Property A. PRESENT POSSESSORY PROPERTY INTERESTS The most extensive estate permitted by law.

Transcription

1 Property I. ESTATES A. PRESENT POSSESSORY PROPERTY INTERESTS 1. Fee Simple Absolute a. Definition The most extensive estate permitted by law. b. The term "fee" connotes that the estate has been inherited. c. The term "simple" connotes that there are no limitations on the estate regarding inheritance. d. A fee simple absolute has a potentially infinite duration. e. Under common law, the technical word of "and her heirs" is required to create a fee simple absolute. 2. Fee Simple Subject to Executory Interest

2 a. Definition An estate that automatically divests to a third party if a specified event occurs. b. Springing Executory Interest A springing executory interest describes an estate that cuts the grantor's estate short. (1) Example: Owner transfers Blackacre "to Arnold for life and then to Cameron 45 days after Arnold's death." Here, Owner has granted a life estate to Arnold that is followed by a reversion to Owner for 45 days. The possessory interest to Blackacre then "springs" to Cameron. 1 c. Shifting Executory Interest A shifting executory interest describes an estate that cuts short another grantee's estate. (1) Example: Owner transfers Blackacre "to Arnold and his heirs but if Arnold does not finish law school to Bonnie and her heirs." Arnold is a grantee and Arnold's interest in Blackacre will be cut short if Arnold does 1 Thomas F. Bergin & Paul G. Haskell, Preface to Estates in Land and Future Interests 80 (2d ed. 1984).

3 not finish law school. However, title to Blackacre shifts to Bonnie, who is another grantee, if Arnold does not finish law school. Thus, Bonnie enjoys a shifting executory interest Fee Simple Subject to Condition Subsequent a. Definition An estate that may be terminated by the grantor upon the occurrence of a specified event. b. The grantor retains the right of reentry. c. The grantee's estate continues until the grantor exercises her right to reenter. d. Usually signified by the use of such phrases as "but if", "on condition that", and "provided that" Fee Simple Determinable a. Definition 2 Id. 3 Id.

4 A fee simple estate that terminates automatically when a specified event occurs. b. Created by the use of language, such as "during", "until", "while", and "for so long as" Fee Tail A fee tail limits the inheritance of real property to linear descendants of the grantee. a. Lineal heirs are daughters, sons, grandchildren, and great grandchildren. b. Created by the words "to A and the heirs of her body." 5 6. Trust a. Definition A trust is a legal term that describes when a trustee holds the title to property for the benefit of a third party called a beneficiary. b. Settlor 4 Id.

5 The settlor is the party that creates the trust. (1) The settlor must own the property of the trust when the trust is formed. (2) The settlor must have the intent for the trust to be in force immediately after the creation of the trust. c. Res The res is the subject matter of the trust. (1) Trust res must exist for a trust to exist. d. Trustee The trustee possesses legal title to the property of the trust. (1) The trustee has a fiduciary duty to the beneficiary of the trust. (2) The trustee must act in accordance with the directions of the settlor. e. Beneficiary 5 John E. Cribbet, Principles of the Law of Property 47 (2d ed. 1975).

6 The beneficiary is the party for whom the trust is formed. 6 (1) A class of parties may be the beneficiaries of the trust (e.g. all of Andy's heirs). However, the class must be clearly defined and comply with the Rule Against Perpetuities. 7. Life Estate a. Definition An estate measured by the lifespan of a human being. (1) A life estate pur autre vie is an estate measured by the lifespan of another party besides the grantee. B. FUTURE INTERESTS IN PROPERTY 1. Remainders a. Definition 6 Tony Honore, The South African Law of Trusts sections 1-2, at 1-3 (3d ed. 1985).

7 A remainder is a future interest in an estate that becomes effective only after the natural termination of the preceding estate. (1) A remainder must be created simultaneously and with the same instrument that supports the preceding estate. (2) A remainder may never follow an estate that has a potentially infinite duration. (3) Under common law, fee tails and life estates are the only estates that can support a remainder. Thus, when you see a life estate on the MBE, the following estate is most likely a remainder. (a) Example: Amy conveys Blackacre to Billy for life and then to Carole. Amy granted a life estate to Billy and Carole enjoys a vested remainder interest in Blackacre that becomes effective after the natural termination of Billy's estate. 7 (4) A remainder may only become effective when the preceding estate comes to a natural conclusion and may not cut short the duration of the preceding estate. 7 John Chipman Gray, The Rule Against Perpetuities 66 (1886).

8 b. A contingent remainder is a remainder that is subject to a condition precedent or possessed by unascertainable parties. (1) A contingent remainder is subject to the Rule Against Perpetuities. (2) Example: Amy leaves Blackacre "to Barry for life, and then, if Carole has graduated law school before Barry dies, to Carole." Carole enjoys a contingent remainder interest in Blackacre. (3) Under common law, if a contingent remainder does not vest prior to or upon termination of the preceding estate, the contingent remainder is destroyed. (a) Example: Amy conveyed Blackacre "to Bonnie for life and then to Carl." If Carl dies before Bonnie's life estate terminates then Carl's contingent remainder is destroyed and Blackacre reverts back to Amy and her heirs. (4) A merger may also destroy a contingent remainder. (a) Example: Amy owns Blackacre in fee simple and conveys Blackacre "to Bonnie for life." Amy subsequently conveys her reversionary interest in Blackacre to Bonnie. Bonnie would enjoy a fee simple interest in Blackacre because Amy's conveyance of her reversionary

9 interest would cause a merger of Bonnie's life estate and Amy's reversionary interest. Thus, the contingent remainder would be destroyed and Bonnie would enjoy a fee simple interest in Blackacre. c. A vested remainder is a remainder that is not subject to a condition precedent. (1) Example: Amy leaves Blackacre "to Barry for life and then to Carole." Carole enjoys a vested remainder interest in Blackacre. d. A vested remainder subject to open is a remainder that is given to a class of people. (1) Example: "to Amy for life, and then equally to all of Bonnie's children." e. A vested remainder subject to complete divestment is a remainder that is conveyed to an ascertained party and is capable of complete elimination if a condition subsequent transpires. (1) Example: Amy conveys Blackacre "to Barry for life, remainder to Carole and her heirs, but if Carole does not finish medical school, to Dan." Carole enjoys a vested remainder that is subject to complete divestment if Carole does not finish medical school. 8 8 Thomas F. Bergin & Paul G. Haskell, Preface to Estates in Land and Future Interests 73 (2d ed. 1984).

10 2. Executory Interests a. Definition An executory interest is a future interest in real property possessed by a party other than the transferor that is not a remainder. (1) A springing executory interest divests a transferor's estate or follows an interval in time from the termination of the preceding estate. (a) Example: Amy transfers Blackacre "to Barry for life, and to Charlie 45 days after Barry's death." Barry enjoys a life estate, Charlie enjoys a springing executory interest, and Amy enjoys a reversionary interest in Blackacre. Charlie's interest springs out of Barry's possession and does not become effective until 45 days after Barry's death. Thus, Charlie's interest is not a remainder because Charlie's interest does not become effective upon the natural termination of Barry's estate and follows an interval of time from the expiration of Barry's estate. Consequently, Charlie enjoys a springing executory interest. (2) A shifting executory interest divests the interest of a transferee.

11 (a) Example: Amy conveys Blackacre "to Barry for life, then to Charlie and his heirs but if Charlie marries before Barry, to Darlene and her heirs." Darlene enjoys a shifting executory interest in Blackacre because Darlene's interest cuts short Charlie's interest in Blackacre Rule Against Restraints on Alienation a. Restraint on Alienation A restraint on alienation is a restriction of a grantee's ability to transfer legal interest in real property. b. Valid Restraints (1) A restraint for a reasonable time on a co-tenant's right to partition. (2) Promissory and forfeiture restraints on life estates. (3) A forfeiture restraint on a future interest. 4. Rule Against Perpetuities a. Definition 9 Thomas F. Bergin & Paul G. Haskell, Preface to Estates in Land and Future Interests 80 (2d ed. 1984).

12 The Rule Against Perpetuities holds that an interest in real property is invalid if the interest does not vest within 21 years after some life in being at the time of the creation of the interest. b. Interests subject to the Rule include: (1) Executory interests; (2) Vested remainders subject to open to a class of beneficiaries; and (3) Contingent remainders. c. Interests not subject to the Rule include: (1) Vest remainders unless if the interest is a vested remainder subject to open to a class of beneficiaries; (2) Reversions; and (3) Present possessory interests. 10 C. CONCURRENT ESTATES IN LAND

13 1. Tenancy by the Entirety a. Definition A tenancy by the entirety occurs when a single instrument conveys real property to a husband and wife. b. A right of survivorship exists when a tenancy by the entirety is created. (1) A right of survivorship describes when the surviving tenant takes the entire estate and the heirs of the decedent are not entitled to inherit a portion of the estate. c. A right to partition does not exist. d. A tenancy by the entirety may be terminated by divorce, the death of a spouse or execution by a joint creditor of both spouses. 2. Joint Tenancy a. Definition 10 Richard A. Posner, Economic Analysis of Law section 18.7, at 394 (2d ed. 1977).

14 A joint tenancy exists when each tenant owns an undivided interest in the entire estate and each tenant enjoys a right of survivorship. b. Four Unities Four unities are required to create a joint tenancy. (1) Unity of title; the joint tenants' interests must be obtained by the same instrument; (2) Unity of time; the joint tenants' interests must vest simultaneously; (3) Unity of possession; the joint tenants must have identical rights in the enjoyment of the property; and (4) Unity of interest; the joint tenants must enjoy the same type of interests for the same duration of time. c. A suit for partition or an inter vivos conveyance may terminate a joint tenancy. (1) An inter vivos conveyance is a conveyance that occurs during the conveyor's lifetime as opposed to a conveyance made by will.

15 d. In a majority of jurisdictions, a joint tenancy is not severed when the conveying joint tenant maintains some interest in the real property. (1) Examples: Mortgages, leases, and judgment liens Tenancy in Common a. Definition A tenancy in common is when two or more parties own an undivided, proportionate, and separate part of an estate. b. Possession A tenant in common is entitled to possess the entire estate but does not own the entire estate. c. Ouster If one tenant wrongfully keeps out another tenant from the real property, an ouster has occurred. 11 Robert Kratovil, Real Estate Law 198 (6 th ed. 1974).

16 (1) An ousted tenant is entitled to regain possession of the property and the fair rental value of the real property for the duration of time the ousted tenant was wrongfully deprived of possession of the real property. 12 II. TENANT/LANLORD ISSUES A. LANDLORD'S DUTIES 1. A landlord has a duty to deliver actual possession of real property to the tenant. 2. There is an implied covenant of quiet enjoyment in every lease. 3. An eviction breaches the implied covenant of quiet enjoyment. a. An actual eviction occurs when the landlord physically excludes the tenant from the entire estate. b. A constructive eviction occurs when the landlord's conduct makes the leased premises uninhabitable. B. TENANT'S DUTIES 12 Id.

17 1. A tenant has a duty to pay rent. a. Under common law, a tenant is obligated to pay rent even if the real property is destroyed by a natural disaster. b. A tenant is obligated to not commit waste. (1) Permissive waste is a tenant's failure to protect real property from deterioration and make routine repairs to the leased property. (2) Voluntary waste is an injury caused to real property from the tenant's affirmative conduct. (3) Ameliorative waste is a tenant's unauthorized alteration of leased real property that increases the value of the real property. 13 C. FORMS OF LEASEHOLD ESTATES 1. Tenancy at Will a. Definition 13 Peter Butt, Land Law 114 (2d ed. 1988).

18 A tenancy at will is an estate that may be stopped at will by the tenant or the landlord. b. If the tenant and landlord do not expressly agree that a tenancy at will is formed, a court will view the estate as a periodic tenancy. c. Termination A tenancy at will may be terminated by: (1) The tenant's attempted assignment of the lease; (2) If the tenant committed waste; (3) If the landlord transferred her interest in the leased property to a third party; or (4) The death of the tenant or landlord. 2. Term Tenancy a. Definition

19 A term tenancy is a tenancy that has a limited duration specified in the lease. (1) "For eight months" indicates the existence of a term tenancy for a period of eight months. 3. Periodic Tenancy a. Definition A periodic tenancy is a tenancy that continues for successive intervals. b. Automatically renews unless if one of the parties gives notice of an intent to terminate the lease. (1) A periodic tenancy of less than a year requires a notice of a full interval. (a) A month-to-month periodic tenancy requires a notice of one full month. 4. Tenancy at Sufferance a. Definition

20 A tenancy at sufferance describes when a tenant unlawfully remains in possession of leased property after the expiration of her tenancy. b. Such a tenant is called a hold over tenant and is obligated to pay the landlord for lost profits. D. SUBLEASES AND ASSIGNMENTS Under common law, restrictions in leases against subleases and assignments are strictly interpreted against the landlord. Thus, a restriction against subleases in a lease applies to subleases only and a restriction against assignments applies to assignments only. 1. Sublease a. A sublease occurs when a tenant transfers her leasehold estate and retains part of the leasehold estate. b. A sublessee is liable to the original tenant for rent. c. A sublessee is not personally liable to the landlord for rent. 2. Assignment

21 a. An assignment occurs when a tenant completely transfers her entire leasehold interest without retaining part of the leasehold estate. b. An assignment terminates the tenant's privity of estate with the landlord but there is still privity of contract with the landlord. (1) Privity of contract allows the landlord to recover rental payments from the tenant if the assignee fails to pay rent. c. An assignee is obligated to honor covenants that run with the land or if the assignee assumes covenants in the lease. (1) Examples of covenants that run with the land include covenants to pay rent or taxes. III. FIXTURES A. DEFINITION A fixture is personal property that is affixed to real property and is viewed as becoming part of the real property because of the annexation. B. INTENTION

22 The intention of the annexor helps determine if chattel is a fixture. 1. Some Indicators of Intent a. The manner in which the chattel is annexed to the land; b. Whether the annexor is a tenant at will or licensee; and c. The potential for damaging the land if the chattel is removed; C. SALE The sale of real property includes the fixtures on the real property. D. MORTGAGE A mortgage on real property covers all fixtures on the real property. E. LEASEHOLD TERMINATION When a tenant affixes a fixture, the fixture becomes part of the real property and may not be removed when the tenant's leasehold interests ends.

23 1. A tenant that is a tradesperson may remove trade fixtures if the fixtures are removed prior to the termination of the lease. 14 IV. ADVERSE POSSESSION A. DEFINITION Adverse possession occurs when the owner of real property does not eject an unlawful possessor of her land within the applicable statute of limitations. Consequently, the unlawful possessor acquires the realty and becomes the rightful owner of the real property. 1. Future Interests The statute of limitations does not apply to the holder of a future interest until the future interest becomes possessory. a. Aaron granted Blackacre to Bobby for life and then to Christine. Dan adversely possessed Blackacre during the existence of Bobby's life estate for the required statutory period. Dan has acquired Bobby's life estate but has not acquired Christine's remainder unless if Dan continues to adversely possess Blackacre for the statutory period while Christine's possessory interest is effective James J. White & Robert S. Summers, Uniform Commercial Code section 33-8, at 338 (4 th ed. 1995).

24 2. Tacking The duration of one adverse possessor may be added onto the adverse possession of another adverse possessor if there is privity between the two adverse possessors. 3. Privity Privity exists when the possession of real property is transferred to another party by contract, deed or will. 4. Tolling of Statute of Limitations The statute of limitations is tolled if the legal owner of real property is disabled when the adverse possession commences. a. Disabilities include insanity, minority, and imprisonment. b. If a party suffers from two or more disabilities simultaneously, the statute of limitations will be tolled until the longest lasting disability is removed. c. Disabilities of successors in interest do not toll the statute of limitations if the disabilities occur after the adverse possession has already commenced.

25 d. A landowner's disability that occurs after the beginning of another party's adverse possession of the realty does not toll the statute of limitations. 5. Elements of Adverse Possession For a party's possession of land to be adverse, the possession must be: a. Open and notorious; (1) Open and notorious use of land means use of the land that is not secretive. b. Hostile; (1) Hostile use of land means use of the land without the landowner's permission. c. Continuous; and (1) Continuous use of land means use of the land without interruption for the duration of the statutory period. For MBE purposes, assume the statutory period is 20 years unless if told otherwise. d. Actual and exclusive.

26 (1) Actual and exclusive use of land means use of the land that gives the lawful landowner notice of the adverse possessor's use and that the use is not shared with the general public. V. LICENSES A. DEFINITION A license is a revocable privilege that allows a party to lawfully enter another party's land. 1. A license is irrevocable if the licensee detrimentally relies on the license. VI. PROFITS A. DEFINITION A profit allows a party to enter land and take something of value from the soil. 1. A profit in gross benefits a party. 2. A profit appurtenant benefits a tract of land.

27 3. A profit may be terminated by misuse. VII. EASEMENTS A. DEFINITION An easement grants the right to use real property for a specified purpose. 1. A negative easement grants the right to prohibit a party from engaging in conduct upon the servient tenement. 2. An affirmative easement grants the right to use the servient tenement. a. The servient tenement is the tract of land burdened by an easement. b. The dominant tenement is the tract of land that benefits from the use of an easement. 3. An easement in gross is an easement that benefits a person but not a tract of land. 4. An easement appurtenant is an easement that benefits another tract of land. 5. Creation

28 An easement may be created by an executed contract, implication or prescription. a. Executed contract - An easement may be created by an executed written contract. Since an easement is an interest in land, the statute of frauds is applicable to the creation of easements that last longer than one year. b. Implication - An easement may also be created by an absolute necessity or if there was an intention for the easement to continue after the division of the real property. c. Prescription - The process of prescription is similar to the process of adverse possession and allows a party to acquire legal title to real property after adverse, continuous, open, and notorious use of land occurs for a specified statutory period. 15 VIII. COVENANTS RUNNING WITH THE LAND A. DEFINITION A promise contained in a deed that binds all assigns and successors. B. REQUIREMENTS 15 Peter Butt, Land Law 305 (2d ed. 1988).

29 1. Intent The original parties that create the covenant must intend for the covenant to bind all assigns and successors to the terms of the covenant. a. Intent may be indicated by the terms of the deed or implied by the events surrounding the creation of the covenant. 2. Touch and Concern the Land The covenant must affect the covenantee and covenantor as landowners and increase or decrease the utility of the land. 3. Privity Horizontal privity must exist between the original covenantee and covenantor for a covenant to be effective. Further, vertical privity must exist for a successor in interest to be bound by the covenant. 16 a. Horizontal privity describes the relationship between the original parties that create a covenant. 16 Roger A. Cunningham et al., The Law of Property section 8.13 (2d ed. 1993).

30 b. Vertical privity describes the relationship between an original covenanting party and a successor in interest to the original covenanting party. IX. EQUITABLE SERVITUDES A. DEFINITION An equitable servitude is a limitation on the use of real property. B. CREATION An equitable servitude may be created by a writing that satisfies the Statute of Frauds. 1. Negative equitable servitude A negative equitable servitude may be implied if there is a common scheme for land development and there is notice of the negative equitable servitude. C. ENFORCEMENT Successors to land are bound to equitable servitudes if: 1. The parties that created the equitable servitude intended for the servitude to be enforceable against transferees;

31 2. Subsequent purchasers of land have actual or constructive notice of the equitable servitude; and 3. The equitable servitude touches and concerns the land. a. An equitable servitude touches and concerns the land when the equitable servitude increases the utility of the land for the covenantee and/or burdens the covenantor. D. COURT'S REFUSAL TO ENFORCE A court of equity may not enforce an equitable servitude if: 1. The benefited party is barred by laches; a. Laches describes a party's unreasonable delay in asserting a claim. 2. Granting relief to the plaintiff would violate public policy; or 3. Granting relief would increase the severity of the plaintiff's injury. 17 E. EXTINGUISHMENT OF EQUITABLE SERVITUDES 17 Id.

32 1. An equitable servitude may be extinguished if a neighborhood changes so dramatically as to make the objective of the equitable servitude impractical. a. Example: A plot of land is sold that contains an equitable servitude that restricts the use of the plot to residential use. However, the immediate surrounding area has changed dramatically because of commercial development. Consequently, the equitable servitude would most likely be viewed by a court of law as being extinguished because the objective of the residential restriction has become impractical. X. LAND CONVEYANCES A. STATUTE OF FRAUDS The statute of frauds requires that certain contracts be in writing to prevent fraud and perjury. Under the statute of frauds, a land conveyance must be evidenced by a written document that contains all of the essential terms of the land sale contract. However, an oral contract for land may be enforceable under the part performance doctrine if certain criteria are met. 1. Essential Terms of a Land Sale Contract a. Description of the land;

33 b. Identification of the parties to the land contract; and c. The price of the land. 2. Part Performance Doctrine a. Definition An oral contract for the sale of land may be enforceable if: (1) The purchaser has paid all or part of the purchase price for the land; and either (2) The purchaser has made substantial improvements to the land; or (3) The purchaser possesses the land. 18 B. EQUITABLE CONVERSION 1. Definition 18 Restatement (Second) of Contracts section 129 (1981).

34 Equitable conversion is a doctrine that holds that a purchaser of land is the equitable owner of land and the seller of the land is the beneficial owner of the land. 2. Death If the seller dies after a land sale contract is signed but prior to the closing of the contract, the seller's heirs inherit the bare legal title to the land and must convey the title to the purchaser when the contract closes. If the buyer dies before the land sale contract is completed, the buyer's heirs inherit the right to purchase the land. 3. Risk of Loss A majority of jurisdictions hold that the buyer is obligated to pay for land that is destroyed without the fault of the buyer or seller if the land is destroyed prior to the closing of the contract. C. MARKETABLE TITLE An implied warranty exists in every land sale contract that the vendor will deliver a good and marketable title to the vendee.

35 1. Marketable Title A marketable title is a title that is free from any reasonable objection and is unencumbered. 2. Unmarketable Title The following are common defects that may make a title unmarketable: a. Restrictive covenants; b. The existence of easements that decrease the value of the land; c. A deed in the chain of title contains a defective description of the land; d. A deed in the chain of title was executed by a grantor that lacked the capacity to effectively transfer the land; e. A deed in the chain of title was defectively recorded; or f. Unascertained parties retain future interests in the land. D. DEED DELIVERY AND ACCEPTANCE

36 A deed must be delivered and accepted for a land conveyance to occur. 1. Delivery A delivery occurs when the grantor's words or conduct indicate that the transfer of land ownership is immediately effective. 2. Returning the Deed Returning the deed to the grantor does not cancel the delivery of the deed or constitute a conveyance of the land back to the grantor. 3. Escrow Delivery A third party may hold a deed until the occurrence of a specified event. The grantee becomes the owner of the land when the specified event occurs. E. RECORDING Recording statutes provide notice to the public of land conveyances. 1. Race Statutes

37 A race statute grants priority to the grantee that records a deed to land first regardless if the grantee has notice of other unrecorded claims to the land. 2. Notice Statutes A notice statute provides priority to the grantee that provides valuable consideration for land and does not have actual or constructive notice of earlier claims to the realty. 3. Race-Notice Statutes A race-notice statute grants priority to the grantee that provides valuable consideration, records a deed to the realty first, and does not have notice of a prior conflicting grantee. F. MORTGAGES 1. Definition A mortgage is an interest in real property that provides security for a debt. 2. Parties The mortgagor is the person who owes the debt.

38 The mortgagee is the party to whom the debt is owed. 3. Buyer's Assumption of Mortgage When the ownership of land is transferred and the buyer assumes the mortgage, the buyer is personally liable for the mortgage and is responsible for any debt not recovered from the foreclosure of the real property. 4. Land Subject to a Mortgage When ownership of land is transferred subject to a mortgage, the grantee is not personally liable for the mortgage. However, if the mortgage is not paid, the real property will be subject to foreclosure. 19 XI. LAND RIGHTS A. RIGHT TO SUBJACENT SUPPORT A real property owner has the right to have the surface of her land supported. B. RIGHT TO LATERAL SUPPORT 19 Leonard A. Jones, A Treatise on the Law of Mortgages (5 th ed. 1908).

39 A real property owner has the right to have her land in its natural condition undisturbed by a neighbor's withdrawal of lateral support. C. WATER RIGHTS 1. Riparian Doctrine Under the riparian doctrine, owners of land that abut water have a right to the reasonable use of the water. 2. Prior Appropriation Doctrine Under the prior appropriation doctrine, the earliest users of water are not restricted to reasonable use and have priority over subsequent users of the water David H. Getches, Water Law in a Nutshell (3d ed. 1997).