Overview
The law of real property centers on a person’s interest in land, which may be as great as full ownership or as small as a right to enter. It governs how the land and those interests are acquired and granted; bought and sold; rented and leased; and used as security for debts. Interests in land arise through express creation (e.g., by a deed, will, or mortgage) and opera- tion of law (e.g., through adverse possession). Realty may be owned by one individual or several, and an interest may become possessory at once or in the future. However, when multiple parties claim conflicting interests in land, recording statutes dictate who will prevail. Real property law also governs items so affixed to land that they are considered realty (i.e., fixtures) and sets forth rights and responsibilities regarding the use of water.
WHAT INTEREST IS INVOLVED? - Freeholds—Present Possessory Interests
- Indefeasible interests—not subject to early termination
a. Fee simple absolute (“to A and his heirs” or “to A”)
b. Life estate (“to A for life” or “to A for the life B”) - Defeasible interests—allows a fee simple or life estate to be terminated if a stated event occurs
a. Determinable (“for so long as,” “until,” “while,” “during”)—automatically reverts to the grantor
b. Subject to condition subsequent (“but if,” “upon condition that,” “provided that”)—subject to the grantor’s right of entry, which must be exercised
c. Subject to an executory interest (“to A for so long as . . . , and if not . . . , to B,” “to A, but if . . . , to B”)—divests in favor of a third party
Note: Courts have policy to avoid forfeiture of estates. Therefore, in a Q if its not clear if its a FSSCS or FSD then construe ambiguous terms in favor of FSSCS
WHAT INTEREST IS INVOLVED? - Freeholds—Future Possessory Interests
- Interests retained by the grantor
a. Reversion—grantor transfers a shorter estate than she owns (grantor with a fee simple transfers a life estate)
b. Possibility of reverter—grantor transfers a determinable estate
c. Right of entry (power of termination)—reserved on the grant of an estate subject to a condition subsequent - Interests created in a transferee (Note: Rule Against Perpetuities may apply)
a. Executory interests—cut short the prior estate
b. Remainders—possessory only on the natural termination of the prior estate (e.g., death of the life tenant)
1) Remainders are vested if made in an ascertained person and with no condi- tions precedent; otherwise are contingent
c. Class gifts—remainders in a class are contingent if no member of the class yet exists, vested if all possible members exist, and vested subject to open if more members might come to exist
1) Under the rule of convenience, an open class closes when any member can demand possession - Rule Against Perpetuities
a. Any future interest that is not certain to vest or fail within a life in being plus 21 years is void
b. Applies to contingent remainders, executory interests, class gifts (even if vested remainders), options and rights of first refusal, and powers of appointment
c. Does not apply to vested interests, grantors’ reversionary interests, or gifts between charities
d. Only the interest that violates the Rule is stricken (severed from the disposition)
e. Cases that always violate the common law Rule:
1) Executory interest following a defeasible fee—executory interest is stricken
2) Gift to an open class conditioned on members surviving to an age beyond 21—entire class gift is stricken (“bad as to one, bad as to all”)
3) Remainder to A’s children living at his widow’s death (“unborn widow” problem)—contingent remainder is stricken
4) Gift conditioned on an administrative contingency is stricken
5) Options or rights of first refusal that extend to the holder’s heirs and assigns are stricken
f. At common law, a woman is conclusively presumed capable of bearing children (the “fertile octogenarian”)
g. Departures from common law Rule:
1) “Wait and see” statutes—validity of interest determined by actual future events
2) Uniform Statutory Rule Against Perpetuities—90-year vesting period, “wait and see” approach
3) Cy pres approach—invalid interests reformed to match grantor’s intent
WHAT INTEREST IS INVOLVED? - Leasehold Interests (Landlord and Tenant)
- Types of tenancies
a. Tenancy for years—for a fixed period of time (e.g., 10 days, 10 years)
1) Created expressly, ends automatically on its termination date (no notice)
b. Periodic tenancy—for a fixed period that continues for succeeding periods (e.g., month to month)
1) Created expressly or when a lease draws periodic rent payments, termi- nated on proper notice (appropriate time period)
c. Tenancy at will—no stated duration, as long as parties desire 1) Created expressly, terminated on proper notice
d. Tenancy at sufferance (hold-over doctrine)—tenant remains in possession after tenancy expires
1) Landlord may evict tenant or create a periodic tenancy by accepting rent - Rights and duties of landlord and tenant
a. Governed largely by the lease and tort law
b. Tenant must pay rent and may not commit waste
c. Landlord generally must repair, must deliver habitable premises, and may not interfere with tenant’s possession - Both parties generally may assign their interests (transferring the entire term), and tenants may also sublease (retaining part of the term)
WHAT INTEREST IS INVOLVED? - Nonpossessory Interests
- Easements
a. Affirmative easement—right to use someone else’s land
b. Negative easement—right to prevent something on another’s land
c. Easement appurtenant—involves two tracts of land
1) Dominant parcel has the benefit, which runs to grantees
2) Servient parcel has the burden, which runs to grantees with notice
d. Easement in gross—involves one tract of land
e. Creation of easements
1) Express grant or reservation (Statute of Frauds applies)
a) An oral grant creates a license, which is not an interest in land
2) Implication—by operation of law
a) By use existing before a tract was divided
b) By necessity for a landlocked parcel
3) Prescription—acquired through adverse, open and notorious, and contin- uous use for the statutory period
f. Termination of easements—can end by stated condition, unity of ownership between easement and servient estate, abandonment, estoppel, prescription, necessity, release, or condemnation - Profits
a. Right to enter another’s land to remove products of the soil - Real covenants (run with the land at law)
a. Written promises to do or refrain from doing something on land, with a usual remedy of money damages
b. Requirements for burden to run to later grantees: intent, notice, horizontal privity, vertical privity, touch and concern
c. Requirements for benefit to run: intent, vertical privity, touch and concern - Equitable servitudes
a. Covenants with equitable remedies (i.e., injunction, specific performance)
b. Implied from a common scheme for development if notice exists
c. Requirements for burden to run: intent, notice, touch and concern
d. Requirements for benefit to run: intent, touch and concern
e. Equitable defenses apply (i.e., unclean hands, estoppel, acquiescence, changed neighborhood conditions)
HOW IS THE INTEREST BEING ACQUIRED? - Conveyancing (Statute of Frauds Applies—Requires Writing Signed by Grantor)
- Land sale contracts
a. Statute of Frauds exception—no writing is required if buyer has partially performed through possession, improvement, or payment
b. Time for performance presumed not of the essence
c. Marketable title—contracts contain an implied covenant that seller will deliver title free from an unreasonable risk of litigation at closing (i.e., when purchase price and deed exchanged) - Deeds
a. Must evidence an intent to transfer land and adequately describe the land and parties
b. Effective on delivery (i.e., words or conduct showing the grantor’s intent to immediately pass title) and acceptance (often presumed)
c. Types of deeds
1) General warranty deed—covenants against any title defects created by the grantor or prior titleholders
2) Special warranty deed—covenants against title defects created by the grantor
3) Quitclaim deed—no covenants; transfers whatever interest grantor has - Wills
a. Effective on the testator’s death
b. If, at the testator’s death, she no longer owns property that was specifically devised, that gift fails (i.e., is adeemed)
c. If, at the testator’s death, the beneficiary has already died, his gift fails (i.e., lapses) or might pass to the beneficiary’s descendants under an anti-lapse statute if he and the testator were related
HOW IS THE INTEREST BEING ACQUIRED? - Adverse Possession
- Possessor must show: (i) actual entry giving rise to exclusive possession that is (ii) open and notorious, (iii) adverse/hostile (i.e., lacking the owner’s permission), and (iv) continuous throughout the statutory period for an ejectment action (e.g., 20 years)
- The statute does not begin to run if the owner is under a disability to sue (e.g., incapacity) when the possession begins
WHO WILL HOLD THE INTEREST? - Concurrent Interests
- All co-tenants share the right to possession and enjoyment of the property
- Joint tenants—two or more co-tenants with rights of survivorship (i.e., the dead co-tenant’s share passes to the remaining co-tenants)
a. Created expressly, severed by a tenant’s sale or suit for partition - Tenants by the entirety—two spouses with rights of survivorship
a. Created expressly or presumed in some states by a grant to spouses, severed
by divorce - Tenants in common—two or more co-tenants, no right of survivorship
a. Created by the severance of the above tenancies
b. Default co-tenancy created if nothing else was specified
WHO WILL HOLD THE INTEREST? - Competing Interests—Grantor Transfers Same Land More than Once
- Recording acts protect a bona fide purchaser for value without actual, inquiry, or record notice of the prior conveyance (“BFP”)
a. Actual notice—what the grantee actually knows
b. Inquiry notice—what a reasonable inquiry would have revealed
c. Record notice—what a search of the real property records would have revealed - Types of recording acts
a. Notice statutes—later BFP wins if earlier grant was not recorded
b. Race-notice statutes—later BFP wins only if she records before the earlier grantee records
c. Race statutes—first to record wins; actual notice is irrelevant
IS THE LAND SUBJECT TO A SECURITY INTEREST? - Mortgages (Land Is Collateral for a Debt)
- Theories of title
a. Lien theory—mortgagee holds a security interest only
b. Title theory—mortgagee holds title until mortgage is satisfied
c. Intermediate theory—mortgagee holds title only after default - If mortgagor transfers mortgaged land
a. Grantee may agree to assume the mortgage and become primarily liable to pay the mortgage loan
b. Grantee who does not assume the mortgage is not personally liable for the loan but may lose the land if the transferor defaults - Foreclosure—after default, property may be sold to satisfy the debt
a. Does not affect senior interests
b. Terminates junior interests
1) Junior interests are entitled to any surplus remaining after the foreclosing mortgage is satisfied
c. The mortgagor may redeem the land by paying the amount due - If there is a deficiency—mortgagee can sue mortgagor if foreclosure sale proceeds do not satisfy mortgage debt
IS THE LAND SUBJECT TO A SECURITY INTEREST? - Other Security Interests
- Deed of trust—similar to a mortgage, but a third-party trustee forecloses
- Installment land contract—seller retains the deed until buyer pays in full
- Absolute deed—treated as an equitable mortgage when given for a debt
- Sale-leaseback—court may determine this was a disguised mortgage
DOES THE LAND HAVE SPECIAL CHARACTERISTICS? - Fixtures
- Fixtures are items so affixed to land that they become part of the realty
a. Constructive annexation—items not physically attached to land are fixtures if they are so uniquely adapted to the real estate that it makes no sense to separate them (e.g., keys to doors) - Common ownership cases—landowner brings chattel onto land
a. Annexor’s objective intent determines whether items are fixtures - Divided ownership cases—landowner does not bring chattel onto land
a. Item’s owner can remove it only if this would not leave unrepaired damage to the premises
DOES THE LAND HAVE SPECIAL CHARACTERISTICS? - Water
- Rules vary by state and by source of water
a. Watercourses—rivers, streams, lakes
b. Groundwater—percolating water from wells
c. Surface waters—rainfall, melting snow, seepage
DOES THE LAND HAVE SPECIAL CHARACTERISTICS? - Zoning
- Governmental regulations that restrict the use of land
a. Existing zoning violations render title to land unmarketable - Variance—permission to depart from zoning restriction
Restrictive Covenant Requirements
(i) the contracting parties intended it to run; (ii) there is privity of estate between the original promisor and promisee (horizontal privity), as well as between the promisor and his successor (vertical privity); (iii) the covenant touches and concerns the property; and (iv) the burdened party has notice of the covenant.
When does a property sale not in writing except the SOF?
Most jx require 2 of the following:
1) Buyer takes possession of land
2) Buyer pays all or part of the purchase price, and/or
3) Buyer makes substantial improvements
Equity of Redemption Right
The equity of redemption gives the borrower the right to free the land of the mortgage by paying off the amount due, plus any accrued interest, at any time prior to the foreclosure sale. If the borrower has defaulted on a mortgage with an acceleration clause, he must pay the full balance in order to redeem.
Note: a statutory right of redemption, recognized in about half the states, gives the borrower a right to redeem for the foreclosure price after* the foreclosure sale.
Lien theory vs. title theory and eval joint tenancy
The minority of states following the title theory regard a mortgage as an actual transfer of title to the property. Thus, a mortgage by one joint tenant transfers the legal title of the joint tenant to the mortgagee (the lender). This action destroys the unity of title and severs the joint tenancy. On the other hand, in a lien theory state (majority), a mortgage is considered a lien on title-one joint tenant’s execution of a mortgage on his interest does not, by itself, sever a joint tenancy until default and foreclosure proceedings have been completed.
Joint tenancy with 3+ people and one of them transfers…
When property is held in joint tenancy by three or more joint tenants, a conveyance by one of them destroys the joint tenancy only as to the conveyor’s interest. The other joint tenants continue to hold in joint tenancy as between themselves, while the grantee holds her interest as a tenant in common with them, because she does not share the unities of time or title with the joint tenants (i.e., her interest vested at a different time and was acquired by a different instrument).
