Property - BAR REVIEW

Adverse possession

• actual possession

• open and notorious - use like typical owner

• hostile

• continuous, can include tacking

• statutory period

effect - does not convey marketable title but title can be made marketable through judicial action to quiet title

Land sale contract

• Contract law requirement - SOF

  • writing

  • identified parties

  • signed by one to be bound

  • describes land

  • consideration

  • exception: possession; improvements; payment (min. 2)

Marketable title

Implied promise in every land sale contract that title is free from reasonable doubt that seller is able to convey title

• look for encumbrances, record chain of title, easements that reduce full enjoyment, and/or real covenants

Equitable conversion

upon signing the contract, buyer is owner

risk of loss prior to closing is imposed on buyer - default rule

Remedy for breach of land sale contract

• damages - typically expectation damages

• specific performance

  • contract is valid

  • conditions satisfied by P

  • inadequate legal remedy

  • mutuality to perform

  • feasibility to enforce

  • no defenses

Mortgage

financing arrangement that conveys a security interest in land where parties intend the land to be collateral for repayment of a monetary obligation - borrower is mortgagor; lender is mortgagee

• writing required, satisfy SOF

Equitable mortgage

when borrower delivers the deed instead of promissory note to secure a mortgage

PER is allowed

these are exempt from SOF

Foreclosure

process by which the mortgagee may reach the land in satisfaction of the debt if the mortgagor is in default on the loan

Foreclosure: priority of loans

secured debts - those where the property is pledged as collateral

1. purchase money mortgage (PMM) given to secure loan to originally buy the land

2. secured senior interests

3. secured junior interests

4. unsecured interest

foreclosure of senior interests destroys all junior interests

Anti-deficiency judgment

lender can receive no more than the value of the loan

excess proceeds is returned to the buyer after paying off all debts

Deficiency judgment

when the property is worth less than the amount owed on the outstanding loans

lender can sue debtor personally for the deficiency difference only if:

• there was a judicial foreclosure and

• if the loan was no a PMM (only in some jx is this required)

Redemption

mortgage is paid off, then property is redeemed from mortgage

some states have statutory redemption - can redeem even after foreclosure proceedings have been started

deed if trust

similar to mortgage

debtor is the trustor and the deed of trust is given to a 3rd party

installment contract

buyer makes a down payment and pays off balance in installments

difference between a mortgage is that the buyer does not receive a deed until the land is paid off

vendor gets forfeiture rather than foreclosure as remedy & can keep installment payments

Deed requirements

• identify the parties

• writing signed by grantor

• description of property

• words of intent, “grant is sufficient

• no consideration required

Quitclaim deed

least amount of security

conveys whatever interest the grantor actually has in the property

contains no covenants of title

General warranty deed

warrants against all defects in title and contains 6 covenants for title

• present covenants - breached at time of sale

  • seisin - grantor warrants they own the land

  • right to convey - grantor warrants they have power to make the conveyance

  • against encumbrances - warrants there are no undisclosed liens, easements, etc.

• future covenants - run with land, breached at time grantee is disturbed in possession

  • warranty of title - grantor promises to defend against lawful claims of title

  • quiet enjoyment - grantor promises grantee will not be disturbed by 3rd party lawful claims

  • further assurances - grantor promises future acts that are reasonably necessary to perfect title

Special warranty deed

grantor warrants against defects cause only by grantor

includes same 6 covenants as general warranty but only applied to actions or omissions of grantor

Delivery of deed

• present intent to transfer

• recording

• physical delivery to grantee

• grantee accepts the deed

title passes immediately to the grantee upon proper delivery and is not revokable

Merger doctrine

once property closes, the deed controls

any clause included in the contract but not the deed is discharged

Damages if deed covenants are breached

if title issues - damages = lesser of the purchase price or cost to defend title

encumbrances - damages = lesser of difference between amount paid and the value of land with encumbrance or cost of removing encumbrance

Defenses to breaches of covenants

unclean hands

laches

waiver

Ademption

specific property devised by will is no longer part of the estate at the time to testator’s death so the gift fails

Exoneration

when a person receives a bequest of specific property and that property is subject to a lien, the lien will be paid off from the testator’s estate unless testator states otherwise

lapse and anti-lapse

if a beneficiary predeceases the testator, the bequest fails

if the beneficiary was a relative of testator, then bequest goes to beneficiary’s heirs

Recording act - common law rule

first in time, first in right

Race notice recording statutes

first to record wins

Notice recording statutes

a subsequent bona fide purchase (BFP) prevails over a grantee that did not record

Race-notice recording statutes

a subsequent bona fide purchaser that records first prevails over a grantee that did not record

Bona fide purchaser (BFP)

one who takes the land for value and is without notice of the prior interest

• recording acts don’t protect heirs or divisees

Wild deeds

deed that is recorded, but not is such a way that a reasonable search of the grantor-grantee index would disclose

• ex: not in chain of title

• wild deeds do NOT provide constructive notice

Estoppel by deed

if one conveys property they di not own but they subsequently obtain an interest in that property, the estate will automatically transfer to the grantee

• does not apply to quitclaim deeds

Shelter doctrine

one who takes from a BFP will stand in the shoes of the BFP and can prevail against any entity against which the BFP would have prevail in their own action - even if transferee had notice

fee simple absolute

conveys absolute ownership

fee tail

allows an owner of land to ensure that the property remains in the family

lasts only as long as there are lineal blood descendants of the grantee

modernly, virtually abolished

fee simple determinable

automatically terminates at the occurrence of a specified condition

possibility of reverter - future interest the grantor retains; if condition occurs automatically transfers back to grantor

• key words - so long as; during; while; until; or unless

fee simple subject to condition subsequent

potential to terminate as estate at the occurrence of a stated event but NOT automatic

right of reentry - future interest retained by grantor but it must be exercised

• key words: but if; provided that; upon condition that

fee simple subject to executory interest

automatically terminates a preceding estate at the occurrence of a stated event but the estate passes to a third person rather than grantor

• executory interest- future interest held by 3rd party; subject to RAP

life estate

an interest that lasts for the lifetime of a person

• it is conveyable

• life tenant had a duty not to commit waste on the property

vested remainder

future interest created in an ascertainable person and not subject to condition precedent

contingent remainder

future interest created in an unascertained person and/or is subject to a condition precedent

alternative contingent remainder

future interest created when both contingent parties have the capacity to take over and it pivots on the same conditions

Executory interest - shifting & springing

an interest in favor of a future grantee that follows a fee simple subject to an executory limitation:

• shifting - cuts short a prior interest; shifts from one interest holder to another interest holder

• springing - does not cut short a prior interest; springs from owner’s interest to another interest holder

restrains on alientation

absolute restraints are void

reasonable restraints will be upheld

rule against perpetuities (RAP)

no interest is good unless it vests no later than 21 years after some life in being at the creation of the interest

only applies to

• contingent remainders

• executory interests

• options “in gross” or right of first refusal

• class gifts

• power of appointment

steps to identify RAP issues

• classify interest

• identify the measuring life in being (if no life, strike)

• identify triggering event

• if any possibility it vests after 21 years, strike

wait and see approach - alternative to RAP where they wait to see if the right vests within 90 years of creation

joint tenancy

when 2 or more people hold a single, unified interest in a property with

• a right of survivorship

• equal right to occupy

• equal ownership shares

must be explicit

creation of joint tenancy

requires an express right of survivorship, and unity of:

• time - interests created as same time

• title - same title

• interest - identical, equal interests

• possession - same rights to possess

cannot be created through a will since testators interest transfers to surviving joint tenant

severance of joint tenancy

unilateral action by one tenant can sever joint tenancy

• severance with 2 joint tenants - remaining joint tenant hold property with new owner as tenants in common

• severance with 3 or more joint tenants - new owner takes their portion as tenant in common; remaining joint tenants will remain joint tenants with each other only

effect of a mortgage on joint tenancy

lien theory (majority) - executing a mortgage by one tenant does not sever joint tenancy

title theory (minority) - executing a mortgage by one tenant will sever joint tenancy as to their share only

joint tenancy is severed if the mortgage is foreclosed and property is sold

tenancy in common

there are 2 or more people who own a property

• no right of survivorship

• equal right to occupy

• nonequal shares are acceptable

• co-tenant can sell, will, or gift their interest

tenancy in common is presumed

tenancy by the entirety

similar to joint tenancy but only between spouses

• not recognized in community property states (CA)

neither tenancy can unilaterally convey their share or encumber the property or break the right of survivorship

can be severed upon divorce, death, or mutual agreement

co-tenancy rules

• right to possess the whole property but not to exclude other co-tenants

  • ouster - if co-tenant refused occupancy to co-tenant then ouster must account to ousted party the fair rental value; ousted party can bring action to regain possession

• no duty to account for profit or losses unless renting to 3rd party

• co-tenant is solely responsible for their own losses and cannot seek contribution

co-tenancy: accounting

co-tenants are responsible for their proportionate share of taxes and mortgage payments

when a co-tenant has paid more than their share they can seek contribution - not automatic right; can deduct from rent

co-tenants have no right to reimbursement for improvements but can seek contribution for necessary repairs

co-tenants must share rent received from 3rd parties

co-tenancy: partition

occurs through voluntary agreement or judicial action

property is divided or sold and proceeds distributed

• each party has right o accounting and be reimbursed for taxes and repairs in excess of their share

• not allowed under tenancy by the entirity