1
Q
Fee simple absolute
A
Largest possible estate in land, indefinite duration (“to A [and his heirs]”)
2
Q
Fee simple determinable
A
Terminates automatically after a duration, grantor has possibility of reverter (“so long as”)
3
Q
Fee simple subject to condition subsequent
A
Can terminate after a named event, grantor has right of reentry (“but if”)
1. If ambiguous whether FSD or FSSCS (contains both language), treat as if FSSCS (grantor may elect forfeiture)
4
Q
Fee simple subject to executory interest*:
A
Automatically divests in a third party on the happening of a named event
v. Invalid conditions: violate public policy, penalize marriage, promote divorce (OK to support until marriage/divorce)
5
Q
Restraint on Alienation
A
Public policy favors free alienability of property. Courts generally uphold reasonable conditions and restraints. Any unreasonable language (e.g., indefinite restraint) are struck from the instrument
6
Q
Life estate
A
Lasts for duration of grantee’s life (life estate transferred to someone else lasts for named grantee’s life)
1. Life tenant duties: Maintain the property in reasonable state; pay mortgage interest only; pay ordinary taxes
2. Remainderman is free of encumbrances by LT, has right to immediate possession from any lessee on LT’s death
3. Life estate pur autre vie (life of another): Measured by life other than grantee’s (“to A for life of B”)
a. May also result when LT conveys its life estate to another (B has a life estate for the life of A (LT))
7
Q
Waste (and three types)
A
Waste: Grantee of less than fee (life, term) cannot adversely injure future interest of remainderman or reversioner
1. Future interest holder may seek damages or injunction, or reimbursement if $ spent to perform LT’s obligations
2. Voluntary waste: Volitional act that decreases value of estate, intentional/negligent damage
a. Exploitation of natural resources by LT limited to PURGE: prior use of land for exploitation before grant, necessary for repair or maintenance of land, express/implied grant to exploit, suitable only for exploitation
b. Open mines doctrine: LT can continue mining existing resources; remainderman can enjoin if new mines
3. Permissive waste: Failure by LT to take reasonable steps to preserve land, or pay taxes or interest (not principal)
4. Ameliorative waste: Change that benefits property. CL: Prohibited. Modern: Allowed if FMV not impaired and either remaindermen consent or substantial, permanent change in neighborhood deprived property of reas. value
8
Q
Future Interests
A
Possibility of reverter
ii. Right of reentry (power of termination)
iii. Reversion
iv. Executory interest
1. Shifting executory interest
2. Springing executory interest
v. Remainder:
9
Q
Possibility of reverter
A
A type of right that is automatically in effect when a grantor creates FSD (see above)
10
Q
Right of reentry
A
(power of termination): Must expressly state in conveyance of FSSCS and affirmatively exercised
11
Q
Reverter
A
Created when grantor transfers less than a fee interest to 3P (“to A for life, then to B for life” → O)
12
Q
Executory interest
A
Created in favor of 3P, cuts short previous estate before its natural termination
1. Shifting executory interest: Future interest in 3P that divests preceding freehold estate (3P1 → condition → 3P2)
2. Springing executory interest: Follows a gap or cuts short grantor’s estate (O → condition → 3P, 3P → O → 3P)
13
Q
Vested Remainder
A
Created in ascertained person + not subject to a condition precedent (other than termination)
14
Q
Remainder
A
Future interested created in 3P (remainderman), to be taken after natural termination of previous estate (“to A for life, then to B”—B has remainder), thus cannot follow a fee simple (but executory interest can cut it short)
15
Q
VR Subject to Open
A
(partial divestment) (class gift): Interest subject to diminution due to new class members (birth of additional persons who will share in the remainder as a class) (“to A for life, then to children of B”)
a. Class closes when at least one member of the class becomes entitled to distribution, per rule of convenience
16
Q
VR subject to total divestment
A
Vested interest subject to condition subsequent (“to A for life, then to B and heirs, but if B dies unmarried, then to C and heirs”; B has VR subject to divestment by C’s executory interest)
a. If ambiguous, construe as subject to divestment rather than contingent remainder or executory interest
17
Q
Contingent remainder
A
Remainder not yet vested in unborn/unknown person, or subject to condition precedent
a. “To A for life, then to children of B”: Remainder is contingent if B has no children (cf. VR subject to open)
18
Q
Contingent
A
Remainder not yet vested in unborn/unknown person, or subject to condition precedent
a. “To A for life, then to children of B”: Remainder is contingent if B has no children (cf. VR subject to open)
19
Q
Common Law Future interests Rules
A
a. Transferability: Remainders and executory interests are transferable, descendible, and devisable inter vivos
b. Shelley’s rule: Modernly, if life estate in A with remainder to A’s heirs only, heirs get contingent remainder
c. Doctrine of Worthier Title: Remainder in grantor’s heirs (“to A for life, then O’s heirs”) is invalid and becomes reversion in grantor (O’s heirs get contingent remainder)
20
Q
Rule Against Perpetuities
A
An interest is valid only if it must vest or fail within 21 years after the death of any measuring life in being (someone who existed when the deed or will takes effect) at the creation of the interest
1. Applies to interests marked * and to rights of first refusal, options to buy, but NOT charity-to-charity gifts
21
Q
Joint tenancy / Joint tenants (JT)
A
- 4 unities of time, title, interest, possession: JTs must take identical interests at same time by same instrument w/ same right to possession
- Right of survivorship: Upon death of a joint tenant, property interest automatically passes to surviving joint tenants (reduces JTs by 1)
- Ownership interests are equally divided
- Severance by JT creates TIC for the severed interest. Transferee becomes TIC; others still own one interest as JTs (if 2+ JTs remain)
- JT may be severed by: inter vivos conveyance/transfer/sale, partition action (to make TIC), mortgage taken on JT interest under title theory jx (no severance under lien theory—majority view), NOT by will
22
Q
Tenancy in Common
A
- Unity of possession required only: Each TIC is entitled to possess and control the whole property
- Presumed form of co-tenancy unless grantor had clear intent/language for rt of survivorship. No such rt for TIC
- Ownership interests are static and not necessarily equal
- Any tenant in common has a right to judicial partition of the property (e.g., if they’re having a disagreement)
- TIC may be terminated by partition
23
Q
Tenancy in Entirety
A
(4 unities + 5th unity of marriage): Only between legally married parties at time of grant
1. Conveyance needs both spouses (ineffective if by one spouse). Severed by death, divorce, mutual agreement
24
Q
Co-tenant (CT) rights, duties, and relief (Six)
A
- Possession: Right to possess the whole property. If ousted from any portion, can sue for $ and/or ejectment
- Partition: Right to demand (bring action) to physically divide if feasible, or seek to sell and divide proceeds
- Profits: Entitled to 3P rent and profit from land proportionally. Profits belong to CT if brought by own efforts
- Contributions for preservation of property: Entitled to taxes, mortgages, necessary repairs shared proportionally
a. Extraordinary repairs: No duty w/o agreement, but can offset with any rent collected and split rest of rent
b. Improvements: No duty w/o agreement, but difference from increased price created goes to improving CT - Waste: CT can bring an action for waste against another CT during life of the tenancy
- Duty of fair dealing: If a CT gets title or lien in the property, other CTs may join and pay share or forfeit interest
25
Communities
property owner (homeowner) associations (HOAs), cooperative apartments (co-ops), condominiums
1. Each homeowner is under overarching covenants & restrictions (incl. fees) that govern whole community
a. HOA may apply to planned unit developments (PUDs) or common interest developments (CIDs)
2. Each shareholder of co-op is tenant of corp. that holds title to land; co-op board decides who can occupy
3. Each condo owner owns fee simple to unit interior; all owners own walls, land, common areas as co-tenants
26
Adverse Possession
A trespasser may acquire title to real property by AP. Possessor must show actual entry giving exclusive possession that is open and notorious, hostile, and for the statutory period. Gov’t land not subject to AP
i. Actual and exclusive: Physically occupied portion, not shared with the true owner or the public at large
1. If reasonable portion of parcel actually occupied, under color of title (document purporting to give title but does not actually do so), may be deemed to possess entire parcel as if actually occupied
ii. Open and notorious: Plainly apparent occupation of land so as to put the true owner on notice of use upon inspection
iii. Hostile: Contrary to true owner’s intent (regardless of possessor’s intent). Owner’s permission destroys hostility
iv. Statutory period: Continuity of stay is a QOF based on circumstances (e.g., leaving for a year breaks continuity)
1. May be tolled if disability (insanity, jail, non-age) already exists at the time of entry until disability is removed
2. May tack periods of AP by privity. Requires intentional transfer. Combine to meet statutory requirement
v. Rights: Same as true owner (remainder, life estate, etc.) at time of entry. Must quiet title to make marketable
27
Landlord Tenant Estates (Four Kinds)
1. Tenancy for years: For fixed period. Terminates automatically. Created by express agreement (writing > 1 yr)
2. Periodic tenancy: Created by express or implied agreement (LL leases at monthly rent), or operation of law (T stays after lease expires). For fixed period that self-renews until notice equal to length of period, up to 6 months
3. Tenancy at will: No stated duration. Lasts until termination, death, or transfer. Created by express agreement
4. Tenancy at sufferance: T occupies after lease expires. Terminates when LL evicts or holds T to another term
28
Tenant Duties and Defenses
Duty to pay rent. Duty to pay rent ends when T surrenders leasehold interest back to LL
a. DEFENSES: failure to deliver actual possession of premises (LL duty), eviction, LL accepts surrender of premises, LL duty to mitigate damages, offsets for warranty of habitability (residential only), impossibility
2. Duty to avoid waste (see § I-vii for types of waste). No waste if premises damaged without fault of LL or T
29
Landlord Duties
1. Duty to deliver actual possession of premises at beginning of lease term (breach if holdover T not been evicted)
2. Implied covenant of quiet enjoyment and possession of premises. Eviction breaches this covenant:
a. Actual: T physically excluded from entire premises by LL or holdover T → T may stop rent
b. Constructive: LL renders property uninhabitable + T vacates w/in reasonable time → T may stop rent and terminate lease. 3P interference is constructive eviction if LL knew or should have known about it
c. Partial (actual/constructive) eviction → T may abate rent to reasonable rental value of partial portion
3. Implied warranty of habitability (residential only) to make reasonably suitable for human dwelling (CL: N/A)
4. LL generally has no express duty to repair or maintain the premises. If LL assumes duty to perform minor repairs (e.g., keep wind- and water-tight) or repair damages caused by T, and is negligent, LL may be liable
a. Latent defects: If LL leases knowing about defects not readily apparent, may be liable in tort to T or guests
30
What happens if landlord or tenant breaches?
If T materially breaches lease, LL can retake by legal process (sue for rent) or eviction
v. If LL breaches, T may self-help: Terminate lease; abate rent to fair value; repair and offset future rent; seek damages
1. Security deposits for T’s lease: LL must return deposit on termination, unless T’s obligations extend beyond termination. If LL fails to pay back T, LL is in default; T can then recover amount + damages
31
Fixtures
Chattel (personal property) affixed to land so that considered part of the realty. T must remove his fixtures by end of lease term (or w/in reasonable time after indefinite tenancy); T must repair any damage from removal
1. Factors: Objective intent to affix a chattel can be determined by nature of item, manner of attachment, amount of damage to chattel or real estate, appropriateness with use of property, permanence of T’s interest in real estate. Would a purchaser or mortgagee (who has priority) expect the fixture to be part of the property?
2. Trespasser or adverse possessor has no right to take back what he didn’t have right to affix in the first place
32
Assignment
T transfers entire remaining lease. T1 is in privity of estate with LL; covenants can be enforced against assignee (T1). T and LL remain in privity of K. LL can sue T or T1, e.g., for rent for period each owes
33
Sublease
T transfers part of remaining lease. T1 is not in privity of estate with LL; covenants not enforceable against sublessee. LL can sue only T, e.g., for rent (absent agreement). LL can evict T1
34
Zoning
Gov’t may reasonably control the use of land to protect the health, safety, welfare, or morals of citizens (police power), but this zoning power is limited by the due process clause, the equal protection clause, and the takings clause. Specifically, zoning ordinances are generally valid as long as reasonably related to public welfare, not too restrictive, and not discriminatory as to race or a particular parcel.
35
Variance in Zoning
Gov’t permission to depart (or vary) from the literal restrictions of a zoning ordinance as an exception to the ordinance, sought as a permit based on one of two bases, an area variance or a use variance
1. Area variance: An exception that allows a building to exist in dimensions that slightly violate zoning ordinance
2. Use variance: A permit that allows operation of a structure for a purpose not permitted by the ordinance. Applicant must show (1) undue hardship but for the variance, (2) that the variance would not harm the community, (3) there is no fault in seeking the request (not a bad actor)
36
Nonconforming Use
A preexisting use of the land that now does not conform to ordinance at time of enacting. Such a use already in effect cannot be eliminated, unless it causes harm to the community, or just compensation is paid
1. Amortization (payments over time) may be provided to landowner to gradually eliminate nonconforming use
37
Special Use Permit
A permit required even if the zoning is proper for the intended use, e.g., hospitals, funeral homes
38
Exaction
Gov’t may seek payment for permission to build (e.g., seek exaction payment from developer if gov’t has to install new traffic lights around new housing development), only if exaction is reasonably related to impact of dev
39
Takings
If zoning reduces property value, gov’t must pay damages to owner
40
Easement Appurtenant
Interest in use of land of another (servient estate) that attaches to and passes automatically w/ benefited land (dominant estate)
1. Burden of easement passes automatically w/ servient land, unless new owner is BFP w/ no notice of easement
2. Holder of easement may reasonably inspect, maintain (duty to make repairs), and improve the easement
41
Easement In Gross
Holder has right to use servient land w/o owning any land (does not attach to land)
1. Transferable if easement serves economic interest (billboard). Not transferable if for personal enjoyment (swim)
42
Types of Easements (Four)
1. Easement by prescription (analogous to AP): Actual (no exclusivity requirement), open and notorious, adverse, continuous use for statutory period. Public may gain easement in private land via public use
2. Easement by implication: Division of a single tract, where open & continuous use of servient part exists prior to division, which is reasonably necessary to enjoy dominant part, and parties intend to continue use after division
3. Easement by necessity: Division of portion of land (e.g., by selling) + absolute necessity of access created by division (e.g., public road or utility line). Owner of servient portion may choose location of easement
4. Express easement by grant: Agreement in writing signed by grantor. A grant of easement must comply with deed formalities (see § III-f). Presumed to be of perpetual duration unless grant limits the interest
43
Termination of an easement (END CRAMPS)
An easement may be terminated by… (END CRAMPS)
1. Estoppel: Servient owner justifiably relies on easement owner’s conduct or assurance that easement will no longer be enforced + materially changes position in reliance
2. Necessity ends (for easement by necessity)
3. Destruction of a structure on servient land involuntarily (willful destruction does not extinguish easement)
4. Condemnation (gov’t taking) of the servient land extinguishes all easements
5. Release by written deed of release from easement holder to servient landowner
6. Abandonment: Affirmative act or words showing intent for permanent non-use (building makes use impossible)
7. Merger of the dominant and servient estates when owned by the same person as the same type of estate
8. Prescription (reverse AP): Servient owner’s continuous interruption of use for the prescriptive period
9. Stated conditions: Original easement grant may specify conditions for terminating the easement
10. Misuse of easement does not terminate an easement. Remedy for servient owner is injunction against misuse
44
Profit a Pendre
Right to remove resources from land of another, created and terminated in same ways as easements
i. A profit may be extinguished through surcharge, a misuse or overuse that unduly burdens the servient estate
ii. CL (MBE): Not transferable. Modern: May be transferrable if commercial, and may be subdivided if quantifiable
45
License
Permission to use land (e.g., tickets). Revocable personal right, not transferable, not subject to SOF, can be oral
i. Estoppel: Irrevocable if, e.g., licensor allowed licensee to invest substantial money or labor in reliance on license
46
Real Covenant
(if holder seeks $ dmg): Written promise or contractual limitation to do or not do something on land
i. A real covenant “runs with the land,” meaning a subsequent owner may enforce or be burdened by the covenant
47
Real Covenant Burden to run with land
ii. For burden to run with the land and bind successor of burdened estate require writing, intent, notice of covenant by BFP of land (actual, inquiry, or constructive/record notice), horizontal privity, vertical privity, and touch & concern
1. Intent: Original covenanting parties intended that the terms be enforceable by successors or assignees
a. Intent may be implied if covenant touches & concerns land or covenant is in writing
2. Horizontal privity: Relationship b/w original covenanting pts who shared interest in land (e.g., grantor-grantee)
3. Vertical privity: Relationship b/w covenanting pts and their successors in interest. Successor must take covenanting pt’s entire interest for burden to run (not a lesser estate such as life estate from fee simple absolute)
4. Touch & concern land: Covenant directly reduces use or enjoyment of the servient land, or increases obligations
48
Real Covenant Benefit to run with the land
iii. For benefit to run to successor of benefiting estate and enforce the covenant require writing, intent, vertical privity (benefit runs to assignees of original or any lesser estate; any successor may enforce benefit), touch & concern (promised performance benefits use and enjoyment of benefited land)
49
Equitable Servitude
(if holder seeks injunction): Type of covenant where successors may be enjoined in equity
1. For burden to run requires writing, intent, notice, touch & concern
2. For benefit to run requires writing, intent, touch & concern
3. EXCEPTION to writing – implied reciprocal servitude: Negative restrictions part of a common scheme or plan (typically subdivisions) can be enforced even if not in the deed, if some other deeds have it and there was notice
4. DEFENSES (ct will not enforce equitable servitude): Changed neighborhood (change is so significant that enforcement would be inequitable; unclean hands (party seeking enforcement is violating similar restriction on own land); acquiescence to violation by benefited party; estoppel (benefited party acted such that reasonable person would believe covenant was abandoned); laches (benefited party didn’t sue within reasonable time)
5. One promise may create both a real covenant and an equitable servitude. Analysis depends on remedy sought
v. Termination: written release, merger, condemnation, involuntary destruction of servient land (see § II-a-iv above)
50
Types of Support
Lateral support: Absolute right to support from side of land. If land in natural state: Adjacent landowner Δ is strictly liable for damage if excavation causes land to subside. If Π improved land (e.g., building): Adjacent Δ is strictly liable for excavation if land would have collapsed in natural state. Otherwise, liable for damage if Δ’s excavation was negligent
Subjacent support: Absolute right to underground support of natural land and structures pre-existing when subjacent estate was created. Underground occupant of land (e.g., mining co.) is strictly liable for damage to structures. If surface structures built after subjacent structures, subjacent owner is liable only if negligent
51
Water Rights
Navigable watercourses (e.g., rivers, lakes, streams) are governed by either of…
1. Riparian doctrine: Owners of land that borders watercourses (riparian owners) have rights to use water for domestic purpose based on…
a. Reasonable use (majority theory): All lands with access to navigable water have reasonable access to make use of the stream as long as use does not unreasonably interfere with rights of other riparian land owners
b. Natural flow (more restrictive minority theory): Riparian owners may be enjoined from use of stream if it substantially or materially reduces water quantity or quality for another owner (e.g., downstream owner)
52
Surface Water Rules
passing over land and not a channel, e.g., rainfall) within boundaries may be used for any purpose. Liability for redirecting and changing its natural flow depends on which theory applies:
1. Natural flow theory: Landowner cannot alter the rate or manner of natural drainage of surface waters where such actions would injure others above or below him. Most states allow “reasonable changes”
2. Common enemy theory: Owner may keep water from coming onto land, if no unnecessary dmg to others’ lands
3. Reasonable user theory: Balance utility of use against gravity of harm
4. Impounding water: An owner may capture and use surface water on or off his land, only if w/o malice
53
Land Sale Process
contract (to buy/sell land) → escrow period (transfer funds) → closing (deed transfer) → conveyance
54
Land Sale Contracts
precede most transfers of land. Writing is required per SOF, unless part performance or estoppel. Must be signed by party enforcement is sought against, and describe land and consideration to be paid
55
Doctrine of Equitable Conversion
(during escrow gap between LSK and delivery of deed): When LSK is formed…
i. Equitable title passes to buyer: Buyer owns the real property and must pay K price by closing date. Estate of decedent seller or buyer is entitled to specific performance (heirs must give up title or seek conveyance at closing)
ii. Legal title remains w/ seller (and heirs) until close: Seller has personal property interest in proceeds of purchase
iii. Risk of loss follows equitable title: If property destroyed before closing w/o fault of pts, buyer bears risk. But seller must credit any received insurance proceeds to purchase price. Sp. perf. may be denied to prevent seller enrichment
1. Relation back: Buyer’s title relates back to time of deposit in escrow if justice requires (e.g., incompetent seller)
2. Under Uniform Vendor and Purchaser Risk Act (UVPRA, minority view), seller retains risk of loss until transfer of legal title or buyer takes possession
56
Marketable Title
is needed by closing date (delivery of deed): All LSKs include an implied covenant of marketability, to convey marketable title that is reasonably free from doubt and defects
i. Defects: chain of title (AP, unvested future interest), encumbrance (mortgages, liens, restrictive covenants, easements, significant encroachments), existing zoning violation (not restriction)
1. Easement that is beneficial, visible, or known to buyer does not impair marketability
57
Effect of Failure to Produce Marketable Title
a waivable buyer’s defense against LSK enforcement. Buyer must notify seller and give reasonable time to cure defects. If unmarketable at time of closing, seller is in breach; buyer’s remedies include rescission, damages, specific performance with abatement (reduced purchase price), and quiet title suit
1. Seller’s liability on implied covenant ends if buyer fails to notify and closing occurs
iii. LSKs have no warranties of quality or fitness (reasonable workmanlike quality), except for sale of new or remodeled houses by a builder. Seller of existing buildings is still liable for known defects
58
Merger
LSK merges into deed at closing; once merged, buyer can sue on breach of warranty, not on LSK
General warranty deed: Seller warrants that no title defects were created by himself and all prior titleholders. Includes 6 covenants of title (different from real covenants):
59
Present Covenants
(do not run w/ land, breached at conveyance, only immediate grantee can enforce): covenant of seisin (promise that he owns title and possesses estate conveyed), covenant of right to convey (grantor had right as valid owner), covenant against encumbrances (no easements, covenants, unpaid mortgages or liens)
60
Future Covenants
(run w/ land, any future grantee can enforce): covenant for quiet enjoyment (promise that grantee won’t be disturbed by lawful claims of title), covenant of warranty (promise to defend vs. reasonable claims of title & compensate for any losses from superior claims), covenant for further assurances (promise to take reasonable steps to perfect defects of title)
61
Other Types of Deeds
ii. Special warranty deed: Seller warrants that no title defects have occurred during own ownership
iii. Quitclaim deed: Seller makes no warranties and conveys whatever interest he has (does not affect implied covenant)
62
Deed Formalities for Valid conveyance
writing signed by grantor, reasonably identifies parties and land
i. Grantee name may be blank (deed valid when filled). If land description blank, void unless grantee’s authority to fill
ii. Valid delivery of proper deed is a question of grantor’s intent to transfer presently + acceptance
1. Intent: manual delivery, notarization and recordation, parol evidence (except to show conditional delivery), etc.
a. Cancelation or destruction of deed has no effect on title, will not return ownership until new deed delivered
2. Acceptance is presumed if the conveyance is beneficial to grantee. A deed to a deceased person is void
3. Relation back: Death or incapacity of grantor of deed in escrow → delivery relates back to time of deposit
iii. Authorized to execute documents: indiv. or corp. buyer/seller, their representative over 18 with power of attorney
63
Recording Statutes
protect BFPs from secret interests if a grantor conveyed a property interest more than once
i. Types: race (first to record wins), notice (subsequent BFP wins), race-notice (subsequent BFP to record first wins)
64
Bona Fide Purchasers
One who paid monetary value in good faith (not a donee) without actual (subjective, from any source), constructive (recorded in chain of title), or inquiry (some fact that would prompt reasonable person to further investigate) notice of prior conveyance (e.g., deed, mortgage, lien) at the time of conveyance
65
Shelter Rule
Grantee (and donee) who takes from a BFP will prevail against an interest that the grantor BFP would have prevailed against, even if the grantee had actual notice of an unrecorded conveyance
66
Mortgage
Interest designed to secure mortgagor (borrower) performance of obligation of debt repayment
67
Debtor (mortgagor) remedies
1. Equitable right of redemption: Mortgagor may pay off debt or bring loan current at any time prior to foreclosure sale. This right cannot be waived in the mortgage
2. Statutory right of redemption: Some jx allow mortgagor to redeem property w/in a fixed period after foreclosure
3. Exoneration: Original mortgagor can compel mortgagee to proceed first against primarily liable person
68
Creditor Remedies
1. Foreclosure by sale
2. Deficiency judgment
3. Acceleration clause in mortgage or note requires debtor to pay full balance before due date upon specified event
69
Foreclosure by Sale
When a mortgagor defaults on his debt, mortgagee (lender) can foreclose on the mortgage and sell the property to satisfy the debt at least in part
a. Before foreclosure, mortgagee may take possession of property or receive rents, depending on theory of title. Lien theory (majority MBE): Mortgagee only gets security interest on property until foreclosure. Title theory: Mortgagee gets title until mortgage is satisfied or foreclosed, is entitled to possession of property
b. Priority: Sale proceeds paid in order: (1) expenses of sale, (2) loan principal & interest, (3) junior interests in order of priority (by time of recording, or recording statute), then (4) mortgagor, if any left. Mortgagor or party who has “assumed” mortgage may be personally liable for unpaid amounts (via deficiency judgment)
i. Purchase money mortgage (PMM): Loan enabling acquisition of the property or improvements, always has priority over prior non-PMMs (subsequent mortgages may defeat PMM by recording act)
c. Buyer of foreclosed property takes title as it existed at time of mortgage(s), subject to senior interests (e.g., original mortgage(s)), but foreclosure destroys junior interests. Ex: Homeowner owes debt on PMM, 2nd credit line, lien. 2nd creditor forecloses. Buyer takes subject to PMM. Lien no longer on land; HO still owes
70
Deficiency Judgment
Mortgagee retains personal cause of action against anyone primarily liable (a grantee who “assumed” mortgage and/or an original mortgagor if grantee bought “subject to” or w/o novation—if ambiguous, default is “subject to”) if proceeds from foreclosure sale are insufficient to satisfy the debt
71
Acceleration clause
Acceleration clause in mortgage or note requires debtor to pay full balance before due date upon specified event
72
