Real Property

An owner conveyed one of his properties to “my son for life, remainder to my daughter.” The son lived on the property without paying any rent, although the property could have been rented for $4,000 a month. The property was assessed annual property taxes of $10,000. The son did not pay the taxes on the property. Not wanting to have a lien on the property or otherwise have it foreclosed upon, the daughter paid the annual property taxes. The fair market value of the life estate was 10 percent of the fair market value of the property held in fee simple absolute.

How much can the daughter recover from the son for the tax payments?

A. $10,000, because life tenants are responsible for paying annual taxes assessed on the property in their entirety.

B. $10,000, because the taxes did not exceed the reasonable rental value of the property.

C. $1,000, the amount of taxes owed based on the proportion of the fair market value of the life estate to the fair market value of the property held in fee simple absolute.

D. Nothing, because the property taxes are the responsibility of the holder of the remainder interest.

B

A man owned a 25-acre tract of land. He conveyed 20 of the 25 acres to a developer by warranty deed and continues to live on the 5-acre portion he retained. The deed to the 20-acre tract was promptly recorded and contained the following provision: "It is a condition of this deed that all owners, and their heirs and assigns, of any portion of the 20-acre tract shall use the land for single-family residences only." The applicable zoning ordinance allows for single and multi-family homes in this area. The developer fully developed the tract into a residential subdivision consisting of 20 lots with a single-family home on each lot. The lots were subsequently sold and the deed to each lot referenced the quoted provision.

A woman who owned one of the lots on the perimeter of the subdivision has decided to build an addition to her house, which would contain an apartment she intends to rent to students of a nearby college. An individual who lives in an adjacent residential neighborhood opposes the woman's addition because he does not want rowdy college students nearby.

Can the individual prevent the woman from building the apartment?

A. No, because the zoning ordinance allows for multi-family homes as well as single-family homes.

B. No, because the individual does not have the right to enforce the restriction.

C. Yes, because the original parties intended for the rights and duties to run with the land.

D. Yes, because the restriction is valid under the common-law Rule Against Perpetuities.

B

A speculator and the original owner of a condominium unit entered into a contract for the sale of the unit. The contract, which contained no reference to the marketability of the title, called for the owner to transfer the unit to the speculator by quitclaim deed, which the owner did on the date called for in the contract.

A year later, the speculator entered into a contract to sell the unit to a third party at a price significantly higher than the price paid by the speculator for the unit. The contract specifically required the speculator to provide the third party with title to the unit free from all defects. Upon investigation, the third party discovered that the unit was subject to a restrictive covenant that rendered the title to the unit unmarketable and that the restrictive covenant had existed at the time that the speculator had purchased the unit. The third party refused to complete the transaction.

The speculator subsequently sued the original owner of the condominium unit for breach of contract.

For whom is the court likely to rule?

A. The speculator, because a covenant of marketable title was implied in the contract.

B. The speculator, because of the warranty against encumbrances.

C. The original owner, because the condominium unit was transferred by a quitclaim deed.

D. The original owner, because of the merger doctrine.

D

A married couple bought a house to use as a residence. Their bank loan was secured by a mortgage on the house. The following year, the couple granted a second mortgage to a savings and loan association in exchange for a loan. The proceeds from this loan were used in the couple's business. Several years later, the couple defaulted on both loans. The couple offered their interest in the house to the bank by deed in lieu of foreclosure and the bank accepted; the bank did not reserve the right to foreclose.

What effect does this transaction have on the savings and loan association's mortgage?

A. As an interest with priority over the bank's mortgage, the savings and loan association's mortgage is unaffected.

B. As a junior interest to the bank's mortgage, the savings and loan association's mortgage is completely eliminated.

C. The savings and loan association cannot foreclose on its mortgage, but must look to the personal liability of the couple, now that the bank owns the house.

D. The house remains subject to the savings and loan association's mortgage.

D