Property II
I.
Cotenancies and Marital Interests
a.
Types
of tenancies
i.
Tenancy in Common
1.
Each
co-tenant is the owner of a separate and distinct share of the property with an
undivided interest in the whole
2.
Each
has a right to possess and enjoy the property
a.
One
tenant can go into possession of the whole unless another objects
b.
If
in conflict over possession, court may partition
3.
Not
survivorship rights – passes to devisees and heirs
4.
This
is default type of tenancy
ii.
Joint Tenancy
1.
Each
owns an undivided interest
2.
Surviving
tenant has a right to the whole estate – survivorship rights
a.
The
interest does not pass to the survivor but the deceased portion is extinguished
upon death
b.
Cannot
be devised by will or reached by creditors upon death
3.
Can
be created in real or personal property
4.
Four Unities Required
a.
Time:
interest must be created at the same time
b.
Title:
must acquire title by the same instrument or jointly by adverse possession
c.
Interest:
equal in size and duration
d.
Possession:
right to possession of the whole
5.
Cannot
be conveyed to self
a.
If
want to create a joint in Hand W, H can use a strawman
6.
Has
to be created by express words
7.
Severance
a.
Break
any of the four unities
b.
Convey
interest – this only severs the portion that was conveyed
c.
Sue
for partition
i.
Although
have to have equal interest, court can partition unequally according to
consideration of each party
d.
Mortgages
i.
Title Theory: mortgage has the effect of conveying the legal title to the
mortgagee, and the mortgagor has an equity of redemption entitling the
mortgagor to get legal title back upon payment of the mortgage – mortgage
destroys the unity of interest and severs the joint tenancy
ii.
Lien Theory: most states hold that the mortgagee does not have legal title, but
rather a security interest called a lien – mortgage does not sever the tenancy
but the states differ on whether the surviving joint tenant takes ½ subject to
the mortgage if the debt is not paid off before the debtor joint tenant dies
e.
Jurisdictions
are split but some hold that if one joint tenant leases her interest in the
property, it may sever joint tenancy
i.
Tenants
can agree among themselves that one may have the right to exclusive possession
and it does not sever the tenancy
f.
Joint
tenants can agree to hold as tenants in common and this severs the tenancy
iii.
Tenancy by the entirety
1.
Can
only be created bt H and W
2.
Requires
the same four unities as joint in addition to marriage
3.
Surviving
spouse has survivorship rights
4.
Most
states presume tenancy by the entirety when H and W – others as joint or in
common
5.
Even
if purchased two weeks prior to marriage, not tenancy by the entirety
6.
Severing
can only be done by divorce or death – partition is not an option
a.
Divorce
i.
Common law: on divorce the husband’s property belonged to the husband and the
wife’s to the wife – husband had obligation of paying alimony for life –
whoever held title kept possession
ii.
Modern law: division is closer to 50/50
iii.
Uniform Marriage and Divorce Act: equitably apportion bt the parties the property
and assets belonging to either or both however and whenever required – consider
prior marriages, length of marriage, earning capacity, and child-care
responsibilities
iv.
Division
of talent and academic degrees
1.
In re Marriage of Graham: increased earning power from a professional degree
is not “property” and therefore is not divisible on divorce
2.
Elkus v. Elkus: earning power increased during marriage by acquiring a
professional degree or celebrity status is property subject to equitable
division – the supporting spouse is awarded a share in the value of his/her
investment in human capital
b.
Divorce
i.
Common Law: for personal property, widows got 1/3 if surviving issue and ½ if not
– widowers got everything – real property applied dower and curtesy
1.
Dower:
for surviving wife for all freehold (not leasehold) land which husband seized
during marriage
a.
A
life estate in 1/3 of each parcel of qualifying land
b.
Attaches
to land at the moment of marriage
c.
W
has interest but not yet possessory until H dies
d.
Any
purchaser from, or creditor of, H takes subject to it unless W releases
e.
If
W predeceases H then it is extinguished
2.
Curtesy: for surviving husband only if issue were born of the marriage – life
estate in all of W’s land (not just 1/3)
3.
Dower
abolished in all jurisdictions except AR, DC, IA, KY, MI, and OH
a.
Wherever
dower abolished, so is curtesy
b.
In
MI, dower is given but not curtesy
ii.
Modern Elective/Forced Share
1.
Almost
all states give the surviving spouse an elective share in the decedent’s
property owned at death
2.
Usually
½ or 1/3
3.
Applies
to all property except owned in joint tenancy or life insurance policies
4.
Surviving
spouse has the option of taking a forced share or taking what the decedent
spouse left by will
5.
GA
does not have a forced share
b.
Joint Tenancy Bank Accounts
i.
Either
party on the account can withdraw the amount deposited and the survivor takes
whatever sum is remaining in the account when the other joint tenant dies
ii.
Convenience Account: the caretaker can lawfully write checks to pay bills during the
depositor’s life, but the caretaker has no rights of survivorship
iii.
Presumption
is joint tenancy – convenience account has to be shown by clear and convincing
evidence
iv.
Majority
holds parties belongs to the parties in proportion to the net contributions of
each to the sums on deposits – creditors can only reach the amount on deposit
proportionate to that person’s contribution
c.
Relations Among Concurrent Owners
i.
Partition
1.
Can
be brought by any tenant in common or joint tenant
2.
Partition in Kind
a.
Court
physically partitions the land into separate tracts
b.
Once
separated, tenants own in fee simple
c.
If
the separate tracts are not equal in value, the court will require one tenant
to make a cash payment (owelty) to the other tenant to equalize the
values
d.
This
type of partition is generally favored by the courts
3.
Partition Sale
a.
Property
is sold and the sale proceeds divided equally among the cotenants
b.
Presumption
is that tenants are entitled to equal shares
c.
Rebuttable
presumption if shares are not actually equal
4.
Houses,
apartments, and commercial property usually partition by sale
ii.
Accounting and Ouster
1.
Majority Rule: a co-tenant not in possession must establish ouster by a co-tenant in
possession in order to request his share of the reasonable rental value
(accounting of the rents) from the co-tenant in possession – this promotes
active use of the land
a.
Ouster:
an act by on co-tenant that deprives another co-tenant the right to possession
– has to actually refuse to admit the other onto the property – ways to
establish:
i.
Adverse
possession: statute of limitations starts running if one tenant refuses entry
to the other – open and notorious is difficult to establish (can be done by
over-hunting the land, chopping down too many trees, paying all of the taxes,
not accounting for revenue, etc.)
ii.
One
co-tenant attempts to enter the common property and is denied (changing the
locks) – must make a physical attempt to enter
2.
Minority Rule: the co-tenant in possession must account to the co-tenant not in
possession for the latter’s share of the reasonable rental value of the
property
3.
Each
co-tenant has the duty to pay her share of taxes in order to protect the
property from a tax foreclosure sale – cannot stop paying taxes then buy the
property at a tax sale free and clear
4.
Co-tenants
are not considered fiduciaries to one another
iii.
Marital Property Interests
1.
Common Law: H owned everything that W had – H had the right of possession, and
H’s creditors could reach W’s property but H was liable for W’s torts
2.
Pre-existing Duty Rule: performance of a preexisting legal duty cannot
serve as consideration
3.
Creditors
a.
Approaches
from Sawada
i.
Group
1: one person, usually the husband, can subject the property to creditors
ii.
Group
2: Creditors can reach the co-tenancy subject to the right of survivorship
1.
If
the co-tenant who did not incur the debt outlives the one who did incur the
debt, then the creditor is out of luck
2.
Creditors
can only reach survivorship rights if the non-debtor spouse dies first
iii.
Group
3: The property may not be subjected to the debts of one spouse only (Hawaii)
iv.
Group
4: The right of survivorship can be reached by creditors, but the present
interest cannot (the converse of group 2)
b.
NY
Approach: essentially marry the creditor and non-debtor spouse – creditor steps
into the shoes of the debting spouse
c.
Seizure
by Government/Government as Creditor
i.
Federal
drug laws provide for the forfeiture to the gov’t any property used in sale of
illegal drugs
1.
Allows
for innocent owner defense – innocent party not just uninvolved but
completely clueless to the activity
ii.
Some
state laws provide for forfeiture of property used in committing various offenses
with no exemption of an innocent owner’s interest
1.
Innocent
owner defense not constitutional compelled
2.
Owner
should bear consequences of misuse when entrusting others
d.
Community Property System
i.
Eight
states have this system: AZ, CA, ID, LA, NV, NM, TX, WA
ii.
Rests
on the notion that the marriage is a community partnership, both contribute to
the material success of the marriage, and both should share equally in the
material acquisitions
iii.
Consists
of earnings of either spouse during the marriage and property acquired through
earnings – property owned by either spouse before marriage or acquired during
marriage by gift, descent, or devise is separate property
iv.
Once
characterized as community property, all income and proceeds of sale of the
property are community property also – if new assets are purchased with
community funds, the new assets are community property
v.
Once
spouse cannot change community property into separate property wo the other’s
consent
vi.
In
ID, LA, and TX, the income from separate property is community property – in
other states, the income from separate property retains its separate status
1.
If
doubt, presumption is community property
vii.
No
tenancy by the entirety, dower, or curtesy
viii.
Each
partner is a kind of fiduciary to the other
ix.
Character
of property does not change when you move form one state to another
x.
Mixing
(community and separate property) Approaches
1.
Inception of Right: the character of the property is determined at the time W or H signed
the contract of purchase – community is only entitle to a return of community
payments plus interest
2.
Time of Vesting: title does not pass to W or H until all the installments are paid
3.
Pro Rata Apportionment: community payments “buy in” a pro rata share of
the title
e.
Unmarried Partners and Nontraditional Couples
i.
Unmarried Partners
1.
Common Law Marriage: an unmarried man and woman who hold themselves out to the public as
married and conduct their affairs as a married couple are treated as if they
were lawfully married – abolished in most states
2.
An
express contract bt unmarried partners providing how the couple’s property will
be divided on separation or death is enforceable in most states – in some
states the contract can be oral (does not give them status rights under law
such as elective share)
a.
Contracts
for meretricious relationships will not be recognized
b.
In
some states, a contract to share property or to support one partner can be
implied from the conduct of the parties
3.
Policy:
a state might not enforce contract bt unmarried partners if it wants to avoid
constructively resurrecting the common law marriage or wants to encourage
marriage
ii.
Nontraditional Couples (Same Sex)
1.
VT:
civil union is similar to the institution of marriage
2.
WA:
currently dealing with what happens to property after the death of one member
of a same sex couple
3.
Defense
of Marriage Act: denies many marital benefits to same sex couples – raises
serious constitutional issues not yet ruled on
II.
Landlord-Tenant
a.
Types
of tenancies
i.
Tenancy for a Term of Years
1.
Any
tenancy for a defined period of time
2.
Lasts
for some fixed period of time or for a period of time computable by a formula
that results in fixing calendar dates for beginning and ending once the terms
is created or becomes possessory – can be a term of days, months, years, etc.
3.
Expires
at the end of the state period wo either party giving notice
ii.
Periodic Tenancy
1.
Month
to month, year to year, etc.
2.
Renews
until notice is given
3.
Old
common law rule was 6 months notice required, now typically 30 days
a.
Common
law rule was notice equal to the length of the period itself (week, month,
etc.) with a maximum of 6 months for a year term
4.
Fixed
duration that continues for succeeding periods until either the ll or t gives
notice of termination
5.
All
terms and conditions for the tenancy are carried over and are applicable in
each subsequent period unless there are express provisions to the contrary
6.
Can
be created by express agreement or implication
7.
At
common law, and in most jurisdictions today, if an annual rent is specified,
the estate if from year to year, even though the rent required to be paid in
monthly installments
iii.
Tenancy at Will
1.
No
stated duration that endures only so long as both ll and t desire
2.
Either
ll or t can terminate at any time, but both must be able to terminate
3.
Can
arise expressly or by operation of law where the intended tenancy fails
4.
At
common law, neither ll nor t had to give any notice for termination
a.
Today,
most states require some sort of notice to terminate
b.
Usually
30 days notice is required but often imposed on ll but not on t
5.
If
leasehold has no certain duration but is terminable at will by one party, the
courts are split as to what is created
a.
Tenancy at Will: some courts imply a power of termination in both parties
b.
Determinable Life Estate: a life estate subject to a condition like paying
rent
iv.
Tenancy at Sufferance/Holdovers
1.
When
a tenant rightfully in possession wrongfully remains in possession (holds over)
after termination of the tenancy, he is a tenant at sufferance
2.
Not
really a tenant at all bc he is not holding with the permission of the ll
3.
Since
original possession was not wrongful, also not a trespasser
4.
Lasts
only until the ll evicts the tenant or elects to hold the t to another term
5.
Holdover Doctrine
a.
Allowing
ll to hold the holdover another term is justified as a deterrent
b.
Some
criticize this as imposing a penalty disproportionate to fault
6.
In
most jurisdictions, holdover tenancy gives rise to a periodic tenancy – the
rest results in a term of years – in either case, limited to one year
a.
Restatement: holding over results in a periodic tenancy measured by the way rent
is computed, up to a maximum period of one year
7.
Except
wrt length, the new tenancy is governed by the provisions in the old lease,
including provisions for paying rent and any covenants
a.
If
the ll notifies the t that he must pay higher rent if he holds over, the
holdover t may be liable for the higher rent unless he notifies the ll that he
refuses to pay
b.
Silence
by the tenant is usually deemed implied consent to an increase in rent
b.
The Lease
i.
Traditionally: rests on a conception that the lease is a conveyance of property and
that the tenant has purchased leasehold estate in land
1.
Traditional
rule is that the t has bought an estate in land and assumes the risks of caring
for the estate
2.
T
has the duty of maintenance
3.
Ll
has only the right to reenter and repossess the land on breach of a covenant by
t
ii.
Modern:
considered contract law
1.
Contains
promises, usually called covenants, bt the parties – pay rent, taxes,
insurance, repair, use property for certain purposes
2.
Covenants
are deemed to be mutually dependent
c.
Housing Discrimination
i.
Civil Rights Act of 1866: bars racial and ethnic discrimination (only) in
the sale or rental of property (not just housing)
1.
Civil
Rights act of 1866 does not have any exemptions for a single family dwelling or
for Mrs. Murphy – does apply to sales and rentals by an owner of a single
family dwelling or by Mrs. Murphy – a racial or ethnic minority denied
admittance to single family dwelling or small boarding/apartment house must sue
under Civil Rights Act rather than FHA
ii.
Fair Housing Act (Title VIII of the Civil Rights Act of 1968)
1.
§ 3604:
make it unlawful to refuse to sell or rent a dwelling (only) to any person bc
of race, color, religion, sex, familial status (persons w children except in
senior citizen housing), national origin, or handicap (sex added in 1974,
familial status and handicap added in 1988)
2.
§ 3604(c): prohibits advertising or making any public statement that indicates a
discriminatory preference – a statement to a t or prospective t that the ll
will not rent to persons protected under the act violates the act
3.
§ 3601:
private clubs, dwellings for religious organizations, and certain specified
persons are exempt from the FHA – purpose of these exemptions is to protect
some types of close personal relationships from what is thought to be an
invasion of privacy
4.
§ 3602(h): Definition of handicap
a.
A
physical or mental impairment which substantially limits one or more of such
person’s major life activities
b.
A
record of having such an impairment, OR
c.
Being
regarded as having such an impairment, but such term does not include current,
illegal use of or addiction to a controlled substance
5.
§ 3603 (b)(1): exempts a person leasing or selling a dwelling he owns if he:
a.
Does
not own more that 3 such dwellings, AND
b.
Does
not use a broker, AND
c.
Does
not advertise or say anything in a manner that indicates his intent to
discriminate
d.
This
subsection only applies to only one sale wi any 24 month period
6.
§ 3603(b)(2): (Mrs. Murphy Exemption) exempts a person offering to lease a room or
an apartment in his building of four units or less, one unit of which he
occupies, and he does not advertise in a discriminatory manner
iii.
Proving Discrimination
1.
To
prove a violation of the FHA or Civil Rights Act, pl must first establish a
prima facie case – pl must show:
a.
Member
of a statutorily protected class, AND
b.
Applied
for and was qualified to rent the designated dwelling, AND
c.
Denied
the opportunity to inspect or rent the dwelling, AND
d.
Opportunity
remained available for others (helps that the dwelling was rented to someone
else)
2.
If
pl makes a prima facie case, the burden shifts to def to produce evidence that
the refusal to rent was motivated by legitimate reasons having nothing to do w
pl race, religion, ethnic origin, sex, disability, or familial status – if one
of the protected statuses is even one of several motivating factors, the
statute is violated
3.
Once
def introduces evidence of his alleged legitimate reasons, the burden shifts
back to the pl to show that the alleged legitimate reasons are pretextual
4.
If disabled, requires
reasonable accommodations – not just all accommodations requested
d.
Delivery of Possession
i.
English Rule: the ll has the duty to deliver actual possession, as well as the
right to possession at the beginning of the term
1.
If
the previous tenant has not moved out when the new t lease begins, and the ll
does not remove the person wi a reasonable period of time, ll is in default
2.
Policies
a.
New
t bargained for the use of the property, not a suit against the prior t
b.
Ll
more likely to know if the previous t will move out and is in a better position
to pressure him to do so
c.
Ll
is usually much more familiar with eviction procedures that t and can evict the
holdover at less cost
d.
More
efficient to put the duty on ll
3.
Remedies
a.
T
can terminate the lease and recover damages for having to obtain housing
elsewhere
b.
T
can affirm the lease, refuse to pay rent for the portion of the term he was out
of possession, and recover damages
c.
Damages
could include items such as costs of renting other premises in excess of the
rent specified in the lease
ii.
American Rule: ll has no duty to deliver actual possession at the commencement of
the term, and hence is not in default under the lease when the previous t
continues to wrongfully occupy the premises
1.
Ll
must deliver legal (rather than actual) possession, then t must go after
holdover
2.
This
is actually the minority view
3.
Policies
a.
Ll
should not be liable for the tortious act of the holdover
b.
Lease
conveys a leasehold estate to the t, so it is up to the t to take possession of
the property if he wants it
c.
T
has the right to evict the holdover by summary proceedings and needs no
additional remedy from the ll
d.
These
policies do not address the fundamental issues of fairness and efficiency
4.
Remedies
a.
Incoming
t generally has the same rights against the holdover the ll would have
b.
Incoming
t can sue to evict the holdover and recover damages, or the incoming t can
treat the holdover t as t for another term with rent payable to the incoming t
iii.
GA
follows the English rule
e.
Subleases and Assignments
i.
Sublease
1.
Arises
when lessee is coming back before the end of the term of the lease (even if for
only one day)
2.
An
interest less than the whole is conveyed
3.
T
becomes ll of the sublessee
4.
Sublessee
is not in privity with the ll so cannot sue or be sued by ll
a.
Not
personally liable to the ll for rent
5.
At
common law, a transfer by the tenant is a sublease if the tenant retains a
reversion in the property after the transfer
6.
If
a t retains a right of entry upon default in rent, some cases hold that the
transfer is a sublease
a.
This
is contrary to the common law rule that holds it is an assignments since no
reversion was retained
ii.
Assignment
1.
Gets
the rest of the term of the lease – original lessee is not coming back
2.
Entire
interest is conveyed
3.
If
the tenant assigns his leasehold, assignee comes into privity of estate w the
ll, which means that the ll and the assignee are liable to each other on the
covenants in the original lease that run with the land
a.
Similarly,
if the ll assigns the reversion, the assignee and the t are in privity of
estate
4.
Privity of Estate
a.
Concept
used in the assignment context to circumvent the fact that ll and assignee are
not in privity of contract w each other
b.
Generally,
ll can sue for rent any person who is either in privity of contract w ll as to
the rent obligation, or who has come into privity of estate w ll so as to be
bound by the rental covenants fo the lease
5.
Although
the assignee is liable for the rent, the original t also remains liable for the
rent, in the event the assignee fails to pay bc the original t contracted w the
ll
a.
Assignment
terminates his interest in the leasehold, but does not affect his contractual
liability to the ll
b.
Original
t is said to be a surety of the assignee’s obligation to pay rent
6.
Mere
fact that ll consents to the assignment and accepts rent from the assignee is
not an implied release of t
a.
Ll
can assent to an assignment, release t, and in exchange for the release, the
assignee might undertake the promises in the lease
b.
This
is a novation
c.
T
is now out of the picture, and there is both privity of contract and estate bt
ll and the assignee
iii.
Restraints
1.
Absent
any covenant to the contrary, a leasehold is freely transferable by the t – it
may be assigned or sublet wo the ll consent
2.
Many
ll insist that the lease contain a covenant against transfers by the t
a.
Such
a covenant is valid, but, being a restraint on the transfer of land, it might b
e strictly construed against the ll
b.
A
covenant not to assign does not prevent the tenant from subleasing, and a
covenant not to sublease does not prevent an assignment
3.
If
the lease contains a covenant requiring ll consent, and it does not contain a
standard for withholding consent, there is a jurisdictional split regarding an
implied standard for withholding consent
a.
Majority Rule: ll can do whatever he wants
b.
Minority Rule: ll must withhold consent in a commercially reasonable manner – this
requirement does not apply to residential leases – can contract around this
rule (adopted by the restatement)
i.
Not
commercially reasonable for personal taste, convenience, sensibilities, or
other things external to the agreement
f.
Ll rights and duties
i.
Right to Enter
1.
Growing
number of jurisdictions prohibit self-help in recovering possession and require
ll to resort to a statutory remedy such as summary proceedings
2.
A
lease may provide that ll is authorized to use self help in retaking possession
on the t default
a.
Most
courts hold such a provision valid
b.
Minority
hold the provision void as violating public policy against self help
3.
Common Law: ll could use a much force as necessary to expel the t
4.
Modern Law
a.
Few
states hold ll may use reasonable force to expel the t wo court process of any
kind
b.
Some
jurisdictions hold that ll can enter only by peaceable means
i.
Changing
the locks and locking out the t has been held forcible (Berg v. Wiley)
5.
Georgia
a.
Entelman v. Hagood: favors tenant in action for trespass in residential lease w no
provision
b.
Rucker v. Wynn:
favors ll with lease provision in commercial lease
ii.
Summary Proceedings
1.
Every
state has a summary proceeding process, but can be a very slow process which is
what drives some ll to self help
2.
Statutes
usually require that before bringing summary action, ll must give the t notice
to quit but the required notice may be very short bc it is assumed the t knows
he is holding over unlawfully
3.
Many
jurisdictions today prohibit retaliatory eviction
iii.
Abandonment/Duty to Mitigate Damages
1.
Common Law: ll may, but need not, mitigate damages – ll has three options
a.
Terminate
the lease
b.
Let
the premises lie idle and sue the t for the agreed-upon rent as it comes due
c.
Retake
possession and attempt to relet the premises, holding the original t liable for
any deficiency that may occur
2.
Old Rule: if ll chooses to stand by and do nothing, the common law rule holds
that ll does not have a duty to mitigate damages by finding another tenant
3.
Modern Rule: In a growing number of states, probably a majority, ll has a duty to
mitigate damages (Sommers v. Kridel)
a.
Put
in open stock
b.
Reasonable
Diligence
4.
GA
follows the common law rule
iv.
Rent Acceleration: to avoid the rule that ll must wait to sue for rent as it falls due,
a rent acceleration clause is often inserted into the lease – provides that th
rent for the balance of the term shall become payable in full on t default of
payment of rent or some other obligation – usually held valid
v.
Security Deposits
1.
Commonly
require t to make a security deposit at the time the lease is executed to
assure t performance – ll promises to return this money to t at the end of the
term if t has not breached any covenant
2.
Example
of a moral hazard: t has an incentive to, at the start of the last month of
tenancy, tell ll to keep the security deposit in lieu of the last month’s rent
– ll has an incentive to nickel and dime t when assessing damages
g.
Tenants Rights When in Possession
i.
Quiet Enjoyment/Constructive Eviction
1.
Constructive Eviction: Where, through the fault of the ll, there occurs a
substantial interference w the t use and enjoyment of the leased premises, t
may terminate the lease, vacate the premises, and be excused from further rent
liability
2.
Common Law: viewed the promises expressed in leases as independent, such that a
breach by the ll gave a tenant a cause of action for damages, but not the right
to suspend rent payments or terminate the tenancy
3.
Notice
a.
If
t knows of the interference prior to taking possession, and subsequently takes
possession, t has waived the interference
b.
Usually,
prior to claiming constructive eviction, t must give notice to ll of the
objectionable conduct and ll must fail to remedy the situation wi a reasonable
time
4.
T
must vacate premises
a.
T
cannot claim constructive eviction unless and until he vacates the premises
b.
T
may be able to stay in possession and bring an equitable action for a
declaratory judgment that ll actions constitute constructive eviction
i.
Such
declaratory relief permits t to know, before vacating the premises, whether he
is justified in vacating
c.
If
t vacates the premises on constructive eviction, this action terminates the
lease – t has no further rent liability
d.
Restatement view: rejects the requirement that t must abandon the property before
claiming constructive eviction – gives t a right to
i.
Terminate,
OR
ii.
Stay
on and receive damages or a rent abatement or employ certain self held remedies
5.
Fault
of ll
a.
Interference
w t quiet enjoyment must result from some act or failure to act by ll
i.
Whether
acts of other tenants or 3rd persons will suffice depends on whether
ll can control the behavior and can be regarded as at fault in not controlling
it
ii.
As
a general rule, ll is not responsible for one t causing annoyance to another t
even though the annoying conduct would be constructive eviction if done by ll
himself and even though ll can legally control the other’s conduct
b.
Modern Trend (minority view): holds ll responsible for other t acts if ll has the
legal ability to correct the conditions and fails to do so
6.
Where
constructive eviction might arise
a.
Failure
to supply heat so that the apt becomes unlivable on cold days
b.
Main
waste pipe of apt building permitted to become and remain clogged w sewage for
a long period of time causing offensive odors and danger to health
c.
Allowing
part of an apt building to be used for lewd purposes such that the rest of the
building is unfit for occupancy by a respectable family
d.
Allowing
plumbing to become so old and worn out as to emit strong and unhealthy odors
7.
Latent/Patent Defects
a.
Latent:
not readily apparent at the time the lease is signed – probably can be grounds
for constructive eviction
b.
Patent:
readily apparent at the time the lease is signed – probably cannot be grounds
for constructive eviction
ii.
Illegal Leases
1.
If
the rental agreement is illegal bc the housing code forbids renting property in
substandard condition, t has no duty to pay rent, but t must pay the reasonable
rental value of the premises
2.
If
the premises are unsafe or unsanitary, the lease is illegal and unenforceable
by operation of law
3.
T
under an illegal lease is a tenant at sufferance, and ll is entitled to the
reasonable rental value of the premises, given their condition
iii.
Implied Warranty of Habitability
1.
Rather
than moving out and claiming constructive eviction, t can claim breach of the
implied warranty of habitability for basic health and safety problems
2.
Violations
of public housing codes may be evidence of breaches of the warranty
3.
Covers
all defects, latent and patent
4.
This
is not waivable by the t – cannot contract around this warranty
5.
Does
not apply to commercial leases
6.
T
can terminate the lease and leave (and recover damages), stay and not pay rent,
stay and pay rent then sue for damages, or fix the problems and deduct the cost
from the rent
7.
T
may also defend, in an action by ll for rent, that the agreed rent is not due
bc of ll breach
8.
T
has a duty of notice – reasonable time to repair after notice given
9.
Adopted
in a large majority of jurisdictions
10.
Often,
smaller ll who cannot afford improvements will declare bankruptcy – if t
obtains judgment, will not be able to reach ll assests – thus sometimes, t
victory is empty
11.
Warranty
applies to patent defects whereas quiet enjoyment may not – warranty allows t
to stay whereas have to vacate for constructive eviction
iv.
Retaliatory Eviction
1.
Ll
cannot evict if he has a retaliatory motive
2.
Whether
ll primary motivation is retaliatory is a question of fact
a.
Burden
of proving motive is on t
b.
Burden
shifts to ll if t can show ll action was:
i.
Discriminatory
against t, AND
ii.
Followed
t reporting violations
3.
A
tenant in default in payment of rent cannot assert a retaliatory eviction
defense
a.
However,
t is not in default if acting legally in withholding rent
v.
Ll Tort Liability
1.
Common Law: ll were liable for t injuries only when ll negligently breached the
limited duties that arose form the handful of exceptions to the general no duty
rule – exceptions include:
a.
Duty
to keep premises habitable for short term leases of furnished dwellings
b.
Duty
to disclose latent defects in the premises of which ll knew or should have
known and as to which t could not be held to have notice
c.
Duty
to maintain common areas used by all the tenants in a building
d.
Duty
to undertake carefully any repairs ll promised or volunteered to make
e.
Duty
to abstain from fraudulent misrepresentations as to the condition of the leased
premises
f.
In
some jurisdictions, duty to abate immoral conduct and other nuisances that
occurred on property owned by ll if they affected the leased premises
2.
Majority: neither impose strict liability nor recognize a general duty of care
on the part of the ll – they only recognize the common law exceptions such as
those listed above
3.
A
few jurisdictions have cited the implied warranty of habitability as a reason
to impose a general standard of care (negligence standard) on ll under all
circumstances
vi.
Tenants’ Obligations When in Possession
1.
T
has a duty not to commit waste by changing the premises substantially, thus
affecting ll future interest
a.
Regards
voluntary waste
2.
T
duty to repair
a.
Common Law: t had an implied duty to make minor repairs, a duty that arose out of
his duty not to commit waste
b.
Modern View: t implied duty to repair no longer makes sense – ll is generally in
the best position to maintain the property
c.
In
jurisdictions that follow the common law rule, a covenant that excepts fair
wear and tear amounts to no more that the common law duty
d.
Explicit
covenants to repair regularly except, in addition to fair wear and tear, damage
by fire or other casualty: current trend exception relieves t from liability
even wrt fire damage brought about by t negligence
3.
Continuation
of rent after premises destroyed
a.
Common Law: unless the lease provided otherwise, t still had to pay rent (still
has an interest in the land even though building is gone)
i.
When
t only rents part of the building, common law recognizes and exception bc T
does not have any interest in the soil and the building itself is the only
consideration for the lease
b.
Modern Law: Do not have to continue paying rent bc purpose for lease has been
frustrated
III.
Real Estate Transaction
a.
Contract of Sale
i.
Statute of Frauds
1.
Must
be a signed writing – signed by parties to be bound
2.
Exceptions
a.
Partial
payment/performance: good enough evidence that contract exists
b.
Estoppel:
one party seriously changed his position in reliance of contract and
unconscionable injury would result if contract not enforced
3.
Can
be formal or informal writing – can consist of several documents
4.
Must
contain all essential terms: parties, description, terms and conditions
ii.
Implied Warranty of Marketable Title
1.
Unless
a provision in the contract to the contrary, implied that the seller must
furnish the buyer with good and marketable title at closing
2.
Can
contract around this rule
3.
Warranty
made even though conveyance by quitclaim deed (wo any warranties of title)
4.
Marketable Title: there is no reasonable probability that the buyer will be subjected
to suit
5.
Insurable Title: insured by a title insurance company and marketable title not
required
6.
Good Record Title: seller must offer a marketable title based on recorded documents
alone, not adverse possession
7.
Unless
marketable title “of record” is called for, many states hold that marketable
title can be based on adverse possession – in a few states, marketable title
cannot be shown by adverse possession unless a quiet title action has
eliminated the record owner’s rights
8.
Encumbrances
a.
Generally,
marketable title means an unencumbered fee simple
b.
Easements
that benefit the property might not constitute encumbrances
i.
Majority
of states hold such easements are encumbrances
ii.
Few
states hold that an open and visible easement for the benefit of the property
known to the buyer before he makes the contract is not an encumbrance
c.
Restrictions
on the use of property, imposed by private covenant, makes title unmarketable –
if contract expressly states that the property has been purchased for a
particular use and such use is permitted by the private covenants, title may be
held marketable
d.
Parties
can contract around encumbrances
e.
Zoning
laws and subdivision restrictions generally do not make title unmarketable
i.
If
zoning restrictions are imposed after the buyer signed the contract, and these
restrictions would materially interfere w or frustrate the buyer’s contemplated
use of the property, many courts will refuse to enforce the contract against
the buyer
ii.
If
the property is in violation of a zoning ordinance or subdivision law, and
correction of the violation can be demanded by the government, the title is
usually held unmarketable
9.
If
the contract for sale expressly provides that time is of the essence the seller
has until the closing date to clear up title problems
a.
Title
defects cannot be cured after that date wo the buyer’s consent
b.
If
contract does not state time is of the essence, the seller has a reasonable
time as established by a court or by agreement of the parties
iii.
Equitable Conversion
1.
Rule:
if there is a specifically enforceable contract for the sale of land, equity
regards as done that which ought to be
a.
Buyer
is viewed in equity as the owner from the date of contract – equitable title
b.
The
seller has a claim for money secured by a vendor’s lien on the land – legal
title as trustee
2.
From
the time of the contract of sale, the burden of fortuitous loss falls on the
buyer, even though the seller retains possession
a.
Most
courts follow this view
b.
Some
courts have declined to apply equitable conversion and have held that the loss
is on the seller until legal title is conveyed
c.
In
some other states, the risk of loss is placed on the party in possession
3.
If
the buyer has the risk of loss, and the seller has insurance, in most states
the seller holds the insurance proceeds as trustee for the buyer
4.
The
parties may contract around equitable conversion – parties should include a
“risk of loss” clause in the contract and buy insurance accordingly
iv.
Duty to Disclose Defects
1.
Caveat Emptor: seller did not have the duty to disclose any defects in the condition
of the premises unless a defect was fraudulently concealed
a.
Also
includes exceptions for fiduciary relationships, active concealment, and
partially disclosing a defect
b.
Still
a rule in many states
2.
Most
states now hold that the seller must disclose all known material defects to the
buyer
a.
Many
states have statutes requiring sellers to give buyers a written statement
disclosing facts about the property
3.
Sometimes
courts will have required sellers to reveal the existence of off-site
conditions that might affect market value (hazardous waste, noisy neighbor,
crimes in the neighborhood)
4.
Generally,
real estate broker can only be held liable for fraudulent misrepresentation,
although some states give real estate brokers a duty to disclose material
defects known to the broker but unknown and unobservable to the buyer
5.
Generally,
parties can contract around the default rules of implied duties
v.
Implied Warranty of Quality
1.
Arises
after sale/closing has taken place
2.
Most
courts now imply a warranty by builders that the buildings are free from
defective materials and are constructed in a sound and workmanlike manner
a.
Policies
i.
Builder
has a greater ability to prevent defects
ii.
Home
buyer relies on builder’s skill
iii.
Unequal
bargaining power
iv.
Importance
to society of soundly constructed housing
3.
Hybrid
bt tort and contract law
a.
Tort Theory: warranty runs to all persons who buy the product, cannot be waived or
disclaimed and statute of limitations runs from the time of discovery of the
defect
b.
Contract Theory: runs only to those in privity of contract with the builder, can be
disclaimed, and statute of limitations runs from the date of conveyance
c.
Courts
have not consistently applied either theory
4.
Subsequent Purchasers
a.
Subsequent
purchasers of a house may have difficulty in recovering from the builder on a
contract theory bc lack of privity
b.
On
a tort theory, they may have difficulty bc both negligence liability and strict
liability are usually limited to physical injury and not mere economic loss
c.
Bc
the builder is placing a defective house in the stream of commerce, and owes a
duty of care to those who subsequently buy it, about ½ the courts that have
considered the question have held that the builder has liability to them
regardless of lack of privity
5.
Some
courts allow buyers to disclaim/waive the implied warranty
6.
It
is unsettled whether the implied warranty of quality applies to commercial
buildings
vi.
Deed
1.
Types
of deeds
a.
Quitclaim Deed
i.
Conveys
the right, title, or interest (if any) that the seller has in Blackacre
ii.
Does
not warrant anything
iii.
Useful
in allowing a land transaction to clear an apparent defect in title, where the
grantor is not pursuing the claim
iv.
This
is why you can sell someone the Brooklyn Bridge – quitclaim deed to the
Brooklyn Bridge conveys nothing
b.
Special Warranty Deed
i.
Limits
liability: warranties only cover defects arising during the grantor’s tenure,
and not defects occurring prior to that time
ii.
The
grantor guarantees only that he has done nothing to make title defective
iii.
Contains
all six of the covenants subject to the limitation
c.
General Warranty Deed
i.
Gives
broader warranty to the seller
ii.
Warrants
against defects arising before as well as during the time grantor had title
iii.
Price
is usually not recited in the deed bc it raises the base for property taxes and
affects the property values
2.
Warranties in Warranty Deed
a.
Present Covenants
i.
Seisin:
I own it – grantor says he owns what he is conveying
ii.
Right to Coveny: I can convey it – power to make conveyance
iii.
Against Encumbrances: There are not any (except the following …) – no
easements, covenants, mortgages, liens or other encumbrances
b.
Future Covenants
i.
General Warranty: I will defend you against lawful claims – claimant must win to be
lawful
1.
Grantor
will defend on behalf of the grantee any lawful claims existing at the date of
conveyance
2.
Will
compensate the grantee for any loss sustained by the assertion of superior
title
3.
This
covenant and the covenant of quiet enjoyment amount to the same thing for all
practical purposes
ii.
Quiet Enjoyment: you will not be disturbed by anyone with superior title – treated the
same as general warranty
iii.
Further Assurances: I will execute any other document to perfect your title – perform
whatever acts are reasonably necessary to perfect to buyer’s title if it turns
out to be imperfect
3.
Present Covenants v. Future Covenants
a.
Present
Covenants
i.
Breached
when made, if at all
ii.
No
eviction or disturbance of grantee’s possession is needed in order to establish
a breach
iii.
Statute
of limitations run from the day the deed is given
b.
Future
Covenants
i.
Not
breached until the grantee is actually or constructively evicted sometime in
the future
ii.
Mere
existence of a superior title does not constitute a breach – grantee has no
cause of action unless disturbed in some way
iii.
Constructive
eviction might occur when grantee is forced to buy from someone who has
superior title
iv.
Statute
of limitations does not begin to run until disturbed
4.
Scope
of Covenant against encumbrances
a.
Breached
if there is a private encumbrance on title such as an easement or mortgage
b.
Not
breached by existence of public land use controls such as zoning ordinances or
building codes
c.
Not
breached by a latent violation of a public land use control which the public
authorities may never discover or enforce
5.
Running with land
a.
Present
Covenants
i.
American Rule (majority): present covenants do not run with the land and cannot be
enforced by remote grantees – at the time of breach, the covenant becomes a
chose in action in the grantee and the chose in action is impliedly assigned
ii.
English Rule (minority): the chose in action is impliedly assigned by the original
grantee to a subsequent grantee
b.
Future
covenants generally run with the land
6.
Delivery of Deed
a.
Must
be intent, delivery, and acceptance
i.
Delivery: words or conduct of the grantor that shows intent to make the deed
operative and to pass an interest immediately to the grantee
ii.
Physical
delivery not mandatory – intent is what matters
b.
Delivery
presumed when
i.
Handed
to the grantee
ii.
Acknowledged
by the grantor before a notary
iii.
Recorded
iv.
Presumption
is rebuttable by extrinsic evidence
c.
Death
i.
If
the grantor intended the deed to be legally effective before death, then
validly delivered
ii.
If
the intent was to be effective upon/after death, then no good – cannot be
substituted for a will
d.
After
there has been an effective delivery of a deed in fee simple, title has passed
ot the grantee and a return of the deed to the grantor has no effect as a
cancellation or reconveyance
e.
Conditional Delivery: a deed to be delivered if a condition is later
fulfilled can be made valid upon occurrence of the condition if it is held in
escrow by a 3rd party – conditional delivery to a grantee vests
absolute title in the grantee
f.
Escrow
i.
Donative escrow: grantor is giving the land to the grantee, but desires to postpone
the grantee’s right to possession until a later date, usually the grantor’s
death
1.
If,
in the escrow instructions, the grantor retains power to recall the deed, the
escrow is invalid
ii.
Commercial Escrow: seller hands a deed naming the buyer as grantee to an escrow agent
with instructions to hand the deed to the grantee when the grantee hands over
the purchase price
1.
Most
courts hold that the grantor may recall the deed while still in the escrow
agent’s hands
iii.
Escrow
cannot be revocable
iv.
Relation
Back Doctrine
1.
In
escrow cases there is a 1st delivery to an escrow agent and a 2nd
delivery to a grantee
2.
Although
title does not pass to the grantee until the 2nd delivery, upon that
delivery title will relate back to the 1st delivery so that the law
assumes it passed at the 1st delivery
vii.
The Mortgage
1.
In
general
a.
Consists
of two documents
i.
Note:
evidences the debt – sometimes called a bond
ii.
Mortgage: agreement that the land will be sold if the debt is not paid and the
lender reimbursed from the proceeds of the sale – gives the lender security,
gives the lender recourse against the land
iii.
In
many states, only one document is used containing both the note and the
mortgage
b.
Usually
recorded – once recorded, any subsequent purchaser or creditor takes subject to
it
c.
Equity:
borrower’s interest in land (short for equity of redemption)
d.
Mortgages
can be taken out for purchase money for property, for home improvement, for
children’s education, etc.
e.
Lenders
often insert due-on-sale clauses into their mortgages
i.
Provides
that at the mortgagee’s election, the entire mortgage debt is due upon sale of
the morgagor’s interest
ii.
Protects
the mortgagee from assignment to an unsatisfactory credit risk, and allows the
morgagee to force the new buyer to refinance at a higher interest rate (if the
rates have increased)
2.
Foreclosure
a.
Property
will be some, and from the proceeds the lender will be paid the amount of the
debt and anything left over goes to the borrower
b.
Deficiency Judgment: if, on foreclosure sale, the land does not bring in enough to pay the
debt, the lender can sue the borrower on the note for the deficiency
c.
Mortgagor
can transfer his interest subject to the mortgage
i.
The
new buyer takes the land subject to the lien, but the new buyer is not
personally liable for the debt
ii.
If
the debt is not paid, mortgagee can foreclose on the land, but the mortgagee
cannot sue the new buyer on the debt
d.
Mortgagor
can transfer his interest to a new buyer who assumes the mortgage
i.
New
buyer becomes personally liable on the debt
ii.
Mortgagee
can sue either the new buyer or the original mortgagor for the debt
iii.
New
buyer and original mortgagor are both subject to a deficiency judgment
iv.
New
buyer is primarily liable so if the mortgagee collects from the original
mortgagor then he can sue the new buyer
e.
Mortgagee
has a fiduciary like duty to protect mortgagor’s equity in a foreclosure sale
f.
Second
morgagee’s rights are subject to the rights of the 1st mortgagee
g.
Types
of prices in a foreclosure sale
i.
Upset Price: minimum price below which property will not be sold
ii.
Fair Market Value: what a willing buyer would pay a willing seller
iii.
Fair Price: the price resulting from due diligence by the mortgagee
3.
What
constitutes a mortgage
a.
Installment Land Contract: agreement by the buyer to buy land and pay for it
over a period of years, maybe 10 or 20 – seller agrees to deliver title at the
end of the period
b.
Rent to Own
IV.
Title Assurance
a.
Recording System
i.
Title Searches
1.
Tract Index: easier than grantee-grantor search
a.
Indexed
by block and lot
b.
Can
see prior recorded instruments conveying, mortgaging, or otherwise dealing with
the land
c.
Looks
at everything that has been recorded as to a specific tract
2.
Grantor-Grantee Index: More complicated than tract search
a.
Use
grantee index to discover from whom each previous owner took title (establishes
chain of title)
b.
Use
grantor index to ascertain what transfers each owner made during his tenure on
the land
c.
Work
backwards to find grantors and forwards to find encumbrances
d.
Problems
i.
H
and W might have different last names
ii.
Some
grantors have numerous entries (construction company)
ii.
What
is recorded
1.
Every
kind of deed, mortgage, contract to convey, or other instrument creating or
affecting an interest in land
2.
Lis
pendens – pending suit that may affect property
iii.
Surveying
1.
History
a.
Land
divided into townships
b.
Townships
divided into 36 sections
c.
Sections
subdivided into quartersections of 160 acres each
d.
After
the Civil War, freedmen got quartersection of a quartersection (40 acres) –
this gave rise to the expression 40 acres and a mule
e.
Surveys
were not entirely reliable – paid by the mile
f.
Survey
gives the legal description of the land that goes in the deed
2.
Other
sources for the description of the land in a deed
a.
Reference
to natural or artificial monuments and reference to directions and distances
(metes and bounds)
i.
When
descriptions in conflict uses a hierarchy or monuments
ii.
Hierarchy:
natural monuments (trees), artificial monuments (surveyor’s stakes), references
to adjacent borders (Smith’s property line), direction (northwest), distance
(30 feet), area (5 acres), place names (Quinn farm)
b.
Reference
to a government survey, recorded plat, or some other record
c.
Reference
to the street and number or name of the property
iv.
Mother Hubbard Clauses
1.
Provision
in a deed that attempts to sweep wi it other parcels not specifically described
2.
Generally
not valid against subsequent purchasers of the undescribed land bc it is an
undue burden to require a title searcher to read all conveyances of other lots
by an owner of the subject lot to see whether the conveyances affect the
subject lot
v.
Misspelled Names
1.
Idem Sonans: name spelled as it sounds
2.
Older
cases said as long as name spelled as it sounds then okay for constructive
notice
3.
Recent
cases hold that the instrument does not give constructive notice unless it
identifies the party by correct name (idem sonans not allowed)
vi.
Generally,
instruments must be notarized in order to be recorded
b.
Recording Acts
i.
Race Statutes
1.
Priority
is determined solely by who records first – notice is irrelevant
2.
First
in time, first in right
ii.
Notice Statutes
1.
Subsequent
bona fide purchaser prevails over a prior grantee who fails to record if
subsequent purchaser has no actual or constructive notice of a prior claim at
the time of the conveyance
2.
Shelter Rule: If a subsequent purchaser would prevail bc of lack of notice, and
then conveys to the other, the other steps into his shoes and would prevail
also
iii.
Race Notice Statutes
1.
Protect
only subsequent purchasers wo notice of the prior claim and who wins the race
to record
2.
Only
bona fide purchasers for value are qualified to run in the race
3.
Exist
in about ½ the states
4.
GA
is race notice
c.
Chain of Title Problems
i.
Do
not arise in a jurisdiction that has a tract index
ii.
Chain
of title includes those documents of which the purchaser has constructive
notice – all documents found in the standard title search are in the chain of
title
iii.
Wild Deed: recorded deed to the property that is not recorded wi the chain of
title – sometimes this term is used in a narrower sense, meaning a recorded
deed from a grantor who is not connected to the chain of title
iv.
If
a deed entered on the records has a grantor unconnected to the chain a title,
such a deed is not recorded wi the chain and does not give constructive notice
v.
Some
hold that bc the burden of title search would be excessive, deeds out to other
lots from the common grantor are not in the grantee’s chain of title, and the
grantee is not bound by them
1.
Others
charge the grantee w constructive notice of all deeds out from a common
grantor, not just the deeds to his particular tract and the grantee is thus
bound by the common restriction
vi.
Estoppel by Deed
1.
If
a grantor who does not have title later acquires it, it passes by operation of
law immediately to the grantee
a.
Ayer v. Philadelphia & Boston Face Brick and Tefft v. Munson
b.
Under
this theory, another must search title prior to the time each previous grantor
acquired title to ascertain whether estoppel applies against the grantor
2.
The
majority of cases, especially recent, go the other way
a.
These
cases emphasize the cost of searching title under the name of every owner for
may years prior to the date the owner received title, looking for a possible
prior deed given by the owner
b.
This
cost does not seem justified in view of the fact that a grantee could easily
make sure his deed is recorded after the previous deed
d.
Bona Fide Purchaser
i.
To
attain the status of bona fide purchaser, and be protected by the recording
acts, a person must:
1.
Be
a purchaser (or mortgagor, or creditor if the statutes allow), AND
2.
Take
without notice (including actual, record, or inquiry) of prior instruments, AND
3.
Give
a valuable consideration
ii.
Donees:
generally, donees do not come wi the protection of the recording system bc they
do not give a valuable consideration
iii.
Valuable Consideration: to be protected under the recording acts, a
purchase must give valuable consideration
1.
Must
be more than merely nominal, but it does not have to equal the market value of
the property
2.
Love
and affection is not valuable consideration, but labor and materials spent on
improving the property might be
iv.
Partial Payment
1.
Where
the purchaser has paid only part of the purchase price and has given a note to
the grantor for the balance, most courts protect the purchaser to the extent of
payments he made
2.
Depending
on the equities, courts will either give the subsequent purchaser a lien on the
land for the amount paid or give the prior grantee a lien to the extent of the
balance still owed the grantor by the subsequent purchaser
a.
Under
the first alternative, the subsequent purchaser loses the land, but receives
his money back (Daniels v. Anderson)
b.
In
a minority of states, a purchaser who gives cash and notes in payment of the
purchase price is fully protected as a subsequent bona fide purchaser (Lewis
v. Superior Court)
3.
Pro Tanto Rule (Daniels v. Anderson)
a.
Relaxes
harsh rule that a purchaser who receives notice of an outstanding interest
after partial payment gets none of his consideration back
b.
Protects
the buyer to the extent of the payments made prior to notice, but no further
c.
Three
methods to apply rule
i.
Most
common: award the land to the holder of the outstanding interest and award the
buyer the payments that he made
ii.
Award
the buyer a fractional interest in the land proportional to the amount paid prior
to notice
iii.
Allow
the buyer to complete the purchase, but to pay the remaining installments to
the holder of the outstanding interest
e.
Notice
i.
Actual Notice: if a subsequent grantee actually knows of the prior instrument, he
has actual notice and is not a bona fide purchaser
ii.
Constructive
Notice
1.
Record Notice: If an instrument is properly recorded, any subsequent purchaser has
record notice and is not a bona fide purchaser
2.
Inquiry Notice: Under certain circumstances, a purchaser is required by law to make
reasonable inquiries – he is charged w notice of whatever the inquiry would
reveal even though no inquiry was made
f.
Title Insurance
i.
Bought
by one premium paid at the time the policy is issued
1.
Premium
based on the amount of insurance purchased
2.
Amount
of insurance purchased is ordinarily the purchase price of the policy for
homeowner’s insurance and the amount of the loan for lender’s policies
ii.
Has
no fixed term and continues for as long as the insured maintains an interest in
the property
iii.
Creates
liability to the insured only and does not run with the land to subsequent
purchasers
1.
Subsequent
purchaser must take out a new policy if the purchaser wants title insurance
iv.
Two
basic forms
1.
Mortgagee’s Policy: insures the mortgage lender and not the homeowner
2.
Owner’s Policy: taken out by a homeowner who desires title insurance
v.
Standard
policy excludes losses arising from government regulations affecting the use,
occupancy, or enjoyment of land – also excludes claims of persons in possession
not shown by the public records, as well as unrecorded easements, implied
easements, and easements arising by prescription – also defects that would be
revealed by a survey or inspection
vi.
Almost
all institutional mortgage lenders require title insurance at the borrower’s
expense
V.
Nuisance
a.
Categories
i.
A
nuisance is an unreasonable, unprivileged interference with a person’s use and
enjoyment of his land
1.
Relief
from nuisance was awarded at common law under the basic maxim that one must use
his property so as not to injure that of another
2.
Considered
a tort so the notion of balancing the costs of the activity against its utility
– property tort
ii.
Private Nuisance
1.
Involves
interference with the private use and enjoyment of nearby property
2.
Either:
a.
Intentional
and unreasonable, OR
b.
Unintentional
but negligent, reckless, or resulting from an abnormally dangerous activity
3.
Cannot
sue claiming a private nuisance unless he has property interest that is
affected or alleges bodily harm as the result of the activities complained of
4.
Types
a.
Nuisance
per se: an activity
that is a nuisance no matter how reasonable the def conduct
b.
Nuisance
per Accidens:
an activity that is unreasonable under the particular facts – usually depends
on location
c.
Tendency
of courts that have found nuisances per se is to limit them to unduly hazardous
activities, unlawful activities, or highly objectionable uses in the particular
district
iii.
Public Nuisance
1.
Interference
is with a common right to the general public
2.
Widespread
in its range or indiscriminate in its effects
3.
Underlying
test is the same as for private nuisance:
a.
Intentional
and unreasonable, OR
b.
Conduct
that is negligent or abnormally dangerous
4.
Suit
is usually brought by the attorney general
a.
Private
individual may act against a public nuisance only if he can show that the
nuisance is specially injurious to him
i.
Does
not have to own affected land but must show that the damage is of a different
kind than the damage to the public at large
ii.
Special
Injury
5.
If
a use is authorized by statute or ordinance, it is not a public nuisance and
cannot be enjoined
6.
Types
a.
Intentional Nuisance: intentional and unreasonable act that continues
over time and is known to interfere w another’s enjoyment of the land
i.
Primary
factor is the unreasonableness
ii.
Unreasonableness
balances the gravity of the harm against the utility of the conduct based upon
the particular facts of the case
b.
Unintentional Nuisance: when the risk of harm makes the conduct
unreasonable
i.
Unreasonableness
here refers to the actor’s conduct as well as the gravity of harm
ii.
The
utility of the conduct is seldom a factor
b.
Tests
i.
Threshold Test: If the annoyance reaches a certain level, then a nuisance (Jost v.
Dairyland Power)
ii.
Balancing Test (Restatement): consider whether the gravity of the harm outweighs the
utility of the actor’s conduct
1.
Factors
relevant to gravity of harm
a.
Extent
of the harm involved
b.
Character
of the harm
c.
Social
value that the law attaches to the type of use or enjoyment invaded
d.
Suitability
of the particular use or enjoyment invaded to the character of the locality
e.
Burden
on the person harmed or avoiding the harm
2.
Factors
relevant to the utility of the conduct
a.
Social
value that the law attaches to the primary purpose of the conduct
b.
Suitability
of the conduct to the character of the locality
c.
Impracticability
of preventing or avoiding the invasion
3.
Problem
with this approach is that it gives no standard for wighing the various factors
against one another
c.
Nuisance v. Trespass
i.
Physical
invasion of another’s land can be either a trespass or nuisance
ii.
Cause
of Action
1.
Trespass
is an actionable invasion of a possessor’s interest in exclusive possession of
land
2.
Nuisance
is an actionable invasion of a possessor’s interest in the use and enjoyment of
land
iii.
Burden of Proof
1.
In
trespass, pl is entitled to relief on showing an intentional, unprivileged physical
intrusion
a.
No
showing of substantial injury is required
b.
Court
does not balance the equities in trespass
c.
Requires
no proof of harm
2.
In
nuisance, pl must show:
a.
Unreasonable
conduct, AND
b.
Substantial
injury, AND
c.
In
most jurisdictions, that the equities balance in pl favor
iv.
Remedies
1.
Trespass:
pl is entitle, usually as a matter of right, to damages for past conduct and an
injunction against future trespass
2.
Nuisance:
court may, in its discretion, give damages for past conduct or permanent
damages for future conduct or an injunction – more flexible than for trespass
d.
Nuisance Factors for Balancing Test
i.
Depreciation of property value: not enough be itself to constitute a nuisance –
important factor in proving substantial injury to pl
ii.
Discomfort: objectionable noise, odors, or smoke are frequently the interference
complained of – standard of unreasonable interference is measured by the
sensibilities of the average person
1.
Sunlight: older cases held that cutting off a neighbor’s sunlight by building
next to the property line was not a nuisance – may change as a result fo the
development of solar collectors
2.
Spite Fences: can be enjoined as a nuisance bc conduct has no social value when it
is erected solely to harm the neighbor and of no economic benefit to the
erecting party
iii.
Fear of Harm: Significant factor in declaring a nuisance (storage of explosives,
mental hospital, etc.)
iv.
Character of the Neighborhood: Pig in a parlor problem
1.
Residential
areas are often given a preferred status and are protected against incompatible
uses
2.
Zoning
ordinance is admissible in court to show community policy wrt desirable land
use wi a neighborhood – however, that it is consistent with zoning is not
controlling in an action for private nuisance (specific activity may be carried
out in such a manner as to constitute an unreasonable interference with the
particular adjoining purposes)
v.
Social Value of the Conflicting Use: primary objects of nuisance law is to avoid
the more serious harm – if great social value, court reluctant to find nuisance
vi.
Priority in Time: If def use was first, pl can to the nuisance and a less appealing
case bc he could have avoided the harm
e.
Lateral and Subjacent Support
i.
Lateral Support: support that land receives from the adjacent land
1.
Landowner
is strictly liable if he changes his land use so as to withdraw lateral support
from neighbor and cause neighbor’s land to slip or fall in
2.
If
an excavator builds a retaining wall to support the adjoining parcel, he and
his successors in interest have the duty thereafter to maintain the wall
3.
Neighbor
is under strict liability duty to provide lateral support to property in its
unimproved state, but only a negligence duty to provide support to buildings on
the land
4.
Duty
to support buildings on land
a.
Majority View: strict liability for withdrawal of lateral support to a neighbor’s
property does not extend to buildings on the neighbor’s land
b.
Minority View: An adjacent landowner has the same strict liability for failing to
support neighboring buildings as he has wrt the land
ii.
Subjacent Support
1.
Whenever
mineral estates are severed from the surface, the surface occupant has a right
of subjacent support against the mineral owner
2.
Right
differs from the right to lateral support in that the mineral owner must
support the land with the buildings existing on it when the mineral estate is
severed (responsible for land and buildings)
f.
Nuisance Remedies
i.
Enjoin
def
1.
Injunctions
can be for sale
2.
Injunction
is an equitable remedy that requires balancing the equities
ii.
Give
pl damages
1.
May
refuse an injunction but grant damages instead
2.
Has
the effect of giving the right to pl but forcing a sale of it to def through
damages
iii.
Enjoin
def and give def damages
1.
This
has the effect of giving the right to pl but forcing the pl to pay the def for
it
2.
Tends
to bring about efficient resource allocation bc pl is forced to back up his
claim for a judicially enforced transfer with cash
3.
May
not be feasible when there are many pl and high transaction costs
iv.
Refuse
any remedy to pl
v.
Remedies
Grid
|
|
Liability
Rule (judicially determined damages)
|
Property
Rule (right gets assigned and parties determine price)
|
|
Pl
Wins
|
Boomer
|
Estancias
|
|
Def
Wins
|
Spur
|
No
liability and the nuisance continues (maybe Osborne)
|
VI.
Easements, Covenants, and Servitudes
a.
Easements
i.
Grant
of an interest in land that entitles a person to use land possessed by another
ii.
Types
1.
Affirmative Easement: (positive easement) has the right to onto the land
of another (the servient land) and do some act on the land – most easements are
affirmative
2.
Negative Easement: can prevent the owner of the servient land from doing some act on the
servient land
iii.
Tenements
1.
Dominant Tenement: the land benefited
2.
Servient Tenement: land burdened – usually (does not have to be) adjacent to the
dominant tenement
iv.
Gross
v. Appurtenant
1.
Easement Appurtenant: easement benefits its owner in the use of another
tract of land it is appurtenant to the owner’s land (dominant tenement)
a.
Attaches
to the dominant tenement and passes with the tenement to any subsequent owner
of the tenement
b.
Cannot
be separated from the dominant tenement and turns into an easement in gross,
unless the owners of the dominant and servient tenements make a new agreement
permitting that
2.
Easement in Gross: easement does not benefit its owner in the use and enjoyment of his
land, but merely gives him the right to use the servient land
a.
Term
used to signify that the benefit of the easement is not appurtenant to the
other land
b.
Does
NOT mean that the easement is personal to the holder and cannot be assigned
i.
However,
if inherited or assigned to many people, they may be difficult to locate so
court restrict assignment
ii.
Although
some cases hold commercial easements in gross are not assignable, the general
rule is that the benefit of a commercial easement is assignable (commercial
easements in gross are those that have primarily economic benefit rather than
personal satisfaction)
c.
Usually
can be assigned if the parties so intend
d.
Easement
is not considered part of the dominant tenement but is merely being used by the
owner of the dominant tenement – attaches to the person instead of the land
3.
If
easement is ambiguous, courts generally construe it as creating an easement
appurtenant to the land rather than an easement in gross
v.
License
v. Easement
1.
License: permission to go on land belonging to the licensor – can be oral or
in writing and is revocable at the will of the licensor
2.
Easement: grant, not mere permission
b.
Creation of Easements
i.
Creation by Express Grant
1.
Must
satisfy the statute of frauds – written instrument signed by the grantor
2.
Can
be created to endure for a person’s life, period of years, or forever
3.
A
grant of limited use, or for a limited, or of an identified space wo clearly
marked boundaries creases and easement
a.
A
sale for less than the fair market value of a fee simple indicates an easement
b.
If
the owner of the servient land pays taxes, and the used space is not separately
assessed, this indicates an easement
ii.
Creation by Reservation
1.
Easement
can be reserved by the grantor over the land granted – if the grantor conveys
land, reserving an easement, the land conveyed is the servient tenement
a.
At
common law and in a majority of states, an easement cannot be reserved in favor
of a 3rd party
b.
A
minority of states would allow easements to be reserved in favor of 3rd
parties
2.
Exception v. Reservation
a.
Exception
cannot vest an interest in the 3rd party and the excepted interest
remains in the grantor
b.
Treated
the same today
3.
Regrant Theory: A deed from O to A purporting to reserve an easement in O was treated
as conveying a fee simple to A, who by the same instrument regranted an
easement to O
a.
A
was treated as the grantor of a reserved easement
iii.
Creation by Estoppel
1.
A
license may become irrevocable under the rules of estoppel
2.
If
the licensee has constructed substantial improvements on either the licensor’s
land or the licensee’s land, relying on the license, in may states the licensor
is estopped from revoking the license
a.
Theory
is that it would be unfair to the licensee to permit revocation after he spends
money in reliance
3.
Restatement: irrevocability exists only for whatever time is required to enable
the licensee to reap the fruits of his expenditures – some courts have held
that irrevocability is limited to the life of the pertinent structure of
improvement – few courts hold that an irrevocable license is like and easement
and is capable of lasting forever
4.
Minority
of courts hold that the licensor will not be estopped from revoking the license
a.
Easement
falls wi the statute of frauds (license can be oral)
b.
In
fairness, a writing should be required so that the good neighbor who gives
casual permission wo thinking of the permanent damage to his land will not be
bound
5.
Requiring
a writing
a.
Shepard v. Purvine: OR Supreme Court holds that easement does not require and writing and
an easement by estoppel can be created
b.
Henry v. Dalton: RI Supreme Court requires a writing so no estoppel created
iv.
Creation by Implication
1.
If,
prior to the time a tract of land is divided into 2 lots, a use exists on the
servient part that is reasonably necessary for the enjoyment of the dominant
part and which the court finds the parties intended to continue after the tract
is divided, an easement may be implied by operation of law
2.
Can
be implied only over land granted or reserved when a tract is divided into two
or more parcels
3.
Easement
in gross will NOT be implied
4.
When
the tract is divided, a use of one part of the tract must exist from which it
can be inferred that an easement permitting its continuation was intended
a.
Such
previous use must be apparent (or at lease inferable from apparent
circumstances), AND
b.
Continuous
(not sporadic)
c.
Both
of these requirements make it more certain that the parties knew about the
easement and intended for it to continue
5.
Easement
must be necessary for the enjoyment of the claimed dominant tenement
6.
Quasi-easement: existing use of the land before the land is divided for sale
a.
Not
a legal easement bc O cannot have an easement on his own land
b.
Can
arise as an easement only when O divides the land
v.
Creation by Necessity
1.
Implied
if the owner of a tract of land divides the tract into 2 lots and by this
division deprives one lot of access to a public road
2.
Requirements
a.
Common
grantor, AND
b.
The
necessity must exist at the time the common grantor severed the 2 estates
3.
Must
be strictly necessary and not just a more convenient route of access
4.
Does
NOT require an existing use at the time a tract is divided into 2 lots
5.
Owner
of the servient parcel has the right to locate the easement, provided it is
reasonably convenient
6.
Might
be implied in situations where an easement for something other than road access
is claimed (not yet been granted in courts)
a.
Easement
for a sewer or for light and air
b.
Courts
have refused to imply on the ground that sewage can be removed by truck and
buildings can be equipped with artificial light and air
7.
Lasts
only as long as is necessary – terminates when the necessity ceases
vi.
Creation by Prescription
1.
Usual
elements required for adverse possession must be shown for this creation:
a.
Open and Notorious Use: must be made wo any concealment
b.
Under a claim of right: not w permission of the owner of the land
c.
Continuous use: does not necessarily mean constant
d.
Uninterrupted use: prescriptive period ends when the owner of the land interrupts
2.
Public
easement by prescription
a.
Majority View: can acquire if members of the public use the private land in a manner
meeting the requirements for prescription
i.
If
the public uses the land for a roadway, the presumption is that the use is
adverse, just as it is for an individual claim of easement
ii.
Conversely,
if the public uses vacant, undeveloped land, the presumption is that the use is
permissive – does not give notice to the owner
iii.
Difficult
to acquire for use other than roadway
b.
Minority View: in some states, the general public cannot acquire prescriptive rights
in private property – owner’s cause of action runs against the specific
trespassing individuals and not against the public at large
3.
Beaches
a.
Most
states
i.
The
beach from the water to the mean high-tide line (wet sand area) is in public
trust
ii.
Dry
sand portion bt the mean high-tide line and the vegetation is subject to
private ownership
iii.
Public
access requires both a way of access form inland to the coast and a lateral
easement up and down the beach
b.
Medieval
doctrine
i.
If
the public has used the beach for so long that the memory of may runneth not to
the contrary, the public has a customary right to use the beaches
ii.
This
applies to the dry sand area
c.
Scope of Easements
i.
General Rule: depends on the intention of the parties
1.
Express:
court will look at the language of the instrument, together w the surrounding
circumstances in order to determine intent
2.
Easements
of Way: strong public policy that land have access necessary to make it useful
under contemporary conditions
3.
Implied
a.
Existing
use: scope is generally the same as express
b.
Easement
by necessity: extent of necessity determines scope
4.
Prescription:
the uses that give rise to the easement can continue, but there is no basis for
assuming the parties intended the easement to accommodate future needs
ii.
Subdivision
of dominant tenement
1.
General Rule: if the dominant estate is subdivided each lot has a right to use
easements appurtenant to the dominant estate
2.
Limitation:
the servient estate is not to be burdened to a greater extent than was
contemplated at the time the easement was created and is necessary to
accommodate normal development of the dominant estate
3.
Use
of an easement may grow commensurate with the normal growth of the dominant
tenement, but no further
iii.
Use
for benefit of nondominant land
1.
Black Letter Law: an easement granted for the benefit of lot 1 cannot be used for the
benefit of lot 2, even though the same person owns lots 1 and 2
2.
The
dominant owner cannot increase the scope of the easement by using it to benefit
a nondominant tenement – can only use the easement for the parcel it was meant
to benefit
iv.
Change
in location
1.
Generally
cannot move an easement – can only be moved through mutual consent
2.
It
is a trespass if the easement is moved wo permission of the servient owner –
same for widening an easement
3.
Restatement: servient owner can relocate the easement or make reasonable changes
in its dimension when necessary to permit normal development of the servient
estate, provided the changes do not unreasonably interfere w the easement
holder’s use, and provided the servient owner pays for the changes
v.
Use by Servient Owner: has the right to use the servient land in ways that
do not unreasonably interfere with the easement
vi.
Division
of Easements in Gross
1.
Nonexclusive Easement: one that is enjoyed both by the easement holder
and the servient owner – absent authority in the grant, the easement holder
cannot divide the right among others who use it independently
2.
Exclusive Easement: the holder has the exclusive right to enjoy the easement – owner of
an exclusive easement can divide it or transfer it to others who can use it
independently, unless the original grant prohibits this
3.
One Stock Rule for profit in gross
a.
Problem:
even though a profit, like an easement, can be divided among several people,
overuse of the profit by these persons (each seeking to maximize his wealth)
can lead to the depletion of natural resources
b.
Majority View: one stock rule regulates the problem
i.
When
two or more persons own a profit in gross, they must use the profit as one
stock – neither can operate independently of the other
ii.
One
owner can veto use by the other bc consent of all is required
iii.
Has
been applied to easements in contexts where overuse of the easement may result
in destroying the resource (Miller v. Lutheran Conference & Camp)
c.
Minority View: a reasonable test is used to govern how much the competing owners can
use the easement
vii.
Maintenance
of easement: generally, the dominant tenement owner must maintain the easement
d.
Termination of Easements
i.
Utility of Title: if the title to the easement and the title to the servient tenement
come into the hands of one person then easement extinguished
1.
Cannot
be revived by subsequent separation of the tenements into two ownerships
ii.
Act of the Dominant Owner
1.
Release: owner of an easement may release the easement to the servient owner
by a written instrument (not oral bc of statute of frauds)
a.
If
the owner of an easement orally releases it to the servient owner, and the
servient owner expends money in reliance on the oral release the easement owner
is estopped to plead statute of frauds
2.
Nonuse:
mere nonuse of an easement does not extinguish the easement – not extinguished
no matter how long the nonuse continues
3.
Abandonment: Although oral release nor nonuse alone is sufficient, if the owner of
an easement acts in such a way to indicate and unequivocal intent to abandon
the easement, then considered abandoned
a.
Such
acts can include an oral release or nonuse coupled w failure to maintain the
easement, or permitting the easement to be blocked by others, or establishing a
substitute easement elsewhere
4.
Alteration of dominant tenement: if granted for a particular purpose, and an
alteration of the dominant tenement makes it impossible to achieve the purpose
any longer, the easement is extinguished
5.
Easement by Necessity: terminates when the necessity ends
iii.
Acts of the Servient Owner
1.
Destruction of Servient Tenement: easement in a structure is terminated if the
building is destroyed wo fault of the owner of the servient estate
a.
If
the building is destroyed by the intentional act of the servient owner, the
easement is not extinguished, and a court may require the servient owner to
create in any new building an easement for use of the dominant owner
b.
However,
one state holds an easement can be destroyed by the intentional destruction of
the building by the servient owner
2.
Prescription: if the servient owner interferes w an easement in an adverse manner,
the servient owner can extinguish the easement by prescription
a.
Requisite
elements of adversity are the same as for the creation
b.
However,
where an easement has been created but no occasion has arisen for its use and
the servient owner fences his land, the servient owner is not deemed to act
adversely until the dominant owner demands that the easement be opened and the
servient owner refuses to do so
iv.
Change of Conditions: an easement cannot be extinguished by a change of
conditions in the neighborhood
e.
Negative Easements
i.
Definition: gives the easement holder the right to prevent the servient owner
from using his land in some way
ii.
Limited Types: are rare and are generally not permitted unless one of four types
recognized by early English law
1.
Light
2.
Air
3.
Subjacent
or lateral support
4.
Flow
of an artificial stream
iii.
Scenic
easements and solar easements are two new types of negative easements
recognized in recent years
iv.
Cannot
arise by prescription
f.
Real Covenants
i.
Covenants
are a private means of land use planning – covenant is a promise to do or not
to do a certain thing
1.
Affirmative Covenant: promise to affirmatively do something
2.
Negative Covenant: promise to refrain from doing something
ii.
If
promise is breached, promissee or successor may want one of two things:
1.
Money
damages (must sue in law)
2.
Injunction
or decree requiring specific performance of the promise (must sue in equity)
iii.
Real Covenants v. Equitable Servitude v. Condition
1.
Real Covenant: covenant that runs with the land – enforceable at law by a successor
owner of the promisee’s land, and also against the promisor’s land – must be in
writing
2.
Equitable Servitude: covenant enforceable in equity by or against successor to the land of
the original parties to the contract
3.
Condition: provides for forfeiture upon breach of the condition, whereas a
covenant is enforceable only by an award of money damages (real covenant) or an
injunction (equitable servitude)
iv.
Benefit and Burden
1.
Burdened
tract is analogous to the servient tenement under the law of easements, and the
benefited tract is analogous to the dominant tenement
2.
Easements
run to successive owners of the tracts involved bc easements are interest in
land – covenants did not start out as interest in land, but rather only as
promises concerning the use of land so courts laid out different rules for when
these promises run to successors
3.
Burden
(Spencer’s Case)
a.
Express:
i.
A
covenant relating to something not in esse (not yet in being) will not
bind assignees of the covenantor unless the convenantor expressly agrees not
only for himself but all “for his assignees” (expressly), so as to show the
intent to bind successors
1.
The
requirement of expressly stating when not in esse has been abolished in almost
all states for the covenants running with a fee simple – must only show an
intention to bind assigns
ii.
A
covenant relating to some in esse (currently in being) will bind the
assigns wo expressly mentioning them, if there is other evidence suggesting
such intent
b.
Touches and Concerns the Land: for the burden of the covenant to run, it must
touch and concern the land
c.
Privity of Estate: must be present for a covenant to run
4.
It
is easier to prove that the benefit runs than to prove that the burden runs bc
courts do not want the dead hand of the past to burden or encumber land for a
long time – courts limited the running of the burden through privity
5.
Horizontal Privity v. Vertical Privity
a.
Horizontal Privity: privity of estate bt the original covenanting parties
b.
Vertical Privity: privity of estate bt one of the covenanting parties and a successor
in interest
6.
Horizontal
Privity
a.
Restatement (1st)
i.
Horizontal
privity is not required for the benefit to fun but it is required for the
burden to run
ii.
In
order to have horizontal privity, there must be either a mutual or successive
relationship bt the promisor and promissee for the burden of a covenant to run
at law:
1.
Successive Relationship (Majority View): most courts define
horizontal privity to be successive (grantor-grantee) relationship
2.
Mutual Relationship (Minority View): MA and a few other states took the position
that horizontal privity means that both parties have a mutual relationship in
the same land, apart from the covenant
b.
Restatement (3rd): Takes the position that horizontal privity of
estate is not required for a covenant to run to sucessors – law is moving in
this direction but many jurisdictions use the 1st’s approach
7.
Vertical
Privity
a.
Traditional
authorities appear to agree that vertical privity of estate is required for a
covenant to run
b.
Restatement (1st)
i.
For
the burden to run, the successor must have an estate of the same duration as
the promisor had – if the promisor had a fee simple, so must the successor
ii.
The
benefit runs to a successor of any interest in the land, and not only to a
successor of the whole estate
c.
Restatement (3rd)
i.
Discards
the vertical privity doctrine and instead draws a distinction bt negative and
affirmative covenants
ii.
Negative
covenants are treated like easements for succession purposes – they run to all
subsequent owners and possessors of the burdened and benefited property
iii.
Affirmative
covenants, required the burdened owner to perform an act are treated
differently – the burdens and benefits run to persons who succeed to estates of
the same duration as were held by the original parties to the covenant
iv.
Special
rules for lessees: must perform only covenants that are more reasonably
performed by the lessee than the by the ll
v.
Special
rule for life tenants: succeed to burdens, but the life tenant’s liability for
performance is limited to the value fo the life estate (becomes less as the
life tenant gets older)
g.
Equitable Servitudes
i.
Definition: is a covenant, whether or not running w the land at law, that equity
will enforce against assignees of the burdened land who have notice of the
covenant – usual equitable remedy granted is an injunction against violation of
the covenant
ii.
Actual
or constructive notice is required in order to be enforced
iii.
Equitable Servitudes v. Real Covenants
1.
Remedies
a.
If
a promisee seeks damages from an assignee, the promisee must go into law and
attempt to enforce the promise as a real covenant
b.
If
the promisee seeks and injunction or specific performance, the promisee must go
into equity and ask for enforcement of an equitable servitude
c.
People
have begun enforcing equitable servitudes rather than covenants bc they prefer
injunctions to damages
d.
The
two are not mutually exclusive – can get injunction and damages
2.
Creation
a.
Real
covenant must be in writing
b.
In
many states, an equitable servitude will be implied
c.
Generally,
and equitable servitude must also be in writing
3.
Privity of Estate
a.
Equitable
servitude
i.
Horizontal
and vertical privity not required for the burden to run
1.
Analogous
to an easement in that it is enforceable against any person who interferes
ii.
When
someone other than the original promisee is enforcing the benefit, some states
say must show that he acquired title to his pand from the promisee, either
before or after the original covanent was made
b.
So
for equitable servitude: horizontal privity does not matter and vertical
privity is not required for the burden to run but is required for the benefit
to run
4.
Touch and Concern and Notice
a.
Real
covenants and equitable servitudes both require that the covenant touch and
concern the land
b.
Neither
is enforceable against a subsequent bona fide purchaser wo notice of the
covenant
c.
Equitable
servitudes require actual or constructive notice
5.
Restatement (3rd)
a.
Abolishes
any distinction bt real covenants and equitable servitudes
b.
Applies
the same rules as real covenants
iv.
Property
Theory of Servitudes
1.
Facilitates
the holding that, after the original promisor has conveyed the burdened land,
the promisor cannot be sued in law or in equity
2.
The
original promisor has lost control of the land when she assigns her entire interest,
and it would be unfair to penalize her for the conduct of some future owner
3.
Also
supports the holding that, if the government condemns the burdened land, the
gov’t must pay the benefited owner damages for loss of the servitude
4.
Can
run with the land, need a writing to be created, and lack of consideration does
not make a difference
h.
Creation of Covenants and Servitudes
i.
Statute
of frauds requires a writing with one exception:
1.
Negative
equitable servitudes may be implied from a general plan for development of a
residential subdivision (usually based on equitable estoppel)
ii.
Implied Servitudes
1.
Elements:
a.
General Plan: usually must exist at the time the developer sells the first burdened
lot wi the general plan and must exist prior to def deed
b.
Notice:
def had notice of the covenant containing the restriction
2.
Reciprocal and Negative Easement
a.
Implied
must be reciprocal
b.
Must
be a negative or restrictive covenant, forbidding some use of land
c.
Court
will not imply affirmative covenants
3.
Some
courts refuse to imply negative reciprocal servitudes in a residential
subdivision, and instead require a written instrument identifying the burdened
lot
4.
Real
covenants have not been implied by courts at all
5.
Modern
courts tend to uphold agreements if for the benefit of the community
6.
Enforcement
by 3rd party beneficiaries
a.
Majority View: any 3rd party beneficiary can enforce a covenant in law or
in equity if the contracting parties so intend, although no magic words are
required
b.
Minority View: privity of estate survives as a requirement for enforcing an
equitable servitude – person seeking to enforce the covenant must trace his
title to the original promisee
iii.
Touch and Concern Requirement
1.
For
the burden to run with the burdened land in equity as well as at law, the
covenant must touch and concern the burdened land
2.
For
the benefit to run with the benefited land, the covenant must touch and concern
the land for both
3.
Cost-benefit
function
a.
The
function of the touch and concern requirement is to permit courts to stop
covenants from running when the social utility of the covenant is outweighed by
the fettering of the burdened property
b.
Restatement (1st): the burden will not run if the burden imposed is
obviously greater than the benefit given – there must be such a relation bt
benefit and burden that the performance of the promise has, in the particular
case, some reasonable prospect of promoting land utilization as a whole
4.
Negative Covenants
a.
Covenants
not to do a physical act touch and concern the land
b.
Affect
the burdened owner in the physical use of his land
c.
Covenants
containing building restrictions touch and concern the land
5.
Noncompetition covenants
a.
Restricts
the promisor in the physical use he may make of his land so touches and
concerns
b.
Benefit
of a covenant not to compete clearly enhances the value of the covantee’s land
but is debatable whether it affects him in the physical use of his land – but a
majority of the courts hold the enhancement of commercial value is enough to
say it touches and concerns
6.
Affirmative Covenants
a.
Most
permit to run both in law and equity, and they are usually held to touch and
concern the land
b.
However,
if it imposes a substantial burden on property that receives no benefit from it
and fetters land in perpetuity, a court may find it does not touch and concern
c.
If
the act is to be performed off the burdened land, wo benefiting the burdened
land, the covenant does not touch and concern the burdened land
7.
Covenants
to pay money
a.
For
some improvement that benefits the promisor by enhancing the value of his
property touch and concern even though the improvements are on other land
i.
Typically,
these covenants provide that the landowner will pay a certain sum each year to
maintain common spaces
ii.
If
the formula for calculating the sum is reasonably clear, a covenant to pay an
annual fee is enforceable against assigns
8.
Restatement (3rd)
a.
Supersedes
the touch and concern requirement with other tests for enforceability against
successors
b.
Unenforceable at Inception: whether the servitude arrangement violates public
policy
i.
Imposes
an unreasonable restraint on alienation
ii.
Imposes
an indirect restraint on alienation that lacks a rational justification
iii.
Imposes
an unreasonable restraint on trade
iv.
Unconscionable
v.
Consider:
legitimacy and importance of the purposes to be served, the fairness of the arrangement,
and the degree of interference w personal autonomy and freedom from
discrimination
c.
Unenforceable
on Account of Subsequent Events
i.
The
covenant should be an initially valid covenant that becomes an appropriate case
for termination when the developer receives a reasonable return on the
investment and has sufficient revenues to assure the other lots of water
ii.
Most
affirmative covenants to pay money arising out of commercial transactions will
be initially enforceable and will become unenforceable only when one of the
following termination rules become applicable
1.
After
a reasonable time if it does not specify the total sum due or a definite
termination point
2.
In
exchange for services or facilities provided to the burdened estate may be
modified or terminated if the obligation becomes excessive in relation to the
cost of providing the services or facilities or to the value received by the
burdened estate
3.
These
do not apply to obligations to a community association or to reciprocal
obligations imposed pursuant to a common plan of development
9.
Covenant
with Benefit in Gross – if benefit is in gross, the burden will not run
a.
For
servitudes
i.
Majority View: when does not touch and concern land (bc in gross), burden will not
run
ii.
Minority View: some courts hold that the burden of a covenant will run even though
the benefit is in gross
b.
Real
Covenants: if a covenant will not run in equity bc the benefit is in gross,
neither ill a covenant run at law
c.
Restatement:
burden will run, both in law and equity, where the benefit is in gross
i.
Covenants and Servitudes: Limitations on Enforcement
i.
Generally,
a covenant will be construed so as to carry out the intention of the parties in
light of the purpose of the covenant
ii.
Single-Family Dwelling Covenant
1.
Cases
are not in agreement as to whether a group home constituted a single-family
dwelling
a.
Most
recent cases take a functional approach and ask if the particular group home
functions with a traditional family housekeeping structure and atmosphere
2.
Enforcement
of a residential covenant against a group home for the disabled, even if the
term single family is construed to exclude group homes, is a violation of the
FHA
iii.
Racial Restrictions
1.
Prohibiting
use of the property by a person of a particular race cannot be enforced by the
courts
2.
Judicial
enforcement of racial covenants would be an action by the state that deprives a
person of equal protection of the law
3.
Although
the covenant is not void, it cannot be publicly enforced
j.
Covenants and Servitudes: Termination
i.
Merger:
if the title to the land benefited and the title to the land burdened come into
the hand of one person, real covenants and equitable servitudes merge into the
fee simple and cease to exist
ii.
Estoppel: if a benefited party acts in such a way as to lead a reasonable
person to believe that the covenant was abandoned, and the burdened party acts
in reliance thereon, the benefited party may be estopped to enforce the
covenant
iii.
Relative Hardship: as a general rule, a court of equity may deny an injunction when the
hardship to the def is great and the benefit to the pl is small – but where the
right to the benefit of a servitude is clear, the defense is disproportionate
harm and benefit is usually not persuasive
iv.
Change in Conditions in Neighborhood
1.
Most
frequently asserted defense
a.
If
this is shown, equity will refuse to enforce the covenant
b.
For
the defense of a change of conditions to succeed the change must be substantial
2.
Court
might refuse to enforce a restrictive covenant if the neighborhood has
abandoned it, but the level of abandonment must be substantial and not sporadic
3.
Restatement:
allows courts wide latitude to change servitudes when conditions have changed
4.
It
has been suggested that efficiency and fairness would be better served by
giving the owners of benefited lots damages rather than an injunction – MA
statue takes this position when conditions are met
v.
Abandonment
1.
An
affirmative covenant, such as paying money, cannot be abandoned
2.
Restatement:
provides for modification or termination of affirmative covenants when the
obligation is in perpetuity or becomes excessive – this does not apply to
community associations or reciprocal obligations imposed in a common plan
vi.
Eminent Domain: the majority rule is that the gov’t must pay damages to the owner of
the benefited land
k.
Covenants and the Creation of Common Interest Communities
i.
Include:
condos, co-ops, subdivisions with homeowners associations
ii.
Condos
1.
Ownership: each unit is separately owned in fee simple by and individual owner –
common areas are owned by the unit owners as tenants in common
2.
Financing and Taxes: each owner obtains own mortgage and is responsible for own taxes
3.
Use:
can be adapted to commercial and residential use
4.
Owner’s Association: ass’n makes and enforces rule, manages common areas, and sets
maintenance charges
5.
Owner’s Obligation: liable for a monthly charge to maintain common facilities and insure
against casualty and liability
6.
Enforcement: may be covered by the state condo statute – if not, enforcement
raises all the legal problems associated with the enforcements of covenants
7.
Destruction: Condo statute should state what happens if the building is destroyed
iii.
Rules
of Conduct
1.
Originating
documents may provide for certain rules of conduct – test of validity is
reasonableness
2.
Restrictions
in originating documents
a.
Have
a strong presumption of validity
b.
Strike
only if arbitrary or violation of public policy or constitutional rights
c.
Generally
not struck down unless unreasonable ab initio (at the time they were adopted),
especially if they are part of the original condo plan
3.
Restrictions
Subsequently Adopted
a.
Must
be reasonable
b.
Court
may give a less deferential review than it gives to a covenant in originating
documents
c.
Reliance
interest of the buyers is not as strong for subsequent changes
d.
Courts
may balance the importance of the new rule’s objective with the importance of
the individual interest infringed upon