Property - Final Sprankling

Rule Against Perpetuities - Basic Concept

Owner cannot set up conditions for the transfer of property that may not happen until too far into the future

Rule Against Perpetuities - Applies to 3 types of future interests

Contingent remainder

Vested remainders subject to open

Executory Interests

Rule Against Perpetuities - Interest is invalid…

Only when we can logically prove that it will not vest too late

Question is “Might it vest too late?” (ANY CHANCE AT ALL)

Rule Against Perpetuities - 5 Part Test

Does the rule apply to this interest?

When does the period begin?

What must happen for the future interest to vest or forever fail to vest?

Who are the relevant lives (Test everyone)?

Does any relevant life validate the interest?

Rule Against Perpetuities - Time Period

One life plus 21 years

3 Types of Concurrent Ownership

Tenancy in Common

Joint tenancy

Tenancy by the entirety

Tenancy in Common

When someone dies, it does not end

Each can use the entire property

Automatic right to partition upon disagreement

DEFAULT

Joint Tenancy

Like a tenancy in common with right of survivorship

Requires 4 unities

4 Unities

Time

Title

Interest

Possession

4 Unities - Time

Acquired at the same time

4 Unities - Title

Acquired by the same instrument

4 Unities - Interest

Same share in estate (size and duration)

4 Unities - Possession

Equal right to use, enjoy, and possess the whole thing

Tenancy by Entirety

Mostly gone now but has the right of survivorship

Each owner owns the entire thing

Tenancy by the Entirety - Split Authority on Creditors

No Rights

Full Interest

Survivorship Interest

Tenancy by the Entirety - No Rights

Creditors cannot reach property held in tenancy by the entirety

Tenancy by the Entirety - Full Interest

Some states allow creditors to attach the full interest of the debtor spouse, but subject to the innocent spouse’s interest

Tenancy by the Entirety - Survivorship Interest

Creditors can only attack the survivorship interest of the debtor spouse

Partition in Kind

Physical division

Partition by Sale

Economic division

A party compelling partition by sale must demonstrate

Property cannot be conveniently partition in kind

The interests of one or more parties will be promoted by sale

Interests of other parties won’t be prejudiced by the sale

Cotenant Actions - Contribution Action

Cotenant seeks reimbursement from other cotenants for certain expenses they have paid fr the operation of maintenance of property

Cotenant Actions - Accounting Action

Cotenant seeks to obtain their share of the rents or profits that the property has generated

Cotenant Actions - Partition Accounting

Cotenant seeks to both partition the property and have the court settle the financial affairs of the cotenants

Ouster

Demand to share possession which has been refused

Marital Property Common Law

Husband gets full control of all personal property and husband gets life estate in real property

Marital Property Common Law - During the Marriage

Basic rule is that property is separately owned by the spouse who acquired it

Marital Property Common Law - Divorce

At divorce, most states mandate equitable distribution of the property owned by each spouse

Equitable Distribution

Based on equitable factors

Assets earned during marriage are equitably distributed

Equitable Distribution Factors

Income and property of each spouse

Occupational skills of each spouse

Duration of marriage

Contribution of each spouse to marriage

Dissipation of assets by each spouse

Opportunity of each for employment

Special needs of each spouse

Marital Property Common Law - Death

Most states offer the surviving spouse a forced share of the decedent’s estate

Marital Property Community Property

Looks at marriage as economic partnership

Does NOT include education

Marital Property Community Property - During the Marriage

All earnings during the marriage and all assets required from those earnings are owned by both spouses equally

Marital Property Community Property - Divorce

All community property is divided between the spouses

Marital Property Community Property - Death

The decedent may devise their half of the community property and all their separate property they desire

Unmarried Couples

To prevail on unjust enrichment, D must show P got a measurable benefit and P keeping it without payment to D is unjust

Statute of Frauds

Essential Terms

Writing

Signature

Statute of Frauds - Essential Terms

Usually the names of parties, price, and property description must be in writing

Statute of Frauds - Writing

Can be a formal contract or an informal memorandum

Statute of Frauds - Signature

Must be signed by the party sought to be bound

Statute of Frauds - Exceptions

Part Performance

Equitable Estoppel

Statute of Frauds - Part Performance

Buyer takes possession, pays all or part of the purchase price, and makes improvements to the property or, in some states, performs only some of these actions

Statute of Frauds - Equitable Estoppel

One party reasonably relies on the oral contract to their detriment and serious injury would result if the contract is not enforced

Marketable Title

Reasonably free from doubt

Unmarketable title if

Sellers’ interest is less than what they are conveying

Encumbrances; OR

Reasonable doubt about either one

Unmarketable Title - Laws

Existence of a law does not make a title unmarketable, but a violation does

Marketable Title - Public Easements Split

Public easements is not valid defect

Public easements are a valid defect

Marketable Title Doctrine

If nothing is in the contract about the title, it is implied by law

Marketable Title Doctrine - Express Title Provision

Contract might expressly require seller to deliver marketable title; but the parties can select another standard

Marketable Title Doctrine - Implied Covenant

If nothing is in the contract, default rule implies marketable title

Allocating the Risk of Loss

Where property is damaged during the executory period and the contract doesn’t allocated damages

Allocating the Risk of Loss - Equitable Conversion

Buyer bears the risk of loss on rationale that the buyer is an equitable owner (majority)

Allocating the Risk of Loss - Massachusetts Rule

Seller bears the risk of loss (minority)

Allocating the Risk of Loss - Uniform Vendor and Purchaser Risk Act

Party with the right to possession at the time the loss occurs bears the risk (modern trend)

Duty to Disclose - Traditional Rule

Caveat Emptor - The seller has no duty to disclose defects to seller; seller was only liable if they

Affirmatively misrepresented the condition of the property

Made only a partial disclosure

Actively concealed its defects

Owed a fiduciary duty to the buyer and failed to disclose

Duty to Disclose - Modern Majority Rule

The seller of residential real property is obligated to disclose defects they know about that

Materially affect the value of the property; AND

Are not known to or readily discoverable by the buyer

Duty to Disclose - NY Rule

Buyer can rescind where the condition is

Created by the seller that materially impairs the value

Known by the seller or not readily discoverable

Requirements for a valid deed

Compliance with the statute of frauds

Delivery

Acceptance

Requirements for a valid deed - Statute of Frauds

Be in writing

Contain essential terms

Signed by grantor

Requirements for a valid deed - Delivery

Deed is effective and delivered when grantor manifests an intention to immediately transfer title to grantee

Can be acts, words or both

For valid delivery, grantor cannot receive the deed with absolute control

Functions of Probate

Provide evidence of transfer of title to the new owners

Protect creditors by providing a procedure for payments of debts

Prevent future creditor claims

Distribute the decedent’s property to those intended after the decedent’s death

Transfer on Death Deed

Effective on death but revocable any time

Decedent signs before death

Damages

Non Breaching party can obtain damages, usually the difference between contract price and fair market value at breach

Defenses to Specific Performance

Impossibility

Adequate Legal Remedy

Hardship

Defenses to Specific Performance - Impossibility

Impossible to perform

Defenses to Specific Performance - Adequate Legal Remedy

Don’t need specific performance because money damages or some other remedy would work just as well

Defenses to Specific Performance - Hardship

Specific performance should be denied because it is too difficult (uneconomical) but still possible

Title Assurances - 3 Methods

Title Covenants

Title Opinion based on search of public records

Title insurance

Title Assurances - Title Covenants

Grantor promises in the deed they have the right to convey

Title Assurances - Title opinion based on search of public records

An attorney or other professional renders an opinion on the state of title after searching public land records

Types of Deeds

General Warranty Deed

Special Warranty Deed

Quitclaim Deed

Types of Deeds - General Warranty Deed

Grantor warrants title against all defects, whether they rose before or after they obtained title

Types of Deeds - Special Warranty Deed

Grantor warrants title against all defects that arose after obtaining title

Types of Deeds - Quitclaim Deed

Grantor makes no warranties about title, so the grantee receives only whatever title the grantor has, if any

Title Assurances - Covenant of Seisin

Warrants that the grantor is the owner of the estate described

Title Assurances - Covenant of Right to Convey

Warrants that the grantor has the legal right to transfer title

Title Assurances - Covenant against Encumbrances

Warrants that there are no encumbrances on the land conveyed

The existence of ordinances and regulations is not an encumbrance but the violation is an encumbrance

Title Assurances - Covenant of Warranty

The grantor’s promise to defend the grantee’s title against other claimants

Title Assurances - Covenant of Quiet Enjoyment

Warrants that the grantee’s possession and enjoyment of the property will not be disturbed by anyone holding superior title

Covenant of Further Assurances

A promise that the grantor will execute any additional documents and take any other actions that are reasonably necessary to perfect the grantee’s title

Title Assurances - Title opinions based on search of public records 2 step process

Locate the relevant documents

Evaluate them

Resolving Title Conflicts - First in Time Rule

First grantee to receive interest prevails over grantee who receives interest later

Resolving Title Conflicts - Bona Fide Purchaser Exception

Someone who purchases land and didn’t know another purchased already (there wasn’t a record) is given preference

Resolving Title Conflicts - Shelter Rule

A grantee from a BFP is protected as a BFP

Actual Notice

Information that is actually known

Constructive Notice - Record Notice

Information that could be obtained by searching public land records

Constructive Notice - Inquiry Notice

Information that could be obtained from investigating suspicious circumstances

Constructive Notice - Imputed Notice

Information that could be obtained from an agent

Recording Acts - Race

The purchaser who records first has priority

Recording Acts - Notice

The subsequent purchaser who has no notice of the prior interest is a bona fide purchaser and thus has priority

Recording Acts - Race-Notice

The subsequent purchaser who both has no notice of the prior interest and records first is protected as a bona fide purchaser

What if there are multiple BFPs?

The very last BFP gets priority

Acknowledgement

Notary certifies grantor’s identity and intention to transfer property; notary signs deed

Title Insurance - Two Obligations

Duty to defend

Duty to indemnify

Two components of a secured loan

Obligation (promissory note)

Security for obligation (a way to get repaid)

Security for Obligation - Mortgage

Mortgagor conveys an interest in land to the mortgagee

Security for Obligation - Deed of Trust

Trustor conveys an interest in land to a trustee for the benefit of the lender (beneficiary)

Security for Obligation - Installment Land Contract

Buyer promises to pay the purchase price to the seller in installments over a period of years

Functionally treated as a mortgage

Security for Obligation - Equitable Mortgage

Where a transaction is a sale in form, but the parties intend it to be a mortgage, the court will treat it as a mortgage as a matter of equity

Security for Obligation - 8 Factors to decide if Equitable Mortgage

Statements by the homeowner or representations by the purchaser indicating an intention that the homeowner continue ownership

A substantial disparity between the value received by the homeowner and the actual value of the property

Existence of an option to repurchase

The homeowner’s continued possession of property

Homeowner’s continuing duty to bear ownership responsibilities, such as paying real estate taxes or performing property maintenance

Disparity in bargaining power and sophistication, including homeowner’s lack of counsel

Evidence showing an irregular purchase process, including the fact that the property was not listed for sale or that the parties did not conduct an appraisal or investigate title

Financial distress of the homeowner including the imminence of foreclosure and prior unsuccessful attempts to obtain loans