Property I - Final Exam Outline

8/8/2019 Property I - Final Exam Outline

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1) Property is a bundle of rights:a) The right to use and possess.b) The right to excludec) The right to transfer (alienation)

2) Adverse Possessiona) Acquisition of title against the true owners interestsb) Elements

i) Actual entry: must actual enter onto the property (the clock starts running)ii) Exclusive Possession: The holds property against true owner and general publiciii) Open and notorious: The uses the property as the true owner would.

(1) Cannot be secretive(2) Use must be in a like manner. If farm land it must be farmed

iv) Adverse or Hostile under a claim of right:(1) Adverse: cannot have permission to be on land by the true owner and must hold the

land against the true owners interests(2) Claim of right:

(a) Objective Standard:(b) Mistaken Belief:(c) Aggressive Trespasser:

v) Continuous and uninterrupted(1) occupies the land in a consistent manner as the true owner would(2) does not do anything to indicate their desire to take back possession

vi) Statutory Period(1) Owner must retake possession of the possession with the statutory period of time or

must occupy the land for statutory period of time(2) Tacking- can add years attained by prior adverse possessor if transferred in Privity(3) Statutory period may be stayed based on disability or minority status

3) The Land Transactiona) Brokers

i) Types of:(1) Listing(2) Selling(3) Buyers

ii) Commission(1) Generally due when brokers finds a ready, willing and able buyer(2) Traditionally is paid at closing(3) Broker can still earn commission even if transaction does not go through

iii) Duty to disclose(1) Common Law: Caveat Emptor let the buyer beware(2) Majority Rule: Broker must disclose known material defects to buyer


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(3) Minority Rule: Broker must make a detailed inspection of the property and report anylatent defects that are discovered to buyer

iv) Obligations of broker(1) Fiduciary(2) Cannot practice law(3) Must hold true to duty

b) The contract of Salei) Statute of Frauds: Any interest in land must be in writing and must

(1) Identify the parties;(2) Describe the property;(3) Price or Method to determine price;(4) Intent to convey the property; and(5) Signed by the party to be bound

ii) Exceptions to the SOF:(1) Part Performance:

(a) has taken possession of property; and(b) either pays part or all of the purchase price; or(c) makes improvements to the property

(2) Equitable estoppel(a) Inducement to by causes to substantially change position in justifiable reliance

on an oral contract; and(b) Injustice would result unless the contract is enforced

c) Marketable Title:i) Generally if title is not marketable the buyer may rescindii) Title is generally marketable if it is free from the risk of litigation and all encumbrances

(1) Types of encumbrances include:(a) Any public zoning restriction is violated(b) Existence of any private covenant or restriction on land(c) Any material defects that are undisclosed and reduce the value of the property

(2) Exceptions:(a) A contract provision may avoid the need for marketable title or buyer may agree to

encumbrances.(b) If title is insurable then courts will most likely adhere to the contract even though it

is unmarketabled) Equitable Conversion:

i) Majority Rule: The buyer is deemed to be the owner of the property between the formationof the contract and the close of escrow:(1) If house burns down in this time frame the buyer must still purchase the property

ii) Minority Rule: Risk is on seller until either possession or title is passed to the buyere) Seller s Duty to disclose

i) Common Law: Caveat Emptor(1) Traditionally seller has no duty to disclose any latent or material defects


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ii) Modern Rule: Seller has duty to disclose known latent or material defects(1) Defects that materially affect the property s value or pose a health/safety risk that the

seller knows or should have known(2) Defects that are not discoverable by buyer upon reasonable inspection(3) The law is unclear if it is necessary to disclose intangible defects like a reputation for

being haunted(4) Example

(a) Seller cannot do something to wrongfully to induce the buyer to purchase thehome; or

(b) Try to cover up a major material defect like covering up cracks in the foundation andnot saying anything to the buyer

(5) Tests for materiality(a) Objective test: would a reasonable person attach importance to it in deciding to buy(b) Subjective test: does the defect affect the desirability of the property to the buyer

iii) Builders Implied Warranty(1) Any home sold by a builder has an implied warranty that provides that the house has

been constructed in a workmanlike manner and is fit for human habitationf) Remedies for breach of contract

i) In the event that the contract for sale is breach there are three remedies for thenondefaulting party(1) Money Damages:

(a) Loss of Bargain: Difference between contract price and market price(b) Incidental and nominal: cost of inspection, moving expenses(c) Liquidated Damages: (Always at issue)

(i) Damages negotiated within a contract if there is a breach1. Retention of the deposit for sellers and restitution of the deposit for buyer;

or another amount negotiated(ii) Liquidated Damages are calculated differently by jurisdiction when challenged

1. Majority Rule:a. Future damages are difficult to determine in advance; andb. Liquidated damages have been calculated fairly

2. Minority Rules:a. If at time of breach liquidated damages are close to actual damagesb. If liquidated damages are an appropriate percentage (10-20% or more)

(2) Specific Performance (usually a buyers remedy):(a) Court makes the seller perform the contract and convey title for purchase price

(3) Rescission(a) Either party can choose to rescind the contract

g) Deedsi) The deed is the basic instrument used to transfer an estate or other interest in land. One

who transfers title is the grantor and one who received is the granteeii) Requirements for Deed:


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(1) Essential Deed Components(a) Must be in writing;(b) Be signed by the grantor;(c) Identify the parties;(d) Contain words of conveyance; and(e) Adequately describe the property

(2) Delivery: A deed is not effective until it is delivered(a) In order to do so the grantor must manifest by words or action the intent that the

deed be immediately effective.(b) Typically the grantor conveys the deed by physically handing it to the grantee with

words indicating the required intent(c) Can also be presumed to be delivered if the grantor records the deed

(3) Acceptance: In return the grantee must accept the deed for the conveyance to beeffective. This is presumed of it benefits the grantee

iii) Merger: At closing, sales contract merges into deediv) Types of deeds

(1) General Warranty Deed: Seller warrants against all defects and encumbrances in titleexcept those specifically excepted in the deed(a) Present Covenants

(i) Covenant of Seisin: grantor warrants that he owns the land1. Damages: return all or a portion of purchase price

(ii) Covenant of Right to convey: grantor has the right to convey the property1. Damages: Recoup monies lost as a result of the transaction

(iii) Covenant against encumbrances: No one else has an interest in the property1. Damages: Cost of removal if easy

(b) Future Covenants:(i) Covenant of general warranty: grantor warrants that he will defend against

lawful claims and will compensate grantee for any loss sustained from superiortitle

(ii) Covenant of quiet enjoyment: grantor warrants that the grantee will not bedisturbed in possession and enjoyment of the property by assertion of superiortitle

(iii) Covenant of further assertions: Grantor will do what it takes to ensure thatperfect title is conveyed

(iv) Damages: Either value at dispossession or value of the initial investment. Alwaysat issue.

(2) Special Warranty Deed: limits warranty to defects and encumbrances arising during timegrantor held title

(3) Quitclaim Deed: Conveys no warranties, conveys whatever interest grantor ownsh) The mortgage

(1) A mortgage is the conveyance of an interest in real property as security for performanceof an obligation. The obligation is almost always a loan of money evidenced by a


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p romissory note. If the borrower (the mortgagor ) fails to make the payments requiredby the note or otherwise defaults on the obligation, the lender (the mortgagee ) maycause the secured property to be sold and apply the sales proceeds to satisfy the unpaiddebt. This process is called foreclosure .

ii) Promissory Note: The promissory note is simply a specialized form of contract between thelender and the borrower; it includes the loan amount, interest rate, term, and repaymentschedule.(1) May also contain a pre-payment clause or a due on sale clause (requires loan amount

due before deed id transferred to a new owner)iii) Foreclosure of the mortgage

(1) Strict Foreclosure:(a) A common law approach, the mortgagee could petition the court to end or

foreclose this equity of redemption, and set a final date for payment.(2) Judicial Foreclosure:

(a) All states allow through legislation the public sale of the property under courtsupervision and distribution of excess sales proceeds to the mortgagor. Often costlyand time consuming

(3) Power of Sale Foreclosure(a) Not available in all states, this allows the mortgagee to sell the property in private

sale or auction as dictated by statute(i) This often permitted with a deed of trust but not mortgage(ii) Provision for Power of Sale must be incorporated in the contract

iv) Mortgage Protection Laws(1) Deficiency Judgment: If the proceeds of the foreclosure do not fully satisfy the debt the

mortgagee can sue requiring the mortgagor to repay the unpaid balance(a) Many states limit the amount of the deficiency judgment by the difference between

the debt and the fair market value(b) Other states do not allow deficiency judgments altogether.

(2)

Redemption(a) Equity Redemption: Defaulting mortgagor can repay the retain the property bypaying off the amount due before the property is sold, w/ acceleration clause fullbalance is due

(b) Statutory Redemption: About half the states allow the mortgagor to redeem theproperty after foreclosure in a process called statutory redem p tion . In such states,the mortgagor may recover title by paying a set amount (usually the foreclosure saleprice plus other expenses) to the successful bidder within a specific period.

v) Alternative to Foreclosure(1) Deed in lieu: When borrower cannot repay his debt he can frequently avoid foreclosure

by tendering his deed to the lender in lieu of foreclosure. In most cases the lender willalso give up any claim to a deficiency judgment. This helps alleviate the great costs of foreclosure.

vi) Alternatives to mortgage(1) Deed in Trust: The Debtor gives the deed of trust to a 3 rd party, who is connected or

affiliated with the lender. In default, the lender instructs the trustee to foreclose thedeed of trust by sale

(2) Installment Land Contract: Seller retains title and does not deed the property until thebuyer has paid a full price(a) Under the common law if a payment is missed, purchaser forfeits his entire interest


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(b) The majority will now protect the purchasers equitable interest and allows thepurchaser a grace period to pay off the full value and keep the property

4) Title Assurancea) Recording system:

i) Purpose(1) The recording system serves two basic purposes: (1) it protects existing owners from

losing their property to later purchasers by providing constructive notice; and (2) itprotects new buyers by allowing them to qualify for bona fide purchaser protectionafter careful title searching reveals no prior interests.

ii) Anatomy(1) The recording system functions much like a specialized library. Deeds and other

instruments are placed in the public land records; a written catalogue (usually consistingof two indices) lists all recorded documents. A title searcher must examine the indicesthat affect the parcel at issue, read the relevant documents, and independently evaluatetheir legal significance to determine the state of title.

iii) Procedure for recording(1) The document must be acknowledged before a notary public or similar official in order

to qualify for recordation.(2) The document is then presented to the appropriate local official along with a fee and is

indexediv) Title Search Indexes

(1) The title searcher first searches in the grantee index back in time to determine whenthe current owner received title; she then repeats the process from owner to ownerback in time. Shifting to the grantor index , she now searches forward in time, under thename of each owner, to determine if any of them made conveyances during theirrespective period of ownership other than the known conveyances to each other.Finally, she reads the relevant documents and evaluates their legal significance.

(2)

Tract index: Indexing according to parcel of land that would reveal all documents relatedto that parcel. Not commonb) Recording Acts

i) Protect subsequent bona fide purchaser of valueii) Recording always puts a subsequent purchaser on notice of the interest recordediii) Are priority statutes. Priority over others with potential superior interests

(1) Types of Recording Acts(a) Pure Race

(i) First in time (of recording), first in right(ii) Extremely Rare (LA, NC)(iii) Problems: Can lead to illicit acts

(b) Pure Notice(i) Protects a subsequent purchaser against an unrecorded instrument IF the

subsequent purchaser has no notice (actual) of the instrument(ii) Problems: Is purely subjective, can reaffirm individuals laziness

(c) Race-Notice(i) In a race-notice jurisdiction, a bona fide purchaser is a subsequent purchaser for

value without notice of any prior interest who also records his deed first.Suppose O conveys to A; then O conveys to B, who pays value to O, has nonotice of A s interest, and who records before A does. B prevails over A.


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(2) Types of Notice(a) Actual notice: subsequent purchaser or agent had actual notice of prior claim you

know(b) Constructive notice (record notice): legally recorded deed provides constructive

notice to everyone. Must be recorded in the chain of title. you should have known(i) Wild deeds: recorded deeds not connected in the chain of title do not give

constructive notice(c) Inquiry notice: Purchaser hears or observes something that would cause an

ordinarily prudent person to further inquire. you should have askediv) Other Recording Items

(1) Shelter Rule: A person who takes from a BFP will prevail against any interest that theBFP would have prevailed against, even if the person has actual notice of unrecordedinterest.

(2) Merchantable Title Act: Establishes a cut off point for the purposes of searching title(3) Recording Mistakes

(a) No acknowledgment: unacknowledged deed does not qualify for recording andtherefore does not give constructive notice

(b) Defective acknowledgement: if defect is not apparent on its face notice is givenc) Title Insurance

i) Most policies insure lenders and not purchasersii) Owner may purchase a separate policy for additional fee

5) Nuisancea) A nontrespassory invasion of another s interest in the private use and enjoyment of land by

conduct raising liability.b) To bring a case for nuisance: (a) must have a p ossessory interest in the land; (b) has done an

affirmative act that interferes w/ use and enjoyment of P s property;c) Elements of nuisance:

i)

Threshold questions:(1) Does have a sufficient interest in the land for nuisance law to apply?(2) Has the interest been interfered with substantially?(3) Is there liability causing conduct? Go into analysis

(a) Determine if unintentional or Intentional:(i) Unintentional: does not intend the conduct: No further analysis(ii) Intentional: intends the conduct

1. Determine if reasonable or unreasonablea. Conduct is reasonable if you intended the condition or substantial

certain the condition would occuri. Use gravity of harm v. utility test to determine liability

b. Conduct is unreasonable if you did not intend the condition or werecertain it would occuri. Unreasonable: Two testii. Balancing Test (restatement): Whether the gravity of harm

outweighs the utility of the actor s conductiii. Gravity of Harm: extent and character of harm, social value of s

use, burden on to avoid(b) Utility: social value, suitability to location, and impracticability of avoiding

interference


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(4) Levels of Interference (Common Law):(a) Sliding scale look to how much interference is caused to the use and enjoyment of

landd) Damages

i) Some courts grant injunctive relief only, majority will grant damages, sometimes in additionto injunctive, or sometimes in lieu of injunctive

ii) Injunction:(1) Common Law: Once nuisance is established the is entitled to an injunction(2) Modern Approach:

(a) Injunction is appropriate if harm to outweighs the social utility of s conduct;(b) can avoid harm without undue hardship;(c) s conduct is not suitable to locale

iii) Monetary Damages(1) Where provides significant social utility and cannot prevent nuisance

(a) Sometime awarded in whole or limited to specific instance

6) Easementsa) A nonpossessory interest in use of land of anotherb) Types:

i) Affirmative: Right to enter upon the servient land and make use of itii) Negative: right to compel servient land refrain, transferrable if commercial

c) Descriptionsi) Appurtenant: benefits land and is transferableii) In gross: benefits a specific person and is nontransferable unless servient gives permission.

transferable if commercial(1) Under restatement it is assignable regardless of commercial character(2) More recently it is assignable as long as the parties intended it

d) Owners:

i)

Dominantii) Servient: Can exclude anyone other than holder of easement and their inviteese) Formation

i) Express:(1) Normal: Must satisfy SOF, just must comply with formal elements of a deed. Presumed

indefinite unless otherwise limited(2) Reservation: Grant of a new easement that servient estate grants to (1) Common Law:

reserve to self only; other jurisdiction: can reserve for 3 rd party because it comports withthe intent

(3) Exception: Servient estate keeps easement upon selling propertyii) Estoppel: Creates an irrevocable licenseiii) Necessity: when owner sells and divides a tract of land and deprives one of the lots one pf

the access to a public road or utility line, a right of way is created, terminates whennecessity ends.(1) Strict necessity

(a) Majority holds that property must be entirely landlocked without touching anypublic road

(2) Reasonable necessity(a) Minority view: Only needs to be convenient and beneficial to the normal enjoyment

and use of the dominant land


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iv) Prescription: Similar to adverse possession however it does not need to be exclusive(1) Open and Notorious(2) Adverse(3) Continuous(4) Statutory Period

v) Termination(1) Expiration: Parties of original creation set a specific termination date(2) Release: release is given by easement holder (dominant) to servient holder and subject

to SOF(3) Change of purpose: extinguishment(4) *Change in Scope: Does extinguish - Misuse can only lead to an injunction(5) Prescription: Same rule apply except that servient owner must substantially interfere

with the holder s use of easement(6) End of necessity(7) Merger: unity of properties(8) Abandonment: Dominant owner does not use land and clearly manifest intent to

relinquish the easement

(9) Condemnation: Eminent domain(10) Defeasible: occurrence of event that extinguishes the easement(11) Estoppel: if servient owner reasonable relies

vi) License(1) Permission to enter land of another that would otherwise be trespass, not an interest in

land(a) Generally Revocable: revocable at will, however may be breach of contract(b) Not Assignable(c) Irrevocable Licenses: (1) estoppel theory if licenses substantially relied on a license

or (2) if associated with an interest (timber)

7)

Real Covenantsa) A promise to do something or to refrain from doing something on land that run with the landb) Enforced in law and only allows for monetary damagesc) General requirements of:

i) There must be a both benefit and burden for a real covenant to exist;ii) Must expressly be in writing and are typically set forth in the deed

d) Requirements for Burden to run:i) Original parties must intend to bind successorsii) Must touch and concern landiii) Privity

(1) Horizontal: between original owner(2) Vertical: between successors

iv) Successors must have noticee) Requirements for Benefit to Run

i) Intent to benefit successorsii) Touch and concerniii) Vertical Privity

f) Termination is similar to Easements

8) Equitable Servitudes


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a) Similar to real covenant and is a promise to do something or to refrain from doing somethingthat run with the land

b) Enforced in equity and only allows injunctive relief c) General Requirement is that it must be in writing and satisfy the SOFd) Requirements for Burden to Run

i) Intent to bind successorsii) Touch and concern land: Servitude must restrict the landowner in use or require him to do

somethingiii) Notice: Subsequent purchaser must have actual or constructive noticeiv) Vertical Privity: Only required in some jurisdictions

e) Requirements for benefit to runi) Intent to bind successorsii) Touch and concern: Servitude must make the land more useful or valuable to the benefited

partyf) Termination: Similar to Easements

9) Common Interest Communities:a) Typically exist in areas that have a common scheme such as condos, PUD s and HOA s

i) Each owner has a right to enforce the benefit of the covenantii) Entire tract of land burdened and benefitediii) Creation imposes binding restrictions on all units of projectiv) Commonly known as Covenants, Conditions and Restrictions or CC&R s

b) Createdi) By Master Deed:

(1) Created at onset of project and presumed to valid unless it is arbitrary; unreasonableburden on constitutional right, or violates other public policy

c) Noticei) Subsequent owners must have

10) Zoninga) Legislative land use control authorized under states police powerb) All zoning ordinances establish a range of uses for real property, beginning with the most

restrictive classifications (typically single-family residential) and ending with the least restrictiveclassification (e.g., heavy industrial). Interim classifications can include multi-family housing,light commercial, heavy commercial, and light industrial.

c) Typical Zoning Ordinancei) Adopts a comprehensive plan;ii) Enacts a zoning ordinance; andiii) Delegates to administrative authority

d) In general, there are two types of zoning ordinances cumulative and noncumulative.i) A cumulative zoning ordinance permits any use within a zone that is more restrictive than

the least restrictive use permitted in it. Therefore, under such a zoning ordinance, the leastrestrictive use under that zoning ordinance would allow all other uses, whereas the mostrestrictive use would only allow that particular use.

ii) A non-cumulative zoning ordinance restricts a district to a single use. Non-cumulative zoningordinances are permissible and constitutional so long as they can survive the test of reasonableness.

e) Nonconforming Use:


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i) A use of land that lawfully existed before the zoning ordinance was enacted but that doesnot comply with the ordinance

ii) Termination(1) Abandonment: owner intends to abandon the use and it is for a substantial period of

time.(2) Destruction: If the use or structure is destructed (bakery burns down can t rebuild in R-1

zone)(3) Amortization: gives the owner of nonconforming use a fixed period of time to operate

the use; thereafter the right to continue ends. Presumed valid if it is reasonable(4) Estoppel:

f) Variance:i) An authorized deviation from the strict enforcement of a zoning ordinance in a individual

case due to special hardshipii) Types of:

(1) Area: Allows for modification of building or land requirements(2) Use: Allows for modification of zoned use

iii) Elements:(1) Hardship of the property owner; and(2) Overall protection of public interest

g) Special Exception:i) Similar to Variance however it is incorporated into the zoning ordinance rather than a

deviation of the ordinance and must meet requirements set forth in the zoning act. Forexample the addition of a new school

h) Spot Zoning:i) Rezoning that confers an interest in benefit of a small parcel of land regardless of the

public s interests. Example, putting a video store in the middle of a residential areai) Aesthetic Regulations: Zoning ordinances can zone for aesthetic reason and can regulate

unsightly uses

j)

Exclusionary Zoning: Exclusionary zoning refers to land-use controls that tend to exclude low-income and minority groupsk) Family Zoning: Justified on the basis that it reduces traffic, noise, congestion, and overcrowding.

i) Non-traditional families: Example allow 2 unrelated people in one home and 6 if relatedl) Growth Controls: Zoning boards can restrict growth if it feels that it cannot keep up with its

infrastructure.

Property I - Final Exam Outline

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