Property Bar Outline

(Reduced)

Concurrent Estates (3 Type) held by more than 1 all of which have right to enjoy & possession of land

(1) Tenancy by Entirety (right of survivorship)

married couples ONLY OR convey to married couple presumed Tenancy by Entirety

destroyed ONLY by death, divorce, mutual agreement, OR execution by joint creditor

divorce automatically turns it into tenancy in common

NC has codified CL, thus TE is created when the conveyance is to (i) named man & wife; (ii) named woman & husband; or (iii) 2 named persons whether or not identified in conveyance as husband & wife, if at the time of conveyance they are legally married.

(2) Joint Tenancy (right of survivorship)

if 1 JT dies, other JT get property (her survivors do not succeed to it)

JT interest MUST be equal, identical, received at same time by same instrument, with same right to possession.

NC four unities (time, title, interest, & possession) are required to create & maintain JT. Unlike CL, NC recognizes JT w/ unequal interest where such interest are clearly created; in event of ambiguity, NC presumes equal interest.

--> MUST have clear expression of right of survivorship otherwise its presumed to be tenancy in common

either JT can convey interest and sever JT by sale, entering into contract for sale, or transfer. Transferee takes as tenant in common

entering into contract for sale severs JT at time when contract was made b/c of equitable conversion (equity regards as done that which ought to be done).

if more than 2 JT, convey by 1 ONLY destroy his JT and other 2 are still JT

Partition in Kind court physically divides property if in best interest of all parties

Forced Sale if in best interest of all, court sales land and divides proceeds of sale.

NC Forced Sale—Partition in Kind Favored by statute, a partition sale may be ordered ONLY IF court finds by preponderance of evidence that actual partition cannot be made w/o substantial injury to any interested party. Substantial Injury: means that the fair market value of each co-tenant’s share in any in-kind partition would be materially less than the money equivalent of each share that would be obtained from the sale of the whole. Party seeking partition by sale has burden of proof.

a will CANNOT convey or sever JT.

judgment lien CANNOT destroy JT

mortgage lien DOES NOT sever JT unless mortgage is foreclosed & prop. sold. (mortgage lien in title theory state DOES sever JT)

(3) Tenancy in Common (no right of survivorship)

2+ ppl own w/ NO right of survivorship

each co-tenant owns an individual part & has right to possess the whole

interest is devisable, descendible, & alienable

courts presume TC

co-tenant out of possession CANNOT bring possessory action UNLESS he is ousted (another co-tenant claims exclusive right of possession)

co-tenant in possession MUST share rents from 3rd parties & net profits from exploitation of land, i.e. mining.

each co-tenant responsible for their share of carrying cost, i.e. taxes, based upon undivided share.

repairing co-tenant has right to contribution for reasonable & necessary repairs provided he told other co-tenants of the need.

NO RIGHT to contribution for improvements ; however, @ partition sale co-tenant would be entitled to a credit equal to any increase in value.

Landlord & Tenant Law

Leasehold Estate (4 types) an estate in land in which tenant has present possessory interest in the leased premises AND landlord has future interest (reversion).

(1) Tenancy for Years

fixed period of time

created by written lease if more than 1yr b/c SoF

must be in writing if longer 3yrs b/c SoF

if more than 3yrs, MUST be recorded to protect T interest from LL lien creditor’s

automatically terminates @ end of stated year/term OR if tenant surrenders tenancy AND LL accepts.

if un-expired terms exceeds 1yr, surrender MUST be in writing

(2) Periodic Tenancy

continues for successive periods UNTIL terminated by proper notice from either LL or T

created by (i) express grant; (ii) implication; or (iii) operation of law

(ii) implication can be (a) lease w/ no mention of duration BUT payment @ set date; (b) oral term of years in violation of SoF; OR (c) holdover tenant

notice to terminate MUST (1) in writing AND (2) be one full period in advance (e.g. 1 month notice if month-to-month) AND timed to terminate at end of period.

NC unless parties otherwise agree, year-to-year periodic tenancy may be terminated by a notice given @ least one month prior to end of current year; month-to-month requires one week ; week-to-week requires two days.

Oral notice is sufficient; however, to be effective, notice must be unequivocal.

(3) Tenancies @ Will

no fixed duration and terminable at will of LL or T

created by EXPRESS AGREEMENT, if not court WILL presume periodic tenancy

terminated by either party @ any time BUT reasonable demand to vacate is usually needed.

if power to terminate w/ ONLY LL, court WILL imply same right to T

if power to terminate w/ ONLY T, court WILL NOT imply same right to LL.

(4) Tenancies @ Sufferance

is an holdover tenant AND last ONLY UNTIL LL takes steps to evict T. NO notice required.

Holdover Doctrine if tenant holdover, LL MAY (i) evict OR (ii) bind to new periodic tenancy. Commercial tenants MAY be held to a new year-to-year tenancy.

Exceptions (i) T in possession for ONLY few hours; (ii) delay NOT T fault; OR (iii) seasonal lease

Tenant’s Duties (3 types) AND LL Remedies for T Breach of Duty

(1) Duty to Repair

(when lease is silent) T MUST maintain premises AND make ordinary repairs AND NOT commit voluntary, permissive, or ameliorative waste.

if T removes fixture (once movable chattel attached to premises), T commits vol. waste

T MAY NOT remove fixture no matter she installed it b/c fixture pass w/ ownership of land

IF premises destroyed w/o fault of LL or T, NO waste BUT T has duty to continue paying rent.

Most state now give T option to terminate lease.

NC if leased premises destroyed (i.e. cannot be made reasonably fit except at an expense exceeding 1 year’s rent), absent negligence by T or lease provision, AND use of building was the main inducement to the lease, T MAY surrender by written notice w/n 10 days plus payment of all rent up to the date of the damages.

(when lease say T will repair) LL remains obligated to repair {except for damages by T} b/c implied warranty of habitability. BUT T is responsible for ordinary wear & tear unless covenant excluded it

NC lease covenant to maintain premises is = to general covenant to repair and includes covenant to rebuild unless excepted by lease or statute.

however, agreement to repair rented house DOES NOT bind promisor to repair or rebuild if the house is destroyed/damaged to more than ½ its value by accidental fire not occurring from lack of ordinary diligence on part of promisor.

HOWEVER, if commercial tenant, T MUST repair and LL MAY get damages for breach based on property condition at end of lease compared to its condition when lease began.

(2) Duty to Pay Rent

T MUST pay @ specified time in lease

IF lease terminates B4 time to pay comes, T MUST pay proportionate amount of agreed rent

IF T effectively surrender back to LL, duty to pay ends.

LL CANNOT keep rent deposit beyond damages ACTUALLY suffered, UNLESS it’s denominated a “bonus”

NC LL may apply security deposit towards possible nonpayment of rent; damage by tenant; T nonfulfillment of rental period; any unpaid bills that becomes a lien on property; cost of re-renting; cost of removal & storage of T property; and court cost for termination proceedings.

Deposit CANNOT be applied towards normal wear & tear.

W/N 30 days after termination, LL must apply deposit to permitted uses & refund balance to T along w/ itemization of damages, if LL fails to do so, T may bring civil action to require an accounting & recover the deposit. If court finds willful noncompliance, attorney’s fees may be awarded.

(A) LL remedies If T fail to pay rent (i) sue for rent due and continue tenancy OR (ii) evict

-->LL entitled to rent until T vacates.

if T breach’s BUT is out of possession LL can (i) treat abandonment as implicit offer of surrender; (ii) ignore abandonment & hold T liable for unpaid rent as if T was there (minority); (iii) re-let premises on behalf of T hold T liable for any deficiency. Majority Rule LL must try to re-let to mitigate damages.

(3) Duty Not to use for Illegal purpose

if T uses for illegal purpose, LL MAY terminate lease OR obtain damages AND injunctive relief.

LL Duties & T Remedies

(1) Duty to Deliver Possession

LL MUST put T in actual physical possession and if holdover T is there, LL breach & new T get dmgs.

(2) Implied Covenant of Quiet Enjoyment

nether LL nor paramount title holdover will interfere w/ T quiet enjoyment & possession

breached by (i) actual wrongful eviction by LL; (ii) constructive eviction (by substantial interference by LL; T gave LL notice of problem; AND T vacated w/n reasonable time after LL failed to fix problem)

T constructively evicted CAN terminate lease AND sue for damages

(3) Implied Warranty of Habitability

premises MUST be fit for basic human habitation.

applies only to residential leases AND is non waivable

common triggers are (i) no heat in winter; (ii) no plumbing; (iii) no running water

T remedies (i) terminate lease; (ii) make repairs & offset cost against future rent; (iii) abate rent to an amount equal to fair rental value in view of defect; OR (iv) remain, pay full rent, AND sue for damages.

(4) Retaliatory Eviction

LL MAY NOT terminate b/c T exercised legal rights, including reporting housing/building code violations.

statutes presume retaliatory motive if LL acts w/n 90-180 days after T exercised her right.

to overcome presumption, LL MUST show a valid reason for actions.

NC if LL sues to evict T w/n 12 months of T’s engaging in statutorily protected activities, T is entitled to raise the defense. If court finds LL action was retaliatory, it will deny request for ejectment but LL still entitled to rent.

Assignments & Subleases

Assignment complete transfer of entire remaining lease term.

in the lease, LL can prohibit T from assigning or subletting w/o LL’s permission

this is WAIVED if LL was aware of assignment & did not object

once LL consent to 1 transfer, Dumpor’s Case provides LL waives as to future transfers (unless LL expressly reserves it)

covenant prohibiting assignment DOES NOT prohibit subleasing and vice versa

if T assigns or sublets in violation of lease, transfer is OK but, LL MAY terminate lease or sue for dmg’s

assignee stands in shoes of original T, (i.e. assignee & LL privity of estate) and each liable to each other for covenants that run w/ land (i.e. touch & concerns land) e.g. rent covenant runs w/ land

original T liable to LL on original contract obligation to pay rent (i.e. privity of contract)

NC if assignment has more than 3 years left to run, it must be in writing to satisfy SoF.

An express covenant in lease that allows for assignment or sublet only if T receives LL permission is valid and NC law does not require that the lessor’s withholding of consent be reasonable.

LL Assignment LL may assign rents & reversion interest AND T consent is not required.

once T have notice of assignment, T must recognize and pay rent to new owner as LL

Sublease occurs when original T reserves time for herself, i.e. does not transfer entire lease term.

sublesee usually pays rent to original T who then pays LL

sublesee not in privity of contract or estate w/ LL UNLESS sublesee expressly assumes the covenants

LL may terminate main lease for nonpayment of rent

termination of main lease terminates sublease

sublesee MAY enforce implied warranty of habitability against LL

LL & T Tort Liability

LL liability

(1) common areasLL must maintain all common areas, e.g. hallways & stairways

(2) latent defect LL must WARN T of hidden defects that LL knows/should know about (No duty to repair)

(3) assumption of repairs a LL who voluntarily makes repairs, MUST complete them w/ reasonable care. LL liable if repairs done negligently or give a deceptive appearance of safety.

(4) short term lease of furnished dwelling LL liable for injuries resulting from any defect whether or not LL knew of defect

(5) public use LL liable for injuries to public IF @ time of lease LL (a) knows/should know of danger condition; (b) has reason to believe T MAY admit public b4 repairing condition; AND (c) fails to repair condition.

Fixtures

Fixture is a chattel so affixed to land that it ceased being personal property & has become part of realty

fixture passes w/ ownership of land

Divided Ownership Cases chattel is owned & brought to realty by someone other than landowner

agreement b/w LL & T is controlling on whether an annexed chattel is a fixture.

Absent agreement, T deemed to lack intent to permanently improve the property & MAY remove his annexed chattel IF removal does not substantially damage premises OR destroy chattel.

annexed chattel MUST BE removed by end of lease OR w/n reasonable time after

T is responsible for repairing any damage caused by removal

Easement, Profits, Covenants

Easementsnon-possessory interest that grants right to use land of another (i.e. servient tenement/burdened land) for a specific purpose

Easement appurtenantexist when easement benefits holder of another tract of land (i.e. dominant tenement/benefitted land).

Easement in Grosspersonal in nature. Right to use land held by individual w/o land ownership.

NC An unvested easement in gross becomes invalid if it does not actually vest w/n 30 years after creation.

Creation of Easement 4 ways to create: (1) prescription; (2) implication; (3) necessity; & (4) express. NC added (5) estoppel; (6) dedication; & (7) cart way proceeding

Prescription (analogous to adverse possession w/o exclusivity req.) (1) actual (must be actual use of another’s land); (2) hostile (must be w/o owner’s permission; NC use is deemed permissive unless contrary is shown. Permission given after hostile use begun will not destroy hostile req.) (3) open & notorious (owner must know/should be able to know about use); (4) continuous (for applicable statutory period i.e. 20 years); (5) easement must maintain its substantial identity for entire period, (easement MUST be confined to definite & specific line w/ only slight deviation)

Scopedetermined by nature of use during prescriptive period. Once scope is established, the holder CANNOT unilaterally expand the scope through misuse/overuse. If holder misuses/overuses easement, appropriate remedy is injunction.

Implication (based on prior use by a common grantor on land subsequently divided into multiple plots by common grantor) (1) common grantor had certain use of land PRIOR TO division of the single tract. NC 13 yrs of prior use; (2) common grantors use is continuous & apparent; (3) use reasonably necessary for enjoyment of dominant estate; (4) parties intended use would continue after division.

Scopedetermined by the scope of prior uses giving rise to the easement. Once scope is established, the holder CANNOT unilaterally expand the scope through misuse/overuse. If holder misuses/overuses easement, appropriate remedy is injunction.

Necessity (arise when access to/from land is impossible w/o easement). (1) common grantor sold portion of land & (2) buyer of one lot is deprived access to road/utility. Servient estate CAN choose a reasonable location for easement.

NC calls it implied easement by necessity & requires: (1) conveyance; (2) of a portion of grantor’s land; (3) after conveyance, it’s necessary for buyer to have easement over seller’s retained land to reach public road. Absolute necessity is not required as long as there is a reasonable necessity. Doesn’t matter if buyer has permissive right over different neighbor’s land. NC will only create easement by necessity over seller’s land, if seller doesn’t retain any portion of adjoining land, easement by necessity will not be created. Easement ends when necessity ends.

Scopedetermined by what is reasonably necessary for dominant estate. Once scope is established, the holder CANNOT unilaterally expand the scope through misuse/overuse. If holder misuses/overuses easement, appropriate remedy is injunction.

Express Easement created by (1) in a writing (SoF applies); (2) signed by servient (burdened) estate holder; & (3) satisfies deed formalities (adequate description of land involved)

Express easement by reservationwhen grantor/seller convey’s land to another. BUT reserves/retains right to continued use of land for designated purpose. Grantor can only reserve easement for himself & not for another/3rd party.

Scopeis controlled by terms of express easement. If ambiguous, court will determine based on surrounding circumstances. Once scope is established, the holder CANNOT unilaterally expand the scope through misuse/overuse. If holder misuses/overuses easement, appropriate remedy is injunction.

Easement by Estoppel (created when someone cognizant of his own right keeps silent in the knowledge that another will be innocently & ignorantly induced to make land purchase or expend money/labor in reliance on the existence of an easement that doesn’t actually exist.

Easement by Dedication (created when owner of land sets land/part of land for use by public) (1) owner of land indicates by word/conduct intent (expressed/implied) to dedicate land for public use; (2) must be an acceptance of the offer in some legal manner by appropriate public authorities.

Express intent may be oral/written. Implied intent may be shown through recording of plat showing public streets or other public areas. The offer is revocable until accepted, once accepted, it becomes irrevocable.

Cartway Proceeding (landowner entitled to “cartway” if following req. are met) (1) landowner engaged in/preparing to engage in cultivation of crops; cutting/removing timber; working quarries, mines, or minerals; or operating public/private cemeteries; (2) no public road or other means of access to landowner’s property; & (3) if it’s necessary, reasonable, & just that landowner have private way.

Cartway MUST be 18ft wide; over the land of another & may include land owned by a gov’t entity; & once established, it may be used for other purposes as well.

NOTE holder of easement has duty to make repairs if they are sole user. If used by the servient estate and easement holder, courts will apportion the repair cost based on their relative use.

Easement Termination

Abandonment estate holder physically indicates clear intent to permanently abandon. Words/intent alone are insufficient.

Estoppel where servient owner relies on easement holder’s conduct indicating intent to abandon.

Necessity Ends

Destruction of Servient Estate will destroy the easement on servient estate. Doesn’t apply if destruction was willful conduct of the owner of servient estate.

Release by written deed to servient estate holder.

Merger terminates easement automatically if one person acquires title to both servient & dominant estate.

Prescription owner of servient estate may extinguish easement through interference w/ easement that meets elements to obtain easement by prescription.

Licenses & Profits

License personal privilege to enter land for defined purpose. It is not an interest in land, it’s revocable, not subject to Sof, and not alienable.

Profit a Prendre right to enter land of another & remove resources from the land. It’s subject to same rules as easements.

Covenants promise to do/refrain from doing something relating to & concerning real property.

Affirmative Covenant promise to do something related to land.

Restrictive Covenant promise to refrain from doing something related to land.

Termination of Covenant (1) writing releasing, (2) destruction of benefitted & burdened estates, or (3) condemnation of burdened property.

Remedy for Breach covenant (money damages) equitable servitude (specific performance to force compliance w/ servitude or injunction to prevent further/continued breach)

Requirement for Burdens of Covenant to run w/ land (1) writing to satisfy SoF; (2) intent to bind successors; (3) touch & concern land, i.e. affects how landowners can/cannot use land (NC covenant MUST affect legal rights of covenanting parties as landowners, if not, this element is not met.); (4) horizontal & vertical privity (Horizontal [NC requires this]: relationship b/w original parties, i.e. grantor/grantee, LL/T, or mortgagor/mortgagee. Vertical: relationship b/w original party & their successor i.e. successor must hold the entire held by original party they rec’v the land from when covenant was made); and (5) notice (successor in interest to original burdened party MUST have had notice of covenant when taking possession: inquiry, actual, or record notice is required. NC only record notice will provide adequate notice.

purchaser is charged w/ notice when the restriction appear in their own deeds as well as when the restriction appears in the recorded conveyances that constitute their chain of title.

Requirement for Benefit to run w/ land (1) writing; (2) intent by original parties to bind successor’s; (3) touch & concern land; and (4) vertical privity (to satisfy, the successor may hold any succeeding possessory estate).

Equitable Servitudes promise to do/refrain from doing something relating to & concerning real property that’s enforced through injunction.

Virtually identical to covenants, but remedy is injunction.

Requirements for burden & benefit to run are identical to covenants except that neither horizontal nor vertical privity is required.

Equitable servitudes allow for equitable remedies, the std equitable defenses that will apply are (1) estoppel, (2) acquiescence, (3) unclean hands, (4) laches & (5) if neighborhood has significantly changed since creation of servitude, equitable relief will NOT be granted.

NC adheres to the view that in changed neighborhood conditions cases, the changes MUST occur w/n the restricted area itself. Changes outside the restricted area (even if directly adjacent to it) are not sufficient to justify holding restriction unenforceable.

Adverse Possession (AHEOC)

Adverse Possession title to property may be acquired by adverse possession which results from operation of the statute of limitations for ejectment. To establish title by adverse possession, the possessor must show:

(1) Actual adverse possessor actually occupies a reasonable portion of parcel.

(2) Hostile possessor entered w/o owner’s permission. Doesn’t matter whether she believes the land to be her own.

In NC, if possessor has conscious doubt as to his true boundary line, his possession is not hostile if he intended to claim title to disputed area only if it was included in land description.

a co-tenant MUST oust others OR make an explicit declaration that he is claiming exclusive dominion to create adverse possession.

(3) Exclusive possessor is not sharing possession w/ true owner OR public. NOTE****2+ can obtain title by adverse possession; they will take title as TC

(4) Open occupation MUST BE sufficiently apparent to put true owner on notice that trespass is occurring.

(5) Notorious possession is open and notorious when it is the kind of use the owner would make of the land.

(6) Continuous possession MUST BE continuous throughout statutory period. Constant use not required SO LONG AS possession is of a type that the usual owner would make.

adverse possessor can tack her own possession onto periods of adverse possession of her predecessors, BUT privity is required.

statute of limitations will not run against a true owner who is afflicted by a disability at the START of the adverse possession.

NC adverse possessor w/ COT is 7 years; w/o COT its 20 years.

Unlike most states, NC allows adverse possession of gov’t land; however, the SoL is longer (30 years w/o COT & 21 years w/ COT)

Effect of Disabilities in NC if @ time the cause of action to recover possession accrues the owner is under disability of minority (under 18), insanity, or incompetence, she has 3 years after the disability is removed to bring suit.

In NC disabilities cannot be tacked from one person to another. However, when 2 disabilities exist at the same time the cause of action accrues or when disability supervenes one that existed at the time the cause of action accrued, the limitation does not attach until they are both removed.

Land Conveyancing

Land Sale ContractsSoF MUST be in writing that contains the signature of the party to be charged & essential terms (e.g. parties, description of land, price)

Part performance, e.g. possession, substantial improvements, and/or payment of purchase price, can take contract out of statute. NC doesn’t recognize this.

Doctrine of Equitable Conversion under this, once K is signed, equity regards the buyer as the owner of the real property. The seller’s interest is considered personal property. Bare legal title remains in seller is considered to be held in trust for buyer. Seller entitled to possession until closing.

Risk of Loss: if property destroyed w/o fault of either party before closing, majority rule places risk on buyer. Minority rule (NC), Uniform Vendor & Purchaser Risk Act places risk on seller UNLESS buyer has title or possession at time of loss.

Even though risk of loss on buyer, if property damaged/destroyed, seller MUST credit any fire/casualty insurance proceeds against purchase price buyer required to pay.

Passage of Title on Death: under doctrine of equitable conversion, if seller dies, bare legal title passes to his heirs or devisee, BUT MUST give up title to buyer at closing. If buyer dies, his heirs or devisee CAN demand a conveyance of land at closing.

Marketable Title is implied in every land sale contract (title reasonably free from doubt at closing). It need not be perfect title, BUT MUST be free of questions that present unreasonable risk of litigation. NC follows this.

3 circumstances will render title unmarketable: (1) adverse possession; (2) encumbrances; & (3) zoning violations.

(1) Adverse Possession if even a portion of title rests on adverse possession, it is unmarketable.

(2) Encumbrances generally, mortgages, liens, restrictive covenants, easements, and significant encroachments render title unmarketable. NOTE: easement that is beneficial, visible, or known to the buyer DOES NOT impair marketability of title.

Seller has right to satisfy an outstanding mortgage or lien at closing, with proceeds from sale. Thus buyer cannot claim title is unmarketable b/c it is subject to a mortgage prior to closing, so long as the parties understand that the closing will result in the mortgage being satisfied or discharged.

(3) Zoning Restrictions an existing violation of zoning ordinance will render title unmarketable.

Remedy for Unmarketable Title (1) buyer must notify seller AND (2) give seller reasonable time to cure. If seller fails to cure, buyer remedies include rescission, damages, specific performance w/ abatement, & a quiet title suit. BUT IF closing occurs, the K & deed merge, and the seller’s liability on the implied covenant ends.

Time of Performance courts presume that time is not of the essence in real estate K’s. Thus closing date is not absolutely binding & a party late in tendering her own performance CAN still enforce the K if she tenders w/n reasonable time (e.g. 2 months) after closing date.

time is of the essence if (1) K so states, (2) the circumstances indicate that was parties intent, OR (3) one party gives the other notice that time is of the essence.

if time is of essence, party who fails to tender performance on closing date is in breach AND MAY NOT enforce K.

Tender of Performance buyer’s obligation to pay & seller’s obligation to convey are concurrent conditions & neither party is in breach until the other tenders performance. If neither party tenders performance, closing date is extended until one of them does so.

party NEED NOT tender performance if other party has repudiated K OR it’s impossible for other party to perform

Remedies for Breach of Sales K nonbreaching party entitled to damages (difference b/w K price and market value on date of breach, + incidental cost) OR b/c land is unique, specific performance. If buyer wishes to proceed despite unmarketable title, buyer can usually get specific performance w/ abatement of purchase price.

Liquidated damages if buyer defaults in performance, seller may retain the buyer’s earnest money as liquidated damages IF amount appears to be reasonable in light of seller’s anticipated & actual damages.

Seller’s Liability for Defective Property (1) Warranty of fitness or quality (new construction ONLY), (2) negligence of builder, (3) liability for defects for sale of existing land/bldg., (4) disclaimers of liability

(1) Warranty of Fitness/Quality K for sale & deeds of real property carry NO implied warranty of quality or fitness for purpose. However, most courts (including NC) recognize a warranty of fitness or quality in sale of new house by builder. The implied warranty is not applicable to commercial structures.

although subsequent purchaser cannot bring action against seller-builder based on implied warranty, he can recover in tort upon proof that he was damaged as a proximate result of latent defects caused by builder’s negligent construction.

builder-vendor & purchaser can enter into binding agreement that this implied warranty should not apply. However, this must be done by clear, unambiguous language; a provision in the K that buyer has inspected property, no representations & inducements were made other than those expressed in K, & K contains entire agreement, is not sufficient.

damages are usually cost of repair; however, if nature of the defect is such that it cannot be remedied w/o substantial portion of work completed having to be destroyed, the measure of damages is the diminution in value NC.

(2) Negligence of builderperson MAY sue builder for negligence in performing building K.

(3) Sale of existing land/bldg.-->liability for defects seller MAY be liable to purchaser for defects such as leaky roof, flooding basement, or termite infestation, on any of several different theories such as:

(a) Misrepresentation (fraud) seller is liable for defects about which he knowingly or negligently made a false statement of fact to buyer if buyer relied on statement AND it materially affected the value of property.

(b) Active Concealment seller WILL BE liable for defects even w/o making any statements if he took steps to conceal defects, e.g. wallpaper over water damage.

(c) Failure to Disclose seller liable for failure to disclose defects if (i) he knows or has reason to know of the defect; (ii) defect is not apparent and seller knows buyer is unlikely to discover it upon ordinary inspection; AND (iii) the defect is serious and would probably cause buyer to reconsider the purchase if known.

(4) Disclaimers of Liability a general disclaimer in sales K (e.g. property sold “as is” or “with all defects”) is NOT sufficient to overcome a seller’s liability for fraud, concealment, or failure to disclose. IF disclaimer identifies specific types of defects, it will likely be upheld.

Deeds—Form & Content Deeds transfer title to an interest in real property. A deed MUST BE (1) in writing to satisfy SoF, (2) signed by grantor, AND (3) reasonably identify the parties & land. NC grantee MUST sign IF the deed imposes a personal liability on the grantee.

deed MAY validly convey real property by inter vivos gift so long as there is (i) donative intent, (ii) delivery, AND (iii) acceptance

A void deed will be set aside even if property passed to BFP, but a voidable deed will be set aside ONLY IF property has NOT passed to a BFP.

Void Deed includes those that are forged, were never delivered, were issued to a nonexistent grantee, OR were obtained by fraud in the factum (grantor was deceived and did not realize she was executing a deed). NC a deed is void if it was executed by persons who have been judicially determined to be mentally incompetent.

Voidable Deeds include those executed by minors or incapacitated persons and those obtained through fraud in the inducement, duress, undue influence, mistake, and breach of fiduciary duty.

Description of Land Conveyed a description is sufficient if it provides a good lead to the identity of the property. IF it is too indefinite, grantor retains title. Parole evidence is generally, admissible to resolve patent or latent ambiguities if description gives a good lead BUT MAY NOT be admissible where the description is inadequate.

Rules of Construction where descriptions are inconsistent/conflicting, these methods of description are given the following order of priority: (i) natural monuments (e.g. oak tree); (ii) artificial monuments (e.g. stakes, bldgs.); (iii) courses (e.g. angles); (iv) distances (e.g. feet/yards); (v) name (e.g. Blackacre); and (vi) quantity (e.g. 300 acres).

Boundary Cases in variable boundary line cases (i.e. water boundary), the slow and imperceptible change in the course of a river or stream operates to change the legal boundary; accretion (slow deposit of soil on land abutting water) belongs to the abutting owner. Avulsion (sudden change of watercourse) does not change ownership rights. Fixed boundaries are not changed by encroachment of water.

Deed—Delivery & Acceptance a deed is not effective UNLESS it has been delivered & accepted.

Delivery refers to grantor’s intent to make a deed presently effective even if possession is postponed. Delivery MAY BE satisfied by (i) manual delivery, (ii) notarized acknowledgment by grantor & recordation, OR (iii) anything showing grantor’s intent to deliver. Parol evidence is admissible on the issue of intent to deliver, BUT NOT to show that delivery was conditional. NC: grantor MUST part w/ physical possession of the instrument and have intent for instrument to be presently effective. W/O both there can be NO valid delivery.

Title passes upon delivery and CANNOT be canceled OR taken back. To return title to grantor, grantee MUST draw up a new deed and deliver it to grantor.

Conditional Delivery if a deed is absolute on its face BUT delivered w/ an oral condition, the condition is disregarded and the delivery is absolute. NC adheres to the view that the grantor’s intent is paramount & thus there can be a conditional delivery to a grantee. The rational is that such conditions do not violate the parol evidence rule b/c they go to show that deed never became operative.

A properly executed & delivered deed that provides that title will not pass until grantor’s death is valid & creates future interest in grantee.

If grantor gives deed to 3rd party w/ instructions to give to grantee, there is valid delivery. If grantor fails to give instructions, the validity of delivery depends on whether 3 rd party considered grantor’s agent. If so, there is no delivery.

Delivery by Escrow a valid conditional delivery occurs when a grantor gives deed to 3rd party w/ instructions to give to grantee when certain conditions occur. Parol evidence is admissible to show that delivery is conditional.

Acceptance by the grantee is required in order to complete a conveyance. Most states presume acceptance. Acceptance relates back to the date the deed was delivered into escrow (unless this would defeat rights of intervening 3rd parties).

Covenant for Title & Types of Deeds there are 3 types of deeds used to convey property other than leaseholds: (1) general warranty deed, (2) special warranty deed, and (3) quitclaim deed. The difference is the scope of title assurance.

(1) General Warranty Deed best deed buyer could hope for. General warranty deed typically contains all 6 of the following covenants. The first 3 (seisin, right to convey, and covenant against encumbrances) are present covenants, meaning a present covenant is breached if ever at the time of conveyance. The last 3 (quiet enjoyment, warranty, & further assurances) are future covenants and are breached ONLY upon disturbance of grantee’s possession.

(a) Seisin grantor covenants that he has the estate she purports to convey, i.e. seller must have title & possession @ time of grant.

(b) Right to Convey grantor covenants that he has authority to make grant. Title alone will satisfy this.

(c) Covenant against Encumbrance’s grantor covenants against existence of physical or title encumbrances. NC: covenant is not breached by existence of an encumbrance on adjacent property.

Future Covenants

(d) Quiet Enjoyment grantor covenants that grantee will not be disturbed in possession by 3rd party’s lawful claim.

(e) Warranty grantor agrees to defend against reasonable claims of title by 3rd party & to compensate grantee for any loss sustained by the claim of superior title.

(f) Further Assurances grantor promises to perform acts reasonably necessary to perfect title.

(2) Special Warranty Deed provided for by statute in many states, this deed contains 2 promises that grantor (i) has not conveyed same estate OR any interest therein to anyone other than grantee; AND (ii) that estate is free from encumbrances made by grantor.

(3) Quitclaim Deed releases whatever interest the grantor has. No covenants of title are included or implied.

(4) Estoppel by Deed occurs when grantor purports to convey an estate in property that he does not then own, his subsequent acquisition of the estate will automatically inure to the benefit of the grantee.

this doctrine applies where conveyance was by warranty deed OR where the deed purported to convey a particular estate and is NOT usually applicable to quitclaim deeds.

Most courts hold that title inures to the benefit of grantee ONLY as against grantor. Thus, if grantor transfer her after-acquired title to a BFP for value, the BFP will prevail over original grantee.

Recording System @ CL if grantor conveyed the same property 2x, the grantee first in time generally prevailed. However, the recording acts change that outcome under certain circumstances.

Recording acts generally protect all BFP’s from secret interest previously created & provide a mechanism for earlier grantees to give notice through recordation. These statutes require a grantee to record his deed to put subsequent purchasers on notice of his interest. Proper recordation gives constructive notice of the first conveyance to everyone, so there can be no subsequent BFPs.

Donees, heirs, and devisee ARE NOT protected b/c they do not value; however, a purchaser from a donee, heir, or devisee of the record owner IS protected against prior unrecorded conveyances of the record owner.

Shelter Rule a person who takes from a BFP will prevail against any interest the transferor-BFP would have prevailed against. This is true even if the transferee had actual notice of prior unrecorded conveyance. This rule DOES NOT HELP a transferee who previously held title; she CANNOT “ship through” a BFP to get good title.

Types of Recording Acts there are 3 major types of recording acts BUT under all 3, the burden is on the subsequent taker to prove that he qualifies for protection under the statute.

(1) Notice Statutes subsequent BFP (person who pays value & has no notice [actual, inquiry, or constructive] of prior instrument @ time of conveyance) prevails over prior grantee who failed to record. NOTE: subsequent BFP protected regardless of whether she records at all.

(2) Race-Notice Statutes subsequent BFP is protected ONLY IF she takes w/o notice AND records before prior grantee.

(3) Race Statutes whoever records first wins. Notice is irrelevant. NC is a pure race jurisdiction & notice is irrelevant except in following 2 situations: (1) need not record leasehold estate of 3 years or less and (2) property conveyed subject to prior interest.

W/O Notice means that the purchaser had no actual, constructive (record), or inquiry notice of a prior conveyance at the time he paid consideration & received the interest.

Actual Notice includes knowledge obtained from any source (e.g. newspaper, word of mouth)

Inquiry Notice purchaser is charged w/ knowledge of whatever the inquiry would have revealed, even if in fact he made none.

Record Notice ONLY IF the deed is recorded in such a manner that a searcher could reasonably find it.

Wild Deeds is a recorded deed that is not connected to the chain of title. It DOES NOT impart constructive notice b/c a subsequent purchaser could not feasibly find it.

Security Interest in Real Estate

Types of Security Interest there are 6 types of security interest in real estate, the first 3 are the most important: (1) mortgage, (2) deed of trust, (3) installment land contract, (4) absolute deed, (5) sale-leaseback, and (6) equitable vendor’s lien.

(1) Mortgage debtor/note-maker is usually the mortgagor. Lender is the mortgagee. On default, the lender can realize on the mortgaged real estate by having a judicial foreclosure sale conducted by the sheriff.

(2) Deed of Trust debtor/note-maker is trustor. He gives a deed of trust to 3rd party trustee, who is usually closely connected to lender (the beneficiary). On default, lender instructs trustee to foreclose the deed of trust by sale.

(3) Installment Land Contract installment purchaser obtains title ONLY WHEN full contract price is paid off. Forfeiture clause, allowing vendor upon default to cancel contract, retake possession, and retain all money paid, are common & generally enforceable.

(4) Absolute Deed an absolute deed, if given for security purposes, CAN BE treated as an equitable mortgage to be treated as any other mortgage (i.e. creditor must foreclose by judicial action).

Transfers by Mortgagee & Mortgagor all parties to a mortgage or deed of trust MAY transfer their interest. The note & mortgage MUST pass to the same person for the transfer to be complete.

Transfer by Mortgagee of Mortgage w/o Note some states hold that transfer of mortgage automatically transfers the note UNLESS the mortgagee-transferor expressly reserves the rights to the note. In these states, transferee CAN file equitable action & compel transfer of note. Other states hold that, b/c the note is the principal evidence of the debt, a transfer of the mortgage w/o note is void.

Transfer by Mortgagee of Note w/o Mortgage the note CAN BE transferred w/o the mortgage BUT the mortgage will automatically follow the properly transferred note UNLESS the mortgagee-transferor expressly reserves the rights to the mortgage.

Methods of Transferring the Note (1) by either indorsing it & delivering it to the transferee OR (2) by a separate document of assignment. ONLY IF the indorsement & delivery method is used can the transferee become a holder in due course. To be a holder in due course, the following MUST BE met: (i) note MUST be negotiable in form, (ii) original note MUST be indorsed & signed by named payee, (iii) original note MUST be delivered to transferee, (iv) transferee MUST take note in good faith (no notice that its overdue) AND MUST pay value for it.

Benefits of Holder in Due Course he takes note free of any personal defenses of the maker (e.g. failure of consideration, fraud in inducement, waiver, and estoppel) BUT is still subject to real defenses (e.g. infancy, other incapacity, duress, illegality, forgery, discharge in insolvency, and any other insolvency).

Transfer by Mortgagor—Grantor Takes Subject to Mortgage a grantee of mortgaged property takes subject to the mortgage. If grantee signs assumption agreement, he becomes primarily liable to the lender, while the original mortgagor is secondarily liable as a surety. However, mortgagee MAY opt to sue either grantee or original mortgagor on the debt. If no assumption agreement is signed, grantee is not personally liable on the loan & the original mortgagor remains primarily & personally liable. Nevertheless, if grantee does not pay, loan MAY BE foreclosed on, wiping out grantee’s investment.

Due On Sale Clauses which appear in most mortgages allow the lender to demand full payment of the loan if the mortgagor transfers any interest in the property w/o lender consent.

Possession B4 Foreclosure Mortgagee MAY have right to take possession before foreclosure, when mortgagor defaults, depending on which of the 3 theories the state follows. Most states follow lien theory. Mortgagee MAY take possession if mortgagor gives consent OR if he abandons property.

(1) Lien Theory (Majority View) mortgagee considered holder of a security interest ONLY and mortgagor deemed owner of land until foreclosure. Mortgagee CANNOT take possession w/o consent upon mortgagor default.

(2) Title Theory (Minority View) legal title in mortgagee UNTIL mortgage is satisfied OR foreclosed, AND mortgagee entitled to possession upon demand @ any time, i.e. mortgagee CAN take possession on default.

(3) Intermediate Theory legal title in mortgagor UNTIL default and upon default legal title in mortgagee. Mortgagee MAY demand possession when default occurs.

most mortgagees DON’T WANT possession b/c of the risk of liability and rather attempt to intercept rents b4 foreclosure by getting a receiver appointed by the court to manage property. Courts WILL appoint receiver IF: (i) waste is occurring, (ii) value of property inadequate to secure debt, AND (iii) mortgagor insolvent.

Foreclosure by sale is required in all most all states under which the property is sold to satisfy the debt in whole or part. All states allow for judicial sale, some states allow for non-judicial sale under a power of sale. Foreclosure sales are usually conducted by auction & lender is permitted to bid @ the sale.

Redemption in equity can occur at any time prior to foreclosure sale if mortgagor pays amount due. IF note contains acceleration clause, the full balance of note/mortgage MUST BE paid to redeem. MUST also pay any interest. This right CANNOT BE waived in mortgage.

Statutory Redemption is allowed in about half the states and allows the mortgagor to redeem property for some fixed period after foreclosure sale has occurred.

Priorities mortgage’s priority usually determined by the time it was placed on property. Foreclosure DOESN’T destroy any interest SENIOR to the interest being foreclosed. It generally destroys all JUNIOR interest, BUT failure to include junior interest in foreclosure action results in preservation of that party’s interest.

Purchase Money Mortgages (PMM) is a mortgage given in exchange for funds used to purchase property. PMM’s are given either to seller as part of purchase price OR to 3rd party lender. PMM’s have priority over mortgages, liens, and other claims against mortgagor that arise prior to mortgagor’s acquisition of title.

However, subsequent mortgages or liens MAY defeat PMM priority by operation of the recording acts. As b/w 2 PMM’s, a seller’s mortgage generally has priority over a 3rd party’s. If there are two 3rd party PMM’s, priority determined by chronological order. USUALLY 2 PMM’s have notice of other’s existence; thus, the recording acts are of no use in determining priority.

Proceeds of Sale applied (1) to expenses of the sale, attorney’s fees, and court cost; (2) then to principal & accrued interest on foreclosed loan; (3) then to any other junior interest in order of their priority; (4) finally to mortgagor if anything is remaining.

If proceeds are insufficient to satisfy mortgage debt, mortgagee retains a personal cause of action against mortgagor for the deficiency. This is called a deficiency judgment.

Rights Incidental to Ownership of Land

(Natural Rights)

Generally an owner of real property has the exclusive right to use & possess the surface, airspace, & soil of the property.

Lateral & Subjacent Support

Lateral Support ownership of land include the right to have land supported in its natural state by adjoining land. A landowner is strictly liable IF his excavation causes adjacent land, in its natural state, to subside. An adjacent landowner is strictly liable for damages to land & bldg’s. caused by excavation ONLY IF it is shown that land would have collapsed in its natural state. Otherwise, he is liable for such damage ONLY IF excavation was done negligently.

Subjacent Support an underground occupant of land (e.g. mining co.) MUST support the surface & bldg’s. existing on the date the subjacent estate was created. Liability for subsequently erected bldg’s. requires negligence.

Water Rights there are two major systems for determining the allocation of water in watercourses, such as streams, rivers, and lakes.

NC adheres to the public trust doctrine under which navigable waters are held for the public. Public uses include navigation, swimming, hunting, fishing, & recreational activities. If a body of water can be navigated by watercraft, it is navigable in fact and thus, navigable in law, even if it has not been used for such purpose. As a result, the public retains the right to travel, by watercraft, on such waters w/o consent of riparian owners.

(1) Riparian Doctrine the water belongs to those who own the land bordering the watercourse and can use the water only in connection w/ the riparian parcel.

Reasonable Use Theory all riparian’s share rights of reasonable use of the water (i.e. one’s use is not enjoinable unless it substantially interferes w/ the use of other riparian owners. Natural use (human uses like consumption, gardening) prevail over artificial uses (e.g. irrigation, manufacturing).

(2) Prior Appropriation Doctrine under this doctrine, individuals acquire rights by actual use. Appropriative rights are determined by priority of beneficial use. If there is decrease in flow, priority is accorded in terms of time of appropriation. Appropriation right can be lost by abandonment

Groundwater (Percolating Water) is water beneath the surface of the earth that is not confined to a known channel. The surface owner is entitled to make reasonable use; however, the use must not be harmful to other owners w/ same right.

Surface Water is water from rain, springs, or melting snow that has not reached a natural watercourse or basin. The common enemy rule followed by many states says that an owner CAN take any protective measures to get rid of the water> But it prohibits unnecessary damage to other’s land.

Possessor’s Rights

The possessor of real property has the right to exclude others and his remedy for invasion includes an action for (1) trespass (land invaded by tangible physical object); (2) private nuisance (land invaded by intangibles such as odors or

noise); (3) continuing trespass (land repeatedly invaded by trespasser; and (4) ejectment or unlawful detainer to remove a trespasser or tenant.

Eminent Domain

Eminent Domain gov’t power to take private property for public use in exchange for just compensation.

Taking a regulation that deprives the owner of ALL economic use of his land constitutes a taking. If a regulation leaves property w/ very little economic value, to determine if there was a taking the court will balance (i) the social goals of the regulation, (ii) the diminution in value of the property, and (iii) whether the regulation substantially interferes with distinct, investment-backed expectations of the owner.

Zoning

State may enact statutes to reasonably control the use of land for the protection of the health, safety, morals, and welfare of its citizens. The zoning power is based on the states police power and is limited by the DP Clause & EQ Clause of the 14th Amendment, and the no taking w/o just compensation clause of the 5th.

Variance is a departure from the literal restrictions of a zoning ordinance granted by administrative action.

Nonconforming Use a use that @ the time of passage of zoning act that does not conform to the statute CANNOT BE eliminated at once. Amortization is the gradual elimination of such uses.

Unconstitutional Exactions a zoning ordinance may so reduce the value of real property that it constitutes a taking under the 5th & 14th Amendment. If the ordinance constitutes a taking, the local gov’t must pay damages to landowner equal to value of reduction. If the ordinance regulates activity that would be considered a nuisance under common law, it will not be a taking if it leaves the land w/ no economic value.

Property Exempt from Judgment debtor may choose either the constitution’s homestead & personal exemptions OR the statutory exemptions but cannot elect both. NOTE: regardless of which exemption claimed, property can be reached to pay (1) taxes, (2) obligations incurred for the purchase price, and (3) mechanics’ or laborers liens. Both exemptions protect the debtor’s life insurance.

Property Exempt Under Constitution NC establishes a homestead exemption of a minimum of 1K. It also provides a minimum exemption of $500 for the debtor’s personal property.

What May Be Claimed a homestead is not an estate in land but rather an exemption from sale or execution for the collection of a debt. A debtor who mortgages her property is entitled to a homestead in equity of redemption; however, it remains subject to the mortgage debt.

Duration of Homestead once property is established as homestead, it can lose this identity only by death, abandonment, or alienation. However, b/c its purpose is to protect the family home from the demands of creditor’s, the exemption will persist after the owner’s death for the benefit of her minor children or if none exist, her surviving spouse until remarriage.

Property Exempt by Statute judgment debtor may opt for exemption by statute instead of the constitutional exemptions.

Residential Exemption under the statute, debtor can exempt her aggregate interest in (i) real or personal property used as a residence or (ii) a burial plot for a value not to exceed 35K or 60K for unmarried debtor over age 64 who took through right of survivorship. If debtor does not use entire exemption, she may claim up to 5K in any property to make up the difference.

Personal Property Exemption by statute, debtor may also claim the following: (i) up to 3.5K in motor vehicle; (ii) up to 5K plus 1K each for up to four dependents, in household or family items (i.e. goods, apparel, books, furnishings, crops, musical instruments); (iii) up to 2K in professional materials of the trade; (iv)

professionally prescribed health aides; (v) compensation for personal injury; (vi) individual retirement plans, benefits, and college savings plans; and (vii) alimony, support, separate maintenance, & child support.

Exceptions goods generally cannot be claimed as exempt if they were purchased w/n 90 days of judgment collection proceedings or bankruptcy filings. Furthermore, in addition to the exceptions discussed above (pay taxes, etc.) the statutory exemptions do not apply to (i) nonjudicial statutory liens; (ii) support (child support, alimony); (iii) criminal restitution orders; or (iv) most security interest. NOTE: household goods receive extra protection & may be reached only by purchase money security interest creditors or secured creditors in possession.

Duration of Statutory Exemptions property so designated remains exempt until (i) it is sold or (ii) it is transferred in satisfaction or enforcement of security interest. If property was left to a dependent after debtor’s death, it remains exempt until dependency no longer exist. If the creditor records the order designated property exempt, the 10-year SoL on judgments is suspended while the exemption is in effect.