I.

PROPERTY I OUTLINE Analytical Tools and Key Concepts a. Theories of Property i. Labor Theory (Locke) 1. You own your own work, so if you mix your work with something, you own the thing a. E.g., horse manure is abandoned property of the horses owners. If you rake the manure into a pile, youve put work into it, making the manure yours. b. Acquisition by Discovery: Native Americans didnt own the land they occupied b/c they did not put enough (or the right kind of) labor into the land 2. Law of Accession: when two ownerships are mingled together, whoever made the most material contribution gets the property (with the other getting restitution for their labor contributed) (e.g., B painting on As canvas to create a valuable artwork) ii. Utilitarianism 1. Property exists in order to maximize the overall happiness or utility of all citizens. (greatest good for greatest number) a. What property allocation promotes overall societal happiness? i. Distribution ii. Asset maximization (see Economics of Property below) iii. Conservation? iii. Political Rights and Autonomy 1. Property allows for sphere of autonomy (e.g., allows you to howl at the moon in your own backyard) 2. Allows for political freedom (e.g., wealth; not dependent on the govt) 3. Allows people to be empowered by property (b/c its transferrable) b. Economics of Property i. Property rules should maximize net social economic utility of resources (the ideology that property exists to be used productively or exploited) ii. Communal property encourages over-depletion (e.g., nobody can stop each other from chopping down trees if theyre communally owned) iii. Externalities 1. A cost that an actor fails to take into account when deciding how to use resources 2. Externalities lead to a misallocation of resources 3. Externalities arent necessarily inefficient (e.g., changing behavior would cost $1,000 to save $500 of costs) 4. Internalizing Externalities: assuming zero transaction costs, those harmed would agree to pay the actor to

change his behavior, if efficient to do so (e.g., eliminating pollution at cost of $100 to save $300 harm) iv. Transaction Costs 1. Transaction costs are the costs of bringing an externality into the actors decision-making 2. Transaction costs may inhibit those harmed from agreeing to pay the actor; externalities persist when theres high transaction costs 3. Types of Transaction Costs a. Informational/Organizational i. The more people in the affected group, the more costly it is to organize them b. Free-rider effect: members of the group affected by an externality have an incentive to free-ride on the benefits of the groups cost to internalize the externality. i. E.g., members of community have incentive to donate little/none to pay factory for pollution control equipment, and benefit from others contributions. c. Legal Fees d. Policing after the actor has been paid v. Benefits of Private Property 1. Private property forces the owner to internalize the costs/benefits of the property; tend to use land more efficiently a. But, there are other ways (e.g., social customs and mores) to internalize costs from community property. Carol M. Rose, p. 50. c. Bundle of Rights i. Property is not the object ii. Instead, it is the relationship btwn people in respect to an object iii. Owning property is holding a Bundle of Rights against others: 1. Right to Include (rent) 2. Right to Exclude (incl. Right to Destroy) a. E.g. in Jacque v. Steenberg Homes, Inc., the ct held that the property owner had unfettered discretion in not allowing a moving co to drive across his land. b. As a matter of law, property owners dont have the right to exclude governmental services. State v. Shack. c. Other Limitations to Right to Exclude i. Rent control and limitations on right to evict tenants ii. Anti-discrimination statutes 3. Right to Possess 4. Right to Use 5. Right to Transfer (reqs both right to include and right to exclude) iv. Note: you can have some of the bundle w/o others

1. E.g., Rx drugs you can exclude others from them, you can possess them, and you can use them; but you cant sell them 2. E.g., the dissent in Moore v. Regents of the University of California suggests that a property right to excised organs could be a bundle of rights, without the right to sell. d. Relativity of Title i. A person can have a relatively better title or right to possession than another, while simultaneously having a right inferior to yet another person. ii. E.g., A fox is on Os land and T1 trespasses and takes it. T2 trespasses onto T1s land and takes the fox. In a suit btwn T1 and T2, T1 has better title (although its inferior to Os title). II. Acquisition by Capture a. Rule of Capture: the first to occupy a ferae naturae (wild animal) has possession of the animal. Mere pursuit is not enough. Pierson v. Post i. Depriving animals of their natural liberty and bringing them w/in the hunters certain control is sufficient (e.g., mortally wounding an animal, securing animals w/ nets, toils, and other traps). Pierson v. Post (dicta) ii. Policies for the Rule of Capture 1. Bright Line Rule a. Easier to determine who owns the fox (than if ownership belonged to the hunter in pursuit); keeps transaction costs down 2. Encourage the destruction of foxes 3. Encourages investment in capture technology (e.g., better guns to kill foxes) iii. Downsides to the Rule of Capture 1. Neglects to protect the investment in a failed capture and thus removes some incentive to hunt 2. Leads to over-exploitation of resources because of first in time nature of rule (race to the resource) a. This may lead to over-investment in capture technology (see picture of Spindletop oil drills on Moodle page) b. Custom (Ghen v. Rich) i. Courts may apply a custom thats inconsistent w/ the common law rule of capture if: (PINC) 1. Not against public policy; 2. The custom regards to an isolated community (e.g., whalers off the coast of Cape Cod); 3. The custom has been used/acquiesced in the industry and is necessary for the industry; and 4. Close to the legal rule of capture. ii. Policy of adopting a custom: the industry knows best c. Protection from Unfair Competition (Keeble v. Hickeringill) i. Competition is good if it leads to a greater production of the resource (e.g., building a more high-tech duck pond to lure the ducks in Ks pond to Hs land)

ii. Interfering with anothers trade is bad when it doesnt lead to a greater production of the resource (e.g., shooting guns to scare away ducks in a decoy pond) d. Rights of a Landowner as Against a Trespasser i. Ratione Soli: a landowner acquires constructive possession of wild animals who are on his land (for the purposes of protection from trespassers) e. Domesticated or Semi-Domesticated Wild Animals i. If captor captures a wild animal and it escapes, the captor loses possession, and the animal becomes a ferae naturae (subject to the rule of capture). 1. If the captured animal that escapes is not native to the area, the hunter may be on notice its anothers property. (e.g., a giraffe escapes from its pen in Mississippi) ii. Animus Revertendi 1. Wild animals that develop an animus revertendi (habit of return) continue to belong to the captor when they roam at large. 2. Policy a. Domesticated animals are valuable to society and this effort to tame wild animals is rewarded b. Land owner invested labor in training animal to return (although hunter has argument of putting labor into the hunt) c. But, this is not fair to the hunter. Animals that develop an animus revertendi arent distinguishable from wild animals. iii. Rule of Increase: the offspring of two animals belonging to different owners is the property of the mothers owner. (dont necessarily know who the dad is) f. Other Fugitive Resources i. Oil and Gas 1. Subject to the Rule of Capture (see above) 2. Angled Drilling a. Ratione Soli gives landowner constructive possession of the fugitive resources in/under the land; landowner would have a claim of trespass 3. Today, extraction is heavily regulated to prevent overproduction (e.g., maximum rates of extraction; minimum space btwn drilling sites). 4. Reinjection a. Common Law: once you reinject the oil/gas it becomes a fugitive resource, subject to the rule of capture b. Today: injector retains possession of the resource c. Policy i. Rule of capture gives powerful disincentive to reinject oil/gas ii. Reinjection is more efficient than aboveground tanks

ii. Water 1. Underground a. English law: Rule of Capture b. US law: Rule of Reasonable Use i. Common Law: wasteful uses are unlawful if they harm your neighbor ii. Today: underground water/oil/gas is heavily regulated 2. Surface Water a. Western States i. Prior Appropriation (Rule of Capture): first to capture the water and put it to a reasonable and beneficial use has a superior right to later appropriators 1. Policy: water is scarce; rule creates an incentive to exploit ii. If A starts diversion works before B, but B finishes his works first and puts water to beneficial use before A, A wins. Contra Pierson v. Post. 1. Policy: more investment than chasing a fox, B would be on notice of As works (digging a big ditch) b. Eastern States i. Correlative Riparian Rights: landowners adjoining the water have riparian rights under a reasonable use standard ii. Factors: 1. Value of use the landowner is making of the water 2. Harm to other riparian neighbors 3. Suitability to the locale (e.g., A trying to build a waterpark in a farming town that relies on the water to power a mill) III. Acquisition by Creation Intellectual Property a. Competing Policies i. Encourage production of intellectual property (writings, arts, invention) by giving exclusive right to exploit the product 1. In International News Service v. Associated Press, INS was copying APs news articles and selling it to its customers. The ct held that AP had a quasi-property interest in its news articles as against INS. ii. Allow competition and avoid monopoly 1. Good Competition a. Imitation allows for competition b. Improvement in price, quality, efficiency in production c. If property rights are too restrictive, you lose the value of competition 2. Distinguishing Tangible Property

a. Monopolies in tangible property dont inhibit competition b/c there can be more than one iteration (e.g., more than one wheat field) b. There can only be one iteration of IP b. Protection Against Copying i. Generally, theres no CL protection against copying 1. In Cheney Brothers v. Doris Silk Co., Doris copied Cheneys designs and sold them at a cheaper price. The ct held that Doris is allowed to copy the design. ii. Legislative Intellectual Property Protection 1. Patents a. Protects novel, useful, non-obvious processes or products i. 35 U.S.C. 101: Whoever invents or discovers any new and useful process, machine, mfr, or composition of matter, or any new and useful improvement thereof, may obtain a patent ii. E.g., in Diamond v. Chakrabarty, the ct held that P could patent a genetically engineered bacterial strain. b. Laws of nature, physical phenomena, and abstract ideas are not patentable c. Lasts 20 years from date of application d. Not renewable 2. Copyrights a. Protect original expression of ideas (not ideas themselves); must be independent creations i. E.g., in Nichols v. Universal Pictures, P couldnt the general idea of conflict btwn parents of lovers from two different racial/religious groups. b. Lasts until 70 years after the death of the author/creator c. Subject to fair use (e.g., academic settings) d. Liability for Secondary Infringement (MGM v. Grokster) i. One who distributes a device w/ the object of promoting its use to infringe is liable ii. Liable if you induce or encourage infringement iii. Can infer intent from device solely used for infringement 3. Trademarks a. Protects words/symbols indicating the source of a product/service b. Arise from use of the mark in commercial activity (lost when abandoned or when the mark becomes generic) iii. Common Law Intellectual Property Protection

1. Right of Publicity a. Protects your right to control the commercial exploitation of your name/likeness i. E.g., In White v. Samsung, the ct held that a robot w/ a blonde wig and jewelry standing on a set that resembled wheel-of-fortune violated Vanna Whites right of publicity. ii. E.g., Heres Johnny port-a-potties intrude on Johnny Carsons likeness rights iii. E.g., Bette Midlers likeness rights were violated where Ford hired Midlers back-up singer to sing one of Midlers hit songs and try to sound like her. b. The right survives death (like property) IV. Acquisition by Find a. Lost Property i. Finder of lost property wins as against anyone except the true owner and prior possessors ii. Voluntary Bailment (example of relativity of title) 1. Winkfield Rule: cts bar an action by the true owner (bailor) against the present possessor (keeper) if the bailee (finder) has recovered from the present possessor. a. E.g., Chimney Sweep (CS) finds a jewel and hands it to Jeweler (J) to have it valuated. J refuses to return the jewel. CS sues J and recovers. If True Owner (TO) shows up, he would have to sue CS, but theres no guarantee that CS still has the money (he may have spent it already). 2. The Winkfield Rule is problematic in involuntary bailment situations b/c the bailor never has a chance to evaluate the trustworthiness of the bailee. iii. Exceptions: Finder loses as to Locus Owner 1. Finder subject to Locus Owners right to exclude (CERT) a. Finder intruded into a private area of a commercial establishment b. Object is embedded in or attached to the land i. In South Staffordshire Water Co. v. Sharman, an ee found rings in the muck at the bottom of ERs pool. Ct held that locus owner wins. c. Find occurs in occupied private residence (occupier has constructive possession of items in the house) (Hanna v. Peel if the owner occupied the house) d. If the finder is a trespasser 2. Agency principles a. Where Finder is ee, cases are split iv. Policy for Protecting Prior Possession 1. Protecting subsequent possession instead would create an incentive to steal 2. Protecting subsequent possession instead would lead to people hiding their property

a. This is bad b/c it has social value (to be marketable) b. Wouldnt buy security technology (fencing the property) 3. We would like for property to end up w/ its true owner b. Mislaid Property i. Object intentionally placed by true owner, but owner forgot to retrieve ii. If found in commercial or private premises, belongs to Locus Owner as against finder. 1. Exception: where theres no locus owner (e.g., mislaid property in a park) iii. Policy 1. Facilitate return to true owner 2. True owner is more likely to retrace his steps for mislaid property a. This may be overbroad b/c a true owner may retrace his steps to recover lost property too 3. True owner better off leaving mislaid property w/ locus owner a. But, this doesnt incentivize the finder to do anything (e.g., if Finder finds a wallet on a table, he would have incentive to knock it to the floor, and declare he found it there) c. Abandoned Property i. Property thats voluntarily relinquished w/ no intention of reclaiming by the true owner ii. Finder is entitled to abandoned property iii. Exception: where location of the find is in a private location of commercial premises or residence (function of right to exclude) 1. E.g., in Corliss v. Wenner, Wenners laborers found 4 lbs of gold coins buried in a jar when building a driveway. Ct held that since the finders were working for Wenner, they were acting on his behalf. The coins, like the dirt they were excavating to build the driveway, belonged to Wenner as owner of the land. d. Maritime Law i. At English CL, wreck was cargo washed ashore from a ship lost at sea w/ no survivors; the property went to the crown ii. Under traditional maritime law, a ship lost at sea and settled on the ocean floor remained the owners property unless title was abandoned but anyone subsequently reducing the ship or its cargo to possession was entitled to a salvage award. 1. E.g., in Columbus-America Discovery Group v. Atlantic Mutual Ins. Co., the insurers of the Central America, which sunk in 1857 and was found in 1992, didnt abandon their title and were still owners of $1B in gold on board; salvors who found the ship were legally entitled to a salvage award iii. Some states have a similar scheme of reward for finders of personal property iv. Policy

1. Facilitates return to true owner; creates incentive for finders (c.f., the law of finders) e. Treasure Trove i. At English CL, treasure trove (money/coin, gold, silver plate, or bullion hidden in the earth) belonged to the king. ii. Today, no separate treasure trove doctrine; cts use lost/mislaid/ abandoned distinction iii. See Benjamin v. Lindner Aviation, Inc., where $18k was found in the wing of an airplane, ct held it to be mislaid b/c no one would abandon so much money. iv. See also, Terry v. Lock Hospitality, where $38k was found in the ceiling by Kers. Possession was awarded to hotel owner for the same reasons as Benjamin. 1. But, see In re Seizure of $82,000 More or Less, where money was found in the gas tank of a car. The car had been seized by the govt b/c it was used to transport drug proceeds and sold to Buyer. Ct held that money was abandoned b/c the culprits couldnt claim it w/o risking arrest for drug dealing. V. Acquisition by Gift a. Elements for Inter Vivos Gifts of Personal Property i. Delivery 1. Donor must place property w/in donees exclusive control. 2. E.g., in Hocks v. Jeremiah, the ct held that Donor didnt give subsequent bonds to Donee where Donor placed them in a joint safe-deposit box in which both had access. ii. Intention by Donor to make present transfer of the property 1. E.g., I will give you this watch is not a valid gift. There must be an intent to transfer title now. 2. Note: intent to give and delivery DO NOT have to coincide (e.g., prior delivery ratified by a subsequent stmt of intent is permissible) (c.f., gifts causa mortis) iii. Acceptance by the donee 1. Usu. presumed by the ct and a non-issue b. Gifts Causa Mortis i. Gift of personal property made in anticipation of Donors imminently approaching death ii. Revoked (canceled) or revocable by recovery in health iii. Same elements as a gift inter vivos (i.e. delivery, intent, and acceptance), but the elements are applied more strictly 1. B/c gifts causa mortis run contrary to the statute of wills 2. E.g., must redeliver property previously delivered to the donee as bailee iv. A gift made by a donor contemplating suicide may be a gift causa mortis (see Erosion of Constructive Delivery Scherer v. Hyland below) c. Delivery i. Policy for the Delivery Requirements 1. Handing over the object makes vivid and concrete to the donor the significance of the act performed. By feeling the

wrench of delivery, the donor realizes an irrevocable gift has been made. 2. The act is unequivocal evidence of a gift to the actual witnesses of the transaction. 3. Delivery of the object to the donee gives the donee, after the act, prima facie evidence in favor of the alleged gift. ii. Manual Delivery 1. Donor physically transfers possession of an item to the donee 2. Limitations: a. Some items are too cumbersome and bulky b. Some items arent readily available (located far away) c. Impracticable when the donee receives less than complete title to the item (e.g., a remainder interest) d. Intangible property cannot be manually delivered iii. Substituted Delivery 1. Constructive Delivery a. Donor physically transfers to the donee the means of obtaining access to and control of the property i. E.g., in Newman v. Bost, Donor affected constructive delivery of a bureau and other household furniture by handing the donee the keys that unlocked these items. b. Erosion of Constructive Delivery Scherer v. Hyland i. Donor received a check from another, endorsed it, and put it on the table w/ a note giving it to donee. Donor then left and committed suicide. ii. Ct found constructive delivery adequate where: 1. the evidence of donative intent is concrete and undisputed, 2. there is every indication that the donor intended to make a present transfer and 3. when the steps taken by the donor must have been deemed by the donor as sufficient to pass the donors interest 2. Symbolic Delivery a. Donor physically hands Donee an object that represents or symbolizes the gift. b. Usu. involves handing over a written instrument declaring a gift of the subject matter 3. Generally, substitutes are effective ONLY when manual delivery is impossible or impracticable a. But see Gruen v. Gruen, where a Fathers letter to Son giving him a future interest in a painting was

sufficient, even though it was possible for S to go to Fs house, F to hand S the painting, and S to give it back to F, who retained the possessory interest. b. See also Rest. (2d) Property, Donative Transfers, 32.2, Illustration 3: A gift of a watch by a document is valid, even though it would be easy to take it off and hand it over. (this view is w/o case support) c. Policy i. Donor feels the wrench of delivery ii. Good permanent evidence of the transaction iii. If symbolic delivery always allowed, people will write, I will give A this watch, which is unenforceable. d. Possession i. Valid gifts transfer possession and ownership of the property. ii. It is possible for Donor to give a gift to Donee, and then have Donee entrust possession of the property with Donor. iii. One can reserve a life estate in the possession of the gift 1. Presently grants title to the property while reserving possession (Gruen v. Gruen) iv. Distinguish Bailments 1. Non-owner (bailee) has rightful possession (see Voluntary Bailment above) e. Special Gift Rules i. Engagement Rings 1. Traditional Rule a. Donor gets the ring back if hes not at fault b. If the donors not at fault, its a conditional gift (a gift thats conditioned upon the marriage going through) 2. Modern Approach a. Donor gets it back (doesnt matter whos at fault) ii. Checks 1. Checks arent gifts until they are cashed, b/c the owner can cancel the check before then (lack of delivery) 2. Woo v. Smart held that death acts as revocation on a check iii. Safety Deposit Boxes 1. To determine if delivery is made, cts consider: a. Who paid for safe deposit box (even if both used it)? b. Who accessed it (even if others had access to it)? VI. The System of Estates: Possessory Estates PRESENT ESTATE FSA FT LE FSD FSSCS FUTURE INTEREST None O: Rev A: Rem O: Rev A: Rem O: Possibility of reverter A: Executory Interest O: Right of Entry/Power of Termination

FSSEL ESTATE FSA FT LE LE (PAV) FSD FSSCS ESTATE Rev Possibility of Reverter Right of Entry Vested Remainder Contingent Remainder Executory Interest

A: Executory Interest ALIENABILITY OF POSSESSORY ESTATES TRANSFERRABLE DEVISABLE INHERITABLE Yes Yes Yes Yes No No (except to heirs of body) Yes No No Yes Yes Yes Yes (today) Yes (today) Yes Yes (today) Yes (today) Yes ALIENABILITY OF FUTURE INTERESTS TRANSFERRABLE DEVISABLE Yes Yes Yes (today) Yes (today) Yes (today) Yes (today) Yes (today) Yes (today) Yes (today) Yes (today) Yes (today) Yes (today) INHERITABLE Yes Yes Yes Yes Yes Yes

a. Fee Simple Absolute (FSA) i. The Nature of the Estate 1. Temporal Duration a. FSA lasts forever (------->); the owner has the right to possess the property forever (if she could live that long) b. There is no future interest. No one presently has the right to possess the property in the future. 2. Scope of the Interest a. Alienability: While Owner is still alive, she has the right to transfer the property freely to whomever he or she wishes. b. Devisibility: Owner can will (devise) the property as she wishes c. Inheritability: If decedent dies w/o a will (dies intestate), the property passes to the decedents heirs (heirs inherit the property) i. Note: while owner is alive, the heirs apparent (parties who think they will receive the owners property when she dies) have a mere expectancy, but no property interest (no present right to possess the property in the future). (No one is heir of the living) ii. Creating a FSA 1. Words of Purchase: indicate the party to whom the property is being transferred (to A)

2. Words of Limitation: indicate the duration of the estate being conveyed (and her heirs) 3. Default Estate a. Common Law i. The default estate (when the magic words arent there) was a life estate ii. Must say to A and his/her heirs to create a FSA iii. Exception: 1. Where O conveys Whiteacre to A for life, remainder to the heirs of B, the ct interpreted to the heirs of B to create an FSA to B b. Modern Approach i. Default estate is to grant all that Owner has (i.e., an FSA if he has one) ii. Must say to A (words of purchase) iii. Inheritance of a Fee Simple 1. Heirs a. Heirs are persons who (1) survive the decedent and (2) are designated as intestate successors under the states statute of descent. b. The surviving spouse is designated as an intestate successor of some share in the decedents land (depending on who else survives) (e.g., if decedent leaves one child, the spouse takes half) 2. Issue a. Decendants (incl. children, grandchildren, greatgrandchildren, etc.) b. Distribution is made among decedents issue per stirpes: if any child of the decedent dies before the decedent leaving children who survive the decedent, such childs share goes to his or her children by right of representation c. Rule of Primogeniture: eldest son inherited the land i. If the eldest son predeceased the decedent leaving issue, his eldest son or other issue represented him ii. This rule was used until 1925. Today, children share equally. 3. Ancestors a. Parents take as heirs if the decedent leaves no issue 4. Collaterals a. All persons related by blood to the decedent who are neither descendants nor ancestors b. Incl. brothers, sisters, nephews, nieces, uncles, aunts, and cousins 5. Escheat a. If person dies intestate w/o any heirs, the property escheats to the state where the property is located

b. E.g. O conveys Blackacre to A for life remainder to B and his heirs. i. A has a life estate; B has a remainder interest in FSA ii. B dies intestate w/o heirs. The state escheats the future interest in Blackacre, since B doesnt have heirs. iii. A dies. The state has a FSA. iv. Numerous Clauses Principle 1. Prohibits new/customized property interests (you have to order off the menu; unicorns dont fit in the zoo) 2. E.g., in Johnson v. Whiton, Royal Whiton couldnt devise land to my granddaughter Sarah and her heirs on her fathers side. Ct held it was a FSA. 3. Policy: reduces transaction costs b. The Fee Tail i. Creating a Fee Tail: to A and the heirs of his body 1. Words of Limitation: heirs of his body means issue 2. Grantor can limit the eligible heirs of the body of the immediate grantee a. FT male: to A and the male heirs of his body b. FT special: to A and the heirs of his body and to wife Katheryn ii. Nature of the Fee Tail 1. Possessory Estate a. Life estate to the immediate grantee, and upon his death, a life estate to his children, and upon each childs death, a life estate to that childs children, and so on until there are no children to take the fee tail. b. An interest under a fee tail is transferrable, but not devisable or inheritable (b/c its a life estate). The transferee would take a life estate pur autre vie measured by the life of the party who transferred the life estate. 2. Future Interest a. Either a reversion back to the grantor; or b. A remainder interest (if grantor conveys it to another party) c. E.g., To A and the heirs of his body, and if A dies w/o issue, then to B and her heirs gives B a Rem| FSA d. Reversions are freely transferable, devisable, and inheritable. e. Remainders transferability, devisability and inheritability depend on whether they are vested or contingent. 3. Fee tail is disentailed (i.e., becomes a FSA) by an inter vivos conveyance

a. Straw Man Transaction: A (w/ fee tail) wants complete control over Blackacre. So he conveys it to X (creating a FSA) and X conveys it back to A. iii. Recognition of the Fee Tail 1. Only four states (DE, ME, MA, RI) recognize the fee tail a. Can still disentail by inter vivos conveyance 2. Two Categories of States that Dont Recognize the Fee Tail a. Category 1: fee tail language creates a FSA; remainder gifts are void b. Category 2: one-generation FT: if A doesnt have any issue, give effect to the remainder; otherwise, FT language creates FSA c. Life Estates i. Creating a LE: to A for life ii. Ambiguous Language in Wills 1. At CL, the LE was the default estate 2. Today, if a wills language is ambiguous, its interpreted as giving as much as possible (FSA if grantor has it) iii. Possessory Estate/Future Interest 1. Lasts for the duration of the grantees life. 2. Future Interest a. Reversion in the grantor, OR b. Remainder interest to a 3d party iv. Life Estate Pur Autre Vie 1. If a life tenant transfers his interest, the grantee holds a life estate pur autre vie (a LE measured by the life of the original life tenant) 2. While the life tenant is still alive, a LE pur autre vie is transferable, inheritable, and devisable 3. Upon life tenants death, the life estate pur autre vie immediately expires v. Alienability 1. Life estates are transferable (see Life Estate Pur Autre Vie above) 2. By definition, life estates cannot be inheritable or devisable 3. Restraints on Alienability a. Disabling restraint: withholds a power to convey b. Forfeiture restraint: forfeit property if attempt to convey c. Promissory restraint: promise not to convey property (legally enforceable K) 4. Validity of Restraints on Alienability (Rest. (2d) Property, Donative Transfers, ch. 4) a. Fee Simple i. An absolute restraint of any type is void ii. Most courts: A partial restraint (e.g., a restraint as to a certain time/persons) is also void

iii. Second Restatement: A partial restraint is valid if reasonable iv. Restraint in the form of a FSSCS (specified use) usually upheld b. Life Estate i. Absolute disabling restraint is void ii. Forfeiture restraint is valid iii. Policy: forfeiture induces the life tenant to pay debts, whereas a disabling restraint, which allows the life tenant to not pay but keep the property, does not 5. Policies Against Restraining Alienation a. Efficiency i. Want to promote the most productive use of land b. Restrictions Concentrate Wealth i. Founders didnt want there to be a landed aristocracy c. Restraints discourage improvements on land i. No incentive to improve for resale ii. If doesnt have power to sell the property, no power to mortgage iii. Creditor might be deceived (house insulated from collection efforts) vi. Valuation of Life Estate and Remainder 1. The value of a LE depends on: (1) the value of the asset today, (2) the rate of return, (3) and the life tenants life expectancy. 2. NPV of LE = value today + PV(interest received in life expectancy) vii. Waste 1. Where two or more persons (e.g. A and B) have rights to possess property at the same time or consecutively, A should not be able to use the property in a manner that unreasonably interferes w/ the expectations of B. 2. Affirmative Waste a. Liability resulting from injurious acts that substantially reduce the value of the property b. Exception: Open Mines Doctrine i. If the mines were opened by the grantor before he created the LE, it is presumed that the grantor intended the life tenant to be able to continue mining. But if the mines were not open before the LE was created, the life tenant cannot open them. ii. Also applies to cutting down trees 3. Permissive Waste a. Failure to take reasonable care of the property (a Q of neg) 4. Substantially Increasing the Propertys Value

a. CL: Ameliorative Waste Action grantor intended the remaindermen to receive the identical thing granted b. Today: life tenants can make substantial alterations or even demolish a structure when conditions change, provided the value of the remainder is not diminished by these actions 5. Externality Problem w/ the Waste Doctrine a. Externality: in using the property, the life tenant doesnt consider costs to the remaindermen b. Transaction costs may be high b/c the life tenant and the remaindermen are locked into dealing with each other (i.e. a bilateral monopoly) 6. Factors in Application of the Waste Doctrine a. Nature of the property interests of the competing parties i. Note: the more certain (and less iffy) the future interest of the remaindermen is, the more cts protect their interest b. Testators Intent c. The conduct in question d. The remedy sought viii. Problems w/ the Life Estate 1. Not much flexibility 2. Harder to mortgage b/c need agreement by remaindermen 3. Harder to lease the land from life tenant (have to negotiate w/ remaindermen too) ix. Seisin 1. Freehold estates (FSA, FT, LE) all had seisin 2. Possession + feudal incidents and services 3. Method of Transfer a. Livery of Seisin: go to land, pick up clod of dirt, hand it to transferee; take out young boy, hit him over the head w/ a stick d. Leasehold Estates i. Term of Years 1. Estate ending on a fixed calendar date 2. to A for 99 years 3. Can have term of years determinable (to A for 99 years, if A so long live) e. Defeasible Estates i. Fee Simple Determinable (FSD) 1. Words of Limitation a. to A, so long as [an event] b. Durational event (while, until, and during also work) 2. Duration a. Lasts as long as the event occurs/doesnt occur 3. Future Interest a. Possibility of reverter

ii.

iii.

iv.

v.

vi.

b. The transferor always maintains the possibility of reverter Fee Simple Subject to a Condition Subsequent (FSSCS) 1. Words of Limitation a. to A, but if [an event] b. Conditional language (provided that, and upon the condition that also work) 2. Future Interest a. Right of entry (a.k.a. power of termination) b. E.g., to A, but if the land isnt used for a school, Hutton has the right to re-enter the land and claim possession c. Not automatic (like FSD); has to be exercised d. Held w/ the grantor Covenants Distinguished 1. If a condition imposed by the grantor in creating defeasible fee is breached, the land is or may be forfeited to the holder of the future interest. 2. A covenant is a promise by the grantee that a specified act will or will not be performed. If a covenant is breached, the promisee may sue for an injunction or damages. Transferability 1. Modern Rule (majority): FSD and FSSCS are transferrable inter vivos or in a will 2. Some states: you can transfer possibility of reverter, but not a right of entry 3. Some states: attempt to transfer a right of entry destroys it 4. CL Rule: FSD and FSSCS are not transferrable inter vivos or in a will a. Exception (some states): Possibility of Reverter and Right of Entry can be released to the person holding current possession (i.e., not enforce his right) Where it is ambiguous whether a FSD or a FSSCS is created: 1. Work with the language a. E.g., in Mahrenholz v. County Bd. of Sch. Trs., the ct noted that in North v. Graham, the word whenever was used in the reverter clause, whereas in its case, the word only was in the granting clause. 2. Grantors Intent a. What did the grantor want to happen if the condition was not fulfilled? 3. Default Rule: courts prefer FSSCS over FSD a. Policy: dislike forfeiture for ___ purposes 1. The grantee is still in compliance with a for ___ purposes condition if he also uses the land for other things 2. E.g., in Davis v. Skipper, where an FSD was conveyed conditioning that the land be used for church purposes.

The church executes an oil and gas lease and oil wells are drilled, striking oil. Since the church building was still being used for a church, the land did not revert to grantor. vii. When does FSD vs. FSSCS matter? 1. Transferability (see Transferability above) 2. Matters for SOL purposes a. For FSD, the SOL starts running when the condition is broken b. For FSSCS, the SOL starts running when Grantor makes a demand to retake the land. c. Some states: SOL starts running when condition doesnt occur in either FSD or FSSCS 3. Wrap Up Example a. The deed says O to A and her heirs, so long as premises arent used for sale of alcohol, and if they are, O has a right to re-enter. A has operated the restaurant for 11 yrs, using alcohol in cooking and serving champagne for no extra cost at brunch. B is considering buying As interest and wants to set up a bar. b. So long as language looks like an FSD c. Right to re-enter language looks like a FSSCS d. Cts preferred construction is a FSSCS e. B wants As interest to be a FSD b/c A would win against O under SOL (adverse possession) i. If its a FSSCS, O could still retake the property b/c SOL doesnt start running until he makes a demand for the property. viii. Restraints on Alienability 1. Less likely to strike restraints on alienation when dealing w/ giving gifts to charities/nonprofits 2. More likely to strike restraints on alienation when the condition is unreasonable or void b/c capricious and imposed for spite or malice a. E.g., in Cast v. Natl Bank of Commerce, Trust & Sav. Assn. of Lincoln, the testator left a farm to Richard Cast in fee simple on the condition that Richard or one of his children shall occupy the farm as his or her residence for 25 years, w/ forfeiture for breach of condition. Ct held condition void. b. E.g., in Casey v. Casey, where testator devised land to his son w/ a provision for forfeiture if the sons daughter were ever to own, possess, or be a guest on the land for more than one week a year, the ct struck the provision. ix. Condemnation of Defeasible Fees 1. Condemnation proceeding: govtal agency makes forced sale (eminent domain)

2. The holder of the possessory estate takes the entire condemnation award; the holder of the reversionary interest takes nothing 3. Rest (2d) Property 53, comment b: if the defeasible fee would prob. not end w/in a reasonably short period of time (not taking into account the condemnation), the fee owner should have the entire award 4. Policy: any future interest would be speculative x. Defeasible Life Estates 1. E.g., O to W for life, so long as she remains unmarried, then to X 2. Today, theres a forced elective share that a surviving spouse can take a. If the will allows for less than 50% to wife, the wife can elect to take up to 50% of the estate b. If the will allows for more than 50% to wife, the wife can elect to follow the will c. Policy: against restraints on marriage 3. Turns on Grantors intent: a. Durational (so long as) good motive b. Conditional (but, if) bad motive 4. Rest (2d) Property 6.1, comment f a. Restraint against marriage is construed as narrowly as possible, consistent with the language employed in describing the restraint and, hence, does not automatically include w/in it a restraint against cohabitation w/o marriage 5. Both LEDs and LESCSs are possible VII.The System of Estates: Future Interests a. Future Interests in the Transferor (grantor, if inter vivos; testator, if in will) i. Reversion 1. Definition a. The interest of the Transferor after transferring a vested estate of a smaller quantum that the vested estate he owns (and the transfer does not specify the ownership of the future interest) b. Refer to hierarchy of estates above 2. Characteristics a. Always vested b. Descendible (heirs) c. Devisable (will) d. Transferrable inter vivos 3. How are they created? a. Expressly: O, owning FSA conveys To A for life, then to revert to O b. By default: O, owning FSA, conveys To A for life 4. May/May Not be Certain to Become Possessory a. Certain

i. E.g. if O conveys Blackacre to A for life, Os future interest (Rev | FSA) is certain to become possessory, either in O or his heirs/devisees b. Uncertain i. E.g. O conveys Blackacre to A for life, then to B and her heirs if B survives A. If A dies before B, B gets FSA and the reversion fails to become possessory (i.e. it is divested). ii. Possibility of Reverter 1. Definition a. Transferor conveys a determinable estate of the same quantum that he has 2. Example 1 a. O conveys Whiteacre to Town Library Board, so long as used for library purposes b. O has Possibility of Reverter 3. Example 2 a. O conveys Greenacre to A for life b. Two years later, A conveys Greenacre to B for life, so long as no tavern is operated on the property c. A has conveyed a determinable estate of the same duration as his (LE) d. A has a possibility of reverter e. B has a LED iii. Right of Entry (a.k.a. Power of Termination) 1. Future interest that follows a FSSCS 2. Example a. O conveys Whiteacre to Town Library Board, but if it ceases to use the land for library purposes, O has the right to re-enter and retake the premises b. Board has FSSCS c. O has a Right of Entry b. Future Interests in the Transferee i. Remainders vs. Executory Interests 1. A Rem becomes possessory immediately at the natural end of the preceding Estate (e.g., the life tenant dies) 2. Executory Interests cut off (divest) the preceding Estate before its natural expiration ii. Vested Remainder (VR) 1. A remainder is vested if: a. Given to an ascertained (born) person, AND b. Not subject to a condition precedent 2. Indefeasible (plain old) Vested Remainder a. Certain of becoming possessory; cannot be divested b. E.g., O conveys to A for life, then to B and her heirs. A: LE; B: VR | FSA. If B dies before A, Bs future interest goes his heirs/devisees/escheats. 3. Vested Subject to Open (or Partial Divestment)

a. Vested Subject to Open occurs w/ class gifts. Here, current members of the class may have their interest partially divested because of additional class members in the future. b. E.g., O conveys to A for life, then to As children and their heirs. B is As child at time of grant. A: LE; B: VR subject to open | FSA. Bs interest is Vested Subject to Open b/c A could have more kids. i. Remainder can begin as contingent and become vested based on later events ii. E.g., using above example, if at time of grant, A didnt have kids, A: LE; As potential kids: CR | FSA; O: Rev | FSA. If has kids, then the remainder becomes vested. 4. Vested Subject to Divestment a. E.g., O conveys to A for life, then to B and her heirs, but if B does not survive A to C and his heirs. i. Compare, O conveys to A for life, then to B and her heirs if B survives A, and if B does not survive A, to C and his heirs a Contingent Remainder b. Keys to distinguish Contingent Remainders from Vested Remainders Subject to Divestment i. Order of language 1. Read left to right, comma to comma 2. Classify interests as you go (vested or contingent), THEN move to next interest 5. Rule of Thumb a. If a LE followed by future interests i. If first future interest is a Contingent Remainder in fee simple 1. The following future interest in a Transferee will be a Contingent Remainder ii. If the first future interest is a Vested Remainder in fee simple 1. The following future interest in a Transferee will be an Executory Interest iii. Contingent Remainder 1. A remainder is contingent if: a. Recipient unascertained, OR b. Is subject to a condition precedent 2. Contingent Remainder if Recipient is Unascertained a. E.g., O conveys to A for life, then to the heirs of B. Bs heirs are unascertainable until he dies. A: LE; Heirs of B: CR | FSA; O: Rev | FSA. 3. Contingent Remainder if Subject to Condition Precedent

a. E.g., O conveys to A for life, then to B and her heirs if B survives A, and if B does not survive A, to C and his heirs i. A: LE; B: CR | FSA; C: CR | FSA; O: Rev | FSA. ii. Note: these are alternative contingent remainders iii. Note: O retains a reversion, even thought it seems like the future interest would either go to B or C. This is because As LE can end before he dies. E.g., early CL forfeiture for treason; A and B die simultaneously. 1. This DOES NOT apply to Vested Remainders. If LE is forfeited or ends early, possession goes to the future interest holder (acceleration). iv. General Rule: when alternative Contingent Remainders follow a LE, throw on a Reversion to O. b. E.g., O conveys to A and B for their joint lives, then to the survivor in fee simple. A and B have CR | FSA b/c (1) the survivor is unascertained, and (2) their future interests have an express condition precedent. A and B Jointly: LE; A: CR | FSA; B: CR | FSA; O: Rev | FSA. c. Not a Condition Precedent if Mere Surplusage i. E.g., O conveys to A for life, and in the event of As death to B and her heirs. B has VR | FSA. 4. If a Remainder-holder transfers to O, the name stays. It does not become a reversion (although it has the same effect). 5. Again, contingent remainders can become vested based on later events a. E.g., O conveys to A for life, then to As children who shall reach age 21. A has a 17 yr old child, B. A: LE; B: CR | FSA; O: Rem | FSA. b. When B turns 21, B: VR | FS subject to open c. If A dies when B is only 17: i. CL: Bs CR is destroyed b/c not ready for possession; Reverts to O ii. Modern: O holds by reversion, then goes to B when he turns 21; if B dies before he turns 21, O holds it iv. Why the Vested/Contingent Distinction Matters 1. Note: when its ambiguous, VR preferred over CR 2. Acceleration: a. Vested, but not Contingent Remainders, become possessory however and whenever the preceding estate ends

i. E.g., O conveys to A for life, then to B and his heirs, but if B dies under age 21 to C and his heirs 1. A: LE; B: Vested Remainder Subject to Divestment | FSA; C: Shifting Executory Interest | FSA 2. If A dies when B is age 17: a. B gets possession. Acceleration. b. B: FSA Subject to Executory Limitation; C: Executory Interest | FSA ii. E.g., O conveys to A for life, then to B and his heirs if B reaches age 21 1. A: LE; B: Contingent Remainder | FSA; O: Rev | FSA 2. If A dies when B is age 17: a. B doesnt get possession; still contingent b. CL: contingent remainder is destroyed; O owns Blackacre 3. At early CL, Contingent Remainders were not transferrable inter vivos a. Creditors of remaindermen couldnt reach them i. They were inheritable, however b. Vested Remainders were assignable and creditors could reach them c. TODAY, Contingent Remainders are assignable in most JRDs 4. Destructibility of contingent, but not vested remainders 5. Contingent, but not Vested Remainders are subject to the rule against perpetuities v. Executory Interests 1. In general, an Executory Interest divests another interest to become possessory a. If it divests a transferee, it is a Shifting Executory Interest b. If it divests the transferor, it is a Springing Executory Interest 2. Origins in Equity a. Restrictive CL rules and the response in equity i. No future interest could be created in favor of a transferee if it cuts short a freehold estate 1. E.g., O conveys Whiteacre to my eldest son A and his heirs, but if A inherits Blackacre, then Whiteacre is to go to my second son B and his heirs. A: FSA; B: nothing. ii. No freehold Estate can be created to spring up in the future.

1. O conveys to A and her heirs when A marries B. A: nothing; O: FSA 2. Did not prevent the creation of a remainder to commence in the future, provided there was a freehold estate in a transferee to support it. E.g., to A for life, then to B and her heirs. Livery of seisin to A was sufficient to create As freehold LE and also to sustain Bs remainder. 3. The Rise of the Use a. E.g., O enfeoffs X and his heirs to hold to the use of A and his heirs, but if A inherits the family manor, then to the use of Os second son B and his heirs. i. X has legal title; X is subject to a duty enforceable in Equity to hold for the benefit first of A, and then later perhaps to the benefit of B ii. Note: Shifting Use b. E.g., O enfeoffs X and his heirs to hold to the use of O and his heirs, but if A marries B, then for the use and benefit of A i. Note: Springing Use c. Gave rise to the bargain and sale deed i. E.g., O sells Blackacre to A for $50, giving a written deed granting to A and his heirs ii. No livery of seisin; O holds legal title iii. But equity reqs O to hold legal title for the benefit of A d. Compare Covenant to Stand Seised i. E.g., O covenants to stand seised for the benefit of Daughter ii. Love and affection for relatives sufficed as good consideration to raise a use e. Other Benefits i. Could effectively deivse property 1. E.g., Enfoeff X and his heirs to the use of O and then to such persons as O shall appoint by will ii. Tax Avoidance 1. Feudal incidents due upon descent to heir b/c of Os death 2. But, avoided if O grants to A, B, C,Z as joint tenants for the use of O and his heirs a. Add ppl b/c once grantees die, grantor has to pay taxes (so you appoint a large number of people; if number grows thin, appoint more ppl)

3. Seisin never passes on 4. Statute of Uses a. If a person seised for benefit of another, then seisin (legal title) deemed transferred to beneficiary of the Use i. E.g., to X and his heirs for the benefits of A ii. After the statute, A holds legal title iii. Incidents due b. A Use (equitable) was thereby converted to a legal interest i. Ex. 12: O bargains and sells to A and his heirs, but if B returns from Rome, then to B and his heirs. 1. Before the Statute of Uses a. O retained legal title (no livery of seisin); A and B had only equitable interests (a Use) 2. After the Statute of Uses a. B: Shifting Executory Interest | FSA b. A: Fee Simple Subject to an Executory Limitation (FSSEL) c. Note: A and B hold LEGAL title ii. Ex. 13: O covenants to stand seised for the benefit of A and her heirs when A marries B. 1. Before the Statute of Uses a. O retained legal title; A had only an equitable interest 2. After the Statute of Uses a. A: Springing Executory Interest | FSA b. O: FSSEL 5. Modern Executory Interests a. Created the Fee Simple Subject to Executory Limitation (FSSEL) i. A fee simple that upon an event occurring is divested in favor of an Executory Interest held by a transferee ii. Similar to a Defeasible Fee, except the future interest is held by a transferee, not O b. Ex. 14: O conveys to A and his heirs, but if A dies w/o issue surviving him, to B and her heirs i. A: FSSEL ii. B: Shifting Executory Interest | FSA iii. NOTE: the FSSEL here is a present possessory estate c. Ex. 15: O conveys to A for life, then to B and her heirs, but if B dies under the age of 21, to C and her heirs. i. A: LE

ii. B: Vested Remainder Subject to Divestment | FSSEL 1. Subject to loss before it becomes possessory AND after it becomes possessory (if B isnt 21) iii. C: Shifting Executory Interest | FSA iv. NOTE: the FSSEL here is a future interest v. Compare, Ex. 8: O conveys to A for life, then to B and her heirs, but if B does not survive A to C and his heirs. 1. A: LE 2. B: Vested Rem Subject to Divestment | FSA 3. C: Shifting Executory Interest | FSA 4. Here, the FI is FSA b/c it cannot be divested after becoming possessory (B survives A) 6. Executory Interests and Defeasible Fees a. Ex. 16: O conveys to Hartford School Board, its successors and assigns, but if the premises are not used for school purposes during the next 20 yrs, to B and her heirs. i. Distinguishing FSSCS 1. FI in FSSCS (right of entry) held by O 2. FI in FSSEL (executory interest) held by 3d party 3. AUTOMATIC divesting if the condition happens; not an optional right of entry ii. Title 1. School Board: FSSEL 2. B: Shifting Executory Interest | FSA b. Ex. 17: O conveys to Town Library Board so long as the premises are used for library purposes, then to Childrens Hospital. i. Distinguishing FSD 1. So long as language looks like FSD 2. In FSD, possibility of reverter goes back to O; here the future interest goes to a 3d party ii. Title 1. Library Board: FSD 2. Childrens Hospital: Shifting Executory Interest | FSA a. Casebook: FSD b. Primer: FSSEL c. Either is acceptable iii. Logically, Its a Unicorn in the Zoo 1. Shouldnt be an executory interest b/c it doesnt divest the FSD

2. Shouldnt be a remainder b/c a remainder cant follow a vested fee simple c. Rules of Thumb i. If grant looks like FSSCS, but FI is in 3d party: FSSEL followed by an Executory Interest ii. If grant looks like FSD, but FI is in 3d party: FSD or FSSEL followed by an Executory Interest 7. More Problems (p. 238) a. Problem 1. O, owner of Blackacre, comes to you to draft an instrument of gift. O tells you he wants to convey Blackacre to his son A for life, and upon As death O wants Blackacre to go to As children if any are alive or, if none are then alive, to Os daughter B. i. (a) O conveys to A for life, then to As children and their heirs, but if at As death he is not survived by any children, then to B and her heirs. 1. Suppose A is alive and has no children a. A: LE b. As kids: Contingent Remainder | FSA c. B: Contingent Remainder | FSA d. O: Reversion | FSA 2. Two years after the conveyance, twins, C and D, are born to A. a. A: LE b. C, D: Vested Remainder Subject to Divestment and Open | FSA c. B: Shifting Executory Interest | FSA 3. Suppose that As child (C) dies during As lifetime and that A later dies, survived by his child (D) and B. a. A: LE ENDED b. D: FSA c. Cs Heirs: FSA (divesting condition never occurred) ii. (b) O conveys to A for life, then to such of As children as survive him, but if none of As children survives him, to B and her heirs. At the time of the conveyance, A is alive and has two children, C and D. 1. A: LE 2. C, D: Contingent Remainder | FSA 3. B: Contingent Remainder | FSA 4. O: Reversion | FSA

iii. (c) O conveys to A for life, then to B and her heirs, but if A is survived at his death by any children, then to such surviving children and their heirs. At the time of the conveyance, A is alive and has two children, C and D. 1. A: LE 2. B: Vested Rem Subject to Divestment | FSA 3. C, D: Shifting Executory Interest | FSA b. Problem 2. T devises $10,000 to my cousin, Don Little, if and when he survives his wife. i. Ts intent: T wants the money to go to his cousin, but not to his cousins wife ii. Don Little has a Springing Executory Interest iii. Testators legatees are divested c. Trusts i. Generally 1. Trustee has Legal Title 2. Beneficiary has Equitable interest a. Income for specified period b. Principal (remainder): Distribution of assets at end of the period 3. Ex. 18: O conveys Blackacre to X in trust to pay the income to A for life, and then to pay the principal to As children who survive A. a. Equitable Future Interests track Legal Future Interests i. X: legal FSA ii. A: equitable LE iii. As children: equitable contingent remainder | FSA iv. O: equitable reversion | FSA b. If X sells Blackacre for $200,000 and reinvests the $200,000 in Whiteacre and General Motors stock, the trust property then consists of these latter items c. Upon As death X conveys the trust property to As children if any are alive or O if A has no surviving children. ii. Trust Basics 1. Trustee is a fiduciary a. Trustee must act for the exclusive benefit of the beneficiaries and is not permitted to benefit personally b. Trustee is subject to personal liability to the beneficiaries for breach of fiduciary duties 2. No self-dealing. Trustee cannot sell assets to himself as an individual 3. Keep Trust assets separate from own 4. Acreage accounts

Impartial treatment of Income and Remainder Beneficiaries Exercise prudent management judgment Subject to personal liability for breach Trusts are not subject to CL rules against restraints on alienation a. Spendthrift Trusts i. Trusts drafted such that trust beneficiaries have no power to transfer or borrow against their trust interests ii. Creditors have no power to reach those interests to satisfy beneficiaries debts iii. Some state statutes make the settlors own equitable interest immune from creditor claims b. Perpetual or Dynasty Trusts i. Trusts that can continue to control the disposition of wealth forever into the future d. Rules Furthering Marketability i. Background 1. People have always wanted to try to control the ownership of their property not just at death but into the future 2. Also sought to prevent future generations from making foolish decisions and squandering wealth 3. After the Statute of Uses, conveyancers began creating increasingly complex arrays of Estates and Future Interests 4. Judicial Response: create rules that curb uncertain Future Interests in order to enhance alienability ii. Destructability of Contingent Remainders (241-42) 1. Rule: A remainder in land is destroyed if it does not vest at or before the termination of the preceding freehold estate. 2. Destruction by Staying Contingent at End of LE a. Ex. 19: O conveys Blackacre to A for life, then to B and her heirs if B reaches 21. A dies when B is age 15. At time of conveyance: i. A: LE ii. B: Contingent Remainder | FSA iii. O: Reversion | FSA b. Bs Contingent Rem is destroyed b/c it didnt vest before A died. 3. Destruction by MERGER a. Rule of Merger: If the LE and the next vested estate in fee simple come into the hands of the same person, the lesser estate is merged into the greater Estate b. E.g., O conveys Blackacre to A for life, then to B and her heirs. A conveys his LE to B. i. B has LE PLUS Vested Rem | FSA; merges into FSA

5. 6. 7. 8.

c. Ex. 20: O conveys Whiteacre to A for life, then to B and her heirs if B survives A. i. At time of conveyance: 1. A: LE 2. B: Contingent Remainder | FSA 3. O: Rev | FSA ii. A conveys his LE to O. 1. O has the LE and the next vested Estate 2. O has FSA!!! 3. Bs contingent remainder is destroyed 4. Limitations a. P. 242, n. 11: Merger doesnt apply when the LE and the next vested Estate are created simultaneously in the same person. Transferors intent. b. Destructibility doesnt apply to Executory Interests c. Destructibility doesnt apply to Equitable Interests 5. Example Problem: Suppose Testator devises to A for life, then in fee simple to Bs children who survive B. a. Title at time of devise: i. A: LE ii. Bs children: Contingent Remainder | FSA iii. Ts heirs: Reversion b. Suppose that B dies during As life, leaving a child, C. Then A dies. i. Cs Contingent Rem became Vested at Bs death (during As life). C owns Blackacre. c. Suppose A dies during Bs life and B has one child C at the time. i. The condition precedent (to survive B) isnt yet satisfied. The Contingent Rem is destroyed d. Suppose A dies during Bs life and B has no children. i. The Rem was still Contingent at the end of As LE (b/c not held by an ascertained person). The Contingent Rem is destroyed. Ts heirs own blackacre. e. Suppose that A conveys his LE to B i. B: LE per autrie vie ii. Bs children: contingent remainder | FSA iii. Ts heirs: Reversion | FSA iv. LE and next vested estate are NOT held by same person. No merger. f. Suppose A conveys his LE to Ts sole heir, X i. X: LE per autrie vie ii. Bs children: Contingent Remainder | FSA iii. X: Reversion | FSA iv. Xs LE merges into his Rev | FSAbecomes FSA

6. Current Status of Destructibility of Contingent Remainders (242-43) a. Abolished in states b. E.g., O conveys Whiteacre to A for life, then to such of As children who reach age 21. Two years later, A dies, leaving children C and D ages 8 and 4. i. At CL: 1. C, D: Contingent Remainder (to reach 21) 2. Since theyre still contingent at the end of As LE, theyre destroyed 3. O: FSA ii. After Abolition: 1. O: FSSEL 2. C, D: Springing Executory Interest | FSA 3. Suppose C is 21 and D is 17. A is alive. a. A: LE b. C: Vested Rem Subject to Open | FSA c. D: Contingent Remainder | FSA 4. Suppose A dies. Then later, C turns 21. D is 17. a. C: FSSEL (C divested Os FSSEL) b. D: Shifting Executory Interest | FSA iii. The Rule in Shelleys Case 1. The Rule a. IF (1) one instrument (will or deed) b. (2) creates a life estate in land in A, and c. (3) purports to create a remainder in persons described as As heirs (or the heirs of As body), and d. (4) the life estate and remainder are both legal or both equitable, e. THEN A, not his heirs, has the remainder in FSA (or fee fail) f. Simplified Rule. Cannot in same instrument create a LE in a person and a Reminder in the heirs of that person 2. Ex. 21: O conveys Blackacre to A for life, then to As heirs. a. Under The Rule in Shelleys Case: i. A: LE ii. A: Vested Rem | FSA b. Does Merger apply? i. LE and next vested estate in the hands of AA: FSA ii. Whenever you see a Shelleys Case issue, always check for merger after applying the Rule in Shelleys Case

c. What if the grant instead left the remainder in As children? i. Rule in Shelleys Case does NOT apply (children heirs or heirs of As body) 3. E.g., O conveys to A for life, then to B for life, then to A heirs a. Under The Rule in Shelleys Case: i. A: LE ii. B: Vested Remainder | LE iii. A: Vested Remainder | FSA b. Note: merger does not apply here b/c A does NOT have the next vested estate after her LE. c. If B dies during As life, his heirs have the vested remainder; merger still doesnt apply. 4. Applicability a. The Rule in Shelleys Case applies to Contingent Remainders as well as Vested Remainders in As heirs b. The Rule in Shelleys Case does NOT apply to executory interests 5. Status of The Rule in Shelleys Case a. Abolished in all but three or four states b. But abolition sometimes not retroactive i. Cts have applied the rule as late as the 1990s as they construe wills and deeds that predate the abolition c. Also important to know the Rule b/c it will apply to land situated in a state that sill has it i. E.g., drafting a will for a TX couple who owns land in AR iv. The Doctrine of Worthier Title 1. Rule a. IF: i. Inter vivos conveyance of land ii. A future interest in Grantors heirs (either a Remainder or an Executory Interest) b. THEN no future interest is created in the heirs of Grantor; rather, Grantor holds a Reversion 2. Ex. 22: O conveys Blackacre to A for life then to Os heirs. a. In the absence of the Worthier Title Doctrine: i. A: LE ii. Os unascertained heirs: Contingent Remainder | FSA iii. O: Rev | FSA b. Under the Worthier Title Doctrine i. A: LE ii. O: Reversion | FSA iii. Os heirs take nothing 3. Status of the Doctrine of Worthier Title

a. Abolished in many states b. Sometimes survives as a rule of construction i. E.g., in a grant from O to A for life, then to Os heirs the ct assumes that O intended to retain a Reversion as opposed to making a grant to his heirs ii. But not a binding rule in those circumstances. Depends upon intent. v. The Rule Against Perpetuities 1. The Rule: No interest is good unless it must vest, if at all, not later than twenty-one years after some life in being at the creation of the interest 2. General Observations a. Interests subject to the Rule: Contingent Remainders, Executory Interests, Class Gifts (Vested Rem Subject to Open) b. The interest must EITHER vest OR fail w/in a life in being plus 21 years c. Life in Being i. When does the clock start running? 1. For a will, the death of the testator (not the date of the will) 2. Inter vivos: Date of delivery of the deed ii. Whose lifetime to use? 1. Generally, someone whose life is causally connected to vesting or failing of the interest 2. E.g., a life tenant for the future interests that follow 3. Ex. 23: O transfers a sum in trust for A for life, then to As first child to reach 21. a. Future interest subject to the Rule: As first child: Contingent Rem | FSA b. Contingency: A having a child that attains age 21 c. As interest is valid: 21 years after As life, we will know whether As first childs interest vests or not. A cannot have kids after he dies. d. A child is considered in being from the date of conception (if later born alive) 4. Ex. 24: O transfers a sum in trust for A for life, then to As first child to reach 25. a. Assume A has NO children at all at the time of the grant i. Future interest subject to the Rule: As first child to reach 25: Contingent Remainder | FSA ii. Contingency: A having a child that attains age 25

iii. As interest is invalid: We dont know if A will have a kid that reaches 25 years old 21 years after As death. iv. Strike out invalid clause: Grant becomes: for A for life; A: LE; O: Rev | FSA b. What if at the time of grant A has a 24 year old child? i. As interest is invalid: As kid could die before reaching 25. Then, the analysis follows the example above. 5. Ex. 25: T devises property to my grandchildren who reach 21. T leaves 2 children and 3 grandchildren under 21. a. Future interest subject to the Rule: Ts grandchildren: Contingent Remainder | FSA b. Contingency: Ts grandchildren reach 21 c. Validating Lives: T (dead), Ts kids, Ts grandchildren d. Grandchildrens interest is valid: 21 years after Ts childrens lives, we will know if their grandchildren reach 21. e. What if the same grant occurred in a deed? i. Cant use Ts children as validating lives b/c T can have grandchildren other than through his currently living children. ii. Current children of T could die. T has third child, Z. T and his children other than Z all die. Z has a child, who is a grandchild to T. Z may turn 21 after T dies. 6. The Fertile Octogenarian and Precocious Toddler (P. 247, FN 22) a. All persons are deemed capable of producing children regardless of age b. Cannot defeat by evidence that the particular person is medically incapable of producing children c. Ex. 26: T devises a sum in trust for A for life, then to As children for the life of the survivor of them, then upon the death of the last surviving child of A, to As grandchildren. At the time of Ts death, A is an 80-year old woman w/ two living children, B and C. i. Title 1. A: LE 2. B, C: Vested Remainder Subject to Open | LE 3. As grandchildren: Contingent Remainder | FSA a. Or Vested Subject to Open if 1 born 4. Ts Estate: Reversion | FSA

ii. B and Cs interest is valid. At As death, the class (of As children) closes. iii. As Grandchildrens interest is invalid. 1. Contingency: As grandchildren who survive the last surviving child of A. 2. Validating lives: A, B, C 3. A can have another child, X. It is possible for X to have a child (As grandchild) more than 21 years after the end of the validating lives. 4. No vesting (class closing) until death of last child of A here X which may be more than 21 years after the end of the lives of A, B and C. 7. Frozen Sperm a. If considered the possibility, then many more future interests would violate the Rule b. See, Ex. 23: O transfers a sum in trust for A for life, then to As first child to reach 21 i. Valid b/c As first child to reach 21 will do so w/in 21 years of his death ii. But what if a woman is inseminated 5 years after As death that would turn 22 (or fail to do so) 2 years after As life? c. Courts disregard the possibility of posthumous parentage for purpose of Rule Against Perpetuities. 8. Class Gifts (248) a. All or Nothing Rule. Gift to a class must stand or fall as a unity. That is, if any class member fails the Rule, then all fail. b. In other words: i. The rule applies to Vested Rem Subject to Open ii. They are not vested for purposes of the Rule Against Perpetuities c. See Problem 4 below. 9. Problems (248-29) a. Problem 1: O conveys to A for life, then to B if B attains the age of 30. B is now 2 years old. i. Contingency: B attaining the age of 30. ii. Validating lives: A, B iii. Bs interest is valid. Use B for the validating life. At the end of Bs life, well know whether or not he reached 30. 1. If we used A for the validating life and A died tomorrow, it would be 28 years before wed know whether B reached 30. iv. Note: The rule doesnt req the interest to vest in a certain time. It only reqd that we

will know whether it vests or fails to vest w/in a certain time. b. Problem 2: O conveys to A for life, then to As children for their lives, then to B if B is then alive, and if B is not then alive, to Bs heirs. Assume that A has no children at the time of conveyance. i. Title 1. A: LE 2. As potential children: Contingent Rem | LE (b/c theyre unascertainable) 3. B: Contingent Rem | FSA (b/c of the condition) 4. Bs heirs: Contingent Rem | FSA ii. Possible Validating Lives: A, B iii. As childrens interest is valid. As children will be ascertained at the end of As life. iv. Bs interest is valid. Use B as a validating life. We will know at the end of Bs life if he survived As children. v. Bs heirs interest is valid. Use B as a validating life. The class (Bs heirs) will close at the end of Bs life. c. Problem 3: O, a teacher of property law, declares that she holds in trust $1,000 for all members of my present property class who are admitted to the bar. i. Title 1. O: FSSEL 2. Members of the property class who are admitted to the bar: Springing Executory Interest ii. Validating life: all the members of the property class iii. The class members interest is valid. When all the members of the property class have died, we will know whether or not they were admitted to the bar. d. E.g., O holds in trust $1000 for the first child of A who is admitted to the bar. i. The grant is invalid. It is possible for the contingency to remain open 21 years after As death. E.g., A has his only kid right before he dies, and the kid passes the bar when hes 25. ii. Even if A now has a 22 year old child in law school, that child may die, A has another, A dies, and the new child is admitted to the bar > 21 years after the death of A and his current child.

e. Problem 4: O conveys to A for life, then to As children who reach 25. A has a child, B, age 26, living at the time of the conveyance. Is the remainder valid? i. A: LE ii. B: Vested Remainder Subject to Open iii. Bs interest is invalid. A could have another child, C, and A and B die next year. Cs interest would not vest w/in 21 years of A and Bs life. Class gift all or nothing. iv. Vested Remainders Subject to Open must close w/in 21 years of a life in being. f. After Born Widow Issue: when a grant refers to a widow, its possible that she isnt alive at the time of the grant. Therefore, she cant be used as a validating life. i. Problem 5: O conveys to A for life, then to As widow, if any, for life, then to As issue then living. 1. A: LE 2. As Widow: Contingent Remainder | LE 3. As issue then living: Contingent Remainder | FSA 4. O: Reversion | FSA 5. Widows interest is valid. Using As life for a validating life, Widow will be ascertainable at As death. 6. As issues interest is invalid. Using As life for a validating life, Widow may live > 21 years after As death. Thus, we wont know 21 years after As death who As issue will be then living at Widows death. Cant use Widow as validating life b/c she may not be born at time of grant. g. Class Gift Problem Problem 5: T devises property to A for life, and on As death to As children for their lives, and upon the death of A and As children, to [the person or persons indicated in the bracketed examples below]. A and B survive T i. Title 1. A: LE 2. As unascertained kids: CR | LE 3. If A has a kid, Z: VR subject to open | FSA ii. (a) [B if A dies childless] 1. B: CR (condition of A dying childless) 2. We will know whether A dies childless by the end of As life. 3. Valid, using As life.

iii. (b) [B if A has no grandchildren then living] 1. B: CR condition of A having no grandchildren then living a. Then is the end of the lives of As children 2. As life does not validate b/c A could have a child alive more than 21 years after he dies. 3. Bs life does not validate b/c A could have a child alive more than 21 years after B dies. 4. The lives of currently living children of A do not validate b/c A could have an afterborn (new) child who outlives the earlier children by > 21 years. 5. Invalid. iv. (c) [Bs children] 1. Bs kids: CR (unascertainable) or VR subject to open (if has kids at time of grant) 2. We will know who Bs children are at the end of Bs life. Bs life validates. 3. Valid. v. (d) [Bs children then living] 1. Bs kids then living: CR (condition of B having children then living) a. Then is at the death of the lives of As children 2. As life doesnt validate b/c A could have a child alive more than 21 years after he dies. 3. Bs life doesnt validate b/c A could have a child alive more than 21 years after B dies. 4. The lives of As currently living children dont validate b/c A could have an afterborn (new) child who outlives the earlier children by > 21 years. 5. Invalid. Same as (b). vi. (e) [As grandchildren] 1. As grandchildren: CR (unascertained) or VR subject to open 2. We will we know who As grandchildren are at end of As childrens lives. 3. As life doesnt validate b/c he could have a child who is still alive > 21 years after A dies. 4. The lives of any currently living children of A dont validate b/c A could have an afterborn (new) child who

outlives the earlier children by > 21 years. 5. Invalid vii. (f) [Ts grandchildren] 1. Ts grandkids: CR (unascertainable) or VR subject to open 2. We will we know who Ts grandchildren are at end of Ts childrens lives 3. Ts children are validating lives 4. If T never had any children, then no grandchildren were added ever (fails to vest immediately) 5. If T has at least one child alive, they are lives in being. At the death of the last of them, we will know who Ts grandkids are. 6. If T had all predeceased children, but grandchildren had been born, the grandchildrens interests are immediately vested (class closed). 7. Valid 10.Savings Clause (note 7, 249) a. To avoid a Perpetuities problem, sophisticated Trust instruments include a savings clause b. It provides for termination of Trust (if not already terminated) upon the end of 21 years after a specified life in being c. E.g., Testator: Income to A for life, then the income to As children to their lives, then the principal to As grandchildren i. RAP problem: A has an afterborn child. The afterborn child lives more than 21 years after the deaths of A and his other children and any previously born grandchildren ii. Solution: Terminate 21 years after the death of the survivor of A and As issue living at Ts death. d. Can use an extraneous life in a savings clause. E.g., terminates at the last person to die who is alive in China at the time of my death. This is rarely done b/c of administrative burden of keeping track i. The Restatement says that a savings clause is ineffective if the group of persons is too large to be feasible 11.RAP and Future Interests in Transferors (250) a. Future interests held by transferors are regarded as vested and therefore not subject to RAP i. Possibility of reverter, right of entry, reversion b. Ex. 27: O conveys Blackacre to the School Board so long as it is used for a school.

i. School Board: FSD ii. O: Possibility of Reverter | FSA iii. VALID under RAP c. Ex. 28: O conveys Blackacre to the School Board, but if it ceases to use Blackacre for school purposes, O has a right to re-enter. i. School Board: FSSCS ii. O: Right of Entry | FSA iii. VALID under RAP 12.Executory Interests Following Defeasible Fees a. Ex. 29: O conveys Blackacre to the School Board so long as it is used for a school, then to A and her heirs. i. A: Executory Interest | FSA ii. Invalid under RAP iii. Effect: Strike the clause; O gets Possibility of Reverter b. Ex. 30: O conveys Blackacre to the School Board, but if it ceases to use Blackacre for school purposes to A and her heirs. i. A: Executory Interest | FSA ii. Invalid under RAP iii. Effect: Strike the clause; Board gets FSA!!! c. How to draft around this? i. Draft as in Ex 27 or 28 (FSD or FSSCS) 1. Then O conveys the Possibility of Reverter or the Right of Entry to A 2. But remember, in some states these interests are not transferable inter vivos ii. Draft as in Ex 27 or 28 (FSD or FSSCS) 1. Then O devises the Possibility of Reverter or the Right of Entry to A 2. If FSD/FSSCS terminates in Os lifetime, then he conveys (or devises) FSA to A iii. First convey FSA to A 1. Then A conveys FSD or FSSCS to the School Board 13.Options (The Symphony Space, Inc. v. Pergola Properties, Inc.) a. Options are subject to RAP and are void if exercisable beyond lives in being plus 21 years. b. In many states, rights of first refusal (a.k.a. preemptive rights) are subject to RAP and are void if they are exercisable beyond the perpetuities period. i. In NY, market-price rights of first refusal created in commercial or govt (but not family) transactions, are not subject to RAP, but are subject to the CL rule against unreasonable restraints on alienation

c. Uniform Statutory Rule Against Perpetuities (USRAP) and Rest. (3d) Property (minority view): RAP doesnt apply to options 14.Perpetuity Reform Movement a. Early Reforms i. First Stage: focus on the actual rather than possible facts existing at the end of the estate preceding the FI ii. Second Stage: specific statutory repairs designed to avoid purely technical violations by altering the CL conventions in certain specific circumstances 1. Avoid fertile octogenarian and precocious toddler problems by providing that anyone 65+ or < 13 is deemed incapable of having a child 2. Avoid unborn widow by presuming that a gift to the surviving spouse of a living person is a gift to a person in being 3. Reform of age contingencies. E.g., if O grants to A, then to As first child to reach 25, the statute changes 25 to 21. iii. Third Stage: immediate reformation 1. Like age contingencies, but more general 2. Cy pres: reform a disposition so that it avoids any perpetuity violation while effectuating the transferors intent as nearly as possible 3. Reformation may be made at any time iv. Wait-and-see approach 1. Rather than invalidating an interest at the time of its creation on the basis of the what-might-happen test, we wait and see whether a contingent interest actually vests w/in some permissible vesting period. 2. Two step process: a. Valid under CL RAP? i. If yes, there is no waiting ii. If no: b. The interest is valid if in fact it vests or terminates w/in the permissible vesting period. If it is still in existence and not vested at the end of that period, then it is invalid.

i. Not clear what the permissible vesting period is. b. Uniform Statutory Rule Against Perpetuities (USRAP) i. CL RAP: At time of grant, determine if its possible for the contingent interest to remain contingent 21 years after a life in being. ii. USRAP: Wait-and-see if the contingent interest remains contingent 90 years after the grant. If it remains contingent after the 90 years, the interest is invalid. iii. E.g., to A for life, then to As first child to reach age 25 1. Violates CL RAP 2. Under USRAP: dont immediately invalidate, wait to see if it vests 3. If A dies w/ 2 yr old, wait 23 yrs iv. The USRAP tried to create incentives to not to create RAP problems, but w/ the 90 day waitand-see approach, the lawyer who drafted the grant is prob. dead when the interest is deemed invalid. c. Perpetual Trusts i. 20 states have abolished RAP in the case of trusts and replaced them w/ a rule against suspension of the power of alienation, as long as the trustee has the power to sell the property ii. These trusts potentially last forever, as long as the trustee has the power to sell (e.g., to X in trust, the income to go to my Descendants; Trustee has power to sell) iii. Federal Estate Tax 1. Federal estate tax levies a tax on any property interest transferred by will, intestacy or survivorship to another person, except for transfers to spouses and charities. 2. The tax was avoided creating trusts w/ successive LEs. At the death of the life tenant, the tenancy ends, leaving no transfer to be taxed. The trust could continue until RAP called for the assets to be distributed. a. E.g., T devises property in trust to pay income to daughter A for life, then to pay income to As kids for their lives, then to distribute the principal to As grandchildren.

b. At Ts death, estate tax is levied on the property, but no estate tax is levied at the death of A or at the death of As kids b/c they dont have interests transferrable on death. An estate tax will be levied at the death of As grandchildren. 3. Generation-Skipping Transfer (GST) Tax (1986): if transferor creates a LE in a child that avoids (skips) the federal estate tax at the childs death, a GST tax is due at the childs death if the property passes to the next generation. a. E.g., in the above example, no federal estate tax is payable at As death b/c A doesnt have a transmissible interest. At As death, a generation-skipping transfer occurs, from T to his grandchildren, so at As death the GST tax is levied on the value of the nonexempt corpus of the trust. Upon the death of As children, another GST tax is levied. 4. In 1986, provided a $1M exemption from the GST tax for each transferor (doubled for married couples). Inflation adjustments: $1.1M in 2002, $1.5M in 2004, . . . $3.5M in 2009. iv. Problems Arising from a Persistent Dead Hand 1. The Problem of Inalienability a. Property should remain alienable so it can go to the highest/best use b. If property is tied up in trust, doesnt allow others to buy it and put it to better use c. Perpetual trusts dont give rise to a problem of inalienability b/c the trustee almost always has the power to sell 2. The Problem of First-Generation Monopoly a. Equality btwn ancestors and descendants vs. donative freedom b. But, descendants may prefer the property be in trust

VIII.

(spendthrifts, incompetants, divorces) 3. Founding fathers didnt want us to have a leisure class a. Certainty of receiving trust income makes beneficiaries lazy and unproductive b. Ppl shouldnt be protected from falling c. Effect on indiv: ppl are better off if theyre able to fall Co-ownership and Marital Interests a. Common Law Concurrent Interests INTEREST TRANSFERRAB DEVISABLE INHERITABLE LE T in C Yes Yes Yes JT No; destroys No; rt of No; rt of unities survivorship survivorship T by E Not unilaterally No; only btwn H No; only btwn H and W and W i. Types, Characteristics, Creation 1. Tenancy in Common (T in C) a. Each tenant has a separate, undivided interest in the land b. Transferrable inter vivos, devisable, inheritable 2. Joint Tenancy (JT) a. Like T in C, each tenant has a separate undivided interest b. JTs have a Right of Survivorship c. Four Unities must be met: i. Time. JTs must acquire title at the same time ii. Title. JTs must acquire title by the same instrument iii. Interest. JTs must have equal interests. 1. C.f., T in C, where tenants can have unequal interests (e.g., A has 60% and B has 40%) iv. Possession. JTs must have equal right to possession of the whole (at the time of creation) d. Severing a Joint Tenancy i. By Conveyance 1. Conveying an interest in JT destroys the unity of time and title. 2. E.g., A and B are JTs. A sells his interest to X. B and X are tenants in common. ii. Action for partition 1. E.g., A and B are JTs. A can bring action against B to partition property.

2. Can do physical partition, or divide proceeds from sale btwn JTs. 3. Tenancy by the Entirety (more on this later) a. Four unities of joint tenancy + marriage b. Each tenant is seized as to the whole c. Neither H nor W can convey their interest on their own w/o the others consent 4. Presumptions a. At CL, in the case of ambiguity, joint tenancies are favored. Today, tenancies in common are favored. i. Policy: cts want property to be in fewer hands ii. E.g., to A and B 1. CL: joint tenancy 2. Today: tenancy in common iii. To A and B jointly might not be a JT at CL. To A and B as JTs and not as T in C, or To A and B as JTs w/ no right of survivorship would be better. iv. to H and W 1. CL presumed an intention to create a T by E 5. Problems and Note (p. 278) a. Problem 1. O conveys Blackacre to A, B, and C as joint tenants. Subsequently A conveys his interest to D. i. Title: 1. D (T in C) w/ [B & C] (JT) ii. B dies intestate, leaving H as his heir. 1. H gets nothing b/c an interest in JT is not inheritable (right of survivorship) 2. D has 1/3 interest in (T in C); C has 2/3 interest in (T in C) iii. What if B had died leaving a will devising his interest to H? 1. Theres no difference b/c interests in JTs are not devisable either. b. Problem 2. T devises Blackacre to A and B as joint tenants for their joint lives, remainder to the survivor. i. Title: 1. A & B: LE 2. A & B: Contingent remainder | FSA 3. T: Rev | FSA ii. Note: this has virtually the same effect as JT. But, in JT, if A conveyed to X, X would be a (T in C) w/ B, destroying the right of survivorship c. Problem 3. A and B are planning to be married. Two weeks before the ceremony, they buy a house

and take title in A and B as tenants by the entirety. i. Title: 1. No tenancy by the entirety b/c not married yet 2. Joint tenancy was created b/c it better approximated their intent (right of survivorship) 3. Tenancy in common (default) is also reasonable ii. Several years after the marriage, A moves out of the house and conveys his interest in the house to his brother C. 1. The conveyance converts the JT into a (T in C). C and A are (T in C). d. Note 4. Deed to grantees jointly, as (T in C), w/ equal rights and interest in said land, and to the survivor thereof, in fee simple. . . . To Have and to Hold the same unto the said parties hereto, equally, jointly, as tenants in common, w/ equal rights and interest for the period or term of their lives, and to the survivor thereof at the death of the other. i. Ct: deed created JT b/c it provided for survivorship 6. Avoidance of Probate a. JTs are the practical equivalent of a will but at the joint tenants death probate of the property is avoided. A JT avoids probate b/c no interest passes on the joint tenants death. b. Probate is the judicical supervision of the administration of the decedents property that passes to others at the decedents death. Probate is costly; administrators, lawyers and ct costs must be paid. c. If a creditor acts during a joint tenants life, the creditor can seize and sell the joint tenants interest in property, severing the JT. At the joint tenants death, his interest disappears, and there is nothing to seize. d. When a joint tenant dies, his share of the jointly held property is subject to federal estate taxation, even though nothing passes at the tenants death. 7. Unequal Shares a. The unity of interest reqs joint tenants to have equal shares. It is increasingly ignored by courts in situations where it counts. b. E.g., If A and B take title as joint tenants and A furnishes $5k and B $10k, and the parties intend the proceeds from sale of the joint tenancy property to be divided 1/3 and 2/3 if sold during their joint lives,

a JT is created, and if the property is sold, the ct will divide the proceeds according to their intent ii. Severance of Joint Tenancies 1. A joint tenant can destroy the JT and convert it into a (T in C) by transferring the interest from herself to herself as tenancy in common. Riddle v. Harmon. a. MN allows a joint tenant to create a (J in C) by signing a Declaration of Election to Sever Survivorship of Joint Tenancy (a deed is usu. the norm). Hendrickson v. Minneapolis Federal Sav. & L. Assn. b. Straw Man Transactions (SMT) i. Before this rule, joint tenants needed a SMT to destroy the JT. E.g., H and W are joint tenants; W conveys to Atty, destroying the JT; Atty conveys back to W. ii. SMTs can also create a JT. E.g., A owns FSA; conveys to Atty; Atty conveys back to A and B as joint tenants. (Must meet the four unities) 2. Creating an Indestructible Right of Survivorship a. Create a joint LE w/ Contingent Rem | FSA to the survivor b. Create a (T in C) in FSSEL w/ an executory interest in the survivor c. Create a fee simple to take effect in possession in the future 3. Invitation for Fraud. Suppose W writes a deed in her own handwriting: I convey my interest in Blackacre to myself, to terminate the JT w/ H. She shows her daughter and puts it in her desk. Then, H dies and W destroys the deed. 4. Death of Joint Tenants. a. Uniform Simultaneous Death Act 3: if joint tenants die in a common disaster and there is no sufficient evidence of the order of death, one-half of the property is distributed as if A survived and one-half as if B survived. b. Uniform Probate Code 2-803(c)(2): If one joint tenant murders the other, the murder severs the JT and converts it into a (T in C) 5. Genlly mortgages do not sever JTs (theyre considered liens on the property, not conveyances). Harms v. Sprague. a. This gives lendees/mortgagees incentive to join all joint tenants in the loan b. The mortgagee could tell the joint tenant to sever the JT (by partition action or straw man transaction), but this might not work b/c the severance may lower the property value

c. Under the title theory, the mortgage is considered a conveyance, severing a JT 6. Questions and Problems (pp. 288-89) a. Problem 1. Suppose Wm and J are JTs of Blackacre. J takes out a mortgage of $5k. Wm dies. The property is worth $5k. i. J succeeds Wm in ownership. The mortgage expands to the whole property. b. Question 2a. A and B own Blackacre in JT. A conveys a 10 yr term of years in Blackacre to C. After five years, A dies, devising all of his property to D. What are Bs rights? i. Some JRDs: D takes from A b/c A had (T in C) (lease affected severance); D gets ; B gets ii. Some JRDs: No severance; need clearer intent to destroy right of survivorship. The lease expires when landlord dies; lessee is left w/ nothing. Tenhet v. Boswell iii. If A dies after the lease expires, some JRDs hold that the lease affects a temporary severance during the lease; after the lease, the JT re-emerges c. Problem 2b. Suppose that A and B sign a written agreement giving B the rentals from and possession of the land for her life. Does the agreement destroy the unity of possession? Upon As subsequent death, who owns the land? i. 4 unities must be present at the creation of the JT. After the JTs created, the parties can make agreements like this. ii. Since the JT isnt severed, B would have right of survivorship upon As death. d. Problem 3. H and W, owners of Blackacre in JT, are getting a divorce. They sign a divorce agreement providing that Blackacre will be sold and the proceeds divided equally btwn H and W. Before Blackacre is sold, W dies. Does H have survivorship rights in Blackacre? i. Some JRDs: divorce automatically converts a JT btwn the former H and W into a tenancy in common ii. Some JRDs: May partition the property in divorce decree. The intention to sell does not sever the JT. Ws estate can sue for specific performance of the K to sell the land and have the proceeds divided. iii. Joint Tenancy Bank Accounts 1. Types of JT Bank Accounts

a. Example. O deposits $5k in a joint and survivor bank account w/ A as JTs. Determine what kind of acct it is from Os intent. b. True Joint Tenancy. O intends to make a present gift to A of one-half the sum deposited in addition to survivorship rights to the whole sum on deposit. c. Payable-on-Death Account. O intends to give only survivorship rights. d. Convenience Account. O intends that A only have power to draw on the account to pay Os bills; no survivorship rights. 2. Assume survivorship rights were intended unless theres evidence to the contrary. 3. During the lifetime of the parties, cts assume the joint account belongs to the parties in proportion to the net contribution of each party. 4. Problems (pp. 290-91) a. Problem 1a. O, a widower, opens a joint bank account with his niece, A. O tells A, Ill want your name on this account so that in case I am sick you can go and get the money for me. O dies. Is A entitled to the money in the bank account? i. No. O intended to create a convenience account (no survivorship rights). A is not entitled to the money. b. Problem 1b. Suppose that O also gives A a right of access to Os safe deposit box by adding As name to the signature card giving access; the lease agreement signed w/ the bank provides that the contents of the box are owned in JT w/ right of survivorship. The box contains $328k in bonds and cash. Is A entitled to the bonds and cash? i. Dont pay attention to the bank K; it doesnt reflect Os intent. Since there is no expression of intent, presume right of survivorship. ii. But, the fact that its a large sum of money is evidence that he didnt want to bestow a right of survivorship. iii. Need more info. What other family members did he have? How rich was he? What did she do for him? c. Problem 2. H and W and their son, S, open a joint savings account. H and W are in their sixties. The money deposited in the savings account comes from savings from Hs salary that H formerly had in a separate savings account. H dies. W, claiming that the entire amount in the savings account is hers,

withdraws the balance. Does S have any rights to the money? i. Possible to have different types of account for the same account ii. Maybe supposed to be True Joint Tenancy btwn H and W, and a convenience account for S d. Problem 3. A and B have a joint savings account of $40k. How much of the account can As creditor reach? i. Creditors can reach the proportion in net contribution of each party ii. If B contributed all $40k, As creditor would be able to reach what B contributed, intending to be given to A (if true joint tenancy) iv. Relations among Concurrent Owners 1. Partition a. Generally i. Applies to JT and T in C (not T by E) ii. Can agree on partition or bring an action to partition b. Partition by Sale: sell the property; divide proceeds (more common) c. Partition in Kind: physically split up property (preferred) d. Factors i. Impractible/inequitable 1. Difficult to make physical partition a. E.g., In re McDowell. A and B are heirs to an old rocking chair. b. HELD: A gets possession for 6 mo., then B gets possession for 6 mo., then A, etc. 2. Numerous fractional small interests ii. Best interests of the parties 1. Economic Efficiency a. E.g., Johnson v. Hendrickson. Widow: wants partition in kind; Cotenants: want partition by sale b. HELD: partition sale if physical partition cannot be made w/o great prejudice to the owners (sale may be ordered if the value of the share of each cotenant is less than his share of money equivalent that could be obtained for the whole c. E.g., Gray v. Crotts. One cotenant arg: upon physical

partiion, he should be awarded the part of property adjacent to his home. d. HELD: divide prop by 4, draw lots 2. Fairness a. E.g., Delfino v. Vealencis. Ct ordered partition in kind where D resided and ran family bus. on prop, even though it was more efficient to partition by sale. b. E.g., Ark Land Co. v. Harper. A bought 2/3 of family farm, but other heirs refused to sell. Ct ordered partition in kind b/c heirs emotional attachment to the land. The fact that the econ value of the prop as a whole would be less if it were partitioned is not dispositive. c. Owelty: compensation for adverse impact on ex-cotenants land e. An agreement never to bring an action to partition the land is unenforceable as a restraint on alienation. 2. Sharing the Benefits and Burdens of Co-ownership a. Liability of Cotenant for Rent/Occupancy (Spiller v. Mackereth) i. A tenant in possession has no liability to a cotenant not in possession for rental value, UNLESS the tenant has ousted the cotenant. ii. Ouster. Occupying cotenant refuses a demand of the other cotenants to be allowed into use and enjoyment of the land iii. Methods of Ouster 1. Ask cotenant for access and be denied 2. Set up a competing use and cotenant objects iv. If cant agree on use of property, partition b. Leasing an Interest in Tenancy (Swartzbaugh v. Sampson) i. In JT, a cotenants lease of his interest in tenancy does not affect a severance. ii. Whether in (T in C) or JT, a tenant does not have the power to do anything to prejudice the joint tenants interest. c. Accounting for Benefits, Recovering Costs i. Rents and Profits

1. Each cotenant is entitled to a pro-rata share of rents received from 3d parties. If tenant refuses to pay, cotenants can bring an accounting action against him to force pmt. 2. Also, each cotenant entitled to pro rata share of profits if tenant exploits natural resources on the property (e.g., minerals, timber). 3. Accounting is based on actual receipts, not FMV ii. Taxes, Mortgage Pmts, and Other Carrying Charges 1. All cotenants are obligated to pay proportionate share of mortgage, tax, and other carrying charges. 2. If one cotenant pays more than his share, may recover excess in a contribution action, or may use excess pmt as a credit in an accounting or partition action. 3. But, where cotenant is in sole possession of the property, cannot recover these pmts unless they exceed the reasonable rental value of the property. iii. Repairs 1. Absent agreement, no rt to contribution from cotenants as to pmt for necessary repairs. 2. But, paying cotenant receives a credit for reasonable cost of repairs in a partition or accounting action. iv. Improvements 1. No right to contribution from other cotenants for expenditures for improvements 2. In a partition in kind action, improved portion is awarded to improving cotenant a. Or divide the property but order pmt (owelty) from noncontributing tenants to the improver 3. In a partition by sale action, proceeds distributed to award the improver the added value 4. In an accounting, the improver is allowed all increments in value attributable to the improvements

b. Marital Interests During marriage what can creditors reach? COMMON LAW SYSTEM Before MWPA Hs creditors could reach Hs prop (W had none) After MWPA Group 1: creditor stands in Hs shoes, but not Ws Group 2: creditor stands in debtor spouses shoes Group 3: creditor cant reach T by E property Group 4: creditor can reach either spouses ROS Before No-Fault Divorces Each took separate property; W got alimony After No-Fault Divorces H and W take their own separate property Marital property subject to equitable distribution Traditional CL System PERS prop: - W took Hs prop if no issue; 1/3 if had issue - H took all Ws PERS prop REAL prop: - Dower W took LE in 1/3 Hs FSAs and FTs* - Curtesy H took LE in all Ws FSAs and FTs if they had kids Modern CL System Forced elective share: spouse can elect to take of ALL spouses prop COMMUNITY PROPERTY SYSTEM Creditors can reach debtor spouses share of CP

Rights upon divorce

H and W take their own separate property Community property split in half

Rights upon death

Surviving spouse takes of community property Deceased spouse can do what he wants w/ separate property and of community property

*exception for FT special held w/ other W

i. Common Law Marital Property System 1. During Marriage a. At marriage, a woman ceased to be a legal person b. Except for the Ws paraphernalia (clothes, ornaments), all personal property owned by the wife at the time of the marriage or acquired thereafter became the property of H. c. H had jure uxoris: right of possession to all Ws lands; this right was alienable by H and reachable by Hs creditors d. Married Womens Property Acts (MWPA) gave women legal control over her property (H couldnt sell; not subject to Hs debts) e. Effect of MWPA i. Group 1 (empty group) 1. Hs creditors can reach Hs share of the T by E, subject to the Ws right of survivorship. 2. Ws creditors cannot reach Ws share of T by E w/out Hs consent. ii. Group 2: Creditor steps in the shoes of the debtor (gets present possession + right of survivorship) iii. Group 3: creditor cant reach any of the T by E property iv. Group 4: creditor can get either spouses right of survivorship only f. Policy for Group 3 i. T by E tenant doesnt have a separate interest for creditor to reach ii. Family wealth protection: T by E prop is a financial nest egg thats immune to creditors iii. For T in C and JT, a homestead exemption precludes creditors from reaching tools of the trade and a tenants homestead (capped at a certain amount) iv. No cap for T by E v. Exception: T by E is not exempt from execution if the creditor is the IRS g. Federal Forfeiture Law i. In United States v. 1500 Lincoln Avenue, govt brought civil forfeiture proceeding against H b/c illegally sold drugs out of his pharmacy (held in T by E). HELD: Hs right of survivorship is forfeited. ii. In United States v. Lee, govt sought to execute forfeiture judgment against Hs home (held in T by E), that wasnt used for crim activity. HELD: house unavailable for forfeiture.

h. Group 2 Example (p. 320, n. 3) i. H and W owned home in NY as T by E. H abandoned W. X, a creditor of H, levied on Hs interest in the dwelling and purchased it at execution sale. X demanded from W onehalf the reasonable rental value. W refused. ii. Group 2: X steps into Hs shoes (gets present possession + right of survivorship) iii. Spiller v. Machareth rule: W doesnt owe X rent, unless ouster i. Personal Property in T by E (p. 320, n. 4) i. Some states allow T by E in personal property ii. Example: Suppose that a JRD recognizes T by E only in real property. H and W own their home as T by E. House burns down, and H dies five days later. Who does ins. co. pay? iii. When house burned, ins. money becomes T in C; W loses right of survivorship 2. Termination of Marriage by Divorce a. Generally i. At common law, each owned separate property; upon divorce, split up property. W would get alimony; lifetime obligation by support. Reduced if Ws at fault. ii. No fault divorce was introduced iii. Equitable distribution of marital property (more like community property) b. Property subject to division i. Some states: all property of both spouses ii. Others: Marital Property 1. Some states: all prop acquired during marriage by whatever means (incl. earnings, gift, inheritance) 2. Some states: only earnings during marriage iii. W generally doesnt get alimony iv. Rehabilitative alimony: if W needs support for limited time to enter the job market and become self-sufficient c. Professional Degrees i. MAJ: professional degrees (e.g., MBA, JD) are not marital property ii. MIN: reimbursement alimony: get pmts from educated spouse for cost of contribution to education (not value) iii. NY: medical license is marital property; different from reimbursement alimony b/c gets share of value of the license d. Career and Celebrity Status i. NY: career/celebrity status is marital property

ii. NY Domestic Relations Law: contribution to career/potential career is considered iii. Counterarg: this double counts earnings if the ee remarries e. Goodwill i. Professional goodwill: reputation that will probably generate future business ii. Professional goodwill is marital property (even w/o contribution by other spouse) 3. Termination of Marriage by Death of One Spouse a. Common Law i. Personal Property (traditional view): 1. W takes 1/3 if theres surviving issue; if none 2. H takes all Ws personal property ii. Real property 1. Dower W gets LE in 1/3 of each parcel in which H was seised during marriage and which could be inheritable by Ws issue a. Translation: W gets LE in 1/3 of Hs FSAs and FTs (except FT special held w/ another W) b. Attached at moment of marriage. Purchasers/creditors take subject to Ws rights. c. Note: H can escape giving W land by holding it in JT w/ another (not inheritable) 2. Curtesy H gets LE in all of Ws land seized during marriage and inheritable by issue, but only if H & W had issue born alive and capable of inheriting. a. Translation: H gets LE in all Ws FSAs and FTs as long as H and W have kids. b. H is not protected from purchasers & creditors like W c. W wasnt allowed to do anything w/her land, husband had control so its his fault if he did anything bad to property. iii. Problems (p. 336) 1. O conveys to A & B as JT w/ rt. of survivorship. O dies, survived by wife W. Is W entitled to dower? a. Yes. W is entitled to LE in 1/3 prop. 2. O conveys: to A & B as JT w/ rt. of survivorship. A is married to W. A

conveys to C. C is married to X. A dies, then C dies. a. Is land subject to Ws dower rts? No. JT that A & B held was converted to T in C btwn C & B. b. Is land subject to Xs dower rts? Yes, b/c T in C has no rt. of survivorship. X has LE 1/3 prop (dower). c. If B is married to H (husband) then B dies, H gets LE in all prop (curtesy). 3. H desires to purchase Brownacre. He wants to be able to deal w/ the property after the purchase w/o any interference from W. a. Take the prop as LE w/ remainder to someone else. Not inheritable, so no dower. b. H could set up a corp. to own Brownacre. H owns stock in a corp. (shares = personal property); W doesnt get dower. b. The Modern Elective Share i. Spouses can take a share (usually or 1/3) of all real & PERS property that decedent spouse owned at death. ii. Spouse does not have to take forced share, but can elect to take through the will, if available. iii. Problem (p. 337) 1. Jurisdiction = elective forced share of prop passing by will or intestacy. H takes out $60K life ins. policy, payable to W. H & W buy house worth $60k as JT. H dies owning $120K in personalty. Devises everything to D. How is Hs estate distributed? 2. W gets: $60k life ins.; $60k JT in house; $60k personal prop 3. D gets $60k personal property ii. The Community Property System 1. Introduction a. Community Property earnings during marriage and the rents, profits, & fruits of earnings. (d/n exist in marital property states) b. Separate Property property that is not CP (prop acquired before marriage or during marriage by gift, devise, descent)

c. Tracing principle community property exchange for something else; that something else = community property i. In TX, income earned from separate prop during marriage is CP (differs by JRD) d. Transmutation (MAJ) can change community prop to separate prop by mutual agreement 2. Community Property Compared with Common Law Concurrent Interests a. Can agree to hold property as JT or T in C (CP JRDs dont recognize T by E) i. Must hold T in C or JT as separate property b. Distinguish JTs and CP i. CP: for H and W only; JTs: any 2 ppl ii. JT can be unilaterally severed into T in C iii. JT has right of survivorship c. Problem (p. 340) i. H, married to W saves $5k of his earnings and deposits in a savings acct in his name. H withdraws the $5k and buys a lot, taking title in H and W as JT. H dies, devising all his separate and CP to S. Who owns the lot? 1. When H puts $5k in savings acct, its still CP 2. When buys the lot, JT is invalid b/c cant convey CP unilaterally. The lot is CP. 3. When H dies, W gets and S gets 3. Management of Community Property a. H & W have equal managing powers. In CP you are joint managers & each spouse can handle the disposition. Managers duty is that you are fiduciary for spouse. Duty of good faith. Creditors can reach whoever is manager. Spouses in CP state can sue each other. b. Some states say you can make valid gift during lifetime of spouse but she can set them aside. After death, you have to sue trustee of estate. E.g., H makes a lot of gift to all these women so W sues his estate for her share that he gave that was hers. She got it. 4. Mixing Community Property with Separate Property a. Three Approaches i. Inception of Right: The character of property is determined at the time of acquisition. Spouse is entitled to reimbursements of pmts made by CP. ii. Time of Vesting: The character of property is determined when title vests. E.g., if you paid off installment K after marriage, CP.

iii. Pro Rata Sharing: Community payments buy in a pro rata share of title. b. Problems (p. 342-43) i. During marriage H takes out $50k life ins. policy on his life, paying premiums out of his earnings. Named beneficiary is Hs son, S. At Hs death, who is entitled to the $50k? 1. Ins. policy is CP; W gets ; S gets ii. Suppose H took out the policy before marriage and $3k in premiums were paid before marriage and $7k in premiums were paid after marriage from community funds. At Hs death who is entitled to the $50k? 1. Inception of Right: Acquired policy when unmarried, so its separate property. W entitled to reimbursement for of $7k. W gets $3.5k. S gets the rest ($46.5k). 2. Time of Vesting: Ins. policy vested when H died, and he was paying out of CP, so its CP. W gets $25k; S gets $25k. 3. Pro Rata Sharing: 30% of policy was paid w/ separate property; 70% paid w/ CP. Therefore, $15k is separate property; $35k is CP. W gets of CP ($17.5k); S gets the rest ($32.5k). iii. During marriage, H purchases land for $20k, using $5k of his separate funds as a down pmt and CP for the rest. H sells the land for $40k. Who is entitled to the proceeds? 1. Approach #1: whole thing is CP b/c $5k is considered a gift to the community. Title was taken in the name of H and W. 2. Approach #2: pro rata based on pmts: of it is separate property; is CP iv. Suppose W owns and operates a jewelry store before marriage. At marriage to H it is worth $100k. Five years after marriage the jewelry store is sold for $250k. Who is entitled to the proceeds? 1. Approach 1: Look to it as a real prop asset; how much of 250k is due to appreciation in value? (e.g., what are other similar lands selling for?) The amount after appreciation is CP. 2. Appraoch 2: reimbursement model; get reimbursed to extent person was compensated by taking out a paycheck

5. Migrating Couples a. Propertys character is determined by spouses domicile when acquired b. Once characterized, the character of property does not change character unless both parties consent. i. I.e., subsequent moves btwn CL and CP states are disregarded c. Personal property: at death, law of decedents domicile governs disposition. d. Real property: at death, law where land is located governs disposition. e. Example: H and W live in OH (CL). H accumulates personal property worth $500k. Under OH law, W has, at Hs death, an elective share of one-half of Hs property. After retirement, H and W move to TX, a CP state. H dies leaving a will devising all his property to D. TX doesnt have an elective share statute. What are Ws rights? i. B/c prop acquired in OH, its separate property. Stays separate when move to TX. Since theres no elective share statute, W doesnt get anything. ii. If the states were switched, the prop is CP. At death, W gets of CP + of Hs share b/c of the forced elective share. iii. Solution: promise to devise to W in will iii. Rights of Domestic Partners 1. CL marriage reqs: (1) intent to be H and W; and (2) hold yourselves out to be H and W 2. Marvin v. Marvin (CA): imply K from conduct 3. Most states that recognize CL marriage req express K 4. American Law Institute proposal: rights arise from conduct, not from express promises per se IX. Leaseholds: The Law of Landlord and Tenant a. The Leasehold Estates i. Term of Years 1. Any fixed, calculable amount of time 2. Can be terminable earlier (e.g., terminates if credit score drops) 3. No notice req to end lease 4. Note: Term of Years Determinable: term of years, w/ event that terminates the tenancy ii. Periodic Tenancy 1. Fixed period of time, to continue for successive periods (e.g., month-to-month; year-to-year) 2. Continues until notice to terminate a. CL notice required for termination: i. Year-to-year or longer six months notice. ii. Period of less than a year notice equal to the period of the lease, not to exceed six months

iii. Lease terminates on the last day of a period. b. Statutory notice thirty days notice. iii. Problems (p. 364) 1. LL leases Whiteacre to T for one year, beginning October 1. The following September 30, T moves out w/o giving L any notice. What are LLs rights? a. Tenancy is a term of years; no notice reqd. b. If the lease had been to T from year to year, beginning October 1, the tenancy is a periodic tenancy. Reqs 6 mo. notice; if no notice, liable for rent. c. If lease was made w/ no fixed term at annual rent of $24k payable $2k/mo. on the 1st of each mo, the tenancy is a periodic tenancy. Period = month tomonth or year to year. 2. T, a month-to-month tenant, notified L on 11/16/01 that she would vacate as of 11/30/01. T subsequently vacated on that date and paid no further rent to L. L relet the premises beginning 4/1/02. What result? a. Not months notice; cant terminate in mid-period; on hook for December iv. Tenancy at Will 1. Exists for an unspecified duration, but can be terminated at any time by either the landlord or tenant. 2. Terminates at the death of either of the parties. 3. Most states req 30 days notice 4. CL rule: If its terminable by only one, imply that it is also terminable by the other. a. Rule is no longer valid b/c its based on livery of seisin and it goes against the weight of the parties. 5. Numerous Clauses Principle a. Where a lease is for unspecified duration, but tenant alone has the right to terminate, its a life tenancy terminable. This resembles a Life Estate Determinable. b. Where the landlord alone has the right to terminate, cts bring back the CL rule and imply a right to terminate in the tenant (making it a Tenancy at Will). i. Note: if we rejected the CL rule, the tenant would have a lease resembling a LE pur autrie vie c. Sometimes where a tenancy isnt a Term of Years or a Periodic Tenancy, it arbitrarily defaults to a Tenancy at Will. (e.g., L leases to T for the duration of the war.) v. Tenancy at Sufferance 1. Generally

a. Tenancy at sufferance arises when a tenant remains in possession (holds over) after termination of the tenancy. b. When tenant holds over, LL can: i. Seek eviction; or ii. Consent to the creation of a new tenancy. c. Once you make an election, you cant change your mind. Crechale & Polles, Inc. v. Smith d. Absent evidence to the contrary, a LL who accepts rent from his holdover tenant will be held to have consented to a renewal or extension of the leasing. i. E.g., in Crechale & Polles, Inc., LL first sought eviction, then accepted rent pmt. HELD: once LL elects eviction, but fails to pursue his remedy of ejecting the tenant, and accepts monthly checks for rent due, he in effect agrees to an extension of the lease on a month-to-month basis. e. Leaving equipment. In Caserta v. Action for Bridgeport Community, where tenant vacated in timely fashion but left office equip, ct held no holdover b/c didnt interfere w/ LLs use of the premises. 2. Holdover Terms a. Most JRDs, holding over gives rise to a periodic tenancy i. Length of the period based on (1) how rent is computed in the original lease, or (2) length of the original term or period. MAX length is 1 yr. ii. Other than length of period, same terms from original lease apply b. Some JRDs convert holdover tenancy into a tenancy at will; tenant liable for the reasonable value of use and occupation. c. Some statutes provide that LLs may demand double rent from holdover tenants. Policy: compensate LL, protect the prospective new tenant, deter holdover tenants. b. The Lease i. Generally. Factors to determine if a lease exists: parties intention, # of restrictions on use, exclusivity of possession, the degree of control retained by granting party, presence/absence of incidental services. ii. Conveyance vs. Contract 1. Historically, granting lease was conveyance of term of years 2. K law agreement to provide space for rent a. If one side breaches, might excuse performance b. Modern trend to treat as K

iii. Statute of Frauds. Agreements to transfer interests in land subject to SOF (applies to leases for more than 1 yr) c. Leases and Discrimination i. Fair Housing Act of 1968, 42 USC 3601-19, 3631 1. Protected Classes (3604). Race, color, religion, sex, familial status, natl origin, handicap 2. Applicability. FHA applies to private individuals who are selling/leasing property. Note: 3604(c) applies to sellers/owners and newspapers. 3. Nondiscrimination ( 3604). (a) Unlawful to refuse to sell/rent on account of protected class; (c) Unlawful to publish ads that indicate preference/limitation/discrim based on protected class. 4. Exemptions (3603(b)) a. Exemptions dont apply to 3604(c) discrim in advertising b. (b)(1) FHA doesnt apply to a seller/owner of single family house IF: i. Seller doesnt own more than 3 single family houses ii. Seller occupies house before sale iii. Seller doesnt hire a broker, and does not advertise c. (b)(2) FHA doesnt apply to renting rooms/units if owner maintains/occupies one of such living quarters as his residence 5. Note: if no facial discrimination, P need only prove discriminatory impact, not discriminatory intent 6. Burden shifting. When P shows D unlawfully discriminated, the burden shifts to D to show a legitimate business purpose. If D does so, the burden shifts back to the P to show the proffered reason was pretextual. ii. Civil Rights Act of 1866, 42 USC 1982 1. All citizens of the US shall have the same right . . . as is enjoyed by white citizens thereof to inherit, purchase, lease sell, hold, and convey real and personal property. 2. Note: applies only to race and natl origin discrimination 3. Note: besides showing discrimination, P needs to prove discriminatory intent iii. Race/Natl Origin Examples 1. Mrs. Murphy has an apt to rent. She puts the following ad in a local newspaper: For rent: Furnished basement apartment in private white home. Black couple is denied b/c of race. a. FHA Analysis i. Under 3604(a), violates FHA (refusing to rent b/c of race). But, this violation is exempted b/c Murphy falls under 3603(b)(2) exemption (owner lives in house).

ii. Under 3604(c), violates FHA (discrim in advertising). 3603(b) exemptions dont apply to 3604(c) violations. b. 1982 Analysis i. Violates 1982 b/c discrimination on basis of race 2. Mrs. Murphy places ad: furnished apartment basement in private home, available only speakers of Polish, German or Swedish. a. FHA Analysis. Natl origin discrimination. Although not facially discriminatory (b/c anybody can speak those languages), it has discriminatory effect. 3. Mrs. Murphy doesnt place an ad, but refuses to rent to a German b/c of his race. a. FHA Analysis. No violation b/c Murphy falls under exemption in 3603(b)(2). b. 1982 Analysis. Violation b/c discrim in leasing on basis of natl origin. iv. Family Status 1. Seller/Owner can discriminate on basis of family status if he shows a legitimate business purpose. a. E.g., occupancy. No FHA violation where Owner limited occupancy to 4 ppl and denied family of H, W and 3 kids. b. Compare, situation where Owner rents a 2-bedroom apartment to a family w/ H, W, and 2 kids, but denies family of one adult and 3 kids. 2. Cohabitants a. Refusal to rent to 2 heterosexual cohabitants; not family discrimination b/c not a family b. Unmarried homosexual cohabitants; discrim based on sexual orientation not covered by statute i. Some state legislation coverage is broader; prohibits discrim based on sexual orientation; may also give right to unmarried heterosexual cohabitants v. Discrimination Based on Sex 1. Discrimination in terms/conditions. Several weeks into the tenancy, LL started harassing Tenant demanding sexual favors. HELD: FHA violation b/c discriminates against person in terms/conditions of rental (3604(b)) vi. Discrimination Based on Handicap 1. Handicap = (1) physical or mental impairment which substantially limits one or more major life activities; (2) record of having such an impairment; or (3) regarded as having such an impairment. 2. Handicap doesnt incl. illegal use/addiction of controlled substance

3. Discrimination incl. not making reasonable accommodations to afford handicapped persons equal opportunity to use/enjoy a dwelling 4. Examples a. LL approached by gay couple; doesnt rent for fear of AIDS i. Discrim on basis of handicap (regarded as handicapped) b. Evicts mentally ill tenant b/c threatening i. How to you make reasonable accommodations? Hold classes to educate fearful tenants? c. Tenant has mental condition that is lessened by companion dog. LL refuses tenant to have dog. i. If possible to allow pets in building, have to accommodate d. Delivery of Possession i. Who has the duty to deliver physical possession by ousting a holdover tenant? 1. Note: the Q is whether the LL has a duty to provide physical possession, not access. Therefore, tenant cant win against LL if cant access a land-locked parcel. 2. Note: in all JRDs, there is an implied covenant that the LL assures the tenant the legal right of possession; that is, at the beginning of the term there shall be no legal obstacle to the tenants right of possession. ii. English Rule 1. Where the lease is silent, LL makes an implied covenant that tenant will be able to take physical possession. 2. Rationale a. LLs Knowledge. LL is much more likely to know the relevant facts (is there a tenant in the space now; likelihood he will holdover, etc.); hes probably a frequent player in ouster suits b. Efficiency. LL can most cheaply litigate the case b/c of his knowledge (if tenant sued, LL would probably be a trial witness) c. Express Covenant Available. The tenant could demand or the LL could provide that the LL has the duty to ouster holdovers. The rule is most likely in accord w/ parties intent/expectations 3. Remedies a. Where LL breached the implied covenant; new tenant can terminate the lease and sue for out-ofpocket damages b. If holdover is partially occupying: i. Take possession of the remainder, pay rent pro-rata ii. Delay occupancy until holdover is evicted; pro-rate rent

c. Proceed against holdover tenant iii. American Rule 1. Where the lease is silent, there is no implied covenant that tenant will be able to take physical possession. New tenant must proceed against the holdover. 2. Rationale a. Tenant is most interested in ouster. b. LL generally not responsible for a wrong to a 3d party e. Subleases and Assignments i. Nature of Subleases and Assignments SUBLEASE ASSIGNMENT LL LL | | T1 T1T2 (fills the shoes of T1) | T2 T1 grants part of his estate T1 conveys his entire estate LL v. T1 privity of K; privity of LL v. T1 privity of K estate LL v. T2 privity of estate LL v. T2 no privity Sublettor (T2) is not liable to LL Assignee (T2) is liable to LL 1. Assignments a. Entire term goes to the length of the lease, not the amount of land. i. E.g., T1 transfers 5 of 20 acres for the rest of the term. This is a partial assignment. ii. E.g., T1 transfers 5 of 20 acres, but reserves the power of termination. Still partial assignment. (MIN: sublease) 2. In sublease or assignment, if the primary lease btwn LL and T1 is prematurely terminated: a. If surrendered by tenant, then rts of sublesee/assignee remains intact b. If breach by original tenant; LL entitled to possession (can evict T2) ii. Determining Sublease or Assignment 1. CL Distinction. If the instrument purports to transfer the lessees estate for the entire remainder of his term it is an assignment, regardless of its form or the parties intention. If the instrument purports to transfer the lessees estate for less than the entire term, it is a sublease, regardless of its form or of the parties intention. 2. Modern Rule. Ascertain the intention of the parties. 3. Language not dispositive. Words such as sublet and assign are not dispositive in determining the nature of the lease. iii. Liability to LL

1. T1 Still On the Hook. The obligations and liabilities of a lessee to a lessor under the express covenants of a lease, are not in anywise affected by an assignment or a subletting to a 3d party, in the absence of an agreement/action that amounts to a waiver. a. E.g., LL leases to T1 for 3 yrs. T1 transfers to T2 for the balance of the term. T2 defaults. LL can sue T1 for the rent due. 2. T2 is liable to LL if: a. T2 has an assignment. T2 is liable to LL b/c he has privity of estate. b. K btwn T2 and T1 results in LL being a 3d party beneficiary. i. E.g., LL leases to T1 a term of 3 years. T1 subleases to T2 for 1 yr. In the instrument of transfer there was a promise where T2 agreed to pay the rents reserved in the head lease. Although privity of K is btwn T1 and T2, LL is a 3PB to the K and can sue T2 on a 3PB theory. iv. Example. LL lease to T for a term of 3 yrs; T covenants to pay rent and keep the premises in good repair. T assigns her entire interest to T1, who agrees in the instrument of assignment to assume all the covenants in the lease btwn L and T; T1 assigns his entire interest to T2; T2 assigns his entire interest to T3. T3 defaults on rent and fails to keep the premises in good repair. Liability? DIAGRAM LIABILITY LL LL v. T: yes privity of K | LL v. T1: yes LL is 3PB LL v. T2: no TT1*T2T3 *T1 assumes all covenants in LL v. T3: yes privity of estate lease v. Approval Clause. Provision that states T1 may not sublease/assign to T2 w/o LLs consent. 1. Arbitrary Disapproval a. Majority Rule: Lessor may arbitrarily refuse to approve proposed assignee b. Minority Rule: Lessor may not refuse to approve a proposed assignee unless he has a commercially reasonable objection to the assignment i. This only serves as a default rule where the lease/assignment is silent. The rule can be Ked out of. ii. This rule only applies to commercial leases. iii. Commercially Reasonable 1. Approval clauses are for the protection of LL in ownership and operation of a particular property, not for its general economic protection

2. Denying consent solely on the basis of personal taste, convenience or sensibility is not commercially reasonable 2. Terminate and Recapture Clause. Provision where T1 would give notice to LL before subleasing/assigning to T2; LL would then have the option to terminate the lease w/ T1 and enter into a new lease w/ T2. 3. Rule in Dumpors Case. In a series of assignments, if LL consents to the first assignment, he waives any objection to future assignments. a. This is a default rule and can be Ked out of f. Defaulting Tenants i. The Tenant in Possession 1. CL Rule: LL may rightfully use self-help to retake leased premises from a tenant in possession w/o incurring liability for wrongful eviction provided: (1) the LL is legally entitled to possession; and (2) the LLs means of reentry are peaceable. Otherwise, LL has to resort to the cts in an action for eviction. a. Narrow construction of peaceable. LLs means of reentry are non-peaceable when possession is adversely held. 2. Modern trend: Self-help is never available to dispossess a tenant in possession who hasnt abandoned or voluntarily surrendered the premises. a. Where JRD bans self-help, its a mandatory rule, and cant be Ked out of b. In some JRDs, the prohibition on self-help applies only to residential leases. Residential tenant suffers a greater psychological impact; more likely equal bargaining power in commercial lease. 3. Summary eviction procedures. Quick, efficient means to recover possession after termination of a tenancy. Reqs only few days notice to the tenant; range of issues subject to litigation is kept narrow. ii. The Tenant Who has Abandoned Possession 1. Duty to Mitigate a. CL rule (MIN): LL has no duty to mitigate damages when tenant abandons possession of the premises. b. Modern rule (MAJ): LL has a duty to mitigate damages when tenant abandons possession of the premises i. Policy: efficiency. Put the duty of filling the premises on the LL b/c its cheaper for him and hes more experienced in filling spaces. c. Extent of Duty to Mitigate

i. Must make reasonable efforts to fill the space, incl. offering to show the space, advertising in local newspapers, etc. ii. If there are several vacancies, the LL has to treat the abandoned premises as part of the vacant stock. d. If LL doesnt mitigate: i. MAJ: LL gets what the tenant owes minus damages he could have mitigated ii. MIN: absolves tenant of all rent e. Surrender vs. Abandonment i. Abandonment: tenant vacates w/ no intention of paying; doesnt terminate lease; T liable for unpaid rent subject to duty to mitigate ii. Surrender: tenant offers to terminate the lease; LL accepts 1. One way to surrender is to abandon the property; if LL accepts, that ends the lease and no further rent is due iii. If tenant abandons and LL relets: Go by intent of LL. If LL wanted to terminate the lease agreement, no liab for rent. If LL was just mitigating, tenant liable for excess. 2. LLs Remedies and Security Devices a. LLs Remedies i. Sue for unpaid rent ii. Action for breach: not keeping in good repair iii. Terminate lease; evict tenant b. Recovering Diff btwn Stated Rent and FMV i. If tenant abandons, hes liable for unpaid rent ii. If tenant remains in possession and K rate < FMV, cant evict tenant and then demand FMV c. Security Deposits i. Pay upfront an amount (1-2 mo. rent) as against damages that may occur ii. Subject to abuse iii. Statutory reforms: 1. Limit the amount 2. LL has to pay interest on amount 3. Treat LL as a trustee; cant comingle deposit w/ personal monies g. Duties, Rights, and Remedies (Esp. Regarding the Condition of Leased Premises) i. Landlords Duties; Tenants Rights and Remedies 1. CL: LL had limited obligations (caveat lessee); T takes prop as is a. Assumptions: This assumed leases for agricultural purposes (care more about farmland than housing).

Also, most ppl living on the farm would be able make repairs to the house. 2. Quiet Enjoyment and Constructive Eviction a. Common Law i. At CL, lease covenants were independent of each other. ii. Exception: an implied covenant of quiet enjoyment that the LL will not wrongfully interfere w/ the tenants possession of the premises was interdependent w/ the promise to pay rent 1. Covenant expanded to incl. beneficial use/enjoyment of property iii. Exceptions: Implied Duties 1. In short term lease of furnished dwellings, implied duty to make and keep premises habitable 2. Duty to disclose latent (hidden) defects 3. Duty to maintain common areas 4. Abatement of nuisance on property 5. If makes promise to make repairs; duty to make repairs b. Constructive Eviction i. Any act or omission of LL which renders the premises substantially unsuitable for the purpose for which they are leased or which seriously interferes w/ the beneficial enjoyment of the premises ii. Act/omission = breach of ICQE or of CL implied duties iii. Substantial Interference 1. Renders premises unsuitable for rental purpose 2. In Reste Realty Corp v. Cooper, regular rain causing flooding was substantial interference. iv. Partial Eviction 1. Actual eviction of part of premises relieves the obligation to pay any/all rent 2. Constructive partial eviction results in a pro-rata rent reduction c. Tenant Remedies i. Tenant can abandon premises ii. Tenant can stay in possession and sue for damages equal to the difference btwn the value of the property w/ and w/o the breach d. Problems (p. 429-30) i. L fails to control excessive noise made by neighboring tenants of T who commonly party

long and loud into the night. HELD: constructive eviction. ii. Apt building is site of criminal activity (burglary and vandalism by 3d parties). L installs deadbolt locks on all entrance doors and hires private security, but problems continue. HELD: LL had duty, but discharged it by making reasonable efforts. iii. T performs abortions. LL does nothing about protestors outside the building and in the lobby, harassing customers. HELD: breach of covenant of quiet enjoyment e. Illegal Leases i. If at time lease is entered into, housing code violations, lease is voidable b/c illegal; T can escape liab. for rent ii. Not important today b/c of implied warranty of habitability 3. The Implied Warranty of Habitability a. Standard: premises must be safe, clean and fit for human habitation i. Objective test: reasonable person find premises uninhabitable? 1. Refer to housing codes 2. Is the defect in essential facilities? 3. Does the defect impact Ts health/safety? ii. LL has burden to show premises dont breach warranty of habitability iii. Limited to residential leases iv. Non-waivable: covers latent and patent defects; T cant assume the risk; cant be waived by lease provision b. Remedies i. Basic K remedies (damages, rescission, reformation) ii. Remain in Possession and Withhold Rent 1. Breach of IWOH is defense to summary eviction and action to collect back rent 2. If partial breach, may withhold all rent and ct will determine partial back rent owed iii. Remain in Possession and Repair and Deduct 1. Repair defects and deduct from rent pmts iv. Remain in Possession and Sue for Damages 1. Hilder rule: damages = FMV as warranted FMV as exists

c. d.

e.

f.

2. Kline rule: damages = agreed rent FMV as exists v. Terminate Lease and Sue for Damages Discomforture/annoyance damages are available. Problems (p. 439) i. Ls janitorial staff goes on strike for 2 wks. Trash piles up to the height of the buildings first-floor windows. HELD: L breached implied warranty of habitability (strict liability) ii. Ts lease in fancy apt building provides for: door attendant, elevator, swimming pool, gym, etc. Statute reqs that dwellings be fit for habitation, safe and health, and in accord w/ the uses reasonably intended by the parties. The pool breaks. HELD: no breach of habitability, despite the statute. T still can sue for damages. iii. L offers run-down house for $100/mo. T finds a lot of defects and says its worth $50/mo. L agrees to lease for $50/mo. T doesnt pay rent. HELD: no waiver of implied warranty of habitability (nonwaivable). Defense to eviction suit is to reduce rent by appropriate amount: 1. Hilder formula: FMV as exists = $50; FMV as warranted? 2. Kline formula: a. Agreed rent: $50 b. FMV as exists: $50? If so, no damages Retaliatory Eviction i. Most states prohibit eviction for good faith complaint by tenant ii. If termination w/in X mo., presumed to be w/in retaliation; burden shifts to LL to show legit purpose LLs Tort Liability i. If 3d partys injured on premises: 1. MAJ: no LL liability for tenant/3d party unless falls under CL implied duties; or expressly warranted 2. MIN duty under neg ii. Problems 1. L leases land to T for one yr, knowing T intends to use the land to board and rent horses and to operate a riding trail. T holds over, and Ts customer is injured when her horse slips on a soft, narrow riding trail and falls on her.

HELD: LL liable b/c implied duty to repair conditions at the outset of the term. (Prob. wrong result.) 2. L lease farm; Ts son gets injured from an auger. HELD: LL not liable b/c of inherent danger of being on a farm. T knows more about farms. 3. Ts daughter badly injured when struck by boys racing their bikes on a parking lot owned by LL and used by tenants. HELD: LL liable implied duty to keep safe common areas. 4. Ts daughter injured on the street, off LLs property. HELD: LL not liable. 5. Tenants attacked/injured in parking lot owned by LL. HELD: duty to keep common areas safe. a. Some JRDs: no duty to prevent 3d party activity; may be liability if notice iii. Exculpatory clauses invalid in most JRDs ii. Tenants Duties; Landlords Rights and Remedies 1. Law of Waste a. Affirmative waste (e.g., bad remodeling) i. Degree of effect on the use and value of the leased premises is relevant, as is its permanence; so too should be the length of the term remaining at the time the tenant makes the changes in Q b. Permissive waste i. Duty of repair: on tenant as to routine things ii. Limited b/c implied warranty of habitability