Property Strategy MBE

Five Main Topics

 Ownership interest
o Present possessory estates
o Future interest
o Co-tenancies
o Landlord-tenant
o Special problems
 Rule against perpetuities
 Rights in real property
o Covenants
o Easements
o Profits
o Fixtures
o Zoning
 Real Estate contracts (conveyance of property)
o Statue of Frauds
o Marketability
o Equitable conversion
o Merger
 Mortgages (and other security devices)
o Types of real estate security interests
o Transfers
o Priority foreclosure
 Titles
o Adverse possession
o Deeds
o Recording Acts

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 Ownership interest
o Present possessory estates
o Future interest
o Co-tenancies
o Landlord-tenant Relationship: Tenancies are classified based on how they can be
terminated
 Tenancy for years: has a definite ending date
 Periodic tenancies: continue for successive periods UNITL terminated BY
proper NOTICE
 Eg. month-to-month, year-to-year
 Created expressly
 Also created when tenancy for years expires + tenant remains
  Terminated BY giving NOTICE at least on period in advance
o Modern view: one month is generally sufficient
 Tenancies at will: terminable w/ reasonable NOTICE by EITHER party
 Created by express agreement
o Otherwise the C would treat as periodic tenancy
 Tenancies at sufferance: occurs when tenant holds over OR wrongfully
remains
 Not a tenancy at all
 Lasts until landlord evicts OR turns into periodic tenancy
 Exceptions
o Tenant remains for small amount of time
o Tenant’s delay in leaving wasn’t their fault
o Seasonal lease
 Lease assignments: Absent an express restriction in lease, a tenant can
transfer their interest in lease
 Assignment: conveyance of ENTIRE duration of lease
o Initial tenant AND new tenant BOTH liable to landlord
 Assignee is not in privity of contract BUT IS in
privity of estate
 Sublease: conveyance of PART of duration of lease
o Only initial tenant liable to landlord
 Sublessee not in privity of contract w/ landlord
NOR privity of estate
 Obligations of subsequent landlords
 Original landlord: liable for ALL lease covenants
 New landlord: liable for all lease covenants that touch and
concern the land
o Special problems
 Rule against perpetuities
 Rights in real property: non-possessory interests
o Easements: give someone right to use real property w/o exclusively possessing it
 Interest is a right of use
 Creation methods:
 A) Express: specific grants or reservations made in a deed
 B) Implied:
o Prior use by a common owner
o Easements by necessity: arise when land is cutoff from
access/landlocked
 C) Prescription
o Adverse possession requirements except exclusivity
 Types:
 A) easement appurtenant: benefits another piece of property
 o When land is transferred, easement appurtenant DOES
transfer
 B) easement in gross: unrelated to other land
o Does NOT transfer
 Questions
 What kind of use can you make of an easement (scope of the use
contemplated)
o Can’t overburden easement
o Can’t exceed its scope
 Repairs
o User must repair, not the owner
 Termination (8 methods)
 Distinguish from license:
 License: permission to use someone’s land
o a privilege, not a right
o can be terminated
o an intended easement that doesn’t meet all requirements
becomes a license
o Covenants (or Equitable servitudes): Private restrictions that arise when 2 or
more landowners create a private land-use regime
 Difference between covenants from equitable servitudes is
ENFORCEMENT
 both affect use of someone’s own property
 BUT enforcing a real covenant is a legal action (money)
 INSTEAD enforcing an equitable servitude is an action in equity
 BURDEN Enforceable against subsequent owners IF burden of restriction
runs w/ the land
 Harder to get money damages than getting an injunction
 If seeking injunction (equitable servitude), must prove:
o A) Intent
o B) Notice
 Actual
 Record
 Inquiry
o And C) Touch and concern: agreement related to use of
land
 If seeking money damages (real covenant), must prove:
o A) Intent
o B) Notice
o C) Touch and Concern
o D) Horizontal privity: covenanting parties shared some
interest in property other than covenant itself
 Grantor-grantee
  Landlord-tenant
 Mortgagee-mortgagor
o And E) Vertical privity: successor in interest received entire
durational estate that original covenanting party had to
give
 BENEFIT receivable by subsequent owners IF
 Equitable servitude
o Intent
o Touch and concern
 Real covenant
o Intent
o Touch and concern
o Vertical privity
o Profits
o Fixtures
o Zoning
 Conveyance of property
o Real Estate contracts
o Merger
 Two step process
 1) Buyer and Seller agree to sign contract of sale
 2) Seller signs and delivers deed to buyer at closing
o Once deed is accepted, terms of K are MERGED into deed
 Parties can no longer sue on K itself
 Must sue on rights that arise from the deed
o Statue of Frauds
 Real estate Ks require a writing that includes
 description of the property
 names of parties
 price
 signature of party to be charged
 EXCEPTIONS
 Oral contract OK ONLY IF
o Part performance (2 of 3)
 A) Buyer is in possession
 B) Paid in full or close to it
 C) Made substantial improvements
o Risk of loss: IF property is damaged or destroyed after K is signed BUT before
closing
 Risk of loss is on BUYER
o Equitable conversion
 IF a party dies before closing
 Doctrine of equitable conversion: sale happens anyway
 o BUYER is deemed to own the REAL property the moment K
is signed
 Exception: SELLER keeps possession of land UNTIL
closing
o SELLER is deemed to own PERSONAL property (right to
receive cash)
o Marketability
 Ever land sale K has an IMPLIED covenant that seller will give marketable
title at closing
 Not necessarily PERFECT title BUT something a reasonable person
would accept
 Requirements
 Proof of title
o Title free of encumbrances
 Easements
 Covenants
 Mortgages (not otherwise agreed to)
 Seller has until day of closing to clear up title issues before buyer
can rescind
o EVEN IF problems are impossible to resolve before closing
o Timing of performance
 Time is NOT of the essence UNLESS specifically stated in K
 Seller has reasonable time after date set for closing (usually up to 2
months) to cure any defects
 Mortgages (and other security devices)
o Types of real estate security interests
o Transfers
o Foreclosure
 Equitable right of Redemption
 At any time before foreclosure sale, debtor can redeem property
BY paying amount in arrears (amount owed)
 UNLESS there’s a valid acceleration clause
o Debtor has to pay entire balance remaining due on loan
 Statutory right of redemption
 Allows redemption for a fixed period EVEN AFTER of foreclosure
sale
o Priority
 Creditors must record
 Generally, first in time first in rights
 Lender w/ highest priority mortgage gets paid first
 Foreclosure sale does NOT destroy senior interests BUT DOES destroy
junior interest EVEN IF not paid in full
  EXCEPTION: purchase money mortgage: Mortgage taken out to actually
buy property
 Has priority over earlier mortgages EVEN IF other mortgages
recorded first
 UNLESS purchase money mortgage lender FAILS TO RECORD
o Through operation of the recording acts
 Titles
o Transfer by Deed
 Deed conveys property from one person to another
 Deed is valid IF
 A) property executed
o Eg. SoF
 AND B) properly delivered
o Based on grantor’s INTENT
o Recording a deed creates presumption of delivery
 Warranties for title
 General warranty deed
o Contains SIX covenants

 Quitclaim deed
o Contains NO promises
 Recording NOT required for deed to be valid
o Recording Acts: relevant when talking about 3rd parties
 Three types of recording statutes
 1) Race: First to record wins
o Notice is irrelevant
 2) Notice: subsequent BFP wins
o A) Value paid
o AND B) no notice
 3) Race-notice*: subsequent BFP who records first wins
o A) Value paid
o B) no notice
o AND C) first to record
 Recording statutes protect ONLY subsequent purchases
 Notice and race-notice statutes protect ONLY BFP
 Donees, heirs, devisee are NOT protected
 EXCEPTION: shelter doctrine
o Protects non-BFP IF they received FROM a BFP
o Adverse possession
 Elements (ECHOES)
 Exclusive
 Continuous
 Hostile
  Open and Notorious
 Entry (actual possession)
 Statutory period

 Direct restraints on alienation of a fee simple are void.

o The grant is simply read as if it had been "O to A in fee simple."
 A life tenant is responsible for paying taxes on the property (
o If there was a mortgage, the life tenant would have had to pay the interest on the mortgage but
not the principal
 Generally, a life tenant can only maintain the property and not sell off any of the natural resources,
such as trees and gravel.
o But there is an exception for existing exploitation of these resources.
 Eg. If a gravel mine was operating prior to the son's taking of the life estate, that
preexisting use is protected and the life tenant is not liable for continuing the mining
of gravel.
 Eg. The destruction of a vacant house in poor condition might be considered
ameliorative waste-the destruction of improvements on the life estate that increase
the value of the property
o Generally, a life tenant cannot tear down improvements simply because the life tenant wants
to make a more profitable use of the land.
 But an exception exists when changed conditions have made the destruction of the
improvement reasonably necessary.
 A landowner has a right to have his land supported in its natural state by adjoining land.
o IF the land has buildings on it, an excavating adjacent landowner is strictly liable for damage
to the buildings caused by the excavation ONLY IF
 the excavation would have caused the land to subside even in its natural state (i.e.,
without buildings).
 OR the excavating landowner was negligent

 EVEN when someone acquires title by adverse possession, that title is not marketable until a judicial
action is taken to quiet title.
o The law does not require purchasers to have to go to court to clearly establish title.
o If seller has not done this, title is not marketable.
 In the majority of jurisdictions, when a mortgagor transfers title to another, and the transferee takes
"subject to" the mortgage, that means that the transferee will not be liable to the mortgagee on the
promise underlying the mortgage.
o So a third party cannot be sued on the debt.
o BUT the mortgage follows the property
 IF the transferee does not make the payments, THEN the mortgagee may foreclose
on the mortgage.
o In any event, the mortgagor remains liable on the mortgage after the transfer and she can be
sued on the debt.
o If the third party had "assumed" the mortgage, rather than merely taking "subject to" it, then
he could have been sued on the debt.
 On complex recording questions, the order of transfers and recordings is critical, so make a quick
marginal chart of transactions:
o 1. Owner to buyer, no recording
 o 2. Owner to investor (BFP), no recording
o 3. Buyer records
o 4. Investor to developer, no recording & developer knows of buyer's deed
 Class closing rule: Whenever any member of the class is entitled to a distribution, the class closes
and the distribution is made then. Any later arrivals to the class lose out entirely.
 Landlords are liable for latent defects even if they neither knew nor should have known of the defect if
the lease is for a short term and the property is furnished.
o This is an exception to the general rule that a landlord is not liable for latent defects unless the
landlord either knew or had reason to know of the defects
 When a tenant wrongfully holds over after the expiration of a lease, the landlord has two choices:
o either treat the tenant as a trespasser and sue for damages and possession
o or impose a new periodic tenancy on the hold-over tenant
 If the landlord chooses, to impose the new periodic tenancy, most courts in
residential situations would impose a month-to-month tenancy.
 While the rent (as well as other terms) of the new tenancy will generally be the same
as the old tenancy, there is an exception when the landlord has told the tenant of a
future higher rent and that notification came before the expiration of the old lease.
 In that event, the landlord can impose the higher rent in the new periodic
tenancy
 BUT if the landlord did NOT tell the tenant of the higher rent before the
expiration of the old lease THEN the lower rent applies.
 for there to be a merger which will extinguish an easement, the duration of the servient estate must be
equal to or longer than the duration of the dominant estate (and therefore the easement)
 Don't be fooled by very long periods of nonuse in the facts-make sure there is an act showing intent to
permanently abandon the easement; otherwise, there can be no termination.
 exclusive possession for the statutory period leads to title by adverse possession, while adverse use
will only result in a prescriptive easement.
 Restrictive covenants on all lots in a subdivision can be voided if changed conditions have made the
property unusable for the specified use
o this means that the entire subdivision must have changed so significantly that enforcement of
the restriction would be inequitable
o IF some houses in the center of the subdivision are not affected by the pollution, THEN none
of the restrictions can be voided
 ONLY IF ALL lots are affected, then all restrictions are voided.
 A seller may use proceeds paid by the buyer at closing to pay off mortgages, and thus deliver clear
title to the buyer.
o As long as the amount due from the buyer is enough to pay off the note, the seller has an
implied right to do this, and the existence of the note under these circumstances does not
breach the contract sale.
o A covenant by the seller that the deed given at closing will be free of encumbrances is
unaffected by the doctrine of equitable conversion
 Equipment installed for the purpose of trade by a tenant, EVEN IF it would otherwise constitute a
fixture, is generally removable IF it is not an integral part of the premises AND the tenant pays for any
damages caused by the removal
o Absent an agreement to the contrary, these annexations are removable BECAUSE it was not
the intention of the tenant to make them a permanent part of the premises.
 An easement by necessity is NEVER in writing
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