Property Outline

A.
Bundle of Sticks-classic theory; one owns a number of distinct rights that may be individually separated from the bundle: (EQUA DPIM) a. Exclude others (most important stick in bundle) b. Quiet enjoyment c. Use the land d. Alienate (sell/lease/give away) e. Develop the property/natural resources f. Possess g. Receive/earn Income from the property h. Manage the property i. Critiques: Unrealistic to have all rights and no duties; disconnects from context of the environment and others who hold interest in it. B. Web of Interests-modern theory preferred by Arnold a. Property is in the center, w/ several entities who have varying degrees of different interests in the property that are balanced. C. RTE Basic Principle RTE is so important to the essence of property and society that courts authorize punitive damages for willful trespass even when actual damages are nominal. PP: a. Legal protection of RTE advances several values served by property: individual freedom and autonomy, the economic value of land (both socially wealthmaximizing and personally utilitarian), and personhood due to the ways in which an owners relationship w/ property helps to shape his identity. b. If landowner could not exclude unwanted trespassers, the other rights in the bundle, such as alienation, possession, and use, would be vastly diminished in value and utility. c. Society has a strong interest in preventing trespass d. Promotes social order: Society disfavors self-help with regard to land because more likely to result in violence e. Promotes economic productive use of the land f. Yet RTE not absolute b/c property serves human values. Courts may treat the owners property rights as BoR, by which legal and political institutions determine the scope of the rights according to social values. Courts might treat the owners property interests as a WoI, in which there are many different interestholders in the office complex. These interest holders may have varying degrees of interest in being present at Dr office or in excluding the uninvited from the complex; there is not just a single holder of the RTE in the WoI. 2 relevant exceptions: i. Invitation and Basic Services: when an owner of property has invited others onto his property, in part for his own benefit, he cannot exclude those seeking access to the invitees to offer basic services that meet their needs. PP: 1) when landowner voluntarily invites ppl onto property, the landowners reasonable expectations about the RTE are diminished. 2) those legally present on anothers land at the owners invitation have interests in meeting basic human needs, in personal dignity and autonomy, and these values must be weighed against the owners
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control over his land 3) societal interest in the poor having access to services 4) law protects against the exploitation of those with relatively weak bargaining power. ii. Invitation to the Public and Public Forum Equivalency: when private property has become the equivalent of a public forum, the expressional interest of those attempting to reach the public may outweigh the private property owners RTE, subject to the owners right to impose reasonable limits aimed at avoiding excessive disruption. 1. Schmid Test (minority): In determining the existence of free speech rights on privately owned property, consider 3 factors: a. normal use of property i. Although the property is large consisting of six 2story buildings and therefore might be seen as hosting a variety of activities, it is substantially different than a regional shopping mall. People generally do not go to a commercial office center to congregate, hang out, communicate with one another, and build community in the ways that they do so at a large regional shopping mall. Most commercial office centers do not convey a community image and do not have many characteristics of public property. b. extent of publics invitation to use i. The extent and nature of the publics invitation to use a commercial office building is much more limited than for a regional shopping mall. The expected invitee is not the all-inclusive (or at least hopefully so for retailers) American consumer; the expected invitee is a much smaller class of consumers of particular professional and business services. On the other hand, it is reasonable to assume that owners who lease to MDs who perform abortions can anticipate that both patients and antiabortion protesters will be attracted to the property c. purpose of activity in relation to propertys public & private use i. Purpose of the expressional activity is to convey a persuasive (and perhaps upsetting) message to medical patients considering an abortion in a way that will convince them not to have the abortion. The activity is discordant with the normal use of the property for medical offices, because the protesters seek to deter others from using Dr. Lands services; the anti-war protesters in Shack had no antishopping message. On the other hand, the expression of an anti-abortion message arguably has
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g.
few effective channels, and the handing out of leaflets at an abortion clinic or medical office is one of the most effective means of communicating the intended message. 2. Bundle of Sticks: owner lacks a property right because his RTE has been taken or severely limited 3. Web of Interests: owner can simultaneously have property rights and have limits to his RTE 4. PP: 1) society has a particularly strong interest in free expression of ideas 2) personhood due to the ways in which the relationship w/ anothers property forms their identity 3) property functions as a social setting. Trespass to Chattels Principal Problem i. Issue: Will A be able to obtain-or can she reasonably seek-an
injunction to prevent Carl from leaning on her car when it is parked on the street in front of his store, even though he blatantly disregards her requests that he not lean on her car and even though he does not cause (nor is likely to cause) any damage to her car? ii. In this case, Amanda will want to rely heavily on the RTE as a component of property ownership. The RTE is one of the most essential sticks in the BoS, and she therefore has the right to prevent Carl from leaning on her car. His blatant disregard for her instructions to not lean on her car is affecting the essential nature of the ownership of her car. The blatant disregard is evidenced by the fact he laughs at her and tells her to "chill out." Surely she should also be able to obtain an injunction. It affects personhood due to the ways in which the relationship w/ anothers property forms their identity. This would be her argument. She would focus on the dissent which adopted a WoI approach, asking whether the owner suffered economic loss generally from the trespass. However, note that Carl's blatant disregard for her refusal is a little bit different from Jacque in that Carl is not doing it in a sneaky manner, and he leans on his own car when it is parked there as well as hers. It is arguably not quite as egregious, but nonetheless, she is insisting than he not lean on her car yet he is blatantly disregarding and laughing at her. iii. To be entitled to an injunction to prevent ongoing or future TTCs, the owner had to demonstrate that D's conduct was: 1) harmful to the physical condition, the quality, or the value of the chattel (none); 2) deprived the owner of the chattel's use for a substantial period of time (none); 3) affected some other legally protected interest of the owner (right to exclude). One major problem is that a car is mobile personal property. A could avoid this (non legal solution). Whether A has an actionable trespass to chattels claim is based on part in that chattel owners can indeed engage in effective self-help by simply moving their tangible personal property out of the place of the harm, helping judicial economy. A might make an argument that the RTE is in itself a legally protected interest, but that is not a
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strong argument. Overall, b/c none of the elements for TTC were met, A is not likely get injunction. An actionable claim for TTC must show harm.
D. AP-- one can acquire legal title of land w/o payment of money and w/o the consent of the legal record owner a. Throughout the statutory period, AP is building an original title that ripens into a full legal title once the period has run b. During the interim period, AP is liable for damages in trespass and is subject to ejectment c. 6 requirements: each element is a particular characteristic of "possession," which is the exercise of "dominion and control" over the property i. Actual Possession-dominion and control over land which simply means treating the property how a true owner would evidence includes: (POIMEST) 1. Physical Occupation 2. Improvements 3. Maintenance 4. Excluding others 5. Securing (building fence) 6. Taxes (paying) required in some JX ii. Hostile Possession- without the title holders permission 1. Easily defeated by signposts which give others permission to use private land iii. Open & Notorious Possession-occupy property in such a manner as to put the whole world, including the title owner, on reasonable notice; means the degree use is consistent as the average owner would. 1. Enough that the title holder SHOULD know iv. Exclusive Possession-no one adverse to the AP v. Continuous Possession- AP must hold that property continuously for the entire SoL period; means the degree of occupancy is consistent as the average owner would. 1. does not require continuous physical presence (AP can vacation) 2. Tacking of possession by subsequent occupants legitimate provided the occupants are in privity. a. Tacking: Process where AP adds his period of possession to that of a prior AP. For tacking to be permitted, there must be privity between the possessors. Privity means one possessor voluntarily transferred possession to a subsequent possessor. b. Tolling Statute: where the state protects certain title owners from having AP run against them due to certain types of disabilities, like age. If state law unknown, mention there might be a tolling statute and you would have to research it and see if this situation would have a basis for tolling. 3. PP: gives the owner notice that possessor is claiming ownership, and that the entries are not just a series of trespasses.
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d.
e.
f.
g. h.
i.
vi. Possession Under Claim of Right-extent to which the AP has some sort of legally legitimate claim to ownership of property; 2 different tests (differ by state) to determine this: 1. subjective test-good faith intent is required a. AP has to believe that the property is his b. PP--Discourages theft, AP wins less often which protects third parties who rely on deed records, court should not produce unjust results simply because it might take extra time and effort to try to ascertain the possessor's subjective state of mind. c. Downsidejudicial economy + integrity compromised? 2. objective test-claim of right satisfied by hostility alone a. PP(also look at PP for AP in general) i. Judicial economy(Easier for court to use, less evidence needed) + integrity (Discourages perjury) Causes of Action for AP (Should bring all 3 even if client only wants one) i. action for trespass = money damages ii. action for ejectment = injunction to recover exclusive possession iii. action for quiet title = declaratory judgment defining who has title PP for AP i. personhood-people develop a personal attachment to their land, which is related to the web of interest approach ii. Encourages productive use of land = reward the user iii. Discourages neglect of land = penalize the neglecter 1. Neglect leads to public health problems, fire hazards, etc. iv. Social order: Provides an orderly and stable means for resolving boundary disputes without it, you would have disorderly self-help. v. Third party expectations: people come to rely on AP PP against AP i. Permits uncompensated wealth transfer ii. May reward theft iii. Anti-wilderness bias (it undervalues natural state of the land) AP may claim all the rights in the bundle of sticks have been usurped Principal P: Under the objective test, a claim of right is satisfied under hostility alone. C has a very good argument for AP if the court follows the objective test because in that case she has met the 6 elements. There are a couple of concerns however. The taxes and the title-holder leaving some property raise some exclusive possession issues. The title-holder will win, and C will lose, if the court follows the subjective test because she did not have a good faith belief that it was her own. Principal P: Sims AP land from BDGI by paving it in 1984. O never did anything about the paving and the use of his land up to 1994. The AP by Sims of CDGH was ended in 1994 b/c O paved it. If continuity and exclusivity is interrupted, Sims loses altogether, even BCHI. There is an argument that the court would view the 3 months of Os construction on BDGI consistent w/ Sims acting as a true owner would, and merely giving his O a brief period of time to use it,
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therefore meeting the two requirements. Alternatively, Pen will argue that he has title to BDGI, but the problem with that is he only possessed it for 3 months, and voluntarily put up a fence halfway at the CH line. Sims will not be successful for AP CDGH, but he should not concede that up front w/o getting something in return. Sim's attorney would say Sim's has AP possessed BDGI. Pen's attorney would then say Sim's clearly have not possessed CDHG. Then Sims could concede that but at least maintain possession of BCHI. E. LL Tenant relationships: Lease or License? a. Lease-unrevocable transfer of right of exclusive possession of the premises for the lease term. It is both: i. contract for possessory interest in the land ii. conveyance of an estate in land b. Bundle of Sticks: LL transfers sticks including RTE, quiet enjoyment, use of land, alienation c. Web of Interests: not just the LL-tenant relationship, but the ways that the owner is connected to the land, the tenant, the govt, neighbors, utility easement holders, etc, and the ways in which each of these persons are connected to the land and to one another. d. Must show i. Intention to establish the relationship of LL and tenant. ii. definite description of the property leased iii. agreement for rent to be paid at particular times during a specified term e. License- revocable agreement authorizing licensee to use the land in possession of another i. At most K, may be oral or written. ii. Not assignable. f. Principal P: Note underlying interest: LL favors license b/c does not create any interest in the property for the licenseelicensee merely gets the right to enter, occupy, and use. Tenant prefers lease. g. To differentiate, several factors to determine and effectuate parties intent: (EEARP) i. Express terms regarding parties' intent to reach a lease or license are persuasive to a court, but not controlling and courts may determine if the whole agreement is in accord with this intent 1. Used lease, court may adopt formalistic approach and go with it, and could incentivize K negotiation in future 2. Lessor and lessee weaker than lease ii. Exclusive Possession dominion and control and the RTE others? 1. Consider limited dates, limited possession of location 2. Sporadic use of premises with shared control by owner with each use can never be deemed as exclusive possession iii. Assignable
i. No assignment provision could mean lease b/c it expressly says so i. No assignment provision could mean license b/c restating the law
iv. Rent-if one isnt paying, looks like license

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1. LAFA will argue % of profits looks like rent and therefore indicative of a lease 2. City will argue % of profits not rent b/c not over specified term v. PP/WoI reasons for choosing one over the other 1. License: more economic productive use of land to benefit community/ characteristic of the property: taxpayer financed public stadium which construes against private parties/ promote judicial economy related to LL-tenant proceedings/ note that even if license, team might get damages for breach of K/characteristics of relationship between interest holders and property: protect third parties who rely upon license 2. Lease: economic productive use of the land to keep team in town to pay taxes/ just as owner can make the licensee come and go at will, the licensee may also leave at will: flexibility of license comes at a price--city may be deprived of a reasonably steady income flow and may see a vacancy rate high enough to drive the building into a negative cash flow status. F. Type of Tenancy a. Tenancy for Years- fixed time period i. terminates automatically at the date provided for in the lease ii. May be made terminable on some event--"When the war ends iii. 9/13/11 to 9/13/12 with a monthly rent of $1k iv. Until 1/1/12 (presume that it is going to start either at the point at which the parties have signed the lease, or at some reasonable time thereafter) b. Periodic Tenancy-Continually renewing lease with no set ending date (month to month, year to year, etc) i. Continues until proper notice of termination is given. ii. Requires notice equal to the length of the period. iii. Exception: Only 6 month notice for a year-to-year periodic tenancy iv. Modern statutes permit it to end upon length of period v. Month to month until 9/13/12--ambiguity in the terms of the lease, but most courts would construe this as a periodic tenancy. c. Tenancy at Will- No designated duration and terminates at the will of either party, thus giving the parties limited certainty as to the duration of the tenancy. Modern statutes require notice of intent to terminate. d. Tenancy at Sufferance- holdover tenant remains after lease ends i. terminates either when: 1. LL takes legal action to eject the tenant, or 2. LL accepts payment of the rent-- creates periodic tenancy G. LLs Duties: Implied Duties (3 below), statutory duties, and duties in K a. Deliver Possession at the Commencement of the Lease Term deliver either: i. actual physical possession-no one else in possession of the property 1. PP: Implied b/c unconscionable for the tenant to agree otherwise ii. legal possession-simply the right to move in (minority) 1. LL doesnt have to kick out any holdovers/trespassers
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Note: Tenant must deal with AP/trespasser during lease term, unless caused by LL.
b. Not to Interfere with Tenants Quiet Enjoyment LL has a duty not to interfere with the tenants possession during tenancy; 4 ways below: i. Actual Total Eviction-tenant is deprived of all of the leased property 1. remedies when caused by LL no longer obligated to pay rent and may elect to terminate the lease. ii. Actual Partial Eviction-tenant deprived of a significant portion of the leased property (deprivation cannot be de minimus) 1. remedies when caused by LL total rent abatement while remaining in possession, until tenant is restored to possession. a. Courts also look to a more equitable outcome based on the context, offering instead proportionate rent abatement. iii. Constructive Eviction-Interferences by LL that fall short of a physical exclusion, but that are so substantial that results in actual eviction of the property. If T wants to stop paying rent in a constructive eviction, he must abandon the premises and terminate the tenancy. 1. Even w/o affirmative activity by LL, there might be CE iv. Substantial Interference of Quiet Enjoyment-tenant deprived of beneficial use and enjoyment that causes damages but falls short of CE 1. remedy monetary damages proportionate to reduced beneficial use and enjoyment 2. PP tenants need a protection against LLs whose interferences fall short of CE Principal P: L leased building to Theresa. L also owned v.
adjacent property that he leased to Tri-State Auto Parks as a parking lot. Theresa began using a strip of the land leased to TriState for the storage of garbage. This strip, approximately 5 ft by 48 ft, was adjacent to Theresa's building. Tri-State did not object to this practice and later erected 4 iron posts marking the strip. Several yrs later the Health Dept informed Theresa that she could not continue the unenclosed storage of garbage on the strip b/c of odor and fire danger. Theresa unsuccessfully negotiated with Tri-State for additional space, and then, with the approval of L, began construction of an extension of her building that enclosed the strip. 1 week after the work began, Tri-State's attorney sent a letter to Theresa protesting the encroachment and demanding that the work be stopped. Theresa, however, was on a 3 month vacation and could not be reached. Building was completed 6 weeks later. Tri-State stopped paying the rent, which was 3K/month, and L is suing for rent. Discuss the rights of the parties. 1. L delivered actual physical possession of the land to TriState, meeting the first implied duty. However, this is not an actual total eviction. 2. Is this an actual partial eviction? Ask is it significant?
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3.
4.
5.
6.
may make it significant. But also consider previously it was not interfering with their use of property. b. Also since Teresa is just a trespasser or AP, it is up to Tri-State to eject her. The only way Tri-State will be successful in an actual partial eviction against L is if this is with L's permission, which is evident. However, the remedy of total rent abatement is a pretty serious remedy, even if it is significant. This suggests that this is exactly the situation where courts may reconsider total rent abatement-proportionate rent abatement might be more appropriate, or the court may go down the road to constructive eviction or substantial breach of quiet enjoyment. Has Tri-State been constructively evicted? a. No- not so substantial that results in actual eviction of property. Substantial interference of quiet enjoyment? a. Yes. While when Tri-State quits paying rent, they want to claim actual partial eviction so they get total rent abatement, a court might be more inclined to view this as a substantial breach of quiet enjoyment because they can award some kind of damages that would get more at the true value of this land to Tri-State. Tri-state may liable to LL for breach of duty not commit waste a. Voluntary i. Tenant cannot affirmatively use the property in such a way as to damage or destroy it b. Permissive i. Tenant is negligent and fails to reasonably prevent waste that could be prevented (ex. T has duty to report leaky roof) c. Ameliorative i. Tenant makes improvement to the property; LL has no cause of action against the tenant for doing this. Any potential for punitive damages here (Jacque) a. Theresa tried to negotiate with Tri-State, and clearly knew she needed their permission. Tri-State said no and she did it anyway. Presumably because L owns both pieces of land, she will be in a slightly more sympathetic position than in Jacque. But fundamentally Tri-State has a right to exclusive possession of the land. L transferred the RTE, a stick of the bundle of rights, to Tri-State.
a. The fact that is going to be a permanent structure
c. Implied Warranty of Habitability(residential):
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i. IWOH- requires LL to maintain reasonable bare living requirements fit for human occupation 1. Arguable IWOH breach is at least a substantial interference of quiet enjoyment. Consider: you get more remedies for a breach of the IWOH, then you do with substantial interference of quiet enjoyment. In SIOQE, you are going to have to prove the damages from the loss of enjoyment. More favorable for the tenant to pursue the IWOH. ii. Scope of Duty and Conditions that Constitute a Breach - some things are BLRs, while others are determined on a context-specific case by case basis (CBC) 1. hot water/heating system BLR 2. building must be structurally sound BLR 3. heat and electricity in safe working condition BLR 4. septic/plumbing systems in good working order CBC 5. rodent/insect infestation CBC 6. What is considered minimum conditions of habitability in some regions may not be minimum conditions of habitability in others (AC depends location) 7. Minor deficiencies do not constitute a breach, such as minor water leaks or wall cracks or the need for paint. 8. LL is not liable for defects caused by the tenant. 9. Substantial compliance with building and housing code standards will generally service as fulfillment of LL's duty to provide habitable premises. 10. But code violation is not necessary to establish a breach so long as the claimed defect has an impact the premises being fit for human occupation. iii. Majority view on breach: If LL is unaware of the condition, LL has reasonable time to repair after notice is given. iv. Minority view on breach: When LL given notice of alleged uninhabitable conditions not caused by the tenants themselves, a LL's breach of IWOH exists whether or not he has had a "reasonable" time to repair. v. No waiver of a breach of IWOH --Tenant awareness of defects irrelevant regarding the LL's duty 1. Against PP to permit tenant to waive defects that make the premises uninhabitable, because society encourages the enforcement of housing code by tenants. vi. Remedies for breach of IWOH 1. Remain in possession, repair, deduct reasonable amount from rent 2. Remain in possession, pay rent, seek rent abatement (partial or total if nature of condition is so extreme) a. Measures for determining the amount of rent abatement to which a tenant is entitled: i. Fair rental value of the premises
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1. K rent may be considered as evidence of the fair market value of the premises as warranted ii. "percentage reduction in rent" method of measuring damages, the rent is reduced by the percentage that the enjoyment of the premises has been reduced as a result of LLs breach. 3. Remain in possession, pay rent, seek damages 4. rescission (only if condition is very extreme) vii. PP for IWOH: 1. Neighboring property values would decline if there was no IWOH 2. Law protects against the exploitation of those w/ relatively weak bargaining power. 3. Health impacts on society 4. Modern urban tenant does not have time to inspect premises and put them in habitable condition. viii. PP against IWOH: 1. May reduce the supply of low-income housing and raise its price 2. Paternalism d. Implied warranty of suitability for nonresidential property-- LL has implied duty at inception of lease that there are no vital defects relating intended commercial purpose AND that these essential facilities will remain suitable. i. PP: Not all commercial tenants savvy enough to incorporate into lease. ii. Minority rule b/c commercial tenants should be expected to bargain for what they want the conditions should be. Not like residential lease where people may not understand their legal rights. e. PP: Warehouse recently converted into studio lofts for working artists.
Each loft contains a huge open area with 2 enclosed toilets. No kitchen per se, but each loft has a microwave and a small refrigerator (but no stove). Intent behind conversion was to afford artist-occupant a space to work on their art in their respective lofts, as well as a common area to display and sell their art to the public. Thus, the complex also contains a large common area that was intended to be used as an open-area market where the artists could sell their wares to the public. Many artists choose to fix their lofts up in a manner that enables them to stay overnight from time to time so they can work on their artwork anytime they choose. In the summer of 09, sculptor Nesa rented loft for 2 year term. When LL showed Nesa the loft, he told her that one of 2 toilets was not operational but that he would repair it soon. Nesa was pleasantly surprised by the low monthly rent for the loft of $600 per month. After she moved in, Nesa discovered that the loft lacked hot water. When she complained to LL, he replied by saying that unless she was some sort of idiot, she must have realized that such a cheap rental surely would be missing something critical like hot water. Furthermore, the open area market has become virtually unusable due to severe flooding from recent rainstorms. This is anticipated to be a long-term problem b/c of construction issue. Nonetheless, Nesa wants to stay in the loft for the community. Also, it is a good location for
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soliciting business because it is right by the train station and the major highway. She comes to you for advice and asks you: 1) whether an IWOH has been breached with respect to the toilet, the heat, and the market; and 2) if so, what remedies she can expect to obtain. i. In terms of analyzing if it is residential or commercial, consider the nature of the property such that the parties reasonably intended that it be used at least in part for residential purposes. If so, then IWOH would apply. 1. IWOH? a. LL Argue: If conditions truly bad enough, Nesa can go home. The primary purpose of the property is nonresidential, specifically commercial. Any residential use of the property is merely incidental to commercial use. Just b/c people sleep in the property, doesnt turn it into a residential property. Characteristics of property is located in industrial area, may mean that not zoned for residential use. Units lack many basic amenities intended for residential buildings. Two toilets may indicate male/female as in commercial settings. Artists who stayed overnight motivated by work. a. Nesa: May have reasonable argument that lease is at least partly residential, which would mean IWOH would apply. Customary usage of the loft units in the building is partially residential. There is arguably a fair amount of residential use happening with LLs implied consent, and therefore a reasonable tenant might reasonably expect that IWOH apply. 3. Nesa could instead focus on IWOS for nonresidential properties, but this is only applied in a minority of JX (assuming no express agreement). PP: courts worry that if IWOS, LLs will raise rents and
commercial tenants will pass those costs onto their customers. If in JX, will be a stronger case than IWOH: 1. IWOS and 2 non-working toilets be a breach?
a. Perhaps it is a breach of an express agreement on his part, because he said he would do it soon. a. No, because one already works and it is not vital defect relating intended commercial purpose. IWOS and lack of hot water? 1. a. Yes-- customary that particular commercial building come with hot water. Also, public health concerns regarding sanitation. Might be vital defect relating to intended commercial purpose (art). a. No--consider what is custom for artist lofts in particular, and lack of hot water may not be vital defect relating intended commercial purpose 1. IWOH and common area? a. It makes a difference whether it is her premises are uninhabitable or the common area. Nesa possibly has claim for damages of substantial interference of quiet
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enjoyment b/c the inability to use the common area interferes with the quiet use and enjoyment for which she intended to use the property. But it is not that her premises are unsuitable in themselves. But could make an argument that the danger of the property makes living area breach of IWOH. Also could make CE. b. It is possible if the stairs were dangerous, the court might view that as habitability related to lease. c. Alternately, Nesa might argue that there was an express agreement that was violated because LL promised it to be fit for use. 1. IWOS and common area? d. Stronger case than IWOH b/c relates to intended commercial purpose. However, is it a vital defect relating to intended commercial purpose? Not to Interfere with Tenants Quiet Enjoyment and Common 2. Area: e. Breach of Substantial Interference of quiet enjoyment. f. Actual partial eviction-- unusable marketplace would certainly constitute being deprived of a significant portion of the leased property, sense that was one of the big selling parts of the location. 3. In conclusion, the broken toilet and lack of hot water are unlikely breaches of IWOH b/c the rental property is a commercial lease. However may breach of IWOS (remedies?). As far as the flooded marketplace is concerned, definitely a breach IWOS, along w/ interference with tenant quiet enjoyment, specifically substantial interference of quiet enjoyment, partial eviction and doubtfully CE. (remedies?).
H. Assignment and Sublease Principal Problem a. In determining whether a subsequent agreement is a sublease or assignment, consider (ERRP) i. Express terms regarding parties' intent are persuasive to a court, but not controlling and courts may determine if the whole agreement is in accord with this intent 1. Substance over formeven though they called it sublease ii. Rent (weak factor to considerwhere A has the entire property for the entire remaining term of the lease with the RTE, it is an assignment, notwithstanding the variation in rent. 2 important things: 1st, we want to protect the LLs ability to get the rent. So when the assignee has the entire remaining term of the lease, entire property, and sticks in the bundle of rights, that is everything. 2nd, the essence of what leasehold is the right to exclusive possession. A court is going to be highly likely to treat this as a leasehold.) 1. assignee rent exactly the amount of rent to be paid under the original lease
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i.
2. Sublessee pays rent to sublessor consistent with the creation of a new LL-tenant relationship. iii. Rights: 1. transfer all of tenants rights indicates assignment 2. transfers less than all tenants rights indicates sublease 3. assignee agreement to obey original lease 4. sublessor retains right to repossess premises if sublessee defaults iv. PP: 1. Equity: A should not have to pay double rent; 2. Court could adopt formalistic approach which would have the effect of incentivizing K negotiation within lease This problem is about the duty to pay rent to the LL. The LL cannot force the tenant, assignee, sublessee to actually be physically be present to the property. The issue is whether a party is obligated to pay the rent through the remainder of the lease term. The original tenant is obligated under the privity of contract. An assignee is obligated under the privity of estate. The question is it an assignment or sublease. If it is assignment, she is liable even if she already paid Terry. If it is a sublease, then she is not. Sublessees are not excused from paying rent altogether, but rather the question is whether Larry can sue Alyssa for the rent. With a sublease, the sublessor could sue Alyssa.
ii.
Assignment- Privity of K continues between the LL and the assignor; privity of K is created between the assignor and the assignee; and privity of estate arises as a matter of law between the LL and the assignee. 1. The assignor remains liable to the LL for all covenants in the original lease, because they remain in privity of K, absent a novation. The privity of estate between LL and assignee requires both of them to perform those covenants in the original lease that run with the land, and, as a practical matter, most lease covenants do so run. Ex. suppose that A leases to B who assigns to C. If no one pays rent to A, both B and C are liable. 2. If the assignee does not pay the rent, presumably the assignment could be terminated. 3. The last assignee is in privity of estate with LL. ii. Sublease- A sublease creates a new LL-tenant relationship. Suppose A leases to B, and B subleases to C. Privity of K and privity of estate remain between A and B; privity of K arise between B and C. a. There is neither privity of K nor privity of estate between LL and the sublessee, and therefore cannot sue or be sued by LL. b. Sublessor remains liable to the original lessor for all covenants in the original lease. Similarly, the sublessee is liable to the sublessor for the covenants in the sublease. However, the sublessee has no obligations to LL. b. Note that in successive lease conflicts, all parties are in privity of K with one another so all will end up in lawsuit c. 3 Potential Situations i. lease is silent on assignments/subleases, the tenant can assign or sublease without consent and sometimes without notice
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ii. lease prohibits assignments/subleases w/o consent, but most JX require that LL cannot unreasonably withhold consent 1. PP: Promote free alienation of land, tenants not stuck living beyond their means, 2. LLs reasonable, objective factors to consider: a. Financial responsibility of proposed assignee/sublessee i. Adequate financial information disclosed? b. Assignee/sublessees suitability for particular property (use the space according to the LLs plans) i. The impact on the value of the property, the surrounding tenants, the characteristics of the property. But also note this is prejudicial, and possible discriminatory which raises concerns of equity. c. Legality of proposed use d. Need for alternation of the premises e. Whether any other reasonable LL would withhold consent iii. lease prohibits assignments/subleases all together, historically given effect, except: prohibitions construed very liberally for the tenant I. Contracts Implied Warranty MT (PP notion is that nobody should agree to pay for real property for which the title is unmarketable.) a. MT is a title that a reasonable and prudent business person, with knowledge of the facts and their legal ramifications, would accept. MT is a title free from reasonable doubt, but not from every doubt. However, the title must be such that there is no reasonable probability that the buyer will be subjected to a lawsuit. b. When a K of sale is executed, Buyer pays Seller (or the real estate or escrow agent) "earnest money" or a "deposit." If no dispute arises thereafter, the deal closes. c. Buyer may refuse to close if believes that Seller unable to convey MT, subject to the agreed exceptions. Seller not relieved from the duty to provide MT at closing. d. If Buyer finds defects after closing, she will NOT be able to rescind or get damages from Seller because the IWMT ends at closing; after that the Seller is liable only for warranties made in the deed. e. The K for sale may expressly enumerate the encumbrances and the Buyer may waive them. Exceptions: i. No waiver of a violation of the encumbrance when the buyer does not know of the violation. Ex-if in the K the buyer waives building restrictions, and it is then found that the building on the property violates the restrictions, the buyer can rescind. PP: 1. Buyer cannot be compelled to purchase a lawsuit. 2. Difficulty in reselling. 3. Courts vary on whether a violation of a CCR is a breach of marketable title. Ex--assume grass got too tall for a couple of
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weeks--most courts would say that is too trivial to be actionable ii. The obligation of the Seller to provide MT may supersede a waiver contractual provision. Ex: drainage easement across property may be sufficiently substantial encumbrance as to nullify the marketable title. The "subject to" waiver provision was in direct conflict with the provision requiring the conveyance of a marketable title. f. Buyer's awareness of encumbrances does not mean that Seller who has promised to deliver MT is relieved of that duty. In order to establish a waiver, there must be some language that makes it clear the Buyer was waiving MT with respect to that. f. Modern: Parties may K to shift MT into insurable title b/c it covers what the Buyer is most concerned about. If it turns out there is a problem with MT, Buyer will be compensated by the title insurance company. (Title insurance is a policy insuring against loss incurred as a result of a defective title.) Often buyer must purchase or lose down payment. However, consider that insurable title is not good enough because of the risks of litigation. 1. Older: Seller still has a MT duty, regardless(test) g. What types of situations constitute a breach of MT? 1. Leases-B/c purchase does not include the right of possession until that lease ends. 2. Someone else owns the property, including co-owners of property. 3. AP 4. Easement is the right to utilize a portion of another's real property for a specific use. Breach b/c they affect ownership of property as a bundle of sticks. Not only is Buyer limited by the use of the property through the easement, but someone else has a property interest in the property. Doesnt include utility easements. 4. Covenants, conditions and restrictions (CCR's) are a legal obligation imposed in a deed by the seller upon the buyer of real estate to do or not to do something. Such restrictions frequently "run with the land" and are enforceable on subsequent buyers of the property. They are promises to everyone else in the subdivision to do or not do something. 6. Mortgages: While technically a breach of MT, the Buyer may NOT rescind the K. Instead, the Buyer must give the Seller a reasonable opportunity to pay off that mortgage before closing or at closing with the proceeds from the sale. a. There are exceptions where the Buyer will not give the Seller reasonable opportunity to pay off mortgage: 1. Ex: Seller has 1 million mortgage and purchase price is 300k. ii. Often the Seller will expressly contract that Buyer agrees to take title to the property subject to the mortgage. g. What types of situations do not constitute a breach of MT?
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a. Zoning laws, land use regulations, standard utility easements are not considered encumbrances and do not make a title unmarketable, even though they may affect an owner's ability to use real estate. a. However, if property is in violation of these, title is usually unmarketable. h. Remedies i. Rescission ii. damages 1. if seller breaches, buyer gets back the earnest money deposit iii. specific performance if buyer still wants property i. Principal Problem: F and J advertises the house for $388,000, even though expects little over $370,000. G signs K to buy house from $388,000. K provides in pertinent part: Received from G $12,000 as earnest money in part payment for purchase of the following described real estate:_, as recorded __ Yolo County. Total purchase price is $388,000, remaining $376,000 to be paid in cash on closing. F and J shall furnish purchaser, as soon as procurable and within 30 days of this date an Allied Title Insurance Co. Standard Owner's Policy. If title is not insurable, and cannot be made insurable, earnest money shall be refunded and all rights of G terminated. But if title is good and G refuses to complete purchase, the earnest money may be retained by F and J as liquidated damages. Title to be subject to building and use restrictions general to the district. The preliminary title report shows the following item on the exception sheet: Declaration of protective restrictions, recorded__Said restrictions violated in that house located only 2 feet from east side line whereas 5 feet required. However, this title company will insure against loss or damage resulting from such violation, and will further insure that said violation will not work a forfeiture or reversion. After signing K, G realizes house is only worth $372,000. Additionally, he would prefer to live in a new condo complex. G would like to get out of K. Advise him of his rights and obligations under the contract. What are G's chances of getting out of K and getting his 12k back? i. What does G want? G does not want to overpay AND he is interested in purchasing elsewhere in a place he likes better. G is asking me, his attorney, whether he has a claim that the title is not marketable, which would then allow him to get out of the contract, if that is indeed the case ii. Before getting into the legal issues, consider: 1. The ethics of seeking to revoke K of sale that is different than the real reason to get out of K. The purpose of the deposit was to impose a cost on G and provide a liquidated damages remedy to F and J. Now, G arguing to get his earnest money deposit back, which he normally would not be entitled to, unless the title is not marketable. 2. Yet MT concerns an objective analysis: does G have a right to terminate the K and get his deposit back because the title is not marketable? If G not getting MT as promised, he is entitled to get out of the K, regardless of his reasons.
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3. Will the Court find a way to rule for F and J if they believe G is just trying to get out of K? No, but court might be less favorable to G in its analysis. iii. Efficient Breach refers to a voluntary breach of K and payment of damages by a party who concludes that it would incur greater economic loss by performing under the K. Does not apply here b/c G is trying to terminate K AND get deposit back. iv. The question is not whether F and J promised MT b/c every K for the sale of real property includes an implied duty of MT. Like IWOH, if not expressly in K, court will imply it. PP notion is nobody should agree to pay for real property for which the title is unmarketable. Note that this document contains insurable title language AND traditional MT language. v. G will start out with the basic definition of MT, and that this could basically subject G to a lawsuit and that the standard is a Buyer is not compelled to purchase a lawsuit. The issue is not so much the covenant itself, which may or may not be a breach. Instead, G would argue this is a possible purchase of a lawsuit b/c the property is in violation of an ordinance, and if he obtains title to the property, he will be in violation. This particular restriction is one where the duty is owed to the other landowners in the subdivision and they might enforce it. We have already noted that the existence of the covenant itself may or may not be a breach of MT. Because each property owner has an interest in all of their neighbors setbacks, it might be or it might not be. But the bigger issue is the violation. Just b/c title is insurable does not necessarily mean it is MT and free from potential lawsuit. This is G's best argument. vi. G might also argue that not only is he purchasing a lawsuit, but that there actually might be some adverse interest on his ownership interest. He might have to move the house; he might be subject to some sort of lien filed by neighbors or the homeowners association. vii. What arguments might F and J make? Almost no chance that Gs claim is actionable. The house is already there and restriction has been impliedly waived by neighbors and will not be enforceable by them. A violation of a covenant is not necessarily a breach of MT. The fact that the title insurance company is willing to insure shows from a more objective stance that it will not be enforced. Other ways to resolve dispute with harming judicial economy. Also will argue the "subject to" clause would mean that G has waived the existence of the covenant, so long as it is applicable to that district( however, not the violation). viii. F and J's best argument is that G has agreed to insurable title. It is not so much that he has waived MT, but that the parties contracted to shift MT into insurable title. Therefore, since the title insurance company will broadly insure against problems arising out of this violation, F and J will argue he has gotten everything that he has bargained for. However, other authorities say the Seller still has MT duty. J. Deeds 3 Elements to Effectively Convey Title (deed is a manifestation of title)
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a. Written Intent--grantor must express written present intent to convey legal title(b/c of SoF) to grantee through 5 requirements (Use evidence: language + extrinsic..note PP concerns for each): i. Grantor/grantee name 1. mom and son weak, actual names would be best, or even a nickname. But could be sufficient if proven through extrinsic evidence. 2. Court may look at envelope that letter was sent in to find the legal names of the parties. However, this may give rise to a potential for perjury, as an envelope can be easily forged. If the court were to allow C to admit the envelope as evidence, it must decide if it is reliable as well as relevant to the issue at hand. The envelope may give the court the proper legal names of the parties, but oftentimes people use nicknames or family names when writing letters, which do not provide the legal names needed. ii. Legally sufficient description of property 1. Permissible Form: general description is usually adequate, but most be specific enough 2. house which M built. Problem b/c M could have built many houses, could be many Ms iii. Words of Grant 1. Some courts require use of word grant. Others: even though a document doesn't use express words, if from the whole instrument the court can ascertain evidence of intention by grantor to convey title to land which is sufficiently described to the grantee, it is a deed if all the other elements are met. 2. shall belong to you. These words of grant are not specific enough as to when. M could have meant at the time of death, or future. But since M died intestate it could be inferred she meant to give the property now. iv. signature of grantor 1. any symbol executed with present intent v. Other state specific elements vi. PP Reasons for Deed Writing Requirements & Delivery Requirements 1. Tension between formalistic approach, where in order to transfer title you have to fit into a set of legal requirements VS contextual approach where you look at the language/evidence to see if the alleged grantor intended to make a present transfer of title to the property to the alleged grantee. Obviously there are problems being too far on one side of the spectrum. a. Protect third parties who rely on deed records (tax officials) b. Promote the free alienation of land i. In order to promote the free alienation of land the legal system must effectuate the intent of the parties (ex. Family transaction)
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ii. ALTERNATIVELY: Promote formalistic approach and incentivize contract negotiation. c. Reasonable expectations of the grantor and grantee d. Recognize multiple interests in land i. You do not want to worry every time you write to invite someone over that you have suddenly transferred title to your property. An invitation to stay could be a tenancy at will, license, or just a hospitable invitation. e. Judicial economy and integrity i. Courts should be able to differentiate an informal letter from an informal deed ii. If too much of contextual approach, it becomes too difficult for the court to be certain that it is basing its decision on relevant, reliable information. iii. If court too formalistic about admitting evidence, the judicial system is closed off to people who are not savvy enough. f. WoI: What is the nature of the relationship of the interest holders to the property, which might help understand whether there was intent to transfer title? We have to look at the context of the relationship of the parties. When we are concerned about 3rd parties, we might think of them as having some relationship to that property. They all have some interest in making sure that the deeds are clear enough. Also look at the characteristics of the property. In this case, residential property that is being transferred by gift to a family member, we might be more accommodating of informal writings than if this were a commercial transaction. b. Delivery of Deed--act by which grantor demonstrates that the deed is to be presently operative, and thus effective to transfer an interest in land. i. 3 purposes: 1. Protective: ensures Grantor has thought about what they are doing before transferring title to real property. 2. Evidentiary: Enough evidence that delivery has actually been made so as not to harm judicial economy 3. Ceremonial: Recognition that the transfer of property is serious ii. In order to deliver a deed, the grantor must manifest: 1. Actual or constructive actions of delivery (objective--words or conduct) AND; a. Grantee seeing deed, holding deed, having access to deed. b. Grantor recording deed (Delivery is presumed if recorded, but not necessary) 2. Intent to deliver and make irrevocable (Subjective)
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iii. Death Escrow: Grantor may deliver deed to 3rd persons with the intent to deliver and make irrevocable, establishing delivery of deed to grantee, while reserving possession of the land until death. 1. Courts assessment of the facts. a. Will depend on part on testimony regarding what the grantor said, if they are available to testify as a witness. b. Language, oral exchanges, surrounding circumstances and facts c. Relationship between the grantor and the escrow agent i. Since they are friends, Joy would likely return it st 2. 1 view: only requires intent to make irrevocable, even though the grantor retains power to invoke 3. 2nd view: Other view requires BOTH intent to make irrevocable, and grantor has no power to retrieve from third party. iv. Safety deposit deeds: 1. If Grantor intended deed to be legally effective before death, it is a validly delivered deed. a. Case helped if the deed is kept in the grantors safe box to which grantee has access, grantee seen the deed, grantee touched the deed, grantee know? 2 However, if grantor did not intend deed to be effective until death, the deed is not delivered during life and is no good as a deed. 1. Look for evidence that grantor never formed a definite crystallized intention to do a legally effective delivery and did not believe himself bound by the deed. v. Principal Problem: H, the owner of Merrywood, executes an otherwise valid deed conveying Merrywood to S, and places it in his vault for safekeeping. H and S both live in Merrywood. H tells S about the deed, and also tells her that she is now the owner of Merrywood. S thanks H and agrees that it is a good idea to keep the deed in the vault where it will be safe. S does not have access to the vault and never sees the deed. Thereafter, H destroys the deed and makes a gift of a deed in favor of G. he manually delivers the new deed to G. Assume that a validly delivered but unrecorded deed is good as between H, S and G. S sues H and G to quiet title in herself. Who wins? 1. Intent: Did H have the intent to deliver and make an irrevocable transfer(subjective)? a. Arguments in favor of H: i. S never had access to the vault ii. S never saw the deed. iii. S never touched the deed. iv. S could have recorded it. v. H is still in co-possession vi. S lived there before the deed was written up so the fact that she is in possession does not help H very much, because she has always treated it as her own.
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If she had moved in and H left, it would have moved us closer vii. Evidence has been destroyed viii. Later evidence indicates he knows the proper way to deliver deed, though sister could argue WoI in that they are family and it was not expected ix. Overall looks like H is telling S one thing, but intending something else. b. Arguments in favor of S i. H executed the deed ii. S knew about the deed and agreed to put it the box 2. Actual/Constructive (objective): Even if H had the intent to deliver, where is actual/constructive delivery? Strongly in favor of inadequate delivery. a. Told sister b. Executed deed vi. Principle Problem 2: Death Escrows: Hal, the owner of Blackacre, a vacant parcel of land in Amador County, State X, handed his friend Joy a deed granting all my land in County, State X, to my nephew Mike. Hal orally instructed Joy not to give the deed to Mike unless Mike survived Hal. The deed was not recorded. Four years later, Hal died. Thereafter, Mike learned for the first time of Hals deed to him. M consults you as to his rights and informs you that he has recorded his deed, which Joy delivered to him upon Hals death, and that Hal owned no land in County except Blackacre. Advise Mike as to his rights. Discuss everything above. A deed must also be properly delivered to the grantee in order to be valid. Here, Joy is acting as the third party escrow agent for Hals deed. Hal instructed Joy not to give the deed to Mike unless Mike survived Hal. This is known as a conditional deed. The deed will be given on the condition the Mike survives Hal. This is acceptable because Hal wants to make sure that he is going to transfer the deed to Mike. Hal wants to be able to revoke the transfer of title if Mike were to die before him. This is a way he can insure the property is transferred as he wishes. When a grantor delivers a deed to a third person with irrevocable instructions, and instructs the third person to deliver it to the grantee on the grantors death, he thereby makes an effective delivery as a matter of law. When Hal died, Joy delivered the deed to Mike in accordance with Hals wishes. There is some ambiguity in this case, because it is unknown if Hal had any way to revoke the deed. If Hal had a way to revoke the deed other than Mikes death before his, then the court may say that the deed was not properly delivered when given to the 3rd party. However, given the facts of the case, it is more likely than not that the court would conclude that the conditional nature of the deed was acceptable and that it was properly delivered when given to 3rd party escrow agent (Joy). This constitutes a proper transfer to title even though Mike had no prior knowledge of the deeds existence, because the deed
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was considered transferred when it was placed with Joy. Normally acceptance is presumed because in most cases people accept things of value. As long as Mike agrees to accept the deed when Joy delivered it to him, the deed has been accepted under the law. Once Mike recorded the deed, for all intents and purposes, the deed has been successfully transferred and the property interest now belongs to Mike. b. Mortgages--To secure the debt owed the lender, the mortgagor grants the mortgagee a mortgage on the property. If the debt is not paid, the mortgagee will "foreclose" the mortgage. 2 essential components: Note is the manifestation of the mortgagor's promise to repay the mortgagee. Most notes contain 2 clauses: Acceleration clause-if mortgagor defaults, the entire principal sum of the loan becomes immediately due and payable Due on sale clause-if mortgagor attempts to transfer property, the entire principal sum becomes immediately due and payable Note defines whether the loan is a Recourse loan(majority)If on foreclosure the land does not bring in enough to pay the debt, the mortgagee can sue the mortgagor on the note for the deficiency. A judgment for this deficiency, collectible out of the general asserts of the borrower, is called a deficiency judgment. Nonrecourse loan-mortgagee agrees that the only way of getting repayment if mortgagor defaults is foreclosure on the property Note defined as: Negotiable(majority): holder of the note may transfer the note to a third party and sell it Nonnegotiable: holder of the note may not transfer to a third party Mortgage follows note; whoever holds note is entitled to foreclose on property If under a negotiable note, the third party may foreclose on the property 2 ways mortgage is a security interest in property: Lien theory(majority) Mortgagor holds legal title. Mortgagee gains a security interest in the land. B/c the mortgagor remains the owner of the land, he is entitled to possession up until the point of a foreclosure sale, at which point mortgagee may take over possession of the land. Title theory Mortgagor holds equitable title. Legal title only passes to the mortgagor once the mortgagor has paid off the mortgage debt. If mortgagor defaults under title theory, loses equitable title.
o
Mortgages and PP: Important for people to be able to own property, and very few people can acquire real estate for cash Helps facilitate development, commercial real estate transactions, commercial financing
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Mortgages are very important in relation to the economy and society, look at the mortgage foreclosure crisis.
Home Equity Loans (in flux) Fair market value of the property MINUS the debt of the property=equity (or the amount of value the owner has) Default: o Failure to make required payment on loan(acceleration and due on sale clauses) o When there is default, mortgagee must provide notice of default. Allows mortgagor to correct any bookkeeping errors o Most mortgagees do not want to go immediately from default to foreclosure, unless there is a fear that the mortgagor, remaining in the property, will destroy it. o Negotiation: Refinancing/New Terms/Extension/ Payment Plans
o
Foreclosure: balance between protecting the mortgagor and protecting the mortgagee; mortgagee is entitled to the security interest in the property they bargained for. If they were not allowed to foreclose, they would not be getting their security interest. 1) Judicial Foreclosure: 1) Mortgagee alleges the fact that the debt is due and unpaid, and asks for a decree from the court directing the property to be sold. 2) Lender will be paid the amount of debt from the proceeds, and anything left will be given to the borrower. 2) Nonjudicial Foreclosure 1) Possible when mortgage provides that the mortgagee may conduct a foreclosure sale w/o decree from a court. 2) Where permitted, they are usually faster and less expensive than judicial foreclosures, and therefore used more often.
o
Equitable right of Redemption: right of the mortgagor to redeem the property from the mortgagee, even if payment is late, before foreclosure sale, Mortgagor cannot waive the equitable right of redemption as part of consideration for obtaining the loan. After default, when foreclosure is pending: In states that allow deficiency judgments, the mortgagee proposes to the mortgagor to waive the equitable right of redemption, in exchange for the mortgagee giving up the right of deficiency judgment
o
Statutory right of Redemption, where it exists, permits mortgagor to redeem the property during a specified time period after the foreclosure sale. o PP: enacted to protect mortgagor by giving them more time to come up with the money and save their property.
o
When a mortgage lender forecloses on mortgage loan, this foreclosure process will extinguish all interests in the foreclosure property that are junior to the mortgage loan. Therefore, if a second mortgage is foreclosed, the first mortgage loan will still
o
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be attached to the property after foreclosure, but a 3rd or 4th mortgage loan that attaches after execution of the second mortgage will be extinguished. o So, there may be a deficiency - not enough money from the sale to pay what's owed on a junior mortgages. Quite often, junior lenders recover little, if anything at all, in a foreclosure. In that case, the borrower is still obligated to pay through a deficiency judgment.
o
Multiple interest holders in foreclosed property: o B owns her house, worth 220k, which is subject to a 120k mortgage, held by Bank. B's equity in the house is 100k, the difference between the value of the house and the debt the house secures. B seeks an additional loan from L. L lends her 80k, taking as security a mortgage on her equity. This is a junior mortgage because it subordinate to the mortgage held by Bank. o Suppose that B defaults on her loan from L, and L forecloses. At the time of the default, the amount owing on Bank's loan is 115k, and the amount owed to L is 81k, including interest and costs of foreclosure. At L's foreclosure sale a third party, T, is the successful bidder, paying 90k. What does T own now? What are the Bank's rights? How should the 90k be distributed? Assume that all the instruments have been promptly and properly recorded. T has purchased the interest that B had when she gave the second mortgage to L. That is, T now owns the property, subject to Bank's mortgage, which now secures a loan of 115k. If T does not pay the 115k when it is due, Bank may foreclose its mortgage. Of the 90k paid by T, 81k would be paid to L, and the surplus would be paid to Barbara. o Same as above, but suppose B defaulted on the 115k Bank loan, and Bank foreclosed before L foreclosed. Suppose also that Tom was the successful bidder at the Bank's foreclosure sale, bidding 200k. What title would Tom get? What would be L's legal position? How would the 200k be divided? Tom would get title free of both mortgages. L's mortgage would be eliminated b/c Tom gets the title that Barbara had when she gave her mortgage to the Bank. Since, at that time, she owned the property free of any mortgages, Tom gets exactly what B gave the Bank as security: title free of any mortgages. B's subsequent junior mortgage given to L could not reduce the value of the security that she had previously given to Bank. Thus, one disadvantage of holding a second mortgage is that it will be eliminated by the foreclosure of the first mortgage. However, although the second mortgage is eliminated, the debt evidenced by the note is not. The 200k that Tom paid would be distributed as follows: 115k to Bank, which will be paid in full, 81k to L in repayment of the loan made by L, and 4K to B.
c. Recording Statutes 1. TYPES OF RECORDING ACTS a. Common Law-first in time, first in rightlegal title trumps equitable T a. PP: bad b/c of potential for perjury and no reason for ppl to record b. Race Statute-first to record has priority
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b. PP-protect first person to record c. Notice Statute-subsequent BFP wins if at the time of conveyance they had no actual or constructive notice of the prior conveyance. Constructive notice is assumed if the prior conveyance was recorded c. Hypo: O conveys to A who does not record. O then sells to B who does not record and has no notice of the previous transaction with A. Thereafter, A records and then B records. B owns Blackacre under a notice type statute. Under a race or notice-race statute, A would win b/c A recorded before B. d. Race-Notice Statute-subsequent BFP wins if (1) at the time of conveyance they had no actual or constructive notice of the prior conveyance, and (2) the subsequent BFP records before the prior purchaser. 2. PP for Recording: a. All 3 recording statutes seek to make it relatively easy to ascertain title by reference to recorded documents, which can only be done if people record deeds. b. Notice/Race-notice: avoid rewarding people who take interest in land while knowing of other peoples interest in the land c. Effectuate parties intent/ protect subsequent grantees d. create a self-policing system instead of harming judicial economy 3. How to use the deed index when you are buying property a. figure out who your grantor is (assume A) b. look in grantor index to make sure A hasnt given property to someone c. look in grantee index to make sure A actually owns the property d. look at As grantor in the grantor index to make sure it was granted to A e. look at As grantor in grantee index to make sure it was granted to him f. and so forthalso, if there are any encumbrances (except mortgage) it is a breach of IWMT, but you must give reasonable time before rescission 3) Wild Deed-non-recorded deed that breaks the chain of title 1) Buyers and lenders are not held to have constructive notice of wild deeds. Ex (notice statute): A transfers to B, who does not record his deed. B sells to C, and C records deed. Now there is a break in the chain of title. The record shows only As deed and Cs deed, but the link between them (Bs deed) is missing, so Cs deed is a wild deed. A is aware that B never recorded his deed and decides to sell the same property a second time. This time she sells it to D. D does not know about B or C, so he has no reason to look up those names in the grantee/grantor index. He looks up As name in the index, and as far as he can tell from the record, she still owns the property. So, D buys the house. D does not have constructive notice of Cs interest in the property, because Cs deed was outside the chain of title. If C had required B to record the A to B deed before C closed, D would have had constructive notice of Cs interest and C would have prevailed. 2) However, if there were a tract index, D would find the B to C deed recorded for that particular parcel of land, and therefore D would be on
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notice. (Entries in a tract index are made by block and lot number, rather than by the name of the grantor or grantee.) 4) Shelter Doctrinewhere the current grantee receives his interest from a prior grantee, and the prior grantee would win a dispute with another grantee, the current grantee is sheltered. Ex. (notice statute): 1) Z Y, Z X, X records, Y records, X W; X shelters W b/c X would win a dispute against Y 5) Principal P: 1) 6/1 A contracts to deliver warranty deed to B, for 45K on June 30th. 2) 6/15 B executed and delivered warranty deed purporting to transfer Wildacre to C for 50K. C made no search of records to determine who appeared as owner of record, but immediately records. 3) 6/30 B paid A the agreed upon purchase price of 45k, and A executed and delivered to B his warranty deed to Wildacre. B recorded immediately. 4) 7/15 B executed and delivered deed to D, for 40K. Dawson made no search, had no knowledge, and never recorded. 5) In property JX, the recording statute provides that unrecorded deeds are void as to subsequent purchasers who are 1) innocent and 2) have paid valuable consideration (notice statute). 6) JX has both grantor-grantee index and tract-index. However, there has never been a decision which one takes precedence over the other. 7) What, if any, were the legal and equitable interests of A, B and C in Wildacre as of June 2, June 16, and July 1? o 6/2-A still has legal title. B has equitable title (K right). o 6/16-C has B's equitable title, b/c equitable title can be assigned. It will ripen into legal title at the time B has the deed. A still has legal title. B has nothing, because he has transferred everything he has to C. o 7/1-C has legal title. A receives the money from B. B receives his money from C. Up until 6/30, C's deed was a wild deed. 8) What happens between C and D as to the title to Wildacre? o D is a BFP. At the time D took interest, D had constructive notice of C's interest b/c he would have searched for B, found that B transferred a deed to C, and would have eventually found the deed from A to B as well. That is enough under the grantor-grantee index. Moreover, both deeds in the tract index. Therefore, D will not be protected by notice statute, and C wins. o PP: Want to protect C b/c C recorded as soon as he had his equitable interest. And as soon as B had legal title, B recorded. We want to reward people who record promptly and put other subsequent purchasers on notice. Covenants of Title --After acceptance of deed, one cannot sue under IWMT due to the doctrine of merger only actions are below. 1) Three Types 1) Quitclaim Deed-no covenants implied; written on the assumption that the grantor may not have title, or that the title is subject to encumbrances.
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Special Warranty Deed-specifies grantee is receiving some, but not all, of the covenants in the general warranty deed o Usually statutory b/c parties havent negotiated/drafted themselves 3) General Warranty Deed-6 standard covenants listed below 2) General Warranty Deed Covenants (SREQWA) 1) covenant of Seisin- grantor is peaceably in possession under a freehold title o possession-dominion and control (lease would be breach of seisin b/c someone else is in possession) o peaceably-no conflict or adversity o freehold title-full legal title
2) o
Breaches: o The presence of an AP b/c it means the grantor is not peacefully in possession. o Foreclosure--only if dispossessed o Leasehold b/c someone else is in possession o Grantor does not have title
Hypo: A conveys Blackacre to B who takes possession, and then A purports to convey Blackacre to C. If A's deed to C contains a covenant of seisin, A is liable for breach of this covenant. It does not matter whether C had notice of B's interest in Blackacre by means of the recording system or otherwise. Covenants of title in a deed are an alternative and additional method of title protection (in addition to a record search) available to a purchaser. However, if C had knowledge (as opposed to mere notice) of B's interest in Blackacre, C would have no rights against A, unless C reasonably believed that A would eliminate B's rights before the closing 2) covenant of Right to convey-grantor has the power and authority to convey (breaches: Grantor does not have title, Grantor is only 1 co-owner and is conveying total title, Right of first refusal=means someone has to be offered title to the property first, AP whose title has ripened into legal possession) 3) covenant against Encumbrances-no other right or interest in the property conveyed, which decreases the value of the property but is consistent with the passing of a fee, is held by any third party o encumbrance-other right or interest in the property o decreases the value of the property-a small decrease is enough (flower garden-yes or utility easement-maybe) o held by a third party-interest held not by grantor or grantee 4) covenant of Quiet enjoyment-grantee will not be evicted (either actually or constructively) by someone with paramount title o Note that PT holder may not be able to evict grantee, and that strict courts might wait until they recognize a breach of the covenant of quiet enjoyment and covenant of warranty. Alternatively, liberal court may want to punish negligent conveyers. If there are facts out
o
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there that indicate grantee might not be evicted, could be construed as a waste of judicial economy. If there is someone out there who holds an interest who might at some point result in an eviction, at what point in that timeframe does the grantee have a claim for breach of the covenant of quiet enjoyment. Some courts are going to view that covenant as only being actionable once there is actually an eviction or where it is so imminent that any reasonable person would vacate the premises. The reason here is that courts say they do not know there will be an eviction when it might not occur. Where there might be a non legal solution. Other courts are more willing to see constructive eviction in a broader context. Part of the reason they might take this view is to promote judicial economy, by dealing with all breaches of covenants of title all at once.
Breach(no breach until actual eviction or constructive eviction): o AP whose interest in the property ripens into title and files an action in ejectment to evict or prevent the grantee from taking possession of the property o Someone else has title to property o Mortgage (but only when the foreclosure is filed)
covenant of Warranty- grantor promises to compensate the grantee in the event he is evicted (actually or constructively) by someone with paramount title o Analyze w/ covenant of quiet enjoyment o A conveys Blackacre to B. A then purports to convey Blackacre to C by a deed containing a covenant of quiet enjoyment and a covenant of warranty. B's deed was recorded; but C, negligent in not having searched the records, did not discover it. B legally ousts C. A is liable to C in damages for breach of his covenants of quiet enjoyment and warranty. 6) covenant for further Assurances-grantor will supply further assurances in the form of documents that grantee may need in the future to prove title 3) Present v. Future Covenants 1) present covenants- do not run w/ land; enforceable only by immediate grantee o 1-3 are present covenants 2) future covenants- run w/ land; enforceable by immediate grantee and all subsequent grantees o 4-6 are present covenants 4) Remedies 1) Damages for 1 through 5 2) Specific Performance for 6 5) Principal Problem: X, owner of Blackacre, borrows 100K securing the loan with a duly recorded mortgage against Blackacre. X then sells the property to Y for 100k, conveying title by CA grant deed that is silent as to the existence of the mortgage. Y, inexperienced in real estate transactions, fails to conduct a title
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search and has no knowledge of the mortgage. Y later sells the property to Z for 90k, using a CA grant deed to convey title. Z also fails to conduct a title search and has no knowledge of the mortgage. After a few months, Z discovers the existence of the mortgage when he is forced to pay 100k to prevent foreclosure. Does Z have a good chance of recovering damages from either X or Y? If so, how much will he recover from each D? 1) Issue: Concerns special warranty deeds by CA Statute, which provide 2 limited, implied covenants: right to convey and covenant against encumbrances. When discussing what constitutes breach, consider the deed from Y to Z. Z cannot recover from Y under the covenant of the right to convey b/c it is limited to grantors conveyances. Y did not convey the property to anyone else. Regarding the covenant against encumbrances, Z cannot recover b/c its limited to covenants made by grantor. Y did not make the encumbrance (mortgage). Also notes that courts are going to be reluctant to saddle Y with responsibility for a mortgage that Y did not create and did not know about. There is an argument that b/c the mortgage existed on the property and that Y passed title counts as suffered. 2) Z cannot recover from X b/c the 2 covenants are present covenants. Do the statutes modify the covenant in a way that says Z is entitled to sue on those? No--only the immediate grantee constitutes an assign. X is a remote grantor to Z, and therefore Z cannot recover. 3) PP: CA statute is only a fallback option to ensure some protection. Parties may K around the statutes. Grantor could grant general warranty deed, or they could grant a quitclaim deed. But if they only use required words of grant, statutory defaults apply. 6) O easement to A. A records. O general warranty to B. B records. B general warranty deed to C. C records. 1) C v B--breach of the covenant against encumbrances. 7) O mortgage to A. A records. O general warranty deed to B. B records. B general warranty deed to C. C records. 1) C v A o Is C's interest in the property subject to A's mortgage? Under a race statute, A recorded before C recorded. Under notice statute, C is the latter to take the interest, but C had constructive notice of A's mortgage b/c it was in the deed records. Race notice, A was the first to record as BFP. A's wins under all 3. This does not mean A owns the property, it just means the mortgage is on the property. 2) C v B o The existence of A's mortgage means that B has breached the covenant against encumbrances. It should be intuitive that a mortgage is an encumbrance on the property. Does it matter that C could have learned about it? No--it might matter if C had actual knowledge. That is, if C admits he had knowledge of the mortgage on the property, which might constitute a waiver. But constructive notice is not a waiver of any of the deed warranties. Why do we hold B liable to C on the covenant against encumbrances? B could
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have put exceptions and exclusions in the deed of known encumbrances. o Covenant of quiet enjoyment and warranty--not breached by the existence of the mortgage on the property, but they would be breached if there was a foreclosure. If the mortgage is just sitting on the property and the loan is being paid, no breaches. If A forecloses on the property, then C can sue B on quiet enjoyment and warranty. 8) A has AP possessed 5 ft of O's property, meeting all the elements for the statutory period. O general warranty deed to B. B records. B general warranty to C. C records. 1) C v B o Covenant of seisin breached b/c B is not peacefully in possession under freehold title o B does not have the power and authority to convey--A has AP the property. However, B merely does not own the 5 ft. If the claim is about the right to convey the property in general, going to be problematic for C to bring claim. If claim is instead more focused, where C is suing B on the covenant of the right to convey regarding that 5 ft, C will win. o Covenant against encumbrances--not breached. o Quiet enjoyment and warranty are breached with respect to the 5 ft. C will not be able to take possession. Non-Title Loss During Escrow (doesnt relate to property value) 1) What kind of rule allocates risk of loss? 1) Express terms of K o Well drafted Ks include provisions that allocate the risks of various kind of losses that will be given effect and control 2) IWMT? o IWMT controls. 3) Casualty loss rule (see #2 below) o Generally, casualty losses constitute physical losses to the existing physical conditions of the property (fires, floods, hurricanes, etc) 4) Loss-specific rules (Zoning changes, govt takes property) o Some courts say loss resulting from zoning change occurring between K signing and actual deed conveyance treated as casualty loss o Other courts disagree b/c not an actual physical loss 2) If casualty loss, which of the following and why? 1) Majority: doctrine of equitable conversion o Risk falls on the buyer b/c the buyer has equitable title at the time the K is signed, and therefore buyer is obligated to proceed w/ transaction o Doesnt apply when the Seller causes the harm o Remedy: loss on buyer; seller can get SP of K 2) Minority/Mass. Rule
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Risk falls on the seller, as the buyer would not be getting what they bargained for. o Remedy: Loss on seller; buyer can rescind OR buyer can get SP w/ abatement 3) UVPRA (Uniform Vender and Purchaser Risk Act) o Whoever is in possession bears the risk. (Ex. If the seller has retained possession during the period, retains the risk) 3) Is the loss-bearing party entitled to the benefit of insurance proceeds of the non-loss insured party? 3 possibilities: 1) 3rd party beneficiary o Yesbut requires them being expressly contemplated as a third party beneficiary under the K between the insurance company and the insured. 2) Equity o Insured party serves as a constructive trustee for the loss-bearing party. Therefore, insured party cannot get the benefit of not bearing the risk, plus getting the insurance proceeds. So they either have to provide the insurance proceeds to the loss bearing party, or in the case of the seller reduce the purchase price by the amount. o PP: prevent unjust enrichment---the insured party would get no risk of loss, plus insurance proceeds 3) Strict insurance K enforcement o Views insurance K as personal between the seller and insurance company, and therefore the third-party has no interest at all in any proceeds under the policy o PP: insured has paid for the benefits, unlike the third-party 4) Principal P: B (developer of large shopping centers) enters into a K with S to purchase land for 1 million. B has already paid 100K down in escrow. 900K due at closing. Property at the time entered into a K was zoned to include a commercial shopping center. Concerned local residents get the city council to amend the zoning ordinance to allow only single-family residences, which decreases the value of the property to 200K. B wants to rescind K and get the 100K deposit back from S. 1) What kind of loss? o Is it a loss covered by express terms of K? No indication that this kind of loss was covered. o Is it a title defect? No, the existence of a zoning regulation is not a title defect. o Is change in zoning a casualty loss? o For: There are arguments that the zoning change could fall under casualty loss. Cannot use the property for the intended physical use of the property. o Against: Not damage to the physical conditions of the property. Generally, casualty losses constitute physical destruction or harm to the existing physical conditions of the property.
o
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If we did treat the zoning change as a casualty loss, which of the 3 follow? o D. of equitable conversion: risk falls under buyer. Why might a court adopt or continue with this rule, under PP? o Equity favors least cost: put the loss on buyer here b/c take the loss with the least cost o Relative bargaining power: Buyer here has lots of bargaining power. o Protect the reasonable expectations of the parties: B should have reasonably expected such an event to occur. o Formalistic Rule: Courts know what to apply and parties know up front who bears the risk of loss. o Incentivize negotiation in K language that allocates risk (regardless of which of 3 rules adopted)
2. PP for minority rule: 1. Promote insurance-insurance is the most effective way to deal with loss 1. S should already have the property insured. Insurance should not end just b/c there is a K for the sale of property. 2. Protect the reasonable expectations of the parties: DOEC inconsistent w/ the way people generally insure real property. The vendor is the one who is likely to have the insurance, and the vendee wont get the insurance until the K closes. 3. PP for UVPRA: o Remedies: If the risk is on B, S can specifically enforce the K. If the risk is on S, B can rescind OR get SP of the K. The likely remedy given the huge change in property value is that the risk is on S, and B can rescind the K. a) Concurrent Estates-2 or more people own same interest in same property at same time. 1. Tenancy in Common: Ex-to A and B(though if married might be TBTE) i. Ambiguous grants presumed as TIC ii. No RoS-shares instead pass to heirs iii. Undivided interest (means neither tenant can exclude the other from any portion of the property) 1. does NOT require undivided interest be equal 2. But if parties do not specify, interest presumed equal. iv. Creditors can get to property 2. Joint Tenancy: i. RoS- remaining JT(s) take the share of the property that deceased JT had ii. Always equal undivided interest in property. iii. Created by specific language and 4 unities (now interpreted loosely) 1. Take interest at same time
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2. Take interest same interest 3. All tenants must have a possessory interest in the whole 4. All tenants must have an equal interest in the property. iv. Creditors may only reach debtors joint tenant interest in property. So long as creditors do not try to satisfy that debt from the property, it remains a joint tenancy. If the creditors force the sale of the property, it severs the joint tenancy with respect to the debtor. A and B will be JTs, but they are tenants in common with respect to C. 3. Tenancy by the Entirety i. RoS ii. Equal undivided interest in property. iii. Cannot be converted into tenancy in common by the act of just one tenant. iv. Requires some marital language OR Facts of Marriage(Some states have statutory presumptions that if couple co-own property, they hold it as tenants by the entirety.) v. Requires 4 unities and unity of marriage vi. Creditors of an individual spouse may not reach any property that the debtor spouse holds as a tenant by the entirety. PP: necessary to protect non-debtor spouse. 1. 2 exceptions: a. Creditor may use the property to satisfy the debtor-spouses debt after the other non-debtor spouse has passed away. b. Federal govt can reach property held in a tenancy by the entirety to satisfy a tax obligation of the debtor spouse. 4. Principal Problem: J died leaving farm to Bart and Rose Lee, and their son Ron Lee, jointly. Bart and Rose were married at the time the will was probated. Ron was a minor and still living with Bart and Rose. 25 years later Ron died, leaving all his interest in the property to his friend, J. J has filed suit seeking a declaration that she has a interest in Pollenacre. Alternatively, J claims a 1/3 share. B and R come to you and insist that J has no interest in Pollenacre. i. Issue: Interpretation of will determine whether J gets any interest in property. J only entitled to property if Ron was a TIC w/ his parents. If Ron was a joint tenant w/ his parents, his interest would automatically go to them at his death b/c the RoS operates automatically at death, and therefore J has no interest. Bottom linedepends if he was a TIC or JT w/ his parents. ii. What possibilities of coownership have been created between the 3 interest holders? 1. Bart and Rose TBTE + TIC with Ron. This would be divided B and Rose and Ron. TBTE treated as one co-tenant. 2. Bart and Rose TBTE + JTs with w/ RoS with Ron. Tenancy by the entirety treated as one co-tenant. Ron would be , and B and Rose would be . Might not be allowed b/c 3 people who do not have exactly equal shares. But if you treat them as one marital unit, it would be allowed.
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3. B and Rose and Ron are TIC, and are equal undivided interest holders (1/3) because it does not say otherwise. 4. B and Rose and Ron are joint tenants. 1/3 equal undivided interest. iii. Note: If R was TIC, it depends what relationship B and Rose have as to whether J would get a 1/3 interest or a interest. iv. After identifying possibilities, address underlying problem regarding what form of co ownership J actually intended create when he drafted the conveyance of the property. Two major standards for determining what interest is: 1) grantors intent (or in a sales transaction, what is the parties intent) and 2) legal requirements. Basic concern is that intent is irrelevant if legal requirements not met (ex. grantor intends to create JT w/ ROS, but instead deed says TiC. Obviously is TIC). Do not go beyond the language of deed. Sometimes conveyances are not going to necessarily reflect grantors intent. However, if grantors intent clear, and legal requirements met, its fine. (If grantor writes out deed that says to A and B as husband and wife, qualifies as a TBET, so long as JX recognizes TBET and they are indeed husband and wife. Here, it is unclear. v. 4 components to interpret ambiguity. 1. Presumption: If all else fails, TIC unless the presumption has been overcome by manifestation of grantors intent and meeting the legal requirements for some other form concurrent ownership. 2. Language of the grant: Court will give effect to the clear, expressed language of the instrument on its face. The language is obviously ambiguous. In order to overcome the presumption that the conveyance is a TIC, there must be adequate evidence of intent to create JT w/ RoS. The problem is jointly could just mean togetherit might not mean JT with RoS. There is authority to indicate that jointly is not enough to create a JT w/ RoS w/ the co-owners. Note that if an attorney drafted it and used the term jointly, they probably meant in the technical sense of joint tenancy w/ RoS. If so, might have malpractice claim. The common last name, the mention of the son, the double and, and the commas all aspects of language of deed that indicate J meant a husband and wife unit, and contrasted Ron as another unit. The question is then whether it is JT or TIC. 3. Surrounding Circumstances: Court might adopt formalistic or contextual approach. In order for TBTE, couple must be married. Clearly some extrinsic evidence MUST be brought in to determine if this is TBTE. What about contextual: consider nature of family relationships. What kind of relationships are there among B and Rose and Ron? Recall Ron was a minor at the time of will, not an adult, so it was mom dad, and minor son. That is the kind of family relationship where expect them to all have RoS if one dies. Also consider not just family relationship, but the relationship of B and Rose and Ron to the grantor J, who was family friend. Being a family friend, J knows B and Rose married. By referring to them
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w/ common last name and referring to their son, he might be suggesting that they are TBTE. Moreover, not business transaction, he cares about making gift to the family that stays in the family. There is also the competing argument that b/c he is a friend rather than a relative, he is not concerned w/ RoS. a. The contextual analysis is similar to web of interests analysis. This problem is where the bundle of rights has not been helpful, because while it is true you can share the bundle of sticks, it does not tell you the nature of the relationship. The surrounding circumstances and public policy is much more of a web of interests approach. 4. PP: a. Equity: Law does not want to facilitate patently inequitable arrangements. Hard to imagine how this will be particularly equitable or inequitable. But there are circumstances that the court may interpret the law in that particular set of facts to avoid one party from exploiting the other. b. Promoting family relationships: Law tends to favor marriage. Where you have a married couple that in the law has a property interest, there is a tendency to treat that property as marital property. Despite the laws protection of marital interests, couple may choose JT with RoS. c. Effectuate parties intent: where unclear, favor the above circumstantial. But if the parties intent may be ascertained, do that. d. Promote free alienation of land/3rd party clarity: encourage voluntary transfer of property. If there is ambiguity, when all else fails, go with default. To extent courts want to discourage ambiguity in arrangements, could have very strong presumptionif dont use required language, fall into defaults so as to promote the free alienation of land and clarity for 3rd parties. o This concludes the concurrent ownership problem. Bottom line is that there are good arguments for any of the 4 possibilities, along w/ problems. Very complicated and ambiguous conveyance. 5) Severance of JT w/ RoS into TIC: Principal Problem: R and H owned land as JTs. Without Hs knowledge, R leased the property to defendant B for a period of 10 years at an annual rental rate of 15k. R died 3 months after the execution of the lease. H brought suit to have the lease declared invalid. H argues that Rs unilateral grant of the lease did not destroy her RoS, and that the lease terminatied on Rs death. The lower court has held that although Hs RoS was not destroyed, H must share the realty w/ B for the term of the lease. Once the lease expires, H will own the property in fee simple absolute. 1) Any JT may destroy the RoS by severing the JT. Upon severance, the JT become TIC. (talking about some sort of severance of the 4 unities of title time, title, interest, possession)
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JT conveys interest to 3rd party o A, B and C are JT. B sells her share to Z. Result: A and C hold equal shares of 2/3 interest in the land as JT, and Z holds 1/3 interest in land as TIC with A/C. o If C dies, A owns 2/3 of the property as TIC with Z who owns 1/3. o If Z dies, Z heir owns 1/3 property as TIC with JT A/C. o A, B, and C JTs. A conveys share to B. B now hold 1/3 as TIC, and B and C hold 2/3 as JTs. If B subsequently died intestate, C would own 2/3s interest and Bs heirs a 1/3 interest as TIC. o JT takes out mortgage on property o Lien theory holds that mortgages do not sever JT. o Title theory: b/c a mortgage by a JT conveys the legal title of the JT, the mortgage destroys the unity of title and severs the JT. (creates TIC) o Self conveyance: Historically not possible, now is. If JT intends to sever JT, court will recognize intent--not concerned w/ formalistic rules. 2) Principal P: o Issue: Whether the lease to the property from R to B is a severance of JT w/ RoS.(Does not matter whether H consented or not) o Formalistic View: Lease severs JT, turning it into TIC. o Lease is not a severance of unity of title, though it might be severance of the unity of possession b/c B, under the lease, has the right to exclusive possession of the premises. R cannot, through the lease, exclude the other JT. Leaseholds is the right of exclusive possession over the leased premises for the lease term. JT do not have the right to exclude other JTs, so arguably this would sever the JT. o Modern View: Lease does not sever a JT. o One view: surviving JT takes subject to the leasehold on a interest. o Other View: survivor holds the entire property not subject to the lease. Under this view, a lessee can protect himself against the risks of the lessor dying only by having all JTs sign the lease or by requiring the lessor to sever the JT beforehand.
o o
PP concerns regarding formalistic approach: a. No evidence that R intended to sever JT when he leased to B. Rather, R wanted make economic productive use of the land by placing tenant. Obviously H was not using or occupying the property otherwise H would know about it.
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b. JTs are often family members who expect to benefit from RoS c. Also want to protect H--dont want her to suddenly lose interest of property upon Rs death, would be inequitable. If working with B, would have wanted to have all JTs sign the lease or require R to sever JT beforehand. Emphasizes that if you are representing someone who is taking an interest in real property, make sure who owns the property. If there is any chance that someone else out there has an interest in the property, they need to be a part of the transaction. d. Consider creative solutions where we are not in the extreme of formalistic, but rather find a way to get the lease to operate and maintain RoS. The mutually exclusive view is not the most ideal choice from the laws perspective given the above PP considerations. We would like to be able to recognize in some circumstances where maintain RoS but the tenant might be able to complete leaseterm. Such a view is not unfair to potential tenants such as B, who are on constructive notice of the existence of multiple owners if the deed is recorded or the will probated, as it is likely to be.
d. Negotiating 1. Identifies clearly the clients objectives a. Reaching an agreement through compromise--if not your goal, save time and energy and go to court b. Familiarize and prioritize w/ your clients goals and interests c. Evaluating the case objectively (strength of legal support, relative strengths and weakness of both sides, novelty of the claim, credibility of likely witnesses, availability of admissible evidence, track record of other players in the game, how likely will a judgment be enforced?) d. Adopt interest-based bargaining, which analyzes interests and looks for solutions to the mutual problems facing the negotiators. d. The problem-solving negotiator looks for ways to make the pie bigger, rather than simply carving it up. e. Must determine whether both personalities and subject matter involved in the negotiation lend themselves to this approach f. If you determine that the subject matter is appropriate, which is particularly likely in a multiple item, non-monetary negotiation, and that you are comfortable with your negotiating counterpart, you might ask about the needs and interests of the other party. Of course, you must be prepared to honestly share your clients goals as well. Then the negotiators can work together to devise options that take into account as many of the needs and interests on the table as possible. g. Less common than adversarial approach
Current as of 1/10/2012 Page 38 of 40
2. Establishing a Opening, Target, and BATNA(best alternative to a
negotiated agreement) a. Opening should be credible, but also give bargaining room b. You should also set a target point, a point at which you would like to settle and that you believe is reasonable based on the information you have. c. Finally, you should set a bottom line before you go into the negotiation. This should be the point below which you absolutely do not intend to go, and you should hold firm at that point if you get there during the negotiation, unless you are satisfied that you have seriously misanalyzed the problem. d. BATNA prevents negotiator from accepting an agreement that is too unfavorable, b/c better option outside the negotiation. 3. Analyzes in substantial depth at least 5 negotiation strategies that have the potential to be effective at achieving the clients objectives with at least 3 strategies having a high potential for success a. Framing-- by framing the problem, you can often have a negotiation advantage. h. Frame the problem in a way that it is solvable by a win/win solution. i. Remove egocentricity by framing problem in a manner that all can accept. b. Use active listening and info sharing to find out as much as you can about the other sides interests. Be careful what you disclose , but consider that if you do not share you may come out with an outcome that is less economically beneficial to both parties j. Carefully phrase questions so as to get the information you want k. Information as belonging to one of 3 categories: information you want, information you dont want to divulge, and information you want your opponents to have. c. Understand competing needs and interests and sometimes your clients might have to consider making tradeoffs. l. Shared needs (if applicable, start here) m. Independent needs-those that can be met w/o an adverse impact on the other party n. Identify whether shared or independent needs are essential, important, or desirable. d. Closing the Negotiation o. Once you believe you have achieved a negotiated resolution, take a few moments to find out if it is possible to adjust the agreement in some way that benefits both parties, or that allows one party to benefit without damaging the other party. These few moments at the end of a negotiation can make a large difference in the parties commitment to the agreement and willingness to carry it out. p. You should also use this final stage of the negotiation to make sure that you have actually reached an agreement.
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4. Considers and analyzes the other sides likely negotiation position
and strategies, including considering the nuances of those likely positions and strategies in light in comparison to the clients objectives and strategies. a. Consider other persons negotiating style and personality, which can have a huge impact on the progress of a negotiation. b. Important to consider other persons BATNA
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2. Establishing a Opening, Target, and BATNA(best alternative to a

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