Condensed Outline – Subject Matter Jurisdiction

I. Subject Matter Jurisdiction

A. Subject Matter Jurisdiction

1. A party cannot waive objections to lack of SMJ because it relates to the court’s ability to hear the case.

2. Federal Question Jurisdiction

a. When a claim arises out of federal law, the court will have federal subject matter jurisdiction under federal question.

1) The district courts shall have original jurisdiction of all civil actions arising under the constitution, laws, or treaties of the U.S.

b. If the defendant’s answer alleges federal law, that is not enough for federal subject matter jurisdiction. The federal law must be pleaded in the plaintiff’s case.

c. Well-Pleaded Complaint Rule

1) Federal Q jurisdiction exists only when the federal law issue is presented in the p’s complaint. Under the well-pleaded complaint rule, the determination of jurisdiction must be made by considering only the necessary elements of the P’s cause of action and not potential defenses.

3. Diversity

a. In order to have diversity jurisdiction, you have to have complete diversity which means no P can be domiciled in the same state as any D and the amount in controversy exceeds $75l. The courts may not exercise supplemental subject matter jurisdiction over a non-diverse D in order to keep the case in federal court. SSMJ only applies once there’s a case in court, so the D must have already been brought in properly, then you get supplemental SMJ if the claims arise out of the same T/O or common nucleus of operative fact.

              1) Class Action

Pages: 1 2 3

Conditions and Promises

CHAPTER 16

Conditions and Promises

§16.1 THE STRUCTURE OF A CONTRACT: AN INTRODUCTION TO PROMISES AND CONDITIONS

Most terms in a contract are promises or conditions—or both. The meaning, nature, and effect of a promise is very familiar by now. The concept of promise was introduced right at the beginning of this book, and its central role in all contractual relationships has been emphasized ever since. Although conditions are just as much a fundamental component of contracts, their presence and function have not been much discussed in previous chapters. It is the purpose of this chapter to introduce the concept of conditions and to examine their functions. In doing this, we will look more carefully at the structure of a contract and explore the way in which conditions and promises interact to form the basis of the contractual relationship. We will then proceed, in this chapter and the next, to consider the performance obligations created by the network of promises and conditions, and to address the problems that are created when those obligations are violated. You will encounter some unfamiliar terminology, but this does not mean that we are entering some new and alien field of contract law. Most, if not all, of the substantive principles discussed here have been covered already, and the breakdown of a contract into promises and conditions is simply the means by which its structure is studied. As is so often the case, you will find that the key to analysis is interpretation—the determination of the parties’ intent, as expressed by them in their contract or as inferred from surrounding evidence and reasonable expectations.

  We begin with a set of definitions and some simple examples to introduce terminology and to provide an initial insight into the reason for differentiating promises and conditions.

  A promise (sometimes called a covenant) was defined in section 1.2.3 as an undertaking to act or refrain from acting in a specified way at some future time. As we have seen repeatedly since then, the exchange of promises (or of at least one promise for a performance) is what contracts are all about. Thus, for example, when parties make a contract for the sale of land, the buyer promises to pay the price in exchange for the seller’s promise to convey title and possession of the land. Diagram 16A illustrates this in a manner similar to that used to explain the exchange element of consideration:

Pages: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52

Index

    Index

A

Accounting. See Concurrent Interests

Adult Entertainment

Adverse Possession

Generally

Boundary disputes and hostility

Color of title

Disabilities

Elements of

Innocent improvers

Life tenant and

Marketable title and

Personal Property and

Subsurface

Tacking

Tenants in common

Theories of

Aesthetic Regulation

Architectural controls

Commercial speech

Content-based or content-neutral

Historic districts

Signs and billboards

Substantive due process

Pages: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

Editorial Advisors

EDITORIAL ADVISORS

Erwin Chemerinsky

Dean and Distinguished Professor of Law

Raymond Pryke Professor of First Amendment Law

University of California, Irvine, School of Law

Richard A. Epstein

Laurence A. Tisch Professor of Law

New York University School of Law

Peter and Kirsten Bedford Senior Fellow

The Hoover Institution

Senior Lecturer in Law

The University of Chicago

Ronald J. Gilson

Charles J. Meyers Professor of Law and Business

Stanford University

Marc and Eva Stern Professor of Law and Business

Columbia Law School

James E. Krier

Earl Warren DeLano Professor of Law

The University of Michigan Law School

Richard K. Neumann, Jr.

Professor of Law

Maurice A. Deane School of Law at Hofstra University

Robert H. Sitkoff

John L. Gray Professor of Law

Harvard Law School

David Alan Sklansky

Professor of Law

Stanford Law School

Preface

Preface

Property, the study of the rights and duties among persons with respect to objects, land, and other assets, is perhaps the least intuitive of all the required courses taught during the first year of law school. The course blends a mixture of abstract relationships and concrete rules, at once a remnant of laws introduced in bygone centuries and a dynamic reflection of changes occurring today.

Property: Examples & Explanations discusses the fundamental definitions, rules, and concepts covered in Property courses. Most of this book’s readers will be first-year students either preparing for class, supplementing class discussion, or studying for examinations. We aim to make the book useful at each of these stages of your semester. It will help bring the course materials into focus and provide the many perspectives to help you “think like a lawyer.”

Each chapter contains an introductory overview that supplements (but does not supplant) your daily class assignments and aids in your review for examinations. Each overview provides a clear and accessible exposition of the fundamentals of the law of property, with the object of helping someone focusing on the subject for the first time.

Each chapter also includes a series of Examples that test your understanding of the material and your ability to apply the law to specific problems. We recommend that you think about, analyze, and write answers to as many Examples as you can. Writing out your responses is good practice for writing final examinations. It also forces you to analyze the facts and the law, evaluating possible solutions and ramifications of each choice you make. Alternatively, you might discuss each Example with a study partner or study group, gaining insight from the discussion.

Following the Examples in each chapter are Explanations that give our solutions. The Explanations discuss majority and minority rules and offer insights not readily grasped in class discussions or in the introductory overviews of the chapters themselves. Some Explanations will help you identify your weak areas; others will reinforce your conclusions and analysis. We have strived to make each Explanation a stepping-stone on the path to success in your Property course.

There are no exhaustive citations of authority in this book. What citations are used in the text or in our Explanations we consider helpful either to orient the student reader to casebook materials or to indicate basic writings and leading cases in the field.

We enjoy our magnificent subject and want students to grasp its fundamental rules and concepts, all the while enjoying their experience.

B.B.

J.S.

August 2015

Contents

Contents

Preface

Acknowledgments

PART I. POSSESSION, PERSONAL PROPERTY, AND ADVERSE POSSESSION

Chapter 1

The Law of Property

Introduction

Common Law Cases

Case Analysis

Chapter 2

Personal Property and First Possession

Introduction and Definitions

Possession, Relativity of Title, and First-in-Time

Actual Possession and the Fox Case

Constructive Possession

Custom

The Doctrine of Custom Giving the Public Access to Beaches and Other Lands

Natural Resources and Other Concerns

Water Law

(a)

Surface Water Courses

(b)

Groundwater

Actionable Interference

Misappropriation

Chapter 3

Law of Finders and Prior Possessors

Conversion, Replevin, and Trover

Armory v. Delamirie

Extensions of the Armory Rule—and a Right of Subrogation

Lost Property, Mislaid Property, Abandoned Property, and Treasure Trove

Other Considerations

Instrumental View

Legislation

Chapter 4

Bailments

Definitions

Overview of Negligence and Strict Liability

Specialized Bailment Issues

(a)

Pledges

(b)

Park-and-Lock Cases

(c)

Safe Deposit Boxes

Misdelivery of Bailed Property

(a)

Strict Liability and Negligence

(b)

Burden of Proof

When Bailed Property Is Lost or Damaged

Chapter 5

Good-Faith or Bona Fide Purchasers

Void Title, Voidable Title, and Bona Fide Purchasers

The UCC and Bona Fide Purchasers

Entrustment

Chapter 6

Gifts

Inter Vivos Gifts

(a)

Donative Intent

(b)

Delivery

(c)

Acceptance

Gifts Causa Mortis

Chapter 7

Fixtures

Chapter 8

Adverse Possession

Introduction

Elements of Adverse Possession

(a)

Actual Possession

(b)

Open and Notorious Possession

(c)

Exclusive Possession

(d)

Hostile or Adverse Possession

(1)

The Majority or Objective View

(2)

The Minority, Bad-Faith, or Intentional Trespass View

(3)

Good-Faith View

(e)

Continuous Possession

Privity and Tacking

Disabilities and Tolling the Running of the Statute of Limitations

Temporal and Physical Severance and Adverse Possession

Personal Property and Adverse Possession

PART II. COMMON LAW ESTATES AND INTERESTS IN REAL PROPERTY

Chapter 9

Common Law Estates and Present Interests

Some History

Estates and Interests

Estates: Fundamental Fragments of Time

The Importance of Terms—and Some More Terms

(a)

Fee Simple Absolute

(b)

Life Estate

(1)

Attributes of a Life Estate

(2)

Marketability Problems

(3)

Conflicts Between the Life Tenant and the Remainderman

(4)

Life Estate or Fee Simple

(c)

Fee Tail and Fee Simple Conditional

(d)

Term of Years

Waste

(a)

Voluntary, Permissive, and Ameliorating Waste

(b)

Open Mines Doctrine

(c)

Economic Waste

Defeasible Fee Simple Estates

(a)

Fee Simple Determinable

(b)

Fee Simple Subject to a Condition Subsequent

(c)

Distinguishing a Fee Simple Determinable from a Fee Simple Subject to a Condition Subsequent from a Covenant

(d)

Fee Simple Subject to an Executory Limitation

Classifying Estates in Fee Simple—a Flowchart

Chapter 10

Future Interests

Introduction

Distinguishing Present Interests and Future Interests

Future Interests Retained by the Grantor or Transferor

Future Interests in Third-Party Transferees

(a)

Remainders

(b)

Executory Interests

Vested and Contingent Remainders

(a)

Ascertained Persons

(b)

No Condition Precedent

Why We Distinguish Vested and Contingent Remainders

Interpreting Transfers with Conditions Precedent and Conditions Subsequent

Alternative Contingent Remainders

Variations on Vested Remainders

(a)

Indefeasibly Vested Remainder

(b)

Vested Remainder Subject to Divestment

(c)

Vested Remainder Subject to Open

(1)

Class Closing Physiologically or Naturally

(2)

Class Closing by the Rule of Convenience

Restatement (Third) of Property

Chapter 11

Special Rules of Construction

The Rule of Destructibility of Contingent Remainders

The Merger Rule

Forfeiture

The Rule in Shelley’s Case

The Doctrine of Worthier Title

Chapter 12

The Rule Against Perpetuities

Introduction

Part I: The Rule Against Perpetuities Explained

Preliminary Observations

(a)

Creation of the Interest

(b)

Vesting versus Possession

(c)

Rule Applies to Legal and Equitable Estates

(d)

Certain Contingent Remainders to Charitable Organizations

An Analytical Approach

Updated Versions of the Rule

Part II: Application of the Rule Against Perpetuities to Specific Situations

Interests Dependent on an Event

Grantees Identified by Description Rather than Named

Vested Remainders Subject to Open (Class Gifts)

Intergenerational Family Transfers

Effect of Class Closing Rules on Intergenerational Transfers

Commercial Options

Statutory Reforms of the Rule

(a)

The Wait-and-See Doctrine

(b)

The Uniform Statutory Rule Against Perpetuities

(c)

The Cy Pres Doctrine

(d)

The Rule and Trust Law

(e)

Generation-Based Perpetuity Period

Chapter 13

Concurrent Ownership

Tenancy in Common

Joint Tenancy with Right of Survivorship

Severance

(a)

Leases

(b)

Mortgages

(c)

Judgment Liens

(d)

Unilateral and Secret Severances

Distinguishing Joint Tenancies from Tenancies in Common

Tenancy by the Entirety

Rights and Obligations Between Co-Tenants

(a)

Possession, Ouster, and Payment of Rent

(b)

Contribution

(1)

Taxes, Interest, and Insurance

(2)

Mortgage Principal

(3)

Repairs and Maintenance

(4)

Improvements

(c)

An Accounting

(d)

Final Settlement on Sale

(e)

Tax Sales and Foreclosure Sales

(f)

Adverse Possession

Partition

(a)

Partition in Kind

(b)

Partition by Sale

Chapter 14

Marital Property

Common Law Dower

Dower Reform

The Elements of Dower

Dower and Adverse Possession

Dower and Waste

Release of Dower

Barring Dower

Forcing an Election

Curtesy

The Modern Elective Share

Calculating the Amount of the Elective Share

Homestead Exemptions

Separate, Marital, and Community Property

Ante-Nuptial Agreements

Putative Spouses

PART III. THE LAW OF LANDLORD AND TENANT

Chapter 15

The Landlord and Tenant Relationship

Types of Leases

(a)

Term of Years

(b)

Periodic Tenancy

(c)

Tenancy at Will

(d)

Tenancy at Sufferance

(1)

Holdover as Trespasser

(2)

Holdover as Renewing Lease

(3)

Holdover in Other Situations

The Landlord’s Duty to Deliver Possession

Chapter 16

Transfers of the Lease

Privity of Contract and Privity of Estate

Assignments and Subleases

The Traditional Rule

Rule of Intent

The Effect of Tenant Transfers on Privity

Real Covenants

Landlord’s Consent to a Sublease or Assignment

Landlord Consent Provisions

The Rule of Dumpor’s Case

Transfers of the Landlord’s Interest

Chapter 17

Waste, Duty to Repair, Destruction of Leased Premises, and Security Deposits

Waste

Remedies and Damages for Waste

Fixtures

The Duty to Repair

The Destruction of the Premises

(a)

Termination of the Lease

(b)

Duty to Rebuild

Security Deposits

Chapter 18

Termination and Abandonment of the Lease

Landlord’s Eviction of Tenant in Default

Self-Help

Ejectment

Summary Possession Statutes

Tenant’s Abandonment and Surrender

Surrender

Abandonment

(a)

Lease Continues—Landlord Does Nothing

(b)

Landlord Relets on Tenant’s Behalf

(c)

Landlord Treats Abandonment as Surrender

(d)

Abandonment as Anticipatory Repudiation

Chapter 19

Achieving Habitable Premises

Evictions—Actual and Otherwise

(a)

Actual Eviction

(b)

Partial Action Eviction

(c)

Constructive Eviction

(d)

Partial Constructive Eviction

(e)

The Covenant of Quiet Enjoyment

(f)

The Tenant’s Dilemma

The Implied Warranty of Habitability

(a)

Basis for the Warranty of Habitability

(b)

A Breach of the Warranty

(c)

Commercial Tenants and the Warranty of Suitability

(d)

Enforcement Remedies

(e)

Damages

(f)

Withholding Rent

Retaliatory Eviction as a Tenant’s Defense to Eviction

(a)

Modifications to the Retaliatory Eviction Defense

Illegal and Frustrated Leases

(a)

The Illegal Lease

(b)

Frustration of Purpose

Chapter 20

Premises Liability of Landlords

Premises Liability

(a)

Landlord Liable for Injuries in Specific Situations

(1)

Latent Defects

(2)

Prior Conditions Dangerous to Persons Off Premises

(3)

Leases for Public Use

(4)

Negligence in Maintaining Common Areas

(5)

Landlord Contracts to Repair Leased Premises

(6)

Negligent Repairs

(b)

Landlord Liable Under Negligence Standard

(c)

Landlord Strictly Liable

Landlord Liability for Criminal Acts

Exculpatory Clauses

PART IV. TRANSFERS OF LAND

Chapter 21

The Sales Contract

Introduction

Closing

Real Estate Brokers and Agents

Broker as Seller’s Agent

Broker’s Duty to Disclose Latent Defects to Purchasers

The Statute of Frauds

Part Performance and Other Exceptions

(a)

Part Performance

(b)

Equitable Estoppel

(c)

Admission of a Contract in Court

Chapter 22

Executory Period Issues

Introduction

Marketable Title

(a)

Definition of Marketable Title

(b)

Examples of Unmarketable Title

(c)

Defective Deed Records

(d)

Adverse Possession

Caveat Emptor and the Duty to Disclose Defects

(a)

Caveat Emptor

(b)

The Duty to Disclose Material Latent Defects

Time for Performance

Remedies for Breach of Sales Contract

Equitable Conversion and Risk of Loss

Chapter 23

Real Estate Closings

The Closing or Settlement Process

Delivery

Specialized Delivery Problems

(a)

Escrow Transfers

(b)

Donative and Testamentary Transfers

Mortgages

(a)

Mechanics of Mortgages

(b)

Title Theory and Lien Theory

(c)

Deed of Trust

(d)

Installment Land Sale Contract (Contract for Deed)

(e)

Debt Satisfaction and Assumptions

(f)

Foreclosure

Chapter 24

Post-Closing Title Assurances

Merger Doctrine

Types of Deeds

Deed Covenants

Present Covenants

(a)

Seisin

(b)

Right to Convey

(c)

Warranty Against Encumbrances

Future Covenants

(a)

Warranty

(b)

Further Assurances

Damages

Attorneys’ Fees

Remote Grantees

Implied Warranty of Quality

After Acquired Title (Estoppel by Deed)

Chapter 25

Recording Systems, Marketable Title Acts, and Title Insurance

Introduction

Searching a Chain of Title Using the Grantee Index

Searching a Chain of Title Using the Grantor Index

Searching a Tract Index

Types of Recording Acts

Race Statutes

Notice Statutes

(a)

Actual Notice

(b)

Constructive Notice

(c)

Inquiry Notice

Race-Notice Statute

Subsequent Purchasers for Value

Problems in Grantor-Grantee Indices

Marketable Title Acts

Title Insurance

(a)

Informational Use

(b)

Lender’s Policy and Owner’s Policy

(c)

No Assignment or Running of Benefits

(d)

Insurer’s Duty to Disclose Excepted Defects

(e)

Damages

(f)

Other Benefits of Title Insurance

PART V. PRIVATE LAND USE CONTROLS

Chapter 26

Private Nuisance

Introduction

Intentional and Unintentional Interferences

Substantial Interference

Unreasonable Interference

Injunctions and Damages

Light and Air

Lateral Support and Subjacent Support

Chapter 27

Creation of Easements

Introduction

Terminology

Other Nonpossessory Interests

Expressly Granted or Reserved Easements

Easements by Estoppel and Irrevocable Licenses

Implied Easements

Easements Implied from Prior Use

Easements Implied by Necessity

Prescriptive Easements

Chapter 28

Assignability, Scope, and Termination of Easements

Assignability of Easements

Divisibility and Apportionment

(a)

Easements Appurtenant

(b)

Easements in Gross

Scope of Easements

(a)

Location

(b)

Intensity of Use

(c)

No Benefit Allowed to Nondominant Property

(d)

Improvements, Maintenance, and Repair

Termination of Easements

Chapter 29

Real Covenants and Equitable Servitudes: Running with the Land

Introduction

Terminology

Identifying Real Covenants and Equitable Servitudes

Intent to Bind and Benefit Successors

Touch and Concern

(a)

Burdens That Touch and Concern Land (or Don’t)

(b)

Benefits That Touch and Concern Land (or Don’t)

(c)

The “Legal Relations” Test

Real Covenants and Privity of Estate

(a)

Terminology

(1)

Original Promisee

(2)

Original Promisor

(3)

Subsequent Owners

(4)

Horizontal Privity

(5)

Vertical Privity

(b)

Horizontal Privity

(c)

Vertical Privity

Equitable Servitudes and Notice

The Restatement (Third) of Property (Servitudes)

Chapter 30

Real Covenants and Equitable Servitudes: Common Schemes and Termination

The Common Scheme and Subdivisions

The Common Scheme and Standing to Enforce a Servitude

The Common Scheme and Notice for Recording Acts and Equitable Servitudes

The Common Scheme and the Statute of Frauds

What Constitutes a Common Scheme

(a)

Common Covenants

(b)

When a Common Scheme Begins

(c)

Geographic Boundaries of Common Schemes

The Restatement (Third) of Property (Servitudes)

Termination of Covenants and Servitudes

PART VI. PUBLIC LAND USE CONTROLS

Chapter 31

Constitutional and Statutory Constraints on Zoning

Introduction

An Introduction to Constitutional Law

The Standard State Zoning Enabling Act

Enacting a Zoning Ordinance

Cumulative and Noncumulative Zoning

The Constitutional Law in Euclid

Unconstitutional On Its Face and As Applied

Nonconforming Uses

Amortization

Chapter 32

Variances, Special Exceptions, and Zoning Amendments

Variances

Special Exceptions

Judicial Review of Variances and Special Exceptions

Amending the Zoning Ordinance

The Problem of Spot Zoning

Initiative and Referendum

Contract and Conditional Zoning

Floating Zones, Cluster Zones, and PUDs

Chapter 33

Zoning Extended and Challenged

Household Composition and Single-Family Residences

(a)

Village of Belle Terre v. Boraas

(b)

Moore v. City of East Cleveland

(c)

Fair Housing Act and Group Homes

Aesthetic Regulation

(a)

Signs and Billboards

(b)

Architectural Controls

(c)

Historic Districts

(d)

Landmarks

Two Federally Favored Land Uses

(a)

Religious Uses

(b)

Wireless Communication Facilities

Adult Entertainment

Exclusionary Zoning

Chapter 34

Takings

Conventional Condemnation

(a)

Public Use

(b)

Just Compensation

Inverse Condemnation

Categorical or Per Se Regulatory Takings

(a)

Physical Invasions

(b)

Total Takings

Regulatory Takings—The Penn Central Ad Hoc Factors

(a)

Character of the Government Action

(b)

The Economic Impact of the Regulation

(c)

Investment-Backed Expectations

Conceptual Severance

(a)

The Surface as Denominator

(b)

Airspace, Surface, and Mineral Rights as Separate Interests

(c)

Temporal Severance

(1)

Permanent Takings

(2)

Temporary Takings

Judicial Takings

Remedies

Exactions

Index

Acknowledgements

Acknowledgments

Barlow Burke acknowledges the helpful and patient research of his research assistants, Les Anderson, Athena Cheng, Stephanie Quaranta, Rachel Rueben, Meryl Eschen Mills, Michael Gonzalez, and Stacy Pine, while they were law students. He also acknowledges with appreciation the financial support, over several summers, of the Washington College of Law, American University. Joseph Snoe appreciates Valerie Price, Judy McAlister, and Grace Simms for their help with the manuscript. He also thanks the Cumberland School of Law, Samford University, for its support.

We are both grateful for the guidance of the several anonymous reviewers of this manuscript provided by Wolters Kluwer, the many comments of students and professors on the previous editions, and for the editorial work of Carol McGeehan, Jessica Barmack, Eric Holt, John Lyman, Vincent Nordhaus, Sarah Zobel, Margaret Rehberger, and Susan McClung at Wolters Kluwer and Paul Sobel at The Froebe Group—all gave their professional best. Aside from the above, we acknowledge our limitations, inevitable and otherwise, in attempting to pull so diverse a subject within the covers of one book, and look forward to the diverse suggestions of readers for the improvement of this edition of Property: Examples & Explanations.

B.B.

J.S.

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Summary of Contents

Summary of Contents

Contents

Preface

Acknowledgments

PART I.

POSSESSION, PERSONAL PROPERTY, AND ADVERSE POSSESSION

Chapter 1

The Law of Property

Chapter 2

Personal Property and First Possession

Chapter 3

Law of Finders and Prior Possessors

Chapter 4

Bailments

Chapter 5

Good-Faith or Bona Fide Purchasers

Chapter 6

Gifts

Chapter 7

Fixtures

Chapter 8

Adverse Possession

PART II.

COMMON LAW ESTATES AND INTERESTS IN REAL PROPERTY

Chapter 9

Common Law Estates and Present Interests

Chapter 10

Future Interests

Chapter 11

Special Rules of Construction

Chapter 12

The Rule Against Perpetuities

Chapter 13

Concurrent Ownership

Chapter 14

Marital Property

PART III.

THE LAW OF LANDLORD AND TENANT

Chapter 15

The Landlord and Tenant Relationship

Chapter 16

Transfers of the Lease

Chapter 17

Waste, Duty to Repair, Destruction of Leased Premises, and Security Deposits

Chapter 18

Termination and Abandonment of the Lease

Chapter 19

Achieving Habitable Premises

Chapter 20

Premises Liability of Landlords

PART IV.

TRANSFERS OF LAND

Chapter 21

The Sales Contract

Chapter 22

Executory Period Issues

Chapter 23

Real Estate Closings

Chapter 24

Post-Closing Title Assurances

Chapter 25

Recording Systems, Marketable Title Acts, and Title Insurance

PART V.

PRIVATE LAND USE CONTROLS

Chapter 26

Private Nuisance

Chapter 27

Creation of Easements

Chapter 28

Assignability, Scope, and Termination of Easements

Chapter 29

Real Covenants and Equitable Servitudes: Running with the Land

Chapter 30

Real Covenants and Equitable Servitudes: Common Schemes and Termination

PART VI.

PUBLIC LAND USE CONTROLS

Chapter 31

Constitutional and Statutory Constraints on Zoning

Chapter 32

Variances, Special Exceptions, and Zoning Amendments

Chapter 33

Zoning Extended and Challenged

Chapter 34

Takings

Index

Title

Property

Fifth Edition

Barlow Burke

John S. Myers & Alvina Reckman Myers Scholar
and Professor of Law
American University
Washington College of Law

Joseph Snoe

Whelan W. and Rosalie T. Palmer
Professor of Law
Samford University
Cumberland School of Law

WK_Logo

Copyright © 2016 Barlow Burke and Joseph Snoe.

Published by Wolters Kluwer in New York.

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ISBN 978-1-4548-5006-9

Library of Congress Cataloging-in-Publication Data

Burke, D. Barlow, 1941- author.

Property / Barlow Burke, John S. Myers & Alvina Reckman Myers Scholar and Professor of Law, American University, Washington College of Law; Joseph Snoe, Professor of Law, Samford University, Cumberland School of Law. — Fifth edition.

pages cm. — (The examples & explanations series)

ISBN 978-1-4548-5006-9

1. Property-United States. I. Snoe, Joseph A., author. II. Title.

KF560.B87 2015

346.7304—dc23

2015017183

Chapter 9. Common Law Estates and Present Interests

CHAPTER 9

Common Law Estates and Present Interests

Real property ownership can be divided several ways. O, owning 100 acres of real property, might transfer 50 acres to A and the other 50 acres to B. Alternatively, O might sell the surface rights to A and the mineral rights to B. If he wanted, O could transfer the management rights to A (a trustee of a trust, for example) and the income and profits interest to B (the beneficiary of the trust). The next few chapters develop a fourth method of dividing up ownership: over time. O, for example, might transfer acreage to A for a period of time (say, ten years) and then give it to B for the rest of the time, or might give it to A “for life” (this is known as a life estate, meaning it lasts as long as A lives, and no longer) and then give it to B for the rest of the time, meaning that B will wind up, after A dies, owning the property in perpetuity. In other words, property can be divided physically, but may also be divided along a timeline.

       The study of who owns what interests in property over time is known as the study of estates and of present and future interests. Studying estates and present and future interests requires more than reading for and attending class. You should work problems outside of class. In addition to the Examples in this book, you can find more practice problems in John Makdisi & Daniel Bogart, Estates in Land and Future Interests (6th ed. 2013), and Linda H. Edwards, Estates in Land and Future Interests: A Step-By-Step Guide (4th ed. 2013).

    SOME HISTORY

We start with a very brief history of the origin of estates and future interests. In 1066, at the battle of Hastings, a Norman archer shot the Anglo-Saxon king, Harold, in the eye socket, killing him and leading to the conquest of England by William I, the Conqueror. After the battle, William parceled out the countryside to his knights; what he gave them was a use right, or tenure—the right to hold.

       William initially parceled out lands for limited periods of time, usually for the life of a particular knight, the estate which today we call a “life estate.” William, as king, prized personal loyalty above all, and rewarded it with land. But that loyalty had to be tested and affirmed anew with each generation, and so the land reverted to the king at death. The knights, once in possession of their holdings, quickly became interested in their families and children holding the land after their deaths. Over time, the knights and other landed persons were allowed to pass property along to male heirs.

       The landed persons, however, became increasingly interested in two additional rights: the right to transfer or dispose of their property by will after death (testamentary power, or devisability) and the right to dispose of their land during their lifetimes (a power to alienate, or alienability). The right to alienate land was recognized by the Statute Quia Emptores (Latin for “concerning purchasers”) in 1290. [1]The Statute of Wills in 1540 authorized all Englishmen to transfer or devise property by will at their death.

[1]    Throughout this book, you’ll notice common law forms of action and procedures based initially on late-thirteenth-century statutes. Many are the result of the work of Edward I, known as a law reformer in his day and to this day. These are not statutes in the modern sense—they are the product of “the King sitting in Parliament” with his nobles, and so are more like executive orders issued with the consent of the nobles.

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Chapter 10. Future Interests

CHAPTER 10

Future Interests

    INTRODUCTION

The previous chapter introduced present interests and estates, and, to a lesser extent, future interests. An estate held in fee simple absolute, for example, is perpetual ownership or ownership until the end of time. A fee simple absolute can be diagrammed on a timeline as follows:

A life estate can be diagrammed as follows:

where A has a life estate. X has either a remainder in fee simple absolute or a reversion, depending on who X is.

  Perhaps the most important feature of these two diagrams is the ∞ symbol at the end of each timeline. From the earliest years of English and American common law, judges and lawyers classified interests and estates by visualizing who controlled ownership of land from the moment of the effectiveness of a deed, will, or other instrument until infinity. If a person owned a life estate, the legal mind wanted to know who (or whose heirs or assigns) took possession once the life estate ended.

    Example:

Orville transferred Blackacre to A for life. A has a life estate or, more fully described, A has a present interest held in a life estate. Because he transferred less than his full interest in Blackacre and will take back possession of Blackacre once A dies, Orville has a future interest, a reversion. A reversion is a future interest since the holder does not have a present possessory right to the land. Orville has a present property right, but the possession is deferred until a later time. Nothing else being said, Orville holds that reversion in fee simple absolute.

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Chapter 11. Special Rules of Construction

CHAPTER 11

Special Rules of Construction

Several rules of law or construction developed in England long ago to decrease the control that grantors, testators, and other transferors have over real property, and later on, to increase the alienability of property. Most states no longer follow many of them, but some do and in some instances, understanding them is necessary to see the extent to which they are and are not followed. This chapter covers these rules, except for the Rule Against Perpetuities, which is discussed in Chapter 12.

    THE RULE OF DESTRUCTIBILITY OF CONTINGENT REMAINDERS

In England during the fourteenth and fifteenth centuries, seisin had to be continuous. Seisin could not ever be in abeyance, for if it was to be, the lord of the manor could not know who was responsible for the land within his domain. Lawyers and judges consequently were troubled when a life tenant died and the holders of a remainder were not yet ascertained, or when a named contingent remainder holder had not satisfied the condition precedent. Early examples generally involved the naming of heirs.

    Example 1:

Owen conveyed Blackacre “to A for life, remainder to B‘s heirs.” B is alive. A living person’s heirs are unascertained (common law lawyers said that “no living person has heirs”), so the remainder in B‘s heirs is contingent. If A died before B, then, the remainder had not vested—a nightmare in the feudal system since no one was responsible for paying taxes and providing soldiers for the king.

  In addition, because the common method of transfer was by enforcement with livery of seisin, judges came to require that all transfers had to take place at once. A vested remainder relaxed this requirement, and the judges regarded the remainder as being capable of taking possession when and if the prior freehold estate ended—at which time seisin passed instantly to the remainderman. A contingent remainder required a further relaxation of the rule that seisin had to be continuous. The judges balked—and wouldn’t do it. Given the choice between having the property revert back to the grantor until the remainderman satisfied the condition precedent or voiding the contingent remainder, the judges chose to void the contingent remainders that were still contingent when the preceding life estate ended. A remainder, they said, had to vest at or before it came into possession. From thence developed the Rule of Destructibility of Contingent Remainders.

  The Rule of Destructibility of Contingent Remainders states that a contingent remainder is destroyed if it has not vested at or before the termination of all preceding life estates.

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Chapter 13. Concurrent Ownership

CHAPTER 13

Concurrent Ownership

As we have seen, property ownership can be divided up in several ways. A landowner of 100 acres, for example, may give 50 acres to one person and 50 acres to another; the landowner may give one person the whole 100 acres as a life estate and another the remainder; the landowner may sever the surface from the subsurface by granting away the mineral rights; or the landowner may transfer legal title to a trustee with rights to manage and sell the property for the economic benefit of beneficiaries who have the right to income and value appreciation.

Finally, two or more persons may concurrently own the same interest in the same land. There are three major concurrent interests developed in England and recognized in the United States: tenancy in common, joint tenancy with right of survivorship, and tenancy by the entirety. Each may be found in any present or future interest, and may be held in any estate—for life, in fee simple determinable or subject to a condition subsequent, in fee simple absolute, etc.

TENANCY IN COMMON

The most common form of concurrent ownership is the tenancy in common. Each tenant in common owns a share of the same piece of property. The default rule is that each co-tenant has an equal right to possess the whole property and to share equally in rents and appreciation in value. Thus, it is said that their interests are “undivided”—that is, each has seisin and the right to possess the whole. In practice, they frequently own varying proportional interests in the land. Tenants in common (or co-tenants) are presumed to own a property in proportion to the amount each contributed to purchase the property, but this presumption is rebuttable and subject to an agreement to the contrary.

Tenants in common normally share in rents and sales proceeds according to their respective interests. Even if co-tenants own varying interests in property, each co-tenant enjoys the right to possess the entire property. Thus, if A owns a 50 percent interest and B and C each own a 25 percent interest in Blackacre, as tenants in common, A would receive 50 percent of any net rents from the property, but all three would have equal rights of possession.

Concurrent ownership sometimes breeds conflict and disagreement. Common law default rules have evolved to resolve possession, use, profit-sharing, and expense-sharing issues that may arise when concurrent owners cannot agree.

A tenancy-in-common interest is assignable (transferable), devisable, and inheritable. Transferees become tenants in common with the remaining tenants in common. A co-tenant can mortgage his interest to secure a loan or can sell his interest, but cannot sell his co-tenants’ interests in the property.

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Chapter 14. Marital Property

CHAPTER 14

Marital Property

At common law, a spouse was not an heir of her husband or his wife. By virtue of the marriage, however, each spouse held a life estate in some types of property of the other. These life estates were implied by law, not created by a deed or in a will.

    COMMON LAW DOWER

At common law, a wife had a claim in the form of a life estate to a one-third share of all of the real property of which the husband was solely and beneficially seised in fee simple at any time during his marriage. This estate is called dower.

  Dower is available from the moment of marriage. In early England, dower designation of the dower house and lands was a part of the marriage ceremony: This designated property was called “named dower.” Originally, the bride’s family met with the groom and determined the lands to serve as his bride’s house and lands, should she outlive him—hence the term “dowager,” meaning a resident of a dower house. Often a large estate had a permanent dower house on its grounds. Kensington Palace in London, for example, is the dower house of the House of Windsor. Dower expanded from that beginning to include a fraction of all the husband’s lands—a/k/a “unnamed dower.”

  Dower is intended to provide economic and social security for a widow, assuring her that she will live as she had become accustomed during her marriage. Originally it permitted her to live in the same locale as during the marriage. Today it permits her to maintain the same social position. In an age of primogeniture, it also provided in some measure for younger sons and daughters, who could continue living with their mother.

  Before a husband’s death, the wife’s dower interests were called inchoate dower—not yet a legal estate in the husband’s real property, but giving her a basis for suit in case the husband attempted to defeat a later dower claim by a fraudulent conveyance during the marriage.

  After the husband’s death, dower was termed choate or consummate dower. On the basis of it, when the husband in his will provided for the wife less than dower would, the wife had the right to have the court probating the will survey the husband’s property and set aside one-third of each parcel of his land—the dower lands—for her life. Dower is thus a life estate that arises by operation of law.

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Chapter 15. The Landlord and Tenant Relationship

CHAPTER 15

The Landlord and Tenant Relationship

In a lease the owner of property (the landlord or lessor) contracts to grant a tenant or lessee exclusive possession of specific real or personal property. It typically is—but need not be—for a definite term and it also is typically given in exchange for rent. (Rent is not necessary for a lease’s validity, just as a deed for the conveyance of any interest or estate need not be based on consideration to be valid.) Thus a lease is either a grant or a contract transferring the right to exclusive possession for an agreed, if indefinite, period of time. The lessor retains a reversion. Leased real property, after being described in detail, is usually known as “the premises.”

  No particular words of art are necessary to create a lease. Under the provision for real property interests in the Statute of Frauds, states require that a lease with a term longer than one, two, or three years—depending on the jurisdiction—must be in writing. If a lease is for a term exactly one, two, or three years, then it too should be in writing because most states’ Statute of Frauds will require some writing for a lease to be enforceable. A few states require all leases to be in writing. If the Statute of Frauds requires that a lease be in writing, so must any agreement modifying or terminating it. The real property recording acts of many states require a lease with a term of more than one, two, or three years (depending on the state) to be recorded to be protected against bona fide purchasers. [1]

  Leases originally were considered conveyances of nonfreehold estates in land. Consequently many rules applicable to the conveyance of land still apply to leases. The law of contracts strongly, even predominantly, influences landlord-tenant law today. In some regards, tort law intrudes, and in the past 60 years or so governments have expanded regulation of the landlord-tenant relationship.

  Whether a lease is a conveyance under property law or a contract can affect the outcome of an issue. For example, if a lease is not considered a conveyance of an interest or estate in real property, a landlord could, any day of the week, walk onto the premises, jerk his thumb at the door, and say “Get out. I’ll pay your damages.” Which law applies may be a function of the type of issue at hand; or a court may label the lease a property conveyance or a contract to justify its substantive law or its remedy.

  Because different approaches and rules apply, sometimes an issue in a case is whether the parties created a lease or some other interest: a life estate, an estate for years; a license; or employee lodging. Evaluate the underlying relationship and not just the name given to the document.

  To illustrate, if a person buys a ticket to a sporting or entertainment event, or to ride an airplane, and the event or airline personnel demands the ticket holder leave the premises, the ticketholder’s (and premises owner’s) rights vary if the arrangement is a lease and not a license. Likewise whether the ticket authorizing a person to park her car in a parking lot is a license or lease affects whether the premises owner is liable if the car is stolen.

[1]   Recording acts are explained in Chapter 25.

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Chapter 16. Transfers of the Lease

CHAPTER 16

Transfers of the Lease

PRIVITY OF CONTRACT AND PRIVITY OF ESTATE

A landlord and tenant relationship, from the outset, involves both privity of contract and privity of estate. Privity of contract is a relationship existing between both parties to a contract. The lease is a contract. Thus the landlord and the tenant are in privity of contract with respect to the leased premises.

At one time only persons in privity of contract could enforce or be held liable for a contract. This caused problems when a tenant transferred her leasehold to a third party (assignee) and the landlord wanted to collect rent from the assignee who was not a party to the original lease, and hence was not in privity of contract with the landlord. The courts resolved this sticky problem by crafting another type of privity—privity of estate.

Landlord and tenant are also in the relationship known as privity of estate because both the landlord and the tenant have a mutual, immediate, and simultaneous interest in the leased premises—the tenant having the right to possession for a term, and the landlord having the reversion after the term. See Restatement (Second) of Property §16.1 (1977). Privity of estate permits a landlord to collect rent from the tenant’s assignee, even though there is no direct contract between them.

ASSIGNMENTS AND SUBLEASES

There are two distinct categories of tenant transfers: assignments and subleases. An assignment is a transfer of the whole of the unexpired term of the lease. It need not be a transfer of all of the premises. An assignment of a portion of the premises for the unexpired remainder of the term is called an assignment pro tanto.

A sublease is a transfer of less than the full remaining term of the lease or, more precisely, when the subletting tenant (by becoming a sublessor) retains some interest in the lease. A sublease is an independent transaction creating a wholly new and distinct landlord-tenant relationship between the sublessor and the sublessee. It has no effect on the original lease—for a court to hold otherwise would be to sanction a unilateral change in an ongoing contract. The sublessee is not bound by the covenant to pay rent in the original lease—the original or head tenant remains bound by it—or by any other covenant in the original lease, also known as the primary or “head” lease. The sublessee, of course, is bound by the rent obligations and other provisions of the sublease.

No particular words of art are required to assign or sublet, but the Statute of Frauds may apply to either category of transfer. A sublease is treated just as a lease would be, and an assignment is subject to the Statute of Frauds depending on the length of the unexpired term. Good practice requires that assignments and subleases be in writing.

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Chapter 17. Waste, Duty to Repair, Destruction of Leased Premises, and Security Deposits

CHAPTER 17

Waste, Duty to Repair, Destruction of Leased Premises, and Security Deposits

    WASTE

A tenant has a duty to his or her landlord not to commit waste. Waste is the unauthorized destruction, alteration, misuse, or neglect of the leased premises. Waste involves a substantial change of the premises. There are two principal types of waste: It may be either (1) voluntary and intentional, or (2) permissive. Voluntary or affirmative waste is a direct, willful, or intentional injury to the premises. Permissive waste is the result of neglect or omission, such as allowing a structure on the premises to deteriorate or become exposed to injury by the weather.

  Traditionally, a tenant’s making material or substantial change in the premises was voluntary waste, regardless of the fact that it increased its fair market value. Such an approach has been modified in many jurisdictions to depend on the express or implied intention of the parties, with the result that a reasonable change in the premises—that is, one reasonably necessary to use the property as contemplated in the lease—is now permitted.

  The tenant has the duty (implied in every lease) to redeliver the premises to the landlord in the same condition as it was received, wear and tear excepted. This implied covenant to redeliver is the minimum duty that the tenant owes the landlord due to the duty not to commit waste. This view may not apply to a long-term leasehold—i.e., to a lease whose term is long enough to amortize or depreciate the value of the tenant’s changes, so long as the tenant restores the premises to its original condition.

  More generally, the tenant has the duty not to injure the value of the landlord’s reversion. This duty is subject to two exceptions. First, a tenant may make such changes as are reasonably necessary to use the premises in a way contemplated by the parties to the lease. Sometimes this is stated as a tenant’s right to make temporary or minor changes in the premises during the course of the lease, subject to a duty to restore the premises as they were at its beginning. Second, as previously mentioned, a tenant is not liable for damage to the premises caused by wear and tear. However, a tenant is liable for damage resulting from his or her own negligence and, of course, for willful and intentional damage.

  The parties are free to agree that the tenant may use the property “without impeachment for waste,” thus waiving the tenant’s liability for waste.

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Chapter 19. Achieving Habitable Premises

CHAPTER 19

Achieving Habitable Premises

    EVICTIONS—ACTUAL AND OTHERWISE

When a landlord and a tenant enter into a lease, the landlord promises that neither she nor anyone else claiming through her will interfere with the tenant’s lawful possession. This promise, implied in all leases, is called the covenant of quiet enjoyment. The promise arises either from the written words of the lease—demise, let, lease, used as verbs—or in oral leases, from the relationship of landlord and tenant. In a related doctrine, a landlord’s actually or constructively evicting a tenant absolves the tenant of his obligations under the lease, including the duty to pay rent.

(a)    Actual Eviction

The landlord’s total actual eviction of the tenant from the leased premises occurs when the landlord excludes or locks the tenant out of the premises. A padlock on the door to an apartment is sufficient for this purpose. Wrongful actual eviction breaches the covenant of quiet enjoyment. The tenant’s obligation to pay rent ends upon eviction and the tenant may sue for damages. An actual eviction may be a partial actual eviction as well, where the landlord renovates the property and makes some of the leased premises part of a common area of a multiunit property, such as a hallway or lobby. Even occupying a de minimis amount of the leased premises in this way may give rise to a partial actual eviction. In some jurisdictions, a tenant is completely relieved of rent liability for a partial actual eviction even if the tenant continues to use the rest of the premises. In other states, the remedy for a partial actual eviction is a partial abatement of the rent if the tenant continues using the premises.

(b)    Partial Actual Eviction

A partial actual eviction occurs when a landlord or her agent takes over part of the premises and denies the tenant use of a portion of the premises crucial to use of the whole. The underlying rationale for an actual partial eviction is that, absent some agreement to the contrary, the landlord conveyed the exclusive use of the demised premises to the tenant for the term and may not evict the tenant from any portion of the premises during the term.

  Because the landlord is not permitted to apportion his wrong, courts have said that in this situation, there has been a total failure of consideration for the lease and, after providing the landlord with notice and a reasonable time to restore the premises to the tenant, the tenant is entitled to vacate the premises and is, in some jurisdictions, relieved entirely of the obligation to pay the rent. See Fifth Ave. Bldg. Corp. v. Kernochan, 117 N.E. 579 (N.Y. 1917) (Cardozo, J.) (denial of safekeeping area for jewelry store when safe was found to be under public sidewalk in the store’s basement); Smith v. McEnany, 48 N.E. 781 (Mass. 1897) (Holmes, J.) (holding that an encroaching wall, making it impossible for dray wagons to deliver goods to retail premises, was such an eviction); Barash v. Pennsylvania Terminal Real Estate Group, 256 N.E.2d 707, 709 (N.Y. 1970) (attorney denied right to work weekends because landlord would not heat or air condition a sealed office building). While useful to commercial tenants, partial actual eviction has not been of much help to residential tenants denied habitable premises.

(c)    Constructive Eviction

Constructive eviction occurs when the landlord so substantially interferes with the tenant’s use and enjoyment, or causes or allows inhospitable conditions to persist that it is tantamount to an actual eviction. In that case, the tenant is justified in vacating the premises, even though the landlord’s actions or inactions fall short of being an actual eviction. When, because of a landlord’s acts or failure to act when the landlord has a duty to act, the leased premises are rendered unfit for habitation, in whole or in substantial part, the tenant may elect to vacate after giving the landlord notice of the disturbance and a reasonable opportunity to cure.

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Chapter 20. Premises Liability of Landlords

CHAPTER 20

Premises Liability of Landlords

    PREMISES LIABILITY

Premises liability—the liability of landlords for injuries to tenants and nontenants—has undergone a major transition in the past century. Currently, the states’ approaches to premises liability fall into three distinct camps.

(a)    Landlord Liable for Injuries in Specific Situations

The majority of states fall into the first camp, which began with the old common law concept that the landlord’s liability ended once the landlord delivered the premises to the tenant. It became the tenant’s duty to keep the premises in repair. See Borders v. Rosenberry, 532 P.2d 1366 (Kan. 1975). The following exceptions to the general rule, however, have often become more important than the general rule.

(1)    Latent Defects

The landlord must disclose latent defects where there is an unreasonable risk of physical harm present on the premises if the risk is known to the landlord but unknown to the tenant on the first day of the lease. (Some courts use the execution of the lease as the relevant date, and in most cases the different time frame is a matter of dicta.) Once the landlord discloses the defect to the tenant—either before, at, or after delivery to the tenant—the landlord’s responsibility to the tenant and invitees ends.

(2)    Prior Conditions Dangerous to Persons Off Premises

The second exception is for a landlord who transfers possession with the knowledge that there is a condition on the premises dangerous to persons off premises. This is a duty imposed on landlords on the first day of the lease. Typically, the landlord is liable for nuisances on the premises at the start of the lease. If the landlord was liable before the transfer, liability should remain and not be avoided just because of the transfer, even if the tenant is also aware of the dangerous condition.

(3)    Leases for Public Use

Third, when the premises are transferred for a public use known to the landlord, the landlord has a duty to inspect and repair the premises in light of that contemplated use. A single-family residence would not be subject to this exception, but commercial premises, such as restaurants, theaters, and retail stores, typically are. If the landlord knows that the public will be admitted to the leased premises, the landlord is responsible for conditions that might foreseeably cause injury even if the tenant is aware of the condition and may be jointly liable.

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Chapter 18. Termination and Abandonment of the Lease

CHAPTER 18

Termination and Abandonment of the Lease

Either the landlord or the tenant may wish to terminate the lease prematurely. The landlord may tire of the tenant’s complaints, or the tenant’s rent may be in arrears. The tenant may need or want to move elsewhere. We have already discussed one option open to the tenant—that is, to assign or sublet the premises to a third party. See Chapter 16, supra.

  This chapter addresses two situations. In the first, the landlord wants to evict the tenant for some reason, often for nonpayment of rent, or the tenant has not vacated the premises after the lease ended. In the second, the tenant wants to turn the leased premises back to the landlord before the lease ends.

    LANDLORD’S EVICTION OF TENANT IN DEFAULT

A landlord may want to evict a tenant who defaults on a lease covenant, normally for nonpayment of rent, but maybe for violating some other lease term, such as being too rowdy, having unauthorized pets, or engaging in an illegal activity. Alternatively, the tenant may be a holdover tenant who remains on the premises after the lease ends. The landlord has various options for evicting a tenant in default. We begin with self-help.

    SELF-HELP

Eviction by self-help takes place when the landlord evicts the defaulting tenant without resort to the judicial process. At one time in England, a landlord could use reasonable force to evict a tenant. No more. First, and most importantly, in no American jurisdiction is a landlord authorized to use excessive force to regain possession of leased premises, no matter what the landlord’s rights are under the lease. A few states still allow reasonable force, but not many.

  In a majority of states today, a landlord can still resort to self-help for retaking possession of the premises if (a) the landlord has a right to repossess the leased premises; and (b) the landlord’s exercise of the remedy is peaceable. As liberating as self-help may sound to a landlord, do not become too enamored with it. While self-help is still the rule in a majority of American jurisdictions, the trend is to restrict it, and a growing number of jurisdictions prohibit self-help altogether.

  Where self-help without excessive force is permitted, the landlord must have a right to repossess the premises. Otherwise, the tenant has the legal right to possession and any eviction, actual or constructive, is wrongful, subjecting the landlord to liability for trespass and interference with the tenant’s quiet enjoyment of the premises. It may also subject the landlord to criminal prosecution for disturbing the peace, breaking and entering, and so forth. The landlord would have a right to possession if the tenant breaches any lease covenant and does not remedy the breach within a reasonable time after notice.

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Chapter 21. The Sales Contract

CHAPTER 21

The Sales Contract

    INTRODUCTION

This chapter concerns the purchase and sale of real property. An owner wishing to sell real property typically places it on the market by listing the property with a real estate broker. The broker is typically the potential seller’s agent and the broker’s employment agreement is known as a listing agreement. In practice, most sellers enter into these agreements without involving an attorney. Purchasers also often contact a broker to locate suitable property and they may also contract for the broker’s services.

  Once brought together, sellers and potential purchasers negotiate the terms of the sale, often through real estate brokers. The purchasers may conduct studies related to the suitability of the land for their needs. Assuming the parties agree on such matters as the sale price, the parties enter into a contract of purchase and sale, sometimes known as an earnest money or deposit contract, or other such name. Both seller and purchaser incur enforceable obligations when it is executed.

  From the date the buyer and seller execute a sales contract to the date their transaction is completed (or “closed”), legal disputes may arise concerning the performance of the contract. Because between these two dates the contract is executory (meaning that it is in the process of being performed by the parties), the period of time between the two dates is known as the executory period.

  Because of the importance of the contract, each party should be represented by an attorney before signing it. In most residential sales, however, the parties rely instead on a pre-printed, standard form contract supplied by the seller’s broker. The blanks on the form identify the parties, set the sale price or at least a method to determine the sale price, describe the property to be conveyed, include language that the seller will convey and the purchaser will acquire the property, set the closing date, delineate the manner of payment including cash and seller-financing, and acknowledge receipt of the deposit, down payment, or earnest money. Filling in these blanks is incidental to the broker’s business, and so is not the unauthorized practice of law. Brokers often supply a form that contains a provision detailing the amount of the sales commission payable to the broker from the deposit. Additional pre-printed terms in the typical form contract concern the remedies—specific performance, damages, or rescission—that each party has on the other’s breach. The parties may insert other conditions, such as making the sale contingent on the purchaser’s obtaining financing, having the land rezoned, or selling an existing residence.

    CLOSING

After entering into the sales contract, the buyer may inspect the property, review title documents, survey the property, and secure loan commitments. The seller may need to correct any title imperfections or repair the property. Based on what’s found about these matters, one of the parties may decide not to complete or close the transaction.

  At closing, then, the parties complete their transaction. The seller transfers the property to the purchaser by deed of some type. The seller might also assign all contracts, leases, and personal property on the premises to the buyer. The buyer will pay the seller cash or execute a note to the seller (or a combination of the two). The closing agent will prorate (allocate) the current year’s taxes, insurance, and other items between the seller and the purchaser. If the purchaser borrows money to purchase the property, the buyer and the seller must execute documents to satisfy the lender’s pre-closing conditions, so that the title and the loan can be closed, in that order, on the same day.

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Chapter 22. Executory Period Issues

CHAPTER 22

Executory Period Issues

    INTRODUCTION

Not all sales contracts are closed. The contract itself may condition the parties’ obligation to close. A party’s failure to satisfy a sales contract condition allows the other party to rescind the contract without liability, and in some cases allows the party not meeting the condition to rescind. For example, a clause may allow the buyer to rescind the contract after consulting with an attorney. A common condition, known as the “subject to financing” clause, conditions the buyer’s obligation to close on securing a loan commitment under suitable terms, including the amount, repayment schedule, and maximum interest rate. Those terms that are “suitable” are often included in the contract: a maximum interest rate, minimum term for the loan, and maximum monthly payment are often included. Implied in this clause is the buyer’s obligation to make a reasonable effort to obtain a commitment. Other clauses may condition the closing on the buyers’ selling their current residence, on a third-party inspection of the property, on its rezoning, on an appraisal or other report (e.g., a termite inspection report), or on the seller’s removing a mortgage or other lien from its title.

    MARKETABLE TITLE

(a)    Definition of Marketable Title

Title to a property constitutes all the elements or attributes constituting ownership. However, a buyer wishes to know, before closing, that he is obtaining a useful title. To this end, unless the sales contract specifically stipulates a different standard, every land sales contract contains an implied condition that the seller will convey “marketable title” to the buyer.

  Marketable or merchantable title, while allowing for the possibility that the buyer’s title might be successfully challenged, is a title secure enough that a reasonable person knowing all the facts would accept and pay for it. It is a title free from reasonable doubt as to its validity and reasonably free of the prospect of litigation. Thus a title is unmarketable if there is a reasonable probability the seller does not own the title alleged, the property is subject to an undisclosed encumbrance, or the buyer bears an unreasonable risk he would be subject to litigation related to it in its current condition. A buyer, in other words, is not required to take unreasonable risks or to “buy a lawsuit.”

  Unless the seller cures all defects before the closing, a purchaser offered an unmarketable title can refuse to close and can rescind the contract. If a buyer intends to rescind a sales contract based on unmarketable title, he must rescind before closing. If closing occurs, courts hold the title required by the sales contract merged with the title taken in the deed; the buyer is thereafter limited to rights flowing from the warranties of title included in the deed. This doctrine of merger does not, however, apply to contract promises concerning the physical condition of the property. These are promises regarded as collateral to the conveyance of the title, and are not merged into the deed.

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Chapter 23. Real Estate Closings

CHAPTER 23

Real Estate Closings

    THE CLOSING OR SETTLEMENT PROCESS

A seller or grantor usually transfers title to property to the buyer or grantee at a closing or a settlement. Typically at closing, a mortgage lender or other financial institution loans the buyer money to complete the purchase, the buyer pays the seller, and the parties sign a series of documents required by the sales contract, the lender, or applicable law.

  The conduct of a residential closing differs by region. In the eastern, southeastern, and mid-western United States, the parties meet face to face and, in the presence of a representative of the lender, exchange the purchase money for the deed. Then the buyer executes a mortgage for the portion of the purchase money funded by the loan. In the inter-mountain and western states, the closing is handled “in escrow” by a closing agent who disburses the money and the deed when all pre-conditions to their disbursal to the seller and buyer are met; here the parties to the contract execute it but never meet thereafter. When they receive whatever documents are required to close, they execute them and send them back to the agent for distribution.

  No matter the region, sales of commercial properties are often conducted using an escrow of some type, sometimes with a title company arranging the mechanics of the closing, supervised by the attorneys for the parties.

  Whether the transfer is a sale or gift, sellers transfer their interests in property by a deed. The deed must be in writing to satisfy the Statute of Frauds, and must contain (a) the grantor’s name, (b) the grantee’s name, (c) words that indicate an intent to convey the property or an interest in the property (the “words of grant”), and (d) the interest being transferred (though a fee simple will be assumed by statute in most jurisdictions unless a lesser interest is stipulated). These elements of the deed are typically known as the “premises.” It is followed by a description or identification of the property.

  The legal description of the property is followed by what is known as the deed’s “habendum clause.” It typically starts with the phrase “To have and to hold” or “Together with.” Here the deed recites any covenants, conditions, easements, equitable servitudes, leases, mineral rights, or other private encumbrances burdening the property. If the grantee is to assume a mortgage or take the property subject to a debt, that too is listed. Often a general reference, such as “subject to all restrictions of record,” is adequate to subject the grantee to all restrictions found in the official deed records. The habendum usually contains the grantor’s warranties of title.

  Finally, at the deed’s end, comes the grantor’s signature. The deed is a conveyance, not a contract, so only the grantor need sign it. However, when it contains promises by the grantee (say, to not use the property for commercial purposes), it is customary in some regions to have the grantee sign as well. [1]

[1]   Some jurisdictions do not require grantees to sign even when the deed binds the grantee to honor covenants, conditions, easements, or other encumbrances included in the deed, or the grantee in the deed agrees to assume or take the property subject to a mortgage. The rationale is that, by accepting the deed’s benefits, the grantee accepts all the obligations in it as well.

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Chapter 24. Post-Closing Title Assurances

CHAPTER 24

Post-Closing Title Assurances

    MERGER DOCTRINE

The sales contract controls the relationship between the buyer and seller during the executory period, but traditionally, the contract’s provisions are no longer enforceable after closing: The contract’s provisions for the transfer of title are said to merge into the deed (now the parties might more appropriately be called grantor and grantee) and the buyer’s rights were limited to those warranties or covenants contained in the deed or other document transferring the title. Warranties are the grantor’s promises either that certain facts are true as of closing, or that the grantor will remedy the problem or pay damages if a third party successfully asserts an undisclosed encumbrance on the title to the property.

  Promises in the sales contract that do not pertain to title or are not normally found in a deed are said to be collateral agreements. They are not merged into the deed and are not subject to the doctrine of merger. They may, for example, pertain to the physical condition of the property, enabling a buyer to resort to the sales contract’s provisions to remedy a seller’s fraud. Alternatively, the sales contract itself may provide expressly that a sales contract provision will survive closing.

    TYPES OF DEEDS

Three types of deeds affecting warranties of title are used in this country: the “general” warranty deed, the “special” warranty deed, and the quitclaim deed. Under the general warranty deed, the grantor warrants against all defects and encumbrances in title excluding those specifically excepted in the deed itself, no matter whether he or a predecessor in title created the defect or whether the seller even knows of the defect. The grantor in a special warranty deed also warrants against defects in title, but the grantor limits his or her warranty to those defects or encumbrances that are attributable to some act of the grantor: The grantor makes no warranties about defects or encumbrances created before he took title. The grantor may refer to any pre-existing defect and encumbrance in the deed, but these representations will not make the grantor liable for them or for other unlisted pre-existing defects or encumbrances.

    Example:

A two decades ago granted Company, Inc., a pipeline easement over Blackacre. A conveys Blackacre to B, the deed mentioning the easement. B conveys Blackacre to C without mentioning the easement. C then conveys to D, who conveys to E, all without mentioning the easement. Finally, E conveys Blackacre to F by warranty deed. One year later Company notifies F of its plans to dig up the land to place pipes in the easement. If the warranty deed from E to F were a general warranty deed, E would be liable to F for damages. On the other hand, E would not be liable to F if the deed were a special warranty deed since E did not create or grant the easement.

  The quitclaim deed contains no warranties. The grantor conveys whatever interest he or she owns, but the grantor does not even warrant he or she has title. In the above example, E would not be liable to F for any defect in title if the transfer was by quitclaim deed. You can recognize a quitclaim deed easily enough because the deed uses the word “quitclaim” or another verb conveying the property that indicates the transfer is without warranties. Quitclaim deeds are especially useful in transfers between family members, short-term ownership situations, and boundary dispute resolutions.

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