Property Law Exam Notes

Leases and Eviction

• L orally leases Blackacre to T, month to month, starting January 1st, for 500 a month.

• In June, T stops paying rent.

• On July 1st, L notifies T that the lease will terminate on August 15th.

• T refuses to leave on August 15th.

• On August 20th, L physically evicts T from Blackacre.

• T sues L for wrongful eviction.

  • Outcome: L is liable for wrongful eviction, applying modern trend principles.

Concurrent Ownership: Joint Tenancy vs. Tenancy in Common

Traditional Common Law Presumptions

• O conveys Blackacre to A, B, and C and their heirs.

• A conveys their interest to D.

• B dies, and their will devises all property to E.

• Applying traditional common law: D holds an undivided 1/3 interest, and C holds an undivided 2/3 interest, as tenants in common.

• Common law presumes a joint tenancy if the four unities (time, title, interest, and possession) are satisfied.

• O’s conveyance to A, B, and C initially creates a joint tenancy because it meets the four unities:

  • Interests vested at the same time.
  • Interests created by the same instrument (title).
  • Equal type and duration of interests (interest).
  • Equal right to possess the whole property (possession).

• A joint tenant can unilaterally sever their share inter vivos (during their lifetime).

• A’s conveyance to D severs A’s 1/3 interest from the joint tenancy.

• B and C still hold their remaining 2/3 interest in joint tenancy.

• State of title at this point:

  • D holds an undivided 1/3 interest as a tenant in common with B and C.
  • B and C hold an undivided 2/3 interest as joint tenants.

• Joint tenancy includes the right of survivorship; a joint tenant's interest expires upon death, and the surviving joint tenants' shares are recalculated.

• A joint tenant cannot sever the joint tenancy via a will because the interest expires before the will takes effect.

• A’s conveyance did not affect the joint tenancy between B and C, who continue to hold a 2/3 interest.

• B's will devising property to E does not sever the joint tenancy or pass any interest to E.

• Upon B’s death, B’s interest expires, and C holds the 2/3 interest alone.

• D’s 1/3 interest remain as tenant in common and is not affected by B’s death.

• Final state of title:

  • D holds a 1/3 interest.
  • C holds a 2/3 interest as tenants in common.

Modern Trend Presumptions

• O conveys Blackacre to A, B, and C and their heirs.
• A conveys their interest to D.
• B dies, and their will devises all property to E.
• Applying modern trend: C, D, and E hold undivided 1/3 interests as tenants in common.
• Modern trend presumes a tenancy in common even if the four unities are satisfied, focusing on the parties' intent.
• Without clear evidence of intent to create a joint tenancy, the presumption is a tenancy in common, meaning each tenant’s share is devisable and inheritable.
• O’s conveyance to A, B, and C satisfies the four unities, but lacks express intent to create a joint tenancy; thus, A, B, and C initially hold the property as tenants in common.

Term of Years and Periodic Tenancy

• L leases Blackacre to T for a ten-year term with an annual rent of 120,000, payable monthly at 10,000.

• Just before the term expires, L writes to T allowing T to stay as long as rent is paid and Blackacre is used as a farm.

• Three years after the original lease, L wants to terminate the lease.

• Common Law Approach: L can terminate, but must give six months' notice because T holds a periodic tenancy from year to year.

• The initial lease was a term of years with a fixed beginning and ending; no notice was needed to terminate.

• L expressly authorized T to remain in possession after the initial term, making T not a holdover tenant but requiring an express agreement.

• L’s offer and T’s acceptance (staying and paying rent) create an express agreement suggesting a periodic tenancy.

• Even if the new lease terms suggest a tenancy at will, the courts are likely to recognize a periodic lease once payments began.

• Notice to terminate a periodic tenancy depends on the duration of the repeating period.

• Ambiguity exists concerning the duration.

  • The terms of the initial lease, with rent set annually but paid monthly, are incorporated into the new agreement.
  • The method of rent reservation (annual rent) controls over the method of payment.
  • The new term is thus year to year.

• Courts look to circumstances surrounding the lease to ascertain intent regarding the duration of the periodic tenancy.

• The premises' use as a farm suggests a year-to-year lease is more likely.

• The court will likely construe the new lease as a periodic year-to-year lease, requiring at least six months' notice to terminate under common law.

Assignments, Subleases, and Privity

Traditional Common Law Approach

• L leases Greenacres to T for three years.

• One year into the lease, T assigns, subleases, and transfers all interest to T1, who assumes all obligations in the lease between L and T.

• T1 assigns, subleases, and transfers all interest to T2, who assumes all obligations and provides T1 a right to terminate and re-enter if T2 violates the agreement.

• T2 fails to pay rent to L.

• Who is liable to L and why? T1 and T2 are liable to L under privity of contract, and T2 is liable because L is in privity of estate with T2

• A tenant or subtenant may be liable to a landlord under either privity of contract or privity of estate.

• L and T are in privity of contract because they are parties to the same lease agreement.

• Both T1 and T2 expressly assumed the obligations in the initial lease, so L is in privity of contract with T1 and T2 under third-party beneficiary principles.

• L can be in privity of contract with multiple tenants/subtenants, but L can be in privity of estate with only one party at a time.

• L and T were initially in privity of estate.

• Under common law, the landlord is in privity of estate with the party who has the right to possession on the last day of the lease before the landlord retakes possession.

  • If a tenant conveys all the interest to a subtenant, it is an assignment, and the landlord and subtenant are in privity of estate.
  • If a tenant conveys less than all their interest, it is a sublease, and the landlord and tenant remain in privity of estate.

• Whether the tenant has conveyed all interest can be troublesome when the tenant retains a right to re-enter if the subtenant breaches.

• Under traditional common law, a right of re-entry was considered not a property interest but merely a “chose in action.”

  • If the tenant conveys the rest of the term but retains a right of entry, the tenant is deemed to have assigned all the tenant's interest.

• T conveyed all of T’s interest to T1, creating privity of estate between L and T1.

• T1 conveyed interest to T2, but T1 retained the right to re-enter if T2 breached. Under the traditional common law approach, the right of re-entry does not constitute a property interest.

• T1 has not retained any reversionary interest, merely a chose in action.

• Because T1 has conveyed all of T1’s interest, T2 is in privity of estate with L.

Modern Trend Approach

• L leases Greenacres to T for three years.
• One year into the lease, T assigns, subleases, and transfers all interest to T1, who assumes all obligations in the lease between L and T.
• T1 assigns, subleases, and transfers all interest to T2, who assumes all obligations and provides T1 a right to terminate and re-enter if T2 violates the agreement.
• T2 fails to pay rent to L.
• Who is liable to L and why? T, T1, and T2 are liable because L is in privity of contract with T, T1, and T2, and L is in privity of estate with T1.
• Privity of contract is the same under both the common law and modern trend approaches.
• Under the modern trend approach, a landlord can be in privity of contract with multiple parties, but in privity of estate with only one.
• The determination of privity of estate focuses on which party has the right to possession on the lease's last day before landlord re-entry.
• Under the modern trend, the courts look more at the intent of the parties in assessing whether the conveyance is an assignment or a sublease. One could argue that although the tenant retains a right of re- entry in the event of a breach, the parties never intended for the right of re-entry to be effective. For all practical purposes, the parties assumed that the tenant was conveying all of his or her interest. Despite this argument, however, the courts have reasoned under the intent based approach, the tenant must not have intended to convey all of his or her interest if the tenant expressly reserves a right to re-enter.
• Here, T conveyed all of T’s interest to T1, thereby creating privity of estate between L and T1.
• When T1 conveyed T1’s interest to T2, T1 retained a right to re-enter in the event T2 breached.
• Under the intent-based approach, T1 intentionally withheld part of their interest by retaining the right to re-enter if T2 breaches.
• Therefore, T1 remains in privity of estate with L.

Adverse Possession and Color of Title

• Lots 1 and 2 are adjoining farms owned by A and B respectively.

• X, who has no interest in either lot, conveys both lots to C.

• C enters and occupies lot 1 openly and notoriously for the statutory period.

• C sues to quiet title to both lots.

• Result: C is entitled to lot 1 only.

• X had no interest in either lot, so C acquires no interest via the deed.

• C’s claim depends on adverse possession.

• Adverse possession requires: actual entry, exclusive possession, adverse/hostile possession, open and notorious, claim of right, continuous possession for the statutory period. The facts indicate that C satisfies actual entry, exclusive possession, adverse/hostile possession, open and notorious, continuous possession for the statutory period for Lot 1.

• Claim of right focuses on the adverse possessor’s actions and state of mind.

  • Objective Approach (Majority): Adverse possessor’s state of mind is irrelevant; satisfying other requirements is sufficient.
  • Subjective Approach (Minority): Adverse possessor’s state of mind matters.
    • Some jurisdictions require the adverse possessor to believe they are rightfully entitled to the property (good faith).
    • Others require the adverse possessor to know they are not entitled but claim it anyway (aggressive trespasser).

• Assuming the objective or good faith approach, C satisfies the claim of right requirement.

• Since C is entitled to claim title based on adverse possession, the issue is how much land C is entitled to.

• Without color of title, an adverse possessor can only claim the land actually possessed.

• Color of title involves claiming adverse possession based on a faulty written instrument that purports to transfer title (X’s deed to C).

• Color of title typically entitles the adverse possessor to the land actually possessed and the land constructively possessed under the instrument.

  • The doctrine of color of title is limited to contiguous lots owned by the same owner.

• Lots 1 and 2 are contiguous but owned by different owners, so C is entitled to Lot 1 only.

Dower Rights and Joint Tenancy

• H and W are husband and wife; H and B hold Malibuacres in joint tenancy.
• B conveys his interest in Malibuacres to W.
• H dies, devising all property to UCLA.
• Applying traditional common law principles, W has a dower interest entitling her to a life estate in 1/3 of H’s interest in Malibuacres.
• Common law granted a surviving wife dower rights, a life estate in 1/3 of the deceased husband’s qualifying real property.
• Qualifying real property: any interest husband was “seised” of and was inheritable (a freehold estate: fee simple, fee simple defeasible, or life estate).
• Initially, H and B acquired Malibuacres in joint tenancy, so no dower interest attached because a joint tenant’s interest is not inheritable.
• B conveyed his interest to W, severing the four unities necessary for a joint tenancy, transforming the co-tenancy into a tenancy in common.
• W and H now hold Malibuacres as tenants in common.
• An interest held in tenancy in common is inheritable, and H was seised in his interest.
• Despite H’s attempt to devise his interest to UCLA, W’s dower interest attached when the property was transformed into tenancy in common.
• W holds a dower interest in H’s half of the tenancy in common, entitling her to a life estate interest in 1/3 of H’s 1/2 interest in Malibuacres.

Landlord-Tenant Relationship and Implied Warranty of Habitability

• Landlord leased an apartment with no express covenants.

• Rioting causes a power outage for two weeks due to arson at the local power transformer, but no direct damage to the apartment.

• Tenant sues for rent abatement.

• Tenant would prevail under the implied warranty of habitability.

• Absent an express covenant, the landlord-tenant relationship is governed by: the covenant of quiet enjoyment, the illegal lease doctrine, and the implied warranty of habitability.

• The implied warranty of habitability provides the most tenant protection.

• The tenant’s duty to pay rent is contingent on the landlord maintaining habitable premises.

• What is "habitable" varies, but the general consensus is what a reasonable person would consider acceptable.

• Conditions that do not amount to a nuisance or breach local housing codes can render premises uninhabitable.

• The landlord’s duty includes conditions created by third parties.

• Historically, the tenant’s primary protection was the covenant of quiet enjoyment, where the landlord will not disrupt the tenant’s quiet enjoyment of the property.

• The classic example of breaching the covenant is the landlord physically evicting the tenant.

• More often, a condition forces the tenant to vacate.

  • If the condition arose from a breach of duty the landlord owed the tenant, and if the condition was substantial and severe enough, the court may find constructive eviction, thereby breaching the covenant of quiet enjoyment.

Adverse Possession and Tacking

• O owns Greenacre; A enters adversely in 1980.

• In 1995, B fraudulently tells A that B owns Greenacre and that A has to leave; A leaves, and B enters the property and uses it adversely.

• The statute of limitations for adverse possession is 20 years.

• In 2005, who owns the land?

• B owns the land only if the jurisdiction applies the statute of limitations/penalty approach.

• B’s claim is based on adverse possession, which requires: actual entry, exclusive possession, adverse/hostile possession, open and notorious, claim of right, continuous possession for the statutory period.

• B has only been in possession for 10 years; the statute of limitations requires 20 years.

• B must tack B's time of adverse possession onto A’s time.

• To tack, adverse possessors must be in privity.

  • American View: Requires some reasonable connection – voluntary transfer or meeting of minds – to justify combining periods of adverse possession; emphasis on the relationship between adverse possessors; transfer via agreement, gift, descent, or devise.
  • English Approach: Adverse possessors may tack if there is no significant temporal gap in possession, focusing on punishing the true owner for sleeping on their rights.
  • Penalty Approach/Statute of Limitations Approach: The relationship between adverse possessors does not matter if there is no significant gap in possession.

Commercial Leases and Duty to Repair

• Racquel owns the Arts Theater; the Valley Arts Association rents it long-term for theater productions.
• The lease has a five-year term with an option to extend for another five years which the parties exercised.
• In 2007, a large portion of the plaster ceiling begins to sag, and the Arts Association cancels shows, as fixing the ceiling is very expensive.
• Racquel refuses to fix the ceiling, claiming it is the tenant's problem, citing a lease clause obligating the tenant to make any necessary interior repairs.
• An initial investigation indicates a latent defect in the roof, previously unknown to Racquel.
• The court applies the common law approach.
• The Arts Association is responsible for fixing the ceiling under the tenant’s duty to perform repairs.
• The common law views leases as a conveyance of real property.
• The landlord conveys the right to possession, and absent fraud, deceit, or concealment, the tenant must inspect to ensure fitness for intended purposes.
• Landlord’s duty to disclose extends only to known defects; there is no duty to fix them.
• “Buyer beware;” the landlord does not warrant fitness or safety.
• The lessee takes the premises as is and, under the law of waste, must return them in the received condition, imposing the duty to make repairs on the tenant.
• An express contractual provision obligating the tenant to repair increases the willingness to impose the duty to repair (or rebuild) on the tenant.
• The existence of an express clause indicating that the tenant has the duty to repair the interior of the premises further supports the tenant’s implied duty to keep the premises repaired.

Commercial Leases: Approval Clauses and Duty to Mitigate

• Arnold owns the GoodBody Medical Building and rents an office to Debbie, a dentist, under a five-year lease with an approval clause requiring Arnold’s permission for assignment or subletting.
• After one year, Debbie quits her practice, and Pamela, a cosmetic surgeon, wants to take over the lease.
• Arnold opposes cosmetic surgery and refuses to consent; Debbie vacates, and the office remains empty for three years before Arnold rents it to Doug, a pediatrician.
• Arnold sues Debbie for the rents due since she vacated.
• Under the common law: Arnold can recover from Debbie; he was free to reject Pamela and let the office remain vacant.
• Under the common law, a lease is a conveyance of the right to possession for the term of the lease.
• Although leaseholds are generally transferable without the landlord’s permission, express approval clauses requiring the tenant to get the landlord’s approval are valid (though construed narrowly). Landlord may deny request for any reason.
• Under the common law, the landlord has no duty to mitigate if a tenant abandons.
• Moreover, if the landlord attempts to mitigate, the landlord must ensure efforts are not construed as acceptance.
• Arnold made no efforts to mitigate, nor is he required to under the common law.

Delivery of Possession

• On November 30, 1999, L leases Blackacre in writing “to T-1 for a term of five years, beginning January 1, 2000, at an annual rent of 120,000 payable 10,000 a month.”

• On December 15, 2004, L leases Blackacre in writing “to T-2 for five years, beginning January 1, 2005.”

• Both leases do not contain an express covenant for delivery of possession.

• When T-2 arrives on January 1, 2005, to take possession of Blackacre, T-1 refuses to give possession of the premises to T-2.

• T-2 sues L for breach of duty to deliver legal and actual possession. In a jurisdiction which applies the American approach to L’s duty to deliver possession: L has not breached any implied duties as to delivery of possession.

• Virtually all jurisdictions acknowledge that a lease includes the covenant of quiet enjoyment. The question is in regards to an implied duty to deliver legal and actual possession.

• The covenant of quiet enjoyment imposes a duty upon the landlord to provide legal (but the issue is if implied; it is never explicitly stated) possession to the tenant:

  • If the landlord, one claiming through the landlord, or one holding superior title to the landlord interferes with the tenant’s possession, the landlord has breached the covenant of quiet enjoyment.

  • English approach the landlord has a duty to provide actual possession on the first day of the lease. Thereafter, the tenant is responsible for actual possession, as long as the interloper is not the landlord, one claiming through the landlord, or one claiming superior title to the landlord.

  • American approach the landlord has no duty to provide actual possession on the first day of the lease, only legal possession; the tenant bears the risk of a third party being in possession of the premises on the first day of the lease.

• Did L have legal possession to convey to T-2 on January 1, 2005, the first day of the lease between L and T-2?

• Did L have properly terminated the lease to T-1.

• The lease between L and T-1 was a term of years since the last day of the lease could be determined at the outset; no notice is necessary to terminate a term of years lease. The lease terminates automatically upon the set date, and the right to legal possession reverts to the landlord.

• T-1’s right to possession terminated automatically December 31, 2004; L had legal possession to grant to T-2 beginning January 1, 2005.

• Under the American approach, L has no implied duty to provide T-2 with actual possession; L has not breached any of the duties as to delivery of possession.

Holdover Tenants and Delivery of Possession

• On December 31, 1996, L leases Blackacre in writing “to T-1 for residential purposes for a term of five years, beginning January 1, 1997, at an annual rent of 120,000 payable 10,000 a month.”

• After the initial term is up, T-1 stays in possession and keeps making monthly payments, and L accepts the payments.

• On October 31, 2004, L agrees to lease Blackacre in writing “to T-2 for five years, beginning January 1, 2005.” That same day (October 31st) L writes T-1 and informs T-1 that L is terminating the lease and T-1 needs to be out at the end of term, December 31, 2004.

• Both leases are without any express covenant as to delivery of possession. When T-2 arrives on January 1, 2005, to take possession of Blackacre, T-1 refuses to give possession of the premises to T-2. T-2 sues L for breach of duty to deliver legal and actual possession.

• In a jurisdiction which follows the modern trend and applies the English approach as to L’s duty to deliver possession: L is liable for breaching L’s implied covenant to provide actual possession.

• Did L have legal possession to convey to T-2 on January 1, 2005, the first day of the lease between L and T-2.

• Was the lease between L and T-1 properly terminated?

• The jurisdictions are split over which type of lease holds over:

  • When a term of years tenant for a year or longer holds over, a new one year term lease is created. Since, No notice is necessary to terminate a term of years lease; meaning L had the legal right to possession on January 1, 2005 granted to T-2.
  • Some jurisdictions hold that when a term of years tenant for a year or longer holds over, a new periodic tenancy is created. To the extent that the term is ambiguous, most courts hold that residential tenancies, if ambiguous, should be construed as month to month periodic tenancies. Even if a jurisdiction were to construe the new tenancy as a year to year periodic tenancy, the issue arguably is moot since under the modern trend, all that is necessary to terminate a periodic lease up to a year to year term is 30 days notice, to terminate on the last day of the term (unless it is a month to month tenancy, in which case the notice may terminate on any day as long as there is 30 days notice).

Commercial Reasonableness and Mitigation in Leases

• Arnold owns the GoodBody Medical Building, rents an office under a five-year lease to Debbie, a dentist, with an approval clause requiring Arnold's permission for assignment or subletting.
• After a year, Debbie quits, and Pamela, a cosmetic surgeon, seeks to take over; Arnold refuses due to opposing cosmetic surgery.
• Debbie leaves it vacant for 3 years, Arnold then rents it and sues Debbie. The most likely result under the modern trend: Arnold cannot recover from Debbie, because he had no right to reject Pamela as an assignee and he had a duty to mitigate.
• Common law the lease is a conveyance approach, the modern approach is the opposite.
• Under the modern trend approach, the parties are obligated to act in good faith and to mitigate damages.
• Even where the lease contains an approval clause, and the clause is silent as to whether the landlord must act reasonably in withholding consent, the duty to act in good faith imposes a duty on the landlord to act reasonably; however, the landlord may still reject commercially reasonable grounds such as: the proposed assignmees financial stability, suitability of premises for use, etc.
• In addition to requiring landlords to act in a commercially reasonable manner with respect to assignments, the modern trend also requires landlords to act in a commercially reasonable manner if a tenant abandons where the landlord must mitigate and is in the best postion to provide sufficient evidence for mitigation. Here, Arnold took no steps to try and mitigate damages, barring any attempt he may make at recovering back rent from Debbie.