Property II (MINE)

Fair Housing Act (1968) Exceptions

Owner-occupied apartments with up to four units OR single family residences rented or sold without a real estate broker or salesperson → You cannot discriminate in an advertisement but you CAN when it comes to actually denying someone in person

Shared living units (e.g. roommates) → FHA doesn't apply at all so you CAN discriminate in ads or real life

Express Easement

Requirements:

(1) Voluntarily created in a deed will or any other written instrument

(2) May arise by grant or by reservation

(3) Must be in writing and

(3) Signed by the parties to be bound (SOF)

Easement by Prior Existing Use (Implied)

(1) Severance of title to the land was held in common ownership

(2) Existing, apparent, or continuous use when severance occurs; and

(3) Reasonable necessity for the use at the time of severance

Easement by Necessity (Implied)

(1) Severance of title to land held in common ownership

(2) Strict necessity for the easement at time of severance

*Strict necessity requires the parcel to be landlocked with no other access to public roads or utilities

Easement by Prescription (Implied)

(1) Actual use - as true holder would use

(2) Open and notorious use -reasonable owner would be aware

(3) Adverse use - without permission from owner of servient land

(4) Continuous use - as the true holder would continuously use the easement

(5) For the statutory period (10 years typically suffice)

Easement by Estoppel (Implied)

Claimants must show:

(1) A license

(2) Licensee's good faith reliance through the expenditure of substantial money or labor

(3) Licensor's knowledge or reasonable expectation that reliance will occur

Transferring Easements — Appurtenant (Express)

Rules:

If dominant land is transferred, automatically runs with the land;

If servient land is transferred, the new burdened party must have had notice of the easement transfer

Transferring Easements — In Gross (Express)

If the dominant owner changes:

*Traditional Rule: Only commercial easements in gross are freely transferable; non-commercial easements in gross are not transferable, unless expressed in writing

Modern Rule: Any easement in gross is freely transferable, unless circumstances show that the parties should not reasonably have expected this result

Transferring Easements — (Implied)

Implied Easements run with the land unless they are terminated

No notice is required when the dominant land is transferred

Terminating Easements (TAMPER)

T: terms of the easement - express limitation in agreement

A: abandonment - (a) no use for a long period and (b) other actions that show intent to relinquish

M: merger - if one person obtains both title to land and easement, the easement terminates under the doctrine of merger.

P: prescription - can terminate based on same elements except servient owner must substantially interfere w/ holder's use of the easement

E: estoppel - servient owner reasonably relied on holder's statement that easement will not be used

R:release - a writing that complies w/ statute of frauds

Scope of Easement

Can increase the manner, frequency, or intensity of an easement's use so long as does not unreasonably damage or interfere with the use or enjoyment of the servient estate

Real Covenant — Remedy Requirements

For burden to run: SOF, intent to bind successors, touch and concern, notice, horizontal privity, vertical privity

For benefit to run: SOF, intent to bind successors, touch and concern, horizontal privity

*NO notice or vertical privity required

Equitable Servitudes — Remedy Requirements

For burden to run: SOF/Common Plan, intent to bind successors, touch and concern, notice

*NO horizontal privity or vertical privity

For benefit to run: SOF/Common Plan, intent to bind successors, touch and concern

*NO notice, horizontal privity, or vertical privity required

JDX Split: Duty to Disclose Physical Defects - Materially Impact K Value

(a) defect known to the seller (or "reason to know")

(b) defect not known or not readily discovered by buyer exercising due care and

(c) defect that materially impacts the value of the contract [JDX Split]

-majority: objective standard for FMV

-minority: subjective standard

Intentional Representation/Fraud

Elements:

(1) False statement or active concealment of material fact made by the seller to buyer

(2) Known to the seller to be false

(3) Made with the intent to induce buyer to purchase

(4) Which the buyer justifiably relied on in deciding to purchase

(5)To the buyer's detriment or loss

Part-Performance (SOF Exception)

Elements:

(1) Buyer takes possession of property

(2) Makes substantial improvements to the property

(3) Makes payment of some or all of the purchase price to the seller

Estoppel (SOF Exception)

(1) Buyer substantially changes their position in reliance on an oral promise by the seller and

(2) Buyer will be substantially injured if specific performance is not granted

JDX Split: "As-Is" Clause — Residential

Residential [JDX Split]

-majority: not sufficient to overcome liability for failure to disclose or fraud

-minority: general "as is" clause is enforceable

Commercial: usually enforceable

Specific: if the clause specifically identifies and disclaims liability for a specific type of defect, it is likely to be upheld

JDX Split: Expectation Damages

Expectation Damages: Loss of bargain damages [JDX Split]

-majority rule: difference between k price and FMV at date of breach

-minority rule: if good faith (unintentional) breach of warranty of marketable title, expectations damages not available

JDX Split: Equitable Conversion

-Majority rule:

Purchase contract "converts" the legal right to property from seller to buyer. The buyer is the equitable owner of the land until closing unless the contract provides otherwise

In general, if the property is destroyed before closing, Buyer bears the risk of loss and must pay contract price

-Minority rule:

Risk is on the seller unless buyer has either legal title or possession at the time of the loss

Marketable Title (Defintion)

Title that is reasonably free from doubt that a prudent buyer would be willing to accept. It does not have to be perfect title, must be free from questions that pose an unreasonable risk of litigation.

If Title Unmarketable

Buyer can rescind p/s k. Unmarketable title allows buyer to rescind, not seller.

Unmarketable Title (Examples)

1. Problems with Title

a. Less property interest than identified in p/s k.

2. Risk of litigation

a. Uncertainty regarding titel

b. Violation of law

c. Substantial Problem

Marketable Title (Timing Issues ToE)

1. In general, Seller has until closing to fix problem w/title.

2. If there is a ToE clause, then Seller MUST provide marketable title At Closing.

3. If No ToE clause, then Seller has reasonable time after closing to provide marketable title.

4. If obvious seller cannot fix problem prior to closing, Buyer can rescind k.

Duty to Disclose

In general, a seller has a duty to disclose:

1. Defects known to the seller

2. Not known or readily discoverable to a buyer exercising average prudence

3. Materially impacts the value of k.

fraudulent misrepresentation (elements)

(1) False statement of material fact by the seller

(2) known by the seller to be false

(3) with specific intent to induce buyer

(4) which buyer detrimentally relies on

(5) to buyers loss or detriment.

General "As is" Waivers/Clauses

(1) Residential - a general "as is" clause is not sufficient to overcome the seller's liability for failure to disclose or fraud.

(Minority) - Enforceable

2. Commercial - usually always enforceable.

Specific "As is" Waivers/Clauses

If identifies and discloses the liability, then it is upheld

Seller's breach of P/S k

Justifies buyer's rescission & other remedies

Buyer's breach of P/S k

Justifies seller's recision & other remedies

Damages for Breach of P/S k

Restitution

Reliance

Expectation

Liquidated

Consequential

Equitable Conversion

The P/S k converts the legal right to the property from the seller to buyer. Buyer becomes the equitable owner of the land until closing unless the k provides otherwise.

Buyer = Equitable owner

Seller = Legal right to payment

Risk of Loss (Majority)

Generally, if the property is destroyed before closing, buyer bears risk of loss and must pay the k price

Uniform Vendor and Purchaser Risk Act

Some states, including CA place risk on seller unless the buyer has legal title or possession of the property at the time of loss.

The Deed (Requirements)

(1) Writing

(2) Be Signed by the grantor

(3) Identify grantor and grantee

(4) Words of conveyance

(5) Describe the property

Merger Doctrine

Terms of the P/S k merge into the deed

Deed Delivery (Key Element)

Grantor's manifest intent to transfer immediate property interest to grantee

Delivery Principles (Rebuttable Presumption)

(1) Physical Delivery

(2) Recorded

Deed given to a Third Party (Rule)

Delivery to a third party is valid if intent to part with "all dominon and control" intending for deed to take effect at time of delivery to third party.

Transfer on Death Deed

Will substitutie. Doesnt take effect until grantor dies. Revocable as a will substitute

Estoppel by Deed

If the seller conveys property with warranty deed before they have title to it, then, when they later obtain the property, they are estopped from claiming title.

General Warranty Deed

Grantor warrants against all defects, whether they arose before or after they obtain title

Special Warranty Deed

Grantor warrants title against all defects that arose after they obtained title

Quitclaim Deed

Grantor makes no warranties about tile, so grant they recieve, if any is what the grantor has.

Title Assurance (General Rule)

What protections do buyers have against potential title defects that don't emerge until closing?

(1) Title Covenants

(2) Recording Statutes

(3) Title Insurance

Covenant of Siesin (Present Covenant)

Promise that Grantor owns the land they are selling

Right to Convey (Present Covenant)

Grantor is authorized to sell

Covenant agiasnt Encumbrances (Present Covenant)

Violated if encumbrance:

Ex. Lien, Servitude, lease

Present Covenants (When Breached)

Breached at closing

Future Covenants (When Breached)

Breached at time of actual interference

Covenant of Warranty (Future Covenant)

Promise to defend grantee against valid claim

Covenant of Quite Enjoyment (Future Covenant)

Grantor's promise that no one else with lawful claim will affect buyer's use and enjoyment of land.

Ex. Tenant in possession; Easement

Covenant of Further Assurances (Future Covenant)

Grantor will take all future steps reasonably necessary that will cure title defects.

Recording statutes (definition)

Mechanism for keeping track of property ownership, informing subsequent purchaser of other interest in the property.

Common Law (Recording Statutes)

First in time, first in right. Whoever obtains title first wins.

Race Jdx (Recording Statutes)

Whoever records first wins. Notice is irrelevant

Notice jdx (Recording statutes)

A subsequent BFP with No Notice wins.

Race-Notice Jdx (Recording Statute)

A subsequent BFP is protected only if record before prior grantee

BFP (Definition)

Bona Fide Purchaser is a purchaser who gives valuable consideration

Shelter Rule

A grant from a BFP protects the grantee agaisnt any interest that the transferor or BFP would have been protected against even if the grantee would not otherwise qualify as a BFP.

Wild Deed

A prior conveyance from a grantor who is outside the recorded chain of title, does not give record notice to subsequent purchasers.

Title Insurance

K of indemnity between the issuing company and the property owner/mortgagee.

In general, title insurance polices include:

(1) Exceptions: for specific and actual or potential title defects; AND

(2) Standard Exclusions:

(a) Problems created

(b) known to party & not shown on public records

(c) Impact of any law, ordinance or regulation.

Promissory Note (Definition)

written k establishing personal liability for a loan

Promissory Note (Components/Requirements)

1. SoF

2. Loan Amount

3. Set interest amount

4. Timeline (payments)

Mortgage (Definition)

Secures the debt, give the lender the right to sell and obtain proceeds if the borrower does not pay back debt. The property is collateral for the loan.

Mortgage (Components/Requirements)

1. SoF

2. Describe the property

3. Recordable interest to provide constructive notice

Lien Theory

Lender obtains lien, right to sell the property if the borrower fails to repay

Title Theory

Lender obtains title to the property until borrower pays off debts.

Foreclosure (Definition)

If borrower defaults, the lender can foreclose. Have the property sold and recoup unpaid balance from sale proceeds.

Traditional Judicial Foreclosure

Lender must bring suit and a court oversees the foreclosure process

Traditional Judicial Foreclosure (Lawsuit Process)

1. Complaint

2. Answer

3. Possible Claims:

a. No Mortgage

b. No Default

c. Defenses to formation

4. If not contested - Lender obtains judgment by default

Traditional Judicial Foreclosure (Sale Process)

1. Authorization

2. Notice

3. Pubic Auction

Nonjudicial foreclosure/Power of Sale (Definition)

Authorizes the lender to sell the property at auction and distribute the proceeds.

Nonjudicial Power of Sale Foreclosure

Mortgage documents must provide for power of sale.

Most states: statutory requirements

Public sale, no direct judicial role.

Deed of Trust

Functionally equivalent to mortgage with power of sale.

Mortgagor's obligations

Make government payments

Maintain property insurance

Defend the property against AP

Transfers by the Mortgagor (Default Rule)

If the deed is silent, the new buyer is NOT personally liable but still faces risk of foreclosure.

"Subject to" loan

Buyer is not personally liable, but still faces risk of foreclosure

"Assuming" the loan

Buyer is personally liable AND faces the risk of litigation.

Deed in Lieu of Foreclosure

If borrower takes deed in lieu of foreclosure, then lender takes property Subject To junior liens.

Foreclosure (Key Questions)

I. Interest

II. Distribution

III. Deficiency

Interests (Foreclosure)

What happens to interests in land Post-Foreclosure?

Senior interests are still attached to property

Junior interests are eliminated

Foreclosing lender's interest is eliminated

Distribution (Basic Priority Rules)

1. Foreclosing lender

2. Junior Lienholder

3. Borrower

Distribution (Advanced Priority Rules)

1. PMM

2. Senior interest Not Recorded

3. Junior interest No notice

4. Deed in lieu of foreclosure

PMM

PMM interests have priority over more senior liens even if PMM lender had notice

Senior Interest Not Recorded

Junior mortgages who are BFE have priority over earlier interests who failed to record.

Junior Interest No Notice of Foreclosure

If no notice, junior interest is NOT eliminated.

Deed in Lieu of Foreclosure

If borrower takes deed in lieu of foreclosure, then takes subject to junior loans. Does not eliminate junior loans.

Deficiency

How can lender pursue for deficiency if proceeds are not sufficient to cover debt?

1. Junior Lien-holders - Sue on promissory note

2. Senior Lien-holders - Foreclosure on bidder who now holds title to property.

Zoning

Divison of a jurisdiction into districts in which certain uses and developments are permitted or prohibtted. Zoning is public law.

Nonconforming use

use of land that lawfully existed before zoning ordinance was enacted, but does not now comply with the ordinance.

Cannot be transferred into another nonconforming use

Minor repairs are permitted; However, structural repairs that will extend the duration of use are NOT PERMITTED.

Terminating Nonconforming use

The right to continue a nonconforming use is terminated by:

(1) Abandonment

(2) Destruction

Abandonment (Nonconforming use)

Abandonment is met when:

(1) Owner intends to abandon; AND

(2) Discontinued use for a substantial period of time.

Destruction (Nonconforming Use)

Destruction of nonconforming use terminates the right to continue, even if the destruction was accidental.

Variance

Permitted deviation from strict enforcement of a zoning ordinance in an individual cause due to special hardship.

Area Variance

Allows for modification of height, location, setback, size, or similar requirements for a use that is permitted in the zone.

Use Variance

Allows for a use that would normally not be permitted in the zone.

Standard for granting Variance

A variance may be granted based upon:

(1) Property owner's hardship; AND

(2) Impact of variance on neighborhood or zoning district.

Property owner's hardship

Owner's property cannot be put to reasonable use under the existing ordinance. Property has a special characteristic not shared by anyone else.

Impact of Variance on Neighborhood and Zoning District

Granting will not alter the essential character of the area.