Property Notes

Property Outline, SP 2005
Prof. G. Nelson
Keemin Ngiam
TYPES OF PROPERTY
Five Theories of Private Property
1. occupation occupation/possession justifies legal protection of occupier/possessors claim to the
thing
2. labor person has a moral right to own and control the thing produced or acquired through his
labor
3. contract private property is the result of a contract between individuals and the community
4. natural rights natural law dictates the recognition of private property
5. social utility law should promote utility, and legal protection of private property does promote
utility
Bundle of Rights theory of property
Property consists of a bundle of rights or expectations in a tangible or intangible thing that

are enforceable against third parties, including the government.
Property is not a thing, but rather a bundle of rights.
The larger the bundle is, the more valuable it is.
Property can be in land, chattel, intangibles.
Land real property (immovable property under civil law)
Chattels and intangibles personal property (moveable property under civil law)
Construction changes personal property (materials) into real property (building).

Justification of private property
Having a personal stake in something may make it more likely for people to be interested in
protecting, preserving, developing it.
Tragedy of the commons. Would complete private ownership of property solve the problem?
Forcing polluters to internalize the costs of pollution?
Just desserts if youve worked for it, you deserve it. And arguably (somehow) you earn the
right to transfer it to your successors. Or to spend it all, exploit the property to its maximum.
Nelson believes that private property ownership is integral to a democratic society; i.e. you
cannot have a democratic society w/o private property ownership. Because private property is
a substantial check on the powers of government.
Real Estate
Fee Simple Absolute. The greatest bundle of rights and highest form of ownership. Unlimited in
duration and freely alienable.
Fee Simple Defeasable. Where subsequent events may deprive owner of ownership and his
rights (f.s.s.c.s.)
Fee simples are marked by inheritability.
Life Estate. Property belongs to the person during his/her lifetime. And the person may collect
rent on it, and within limits, mine, or otherwise exploit the land. Upon death, property no longer
belongs to that person or persons estate. But property may be transferred before death. It can
also be subject to involuntary transfer bankruptcy seizures, seizure by creditors, government
seeks to convert the land for public use. Ownership of transferred property is only valid for as
long as the original person is alive it becomes a life estate pur autre vie (by another life). Life
estates may be defeasible.
Leasehold Estate lessee rents the property from lessor. At end of lease, reversion to lessor.
Lease may also be defeasable.
Reversion - when the estate reverts to the owner (the grantor) in the future. E.g. a leasehold. At
the end of the lease it reverts back to the landlord.
Remainder a remainder is in the third party, not in the grantor, or the grantee. E.g. where the
owner leases to A the land for life, then gives the future interest (which we call the remainder) to
B.

Prof. G. Nelson
Keemin Ngiam
Possibility of reverter future interest in a determinable estate

Right of entry future interest in a estate on condition subsequent
Personal Property
F.S.A. is termed absolute ownership in the domain of personal property.
We never see Fee Simple Defeasable in personal property.
A life estate in personal property is possible. E.g. a trust.
Leasehold estates are common in personal property. E.g. car leases.
Reversions and remainders can exist in personal property.

Fee Simple Absolute
Rights under F.S.A. include:
1. Right to possess or occupy. Usually true 99% of the time. There are some limitations. E.g. zoning
ordinances, local ordinances, restrictive covenants.
2. Right to use as one sees fit. Usually subject to numerous restrictions. Restrictions are permissible
so long as some viable economic use to the land remains. Even if most of the fair market value of
the land is destroyed by the restrictions. The government does not need to pay to restrict the land
use. The law of private nuisance a common law doctrine. A defendant cannot use his real estate
in such a way as to unreasonably interfere with the plaintiffs real estate. Restrictive covenants
landowners agree among themselves upon limitations in the use of the land.
3. Right to exclude. Not absolute. Emergency services, e.g. fire, police. If something on the land is a
health or safety hazard. Official health/safety inspectors have a right to enter the land, even if
such right is dependent upon a warrant. Or a police search warrant. Granting easements to third
parties.
The right to exclude is at its strongest in dealing with residential property. But it weakens when
the property is commercial in nature. The reasoning is that once you decide to open up to the
public, you have to open up to all the public. Residential homeowners have a very strong right
to exclude. Wisconsin case husband and wife refused to allow mobile home dealer to deliver
mobile home across their land. Dealer did so anyway. Landowners sued for trespass and got
$100,000 in punitives, despite lack of physical damage. For violation of their right to exclude.
4. Right to alienate. Under common law - unreasonable restraint on alienation doctrine. Court will
determine if such restraint is reasonable. Alienation includes selling inter vivos (while alive), and
selling incident to death. The sine qua non of F.S.A. is the right to determine where the
property goes upon death. Transfer upon death can be by: Will (testamentary transfer); joint
tenancy; intestate succession; trusts. There are restrictions on alienation and transfer. E.g.:
a. lot-split ordinances. To prevent the excessive splitting of lots.
b. Eminent domain. The government could just compel you to alienate.
c. Housing discrimination. You cannot discriminate between potential buyers.
(discrimination in transfer at death is usually protected)
d. Death/Estate taxes. Depending on the level of taxation. The more confiscatory the tax, the
more it changes a persons behavior in life.
e. Gift taxes. A parent is limited in the amount of money they wish to give their child in
their lifetime: a tax is imposed if the amount exceeds a certain amount. Charities are
entirely exempted.
f. Capital gains taxes, e.g. from the sale of property, stocks, etc.
g. Sales taxes, property value re-assessment.
h. Assignment/subletting restrictions. Where the tenant is disallowed from subletting or
assigning w/o the landlords consent. Some courts have found this to be an unreasonable
restraint on alienation, unless the landlords denial was reasonable.

Prof. G. Nelson
Keemin Ngiam
Fee Simple Defeasibles

Conveying f.s.a. for an estate held in f.s.defeasible. requires holders of both present and future
interest to convey together.
Language must be clear, otherwise court will interpret as restrictive covenant, not f.s.d.
Courts prefer land to be alienable and will read f.s.d.s as narrowly as possible restrictive
covenants or even just precatory language.
Determinable Estate (qualified fee, fee on special limitation, base fee, fee simple determinable)
The estate automatically reverts to grantor upon triggering condition being met.
Future interest associated with a f.s.d. is called a possibility of reverter.
Possibility of reverter is automatic and cannot be waived.
Created by using language of duration, so long as, until, during the time that, and
specifically providing for automatic termination upon occurrence of stated contingency and
revestment in the grantor. (possibility of reverter)
Some jurisdictions hold that A.P. begins in a f.s.d. once triggering condition met.
Once condition met, grantor can also claim rent for trespass.
Estate on Condition Subsequent (fee on condition, FSSCS, fee subject to a power of termination)
Estate doesnt automatically revert back upon triggering condition being met. But triggering
condition gives grantor the power to terminate grantees estate, upon actual election and exercise
of that power.
Future interest associated with a f.s.s.c.s. is called a right of entry or power of termination.
Right of entry need not be exercised.
Created by language of condition, on condition that, provided that, and expressly provides
for a right of entry upon breach of condition.
Words of condition alone may (usually are not) enough! Courts want to see express reservation of
right of entry as well.
Language only declaring purpose of land or why it is granted does not amount to f.s.s.c.s.
Words of condition alone may held to just be precatory, words of intent, desire, wish, or
indicative of a restrictive covenant, violation of which is grounds for an injunction or monetary
damages (depending on whether remedy is available at law or equity).
Courts divided on A.P.: some say triggering condition starts A.P. (no diff. b/w f.s.d. and fs.s.c.s.),
others say use is permissive absent notice to contrary.
If not exercised in a reasonable period of time after knowledge of breach, grantor might be held
to have waived right to reenter by silence or failure to act.
o Grantee or grantor may also claim action for estoppel reliance on failure to exercise.
If condition met but right not exercised, grantor cannot claim for rent.
Fee Simple Subject to an Executory Limitation (f.s.s.e.l.)
Grantor uses language requiring transfer of estate to a third party upon triggering condition being
met.
Future interest associated with a f.s.s.e.l. is an executory interest.
Policy Concerns re. Defeasible Estates
possibility of reverter or right of entry upon land significantly detracts from its value.
If condition or limitation concerns land use, then a potentially severe restriction is placed upon
the land.
Common law had no limit to duration of these future interests. Hence, long-term restrictions and
unmarketability disfavored current owners and perhaps even society as a whole.

Prof. G. Nelson
Keemin Ngiam
Thus, statutes have been passed limiting the life of such future interests. At expiry of statute of
limitations, the defeasible fee becomes a f.s.a.
Alternative statute allows for disregarding of a condition which has become nominal, and is of no
actual or substantial benefit to those who were intended to benefit from it.
Or, third alternative (in Florida) is that after statute of limitations expires, the estate is converted
into a restrictive covenant.
Wood v. Board of County Commissioners of Fremont County(cty tries to sell land granted for a
hospital)
The Court holds that theres no f.s.d here due to the absence of f.s.d. language so long as or
until.
Court also sees no language indicating a right of entry, which would make it a f.s.s.c.s.
Court holds that its not a defeasible fee estate at all, just precatory language.
Therefore land belongs to County and not Wood.
Wood may have tried to sue for injunction for specific performance, or restrictive covenant.
Walton v. City of Red Bluff (land in f.s.d. to city for library but f.s.d. changed by CA statute)
Land conveyed in f.s.d. to city for library but city changed use to meeting hall.
CA legislature passed statute: all f.s.d.s f.s.s.c.s., gave f.s.d.s 5 years to register as f.s.s.c.s.
Policy: make land more freely alienable.
Walton filed late but not raised at trial, so he got land back.
In Re .88 Acres of Property (govt gained land by A.P./easier to get A.P. under f.s.d than fsscs)
When govt stopped using land for town hall, title flew back to grantor (f.s.d.)
But grantor never ejected government from land, so govt gained land through A.P.
If grantor had made title f.s.s.c.s., could have argued that he maintained right of entry, and title
remained in govt until right was exercised. A.P. would not begin until that point.
Court also held that A.P. statute protected govt from losing land but did not prevent it from
gaining land.
But new line of cases hold that holder of right of entry must exercise right within a reasonable
time after he knows or should have known that breach occurred. Waiver of right to assert ones
right of entry. The reasonable time might (would probably) be correlated to A.P. SoL or
ejectment SoL.
Fee Tails
Used to grant life estates to a line of descendants from grantee.
Grantee could not alienate land in f.s.a.
Strawman conveyance to X, and X back to A, was an early disentailment device.
Fee tails largely obsolete.
In the U.S., commonly interpreted as fee simple in the first grantee or devisee named in the deed
or will.
Or a conditional fee f.s.d. to A until issue born, when it becomes f.s.a. and a vested remainder
conveyable to As successor in interest.
Or life estate to A, and f.s.a. per stirpes to As surviving issue a contingent remainder,
contingent upon A having issue and issue surviving A.
Some forms that dis-entailing statutes take:
A) Any remainder that follows the fee tail is considered an executory interest in fee simple, that
will become possessory upon demise of first taker w/o lineal descendants. If no reference to
remainders, then A acquires a f.s.a.

Prof. G. Nelson
Keemin Ngiam
B) Life estate in first grantee or devisee named in the deed or will, and remainder in f.s.a. to
lineal descendants of that first grantee/devisee. Jurisdictions divided on question of survival,
if child or descendant of A must survive A to share in estate.
C) First taker acquires a fee tail, and lineal descendants acquire a fee simple. As right to
alienation limited to an estate for his own life.
D) Delaware, Maine, MA and RI hold that tenant in tail can convey f.s.a. through a deed.
Life Estates
Grantor to grantee for life, then reversion.
Only granted by deed (SoL?).
Can lead to conflicts of interest b/w present and future possessors.
Grantee possesses but cannot act like an owner would.
Cannot exercise dominion: i.e. waste.
Can rent out property.
But grantee must take into account the interests of future holders of the estate.
But any conveyed interests made by grantee only valid for grantees life.
Does not halt A.P. if A.P. began before conveyance of life estate.
Future Estates
Contemporary interest, future possession: Interest exists at the moment it is created by deed, but
possession only takes place in the future.
Someone with a future interest can:
a) receive compensation for condemnation,
b) alienate the interest,
c) enjoin current possessor from wasting the property.
Forms of Grantors Future Interests
1. Possibility of reverter (follows a f.s.d.)
2. Right of entry (follows a f.s.s.c.s.)
3. Reversion (future interest created in grantor, but not a possibility of reverter or right of entry).
(e.g. limited duration interest, or a common law fee tail). Leases, fee tails, life estates.
Forms of Third Partys Future Interests
1. Remainder. Must comply with 4 rules:
a. Remainder must be created at same time, and by same document that creates prior
estates.
b. Remainder must follow freehold estate, but not a defeasible fee simple. No leases.
Effectively means remainders only follows life estates.
c. Remainder must not be able to cut short prior estate.
d. No built-in time gap b/w termination of prior estate and buyers taking over of premises.
2. Executory Interest. Any future interest, not in the grantor, that doesnt satisfy the rules for a
remainder. Leaseholds.
a. Created in someone other than the grantor.
b. Doesnt follow the rules for remainder.
Rules of Remainder
There are four rules to follow in creating a remainder. If they are not followed, an executory interest is
created. (p. 249)
1. A remainder must be created at the same time and by the same document that creates the prior
estate or estates. Otherwise, O only conveys the reversion, not the remainder (although
substantively the same). To A for life, followed by a second deed Os interest to B.

Prof. G. Nelson
Keemin Ngiam
2. In order to be a remainder, it must follow either a life estate (99.9% of the time they do) or a fee
tail. It cannot follow a fee simple of any kind.
3. A remainder must not have the capacity to cut short the prior estate(s). e.g. to A for life, and
upon As death or divorce, to B.
4. There must be no built-in time gap between the termination of the prior estate and the remainders
taking of possession. to A for life, and a month after As death, to B.
Rights of Future Interest Holder
To enter land to inspect for waste
TRANSFERRING PROPERTY
Restatement definition of estate:
An interest in land which
(a) is or may become possessory; and
(b) is ownership measured in terms of duration.
Inter vivos usually requires a written document to avoid Statute of Frauds, unless for lease less than a
year.
Testamentary upon death. Either via a will or intestate succession, or transfer via concurrent estates,
trust, insurance or death bank accounts.
Involuntary taking by the government. Or mortgage foreclosure or judgment lien. In a government
taking, government pays value into court and lets parties with interests in land dispute over
their share.
Judgment lien either recorded in county, or in some states, with a state office (sec. of state).
Heirs An heir is someone who would take your property if you die without a will, someone who would
take under intestate succession. Those who take under a will are called by a whole variety of
terms, but they are not heirs. In testamentary language, now words of limitation, not words of
purchase.
Consanguinity Having the same blood, being related by blood. This includes adoptees. Adopted
children thus have full rights. But not stepchildren.
Collateral consanguinity related by blood to you who are neither ascendants nor descendants. Aunts,
uncles, cousins, brothers, sisters. People, related by blood, who share a
common ancestor, but are neither ascendants nor descendants.
Affinity related other than blood, e.g. in-laws.
Per stirpes by representation. If A dies leaving B, C and D, then B, C, D each take a third. If B dies,
leaving E and F, then Bs share is split, on As death, b/w E and F. E and F take per stirpes,
by representation.
Per capita each person gets an equal share. So if A dies, leaving C, D, and Bs children E and F, then
each of them take a quarter. Per capita ordinarily only considers those below you directly,
i.e. if B was still alive, E and F wouldnt get anything.
Degrees of Consanguinity Why Do They Matter?
When you die w/o heirs, your estate escheats to the state. The state determines the limits of
degree of consanguinity. In MO, it is the 9th degree. Beyond that, the state would get the estate.
Some states such as Ohio go out to the nth degree of consanguinity. Others go out to far less, e.g.
IL only goes out to the 6th degree of consanguinity.
In Ohio, stepchildren come after the nth degree.
Half-blood relatives are considered as full-blood relatives.
Half siblings are treated as whole, but step siblings dont inherit b/c no blood relation.
Adoptees relations to their blood parents are cut-off as a matter of law.

Prof. G. Nelson
Keemin Ngiam
Revocation of Wills
Latter of two wills govern but should include a revocation clause to revoke first
will to make things crystal clear.
Physical destruction but could be multiple copies floating around
Marriage and Divorce revokes in many states
LA child can take a forced share in will if parents cut them out. Parents can cut
children out in all 49 states. Many states have presumption that testator wants to include certain
blood relatives. If you really dont want to include them, use explicit clause in will.
Forced share for 42 states: surviving spouse has right to forced share thats equal to their share
through intestate succession.
Policy Behind Intestate Succession Statutes
The Legislature is trying to think like the hypothetical, ordinary, reasonable, decedent. What
would that person want, in terms of where their property would go upon their death?
Reducing costs of probate, finding people.
Determining when the state would get the money.
Do you favor spouses over children? The state especially wants to favor minor children,
otherwise the state would have to pay for them they become wards of the state. Someone has to
support the children.
Changing cultural morays how long a person has been married. Same sex partners. Serial
marriages how long the marriage lasted, the current spouse. Domestic partners.
Statutory presumption: any conveyance to A is presumed to pass the entire estate of the grantor
unless the contrary intent is expressed in the document (f.s.a.).
Wayburn v. Smith: Conveyance said to A and her heirs and assigns forever and was controlling
over conveyors intent to grant a life estate.
Practical Differences b/w Vested and Contingent Remainders
Someone with a vested remainder has a greater interest in the land than someone with a contingent
remainder.
Because the condition upon which the contingent remainder depends may never be met. Such a
contingent remainder is tenuous and thus the interest in the land is only potential.
A vested remainder is not tenuous; it is certain. It will happen someday. And thus the interest in the land is
greater than just potential.
Restraints on Alienation
Indirect:
Co-tenancies (harder to alienate entire property because all owners must agree)
Serial interests in land (need all interest holders to agree to alienation)
Mortgage due-on-sale clauses
Use restrictions (fee simple defeasibles, restrictive covenants)
Direct:
Disabling restraints on alienation when a clause makes any subsequent transfer void w/o
some condition being met (usually original grantors permission).
Forfeiture restraint to A and her heirs, but if A attempts to transfer said estate without the
prior consent of the Grantor, it shall immediately revert to the Grantor.
o not enforced on f.s.a.
o occasionally enforced on life estates
o sublease approval provisions in leases. Usually but not always enforceable.

Prof. G. Nelson
Keemin Ngiam
Contract/promissory restraint To A and her heirs, but A covenants for herself, her heirs and
assigns that no transfer of said estate shall be made without the Grantors prior consent. They are
viewed with suspicion as disabling or forfeiture restraints, but they are not. At most they trigger
damages or right to injunctive relief, but do not give the Grantor a right of entry, nor is it like a
f.s.d.
o Enforceable in leaseholds
LAW OF WASTE
Definition
Waste is unreasonable use of the property by the owner of the possessory estate which reduces the
value of a future estate.
Law of Waste: Possessor of a limited estates use of estate (less than f.s.a.) is limited by future
estate holders interests in estate.
Restrictions involve a determination of the extent to which holder of future estate may protect
value of that estate by limiting diminution of the estate that possessor may cause.
Loss of Value
Does not always need to be proved.
Actual removal of the substance of the soil is per se waste. Damages awarded will be based on
value of what is removed, not just determining value of land before and after the removal.
Nature of Future Estate
Bears on the extent of limitations on current use, and the remedy available.
Holder of a vested future estate (e.g. when current possessor only has a life estate) has more at
stake than the contingent holder of a future estate (e.g. when possessor has a f.s.s.c.s. or f.s.d.
estate).
Life tenants
Allowed to use the property, so long as use does not unreasonably reduce value of future
estate.
Life tenant is entitled to income, but cannot encroach on principal.
The principal, the corpus, is owned by the owner of the future estate, who has a right to
receive it intact.
Life tenant not liable
If property is destroyed or substantially damaged by fire or other casualty, e.g. flood, natural
disaster, etc.
For decrease in value from ordinary wear and tear, except for what could be prevented by
reasonable maintenance.
Acts of Waste
Voluntary Waste: positive acts which will decrease the value of the future estate.
Permissive Waste: failure to commit repairs that a reasonable person would perform to maintain
the property failure to fulfill legal duty
Destruction of building is almost always an act of waste.
Fiduciary Obligation and Commingling of Money
Life tenant thus has a fiduciary obligation to the future owner of the estate. This can affect
decisions in areas other than actions for waste.
If the life tenant mixes her own money with the principal sum, court may raise presumption that
she spent her own money first, before spending principal. Or that losses incurred, are losses of her
own money and not of principal, etc.
Permissible Adverse Use
Certain doctrines allow life tenant to diminish the value of the future estate.
Estovers life tenant can cut timber on property needed for reasonable use of premises, e.g. for
fires, repairs.

Prof. G. Nelson
Keemin Ngiam
Open mines policy life tenant allowed to continue removing minerals from mines that are
already open.
Lumber-producing forest If only reasonable use of land is as a lumber-producing forest, life
tenant may be entitled to harvest timber for profit (acting in accordance with approved industry
practices).
Emblements
Life tenant plants a crop but passes away.
Survivors of life tenant are entitled to that harvest, on the policy basis of:
1. compensation for the labor and expense of growing the crop
2. encouraging good husbandry, which is a public benefit by virtue of increasing provisions for
people. Good public policy to protect good husbandry.
Defeasible Estates
Owners of a defeasible estate, whose possession is contingent and maybe remote, have less of an
interest and ability to enjoin/recover damages from current possessor for waste.
Must show:
1. The possessors conduct is unconscionable;
2. reasonable probability that the future interest will become a present interest.
Remedies
Indefeasible Estate (present estate is life or leasehold):
Damages for injuries sustained (possibly multiple damages according to various statutory
schemes).
Prohibitory injunction (against voluntary waste).
Mandatory injunction (against permissive waste).
Forfeiture in extreme cases of waste, e.g. where it is wanton or defendant fails to pay
damages awarded.
Defeasible Estate:
Enjoin waste.
Damages are unlikely to be awarded, unless the estate will clearly pass to future estate holder.
Possible that court may collect damages and impound them, until future estate owner is
determined.
Without impeachment for waste. Exculpates life tenant from normal obligations of a possessor
of real estate, i.e. maintenance and such. But even here, B can have the court enjoin A for
outrageous acts of waste, e.g. demolishing the house.
LL-T has different rules of waste: depends on who assumes responsibility for upkeep, K
provisions, statutory warranties.
Some states have statutes awarding treble damages for willful or wanton waste.
Other states have statutes forfeiting the present interest to the future interest for wanton waste.
if building torn down by third party tortfeasor, court might use replacement cost, or diminution of
value of the whole property.
For future interest holders, court will not speculate about the future value of the land. It will make
calculations based on the present value of land, and compute damages based on the time value of
money.
Holders of contingent interest unlikely to prevail on action for damages. Depends on likelihood of
their interest vesting.
Court may have their damages paid into court, to be given to successor in interest.
Court more likely to grant injunctive relief to both vested and contingent interest holders.
Liability For Permissive Waste?

Prof. G. Nelson
Keemin Ngiam
1. Cap on liability is the greater of: the rent being paid, or the fair rental value.
a. No need to repair in excess of rent or fair rental value. Future interest cannot force
present interest to spend more than propertys rent is worth.
2. Property taken as it is found. Duty is only to preserve the principal, ordinary wear and tear
accepted.
3. Free ordinary wear and tear no need to compensate for it.
4. wind and water-tight. Entitled to reasonable wear and tear, but at the minimum must make sure
the roof is on and sound, that windows are put on it, etc. Because failure to do these things might
lead to the principal being diminished by wind, water, etc.
5. A life tenant is liable for paying the property tax. Future interest might end up paying the taxes
just to make sure that the taxes are getting paid and to prevent the possibility of the government
seizing the land for a tax foreclosure.
These are the default rules.
Over the years, courts have held that theres no obligation to insure. E.g. if the property burns
down or is destroyed, current interest has no liability unless responsible.
Person who owns the remainder, should undertake to insure the property.
Brokaw v. Fairchild (NYC land divided up b/w relatives)
Grantor built mansion on part of land parcel. Conveyed to my son and his eldest surviving
child, but if no child survives him, to my daughters.
Son could not maintain house, so wanted to demolish it and build apartments.
Tearing down the building would increase the value of the land make it possible to build
apartments on it (ameliorative waste).
Plaintiffs daughter was 4. Contingent interest - depended on her surviving plaintiff.
Defendants chances of getting the property depended on daughter dying before plaintiff.
If the daughter had a f.s.a., the court would probably appoint a guardian ad litem, just to
safeguard her interest.
A, B and C are opposed to the sale because:
o they are concerned about the impact of an apartment building on their own properties
and homes.
o selling off Isaacs portion of the property would mean that the area of the parcel would
be diminished thus the whole value of the land would diminish (they could sell the
entire thing for more later).
Court rules that Brokaw cannot demolish the house.
They look at testators intent: my home implies that he wants his son to live in the house.
Brokaw cited Melms v. Pebst Brewery as support for his position.
Pebst owned a house next to his brewery, but had bought it from someone who only had a
life estate. Tore down house to expand brewery.
Owner of the remainder then sued Pebst for waste.
Pebst argued tearing house down improved value - rest of neighborhood was commercial
real estate.
Court agreed and held that the future interest was not harmed but enhanced.
Pebst was a controversial case. NY Legislature later passed a law stating that if the life
tenant had a life expectancy of at least five years, and the demolition wouldnt financially
harm the future interest, and the action by the life tenant is something that a rational
reasonable person would otherwise do, it cannot be waste.
Ameliorative Waste Waste that adds value to the property. Pebst is one, although arguably an
anomaly it was post facto.
Plaintiff in Brokaw may not have succeeded even if court approved: difficult to get mortgage
financing - whoever bought mortgage would be buying a bet on daughters life.
10

Prof. G. Nelson
Keemin Ngiam
Even if Brokaw built it with his own money, he would still be taking a risk if his daughter died,
all his investment would then go to A, B and C.
If Brokaw had more children (say 5 or 6), the court might say to A B and C that their standing is
so slim, their chances of inheriting so small, that they had no right to raise their complaint.
Partition
Partition: Court may allow for concurrent partition, but less likely to partition serially held land.
Unless waste is occurring, or present holder cannot afford to upkeep land, pay taxes.
Some states partition of serial interest only if in best interest of all the parties usually means
person with greatest interests will win.
Baker v. Weedon (the old woman, the highway, the lost family)
to Anna for life, then to Annas issue, and if she dies without issue, to my grandchildren per
capita.
State condemns land for highway, joins all parties to condemnation action.
Parties split proceeds amicably and Anna allowed to live on part of land.
Anna later petitions to have land partitioned and sold as she needs money.
Other family claim waste, as they believe land will be worth more in future.
Court finds that part of land should be sold, and interest from land given to Anna, but principal
kept for future interest holders.
Beach v. Beach (daughter asks parents to come live with her and dad later dies)
parents put up the money and build an addition to the house.
In return, they get a life estate on the addition and the land under the addition, and remainder to
the daughter.
After father dies, mother wants to sell addition and daughter objects.
Court denies mothers request to partition land: statute not explicit enough to allow that.
Daughter would have had to endure loss of privacy of her own home and loss of her own homes
value.
Or had to buy the addition back herself. Or if court held that entire property had to be sold,
daughter would have to buy back her own property.
No unreasonable restriction on alienation here because mother only had a life estate.
Present Value of Money
Table on p. 302
When r/i low take lump sum now, not periodic payments.
When r/i high take periodic payments.
When the interest rate is higher, the present value of money is lower. (Future interest holder will
want to litigate for a lower r/i, and present interest holder will want to litigate for a higher r/i).
The holder of a life estate will always argue for a higher interest rate (because that would reduce
the present value of money for the holder of the remainder). This will give the owner of the life
estate more money today. Which can then be invested for greater profit, etc.
makes more sense for a holder of a life estate to seek a partition of the land as soon as possible.
Because then he gets part of the money into his pocket, which he can pass on to his successors,
unlike the actual property itself. Plus he can invest it now, and in 20 years (or whatever his life
expectancy is supposed to be), his estate will have more than the holder of the remainders estate.
Future estate holder gets present value of the price for the property.
Current estate holder gets the difference between price of property today and present value of
money for that price.
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ADVERSE POSSESSION
Definition: The nonpermissive occupation of anothers land, which if continued for the period of the
statute of limitations on actions to recover land, will give the occupier the estate owned by
the person then legally entitled to possession.
whole hog adverse possession claim: When both parties lay claim to the whole piece of real
estate (relatively rare).
More common boundary disputes. E.g. when someone builds a fence ten feet over his
boundary into his neighbors land. The newly enveloped land becomes the contested piece of
adversely possessed property.
To defeat A.P., owner just needs to give permission convert into a lease, license, or easement.
License is most preferred may be terminated at any time.
Adverse possession consists of:
(1) The statute of limitations on actions to recover land;
(2) The judicial doctrine of adverse possession.
Judicial Doctrine of Adverse Possession
To be adverse, possession must be:
1. actual
These elements
2. open and notorious open visible. Notorious known.
often overlap.
3. hostile (not matter of subjective intent)
4. exclusive: Whether A.P. shared use no more than normal in circumstances for an owner.
5. continuous
Courts occasionally add the following phrases:
6. under claim of right (really just an aspect of hostility). This phrase creates problems having to do
with the state of mind, or intent, of the disseisor. But A.P. usually has nothing to do with
subjective intent.
7. in good faith (should not be included at all, just causes trouble).
Hostility
1. I thought the land was mine. A mistaken claim of right, an innocent state of mind. Some
jurisdictions insist A.P. can only be granted when a mistake has been made: an attempt to
punish knowing wrongdoing.
2. I knew it was not mine, but I took it anyway. Knowing thief. Some jurisdictions insist on this
being the way to show adverseness or hostility the Maine doctrine.
Policy Reasons Behind the Maine Doctrine
Maine doctrine rewards possessor who premeditates and predesigns seizure of anothers
lands, an intentional wrongdoer. And it punishes an honest, mistaken errant.
To discourage boundary line disputes? So that transfer of title isnt effected in such
situations. (seems rather silly. There would be easier ways to do it, i.e. just outright ban
application of A.P. to boundary line disputes)
3. Intent to claim as ones own. CT Doctrine, emerging view. A.P. has intent to claim as his
or her own, upon entry and use of the land, regardless of subjective belief.. The very nature of
the act [entry and possession] is an assertion of his own title.
4. I did not have permission. Only permission, license, or lease defeats the hostile element of
A.P. State of mind and intent is irrelevant.
Policy Reasons behind Claim of Right Requirement
A.P. is the exception and not the rule, should only be allowed when A.P. is acting innocently.
States that have a lot of land and few people, generally have a presumption that when a non-title
holder uses the land, it is done with permission.
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Conversely, there is a presumption of adverse use in heavily populated states.

In general, harder to get title by A.P. in sparse rural states such as Wyoming, than in densely
populated states such as NJ.
Because owners are less likely to know of A.P. in sparse rural areas.
Except in a few instances, we want to rely on record title. It is predictable, safe and established;
gives less room for dispute.
NY expressly denies the knowing thieves the possibility of A.P.: have to show you are there
innocently, that you made a mistake as to A.P., thinking that you owned the land.
Other Requirements of A.P. (vary from state-to-state)
In CA, A.P. requires paying taxes on the land during period establishing A.P.
In other states, paying taxes shortens statute of limitations required for establishing A.P.:
paying taxes reduces requisite time from 15 to 7 years.
In some states, color of title also shortens the statute of limitations.

Color of title: when the A.P. claims possession based on a written document, even if written
document is defective and conveys nothing.
Some claim that when a recipient knows that the deed is fraudulent, we should not give
the grantee the benefit of color of title.
Majority approach argues that to follow that approach would be time-consuming because
it would involve an inquiry into subjective intent. Just easier to grant color of title whenever it
appears, instead of inquiring into the adverse possessors intent.
Government land cannot be lost to A.P.
If there is a Torrens title system, there is no A.P. if there is a claim of right

requirement.
Policy Justification for A.P.
1. People should not sleep on their rights. But why not? Or why?
a. An estoppel reliance theory. Because if people sleep on their rights, an innocent thirdparty might mistakenly think it is the true owner, and make improvements to the land, to
their detriment when the true owner claims the property for their own. As a policy,
estoppel reliance should only apply to innocent A.P.
2. We want to reward diligent adverse possessors (weak argument, akin to rewarding good thieves,
finders keepers).
3. We wish to encourage development and use of the land. Thus we wish to encourage adverse
possession when it leads to development and productive use of the land.
4. Efficiency. A.P. makes it relatively easy to determine boundary line disputes. Settled by looking
at whats on the ground, if its been in existence for long enough.
a. Counter-argument is that its just as easy to look at the actual records to see where the
original boundary lines were supposed to fall.
b. A.P. is actually less efficient because of court costs, time, etc.
c. More efficient to have land surveyed and determine where original boundaries were.
5. It is a doctrine of repose. That boundaries not remain uncertain indefinitely. People, including
third persons e.g. mortgage lenders, come to rely on apparent ownership for various purposes,
e.g. tax assessment, issuance of credit.
6. The mystical connection between possession and title is worth something; possession is the
source of original title; it is evidence of title.
A.P. and Future Interests
Future interests are protected from A.P., because future interest holder, at the current time, lacks
legal standing to bring a cause of action to prevent the A.P.
A.P. can only acquire the present interest.
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Furthermore future interest holder does not have the same level of responsibility to take care of
the real estate as the current interest holder.
The A.P. takes the land as she finds it. If future interest is created after A.P. begins to use the land,
future interest can be wiped out, if A.P. succeeds. An A.P. can also wipe out a mortgage on the
land.
Disability: If owner is under a disability at the time A.P. begins, the clock doesnt run. But if
disability occurs after A.P. begins, clock continues to run.
If a minor inherits the land, the clock continues to tick and is not reset, unless the minor did not
have a future interest in the land at the time that A.P. began. In general, the clock is not reset
when the minor inherits.
Constructive A.P.
If there is a large piece of land, only a part of which is actually possessed, only the part can be
A.P., absent color of title.
If theres color of title, then the whole piece can be adversely possessed. This is constructive A.P.
constructive possession is limited to an area that bears a reasonable relationship to the area
actually possessed.
Theory: that possession under color of title makes clear to the true owner the extent of the
disseisors claim, and puts the disseisee on notice that failure to bring an action will result in
extinguishment of title to the whole tract.
The Problem of Tacking
When two or more persons are in successive A.P. of the land, neither for the full period of the
statute of limitations.
Can length of their A.P. be combined to meet statute of limitations?
Only if they passed possession continuously, i.e. grantor grantee.

Type of Title Gained Through Adverse Possession
A.P. only gains the estate to which owner was entitled.
Statute of limitations does not run against the owner of a future estate. If future owner was
not entitled to the estate at the time of adverse possession, he had no cause of action.
Similarly adverse possession does not extinguish a mortgage in states where the mortgagee has
no right to possession.
How Does the New Owner Get Title?
The new title is an original one, not derived from the disseised former owner.
The former owners title is extinguished (This is unusual. The common law legal system
generally holds that interests in land may not be destroyed, although they can be transferred,
shaped and re-shaped).
One suggestion is that A.P. works through the doctrine of abandonment by operation of law,
analogous to the doctrine of abandonment of chattels (abandoned things are added to the store of
the worlds unowned things, available to the new ownership of whoever comes to possess them
with intent to own).
But abandonment theory is problematic because our legal system does not recognize unowned
land; all land is owned by someone. And A.P. does not make the land available to anyone who
comes upon it, but only to a certain person unlike abandonment of personalty.
Role of Statutes of Limitations
Usually provides just the time period for acquiring title.
But some legislatures have enacted special A.P. statutes that add substantive elements, e.g. for
certain classes of cases.
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These elements can, and usually do, reduce the disseisors ability to obtain title.
American statutes usually allow tolling suspension of the limitations period while the disseisee
is under some disability. E.g. if a minor, or insane, imprisoned, citizen of a country at war with
the U.S., absent from the state.
Statute of limitations does not apply against government: government is immune from A.P.,
except in certain cases involving municipalities.
Policy Behind SoL
prevents the making of illegal claims on the property after evidence necessary to defeat such a
claim is lost (deterioration of evidence)
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Monroe v. Rawlings (hunters thought they owned land and used it)
Case turned on whether actual possession required continuous possession.
A.P. exists if acts of ownership openly and publicly indicate an assumed control or use
consistent with the character of the premises in question.
o R built cabin
o R granted logging rights to part of land
o R paid taxes on land
Land need not be fenced, buildings not necessary.
Sufficient if disseisor openly and notoriously claimed or used land in the only way it could be
used.
Neither actual occupancy, cultivation nor residence is necessary to constitute actual possession
of the land.
Sufficient if A.P. used land as a reasonable owner would.
R had constructive A.P. of all the land because R had color of title via tax sale.
But not legal title no service to actual owner after tax sale.
Nome 2000 v. Fagerstrom (N argued no A.P. native Alaskans - diff. concept property)
A.P. only contested for 1977, before F built cabin on land.
Open & notorious: actual use of land.
Continuous: N contests 1/10 of A.P. duration
Exclusive: N claims F had different subjective belief about ownership: Native Alaskan
stewardship concept. Not adverse or hostile.
Court rejects: subjective state of mind of A.P. irrelevant, only objective: whether there was
permission, license or lease.
Squatters get no A.P.
In contrast with Monroe, F did not get all the land: not all of it was A.P., used continuously.
Joseph v. Whitcombe (house in the Bronx)
NY is claim of right jurisdiction A.P. must have a claim of right, subjective belief in
ownership of property.
If W went in w/o belief in ownership of property, but believed to be at owners mercy, then W was
squatter, or expectant licensee, not A.P.
W only paid electric bill: passed gas and tax bills on to a friend who purported to pass it to real
owner.
J may have been able to claim back rent, subject to SoL, improvements on property, sale of rights
to rent at foreclosure sale.
Inefficient to inquire into subjective intent: requires courts to do more work.
Mannillo v. Gorski (boundary dispute over 15)
Court engages in a balancing test.
where the encroachment is small, i.e. boundary disputes, no presumption of knowledge applies
(no constructive notice), unless owner has received actual notice. Open and notorious requires
actual knowledge of encroachment when encroachment is small.
no way for owner to know of encroachment, short of having a professional survey undertaken
whenever any sort of improvement is conducted near the boundary. Court distinguishes open
from notorious.
In practice, most courts collapse open and notorious into a single element.
Court rejects ME doctrine and adopts CT doctrine: sufficient that A.P. claimed land as his
regardless of subjective intent.
In boundary disputes where encroachment is built, usually real owner will convey land to adverse
possessor for FMV if improvement cannot be removed easily.
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If no A.P. and deliberate, court may grant injunction for removal of encroachment. To strengthen
plaintiffs hand at settlement.
If no A.P. and not deliberate, court may just grant an easement or order conveyance for value.
Wright v. Wright (A.P. between co-tenants hard to establish but possible via constructive ouster)
A.P. against a cotenant requires one of the following:
1. Actual ouster
2. Retention of exclusive possession after demand
3. Express notice of A.P.
Presumption of permission: that a cotenant holds the land for the benefit of other cotenants
Presumption is rebuttable by unequivocal acts such as selling or leasing the premises or part
thereof, bringing it home to cotenants.
Express notice of A.P. satisfied by either actual notice to cotenant, or unequivocal acts that are
open and public, and make the possession visible, hostile, exclusive, notorious (constructive
ouster).
Conveying a fee simple interest in the property is prima facie evidence of ouster.
Not sharing rent or profits from sale of property is also evidence of ouster.
Ouster does not require physical removal. Sufficient if claimant is in exclusive possession of land,
and by words or acts, evinces a claim of separate ownership.
Courts often require strong evidence of ouster in cotenancy cases policy reason of discouraging
A.P. among relatives. (policy favoring integrity of families, healthy family life?)
Court here found A.P. If no A.P., then would have ordered partition action, accounting for all
previous rents, profits, etc.
Porter v. Posey (Transfer of A.P. from one A.P. to next)
Plaintiffs predecessor in interest built upon land thinking they owned it.
Much later, defendant tried to stop plaintiff from using land.
Argued that since land was not included in written deed granted to plaintiff, they could not claim
A.P.
Court found that where plaintiff predecessor in interest had intended to convey all their property
to plaintiff, there was a transfer of interest in the A.P. land.
No need for land to be in written deed, since they did not have deed to the land anyway.
Tacking b/w adverse possessors requires privity b/w them. Courts have found privity in: transfer
of a deed; testamentary transfer (will); intestate succession.
Court less likely to find oral transfer sufficient in cases of whole hog A.P.
A.P. not defeated although defendant had occasionally used land: exclusivity existed so long as
A.P. did not share use more than normal for an owner.
MARITAL ESTATES
Estate will cover both property owned at death, and gifts made to defraud the marital estate.
Dower and Curtesy
Dower and curtesy dangerous for conveyances. Surviving widow could always take land back,
unless widow consented to conveyance.
Jurisdictions that retain dower limit it to lands possessed by decedent at death.
Fractions for curtesy and dower have been equalized.
Some states where they have been retained, now convey a f.s.a. by dower or curtesy, not just a
life estate.
If a state makes both dower and intestate share available, widow/er may have to elect.
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Fraud on Marital Rights

Conveyances that defraud the spouse are barred, even if property given to children.
Fraud on marital rights looks at all gifts made over the course of the marriage.
Gifts will count for the spouse (if they were given to other parties to defraud the spouse)
but not against the spouse (gifts previously given to the spouse will be counted as part of her
share). The latter is only in states that have augmentation.
Augmentation
States that have adopted the Uniform Probate Code do not have fraud on marital rights, they have
augmentation.
Fraud on marital rights enlarges the pot for surviving spouse.
But augmentation can be used to reduce the share of the surviving spouse.
In Missouri, they have fraud on marital rights to help a surviving spouse, but they also enacted an
augmentation statute to count against a surviving spouse.
Augmentation and fraud of marital rights does not create a right for children to receive
two-thirds. It only creates a right for the spouse to receive a third.
Election Against the Will
Statutory provision made by legislatures.
If spouse elects against the will, spouse will get either half (if not lineal descendants of surviving
spouse) or a third (if they are lineal descendants of surviving spouse).
Problems With Early Modern Election Against the Will
Left open two possibilities:
1. widow/er could still be disinherited. Use of will substitutes could deplete the estate and render
forced heirship valueless. E.g. use of trusts, insurance policies with third party beneficiaries,
joint tenancies, etc.
2. Widow/er could still gain more than prescribed and intended share. If well provided for by inter
vivos transfer, could gain even more through forced heirship.
Uniform Probate Code Solution
Statutes have created concept of augmented estate and gave surviving spouse the right to onethird of augmented estate, the fair share. (adopted in at least fifteen states, but not all, partly due
to complex statutory provisions needed to implement it)
Augmented Estate includes:
a) the property owned by decedent at death
b) value of property which the decedent has disposed of during his lifetime through will
substitutes. Including revocable trusts, gifts to children, transfers to decedent and another
creating joint tenancy, power of appointment, etc.
c) Excludes transfers for value (sale), and transfers to which the surviving spouse had consented
in writing.
Augmented estate also precluded over-recognition. Fair share had to include

property of the surviving spouses that had been derived from decedent in course of the marriage,
e.g. trusts.
Surviving spouse may take the elective share w/o taking against the will: when the
will gives less than she is entitled to under the statute, she can take what is provided for in the
will and the balance that is due to her.
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The statute would effectively reduce the number of elections: probate attorneys and
estate planners would counsel testators against disinheriting their spouses, and widow/ers would
be less able to claim a share due to inter vivos transfers to them. But it would also protect against
disinheritance.
Homestead Rights
Some states have constitutional or statutory provisions guaranteeing surviving spouse a roof over
their heads homestead rights.
Protects property from creditors claims during spouses lifetime, and from alienation by owner
w/o consent of spouse.
Assures a home during lifetime of owner and spouse.
Requirements
1. that owner has a family
2. homestead usually consists of a home and land that it is situated upon.
3. homestead rights usually limited to a stated value, area, or both (protection against creditors).
Homestead rights are a life estate.
Some states will extend rights to protect minor children until age of their majority.
Homestead rights cannot be defeated by decedents will.
Some states ask surviving spouse to make an election b/w provisions of the will and the
homestead rights.
Community Property
Basic premise: Husband and wife are equals and form a marital partnership.
Essentially like TiC.
Community property H&W each own an undivided one-half interest as tenants in common.
Each may own individual separate property.
But they will also jointly own community property.
Characterization of the property as separate or community is the first step in determining the legal
relationships.
Separate property is what you owned before the marriage.
Presumption that its community property absent clear evidence of separate ownership.
Property received as gift or by probate after marriage is also considered separate property.
Income (rents and interest) from separate property also remain separate property.
Largest item of community property is personal services income income earned from your
employment. It is split 50-50.
Some debate about whether income from separate property should be treated as separate.
Seems intuitively unfair to treat it as community.
o Interest helps compensate the owner for inflation.
o By making it community property, value of principle reduced by a little each year. The
benefit of it goes to the other spouse.
Contract or tort liabilities are also classified as either separate or community.
Separate property is owned and treated as each spouses, as if that person was unmarried.
8 or 9 states have community property. They are almost all in the West. Except for Wisconsin,
which adopted it in the mid-1980s along with the Uniform Marital Property Act.
Law of Wills
Surviving spouse has no right to elect against the will.
Theory is that the surviving spouse has the right to half of the community property.
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But she has no right to elect against her husbands disposition of his half of community property
and his separate property.
Intestate succession
If husband dies w/o a will, surviving spouse gets all of the community property and intestate
share of husbands separate property.
Divorce
Community property is usually split 50-50, spouses keep own separate property.
Control during marriage
Both spouses have control of community property, individual control of own separate property.
With respect to personal community property, each spouse can deal with third parties and bind
the other spouse.
With respect to real estate, joint action of both spouses is required in dealing with third
parties.
Policy Reason: Purchasers dont know if the property is separate or community property. Even if
title is only in one partys name, it might still be community property if community funds were
used to purchase it.
You want to get a signature even for separate property, because there might be a fraud of marital
rights, or augmentation.
Rights of creditors
Judgment can be collected against all of community property.
Family purpose doctrine (aka community purpose doctrine)
If individual debt is for community purpose, then community property can be used to satisfy debt.
But if not for community purpose, then only separate property may be used to satisfy that debt.
Family purpose is a broad doctrine that reaches most debts, but not all hypotheticals.
A presumption that debts incurred are for a family purpose.
Transmutation
Property can be transferred from separate property to community property or to other partys
separate property.
There is a presumption unless evidence clearly indicates otherwise that resulting property is
community property.
If transmutating from community property to separate property, evidence must be absolutely clear
as to that transfer.
Fraudulent transfers under transmutation are not permitted.
o Such transfers would be set aside, if there has been a judgment rendered.
o The further back transfer occurred, less likely to be set aside.
Policy Behind Community Property
It may be more efficient less effort to divide property, simplifies division.
Recognizes equality of earning power in many homes: changing times.
Given increased rate of divorce, makes sense: makes divorces easier, does not disadvantage either
party substantially.
Contracting Out of Community Property
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By the use of pre-nuptial agreements. Agreements that stipulate what is separate and what is
community. But they can be annulled if they are unfair.
Creditors may be able to challenge pre-nuptials, but then again it would take away a lot of the
effectiveness of the agreements.
Uniform Marriage and Divorce Act

The early version (bottom of p. 391), instituted a community property regime for the purpose of
divorce. Even though they are common law property states for every other purpose.
Uses the term marital property. In large measure that is synonymous with community property.
The statute doesnt, however, state 50-50 division. By and large though, the property was split 5050, unless other factors played in.
Common Law
In common law states, no traditional common law approach of letting title.
For purposes of divorce, the courts can look at ALL the property, however title was acquired and
whomever it was acquired by, and make an equitable division taking into consideration various
factors as enumerated in the statutes.
The courts have carte blanche with regards to divorce division of property.
Uniform Marital Property Act
Advocated that all states adopt community property principles. Thus far, only Wisconsin has
adopted it.
As originally drafted, judgment against an individual spouse may be collected against that
spouses separate property, and all of the community property.
Negative policy: In the case of marital infidelity, if the husband takes a loan to support a mistress
and defaults, the wife would be punished for her husbands infidelity. She finances the dalliance.
CONCURRENT ESTATES
Co-Tenancy Disputes
Co-tenant disputes usually handled by K law: co-tenants usually have express oral or written
contracts to handle such disputes.
In-tenant: the tenant who is collecting rent, managing the property, the one in possession.
Out-tenant: the one who is not in possession, who is not running the show.
Most disputes handled by default rules. Most of these rules can be changed by K, except for some
dealing with alienation of the land.
Substance of law is governed by remedy being sought. Rights of the parties depend on the cause
of action that is brought.
Three kinds of actions (all created by equity courts):
(1) Accounting typically brought by out-tenant, to have an accounting for rents and costs.
(2) Contribution typically brought by in-tenant, to have out-tenant contribute to upkeep.
(3) Partition it is to concurrent interests what divorce is to marriage.
In partition actions, the courts are most flexible in doing justice.
But courts much more restrained when action is for accounting or contribution.
Default Rules
For residences, concurrent tenant who lives on property does not owe rent to outtenant, unless there is ouster.
When there is ouster, the out-tenant can claim rent.
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Ouster may be actual: telling cotenant to never return, or constructive: changing

locks.
Ouster may create A.P., if it goes on long enough.

Court may require more evidence of ouster to prove A.P., than just rental liability.
When theres ouster, in-tenant becomes liable to out-tenant for half the rent.
Carrying costs: what is put into property taxes, repairs, etc.
When action for contribution is brought, out-tenant can seek rent as
defensive offset from carrying costs. For equity. One who seeks equity must do equity.
Offsets should be granted to both parties (these are all actions in equity).
But in accounting action, no rent due out-tenant for in-tenant occupancy w/o
ouster.
If in-tenant rents out property, can only take fair share of rent: excess must go to
out-tenant (Statute of Anne).
When in-tenant operates business, courts unlikely to grant out-tenant share of
profits, just half of rental value.
Out-tenant may not be liable for mortgage payments, depends on who took
mortgage and purpose of mortgage.
Policy: Creates dis-incentive to sue, encourages settlement outside of courts.
Improvements and Repairs

Out-tenant is not liable for contribution on improvements made w/o out-tenant consent.
In-tenant cannot improve out-tenant out of ownership.
Improvements are taken into account when partition is made.
Increase or decrease in value caused by an improvement is given to the one who bore the cost of
making the improvement.
In accounting action, change in rent due to improvement is credited to one who made
improvement.
In-tenant cannot seek contribution for repairs. But in accounting action or partition, will be given
credit for repairs.
Increased taxes by way of improvements can indirectly improve out-tenant out of possession. But
court would probably limit this and do equity, make in-tenant liable.
Restrictions on Partitions
They are not restrictions on alienation: interests may be sold.
Usually cannot be for longer than allowed under Rule of Perpetuities: cant be perpetual.
A rare area where courts will uphold disabling restraints X has no power to
Sometimes upheld if partition would defeat purpose of grantor/creator.
Some statutes prohibit judicial partition if creator of estate forbids it.
Condominiums statutorily are allowed to have perpetual restrictions on partition over common
areas.
Murder and Co-Tenancy
One should not profit from ones own wrong.
Joint Tenancy and Tenancy by the Entirety
Right of survivorship severed when killing is willful and unlawful or feloniously and
intentionally.
UPC severs right of survivorship decedents interest will pass by probate. If killer would
benefit, we assume killer died before decedent.
Or killer may forfeit all interest.
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Or court may give killer life estate, and reversion to decedents estate if killer is released, no
need for state support. Or if killer must pay for own incarceration. Hybrid approach.
Statute of limitations might bar division of estate if charges only brought later.
If no criminal conviction, probate court may re-assess evidence under preponderance standard.
Tenancy in Common
No change interests are separate to begin with. Killer keeps estate, and decedents interest goes
to decedents estate. Killer will not be allowed to inherit UPC.
Lakatos v. Estate of Billotti (H&W own as J/Ts and H kills W, conveys to mother, mother to straw
party, back to H and mother)
WV SC rules that statute does cover J/T. And H is presumed to have predeceased W, so interest
passes to Ws estate.
Joint Tenancy
At common law, joint tenancy was created simply by conveying to A and B.
Today, by virtue of presumption statutes in most states, such a conveyance only creates a tenancy
in common.
Most important differentiating factor b/w joint tenancy and tenancy in common is the right
of survivorship. (joint tenancy has it, tenancy in common doesnt, vis--vis the other cotenants)
J/T may be for life or defeasible, not just f.s.a.
Four Unities
1. Time Joint tenants must acquire their interest at the same time.
2. Title Joint tenants must also acquire their interest by the same instrument/document.
3. Interest Joint tenants must have equality of interest equal shares.
4. Possession Each joint tenant must have same right to possess every part of the property.
Form of strict formalism that governed when the right of survivorship existed.
Two schools of thought: we govern by the forms, or by the intents of the grantor or grantee
(if grantors intent not available).
Intents school now predominates.
Straw Man Requirement
O -> A and O as joint tenants.
This violated two of the four unities if done directly. So O would convey to X (straw man), who
would in turn convey back to A and O as joint tenants.
At common law, one could not convey to oneself. So even if O conveyed the land, he would only
convey to A a half-interest. But he could not convey land to himself. So there would be no unity
of time or title.
X had to be a single person to avoid fraud on marital rights.
Most states have since enacted legislation to eradicate the straw man requirement. And allowed
the direct creation of joint tenancy even w/o the four unities.
Destroying J/T Right of Survivorship
By deeding your interest to someone else, giving or selling your interest away. It destroys joint
tenancy by destroying the unities of time and title.
Most states allow the severance of joint tenancy surreptitiously, w/o telling anyone else. There is
no obligation to disclose.
Right of survivorship is severed by deeding away any part of ones interest. So even if Alice
only gives away half of her interest, it suffices to sever joint tenancy.
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Keemin Ngiam
A will cannot sever joint tenancy. Because a will only becomes effective upon death.
If 3 J/Ts, and 1 gives away interest, J/T still exists b/w other 2. But b/w other 2 shares and share
given away, only T-i-C. Even if share given away is held by one of the 2 J/Ts.
Foreclosure sale on a mortgage or personal debt of one of the J/Ts.
Partition will also destroy J/T, whether physical or by sale.
In CA
Statute concerning severance by written instruments requires deed severing J/T to be recorded before
death.
If deed is executed at deathbed or death is unexpected, deed must be executed no more than 3 days
before death, and recorded no later than 7 days after.
Crowther v. Mower (mom remarries, sends son deed, tells him not to record until shes dead)
If recorded, it will be easier to discover, to be found out.
But if not recorded, and Crowther dies first, Nellie gets it all, and in turn Mower can get it all.
And Crowthers 3 children would be shut out.
Crowther argues there is no severance unless deed is recorded.
Court rules that conveyance shows intent to sever was there, and so J/T severed.
Patience v. Snyder (deed not recorded in time because they had to pay recording fee first)
In CA, Recording Act states that deed is only effective against third parties from time of
recording.
Kenneth executes deed to Donnas mom before he dies.
But deed not recorded before he dies.
So ex-girlfriend/wife, Diana, gets everything.
Phillips v. Nyhus (J/T business partners who sell land but one dies before closing)
In some states, under Intent approach, there was intent to sever, and so J/T severed before
closing: money from sale will be split.
But in most states, sale by both parties does not show intent to sever absent further evidence, e.g.
money to be paid into separate bank a/c.
Under formalistic approach, no disruption of unities, so no severance.
W/o evidence of intent to divide up cash, Nyhus gets it all. Equity of situation questionable:
business partner gets it all but family doesnt.
Albro v. Allen
Carol and Helen as joint tenants with full right of survivorship.
In MI, this is an inseverable joint-tenancy.
Carol sells her half in the land to Kinzer, and signs an earnest money contract.
Helen seeks an injunction to bar Carol from selling.
MI Supreme Court says that life estates are fully alienable, but measured by transferors life:
Carol cannot be stopped from selling a life estate to Kinzer.
What Kinzer is buying is a present half-interest in the rents, but beyond that, hes just buying a
risky chance to get the whole property.
If Carol dies, Kinzer is wiped out, he sees nothing for his investment and Helen gets all.
If Helen dies first, Kinzer would get it all.
If this were a regular joint-tenancy, then Kinzer would get a full half-interest and be tenants-incommon with Helen. Unity of interest would be broken.
24

Prof. G. Nelson
Keemin Ngiam
An inseverable joint tenancy becomes stronger than a tenancy by the entireties: it cant be broken
at all. Save using a straw person. Or death.
Policy: Respects Os wishes and allows O to ensure that the estate is not divided up, short of
mutual consent. But it is a very strong restraint on alienation.
Porter v. Porter (divorce remarry husband dies. Does 2nd wife get share of 1st house?)
Court holds that divorce does not automatically sever joint tenancy majority rule.
Parties must expressly provide for severance if they want to sever.
Rationale: because joint tenancy is not tied to marriage per se. Joint tenancy is not inherently
spousal, and thus we shouldnt engage in any unnecessary presumptions of severance.
This does seem rather counter-intuitive. Most people who get divorced probably (empirically) do
want to divide their interests in land.
But many other states hold that divorce does sever joint tenancy.
2nd wife argued that exclusive occupancy of house by 1st wife equaled exclusive possession: unity
of interest b/w husband and 1st wife severed and so no J/T.
But Court holds occupancy is not same as possession, and so no upset of interest.
Mann v. Bradleis (J/T b/w husband and wife; divorce; house to be sold on her remarrying, youngest
child 21, mutual agreement)
Wife dies w/o remarrying, youngest child turning 21.
Husband seeks repossession, arguing that there was no severance of J/T
Court holds severance occurred with the divorce: intent to sever parties contemplated
permanent dissolution, a definite ending to concurrent tenancy (provisios for split).
Brant v. Hargrove (1 J/T mortgages land, later other J/T dies was there severance?)
AZ Court holds AZ is lien theory state no upsetting of unity of interest therefore no severance.
Brants can therefore collect debt against whole property.
If title theory state, Brants would gain legal title to land by mortgage, upsetting unity of interest
severance.
Under intents approach, mortgage does not mean intent to sever no severance.
If mortgagor had died first, in lien theory state, two approaches:
1. anti-lender: no severance so survivor gets all and mortgage extinguished; debt is
personal debt on Hargroves estate.
2. partial severance: survivor gets all, but mortgage is still on half the land and satisfactory
on that half.
If mortgagor dies first in title theory state, severance and mortgage valid on half the land.
Tenancy In Common
Now preferred by the law over J/T. By statute, to A and B now has presumption of TiC, not J/T.
No right of survivorship.
Each person has an interest in Blackacre, even if the interest is different: undivided share.
There is only unity of possession.
May be partitioned.
Freely alienable and inheritable.
When more than one heir survives decedent, all heirs become TiC to property.
Esteves v. Esteves
Parents and son as co-tenants, parents were in-tenants.
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Prof. G. Nelson
Keemin Ngiam
When commonly owned property is sold, owner whos paid less than his pro-rata share of
operation and maintenance expenses must account to owner who paid more than his pro-rata
share. Even if former owner was out of possession and latter was in possession of the property.
All tenants in common have a right to occupy all of the property, and if one chooses not to,
he has no right to impose an occupancy charge on the other.
Notwithstanding above 2 rules, when the property is sold, tenant who was in sole possession
of the property must give credit to the co-owner for the value of sole occupancy of the premises.
Rejection of such credit would be patently unfair.
Party seeking such sole occupancy credit has the burden of proving the actual rental
value of the property enjoyed by the occupying co-tenant.
Court held that in partition, although no ouster, parents should have to account for rental
value of their occupancy, since son was liable for carrying costs: matter of equity.
Carr v. Deking (father & son cotenants, father leased to third party w/o sons approval)
Son argues lease invalid w/o both cotenants agreement.
Father died, and son tried to eject lessee.
Court holds son cannot eject lessee.
Lease valid: TiC has undivided right to use all the land subject to equal rights of other tenants.
Therefore can assign own interest w/o consent of other tenants.
Non-signing tenant not bound by the lease terms, but cannot profit either.
But can get benefit of lease (rent and no payment of fertilizer costs) if he opts in, or seek
partition.
Can demand to be let into co-possession but cannot exclude lessee.
Lessee of a TiC interest becomes a TiC with other cotenants for duration of lease.
Partition would be physical.
Nelsons alternative solution: lease not binding on non-signing co-tenant until cotenant accepted
share of rent sign of consent.
Massey v. Prothero (brother tries to doublecross the whole family)
Taxes on family land lapse and land is sold at tax sale.
Brother buys land w/o telling rest of family. Later tries to exclude them and claim sole ownership.
Court holds that their interest in the land never lapsed.
When Lewis bought title at tax sale, he was acting on behalf of all of them: had fiduciary
relationship and duty. Cant gain a greater interest in the land than them.
o In keeping with good faith that should accompany cotenancy.
o All tenants have duty to pay taxes: one cotenant shouldnt be able to benefit at expense of
others by neglecting this duty (then buying at tax sale).
o Spouses barred as well.
Tax title statute of limitations does not apply: not meant to protect his fraud, operate against
cotenants.
Lewis did not bring it home until he threatened to have sister arrested for trespass no A.P.
This is an easy case because they are all related family members, and they all obtained their
interest from the same instrument.
The strongest case is when they are all blood relatives and they all obtained their interest from
the same instrument.
The weakest case is when you have non-blood relatives, and one of them obtained interest from a
previous tenant who was a blood relative, etc.
The further you get from the core, the less likely the court is to find an agency
relationship/fiduciary relationship between the tenants.
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Prof. G. Nelson
Keemin Ngiam
If third party bought at tax sale, and title bought back, cotenancy extinguished. Except when
there is fraud.
If taxes assessed separately, and taxes lapse, lapsed interest may be bought by other cotenant and
extinguish cotenancy (because no shared interest).
If there is no fiduciary relationship (e.g. personal debt or obligation not tied to land), then no
presumption of buying for all cotenants.
Delfino v. Vealencis (partition of land in kind or by sale)

Partition by sale only if:
1. partition in kind not practical. A presumption in favor of partition in kind unless land
is unique and cant be partitioned. (But presumption does not hold well today)
2. It is in the best interest of all the parties.
Tenancy by the Entirety
Does not exist in CA.
Offered by MO, MA, TN, among others.
Available only to husband and wife.
It is a legal reflection of the unity of husband and wife.
Created when there is a conveyance to both parties.
To H and W alone may suffice to create a tenancy by the entirety. Or conveyance may make it
explicit (more common and safer).
Tenancy by the Entirety has five unities: the four covered under joint tenancy, plus the unity of
marriage.
Tenancy by the Entirety is inviolable, unless both parties act together. Either party acting alone
cannot violate or end or sever tenancy by the entirety.
Divorce changes TbtE into J/T or TiC, depending on state.
If couple not married, TbtE is really just J/T or TiC, depending on state.
Whoever accepts conveyance from just one party accepts nothing. Both husband and wife must
consent.
Creditors must obtain both signatures. Property that is held in tenancy by the entirety, is utterly
protected.
Only joint debt is collectable against property held in tenancy by the entirety. The property
cannot be used to repay debt held by just one of them.
If the wife declared bankruptcy, the property still could not be touched. Once she exits
bankruptcy, they can sell the property and keep all the proceeds.
Some states have homestead exemptions the homestead is protected from all debt collectors,
except for mortgage lenders.
Three Approaches to Conveyance of TbtE Property
Pure: Any attempt to convey or affect the interest in the land, must be undertaken by both parties.
Any lien or debt sought to be collected on the land, must be a lien or debt of both parties. In its
purest form, tenancy by the entirety only exists in five or six states.
MA: Other than homestead property - cotenant is free to convey his interest, either by mortgage,
deed, or involuntarily, when a debt is levied against cotenants interest (i.e. other cotenant not
liable on the judgment). But all that is conveyed, is the right of survivorship Coraccio. Rents
and other proceeds of the land are untouchable. Creditor only gains if other cotenant dies before
debtor.
Homestead property - Judgment creditors cannot get any interest in the homestead
property. Grantees of a deed, conveyance, or mortgage, can be given the contingent right
of survivorship.
27

Prof. G. Nelson
Keemin Ngiam
NY, NJ: H&W have interest equivalent to co-tenancy for life, remainder to surviving spouse.
May be conveyed, but only life estate plus right of survivorship. Rents are conveyable, for the
duration of the life of the conveyor. But the rest of it is contingent on the survival of the
conveyor. The right of survivorship is non-severable.
Coraccio v. Lowell Five Cents Savings Bank (TbtE b/w h&w; H takes mortgage and defaults
foreclosure she tries to have foreclosure annulled)
In a pure jurisdiction she would win.
Court holds that the mortgage is valid even if it is unilateral.
But its a little pyrrhic he can only convey his interest.
And his interest is only the right of survivorship. So foreclosure only if she dies.
If H conveyed to third party, and died, third party has the right of survivorship. But no right to
rents or anything, until W dies. So if third party dies first, too bad, W gets it all.
LANDLORD TENANT
Law combines K and Property law.

Traditionally LL would deed 10-year leasehold to tenant.
T would pay full lump sum of money upfront, and then go into possession.
LL would only have a reversion, and T would have possession.
Essentially like a temporally defined life estate.
Origin: Usury laws held that it was immoral to charge interest.
Leases thus sought to get around the usury laws.
T would lend LL money and get interest, by offering 50k for land valued at 75k.
Today, leases are an amalgam of property law and contract law. E.g. LL has duty to mitigate
damages when T breaches the lease contract. This amalgamation makes sense today.
Modern Lease
LL has (1) Right to rents (interest) + (2) Reversion (principal)
T has (1) Rental obligation + (2) Right to possess
Bonus value: When the value of the property rises, but the rents stay the same.
Bonus value only realized when T has right to alienate.
As a default rule, the tenant has a right to alienate.
Residential Ts enjoy more protection than commercial Ts: differences in bargaining power.
Rent is limited by K SoL. Theoretically LL cannot Dd rent for longer than K SoL.
Calculation of Rents
Retail leases usually percentage leases.
o Combination of fixed rent plus percentage rent.
o The percentage rent is tied to gross sales, not profit.
o Protects the LL against inflation. As the costs of the goods go up, so does the rent.
o In effect, the LL is a business partner of sorts with the tenant.
Residential leases usually fixed amounts.
Net lease Usually in commercial context.

o At CL, leases were all net leases: T took on all responsibilities.
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Prof. G. Nelson
Keemin Ngiam
o
o
o
o
o
o
LL has no obligations, just the right to collect rent.

T is obligated to make all the repairs, pay all the taxes on the property, pay all the
utilities, insure the property.
LL wants to put all the obligation on the T.
Most common today are triple net leases.
single net lease is where T has obligation to repair.
Double is repair plus taxes.
Triple is repair, taxes, insurance.
As a result of obligations being put on T, rent is lower.
Net leases are not allowed in residential contexts.
Residential Ts not allowed to waive implied warranty of habitability.
Ground Lease
T leases raw land from LL and builds on it, rents it out or uses it, may have renewal options.
At end of lease, LL gets back land and buildings.
If rent is not paid, LL can terminate lease and claim building before the end of the lease.
Mortgagee financing T takes mortgage on 90 year ground lease, not f.s.a.
Mortgage only applies to the leasehold interest.
Lender therefore tries to ensure that it is informed if the rent is not paid.
It will then pay the rent in order to protect the mortgage.
Rationale behind a ground lease is that it is much cheaper to build.
Homeowners dislike this setup towards the end of the lease: they will lose their homes.
In Hawaii, they petitioned their Legislature, and the Legislature granted them the power of
eminent domain, to condemn the land their houses were on.
So they managed to keep the land and their homes after all.
Supreme Court held that condemning the land in this case was a public purpose.
Law of waste applies in the context of ground leases too T cannot decrease the value of the
land.
A ground lease is usually a commercial venture. No restrictions on freedom to K.
Lease, License, Easement
Lease most rights revocation is breach of K. Possessory. T can get specific performance. Security
deposit.
Easement second most cannot be revoked. Incorporeal, not possessory. Just right to use. Specific
performance possible.
License the least. Revocable at will. No security deposit. Only remedy is damages, not specific
performance.
Friend v. Gem (Gem grants what it thinks is license, court holds its lease, slip and fall, Gem sued)
Gems defense: as an employee of Biederman, only has licensee privileges, not T.
Gems standard of care in MO is lower if it is a licensor than if it were a LL.
Argument for license:
o lack of a demarcated boundary,
o right to move Biederman around at will,
o Gems employees enter Biedermans space to clean and count the days earnings,
o agreement between them also calls it a license.
Court rejects Gems argument:
o boundary lines demarcating Biedermans space from rest of store existed
o There was a specific space that was understood to be Biedermans.
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Prof. G. Nelson
Keemin Ngiam
Everyone knew where the Biederman section began and ended.
Termination of Leaseholds
Termination must be in writing.
Termination must be specifically directed either to LL or T (depending on which party is seeking
to terminate).
Termination notice must be signed by person seeking termination.
Termination notice must include clear evidence of intent to terminate, e.g. elect to terminate.
Notice must specify the effective date of termination. Usually the last day of the month, in a
month-to-month tenancy. Usually must be at least 30 days (see Davidson v. Kenney).
Effective date of a termination must be at the end of a rental period. Normally in a month-tomonth this will be the end of the month.
Notice of termination must be received by the party outside of the notice period, i.e. received
before the rental period immediately preceding termination.
Easiest way to effect notice is to serve notice personally. Short of that, registered or certified mail
would be best. Termination is never effective without notice.
Davidson v. Kenney (notice of termination not given in time, and possession lawful till T left)
If lease was terminated validly, Davidsons can bring unlawful detainer action and get double
rent.
If invalid termination, lease was valid until Kenney left.
Theoretically Davidsons could argue that Kenney never terminated lease, and so rent is still
owed.
Notices of termination are construed strictly against LL: because of harsh double rent penalty.
Majority Rule: If notice insufficient, must send new notice for next period.
Restatement: if notice insufficient for termination date specified in notice, termination becomes
effective at end of next period.
Termination can only take place at end of lease period, at end of the month.
Eviction of T
At CL, self-help could be used to evict T, or seek judicial ejectment action.
Legislatures passed summary proceeding/unlawful detainer/rent and possession statutes
summary eviction proceedings.
Courts then banned self-help as public policy: adequate remedy available through unlawful
detainer actions.
Some states allow self-help if peacable changing locks.
States that ban self-help render it a tort forcible entry.
Harkins v. Win Corp. (hotel guest: licensee or tenant? Arrears, hotel changed locks)
Factors Militating for Harkins Being a Licensee
The hotel would come in, clean the room, change his linens. They provided the furniture.
His payments were made weekly. Seems to indicate a licensee status.
In CA, once youve stayed for over 30 days, youre a tenant. The statute carves out an exception
for regular hotels and luxury hotels.
Economic reasoning: If the LL seeks a judicial action, then until the case is heard, the T gets
free rent. They wont have to pay for the 60 to 90 days until the case is heard. The rent accrues,
but you cant squeeze blood out of a turnip. In cases like this, some LLs will pay the T to leave.
Summary Proceedings to Evict Tenant
Traditionally LL could use self-help. Later barred for policy reasons.
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Keemin Ngiam
If T holds over, LL can bring summary proceedings (unlawful detainer) action against T.
LL might also just offer to pay T to leave (less costly than court action).
In theory if LL does everything properly and the T does nothing to contest, a T can be evicted in
16 days.
But in practice, average time to judgment of eviction is 48 days.
Time to actual eviction of the T is anywhere from 90 to 108 days.
System de facto builds in a 2 to 3 month period during which the T gets free rent, if the T is
judgment-proof (i.e. back rent cant be collected from the T).
Traditionally when the issue goes to trial, the defendant T had very little ability to assert a defense
or counter-claim. Traditionally it was just a matter of whether or not T had paid the rent. But
today there are more possible defenses:
1. implied warranty of habitability
2. implied covenant of quiet enjoyment
The limit of the judgment is usually around $25k.
Unlawful detainer actions can also be brought against commercial
tenants. But if recovery sought is in excess of $25k, then the action should be brought in Superior
Court and not municipal court.
A jury trial can be given, but is usually waived.
The number of judgments entered in favor of Ts, in general, was 1%.
But if the T was represented by a lawyer, the % went up to 20%.
Either way, Ts still lost in the majority of cases.
LL can seek enforcement by asking court marshall to enforce order.
Judgment against T will also adversely affect credit rating.
T might offer to leave if LL does not report, and get it in writing.
LLs may have collection agencies collect on judgment. Knowing that LL will seek them out until
death might be an incentive against Ts defaulting.
Appeals
In most states, as a condition precedent to appeal, the T is required to post a bond, to guarantee
the LL that even if T loses on appeal, there will be money available to pay for the rent. The bond
is known as a stay bond. But once bond is posted, the T can stay till the appeal is heard.
Lindsey states that requiring a bond of two months of rent is unconstitutional.
In CA, once judgment is entered in an action for eviction, there is a right to appeal to a
three-judge municipal court panel. But there is no right to stay in the apartment pending
the appeal, even by posting a bond, except in extremely rare circumstances.
o Policy: Seems more efficient, given that most cases are won by LLs, to require
burden to be shifted to T. It would consume less resources.
Lindsey v. Normet (summary proceedings held to be constitutional)
Fact that its a summary proceeding does not violate due process.
Fact that limited defenses are available to the T does not violate due process.
Lindsey stands for the proposition that where summary proceedings are a legislative action to
deal with the slowness of judicial eviction action and to avoid self-help, they are not a violation
of due process.
Summary proceedings are constitutional.
Self-Help
Its permitted in about 20% of the states. Peaceable self-help of course.
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Keemin Ngiam
In such states, LL uses self-help to get rid of T.

T can then sue LL in court.
T can be compensated by getting free attorneys fees or judgment, if T prevails.
Self-help permitted when repossession is of chattel, not property. But must be peaceable.
Why the difference b/w chattels and property?
1. Property is more substantial and arguably more important than chattel.
2. It puts the burden on evicted T to prove that eviction was unlawful.
3. Hard for it to be peaceable. People have greater stake in their home. All their belongings are
there, etc. Person will be more likely to engage in violence to defend home.
4. Homelessness: legislatures rule out self-help to cut down on homelessness? Give tenants a
chance, a few months to get their act together and stay off the street.
The LL usually wont absorb the cost of the free rent: its usually just passed on to other Ts in the
form of higher rent.
Avoiding Termination
LLs can:
1. screen Ts more effectively.
2. Require higher security deposit.
3. Require more rent upfront.
Waiver
Unlawful detainers are not waivable as a matter of public policy.
Abandonment and Surrender
LLs Options
1. Accept the abandonment. But the LL only wants to do this intentionally. It may, however, be held
to have occurred when the LL had no such intent. Turns on what the LL actually does.
2. Refuse to accept the abandonment as an offer of surrender, and keep the lease in effect. This is
increasingly being abandoned as an option by courts, although theres still a significant amount of
states that allow it. LL then has no duty to mitigate.
3. Act as Ts agent and find a substitute tenant. T liable for damages but lease no longer in effect.
LL can seek damages for rent differential and cost of finding new T.
Damages = (Original Rent x Remainder of Original Lease) (New Rent x Remainder of Original
Lease) x Discount for Present Value
Abandonment is considered an offer of surrender. Once both parties accept, that ends the lease.
Under option 2, sometimes the LL will just wait until the end of the lease to sue. And they will
sue for the accrued rent (the judgment amount would be greater).
Mitigation will always be subtracted from recovery: LL has duty to mitigate damages if LL
accepts abandonment.
Acceptance of Surrender
LL must be careful when he is considering option (1) in response to abandonment.
Courts have held that when T abandons the premises, it is an offer of surrender.
And by entering the premises to re-model, LL is accepting the offer of surrender, unless LL
expresses to the T in writing that the re-entry is not an acceptance of the offer, and that the reentry is done to mitigate the Ts damages, not the LLs. This is the minority rule.
In jurisdictions that impose a duty to mitigate, the LLs re-entry is not an acceptance of surrender.
It would be perverse to cause the LL to lose any right to recover damages because he is
performing his duty.
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Prof. G. Nelson
Keemin Ngiam
What If the T Makes an Actual Offer of Surrender?

The LL can choose not to accept the offer.
Unless its a jurisdiction that imposes a duty to mitigate.
Then LL may have to accept offer, but make it clear that in doing so, the LL is mitigating for the
Ts benefit, and not his own. That he is choosing (3) and not (1).
Acceleration clause
If T abandons, LL has the right to collect all the rent under the lease presently due and payable.
Court will usually require the amount to be reduced to present day value, and wont let the LL
collect it all. Hence the property will still be the Ts. You cant let the LL collect both rent and the
property back.
Used quite frequently by LLs.
Anticipatory Repudiation
By abandoning premises, T has signaled to the world that he is not going to perform.
Courts may interpret this as an anticipatory repudiation.
Result is the same as with acceleration clause LL gets present value of the accruing rent. But
premises must then be available to the T.
Under both acceleration clause and anticipatory repudiation, the T retains control of the property.
Hence LL cannot re-enter. If LL does re-enter, then T could sue.
Mitigation
If LL has multiple vacancies, LL must treat abandoned apartment just like one of the others.
If T pays all rent upfront, court might impose duty to mitigate in order to discourage the
inefficient use of land.
In CA, security deposit cannot be used to mitigate: would turn it into liquidated damages.
Policy Reasons for Requiring Mitigation:
Anti-social to have unused real estate, especially housing, when housing is a relatively precious
commodity.
(In California)
Penalty for Failure to Mitigate
1. Court will subtract from K rent damages what reasonable mitigation would have yielded. It is
relatively inefficient a lot of discovery and investigation needed. This is by far the most
common. Or:
2. LL will lose right to bring an action. No reasonable attempt at mitigation = T is off the hook. Of
course, litigation is needed to establish if LL made a reasonable attempt at mitigation.
(c) LL has burden of showing mitigation.
(d) Because LL is in an easier position to prove mitigation.
(e) T would have to engage in tremendous amounts of discovery to determine mitigation.
Reasonable Attempt at Mitigation
Usually it is T who attempts mitigation by finding sublessee or assignee.
Minimum duty to mitigate requires LL to accept any substitute T found by breaching T, provided
that substitute T is solvent and creditworthy.
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Prof. G. Nelson
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Length of new lease doesnt have to be identical to the original lease, but must be a reasonable
equivalent.
Rent does not have to be for same amount. LL can recover for cost of re-letting and for rent
differential.
Waiving Duty to Mitigate

In residential context, public policy is against recognizing such waiver.
a. Inequality of bargaining power.
b. Would encourage inefficient use of land.
In commercial context, court may be willing to accept such waiver.
c. Bargaining power more equal.
d. Inefficient use of land argument not as strong: commercial land more available than
residential.
Mitigation of Commercial % Rent Lease
No mitigation unless there is a duty to operate.
Some courts might grant an injunction to compel operation. T can get out of lease by buying the
injunction: settling lease termination on LLs terms.
Courts might award damages.
Court will have to decide if there is a duty to mitigate.
Court will have to determine what the % rent might be. (Speculative)
If T attempts to mitigate and rents to third party on % lease, K rent and the mitigation amount will
need to be determined.
Awarding damages is thus a messy business, requiring a lot of calculation, etc.
But awarding an injunction, compelling specific performance is easier. And it lets the parties
essentially settle the matter with minimum efforts to calculate how much is due, etc. More
efficient.
If T Has No Duty to Operate
Liquidated Damages Clause. A sliding scale liquidated damages provision would help avoid
interpretation that it is a penalty.
Because its not a fixed or flat amount it will vary over time, and with the set % of profits for
the % lease.
Tenants Fixtures
When chattel attached to real estate in a relatively permanent way, that chattel becomes part of
the real estate.
Common in commercial leases.
Default rule: LL can keep the improvements. Also holds if lease stipulates that T can build
improvements but is silent about what will happen at the end of the lease.
If improvements decrease value of land, T may be liable for tearing them down.
T has right to remove trade fixtures so long as T does not damage the structure/property in doing
so, or repairs any damage done to the structure/property.
Default rule is that T cannot seek contribution for the improvements.
Eminent Domain Condemnations
Quick Take government pays money into court, and within a matter of weeks, the owner has to
leave the property.
In making its offer, government has an incentive to make an offer closer to FMV otherwise it
goes to a jury trial, where jury will likely give more than FMV.
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The courts generally dont want to have to determine who has what interests in the land. In most
states, there is one judgment for the FMV of the land. All parties with interests in the land then
have to litigate to get their share.
A minority of jurisdictions will determine how much each party should get. Danger of doing this
is that the sum of the parts might be more than the whole. Also results in more work less
efficient. Will frequently be subject to litigation as well.
When leased land is condemned, the lease is terminated. The T has no more obligation to pay
rent. But the leasehold is also wiped out.
Lessee may get part of condemnation award when there is bonus value: Ts
leasehold is worth more than his obligation.
T will get the discounted present value of the bonus value for the remainder of the lease.
This amount will be paid out of the FMV of the land.
The court would also likely account for Ts options to extend the lease.
But T can only recover for what bonus value at present is: future appreciation of land is
disregarded.
Type of lease will matter as well the longer and harder to terminate, the more likely the T is to
be able to get some of the condemnation award.
Four Tenancies
1) Fixed-term Leases.
a. There is an identifiable ending date. The lease terminates on its own, no notification of
intent to terminate is required.
2) Periodic Lease.
a. Could last forever. Most common is month to month.
b. Unless one of the parties takes some action, the lease is perpetual.
c. Termination is by notice. At c/l, used to be 6 months for a year to year tenancy.
Nowadays more often its 30 days.
3) Tenancy at Will.
a. People seldom expressly create tenancies at will.
b. They usually result from implication.
c. Termination by either party without any notice is possible.
d. Usually, however, when the LL terminates, the T has a reasonable amount of time to
leave. Some legislatures require 30 days notice by statute, even for tenancies at will
(questionable if its still a tenancy at will).
e. Courts usually call a tenancy a tenancy at will when they cant otherwise describe it.
4) Tenancy at Sufferance.
a. Created when a T holds over under another type of lease.
b. Parties dont consciously create tenancies at sufferance.
c. It is a protection against A.P.
d. Makes the occupancy by, through, and under the LL.
e. They could have done the same by making the possession a license.
Statute of Frauds
Ks concerning land to be in writing if over a year.
Oral K not enforceable if longer than a year.
Written Ks not enforceable if key terms not included.
Renders defective K unenforceable.
Does not void the lease, just makes it unenforceable.
If K is defective, when T goes into possession, T becomes a tenant by will. T is not a trespasser
or licensee.
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T can become a periodic tenant by paying rent and having the LL accept it.
The lease can be taken out of the statute of frauds by part performance.
a. Once T or LL engages in significant detrimental reliance, bar of the statute comes down.
b. Evidentiary rule is lowered, and parties can prove their oral K by testimony and the use
of extrinsic documents (we no longer need a written K).
c. T paying periodic rent alone may not be enough to qualify for part performance.
d. But if T made significant improvements to the property, it will usually be enough to get
part performance in most states.
e. LL can likely do the same thing. If LL makes business judgments on the basis of the
lease.
Giving up chances to rent for a higher price to other Ts in order to obtain a
longer lease from the T.
LL could testify as to the length of the lease, and if believed by the Court, it
will be enforceable.
Landlords options when tenant holds over (and becomes a tenancy by sufferance)
1. treat tenant as trespasser and sue for eviction (judicial actions are only ones allowed no selfhelp possible). Trespasser is then liable for reasonable rental value and a penalty for holding over
(either stipulated by statute or in the lease 2/3 lease, or 2 to 3 times rent).
2. treat tenant as a periodic tenant at a rent specified in written notice to the tenant (see David v.
Selk). So long as rent specified is reasonable, we will hold the holdover tenant to a new periodic
tenancy, month to month.
3. Or if the parties do nothing, and the tenant keeps making monthly rental payments, court will
hold that the tenant has become a periodic tenant based on payment and acceptance of rent.
David Properties v. Selk (D buys land from S, gives S a mortgage for payments, and lets S live on
land, S holds over and refuses to leave, D stops paying mortgage)
When deed delivered to D, both legal and equitable title passed to D (FL is a lien theory state).
Hence for all purposes, David is an owner in f.s.a. subject to the lien on the land.
But after the closing, S doesnt leave the property, and instead stays on.
D doesnt make last few mortgage payments and S sues for judicial foreclosure.
Davids defense is that Selk did not pay rent. They wished to offset $6600 worth of rent, i.e. David
only owes $2400 to defeat the foreclosure.
But this isnt a tenancy by sufferance. Selk isnt a prior T. Hes a prior owner who didnt leave the
land. To prevent A.P., he could either be made a T or a licensee.
Selk was not a trespasser he testified that the president of David allowed him to stay as long as
he wished.
When David wanted the property back, they negotiated and agreed to sign a written agreement
making Selk a tenant till the end of the year.
Selk stayed over beyond that.D in response sends him a letter informing him that rent will be
$300 a month.
S doesnt pay and D refuses to pay the last installment.
When S didnt pay after the period expired, he became a tenancy at sufferance.
Court holds that by the two letters, D offered S a month to month tenancy.
And S accepted by keeping silent.
Selk wants to be a trespasser. Because the damages at common law are only reasonable market
value.
Letter said it was not a lease court could have found that rent demanded was really damages,
and S was a trespasser.
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Prof. G. Nelson
Keemin Ngiam
Statutes will often allow the LL to collect two or three times rent as penalty. Courts will also
uphold provisions in the lease that allow the same thing.
Court treats the T as a periodic tenant, at a rent specified by the LL. And silence on the Ts part is
considered acceptance. If the LL deducts the holdover rent from the previous rental deposit, the
Court will likely hold that a new lease has been created.
LL T Warranties and Duties

Breaches: K or Property Law?
Under pure K law, T can get out of the lease upon LLs breach of material term/covenant and sue
for damages. Material covenants mutually dependent.
Under pure Property law, T can sue LL for damages from breach, but cannot avoid obligations to
pay rent. Covenants are independent.
Arguably, we are moving more and more towards a K understanding of leases, even if we are not
yet at a pure K law understanding of leases.
LL can protect against independent (K) understanding of covenants by inserting a clause: LL has
right to terminate lease for a breach of any terms of lease.
Or parties could agree on termination of lease and suit upon breach of any terms.
Enforcement of such clauses would depend on residential or commercial context, bargaining
power of parties.
Implied Covenant of Quiet Enjoyment
(1) Landlord has obligation to deliver possession; and during term of lease,
(2) landlord will not personally or by an agent wrongfully interfere with tenants sole right of
possession;
(3) no third person who has a better right of possession than the tenant will disturb the tenants
possession.
In most states, lessor implies quiet enjoyment in the lease. This is by far the default in most
states.
(In some states, no implied duty on the lessor unless contract states otherwise. By far the
minority rule.)
This does not cover wrongful trespass. Only covers third parties who have a better right of
possession, e.g. mortgagees.
If LL breaches ICQE, T has no obligation to pay rent.
ICQE only protects against actions by through or under LL. Not third parties.
Primarily a protection against eviction by LL.
ICQE cannot be waived in residential leases, and waiver possible but improbable in commercial
context.
ICQE covers actual, partial actual, and constructive evictions.
Partial eviction: T can withhold all rent and is not liable for any rent at all during the
period of the partial actual eviction.
o Do not require an apportionment of harm.
o we do not allow the wrongdoer to apportion his wrong.
Constructive eviction: action or inaction by LL that substantially interferes with Ts use and
enjoyment of premises. (failure to maintain premises)
o It is strict liability if LL makes reasonable efforts but the interference remains, T can
still claim constructive eviction.
o But T must promptly leave the premises and bring an action. No constructive
eviction until T leaves.
Barash v. Pennsylvania Terminal Real Estate (LL turns off a/c, T lawyer claims constructive
eviction)
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Oral agreement to provide fresh air after hours, but breach, lawyer could not work after hours.
Court denies claim: no physical eviction, instead interferes with use and enjoyment constructive
eviction.
But constructive eviction cannot apply because the tenant did not leave promptly.
Violation of express agreement in K is usually not considered a violation of ICQE.
Eviction must be complete abandonment of the property includes removing all personal
property.
o Policy: Abandonment is evidence that the interference is substantial enough. Otherwise
anything might become constructive eviction.
Does Landlord Have Duty to Provide Actual and Legal or Just Legal Possession?
American rule: the lessee is entitled to legal right of possession, but no implied covenant to protect
lessee from wrongful acts of strangers.
English rule: (modern rule in U.S.) where the term is to commence in futuro, there is an implied
undertaking by the lessor that the property will be ready for the lessees actual and legal
possession. LL has a duty to put T in actual and legal possession at start of the lease.
Puts the common intention of the parties into effect
No policy justification for having the lessee assume the burden of ousting a wrongful tenant or
trespasser, and not the lessor.
Lessee is also not in the best possession to determine who has what interest in the land.
People who sign a lease expect to get actual possession, and expect the landlord to deliver it, not
to do it themselves.
Adrian v. Rabinowitz (LL did not deliver actual possession)

T is the injured party in this case no reason to make him bear burden of evicting trespasser,
bear cost of the delay, and still pay rent.
LLs breach of this duty thus triggers lessees right to collect damages.
LL is better able to know who has a right to the land, who has what interests. Generally speaking
the LL is in a better position to know and to deal with the problem, prevent it from happening.
Default rule: Unless stipulated in the lease, burden is on lessor to ensure actual and physical
possession.
A sought to recover lost profits. Court acknowledges that lost profits are a valid item of damages
if reasonably foreseeable. But reversed in this case because damages were too uncertain:
insufficient evidence proving amount of lost profits.
Measure of Damages
What is fairly and reasonably within contemplation of parties to the K as being probable
consequences of the breach. Court will only award damages that are reasonably certain and
foreseeable.
Difference between FMV and lease rent for period T not in possession.
Damages usually insufficient, as difference b/w lease rent and FMV will be slim or none.
T is likely to want to recover special damages, e.g. lost profits and such.
Tenant will not have to pay rent for the period in question.
Minority Jurisdictions
If T has obligation to eject holdover T, T also has right to collect rent from holdover T.
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T inherits all rights to the land, as long as hes paying rent on it.
When LL assigns legal possession to T, he also assigns legal rights to control the land,
eject the holdover tenant, etc.
But T cannot collect ejectment costs from the LL (not equitable).
Commercial Leases, Anchor Ts

When LL is in superior bargaining position, will want to include covenant to operate premises in
specified retail purpose, to trigger % rentals (when sales reach a target).
It is to LLs detriment if anchor T closes shop but keeps paying rent.
o Defeats % rents in anchor lease, but also affects % rents of other Ts.
o Makes it more difficult to rent space to other Ts in complex (no anchor T).
In percentage rental Ks, general rule is:
o obligation to perform in specific manner must arise from presumed intention of the
parties as gathered from the language of the written instrument, or it must appear from
the contract as a whole that the obligation is indispensable if the intention of the parties is
to be given effect;
o obligation must have been so clearly within contemplation of the parties that they deemed
it unnecessary to express it.
o If minimum rental is nominal, or there is no minimum rental, a covenant may be implied.
Courts will not address inequality of bargaining power b/w commercial parties unless extremely
egregious (BVT Lebanon v. Wal-Mart).
LL will usually seek court order compelling specific performance to obtain % rent.
Courts traditionally reluctant to issue because of difficulties in overseeing orders.
Counter-argument is that T will not want to tarnish name by operating in lackluster way.
Courts might say only equitable remedy (specific performance) possible, because damages are
hard to calculate.
o Inability to ascertain damages as to other percentage rentals affected by Ts nonperformance.
o Also inability to ascertain effect on fixed rentals. Damages just too speculative.
But specific performance may discourage efficient breach.
If specific performance undesirable, T can always buy out the injunction (but possibly for more
than damages worth).
T has no duty w/o explicit promise to occupy premises or use premises for particular activity (but
T always liable for rent and other promises made).
Ts in outlet malls often do agree to operate in specific ways (economically lucrative to do so).
If T fails, LL should get injunctions to compel performance temporary restraining order,
preliminary short-term, permanent long-term.
Mercury Investment v. Woolworth (W drafted lease, MI sued because % rents never triggered)
W was anchor T.
Lease was for a minimum fixed rent per month, plus percentage of profits if sales exceeded a
certain amount.
Sales never exceeded that amount. M sued W for breach of an implied covenant to operate its
business in such a way as to generate percentage rentals and attract customers to the mall for the
benefit of the other Ts.
Woolworths defense: (a) claim relied on inadmissible parol evidence; (b) action barred by
statute of limitations.
K clause explicitly stated that Woolworth would not guarantee any volume of sales.
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Keemin Ngiam
Merger clause excluded all prior written or oral negotiations and released T from performance
of any obligations except those expressly included in the lease.
K also allowed W to vacate premises at will if it paid stated rental for remainder of term: fixed
rent plus % of profits based on past sales.
The parties contemplated W moving out, and agreed to liquidate damages balance of fixed
rent and a third of additional % rent (if any).
Court found there was no implied covenant by W to operate in such a way as to generate % rent,
unless fixed rent was nominal or zero (court assumes that parties intended rent to come from %
rentals).
Also difficult to articulate standard that W would have to meet: too amorphous. A covenant
calling for a performance the parties themselves cannot define in clear and certain terms will
not be implied.
Service Oil Co. v. White (gas station lease but distance from pumps to sidewalk not up to std)
White had conveyed away part of property, making pumps too close to sidewalk
Default rule: No implied covenant in a commercial lease that the premises are suitable for
their intended purposes.
Parties presumed to K w.r.t. present law, provisions of which will be read into and become part of
the K by implication, except where contrary intention is manifested.
In commercial leases, lessor has less of a duty, but courts are eroding caveat emptor. 3 or 4 states
have an implied warranty of suitability for intended use. But warranty may be waived in some
states.
Service Oil prevailed on basis of fraud and reckless misrepresentation.
o White knowingly concealed facts he knew about the evidence and he knew he had
conveyed away ten feet, and he had failed to disclose.
o This alone isnt fraud.
o But when what was concealed was not discoverable by the other party through the
exercise of reasonable diligence, then that becomes fraud.
Where lessor has knowledge of a defect in property which is not within fair and reasonable
reach of the lessee and which lessee could not discover by exercise of reasonable diligence,
silence and failure of lessor to disclose defect constitutes actionable fraudulent concealment.
Service Oil and White are both assumed to know the existing statutes and ordinances covering
the contract and terms of lease. But lessee is not assumed to know all the defects with the land,
only those that could be uncovered by reasonable inspection.
Service Oils damages were the cost of moving the pumps. No punitives were awarded in this
case. Although punitives may have been possible.
To extent that lessor has knowledge of defect and does not disclose, and due diligence by lessee
would not have discovered it, there is fraud.
Lessee and buyer have different standards of due diligence. Length of lease also matters.
Duty to Repair
Commercial LL has no duty to repair absent specific K provisions.
Commercial T must at least keep property wind and water tight, cannot engage in waste.
Acts of God: when acts of God, T has no duty to rebuild building. But T may still be liable on
rent depends on jurisdiction.
Increasingly T has no obligation to pay rent after act of God land was traditionally regarded as
part of lease not just the building.
Court will try to determine parties intents by K language and other evidence.
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Prof. G. Nelson
Keemin Ngiam
Commercial leases often have standard repair clauses T to make reasonable repair.
o General repair clause T will maintain property in good repair or same condition as
when received.
o Redelivery clause T covenants to return property in good or same condition as it was
received.
o Both clauses will usually include exception for reasonable wear and tear.
o Clauses should also excuse casualty loss not the fault of T.
o Modern courts more willing to distinguish repair from rebuild
o No fixed default rules in repair clauses: court will determine parties intents.
Chambers v. North River Line

T leases wharf from LL, wharf floats away in storm, court holds T has general
repair obligation to LL, to rebuild wharf.
Because general repair clause was unqualified, no exceptions.
Hadian v. Schwartz (retrofitting leased bar on Sunset for earthquake protection)
Net lease T only responsible for repairs, not insurance or taxes.
Court says LL should bear the burden of the retrofit, since K did not place it on T.
Court decides to interpret the intents of the parties, not just look at express terms of lease.
Reason for the retrofit (earthquakes, or the city ordinance) were not a result of Ts operation, prior
use, elements, etc., as according to K.
Six Factors in Allocating Cost for Retrofit
1. Cost of retrofit v. lease. (in Brown, the cost was small compared to lease. The T had also caused
the need for repair).
2. Length of lease.
3. Benefit to lessee v. that of lessor
4. Whether repair is structural/non-structural.
5. degree of interference with lessees operation of premises during repairs.
6. likelihood that parties contemplated application of particular law or order involved.
As result of 6 factors, LLs now insert as many contingency clauses as possible.

Ts response is to get lower rent as consideration for more risk
This is an allocation of risk, encourages parties to be careful.
Risk and cost might be put on least cost avoider as alternative.
When retrofit is tailored more specifically to Ts use of property, court will more likely place the
burden on the T.
Insurance might be considered intention to assume liability. But policy might militate against it: it
would discourage people to take insurance.
Net Lease Policy

Net leases encourage entrepreneurship. By lowering cost of entry into business.
Also help apportion risks.
Warranty of Habitability
Violations of Warranty of Habitability?
1. a substantial violation of the housing code. This is a prima facie case.
2. but this alone is not enough there are places where there are no housing codes. Hence the courts
use terms like fit for habitation; housing code by analogy.
3. Violation must be substantial interference with inhabitation and use of premises. Must show
specific facts, specific violations.
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Prof. G. Nelson
Keemin Ngiam
4. If it interferes with health or safety of T.

5. Warranty of habitability is not violated by bad aesthetics.
Warranty cannot be waived (Hilder).

Even though covenant cannot be waived, the obligation to some extent may be shifted to the T.
Exception for Ts who want to fix up the place.
Lower rent in exchange for services rendered.
But if T moves in before he fixes it up, hes still living in substandard conditions and
getting around the purposes of the legislature.
Hilder v. St. Peter (LL never kept up property really egregious facts)
Not violation of ICQE because T never left.
T does not need to leave to prove claim.
Court recognizes implied warranty of habitability.
1. Legislature has already passed statutes covering certain requirements for residential leases.
Not making new substantive law. Housing codes already impose on LLs an obligation to
make premises fit for human habitation.
2. Court is just giving a different group of people, the Ts, standing to bring action, enforce
existing law.
Policy: recognition of the implied warranty of habitability promotes enforcement of

substantive law by allowing Ts to bring their own independent actions.
Historically once courts began recognizing implied warranty, legislatures passed

statutes. Recognition of the importance of the warranties. But also cabins in the
doctrine and limits what the courts can do.
Court allows
Warranty covers both latent and patent defects: T cannot assume the risk.
Parties cannot waive the implied warranty of habitability. Protection for Ts.
i. Even if they wish to waive to get lower rent.
ii. Waiver allows people to live in conditions that the legislature has decreed to be
sub-standard, allowing people to get around the law.
iii. Are violations of the housing code necessarily bad?
iv. Sometimes its all people can afford immigrants, etc.
v. Public health considerations? Spreading diseases, etc.
vi. Arguments pro and con.
vii. Maybe the uniform act tries to recognize that and allow for some leeway
allowing shifting of obligations to the T.
Damages
Measured by difference in value of dwelling as warranted (FMV, but can use rent as gauge for
judicial efficiency) and as it existed; or value measured by rent and actual value
Discomfort and annoyance arising from breach
Withholding payment of future rent (to cause LL to sue)
If T repairs, can claim costs back.
Punitive damages if breach is willful, wanton, fraudulent. If LL fails to repair facility essential to
Ts health and safety after being notified.
Jack Spring v. Little (court holds that IWOH and rent are mutually dependent)
In the 70s, courts began allowing IWOH to be raised as a defense in unlawful detainer
proceedings/summary proceedings.
If not, IWOH wouldnt matter much to low income Ts, who are most affected by it.
Jack Spring is one of the landmark cases in this regard.
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Prof. G. Nelson
Keemin Ngiam
In Jack Spring, the IL court held that the Ts obligation to pay rent is dependent on the IWOH.
Mutually dependent obligations.
How Warranty of Habitability Works

1. Ts lease ends and T is out of possession
In Hilder, she no longer had possession, and the lease had run out. She had left the premises, and only
sued the LL after leaving, and having paid all her rent. The court can deal with the case easily just apply
the rule and add damages for P&S, punitives.
2. T vacates during the lease
In this situation, if the IWOH is not held to have been violated, the T is held to be in violation of the lease
and is liable for all the rent. Otherwise, the LL is liable. In which case:
Pre-Vacation: The court will calculate difference b/w rent and actual value, or FMV and actual value.
Post-Vacation: bonus value. If the T had cut a good deal. Formula: difference b/w what the premises
would have been worth if they had been as warranted, and the actual K rent. If the figure is positive, the T
has bonus value. T can also get the other damages, i.e. punitive, P&S, etc.
3. T stops paying rent, but stays on the premises
It comes into court when the LL brings a summary proceeding against the T.
The T will then raise the IWOH as a defense.
If court determines that there was no violation of IWOH or it was too small, then judgment for the LL and
the T is evicted. And judgment for past due rent will usually also be rendered.
But if there was a violation, court will calculate damages.
As to the past, the court will award past damages according to the rule chosen. These damages will then
be used to offset the past rent that was not paid. But if the damages dont equal the rent, then there will
still be rent that the T must pay past arrears.
As to the future:
1. court may issue an injunction ordering the LL to make the repairs (depends on whether court has the
authority to do that).
2. Another thing that may happen is that the rent due will be paid into the court, and the court will release
the rent, less damages, once the repairs are made and the property is brought up to code. But the rent still
needs to be paid each month.
3. A third option is that the court will say that the T has no rental obligation until the repairs are made.
Only thing is that if rent is not paid, LL may not have money to make the repairs! The rent that the T has
to pay will be lowered to account for the fact that the property is not up to code.
Receivership Statute
Ts get together and file a civil action to have the property placed in receivership.
If the court declares that the premises are in substantial violation of the housing code, it has several
options:
i.
order LL to make the repairs. Until repairs are made, rent paid into court. When repairs are
made the LL will get the rent, w/o interest.
ii.
but if that doesnt work or the court doesnt think the LL will make the repairs, court will
appoint a third-party receiver to take over management of the building from the LL, and
rents are paid to the receiver. Receiver also has authority to borrow money to fix the building,
but any lender would require a mortgage. Furthermore there would probably be an existing
mortgage on the building anyway. So bringing the building up to code would have to yield
enough rent to cover all three mortgages (the receivership is a mortgage too for the benefit
of the Ts?).
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Prof. G. Nelson
Keemin Ngiam
Receivership works well in middle-income buildings, where theres still value in the building, and the
Ts pay rent. Not as well in low-income buildings, where theres little value in the building (no
mortgage or not much to mortgage), and the Ts dont pay rent. In the latter case, the LL might just
abandon the building.
Security Deposits
Important questions to bear in mind:
1. how much does the statute authorize the LL to ask for as a security deposit?
Depends on state. CA is up to two months rent.
2. What does the deposit cover? What is it security for?
Usually damages caused by T and back rent.
3. what is the penalty imposed on LL if LL either: (a) fails to provide written accounting of the
deposit; (b) what penalty is imposed if deposit is wrongfully withheld.
In CA, up to twice security deposit plus actual deposit, but no attorneys fees.
4. What if LL goes bankrupt before end of tenancy? Does Ts claim to the deposit trump other
creditors of the LL?
Cal.Civ.Code 1950.5 (d)
Gives T priority to the security against any other creditor.
Doubtful that it trumps secured creditors of the LL, or against the IRS for federal taxes.
But if the security deposit is construed as being Ts money held in trust by LL for Ts benefit,
then Ts claim to the security would trump everyone, including secured creditors and the IRS.
5. What if the LL sells the building during the term of the lease? Is cause of action for return
of deposit against original LL, new LL, or are they both J&S liable?
When LL sells the property, LL has two options:
1. transfer deposit to new LL
2. return deposit to the T
When either one of these things is done, LL is no longer liable.
But if LL does neither, then both predecessor LL and successor in interest are jointly and
severally liable for the return of the deposit.
6. Is T entitled to interest on the security deposit?
Most courts held in the 70s and 80s that unless statute required it or LLs agreed to it, no
interest necessary.
But some states (MN) now require, by statute, that interest be paid.
LLs may owe Ts interest on their deposits even where statute did not require it. Argument
was that the deposit was money held in trust for the LL, and the T should stand to benefit
from the income.
7. Who pays attorneys fees?
Usually LL has no obligation to: T must pay own attorneys fees.
One way to get security deposit back is not to pay the last months rent.
But LL can report you to the credit bureau and screw up your credit rating.
Garcia v. Thong (LL sues T for damages but loses because she failed to follow the law)
LL never accounts for how the damage deposit is spent.
By not giving an accounting of the deposit, she forfeited all her right to assert an action against
the T.
And had to pay his attorneys fees
And had to refund the deposit.
And cannot assert any counterclaim in an action to recover the deposit.
Cal. Statute Regarding Residential Security Deposits
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Keemin Ngiam
(b) Security deposit can be used to:

1. compensate LL for default in rent payment
2. repair damages, exclusive of wear and tear, caused by T
3. cleaning of premises upon termination of tenancy (in 03, amended to the state of cleanliness it
was in when T moved in)
4. remedy defaults by T regarding personal property
(c) LL can only require up to two months rent plus rent for first month (for unfurnished apartment), or
three months (for furnished). Amount of security deposit is function of how long they think it will take T
to leave on time.
(Is the second para just drafted badly? Maybe to allow people to reduce rent payment if they pay 6
months upfront?)
(d) claim of T to security deposit is prior to the claim of any creditor of the LL. (but may not trump IRS)
Assignment and Transfer of Lease/ Landlordship
Privities
1. Privity of K: when K duties and obligations exist b/w each other.
2. Privity of Estate: when possession of estate abuts each other.
When property is first leased, LL and T have privity of K and privity of estate.
When T assigns to T2, T2 does not have privity of K with LL. But T2 will have privity of estate
with LL. T2 becomes liable for and gets benefit of the vast majority of the provisions of the lease
(those that deal with the estate directly?).
Assignee essentially becomes a substitute for T.
But T still remains in privity of K. In the absence of express provisions to the contrary. But T is
no longer in privity of estate.
Privity of K or privity of estate can make T liable to LL.
If T only has privity of estate and assigns interest to T3, T has no more liability to LL.
Assumption creates both privity of K and privity of estate.
Vertical privity only if full estate or interest is transferred: only if theres an assignment, not a
sublease.
Assignment
T transfers all that T has; Ts entire interest in the property.
T may transfer without any consideration given for the transfer (no benefit to T).
Once assignment is made, assignee makes payment to LL directly.
But T could also get bonus value for the property from T2, above and beyond LLs rent.
T may request for present value of the bonus value of the lease lump sum payment.
Even if T assigns away all interest in the land, T will normally retain a right of reentry.
Because T remains personally liable for that lease.
Should assignee default, T retains right of reentry to reclaim property.
o A minority of courts hold that this right of reentry defeats assignment: retention of right
of reentry makes it a sublease, and not an assignment.
o Majority rule holds the right of reentry insufficient to make it a sublease, defeat
assignment.
This matters because if its a sublease, then LL has no obligations to sublessee.
With assignment, T retains privity of K with LL, but no privity of estate.
T1 enters into privity of estate with LL, but not privity of K.
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Prof. G. Nelson
Keemin Ngiam
If you are an assigned person, once you get rid of the property via a good faith assignment,
you are no longer liable.
Sublease
T retains a reversion in the estate.
Relatively few obligations b/w T1 and LL.
T retains privity of K and privity of estate with LL.
T has privity of K and estate with T1 as well.
T1 has neither privity of K nor estate with LL.
o adding up LL and T1s interests in the property do not add up to a f.s.a.
o T retains some interest in the property (reversion of period b/w end of sublease and end
of lease)
T1 has limited rights against LL, especially in commercial lease. May sue for breach of warranty
of habitability.
LL has no rights against sublessee, but can sue for waste as a tort.
T1 pays rent to T, not LL.
T is liable for paying rent to LL.
If T doesnt pay rent, LL retains right to clear premises and evict T1.
American Community Stores v. Newman (T & T1 modify assignment to become sublease)
T & T1 request permission to create assignment.
LL refuses consent.
Lease gives 20 days for T to cure a default.
T & T1 amend agreement to be a sublease. Because consent is not required for a sublease. (this is
a rarity. But supermarkets often sublet portions of the property to third parties: banks, fast food
operators, coffee chains, etc. In this context, such a clause would make sense)
T1 assigns its sublease to T2.
LL objects that sublease is really an assignment, and the lease is substantively if not technically
violated.
Court rejects argument. Even 2 days short of the entire term qualifies it as a sublease.
T retained a right of reentry, which is sufficient interest to defeat an assignment (minority
rule).
Alternative school of thought
An examination of intent and not technical terms.
But less efficient: requires putting people on the stand, inquiry into subjective intent.
Formalistic approach has benefit of clarity. It makes it easier for court to decide the issues.
LL Consent Clauses
LL wants to retain control over lease and tenants. Does so by using consent clauses.
1. financial considerations. It doesnt want a deadbeat assignee to occupy the premises and fail
to pay rent. Because then LL will have to pursue judicial action to recover rent.
2. undesirable use. E.g. Walgreens assigns to an adult theater. The use of the premises
changes. Or to an assignee that LL doesnt like (e.g. an abortion clinic).
3. Bonus value. LL will want to be able to capture the bonus value of the property. Predicating
consent on an increase in rent, or some other way of giving them bonus value. (KendallPestana)
These are permissible forfeiture restrictions on alienation because they are of definite duration.
Ambiguity is interpreted in favor of transferability.
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Prof. G. Nelson
Keemin Ngiam
If clause calls for ambiguity to be interpreted in favor of LL, court may not enforce it as public
policy, especially in residential context. May be more willing in commercial.
Ts should seek a consent will not be unreasonably withheld clause.
LLs should resist such a clause: implied reasonableness is minority rule.
Majority rule: LL can refuse consent for any reason except banned discrimination.
Minority rule: LLs refusal must be reasonable.
Corporations: If corporation is a T, no transfer clause can be avoided by transferring ownership
of corporation, and not ownership of property. Many Ks stipulate that transfer of more than 20%
ownership of corporation is effectively a transfer of property.
Involuntary transfer: Unless barred by express language of transfer clause, allowed. Either by
death and probate/will, or by judgment creditors.
Even without consent, a transfer is still a transfer and is not automatically void. It might
violate and trigger right to terminate lease, but its not a nullity: transferee cannot be ejected for
trespass.
Express K provision that any transfer w/o consent is void a disabling restraint is likely to be
judicially disfavored.
Kendall v. Ernest Pestana (T refused consent to T1 sublease in order to capture bonus value)
Court rules Pestana cant refuse in order to capture the bonus value.
If value of property had dropped, Pestana would not have sought to capture the negative bonus
value.
Fairness dictates that Bixler be allowed to suffer both the benefits and disadvantages of changes
in the rental value, whether negative or positive.
Court cites to Wellenkamp v. Bank of America. BoA used due-on-sale clause to try to prevent
transfer of mortgage interest to realize value from higher interest rates.
Held to be restraint on alienation, enforceable only if BoA had a reasonable reason to do so,
e.g. if grantee had a bad credit rating, was insolvent, etc.
(In response to Wellenkamp, Congress passed a statute declaring that due-on-sale clauses
were enforceable for any reason or no reason at all.)
Court will enforce clause if LL has valid reason to refuse consent to the transfer.
In response to Kendall, CA Legislature passes law: only if no standard for giving or withholding
consent is included, must LL not unreasonably withhold consent.
If lease contains specific language saying so, LL is entitled to capture bonus value.
If Kendall had remained good law, leases would have gotten shorter LLs would be less
willing to offer long-term leases because that means theres bonus value that remains
uncaptureable. Or they would tie the rent to some sort of inflation index, or market value index.
Ts would not like this because it means that they cannot accurately predict what rent will be. So
effect might be shorter leases.
Transfers and LL-T Duties and Rights
Assignment: T transfers most duties and rights (touch and concern the land) to T 1.
T1 who receives by assignment only liable if duty touches and concerns the land.
Assumption puts T1 in privity of K with T.
Assumption makes T1 liable for every promise of the lease, both touch and concern and
personal.
Assumption makes T1 liable for all past and future breaches of lease K until lease ends.
o T1 can limit liability by having LL make an estoppel statement that there is no hidden past
liability promissory estoppel.
o T1 can also limit assumption to certain duties freedom of K.
47

Prof. G. Nelson
Keemin Ngiam
Assumptions are common - because LL would probably only give consent if the new transfer had
assumed.
Regardless of transfer, always want an estoppel statement: to know what controversies are on the
land.
Even after assignment or assumption, T still liable (privity of K) to LL, absent LL release.
In sublease, T2 only has LL-T relationship with T1.
T2 cannot get damages from LL, and vice-versa: LL cannot sue T2 for violations of T1s covenant.
But LL can terminate lease if T1s covenants not performed, and evict T2.
T2 therefore has interest in performing covenants, making sure covenants are performed.
Majority rule: Reservation of right of entry does not change assignment into sublease. Too
insubstantial an interest.
If assignment contains variations in main lease, may be a sublease instead of assignment.
If T transfers entire interest, but only to part of property, it is still held to be an assignment (but
opinions divided).
New approach: intent should govern in determining rights and duties of parties.
But evidentiary issue, and parties often dont have specific intents regarding rights & duties.
Traditional approach has certainty on its side (American Community Stores v. Newman).
Subleases can expressly grant certain rights and duties that would normally be under an
assignment and not a sublease.
Implied covenants (quiet enjoyment, habitability) always run.
But equitable remedies may be available to LL and sublessee: specific performance.
Questionable if could ask court for injunction to pay past rent.
If T2 gives T1 bonus value in exchange for sublease, T2 can get back some of bonus value if main
lease terminates early. Debatable if this is possible in assignment: bonus value may just be
consideration for the assignment.
Touches and Concerns Standard
Use decades of case law precedent.
Three tests:
o Bigelow test - If enforceable promise made LL or Ts interest in the land more valuable,
it touched or concerned the land. Bad test. People would never litigate over a promise
unless they thought it made their interest in the lease more valuable.
o Clark test - If a promise is intimately bound up with the land.
o Would reasonable assignee believe, ex ante, that he or she was bound by the promise?
Thompson v. Bobs U-Drive (T is getting around restrictive use covenant on # of cars)

Continental has no assignment from U-Drive. May be a licensee or sublessee.
But if licensee or sublessee, no privity of K or estate with LL and so no obligation to obey
covenants, including arbitration (one in issue).
LL argues there is an implied assignment. (but such an assignment would violate the Statute of
Frauds and be void court ignores this issue)
Court holds that Continental was a co-assignee prior to the written assignment of the lease.
When a person other than lessee is in possession of leased premises paying rent to the lessor,
there is a presumption that the lease has been assigned to the person in possession.
An implied assignment. Means that any burden on the land will also be on Continental, if it
touches and concerns the land.
Arbitration touches and concerns the land its about rent.
Court finds that reasonable assignee would believe that covenant bound them (third test).
Court seems to think if Continental not bound to arbitrate, owner not liable. But Bob is liable for
every provision of the lease.
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Prof. G. Nelson
Keemin Ngiam
Original lessee, T, cannot escape liability even if Continental was not bound by the lease.
T who assigns leasehold does not escape liability on the lease covenants.
Alternative: call Continental a licensee and hold Bob on the hook.
But going after Continental is a good way of making sure that you can get judgment Bob might
have transferred his assets and been judgment-proof.
Burton v. Chesapeake Box & Lumber (T assigns to Ches, with duty to insure, Ches doesnt, building
burns down, LL sues Ches)
Court says promise to insure does not touch and concern.
Because LL had no obligation to rebuild the building with the money.
Short of such obligation, the promise does not touch and concern the land.
Such a holding today would undermine the effect of a triple-net lease.
LL probably didnt sue T because T was judgment-proof. T would have been liable to LL.
Security Deposits When LL Assigns to LL1
Security deposit agreement does not touch or concern the land,
o unless LL is obligated to use security deposit to make repairs,
o and it is specified in the lease.
At CL, T could still sue LL for the deposit. But LL might be judgment-proof.
Gerber v. Pecht (T3 fails to pay rent, LL sues T to recover)
L (Gerber) T (Pecht) for 5 years Moskowitz (assignment, with assumption) Christensen
(assignment, without consent)
Original tenant remains in Privity of K with LL
Remains liable for the rent for the duration of the lease.
Unless LL releases T (possible if T1 is financially stronger than T)
T is Principal Debtor (Moskowitz)s Surety.
Surety only applies in assignments no surety in sublease.
LL remains able to sue either surety or principal debtor: anyone who was assigned.
Pecht can get reimbursement from Moskowitz because of assumption
W/o assumption, Moskowitz not liable to Pecht for Christensens rent?
No. Moskowitz not liable for future failure to pay rent.
Assignee only liable for promises that touch and concern the land for the
duration of his watch
Mostkowitz not liable for the Christensens default.
Christensens liable to Pecht because defaults occurred while they had duties.
Pecht can get off the hook: Where LL and subsequent transferee change terms of the deal to the
detriment or prejudice of original T, the Surety.
E.g. raising the rent, extending lease.
The slightest prejudice gets T off the hook, but only detriments.
What if LL inserts provisions keeping T on the hook? Not sure if court would
enforce it.
Neal v. Craig Brown, Inc. (dry-cleaning, T subleases to T1, T1 assigns to T2, T goes bust, T2 tries to
renew option, fails)
When T goes bust, no indication that it surrendered or terminated lease.
So T retained reversion, and T2 remains sublessee, only has T1s sublease terms
T2 cannot exercise Ts option.
So T2 only sublessee, and LL can terminate T2s lease and evict T2.
49

Prof. G. Nelson
Keemin Ngiam
Neal could have relied on action in reliance, part performance, to take oral K out of statute of
frauds. Actions over 13 year period.
50

Prof. G. Nelson
Keemin Ngiam
EASEMENTS
Definition: Non-possessory (incorporeal) interest in real estate.

An easement falls b/w a license and a fee simple (leaseholds, life estate, f.s.a.).
Some licenses can be interpreted as leaseholds a long-term boarder/lodger in a hotel room.
Kiosks or retail space in a mall.
Language of conveyance is crucial in determining if f.s.a. or an easement is created.
o If deed is for a strip of land then it is a litigable f.s.a.
o But if it clearly says right of way or easement likely to be held an easement.
Easements are often valuable assets. E.g. a pipeline over 2000 miles cross-country. May just be
an easement, but it can be very valuable.
Appurtenant easements are those on the servient land that are conveyed with the dominant
estate.
The dominant land does not need to abut, or literally touch, the servient land or easement.
Easement in Gross - One that is not for the benefit of any land.
Profit in Gross Easement that grants the right to go on a piece of land and to take profit from
the land oil, minerals, timber, etc.
Profits might be argued to be appurtenant, if they are adjacent to a fixed piece of land. But usually
they are just profits in gross, not for the benefit of any other land.
Millbrook Hunt Inc. v. Smith (O allowed hunters to use land, new buyer Smith doesnt want to)
Smith argues its a license, revocable at any time.
If it is a license, it is also not transferable. Attempt to transfer would kill the license.
Millbrook argues its an easement, and not revocable.
Court concludes that it is a 75-year easement.
o Time period was defined, more in keeping with easement than license.
o Smith could not exclude Millbrook Hunt from property.
o Even though Smith could move trails or develop property, insufficient to make it a
license.
Easements and Duration
If we compare non-possessory interests and possessory interests in terms of duration:
Duration
Non-Possessory
Possessory
Forever
Perpetual
Fee Simple Absolute
For Life
Easement for Life
Life Estate
For years
Easement for years
Leasehold
Revocable at any time
License
Tenancy at Will, tenancy at
sufferance
Creation of Easements
Easements are interests in land, and they are almost always longer than a year.
Therefore, easements must normally be in writing and have certain key elements (governed by
the statute of frauds).
99% of the time, easements are created by a deed.
Easements may however be inadvertently created in other ways:
(1) oral
(2) written but defective (part-performance doctrine takes the easement out of the statute of
frauds)
(3) by implication
(4) by prescription (adverse use, analogous to adverse possession)
51

Prof. G. Nelson
Keemin Ngiam
Creation of Express Easements, Easements by Deed

At bare minimum, express easement must:
a.
identify two adjacent pieces of land
b.
identify the servient and dominant estates, describe both
Easement can also be incorporated into a deed for the dominant or servient land (e.g. a fee
simple deed).
Easement by reservation will use the word reserving in reference to an easement. When
grantor seeks to keep an easement for himself.
Without the word reserving, grantor is warrantying that property has no easement: court is
unlikely to allow grantor to breach his own warranty.
A court will normally interpret an easement as being perpetual, short of language that ties it to
a specific time period.
Courts will tend to engage in some judicial activism to update antiquated language (e.g. an
easement for horse carts will be interpreted as allowing technological advances in transportation,
and thus allowing trucks, cars, etc.)
The use of the easement will usually be stipulated: no servient landowner would grant an
unlimited easement.
Ricenbaw v. Kraus (drainage tiles across servient land, use granted orally)
Part performance in building drainage lowered bar to Statute of Frauds.
Some interpretations of the case say that the court does not consider this to be an irrevocable
easement but estoppel to revoke a license. The difference is in the permanence of the thing at
issue.
Difference b/w it being a license or easement: compensation. Licenseholders get no
compensation in the case of a government condemnation, but easement holders would.
Typical condemnation award is based on the value of the land (the dominant land) before and
after the easement. But if its just a license, the court could hold that the license does not rise to
the level of dignity of an interest in land.
With estoppel to revoke a license, the court might hold that the estoppel has to end the estoppel
does not go on forever. Would be tied to as long as the actual tile drains existed; we essentially
allow Hannah to amortize the cost of his investment over the life of its years.
The troubling aspect of this case is that the court seems to be influenced by long use.
Not all courts take the approach of irrevocable easements/estoppel to revoke a license.
The bootstrapping of the license into an easement could have been avoided by language in the
grant saying that it was revocable at any time for any reason or no reason whatsoever.
If court found there was no easement, could have had Kraus repay Ricenbaw for reliance.
Berg v. Ting (easement improperly recorded, location not specified, part performance insufficient)
The title report to the Tings did not mention the easement, nor did the final title insurance
report (the title insurance company screwed up).
Because the easement deeds descriptions did not match up with the actual description of the
plat.
Location not definite enough for easement deed to be valid, failed Statute of Frauds.
Not a floating easement either: the descriptions just didnt match up.
Part performance was insufficient too, where they only forbore their opposition.
Floating Easement
One that describes the easement, but not its precise location.
A floating easement renders the title unmarketable. Because it could trump any attempt to
develop the land.
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Prof. G. Nelson
Keemin Ngiam
Most floating easements dont end up proving to be an insurmountable problem. You could
negotiate with the easement holder to affix a location. Or you could just go down, look at the
site, and just figure out where the easement is (i.e. where the power lines were, etc.).
Once a prior floating easement is physically located, a court will force the easement holder to
release its claim from the rest of the land, and be content with the actual physical land they
have. The easement holder will then grant a quit claim deed relinquishing all claim to the land
save for the actual land their easement occupies.
Never let a client give a floating easement.
You can compel someone to locate a floating easement. You do it in such a way, balancing
your needs, as to do the least harm to the servient tenement.
Part Performance and the Statute of Frauds

First arose in the context of earnest money Ks in an oral setting, or a writing that lacks some or all
of the required elements.
Evidentiary theory of part performance. If person seeking enforcement of the K can show
sufficient acts of part performance that point towards the existence of a K, the bar on the statute
of frauds comes down and the proponent will be permitted to put on the oral evidence. Basic 3
elements:
(1) delivery and assumption of actual and exclusive possession;
(2) payment or tender of consideration;
(3) making of permanent, substantial and valuable improvements,.
Presence of factors indicate that there was some kind of contract dealing with land.
In Berg, no possession because its an easement, a non-possessory interest. Court holds that all
we have is just the tender of consideration, which alone is insufficient.
Estoppel-Reliance Theory of Part Performance. Court will not look for discrete acts. Instead the
court cares whether someone has relied so much to their detriment on the existence of something,
that it would be unjust not to allow them to show what they had relied upon. In this case, the
Bergs withdrew their opposition to the subdivision and it would be unjust to not grant them the
easement.
The court uses evidentiary theory and rejects the estoppel-reliance theory, so Bergs lose.
Implied Creation of Easements
When the parties intend to create an easement but do not.
The surrounding circumstances point towards or create a compelling argument that the parties
intended an easement either by reservation or by grant.
1. Easement Implied from Quasi-easement
aka easement implied from prior use.
e.g. when a property is split in two. If the original property had access to something (e.g. a road)
that a part of the new divided property did not. The original owner would grant with the new
deed.
The requirements is that the land before the split had to be held in common ownership.
And the quasi-easement has to exist prior to the split (Its a quasi-easement because the
original owner cant grant an easement to himself/herself).
Quasi-easement had to be apparent before the split.
Quasi-easement has to be reasonably necessary to the enjoyment of the dominant lot.
If these requirements are met, the court will supply the language of easement that the actual title
or deed lacked.
In the case of reservation, courts are less willing to find implied easements. Because it violates
grantors own warranty.
Some states apply a higher strictly necessary standard for reservations.
53

Prof. G. Nelson
Keemin Ngiam
Most just use same reasonably necessary standard.

An easement implied from a quasi-easement endures forever.
Apparency
Helps to determine the intent of the parties.
If it was apparent, the easement was probably intended to go along with the conveyance.
Campbell v. Great Miami Aerie No. 2309 (the motel, restaurant, and septic tank)
No question that a quasi-easement existed at the time of the split.
septic tank easement arguably is reasonably necessary to the enjoyment of the property.
The issue in Campbell is apparency.
In underground easements, the courts often fail to distinguish b/w two points in time: time at
split and time of action.
o Apparency at the time of the split goes to the question of whether an implied
easement ever came into existence.
o Apparency at the time of action matters to the concept of the bona fide purchaser.
Implied grant or reservation?
Hard to tell. We dont know which property was conveyed out first. If the restaurant was conveyed
out first, then its an implied grant. If the motel was conveyed out first, it was an implied
reservation.
Apparency
Apparency may have been met at the time of the split the sewage line could have been visible at
the time of the split. But perhaps after construction was completed, the line was obscured.
Since line was not apparent, Campbell asserts the BFP doctrine.
o One who pays value and takes w/o notice of the outstanding interest. You cannot
assert BFP regarding anything that is recorded on the title (in writing). One is also
on constructive notice and cannot assert BFP regarding anything that a reasonable
inspection of the premises would reveal.
A BFP can cut off the operation of an implied easement, as long as BFP did not know about it
and had no constructive notice.
Ct holds that Campbell was not put on notice because a reasonable inspection would not disclose
the septic tank.
Prescription
Eagles might argue an easement by prescription.
Problem there is whether the easement was open and notorious. Same as apparency.
Otero v. Pacheco (defendant kept using sewer line under property sold to plaintiffs)
This is an implied reservation.
Court holds that reasonable necessity sufficient, no need for strict necessity.
Court does not discuss apparency at time of the split.
Court holds that the sewer line was apparent the Oteros should at least have had constructive
notice of it.
This was held to be an implied easement by reservation, even though the court made no
determination of apparency at the time of the split.
Easement Implied by Strict Necessity
An easement implied by strict necessity will be found when such an easement is necessary for the
enjoyment of the land (and w/o it, the land is useless or effectively useless).
Requirements:
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Prof. G. Nelson
Keemin Ngiam
Common ownership of the land at a prior point in time

Strict necessity that is created by conveyance of the land (usually only applies to
roadways and utilities). Landlocked land is the prime example.
o No quasi-easement at time of split is required.
An easement implied by strict necessity lasts only as long as the necessity exists. Once the
circumstances change and the necessity of the easement dissipates, the easement dissipates
along with it.
o
o
Public Policy or Intent

Owners who convey away land and landlock themselves. May be considered an intent not to have
an easement.
If its a public policy decision, then it raises questions of takings and just compensation for
takings.
Using intent as the basis however requires more litigation to determine what the parties intents
were.
Questionable that current public policy is against letting land go unused.
If easements by necessity were public policy, then conveyances creating need for such easements
should be void.
Landlocked parcels are not prohibited by law.
Hurlocker v. Medina (speculator who bought landlocked parcel)
Hurlocker claims an easement by strict necessity on the basis of his plot of land (the 2.2 acres)
being landlocked.
When courts do find easements created by strict necessity, they try and locate them in a way
that least interferes with the owner of the servient land. Great deference is paid to the owner of
the servient land.
Medina argues that necessity was not created by the split-off (which is true).
But necessity was created when the lots were in common ownership (the bank).
Court holds that either situation can give rise to easement by strict necessity. If two contiguous
lots come into common ownership, and a necessity is later created, thats fine.
Court holds that intents of parties should be basis of finding easement, not public policy.
The Bank sold Hurlocker the land later, in a landlocked condition.
Both the Bank and Hurlocker were aware of the landlocked condition he got it for half of its
value.
The evidence seems to indicate that the Bank sold it w/o any such easement.
In about half of the states, there is legislation giving landlocked owner the right to condemn an
easement of access eminent domain, for a public purpose. Is giving a landlocked owner the
power to condemn an easement for his private use, a public purpose? Giving private owners the
power of eminent domain has traditionally been upheld constitutionally.
The value of the easement, is measured by the difference in value of Lot 13 with and w/o the
easement. The difference is the condemnation award.
Easements by Prescription
They are easements by adverse use.
Use must be:
1. adverse (similar to hostile under A.P.)
some courts hold that it must just be non-permissive
this issue is not litigated very often
2. open and notorious
3. continuous and uninterrupted, but in keeping with reasonable use of the easement
55

Prof. G. Nelson
Keemin Ngiam
4. does not need to be exclusive: many easements are nonexclusive.

Color of title and taxes: no relevance to easements by prescription.
Government usually doesnt assess taxes on easements, especially appurtenant
easements.
Recent CA Case
Two adjacent pieces of land, one owned by government water utility, other private.
Dam on water utility backed up and flooded private owners land.
Existed for over five years (past SoL).
Government could not claim A.P. (requires paying taxes).
But government obtained a perpetual easement by prescription to keep the water there.
Seems like a taking.
But owner could have brought action before SoL ran out.
So owner waives his right.
It is not A.P. because the underlying land still belongs to private owner, e.g. if
there was oil under the water.
If government had demolished dam, the easement would probably disappear.
But if it were A.P., land would belong to government even if dam destroyed and land unflooded.
Landowner might be able to still use the water on his land boating, fishing, etc. Depends on
what the easement was.
If there is no easement by prescription statute, court will likely just follow A.P. statute.
Other states do have easement by prescription statutes, e.g. CA (which does not require paying of
taxes).
Pre-existing writing: legal fiction underlying easement by prescription.
When someone uses someone elses land w/o a formal easement, theory of prescription is that we
give someone an easement by prescription because there has been a writing that has been lost
the Lost Grant Theory.
Only matters in the case of an act of protest by true owner.
The true owner is not recognizing a lost grant.
Protest therefore interrupts the running of the SoL.
Policy: perhaps protest should be enough to interrupt easement by prescription.
It reduces lawsuits.
Wrong use of land is not a good thing.
Puts burden on the wrongdoing adverse user to establish that he has a right to use
the land.
Perhaps protest should also stop the clock in A.P.
Tacking and Privity

Tacking is easy with appurtenant easements: when dominant estate is sold, easement rights go
with it.
Tacking is a problem with easements in gross: not tied to a dominant estate.
Hester v. Sawyers (S property is landlocked with easement for a road over Hs property)
Not easement by necessity because no common ownership of lands.
First road was held to be permissive. But once second road was built after land was
enclosed, second road was adverse use.
Court borrows NM A.P. SoL.
Court finds easement by prescription.
Adverse use proved by:
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Presumption is that in rural areas, unless land is fully fenced, use of land by third
party is permissive.
o Second road was used after land was fully fenced in: presumption of adversity.
o S tore down a barrier that H erected.
When H asked S to move road, he agreed. Perhaps should raise presumption of permission?
But not raised.
o
Shanks v. Floom (common driveway b/w 2 neighbors)

Most common easement disputes in the U.S.
Court holds presumption is of adverse and not permissive use once driveway installed. Majority
rule.
Presumption of adverse use creates certainty: it vests in 10 years short of interruption.
Presumption not rebutted, and so both sides have a perpetual easement in the others land for
driveway purposes.
If court had adopted minority rule. Could find that they created a mutual license that is
irrevocable because of part performance: estoppel by virtue of their investment in the driveway.
They could also have created a cross-license agreement. notwithstanding reliance in creating
driveway, notwithstanding estoppel, we agree that license is revocable at any time.
Public Trust Doctrine
When private land is used by public, there is a continuity problem and privity problem: hard to
identify specific parties who own the prescriptive easement, and parties may not be in continuous
use.
But when the easement is in favor of the sovereign, there is no continuity or privity problem: the
sovereign is represented by members of the public.
Public trust is almost always used for roadways, and sometimes for parks.
In CA
Along beaches, private ownership typically ends at the dry sand area the government owns all
the wet sand: all the land up till the mean high-tide line.
If public uses land for period of SoL, and landowner has done nothing, landowner has implicitly
dedicated use of the land to the public.
Legislature passed law: if landowner files declaration with recording office allowing public to use
private beach, prescription and implicit dedication defeated.
The Supreme Court of New Jersey held that access to the wet sand area must be given, otherwise
the land is worthless. Hence the public has a right of reasonable access. The public
must be given access to and use of privately-owned dry sand areas as reasonably
necessary. While the publics rights in private beaches are not co-extensive with the
right enjoyed in municipal beaches, private landowners may not in all instances
prevent the public from exercising its rights under the public trust doctrine. The
public must be afforded reasonable access to the foreshore as well as a suitable area
for recreation on the dry sand.
Maintenance of the easement is the governments responsibility, not the landowners.
Rationale Behind Right of Reasonable Access, Public Trust Doctrine

May not be able to meet all the elements for implied easement by strict necessity.
Condemning the land would be too expensive.
Gion v. City of Santa Cruz (beach access case)
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City held that it had an easement on the beach for public access and enjoyment.
Not one by prescription (due to difficulties of proof), but because the public had for a long time
been allowed to use the beach, the owner had implicitly dedicated the beach to public use.
Actually involved two cases. In one case the government had actually gone in and paved part of
the property (which they did not own) for a parking lot.
In the other, it was just about using the beach.
In both cases the court held that the owners had given the government and the public easements
by virtue of implied dedication.
Implied dedication traditionally was used only for roadways. Where when human memory
runneth not to the contrary, the public was granted an easement over a private roadway.
In response to Gion, the legislature did two things.
(1) Landowner could protect herself against prescriptive easement by recording a notice giving
permission to the public to use her land and thus conclusively negate prescription. The use
became permissive.
(2) Dedications from public use were prohibited unless the owner makes express written offer
of dedication. But if the government went in and expended substantial funds on the land,
plus there had been public use for five years, then implied dedication was appropriate. The
expense of money and the use for a long period of time, the owner is estopped from
protesting.
Although the parking lot case was a taking, the statute of limitations applies: that because the
owner registered no protest or court action for five years, the statute of limitations has run against
the owner and now the government has acquired a prescriptive easement to use the whole
property as a parking lot.
In cases of public use, the assumption is that the public represents the government. And
hence when the public uses the land, they act for the government, allowing the
government to claim a public easement after five years.
Law of K does not apply to prescriptive easements (no consideration for prescriptive easements).
It is under Law of Property. Because if its acquired by prescription, it gets taken out of K there
is no mutual agreement at all, yet the prescriptive adverse possessor can obtain an easement.
Scope of the Easement

The concept of surcharge impermissible use of the easement that violates the underlying
landowners rights.
Usually two issues:
1. Whether there is a violation of the purpose of the easement.
2. Is there overuse of the easement.
Express easements purpose and acceptable level of use of the easement are dealt with by the
language of the document granting the easement.
But most easements are not drafted precisely. Most are drafted quite vaguely to pass and
repass along private road for access to *blank* from *blank*.
Might make sense to tie the use of the easement down through the express language.
Rule of Reason: Where there is any ambiguity at all in the language of the easement, the parties
foresee reasonable evolutionary change. Both in use of the dominant estate and in technology.
Subdivision and Surcharge
Servient owners are per se assumed to foresee subdivision of the dominant land and increased use
resulting therefrom.
But surcharge can occur when the burden on the servient owner becomes substantial.
While parties are presumed to foresee some gradual increase in use, when the change is too
revolutionary, it is not the subdivision that is the surcharge.
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It is the burden on the servient landowner that becomes the surcharge: pollution, public nuisance,
etc.
Cameron v. Barton (use of road easement changes overtime)

Two things have happened:
1. change of use of the dominant land from slaughterhouse to a garage.
2. change of type of vehicles on the roadway from animals to trucks.
Owner of the servient land attempts to get a court order holding that there has been overuse
of the easement.
Court holds that technological change is foreseeable, and change in the use of the
dominant estate is also foreseeable to some extent (i.e. change from the slaughterhouse to a
garage was reasonably foreseeable).
Parties could have drafted a tighter and more precise easement no technological change
foreseen, only horse-drawn carts, and so on.
Brown v. Voss (Lot B&C glommed together, sought to use easement across lot A)
No glom on rule: The per se rule is that you cannot attach one property to another, and use
the easement for the benefit of the property that did not have the easement.
Court agrees that the rule should stand.
But court found that the owner of lot A would not be excessively disturbed.
Voss sought to get an injunction against the Browns using the easement to benefit lot C. Court
ultimately denies it.
Court holds that the Browns are wrongdoers they violated the no glom on rule. But they only
give $1 in damages, because it would be unfair (inequitable) to grant an injunction against
Brown.
It is akin to an estoppel the Vosses let the Browns spend that money and didnt do anything
about it until they got to trial.
When a dominant and a servient tenement come into common ownership, the easement
disappears, it terminates.
Merging lots B and C (creating BB) does not affect the easement: the easement will still only
apply to the southern half of lot BB.
Expansion of the dominant tenement is not foreseeable.
Only change in the use of the dominant tenement can be considered foreseeable.
Fristoe v. Drapeau (owner wants to build home on lemon grove accessible only via easement)
Easement not in writing, just implied.
Servient owner says building home on dominant estate will be a surcharge on the easement.
o More traffic as result of construction.
o Daily use by residents, vs. seasonal use by lemon pickers.
The objection is not to what the easement says (it doesnt say anything), but that a change in
the use of the dominant estate results in a surcharge on the easement.
Baseline will be the use of easement when it was first created, whether by express agreement or
by implication.
Court says theres a presumption that society favors single-family dwellings, and that governs
here. In this sense the case is a no-brainer.
To some extent, focusing on easements allows landowners to combat what they believe is
detrimental to the environment.
Servient landowner could try to:
bring a private nuisance action.
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bring an action claiming surcharge of the easement: revolutionary and not evolutionary
change of the use of the easement.
Glenn v. Poole (easement used for long time prescriptive)

Focus here is on surcharge of a prescriptive easement.
Pooles start off in the lumber business, then go into the gravel pit business, and finally are now
running a repair garage. Significant change of use, over 80 years.
Court holds that there has been a prescriptive easement: the Pooles have been adversely using
the road w/o permission for such a long time.
What is not clear is what exactly the nature of the prescriptive easement is.
The prescriptive easement was established when the statute of limitations first ran. So around
WW I, Pooles trespassing ripened into a right a prescriptive easement.
The question now, is if there has been a surcharge. The Pooles graveled the lot, asphalted it, and
rounded off the turn onto the main road.
The court holds that some change is foreseeable (but not all, not too much). Some increase of use,
both physically and technologically, comes within the scope of the easement (but it must be
evolutionary and not revolutionary).
This tells us that an easement can be expanded by evolutionary change, but can also be
expanded by revolutionary change if it occurs by prescription: if there has been no protest
about it.
OBrien v. Hamilton: Court dealing with prescriptive easement found surcharge when use
changed from 6-wheel dump trucks to noisy 10 and 18-wheel trucks making 10 to 15 trips a day.
Since servient owner objected in time, the expansion of the easement was stopped, but if he had
not, long enough use would result in there being an expansion of the scope of the easement via
prescription.
Assigning/Splitting Easements
Easements in gross are assignable. Pipelines can be sold freely.
Divisibility is dependent on exclusivity.
If the easement is exclusive, easement holder can subdivide easement, but not landowner.
If its non-exclusive, only landowner can subdivide easement.
If its non-exclusive and the landowner subdivides the easement (Pasadena), then all that the
original easement holder can litigate, is if the second easement unreasonably interferes with
its use and enjoyment of the easement.
If its exclusive, the landowner can bring action against first easement holder, claiming that
there has been surcharge of the easement: (1) purpose of the easement has changed, or (2)
the second easement is an undue burden on the landowner.
Easements for roadway purposes or ingress and egress, have often been judicially read by courts,
to also allow for the installation of utility lines (easement appurtenant). The courts reasoning is
that the overall burden to the landowner is not greatly increased. They conflate the purpose and
burden issues.
Why Utilities are Given Power of Eminent Domain
Because they provide a public benefit.
W/o giving them the power of eminent domain, they would have to buy each easement or each
piece of land upon which they lay their pipes, railways, etc.
It would raise the cost of the utilities.
You also face the problem of holdouts: landowners who refuse to sell at any price, disrupting
provision of the utilities.
Pasadena v. California-Michigan Land & Water (Splitting water pipe easement)
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Case really is about competition for water supply rights in Pasadena.

Owner of the land grants the city of Pasadena an easement to lay a water-pipe.
Later on the same landowner grants an easement to C-M, on the same space.
Pasadena challenges this second easement in court on grounds of exclusivity: that their easement
is exclusive.
If this really were an exclusive easement, then only Pasadena could make further subdivision of
this easement.
But if it were non-exclusive, the landowner could make further grants in the same area.
Court holds the easement is not exclusive. What is the test?
Priority is given to the first grantee. Subsequent uses of the easement cannot interfere with the
uses of the first grantee: so C-M cannot interfere with Pasadenas use of the easement. But so
long as it does not do so, its okay for C-M to have an easement on the same land.
Modification of Easements
Per se rule: if the location of the easement is specifically stipulated in the easement, or it is
de facto located on the land over a long period of time, neither dominant nor servient
landowner may relocate the easement without permission of the other.
Even if it would be efficient or eminently reasonable to do so.
To allow dominant holder to do so would greatly decrease the value and marketability of servient
land: uncertainty about how the easements location might change.
The converse is also true: servient owner cannot relocate easement, where it is clearly specified or
de facto fixed by physical installation, without permission of dominant owner.
But a court will allow important modifications. Courts will routinely, at the request of servient
owners, limit the height of easements. They do not go to the heavens. They will limit the height of
the easement to what is reasonable use of it. But they will not change the physical location.
When location is specifically described, dominant owner cannot change it.
If it was floating, but has been specifically located in fact, dominant owner cannot change it
(Allowing dominant owner to change location would severely reduce the value of the servient
land and its marketability).
If the servient owner seeks a change, courts will allow a modification of the easements height
(and even width) to permit significant development on the servient estate.
Lewis v. Young (the greedy nephew and the tennis court and the road)
Three easements granted at time of land split: two of them are specifically described, the third
(the one in dispute) is not: it is merely for a perpetual use of the [Browns] main driveway,
running in a generally southwesterly direction b/w South Ferry Road and the [Browns]
residence premises.
Brown later sells the western (servient) tract to the Youngs.
Youngs plan to tear the house down, build a new house with a swimming pool and tennis court.
Tennis courts location requires a change in location of the driveway.
They speak with Mrs Jaffee, she agrees, as does Katz.
Mrs Jaffee passes on, leaving her estate to Lewis.
Lewis begins disputing the driveway he conditions relocation of driveway if the Youngs upgrade
it. They consent to do so once new home is completed.
Before house is completed, Lewis demands that the driveway be completed as promised, or else
he would put the easement back in its original place, destroying the tennis court.
And thus litigation.
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Procedurally, the Youngs could have waited. They might have, prior to starting renovations, gone
to court and sought an injunction declaring them able to move the easement. In such a case, the
court might have just applied the traditional rule that they could not move a floating easement.
But in this case they detrimentally relied on Jaffees prior agreement. There was also the strong
hint of extortion on the part of Lewis.
New Rule
A balancing test is also appropriate as to relocation of an undefined right of way.
In the absence of a demonstrated intent to provide otherwise, a landowner , consonant with the
beneficial use and development of its property, can move that right of way, so long as the
landowner bears the expense of the relocation, and so long as the change does not frustrate the
parties intent or object in creating the right of way, does not increase the burden on the easement
holder, and does not significantly lessen the utility of the right of way.
The rule is valid in NY, but its not the majority rule.
We first always look to the express language. If the easement is described clearly and fixed in the
creating document, then it cannot be moved absent consent of both parties.
If the language does not fix the location of the easement, it may be moved by servient owner if
necessary (see NY rule).
Termination of Easements
1. Easement holder executes a deed of release. An oral release is insufficient Statute of Frauds
prevents it (it is a conveyance of land).
2. If it is oral, detrimental reliance on the release may suffice to terminate easement.
3. Execute a quitclaim deed. If theres only one easement and thats the only interest in the land. The
quitclaim deed is to the entire servient tenement. It thus conveys all interest in the servient estate,
back to the dominant owner. (It would cover even unknown interests in the servient tenement, and
multiple easements. Danger of quitting interests that were not intended to be released)
4. Merger. When there are two tracts of land, owned by different owners, which are later owned by
the same owner. Common ownership extinguishes the easement (one cannot have an easement
over ones own land. Perhaps there might be a quasi-easement). (The danger of merger is that
should one of the tracts be sold again later, there is no easement unless expressly granted or
reserved).
5. Mortgages
When easement granted over mortgaged property.
If mortgage is foreclosed, easement will be wiped out: the easement is not on the mortgage deed.
If a senior mortgage is foreclosed, it wipes out all junior interests in the mortgaged property.
Even though the easement is physically there, physically on the ground, it is wiped out.
Solution: Ask the bank to subordinate its mortgage to the easement. Get Wash. Mut. to sign the
mortgage as well, and promise that even if it forecloses the mortgage, the easement will remain.
But there is little incentive for Wash. Mut. to do so. The easement reduces the value of the land.
Even if the dominant owner detrimentally relies on the easement, or his property is valueless but
for the easement, w/o consent of the mortgage holder, no dice. He might, if landlocked, be able to
either have a court recognize an easement by strict necessity, or in some states, condemn such an
easement.
6. Joint Tenancy
A unilateral grant of an easement, under a unities approach, is likely to sever the joint tenancy.
Change in interest.
7. Eminent Domain
If the servient land is condemned by the state for a legitimate purpose, the easement is wiped off.
Condemnation destroys easements.
The general rule is that the dominant owner gets to share in the condemnation award D.O. has
lost a valuable interest in land.
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Two methods of computing D.O.s share of award:

1. Difference b/w value of condemned land with and without easement.
2. Difference b/w value of D.O.s land with and without easement.
Both methods measure the value of the easement.
In (2), the state has to pay FMV for servient land, measured w/o the easement, as
well as an extra on top for the value of D.O.s land. State will have to pay more under
method (2).
The loss of the easement is a taking from D.O.

8. Tax Sale
Default position - A tax sale wipes the slate clean. A purchaser buys the property in f.s.a., subject
to nothing.
Some states, however, have decided on another approach. In assessing taxes on the dominant
land, they include taxes for the easement how much the easement increases the dominant
property.
Under this approach, the easement is not subject to the tax sale. The easement is kept even though
the servient land is sold.
But if the servient land tax does not include the easement, it will not be included in the tax
sale.
D.O. therefore has an interest in S.O. paying S.O.s taxes, if easement is not included in D.O.s
tax assessment.
9. Fixed-Length Easements
Easement can be extinguished at the termination of the easement period, e.g. 5-year easement.
But after the end of the period, if use continues, adverse possession might occur: easement by
prescription.
There is no equivalent to tenancy at sufferance in easements.
10. Abandonment
Mere nonuse is not abandonment.
But other acts, or lack of action, together with nonuse, can combine to be evidence of
abandonment. E.g. blocking off the right of way.
Oral statement cannot constitute abandonment. But it can help support that inference, if there is
some act that helps provide evidence of abandonment.
If the easement is not used for some time, and S.O. builds over part of the easement, and D.O.
does not object, D.O. may be estopped from claiming back the easement.
The difference b/w estoppel and abandonment is that abandonment wipes out the easement:
estoppel does not. How long should D.O. be estopped?
If its just a crop of wheat, and D.O. doesnt say anything to object, then D.O. may be estopped
for a short period of time: until wheat can be harvested.
The longer the estoppel, the more it seems like abandonment.
But reliance by S.O. does not create abandonment.
Estoppel requires the S.O. to act in detrimental reliance on what the D.O. does or does not do.
The key to establishing estoppel is detrimental reliance on the part of S.O., regardless of
D.O.s state of mind.
But if the S.O. occupies the easement for long enough, then the easement might be destroyed by
prescription: prescription can birth and kill an easement.
Hickerson v. Bender (house by the lake, built into neighbors easement for path to lake)
owners of the dominant estate didnt use the easement for a while nonuse.
Abandonment here is an extreme holding because abandonment is hard to establish: here there is
no clear evidence of intent to abandon.
Nonuse alone cannot establish abandonment.
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Furthermore there is some evidence that Hickersons predecessors in interest did use the
easement.
Reliance of servient owner cannot establish abandonment.
But it can lead to estoppel, but not really show abandonment.
Court holds there is abandonment.
It is easier to justify by an appeal to adverse possession or prescription.
What really happened here is adverse possession or prescription the fact that the Benders and
the Benders predecessors in interest did not object to the Hickersons encroachment.
Glosemeyer v. United States (rails to trails)

Many of the grants to RR easements were pretty ambiguous. A RR right of way, a strip of land for
a RR right of way. Some of these, especially the latter, have been interpreted as f.s.a.
Why not a restrictive covenant? Perhaps they might be a f.s.a. with a restrictive covenant.
RRs always paid taxes on both easement and f.s.a. right of ways.
If the rights of way are easements, they are capable of being abandoned. And if they are abandoned,
then the land is owned by the adjoining landowners or underlying landowner (it goes back to whoever
has the land from which the easement was crafted).
In rails to trails, the Federal Government sought to turn these abandoned rail lines over to local
government for use as nature trails. How?
1. railroads had to go to the Surface Transportation Board, a regulatory agency, in order to seek
permission to tear up the track. This was usually granted.
2. The statute allowed for third parties, trail providers, usually the local government, to enter into Ks
with the railroads in order to use the trails for hiking and biking.
3. When the RR and the trail provider enter into the deal, it is deemed a rail purpose and not to be
treated as an abandonment. It is a railroad purpose regardless of what state law says.
How Is Trail Use A Rail Use?
Form of transportation. A rail purpose moving people around.

Courts are not in favor of this argument. They hold that abandoning, not using the track, plus
tearing up the actual physical track, is pretty strong evidence of abandonment.
Rail banking. The RR can ask for the property back when they want to start running trains on it
again.
Courts also disfavor this approach. They say it is unlikely that the railroads will start running
trains on these tracks again.
Conclusion
Court concludes that if there is no rail purpose, that the federal statute really just works a
taking. Essentially the government now owns the easements. Under state law, when the easement
was abandoned, it returned to the underlying landowner.
It is a taking because under the current use, the landowner loses the power to exclude others
(the public) from the easements.
The federal statute takes away landowners right to exclude, a fundamental part of the bundle
of rights, and thus constitutes a taking the power to exclude has traditionally been considered
one of the most treasured strands in an owners bundle of property rights.
Right to Exclusion
When RR had right to exclude, they did convey interest to government.

Courts Solutions
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Courts have either interpreted the easement to be a f.s.a. and given it to the government (ironic
given the populist rationale behind why they didnt get f.s.a. to begin with).
Or held that even if its an easement, its still a rail purpose.
Or just said that the statute works a taking and ordered the government to compensate the
underlying landowner.
SALE AND FINANCING OF REAL ESTATE

There is an earnest money contract.
After 1 3 months, there is a closing.
This applies to all property.
Why the Earnest Money K and the Wait?
Physical inspection of property
Ensure that the title is marketable
Arrange for financing

Why Use Standard Forms?
Because most deals are done through brokers. And the brokers lawyers draft the forms for them.
The forms thus have several main goals:

(1) ensuring that the broker gets paid;
(2) insulating the broker from as much liability as possible.
But in commercial transactions, the form is just a starting point. The parties negotiate the exact
terms of the earnest money K very carefully.
Terms of Contract
Title Quality: Default position is that the title will be marketable and clear. This is true in every state.
Even if its not stated in K, courts will assume that the title was marketable. Marketable is
just free from reasonable doubt, not that its perfect.
Title Approval: 70% of land transfers in the U.S. are covered by title insurance. The seller agrees to give
buyer a preliminary title report within a few days after signing.
Title Insurance
promise by the title company that if the deal is closed, the title company will issue an insurance
policy in favor of the buyer guaranteeing title in f.s.a., subject to the following: a list of
encumbrances that are existing on the title leases, mortgages, easements, etc.
The buyer then has the power to object to any encumbrance on the title and ask the seller to
rectify it.
How does the seller rectify it? Goes to the title company, which agrees that, for an additional
premium from the seller, it will delete that exception.
Once this is done, the title insurance company will send the buyer a title with the objections
deleted.
Abstracts
Some states dont use title insurance. Instead they use abstract list a history book of the property. It
records every transaction that has to do with the land. Every time the land is sold, the seller hands the
buyer an updated abstract. The abstracts are handled by abstract companies. There is no title insurance.
The abstracts are analyzed by the buyers lawyers. The only insurance the buyer has, is to sue the law
firm for malpractice.
Lawyers
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Some states dont have title insurance or abstracts. Instead lawyers will examine title and inform the
buyer if title is clear. This is cheaper than title insurance and abstract.
Torrens System
Every time title is transferred, the state will issue new title to the buyer. The title will still contain all the
encumbrances and exceptions to title. The buyer must still examine the title. There is still subject to the
following. If the state fails to list an encumbrance, it is liable and will compensate the buyer. Torrens is
largely dwindling due to title insurance.
Real Estate Financing
Buyer has to put money down for an earnest money K. There is no required amount. In a sellers market it
will be higher, in a buyers market it will be lower.
buyer will usually have to pay by conventional financing, an uninsured mortgage. A conventional
mortgage is a 80% Loan To Value (LTV). 80% of the purchase price. The buyer has to come up with 20%
of the purchase price.
Seller then conveys a grant deed at closing.
Fannie and Freddie
FNMA Fannie Mae. FHLMC Freddie Mac. They used to both be wholly-own government entities. In
the 70s they were privatized. They have trillions of dollars in assets. They buy secondary loans from
mortgagees like Washington Mutual. And either keep them, or sell the mortgages piecemeal to the public,
by creating mortgage pools, aggregates of individual mortgages. And they then sell portions of those
pools to public investors. Fannie Mae and Freddie Mac guarantee returns to the investors. Investors think
there is an implicit guarantee that the government would bail out FNMA and FHLMC if they went under
or were unable to pay.
FNMA & FHLMC Quasi-federal. They issue bonds to raise money. Considered safe because implicit
assumption of investors is that the federal government will bail them out in case of trouble.
Fannie and Freddie do two things with mortgages: keep them for themselves, or form mortgage pools and
sell shares in those pools to investors.
Conventional and Insured Loans
There are two governmental entities that insure loans: the FHA (part of HUD) and the VA. If one qualifies
for a FHA or VA loan, one can pay as little as nothing down. VA loans are 0% down, FHA loans are 2-3%
down.
The government doesnt make the loan. It just insures it.
If the mortgage is foreclosed, and the property cannot pay off the debt, the FHA or VA will cover
the difference.
Buyers pay a premium to FHA or VA for the insurance. Since they usually are poor, they usually
tack on .5% to the interest rate to pay it off.
But FHA and VA loans are limited in size (currently about 225k in CA).
There are also Private Mortgage Insurers (PMI). They will insure zero-down loans. They either
take their premium up front in cash, or as a percentage tacked onto the i/r amount.
Some companies these days make loans with zero-percent down, or as much as 125% of the
property value. Even if they are uninsured. Because the market is good and they think they can
recoup from the property alone.
Government National Mortgage Association (Ginnie Mae) it buys FHA and VA loans. And
creates mortgage pools, selling them in much the same way as Fannie and Freddie. But they are safer.
The underlying loan is protected by the FHA or VA. It is also explicitly guaranteed by the U.S.
Government through Ginnie Mae it is a federal entity. Ginnie Mae operates to break even, not to
make money.
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Fannie, Freddie, FHA and VA mortgages are all standardized.
Secondary Loan Market Risks
How do investors in mortgage pools protect against pre-payment? They cant, in residential mortgage
contexts. All Ginnie, Fannie, and Freddie loans, are all pre-payable. When i/r drops, mortgagors can
refinance. This results in the mortgages being paid off resulting in less interest and returns to the
investors.
This is in contrast to commercial mortgages these are not pre-payable, or if they are, they will be
fully compensated for it.
The market also knows that there is a lag time in pre-payment. The public generally waits for i/r to
drop by 1-2% before it acts. Furthermore there is refinancing costs. Pre-payment is therefore to some
extent predictable, and the risks are avoidable.
Of course, investors are not protected against i/r increases. Their money is locked in, unless they sell
their interest in the mortgage pool.
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Adjustable Rate Mortgages

ARM Lenders like them. Borrowers like them because the i/r or downpayment usually starts off being
lower.
Secondary Loan Markets Importance
They have financed the American home market. The inflow of equity has allowed more Americans to
own homes.
Seller Financing (alternative to Conventional Financing)
Popular when i/r are high.
At a time in the past, the FHA loan rate was 17%.
A lot of buyers, even though they could pay the 20% down, could not qualify for the 17% loan.
So to help buyers, sellers would themselves take on a mortgage. Buyer would give seller a note
and mortgage for 240k, payable in full (balloons) in x years (usually five they were pretty shortterm).
So the buyer pays the seller a constant stream of income (interest and some principal) for the x
years, and the balance of the principal at the end of the x years.
The theory was that at the end of the x years, the buyer would refinance, and the i/r would go
down.
This historically worked i/r did drop.
This did mean that the seller got less for their house. Because the seller took on below marketrate interest financing. And would be getting less, vis--vis getting cashed out (because if they
cashed out, they could turn around and invest it at the higher i/r).
Buyer Can Take Out Two Mortgages if Hes Short on the Down
If the buyer only had 40k (and not 60k, to make the 20% down), and the mortgagee only was
willing to loan 80%, buyer would be 20k short.
Buyer would then take out two mortgages a second mortgage to the seller for 20k. But this
mortgage is riskier: because it would get wiped out if the first mortgage foreclosed. They also
earn higher interest because of the higher risk.
Families are also a good and popular source of secondary mortgages. Especially parents.
In contemporary American society, parents tend to want to give mortgages, in case of the
eventuality of divorce. To make sure that they are protected in case of divorce.
Other institutions may also grant secondary mortgages, but at higher i/r.
Taking Over Loans
Mortgagor has a 240k mortgage with mortgagee, at 6%.
Interest rates go up to 10%.
The buyer might want to take over the mortgage.
But the mortgagee might not consent the due on sale clause of the mortgage might step in. Most
mortgagees wont.
But if its a VA or FHA loan, they MUST consent to transfer so long as buyer is creditworthy. The
buyer doesnt need to qualify for the VA or FHA loan personally.
Statute of Frauds
By and large, based on the 1677 English Statute of Frauds.
Most commonly requires:
Contract, some memorandum or note thereof, be in writing.
Only exception is for leases of a year or less.
Does not have to be a formal K.
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It does not even need to be between the buyer and seller. Correspondence b/w one of the parties
and a third party could be sufficient.
Just need to identify: parties, property, and price.
A signature or some sign of consent.
The statute of frauds does not make a contract void for all purposes. It just means that
neither party can enforce the K. but it might still be valid for other purposes.
Part Performance
Part performance can take a K out of the statute of frauds.
It can apply when K is purely oral.
Or when written K lacks one of the essential elements. (Berg v. Ting)
Safety Provision in E.M. K
If Buyer defaults, Sellers sole remedy is to keep the E.M.
This is the functional equivalent of an option.
Seller should NEVER agree to this.

Essential Elements of a Earnest Money K
Names of parties
Identification of the property. My farm can be enough. My house can be enough. The street
address can be enough.
o
Some courts hold that the legal description is the essential element. p. 945.
Three Types of Legal Descriptions
1. by reference to a U.S. survey (Jefferson had the Midwest and west surveyed, even before
they belonged to the U.S.)
a. divided up into townships, then sections. Each section is 640 acres one square
mile.
2. By reference to an official subdivision.
3. Metes and bounds. Problem is that they dont always close. Simply calls distances, using
feet, and angles. Sometimes they would even use landmarks.
o
(surveying these days is risky finding that you dont own your property)
Statement of the price. Including the terms of the mortgage, if any (if seller is financing).
Mortgage terms must be reasonably complete.
Dont need to specify a closing date: court will just read in a closing at a reasonable time.
Does not need to be signed. Statute of Frauds usually requires the K to be signed by the party to
be charged (only defendant who might raise Statute of Frauds).
o
Courts have been pretty liberal in interpreting the signature requirement.
o
But see p. 841, n. 8. Pretty broad definition of electronic signature.
Past Performance Theories to Escape Statute of Frauds
1. evidentiary theory
2. estoppel-reliance theory
Both require the big 3:
payment
possession
improvements
Evidentiary theory uses them as evidence that there was some kind of agreement about land b/w the
parties. Either party can introduce evidence of any partys acts under evidentiary theory.
Estoppel-reliance uses them just to indicate that the parties have relied detrimentally on something. Party
seeking estoppel must introduce evidence of its detrimental reliance. The big 3 is just evidence that
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someone has taken steps to their detriment. But estoppel-reliance does not need the big 3 just need
some evidence that there was detrimental reliance.
Policy: Statute of Frauds
Some argue that since we prefer written agreements, and have so many exceptions for part
performance, the SoF should be abolished.
But the SoF does serve a purpose, a good one. It makes fraud harder.
Roundy v. Waner (dispute b/w parents and kids about who owned home parents lived in)
Waners (daughter and son-in-law) own legal title, but not equitable title.
Importance of Legal Title
The possession of legal title allows the Waners to sell the property. Provided that the purchaser
was a Bona Fide Purchaser (BFP), the purchaser could cut off the Roundys equitable title, their
real title. Real title can be cut off by legal title passed to a BFP.
In 1964, the property was purchased because the Roundys (parents) could not get a mortgage on
the house.
In 1969, there is a falling out and the Roundys demand that the Waners remove their names from
the title.
Waners sue, and ask the court to recognize an oral agreement b/w the parties in 1968, to pass
equitable title to the Waners.
Consideration:
paying off the mortgage
promise to make improvements
past services taking care of Mrs. Roundy
Estoppel reliance:
the Waners sold their house to move closer
the SoF will not be allowed to be used to perpetuate fraud
a court of equity will not permit the Statute of Frauds itself to become an agent of fraud. A defendant
who is induced to rely on an oral agreement and who changes position to his own detriment cannot be
defrauded by a plaintiff who interposes the Statute of Frauds to declare the agreement invalid.
Burns v. McCormick (deal to move out and take care old man till death, get house)
Cardozo holds that oral agreement cannot overcome the SoF.
Furthermore there are insufficient acts of past performance.
Followed the evidentiary theory. Furthermore, the evidence is not unequivocal. No

possession must be exclusive according to Cardozo (the old man was still in possession), and
evidence of payment (taking care of the old man) insufficient.
Under estoppel-reliance, the fact that the Burns sold their house and business and
moved out there, would be sufficient to allow the bar to the SoF to come down and allow
evidence of the oral agreement.
Cardozo is mindful that the deceased cannot testify: we only have the testimony of
the plaintiffs.
Escrow Systems (in CA)
o Earnest money K in writing.
o There is a closing in 1-3 months.
o 1 or 2 days after earnest money K is signed, the property goes into escrow. Just means a K is
pending.
o Within a week or two after earnest money K is signed, the parties sign an escrow contract with an
escrow company.
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o
o
o
o
o
o
o
o
o
o
o
The escrow company takes care of all the paperwork, closing services: checking the property, holding
the earnest money, checking title.
If the buyer examines title and finds something objectionable, they raise it with the escrow company,
which in turn raises it with the seller.
The standard going rate is .5% of the sale price. $5000 on a $1000k house.
These services are practiced, in other states, by the realtors, or by the title insurance company.
The title insurance company has a vested interest in making sure the deal goes right. Otherwise its on
the hook.
The escrow company will not do anything unless both parties consent, or there is a court order. So if
buyer defaults, escrow company will not release earnest money as liquidated damages without
buyers consent.
Title insurance companies charge a lot less for the same services. $135 flat fee, vs. $1500 or even
$5000.
Escrow companies go back to the late 40s and early 50s, when the mortgagees would do the same
services (because they had an interest in the property). The employees who handled these services
went independent, set up escrow companies.
Escrow companies can do one thing other closing services cant: if the seller dies before closing, the
escrow company can still convey the deed: the deed is still valid. Because it was signed by the seller.
Without an escrow company, the court might require a deed from the executor.
Lawyers dont get as involved in residential real estate closings. But they are in commercial settings.
Escrow companies assume some risk.
Conflicts of interest?
The argument made in favor of escrow companies is that they are neutral parties, who have the interests
of both parties in mind.
Marketability of Title
In virtually every state, the governments role in assuring good title is twofold:
a recording office where titles are kept for examination
a court system for litigation over validity of title
This is pretty much the limit of the governments involvement.
Except in Torrens system states where the state issues title.
Buyer usually has more than one source of protection.
Pre-closing, major protection is marketability standard. Default in every sale of land, is an
implicit promise by the seller to deliver marketable title.
o Even if K is purely oral, and escapes SoF because of part performance, court will read
implicit warranty of marketability into the K.
o Marketability standard = free from reasonable doubt.
o If buyer examines title and objects to it, buyer can refuse to close K.
o Or buyer can sue for performance, but with abatement.
o Marketability is an issue in both cases.
o Or seller can demand performance, and show that title is marketable.
o Buyers remorse can masquerade behind marketability.
o Marketability can be negated by express provisions in K: buyer accepts title as is.
Post-closing, title insurance is major line of defense, or the lawyer.
o After closing, marketability objections to title merge into the deed. They can no longer be
raised.
o But if title is defective, you can recover from title insurance.
o If lawyer who examined title was negligent or engaged in malpractice, can sue lawyer.
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o
o
o
We can also sue the seller for breach of warranty, if a warranty deed is given.
The practice in CA is to give a grant deed, not a warranty deed. Grant deeds are limited
warranty deeds. Only warrants that the seller did not do anything to defect title. But does
not warrant prior owners.
Some sellers will only give a quit-claim deed. Usually the government. Will only pass
over whatever the seller has, whatever that is.
Marketability protects the purchaser w.r.t. title defects prior to closing.

When the buyer does due diligence to ensure that seller has marketable title, buyer is protected:
not required to close when title is unmarketable, not free from reasonable doubt.
Seller cannot plead marketability: only the buyer may. Its only a buyers defense.
Apart from buyer, the mortgagee (mortgage lender) might refuse to grant the mortgage because of
risky title. There are usually two premiums one for the buyer, one for the mortgage lender.
Break in Chain
When seller, in theory, does not actually have title to the property.
Seller purports to sell the property to buyer.
But there is a break in the chain of title.
At the worst, it means that the owner at the time of the break in chain, still owns the property.
Usually, however, the current seller really does own the title.
Breaks in chain usually are the result of a missing deed that was never recorded.
Alternative Cause: Adverse Possession.
But problem is that the A.P. issue must first be litigated. And it must be litigated between seller
and the owner at time of break: a quiet title action, with the owner at time of break, and all
subsequent owners, joined as parties.
The A.P. issue cannot be litigated b/w seller and buyer buyer has no standing. We require the
owner at time of break, and all subsequent owners, to be parties.
The further back the break, the more likely the court will be to hold it unimportant.
When Bad Title Is Marketable
Assume that in the chain of title, one of the deeds was forged. The title is entirely marketable (no
break in chain), but its also utterly bad: invalid.
When Good Title Is Unmarketable
If there was a break in chain, but only because deed was not recorded: all owners did in fact
convey, there was no A.P.
Encumbrances
Encumbrance: any claim by a third party against the real estate. Most commonly mortgages,
easements.
Mortgages do not always or even usually render title unmarketable: buyer may take over the
mortgage, or mortgage will be paid off out of proceeds of sale.
Easements.
Leases Except that often parties buy property with leases on them because they make the
property more valuable (source of income).
Unpaid property taxes a government lien.
Judgment liens. Judgments, when recorded, can become a lien on all of the debtors real estate
within the county, or even within the state (in some states).
Restrictive covenants the mere existence of such covenants is an encumbrance that renders
title unmarketable.
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Zoning ordinances, while possibly encumbrances, do not render title unmarketable. Unless, at
time of sale, property is violating the ordinance. Building code violations do not violate
marketability.
Encumbrances render title unmarketable, unless they are the type the buyer has agreed, in
the K, to take subject to. In the K, the buyer waives certain potential claims, provided that they
do not materially interfere with use and enjoyment of the property.
Defeasability having a defeasible condition upon the land renders title unmarketable, generally
speaking.
Encroachments
Either seller encroaching upon neighbors land, or neighbor encroaching on sellers land. Either way, title
is rendered unmarketable.
Insurable v. marketable
Almost all title is sold as marketable. But this is different from insurable.
Marketability standards were developed by lawyers.
But when the break is not substantial or the risk is small, the insurance company or mortgage
company will issue an insurable title.
If the title is marketable, the insurance company will issue an insurable title. If its not, title
company will just refuse to grant the mortgage or the deed.
Insurability is a laxer standard than marketability.
Sometimes E.M. K will say that seller will convey by quitclaim deed.
Quitclaim deed does not negate the marketability. But it does make it harder to convey. Because
the buyer must then take the deed and record it openly.
Even where K is silent about marketability, there is an implied K of marketability, even in
quitclaim deed.
Buyers right to reject deed for unmarketability is not annulled by the fact that there is no such
language in the K.
Laba v. Carey (the uneven sidewalk case)
The general promise was not marketability, but insurability title such as any reputable title
company would approve and insure.
But the provisions of the clause had the buyer to take subject to the encumbrances noted in the K
and free of all notes or notices of violations of law or municipal ordinances, orders or
requirements noted in or issued by the Department of Health, etc.
The sidewalk was below citys grade requirement. But city had waived any such objection to it.
The title insurance company did agree to insure that the property did not violate any restrictive
covenants at this point in time so the sidewalk grade issue was irrelevant.
But in n.5, the standard of the K is marketability. Buyer argues that the survey showed that the
property didnt meet the citys requirements. Court dismisses his claim it would render most
titles in the state void.
Merger
Once you close the deal, you are barred from making any marketability claims to void the deal.
Marketability claims merge into the closing, because well, the deed was marketed.
This does not foreclose all options: you can still sue for misrepresentation, fraud, or other causes
of action.
Types of Actions Filed Before Closing
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Buyer
Seller
Restitution (E.M. and expenditures
Sue for E.M. as liquidated

in direct reliance)
damages.***
Damages (E.M. and loss of
Damages****
bargain*). Not common.
Specific performance (the price of
Specific performance (an equitable

the K in exchange for the
remedy).**
land)*****
* Loss of bargain: if FMV of property is above K price, loss of bargain is the difference b/w the two.
Problem with loss of bargain is the need for evidence, witnesses. Its costly to
establish loss of bargain.
** Specific performance was traditionally the default per se remedy because every land is unique,
irreplaceable by money. Benefit of s.p. is that it needs no evidence of FMV, etc. Easier burden of
proof.
*** Depends on whether or not the sum is reasonable ex ante. Otherwise it becomes a penalty. It must be
reasonable given the price of the property.
**** Suing for damages can lead the jury to think youre taking the buyer for a ride. That you sold the
property for more than FMV. Because damages results in a jury trial. Specific performance is in
equity no jury.
***** Specific performance is the traditional option for the seller as well as buyer because the land is
unique.
If the value of the land has increased, buyer will seek s.p.
If value of land has dropped, buyer will seek restitution.
If property was sold to someone else who did not know about the K (BFP), the land is
unavailable, and specific performance is not available.
Only options left would be restitution or damages. Damages might be easier to prove in such a
situation: FMV could be pegged at what the seller sold the land to the bona fide purchaser for.
Limited to Restitution the English Rule (Minority of States)
If the seller has breached in good faith (unintentionally), e.g. bad title, and is unable to convey the
land.
Only remedy is restitution, not loss of bargain.
But this rule is dying out. Majority of states dont care what sellers state of mind is.
Mortgages
Evenly amortized evenly distributed over course of the loan.
Pre 1940s
The evenly amortized mortgage is a relatively recent development in American economic history.
Its predecessor was the balloon mortgage everything came due at the end of a short period of time 5
years or so. Offered by buildings & loans associations, later known as savings & loans associations.
The monthly payments were mostly interest, and a little principal. But all of the principal would be due at
the end of the mortgage.
Balloon mortgages were traditionally successful because property values rose from year to year, and so
new loans could always be taken out: they would be renewed at the end of each balloon mortgage. The
debts would slowly be paid off over the decades.
But this ended in the Depression of 1929. Homeowners were unable to find banks that would refinance
their loans. Banks either went belly-up, or refused to issue new loans (hoarding cash to save it).
Homeowners thus could not keep their houses their properties would be foreclosed because they could
not make the balloon payments.
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In 1935, Congress set up the Federal Housing Administration (FHA). Policy was to encourage long-term
loans. In 1935, FHA Insurance said that if lender was willing to loan out 90-95% of the loan, for 30 years
(or so), evenly amortized, the government would insure the lender. Would pay the difference. FHA
Insurance is paid by tacking on .5% to the interest premium paid by buyer.
The 1940s to 1970s
In 1944, Congress passed the G.I. Bill. Sending G.I.s to universities and college especially. The V.A.
Mortgage Guarantees were a part of the G.I. Bill. The V.A. guarantee was that if a lender gave a veteran a
long-term loan with zero-down, the V.A. would insure the lender if the loan was defaulted upon.
The default rate on the FHA and VA loans was miniscule. Based on their success, private lenders therefore
began making long-term loans to other parties on their own. But since they were not insured, lenders
required 20% down.
In the 1940s to 1960s, the interest rate of S&L was fixed by the government. It was usually pretty low.
Inflation was also low, around 1 to 1.5%. And so they could offer low loan rates. 2% i/r, and they would
just tack on 2% and offer 4% loans.
In the 1960s, inflation rose to 5%. People made massive withdrawals from S&L, and invested in federal
bonds instead: disintermediation. They went straight to the government and invested in bonds at 5 to
6%. They cut out the middleman. In response, Congress deregulated interest rates, allowed S&Ls to set
their own interest rates.
In an environment of skyrocketing interest rates, in order to keep customers savings, the S&L began
offering matching interest rates, or more. 14% or more.
But this was unsustainable. The assets that the S&Ls had were mortgages, with no due-on-sale clauses.
The long-term mortgages were at 4-5%, but they had to pay out up to 14%. Obviously they went belly up,
and were bailed out by the federal government.
The 1980s
In response, in 1982 Congress made due-on-sale clauses enforceable. And lenders began using them as a
matter of course: so that low interest rates could not be passed on from buyer to buyer (lender could
refuse and raise the interest rate, end the loan and demand a new one at higher i/r).
Lenders also began using ARM mortgages adjustable rate mortgages.
Lenders also started using pre-payment charges. The economic reverse of a due-on-sale clause. Requiring
borrowers to pay extra if they started paying off their loans early. Not very significant back then because
i/r were high: no one was refinancing. They disappeared in the early 80s with Fannie and Freddie, who
got rid of them ostensibly to appear more reasonable. Although Fannie and Freddie did not grant loans
directly, they required anyone who granted a mortgage and wished to sell it to them, not to impose prepayment charges on the borrower. Fannie and Freddie have sought to create uniformity in mortgages
through contract law as much as possible. Limited by state statute: certain terms are non-waivable, e.g in
FL, foreclosure outside of court is unavailable. (The forms are evenly balanced in terms of advantages
and burdens to both parties.)
One solution found by lenders, is to disallow pre-payment entirely, by inserting terms into the mortgages.
TIAA-CREF mortgages are non pre-payable.
In 1982, Congress also passed legislation deregulating S&Ls entirely. Gave them full power to act like
banks. By the late 80s, many of them were running into difficulties caused by mendacious incompetence.
They did not have the resources to act like banks, but tried to. In response, the federal government created
the Resolution Trust Corporation RTC. It sold off the assets of all the failed S&Ls - $50 billion worth.
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Often at firesale prices. Get rid of it and do it fast. The RTC was dissolved after 6 years, after having
sold off all of the assets.
The 1990s
In the 90s, the importance of the secondary market started growing.
Originators (grantors of loans) banks, thrifts (former S&Ls), mortgage bankers (Countrywide),
mortgage brokers (they never own the loans, just match lenders with borrowers). Originators keep the
loans for a while. Banks and thrifts tend to keep the safest loans in their own portfolio the ARM loans.
But they will sell most of the others, fixed-rate loans, on the secondary market.
Mortgage bankers will keep no loans in their portfolio. They make a loan and hold it for no more than 30
to 60 days before selling it on the secondary market, e.g. to Fannie Mae, Freddie Mac.
Incidentally, Fannie and Freddie have incredible leverage they have much lower requirements in terms
of holdings to loans: they can loan much more than banks, and are required to hold less cash.
The 2000s
The worry about Freddie and Fannie today is that they might go belly up.
Federal Involvement in Freddie and Fannie
They get preferred borrower status from the Treasury.
They are not subject to state taxation.
The President of the U.S. appoints 5 out of their 15 directors.
Latest studies indicate that homeowners are saving about .25% on their mortgages due to Fannie or
Freddie.
History of Mortgages
Started about 1450 in common law England.
Grantor (Mortgagor) wished to borrow money and use the land as security for the debt.
He would grant a deed to the lender (mortgagee).
The deed would say: but if grantor paid the lender the loan amount (20k pounds) on a day certain (the law
day), grantor had a right to re-enter and regain title. (a fee simple s.c.s.)
So the first mortgages in common law England were f.s.s.c.s.
And no interest would be charged it would be usury.
But the mortgagee/lender would collect rent on the land.
If debt was not repaid on law day, the right of re-entry would be extinguished.
And the law court would uphold that, even if debtor sought to repay the debt several days late.
It was transactions such as these that created the power of equity courts.
Debtors would go to the Kings Chancellors courts and seek equitable remedy.
The equity courts held that these were not really f.s.s.c.s., they were not really grants of land. They were
really just deeds as security for a debt. They did not pass real title.
The debtor was held to still have equitable title to the land. The lender only had legal title.
They called the debtors interest in the land equity of redemption, i.e. equitable title.
Debtor therefore has a right to pay off the full amount provided debtor is not unreasonably tardy or late in
repayment.
Equity of redemption = right to pay late, provided its not unreasonably late.
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Equity of a house: amount by which value of the house exceeds value of the mortgage.
Equity in a corporation is exactly the same thing: substantive ownership of the corporation, via the issue
and possession of stock.
However, this created an absence of predictability: lenders now did not know whether or not they truly
owned the property when law day passed. Furthermore reasonably late was not fixed by definition. They
were therefore discouraged from lending.
Equity courts therefore created the option of foreclosure.
Lenders could go into court and seek a writ of foreclosure.
Courts would craft an order saying that if the debtor came up with the full amount by a day certain, debtor
could get the land back.
But if debtor failed to do so, the land would absolutely belong to the lender.
This restored predictability.
This option was known as strict foreclosure. To distinguish it from foreclosure by sale (which did not
exist back then, but does now).
In the Renaissance, canon laws prohibiting usury ceased to operate. So lenders now charged interest and
no longer went into possession. But England, and some of the New England states, retain the notion that
the lender has legal title (these are title theory and not lien theory states).
Effectively its the same thing unless theres a default. If theres a default, the lender can go into
possession in a title theory state. In a lien theory state, lender cannot go into possession short of a
foreclosure.
Foreclosure Today
Foreclosure today is done by public sale, foreclosure by sale. Only two states, VT and CT, still
use strict foreclosure.
There are two documents creating a mortgage: a promissory note and a mortgage.
One cannot have a mortgage unless its linked to a promissory note, a promise to pay.
A promissory note without an accompanying mortgage is just an unsecured debt.
Most promissory notes have a provision, an acceleration clause. The clause allows the mortgagee
to demand the full amount if the mortgagor defaults.
Prior to acceleration, mortgagor can always cure a default by paying arrears: back payments, late
fees, etc.
But once acceleration kicks in, mortgagor must tender the full amount or lose the land at
foreclosure.
But w/o acceleration clause, the situation would get messy: mortgagee cannot demand full
amount.
After acceleration kicks in, and presuming mortgagor doesnt pay, there is a foreclosure sale. A
foreclosure sale is pro-debtor. Because of public competition, the price arguably will be higher
and the debt is more likely to get paid off; or more of it will be paid off.
Some states, a minority, only permit judicial foreclosure NY, OH, FL, IL. And it is not
waivable.
o A very pro-defaulting debtor rule.
o Gives the debtor a day in court by default (non-judicial foreclosure requires debtor to hire
a lawyer and go to court).
o Judicial foreclosure states have higher i/r. and lenders tend to lend less, in terms of loan to
value ratio.
Other states, over last 100 years, have developed non-judicial foreclosure.
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Foreclosure Options
In the majority of the states, if the proceeds of the foreclosure sale are less than the debt, the
excess becomes unsecured debt.
The mortagee will obtain a deficiency judgment and collect the balance from the debtors other
assets (of course this debt could be wiped out if the debtor went through bankruptcy). The
deficiency judgment becomes an in personam debt.
But in CA, there is an anti-deficiency statute. If you are a debtor on a purchase money
mortgage on residential real estate (mortgage was used to buy the property), and the property
is owner-occupied and a 1 to 4 family dwelling, a deficiency judgment against the mortgagor
is barred. These loans are also known as no-recourse loans. This is the minority position.
What Causes Foreclosures?

unemployment
illness
divorce (a leading cause people stop paying for emotional reasons)
rational behavior. A 300k mortgage on a 200k house. Because the debtor receives no equity out of
making payments.
o To discourage voluntary foreclosure, there is the credit system. Not making payments
affects your credit rating and renders lenders less likely to lend the defaulting debtor
money.
Alternative to Defaulting as Rational Behavior
Debtor can go to lender and strike a bargain with them: to pay a percentage of the deficiency in
exchange for not being reported to the credit bureau. But the lender still keeps the property.
The debtor can also grant the lender a deed in lieu of foreclosure. The lender thus doesnt need to go
through the process of foreclosure. This reduces the costs for lender, might make lender more willing
to strike a deal.
Second Mortgages and Priorities

Mortgagor grants Washington Mutual a first mortgage for 175k.
If mortgagor wants to take out a second loan for another purpose, mortgagor can go to another
lender and seek a second mortgage, e.g. BoA.
If BoA is rational, they will seek to know if there is equity in the real estate: hire an appraiser to
check the property. Because they know their mortgage is secondary. They want to know that the
FMV of the real estate will either equal or (better) exceed the value of the primary mortgage.
Foreclosure by Public Sale
1. Judicial foreclosure
2. Non-judicial foreclosure (power of sale foreclosure)
Judicial Foreclosure
Judicial foreclosure is the sole means of foreclosure in certain states. A good old fashioned
lawsuit, with depositions, trials, etc. NY, FL, OH, IL are all sole judicial foreclosure suits.
After accelerating the debt, Mortgagee 1 will file a lawsuit against mortgagor, and join mortgagee
2 as a party.
Each month that the judicial process continues, the mortgagor will be in possession without
needing to make a payment mortgagee will be losing money.
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The process takes between 5 to 6 months.
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Prof. G. Nelson
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Non-Judicial Foreclosure
Majority of states today (including CA) now allow either judicial or non-judicial foreclosure.
Under non-judicial foreclosure, the mortgage will grant the power of sale to a trustee, usually
the lawyer for the lender.
The trustee publishes notice in the newspaper and sends notice to the parties, that the foreclosure
sale will take place on a certain date.
And that foreclosure wipes out the equity of redemption.
But even in states that have non-judicial foreclosure, lenders will still use judicial foreclosure.
In CA, there is a statute prohibiting deficiency judgments unless there is a judicial foreclosure.
Because there are a substantial number of mortgages in CA that are not purchase money
mortgages, or are not on 1 to 4 family dwellings.
Power of Sale Foreclosure
All p/s states require an explicit p/s clause in the mortgage. If no clause, no p/s.
P/s states allow both kinds of foreclosure.
In CA, not possible to get deficiency judgment except through judicial foreclosure. And even
then, there are limitations.
When there is uncertainty about mortgage priority, judicial foreclosures are more likely. Because
a p/s foreclosure would suppress the bidding: people dont know what they are bidding on, what
the priority of their deed will be.
a. Power of Sale in E
Power of sale is in lender, mortgagee. This of course has the potential for abuse. Mortgagees are
held to a high standard.
b. Power of Sale in sheriff
P/s is in sheriff or some other public official, a neutral third party.
c. Deed of trust (P/s in trustee)
The overwhelming majority of states, including almost the entire west, use a deed of trust, with
p/s in trustee.
o Debtor conveys via a deed to trustee, who holds it in trust for lender.
o In case of default, trustee will sell the deed via public sale.
o But it still takes at least 5-6 months, more typically 7-8, to get to sale.
o But the trustee is not really a trustee, and its not really a trust. The trustees main
function is to conduct a sale and get as high a price as possible.
Facts About Foreclosure Sales
o Rare that a foreclosure sale will yield the same price as a regular sale on the open market,
FMV.
o Because you cannot inspect the property its still occupied.
o (A rational homeowner would try and sell the property on their own before the
foreclosure sale. And would allow inspections whatever would increase the price of the
house at the sale.)
o Drop-dead date problem: the sale must be sold by a day certain: a definite date.
o Purchaser must also eject the old debtor, via a court action. Self-help impermissible. This
also reduces the price at foreclosure.
o Statutory redemption also can reduce the price.
o Government does not warranty the title, nor does any title insurance company.
o Speculators have to pay up-front cost to do title research. Most insurance companies
would allow the cost to be put towards an insurance policy if speculator bought the
property.
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Prof. G. Nelson
Keemin Ngiam
Statutory Redemption
Another form of defaulting debtor protection.
Default on mortgage acceleration of mortgage (mortgagor must come up with full mortgage
amount to avoid foreclosure) followed by foreclosure sale.
Up till the foreclosure sale, the mortgagor still has an equity of redemption, the right to pay late.
In about 60% of the states, a valid foreclosure sale spells the end for the debtor.
But in 40% of the states, there is a period after foreclosure sale, about 3 months to a year, during
which debtor has a right to pay the purchaser the foreclosure sale price, and get the property back.
But this discourages buying at a foreclosure sale: you are only buying a defeasible title.
Any purchases will probably be for a much reduced price.
The original theory behind statutory redemption was that purchasers would drive the price up, to
make it harder for the debtor to regain the property.
Statutory redemption is being cut back in the states that have it: reducing the period of statutory
redemption.
The debtor will still usually be in possession of the land.
Clogging the Equity of Redemption
Mortgagees may attempt to clog the equity of redemption.
Offer a lower i/r in exchange for a waiver of the foreclosure sale, or to make foreclosure sale
earlier.
All such attempts to clog the equity of redemption are unenforceable.
Agreements waiving or limiting the right to have a foreclosure sale are judicially unenforceable.
Foreclosure is a right in the debtor. It is for their protection.
Foreclosure and Mortgage Priorities
The purpose of foreclosure, is to put P into the shoes of MR at the moment before the mortgage
was created.
Foreclosure gives P the title that MR had at the moment before MR signed the mortgage being
foreclosed.
Valid foreclosure of a senior mortgage wipes out all junior interests.
Any government lien (tax lien) will be senior to all mortgages.
A mortgagee goes to the sale with money in her pocket: the mortgagee does not need to pay
actual cash up to the value of the mortgage.
Hypo:
MR mortgages to E1 for 100k.
MR later mortgages to E2 for 60k.
If MR defaults and E1 forecloses, what is the maximum should P pay?

P should only pay a maximum of FMV.
Because E1 is the senior mortgage, and foreclosure on the senior mortgage kills the junior
mortgage.
What if Blackacre sells for 175k?
Trustee or public official or E1 will be in charge of distributing money.
E1s mortgage will be paid off.
E2s mortgage will also be paid off.
And balance will go to MR.
E1 will be fully paid off.
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E2 will be repaid 40k, leaving a debt of 20k.

E2 will then be able to pursue a deficiency judgment against MR.
E1 will get the full 75k.
E2 will only be able to get a deficiency judgment on the note, i.e. it will be an unsecured debt.
In CA, E1 will be unable to get a deficiency judgment, if it were a purchase money mortgage.
When property drops in value, it hurts E2 before E1. Because E1s senior mortgage protects it.
What if E2 forecloses before E1?

The most P should pay at junior foreclosure sale, is FMV less senior debt.
Goes back to principle of foreclosure: foreclosure puts P in MRs shoes the moment before the
foreclosed mortgage was created.
P will take title with E1 mortgage on it.
What if FMV is 175k, and E2 forecloses?
P should only pay 75k FMV less senior mortgage.
P, after buying the property or even before buying the property, will go to E 1 and ask to take over
the mortgage.
E1 will usually agree to allow them to do so. Because an unpaid debt, a liability on their balance
sheet, will now be paid off.
What if P pays more than FMV at sale?
E2 will be paid off.
But senior liens have no right to junior surplus.
Junior liens do have right to senior surplus, to recover the lien amount. Because MR has
assigned the surplus to E2 by taking out the junior mortgage.
MR has not assigned surplus to E1, because that mortgage was given prior to the junior mortgage.
So the surplus will go to MR.
What if FMV is 90k, less than the E1 mortgage?
Would it be rational to foreclose?
No rational purchaser would buy.
Except perhaps E2. Because it can bid up to 60k, hold the property, make payments to E 1, and
wait for property prices to rise.
Uniform Non-judicial Foreclosure Act (UNFA).

An option of the lender: instead of public auction, to try and sell property in ordinary course of
business going out into the market to get the best offer, hire a broker, etc.
Theory is that once mortgagee receives an acceptable offer (best one on the market), mortgagee will
accept it, and notify every interested party (mortgagor and all mortgagees). And all interests will be
satisfied via the proceeds.
If any interested party refuses consent, then property will be sold at auction.
Problem with residential real estate: Mortgagor often will not cooperate hostility to foreclosure. But
it is in mortgagors best interest to cooperate and Act itself has provisions compelling mortgagor to
cooperate.
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Prof. G. Nelson
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TITLES AND DEEDS

Deeds
Example on p. 938.
Requirements
Deed does not have to be a formal document. Although it usually is.
Deed must be in writing, unless it is a lease for less than a year.
Parties must be identified
Land must be described (even my home or my farm sufficient).
Evidence of intent to convey.
Grantors signature.
Deed must be delivered to grantee.
Whats Missing
No price mentioned.
No notaries required.
Although 99% of the time deeds are notarized.
They usually are notarized in order to be recorded: signature must be recognized by a notary. To
make it effective against third parties, under recording acts.
But as between the parties, the deed is effective without notarization.
Consideration
Required to enforce K against either party.
Ks to give gifts are unenforceable, save for promissory estoppel.
Consideration for the Deed?
in consideration of $10 and other valuable consideration is usually in the deed.
Need they say this at all?
No. Consideration is given for the K.
But what if the deed is a gift?
Almost all courts today say no. One can convey land for nothing, as a gift to a charity, family
member, etc.
But it is a historical relic. And we keep it around.
Chase Federal v. Schreiber (conman conveyance for love and affection)
Ross conveys to Cournoyer a quitclaim deed for $10 and other valuable consideration and
love and affection.
Cournoyer conveys to the Perezs.
The Perezs in turn mortgage property to Chase Federal.
After Ross death, Schreiber, Ross successor in interest, sues to set aside the conveyance and
regain ownership of the land.
Schreiber argues that under FL law, a conveyance for love and affection can only be granted
to family members, but not non-family members.
A conveyance to non-family members previously did require valid consideration.
Schreiber argues that the Perezs had constructive notice of the invalid consideration.
The FL Supreme Court changes the rule, and holds that love and consideration is sufficient
consideration for a conveyance to non-family members.
Love and consideration or even no consideration at all, is required for a conveyance to a nonfamily member.
The Perezs are protected from judgment if they were BFPs bona fide purchasers.
But if they knew or should have known that the original conveyance was fraudulent or somehow
invalid, then they are not protected.
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Kinds of Deeds
1. Warranty
a. usually have 5 or 6 covenants that protect buyers
2. Limited Warranty
a. only protect buyers w.r.t. things that grantor did do not warrant mistakes made by
previous owners other than grantor.
b. In CA, known as a grant deed.
c. A buyer with clout might demand a full warranty deed. But they are seldom used.
3. Quitclaim
a. Conveys all interest that grantor has in Blackacre to grantee.
b. But makes no warranties whatsoever.
Marketability
Must be raised before closing.
Once closing has occurred, marketability has merged into the deed: it cannot be raised.
One could bring malpractice suit against the lawyer who represented the buyer.
Or sue grantor for breaching one of the warranties of deeds.

Warranty Deeds
Some states have passed statutes allowing the granting of warranty deeds by simply using several words.
Does not need to expressly mention each covenant.
Limited Warranty Deed
The deed language changes. But it still is effected by a few words bargains, sells and conveys. It does
not render grantor liable for defects not incurred by grantor.
Quitclaim Deed
The magic language is release, remise and quitclaim.
Covenants
Either present or future.
Present:
1. Seisin. Grantor is affirming ownership of the land. In minority jurisdictions, grantor affirms
possession of land (only important if there is a.p.).
2. Right to convey (almost irrelevant; just means that if grantor has appointed an agent to handle the
conveyance, that the agent does indeed have the power to convey).
3. against encumbrances: third party interests in the land, e.g. mortgages, liens, leases, etc. Tracks
marketability (but is not the same thing. Just examines if title is bad or good, not if its
marketable).
a. Restrictive covenants, zoning laws are encumbrances (only if there is a present violation).
Clarify with him!
i. But not violations of codes that are irrelevant to title, e.g. building code, zoning,
etc. Existing conditions which breach local zoning or other ordinances are not
usually considered to violate deed covenants of title.
b. Clause will often say of record, to hold grantor not liable for unknown encumbrances.
c. Reservation to find implied reservation for an easement, is literally to attack ones
warranty deed. The grantor is trying to reclaim an interest that he conveyed, or trying to
break his own warranty.
A cause of action is triggered on day the deed is delivered. The state of limitations begins to run from
date of delivery of deed.
Present covenants do not run with the land: only good against the grantor.
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Keemin Ngiam
Future:
1. Warranty and quiet enjoyment. They are substantively the same. They essentially cover seisin,
right to convey, and encumbrances: tracking the present warranties.
What makes future covenants important is that they are triggered only where there is an eviction
or constructive eviction.
o In the case of a mortgage foreclosure several years after sale, it is an eviction.
o Statute of limitations starts to run from the date of eviction.
o And a cause of action is triggered by the eviction.
o The grantee could always settle with the mortgagee: pay it off, or settle with the
mortgagee. This would be constructive eviction, even if not actual eviction.
But grantee must ensure that the mortgage is valid!
If its not valid, there is no cause of action against grantor.
2. Further assurances.
The only warranty that can be satisfied by anything other than money.
If there is a problem with title, and grantor can cure it by executing and delivering a document,
court will compel grantor to execute and deliver document to cure title: specific performance for
further assurances.
Future covenants run with the land.

Remedy Available
Usually just money damages. Specific performance only for breach of future assurances warranty.
Quality of Title
Marketability title must not only be good, but marketable: not subject to an unreasonable risk of
litigation.
Deed covenants title only needs to be good; unmarketability does not violate covenant: it can be
subject to unreasonable litigation.
Lober v. Brown (buyer thought he had all the coal but only had a third)
Lober conveys property to Brown.
Brown in turn sells coal on property to Coal Co.
Coal Co. discovers that Brown only owns a third of the coal.
Brown then sues Lober for a violation of seisin.
But suit is unsuccessful because Brown brings suit after statute of limitations ran out (against
present covenants).
Brown cannot plead a violation of warranty of quiet enjoyment either: no actual or constructive
eviction. Mere existence of paramount title in one other than the covenantee is not sufficient to
constitute a breach of the covenant of warranty or quiet enjoyment.
Brown could have gotten the prior owner who reserved right to two-thirds of coal, to somehow
actually or constructively evict Brown: to mine the coal, or sue Brown, etc.
This would have given Brown a cause of action against Lober violation of quiet enjoyment.
Alternative Hypo
Brown conveys land to Coal Co.
And assume Brown is judgment-proof.
Could Coal Co. sue Lober on future covenant if there is an actual or constructive eviction?
Yes: future covenants do run with the land, beyond the initial grantee.
Present covenants are only valid w.r.t. initial grantee.
In practice, a court would probably limit how far back the future covenant could run.
But in theory, it goes on forever.
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When does SoL

begin to run?
What constitutes a
breach?
Who may be sued?
Present Covenants
When deed is delivered
Future Covenants
When eviction occurs
Failure of title/ existence of an

encumbrance at time of delivery
Only plaintiffs immediate grantor
(present covenants do not run with the
land)
Eviction (actual or constructive) by

holder of paramount title
Any predecessor in title who gave a
future covenant.
Quitclaim Deeds and Covenants

ABC
C cannot sue B when property is conveyed via a quitclaim deed.
Some states do allow plaintiff C to sue A when B conveys via quitclaim.

o Argument is that B conveyed all interest in land, including present covenants received
from A, to C.
o This is the minority position.
Quitclaim deeds carry no covenants at all: grantee cannot sue for either breach of present or
future covenants.
A.P. and Covenants
A B (quitclaim) C D
E claims A.P. of portion of the land.
Who can D sue for breach of quiet enjoyment and warranty?
Cannot sue B: B granted quitclaim deed.
D can only sue owners of Blackacre who owned during duration of A.P.
Acts Constituting Actual or Constructive Eviction
1. paramount title holder obtains order giving him possession or confirming his title to the land
(decree of specific performance, ejectment).
2. paramount title holder orders grantee off the land and threatens litigation against her.
3. grantee buys the paramount title in order to avoid being evicted by its holder (provided title is
good).
4. grantee surrenders claim to paramount title holder and moves off the land (assuming the
grantee has no interest in the land in fact).
5. grantee is sued by the person with paramount title, and enters into a reasonable settlement of the
suit in which the grantee is left with only a part of the land originally granted by the deed in
question.
6. Physical interference by paramount title holder with grantees possession actual eviction.
a. When paramount holder is already in possession.
b. Holder of paramount title comes onto land and attempts to take possession, use easement,
etc.
c. If government is holder of paramount title, government entry onto land to take possession
comprises eviction.
Limits on Recovery
Recovery limited to consideration paid by grantee (plus interest).

When grantee loses title, cannot recover for increase in land value or
improvements made on land.
Some courts and some statutes allow for greater measure of recovery remove
limitation and permit recovery based on current land value.
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Limitation applies even if a prior encumbrance is for value greater than
consideration.
But of course, plaintiff can sue multiple prior title holders to cover cost (going
after more than one deep pocket).
But this limitation hard to apply when consideration is not monetary, but in
kind (land for land).
Also hard to calculate when it is a future covenant that is breached and
recovery sought against a remote grantor: what is value of recovery for the grantee? Value for
which remote grantor conveyed to immediate grantor? Or value for which immediate grantor
conveyed to grantee?
Damages for an encumbrance measured by:
amount required to remove encumbrance.
Amount by which value of land is diminished by the encumbrance.
Recovery limited to actual loss if grantee does not suffer inconvenience or
remove encumbrance, nominal recovery only.
Covenantee can usually recover court costs, attorneys fees, interest on
consideration. More liberal than other causes of actions. Provided that negotiation or litigation is
done in good faith against holder of paramount title. Some courts require grantee to first demand
grantor to provide representation in order for grantee to receive recovery for litigation costs.
If grantee litigates against paramount title holder and wins, the grantee is
usually held to have established the lack of a title defect, and that the grantor is not liable to
grantee for any costs or damages.
Lober v. Brown (changed hypo)

L B.
After Ls uncle dies, L gets the two-thirds interest in coal.
Estoppel by deed since L has already conveyed the two-third interest to B, L is estopped to claim
that interest.
Estoppel by Deed
When grantor gains interest in land after having conveyed it to grantee, grantor is estopped
from claiming any interest in the land.
But this does not apply to quitclaim deeds: quitclaim deeds only pass interests possessed at
time of conveyance.
California
CA uses grant deeds, not warranty deeds.
Use of grant deeds are not required by law.
(But asking for a warranty deed makes people suspect youre up to no good).
Elements of Grant Deeds
1. Only allows suit against grantor for defects caused by grantor: immediately prior title holder.
2. Only incorporates present covenants, not future covenants.
RECORDING ACTS
Common Law Rules Prior to Recording Acts
Under common law, the 1st taker has title, because the 2nd conveyance is void: O had nothing to
convey.
This is true even if A gave no consideration for the land (A was a donee) and B did.
Policy Behind Recording Acts
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Prof. G. Nelson
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Acts make it easier to check title: one central location where almost all documents concerning the
land are kept.
This facilitates the transferability and alienation of land.
This also enables third parties to know the status of the land.
o Between two parties, recording is not necessary: it is effective between the parties even
before it is recorded.
o Insurance against other claimants to the land: Recording protects against subsequent
BFPs: recording voids third party BFP claims to the land.
General Operation of Recording Acts
Recording Acts answer the question: When does a subsequent taker of a

conveyance prevail as against a prior unrecorded conveyance (1st taker)?
Under every Recording Act, the prior taker always wins if he/she records
before second taker takes.
If A takes but does not record before B takes:

o We could impose a penalty on A by giving B title regardless of who records first. But B
does not automatically trump A in any state.
o The actual approach depends on the system.
Race States
LA is the only state that has a pure race system.

o It disregards subjective intents of parties
o Disregards whether consideration was given
o First one to record gets legal title.
o This is the UCC approach nationwide for chattel.
o Perhaps exceptions when the race is unfair: one party murders or detains the other.
o The system is clean, but considerations of justice and fairness result in LA being the only
state that uses it.
NC and DE are modified race states.

o Subsequent taker prevails against prior conveyances if subsequent taker:
1.
records first
2.
pays value (does not need to be FMV)
Subjective state of mind of subsequent taker does not matter.
But donees are not protected because they do not pay value (will not prevail against
prior takers, even if they record first).
The other 47 states are either Pure Notice or Notice-Race states.

o
Subsequent taker MUST be a BFP.
Elements of BFP:
1.
BFP must be purchaser for value
Donees not protected they are only protected against subsequent

recordings, but not prior ones.
2.
BFP must take without notice, either actual or constructive:
No awareness of prior instrument. Subsequent taker is always on

constructive notice of a prior taker who recorded conveyance.
In Pure Notice states, subsequent taker does not need to record in order to be
perpetually superior to prior taker. Subsequent taker displaces prior taker.
o Subsequent taker need only be a BFP.
o Even if prior taker records before subsequent taker.
o Subsequent taker will still want to record, to protect against other subsequent
BFPs.
In Notice-Race states, a BFP must meet an additional requirement:
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BFP must record first.

Prior taker will beat subsequent taker if prior taker records first.
But if subsequent taker records first, prior taker loses.
Notice
1. Actual notice.
a. Not just rumor.
b. But a court will imply actual notice from circumstantial evidence.
2. Prior taker records first automatic constructive notice.
3. Constructive notice of rights of parties in possession.
a. In almost all states, possession is the equivalent of recording.
b. Leases are thus constructively recorded.
c. Purchasers of properties with leases are thus deemed to know of the lease, and thus of
rights of lessees.
d. Not all states (MS, possibly MA) follow this rule. In some states, possession is only
actual notice, not constructive notice. (this rule encourages negligence)
In all but 3 Recording Acts, subsequent party can only trump prior taker if subsequent party takes
w/o notice
o Notice may be actual or constructive
o Recording by prior taker is automatic constructive notice
o Parties in possession: even if there is a written document and it can be recorded, actual
possession creates constructive notice to subsequent parties
In commercial leases, not all lessees record all of their lease: they usually record
just the memorandum of lease. A one-page notarized document that allows
lease to be recorded.
Tenants: their possession is a substitute for recording.
Seasonal lessees or tenants: if this is the reasonable use of land, notice is created.
o But some prior interests in land cannot be recorded. Yet they are so important that
subsequent takers are deemed to be on notice of them.
Adverse possession
A.P. dont need to record their interest in the land.
If we required them to record, it would mean they had a clear intent to
steal the land.
This would run afoul of the trend in the law to reward innocent A.P., by
meaning only knowing A.P., knowing thieves, would get A.P.
A.P. must be open & notorious to put actual owner on notice
But open & notorious also puts third parties, subsequent takers, on
notice.
o Subsequent takers fall under inverse tacking: the clock keeps
ticking even when legal title is transferred
o Rationale is because subsequent takers are also under notice,
through open & notorious element of A.P.
Seasonable A.P.: putting third parties on constructive notice may be a
stretch. But the rule still holds, even if it doesnt reflect reality.
Sometimes even if A.P. is not in possession at all, A.P. can be found: if
A.P. establishes A.P. prior, then leaves subsequent taker still held to be
on notice of A.P.
Title is clear subject to rights of parties in possession.
Easements by prescription
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Prof. G. Nelson
Keemin Ngiam
Subsequent takers are deemed to have constructive notice of easements

by prescription.
Makes sense to check the land before closing, to ensure there are no
easements.
Title is clear subject to rights of parties using the land.
Easements by implication
Apparency. There must be physical apparency of the need for the
easement, at the time of the split.
There must also be apparency w.r.t. later third parties. P. 1009 fn. 14.
Mechanics liens.
When labor or materials are invested in real estate (supplier, contractor,
architect, plumber, etc. But it must be part of the real estate, not personal
property), such investors are termed mechanics.
Mechanics are deemed to be secured creditors: they get security, a lien, at
an early stage when they put the investment in.
Although not recorded, BFPs are on constructive notice of mechanics
liens.
There is no foolproof protection against mechanics liens, except title
insurance by a reputable company against them, without any exception to
them.
Mechanics Lien
Birth: date of first visible improvement.
Date last work/supply is done.
Date lien claim must be filed (usually 3-6 months after last work is done). This is the period of
risk to BFPs.
After lien is filed, the lien is of record.
There is usually one year from filing of lien until action to foreclose lien may be filed.
If action is not instituted to foreclose the lien, the lien is lost.
The claim of action remains, but the lien is lost.
The lien holder has to put up or shut up.
In about half the states, home owner need only pay general contractor.
This is deemed to be payment to subcontractors: they cannot file a lien against homeowner. Can
only seek action against general contractor.
But in other half of the states, including CA, payment to general contractor is not payment to
subcontractor.
A compromise in MS:
For single-family dwellings, payment to general contractor is payment to subcontractors.
But for all other property, subcontractor can still file a lien against property.
In CA
Ask for list of subcontractors and lien waivers when having work done general contractor
to show that all subcontractors have waived the right to institute a lien against property.
Fixer-Uppers and mechanics liens
Home sellers often remodel their home before selling it.
The remodel is a ticking mechanics lien if contractor not paid, they could file a lien claim against
the home purchaser (who did not pay for the remodel but bought house after it).
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Home purchaser can require that title insurance company insure against liens that do not appear
of record.
Title insurance companies these days will provide such coverage w/o charging more.
If they do, seller might pay. If seller doesnt, likely that real estate broker would, to close the deal
and earn the commission.
Warranty deeds would cover such liens, but it requires suing the owner.
Buying a New House

Important to get lien coverage from title insurance because the whole house could be a
mechanics lien!
Determining Priority of Mechanics Liens
Could be done in terms of time: but it would be unfair. All parties add value to the real estate.
Most states treat all lien holders alike relate all liens to date of first visible improvement.
Paying Value
O A (1st taker, unrecorded)
OB
When can B use Recording Act to defeat A?
In every state but LA, B must pay value.
If B is a donee, A will win even if B records first and even if A was a donee.
Recording Acts still have presumption built into them that favor the first taker.
Paying value is a flexible standard: it is not FMV.
Only requires paying some significant amount for the transaction.
If any money is given, with a promissory note for the rest, buyer is deemed to have paid value.
If only promissory note given: it is only value if it is negotiable meets all the UCC
requirements of negotiability.
Nelsons position: when an enforceable promissory note is given, it is value: it is liability to the
issuer and should constitute paying value.
MR E1 (unrecorded)
MR E2
When Recording Act applied to mortgages, E1s interest is not lost. The penalty for not recording
is just a loss of priority.
E2 will defeat E1 if E2 pays value for the mortgage.
o Half of states (notice states) also require E 2 to take without notice.
o The other half (notice-race states) require E 2 to take without notice and record.
What if purchaser at E2s foreclosure sale knows about E1?
o Doesnt matter. Once E2 takes over E1s priority, E2s new priority is fixed and cannot be
trumped.
Beneficiaries of Recording Acts
1. Purchasers (grantees) who pay value
2. Lessees (for value)
3. Easement holders (for value)
4. Mortgagees (who by definition pay value)
5. Option holders
6. Judgment lien holders
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MR E1 (unrecorded)
MR E2
In CA, notice-race state, E2 must:
pay value (loan MR money)
1)
have no notice of E1s mortgage (either actual or constructive)
2)
record before E1
3)
in order to take priority over E1.
Antecedent debt
A previously unsecured creditor who seeks security via a lien on the property.
E.g. E2 lent MR money that is on an unsecured note, but now seeks security via a mortgage.
Unless E2 gives present value for the mortgage, E2 is said to have not paid value under the Recording Act.
E2 can give present value by:
1. loaning more money
2. granting an extension on the antecedent debt (this is also giving value, valuable consideration)
Without giving present value, holder of an antecedent debt who obtains a mortgage cannot take priority
over a prior unrecorded mortgagee.
Policy: because we place value on giving value.
Judgment Lien Holders
MR E1 (unrecorded)
MR JL (Visa)
JL Holders as Equal Creditors
A JL may not get the benefit of being able to assert the Recording Act against prior recorded
interest no payment of present value.
But JL holders will go to trial and sue to get judgment on the debt.
The time and money expended might be considered present value for the JL.
This is the rule in CA. JL holders are deemed to pay present value for the lien on the land.
JL Holders as Second Class Creditors
But in other states, courts will pity the plight of the judgment creditor (Visa) (but not really
its a term of sarcasm).
They consider the judgment debt to be antecedent debt, and that no present value was given.
In these jurisidictions, E1 is only wiped out if JL gets to a foreclosure sale, and purchaser at sale,
at moment of purchasing, is a BFP (w/o knowledge of E1).
But if E1 records at any time prior to the sale, purchaser at the sale buys subject to E 1s mortgage.
What if MR takes out third mortgage from E3?
o Circularity of liens problem.
o JL records judgment lien and has perfected and recorded lien, protecting itself from
subsequent takers (E3).
o But once E3 records, it will trump E1. Because its not a JL holder: under either race or
race-notice systems, it just needs to give present value and record.
o So JL will be senior to E3, but E3 in turn will be senior to E1, while E1 will be senior to JL.
Torrens System
in most states, states role in title is threefold:
o setting up offices for recording of title
o paying judges to adjudicate title disputes
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o passing substantive rules regarding title disputes

In Torrens states, state takes on an additional duty:
o The Torrens system (in MN, Torrens is largely limited to the largest cities, twin cities and
Rochester, Duluth).
Torrens system began in England, and is largely prevalent in former British colonies
(Commonwealth).
States role w.r.t. title is similar to its role w.r.t. automobiles.
Land enters the Torrens system through landowners voluntarily bringing their land into the
Torrens system.
o Prevalent in urban and suburban areas, because post-war, developers found that it cost
less to bring their numerous suburban divisions under the Torrens system, rather than
maintain separate abstracts for each one.
Torrens Registration: Instead of bringing quiet title action to determine bounds and limits of
prescriptive easement, landowners can register land in Land Courts. Functionally equivalent to
quiet title.
Once the land is registered, state issues a Certificate of Title. Owner gets a copy, but the master
Certificate is kept in the Torrens Office.
Benefit of Torrens is that it makes title examination much easier: almost all relevant interests in
the land are recorded on one certificate, in one place.
Buying land in a Torrens system requires a deed from the owner, plus the owners Certificate of
Title (just like selling or buying a car).
There is no A.P. in Torrens system barred by statute.
But Torrens examiners make mistakes. E.g. forgeries and stolen certificates. That is still bad title.
In the case of mistakes, there is a fund that will compensate the person who bought the fake title.
Torrens still works well in MN and small parts of MA.

But its dying out because of:
o Title insurance companies.
o IL has stopped new properties from being brought under Torrens system.
o Title insurance companies brought political pressure.
o But the Torrens office was also very slow issuing certificate took 9 to 12 months.
o In the secondary mortgage market, buyers demand insurance on those mortgages, even if
its Torrens real estate.
o Even though the Torrens system is insurance on the mortgage, secondary buyers still
demand commercial title insurance for the mortgage: duplicative insurance.
o it requires expertise in the Torrens office. Real estate lawyers willing to do it.
Title Insurance
In Canada (a detour)
Title insurance is gaining a foothold in Canada.
Torrens offices in Canada were not able to keep up with the speed of real estate transactions.
Title insurance companies promised that title insurance would speed up real estate deals: they
would insure the land and issue title policies even before Torrens office issued certificates.
The policies are not stop-gap: they are for the life of the land. But they are issued with effective
date being the date of the deal, not date of the issue of certificate.
Policies are written without even checking the record: title company takes the risk.
In the U.S.
80% of the country is under title insurance, including CA.
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When an E.M. K for land is entered, a preliminary title report will be issued by title insurance
company.
Buyer then has to check report and raise objections with seller.
A week after closing, the actual policy will be sent to the escrow company, which will forward it
to the new owner.
Title insurance companies today, are willing to insure more they pay just 4.5% of their gross
revenues for claims, and are willing to offer to insure more, to gain more business.
Traditionally they were not willing to offer as much coverage p. 1042 Schedule B. Did not
cover boundary disputes, implied or prescriptive easements, rights of parties in possession,
whether or not disclosed by public record, mechanics liens, whether or not disclosed by public
record.
Buyers Insurance
Title insurance protects homeowner mostly only during time of ownership.
But there is some post-sale insurance.
o Homeowner grants a warranty deed.
o If problems crop up later, homeowner can look to title insurance company for protection.
o The insurance policy doesnt just cover that title is good during ownership, but it also
covers that title will be marketable.
But no title insurance company insures against defects in title that the homeowner creates after
getting title.
Seller customarily pays for buyers policy (in some East Coast states, buyer pays).
Sample Title Insurance

ALTA policy is pro-consumer.
ALTA Schedule B is list of actual encumbrances on land disclosed by due diligence.
Weaker policy found on p. 1042: WLTA standard owners policys Schedule B.
o Does not cover:
Encroachments or questions of location, boundary, area, disclosable by accurate
survey
Public or private easements unless disclosed of record (excludes all implied or
prescriptive easements)
Rights or claims of persons in possession
Mechanics liens
ALTA Policy Covered Risks:
o Someone else owns an interest in policy holders title
o Leases, contracts, or options (recorded leases would be in Schedule B)
o Forgeries or impersonations (most common are forged mortgage releases)
o Easements (except those in preliminary title report and therefore in Schedule B)
o Right to limit use of land
o Defective title
o Lien on title
o Any lien occurring before or after policy date, for labor and material furnished before the
policy date
o 12. Policy holder forced to correct or remove an existing violation of any covenant,
condition or restriction affecting the land, even if such covenant is excepted in Schedule
B.
o 18. Policy holder forced to remove existing structures because they encroach on
neighbors land. If encroachment is a boundary wall or fence, coverage is limited.
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20. policy holder forced to remove existing structures which encroach onto an easement,
or over a building set-back line, even if easement or set-back line is excepted in Schedule
B.
o 22. existing improvements are damaged because of future exercise of right to use surface
of land for extraction or development of minerals, water, or any other substance, even if
such rights are excepted or reserved from description of land or excepted in Schedule B.
Insurance company will probably want to have a survey done before issuing such a policy - 12,
18, 20.
Alternatively they might just require a drive-by, a purely visual inspection.
Title insurance companies only pay out 4.5% of their gross national income on claims.
Insurance policies dont usually have inflation riders must be specifically asked for.
Insurance policy will usually be for full purchase price.
Same title insurance company will usually insure both lender and homeowner: more efficient
only one title search is done.
Action/Duty of Insurance company
Insurance company will:
o Pay attorneys fees.
o Or cure the defect themselves (e.g. pay off an undiscovered mortgage, buy back an
easement). Curing it themselves is preferable to paying out money, unless encumbrance
costs more than the policy coverage.
o
Some lenders are now only paying a flat insurance fee for their title insurance. $275. and
theoretically those savings are passed on to the borrower, who usually pays for the insurance on
the loan anyway.
Lenders now are requiring escrow companies for refinancing loans. Because they want title
insurance on the refinanced mortgage.
Lenders Insurance
Because secondary market requires insurance on mortgages, lenders will take out such insurance
on the mortgage policy.
Policy is assignable: policy travels with the mortgage.
Mortgagees policy typically paid for by borrower.
Lenders policy has greater protection:
o It insures lenders lien priority (usually 1st because only senior mortgage lenders ask for
insurance. Junior mortgage lenders usually dont)
o It also contains all the usual buyers coverage (lender wants to make sure that buyer at
foreclosure sale will take clean and clear f.s.a.)
Junior mortgage lenders usually rely on senior mortgage lenders insurance, as an assurance of
good title.
If they form a secondary market mortgage pool, they might take out insurance.
Junior mortgage lenders might just ask for a preliminary title report from insurance company, just
to make sure that they are okay. But wont take out the policy.
RESTRICTIVE COVENANTS
Three ways of regulating land use in the U.S.:
1. law of nuisance landowner cannot use land in such a way as to unreasonably interfere with use
of neighbors land
2. restrictive covenants amalgamate law of K and law of real property
3. zoning laws
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Effectively or functionally like negative easements.

Also known as servitudes.
In the Restatement, servitudes cover both easements and restrictive covenants.
o Right to use someones land, or right to prohibit use of someones land.
There is increasingly less litigation over whether covenants run with the land and burden
successors in interest.
o Because in the last 50 years, we are increasingly just using formal CC&Rs.
o These are just created incident to the development of real estate: they benefit and burden
all members of the subdivision.
o Courts have taken the position in equity, that the sole question is whether the defendant is
on notice.
o Questions of horizontal privity are largely fading. 95-99% of litigation dealing with
restrictive covenants deal with the question: What do the words mean?
Formal Approach
developer buys a plot of land and has local government approve and record a new plat that
subdivides the land.
Developer then records a set of restrictions: CC&R covenants, conditions, and restrictions,
before any lot is conveyed out.
Every purchaser of a lot is thus under constructive notice of those CC&Rs, and is subjected to
their conditions.
Typical Restrictions
o Single-family dwelling
o Only for residential and not commercial purpose
o Set-back lines how close to the street or to the neighboring lot can the home can be
built
o Size of home
All subsequent purchasers of the property are both bound and benefit from the CC&R.
The CC&R are reciprocal: all owners in the subdivision can sue for their violation, and all benefit
from them.
Some subdivisions have a Continuing Owners Association:
o Levy can be charged to finance the owners association.
o Unpaid levies become liens on individual lots.
o Levies are sometimes assessed based on size of the house or lot.
o Owners association benefit: a pot of money to pay a lawyer to take legal action to
enforce CC&R.
Some subdivisions may also have a Building or Architectural Committee to approve of proposed
plans.
o Committee usually controlled by developer until large amount of units are sold.
Vertical Subdivision - condominiums
Condos have a set of bylaws, created before sale of any units.
Bylaws give board of directors of owners association:
o the right to levy monthly assessment,
o sometimes right to levy assessment for capital improvements,
o sometimes right to amend the bylaws.
Developer typically controls owners association at the beginning of development: until sufficient
lots are sold to other owners.
Sometimes the bylaws reserve 51% control of owners association to developer until 75% of units
are sold: to help developer preserve control until it knows sufficient units have been sold.
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Remedies for Violation of CC&R

Usually an injunction.
Damages are possible, but very speculative.
Informal Restrictions
Nelsons half-assed restrictions.
Piecemeal subdivision of property so unlike creating a plat and all subdivisions at once,
developer partitions them and sells them one by one.
And developer conveys each one with separate restrictions, separate CC&Rs.
o So each buyer has a separate CC&R.
Sometimes, perhaps by mistake, a deed may be granted free of any CC&R.
In such a situation, court will have to address two issues:
o No covenant grants any of the owners right to enforce CC&R against another owner
they are not benefited by each others CC&R.
o Court has held that if subdivision look s like theres a common plan (apparency test),
even the landowner whose property is free from CC&R, will be bound to the CC&R of
the common plan.
o Common plan analysis will also give the other homeowners standing.
But the requirements to find standing are much more stringent than the
requirements to bind someone to the litigation result.
Two landowners.
When A owns a plot of land, subdivides it, and sells half to B, with some restrictions on the deed.
All restrictions are now on Lot 2, not Lot 1.
Court will usually allow purchaser of Lot 2 to maintain status quo: to build as Lot 1 builds/built.
Or A and B own adjacent lots and agree to make some CC&R between them, execute a bilateral
agreement to only allow single-family use, building.
The agreement will bind both A and B, and their successors in interest.
Litigation arises over subsequent successors in interest: argument that they were not in privity.
Restrictions were not created incident to a possessory interest in real estate. No horizontal privity.
The law used to agree with such an interpretation, and some jurisdictions still do: that recovery
cannot extend to subsequent parties.
But injunctive relief available if owner is on notice, regardless of privity.
Restrictive Covenants and Zoning

Houston, TX, has no zoning law, just restrictive covenants.
Basic Rule: The more restrictive of the two will govern.
But must comply with both restrictions.
Interpretation and Meaning of Words
CC&Rs are often drafted by lawyers of the developer (in the typical subdivision).
Lawyers have no great vested interest in the restrictions.
Buyers often dont read the covenants anyway.
Ambiguity: Two opposing policy arguments.
o Attacking restriction: Law favors free and unfettered use of land.
o Defending restriction: Law should favor planning through the use of CC&R.
Court will always look at meaning of terms first.
Groninger v. Aumiller (model home in a subdivision used to make deals, building v. use)
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Building or use restriction? Ambiguity in the language.

Court holds that it is a building and not a use restriction.
Although home is used for a business, the building itself is a residential structure.
Metzner v. Wojdyla (daycare center in a home dispute)

Only limitation is the residential purposes covenant.
But residential could cover a variety of arrangements where property is rented or used for
commercial residential purposes.
without the consent of the grantor may invalidate covenant.
Court holds that residential is the opposite of commercial.
o (But its a false dichotomy!)
o Seems unlikely court would not permit grandparents to take care of grandchildren.
Better provision would have been no commercial purposes allowed.
Home offices both residential and commercial.
o Policy: reduces pollution, traffic, encourages enterprise, lowers business costs, more
efficient.
o People often do work from home, or take work home, or telecommute, or are consultants.
All commercial use might be unenforceable too broad and covers too much.
o Court may just distinguish b/w commercial uses with negative externalities and those
that do not.
Drafter must therefore specify what sort of commercial activity is barred what kind of
externalities to prohibit.
Storey Restrictions
One-storey only.
o Prevent intrusion on other peoples air rights, light, etc.
o Restriction affected FMV of land: land was not absolutely free.
o Void for ambiguity could build 50 tall one-storey home. A storey is too vague to
enforce.
Crystal Clear Covenants
E.g. Single Family Related by Blood or Marriage
Restriction would bar same-sex couples or unmarried partners, but not large immigrant families.
Once the restriction is clear, ambiguity cannot be used to attack the covenant.
Other Ways of Attacking Restrictive Covenants
1. Constitutional Law Shelley v. Kramer.
2. State statutes.
3. Local ordinances.
4. Federal statutes.
o Most prominent: Federal Housing Act (FHA of 1988, dealt with disabilities)
5. Public policy.
The holding of Shelley stands, but it has been operationalized through legislation.
Because Shelley was decided on state action grounds judicial enforcement of a restrictive
covenant.
Most cases therefore do not try to argue on the basis of Shelley, but on the basis of a violation of
an ordinance or statute.
State statutes often cover most suspect classes: race, national origin, ethnicity, disability, religion,
etc.
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Blood or Marriage Case in LaDue, MO

Brady Bunch family.
City sought to enforce zoning ordinance blood or marriage.
Lower court held it violated privacy rights.
Supreme Court said it encouraged marriage public policy.
Ten days later, they got married.
State Statutes - Group Homes
If covenant is residential use, they have a good argument.
If covenant is single family, blood or marriage, they cant use ambiguity.
Many states have passed statutes saying that such covenants are inapplicable to group homes for
the aged or mentally retarded.
Statutes put limits on number of people in the home, to reduce negative externalities.
Federal Statutes
Fair Housing Act bans discrimination against the handicapped.
Statute has often allowed for density restrictions.
Some group homes are not covered:
o Sex offenders
Some are not:
o Alcoholics
o Drug addicts
There is a cultural difference b/w homes for the physically handicapped, mentally challenged,
and group homes for released felons, drug addicts, sex offenders.
Restrictions on families with children also illegal.
Private property prohibitions on expression have been upheld: not violations of First
Amendment.
Who Bears the Burden?
Those who dont have as much money or power to protect their interest.
Where land is expensive, you dont see group homes. They cant afford the land.
Its all about who has the money.
Nelsons proposal: Spreading out low-income housing. One lot in every neighborhood,
condemned by the government.
Condo Unit Owner vs. Owners Association
Condo bylaws and regulations often give tremendous power to owners association, which in turn
gives it to the board of directors.
In part because people live in greater proximity greater impact on each others lives.
The owners association also has the power to tax, power to impose an ownership fee.
o Revenue to maintain common areas.
Scholars have made argument that board of directors should be treated as the government, and
subject to the EPC.
The hot button issue today is the board of directors power to tax.
o Assessments for maintenance are normally allowed for in the bylaws, and assessments
for capital investments usually require a special vote.
o Condo regulations often say that failure to pay fees becomes a lien on the unit.
o And foreclosure on an assessment sale is often, by statute, deemed to be just like a
foreclosure on a mortgage, a deed of trust.
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o
o
o
o
o
o
But if the analogy is paying taxes, the time needed to foreclose a tax lien is long, whereas
the time needed to foreclose an assessment lien is much shorter.
Legislatures have been lengthening the time b/w foreclosure and sale.
In a tax sale, the burden of unpaid taxes is borne broadly by all taxpayers.
But in a condo, the burden is heavier on the others in the smaller pool of condo owners.
Failure to pay has a greater impact on the condominium as a whole.
Assessment liens in condos are usually junior to mortgage liens. Their priority varies
from state to state: some states they are senior to all but first mortgage, others they take
priority according to when they were recorded.
Condominium Bylaws
There is a declaration (Constitution) and bylaws.
Condo bylaws are more fluid than CC&Rs in a housing development.
The board of directors functions like a city council.
The standard test for condo bylaws and other CC&Rs is reasonableness.
o Either the courts view of reasonableness
o Or if the regulation serves any rational purpose
o Business judgment rule. Granting deference to board or committee. Inquiry is solely
whether they acted within scope of authority and action was in good faith pursuit of
legitimate interest.
Development Architectural Committees
Usually first staffed by the developer.
Later will be filled by owners in the development.
All subsequent developments on the land, changes to the structures, must be approved by the
architectural committee.
Courts will uphold their decisions so long as they are rational and not prejudicial in nature.
Their oversight tends to lapse as the subdivision or development gets older: people stop caring as
much, new owners move in, etc.
How Restrictive Covenants End
Predetermined end date 20, 25 years.
The default rule for renewal is that everyone in the subdivision must agree to renew the covenant:
otherwise the covenant is not binding.
But many covenants have a supermajority provision for renewal: setting less than 100% approval
for renewal.
Amendments
CC&Rs usually also have separate provisions for amendments: requiring just a supermajority.
Courts sometimes impose a uniformity requirement for amendments.
o To avoid benefiting some owners at the expense of others.
o Zoning law analogue is spot zoning. The zoning only provides a benefit for one piece
of property.
Pietrowski v. Dufrane (detached garage, sheds, restrictive covenant)
Damages are hard to grant for a violation of CC&R. Every owner in the subdivision is injured by
the violation, although not all to the same degree.
The typical remedy is therefore an injunction.
Laches and estoppel did not apply: plaintiff put defendant on notice from the start.
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Unclean hands (equitable defense). Plaintiff cannot claim relief if plaintiff has violated the same
or similar covenant.
o court rules that plaintiffs violation was too minor to be a waiver of right to relief. A
storage shed is not the same as a freestanding garage. Distinction b/w minor and serious
breaches of covenant.
Acquiescence. If plaintiff allows others to violate the same or similar covenant, plaintiff has
waived right to enforce, or acquiesced in the other violations, and has therefore waived right to
bring an action.
o Similar to EPC violation of selective enforcement.
Changed circumstances v. abandonment.
o Either would destroy the covenant.
o Changed circumstances If the changes in the residential character of the
neighborhood are substantial enough that they frustrate the purpose of the covenant.
Changed circumstances only apply in residential settings.
Minority rule: Changed circumstances of environment outside subdivision may
void covenant.
o Abandonment there is substantial violation of the covenant, which does not change the
residential character of neighborhood. If it is extensive enough, it will constitute
abandonment.
Test: whether average person would reasonably conclude that there was
abandonment.
Alternative test: whether violations widespread enough to frustrate goal of the
covenant, such that enforcement would impair value of burdened lot w/o
benefiting other lots.
o Acquiescence is a personal defense abandonment applies to the whole neighborhood.
Defenses for the Breacher

Laches
An equitable defense unreasonable delay. It bars injunctive relief (but not legal damages).
Laches can bar a plaintiffs claim much earlier than a statute of limitations.
Some argue laches should be prevented by bringing suit: but not good policy encourages
lawsuits when a simple letter or personal notice will do.
Estoppel
Defense against both law and equity.
Where the plaintiff affirmatively misleads the defendant.
Distinction b/w laches and estoppel is not a bright-line: sometimes estoppel can be laches, or vice
versa.
Even if laches or estoppel bars the plaintiff, it does not bar other members of the subdivision.
Balancing Approach
Similar to Manillo v. Gorski.
Court examines if defendant acted in good faith: did defendant knowingly (subjectively, not
constructively) violate the covenant, or do it innocently?
If in bad faith, injunction will be granted.
If violation occurred in good faith, court may not grant injunction depends on outcome of the
balancing test.
Can occur in sideyard or setback requirement violations.
o But if injunction is granted, and defendant pays off plaintiff, defendant might also have to
pay off the rest of the subdivision.
o Might create incentive for others to demand a pay-off too.
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o
o
Therefore it makes it hard to buy off the injunction.

If court does not grant injunction but instead grants damages in lieu, defendant will
probably want to bind everyone to the action (class action).
Merger
When properties bound by a CC&R are subsequently owned by the same owner at the same time,
the covenants are merged and wiped out of existence, as with easements.
But unlike easements, there are no quasi-covenants or implied covenants.
Merger in a large subdivision is virtually impossible.
Eminent Domain
Condemnation by the government will wipe out any covenant on the condemned land.
Most courts have held that when the government condemns certain lots in a subdivision, the other
owners of the subdivision can claim damages for the reduction in value of their property, for
violation of CC&R.
They are suing for a condemnation of their property right the restrictive covenant occasioned
by the condemnation and taking of their fellow subdivision owners land.
But the other owners are still bound by the covenant.
Tax Foreclosure
Buyer at a tax sale takes free and clear of all encumbrances on the land.
Many states, however, require the buyer to still be bound by the covenant: CC&Rs are not
destroyed by the tax sale in these states.
Destroying CC&R by Prescription
Analogous to obtaining an easement by prescription.
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Property Outline, SP 2005

Property consists of a bundle of rights or expectations in a tangible or intangible thing that

Property is not a thing, but rather a bundle of rights.

The larger the bundle is, the more valuable it is.

Property can be in land, chattel, intangibles.

Land real property (immovable property under civil law)

Construction changes personal property (materials) into real property (building).

Fee simples are marked by inheritability.

Property Outline, SP 2005

Possibility of reverter future interest in a determinable estate

F.S.A. is termed absolute ownership in the domain of personal property.

We never see Fee Simple Defeasable in personal property.

A life estate in personal property is possible. E.g. a trust.

Leasehold estates are common in personal property. E.g. car leases.

Reversions and remainders can exist in personal property.

Property Outline, SP 2005

Fee Simple Defeasibles

Property Outline, SP 2005

Property Outline, SP 2005

Property Outline, SP 2005

Property Outline, SP 2005

Physical destruction but could be multiple copies floating around

Marriage and Divorce revokes in many states

Property Outline, SP 2005

Life tenant is entitled to income, but cannot encroach on principal.

Property Outline, SP 2005

Liability For Permissive Waste?

Property Outline, SP 2005

Property Outline, SP 2005

Property Outline, SP 2005

Property Outline, SP 2005

Conversely, there is a presumption of adverse use in heavily populated states.

Other Requirements of A.P. (vary from state-to-state)

In some states, color of title also shortens the statute of limitations.

Government land cannot be lost to A.P.

If there is a Torrens title system, there is no A.P. if there is a claim of right

A.P. can only acquire the present interest.

Property Outline, SP 2005

Can length of their A.P. be combined to meet statute of limitations?

Only if they passed possession continuously, i.e. grantor grantee.

A.P. only gains the estate to which owner was entitled.

Usually provides just the time period for acquiring title.

Property Outline, SP 2005

Property Outline, SP 2005

Case turned on whether actual possession required continuous possession.

Land need not be fenced, buildings not necessary.

Sufficient if A.P. used land as a reasonable owner would.

Property Outline, SP 2005

Property Outline, SP 2005

Fraud on Marital Rights

Augmented estate also precluded over-recognition. Fair share had to include

Property Outline, SP 2005

Property Outline, SP 2005

Property Outline, SP 2005

Uniform Marriage and Divorce Act

When there is ouster, the out-tenant can claim rent.

Property Outline, SP 2005

Ouster may be actual: telling cotenant to never return, or constructive: changing

Ouster may create A.P., if it goes on long enough.

Improvements and Repairs

Property Outline, SP 2005

Property Outline, SP 2005