Property:

1. Summary of Freehold Estates:

i. Absolute Estate

* Estate: Fee Simple Absolute

- Language To Create: "To A and his heirs" "To A"

- Duration: Absolute ownership of potentially infinite duration

- Transferability: devisable, descendible, alienable,

- Future Interest: Non

* Estate: Fee Tail

- Language To Create: “To A and the heirs of his body”

- Duration: Lasts only as long as there are lineal blood descendants of grantee

- Transferability: Passes automatically to grantee's lineal descendants

- Future Interest: Reversion (if held by grantor); Remainder (if held by 3rd party)

ii. Defeasible Fees

* Estate: Fee Simple Determinable (SUD)

- Language To Create: "To A So long as" "To A Until..." "To A While" "To A During"
: language providing that upon the happening of a stated event, the land is to revert to the grantor

- Duration: Potentially infinite, so long as event does not occur

- Transferability: Alienable, devisable, descendible, subject to condition

- Future Interest: Possibility of Reverter held by Grantor

* Estate: Fee Simple Subject to Condition Subsequent (BUT)

- Language To Create: "To A, BUT if X event happens, grantor reserves the right to re-entry and retake"
: Grantor must use his right to get the estate back.

- Duration: Potentially infinite, so long as the condition is not breached and thereafter until the holder of the right of entry timely exercises the power of termination

- Transferability: Alienable, devisable, descendible, subject to condition

- Future Interest: Right of Re-entry and Power of Termination held by Grantor

* Estate: Fee Simple Subject to an Executory Limitation (BUT+3rd)

- Language To Create: "To A, BUT if X event occurs, then to 3rd person"

- Duration: Potentially infinite, so long as stated contingency does not occur

- Transferability: Alienable, devisable, descendible, subject to condition

- Future Interest: Executory Interest held by 3rd party

iii. Life Estate

* Estate: Life estate

- Language To Create: "To A for life..." "To A for B's Life"

- Duration: Measured by life of transferee or by 3rd person (pur autre vie)

- Transferability: Alienable, devisable, descendible if pur autre vie and measuring life is still alive

- Future Interest: Reversion held by Grantor; Remainder held by 3rd person

b) The Present Estates:

i) Fee Simple Absolute:

(1) What language will create:

(a) “To A” or “To A and his heirs”

(2) Distinguishing characteristics:

(a) This is absolute ownership of potentially infinite duration.

(b) It is free devisable, descendible and alienable.

(3) Accompanying future interest:

(a) None

(b) A living person has no heirs, thus while A is alive, A has no heirs (only prospective heirs).

ii) Fee Tail:

(1) What language will create:

(a) “To A and the heirs of his body.”

(2) Distinguishing characteristics:

(a) Virtually abolished in the U.S. today, including NY.

(b) Historically, the fee tail would pass directly to grantees lineal blood descendents (no matter what).

(3) Accompanying future interest:

(a) If future interest is held in the grantor it was called a reversion.

(b) If future interest is held in a 3^rd party it was called a remainder.

iii) Defeasible fees:

(1) Types: FSD/FSSCS/ FSSEI

(a) Fee simple determinable (Fee on Limitation):

(i) What language will create: (S.U.D.)

1. “To A for so long as…” “To A during…” or “To A until…”

2. Grantor must use clear durational language.

3. If the stated condition is violated, forfeiture is automatic.

(ii) Distinguishing characteristics:

1. This estate (like all defeasible fees) is devisable, descendible and alienable, but always subject to a condition (can’t convey more than what you started with).

(iii) Accompanying future interest:

1. in the grantor – possibility of reverter.

(b) Fee simple subject to a condition subsequent (Fee on Condition):

(i) What language will create: (BUT IF)

1. “To A, but if X event occurs, grantor reserves the right to reenter and retake.”

2. Grantor must use clear durational language and must carve out the right to reenter.

(ii) Distinguishing characteristics:

1. This estate is not automatically terminated, but it can be cut short at the grantor’s option (i.e., Right of Re-Entry) if the stated condition occurs.

2. This estate (like all defeasible fees) is devisable, descendible and alienable, but always subject to a condition (can’t convey more than what you started with).

(iii) Accompanying future interest:

1. right of entry (a.k.a. power of termination)

2. NY – called Right of Reacquisition.

(i) What language will create: (BUT IF + 3rd)

1. “To A, but if X event occurs, then to B.”

(ii) Distinguishing characteristics:

1. This estate is just like the fee simple determinable, only now, if the condition is broken, the estate is automatically forfeited in favor of 3^rd Party Grantor.

2. This estate (like all defeasible fees) is devisable, descendible and alienable, but always subject to a condition (can’t convey more than what you started with).

(iii) Accompanying future interest:

1. Shifting executory interest.

(2) Rules of construction (for All Defeasible Fees):

(a) Words of mere desire, hope, or intention are insufficient to create a defeasible fee.

(i) Courts disfavor restrictions on the free use of land.

(ii) Thus, courts will not find a defeasible fee unless clear durational language is used.

1. e.g., - in each of these instances, A is vested with a fee simple absolute, and NOT a defeasible fee: "To A for the purpose of constructing a day care center"; "To A with the hope that he becomes a lawyer"; "To A with the expectation that the premises will be used as a Blockbuster video store."

(b) Absolute restraints on alienation are void.

(i) An absolute restraint on alienation is an absolute ban on the power to sell or transfer that is not linked to any reasonable, time limited purpose.

1. Example 1 – O conveys: "To A so long as she never attempts to sell." à A has a fee simple absolute (O has nothing).

2. Cf., example 2 – O conveys: "To A so long as she does not attempt to sell until the year 2004, when clouds on the title will be resolved." A has a fee simple determinable and O has a possibility of reverter (b/c the restraint is linked to a reasonable, time-limited purpose).

iv) Life estate:

(1) What language will create:

(a) “To A for life”

(b) This is an estate that must be measured in explicit lifetime terms and never terms of years.

(i) A life estate measured by a life (3^rd Party) other than the grantee’s.

1. example 1 – “To A for the life of B.”

2. example 2 – “To A for life”; then, A sells the life estate interest to D. D has possession of the land for A’s life.

(2) Distinguishing characteristics:

(a) The life tenant is entitled to all the ordinary uses and profits from the land.

(b) The life tenant must not commit waste (can’t do anything to harm future interest holders).

(i) Three species of waste: Voluntary, Permissive, & Ameliorative

1. Voluntary or affirmative waste – actual conduct that causes decrease in value.

a. Voluntary waste and natural resources - the general rule is that the life tenant must not consume or exploit natural resources on the property (such as timber, oil, or minerals), unless one of four exceptions applies, remembered by PURGE.

i. Prior Use – prior to the grant, the land was used for exploitation.

1) Open Mines Doctrine – if mining was done on the land before the life estate began, the life tenant may continue to mine, but is limited to the mines that are already open.

ii. Reasonable repairs – the life tenant may consume natural resources for reasonable repairs and maintenance of the premises.

iii. Grant – the life tenant may exploit if expressly granted the right to do so.

iv. Exploitation – the land is suitable only for exploitation (e.g. – a quarry).

2. Permissive waste or neglect – this occurs when the land is allowed to fall into disrepair or the life tenant fails to reasonably protect the land. [ReTax]

a. Permissive waste and the obligation to Repair – the life tenant must simply maintain the premises in reasonably good repair.

b. Permissive waste and the obligation to pay all ordinary Taxes

i. If there IS income or profits, the life tenant is obligated to pay all ordinary taxes on the land, to the extent of income or profits from the land.

ii. If there is NO income or profit, the life tenant is required to pay all ordinary taxes to the extent of the premises fair market value.

3. Ameliorative waste – the life tenant must not engage in acts that will enhance the properties’ value Unless all future interest holders are known and consent.

(3) Accompanying future interest:

(a) if in the grantor – reversion.

(b) if in a 3^rd party – remainder.

c) Future interests:

i) Future interests capable of creation in the grantor:

(1) Possibility of reverter only with the fee simple determinable (fee on limitation).

(2) Right of entry (a.k.a. power of termination; right of reacquisition) – only with the fee simple subject to a condition subsequent (fee on condition).

(3) Reversion – the future interest that arises in a grantor who transfers an estate of lesser quantum then he started with, other than fee simple determinable or a fee simple subject to a condition subsequent. (FSD, FSSCS이외)

(a) Examples:

(i) “To A for life.”

(ii) “To A for 99 years.”

(iii) “To A for life, then to B for 99 years.”

ii) Future interests in transferees (i.e., 3^rd party):

(1) Types:

(a) Vested remainder:

(i) 3 species:

1. indefeasibly vested remainder;

2. vested remainder subject to complete defeasance (a.k.a. vested remainder subject to total divestment);

3. vested remainder subject to open (class).

(b) Contingent remainder:

(i) 2 species:

1. shifting executory interest;

2. springing executory interest.

(2) What is a remainder?

(a) A remainder is a future interest created in a grantee that is capable of becoming possessory upon the expiration of a prior possessory estate created in the same conveyance in which the remainder is created.

(i) It always accompanies a preceding estate of a known fixed duration (a life estate or term of years).

(ii) A remainder cannot cut short or divest a prior transferee (it will never follow a defeasible fee).

(b) Vested remainders:

(i) A remainder is vested if it is both created in an ascertained 3^rd person and is not subject to any condition precedent.

(ii) 3 kinds of vested remainders:

1. indefeasibly vested remainder – the holder of this remainder is certain to acquire an estate in the future with no conditions attached.

a. example – “To A for life, remainder to B.” A is alive. B is alive.

i. If B predeceases A, B’s future interest passes by his will or by intestacy to his heirs.

2. vested remainder subject to complete defeasance - right to possession could be cut short by a condition subsequent.

a. Also known as the vested remainder subject to total divestment.

b. NY - this remainder is called a "remainder vested subject to complete defeasance."

c. Here, note the difference between a condition precedent, which creates a contingent remainder, and a condition subsequent, which creates a vested remainder subject to complete defeasance. To tell the difference, apply the "Comma Rule": When conditional language in a transfer follows language that, taken alone and set off by commas, would create a vested remainder, the condition is a condition subsequent, and you have a vested remainder subject to complete defeasance.

d. example – O conveys: "To A for life, remainder to B, provided, however, that if B dies under the age of 25, to C." A is alive. B is 20 years old.

i. A – life estate

ii. B – vested remainder subject to complete defeasance

iii. C – shifting executory interest

iv. O – reversion (if neither C nor C’s heirs exist if the condition is breached).

e. By contrast, if the conditional language appears before the language creating the remainder, the condition is a condition precedent, and you have a contingent remainder.

i. For example: O conveys "To A for life, and if B has reached the age of 25, to B." (B has contingent remainder, O has reversion).

3. vested remainder subject to open – here a remainder is vested in a group of takers at least one of whom is qualified to take possession but each class member’s share is subject to partial diminution b/c additional takers not yet ascertained can still qualify as class members.

a. example - "To A for life, then to B’s children." A is alive. B has two children, C and D.

b. classes – a class is either open or closed.

i. A class is open if it is possible for others to enter.

ii. A class is closed when its maximum membership has been set (so that persons born after are shut out).

iii. common law rule of convenience - a class closes when ever any member can demand possession.

1) In the above example, the class closes in B’s death (b/c B can’t have any more children, and on A’s death (b/c under the rule of convenience, C and D can demand possession).

2) Once A dies a child born to B or conceived thereafter will not share in the gift.

3) Exception: the womb rule – a child of B in the womb at A’s death will share with C and D.

4) What if C or D predeceases A? – at common law, their share goes to there devisees or heirs.

(i) A remainder is contingent if it is created in an unascertained person or is subject to a condition precedent, or both.

1. The remainder that is contingent because it is created in as yet unborn or unascertained persons.

a. Example 1 - "To A for life, then to B’s first child." A is alive. B, as yet, has no children.

b. Example 2 - "To A for life, then to B’s heirs." A is alive. B is alive. Because a living person has no heirs, while B is alive his heirs are unknown.

c. Example 3 - "To A for life, then to those children of B who survive A." A is alive. We don’t yet know which, if any, of B’s children will survive A.

2. The remainder that is contingent because it is subject to a condition precedent.

a. A condition is a condition precedent when it appears before the language creating the remainder or is woven into the grant to remainderman.

i. Example 1 - "To A for life, then, if B graduates from college, to B." A is alive. B is now in high school. Before B can take, he must graduate from college. He has not yet satisfied this condition precedent. B has a contingent remainder. O has a reversion (if B never graduates, O or O’s heirs take).

1) If B graduates from college during A’s lifetime, B's contingent remainder is transformed automatically into an indefeasibly vested remainder.

ii. Example 2 - "To A for life, and, if B has reached the age of 21, to B." A is alive. B is 19 years old. Again, B must satisfy a condition precedent before B can take. B therefore has a contingent remainder. O has a reversion (if B never reaches 21, the estate reverts back to O or O’s heirs).

1) If B obtains the age of 21 during A’s lifetime, B's contingent remainder is transformed automatically into an indefeasibly vested remainder.

3. The rule of destructibility of contingent remainders:

a. At common law – a contingent remainder was destroyed if it was still contingent at the time the preceding estate ended.

i. e.g. – “To A for life, and if B has reached the age of 21, to B.” Now, A has died, leaving behind B, who is still only 19 years old. At common law, B’s contingent remainder would be destroyed and O (or O’s heirs) would take in fee simple absolute).

b. Today – the destructibility rule has been abolished.

i. Thus if B is still under 21 when A dies, O (or O’s heirs) hold the estate subject to B’s springing executory interest. Once B reaches 21, B takes.

ii. The Rule of Destructibility has been abolished in NY.

4. The Rule in Shelly’s case:

a. Applies in one setting only – O conveys “to A for life, then on A’s death to A’s heirs.” A is alive.

i. Historically – the present and future interest would merge, giving A a fee simple absolute (this was a rule of law and thus would apply in the face of contrary grantor intent).

ii. Today – Rule in Shelly’s Case has been virtually abolished. Thus, A would have a life estate, A’s as yet unknown heirs have a contingent remainder, and O has a reversion (since A could die without heirs).

iii. NY – the Rule in Shelly’s Case has been abolished in NY.

5. The Doctrine of Worthier Title (a.k.a. rule against a remainder in Grantor’s heirs):

a. This doctrine is still viable in most states today. It applies when O, who is alive, tries to create a future interest in his heirs.

i. e.g. – O, who is alive, conveys “to A for life, then to O’s heirs.”

b. If the Doctrine of Worthier Title did not apply:

i. A – life estate;

ii. O’s heirs – contingent remainder.

c. With the Doctrine of Worthier Title:

i. Contingent remainder in O’s heirs is void (promotes free transfer of land).

ii. A – life estate.

iii. O – reversion.

d. The Doctrine of Worthier Title is a rule of construction not a rule of law, thus grantor’s intent controls.

i. If the grantor clearly intends to create a contingent remainder in his heirs, that intent is binding.

e. NY – The Doctrine of Worthier Title has been abolished in NY with respect to transfers taking effect after September 1, 1967.

(3) Distinguishing remainders from executory interests:

(a) What is an executory interest? - it is a future interest created in a transferee (a third party), which is not a remainder and which takes effect by either cutting short some interest in another person ("shifting") or in the grantor or his heirs ("springing").

(i) Shifting executory interest – it always follows a defeasible fee and cuts short someone other than the grantor.

1. example - "To A and her heirs, but if B returns from Canada sometime next year, to B and his heirs."

a. A – fee simple subject to B’s shifting executory interest.

b. B – shifting executory interest

c. B does not have a remainder b/c remainders never follow defeasible fees.

d. RAP problem? – this conveyance does not violate the RAP b/c of the one-year limit on B’s potential power.

(ii) Springing executory interest – it always follows a defeasible fee and cuts short the grantor.

1. example - : O conveys: “To A, if and when he marries.” A is unmarried.

a. O – fee simple subject to A’s springing executory interest

b. A – springing executory interest

c. RAP problem? – no, b/c we will know by the end of A’s life whether the condition is met or not.

(iii) NY - has abolished the distinction between executory interests and contingent remainders. Instead, contingent remainders and executory interests are called remainders subject to a condition precedent.

iii) The Rule Against Perpetuities:

(1) Rule - Certain kinds of future interests are void if there is any possibility, however remote, that the given interest may vest more than 21 years after the death of a measuring life.

(2) Four-Step Technique for Assessing Potential RAP Problems:

(a) Determine which future interests have been created by the conveyance. The RAP potentially applies only to contingent remainders, executory interests, and certain vested remainders subject to open.

(i) The RAP does NOT apply to any future interest created in O (the grantor), or to indefeasibly vested remainders or vested remainders subject to complete defeasance.

(ii) example: "To A for life, then to A’s children." A is alive. She has no children.

1. A – life estate

2. as yet unborn children – contingent remainder

(b) Identify the conditions precedent to the vesting of the suspect future interest.

(i) E.g. – in the above example, A must die leaving a child.

(c) Find a measuring life. Look for a person alive at the date of the conveyance and ask whether that person's life or death is relevant to the condition's occurrence.

(i) In the above example, A qualifies as a measuring life.

(d) Ask: Will we know, with certainty, within 21 years of the death of our measuring life, if our future interest holder(s) can or cannot take?

(i) If so, the conveyance is good. If not (if there is any possibility, however remote, that the condition precedent could or could not occur more than 21 years after the death of a measuring life), the future interest is void.

(ii) The above conveyance, therefore, is good b/c we will know, at the instant of A’s death, if A has left behind a child or not.

(3) Applying the 4 steps:

(a) example - "To A for life, then to the first of her children to reach the age of 30." A is 70. Her only child, B, is 29 years old.

(i) Step 1: classify the future interest – contingent remainder

(ii) Step 2: condition precedent – A must die, and must have a child reach 30

(iii) Step 3: find a measuring life – A (not B b/c conveyance to A’s children is not B specific).

(iv) Step 4: ask relevant question - Will we know, with certainty, within 21 years of the death of our measuring life, if a future interest holder can take? In other words, is there any possibility, however remote, that A would not have a child to reach 30 until more than 21 years after A’s death? – Yes (thus the contingent remainder violates RAP).

1. The common law RAP is miserable. It presumes that anything is possible (e.g. – B, who is 29, could die tomorrow. Thereafter, A could have another child, no matter that A is 70. (This is called the Fertile Octogenarian Rule: it presumes that a person is still capable of having children no matter what his/her age). A could die in labor, or, A could live. We just don’t know for sure, today, whether the condition precedent to any potential newborn’s taking—the child’s turning 30—will be satisfied within 21 years of A’s death.

2. Thus, we are left with:

a. A – life estate

b. O - reversion

(4) Two bright line Rules of Common Law RAP:

(a) A gift to an open class that is conditioned on the members surviving to an age beyond 21 violates the common law RAP.

(i) "Bad as to one, bad as to all." - to be valid, it must be shown that the condition precedent to every class member’s taking will occur within the perpetuities period. If it is possible that a disposition might vest too remotely with respect to any member of the class, the entire gift is void.

1. For example: "To A for life, then to such of A’s children as live to attain the age of 30." A has two children, B and C. B is 35 and C is 40. A is alive.

a. B and C’s vested remainders subject to open are voided by the CL RAP and its “bad as to one, bad as to all” principle.

b. Thus, under the common law RAP, we are left with:

i. A – life estate

ii. O – reversion

(b) Many shifting executory interests violate the RAP. An executory interest with no limit on the time within which it must vest violates the RAP.

(i) example 1 - "To A and his heirs so long as the land is used for farm purposes, and if the land ceases to be so used, to B and his heirs."

1. Step 1: classify the future interest – shifting executory interest

2. Step 2: condition precedent – land must cease to be used for farming purposes.

3. Step 3: find a measuring life – A

4. Step 4: ask relevant question – Will we know within 21 years of A’s death if the B can take? NO

a. Thus we are left with:

i. A – fee simple determinable

ii. O – reversion

iii. RAP problem? – No, b/c RAP doesn’t apply to future interest in O

(ii) example 2 - "To A and his heirs, but if the land ceases to be used for farm purposes, to B and his heirs."

1. Same result as above, except that now, once the offensive future interest is stricken, the conveyance no longer is grammatically sound. Thus the entire conditional clause is stricken.

a. A – fee simple absolute

b. O – nothing

(iii) Charity-to-charity exception – A gift from one charity to another does not violate RAP.

1. e.g. - "To the American Red Cross, so long as the premises are used for Red Cross purposes, and if they cease to be so used, then to the YMCA."

a. Ordinarily the YMCA would have a void shifting executory interest.

b. However, b/c of the charity-to-charity exception to RAP, the gift is good.

c. Thus the Red Cross has a fee simple subject to the YMCA’s shifting executory interest.

(5) Reform of the RAP:

(a) the "wait and see" or "second look" doctrine - under this majority reform effort, the validity of any suspect future interest is determined on the basis of the facts as they now exist at the conclusion of the measuring life.

(b) Uniform Statutory Rule Against Perpetuities (USRAP) - codifies the common law RAP and, in addition, provides for an alternative 90 year vesting period.

(i) The cy pres doctrine (“as near as possible”) - if a given disposition violates the rule, a court may reform it in a way that most closely matches the grantor’s intent while still complying with RAP.

(ii) The reduction of any offensive age contingency to 21 years.

(d) The New York Perpetuities Reform Statute:

(i) New York applies the common law rule against perpetuities, and has rejected wait and see and cy pres, except for charitable trusts and powers of appointment, to be taken up in Trusts.

(ii) Three points of note:

1. Under the New York perpetuities reform statute, where an interest would be invalid because it is made to depend on any person’s having to attain an age in excess of 21 years, the age contingency is reduced to 21 years.

2. The common law fertile octogenarian principle is modified by the New York perpetuities reform statute. The New York statute presumes that a woman over the age of 55 cannot have a child.

a. The possibility that the person may have a child by adoption is disregarded.

3. The New York "suspension" rule (tested with Trusts and Wills):

a. The rule against suspension of the absolute power of alienation applies the common law RAP to restrictions on the power to sell or transfer.

b. Thus, an interest is void if it suspends the power to sell or transfer for a period longer than the lives in being plus 21 years.

i. In other words, for a conveyance to be valid under the suspension rule, there must be persons in being who could join together in a conveyance of the full fee simple title within lives in being plus 21 years.

d) Concurrent Estates:

i) Types:

(1) Joint tenancy - two or more own a share with the right of survivorship and the right to use and enjoy the whole.

(a) Distinguishing characteristics:

(i) The right of survivorship – when one joint tenant dies, his share passes automatically to the surviving joint tenants.

(ii) Joint tenant’s interest is alienable, it is not, however, devisable or descendible.

(b) Creation:

(i) 4 unities (“T-TIP”) – joint tenants must take their interests:

1. Time – at the same time;

2. Title – by the same title (in the same instrument);

3. Interests – with identical (equal) interests;

4. Possession – with identical rights to possess the whole.

(ii) Grantor must clearly express the right of survivorship.

(iii) Use of a straw:

1. If one individual is the sole owner of BA and he wants to hold it as a joint tenant with 1 or more individuals, under the common law he must use a straw in order to satisfy the 4 unities.

a. Step 1 – original owner conveys BA to a strawman.

b. Step 2 – straw conveys back to original owner and prospective joint tenants with the right of survivorship (now all 4 unities are present including time and title).

2. In NY – by statute, NY has dispensed with the need for a straw. In NY it is permissible for original owner to convey, using only 1 piece of paper to himself and prospective joint tenants.

(i) Severance and Sale:

1. A joint tenant can sell or transfer his interest during his lifetime.

a. He can even do so secretly without the consent of fellow joint tenants.

2. One joint tenant’s sale severs the joint tenancy as to the seller’s interest b/c it disrupts the 4 unities.

a. Buyer becomes a tenant in common.

b. To the extent that we started with more than 2 joint tenants in the first place, the joint tenancy remains in tact as between the other, non-transferring joint tenants.

c. e.g. – O conveys BA “To P, R and M as joint tenants with the right of survivorship.” P, R, and M now each own a presumptive 1/3 share in BA and a right to use and enjoy the whole. If P then sells her interest to C, this severs the joint tenancy as to P’s interest. C owns 1/3 as tenant in common with R and M, R and M still hold 2/3 as joint tenants.

3. At equity, a joint tenant’s mere act of entering into a contract for the sale of her share will sever the joint tenants as to that contracting party’s interest under the Doctrine of Equitable Conversion (“equity regards as done, that which ought to be done”).

(ii) Severance and Partition:

1. Three variations:

a. by voluntary agreement – an allowable peaceful way to end the relationship.

b. partition in kind – a judicial action for physical division of the property if it is in the best interest of all parties (divide the property itself).

c. forced sale – judicial action, if in the best interests of all involved, where the land is sold and sale proceeds are divided up proportionately (works best when BA is a building).

(iii) Severance and Mortgage:

1. Title theory of mortgages (minority)– one joint tenant’s execution of a mortgage or a lien on his or her share will sever the joint tenancy as to that now encumbered share.

2. Lien theory of mortgages (majority and NY) – a joint tenant’s execution of a mortgage on his or her interest will not sever the joint tenancy.

(2) Tenancy by the entirety (recognized in 21 states) - a protected marital interest between husband and wife with the right of survivorship.

(a) Distinguishing characteristics:

(i) This is a very protected for of co-ownership:

1. Creditors of only one spouse cannot touch the tenancy.

a. In NY – one spouse may mortgage his interest and his creditors may enforce against that interest, but only as to debtor spouse’s share. Further, the non-debtor spouse’s rights, including the right of survivorship, must not be compromised.

2. Neither tenant, acting alone, can defeat the right of survivorship by a unilateral conveyance to a 3^rd party.

(b) Creation:

(i) It can only be created in husband and wife as fictitious one person with the right of survivorship.

(ii) In those states that recognize the tenancy by the entirety, it arises presumptively in any conveyance to husband and wife, unless clearly stated otherwise.

(3) Tenancy in Common - two or more own with no right of survivorship.

(a) Three features:

(i) Each co-tenant owns an individual part and each has a right to possess the whole.

(ii) Each interest is descendible, devisable and alienable (there are no survivorship rights between tenants in common).

(iii) The presumption favors tenants in common.

ii) Rights and Duties of Co-Tenants (for all three above):

(1) Possession – each co-tenant is entitled to possess and enjoy the whole.

(a) If one co-tenant wrongfully excludes another tenant from possession of the whole or any part, he has committed wrongful ouster.

(2) Rent from co-tenant in exclusive possession – absent ouster, a co-tenant in exclusive possession is not liable to other co-tenants for rent.

(3) Rent from 3^rd parties – a co-tenant who leases all or part of the premises to a 3^rd party must account to his co-tenants, providing them their fair share of the rental income.

(4) Adverse possession – unless he has ousted the other co-tenants, one co-tenant in exclusive possession for the statutory adverse possession period cannot acquire title to the exclusion of others.

(a) Why? – the hostility element of adverse possession is absent. There is no hostility b/c there was never any ouster.

(b) In NY – a co-tenant may acquire full title by adverse possession if he is in exclusive possession for 20 continuous years under a theory of implied ouster.

(5) Carrying costs – each co-tenant is responsible for his fair share of carrying costs (such as taxes and mortgage interest payments), based upon the individual share that he holds.

(6) Repairs – the repairing co-tenant enjoys a right to contribution for necessary repairs provided that she has notified the others of the need for repairs (based on percentage of ownership).

(7) Improvements – during the life of the co-tenancy, there is no right to contribution for so called “improvements” (b/c one co-tenant’s improvements could be another’s nightmare).

(a) However, at partition, the improving co-tenant is entitled to a credit equal to any increase in value caused by her efforts.

(b) In addition, at partition, the “improver” bears full liability for any decrease in value caused by her efforts.

(8) Waste – a co-tenant must not commit waste (voluntary, permissive or ameliorative)

(a) A co-tenant can bring an action for waste during the life of the co-tenancy.

(9) Partition – a joint tenant or tenant in common has a right to bring an action for partition (see above).

e) Landlord/Tenant Law:

i) The four leasehold or non-freehold estates:

(1) The Tenancy for Years (a.k.a. the Estate for Years or the Term of Years):

(a) This is a lease for a fixed determined period of time (could be 1 day, 2 months, 5 years, etc).

(b) Triggering fact - when you know the termination date from the start.

(d) A term of years greater than 1 year must be in writing to be enforceable b/c of the SOF.

(2) The Periodic Tenancy:

(a) This is a lease that continues for successive intervals until landlord or tenant gives proper notice of termination.

(b) The periodic tenancy can be created expressly (e.g. – L conveys “To T from month to month”) or impliedly in one of 3 ways:

(i) Land is leased with no mention of duration, but provision is made for the payment of rent at set intervals.

(ii) An oral term of years in violation of the SOF creates an implied periodic tenancy measured by the way rent is tendered.

(iii) In a residential lease, if the landlord elects to holdover a tenant who has wrongfully stayed past the conclusion of the original lease, an implied periodic tenancy arises measured by the way rent is now tendered.

1. In NY – a landlord who elects to holdover a tenant creates an implied month-to-month periodic tenancy, unless otherwise agreed.

(i) Notice, usually written, must be given.

(ii) At common law, time for notice must at least be equal to the length of the period itself unless otherwise agreed.

1. exception – if the tenancy is from year-to-year or greater, 6 months notice is required.

(iii) By private agreement, the parties may lengthen or shorten these common-law prescribed notice provisions (freedom of contract).

(iv) The periodic tenancy must end at the conclusion of a natural lease period.

(3) Tenancy at Will:

(a) This is a tenancy for no fixed period of duration (e.g. – “To T for so long as L or T desires”).

(b) Unless the parties expressly agree to a tenancy at will, the payment of regular rent will cause a court to treat the tenancy as an implied periodic tenancy.

(c) The tenancy at will may be terminated by either party at any time. However, a reasonable demand to quit the premises is typically required.

(d) In NY – the landlord terminating a tenancy at will must give a minimum of 30 days written notice of termination.

(4) The Tenancy at Sufferance:

(a) It is created when T has wrongfully held-over past the expiration date of the lease. This wrongdoer is given a leasehold estate (the tenancy at sufferance) to permit the landlord to recover rent.

(b) The tenancy at sufferance lasts only until the landlord either evicts the tenant or elects to hold the tenant to a new term.

(c) In NY – landlord’s acceptance of rent subsequent to the expiration of the term will create an implied month-to-month periodic tenancy, unless otherwise agreed.

ii) Tenants Duties:

(1) Liability to 3rd parties:

(a) T is responsible for keeping the premises in reasonably good repair.

(b) T is liable for injuries sustained by 3^rd parties he invited, even where the landlord has expressly promised to make all repairs.

(2) T’s duty to repair:

(a) When the lease is silent:

(i) standard – T is required only to keep the premises in reasonably good repair.

(ii) T must not commit waste:

1. voluntary waste – overt harmful acts.

2. permissive waste – neglect.

3. ameliorative waste – alteration that increase the premises’ value.

(iii) The law of fixtures:

1. T must not remove a fixture, no matter that he installed it (fixtures pass with ownership of the land).

2. When a tenant removes a fixture, he commits voluntary waste.

a. fixture – a once moveable chattel that, by virtue of its annexation to realty objectively shows the intention to permanently improve the realty.

i. Fixtures pass with ownership of the land.

ii. e.g. – heating systems, customized storm windows, a furnace, certain lighting installation, etc..

b. How to tell when a tenant installation qualifies as a fixture:

i. Express agreement controls – the agreement between landlord and tenant is binding.

ii. In the absence of an agreement – the tenant may remove a chattel that she has installed so long as removal does not cause substantial harm to the premises.

iii. If removal will cause substantial harm – in objective judgment, tenant has shown the intention to install a fixture (the fixture must stay put).

(b) When tenant has expressly covenanted in the lease to maintain the property in good condition for the duration of the lease:

(i) At common law – historically, a tenant was responsible for any loss to the property including loss attributable to force of nature (e.g. – earthquakes, lightning, etc.).

(ii) Today (majority view) – a tenant may terminate the lease if the premises are destroyed without the tenant’s fault.

(iii) NY – absent tenant’s express undertaking to restore the premises in the event of their destruction, if the premises are destroyed through no fault of the tenant, tenant may quit the premises and surrender possession without any further duty to pay rent.

(3) Tenant’s duty to pay rent:

(a) Tenant breaches the duty and is in possession of the premises:

(i) The landlord’s only options are to evict the tenant through the courts or continue the relationship and sue for rent due.

1. If the landlord moves to evict, he is nonetheless entitled to rent from the tenant until the tenant, who is now a tenant at sufferance, vacates.

(ii) Landlord must not engage in self-help, such as changing the locks, forcible removing the tenant, pr removing any of the tenant’s possessions.

1. Self-help is flatly outlawed and is punishable civilly and criminally.

2. In NY – self-help is flatly prohibited and entitled tenant to treble damages.

(b) Tenant breaches the duty but is out of possession (e.g. – wrongfully vacates the time left on a term of years lease):

(i) Remember SIR:

1. Surrender – landlord can choose to treat tenant’s abandonment as an implicit offer of surrender, which the landlord accepts.

a. Surrender occurs when a tenant demonstrates by words or actions that she wishes to give up the leasehold.

b. If the unexpired term is greater than 1 year, surrender must be in writing to satisfy the statute of frauds.

2. Ignore – landlord can ignore the abandonment and hold the tenant responsible for the unpaid rent, just as if tenant were still there.

a. Only available in a minority of states.

3. Re-let - landlord can re-let the premises on the wrongdoer tenant’s behalf, and hold him liable for any deficiency.

a. Majority rule – landlord must at least try to re-let (mitigation principle).

b. NY – generally, NY does not require a landlord to mitigate damages when a tenant abandons the premises.

iii) Landlord’s Duties:

(1) Duty to deliver possession – the majority rule requires that L put T in actual physical possession of the premises. Thus if at the start of T’s lease a prior holdover is still in possession, L is in breach and the new T is entitles to damages.

(2) Implied covenant of quiet enjoyment – applies to both residential and commercial leases. T has a right to quiet use and enjoyment without interference from L.

(a) Breach by actual wrongful eviction – this occurs when L wrongfully evicts T or excludes T from the premises.

(b) Breach by constructive eviction – for example, every time it rains, D’s apartment floods (D ha a claim for constructive eviction if the three elements below are met).

(i) 3 elements for constructive eviction (SING):

1. substantial interference – a chronic problem attributable to L’s actions or failure to act.

2. notice – T must give L notice of the problem and L must fail to respond meaningfully.

3. goodbye – T must vacate the premises within a reasonable time after L fails to correct the problem.

(ii) Is the landlord liable for acts of other tenants?

1. general rule – no

2. two exceptions:

a. L had a duty not to permit a nuisance on the premises.

b. L must control common areas.

(3) Implied warranty of habitability – applies only to residential leases. It is non-waivable.

(a) standard – the premises must be fit for basic human habitation (bear living requirements must be met).

(i) The appropriate standard may be supplied by local housing code or judicial conclusion.

(ii) Example of problems that trigger breach of the warranty:

1. failure to provide heat in winter;

2. lack of plumbing;

3. lack of running water.

(b) T’s entitlements when the implied warranty of habitability is breached (MR³):

(i) Move (and terminate lease);

(ii) Repair and deduct (allowable by statute is a growing number of jurisdictions).

(iii) Reduce rent (or withhold all rent until the court determines fair rental value; typically T must place withheld rent in escrow to show her good faith).

(iv) Remain in possession (pay rent and affirmatively seek money damages).

(4) Retaliatory eviction – if T lawfully reports L for housing code violations, L is barred from penalizing T by raising rent, ending lease, harassing T, etc.

iv) Assignment versus the sublease:

(1) In the absence of some prohibition in the lease, T may freely transfer his interest in whole (an assignment) or in part (a sublease).

(a) In the lease, L can prohibit T from assigning or subletting without L’s prior written approval.

(i) Once L consents to one transfer by T, L waives the right to object to future transfers by T unless L expressly reserves the right.

(b) NY – unless the lease provides otherwise, a residential T may not assign without L’s written consent. L can unreasonably withhold consent to assign, and T’s sole remedy is to seek release from the lease.

(i) By contrast, in NY, a T in a residential building having four or more units has the right to sublease subject to L’s written consent. Consent to sublease cannot be unreasonably withheld (unreasonably withheld consent is deemed consent).

(2) The assignment:

(a) Example 1 – T1 has ten months remaining on a two-year term of years. T1 transfers all 10 months to T2 (this is an assignment).

(i) As a result, L and T2 are in privity of estate (this means that L and T2 are liable to each other for all of the covenants in the original lease that run with the land: promise to pay rent, duty to repair, etc.).

(ii) L and T2 are not in privity of contract unless T2 expressly assumed the performance of all promises of the original lease.

(iii) L and T1 are no longer in privity of estate, but remain in privity of contract.

1. This L and T1 remain secondarily liable to each other.

(b) Example 2 – L leases BA to T1. T1 assigns to T2. T2 assigns to T3. T3 then engages in flagrant abuse of the premises.

(i) L can proceed against T3 (b/c in privity of estate).

(ii) T1 is secondarily liable to L (b/c in privity of contract).

(iii) L cannot proceed against T2 (no privity of estate or contract).

(3) The sublease:

(a) L and the sublessee are in neither privity of estate or privity of contract.

(i) T2 can proceed against T1 and vice versa.

v) Landlord’s Tort Liability:

(1) general CL rule (caveat lessee) – in tort, L is under no duty to make the premises safe.

(2) Five Exceptions (CLAPS):

(a) Common areas – L must maintain all common areas such as hallways and stairwells.

(b) Latent defects rule – L must warn T of hidden defects of which L has knowledge or reason to know of (L is under no duty to repair).

(c) Assumption of repairs – while under no duty to make repairs, once undertaken, L must complete them with reasonable care.

(d) Public use rule – L who leases public space (such as convention hall, museum) and who should know, b/c of the nature of the defect and the length of the lease, that T will not repair, is liable for any defects on the premises.

(e) Short-term lease of a furnished dwelling – L is responsible for any defective condition that proximately injures T.

f) Servitudes:

i) Easements:

(1) easement – the grant of a nonpossessory property interest that entitles its holder to to some form of use or enjoyment of another’s land (the servient tenement).

(2) Easements can be affirmative or negative.

(a) affirmative easement – most easements are affirmative (the right to go onto and do something on servient land).

(b) negative easement – entitles its holder to prevent the servient landowner from doing something that would otherwise be permissible.

(i) Negative easements are generally recognized in only four categories (LASS):

1. light;

2. air;

3. support;

4. streamwater from an artificial flow.

(ii) Negative easements can only be created expressly, by writing signed by the grantor. There is no natural or automatic right to a negative easement.

(3) An easement is either appurtenant to land or it is held in gross.

(a) Easement appurtenant – an easement is appurtenant when it benefits its holder in his physical use or enjoyment of the property. Two parcels of land must be involved:

(i) the dominant tenement (which derives the benefit); and

(ii) the servient tenement (which bears the burden).

(b) Easement in gross – an easement is in gross if it confers upon its holder only some personal or pecuniary advantage that is not related to his use or enjoyment of his land. Here the servient land is burdened, but there is no benefited or dominant tenement.

(i) Examples:

1. right to place a billboard on another’s lot;

2. right to swim in another’s pond;

3. utility’s right to lay power lines on another’s land.

(4) Transferability:

(a) Easement appurtenant – passes automatically with the dominant tenement, regardless of whether it is even mentioned in the conveyance.

(i) Note that the burden of the easement appurtenant also passes automatically with the servient estate, unless the new owner is a bona fide purchaser w/o notice of the easement.

(b) Easement in gross – an e is not transferable unless it is for commercial purposes.

(5) Creation of an affirmative easement:

(a) Four ways:

(i) By grant – an easement to endure for more than one year must be in a writing that complies with the formal elements of a deed (b/c of SOF concerns - called a deed of easement).

(ii) By implication – also known as an easement implied from existing use

1. example – A owns two lots. Lot 1 is hooked up to a sewer drain located on lot 2. A sells lot 1 to B, with no mention of B’s right to continue to use the drain on A’s lot 2. A court may nonetheless imply an easement on B’s behalf if:

a. the previous use had been apparent; and

b. the parties expected that the use would survive division b/c it is reasonably necessary to the dominant land’s use and enjoyment.

(iii) By necessity – the landlocked setting; an easement of right of way will be implied by necessity if grantor conveys a portion of his land with no way out except over one part of grantor’s remaining land.

(iv) By prescription – an easement may be acquired by satisfying the elements of adverse possession.

1. elements of adverse possession (COAH):

a. continuous use for given statutory period;

i. NY – the statutory period is 10 years

b. open and notorious use;

c. actual use;

d. hostile use (w/o servient owner’s position)

(6) The scope of an easement:

(a) The scope of an easement is set by the terms of the grant or conditions that created it.

(i) Unilateral expansion is not allowed.

(7) Termination of an easement (“END CRAMP”):

(a) Estoppel – servient owner materially changes his or her position in reasonable reliance on the easement holder’s assurances that the easement will no longer be enforced.

(b) Necessity – Easements created by necessity expire as soon as the necessity ends. However, if the easement, attributable to necessity, was nonetheless created by express grant it does not end automatically once the necessity ends.

(d) Condemnation – of the servient estate, by governmental eminent domain power.

(e) Release – a written release, given by the easement holder to the servient landowner.

(f) Abandonment – the easement holder must demonstrate by physical action the intention to never make use of the easement again.

(i) Abandonment requires physical action by the easement holder (mere nonuse or mere words are insufficient to terminate by abandonment).

1. e.g. – A has a right of way across B’s parcel. A erects a structure on A’s parcel that precludes him from ever again reaching B’s parcel. That action signifies abandonment.

(g) Merger – also known as unity of ownership

(i) The easement is extinguished when the easement and title to the servient land become vested in the same person.

(ii) If complete unity of title is achieved, the easement is extinguished. If there is later separation of title the easement is not automatically revived (easement would have to be created from scratch).

(h) Prescription – the servient owner may extinguish the easement by interfering with it in accordance with the elements of adverse possession.

(i) Requirements for adverse possession:

1. continuous interference that is

2. open and notorious; and

3. actual; and

4. hostile to the easement holder.

(ii) E.g. – A has an easement of a right of way across B’s parcel. B erects a chain link fence on B’s parcel, thereby precluding A from reaching it. Over time, B may succeed in extinguishing the easement through prescription.

ii) The License:

(1) Definition – a mere privilege to enter another’s land for some delineated purpose.

(2) Does not need to be in writing (not subject to the SOF).

(3) Licenses are freely revocable, at the will of the licensor, unless estoppel applies to bar revocation.

(4) Typical cases:

(a) Ticket cases – tickets create freely revocable licenses.

(b) Neighbors talking by the fence – attempts to create oral easements (unenforceable b/c of SOF) instead result in a freely revocable license (nothing good comes when neighbors talk by the fence).

(i) e.g. – Neighbor A, talking by the fence with neighbor B, says, “B, you can have that right of way across my land.” This oral easement is unenforceable due to SOF, instead a freely revocable license is created.

(c) Estoppel – will apply to bar revocation only when the licensee has invested substantial money, labor or both in reasonable reliance on the license’s continuation.

iii) The Profit:

(1) The profit entitles its holder to enter the servient land and take from it the soil or some substance from the soil such as minerals, timber or oil.

(2) All the rules of easements apply to profits.

iv) The covenant:

(1) The covenant is a promise to do or not do something related to land. It is unlike the easement b/c it is not the grant of a property interest, but rather a contractual limitation or promise regarding land (one tract is burdened by the promise and another is benefited).

(a) Negative (restrictive) covenants – a promise to refrain from doing something related to land (e.g. – I promise not to build for commercial purposes on my land).

(b) Affirmative covenants – a promise to do something related to land (e.g. – I promise to maintain our common fence).

(2) Covenant vs. Equitable Servitude:

(a) Difference lies in the remedy sought.

(i) If P seeks money damages – covenant.

(ii) If P seeks an injunction – equitable servitude.

(3) When will a covenant run with the land? – when it is capable of binding successors (both benefit and burden must run):

(a) elements necessary for the burden to run (“WITHN”)

(i) Writing – original promise must have been in writing.

(ii) Intent – original parties must have intended that the covenant would run.

(iii) Touch and concern the land – the promise must affect the parties’ legal relations as landowners, and not simply as members of the community at large.

1. Covenants to pay money to be used in connection with the land (e.g. – homeowners association fees) and covenants not to compete do not touch and concern the land.

(iv) Horizontal and vertical privity – both required for the burden to run.

1. Horizontal privity refers to the nexus between the originally promising parties.

a. It requires that they be in succession of estate, meaning that they were in a grantor/grantee, landlord/tenant or mortgagor/mortgageee relationship.

2. Vertical privity refers to the nexus between original owner and their successor to title in the parcel.

a. It requires some non-hostile nexus such as though contract, devise or descent (the only time when vertical privity will be absent is when successor obtains land through adverse possession).

(v) Notice – successor must have had some notice of the promise when he took.

(b) Elements necessary for the benefit to run (“WITV”):

(i) Writing – original promise was in writing.

(ii) Intent – original parties intended that benefit would run.

(iii) Touch and concern – promise affects the parties as landowners.

(iv) Vertical privity – same non-hostile nexus between original holder of the benefited parcel and his successor in title.

1. horizontal privity is not required.

v) Equitable servitudes:

(1) The equitable servitude is a promise that equity will enforce against successors.

(2) It is accompanied by injunctive relief.

(3) To create an equitable servitude that will bind successors you need:

(a) Writing – generally, although not always, the original promise is in writing.

(b) Intent – the original parties must intend that the promise would be enforceable by and against assignees.

(d) Notice – the assignees of burdened land must have notice of the promise.

(e) Privity is not required to bind successors.

(4) The implied equitable servitude:

(a) Under the general or common scheme doctrine, a court will imply a reciprocal negative servitude to hold an unrestricted lot-holder to a restrictive covenant.

(i) Requirements - when the sales began, the subdivider:

1. had a general scheme of residential development which included D’s lot now in question; and

2. the D lot-holder had notice of the promise contained in the prior deeds.

a. There are 3 types of notice potentially imputed to D (“AIR”):

i. Actual notice - D had literal knowledge of promises contained in those prior deeds;

ii. Inquiry notice – neighborhood seems to conform to common restrictions;

iii. Record notice – the form of notice sometimes imputed to buyers on the basis of publicly recorded documents.

1) courts are split: some take the view that a subsequent buyer is on record

notice of the contents of prior deeds transferred to other by a common grantor. The better view, taken by other courts and NY, is that the subsequent buyer dies not have record notice of the contents of those prior deeds transferred to others by the common grantor).

(5) Equitable defenses to enforcement of an equitable servitude:

(a) Changed conditions – the changed circumstances alleged by the party seeking release from the terms of an equitable servitude must be so pervasive that the entire area or a subdivision has changed (piecemeal change is never good enough).

vi) Adverse possession:

(1) Basic concept – possession, for a statutorily prescribed period of time can, if certain elements are met ripen into title.

(2) Elements for possession to ripen into title (COAH):

(a) Continuous – uninterrupted for given statutory period (10 years in NY);

(b) Open and Notorious – the sort of possession that usual owner would make under the circumstances;

(d) Hostile – the possessor does not have true owner’s permission to be there.

(e) Possessor’s subjective state of mind is irrelevant.

(3) Tacking:

(a) One adverse possessor may tack on to his time with the land his predecessor’s time, so long as there is privity which is satisfied by any non-hostile nexus (e.g. – blood, contract, deed or will).

(b) Tacking is not allowed when there has been an ouster.

(4) Disabilities:

(a) The statute of limitations will not run against a true owner who is afflicted by a disability at the inception of the adverse possession.

(i) Common disabilities include insanity, infancy and imprisonment.

g) Land Conveyances - the Purchase and Sale of Real Estate:

i) Every conveyance of real estate consists of a two-step process.

(1) Land contract – which endures until step II

(2) Closing – where the deed becomes the operative document

ii) The land contract:

(1) The land contract and the Statute of Frauds:

(a) standard – the land contract must be in writing, signed by the party against whom enforcement is sought (it must describe the land and state some consideration).

(b) When the amount of land recited in the land contract is more than the actual size of the parcel: the buyer is entitles to specific performance with a pro rata reduction in the purchase price.

(i) Doctrine of part performance – if you have two of the following three, the doctrine is satisfied and equity will decree specific performance of an oral contract for the sale of land:

1. B takes physical possession of the land;

2. B pays all or part of the purchase price;

3. B makes substantial improvement to the land.

(2) The problem of risk of loss:

(a) Apply the doctrine of equitable conversion: equity regards as done that which ought to be done.

(i) Thus, in equity, once the contract is signed, B is the owner of the land, subject of course to the condition that he pays the purchase price.

(ii) One important result flows from this: Destruction.

1. If, in the interim, between contract and closing, BA is destroyed through no fault of either party, B bears the risk of loss (unless the contract says otherwise).

(b) NY – so long as the buyer is without fault, the risk of loss remains with seller until buyer has title or takes possession.

(3) Two implied promises in every land contract:

(a) Seller promises to provide marketable title – title free from reasonable doubt, free from lawsuits and the threat of litigation.

(i) Three circumstances will render title unmarketable:

1. adverse possession – if even a portion of the title rests on adverse possession, it is unmarketable (seller must be able to provide good record title).

2. encumbrances – marketable title means an unencumbered fee simple. Thus servitudes and mortgages render title unmarketable unless the buyer has waived them.

a. Seller has the right to satisfy an outstanding mortgage or lien at the closing, with the proceeds from the sale. Thus, buyer cannot claim that title is unmarketable b/c it is subject to a mortgage prior to closing, so long as the parties understand that the closing will result in the mortgage being satisfied or discharged.

3. zoning violations – title is unmarketable if the property violates a zoning ordinance.

(b) Seller promises not to make any false statements of material fact – the majority of states now also hold sellers liable for failing to disclose latent material defects (thus seller is responsible for his material lies and material omissions.

(i) If the contract contains a general disclaimer of liability (e.g. – “property sold as is” or “with all faults”), it will not excuse seller from liability for fraud or failure to disclose.

(ii) NY – in March 2002, NY passed the Property Condition Disclosure Act, which requires sellers of 1-4 family residential dwellings to provide the prospective buyer with a completed statutory disclosure form (condition of the premises) before the contract is final.

1. Does not apply to coops, condos, or new construction.

(4) The land contract contains no implied warranties of fitness or habitability (the CL norm is caveat emptor).

(a) Exception – the implied warranty of fitness and workmanlike construction applies to the sale of a new home by a builder-vendor.

iii) The Closing:

(1) controlling document – the deed

(2) Unless otherwise specified, acceptance of the deed discharges all of the seller’s contractual obligations, and leaves buyer only with remedies on any covenants contained in the deed.

(i) exam tip – once closing has occurred, don’t select any answer choices pertaining to the land contract.

(3) How does the deed pass legal title from seller to buyer (LEAD):

(a) Lawful Execution of the deed:

(i) standard – must be in writing, signed by the grantor

1. The deed need not recite consideration, nor must consideration pass to make a deed valid.

(ii) description of the land – does not have to be perfect, only an unambiguous description or a good lead (e.g. – “all of my land”).

(b) Delivery Requirement:

(i) The delivery requirement could be satisfied when grantor physically or manually transfers the deed to the grantee (it is permissible to use the mail, an agent, or a messenger).

(ii) However, delivery does not necessarily require actual transfer of the instrument itself.

(iii) The standard for delivery is a legal standard, and is a test solely of present intent.

1. Ask: did the grantor have the present intent to be immediately bound irrespective of whether or not the deed itself has been literally handed over.

(iv) Recipient’s express rejection of the deed defeats delivery.

(v) If a deed, absolute on its face, is transferred to the grantee with an oral condition, the oral condition drops out (not provable – thus delivery is deemed accomplished).

(vi) Delivery by escrow is permissible.

1. Grantor may deliver an executed deed to a third-party, known as an escrow agent, with instructions that the deed be delivered to grantee once certain condition are met. Once the conditions are met, title automatically passes to the grantee.

(4) Covenants for title and the three types of deeds:

(a) quitclaim deed – contains quitclaim; grantor isn’t even promising that he has title to convey

(b) general warranty deed – it warrants against all defects in title, including those attributable to grantor’s predecessors.

(i) The general warranty deed typically contains all six of the following covenants:

1. Present covenants (breached at the time the deed is delivered – SOL runs from then):

a. covenant of seisin – grantor warrants that he owns the estate he now claims to convey.

b. covenant of right to convey – grantor promises that he has the power to make this conveyance (no temporary restraints on grantor’s power to sell).

c. covenant against encumbrances – grantor promises that there are no sertitudes or mortgages on the land.

2. Future covenants (breached when grantor is disturbed of poss.- SOL runs from then):

a. covenant for quiet enjoyment – grantor promises that grantee will not be disturbed in possession by a third-party’ lawful claim of title.

b. covenant of warranty – grantor promises to defend the grantee should there be any lawful claims of title asserted by others.

c. covenant for further assurances - grantor promises to perform whatever future acts are reasonably necessary to perfect grantee’s title if it later turns out to be imperfect.

(c) statutory special warranty deed – provided for by statute in many states, this deed contains two promises (note: grantor makes no representations on behalf of his predecessors in interest):

(i) The grantor promises that he has not conveyed this estate to anyone other than the grantee.

(ii) The grantor promises that the estate is free from encumbrances made by the grantor.

(iii) NY – this deed is called a bargain and sale deed.

h) The Recording System:

i) Model scenario – O conveys BA to A. Later, O conveys BA (the same parcel) to B. O, our double-dealer, has skipped town. In the battle between A and B, who wins?

ii) Two brightline rules:

(1) Notice jurisdiction – if B is a bona fide purchaser, B wins regardless of whether or not she records before A does.

(2) Race-notice jurisdiction – in B is a bona fide purchaser, B wins if she records properly before A does.

iii) Recording Acts exist only to protect bona fide purchasers and mortgagees.

iv) A bona fide purchaser is one who:

(1) purchases BA for value; and

(a) bargain sales - are considered for value (B must remit substantial pecuniary consideration).

(b) Must be a purchaser – B always loses if B is O’s heir, devisee, or donee.

(2) w/o notice that someone else got there first.

(a) Three forms of notice (AIR):

(i) actual – prior to B’s closing, B gets literal knowledge of A’s existence

(ii) inquiry – B is on inquiry notice of whatever examination of the land would reveal, whether B actually looks or not (a form of constructive notice).

1. If a recorded instrument makes reference to an unrecorded transaction, the grantee is on inquiry notice of whatever a reasonable follow-up would have revealed.

(iii) record – B is on record notice of A’s deed if at the time B takes, A’s deed was properly recorded within the chain of title (a form of constructive notice).

1. To give record notice to subsequent takers, the deed must be recorded properly within the chain of title, which refers to that sequence of recording documents capable of giving record notice to subsequent takers. In most states, chain of title is established through a title search of the grantor/grantee index.

2. Two discrete chain of title problems:

a. The problem of the wild deed – O sells BA to A, who does not record. A then sells to B. A records the AàB deed.

i. The AàB deed, although recorded is NOT connected to the chain of title b/c it contains a missing grantor (the OàA link is missing from the public record).

ii. Rule of the wild deed – if a deed, entered on the record (AàB above) has a grantor unconnected to the chain of title (OàA above), the deed is a wild deed and incapable of giving record notice of its existence.

iii. Thus in our problem above, it O then sells BA to C, C is a bona fide purchaser (assuming he didn’t have actual or inquiry notice), and wins in both a notice state (by being A BFP), and in a race-notice state (by being first to record b/c B’s recording is a nullity).

b. Estoppel by deed:

i. In 1950, O owns BA. He is thinking about selling it to X, but for now decides against it. In 1950, X who does not own BA, sells it anyway to A. A records.

ii. In 1960, O finally sells BA to X. X records in 1960.

iii. In 1970 X, a double dealer, sells BA to B. B records.

iv. As between X and A, who owned the property from 1960-69?

1) A - b/c of the rule of estoppel by deed (one who conveys realty that in which he has no interest is estopped from denying the validity of the conveyance if he subsequently acquires the interest that he previously transferred.

v. Who owns BA in 1970?

1) B – as long as B is a BFP (B wins in a notice system b/c he is a BFP; B wins in a race-notice system b/c he is a BFP who won the race to record).

2) How did B win the race to record? – A’s 1950 recording is a nullity b/c A recorded too early. B’s title searcher would not find A’s deed b/c one is entitled to assume that no one sells land until they first own it. Thus B’s title searcher would not discover X’s 1950 pre-ownership transfer to A.

i) Mortgages:

i) A mortgage is the conveyance of a security interest in land, intended by the parties to be collateral for the repayment of a monetary obligation.

ii) It is the union of 2 elements:

(1) a debt; and

(2) a voluntary transfer of a security interest in debtors land to secure the debt.

(a) Debtor – the mortgagor.

(b) Creditor – the mortgagee.

iii) Legal mortgage - typically must be in writing to satisfy the SOF

(1) a.k.a. - mortgage deed, note, security interest in land, deed of trust, or a sale leaseback.

iv) Equitable mortgage – parties understand that land is collateral for the debt, but instead of executing a note or mortgage deed, the debtor hands the creditor a deed to the land that is absolute on its face.

(1) Parole evidence is freely admissible to show the parties’ true intent.

(2) If creditor proceeds to sell the land to a bona fide purchaser, the bona fide purchaser owns the land. The original owner’s only recourse is to proceed against the creditor for fraud and recover the proceeds of the sale.

v) Once a mortgage has been created, what are the parties rights?

(1) Unless and until foreclosure, debtor-mortgagor has title and the right to possession.

(a) Creditor mortgagee has a lien (the right to look to the land if there is default).

(2) All parties to a mortgage can transfer their interests.

(a) The mortgage automatically follows a properly transferred note.

(b) Creditor-mortgagee can transfer his interest:

(i) Ways to transfer:

1. endorsing the note and delivering it to the transferee; or

2. by executing a separate document of assignment.

(ii) If the note is endorsed and delivered, the transferee is eligible to become a holder in due course. This means that he takes the note free of any personal defenses that could have been raised against the original mortgagee.

1. “personal defenses” include lack of consideration, fraud in the inducement, unconscionability, waiver and estoppel.

2. Thus the holder in due course may foreclose the mortgage despite the presence of any such personal defense.

3. By contrast, the holder in due course is still subject to “real” defenses that the maker might raise (“MAD FIFI⁴”).

a. Material Alteration;

b. Duress;

c. Fraud In the Factum (a misrepresentation about the instrument);

d. Incapacity;

e. Illegality;

f. Infancy;

g. Insolvency.

4. To be a holder in due course of the note, the following criteria must be met:

a. the note must be negotiable, made payable to the named mortgagee;

b. the original note must be indorsed, signed by the named mortgagee;

c. the original note must be delivered to the transferee (a photocopy is unacceptable);

d. the transferee must take the note in good faith without notice of any illegality;

e. the transferee must pay value for the note, meaning some amount that is more than nominal.

(i) The lien remains on the land so long as the mortgage interest has been properly recorded (recording statutes protect mortgages).

1. It doesn’t matter which recording state the jurisdiction has enacted.

a. Notice state – buyer takes subject to the lien b/c he is on record noteice of the lien at the time he takes.

b. Race-notice state – buyer takes subject to the lien b/c he is on record notice and the first creditor-mortgagee won the race to record.

2. If the original mortgage was not recorded when the land was sold but is recorded before buyer records the deed, whether the buyer holds the land subject to the mortgage depends on which recording statute has been enacted.

a. Notice state – buyer takes the land free of the mortgage so long as he was a bona fide purchaser when he took.

b. Race-notice state – buyer takes subject to the mortgage b/c he lost the race to record.

(ii) Who is personally liable on the debt if debtor mortgagor sells the mortgaged property?

1. If the buyer has assumed the mortgage – than both the original owner and the buyer are personally liable (buyer is primarily liable and original owner is secondarily liable).

2. If the buyer takes subject to the mortgage – the buyer assumes no personal liability on the debt (only the original owner is personally liable).

a. However, if recorded, the mortgage remains on the land and if the original owner does not pay, the mortgage may be foreclosed.

vi) Foreclosure:

(1) The mortgagee must foreclose by proper judicial proceeding. At foreclosure, the land is sold. The sale proceeds go to satisfying the debt (with attorney’s fees, expenses of foreclosure and any interest accrued on the mortgage taken off the top).

(a) If the proceeds from the sale are less than the amount owed – the mortgagee can bring a personal action against the debtor for a deficiency judgment.

(b) If there is a surplus from the sale – junior liens are paid off in order of their priority (each claimant is entitled to satisfaction in full before a subordinated lienholder may take). Any remaining surplus goes to the debtor.

(2) Effect of foreclosure on various interests:

(a) Foreclosure will terminate interests junior to the mortgage being foreclosed but will not affect senior interests.

(i) Junior lienholder will be paid in descending order with the proceeds from the sale, assuming funds are leftover after full satisfaction of superior claims.

(ii) Junior lienholders should be able to proceed for a deficiency judgment, but once foreclosure of a superior claim has occurred, with the proceeds distributed appropriately, junior lienholders can no longer look to the property for satisfaction.

(iii) Those with interests subordinate to those of the foreclosing party are necessary parties to the foreclosure action.

1. The debtor mortgagor is also considered a necessary party and must be joined, particularly if creditor wishes to proceed against debtor for a personal deficiency judgment.

2. Failure to include a necessary party results in the preservation of that party’s claim despite the foreclosure and sale. Thus if a necessary party is not joined, his mortgage will remain on the land.

(b) Foreclosure does not affect any interest senior to the mortgage being foreclosed. The buyer at the sale takes subject to such interest. This means that the buyer is not personally liable on the senior debt, but, as a practical matter, if the senior mortgage is not paid sooner or later, the senior creditor will foreclose against the land.

(i) Therefore the foreclosure sale buyer has a strong incentive to pay off any senior mortgages still attached to the land in order to avoid a later foreclosure action that could be brought by that mortgagee.

1. Thus, bidder should offer for the purchase price the FMV of the property minus the amount he will have to pay to discharge any mortgages the land is still subject to.

(3) Priorities:

(a) As to creditor, you must record (until you properly record your mortgage you have no priority).

(b) Once recorded, priority is determined by the norm of first in time, first in right.

(i) The purchase money mortgagee is first priority as to the parcel he financed.

(ii) E.g. – C1 lends $200,000 to O, taking a security in all of O’s real estate holdings, “whether now owned or hereafter acquired.” (this is a permissible after-acquired collateral clause) C1 records the mortgage note. Six months later C2 lends O $50,000 to enable O to acquire a parcel known as BA, taking back a security interest in BA and recording that interest. Subsequently, O defaults on all outstanding obligations. All that he has left is BA. C2, the purchase money mortgagee, has first priority in BA because he financed that parcel.

(d) Subordination agreements – by private agreement, a senior creditormay agree to subordinate its priority to a junior creditor.

(4) Redemption in equity:

(a) At any time prior to the foreclosure sale, the debtor has the right to redeem the land and free it from the mortgage.

(i) Equitable redemption is universally recognized up to the date of sale.

(ii) Once a valid foreclosure has taken place, the right to equitable redemption is cut off.

(b) The right is exercised by paying off the amount due plus interests and costs.

(i) If the mortgage or note contained an acceleration clause, the mortgagee is permitted to declare the full balance due in the event of default, therefore the full balance plus accrued interest plus costs must be paid to redeem.

(ii) The debtor/mortgagor may not waive the right to redeem in the mortgage itself (this is known as clogging the equity of redemption and is prohibited).

(c) Statutory redemption – recognized in ½ the states, it gives the debtor/mortgagor a statutory right to redeem for some fixed period after the foreclosure sale has occurred (typically 6 months to 1 year).

(i) Where recognized, statutory redemption applies only after foreclosure has occurred. The amount to be paid is usually the foreclosure sale price rather than the amount of the original debt.

(ii) In most states recognizing statutory redemption, the mortgagor will have the right to possession of BA during the statutory period.

(iii) When the mortgagor redeems, the effect is to nullify the foreclosure sale and the redeeming owner is restored to title.

(iv) In NY – does not exist.

j) Lateral Support:

i) If land is improved by buildings and an adjacent landowner’s excavation causes that improved land to cave in, the excavator will be liable only if he acted negligently.

ii) Strict liability does not attach to the excavator’s actions unless P shows that b/c of D’s actions, P’s improved land would have collapsed even if in its natural state (before improvements).

k) Water rights:

i) There are 2 major systems for determining allocation of water in watercourses such as streams, rivers and lakes.

(1) The Riparian Doctrine – the water belongs to those who own the land bordering the water course.

(a) These people are known as Riparians, who share the right of reasonable use of the water.

(i) One Riparian will be liable if his or her use unreasonably interferes with others’ use.

(2) The prior appropriation doctrine – the water belongs initially to the state, but the right to divert it and use it can be acquired by an individual, regardless of whether or not he happens to be a Riparian owner.

(a) Rights are determined by priority of beneficial use. The norm for allocation is first in time, first in right, Thus, a person can acquire the right to divert and use water from a watercourse merely by beings the first to do so. Any productive or beneficial use of the water, including use for agriculture, is sufficient to create the appropriate right.

ii) Groundwater (a.k.a. percolating water) – water beneath the surface of the earth that is not confined to a known channel.

(1) The surface owner is entitled to make reasonable use of groundwater. However, the use must not be wasteful.

iii) Surface Waters – those which come from rain, springs or melting know and which have not yet reached a natural watercourse or basin.

(1) Common enemy rule – surface water is considered a common enemy and a landowner may change drainage or make any other changes/improvements on his land to combat the flow of surface water (followed in ½ the states).

(a) Many courts have modified the common enemy rule to prohibit unnecessary harm to others’ land.

l) Possessor’s rights:

i) The possessor of land has the right to be free from trespass and nuisance.

(1) Trespass – invasion of land by tangible, physical object.

(a) To remove a trespasser, landowner brings an action for ejectment.

(2) Private nuisance – the substantial, intentional and unreasonable interference with another’s use and enjoyment of land.

(a) Unlike trespass, nuisance does not require tangible physical invasion. Thus, odors and noise could give rise to a nuisance but not a trespass.

(b) Nuisance and the hypersensitive P - there is no nuisance if the problem is the result of P’s super sensitivity or specialized use.

m) Eminent domain – governments 5^th amendment power to take private property for public use in exchange for just compensation.

i) Explicit takings – acts of governmental condemnation (e.g. – gov’t condemns your land to make way for a public highway, gov’t must pay just compensation).

ii) Implicit or regulatory takings – a governmental regulation that, although not intended to be a taking, has the same effect.

(1) e.g. – you buy land in NC for development. 3 months later the gov’t imposes a ban on all development. You have not been the target of an overt condemnation. Still, you argue that the regulation is an implicit taking b/c it has worked an economic wipeout of your investment.

(2) Remedy for a regulatory taking – the government must either:

(a) Compensate the owner for the taking; or

(b) Terminate the regulation and compensate owner for damages that occurred while regulation was in effect.

n) Zoning – pursuant to police power, gov’t may enact statutes to reasonably control land use.

i) Variance – permission to depart from requirements of a zoning ordinance (principal means to achieve flexibility in zoning).

(1) Proponent must show:

(a) undue hardship; and

(b) variance won’t work detriment to surrounding property values.

(2) Variance is granted or denied by administrative action (typically a zoning board).

ii) Non-conforming use – a once lawful, existing use now deemed nonconforming by a new zoning ordinance.

(1) It cannot be eliminated all at once unless just compensation is paid. Otherwise, it could be deemed an unconstitutional taking.

iii) Unconstitutional exactions – those amenities that the gov’t seeks in exchange for granting permission to build.

(1) They must be reasonably related in both nature and scope to the impact of the proposed development (if not they are unconstitutional exactions).

E.g. – you are a developer seeking permission to build a 200-unit residential development in the town of Utopia. The town tells you that it will grant you the requisite permit if you agree to provide several new streetlights, a small park, and wider roads.

[이상의 아웃라인은 본인이 작성한 것이 아닙니다. 인터넷에서 쉽게 구할 수 있는 것임을 밝힙니다. 하지만, New York Bar Exam을 준비하시는 분들께 도움이 되리라 생각합니다]

Kim's Bar Exam & American Law Talk

2011년 12월 8일 목요일

Sample Property Law Outline

Property:

1. Summary of Freehold Estates:

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