Property RULES

Fee Simple Absolute

• Fee simple is 100% ownership that is capable of lasting forever.

  • “O to A”, “O to A and his heirs”

Defeasible Fee

• Fee simple that may be terminated by occurrence of event.

  • Two types are fee simple determinable and fee simple subject to condition subsequent.

Fee Simple Determinable

• Fee simple limited by durational language.

  • “So long as”, “while”, “during”, “until”

• Possibility of reverter is the future interest held by the grantor automatically if condition is not met.

Fee Simple Subject to Condition Subsequent

• Fee simple limited by conditional language.

  • “But if”, “provided that”, “on the condition that”

• Right of entry is the future interest held by the grantor (not automatic, must reclaim) if condition is not met.

Executory Interest

• Future interest that will cut short/divest an earlier interest.

  • O to A, but if X occurs, then to B.

  • B has executory interest since B divests A’s interest if X occurs.

  • Subject to RAP.

• Springing executory interest divests the grantor.

• Shifting executory interest divests the grantee.

Life Estate

• Present interest that is limited by a life.

  • O to A for his life.

• Life tenant has control over property, but cannot commit waste.

  • A can mortgage property and convey property, but only for A’s life.

  • A has right to rent and income for A’s life.

  • A must pay interest and taxes on property.

• Reversion is when interest goes back to grantor after life tenant’s death.

  • O to A for his life.

• Remainder is when interest goes back to grantee after life tenant’s death.

  • O to A for his life, then to B.

Waste

• Affirmative waste is waste caused by voluntary conduct which causes decrease in value.

• Permissive waste is waste caused by neglect which causes decrease in value.

• Ameliorative waste is when person in possession changes the use of property and increases value.

Vested Remainder & Contingent Remainder

• Vested remainder is a future interest given to ascertained grantee and not subject to condition precedent.

  • O to A for his life, then to B.

• Contingent remainder is a future interest given to n unascertained grantee or subject to condition precedent.

  • O to A for his life, then to B if he’s married (B is not married at the time of death).

  • Subject to RAP.

Vested Remainder Subject to Open & Vested Remainder Subject to Total Divestment

• Vested remainder subject to open (partial divestment) is a vested remainder in a class of people.

  • As long as one member of class is alive and identified, then that member has vested remainder subject to open.

  • Subject to RAP.

  • O to A for his life, then to B’s kids (B has one kid at time of death).

• Vested remainder subject to total divestment is a vested remainder that can be wiped out by occurrence of a condition.

  • O to A for his life, then to C, but if C has no children, then to D.

Rules Against Perpetuities

• RAP operates like a SOL for contingent future interests and interest must vest within a life plus 21 years.

  • Applies to contingent remainders, executory interests, and vested remainder subject to open.

• If possible that A will have interest within 21 years, then no violation of RAP.

• If not impossible that A will have interest within 21 years, then violation of RAP.

  • O to A, as long as A use it as a farm, but if A stops using it as a farm, then to B and his unborn children.

  • “B and his unborn children” violate RAP, but keep O and A’s interest.

Doctrine of Worthier Title

• Doctrine prevents remainders in grantor’s heirs and creates presumption of reversion to grantor.

  • O to A for her life, then to my heirs.

  • O has reversion.

Rule in Shelley’s Case

• Rule prevents remainders in grantee’s heirs and uses doctrine of merger to create a fee simple.

  • O to A for life, then to A’s heirs.

  • A has fee simple.

Tenancy in Common

• Tenancy in common is when two or more people have undivided interest in the property and there is no right of survivorship.

  • Co-tenant can transfer, devise, mortgage, or lease his interest to a third party which does not affect the tenancy in common.

Joint Tenancy

• Joint tenancy is when two or more people have undivided interest in the property and there is right of survivorship.

  • Right of survivorship is automatic and trumps a will.

• Each joint tenant must have the four unities (PITT):

  • Possession (equal right to possess property)

  • Interest (equal share of interest)

  • Time (received interest at same time)

  • Title (received interest in same instrument)

• Joint tenants may convey their own interest to third party, but it severs the joint tenancy to tenancy in common.

  • For lien theory state, mortgage is treated as a lien and severs the joint tenancy into tenancy in common.

  • When one joint tenant leases his interest, there is a split among jurisdictions. Some hold the lease severs the joint tenancy while others hold the lease temporarily suspends the joint tenancy and resumes after the lease expires.

Tenancy by the Entirety

• Joint tenancy between married spouses with right of survivorship.

  • Must have consent from other spouse to convey interest.

  • Divorce severs tenancy by the entirety into tenancy in common.

• Subsequent marriage does not convert joint tenancy into a tenancy by the entirety.

Co-Tenant Right

• Co-tenant has right to possess all of the property regardless of share or type of tenancy unless agreed otherwise.

  • Ouster is when co-tenant is denied access to property by another co-tenant. Remedies are injunction or damages.

• Co-tenant entitled to rent from third party, minus operating expenses (ie. necessary repairs).

  • Third party rents are divided based on ownership interest of each cotenant.

  • If co-tenant is not living on property, then may be entitled to rent/profit, but cannot demand from co-tenant living on property unless that tenant is damaging property.

• Co-tenant paying mortgage/taxes is entitled to contributions from other co-tenant, divided based on ownership interest.

  • If co-tenant is in sole possession, then can only recover amount to the extent that it exceeds the market value of the land.

• Co-tenant has no right for necessary repair or improvement reimbursement.

• Co-tenant can seek partition where court will divide the property into distinct portions.

  • If physical division of the land is impossible, impracticable, or inequitable, then court will grant partition by sale.

Periodic Tenancy

• Periodic tenancy is measured by repetitive and ongoing period (month-to-month, year-to-year) and automatically renews unless termination date is made.

  • For month-to-month, one month notice required,

  • For year-to-year, six month notice required.

Tenancy for Years

• Tenancy for years is measured by fixed start date and end date and does not require notice for termination.

  • If term is longer than one year, must in writing to satisfy SOF.

Tenancy at Will

• Tenancy at will has no specific terms and goes until one party terminates with reasonable notice.

  • If only one party is expressly given the right to terminate, then arrangement may be unconscionable.

Tenancy at Sufferance

• Tenancy at sufferance is when tenant is when holds over after the lease ended.

  • Terminates when tenant leaves, evicted, or landlord re-rents.

  • Absent statute, landlord is not required to give tenant at sufferance notice to vacate the premises before taking steps to recover possession. 

Lease Termination

• Lease termination occurs automatically upon expiration of the term.

• Lease termination occurs if tenant surrenders the lease prior to expiration and the landlord accepts the return of the lease.

• Lease termination occurs if tenant abandons the lease and landlord treats the abandonment as a surrender and retake the property.

  • Most states require a landlord to mitigate damages by attempting to re-rent the property if tenant abandons.

• Doctrine anticipatory breach does not apply to leases so landlord may only sue tenant for rent as it becomes due, not future rent under the lease,

Landlord Duties

• Duty to deliver possession

  • Landlord must give actual possession of property on the first day of lease term.

• Duty to mitigate damages

  • Landlord must make reasonable efforts to re-rent property.

• Warranty of habitability

  • Landlord must provide habitable premises.

  • If landlord breaches, then tenant can refuse to pay rent.

• Warranty of quiet enjoyment

  • Landlord must control common areas and nuisances.

  • If landlord breaches, then tenant can refuse to pay rent.

• Under common law, there is no duty to repair leased property, but many states enforce the duty.

  • Exception is when tenant caused the damages.

  • For commercial leases, courts are less likely to enforce duty to repair since implied warranty of habitability does not apply.

Tenant Duties

• Duty to pay rent

  • Exception when property is destroyed, tenant is evicted, or landlord materially breaches lease (warranty of habitability/quiet enjoyment).

• Duty to avoid waste

  • No affirmative or permissive waste.

  • Landlord has duty to make repairs and tenant must give notice.

Constructive Eviction

• Under constructive eviction, if a landlord breaches a duty to the tenant, then the tenant’s may be excused from paying rent.

  • Landlord must have breached a duty which caused the loss of the substantial use and enjoyment of the property.

  • Tenant must give the landlord notice of the issue and reasonable opportunity to cure.

  • Tenant must vacate the property within a reasonable period of time.

  • Temporary or de minimis acts generally do not amount to constructive eviction.

Assignment and Sublease

• If tenant assigns to third party, then third party is primarily liable for lease.

  • Tenant is still secondarily liable if third party does not pay rent unless there was novation.

• If tenant subleases to third party, then tenant is still liable for lease unless there was novation.

• Any covenant against assignments or subleases are strictly construed.

Fair Housing Act

• FHA prohibits discrimination in the sale, rental, financing, and advertising of dwellings.

• Protected classes are race, color, religion, national origin, sex, disability, and familial status.

  • Sex includes sexual orientation and gender identity.

  • Familial status includes having children under 19 and being pregnant.

Fixtures

• Fixtures are tangible personal property that are attached to the real property.

  • Fixture automatically transfers with the land unless conveying instrument provides otherwise.

Conflict of Law

• The state where the property is located controls (law of the situs).

Easement Creation

• Easement is a nonpossessory right to use another's land (servient land) for a specific, limited use.

  • Affirmative easement is when holder has right to do something on someone’s land.

  • Negative easement is when holder has right to prevent someone from doing something on his land.

• Creation of easement:

  • Express easement is when easement is affirmatively created by parties in a writing that complies with SOF (ie. deed).

  • Easement by prescription is when easement is created similar to adverse possession (except exclusive element).

  • Easement by implication is when easement is created by existing use of property.

  • Easement by necessity is when easement is created when property is virtually useless without it (ie. landlocked property)

• Easement holder has right to use land in any manner that is reasonably necessary to use and enjoy easement.

  • Easement also anticipates reasonable and natural development of easement holder's land (dominant land) so easement holder may increase manner, frequency, and intensity of easement's use if it does not unreasonably damage or interfere with use or enjoyment of servient estate.

Easement Termination

• Easement lasts forever unless it’s terminated.

  • It is irrelevant whether the new owner doesn’t want or didn’t have notice of easement.

• Termination of easement:

  • Agreement

  • Merger is when easement owner acquires the land so the easement merges into the title.

  • Abandonment is when easement owner leaves and has intent not to return.

Covenant

• Covenant is a promise between parties to do or not do something on land that is enforceable by money damages (real covenants) or injunction (equitable servitudes). 

  • Covenant lasts forever unless it’s terminated.

• Promising parties are bound under contract law for covenants, but successors are only bound if covenant runs with the land:

  • Writing (covenant in writing and satisfies SOF)

  • Intent to run (parties intended for covenant to be enforceable against successors)

  • Touch and concern (covenant relates to use, enjoyment, or occupation of land)

  • Notice (if there is purchaser, then purchaser had actual, record, or inquiry notice of covenant)

  • Privity (horizontal and vertical)

• Landlord can assign rights under lease to a third party without tenant’s consent.

  • New landlord can enforce covenants in the lease that run with the land.

  • Even if intent to bind successors is not stated in lease, it is presumed when covenant touches and concerns the land.

Equitable Servitude

• Equitable servitude is like a covenant, but does not require privity element.

  • If there is a breach, nonbreaching party can sue for injunction.

Implied Reciprocal Servitude

• Implied reciprocal servitude is when restriction is enforceable against everyone (common scheme) and there is notice.

  • Restriction lasts forever unless there is change in profile/character of the community.

  • Most often found in condos.

License

• License is a nonpossessory right to enter and use someone else's land for a specific purpose.

  • Grantor can revoke license any time unless licensee detrimentally relied on license (ie. paid money) OR license was coupled with interest in the property (ie. enter and inspect property).

  • License terminates automatically upon death of licensor or licensee OR conveyance of the licensed property.

Profit

• Profit is the right to enter another’s land and remove a natural resource (ie. gas, oil, timber, fruit).

• Right to subjacent support arises when landowner grants right to mine minerals to a third party.

  • Mineral right owner is strictly liable to landowner for any failure to support the land and any buildings that existed on the land at the time the mineral rights were conveyed.

  • Mineral right owner is liable for negligence for any damage to improvements built after the mineral rights were conveyed.

Taking

• Taking is when government acquires private property for public use and provide just compensation (fair market value).

Water Rights

• Doctrine of riparian rights provides that landowner who borders waterway own the rights to the waterway.

  • Landowner can use reasonable use of water.

Crops

• If crops are on the land naturally (tree, grass, wild berries), then they are part of the real property and will go with the land when sold.

• If crops are planted on the land (corn, fruit), then they are personal property and will still go with the land when sold.

  • Exception is when it’s expressly agreed or when there is tenancy (except tenancy for years).

Support Rights

• If landowner is excavating land, then landowner is strictly liable for damages for undeveloped land.

• If landowner is excavating land, then landowner is strictly liable for damages for developed land no matter what (would have happened anyways).

  • If it wouldn’t have happened anyways, then landowner is liable for negligence.

• If landowner allows others to excavate on land, then landowner is liable for negligence.

Private Nuisance

• Private nuisance is unreasonable and substantial interference with the use and enjoyment of another’s property.

  • Unreasonableness is governed by objective test (reasonable person).

Public Nuisance

• Public nuisance is unreasonable inference that affects the public at large.

  • If private individual brings claim, then individual has to prove special damages (unique harm).

Common Interest Owned Community

• Common interest owned community involves a development where individual units have a covenant to pay fees to an association.

  • Owners’ association is where property owners belong to an association and pay fees.

  • Condominiums where individual units are owned outright, but common areas are owned collectively as tenants in common.

  • Co-op is where property owners are owned by a cooperation that lease units to shareholders.

• Governing documents include declaration bylaws, and articles of incorporation.

  • Declaration is given the most weight.

Real Estate Contract (Land Sale Contract)

• Real estate contract shows buyer’s intent to convey title to seller.

  • Contract must in writing (SOF), but still valid if there was part performance or detrimental reliance.

  • Real estate contract must have price, parties, description of property, conditions, and signed by party to be charge.

  • Courts assume time is not of essence (unless parties state otherwise) and buyer can purchase title within reasonable time after closing.

• Real estate contract has implied covenant of marketable title where title is free of any liens/encumbrances.

  • Title need not be perfect to be marketable, but it must be free from unreasonable risk of litigation. If seller cannot convey marketable title by time of closing, then buyer can refuse to close.

  • Seller also has duty to disclose material physical defects that are known to seller and cannot be reasonably discovered by buyer.

• Doctrine of merger provides after closing, all terms in the contract merges into the deed and buyer’s rights are governed by the deed.

• Liquidated damages clause allows seller to retain buyer's deposit if buyer breaches and refuses to purchase property.

  • Clause is enforceable when amount of liquidated damages is reasonable (ie. 10% or less) and other factors include sophistication of buyer, transaction nature (commercial or residential), and if seller suffered actual loss.

Equitable Conversion Doctrine

• Equitable conversion doctrine places the risk of loss on the buyer during the executory period (period between execution of land sale contract and closing).

  • Seller still retains legal title until day of closing.

  Minority adopted Uniform Vendor and Purchaser Risk Act which places the risk of loss on the seller until the buyer takes possession or receives legal title to property. 

Purchase Money Mortgage

• Purchase money mortgage is a loan to purchase property.

  • Purchase money mortgage always gets priority.

Redemption

• Redemption is the common law right to reclaim title by paying off the debt in order to prevent foreclosure.

  • Terms of the mortgage or deed of trust cannot waive this right.

• Equitable redemption is the period of time from the notice of foreclosure until foreclosure sale.

  • Equitable redemption cannot be waived.

• Statutory redemption is the period of time after foreclosure sale until a statutorily defined date.

Lien Theory and Title Theory

• For lien theory state, mortgage is treated as a lien.

  • Lien is removed once mortgage is paid.

  • Does not sever joint tenancy.

• For title theory state, mortgage is treated as a legal title.

  • Legal title is given once mortgage is paid.

  • Does sever joint tenancy into tenancy in common.

Assuming Mortgage & Taking Subject to Mortgage

• Owner of interest in real property can give interest to lender to secure a debt (usually by mortgage or promissory note).

  • Owner can sell mortgaged property to a buyer unless owner and lender agreed otherwise.

  • Mortgage remains attached to property and owner is still personally liable for mortgage debt.

  • Whether buyer has obligation depends on if buyer assumes or takes subject to mortgage.

• If buyer assumes mortgage, then buyer is primarily liable for mortgage.

  • Original owner is secondarily liable unless there was novation.

  • Buyer cannot raise defenses (ie. duress, SOL) that debtor could have raised to avoid mortgage.

• If buyer takes subject to mortgage, then buyer is not liable for mortgage.

  • Original owner still pays for mortgage, but if original owner stops paying the property will be foreclosed

Foreclosure

• Foreclosure is a forced sale of an asset to pay off a debt.

  • After foreclosure sale, mortgages on property are eliminated, but senior interests are generally not affected by foreclosure sale.

• “First in time, first in right" rule determines lien priority.

• Foreclosing mortgagee must give notice to junior interest holders and make them parties to foreclosure action so they can participate.

  • Failure to give notice will allow junior interest holder's interest to remain after the sale.

• Foreclosing mortgagee may give notice to senior interest holders or those liable on debt (ie. guarantor).

Deed in Lieu of Foreclosure

• Deed in lieu of foreclosure allows one to skip foreclosure proceedings and convey property to lender.

Deficiency Judgment

• Deficiency judgment is when the foreclosure sale produces less than the debt amount.

  • Mortgagor is liable for deficiency judgement.

Installment Land Contract

• Installment land contract is when buyer receives title once all installment payments are made.

• Traditionally, if buyer defaults payment, then seller can take property back and keep payments.

• Today, if buyer defaults payment, then there are three options:

  • Seller can take property back but give some form of restitution to buyer

  • Buyer can keep property by paying full balance of installment contract any time prior to foreclosure sale (equitable right of redemption)

  • Treat installment land contract as a mortgage so seller must foreclose to gain title to property and buyer has equitable right of redemption

• If installment contract has acceleration clause, then full balance is due upon default and buyer must pay it to redeem the property.

General Warranty Deed

• General warranty deed provides the greatest amount of title protection.

• 6 implied covenants in warranty deed:

  • Warranty of seisin (present) warrants deed describes the land.

  • Covenant of the right to convey (present) warrants grantor has right to convey land.

  • Covenant against encumbrances (present) warrants there are no undisclosed encumbrances on land.

  • Covenants of quiet enjoyment (future) warrants grantee will not be disturbed by third party claims.

  • Covenant of warranty (future) warrants grantor will defend against future claims of title by a third party.

  • Covenant of further assurance (future) warrants grantor will fix future title issues.

Special Warranty Deed

• Special warranty deed is where grantor warrants against defects only caused by the grantor.

  • Provides lesser title protection than general warranty deed.

Quitclaim Deed

• Quitclaim deed is where grantor makes no warranties to the title.

  • Provides the lease amount of title protection.

Deed / Closing

• Deed is a legal instrument that transfers legal title.

  • Deed has to be in writing (SOF).

  • Deed must identify parties, signed by grantor, and description of property.

  • Deed that names nonexistent or ambiguous grantee is void (to that grantee only).

  Deed must be delivered and accepted.

  • Delivery requires grantor to express unequivocal intent to give title and physical delivery is not required.

  • Acceptance is presumed unless rejected.

• At closing, all terms of the contract merge into the deed.

Transfer of Title by Will

• Property can be transferred by will.

  • If there is no will, property can be transferred by intestate succession.

  • If grantee dies before grantor, then property land goes to residuary estate.

  • If property has encumbrance (ie lien, mortgage), then estate will pay them off so that grantee may receive property free and clear (common law exoneration of lien doctrine).

Adverse Possession

• Adverse possession allows a person to gain title of property.

  • Government owned property cannot be adversely possessed.

• Adverse possession requires:

  • Continuous (uninterrupted for statutory period; tacking is allowed)

  • Open, and notorious (apparent or visible to reasonable owner)

  • Hostile (use without owner’s permission)

  • Actual (physical presence on land)

  • Exclusive (not shared with owner)

• Tacking doctrine provides adverse possessor may tack on predecessor's time if there is privity between successive adverse possessors.

  • Privity is satisfied if possessor takes by nonhostile means (ie. by descent, devise, contract, deed).

• SOL for adverse possession does not run against a true owner of property who had disability at inception of adverse possession.

  • Includes insanity, infancy, and imprisonment.

Drafting/Executing Legal Documents

• For drafting, non-attorneys (brokers, agents) may prepare a legal document (fill out form), but cannot practice law or give legal advice.

• For executing, agent may sign deed on behalf of seller, but authority granting right has to be in writing (equal dignities rule).

  • Exception is officer of corporation that has authority to sign.

  • Exception is signing agent (job is to sign).

  • If there was no writing, then grantor is estopped if he tried to induce reliance.

Notice Recording Statute

• For notice recording statute, the last bona fide purchaser wins.

  • BFP is one who pays value and has no notice of any transaction.

  • Creditors and those who receive by gift, will, or adverse possession (not pay value) are not BFP.

  • Mortgagees are BFP.

• “In good faith” or “without notice”

Race Recording Statute

• For race recording statue, the first to record wins.

Race-Notice Recording Statute

• For race-notice recording statute, the first bona fide purchase who recorded wins.

• “In good faith” or “without notice” PLUS “first recorded”

Shelter Rule

• Shelter rule provides a person who takes from a bona fide purchaser has the same rights as his grantor.

  • O gives to A who does not record; O then gives to B who records; B gives to C as a gift.

Wild Deed

• Wild deed is a recorded deed that is outside the chain of title.

  • O gives to A who does not record; A then gives to B; O gives to C.

  • A to B is a wild deed since B does not have notice that O was original grantor, so C wins.

After-Acquired Title

• After-acquired title provides that if grantor does not have title at time of closing and later acquires closing, then title passes automatically to grantee.

Implied Warranty of Fitness

• Most jurisdictions require a builder of a new home impliedly warrants that home is fit for its intended purpose and constructed in a workmanlike manner.

Equitable Mortgage

• Equitable mortgage is when debtor gives absolute deed (deed that is free of encumbrances and transfers title) to a lender with the intent to secure a loan.

  • Debtor must prove by clear and convincing evidence that deed was intended as security for a loan (not as outright transfer).

  • Deed recipient, like any other lender, may then bring foreclosure action if debtor defaults.

Right of First Refusal Clause

• Right of first refusal gives its holder the opportunity to acquire property from a seller before it is transferred to a third party.

  • Provision is valid if it complies with SOF (writing, signed, essential terms) and terms are reasonable. 

  • Although direct restraints on alienation are invalid, ROFR is a reasonable indirect restraint.

Due-on-Sale Clause & Due-on-Encumberance Clause

• Due-on-sale clause is when lender (mortgagee) can demand payment of remaining mortgage debt if borrower (mortgagor) transfers mortgaged property without consent. 

  • If borrower cannot pay, then lender can foreclose on mortgaged property to satisfy unpaid debt.

• Certain transfers of residential real property are not subject to a due-on-sale clause:

  • Devise, descent, or transfer to joint tenant upon death

  • Transfer to spouse or child

  • Transfer to ex-spouse in divorce

  • Transfer to borrower's living trust

  • Creation of subordinate lien without occupancy rights

  • Granting leasehold interest of less than 3 years without option to purchase

• Due-on-encumbrance clause is when lender (mortgagee) can demand payment of remaining mortgage debt if borrower (mortgagor) obtains second mortgage or otherwise encumbers mortgaged property without consent. 

  • If borrower cannot pay, then lender can foreclose on mortgaged property to satisfy unpaid debt.

Ademption

• Ademption is when a testator transfers property after executing a will and causes a devise to fail.

  • Ademption by extinction is when testator does not own devised asset at time of death OR testator owns devised asset at time of death but asset has been destroyed or changed.

  • Ademption by satisfaction is when devisee received the devised asset or satisfactory substitute during testator's life.

• For both ademption, devisee takes nothing unless will states otherwise.

  • Proceeds from sale of the devised asset become part of the general estate.

Estoppel by Deed Doctrine

• Estoppel by deed doctrine provides a grantor who conveys an interest in land by warranty deed before actually owning it is estopped from later denying the effectiveness of that deed.

  • When grantor acquires ownership of land, after-acquired title is transferred automatically to the prior grantee.

  • Ie. X conveyed residence to Y by warranty deed before X received it. When X acquired title later, X’s after-acquired title transferred automatically to Y.