PROPERTY TOPIC OUTLINE 1

Transcription

1 DAN WILSON'S OUTLINES PROPERTY TOPIC OUTLINE 1 My outlines are not intended to be definitive, comprehensive treatments of the various subjects. They are offered to show the thought processes of a successful bar study process. I ignore large swaths of material that is rarely or never tested. I focus on core concepts that are consistently tested and areas years of experience have shown are particularly challenging to students. The outlines are not intended as a substitute for commercial outlines. For example, commercial Property outlines explain in mind-numbing detail The Rule in Shelly's Case, The Doctrine of Worthier Title, and The Destructibility of Contingent Reminders. These rules are impossible for the modern mind to understand without extensive study of the Common Law. AND THEY ARE NEVER TESTED. So my Property outline addresses material which is always tested, such as present possessory interests and future interests. My outlines are not pretty. They have grown incrementally over the years. But if you master the material you will be well on your way to passing the bar. The outlines are offered free of charge. May they aid you in your endeavor! SUMMARY PROPERTY OUTLINE 1. FREEHOLD ESTATES AND ASSOCIATED FUTURE INTERESTS 2. RULE AGAINST PERPETUITIES 3. CONCURRENT ESTATES 4. EASEMENTS, PROFITS, LICENSES, EQUITABLE SERVITUDES, COVENANTS THAT RUN WITH THE LAND 5. ADVERSE POSSESSION 6. CONVEYANCING 7. LANDLORD/TENANT 8. ADDENDUM: MORE ON MORTGAGES 1. PRESENT FREEHOLD ESTATES AND ASSOCIATED FUTURE INTERESTS a. Freeholds estates are measured by extent. This means in time, not size of the estate. What is the present possessory estate, 1 This outline is copyrighted by Daniel J. Wilson Revised Revised This material is drawn from released MBE questions, released Colorado essays, various commercial outlines and Professor Lucy Marsh, University of Denver College of Law. Permission is freely given to use this outline to prepare for the bar exam. 1

2 what words create it, what is the associated future interest or interests and who owns it. b. EXCEPT FOR THE FEE SIMPLE ABSOLUTE THE ESTATE IS DIVIDED INTO THE PRESENT POSSESSORY ESTATE AND THE FUTURE INTEREST. THESE INTERESTS CAN BE CONVEYED, BEQUEATHED AND INHERITED. Future interest is a present ownership right, that the holder owns now. He does not have a present right to possess. c. Common law presumption. "To A", created a life estate. Had to say "To A and his heirs" to transfer Fee Simple. "And his heirs" are words of limitation, not words of purchase. Presumption today is reversed. "To A" transfers a Fee Simple. d. Fee Simple Absolute. The largest estate because it is of infinite duration. No future interest. e. Fee Tail. Obsolete. Forget it. f. Life Estate. O grants Blackacre to A for life, or to A for life and then to B. Future interest is reversion in O or remainder in B. Reversion is vested. Remainder can be vested or contingent. See discussion of RAP below. i. Life Estate can be measured by third party's life. Ex: To a for the life of B. ii Waste--three kinds. a. Affirmative or voluntary waste. Life tenant cannot consume natural resources except for necessary for repair and maintenance, or to work an existing mine. b. Permissive waste. Tenant has duty to keep structures in reasonable repair, pay interest on mortgage and taxes. c. Ameliorative waste. Changes to the land that increase value. d. Holder of reversion or remainder is entitled to receive land in same condition that life tenant takes it. Exception is if conditions in the neighborhood have changed so much that it does not make sense to maintain land in same condition. g. Fee Simple Determinable. Words of duration. O grants Bacre to A so long as no liquor is served. Future interest is the Possibility of Reverter in O. Possibility of Reverter is vested. Holder of future interest takes automatically. 2

3 h. Fee Simple Subject to Condition Subsequent. Words of event. O grants Bacre to A for school purposes, but if A ceases to use Bacre for school purposes Bacre will revert to O. Future interest is the Right of Reentry. Right of Reentry is vested, and holder must assert right to take possession. i. Fee Simple Subject to Executory Interest. Words that cut off the present possessory estate before its natural end and give Bacre to a third party. O grants Bacre to A, and then to B when he passes the bar. Future interest is an executory interest. It is contingent. 2. RULE AGAINST PERPETUITIES. a. Landowners wanted to control their land after they were dead. This value conflicts with the principle of free marketability of land. RAP is a compromise. It allows landowner to control the use of Bacre for about 90 years after his death. b. Rule: An interest MUST vest OR fail to vest within 21 years of the end of a life in being. i. The interest must be sure to either vest or fail--it does not matter which. ii. The word 'must' is strictly construed. If there is any theoretical possibility that will prevent the gift from vesting the rule is violated, hence the Unborn Widow and Fertile Octogenarian. iii. Life in being must have something to do with the gift. c. Does not apply to vested future interests. Reversion, Possibility of Reverter, and Right of Entry are all vested in the Grantor. Vested Remainder is vested in the remainderman. d. RAP only applies to contingent remainders, executory interests and right of first refusal in a deed. e. A remainder is contingent if either i. unascertained remainderperson, or ii. condition precedent f. RAP does not apply to remainders in a charity following interest in a charity. Ex: To Red Cross, but if Red Cross goes out of business, to Salvation Army. Red Cross has fee simple subject to executory limitation, Salvation Army has executory interest. Normally gift to Salvation Army would be subject to RAP. g. If gift violates RAP, the offending gift is stricken and the rest 3

4 remains. h. Statutory reforms: cy pres, wait and see, 90 years. 3. CONCURRENT ESTATES a. These are Freehold Estates b. Joint tenancy w/ right of survivorship. i. Each tenant has a 1/2 undivided interest in possession of the entire estate. ii. Four unities must be present. (1) time (2) title (3) possession (4) interest iii. C/L presumption was that a conveyance to two or more created joint tenancy w/ right of survivorship. Modern presumption is that conveyance is of tenancy in common. This means that very specific language must be used to iv. create a joint tenancy. Rights and duties of co-tenants (1) accounting (2) partition (3) ouster--when one tenant excludes the other. v. Conveyance by one joint tenant severs tenancy. Signing a contract to convey a tenant's interest probably severs a joint tenancy. Judgment lien on one tenant does not s sever. Mortgage does not sever in a lien theory state. vi. Right of survivorship means that interest passes outside of probate so will has no effect. A judgment lien against one tenant, which is not executed before that tenant's death, has no interest left to attach to. c. Tenancy in common i. only one unity--possession. d. Tenancy in entireties i. Joint tenancy between married couple. Abolished in Colorado and most states. e. Issues can arise when one tenant is in possession, other tenant not in possession, but there has been no ouster. i. TIP (tenant in possession) need not pay rent ii. need not account for profit from normal use of land 4

5 iii. TIP must account for rents from third parties or use that reduces value of land. iv. TIP may not get contribution for repairs but an accounting on partition. v. TIP cannot get contribution for improvements but can get an accounting on partition. vi. TIP can get contribution for mortgage and taxes. vii. TIP can be reimbursed for capital improvements only from increased rents. viii. Ouster is when TIP prevents other tenant from entering the land. Tenant not in possession can force partition and TIP must pay fair rental value. ix. Tenants owe each other duty of fair dealing. If one buys Blackacre at tax or mortgage sale must give other tenant reasonable time to pay his share. 4. EASEMENTS, PROFITS, COVENANTS AND SERVITUDES a. Introduction. Easements are a right to use someone else's property, as is a license or a profit. It the burden runs to successive grantees of the serviant estate and the benefit runs to successive grantees of the dominant estate we say the easement is appurtenant or runs with the land. Covenants and servitudes are a right to prevent someone else from using his land in a certain way. If the burden and the benefit runs to successive grantees we say the covenant or servitude runs with the land. b. Easement. How are they created, how are they destroyed, what is their scope. i. Four kinds. (1) Express. Must be in writing, parties must intend the easement to run with the land, and successive grantees must have notice. (2) Implied. Implied, so not in writing. Dominant and serviant estate must have been in common ownership, quasi-easement in place at time of severance, continued use of easement and reasonable necessity. (3) Necessity. Dominant and serviant estate in common ownership before severance, strict 5

6 necessity, i.e., landlocked. (4) Prescriptive. Similar to adverse possession. Use need not be exclusive. ii. Scope. Express, specified in deed. Implied, necessity prescriptive, extent of use. iii. Easements can be destroyed by merger, by agreement, destruction of serviant estate, abandonment, estoppel. iv. Remedy for overuse is injunction. v. Easements in gross--two kinds a. Personal easement, dies with grantor or grantee, does not run with the land. b. Utility easement. Does not benefit a dominant estate but is binding on successive grantees of serviant estate. c. License. Personal privilege to enter the land, revocable, may become irrevocable if licensee makes some sort of investment. d. License coupled with an interest is irrevocable. e. Profit is a license to enter the land and remove resources. f. Covenants that run with the land are restrictions on landowners right to use his land in some way. i. Requirements for covenant are: parties intend the covenant run with the land, successive grantees have notice, the covenant touches and concerns the land and sometimes horizontal and vertical privity. ii. Horizontal privity means that the covenanter and the covenantee must be in privity when the covenant is formed. This typically means that the owner of the benefited land owned both parcels before severance and the covenant is contained in the deed that severs and conveys the burdened estate. For the covenant to burden successive grantees of the burdened land there must be vertical privity. That means the grantee take the same estate (i.e., fee simple). iii. Remedy for breach is damages. g. Equitable Servitudes i. Very similar to a covenant that runs with the land. Parties must have intended servitude run with the land, servitude must touch and concern the land, subsequent grantees must have notice. 6

7 ii. Notice can be constructive (record notice), actual, or inquiry. iii. Implied reciprocal servitudes. Elements: Plat filed with county showing developer intended a coherent scheme which would impose covenants on all buyers; 1st developer builds out half the project, with each deed containing the covenants; 1st developer goes bankrupt and 2nd developer builds out rest of houses, but deeds do not have covenants. Issue? Are the buyers of the 2nd half bound by the covenants, even though they are not in their deeds? We say the buyers of the second half should be on notice that there might be implied reciprocal covenants. 5. ADVERSE POSSESSION a. Elements i. Open, notorious, continuous, statutory period, exclusive, hostile. Hostile, open and notorious seem to me to be facets of the same element, that is the possession must be such that the true owner would be aware of the possession if he was paying any attention to the land. Another way to say the same thing is the possession is non-permissive. If the true owner gives permission for the trespasser to be on the land, implied or express, the possession is not hostile. The possession must be uninterrupted. The possessor must exclude all others from the land. Hostile does not mean any sort of antagonism to the true owner, thus adverse possession is often accidental. b. Tacking. Sometimes two adverse possessors can possess in succession to meet the statutory period, but there must have been privity between them, such as a deed. c. Seasonal use. Possession is still continuous even if the possessor only possesses the land for the appropriate seasonal use, i.e., farmland or a summer cottage. d. Color of title. This issue rises when the possessor is only possessing a portion of Blackacre. Without color of title he is only adversely possessing that portion. Color of title means the possessor took with a deed, but the deed is ineffective for some reason. The possessor is then said to have constructive possession of the entire contiguous parcel. e. Notice. The possession is not hostile and notorious if the true 7

8 owner would not be on notice. f. Disabilities. Adverse possession is actually the running of a statute of limitations. The statute starts to run when the possession begins. If the true owner does not evict the trespasser within the statutory period he will be barred from doing so. The statute is tolled if the true owner is under age, insane or in jail. The statute starts to run when the true owner is no longer disabled. It is not tolled again if the true owner subsequently becomes disabled again. g. Future interest. An owner of a future interest cannot be adversely possessed against until his interest becomes a present possessory one. h. The title of the adverse possessor is not marketable until he brings a quiet title action. i. It is very difficult for a co-tenant to adversely possess against another, absent ouster or explicit declaration. j. Recording acts do not apply to adverse possession. That means a subsequent grantee, even though he takes without notice and for value, is not protected. 6. CONVEYANCING a. Statute of Frauds--contract. Transfer of an interest in land falls within the statute of frauds. The land sale contract must be in writing signed by the party to be charged and must adequately describe the land. The writing probably must also name the parties and price. i. part performance can bring the contract out of the statute. Part performance by the vendee means making payments, being on the land and making improvements. Remedy is specific performance but not damages. ii. Lease for more than a year falls within the SOF. Oral lease for more than a year becomes a periodic tenancy if there is part performance, i.e., paying rent. In some jurisdictions a term of years for one year is created, probably more likely if property is commercial. b. Equitable conversion means that in the period between contract formation and closing the vendee is the equitable owner. This is so because the vendee can specifically enforce the contract. In the absence of an explicit term the risk of loss if Blackacre burns down is on the vendee. If Blackacre is insured to the 8

9 benefit of the vendor the vendee will be credited to the extent of insurance proceeds. c. Marketable title i. Every contract for land has an implied covenant of marketable title. In short this means the buyer is not buying a lawsuit. Encumbrances such as mortgages, liens, covenants, easements and encroachments make a title unmarketable unless waived. Zoning restrictions do not, present zoning violation does. Building code violations do not make the title un-marketable. Title is marketable by record title. A title gained by adverse possession is not marketable until possessor brings quiet title action. ii. Title must be marketable at closing, but not during the gap period between contract formation and closing.. d. Unless expressly provided time is not of the essence. This means that even if either party breaches the contract by not being ready and able to close at the specified time, he can still get specific performance if he is able to perform within a reasonable time. He is still liable in damages for breach. If time is of the essence the party is in total breach and cannot enforce the contract. e. Remedies for breach are damages or specific performance. f. Property defects i. New construction. Majority rule is probably a warranty of fitness. ii. Used houses. Seller has a duty to disclose latent defects. If the defect is obvious the seller has a duty not to conceal or to engage in fraud. An "as is clause" is probably effective as to latent defects but not fraud or concealment. g. Deeds i. Must be in writing signed by grantor. It must adequately describe the land and name the grantor and the grantee. No consideration is necessary because a deed is not a contract. There must be present intent to convey. ii. iii. Accretion/avulsion happen when a boundary is a river. A slow change of the river bank is an accretion and the boundary line follows the river. A swift change is an avulsion and the boundary line does not change. Delivery/acceptance. The deed must be delivered. 9

10 iv. Recording a deed raises a presumption of delivery. Acceptance is assumed unless grantee expressly disclaims. Land may be dedicated to a public agency. Agency must accept by resolution or approval of a plat. v. General warranty deed. Most contracts call for a general warranty deed. If the buyer accepts a deed that is lacking the warranties the contract merges with the deed and the buyer loses his cause of action. (1) 3 present. Really only two, Covenant of Seisin and Covenant against Encumbrances. Statute of limitations starts to run at closing. (2) 2 future. Covenant of quiet enjoyment and Covenant of Warranty. Statute does not start until they have been violated. vi. Special warranty deed. Only applies the above covenants to problems that arose during the grantor's possession. vii. Only immediate grantee has cause of action. h. Mortgages. Create a security interest in the land. i. Mortgagor/mortgagee. Buyer is the mortgagor, lender is the mortgagee. ii. iii. iv. Equity of redemption. C/L origins. Not evidence of personal obligation, mortgage evidences right of foreclosure Due on sale clause accelerates the debt so mortgagor has to pay off the existing mortgage v. Subject to mortgage. Sometimes the mortgagee will allow the mortgagor to sell Blackacre without paying off the existing debt. If the new buyer takes subject to the mortgage the new buyer does not assume the indebtedness of the promissory note. If the new buyer assumes the personal indebtedness he assumes the mortgage vi. vii. Lien theory/title theory. In a lien theory jurisdiction a mortgage does not transfer title, it merely creates a lien on the land. In a title theory jurisdiction a mortgage transfers title. Mortgage follows the note 10

11 viii. ix. Attempt to transfer mortgage w/out the note is void Installment contracts. Also called land sale contracts. Deed is not transferred until last payment is made. In principle the buyer could lose all equity if he misses one payment. Courts treat it as though they have an equity of redemption. x. Foreclosure. When the mortgagee is in default the mortgagor may foreclose, gain possession, sell Blackacre, and if the sale price is less than the debt may pursue an action for the deficiency. If there is more than one mortgage, foreclosure destroys the interests of junior liens but does not affect senior mortgages. i. Recording Acts. Protect subsequent good faith purchaser. Do not protect donees. i. Notice. Subsequent BFP prevails over prior grantee if BFP had no actual or constructive notice ii. Race-notice. Subsequent BFP prevails if BFP had no notice and records first iii. Race. Subsequent grantee prevails if records first iv. Shelter rule. Subsequent donee is protected by the status of his transferor. v. Mortgagees are purchasers for purposes of recording vi. vii. acts. Judgment liens are not. Notice. Actual, record, inquiry. Grantor--grantee index. Give example. Subsequent bona-fide purchaser for value does NOT prevail against adverse possession title because there was no document to record, even if land is vacant at time of subsequent purchase. j. An option contract for sale of land must be in writing, describe land and be signed by party to be charged. 7. LANDLORD-TENANT a. BarBri and Emanuals both think this is a freehold estate. I disagree. In the C/L a tenant did not have seisin, was not subject to feudal duties, did not have a freehold estate. Its not important anymore. We say that the landlord has a reversionary interest at the end of the lease. In C/L the covenants to pay rent and to give the land were independent. 11

12 That meant that the tenant's duty to pay rent was not relieved by Landlord's breach. Modern trend is a K theory, which means the duty to pay rent was a dependent promise on landlord's duty to deliver premises. b. Tenancies i. Tenancy for years. A tenancy with a definite start and end. Terminates automatically. No notice necessary. ii. Periodic tenancy. Tenancy which renews automatically at the end of each period. Often created by inference, by a void lease or a holdover tenant. It is terminated by notice of landlord or tenant. Notice is the period, except for a one year period, in which case it is six months. iii. Tenancy at will. No stated duration. Terminable at any time without notice. Terminates at death of landlord or conveyance of property. Your brother in law living in your garage. iv. Tenancy at sufferance. Created by holdover of a tenant for years. Landlord has the option of eviction or of accepting rent, in which latter case tenancy becomes periodic, in my opinion. Outlines differ. Some say that if the lease is commercial the new lease is a term of years. c. A lease is not a transfer of an interest in land for SOF purposes. A lease of more than one year must be in writing. An oral lease becomes a periodic tenancy if T tenders and LL accepts rent payments. d. Tenant's rights and duties. Right of Possession and Quiet Enjoyment. Duty to pay rent and behave reasonably. e. Landlord's duties. Give actual possession. Not negligently repair. f. Constructive eviction. If actions by Landlord interfere with use and enjoyment of the property to such an extent as to amount to constructive eviction Tenant may declare lease at an end. Tenant must leave. g. Condition of Premises. In general no C/L duty on part of Landlord. Colorado recently joined states such as Cali and NY in creating by statute a warranty of habitability. Probably still minority rule. h. Landlord is responsible for areas under Landlord control, such as common areas. 12

13 i. Landlord remedies. Most leases have an acceleration clause whereby if Tenant violates one of the covenants of the lease Landlord can declare the entire amount due. Landlord may pursue the expedited remedy of forcible detainer and may also seek damages. Landlord has a duty to mitigate loss by reletting. j. Partial eviction. Tenant can continue to possess part of land and not pay any rent. k. Assignment and subletting. i. Assignment is the transfer of T1's entire interest. T2 is in privity of estate w/ landlord and is bound by the covenants that run with the land between L and T1. L may evict and seek damages. L also has cause of action against T1. T1 is bound by no-assignment clause. No-assignment clause runs w/ the land. ii. In the absence of a no-assignment clause T is free to assign. Same w/ sublease. iii. A sublease is a transfer of less than entire interest. T1 retains a reversionary interest. T2 is not in privity of contract or estate w/ Landlord. Sublessee not bound by no-assignment clause or other covenants that run with the land. iv. No-assignment clause does not bar sublease, nosubleasing clause does not bar assignment. 8. ADDENDUM: MORE ON MORTGAGES INTRODUCTION l. Mortgages are the mechanism by which a security interest in real property is created. Colorado is a Deed of Trust state, which is similar to a mortgage. Many of our current mortgage rules are the result on the interplay between law and equity. In the Common Law a mortgage was a conveyance of title, specifically a fee simple defeasable, either a fee simple subject to a condition subsequent or a fee simple determinable. If the buyer made all the required payments title to Blackacre would be reconveyed from the lender to the buyer. If the buyer missed even one payment he lost his chance to get Blackacre back and forfeited all his payments. 13

14 m. Disgruntled buyers/borrowers went to the equity court to ask for relief. The equity court created the equity of redemption, which is what we mean when we talk about a homeowner having equity in his house. If the buyer/borrower could come up with what he owed he was allowed to keep Blackacre. This created its own problem. The lender could never be sure that his title was secure because the buyer/borrower could always show up with the money. Hence, the courts developed the process of foreclosure, a process whereby a lender could foreclose the buyer/borrower's equity of redemption and gain clear title. n. In modern usage, foreclosure is by private or judicial sale. The buyer/borrower still has a redemption period after foreclosure, but it is limited by statute.2 o. Since this is all equity there is no jury. LAND SALE CONTRACT a. Ordinarily, the parties enter into a contract to buy and sell land before the deed is transferred. b. This contract falls within the Statute of Frauds, as does a contract to transfer any interest in land. An easement is a transfer of an interest in land; a lease is not. (Note that a lease for more than one year also falls within the Statute, but for a different reason.) i. The writing must identify the parties, the land and essential terms. I think price is the most important term. The writing must be signed by the party to be charged. The writing need not be the land sale contract. ii. The fact that the parties intended to execute a more formal writing later but failed to do so will not make an otherwise sufficient writing ineffective. iii. The contract can be taken out of the Statute by part performance if one party relied on the oral agreement. iv. If vendor has conveyed he can recover the contract price. v. Reliance by buyer can range from possession alone to possession, payments, improvements or change in position in reliance. The majority rule is possession, payments and improvements. 2 A year or two ago Colorado changed its foreclosure laws so the redemption period is before the foreclosure sale. The result is the foreclosure sale completely extinguishes the owner's interest in Blackacre. 14

15 vi. A party may use the other party's part performance to bring the contract out of the statute. vii. Modifications must generally also be in writing. Rescission need not be. viii. Option to buy land falls within the Statute. c. Time for performance i. The contract will specify the time for closing. ii. In a suit for money damages the time for performance will be of the essence and the party that tendered performance will be able to recover for interest on purchase price money or fair rental value of land. iii. In a suit in equity for specific performance time is generally not of the essence. iv. A specific provision in the contract that time is of the essence will generally be enforced, even if it means a forfeiture. d. Marketable Title i. A promise to convey marketable title is implied even if not specifically present in the contract, even in a quitclaim deed. ii. A marketable title is one which is free from reasonable doubt, which a reasonable person would be willing to and ought to accept. A title is not marketable if the buyer is buying a lawsuit. The marketability of the title must be apparent from the title record. Title must be marketable at closing. Thus, an existing mortgage which would ordinarily be an encumbrance which would make the title unmarketable can be paid off at closing. Title marketable by record. e. Gap i. During the gap between execution of the contract and closing the parties arrange financing, check the title, survey the land and inspect the land and buildings. Nowadays this probably should include an environmental survey. ii. Most contracts include a condition. The buyer is not obligated to perform if, after making reasonable efforts, he is unable to obtain financing. f. Closing i. Seller tenders deed, buyer tenders purchase price, existing mortgages are paid off. In order to have an action against a party who refuses to perform the non-breaching party must tender performance. 15

16 ii. Remedy for nonperformance is damages or specific performance. g. Equitable Conversion i. The problem arises in the gap between contract formation and closing. The seller is said to have legal title until closing while the buyer has equitable title. The seller is the equitable owner of the purchase price. ii. If vendor dies before closing his interest in Blackacre is personal property, not real property. Bene of gift of personal property is a legatee. Bene of real property is devisee. iii. If vendee dies before closing his interest in Blackacre is real property. If vendor dies before closing his interest is personal property. iv. The C/L rule is that risk of loss is on the vendee. Minority rule is that risk of loss is on party in possession. v. If there is insurance vendee is entitled to insurance payment and to close. MORTGAGES a. Generally the purchase price is a bank loan. The bank pays any existing mortgage and the remainder of the purchase price to the vendor. The bank then takes a mortgage to secure the loan. Or the seller may finance the purchase, called a purchase money mortgage. b. Borrower is the mortgagor. Lender is the mortgagee. A note always accompanies a mortgage. The note is the evidence of the borrower's personal indebtedness. c. Most mortgages have a due on sale clause, so must be paid off when the land is sold, usually out of the proceeds of a new loan. However, a buyer may take 'subject to' the existing mortgage. That means the new buyer is not personally liable for the debt. Or he may 'assume' the mortgage and be personally liable. d. Mortgages are often assigned. Assignment of mortgage without the note is void. If the note is transferred the mortgage follows. e. Title theory vs. Lien theory. In some states a mortgage is considered as transferring title. This would sever a joint tenancy. The other theory is that a mortgage is just a lien f. Foreclosure. Most common is by public sale. Mortgages and other lienholders are paid off in order of seniority and any left over is 16

17 given to borrower. If there is a deficiency the borrower is personally liable because of the note. g. Public sale. Supervised by the court and conducted by the sheriff. Private sale. Deed of Trust states (including Colorado.) If buyer defaults Public Trustee can sell land without a court order. Trustee must use good faith and due diligence to get the best price to protect the borrower from a deficiency judgment and his possible equity. h. Strict foreclosure. Lender takes property as full satisfaction of debt and borrower gives up equity. i. Installment contract does not give buyer title until entire price paid. Courts treat it as a mortgage for purposes of foreclosure and equity. j. Even today a security interest may be created by an outright transfer. Then a court must decide if the transfer was intended to create a security interest or transfer ownership. In equity, a grantor may show that a deed, absolute on its face, was intended only to be security for the payment of the debt and thus was in actuality truly a mortgage. The burden of proving that the transaction was truly a mortgage rests upon the grantor. The burden may be met only by clear and convincing evidence. When a vendor, at the time of a sale, is indebted to a purchaser, and continues to be indebted after the sale, with the right to call for a reconveyance upon payment of the debt, a deed absolute on its face will be considered in a court of equity a mortgage. k. If there is more than one mortgage, foreclosure destroys the interests of junior liens but does not affect senior mortgages. 17