USP 150 Final

What is the purpose of real estate laws and regulations?

- create standards
- prevent arguments

Government Sources of Laws and Regulations

- legislative (enact statutes): federal, state, local
- Executive (adopt regulations): federal, state, local
- Judicial (common law and case decisions): federal and state

American Legal system and federalism

- gov functions divided between federal and state/local governments
- constitutions - US constitution and the 50 state constitutions
- US Constitution specifics certain powers of the federal government, and the rest are reserved to the state
--- states can provide more protection than the federal law states

Congress

- enumerated and implied powers recognized for Congress
- two chambers, house and senate. Passage by both needed
- President signs, vetos or fails to act. If vetos, can be overriden by two-thirds majority

Powers of Congress

Limited and enumerated powers
- taxing and spending powers
- power to declare war
- power to regulate interstate commerce
- power to establish federal court system

Only powers specifically granted in US constitution: 10th amendment

When does Congress pass laws that are outside these enumerated powers?

Necessary and proper clause

10th amendment

any powers the U.S. Constitution doesn't give to the federal government—and doesn't forbid the states from having—belong to the states or the people.

Administrative Agencies

- created by legislatures
- powers are delegated from legislatures
- are overseen by legislatures
- promulgate rules
- enforce rules
- adjudicate disputes over application of rules
- many agencies significantly influence real estate business
- constrained by constitutional prohibitions

The American Judicial System

- Court systems: federal courts and the 50 state court systems
- why courts?
--- resolve disputes
--- interpret the law
--- preserve the separation of branches of government
--- protect individual rights
-- foster legal development
--- establish transparency and predictability of law to foster social, economic, and political stability and reliability
--- create law when statuary law hasn't superseded common law

Why is stare decisis important to our legal system?

- creates predictable/stable application of laws
- makes things fair

Cases and Controversies Heard by Federal Courts and SCOTUS

- Federal courts resolve questions arising under the constitution, a federal statute, regulation, executive order, or treaty
- civil suits where there is diversity jurisdiction (cases involving citizens of separate states)
- SCOTUS resolves questions on appeal from the federal circuit courts and state supreme courts (involving federal law), and acts as the "trial court" for disputes between states
- SCOTUS can decide to hear cases with a writ of certiorari. In other words, thee is not a right to SCOTUS review, SCOTUS must choose to review

The Role of Appellate Courts

- Appellate courts focus on error correction:
--- do not retry facts of case but look for legal errors that may have occurred at the trial court
--- can reverse based on the facts only if the facts are so lacing that the trial court could not have reasonably determined the facts as it did
--- can reverse based on the trial court misapplying the law, misinterpreting the law, or applying the wrong law
- Appellate decisions make law by establishing case precedent to be followed in the future (common law)

Once decided, do appellate decisions bind all other courts?

- binds decisions/creates precedent for lower courts
- SCOTUS decisions binds all courts
- only SCOTUS can change SCOTUS decisions

Real property

land and things affixed to land, such as structures, crops, and minerals (not movable)

Personal property

all property that is not real property, so it includes tangible and intangible property

Bundle of Rights

The right to possess
The right to use
The right to exclude others from possessing or using
The right to lease to others
The right to transfer

Title

having ownership over real or personal property

Possession

having dominion and control over the real or personal property

The bundle of property ownership rights can be limited, restricted, or regulated by?

local zoning ordinances

The 4th Amendment (protecting people from unreasonable searches and seizures) to the US constitution implicates which property right?

Excluding others from possessing or using both real and personal property

Powers delegated by the constitution can be re-delegated

by congress to federal administrative agencies

Three broad categories of congress' commerce power can be summed up by

- regulating channels of interstate commerce
- instrumentalities of interstate commerce
- activities having substantial affect on interstate commerce

A ninth circuit decision is

a binding authority on the district court of southern California, persuasive authority to the fifth circuit, persuasive authority to SCOTUS

Freehold Estates

- Owners of real property own an "estate" (an interest) in it, which may either be an extensive interest (e.g., fee simple absolute) or a more limited one (e.g., periodic estate)
- Traditionally, the law has recognized certain freehold and non-freehold estates

Three types of freehold estates

Fee simple absolute
Fee simple defeasible
Life estate

Fee simple absolute

- Most unrestricted estate, but subject to certain limitations
- Has infinite duration
- Inheritable under intestate statutes

Fee simple defeasible

Similar to fee simple absolute, but it has "strings attached"
- May use and hold property forever, convey it, or have it inherited by heirs, but it must be used subject to a restriction
- 3 different types:
o Fee simple determinable
o Fee simple subject to a condition subsequent
o Fee simple subject to an executory limitation

Fee simple determinable

Automatically comes to an end when stated event occurs (or fails to occur)
- Usually functions to prevent certain use of property that grantor opposes
- Possibility of reverter to grantor
- Words like "so long as" or "until" or "during" or "while,"and mentioning that the property will "revert" to thegrantor, typically signal this estate

Fee simple subject to condition subsequent

- Unlike fee simple determinable, does not automatically end when stated event occurs (or fails to occur)
- If event occurs (or fails to occur), grantor has right to take back property, but nothing happens until grantor affirmatively exercises that right
- Right of re-entry
- Must use words like "upon condition that" or "provided that," and must state that grantor may re-enter the property and terminate the estate if event occurs/fails

Fee simple subject to executory limitation

- Like fee simple determinable, automatically comes to an end when stated event occurs/fails
- However, instead of a possibility of reverter to grantor, the estate passes to a third person (other than grantor) if the event occurs/fails
- Words like "so long as" or "until" or "during" or "while,"and mentioning that the property will transfer to another party, typically signal this estate

Life Estate

Lasts for the lifetime of a person
- Ordinarily, estate is measured by life of holder of estate
- But estate sometimes is measured by life of another. This type of life estate is called an estate"per autre vie"
- May be defeasible

Future Interests

Non-possessory estates that may or will become possessory in the future
- Possibility of reverter
- Right of re-entry (sometimes called right of entry)
- Reversion
- Remainder
- Executory interest

Possibility of Reverter

Occurs when owner transfers a fee simple determinable to another party
- The transferring owner retains a possibility of reverter
- If the fee simple determinable ends, possession "reverts back" to the transferring owner

Right of Re-entry

- Occurs when owner transfers an interest subject to a condition subsequent to another party
- The transferring owner retains a right of re-entry
- If the interest subject to a condition subsequent ends, the transferring owner has the right to take back the estate

Reversion

- Interest left in grantor after the grantor makes a conveyance of a lesser estate
- Grantor does not need to specifically reserve a reversion
- Contrast with a possibility of reverter

Remainder

Interest in party other than grantor or grantee, following termination of earlier estate
- Grantor conveys present possessory interest in one transferee
- Grantor creates non-possessory future interest in another transferee
- The non-possessory future interest (i.e., the remainder)must be able to become possessory upon "natural" expiration of first interest

Executory interest

- Occurs when owner of fee simple absolute transfers fee simple subject to an executory limitation to another party
- Interest in party other than grantor, taking effect when prior interest ends due to occurrence or failure of specified event

McCulloch v. State of Maryland

This case was about whether the federal government could create a national bank, and whether a state (Maryland) could tax that bank.

The Supreme Court said:

- Yes, the federal government can create a national bank—even though the Constitution doesn't say it directly. That’s because of the Necessary and Proper Clause, which lets Congress do things that help it carry out its powers.

- No, states can’t tax the federal government. That’s because "the power to tax involves the power to destroy," and states shouldn't be able to interfere with federal actions.

Villas at Parkside v. City of Farmers Branch

This case was about a Texas city (Farmers Branch) that passed a law saying landlords had to check the immigration status of renters and couldn’t rent to undocumented immigrants.

What happened:

- Some landlords and tenants sued the city, saying the law was unfair and unconstitutional.

- The court ruled that only the federal government has the power to make and enforce immigration laws—not cities or states.

- So, the court said the city’s law was invalid because it interfered with federal immigration powers.

Why it matters:The case showed that local governments can’t make their own immigration rules—that’s a job for the federal government only.

Mahrenholz v. County Board of School Trustees

In 1941, a family gave land to a school with a condition: the land could be used "only for school purposes." Years later, the school stopped using the land for a school. The Mahrenholz family, who got the land from the original owners, said the land should go back to them because it wasn't being used for a school anymore.

Question:

Was the original gift of land a fee simple determinable or a fee simple subject to a condition subsequent?

Decision:

The court said it was a fee simple determinable—meaning the land automatically went back to the original owners when it stopped being used as a school.

Offer

- An offer is a conditional promise - a proposed bargain with another party
- Creates a power in the offeree to enter into a contract by accepting the offer
- Options keep offers open for a certain period

Acceptance

- Acceptance can only be by the person who was given the offer
- Unless offer states otherwise, acceptance can be in the form of words or actions

Consideration

- the exchange by each party of anything of value to the other side
- Money is the most common form of consideration
- But a barter contract (each side will exchange a thing), or a promise to not do something that the party could do (forbearance), are also forms of consideration

Contracts in General

- Contracts can generally be oral or written
- Contracts can be bilateral: each party promises to perform in exchange for the other party's promise to perform
- Contract can be unilateral - a "one-sided" contract

Void Contract

the promise by one or both parties is prohibited by law

voidable contract

one party can, at that party's option, enforce or not enforce the contract because the law allows that party a right to cancel the contract

Statute of Frauds

Certain promises must be in writing:
- To sell real property
- To lease real property for more than a year
- To mortgage real property for purchase
Exceptions:
- Seller conveys property to buyer
- Buyer pays for and improves property

PSA Process

- Letter of Intent
- Negotiation and PSA preparation
- PSA execution and escrow instructions
- Due diligence - physical, legal and representations
- Financing
- Title Insurance and resolution of issues
- Closing and Closing Deliverables

What are Non-Freehold Estates?

- Like freehold estates, residential and commercial leases are estates in land
- But they are not ownership interests
- Each gives exclusive possession to a tenant, with a duty by the tenant to pay rent to the owner/landlord

Non-Freehold Estate types

- Term Tenancy (or Term for Years)
- Periodic Tenancy
- Tenancy at Will
- Tenancy at Sufferance

Term Tenancy

- A lease for a term which is to continue for a definite period fixed in advance by agreement between landlord and tenant

Periodic Tenancy

- Continues for periods of time (typically year-to-year, month-to-month, or week-to-week) indefinitely until terminated by one of the parties by proper notice
- The most common periodic tenancy is the month-to-month tenancy

Tenancy at Will

- No stated duration
- Terminable at any time upon unilateral decision of either party
- Uncommon because a landlord's acceptance of periodic rents causes tenancy to be treated like a periodic tenancy
- California requires minimum of advance 7-day notice (but otherwise 30-day notice) of termination by either party

Tenancy at Sufferance

- When tenant has rightfully come into possession of the land, but retains possession after the expiration of the term
- For example, a tenant who holds over after the expiration of a lease
- Landlord's election: evict tenant or bind tenant to periodic tenancy

Length of Lease Term

If fail to specify lease term, it is presumed:
- For lodgings, dwelling-houses, residential properties, it is the period of time adopted for the payment of rent
- For agricultural or grazing properties, it is 1 year
- For all other properties where there is no custom or usage, it is for 1 month unless otherwise designated in writing
Even if specified or implied by statute, the lease term may be limited:
- An agricultural lease cannot have a term exceeding 51 years
- A lease for any city lot cannot have a term exceeding 99 years
- A lease of land for the production of minerals, oil or gas cannot have a term exceeding 99 years

Tenant's Right to Enjoyment of Premises

Tenant has the "right of quiet enjoyment"
- Landlord impliedly warrants that it has legal power to give possession to tenant
- Landlord impliedly promises not to interfere with tenant's use of premises

Condition of the Premises

- A landlord of residential dwelling has legal duty to keep the dwelling in a habitable condition
- In commercial leases, a landlord is generally not under any implied obligation to make repairs or to maintain the leased premises in a tenantable condition

Ground Leases

- Long-term leases
- In lieu of purchasing land, but tenant acts like owner
- Tenant can finance and construct its building without much landlord involvement
- Tenant pays all operating expenses and taxes
- Desirable location or financing strategy

Role of Real estate attorney

1) Advise client regarding legal requirements, options and pitfalls
2) Advise client regarding industry market and standard practice
3) Negotiate terms and voice client's positions and concerns
4) Draft documentation
5) Oversee logistics so as to ensure binding effect

California Civil Code 1938

When a commercial property is being leased, the landlord must say in the lease whether or not the property has been inspected by a Certified Access Specialist (CASp). A CASp inspection checks whether the property meets the requirements of the Americans with Disabilities Act (ADA).

- does not require property to be inspected

- only requires disclosure of whether or not an inspection has been done

- Helps tenants understand if a building is ADA compliant

- only applies to public accommodations

- owner/lessor will have responsibility for it if not otherwise stated

- parties mutually agree on time and manner, payment of fee, and cost of making any repairs necessary

California Government Code 65852 and 65852.2

providing standards for creation of accessory dwelling units (ADUs)

Code 65852.150 = legislative intent
Code 65852.2 = mechanics of statute

setback

the minimum distance required by zoning to be maintained between two structures or between a structure and a property line

Code 65852.2

- local agencies must approve or deny ADUs within 60 days or they are automatically approved
- ministerial process so no discretionary review
- you can't have more restrictive requirements for ADUs since that is against state law (there will be consequences)

What is a purchase and sale agreement?

a document containing the terms upon which a seller will sell and convey real property, and upon which a buyer will purchase real property and accept the conveyance

Parties involved in a PSA

- Purchaser
- seller
- brokers
- escrow agent
- title agent
- third party lender

goals of purchaser in PSA

- purchase property for lowest amount of money and least risk
- wants as much time as possible to investigate the property (or terminate if needed)
- cleanest most secure title
- ensure that there are no outstanding liens, taxes, etc
- ensure property is suitable for intended use
- review all of the leases
- review any covenants

goals of seller in PSA

- make as much money as possible
- make lowest possible number of warranties on property
- shift as much risk to purchaser as possible
- close as quickly as possible

order of events

1. Letter of intent
2. Negotiation and PSA preparation
3. PSA execution
4. Due Diligence
5. financing
6. Title insurance and resolution of issues
7. closing and closing deliverables

Letter of Intent

- outlines terms/conditions of the purchase and sale
- not a binding agreement
- access to information not otherwise available (leases, financial, etc)
- prepared by brokers or parties

Covenants

a legal promise written into a deed or other real estate document that restricts or requires certain actions regarding the property

Contingencies

conditions that must be met for a real estate deal to move forward or close

Easement appurtenant

t’s a permanent access right tied to a piece of property—not to a person.

- creates dominant and servient tenements

- has to benefit another piece of land

Easement in gross

benefit is not tied to any particular piece of land; rather it is personal to its holder (so it will end when owner changes)

easement by prescription

- use of property must be open, notorious, continuous and adverse for uninterrupted period of 5 years
- have actual or constructive notice
- must be adverse or without permission

affirmative easement

entitle holder to do a physical act on the land of another

negative easement

entitle holder to prevent the owner of the land from enjoying certain uses of that land

creation of easements

- by an express grant
- by implication as part of land transfer
- by necessity to prevent parcel from being landlocked
- by prescription
- by estoppel

express creation

- by deed or will
- fastest
- agreement must be in writing
- needs to be recorded

created by implication

- no writing required
- owner sells part of land or subdivided land to different grantees
- the use of the land prior to the sale was obvious and permanent
- the easement is reasonably necessary to the use and benefit of the dominant tenement

easement by necessity

- must be necessary to enjoy property
- dominant and servient tenements were under common ownership prior to conveyance
- necessity was caused by the conveyance

easement by estoppel

- If a landowner agrees to your use of the land, and you spend money or make big changes based on that promise, the law may stop the owner from changing their mind later

termination of easements

- by express terms
- by merger
- by destruction of servient tenement
- by prescription
- by release
- by estoppel

Licenses

- non-exclusive right to use property, which is revocable at the will of the licensor, with some exceptions
- use of property in nonpossessory and in a specified way
- may be created verbally

covenant running with the land

affirmative promise to pay for benefits received on the land or to take care of certain acts on the land

equitable servitude

negative promise involving a restriction on the land

Easement by prescription in California

- no permission
- open and notorious use
- continuous and uninterrupted use
- for 5 year
- periods can be "tacked" together
- scope: same general pattern of use that the owner would not have objected to
- can prevent this by giving them permission

adverse possession in California

- actual occupation (improvements to the land or leased to a tenant)
- hostile possession (no permission from owner)
- claim of right (they believe the own it)
- continuous and uninterrupted possession
- payment of taxes
- for 5 years

who has the power to condemn?

- federal government pursuant to US constitution
- California pursuant to US constitution
- Counties, cities, special districts in their legislatively authorized powers
- Private utilities if authorized by the California Public utilities commission

Why take public property in Cali?

- necessary for public use
- because public use resulted in damaging real property

valuation

- compensation for pre-condemnation injury and insulation from value decline
- value of property taken (best and highest use)

Pre-Condemnation offer

- pre-trail offer and demand required (at least 20 days before compensation trial)

Constructive notice

assumes you have knowledge since it is public knowledge

General Recording Requirements (For San Diego)

- The property must be located in San Diego County
- Specific formatting
- Must be notarized
- Notary Public
- The Assessor's Parcel Number is required on deeds by local ordinance

3 ways of Recording Statutes

- Race
- Notice
- Race-Notice

Race

Whoever gets there first

Notice

The party who purchases without knowing prior conveyance (The last buyer wins only if they didn’t know about the earlier buyer's claim)

- bona fide purchase: without "actual knowledge" of prior conveyance

Race-Notice

The last buyer who
1. records first
2. had no knowledge of prior claim
- California's

Purpose of Title Insurer

Title insurer assures you that you have clean title/know everything, and they are liable if they missed anything

Role of the Title Insurer

- conduct numerous title searches in several counties
- Examine the results of the searches for any encumbrances or other title defeats that could cause loss
- Prepare documents for filing to eliminate as many title defects as possible
- Negotiate the insuring of remaining risk
- holding documents and purchase money at the appropriate times
- presiding over the closing of the transaction
- issuing lender's and owner's title insurance policies insuring the various interests in real property involved

Title Insurance

- Determines disclosed status of title
- insures against loss or damage caused by liens, encumbrances, or defects in title
- preliminary title report on status of the title acts as an offer of insurance
- Title insurance policy is contract to indemnify against loss

Essentially ensure that they know the information about the title, and if they miss something they will have to indemnify (pay) for any damages