The Origins of American Real Property Law

Preface to the Fourth Edition..................................... ix Preface to the Third Edition..................................... xiii Preface to the Second Edition...................................xvii Preface to the First Edition...................................... xix About the Author............................................. xxi Summary of Contents........................................ xxiii 1 The Origins of American Real Property Law................... 1 1-1 Introduction......................................... 1 1-2 Early Grants of Land: Origins of the Indenture Deed......... 2 1-3 Use of the Words And His Heirs : The Fee Simple Interest in Land...................................... 2 1-4 The Feudal Tax System.............................. 5 1-4.1 Reliefs, Escheat............................. 5 1-4.2 Feudal Services............................. 6 1-5 The Feudal Tax Dodger............................... 6 1-5.1 Subinfeudation to Children with Reservation of Puny Services............................ 6 1-5.2 The Statute Quia Emptores: The Feudal System Shoots Itself in the Foot................. 7 1-5.3 Avoidance Through a Conveyance To A for Life, Then to A s Heirs : The Rule in Shelley s Case.................... 8 1-6 The Rule in Shelley s Case Survives into the Twentieth Century................................ 9 1-6.1 The Policy that Led to the Rule No Longer Applies........................... 9 1-6.2 Why Did the Rule Survive for So Long?........... 9 1-6.3 Title to Real Estate is Derivative: It is Traced Back Historically.................. 11 1-6.4 Is There Perhaps a Modern Argument in Favor of the Rule in Shelley s Case?.......... 12 xxv

1-7 Origins of a Modern Deed............................. 14 1-7.1 The Granting Clause......................... 14 1-7.2 The Bargain and Sale: Recitation of Consideration............................ 15 1-7.3 Description of the Property in the Deed.......... 18 1-7.4 Notes on Deed Descriptions and ALTA/ACSM Land Title Surveys................ 20 1-8 Contents of a Modern Deed........................... 21 1-8.1 Date..................................... 21 1-8.2 Names of the Grantor and Grantee; Parcel Identifier Number...................... 22 1-8.3 Description of the Property Conveyed........... 22 1-8.4 Words of Grant............................. 23 1-8.5 Consideration.............................. 23 1-8.6 Seal as Consideration........................ 23 1-8.7 The Habendum Clause....................... 24 1-8.8 Signature of the Grantor, Seal, and Acknowledgment........................ 24 1-8.9 Warranty of Title............................ 25 1-8.10 Recital, Encumbrance Clause, Appurtenance Clause........................ 25 1-9 The Extent of Ownership of Land; Vertical and Horizontal Division; Coal and Mineral Estates; Air Rights; Riparian Rights............................ 26 1-9.1 Coal and Mineral Rights; Oil and Gas............ 27 1-9.1.1 Natural Gas; Hydraulic Fracturing and Trespass.............. 29 1-9.1.2 Marcellus Shale and the Dunham Rule...................... 30 1-9.2 Air Rights................................. 32 1-9.3 Riparian Rights............................. 33 1-9.3.1 Riparian Rights on the Delaware and Schuylkill Rivers in Philadelphia................ 38 1-9.4 Fixtures................................... 45 1-10 Required Disclosures in a Deed........................ 48 2 The Development of Property Remedies and the Origins of Equity...................................... 51 2-1 Introduction........................................ 51 2-2 Modern Codes of Civil Procedure....................... 51 xxvi

2-3 Forms of Action Affecting Land At Early Common Law ( At Law ).............................. 54 2-3.1 The Writ of Right........................... 54 2-3.2 The Assize of Novel Disseisin................. 56 2-3.3 Ejectment................................. 57 2-4 Property Remedies Developed in the Court of Chancery ( In Equity )......................... 60 2-4.1 Introduction................................ 60 2-4.2 The Office of the Chancellor................... 61 2-4.3 The Origins of the Court of Chancery............ 62 2-4.4 Procedure in Chancery....................... 63 2-5 Deficiencies in the Common Law Remedy of Ejectment................................ 65 2-5.1 No Protection Against Repeated Actions in Ejectment......................... 65 2-5.2 No Remedy Against Repeated Interferences with Enjoyment.................. 65 2-5.3 No Remedy to Try Title if the Claimant is in Possession.................... 69 2-6 The Chancellor s Remedies........................... 70 2-6.1 For Threatened or Repeated Action: The Injunction.............................. 70 2-6.2 Bills of Peace.............................. 72 2-6.3 The Bill Quia Timet (Quiet Title)................ 72 2-7 Modern Developments in the Action to Quiet Title.......... 72 2-7.1 Must the Plaintiff be in Possession of the Land in Question?..................... 72 2-7.2 If the Adverse Claim is Frivolous, Should the Court Dismiss the Case?............ 74 2-7.3 Is There a Right to a Jury Trial in a Quiet Title Action?.......................... 75 2-8 Declaratory Judgments............................... 80 2-9 Other Equitable Remedies and Doctrines Affecting Real Property............................... 81 2-9.1 Specific Performance........................ 81 2-9.2 Lis Pendens............................... 84 2-9.3 The Equitable Charge....................... 86 2-9.4 Equitable Subordination...................... 87 xxvii

3 The Real Property Title System, the Recording Acts, and the Role of Adverse Possession......................... 89 3-1 Introduction........................................ 89 3-2 The Recording Acts: Basic Elements of the System......... 89 3-2.1 The Subsequent Taker Must Be a Purchaser for Value......................... 90 3-3 Actual Notice....................................... 93 3-4 Constructive Notice.................................. 93 3-4.1 Inspection Notice........................... 93 3-4.2 Record Notice.............................. 94 3-4.3 Effect of Failure to Record.................... 94 3-5 Mechanics of Recording.............................. 95 3-6 The Chain of Title................................... 96 3-7 Records in the Chain of Title........................... 97 3-7.1 Probate Records............................ 97 3-7.2 Mortgages................................. 97 3-7.3 Liens..................................... 97 3-7.4 Recorded Plats............................. 99 3-8 How Far Back Does the Title Search Have to Go?.......... 99 3-9 How is a Title Search Conducted; What Documents are Considered Within the Chain of Title?................ 99 3-9.1 Matters Recorded After the Date When (According to the Record) Grantor No Longer Had Title........................ 100 3-9.2 Matters Recorded in Deeds to Adjacent or Nearby Land Once Owned by a Common Grantor.......................... 101 3-9.3 Search of Surface Estate Where Title to Subsurface Estate is Being Examined......................... 104 3-9.4 Other Quirky Interests That May Affect Title Search............................... 105 3-9.4.1 Dower and Curtesy................. 105 3-9.4.2 Community Property Law............ 107 3-9.5 Indexing................................. 107 3-10 The Role of Title Insurance........................... 109 3-11 The Doctrine of Adverse Possession................... 111 3-11.1 Statutes of Limitations....................... 111 xxviii

3-12 The Required Posture of the Adverse Possessor......... 112 3-12.1 Actual Possession Under a Claim of Right..... 112 3-12.2 The Idea that the Possession Must Be Hostile, Under a Claim of Right, Open and Notorious....................... 117 3-12.3 The Adverse Possession Must Be Continuous.. 118 3-12.4 Tacking Adverse Possession The Idea of Privity........................ 119 3-12.5 Constructive Possession Under Color of Title.... 121 3-13 Exceptions: When the Statute of Limitations Does Not Run..................................... 123 3-13.1 Entry by True Owner....................... 123 3-13.2 Bankruptcy of the True Owner................ 124 3-13.2.1 Is There a Basis for Showalter in Bankruptcy Law?................ 125 3-13.3 Future Interests........................... 126 3-13.4 Disabilities............................... 127 3-13.5 Adverse Possession By and Against Public Authorities and Public Utilities........... 128 3-14 Position of the Person Who Has Completed the Period of Adverse Possession..................... 129 3-14.1 Will Equity Aid an Adverse Possessor?......... 129 3-14.2 What if the Adverse Possessor Does Not Know Who the True Owners Are?............. 130 3-15 Boundary Disputes................................. 132 3-15.1 Buildings and Fences....................... 132 3-15.2 Encroaching Tree Branches and Roots......... 133 3-15.3 Fallen Trees or Limbs....................... 134 3-15.4 Water Runoff............................. 135 4 The Fee Simple, the Fee Subject to Condition Subsequent, Determinable Fees, and Mortgages......................... 137 4-1 The Fee Simple Absolute............................ 137 4-2 The Fee Simple Determinable and the Fee Simple Subject to a Condition Subsequent.................... 138 4-3 Does the Concept of a Defeasible Fee Serve Any Purpose in Modern Real Estate Law?.................. 140 4-3.1 A Discriminatory Purpose.................... 141 4-3.2 Adverse Possession (A Nonsensical Distinction).. 141 4-3.3 Condemnation and Idiosyncratic Restrictions.... 142 4-3.4 The Rule Against Perpetuities................ 143 xxix

4-4 The Mortgage..................................... 148 4-4.1 The Old Common-Law Mortgage: A Conveyance of Land in Fee Simple Determinable........................ 148 4-4.2 There Must Be a Debt or Other Monetary Obligation........................ 149 4-5 The Equity of Redemption: Foreclosure................. 149 4-5.1 Strict Foreclosure.......................... 150 4-5.2 Foreclosure by Judicial Sale.................. 150 4-5.3 No Clogging of the Equity of Redemption...... 151 4-5.4 Deeds in Lieu of Foreclosure................. 153 4-6 The Mortgage Modern Developments................. 154 4-6.1 Title Theory versus Lien Theory States......... 154 4-6.2 Deeds of Trust and Powers of Sale............ 155 4-7 The Difference Between Foreclosing on the Mortgage and Suing on the Note...................... 156 4-7.1 Deficiency Judgments....................... 161 4-7.2 Anti-deficiency Legislation................... 161 5 Concurrent Ownership................................... 165 5-1 The Idea of Co-ownership............................ 165 5-1.1 Partition in Kind............................ 166 5-1.2 Partition by Judicial Sale..................... 166 5-2 Tenancy in Common as a Financing Device.............. 168 5-3 The Joint Tenancy.................................. 170 5-4 Creation of the Joint Tenancy......................... 171 5-4.1 The Statutory Provisions..................... 171 5-4.2 The Effects of the Unities.................... 172 5-5 Severance (Termination of Survivorship in a Joint Tenancy)..................................... 173 5-5.1 Severance by Conveyance................... 174 5-5.2 Severance by Agreement to Convey........... 177 5-5.3 Severance by Mortgage..................... 179 5-5.4 The Rights of Judgment Lien Holders........... 182 5-5.5 A Will Cannot Operate to Sever Survivorship: The Poor Man s Will....................... 183 5-6 Tenancies by the Entireties: Characteristics.............. 183 5-6.1 Creation................................. 184 5-6.2 Rights of Individual Creditors of Either Spouse... 185 5-6.3 Federal Tax Lien: Different Rule?.............. 188 5-6.4 Treatment in Bankruptcy When Only One Spouse Files.............................. 193 xxx

6 Landlord and Tenant..................................... 197 6-1 The Estate Concept of the Lease...................... 197 6-2 Some Consequences of the Estate Concept of a Lease.... 198 6-2.1 Statute of Frauds.......................... 198 6-2.2 Term (Duration) of the Lease................. 198 6-2.3 Termination of the Leasehold Estate Upon Default by the Tenant.................. 201 6-2.4 A Claim for Rent versus a Claim for Damages.... 210 6-2.5 Tenant s Abandonment of the Premises: Application of the Above Doctrines............ 213 6-3 Landlord s Obligations to Tenant: The Old Common-Law View................................ 217 6-3.1 Warranty of Quiet Enjoyment................. 217 6-3.2 Constructive Eviction....................... 220 6-4 Landlord s Obligation to Deliver Vacant Possession of the Premises.................................... 220 6-5 The New Wave: The Lease as a Contract............... 221 6-5.1 Warranty of Habitability..................... 221 6-5.2 Dependence of Obligations.................. 222 6-5.3 Retaliatory Eviction......................... 224 6-5.4 Confession of Judgment..................... 224 6-6 Further Consequences of the Estate Concept of the Lease...................................... 230 6-6.1 Damage or Destruction by Fire or Other Casualty.......................... 230 6-7 Assignment and Sublease........................... 234 6-7.1 Consequences of an Assignment as Compared to a Sublease.................. 234 6-7.2 Obligations that Run with the Lease: The Running of the Burden of the Tenant s Obligations to the Landlord.................. 235 6-7.3 Distinguishing an Assignment from a Sublease... 238 6-7.4 The Leasehold Mortgage: Assignment or Sublease?............................. 239 6-7.5 How Do Those Who Are Bound as Tenants on the Lease Become Released?............. 241 6-7.6 Covenants Against Assignment and Sublease... 242 6-8 Tenant s Bankruptcy................................ 243 6-8.1 Effect on Landlord s Right to Terminate Lease.... 243 6-8.2 Assumption or Rejection of the Lease by Tenant s Trustee........................ 244 xxxi

6-8.3 Limitation on Recovery in Damages After Termination.......................... 244 6-8.4 Assignment of the Lease by the Tenant s Trustee........................... 247 6-8.5 1984 Shopping Center Amendments to the Bankruptcy Code..................... 248 6-8.6 Bankruptcy Reform Legislation, 2005........... 250 6-9 Transfer and Assignment of the Landlord s Interest........ 252 6-9.1 Relationship of the Mortgage on the Property (on the Landlord s Interest) to the Lease........ 252 6-9.2 Subordination, Non-disturbance, and Attornment Agreements..................... 254 6-9.3 The Running of the Benefit of the Tenant s Obligations to the Landlord Particularly, the Landlord s Right to Rent.................. 255 6-9.4 The Mortgagee s Right to Rent After Default But Prior to Foreclosure..................... 256 6-10 Landlord s Bankruptcy............................... 257 6-10.1 Trustee s Power to Assume or Reject the Lease: Effect on Tenant.................. 257 6-10.2 Effect on the Landlord s Mortgage Lender s Right to Collect the Rents.................... 259 6-10.3 Sale of the Leased Real Estate by Landlord s Trustee in Bankruptcy: Can It Terminate the Lease?................. 267 7 Easements............................................. 269 7-1 Introduction....................................... 269 7-1.1 What Kind of Rights are Easements?........... 270 7-1.2 Conservation Easements................... 271 7-1.3 The Restatement (Third) of Property: Servitudes (2000).......................... 273 7-1.4 The Distinction Between Easements and Licenses.............................. 274 7-1.5 Licenses that Become Irrevocable............. 277 7-1.6 Profits à Prendre........................... 278 7-2 How Easements Are Created......................... 278 7-2.1 The Title of the Document and the Language Used............................ 278 7-2.2 Easements by Express Grant or Reservation..... 279 7-2.3 Reservations in Favor of Third Parties.......... 281 xxxii

7-3 Easements Appurtenant and Easements in Gross......... 283 7-3.1 Easements Appurtenant..................... 283 7-3.2 Easements Are Appurtenant to Every Portion of the Dominant Property.............. 283 7-3.3 Easements in Gross........................ 284 7-4 Easements by Implied Grant and Implied Reservation..... 285 7-4.1 Implied Easements in General................ 285 7-4.2 Easements Implied from Necessity............ 286 7-4.3 Easements Implied from Visible Physical Conditions Existing at the Time of Conveyance.................. 288 7-4.4 Easements Implied from What is Shown on a Recorded Subdivision or Land Development Plan: Introductory............... 290 7-5 Dedication of Streets and Other Common Areas to the Public...................................... 291 7-5.1 Dedication by Recording a Plat............... 291 7-5.2 Acceptance of Dedicated Streets and Other Common Areas by the Public............ 292 7-5.3 Type of Interest Held by the Public............ 293 7-5.4 Title of Abutters........................... 294 7-5.5 When a Property is Dedicated and Accepted for a Specific Public Purpose, Can the Municipality Use the Property for Some Other Purpose, or Sell or Vacate the Property?....................... 294 7-5.6 When a Street is Vacated, Who Has Title?...... 296 7-5.7 Implied Easements by Reference to Recorded Plans......................... 296 7-6 Easements by Long-Term Use (by Prescription ): Estoppel......................................... 301 7-6.1 If the Period is the Same as for Adverse Possession, Why is it Called Prescription?....................... 301 7-6.2 The Rules are the Same as for Adverse Possession........................ 302 7-6.3 Easements by Estoppel..................... 302 7-7 Use of Easements................................. 303 7-7.1 Drafting and Interpretation of Easements........ 303 7-7.2 Party Walls............................... 304 7-7.3 The Doctrine of Technological Advances........ 306 xxxiii

7-7.4 Pole Attachments ; Use of Streets and Railroad Rights-of-Way.................. 307 7-7.5 Maintenance Obligation..................... 317 7-8 Termination of Easements........................... 319 7-8.1 Relinquishment............................ 319 7-8.2 Abandonment............................. 319 7-8.3 Prescription: Estoppel....................... 322 7-8.4 Loss of Easement Through Its Abuse........... 323 7-8.5 Extinction by Merger........................ 324 7-8.6 Modification of Easements by the Courts........ 327 8 Agreements Affecting Land Use............................ 331 8-1 Introduction....................................... 331 8-2 The Requirement of Notice........................... 332 8-2.1 Duty to Search Title to Surrounding Lots........ 332 8-2.2 Notice Implied from the Existence of a Common Scheme......................... 334 8-3 The Idea of Privity and Touching and Concerning the Land......................................... 339 8-3.1 Privity ( Horizontal and Vertical )............ 339 8-3.2 Touching and Concerning the Land........... 345 8-4 Restrictive Covenants............................... 347 8-4.1 No Horizontal Privity, But the Enforcer Must Have Land Intended to be Benefited by the Restriction.................. 348 8-4.2 No Vertical Privity, But Some Nexus Must Exist................................ 350 8-4.3 The Requirement that the Covenant Touch and Concern the Land................ 350 8-5 Restatement (Third) of Property: Servitudes (2000)........ 352 8-6 The Role of a Declaration of Covenants................. 356 8-7 Termination of Covenants by Merger................... 356 8-8 Termination or Modification Because of Change in the Condition of the Neighborhood................... 357 8-9 Relationship of Land-Use Covenants to Zoning and Other Statutory or Constitutional Limitations.............. 360 8-9.1 Relationship to Zoning...................... 360 8-9.2 Constitutional and Statutory Limitations......... 361 xxxiv

8-10 Restraints on Alienation and the Rule Against Perpetuities............................ 365 8-10.1 First Refusal Options and Options to Purchase: As Restraints on Alienation or as Perpetuities.................. 366 8-10.2 Options to Purchase and First Refusal Options: Drafting Considerations..................... 368 8-11 Residential Communities with Common Areas and Facilities Maintained Through Mandatory Assessments Against the Membership Properties Created Under Common Law, Without the Help of Statute.............. 371 8-11.1 Recommendations of the Homes Association Handbook...................... 373 8-11.2 Early Condominiums....................... 376 8-11.3 Development of a Common-Law-Based Association by Phases...................... 380 8-12 The Pennsylvania Uniform Planned Community Act and the Uniform Condominium Act..................... 383 8-12.1 Cutoff for Expansion After Seven Years......... 384 8-12.2 Form of Organization; Can the Organization Be a Trust? Some Constitutional Issues.................. 393 8-12.3 Planned Communities, Condominiums, and Subdivision and Land Development Review....................... 397 8-12.4 Site Condominiums and the Subdivision Issue.......................... 401 8-12.5 Tax Aspects of Planned Communities and Condominiums........................ 404 8-12.6 Shared-Amenities Housing: Some Interrelationship Issues................ 407 9 Zoning and Other Governmental Intervention in Real Estate Development............................... 411 9-1 Introduction....................................... 411 9-2 The Constitutional Backdrop......................... 412 9-3 Police Power...................................... 412 9-3.1 Eminent Domain........................... 416 9-3.2 Regulatory Police Power.................... 417 9-4 The Origins of Zoning............................... 419 xxxv

9-5 The Standard State Zoning Enabling Act (SZEA) and the Municipalities Planning Code (MPC)............. 423 9-6 Basic Theory of Zoning.............................. 425 9-7 Separation of Uses: Robinson Township, a New Constitutional Principle?....................... 427 9-8 Preemption....................................... 429 9-9 Release of Land into Development Through Zoning Amendment................................. 431 9-9.1 Spot Zoning............................. 432 9-9.2 The Floating Zone........................ 435 9-9.3 The Role of the Comprehensive Plan........... 440 9-9.4 Contract Zoning.......................... 442 9-9.5 Settlement of Litigation...................... 446 9-10 Release of Land into Development by Special Exception or Conditional Use.................................. 450 9-11 Release of Land into Development Through the Planned Unit Development Device..................... 452 9-11.1 Origins of the Planned Unit Approach (Model Planned Residential Development Statute)....................... 452 9-11.2 Pennsylvania Version of the Model Planned Residential Development Statute....................... 455 9-11.3 Traditional Neighborhood Development......... 459 9-12 Release of Land into Development by Variance........... 459 9-12.1 The Variance Concept...................... 459 9-12.2 A Variance Application and Challenge to the Validity of an Ordinance May Be Combined in a Single Proceeding Before the Board........................... 460 9-12.3 The Requirement that the Hardship Arise Out of the Unique Physical Characteristics of the Property and Not Be Due to the Peculiar Personal Circumstances of the Owner and the Self-inflicted Hardship Idea............ 461 9-13 Procedure Before the Zoning Hearing Board Under the MPC (Board of Adjustment Under the SZEA).......... 464 9-14 Subdivision and Land Development Control.............. 467 9-14.1 Subdivision Exactions....................... 471 xxxvi

9-15 The Takings Issues, Particularly the Temporary Taking Puzzle..................................... 473 9-15.1 The First English Case Appears to Hold that a Deprivation of All Viable Economic Use, However Temporary, is a Per Se, Categorical Taking......................... 473 9-15.2 For Purposes of Deciding Whether There Has Been Complete Deprivation of All Viable Economic Use, Property is an Indivisible Bundle of Rights.................. 474 9-15.3 In Applying the Balancing Test Has the Court Abandoned the View that the Specific Investment-Backed Expectations of the Owner are Important?...................... 476 9-15.4 Are Temporary Deprivations of All Viable Economic Use of the Property Per Se, Categorical Takings?....................... 477 9-16 Regulations That Require the Owner to Devote a Portion of His or Her Property to Public Use (Regulatory Exactions )............................. 485 9-17 Procedures Under the Pennsylvania Municipalities Planning Code.................................... 487 9-17.1 Challenge by the Landowner to the Validity of an Ordinance on Substantive Grounds....... 488 9-17.1.1 Standing......................... 488 9-17.1.2 Where to File..................... 488 9-17.1.3 When to File...................... 493 9-17.2 Definitive Relief for the Landowner............ 494 9-17.2.1 The Pending Ordinance Rule....... 497 9-17.2.2 New Developments in Definitive Relief; the Pending Ordinance Doctrine and Piper Group........... 498 9-17.3 Challenge to an Ordinance on Procedural Grounds by the Landowner.................. 508 9-17.3.1 Where to File and When to File....... 508 9-17.3.2 Standing......................... 509 9-17.3.3 Landowner Challenges: Beating the Municipality to the Punch......... 509 9-17.4 Challenges to the Validity of an Ordinance by Neighboring Property Owners ( Persons Aggrieved )...................... 519 9-17.4.1 Standing......................... 519 9-17.4.2 Where to File..................... 520 9-17.4.3 Time for Filing.................... 520 xxxvii

9-17.5 Appeals.................................. 525 9-17.5.1 Where to File..................... 525 9-17.5.2 Time to File; Appeal from Decisions....................... 527 9-17.5.3 Time to File; Appeal from Determinations................... 537 9-17.5.4 Standing of Appellants from Decisions....................... 538 9-17.6 Frivolous Appeals from Decisions or Determinations Approving a Development....... 542 10 Eminent Domain......................................... 547 10-1 Origins of Power................................... 547 10-2 Enabling Legislation................................ 548 10-2.1 Scope of Delegated Power................... 549 10-2.2 Procedures and Defenses................... 551 10-3 Substantive Defenses to Eminent Domain............... 552 10-3.1 Public Use; Good Faith; Abuse of Discretion..... 552 10-3.2 Condemnation Merely to Preserve Land for Passive Open Space..................... 560 10-3.3 Public Purpose and the Pennsylvania Private Road Act........................... 563 10-3.4 Act 13 Eminent Domain Grant to Natural Gas Companies..................... 567 10-3.5 Agreements with the Condemnee or with the Private Redeveloper: Improper Delegation of Power?............... 568 10-4 Two Standard Procedures Compared................... 570 10-4.1 Maryland................................. 570 10-4.2 Pennsylvania.............................. 572 10-5 Quick-Take by the United States...................... 575 10-5.1 Due Process and the Right to a Pre-deprivation Hearing..................... 576 10-5.2 Quick-Take Pre-deprivation Hearing About What?.............................. 578 10-6 Quick-Take The Pennsylvania Procedure.............. 579 10-7 Inverse Eminent Domain Proceedings.................. 583 10-7.1 The Pennsylvania Inverse Eminent Domain Procedure......................... 583 10-7.2 Statutes of Limitations....................... 584 10-7.2.1 Introductory....................... 584 10-7.2.2 Pennsylvania Statutes of Limitations... 585 xxxviii

10-7.3 Inverse Eminent Domain: Some Procedural Issues.................... 587 10-7.3.1 In Asserting Inverse Condemnation, How Can the Owner Avoid Conceding that the Condemnor Had Authority to Condemn or that the Taking Was Valid?....................... 587 10-7.3.2 After a Declaration of Taking Has Been Filed by the Condemnor, How Can the Condemnee Claim that the Condemnation De Facto Occurred Earlier?.................. 588 10-7.4 Regulatory Takings Issue Revisited........... 589 10-8 Valuation Phase................................... 592 10-8.1 The Unit Valuation Doctrine................. 593 10-8.2 Valuation of a Property in Which a Business Has Been Conducted............... 595 10-8.3 Valuation of Larger Land Areas that Have Been or Can Be Subdivided into Lots for Development................... 597 10-8.4 The Concept of Floating Value.............. 599 10-8.5 The Effect of the Announcement of Condemnation on the Interim Use and on the Value of the Property at Condemnation.......................... 601 10-8.6 Valuation of Interests that are Appurtenant to Adjacent or Nearby Property............... 604 10-8.7 The Question Is What Has the Owner Lost, Not What Has the Taker Gained.............. 607 10-8.8 Betterments; Severance Damages; Partial Takings............................ 607 10-8.9 The Pennsylvania Approach to Valuation....... 610 10-9 Landlord and Tenant............................... 613 10-9.1 Total Taking.............................. 613 10-9.2 Partial Takings: Landlord and Tenant.......... 614 10-9.3 Drafting the Condemnation Clauses in the Lease.............................. 616 10-9.3.1 Total Taking...................... 616 10-9.3.2 Partial Taking..................... 617 10-9.3.3 Possessory Takings................ 618 10-10 Mortgagor, Mortgagee.............................. 619 10-10.1 Total Taking.............................. 619 10-10.2 Partial Taking............................. 619 xxxix

10-11 Condominiums; Common-Interest (Planned) Communities.. 621 10-11.1 Taking of a Unit............................ 621 10-11.2 Taking of the Common Elements.............. 622 11 Agreements for the Sale of Real Estate...................... 625 11-1 Statute of Frauds................................... 625 11-2 Letters of Intent.................................... 626 11-3 Terms of the Formal Agreement....................... 628 11-3.1 Identification of the Parties................... 628 11-3.2 Description of the Property................... 628 11-3.3 Purchase Price: Deposits.................... 628 11-3.4 Settlement Date; Due Diligence; Mortgage Contingency Clauses; Inspections............................... 629 11-3.5 Description of the Title to be Conveyed at Closing: Type of Deed to be Used........... 634 11-3.6 Exceptions to the Title to be Conveyed at Closing................................ 640 11-3.7 Buyer s Remedies When the Seller Does Not Provide the Title Agreed To............... 642 11-3.8 Seller s Obligations as to Quality.............. 643 11-3.9 Disclosure Laws for Existing Home Sales....... 644 11-3.10 The Interstate Land Sales Full Disclosure Act.... 646 11-3.11 Environmental Problems and Liabilities......... 648 11-3.12 Risk of Loss Between Contract and Closing...... 654 11-3.13 Representations and Warranties.............. 656 11-3.14 Prorations................................ 658 11-3.15 Seller s Remedies for Breach of the Agreement............................ 658 11-4 Title Insurance..................................... 658 11-4.1 The Role of Title Insurance................... 658 11-4.2 ALTA 2006 Owner s Policy................... 660 11-4.2.1 Coverage That Was Only Implicit in the Wording of the Coverage Offered Under the Old Policies is Made Explicit.................... 660 11-4.2.2 Coverage That Was Implicit in the Wording of the Exclusions From Coverage Under the Older Policies is Made Explicit (New Covered Risks 5 through 10)................. 663 xl

11-4.3 ALTA 2006 Homeowner s Policy (One- to Four-Family Residence).............. 671 11-4.4 ALTA 2006 Loan Policy..................... 672 11-4.4.1 State of the Borrower s Title.......... 672 11-4.4.2 Validity and Priority of the Mortgage Lien.................... 672 11-4.5 Exclusions from Coverage (2006 Owner s and Loan Policies)......................... 677 11-4.6 Additional Exclusions from Coverage (ALTA 2006 Loan Policy).................... 680 11-4.7 Schedule B Exceptions..................... 680 11-4.8 Endorsements............................ 683 11-5 Mechanics Liens: Recent Changes in Pennsylvania Law.................................. 687 11-5.1 Pennsylvania s Mechanics Lien Law: Prior to Act 52............................. 687 11-5.2 Act 52 and Subsequent Changes in the Mechanics Lien Law (Including House Bill 1602).................. 692 11-5.2.1 House Bill 1602................... 696 12 Mortgage Financing Issues............................... 699 12-1 Mortgage Securing Future Advances................... 699 12-1.1 Formalities............................... 699 12-1.2 Obligatory versus Voluntary Advances; Effect on Priorities......................... 701 12-1.3 Statutory Changes Affecting Priority of Future Advances.......................... 708 12-1.4 Title Company Problems in Insuring the Priority of a Mortgage for Construction Advances..................... 713 12-2 The Doctrine of Equitable Subordination................ 714 12-3 The Mortgage Lender and Bankruptcy of the Borrower..... 718 12-3.1 The Mortgage Lender That Completes Foreclosure Before the Borrower Files: The Durrett Case.......................... 719 12-3.2 Delays in Recording a Mortgage After the Loan is Made: Bankruptcy Trustee s Avoidance Powers......................... 720 xli

12-3.3 Defective Acknowledgments; Bankruptcy Trustee s Avoidance Powers................. 721 12-3.3.1 Defective Acknowledgment: The Bankruptcy Cases.............. 722 12-3.3.2 Effect of Bankruptcy Avoidance of the Mortgage on the Liability Under the Note.................... 725 12-3.3.3 Effect of the Interpretation of 21 P.S. 444 in Fisher and Batipps on the Secondary Mortgage Market......... 725 12-4 The Mortgage Lender That is Caught in the Borrower s Bankruptcy.............................. 726 12-4.1 Chapter 7 Bankruptcy....................... 726 12-4.2 Chapter 13 Bankruptcy...................... 731 12-4.3 Motion for Relief from Stay................... 734 12-4.4 Single-Asset Real Estate Debtors: The 1994 and 2005 Changes................. 738 12-4.5 Relief from Stay: Demonstrating That There is a Viable Plan of Reorganization.......................... 740 12-4.6 Treatment of Mortgage Lender, in Chapter 11, That is Unable to Obtain Relief from Stay...................... 742 12-5 The Secondary Mortgage Market...................... 747 12-5.1 FNMA, FHLMC, and GNMA are Created to Facilitate a Secondary Mortgage Market for Residential Mortgages.................... 747 12-5.2 The Residential Mortgage-Backed Securities Program......................... 748 12-5.3 Mortgage-Backed Securities Program Extends to Commercial Real Estate: REMICS....................... 749 12-5.4 The Secondary Mortgage Market and the Peculiar Relationship of the Mortgage to the Note.................... 751 12-5.5 Article 9 of the UCC Before Revision in 1999..... 754 12-5.6 Structure of the Mortgage-Backed Securities Offerings......................... 755 12-5.7 Bankruptcy of the Record Mortgagee; The Kennedy Mortgage Case; Former Article 9 of the UCC........................ 758 12-5.8 (Revised) Article 9, Uniform Commercial Code.......................... 764 xlii

12-5.9 Bailee Letters............................. 768 12-5.10 Mortgage Electronic Registration System (MERS)........................... 769 12-6 Transfers of Mortgaged Property...................... 771 12-6.1 Buyer Assumes the Mortgage............... 771 12-6.2 Sale Subject to a Mortgage................. 773 12-6.3 Sale Subject to the Mortgage with Purchase-Money Second Mortgage to Seller................................. 774 12-6.4 Sale Subject to the Mortgage with Wrap Mortgage Back to Seller............... 774 12-6.5 Sale of Mortgaged Property Under an Installment Contract........................ 775 12-6.6 Tax Consequences of the Wrap and the Installment Sale....................... 775 12-6.7 Bankruptcy of the Buyer in a Wrap Transaction......................... 779 12-7 Lender Liability.................................... 782 12-7.1 Tort Liability of Lender...................... 782 12-7.2 Fiduciary Liability of Lender to the Borrower and Its Guarantors................. 783 12-7.3 Environmental Liability of Lender as Owner or Operator of the Site or as Successor to Such Owner............... 784 12-7.4 Deepening Insolvency..................... 786 Index of Cases............................................. 787 Subject Index.............................................. 837 xliii