances a court of equity should enforce the covenant. The Association asserted that it was not seeking a money judgment against Emigrant but was seeking only to enforce a charge already in existence at the time Emigrant took title to the property.
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Property 2 Reuben-Cooke, Spring 2012

Property 2 Reuben-Cooke, Spring 2012

Property 2 Reuben-Cooke, Spring 2012

Property 2 Reuben-Cooke, Spring 2012

Property 2 Reuben-Cooke, Spring 2012

Property 2 Reuben-Cooke, Spring 2012

Property 2 Reuben-Cooke, Spring 2012

Property 2 Reuben-Cooke, Spring 2012

Property 2 Reuben-Cooke, Spring 2012

Property 2 Reuben-Cooke, Spring 2012

Property 2 Reuben-Cooke, Spring 2012

Property 2 Reuben-Cooke, Spring 2012

Property 2 Reuben-Cooke, Spring 2012

Property 2 Reuben-Cooke, Spring 2012

Property 2 Reuben-Cooke, Spring 2012

Property 2 Reuben-Cooke, Spring 2012

Property 2 Reuben-Cooke, Spring 2012

Property 2 Reuben-Cooke, Spring 2012

Property 2 Reuben-Cooke, Spring 2012

Property 2 Reuben-Cooke, Spring 2012

Property 2 Reuben-Cooke, Spring 2012

Property 2 Reuben-Cooke, Spring 2012

Property 2 Reuben-Cooke, Spring 2012

Property 2 Reuben-Cooke, Spring 2012

Property 2 Reuben-Cooke, Spring 2012

Property 2 Reuben-Cooke, Spring 2012

1.) TO PROTECT PURCHASERS FOR VALUE NOT DONNEES

Property 2 Reuben-Cooke, Spring 2012

Property 2 Reuben-Cooke, Spring 2012

Property 2 Reuben-Cooke, Spring 2012

Property 2 Reuben-Cooke, Spring 2012

Property 2 Reuben-Cooke, Spring 2012

Property 2 Reuben-Cooke, Spring 2012

Property 2 Reuben-Cooke, Spring 2012

Property 2 Reuben-Cooke, Spring 2012

Property 2 Reuben-Cooke, Spring 2012

Property 2 Reuben-Cooke, Spring 2012

Property 2 Reuben-Cooke, Spring 2012

Property 2 Reuben-Cooke, Spring 2012

Property 2 Reuben-Cooke, Spring 2012

(2) (3) (4) (5)

Property 2 Reuben-Cooke, Spring 2012

Property 2 Reuben-Cooke, Spring 2012

Property 2 Reuben-Cooke, Spring 2012

Property 2 Reuben-Cooke, Spring 2012

Property 2 Reuben-Cooke, Spring 2012

Property 2 Reuben-Cooke, Spring 2012

Property 2 Reuben-Cooke, Spring 2012

Property 2 Reuben-Cooke, Spring 2012

No No, generally presumed Yes

Attenuated Attenuated benefit burden

Neponsit Group Assignment

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