REAL PROPERTY

REAL PROPERTY

REAL PROPERTY
TABLE OF CONTENTS

1 OVERVIEW OF REAL PROPERTY  1

2 CONCURRENT ESTATES  2
2.1 THE JOINT TENANCY  2
2.1.1 Distinguishing Characteristics  2
a. Right of Survivorship  2
b. Alienability  2
c. Not Descendible or Devisable  2
2.1.2 How to Create a Joint Tenancy  2
a. The Four Unities  2
b. Clear Expression of Right of Survivorship  3
2.1.3 Severance of a Joint Tenancy  3
a. Severance and Sale  3
b. Severance and Partition  4
c. Transactions that Will Not Result in Severance  4
d. Testamentary Disposition Has No Effect   5
2.2 TENANCY BY THE ENTIRETY  5
2.2.1 How Created  5
2.2.2 Very Protected Form of Co-Ownership  5
a. Creditors  5
b. Unilateral Conveyance or Encumbrance  5
2.2.3 Severance  5
2.3 TENANCY IN COMMON  5
2.4 RIGHTS AND DUTIES OF CO-TENANTS  6
2.4.1 Rights and Duties of Co-Tenants   6
a. Possession   6
b. Rents and Profits   6
c. Adverse Possession  7
d. Carrying Costs  7
e. Repairs   7
f. Improvements  8
g. Waste  8

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h. Partition   9
i. Effect of One Concurrent Owner’s Encumbering the Property   9
j. Duty of Fair Dealing   9

LANDLORD AND TENANT LAW ���������������������������������������������������������������������������������������� 11

3 THE FOUR LEASEHOLD OR NONFREEHOLD ESTATES  11
3.1 THE TENANCY FOR YEARS  11
3.1.1 Termination  11
a. Termination upon Breach of Lease Covenant  11
b. Termination upon Landlord’s Acceptance of Tenant’s Surrender   12
3.1.2 Writing   12
3.2 THE PERIODIC TENANCY  12
3.2.1 Creation   12
a. Express  12
b. By Implication/Operation of Law  12
3.2.2 Termination   13
3.3 THE TENANCY AT WILL  13
3.3.1 Creation   13
3.3.2 Termination   14
3.4 THE TENANCY AT SUFFERANCE  14
3.4.1 Creation   14
3.4.2 Termination   14
3.5 THE HOLD-OVER DOCTRINE  14
3.5.1 Commercial Tenants  14
3.5.2 Residential Tenants  16
3.6 LEASES  16
3.6.1 Dependence of Lease Covenants  16
3.6.2 Options to Purchase  16
a. Exercise of Option  16
b. Enforcement  17
4 TENANT’S DUTIES  18
4.1 TENANT’S DUTY TO REPAIR  18
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4.1.1 Tenant’s Duty to Repair When Lease Is Silent  18

a. Obligation to Maintain Premises  18
b. Tenant Must Not Commit Waste  18
4.1.2 Tenant’s Duty to Repair When Express Covenant in Lease  19
a. Destruction of Premises  19
b. Residential vs. Nonresidential Contexts  19
4.2 TENANT’S DUTY TO PAY RENT  19
4.2.1 Tenant Breaches and Is in Possession of Premises  19
a. Evict or Sue for Rent  19
b. Landlord Must Not Engage in Self-Help  19
4.2.2 Tenant Breaches but Is Out of Possession  19
4.2.3 Rent Deposits   20
4.3 CONDEMNATION OF LEASEHOLDS  20
4.4 TENANT’S DUTY TO NOT USE PREMISES FOR ILLEGAL PURPOSE  20
5 LANDLORD’S DUTIES  21
5.1 DUTY TO DELIVER POSSESSION  21
5.2 THE IMPLIED COVENANT OF QUIET ENJOYMENT  21
5.2.1 Breach by Wrongful Eviction  21
a. Actual Eviction   21
b. Partial Eviction   21
5.2.2 Breach by Constructive Eviction   21
a. Acts of Other Tenants  22
5.3 THE IMPLIED WARRANTY OF HABITABILITY  22
5.3.1 The Standard  22
5.3.2 T’s Entitlements When Implied Warranty of Habitability Is
Breached  22
5.4 RETALIATORY EVICTION  23
5.5 ANTI-DISCRIMINATION LEGISLATION  23
5.5.1 Civil Rights Act  23
5.5.2 Fair Housing Act  23
a. Exemptions  23
b. Prohibited Actions  24

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c. Discriminatory Advertisements Also Prohibited  24

d. Reasonable Accommodations  24
6 TRANSFERS OF LEASEHOLDS AND LANDLORD’S TORT LIABILITY  25
6.1 TRANSFER OF LEASEHOLD–THE ASSIGNMENT VERSUS THE SUBLEASE 25
6.1.1 The Assignment  25
a. Covenants that Run with the Land   26
b. Rent Covenants   26
6.1.2 The Sublease  26
a. Landlord’s Remedies   27
b. Rights of Sublessee   29
6.1.3 Covenants Against Assignment or Sublease   29
6.1.4 Assignments by Landlords   29
a. Rights of Assignee Against Tenants—Attornment   29
b. Liabilities of Assignee to Tenants   29
6.2 LANDLORD’S TORT LIABILITY  29
6.2.1 Common Law of Caveat Lessee  29
a. Common Areas   30
b. Latent Defects Rule   30
c. Assumption of Repairs   30
d. Public Use Rule   30
e. Short-Term Lease of Furnished Dwelling   30
6.2.2 Modern Trend—General Duty of Reasonable Care   30
a. Defects Arising After Tenant Takes Possession   31
b. Legal Duty to Repair   31
c. Security   31
6.2.3 Tenant’s Liability   31
6.3 FIXTURES  31
6.3.1 CHATTELS INCORPORATED INTO STRUCTURE  31
6.3.2 COMMON OWNERSHIP CASES  31
6.3.3 DIVIDED OWNERSHIP CASES  32
a. Landlord-Tenant  32
b. Life Tenant and Remainderman  32
c. Licensee or Trespasser and Landowner  32

SERVITUDES �������������������������������������������������������������������������������������������������������������������������33

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7 EASEMENTS  34
7.1 TYPES OF EASEMENTS  34
7.1.1 Easements Are Affirmative or Negative  34
a. Affirmative  34
b. Negative  34
7.1.2 Appurtenant or in Gross  34
a. Easement Appurtenant   35
b. Easement in Gross   35
7.2 TRANSFERABILITY  35
7.2.1 Easement Appurtenant  35
7.2.2 Easement in Gross  36
7.3 CREATION  36
7.3.1 By Grant   36
7.3.2 By Implication  37
a. Easement Implied from Preexisting Use  37
b. Easement Implied Without Any Existing Use   37
7.3.3 By Necessity   37
7.3.4 Prescription   38
7.3.5 Additional Method–Express Reservation   38
7.4 SCOPE  38
7.4.1 Use of Servient Estate—Repairs   39
7.5 TERMINATION  39
7.5.1 Estoppel  40
7.5.2 Necessity  40
7.5.3 Destruction  40
7.5.4 Condemnation  40
7.5.5 Release  40
7.5.6 Abandonment  41
7.5.7 Merger (Unity of Ownership)  41
7.5.8 Prescription   41
7.6 PARTY WALLS AND COMMON DRIVEWAYS  42

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7.6.1 Creation   42
7.6.2 Running of Covenants   42

8 LICENSES AND PROFITS  43

8.1 THE LICENSE  43

8.1.1 Creation  43
8.1.2 Revocation  43
a. Estoppel   43
b. License Coupled with an Interest   43

8.2 THE PROFIT  44

9 RESTRICTIVE COVENANTS  45

9.1 THE COVENANT  45

9.1.1 Negative and Affirmative  45
a. Negative Covenants  45
b. Affirmative Covenants  45
9.1.2 Covenant vs. Equitable Servitude  45
9.1.3 Running with the Land  45
9.1.4 Requirements for Burden to Run   46
a. Writing  46
b. Intent   46
c. Touch and Concern   47
d. Horizontal and Vertical Privity   47
e. Notice   47
9.1.5 Requirements for Benefit to Run   48
a. Writing  48
b. Intent   48
c. Touch and Concern   48
d. Vertical Privity   48
9.1.6 Specific Situations Involving Real Covenants   49
9.1.7 Remedy—Damages   49
9.1.8 Termination   49

9.2 EQUITABLE SERVITUDES  49

9.2.1 Creation   49

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9.2.2 The Implied Equitable Servitude—The General or Common Scheme

Doctrine   51
a. Elements of the Common Scheme Doctrine  51
9.2.3 Equitable Defenses to Enforcement   52
9.2.4 Termination   52

TITLES �������������������������������������������������������������������������������������������������������������������������������������55
10 ADVERSE POSSESSION  55
10.1 THE ELEMENTS OF ADVERSE POSSESSION  55
10.1.1 Continuous  55
10.1.2 Open and Notorious Possession   55
10.1.3 Actual and Exclusive  55
10.1.4 Hostile   56
a. Co-Tenants—Ouster Required   56
b. Grantor Stays in Possession—Permission Presumed   56
c. Claim of Right  56
10.1.5 Running of Statute   56
10.1.6 Payment of Property Taxes Generally Not Required   57
10.2 TACKING  57
10.3 DISABILITIES  57
10.4 ADVERSE POSSESSION AND FUTURE INTERESTS  57
10.5 EFFECT OF COVENANTS IN TRUE OWNER’S DEED  58
10.6 LAND THAT CANNOT BE ADVERSELY POSSESSED  58

CONVEYANCING—THE PURCHASE AND SALE OF REAL ESTATE �������������������������59

11 LAND SALE CONTRACTS  60
11.1 STATUTE OF FRAUDS APPLICABLE   60
11.1.1 Inaccurate Description of Land  60
11.1.2 Exception to Statute of Frauds—The Doctrine of Part Performance 60
a. Possession  61
b. Purchase Price  61
c. Improvements  61

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11.2 DOCTRINE OF EQUITABLE CONVERSION   62

11.2.1 Risk of Loss   62
11.2.2 Passage of Title on Death   62
11.3 TWO PROMISES IMPLIED IN EVERY LAND SALE CONTRACT   63
11.3.1 Seller Will Provide Marketable Title  63
a. Defects in Record Chain of Title   63
b. When Title Must Be Marketable   64
c. Remedy If Title Not Marketable   64
11.3.2 Seller Will Not Make False Statements of Material Fact  64
a. Failure to Disclose   65
11.3.3 Disclaimers of Liability   65
11.4 No Implied Warranties of Fitness or Habitability  65
11.4.1 Exception—New Home Construction  65
11.4.2 Negligence of Builder   65
11.5 TIME OF PERFORMANCE   65
11.5.1 When Presumption Overcome   66
11.5.2 Liability   66
11.6 TENDER OF PERFORMANCE   66
11.6.1 When Party’s Tender Excused   66
11.7 REMEDIES FOR BREACH OF SALES CONTRACT   66
11.7.1 Liquidated Damages   66
11.8 REAL ESTATE BROKERS   66
11.8.1 Exclusive Listing Agreements  67
11.9 TITLE INSURANCE   67
12 THE CLOSING—DEEDS  68
12.1 Lawful Execution of a Deed  68
12.1.1 Description of Land  68
a. Effect of Insufficient Description  68
12.2 The Delivery Requirement  69
12.2.1 Acceptance and Rejection  69

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12.2.2 Presumptions Concerning Delivery  69

12.2.3 Extrinsic Evidence  69
12.2.4 Delivery with Oral Conditions  70
12.2.5 Delivery with Written Conditions  70
12.2.6 Delivery to Third Party  70
a. Transfer to Third Party with Conditions (Escrow Transaction)  70
b. Donative Escrow with Conditions  70
12.3 Covenants for Title  71
12.3.1 The Quitclaim  71
12.3.2 The General Warranty Deed  71
a. Present Covenants   71
b. Future Covenants  72
12.3.3 The Special Warranty Deed  72
12.3.4 Statutory Special Warranty Deed   72
12.3.5 Damages and Remote Grantees   73
12.4 DEFECTIVE DEEDS   73
12.4.1 Fraudulent Conveyances   73
12.5 Closing Documents  75
12.5.1 Closing Disclosure  75
12.5.2 Notification of Defects  75
12.5.3 Environmental Report  75
12.6 Conveyance by Gift and Will  75
12.6.1 Ademption   75
a. Land Under Executory Contract   76
b. Other Proceeds Not Subject to Ademption   76
12.6.2 Exoneration   76
12.6.3 Lapse and Anti-Lapse Statutes   76
a. Degree of Relationship to Testator   76
b. Application to Class Gifts   77
c. Anti-Lapse Statute Does Not Apply If Contrary Will Provision   77
12.6.4 Abatement   77
12.6.5 Conflict of Laws Issues  77

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13 THE RECORDING SYSTEM  79

13.1 Bona Fide Purchasers  80
13.1.1 Purchaser for Value  80
a. Two Routine Value Questions  80
13.1.2 Notice  81
a. Actual Notice  81
b. Inquiry Notice  81
c. Record Notice—Chain of Title   81
13.2 Types of Recording Acts  82
13.2.1 Race Statute  82
13.2.2 Notice Statute  82
13.2.3 Race-Notice Statute  83
13.2.4 Chain of Title  85
a. Transferees from BFP—The Shelter Rule  85
b. The Problem of the Wild Deed  85
c. Estoppel by Deed  86
d. Deeds Recorded Late   87
e. Deed in Chain Referring to Instrument Outside Chain   87
f. Restrictive Covenants—Deeds from Common Grantor   87
13.3 JUDGMENT CREDITORS   87
14 MORTGAGES  89
14.1 Mortgagor and Mortgagee  89
14.2 Promissory Note and Mortgage  89
14.3 Purchase-Money v. Non-Purchase-Money Mortgage  89
14.4 Creation  90
14.4.1 Writing  90
14.5 Transfer of Interests  90
14.5.1 Transfer by Mortgagee  90
14.5.2 Transfer by Mortgagor—Assumption or Subject To  90
a. Effect of Assumption  91
b. Due-on-Sale Clauses   91
14.5.3 Effect of Recording Acts  91

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14.5.4 Who Is Personally Liable on the Debt If O, Our Debtor-Mortgagor,

Sells Blackacre to B?  92
14.6 Foreclosure  92
14.6.1 How to Proceed  92
a. Deed in Lieu of Foreclosure  92
14.6.2 Sale Proceeds Are Less or More than Amount Owed  93
14.6.3 Effect of Foreclosure on Various Interests  93
a. Junior Interests  94
b. Senior Interests  94
14.6.4 Priorities  95
a. Purchase-Money Mortgage  95
b. Subordination Agreements  96
14.6.5 Redemption  96
a. Redemption in Equity  96
14.7 Mortgage Alternatives  96
14.7.1 Deed of Trust   96
14.7.2 Absolute Deed   97
14.7.3 Installment Land Contract   97
14.7.4 Equitable Vendor’s Lien  97
14.8 SALE-LEASEBACK   97

ZONING, CONDOMINIUMS, AND NATURAL RIGHTS ������������������������������������������������98

15 ZONING  98
15.1 THE VARIANCE  98
15.2 THE NONCONFORMING USE  98
15.2.1 Elimination of Once Lawful Use  98
15.2.2 Changes to Nonconforming Use  98
15.3 CUMULATIVE ZONING  99
15.3.1 Cumulative Zoning Ordinance  99
15.3.2 Noncumulative Zoning Ordinance  99
15.4 SPECIAL USE PERMIT  99

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16 CONDOMINIUMS AND HOMEOWNERS’ ASSOCIATIONS  100

16.1 CONDOMINIUMS  100
16.2 HOMEOWNERS’ ASSOCIATIONS  100
16.2.1 Membership  100
16.2.2 Association Rules  100
16.2.3 Fees  100
16.3 COOPERATIVES  100
17 RIGHTS INCIDENTAL TO OWNERSHIP OF LAND (NATURAL RIGHTS)  101
17.1 IN GENERAL  101
17.2 RIGHTS TO LATERAL AND SUBJACENT SUPPORT OF LAND  101
17.2.1 Lateral Support   101
a. Support of Land in Natural State   101
b. Support of Land with Buildings   101
17.2.2 Subjacent Support   101
17.3 WATER RIGHTS  101
17.3.1 Watercourses (Streams, Rivers, and Lakes)   101
a. Riparian Doctrine   101
b. Prior Appropriation Doctrine   102
17.3.2 Groundwater (Percolating Water)   102
a. Absolute Ownership Doctrine   102
b. Reasonable Use Doctrine   103
c. Correlative Rights Doctrine   103
d. Appropriative Rights Doctrine   103
e. Restatement Approach   103
17.3.3 Surface Waters   103
a. Natural Flow Theory   103
b. Common Enemy Theory   103
c. Reasonable Use Theory   103
17.4 RIGHTS IN AIRSPACE  104
17.5 RIGHT TO EXCLUDE—REMEDIES OF POSSESSOR  104

APPENDIX—PRESENT ESTATES AND FUTURE INTERESTS �����������������������������������105

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18 ESTATES IN LAND  105

18.1 PRESENT POSSESSORY ESTATES  105
18.1.1 Fee Simple Absolute   105
18.1.2 Defeasible Fees   105
a. Fee Simple Determinable (and Possibility of Reverter)   105
b. Fee Simple Subject to Condition Subsequent (and Right of Entry)   105
c. Fee Simple Subject to an Executory Interest   106
18.1.3 Life Estate   106
a. Rights and Duties of Life Tenant—Doctrine of Waste   106
18.1.4 Estate for Years, Periodic Estate, Estate at Will, Tenancy at
Sufferance   107
18.2 FUTURE INTERESTS  107
18.2.1 Future Interests in Transferor—Reversionary Interests   107
18.2.2 Future Interests in Transferees  107
18.2.3 Future Interests in Transferees—Remainders   107
a. Vested or Contingent  108
18.2.4 Future Interests in Transferees—Executory Interests   108
18.3 THE RULE AGAINST PERPETUITIES  108
18.3.1 When Perpetuities Period Begins to Run   109
18.3.2 “Must Vest”   109
18.3.3 “Lives in Being”   109
18.3.4 Interests Exempt from Rule   109
18.3.5 The Rule in Operation—Common Pitfall Cases   109
18.3.6 Perpetuities Reform Legislation   110
18.4 THE RULE AGAINST RESTRAINTS ON ALIENATION  110
18.4.1 Types of Restraints on Alienation   110
18.4.2 Restraints on a Fee Simple   110
18.4.3 Restraints on a Life Estate   110
18.4.4 Options and Rights of First Refusal   111

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REAL PROPERTY NOTES

1 OVERVIEW OF REAL PROPERTY
Below is a chart detailing the Real Property coverage on the
Multistate Bar Exam (the MBE). The MBE questions are divided
equally among each of the five main topics in the top row. To put
these concepts in a logical framework, we will deal with them in a
slightly different order at times, but we will touch on everything.

Real Property

Ownership in Rights in Real Estate Mortgages and

Real Property Real Property Security Devices Titles
Contracts

All Aspects of Mortgages and

Present Estates Easements Deeds
Real Estate Other Security
Contracts Devices

Future Estates Profits and Transfers and Recording

Licenses Foreclosure Statutes

Restrictive Record Notice

Co-Tenancy
Covenants Chain of Title Issues
Estoppel by Deed

Fixtures Adverse
Landlord-Tenant
Zoning Possession

CMR Chart

Real Property essay questions in all jurisdictions also come from

these topics to varying degrees. Present estates and future interests
are tested on the MBE as part of Real Property and on the essay
portion of your exam in Real Property as well as other subjects, such
as Trusts. There is a quick summary of these topics at the end of this
outline, as well as a separate outline and lecture dealing with those
complex issues.

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NOTES 2 CONCURRENT ESTATES

An estate in land can be held concurrently by several persons, all of
whom have the right to enjoyment and possession of the land.
There are three forms of concurrent ownership:

• The Joint Tenancy

Two or more own with the right of survivorship

• The Tenancy by the Entirety

A protected marital interest between spouses with the right of survi-
vorship

• The Tenancy in Common

Two or more own without the right of survivorship

2.1 THE JOINT TENANCY

2.1.1 Distinguishing Characteristics

a. Right of Survivorship
A joint tenancy’s distinguishing feature is the right of survivorship.
So when one joint tenant dies, what’s the result?

transferable during the b. Alienability

holder's lifetime A joint tenant’s interest is alienable inter vivos. What does that mean?

c. Not Descendible or Devisable

Devisible meaning passing
by will A joint tenant’s interest is neither devisable nor descendible. Why not?

Since a deceased joint tenant’s property passes to the surviving

joint tenant(s) by operation of law, there isn’t any property interest
remaining that a decedent’s beneficiary may inherit. So, joint tenancy
property doesn’t become part of the deceased joint tenant’s estate,
and an executor or administrator has no interest in the property. This
survivorship characteristic also means a joint tenant’s attempt to
dispose of the property by will is void. The survivorship
characteristic
2.1.2 How to Create a Joint Tenancy
a. The Four Unities
The common law requires four unities, which you can remember with
“T-TIP”: Joint tenants must take their interests:

• T: at the same time;

• T: by the same title (meaning, in the same deed, will, or other

document of title);

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• I: with identical, equal interests; and

NOTES
• P: with rights to possess the whole

In other words, the interests of joint tenants must be equal in every

way. They must take identical interests, at the same time, by the same
instrument, with the same right to possession. Thus, all interests in a
joint tenancy must be equal shares. If there are three joint tenants,
they each own an undivided one-third interest.

Compare: In a tenancy in common, by contrast, equal shares are

presumed, but are not required. For example, in a tenancy in common
held by three parties, one tenant may own a two-thirds undivided
interest while each of the other two tenants holds an undivided
one-sixth share.

b. Clear Expression of Right of Survivorship

In addition to the four unities, to create a joint tenancy the grantor
must clearly express the right of survivorship. For example, “To A and
B as joint tenants with the right of survivorship.” Otherwise, a convey-
ance to two or more persons, without more, is presumed to be a
tenancy in common.

By contrast, if in a question the bar examiners identify

CMR the parties as joint tenants, take it as given that they are
Exam Tip
joint tenants with the right of survivorship. In this situa-
tion, do not apply the presumption that any conveyance to two or
more persons is a tenancy in common. The bar examiners are not
testing your knowledge of that unless the fact pattern gives you the
quoted language of the grant creating the concurrent estate and
then specifically asks you which concurrent estate has been creat-
ed by that language.

2.1.3 Severance of a Joint Tenancy

Under certain circumstances, a joint tenancy will be severed
(meaning, terminated) and a tenancy in common results. Remember
SAP for these circumstances: Sale And Partition.

a. Severance and Sale

A joint tenant may sell or transfer her interest during her lifetime. A
voluntary conveyance by a joint tenant of their interest destroys the
joint tenancy. The transferee takes as a tenant in common.
Yes, even without
May a joint tenant transfer his interest secretly? nother knowledge
or consent
One joint tenant’s sale severs the joint tenancy as to the seller’s
interest. Why?
it disrupts the 4
unities
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Thus, the buyer is: is a tenant in common

NOTES
If we started with more than two joint tenants in the first place,
remember, the joint tenancy remains intact as between the other,
non-transferring joint tenants.

HYPO 2A
each holds 1/3 undivided O conveys Blackacre: “To Phoebe, Ross, and Monica as joint
shares tenants with the right of survivorship.” Each owns what?

Phoebe then sells her interest to Chandler. What’s the result?

Chandler then becomes a
tenant in common What is the state of Ross and Monica’s title?
Ross and Monica hold 2/3 What does Chandler have?
as joint tenants
Later, Ross dies, leaving behind his heir, Rachel. What happens to
Chandler has 1/3 tenant in the share that was held by Ross?
common
What is the final result?
Ross' share is transferred
to Monica due to right of b. Severance and Partition
survivorship. RACHEL There are 3 types of partition:
TAKES NOTHING.
• By voluntary agreement: An allowable and peaceful way to end
Final result: Monica holds the relationship.
2/3 tenant in common and
Chandler holds 1/3 • By judicial action called partition in kind: An action for a physical
division of the property, if in the best interests of all parties. When
would a partition in kind work best? when the property is sprawling acreage like a
farm. Lends itself to a physical division

• By judicial action called a forced sale: An action when, in the

best interests of all parties, the land is sold and the sale proceeds
are divided up proportionately. When would a forced sale work
best? Works best when the property is a single building. It doesn't lend itself to
a physical division

c. Transactions that Will Not Result in Severance

A joint tenants execution of a lien

y Mortgages
(mortgage) on her share wont sever In most states, a mortgage is a lien on title and does not
the joint tenancy in the majority of sever a joint tenancy. Severance occurs only if the mortgage
states
is foreclosed and the property is sold. The execution of a
An encumbrance by lien will sever the mortgage in title theory states, however, does sever a joint
joint tenancy IN A TITLE THEORY. tenancy (because, under this minority view, giving a creditor a
lien on one’s share is the equivalent of transferring title to that
creditor).

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y Effect of One Joint Tenant’s Murdering Another

Under the Uniform Probate Code and modern statutes, when a
NOTES
beneficiary unlawfully and intentionally kills a joint tenant, any
joint property is transformed into a tenancy in common.

d. Testamentary Disposition Has No Effect

A will is ineffective to work a severance because at death the testa-
tor’s interest vanishes.

2.2 TENANCY BY THE ENTIRETY

A tenancy by the entirety is a marital estate akin to a joint tenancy. It
can be created only between married partners, who take as a ficti-
tious “one person” with the right of survivorship.

2.2.1 How Created

In states that recognize the tenancy by the entirety, it arises presump-
tively in any conveyance to married partners unless the language of
the grant clearly indicates otherwise.

2.2.2 Very Protected Form of Co-Ownership

The tenancy by the entirety is a very protected form of co-ownership.
Remember it with the phrase: “Can’t touch this.”

a. Creditors
Creditors of only one spouse cannot touch this tenancy for satisfac-
tion of the debt.

b. Unilateral Conveyance or Encumbrance

One spouse, acting alone, cannot defeat the right of survivorship by
unilaterally conveying to a third party.

HYPO 2B
Jack and Rebecca, married to each other, own Blackacre as
tenants by the entirety. Jack then secretly transfers his interest to
Miguel. What does Miguel have?
Miguel has nothing
An individual spouse also cannot encumber tenancy by the entirety A spouse cannot unilaterally
transfer a share
property and a deed or mortgage executed by only one spouse is
ineffective.

2.2.3 Severance
Only death, divorce, mutual agreement, or execution by a joint
creditor of both the spouses can sever a tenancy by the entirety. On
divorce, the tenancy by the entirety becomes a tenancy in common.
execution of a lien by a joint creditor of both of the spouses.
2.3 TENANCY IN COMMON After a divorce, a tenancy by the entirety becomes tenancy in common
A tenancy in common is a concurrent estate with no right of

5
 REAL PROPERTY

survivorship. Today, multiple grantees are presumed to take as

NOTES tenants in common, not as joint tenants. Remember these two
features of the tenancy in common:
- no right of survivorship
- co-tenant owns individual part + • Each co-tenant owns an individual part, and each has a right to
rights to possess whole
- devisable, descendible, alienable possess the whole
Why? B/c of no survivorship rights
• Each interest is devisable, descendible, and alienable. Why?

2.4 RIGHTS AND DUTIES OF CO-TENANTS

Tenancy in common b/c they

HYPO 2C
have unequal shares. Suppose that siblings Kevin and Randall co-own a cabin. Kevin
contributed 90% of the purchase price and Randall 10%. Which
form of ownership is this?

Why?

2.4.1 Rights and Duties of Co-Tenants

a. Possession

No -> each cotenant gets to enjoy the HYPO 2D

whole regardless
Kevin takes a can of white paint and divides up the premises.
“Randall,” he says, “you can use and enjoy that 10% on that side of
Rights and Duties of Co-Tenants the line, and only that.” Are Kevin’s actions permissible?
- Possession
--No ouster (wrongful exclusion from
part/whole) Each co-tenant has the right to possess all portions of the property
- Rents and profits but has no right to exclusive possession of any part. If one co-tenant
-- None from co-tenants in exclusive wrongfully excludes another co-tenant from possession of the whole
possession (unless ouster)
-- Fair share if leased to third party or any part, they’ve committed ouster. Ouster is an actionable wrong.

b. Rents and Profits

y From Co-Tenant in Exclusive Possession

No. Unless there has been an HYPO 2E

Kevin leaves the cabin voluntarily, for a three-month tour of Europe
ouster, a co-tenant in exclusive
possession is not liable to the
other for rent. to promote his latest movie. On his return, he demands rent from
Randall for the three months in which Randall enjoyed exclusive
possession. Will Kevin prevail?

In most states, a co-tenant in exclusive possession has the right

to retain profits from their use of the property; that is, they don’t
need to share profits with other co-tenants absent ouster or an
agreement to the contrary.

6
 REAL PROPERTY

y From Third Parties

NOTES
HYPO 2F
Randall leases the cabin’s basement to William, a tenant. Is Kevin Rent is shared via ownership -> so
Kevin gets 90% and Ken gets 10%
entitled to a portion of the rental income?

A co-tenant who leases all or part of the premises to a third

party must account to their co-tenants, providing them their fair
share of the rental income.

In our hypo, what are the parties’ respective fair shares of the
rental income?

Note: Co-tenants in exclusive possession must also share net

profits gained from exploitations of the land, such as mining.

c. Adverse Possession

HYPO 2G No. Unless he ousted, the co-tenant

in exclusive possession wont be
Kevin loses interest in the cabin and decides instead to relocate to able to acquire title to the whole to
the exclusion of the other co-tenant.
Los Angeles, where he stays for the next 20 years. In his absence, Why? B/c the hostility element of
can Randall acquire title to the whole, to the exclusion of Kevin, adverse possession is absent.
through adverse possession?
Rights and Duties of Co-Tenants

Unless they’ve ousted the other co-tenant, the co-tenant in exclu- - Adverse Possession
sive possession for the statutory adverse possession period cannot -- Not unless ouster
- Carrying Costs
acquire title to the whole to the exclusion of the other co-tenant. Why -- Each pays fair share
not? - Repairs
-- Contributions for reasonables,
d. Carrying Costs necessary repairs with notice
- Unilateral improvements
carrying costs mean taxes,
--No contribution (credit at
HYPO 2H mortgage, interest payments
partition)
What are Kevin’s and Randall’s respective responsibilities with
respect to the cabin’s carrying costs?

e. Repairs Yes. Repairing cotenant enjoys the

right of contribution. Kev 90% and Ran
HYPO 2I 10%

A persistent squirrel breaks the cabin’s front window. Randall has

repaired the window. He seeks contribution from Kevin for the cost
of that repair. Will he succeed?

7
 REAL PROPERTY

Yes. The repairing co-tenant enjoys a right to contribution during

NOTES the life of the co-tenancy for reasonable, necessary repairs,
provided they gave notice to the other co-tenant(s) of the need for
the repairs.

What must Kevin and Randall each contribute?

f. Improvements

HYPO 2J
Randall unilaterally converts part of the cabin into a science
laboratory, to foster his passion for chemistry. To do so, he had
to eliminate the cabin’s game room. He seeks contribution from
Kevin, for Kevin’s fair share of Randall’s “improvements.” Will
Randall succeed?

No. During the life of the co-tenancy, there is no right to

During partition (when time comes to contribution for “improvements” made by one co-tenant.
dissolve the party's relationship) ->
the improver gets a credit equal to
any value increase he caused.
What about at partition?
THE IMPROVER SUFFERS A
DEBIT EQUAL TO ANY g. Waste
DIMINATION IN VALUE HE
CAUSED. A co-tenant must not commit waste. During the life of the co-tenancy,
a co-tenant is permitted to bring an action for waste against another
co-tenant.

There are 3 types of waste:

• Voluntary waste is willful destruction

• Permissive waste is neglect

• Ameliorative waste is unilateral change that increases value

HYPO 2K
Which forms of waste might reside on the basis of the previous
hypothetical where Randall unilaterally converted part of the cabin
into a chemistry lab, eliminating the premises’ game room in the
process?

HYPO 2L
O conveys Blackacre, “To A and B as co-tenants.” Which form of
co-ownership is this?

8
 A interest is divisible.(A tenant in common share
is divisible and descendible. No survivorship
rights in tenants in common). Jen becomes
tenants in common with B.
REAL PROPERTY

Thereafter, A dies, devising her interest to her daughter, Jen. Then,

B unilaterally chops down the walnut grove on the premises to NOTES
build a tennis court. Jen, a conservationist, is outraged. Does she
have any rights? Jen may def claim amerliorative
waste action,
What could Jen claim?
jen may also claim partition b/c the
Courts prefer partition in kind. problem may be irreconcilable. She
h. Partition may seek dissolution of the
A joint tenant or tenant in common has a right to bring an action for relationship (i.e. partition)
partition. Recall the three types of partition: voluntary agreement,
partition in kind, and forced sale. Courts prefer partition in kind
but will permit partition by sale when a fair and equitable physical
division of the property cannot be made. Although generally this right
may be exercised at any time, restraints on partition by co-tenants
are valid, provided they are limited to a reasonable time.

i. Effect of One Concurrent Owner’s Encumbering the

Property
A joint tenant or tenant in common may encumber her interest (for
example, by mortgage or judgment lien), but may not encumber the
interests of other co-tenants. If, for example, one tenant in common
mortgages her interest, the mortgagee can foreclose only on the
mortgaging co-tenant’s interest. If a joint tenancy is involved, a
mortgage (in a lien theory state) or lien does not sever the joint
tenancy, but a foreclosure sale will. Note, however, that in the case of
a joint tenancy, a mortgagee or lienor runs the risk that the obligated
co-tenant will die before foreclosure, extinguishing the mortgagee’s
or lienor’s interest.

j. Duty of Fair Dealing

A confidential relationship exists among co-tenants; for example, one
co-tenant’s acquisition of an outstanding title or lien that may affect
the estate is deemed to be on behalf of other co-tenants. This is also
why it’s difficult for one co-tenant to adversely possess against other
co-tenants.

9
REAL PROPERTY

CONCURRENT OWNERSHIP

Type of Tenancy Definition Creation Termination

Joint Tenancy Each tenant has an “To A and B as The right of
undivided interest joint tenants survivorship may be
in the whole estate, with the right of severed, and the
and the surviving survivorship.” estate converted to
co-tenant has a (Without a tenancy in
right to the whole survivorship common, by: a
estate (right of language, it may conveyance by one
survivorship). be construed as a joint tenant,
tenancy in common.) agreement of joint
Joint tenants tenants, murder of
must take: one co-tenant by
(i) identical interests; another, or
(ii) from the same simultaneous deaths
instrument; of co-tenants.
(iii) at the same time; A joint tenancy can
(iv) with an equal be terminated by
right to possess partition (voluntary
(the four unities). or involuntary).

Tenancy by the Each spouse has an “To A and B” The right of

Entirety undivided interest (when A and B are survivorship may be
in the whole estate married). Some severed by death,
and a right of states presume a divorce, mutual
survivorship. tenancy by the agreement, or
entirety in any joint execution by a joint
conveyance to two creditor. Tenancy by
spouses where the the entirety cannot
four unities (above) be terminated by
are present. involuntary partition.

Tenancy in Each tenant “To A and B” or, May be terminated

Common has a distinct, sometimes, “To A by partition.
proportionate, and B as joint
undivided interest tenants.” Only unity
in the property. required is
There is no right of possession.
survivorship.

CMR Chart

10
 REAL PROPERTY

LANDLORD AND TENANT LAW NOTES

3 THE FOUR LEASEHOLD OR NONFREEHOLD
ESTATES
A leasehold is an estate in land, under which the tenant has a
present possessory interest in the leased premises and the landlord
has a future interest (reversion). There are four leasehold estates:

• The tenancy for years

• The periodic tenancy

• The tenancy at will

• The tenancy at sufferance

3.1 THE TENANCY FOR YEARS

This lease, also known as the estate for years or term of years, is for a
fixed, determined period of time. That period could be, for example,
as short as one week or as long as 50 years.

Watch for a termination date. Whenever you know the

CMR termination date from the start, you have a tenancy for
Exam Tip
years.

3.1.1 Termination
A tenancy for years ends automatically at its termination date. How
much notice is needed to terminate a term of years? No notice needed to terminate.
Writing typically needed if
HYPO 3A GREATER than 1 year.

Taylor leases Blackacre to Selena “from January 1, 2022 to July 1, as long as you see an
end date -> youve got a
2022.” TENANCY FOR
YEARS
Why is this a tenancy for years?

How much notice is required to terminate?

a. Termination upon Breach of Lease Covenant

In most leases, the landlord reserves a right of entry, which allows
them to terminate the lease if the tenant breaches any of the lease’s
covenants.

y Failure to Pay Rent

In many jurisdictions, a landlord may, by statute, terminate the
lease upon the tenant’s failure to pay the promised rent—even in
the absence of a reserved right of entry.

11
 REAL PROPERTY

b. Termination upon Landlord’s Acceptance of Tenant’s

NOTES Surrender
A tenancy for years may also terminate if the tenant surrenders the
tenancy and the landlord accepts. The same formalities required for
creation of the leasehold (see below) are required for surrender (for
example, if the unexpired term exceeds one year, surrender must be
in writing).

3.1.2 Writing
Tenancies for years are usually created by written leases. A term of
years greater than one year must be in writing to be enforceable.
Why? This is required by the Statute of Frauds.

3.2 THE PERIODIC TENANCY

A periodic tenancy is a lease which continues for successive intervals
(for example, month to month) until either the landlord or the tenant
gives proper notice of termination. Thus, one of the hallmarks of the
periodic tenancy is that it is continuous until properly terminated.
Periodic Tenancy Creation
3.2.1 Creation "the lease goes on" ->
- Express ("L to T from month to continues until properly
month" a. Express terminated
- By implication
--No mention of duration but rent at The periodic tenancy can be created expressly. For example, Rihanna
set intervals conveys to Olivia from “month to month” or from “year to year” or
--Oral term of years violating statute from “week to week.” What do those examples have in common?
of frauds
-- Holdover tenant after lease ends
b. By Implication/Operation of Law
The periodic tenancy can also arise by implication, in any one of
three ways:

• Land is leased with no mention of duration, but provision is

made for the payment of rent at set intervals.

HYPO 3B
T is an IMPLIED MONTH TO T rents an apartment from L, beginning June 1. Nothing is said
MONTH PERIODIC TENANT about duration. T pays rent each month. What tenancy exists here?

• An oral term of years in violation of the Statute of Frauds cre-

ates an implied periodic tenancy, measured by the way rent is
tendered.
Another way periodic tenancies HYPO 3C
arise by implication: when you see
you have a seeming aural term of L and T negotiate on the telephone for a commercial lease. They
years (violation of statute of frauds) orally agree on a five-year lease with rent at $1,000 a month. Is this
Those instances a implied periodic a tenancy for years?
tenancy will be created measured
by the way THE RENT IS What if T sends L a check for $1,000 and L accepts it?
TENDERED.
No tenancy for years b/c violate SOF.
12
 REAL PROPERTY

T’s first rental payment renders his interest an implied periodic

tenancy with the intervals based on how rent is tendered. NOTES
another way to • In a residential lease, if a landlord elects to hold over a tenant
to get implied
periodic who has wrongfully stayed on past the conclusion of the origi-
tenancy nal lease, an implied periodic tenancy arises measured by the
way rent is now tendered.

HYPO 3D
T holds over after the expiration of her one-year lease but sends implied month to month implied
tenancy
another month’s rent check to L. L cashes the check. What kind of
tenancy now exists?

3.2.2 Termination
How is a periodic tenancy terminated? Notice, usually written, must
be given. Remember, this is because a periodic tenancy is automati-
cally renewed until proper notice of termination is given.

How much notice is needed to terminate a periodic tenancy? At

common law, notice must be at least equal to the length of the period
itself, unless otherwise agreed. Usually, the notice also must be timed
to terminate the lease at the end of a period (for example, the usual
month-to-month tenancy can end only on the 30th or 31st, not the 15th).

• In a month-to-month periodic tenancy, how much notice is re- 1 month

quired?

• In a week-to-week periodic tenancy, how much notice is required? 1 week

• In a tenancy that is year-to-year or greater, how much notice is 1 month under restatement: its
bar examiner preferred
required? approach

Note: By private agreement, the parties may lengthen or shorten

these common-law prescribed notice provisions.

3.3 THE TENANCY AT WILL

This is a tenancy of no fixed period of duration–it’s terminable at the
will of either the landlord or the tenant. For example, “To T for as
long as L or T desires.”
Tenancy at Will

3.3.1 Creation - No fixed duration

Generally, a tenancy at will must be created by an express agree- - Terminable at will of either party ("To
ment that the lease can be terminated at any time. Unless the T for as long as L or T desires")

parties expressly agree to a tenancy at will, the payment of regular

rent will cause a court to treat the tenancy as an implied periodic
tenancy. If the lease gives only the landlord the right to terminate,
a similar right will be implied in favor of the tenant. However, if only

13
 REAL PROPERTY

the tenant has a right to terminate, a similar right will not be implied
NOTES in favor of the landlord.

3.3.2 Termination
In theory, a tenancy at will can be terminated by either party at any
time. But today, in most states, notice and a reasonable time to
quit (meaning, vacate) are required to terminate a tenancy at will.
Alternatively, a tenancy at will can be terminated by operation of law
(for example, due to death or commission of waste).

3.4 THE TENANCY AT SUFFERANCE its a legal name landlord

appoints to wrongdoer for
Tenancy at Sufferance
legal basis
3.4.1 Creation
- T wrongfully holds over past lease
expiration A tenancy at sufferance is created when a tenant wrongfully holds
- L proceeds to recover rent over, meaning they remain in possession past the expiration of the
- Terminates when L moves to evict
lease. In such cases, we give this wrongdoer a leasehold estate (the
or holds T to new tenancy
tenancy at sufferance) to permit the landlord to recover rent.

3.4.2 Termination
The tenancy at sufferance is short-lived. It lasts only until the landlord
either evicts the tenant or elects to hold the tenant to a new tenancy.
No notice of termination is required.

3.5 THE HOLD-OVER DOCTRINE

If a tenant continues in possession after their right to possession has
ended, the landlord may: (1) evict the tenant, or (2) bind the tenant
to a new periodic tenancy. The length of the new tenancy gener-
ally depends on the way the rent was computed under the lease
that has ended. If the rent was computed on a monthly basis, the
election creates a month-to-month periodic tenancy. If the rent was
computed on a quarterly basis though payable monthly, a quarter-
to-quarter periodic tenancy is created, and if computed on an annual
basis payable monthly, a year-to-year periodic tenancy is created.
No matter how the rent is computed, the maximum tenancy that can
be created by the election to hold the tenant to another term is a
year-to-year tenancy. The various promises made by the landlord and
the tenant in the original lease become part of the tenancy for the
additional term.

3.5.1 Commercial Tenants

Commercial tenants may be held to a new year-to-year periodic
tenancy if the original lease term was for one year or more. While,
technically, the length of the new tenancy is based on the way rent
was computed (and could be quarterly or some other time frame), if
the original term was less than one year, the new tenancy is typically
a month-to-month tenancy.

14
 REAL PROPERTY

LEASEHOLD ESTATES

Type of Definition Creation Termination

Leasehold
Tenancy for Years Tenancy that lasts “To T for 10 years.” Terminates at the
for some fixed end of the stated
period of time. period without either
party giving notice.

Periodic Tenancy Tenancy for some “To T from month Terminates by notice
fixed period that to month.” from one party at
continues for OR least equal to the
succeeding periods length of the time
until either party “To T, with rent period (e.g., one full
gives notice of payable on the month for a
termination. first day of every month-to-month
month.” tenancy). Exception:
OR Only one month's
notice (six months' at
L elects to bind
common law)
hold-over T for an
is required to
additional term.
terminate a year-
to-year tenancy.

Tenancy at Will Tenancy of no stated “To T for and during Usually terminates
duration that lasts as the pleasure of L.” after one party
long as both parties (Even though the displays an intention
desire. language gives that the tenancy
only L the right to should come to an
terminate, L or T may end. May also end
terminate at by operation of law
any time.) (e.g., death of a
party, attempt to
transfer interest).

Tenancy at Tenant wrongfully T’s lease expires, Terminates when

Sufferance holds over after but T continues landlord evicts
termination of the to occupy the tenant or elects to
tenancy. premises. hold tenant to
another term.

CMR Chart

15
REAL PROPERTY

3.5.2 Residential Tenants

NOTES Residential tenants, however, are generally held to a new month-to-
month tenancy, regardless of the original term. If the landlord notifies
the tenant before the lease expires that occupancy after the termi-
nation will be at an increased rent, the tenant, by holding over, is
held to have acquiesced to the new terms (even if the tenant actually
objected to the new terms). Holding over equals assent.

There are exceptions to the hold-over doctrine. Watch for

CMR situations where: (1) the tenant remains in possession for
Exam Tip
only a few hours after termination or leaves a few articles
of personal property or (2) the delay is not the tenant’s fault (for
example, severe illness). In such cases, the landlord cannot bind the
tenant to a new tenancy.

3.6 LEASES
A lease is a contract that governs the landlord-tenant relationship.

3.6.1 Dependence of Lease Covenants

At common law, covenants (meaning promises) in the lease were
independent; that is, if one party breached a covenant (such as the
promise to pay rent or to repair the premises), the other party could
recover damages for that breach but the landlord-tenant relationship
persisted and the lease endured. By contrast, today, the landlord
can terminate the lease for nonpayment of rent, and the tenant can
terminate the lease when the landlord breaches the covenant of quiet
enjoyment or the implied warranty of habitability.

3.6.2 Options to Purchase

Options to purchase are sometimes attached to leases. An option to
purchase real property is a separate contract supported by consid-
eration that is a continuing offer to sell the land at a specified price.
As long as the option is contained within the lease itself, the consid-
eration for the lease supports the option. Because it is an interest in
land, an option must be evidenced by a signed writing to satisfy the
Statute of Frauds.

a. Exercise of Option
Absent a contrary provision, the option lasts as long as the lease.
The method of exercise is determined by the agreement. Generally,
the party granting the option may keep the consideration regard-
less of whether the option is exercised; the consideration is for the
continuing offer, and not money for the purchase.

16
 REAL PROPERTY

b. Enforcement
Although the Rule Against Perpetuities applies to options, there is an
NOTES
exception for options attached to leases; so an option to purchase in
a lease is enforceable even if it would otherwise violate the Rule. The
usual remedy for enforcement of an option to purchase is specific
performance, but damages are also available.

17
REAL PROPERTY

NOTES 4 TENANT’S DUTIES

A tenant has two primary duties: (1) to repair, and (2) to pay rent.
not ordinary wear and
4.1 TENANT’S DUTY TO REPAIR tear repairs
- and dont commit waste
4.1.1 Tenant’s Duty to Repair When Lease Is Silent
a. Obligation to Maintain Premises
A tenant need only maintain the premises. What does that mean?

Thus, it’s important to distinguish between a routine repair (which a

tenant is obliged to make) and a repair occasioned by ordinary wear
and tear (which a tenant is not obliged to make).

HYPO 4A
One morning, as she is cleaning her hairbrush, T clogs the
bathroom sink. What is her duty?

Later, in the shower, T notices that some of its tiles have yellowed
as a consequence of the passing of time. Must T replace the worn
tiles?

b. Tenant Must Not Commit Waste

A tenant’s duty to repair is linked to the doctrine of waste. A tenant
cannot damage (meaning, commit waste on) the leased premises.
There are 3 types of waste:

y Voluntary (affirmative) waste:

It results when the tenant’s overt conduct damages the
premises.

y Permissive waste:
It occurs when the tenant fails to take reasonable steps
to protect the premises from damage from the elements.
Remember, the tenant is liable for maintaining the premises,
excluding ordinary wear and tear. If the duty to maintain the
premises is shifted to the landlord (by lease or statute), the
tenant has a duty to report deficiencies promptly.

y Ameliorative waste:
It occurs when the tenant unilaterally alters the leased property,
thereby increasing its value. Generally, the tenant is liable for
the cost of restoration. There is a modern exception to this rule,
however, which permits a tenant to make this type of change
if the tenant is a long-term tenant and the change reflects
changes in the neighborhood.

18
 REAL PROPERTY

4.1.2 Tenant’s Duty to Repair When Express Covenant in NOTES

Lease
When a lease is silent about a tenant’s repair obligations, the tenant
must maintain the premises in reasonably good repair but isn’t
responsible for ordinary wear and tear. What about when a tenant T's Duty to Repair with Express
Covenant
has expressly covenanted in the lease to maintain the property in
good condition for the duration of the lease? - Maintain in good repair/condition
- T may terminate if premises
a. Destruction of Premises destroyed without T's fault

At common law, historically, a tenant was responsible for any loss

to the property, including loss attributable to force of nature, such
as hurricanes, earthquakes, or lightning strikes. However, today, the
majority view is:

b. Residential vs. Nonresidential Contexts

If a residential tenant covenants to repair, the landlord usually
remains obligated to repair (except for damages caused by the
tenant) under the nonwaivable “implied warranty of habitability”
(see 5.3, infra). However, a nonresidential tenant’s covenant to
repair is enforceable, and a landlord may be awarded damages for
breach based on the property’s condition when the lease termi-
nates compared with its condition when the lease commenced. In
the absence of a specific reference to ordinary wear and tear, a
covenant to repair usually includes such repairs. However, repair
covenants frequently exclude ordinary wear and tear.

4.2 TENANT’S DUTY TO PAY RENT

4.2.1 Tenant Breaches and Is in Possession of Premises

a. Evict or Sue for Rent
If a tenant is on the premises and fails to pay rent, the landlord can Duty to Pay Rent
evict through the courts or continue the relationship and sue for rent If T breaches and remains on
due. premises:
- Evict
If the landlord moves to evict (which they do under a state’s unlawful - Continue relationship and sue
detainer statute), are they nonetheless entitled to rent? for rent
- No self-help

b. Landlord Must Not Engage in Self-Help

Landlord is entitles to rent until the
It’s important to remember that the landlord must not engage in tenant vacates.
self-help, such as changing the locks, forcibly removing the tenant, or
removing any of the tenant’s possessions. Self-help is flatly outlawed
and is punishable civilly and criminally.

4.2.2 Tenant Breaches but Is Out of Possession

Suppose that a tenant wrongfully vacates with time left on a term of
years lease. What are the landlord’s options?

19
 REAL PROPERTY
When your tenant has
wrongfully vacated with time
Remember S I R still left on the lease.
NOTES
• Surrender: The landlord could choose to treat the tenant’s aban-
donment as an implicit offer of surrender, which the landlord
accepts, thereby ending the lease. What is surrender? T shows by words/conduct
Duty to Pay Rent
they want to giveup lease.
If T breaches and is out of • Ignore the abandonment (meaning, do nothing) and hold the
possession: tenant responsible for the unpaid rent until the natural end of the
- S -- Surrender: End lease lease, just as if the tenant were still there. This option is available
- I -- Ignore: Do nothing (hold T only in a minority of states.
liable for rent)
- R -- Relet: New lease (hold T
liable for deficiency) • Re-let the premises on the wrongdoer-tenant’s behalf, and hold
the wrongdoer-tenant liable for any deficiency.

Under the majority rule, the landlord must at least try to re-let.
Why?

4.2.3 Rent Deposits

Most states restrict the amount of security deposits to one month’s
rent, require landlords to pay interest on security deposits, and allow
statutory or punitive damages for a landlord’s improper refusal to
return a security deposit. Clauses in leases that attempt to avoid
these state laws are void. The landlord is permitted to retain a
security deposit for damages actually suffered to the premises.

4.3 CONDEMNATION OF LEASEHOLDS

If the entire leasehold is taken by eminent domain, the tenant’s
liability for rent is extinguished because both the leasehold and
reversion have merged in the condemnor and there is no longer a
leasehold estate. The lessee is entitled to compensation. However, if
the taking is temporary or partial, the tenant is not discharged from
the rent obligation, but is entitled to compensation (that is, a share of
the condemnation award) for the taking.

4.4 TENANT’S DUTY TO NOT USE PREMISES FOR ILLEGAL

PURPOSE
If the tenant uses the premises for an illegal purpose, the landlord
may terminate the lease or obtain damages and injunctive relief.

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 REAL PROPERTY

5 LANDLORD’S DUTIES NOTES

5.1 DUTY TO DELIVER POSSESSION
The majority rule requires that the landlord put the tenant in actual Duty to Deliver Possession
- Duty to place T in actual, physical
physical possession of the premises at the beginning of the lease- possession
hold term. Thus, if at the start of the tenant’s lease, a prior holdover
tenant is still in possession, what’s the result? LL has breaches and new T gets
damages.
5.2 THE IMPLIED COVENANT OF QUIET ENJOYMENT Arises by implication in residential
This exceedingly important promise arises by implication in every and commericial leases.

residential and commercial lease. It provides that a tenant has a Implied Covenant of Quiet Enjoyment
right to quiet use and enjoyment of the premises, without interfer- - T has right to quiet use & enjoyment
without inference from L (residential
ence from the landlord or a paramount title holder (for example, a & commercial)
prior mortgagee who forecloses). How might a landlord breach this
covenant? Breach by wrongful eviction or constructive
eviction.
5.2.1 Breach by Wrongful Eviction
When does this occur?

a. Actual Eviction
Actual eviction occurs when the landlord, a paramount title holder,
or a hold-over tenant excludes the tenant from the entire leased
premises. Actual eviction terminates the tenant’s obligation to pay
rent.

b. Partial Eviction
Partial actual eviction occurs when the tenant is physically excluded
from only part of the leased premises. Partial eviction by the landlord
relieves the tenant of the obligation to pay rent for the entire
premises, even though the tenant continues in possession of the
remainder.

5.2.2 Breach by Constructive Eviction

Constructive eviction occurs when the landlord’s breach of duty
renders the premises unsuitable for occupancy.

How might this occur? Suppose, for example, that every time it rains,
Dido’s apartment floods. She has a claim for constructive eviction
if three elements are met. To recall the elements of constructive
eviction, remember S I N G:

• Substantial Interference: substantial interference (chronic/permanent

problem due to LL actions or failures)
Notice (T must notify L)
• Notice:

• Goodbye: Goodbye/Get out (T must

vacate reasonable after LL
fails to remedy)

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 REAL PROPERTY

A tenant who has been constructively evicted may terminate the

NOTES lease and may also seek damages.

a. Acts of Other Tenants

Is the landlord liable to a tenant for the wrongful acts of other
tenants? As a general rule, no. But there are two exceptions in which
case a landlord will be liable:

• A landlord has a duty to abate a nuisance on site

• A landlord must control common areas

5.3 THE IMPLIED WARRANTY OF HABITABILITY

Most jurisdictions imply a covenant of habitability into residential
leases. This important promise applies only to residential leases and
not to commercial leases. This warranty is nonwaivable.

Keep in mind that the implied warranty of habitability does

CMR not apply to commercial tenants—only to residential
Exam Tip
tenants.

5.3.1 The Standard

The implied warranty of habitability provides that the premises must
be fit for basic human habitation. In other words, bare living require-
ments must be met.
By case law and local housing code
How is the appropriate standard for habitability discerned?

No heat in winter is an example. No What sorts of problems trigger breach of the implied warranty of
working plumbing. habitability?

5.3.2 T’s Entitlements When Implied Warranty of

Habitability Is Breached applies to residential leases
If the implied warranty of habitability is breached, you can remember
the tenant’s options as M R 3: Move, Repair, Reduce, Remain:

• Move out and terminate the lease But doesnt have to move

• Repair and deduct (allowable by statute in a growing number of

jurisdictions; a tenant may make the reasonable repairs and de-
duct their cost from future rent)

• Reduce rent or withhold all rent until the court determines fair
rental value (typically, the tenant must place withheld rent into an
escrow account to show their good faith)

• Remain in possession, pay full rent, and affirmatively seek money

damages

22
 REAL PROPERTY

On the exam, remember the difference between the NOTES

CMR covenant of quiet enjoyment (where to plead constructive
Exam Tip
eviction successfully the tenant must vacate), and the
implied warranty of habitability, where the tenant could
vacate but is not required to.

HYPO 5A
L and T entered into a written lease to endure from June 1, 2017 Commericial lease so IWoH is out.
to June 1, 2024. T operates her jewelry business on site. Several
Consider SING. Elemenst were met
so she may vacate.
months ago, the building’s sprinkler system began going off in
error, ruining some of T’s inventory. She complained to L, who
promised to correct the problem. L never did. Last week, when the
sprinkler system malfunctioned yet again, T vacated. Was T within
her rights?

Does the implied warranty of habitability apply?

5.4 RETALIATORY EVICTION

In many states, a landlord may not terminate a lease or otherwise
penalize a tenant in retaliation for the tenant’s exercise of their legal
rights. So, for example, if a tenant lawfully reports a landlord for
housing code viola­tions, the landlord is barred from penalizing the
tenant by raising rent, ending the lease, harassing the tenant, or
taking any other reprisals. Many statutes presume a retaliatory motive
if the landlord acts within, for example, 90 to 180 days after the tenant
exercises their rights. To overcome the presumption, the landlord
must show a valid, nonretaliatory reason for their actions.

5.5 ANTI-DISCRIMINATION LEGISLATION

5.5.1 Civil Rights Act

The Civil Rights Act bars racial or ethnic discrimination in the sale or
rental of all property.

5.5.2 Fair Housing Act

The Fair Housing Act protects tenants and potential tenants from
discrimination based on race, color, religion, national origin, sex, or
disability, as well as familial status (except in senior housing).

a. Exemptions
Except as relates to advertising (see 3), infra), the Fair Housing Act
does not apply to (1) owner-occupied buildings with four or fewer
units in which persons live independently of each other; and (2)
single-family homes sold or rented by an owner who owns no more
than three single-family homes.

23
REAL PROPERTY

b. Prohibited Actions
NOTES Under the Fair Housing Act, it is unlawful to take certain actions
because of a person’s race, color, religion, sex, disability, familial
status, or national origin, including:

1) Refusing to negotiate, rent, or sell housing or make avail-

able a mortgage loan or other financial assistance;

2) Providing different terms or conditions for the sale or rental

of a dwelling or for a mortgage or other financial assis-
tance; and

3) Falsely representing that a dwelling is not available for

inspection, sale, or rental.

c. Discriminatory Advertisements Also Prohibited

It is also unlawful under the Fair Housing Act to make, print, or
publish any notice or advertisement that indicates any preference or
limitation based on race, color, religion, sex, disability, familial status,
or national origin. This provision may be violated by the person who
makes a discriminatory advertisement (such as a landlord) as well as
by the newspaper or other publisher that prints it. The exemptions
stated above do not apply in relation to advertising.

d. Reasonable Accommodations
When the Fair Housing Act applies, landlords must permit disabled
tenants to make reasonable modifications to existing premises
to accommodate their disabilities at the tenants’ own expense.
Landlords must also make reasonable accommodations in rules,
policies, and services when necessary to afford a disabled person an
equal opportunity to use a dwelling.

tested heavily

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 REAL PROPERTY

6 TRANSFERS OF LEASEHOLDS AND NOTES

LANDLORD’S TORT LIABILITY
6.1 TRANSFER OF LEASEHOLD–THE ASSIGNMENT
VERSUS THE SUBLEASE
In the absence of some prohibition in the lease, a tenant may freely
transfer their interest in whole (thereby accomplishing an assign-
ment, meaning a transfer of the entire remaining term of a lease)
or in part (thereby accomplishing a sublease, meaning the tenant
has retained some part of the remaining term, other than a right to
reenter upon breach). In the lease, a landlord can prohibit a tenant
from assigning or subletting without the landlord’s prior written
approval. However, once a landlord consents to one transfer by a
tenant, the landlord waives the right to object to future transfers by
that tenant, unless the landlord expressly reserves the right.

For bar exam purposes, a transfer will be considered a

CMR sublease, rather than an assignment, only when the
Exam Tip
original tenant reserves time for herself (for example, the
last month of the lease).

6.1.1 The Assignment Assignment

An assignee stands in the shoes of the original tenant in a direct - Assignee T in privity of estate w/L
relationship with the landlord; that is, the assignee and the landlord --Liable on covenants that run with
are in “privity of estate,” and each is liable to the other on all land
- Original T in privity of K (but not
covenants in the lease that “run with the land.” After assignment, the estate) w/L
original tenant is no longer in privity of estate with the landlord, but --Liable for original lease obligations
their lease contract remains in effect and enforceable. In other words,
the original tenant remains liable on the original contractual obliga-
tions, such as to pay rent (privity of contract).

HYPO 6A
T1 has 10 months remaining on a two-year term of years lease. T1
transfers all 10 months to T2. Is this an assignment or a sublease?

L and T2 An assignment b/c T1 transferred her interest in whole. An assignment arises when the assignor (OG
Tenant) transfers all the time she has to the assignee

As a result of the assignment, L and T2 are in privity of estate.

Why? Privity of estate is a product of possession. i.e. a nexus that [parties share by virtue of a possessory
interest. Therefore they are liable to eachother for all promises in the original lease that RUN WITH LAND
Because L and T2 are in privity of estate, they are liable to each
other for all of the covenants (promises) in the original lease that
run with the land.

What are some examples?

25
REAL PROPERTY
b/c they dont share original
Note: L and T2 are not in privity of contract. Why not? promissory words created by
NOTES the lease.
They never exchanged the original promissory words of contract
that created the lease.

L and T1

As a result of an assignment, L and T1 are no longer in privity of

estate. Why not? T1 is gone. T1 is out of possession.

However, they remain in privity of contract. Why? they share original k words.

They shared the original words of contract that created the lease.

Because L and T1 remain in privity of contract: they are 2ndry liable to each other.
I.e. if T2 (direct wrongdoer) cannot
What does that mean? pay (cannot make rent), then T1 is
liable. T1 is the backup

HYPO 6B
L leases Blackacre to T1. T1 assigns to T2. T2 assigns to T3. T3
then engages in flagrant abuse to the premises. Yes b/c L and T3 share
privity of estate
Can L proceed against T3, the direct wrongdoer?
Yes, b/c L and T1 are
Can L proceed against T1, the original tenant? connected via privity of
contract (2nry liable to L)
Can L proceed against T2?
No b/c no privity of k, and
no privity of estate b/c T2
assigned to T3.
a. Covenants that Run with the Land
A covenant runs with the land if the original parties to the lease so
intend and if the covenant “touches and concerns” the land (that
is, benefits the landlord and burdens the tenant (or vice versa) with
respect to their interests in the property).

b. Rent Covenants
Because a covenant to pay rent runs with the land, the assignee
owes rent directly to the landlord. If a tenant’s assignee fails to
pay rent (or breaches another covenant), the landlord can sue the
assignee because of privity of estate and, if the assignee cannot
pay, can also sue the original tenant because of privity of contract. If
the assignee reassigns the leasehold interest, their privity of estate
with the landlord ends, and they have no liability for the subsequent
assignee’s failure to pay rent.

6.1.2 The Sublease

A sublessee is the tenant of the original lessee and usually pays rent
to the original lessee, who then pays the landlord. A sublease arises
when T1, the original tenant, transfers less than her entire interest to

26
 REAL PROPERTY

T2. The result of a sublease is that the landlord and sublessee are in
neither privity of estate nor privity of contract. Instead, T2 is respon- NOTES
sible to T1 and vice versa. Thus, a sublessee is not personally liable to
Sublease
the landlord for rent or for the performance of any of the covenants
in the main lease unless the sublessee expressly assumes the - T2 has no privity (estate or
covenants. contract) with L
--T1 and T2 responsible to eacgh
other
Remember, if there’s a sublease, the relationship between - Relationship between L and T1
CMR L and T1 remains fully intact. Thus, for example, if T2 fails
remains intact
Exam Tip
to pay rent, L proceeds against T1 and T1 in turn proceeds
against T2. If the residential premises betray the implied warranty of
habitability, T2 proceeds against T1 and T1 in turn proceeds against L.

a. Landlord’s Remedies
The landlord may terminate the main lease for nonpayment of rent
or breach of other covenants if the lease so states or the power is
given by statute. The sublease automatically terminates with the main
lease.

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REAL PROPERTY

ASSIGNMENT VS. SUBLEASE

Assignment by Assignment by Sublease by

Landlord Tenant Tenant
Consent Tenant’s consent Landlord’s consent Landlord’s consent
not required. may be required may be required
by lease. by lease.

Privity of Estate Assignee and Assignee and Sublessee and

tenant are in privity landlord are in landlord are not
of estate. privity of estate. in privity of estate.
Original tenant
remains in privity
of estate with
landlord.

Privity of Contract Assignee and Assignee and Sublessee and

tenant are not in landlord are not in landlord are not in
privity of contract. privity of contract. privity of contract.
Original landlord Original tenant and Original tenant and
and tenant remain landlord remain in landlord remain in
in privity of contract. privity of contract. privity of contract.

Liability for Assignee liable to Assignee liable to Sublessee is not

Covenants in Lease tenant on all landlord on all personally liable on
covenants that run covenants that run any covenants in
with the land. with the land. the original lease
and cannot enforce
the landlord’s
covenants.

Original landlord Original tenant Original tenant

remains liable on remains liable for remains liable for
all covenants in rent and all other rent and all other
the lease. covenants in covenants in the
the lease. lease and can
enforce the
landlord’s
covenants.

CMR Chart

28
 REAL PROPERTY

b. Rights of Sublessee
A sublessee cannot enforce any covenants made by the landlord in
NOTES
the main lease, except a residential sublessee may be able to enforce
the implied warranty of habitability against the landlord.

6.1.3 Covenants Against Assignment or Sublease

In the lease, a landlord can prohibit a tenant from assigning or sublet-
ting without the landlord’s prior written approval. A valid covenant
against assignment is considered waived if the landlord was aware
of the assignment and did not object (for example, by knowingly
accepting rent from the assignee). Once a landlord consents to one
transfer by a tenant, the landlord waives the right to object to future
transfers by that tenant, unless the landlord expressly reserves
the right (known as the Rule in Dumpor’s Case). Lease covenants
restricting assignment and sublease are strictly construed against
the landlord. (Thus, a covenant prohibiting assignment does not
prohibit subleasing and vice versa.)

Note: If a tenant assigns or sublets in violation of a lease provision,

the landlord usually may terminate the lease or sue for damages, but
the transfer is not void.

6.1.4 Assignments by Landlords

A landlord may assign the rents and reversion interest they own. This
is usually done by deed when the landlord conveys a building to a
new owner. The tenants’ consent is not required.

a. Rights of Assignee Against Tenants—Attornment

Once tenants are given reasonable notice of the assignment, they
must recognize and pay rent to the new owner as their landlord. The
benefit of all tenant covenants that touch and concern the land runs
with the landlord’s estate to the new owner.

b. Liabilities of Assignee to Tenants

The burden of the landlord’s covenants that touch and concern
the land runs with the landlord’s estate to the assignee; thus, the
assignee is liable for the performance of those covenants. The
original landlord also remains liable on all of the covenants they
made in the lease.

6.2 LANDLORD’S TORT LIABILITY L has no duty to make premises

safe.
6.2.1 Common Law of Caveat Lessee
The common law norm is: Let the tenant beware. In tort, a landlord
was under no duty to make the premises safe.

The five exceptions to caveat lessee: CLAPS:

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REAL PROPERTY

• Common areas
NOTES
• Latent defects

• Assumption of repairs

• Public use rule

• Short-term lease of furnished dwelling

a. Common Areas
A landlord has a duty of reasonable care in maintaining all common
areas (for example, hallways, stairwells, elevators).

b. Latent Defects Rule

A landlord must warn a tenant of hidden defects (meaning, a
dangerous condition that the tenant couldn’t discover by reasonable
inspection) of which the landlord has knowledge or reason to know.
Otherwise, the landlord will be liable for any injuries resulting from
the condition. If the tenant accepts the premises after disclosure, the
tenant assumes the risk; the landlord is no longer liable in tort. Note
that the landlord’s obligation in tort is a duty to warn, and not a duty
to repair.

c. Assumption of Repairs
While in tort a landlord is under no duty to make repairs, once repairs
are undertaken, the landlord must complete them with reasonable
care. What does that mean? if LL makes repairs negligently, LL is liable.

d. Public Use Rule

A landlord who leases public space (for example, a convention hall or
a museum), and who should know, because of the significant nature
of the defect and the short length of the lease, that a tenant will not
repair, is liable for any defects on the premises that cause injury to
members of the public. Why? b/c the tenant doesnt have time nor
expertise to make repair themselves.

e. Short-Term Lease of Furnished Dwelling

A landlord who rents a fully furnished premises for a short period (for
example, a summer cottage) is under a stricter duty. Such landlords
are responsible for any defective condition which proximately injures
a tenant (whether or not they knew of the defect). Why? b/c the tenant doesnt have
time nor expertise to make
repair themselves.
6.2.2 Modern Trend—General Duty of Reasonable Care
Many courts now hold that a landlord owes a general duty of reason-
able care toward residential tenants, and will be held liable for
injuries in tort resulting from ordinary negligence if the landlord had
notice of a defect and an opportunity to repair it.

30
 REAL PROPERTY

a. Defects Arising After Tenant Takes Possession

A landlord generally is held to have notice of defects existing before
NOTES
the tenant took possession but is not liable in tort for defects arising
after the tenant takes possession unless the landlord knew or should
have known of them.

b. Legal Duty to Repair

If the landlord has a statutory duty to repair (for example, housing
codes), the landlord is liable in tort for injuries resulting from the
landlord’s failure to repair or negligence in making repairs.

c. Security
Some courts hold landlords liable in tort for tenant injuries inflicted
by the criminal conduct of third parties in cases where the landlord
failed to comply with housing code provisions dealing with security,
maintain ordinary security measures, or provide advertised security
measures (for example, surveillance cameras).

6.2.3 Tenant’s Liability

The duty of care owed by a tenant, as an occupier of land, to third
persons is discussed in the Torts outline.

6.3 FIXTURES
A fixture is a chattel that has been so affixed to land that it has
ceased being personal property and has become part of the realty. A
fixture passes with the ownership of the land and must stay put.

6.3.1 CHATTELS INCORPORATED INTO STRUCTURE

How to tell that a given chattel is a fixture and must stay put: there
are two ways to tell. First, when items are incorporated into the realty
so that they lose their identity. Second, a chattel affixed to realty
is a fixture when its removal would cause considerable damage to
the premises. Common examples here: plumbing, heating ducts, a
furnace.

6.3.2 COMMON OWNERSHIP CASES

A common ownership case is one in which the person who brings
the chattel to the land owns both the chattel and the land, as when
X installs a furnace in his home. That item is a fixture if the party who
made the annexation objectively intended to make the item part of
the realty. This intention is determined by: the nature of the article,
the manner of attachment, the amount of damage that would be
caused by its removal, and the adaptation of the item to the use of
the realty.

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REAL PROPERTY

6.3.3 DIVIDED OWNERSHIP CASES

NOTES In divided ownership cases, the chattel is owned and brought to
the realty by someone other than the landowner (for example, by a
tenant, licensee, or trespasser). Accession describes the annexor’s
intent to make the chattel a permanent part of the real estate.

a. Landlord-Tenant
Suppose that a tenant installs a chandelier onto the leased premises’
ceiling. How can you tell whether that tenant installation qualifies
as a fixture, in which case it must stay put because fixtures pass
with ownership of the land? An agreement between the landlord
and tenant is controlling on whether an annexed chattel is a fixture.
Absent an agreement, a tenant is deemed to lack the intent to
permanently improve the property, and thus may remove his annexed
chattels if removal does not substantially damage the premises or
destroy the chattel. Annexed chattels must be removed by the end
of the lease term (or within a reasonable time after the termination of
an indefinite tenancy), and the tenant is responsible for repairing any
damage caused by the removal.

b. Life Tenant and Remainderman

The same rules apply in the life tenant-remainderman context as in
landlord-tenant situations, except that the life tenant’s representa-
tive may remove annexations within a reasonable time after the life
tenant’s death.

c. Licensee or Trespasser and Landowner

Licensees are treated much like tenants, whereas trespassers
normally lose their annexations. Thus, absent a statute, an adverse
possessor or good faith trespasser cannot remove fixtures (for
example, house erroneously constructed on a parcel that possessor
believed she owned). Some courts, however, allow a good faith
trespasser recovery measured by the value added to the land (not
construction costs).

32
 REAL PROPERTY

SERVITUDES

A SUMMARY OF SERVITUDES

Forms of Servitude Method of Creation Parties Bound Remedy

Affirmative Easements P-I-N-G Easement appurtenant is Injunction or Damages

P- Prescription (use that is transferred automatically
continuous,open & notorious, with dominant tenement
actual, and hostile for statutory
period) Easement is gross for
I- Implication (implied from prior commercial purposes is
use at time land is severed) assignable
N- Necessity (division of tract
deprives one lot of means
of access)
G- Grant (writing signed by
grantor)

Negative Easements Writing signed by grantor Injunction or Damages

(L-A-S-S: Light,
Air, Support, and
Streamwater)
Real Covenants Writing signed by grantor Burden of promise will run to Damages
successor if WITHN: Writing,
Intent, Touch & concern,
Horizontal and vertical privity,
and Notice
Benefit of promise will run to
successor of benefited lot if
WITV: Writing, Intent, Touch
and concern, and
Vertical privity

Equitable Servitudes Writing signed by grantor Successors bound if WITNes:

(unless implied by General Writing, Intent, Touch and
Scheme Doctrine) concern, Notice
(privity not required)

Reciprocal Negative Majority: In a subdivision, Where common scheme Injunction

Servitudes (Common residential restrictions in prior exists, subsequent purchasers
Scheme Doctrine) deeds by common grantor with notice are bound
bind subsequent grantees
whose deeds don’t have the
restriction if, at the start of the
subdivision: (1) grantor had
common scheme and
(2) unrestricted lot holders
had notice.

Minority: Not binding on

subsequent grantees unless
their lots are expressly
restricted in writing.
CMR Chart

33
 REAL PROPERTY

NOTES 7 EASEMENTS
An easement is a grant of a nonpossessory property interest that
entitles its holder to some form of use or enjoyment of another’s land.
An easement holder has the right to use another’s tract of land for
a specified purpose, but has no right to possess or enjoy that land.
An easement is presumed to be of perpetual duration unless the
grant specifically limits the interest. Common examples of easements
include:

• The right to lay utility lines on another’s land

• The right of way over another’s land

• The right to tap into a neighbor’s drain

7.1 TYPES OF EASEMENTS

7.1.1 Easements Are Affirmative or Negative

a. Affirmative
servient land is land imposed upon
by the easement Most easements are affirmative. An affirmative easement is the right
to go onto and do something on servient land (meaning, the land that
is imposed upon by the easement).
right to go on and do something on
someone's land
b. Negative
The negative easement entitles its holder to prevent the servient
negative: right to prevent
landowner from doing something
(LASS) landowner from doing something that would otherwise be permis-
sible. Negative easements are generally recognized in only four
categories:

Remember L A S S :

• Light building something that prevents sunlight

• Air that prevents airflow

• Support prevent that would erode your parcel,

subjacent or underground support
• Stream water from an artificial flow

A minority of states also allow a negative easement for scenic view.

y Creation of a Negative Easement

Negative easements can only be created expressly, by a writing
signed by the grantor. There is no natural or automatic right to a
negative easement.

7.1.2 Appurtenant or in Gross

34
 REAL PROPERTY

a. Easement Appurtenant
An easement is appurtenant when it benefits its holder in his physical
NOTES
use or enjoyment of his own land. How will you know when you’ve Benefits holder in use/enjoyment
got an easement appurtenant? Two parcels of land must be involved: of own land

• a dominant tenement, which derives the benefit

• a servient tenement, which bears the burden

HYPO 7A
A grants B a right of way across A’s land, so that B can more easily
reach his land. B’s land is benefited by the easement. In easement
parlance, it is the dominant tenement. A’s land is serving B’s
easement. It is the servient tenement. Notice that two parcels are
involved. What does B have? B has an easement appurtenant to B's dominant
tenement.
b. Easement in Gross
An easement is in gross if it confers upon its holder only some
personal or pecuniary advantage that is not related to their use or
enjoyment of their land. Here, servient land is burdened. However,
there is no benefited or dominant tenement (because the easement
benefits the holder rather than another parcel). Some common
examples of an easement in gross:

• The right to place a billboard on another’s lot

All in common: servient land is
• The right to swim in another’s pond burdened, but there is not
dominant parcel.

• The utility company’s right to lay power lines on another’s lot

What do those examples have in common?

7.2 TRANSFERABILITY

7.2.1 Easement Appurtenant

The appurtenant easement passes automatically with transfers of
the dominant tenement, regardless of whether it is even mentioned in
the conveyance.

HYPO 7B
A has an easement entitling her to cut across B’s lawn to get more
easily to her land. What kind of easement does A have?
Easement appurtenant. Two parcels involved, one is
Why? dom and other is serviant.

Now A sells her parcel to Mr. X, with no mention of the easement.

Does Mr. X enjoy the easement? Yes, it passes with the
dominant tenement.

35
REAL PROPERTY

The burden of the easement appurtenant also passes automati-

NOTES cally with the servient estate, unless the new owner is a bona fide
purchaser without notice of the easement.

It is important to remember that the easement appurtenant

CMR passes automatically with the dominant tenement (the
Exam Tip
benefited land). Don’t be fooled by questions that make
you think it must be specifically mentioned in the deed. On the flip
side, remember that the benefit of an easement appurtenant cannot
be conveyed apart from the dominant tenement. The only exception
to that rule is a conveyance of the easement to the owner of the servi-
ent tenement to extinguish the easement).

7.2.2 Easement in Gross

An easement in gross is not transferable unless it is for commercial
purposes.

HYPO 7C
A has an easement entitling her to swim in B’s lake. What kind of
easement does A have?

Why? easement in gross. only serviant land is involved. no b/c

its personal

Is it transferable?

HYPO 7D
SafeSplash Swim School has an easement to use B’s lake to give
swim lessons. What kind of easement does SafeSplash have?

Why? easement in gross. It

is
transferable b/c it is for a
Is it transferable?
commericial purpose.
7.3 CREATION
The basic methods of creating an easement can be remembered by
P I N G:

• Prescription

• Implication preexisting use/ quasi-

easement
• Necessity
signed writing (unless so brief
• Grant that it's outside SOF)

7.3.1 By Grant
Any easement must be memorialized in writing and signed by the
holder of the servient tenement unless its duration is brief enough

36
 REAL PROPERTY

to be outside the coverage of a particular state’s Statute of Frauds.

So, most commonly, this means that easements to endure for greater NOTES
than one year must be in writing to be enforceable. That writing must
comply with all the formal requisites of a deed (see12.1, infra).

What is the writing that evidences the easement called? A deed of easement

7.3.2 By Implication
Easements by implication are created by operation of law; they’re an
exception to the Statute of Frauds (which would otherwise require
these easements to be in writing).

a. Easement Implied from Preexisting Use

This is also known as a “quasi-easement.”

HYPO 7E
A owns two lots. Lot 1 is hooked up to a sewer drain located on lot
2. A sells lot 1 to B, with no mention of B’s right to continue to use
the drain on A’s remaining lot 2. For the court to imply an easement
on B’s behalf it would have to find:

• the previous (prior to division) use on the servient part was ap-
parent and continuous AND

• the parties expected that the use would survive division be-
cause it is reasonably necessary to the dominant tenement’s
use and enjoyment

b. Easement Implied Without Any Existing Use

In two limited situations, easements may be implied without preex-
isting use.

y Subdivision Plat
When lots are sold in a subdivision with reference to a recorded
plat or map that shows streets leading to the lots, buyers of the
lots have implied easements to use the streets to access their
lots.

y Profit à Prendre
The holder of a profit à prendre (see 8.2, infra) has an implied
easement to pass over the surface of the servient land and
to use it as reasonably necessary to extract from the servient
property its minerals or some product of the servient property
(such as timber, fish, or game), as specified by the terms of the
profit.

7.3.3 By Necessity
An easement by necessity (another form of easement by implication)

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REAL PROPERTY

will be implied when a landowner conveys a portion of her land with

NOTES no way out except over some part of the grantor’s remaining land.
The owner of the servient parcel has the right to locate the easement.

HYPO 7F
A owns 100 acres. She conveys two of those acres to B, right in the
middle of A’s remaining acreage. As a result, B is landlocked. What
will the court do?

Imply an easement of right of way on B’s behalf over some part of

A’s remaining acreage.

7.3.4 Prescription
An easement may be acquired by analogy to adverse possession. For
the elements to acquire a prescriptive easement, remember C O A H:

C: Continuous and uninterrupted use for the given statute’s period

O: Open and notorious use (that is, it’s discoverable upon inspection)

A: Actual use that need not be exclusive PERMISSION BY OWNER

DEFEATS

H: Hostile use (meaning, use without the servient owner’s consent)

Note: Permission defeats the acquisition of an easement by prescrip-

tion. An easement by prescription requires that the use be hostile.

Generally, prescriptive easements cannot be acquired in public land.

7.3.5 Additional Method–Express Reservation

An easement by reservation arises when a grantor conveys title to
land but reserves the right to continue to use the tract for a special
purpose.

Watch for fact patterns in which a grantor reserves an

CMR easement for someone else. Under the majority view, an
Exam Tip
easement can be reserved only for the grantor. An
attempt to reserve an easement for anyone else is void.

7.4 SCOPE
The scope of an easement is determined by the terms of the grant
or the conditions that created it. If an easement is created but not
specifically located on the servient tenement, an easement of suffi-
cient width, height, and direction for the intended use will be implied.
The owner of the servient tenement may select the location of the
easement so long as their selection is reasonable. If there are no
specific limitations in the grant, courts assume that an easement was

38
 REAL PROPERTY

intended to meet both present and future needs of the dominant

tenement (so, for example, an easement may widen to accommodate NOTES
new, wider cars). If, however, the dominant parcel is subdivided, the
lot owners will not succeed to the easement if to do so would unrea-
sonably overburden the servient estate.

When confronted with an exam question involving over-

CMR use or misuse of an easement, remember that such use
Exam Tip
does not terminate the easement. The appropriate
remedy for the servient owner is an injunction against the misuse.

HYPO 7G
A grants B an easement to use A’s private road to get to and from
B’s parcel, Blackacre. What does B have? B has an easement appurtenant
A parcel is known as servient
What is A’s parcel known as? tenement

Subsequently, B purchases the adjacent Greenacre, with its small

marina. May B unilaterally expand the use of the easement to
benefit Greenacre? No unilateral expansion

7.4.1 Use of Servient Estate—Repairs

The servient owner generally may use her land in any way she
wishes so long as her conduct does not interfere with the easement.
The easement holder has the duty to make repairs to the easement if
she is the sole user; but if both the easement holder and the servient
owner are users, the court will apportion the repair costs.

7.5 TERMINATION
There are eight ways to terminate an easement. Remember END
CRAMP:

• Estoppel servient owner materially changes positions in reliance

• Necessity when need ends unless writing

• Destruction of servient land

• Condemnation of servient land

• Release by holder to servient owner

• Abandonment physical action

• Merger easement & servient land

held by same person
• Prescription
by servient owner

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REAL PROPERTY

Note: In addition, an easement may be terminated under its stated

NOTES conditions, meaning the original easement grant may specify when or
under what conditions the easement will terminate.

7.5.1 Estoppel
An oral expression of an intent to abandon an easement won’t
terminate an easement unless it’s also committed to writing (a
release) or accompanied by action (abandonment). But if the servient
owner materially changes their position in reasonable reliance on
the easement holder’s assurances or representations (such as that
the easement will no longer be enforced), the easement terminates
through estoppel.

HYPO 7H
A tells B that A will no longer be using her right of way across B’s
parcel. In reasonable reliance, B builds a swimming pool on B’s
parcel, thereby depriving A of the easement. May A later enforce
the easement? A is estopped from enforcing it

7.5.2 Necessity
Easements created by necessity expire as soon as the necessity
ends, unless the easement was reduced to an express grant.

HYPO 7I
O conveys a portion of his 10-acre tract to A, with no means
of access out except over a portion of O’s remaining land. In
response, the parties reduce to express writing their understanding
that A enjoys a right of way over a part of O’s remaining acreage.
Thereafter, the city builds a public roadway affording A access out.
Is A’s easement terminated? No b/c it was reduced to writing
Why?

7.5.3 Destruction
Destruction of the servient land, other than through the willful
conduct of the servient owner, will terminate the easement.

7.5.4 Condemnation
Condemnation of the servient estate by governmental eminent
domain power will terminate the easement. Courts are split as to
whether easement holders are entitled to compensation.

7.5.5 Release
A release given by the easement holder to the servient land owner
will terminate the easement. (Note that this applies even to an
easement in gross, which is otherwise inalienable.) Does the release
have to be in writing? Yes, release needs to be in writing

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 REAL PROPERTY

7.5.6 Abandonment NOTES

What must an easement holder show to terminate an easement by
abandonment? They must show by physical action (for example,
building a structure that blocks access to easement on adjoining lot)
an intent to never use the easement again.

EXAMPLE
A has a right of way across B’s parcel. A erects a structure on A’s
parcel that precludes her from ever again reaching B’s parcel. That
is the sort of action to signify abandonment. By contrast, mere non-
use, or mere words (such as expressing a wish to abandon), are
insufficient to terminate by abandonment (though oral expressions
combined with a long period of nonuse may be sufficient).

7.5.7 Merger (Unity of Ownership)

An easement is extinguished when title to the easement and title
to the servient land become vested in the same person (because
a person doesn’t need an easement over their own land). So, if the
same person acquires ownership of both the easement and the
servient estate, those estates merge and the easement is destroyed.

HYPO 7J
A has an easement of right of way across B’s parcel, to enable
A to better reach her parcel. Later, A buys B’s parcel. As a result,
the easement ends. When complete unity of title is achieved, the
easement is extinguished. Thereafter, if title is separated again, will
the easement return? No

For example, assume now that A sells the parcel over which she
once enjoyed the easement of right of way. The easement is not
automatically reinstated. To create it, A would have to start from
scratch.

7.5.8 Prescription
A servient owner may extinguish the easement by interfering with it
in accordance with the elements of adverse possession (see Module
10).

Remember C O A H:

C: Continuous interference

O: Open and notorious

A: Actual

H: Hostile to the easement holder

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REAL PROPERTY

NOTES HYPO 7K
A has an easement of right of way across B’s parcel. B erects a
chain link fence on B’s parcel, thereby precluding A from reaching
it. With the sufficient passage of time, how might B extinguish A’s
easement?

7.6 PARTY WALLS AND COMMON DRIVEWAYS

Courts will treat a wall erected partly on the property of each of
two adjoining landowners as belonging to each owner to the extent
it rests upon their land. Courts will also imply mutual cross-ease-
ments of support, with the result that each party can use the wall or
driveway and neither party can unilaterally destroy it.

7.6.1 Creation
A written agreement is required by the Statute of Frauds for the
express creation of a party wall or common driveway agreement, but
an “irrevocable license” can arise from detrimental reliance on a parol
agreement. Party walls and common driveways can also result from
implication or prescription.

7.6.2 Running of Covenants

If party wall or common driveway owners agree to be mutually
responsible for maintaining the wall or driveway, the burdens and
benefits of those promises (which are deemed covenants (see
Module 9)) run to the successive owners of each parcel.

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 REAL PROPERTY

8 LICENSES AND PROFITS NOTES

8.1 THE LICENSE
The license is a mere privilege to enter another’s land for some
delineated purpose. Unlike an easement, a license is not an interest
in land; it’s merely a privilege, revocable at the will of the licensor. A
license is personal to the licensee and, thus, inalienable. Any attempt
to transfer a license results in revocation by operation of law.

8.1.1 Creation
A writing is not needed to create a license. Why not?

A failed attempt to create an easement results in a

CMR license. Thus, if a grantor orally grants an easement for
Exam Tip
more than one year, it is unenforceable because it is not
in writing. The grantee does not have a valid easement but does
have a license.

8.1.2 Revocation
Licenses are freely revocable, at the will of the licensor, unless
estoppel applies to bar revocation. Note the classic license cases:
a revocable license
• The ticket cases: What does a ticket create?

• Neighbors talking by the fence: Here, beware of seemingly oral

easements.

HYPO 8A
Neighbor A, talking by the fence with neighbor B, says, “B, you
can have that right of way across my land.” Is this oral easement
enforceable?
No, b/c it violates the SOF. What is created instead
Why not? is a freely revocable license.

What has been created?

a. Estoppel
When will estoppel apply to bar revocation? Only when the licensee
has invested substantial money or labor or both in reasonable
reliance on the license’s continuation. The license becomes an
easement by estoppel, which lasts until the holder receives sufficient
benefit to reimburse him for his expenditures.

b. License Coupled with an Interest

A license coupled with an interest is irrevocable as long as the
interest lasts. For example, the buyer of a chattel may enter the

43
REAL PROPERTY

seller’s land to remove the chattel, or a future interest holder may

NOTES enter and inspect the land for waste.

8.2 THE PROFIT

The profit entitles its holder to enter the servient land and take from
it some resources, for example, the soil, some substance of the soil
(such as minerals, timber, or oil), or some product of the property
(such as fish or game).

What are the rules for creating and terminating profits?

All of the rules governing creation, alienation, and termination of

easements are applicable to profits. In addition, a profit may be extin-
guished through surcharge (misuse that overly burdens the servient
estate).

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 REAL PROPERTY

9 RESTRICTIVE COVENANTS NOTES

9.1 THE COVENANT
The covenant is a written promise to do or not do something related
to land (for example, to maintain a fence, or to not build a multifamily Covenant is a promise to do or
dwelling). It’s unlike the easement because it is not the grant of a not to do something.
property interest. Instead, it is a contractual limitation or promise
regarding land. Real covenants are normally found in deeds and when
certain requirements are met they run with the land at law, which
means that subsequent owners may enforce or be burdened by the
covenants.

9.1.1 Negative and Affirmative

NEGATIVE/RESTRICTIVE: Refrain
a. Negative Covenants from doing something ("I promise not to
Covenants can be negative. These are known as restrictive build for commercial purpose")
covenants. A restrictive covenant is a promise to refrain from doing
something related to land. What are some examples of restrictive
covenants? Affirmative: Do something relagted to
land ("I promise to maintain our shared
b. Affirmative Covenants fence")

Covenants can be affirmative: The affirmative covenant is a promise

to do something related to land. What are some examples?

9.1.2 Covenant vs. Equitable Servitude Distinguish by Remedy Sought

On the exam, the same set of facts could seem to give rise to either - Money damages: Construe as
a covenant or an equitable servitude. How will you know which covenant at law
- Injunction: Construe in equity as
analysis to apply? Know by the basis of the remedy the plaintiff seeks: equitable servitude

What that means is that if the plaintiff wants money damages, you
must construe the promise as a covenant. If the plaintiff wants an
injunction, you must construe the promise as an equitable servitude.

9.1.3 Running with the Land

In covenant parlance, one tract is burdened by the promise and
another is benefited. Our key question in this area is figuring out
when a covenant will run with the land. In other words, when is a
covenant capable of binding successors? When will the burden and/
or benefit run to successors?

HYPO 9A Depends on the facts as elaborated

support the conclusion that both the
Suppose neighbor A promises neighbor B that A will not build for burden side of the original promise and
commercial purposes on A’s property. A’s parcel is burdened by the benefit side of the original promise run
promise. B’s parcel is benefited. Later, A sells her burdened parcel with the land at law.
To find out, diagram the facts
to A-1. B sells his benefited parcel to B-1. Now, A-1 has commenced
manufacture of a steak sauce plant on the premises. B-1 wishes to
proceed against A-1 for money damages. Will B-1 succeed?
Plaintiff seeking MONEY DAMAGES so
covenant at law 45
 REAL PROPERTY

It depends on whether the facts support the conclusion that the

NOTES burden and benefit run.

In answering, two separate contests must be resolved:

• First, does the burden of A’s promise to B run from A to A-1?

Note: Always analyze the burden size first. It is harder for the
burden to run than for the benefit to run.

• Second, does the benefit of A’s promise to B run from B to B-1?

9.1.4 Requirements for Burden to Run

If the following requirements are met, any successor in interest to the
burdened estate will be bound by the covenant as if they themselves
had expressly agreed to it. For the requirements for the burden of a
Still have to do other side covenant to run, remember W I T H N:
whether benefit to run
• Writing

• Intent

• Touch and concern

• Horizontal and vertical privity

• Notice

a. Writing
The original promise (between A and B) must have been in writing.

b. Intent
The original covenanting parties (A and B) must have intended that
the covenant would run (meaning they intended that successors to

46
 REAL PROPERTY

the originally promising parties would be bound by the covenant). This

intent may be inferred from circumstances surrounding the creation of NOTES
the covenant, but is usually found in the language of the conveyance
itself (for example, “A promises on behalf of herself, her successors
and assigns...”). Courts are generous in finding the requisite intent.

c. Touch and Concern

The promise must affect the parties’ legal relations as landowners
and not simply as members of the community at large. Restrictive
covenants touch and concern the land if they restrict the burdened
parcel owner in her use of that parcel of land. Affirmative covenants
touch and concern the land if they require the holder of the servient
estate to do something that increases her obligations in connection
with the land. Covenants to pay money to be used in connection with
the land (such as homeowners’ association fees) and covenants not
to compete do touch and concern the land.

d. Horizontal and Vertical Privity

Both horizontal and vertical privity are required for the burden to run.

y Horizontal Privity Horizontal Privity: Nexus between

Horizontal privity refers to the nexus between the original original promising parties
promising parties (A and B). It requires that they be in succes- (succession of estate)
sion of estate, meaning that they were in a grantor-grantee or
landlord-tenant or mortgagor-mortgagee relationship when the
covenant was created. In other words, at the time the promisor
entered into the covenant with the promisee, the two must have
shared some interest in the land independent of the covenant.
Horizontal privity is difficult to establish. Its absence is the
reason why many burdens will not run.

Horizontal privity concerns the connection between the

CMR original parties. No matter that it’s the successors in
Exam Tip
interest who are trying to enforce the covenant, horizontal
privity is determined on the basis of the connection between the
originally covenanting parties.

y Vertical Privity Vertical Privity: Nexus between

Vertical privity refers to the nexus between the successor in successor and original covenanting
interest (A-1) and the originally covenanting party (A). It simply party (non-hostile)
requires some non-hostile nexus, such as contract, devise, or
descent. The only time vertical privity will be absent is when the
successor acquired her interest through adverse possession.

e. Notice
The successor must have had notice of the promise when she took.

47
 REAL PROPERTY

Why? Because under modern recording acts (see 13.1, infra), to be

NOTES bound by a covenant, a subsequent purchaser for value must have
had actual, inquiry, or record notice of the covenant at the time of
purchase.

Under the recording statutes, a subsequent purchaser for

CMR value will not be bound by the covenant if that purchaser
Exam Tip
for value took without either actual, inquiry, or record
notice of the covenant.

9.1.5 Requirements for Benefit to Run

What you’re asking here is, does the successor (B-1) have standing
to enforce the covenant? If the following requirements are met, the
promisee B’s successor in interest (B-1) may enforce the covenant.
For the benefit of a covenant to run, remember W I T V:

• Writing

• Intent

• Touch and concern

• Vertical privity

a. Writing
The original promise (between A and B) must have been in writing.

b. Intent
The originally covenanting parties (A and B) must have intended
that the benefit would run, meaning they intended that successors in
interest to the promisee would be able to enforce the covenant.

c. Touch and Concern

The benefit of a covenant touches and concerns the land if the
promised performance benefits the promisee and her successors in
their use and enjoyment of the benefited land. In other words, the
promise must affect the parties as landowners.

d. Vertical Privity
There must be a non-hostile nexus between the original promisee (B)
and the successor in interest (B-1).

Horizontal privity is not required for the benefit to run

CMR (that’s why it’s easier for the benefit to run than for the bur-
Exam Tip
Horizontal privity is not needed den to run). Thus, where horizontal privity is lacking, the
for the benefit side to run. Thats promisee B’s successor (B-1) can enforce the covenant against the
why it is easier for BENEFITS
original promisor (A), but not against the promisor’s successor (A-1).
TO RUN THAN BURDENS TO
RUN.

48
 REAL PROPERTY

9.1.6 Specific Situations Involving Real Covenants NOTES

Generally, promises to pay money to be used in connection with the
land (for example, homeowners’ association fees) and covenants
not to compete run with the land. Racially restrictive covenants are
unenforceable.

9.1.7 Remedy—Damages
A breach of a real covenant generally is remedied by an award of
money damages, collectible from the defendant’s general assets. If
an injunction is sought, the promise may be enforced as an equitable
servitude (see 9.2., infra).

9.1.8 Termination
As with all other nonpossessory interests, a covenant may be termi-
nated by: (1) a written release, (2) the merger of the benefited and
burdened estates, or (3) the condemnation of the burdened property.
(See 7.5, supra.)
Equitable Servitude: Promise equity will
9.2 EQUITABLE SERVITUDES enforce against successors of burdened
An equitable servitude is a promise that equity will enforce against land (regardless of whether it runs with land
at law)
successors of the burdened land regardless of whether it runs
with the land at law, unless the successor is a bona fide purchaser ES is meant to be breath of fresh air in
(meaning, a subsequent purchaser for value without notice of the equity endeavoring to make it easier
when fairness requires for promises
covenant). between landowners to bind the
successors to those landowners.
The equitable servitude is accompanied by which form of relief?
acconpanies by INJUNCTIVE RELIEF

A single promise can create both a real covenant and an

CMR equitable servitude. For the bar exam, the main difference
USED to indicate that one of those
successors wishes to enjoin the
Exam Tip
between the two will be the remedy sought. If money offending party from going forward
damages are sought, you should use the real covenant analysis. If a and betrayiing the promise that a
predecessor made.
party seeks an injunction, you should consider whether the require-
ments for enforcement as an equitable servitude have been met.

9.2.1 Creation
Generally, as with real covenants, equitable servitudes are created by
promises contained in a writing that satisfies the Statute of Frauds.
To create an equitable servitude that will bind successors, remember
W I T N E S:

• Writing: Generally, but not always, the original promise was in writ-
ing (the common scheme doctrine, discussed below, is an excep-
tion to this requirement)

• Intent: The original parties intended that the promise would be

enforceable by and against successors

49
 REAL PROPERTY

• Touch and concern: The promise affects the parties as landowners

NOTES
• Notice: Subsequent purchasers of land burdened by the covenant
had actual, inquiry, or record notice of the covenant when they
No privity is required for equitable
servitudes acquired the land. (Note: This rule is part of the law of equitable
servitudes, and exists apart from the recording acts, so notice is
required to bind a subsequent purchaser regardless of whether
they seek the protection of a recording act. On the exam, though,
a recording act will usually be involved. Note also that in most
states, successors of burdened land who are not purchasers
(such as donees) are bound by the covenant whether or not they
had notice).

• ES, for equitable servitudes

In contrast to real covenants, which require vertical

CMR and horizontal privity of estate for burdens to run, and
Exam Tip
vertical privity for benefits to run, no privity of estate is
required for an equitable servitude to be enforceable by and
against assignees.

CHECKLIST OF REQUIREMENTS FOR THE

RUNNING OF BENEFITS AND BURDENS

Covenants Equitable Servitudes

{
{
Benefit Burden Benefit Burden

Intent
✓ ✓ ✓ ✓
Notice
✓* ✓
Touch & Concern
✓ ✓ ✓ ✓
Horizontal Privity
✓
Vertical Privity
✓ ✓
* Under recording acts
CMR Chart

50
 REAL PROPERTY

9.2.2 The Implied Equitable Servitude—The General or NOTES

Common Scheme Doctrine
This issue will likely be on the exam. You can think of it as an excep-
tion to the general requirement that the original promise be in
writing.

HYPO 9B
Suppose A subdivides her land into 50 lots. She sells lots 1 Under the common scheme doctrine,
through 45 through deeds that contain covenants restricting use the court will imply a reciprocal
negative servitude (I.E. IMPLIED
to residential purposes. A then sells one of the remaining lots to a EQUITABLE SERVITUDE), that
commercial entity, B, by deed containing no such covenant. B now would succeed in holding that
seeks to build a convenience store on his lot. Can B be enjoined unrestricted lot holder to the terms of
a promise that's not contained in his
from doing so? deed, tohis lot. But rather contained
in all of those predecessor deed.

Under the common scheme doctrine, the court will imply a reciprocal
negative servitude to hold the unrestricted lot holder to the promise.
(Reciprocal negative servitude means an implied equitable servi-
tude). Thus, if a developer subdivides land, and some deeds contain
restrictive covenants while others do not, the restrictive covenants
will be binding on all parcels provided there was a common scheme
of development and notice of the covenants.

a. Elements of the Common Scheme Doctrine

The two elements of the general or common scheme doctrine:

• When the sales began, the subdivider (A) had a general - scheme of development
(including D's lot) when sales
scheme of residential development which included the began)
defendant’s lot (the scheme may be evidenced by: a recorded
plat, a general pattern of restrictions, or oral representations they took
- D had notice of promise when

to early buyers); and

• The defendant lot-holder (B) had notice of the promise con-

tained in those prior deeds when it took.

z Notice
For the three forms of notice, remember A I R:

• Actual notice, meaning the defendant had literal knowledge of

the promises contained in the prior deeds

• Inquiry notice, meaning the neighborhood seems to conform

to the common restriction (it’s the “the lay of the land”)

51
REAL PROPERTY

• Record notice, meaning the form of notice sometimes imput-

NOTES ed to buyers on the basis of the publicly recorded documents
(so, there’s a prior deed with the covenant in grantee’s chain
of title)

If the scheme arises after some lots are sold, no implied

CMR servitude can arise with respect to the lots already sold
Exam Tip
without express covenants. So remember, if Lots 1
through 5 are sold without a restrictive covenant and the deeds to
Lots 6 through 50 contain one, the covenant cannot be enforced as
a servitude against the owners of Lots 1 through 5.

9.2.3 Equitable Defenses to Enforcement

A court will not enforce an equitable servitude if:

a. The neighborhood conditions have changed so significantly

doctrine of changed conditions that enforcement would be inequitable. The changed circum-
stances alleged by the party seeking release from the terms of
an equitable servitude must be so pervasive that the entire area
or subdivision has changed. What’s never good enough here is
piecemeal change or mere pockets of limited change;

b. The person seeking enforcement is violating a similar restriction

on his own land (unclean hands);

b. A benefited party acquiesced in a violation of the servitude by a

burdened party;

c. A benefited party acted in such a way that a reasonable

person would believe the covenant was abandoned or waived
(estoppel); or

d. The benefited party fails to bring suit against the violator within
a reasonable time (laches).

9.2.4 Termination
Like other nonpossessory interests, an equitable servitude may
be extinguished by: (1) written release from the benefit holders, (2)
merger of the benefited and burdened estates, or (3) condemnation
of the burdened property. (See 7.5, supra.)

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 REAL PROPERTY

DISTINGUISHING CHARACTERISTICS OF REAL

COVENANTS AND EQUITABLE SERVITUDES
Real Covenants Equitable Servitudes
Creation Writing is always required Writing is usually required
but may arise by implication
from common scheme of
development of a residential
subdivision

Running of Burden Horizontal privity (shared No privity required

interest in land, apart from
the covenant, by original
covenanting parties;
e.g., mortgagor-mortgagee,
landlord-tenant) and vertical
privity (successor holds entire
interest held by covenanting
party) required

Running of Benefit Vertical privity required No privity required

Remedy Generally damages Generally an injunction

CMR Chart

NOTES

53
REAL PROPERTY

NONPOSSESSORY INTERESTS

Easement License Profit Real

Covenant/
Equitable
Servitude
Definition A grant of an Permission to Right to take Promise to do
interest in land go onto resources or not to do
that allows another’s land from another’s something on
someone to land the land
use another’s
land

Example Owner of O allows the O allows A to O conveys an

parcel A electrician to come onto O’s adjoining
grants owner come onto O’s land to cut and parcel to A. A
of parcel B the land to fix an remove timber promises not
right to drive outlet to build a
across parcel swimming
A pool on the
property

Writing Generally Not required. Required Required.

required. Note: An Exception:
Exceptions: invalid oral Equitable
• Less than easement is a servitude may
one year license be implied
• Implication from common
• Necessity scheme of
• Prescription development
of residential
subdivision

Termination • Stated Usually Same as • Release

conditions revocable at easement • Merger
• Release will. May be • Condemnation
• Merger irrevocable if • Also
• Abandonment coupled with equitable
• Estoppel an interest or if defenses
• Prescription licensor may apply to
• End of estopped by enforcement
necessity licensee’s of servitude
expenditures

CMR Chart

54
 REAL PROPERTY

TITLES NOTES
10 ADVERSE POSSESSION
Adverse Possession
The basic concept here is that possession for a statutorily prescribed Possession for statutorily prescribed
period of time can, if certain elements are met, ripen into title to real time can ripen into title if elements
met (COAH)
property. Title by adverse possession results from the operation of
the statute of limitations for ejectment. If an owner does not, within
the statutory period, take action to eject a possessor who claims
adversely to the owner, title vests in the possessor.

10.1 THE ELEMENTS OF ADVERSE POSSESSION

For the elements of adverse possession (meaning, what the
possessor must show to establish title by adverse possession),
remember C O A H. For possession to ripen into title, it must be:
continuous for stat. period
• Continuous

• Open and notorious

• Actual and exclusive

cannot be coexistent b/c
• Hostile
permission defeats hostility

10.1.1 Continuous
An adverse claimant’s possession must be continuous throughout the
statutory period. What does this mean?
possession the usual owner
Intermittent periods of occupancy are not sufficient. However, would make. So if summer house,
constant use by the claimant is not required as long as possession is then every summer

of a type that the usual owner would make. Also, there need not be
continuous possession by the same person; an adverse possessor
can tack her own possession onto the periods of adverse possession
of her predecessors (see below).

10.1.2 Open and Notorious Possession

When is possession open and notorious?

The adverse possessor’s occupation must be sufficiently apparent to

put the true owner on notice that a trespass is occurring.

10.1.3 Actual and Exclusive

What does actual possession mean?
color of title: means you are assuming
An adverse possessor will gain title only to land they actually occupy. possession under a mistaken deed or
maybe a fraudulent deed.
In some cases, however, actual possession of the entire parcel
claimed is not necessary. If an adverse possessor enters under color
of title (meaning by invalid deed), she is deemed to be in constructive

55
 REAL PROPERTY

possession of all the land that the deed describes, as long as she is
NOTES in actual possession of a reasonable portion of that land.
If you enter through color of title What does exclusive possession mean? Exclusive possession means
AND YOU SATIFY COAH elements,
you can stake claim on land AND that the possessor is not sharing with the true owner or the public.
the surrounding parts DESCRIBED Two or more people acting together could succeed in obtaining title
IN DEFECTIVE DEED. by adverse possession; they would take title as tenants in common.

10.1.4 Hostile
What does it mean for possession to be hostile?

The hostility requirement is satisfied if the possessor enters without

the owner’s permission. Note that the adverse possessor’s state of
Adverse possessor's TRUE STATE mind is irrelevant. It doesn’t matter whether the possessor actually
OF MIND IS IRRELEVANT. thought that they were on their own land or knew that they were
Look OBJECTIVELY when encroaching on another’s land. When possession starts permissively
determining. (for example, by lease), possession does not become adverse until
the possessor makes clear to the true owner the fact that they are
claiming “hostilely.”

a. Co-Tenants—Ouster Required
Possession by one co-tenant is not adverse to the other co-tenants
voluntarily out of possession because each co-tenant has the right to
possession of all the property. A co-tenant must oust others or make
an explicit declaration that they’re claiming exclusive dominion to
create adverse possession.

b. Grantor Stays in Possession—Permission Presumed

Where a grantor stays in possession of land after their convey-
ance, they’re presumed to be there with permission of the grantee.
(Likewise, if a tenant remains in possession after the expiration of the
lease, they’re presumed to have permission of the landlord.)

c. Claim of Right
A possessor enters under claim of right when they reasonably believe
that the property belongs to them—usually because they have an
invalid deed. An invalid deed does not give the possessor permission
to be on the land. When someone assumes possession with what
they mistakenly believe is valid title, the possession is hostile and
adverse. Most states use “claim of right” instead of or interchange-
ably with “hostile.”

10.1.5 Running of Statute

The statute of limitations begins to run when the true owner can first
bring suit. Filing a suit will not stop the period from running, however;
the suit must be pursued to judgment.

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 REAL PROPERTY

10.1.6 Payment of Property Taxes Generally Not NOTES

Required
Most states do not require the adverse possessor to pay taxes on
the property, but consider such payment good evidence of a claim of
right.

10.2 TACKING
One adverse possessor may tack on to his time with the land his Privity is any non hostile
predecessor’s time, so long as there is privity between the posses-
relationship between the
possessors.
sors. Privity is satisfied by any non-hostile nexus, such as a contract, It could be a defective will, contract,
deed, or will. By contrast, privity is absent when the possessor deed.
acquires possession by ousting his predecessor in possession.

HYPO 10A
O owned Blackacre in 2000 when A entered adversely. A was on O would own because Mr. X
her way to satisfying the elements of adverse possession when, in OUSTED A.
Ouster defeats privity.
2010, Mr. X ousted her. Mr. X stays on the land through 2020. Our Mr. X is the wrongdoer.
jurisdiction has a 20-year statute of limitations. In 2020, who owns
Blackacre?

10.3 DISABILITIES
The statute of limitations will not run against a true owner who is Common disabilities: insanity,
imprisonment., infancy
afflicted by a disability at the inception of the adverse possession
(meaning, when the cause of action first accrued). Only the disability
of the owner existing at the time the cause of action arose is consid-
ered. What are some common disabilities? Statute of limitations will not run
against owner inflicted by a disability
HYPO 10B at the inception of the adverse
possession. Here, A entered adversely
O owned Blackacre in 2000 when A entered adversely. In 2010, O on 2000, and O went into an a coma at
2010, which is not at the inception of
went into a coma. In 2020, O recovered. Our jurisdiction has a 20- the adverse possession.
year statute of limitations. In 2020, who owns Blackacre?

Why can’t O claim the benefit of the disability?

10.4 ADVERSE POSSESSION AND FUTURE INTERESTS

The statute of limitations does not run against a holder of a future
interest until the interest becomes possessory.

The event or condition giving rise to a grantor’s right of

CMR entry (for example, “To Grantee on condition that if alcohol
Exam Tip
is ever used on the premises, Grantor shall have the right
to reenter and retake the premises”) does not trigger the statute of
limitations for purposes of adverse possession. The statute does not
begin to run until the right is asserted by the grantor because, until
that time, the grantee’s continued possession of the land is proper.

57
REAL PROPERTY

10.5 EFFECT OF COVENANTS IN TRUE OWNER’S DEED

NOTES If an adverse possessor uses the land in violation of a restrictive
covenant in the owner’s deed for the statute of limitations period,
they take free of the restriction. If, however, the possessor’s use
complies with such a covenant, they take title subject to the restric-
tion.

10.6 LAND THAT CANNOT BE ADVERSELY POSSESSED

Title to government-owned land and land registered under a Torrens
system (in place in a small minority of states, whereby title is estab-
lished with a governmental authority that issues title certificates to
owners) cannot be acquired by adverse possession.

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 REAL PROPERTY

CONVEYANCING—THE PURCHASE AND NOTES

SALE OF REAL ESTATE
Every conveyance of real estate consists of a two-step process:

Step I: The land contract, which conveys equitable title. The land The space in between the steps is to
give the buyer time to inspect, get a
contract endures until step II. mortgage etc.
also known as ESCROW PERIOD
Step II: The closing, where the deed passes legal title and becomes
our operative document.

• Keeping the Two Steps Separate

The closing date is generally set in the contract. The buyer and seller
typically meet on that date at a title insurer’s office or similar place to
exchange the purchase price for the deed. It’s important to keep the
two steps in the real estate sale separate in your mind. Before the
closing, Contracts rules apply; after closing, we’re strictly in the realm
of Real Property law. It’s a good idea to associate certain issues with
before closing and others with after closing.

• Common Issues Before Closing

If there are going to be problems in the sale of land, they generally
arise during the period between the signing of the contract and the
closing date. This is sometimes called the escrow period. During this
time, any number of things could cause one of the parties to have a
change of heart and try to back out of the contract. The buyer might
learn of title defects, or termites, or bad plumbing and wish to rescind
the contract. The seller may discover that they can get a better price
and want to rescind the contract. What if the property is damaged or
destroyed during this period? Who will bear the cost of the loss?

• Common Issues After Closing

Problems between a buyer and seller are less common after closing.
These issues are most likely to arise when title problems or encum-
brances are discovered after closing. For example, what if it turns
out the seller sold the property to multiple buyers? What if, after the
closing, the buyer discovers that a neighbor has an easement over
the property or a judgment creditor has a lien on the property? Does
the buyer have any recourse against the seller?

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 REAL PROPERTY

NOTES 11 LAND SALE CONTRACTS

Conveyancing starts with the real estate contract. This contract is the
same as any other in terms of what is required to make it enforceable.
As always, we need an offer, an acceptance, and consideration. The
contract must comply with the Statute of Frauds and there must not
be any defenses to enforcement.

11.1 STATUTE OF FRAUDS APPLICABLE

Because the real estate contract involves an interest in land, the
Statute of Frauds requires a writing signed by the party against whom
Statute of Frauds Applicable: enforcement is sought—in other words, signed by the party currently
- K must be in writing being sued. In addition to that signature, to satisfy the statute, the
- signed by party against whom writing must:
enforcement is sought (i.e. your
defenant) • Identify the parties
doesnt need to be sighned by all
parties
- Must also
• Describe the property, and
--Identify parties
--describe property • Include the price (the consideration) or a means of determining
--state consideration the price (such as the fair market value as determined by an ap-
praisal)

These terms must be definite enough for a court to enforce the

contract. So, if a court can tell from the documents who the parties
are, which parcel is being conveyed, and what consideration is being
supplied, the statute is satisfied.

Don’t be fooled into thinking both parties have to sign the

CMR contract. On the exam, the parties are already at the
Exam Tip
breach of contract stage, not the drafting stage. There-
fore, only the signature of the party being sued is required.

11.1.1 Inaccurate Description of Land

Sometimes the land description in the contract will overstate or under-
state the amount of land being transferred. On the bar exam, you’re
more likely to see a contract that overstates the size of the parcel.

HYPO 11A
Remedy is specific performance
B enters into a contract to purchase a farm. The con­tract recites
with a pro rata reduction in price.
Land is unique so pref remedy is that the farm is 100 acres. When B has a survey done, B learns that
specific performance the farm is actually 98 acres. What is B’s remedy?

11.1.2 Exception to Statute of Frauds—The Doctrine of

Part Performance
What happens if there is no writing or the writing falls short of the

60
 REAL PROPERTY

requirements? Suppose, for example, that while chatting at the

local diner Kendall and Roman orally agree that Roman will buy NOTES
Kendall’s farm for $500,000. As so often happens on the bar exam,
before closing, the seller, Kendall, meets a tragic and premature
end. Kendall’s estate decides that Kendall made a bad bargain and
refuses to close, citing the Statute of Frauds. Any time you see an
oral contract for a sale of land on your exam, bells should go off
alerting you to a Statute of Frauds issue. Roman, the buyer, has only
one hope: the one exception to the Statute of Frauds in a land sale
contract—the doctrine of part performance. Part performance is an
equitable doctrine allowing a buyer to enforce an oral real estate
contract by specific performance if:

• The oral contract is certain and clear, and

• The acts of partial performance clearly prove the existence of a

contract

This second requirement is usually satisfied if the buyer can prove

two of the following three actions:

• Buyer has taken possession of the property

• Buyer has paid the purchase price or a significant portion of the

purchase price

• Buyer has made substantial improvements to the premises

a. Possession
Suppose the buyer moves into the farmhouse but hasn’t yet paid
the purchase price. The buyer will say, “Clearly I bought this. I am
in the house! My stuff is here. I sleep here every night.” Does this
prove a sale contract? No, not on its own. Think about a tenant. A
tenant occupies land. That doesn’t mean they own it. The evidence
that the parties entered into a contract must be unequivocal. There
must not be any other plausible explanation for their actions. So,
possession is good evidence, but on its own, it’s not enough.

b. Purchase Price
What if the buyer says, “I gave the seller $200,000! That’s a lot of
money. And it happens to be about how much the house is worth.”
That’s great evidence, but by itself, it doesn’t unequivocally prove
the parties had a contract to sell the property. The money may be
unrelated to the property. Maybe the buyer is paying off a gambling
debt or loaning money to the seller.

c. Improvements
Most people don’t go around fixing up houses they don’t own. A lot

61
 REAL PROPERTY

of times, people improve houses right after they buy them. They build
NOTES a new porch on the house, install a swimming pool in the backyard,
pave the driveway, something like that. Usually, tenants don’t invest
that type of money into a rental, but it’s possible, particularly with a
long-term rental. So, improvements alone are not enough.

If you see an oral contract for the sale of land on an

CMR
Exam Tip essay question and you think the doctrine of part
performance may apply, don’t forget to state the general
rule first. Start your answer by stating that the Statute of Frauds
requires contracts for the sale of land be evidenced by a writing
and signed by the party being sued. Then state that, here, the
contract is oral and won’t be enforceable unless it falls within an
exception to the statute. And finally, state your part performance
rule and analysis.

Legal Title: Deed (Right to 11.2 DOCTRINE OF EQUITABLE CONVERSION

possess) Once we have the enforceable contract in place, we move into
Equitable Title: Contract (Risk of
the time between the signing of the contract and the closing (the
loss) escrow period). Under the doctrine of equitable conversion, once
--Buyer bears risk unless the contract is signed, equity regards the buyer as the owner of the
contract says otherwise
real property. The contract conveys equitable title to the buyer. By
contrast, at the closing, the deed conveys legal title to the buyer. The
right to possession rests with the party who holds legal title. Thus,
seller is entitled to possession until closing.

11.2.1 Risk of Loss

Remember that the contract conveys equitable title to the buyer. One
important result flows from this: DESTRUCTION. If between contract
and closing, Blackacre (the property) is destroyed through no fault of
It is the buyer's land and buyer's
either party, who bears the risk of loss?
buyer bears risk, unless k says otherwise
loss the INSTANT THE K IS
SIGNED Even though the risk of loss is on the buyer, if the property is
CMR damaged or destroyed, the seller must credit any fire or
Exam Tip
casualty insurance proceeds they receive against the
purchase price the buyer is required to pay.

11.2.2 Passage of Title on Death

As we’ve mentioned, the life expectancy for parties on the bar exam
can be surprisingly short. What happens if one of the parties meets
an unexpected end after the contract but before the closing? The
interests of the departed party pass to their estate. So, because the
buyer is deemed to own the property from the moment the contract
is signed, a deceased buyer’s interest passes as real property to their
estate. A deceased seller’s interest, the right to the purchase price,

62
 REAL PROPERTY

passes to their estate as personal property. The contract remains

enforceable, with the deceased party’s estate taking the decedent’s NOTES
place in the transaction.

If the property is specifically devised by will, check to see

CMR whether ademption or exoneration rules apply. See
Exam Tip
Conveyance by Gift and Will below.

11.3 TWO PROMISES IMPLIED IN EVERY LAND SALE

CONTRACT

11.3.1 Seller Will Provide Marketable Title Marketable Title:

Every contract contains an implied covenant that the seller will Seller's implied promise to provide
title reasonably free from doubt/
provide marketable title at closing. Marketable title is title reasonably threat of litigation on closing
free from doubt and the threat of litigation. The common defects that
render title unmarketable are:

• Defects in record chain of title—most often, adverse possession even PART of title rest on
adverse possession, it is
• Encumbrances (mortgages, liens, easements, restrictive cove- UNMARKETABLE

nants)

• Zoning violations
instances to deem title
a. Defects in Record Chain of Title unmarketable

y Adverse Possession
If even a portion of the title rests on adverse possession, it is
unmarketable. For title to be marketable, the seller must be Seller must provide GOOD
able to provide what kind of title? RECORD TITLE for it to be
MARKETABLE
Unless a suit has been brought to quiet title, title acquired by
adverse possession does not appear in the record.

y Encumbrances
Generally, mortgages, liens, restrictive covenants, easements,
options to purchase, and significant encroachments render
title unmarketable unless the buyer has waived them. If an
encroachment is very slight (a matter of inches) and doesn’t
inconvenience the owner of the encroached-on parcel,
the encroachment won’t render title unmarketable. But, an
encroachment of a foot or more likely will. An easement that
is beneficial (for example, a utility easement to service a
property), visible, or known to the buyer does not impair the
marketability of title. Purchasers are generally presumed to
have contracted to accept the land subject to visible (obvious)
easements.

63
REAL PROPERTY

NOTES Remember that a seller has the right to satisfy a mortgage

CMR or lien at closing with the proceeds of the sale. Thus,
Exam Tip
prior to closing, the buyer cannot claim that title is unmar-
ketable because it is subject to a mortgage if the closing will result in
that mortgage’s discharge.

y Zoning Violations
Zoning restrictions do not affect marketability, but an existing
violation of a zoning ordinance does render title unmarketable.

y Future Interests Held by Unborn or Unascertained

Parties
When a holder of a future interest is unborn or unascertained, it
is impossible to convey marketable title. Courts will not appoint
a guardian ad litem to represent the unborn or unascertained
parties for the purposes of conveying land.

b. When Title Must Be Marketable

Title must be marketable on the day of closing. The seller has up
until that time to clear up whatever defect is making the title unmar-
ketable. In an installment land contract, the seller need not provide
marketable title until the buyer has made his last payment.

Avoid answer choices referring to the implied covenant of

CMR marketability of title if the closing has already occurred.
Exam Tip
Once the closing occurs and the deed changes hands,
the seller is no longer liable on this implied contractual covenant.
The seller is then liable only for express promises made in the deed.

c. Remedy If Title Not Marketable

The buyer must notify the seller that title is unmarketable and give
the seller reasonable time to cure the defects. If the seller fails to
cure the defects, the buyer’s remedies include rescission, damages,
specific performance with abatement, and a quiet title suit. But if
closing occurs, the contract and deed merge, and the seller’s liability
on the implied contractual covenant ends.

Don’t be fooled into choosing the answer that lets the

CMR seller off the hook for title defects because the contract
Exam Tip
calls for a quitclaim deed. A quitclaim deed does not in
any way affect the implied covenant to provide marketable title.

11.3.2 Seller Will Not Make False Statements of Material

Fact
The second implied promise is that the seller will not make any false

64
 REAL PROPERTY

statements of material fact. The seller may be liable to the purchaser

after the closing for defects, such as a leaky roof, flooding basement, NOTES
or termite infestation, if they knowingly made a false statement of
material fact that the buyer relied on, actively concealed a defect
seller liable for failure to disclose
latent material defects
(for example, wallpapered over water damage), or failed to disclose
known defects in the property.

a. Failure to Disclose
To be liable for failure to disclose:

• The seller must know or have reason to know of the defect;

• The seller must realize that the buyer is unlikely to discover the
defect; and

• The defect must be serious enough that the buyer would proba-
bly reconsider the purchase.

Factors increasing the likelihood that liability will be imposed in

these cases include whether the property is a personal residence,
whether the defect is dangerous, and whether the seller created the
defect or made a failed attempt to repair it.

11.3.3 Disclaimers of Liability

Can the seller avoid liability for fraud or failure to disclose by
including in the contract a general disclaimer of liability, such as
“property sold as is” or “with all faults”?
no. General disclaimers no good
If the disclaimer identifies specific types of defects (for example,
“seller is not liable for any defects in the roof”), it will likely be upheld.

11.4 NO IMPLIED WARRANTIES OF FITNESS OR

HABITABILITY
The land contract contains no implied warranties of fitness or habit-
ability. Caveat emptor is the common law norm.

11.4.1 Exception—New Home Construction Exception to Caveat Emptor: if the builder

is the seller, thje builder should know
Most courts recognize a warranty of fitness or quality in the sale of a about defects and should have
new home by the builder. constructed in a fit manner

11.4.2 Negligence of Builder

A person may sue a builder for negligence in performing a building
contract. Some courts permit the ultimate buyer to sue the builder
despite lack of privity.

11.5 TIME OF PERFORMANCE

Courts presume that time is not “of the essence” in real estate
contracts. Thus, the closing date isn’t absolutely binding, and a party
late in tendering their own performance can still enforce the contract

65
REAL PROPERTY

if they tender within a reasonable time (for example, two months)

NOTES after the closing date.

11.5.1 When Presumption Overcome

Time is of the essence if: (1) the contract so states, (2) the circum-
stances indicate that was the parties’ intent, or (3) one party gives the
other notice that time is of the essence.

11.5.2 Liability
If time is of the essence, a party who fails to tender performance on
the closing date is in breach and may not enforce the contract. Even
if time is not of the essence, a party who is late in tendering perfor-
mance is liable for incidental losses.

11.6 TENDER OF PERFORMANCE

The buyer’s obligation to pay and the seller’s obligation to convey are
concurrent conditions; so, neither party is in breach until the other
tenders performance (even if the closing date passes). If neither party
tenders performance, the closing date is extended until one of them
does so.

11.6.1 When Party’s Tender Excused

A party is excused from performing if the other party has repudiated
the contract or it is impossible for the other party to perform, such as
when unmarketable title can’t be cured.

11.7 REMEDIES FOR BREACH OF SALES CONTRACT

The nonbreaching party is entitled to damages (difference between
contract price and market value on the date of breach, plus incidental
costs) or, because land is unique, specific performance. Note that
if the buyer wishes to proceed despite unmarketable title, they can
usually get specific performance with an abatement of the purchase
price.

11.7.1 Liquidated Damages

Sales contracts usually require the buyer to deposit “earnest money”
with the seller and provide that if the buyer defaults in performance,
the seller may retain this money as liquidated damages. Courts
routinely uphold the seller’s retention of earnest money if the amount
appears to be reasonable in light of the seller’s anticipated and actual
damages.

11.8 REAL ESTATE BROKERS

Real estate brokers are the seller’s agents but should disclose
material information about the property if they have actual knowl-
edge of it. Traditionally, agents earned their commissions when they
produced a buyer who was ready, willing, and able to purchase the

66
 REAL PROPERTY

property. Therefore, the commission was owed regardless of whether

the deal actually closed. The growing trend, however, is to award NOTES
the commission only if the sale actually closes or if it fails to close
because of the fault of the seller.

11.8.1 Exclusive Listing Agreements

Under an exclusive listing agreement with a real estate broker, the
broker’s best efforts to sell the property is consideration for the
broker’s commission. “Best efforts” includes expenditure of time,
effort, or money. If the property is sold by the seller or another agent
during the listing period, the seller still may have to pay a commis-
sion. Exclusive agency agreements prohibit listing the property with
other brokers during the time of the listing. Exclusive right-to-sell
agreements additionally preclude the seller from selling the property
themselves without paying the commission.

11.9 TITLE INSURANCE

A title insurance policy insures that a good record title of the property
exists as of the policy’s date and promises to defend the record title
if litigated. An owner’s policy protects only the person who owns
the policy (usually either the owner of the property and their succes-
sors to the property by operation of law, such as heirs or devisees,
or the mortgage lender) and does not run with the land to subse-
quent purchasers. A lender’s policy follows any assignment of the
mortgage loan.

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 REAL PROPERTY

NOTES 12 THE CLOSING—DEEDS

If the buyer permits the closing to occur, the contract is said to merge
with the deed (it disappears) and, in the absence of fraud, the seller
Deeds is no longer liable on the promises in the contract, only those in the
- To pass title, must be "LEADS":
deed. The controlling document now is the deed. The deed transfers
Lawfully executed and delivered legal title from grantor to grantee.
- Lawful execution requires Remember: to pass legal title from grantor to grantee the deed
--Writing signed by grantor
--Unambigous description
must be “LEAD”: Lawfully Executed And Delivered.
--Identification of parties
--Words of intent 12.1 LAWFUL EXECUTION OF A DEED
Executing a valid deed requires the following:
- No consideration
• A writing signed by the grantor

• An unambiguous description of the land

• Identification of the parties by name or description

• Words of intent to transfer, such as “grant”

Note: The deed need not recite consideration, nor must consideration
pass to make a deed valid.

12.1.1 Description of Land

The description of land in the deed need not be perfect, but it must
be unambiguous and at least provide good “lead.”

HYPO 12A
They would because they give
good LEAD. Through research we The deed recites that O conveys “all of O’s land,” or “all of O’s land
can determine all. in Essex County.” Would such descriptions suffice?
Some is an ambighous term.
HYPO 12B
O conveys “some of my land in Sussex County.” Does such a
description satisfy the standard?

a. Effect of Insufficient Description

If the description of the land is insufficient to provide a good lead, title
isn’t transferred. The grantor retains title. If a description is ambig-
uous, rather than vague or inadequate, outside (parol) evidence is
permitted to clear up the ambiguity.

If a deed is delivered with the name of the grantee left

CMR blank, the court presumes the person taking delivery has
Exam Tip
authority to fill in the name of the grantee. If the person

68
 REAL PROPERTY

fills in a name, the deed is valid. If, however, the land description is
left blank, the deed is void unless the grantee was explicitly given NOTES
authority to fill in the description.

12.2 THE DELIVERY REQUIREMENT Legal standard testing grantor's present

A deed isn’t effective to transfer an interest in realty unless it has intent (did they have present intent to be
bound?)
been delivered. Delivery turns on the grantor’s intent that title
pass immediately, even if possession is postponed. Acceptance is
presumed.

• The delivery requirement could be satisfied when the grantor

physically or manually transfers the deed to the grantee. It’s per-
missible here to use the mail or agent or messenger. As long as present intent is
established, deed doesnt need to
be literally, physically
Delivery does not necessarily require actual physical transfer of accomplished
the instrument itself. The standard for delivery is a legal standard
and is a test solely of present intent. Ask:
Did grantor have PRESENT intent to be
12.2.1 Acceptance and Rejection immediately bound

Rejection defeats delivery. Acceptance is presumed, but if a grantee

expressly rejects the deed, the deed is ineffective to pass title.

HYPO 12C
Expressing rejection of the receipt
As a surprise graduation gift, A’s Aunt Gertrude executes a deed defeats delivery. So itll belong to
conveying Blackacre to A. A responds, “I can’t accept such a lavish aunt
gift.” Who does Blackacre belong to?

12.2.2 Presumptions Concerning Delivery

Courts recognize a number of rebuttable presumptions with
respect to delivery. If the grantor retains possession of the deed, it’s
presumed that it hasn’t been delivered. Conversely, if the grantee has
possession of the deed, delivery is presumed. Additionally, delivery is
presumed if the deed is:

• Handed to the grantee,

• Acknowledged by the grantor in front of a notary, or

• Recorded

12.2.3 Extrinsic Evidence

All types of evidence, including the grantor’s conduct or statements
before or after the alleged delivery, are admissible to prove the grant-
or’s intent to pass title. Outside evidence is not permitted to show
that an unconditional deed given directly to a grantee was subject to
a condition.

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 REAL PROPERTY

12.2.4 Delivery with Oral Conditions

NOTES If a deed, absolute on its face, is transferred to the grantee with an
oral condition, what result? Oral condition drops because not provable.
HYPO 12D
Grantee takes deed free of oral O conveys a deed to Blackacre that is absolute on its face, but
condition says to grantee, “Blackacre is yours only if you survive me.” What is
the effect of the oral condition?

12.2.5 Delivery with Written Conditions

A deed containing a written condition is generally valid when deliv-
ered. If the condition is the grantor’s death, the deed creates a future
interest (an executory interest) in the grantee.
12.2.6 Delivery to Third Party
A delivery to a third party with instructions to deliver the deed to the
intended grantee is considered valid delivery. Whether a delivery to
a third party without instructions is a valid delivery often hinges on
whether that third party is an agent of the grantor or the grantee. For
instance, a delivery to the grantor’s lawyer is probably not delivery,
while delivery to the grantee’s lawyer probably is.
a. Transfer to Third Party with Conditions (Escrow
Transaction)
Means a grantor may deliver Grantor may deliver an executed deed to a third party, known as an
executed deed to a 3rd party known
as excrow agent with instruction that escrow agent, with instructions that the deed be delivered to the
title will pass from agent to grantee grantee once certain conditions are met. This typically is related to
when certain conditions are met. the purchase of property and the condition typically is the payment of
Grantor not be on sight. Deed can
still pass. the purchase price.
What happens once the conditions are met?
If the escrow agent is given written instructions, the grantor is
bound by the delivery to the agent. But, if the grantor gives the
escrow agent oral instructions, the grantor may change the instruc-
tions and recall the deed while it’s still in the agent’s hands, unless
there is a written contract of sale.
b. Donative Escrow with Conditions
If the grantor gives a deed to a third party with instructions to
turn it over to the named donee only when certain conditions
occur, is there a valid delivery or can the grantor change her
mind and demand the deed back before the conditions occur?
It depends on the condition. If the condition is something other
than the grantor’s death (the grantee’s marriage, for example),
the grantor may retrieve it. If the condition is the grantor’s
death, the grantor cannot get the deed back because they
intended to presently convey a future interest.

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Watch out for a condition of survival. Although a condition NOTES

CMR that the grantee survive the grantor seems like the same
Exam Tip
thing as a condition of the grantor’s death, it isn’t. Unlike
the condition of the grantor’s death, which conveys a future interest,
a conveyance to the grantee “only if the grantee survives the grant-
or” indicates that the grantor does not intend to part with anything
until death. Thus, there is no delivery.

12.3 COVENANTS FOR TITLE

There are three types of deeds used to convey property interests
other than leaseholds: the general warranty deed, the special
warranty deed, and the quitclaim deed. The difference among these
deeds is the scope of title assurance (that is, covenants for title).

Be careful not to confuse covenants for title with real

CMR covenants (written promises to do or not do something on
Exam Tip
the land). They are completely different. Real covenants
do not relate to title.

12.3.1 The Quitclaim None. Grantor is not promising good title

Which covenants does a quitclaim deed contain?

Grantor isn’t even promising that he has title to convey. This is the
worst deed a buyer could hope for. It conveys only what the grantor
has at the time of the conveyance.

12.3.2 The General Warranty Deed Warrants against all defects in title (including by grantor's
predecessors)
The best deed a buyer could hope for. Why?

It warrants against all defects in title, including those attributable

to grantor’s predecessors.

The general warranty deed typically contains all six of the following
covenants. The first three are present covenants, meaning that the
covenant is breached, if ever, at the time the deed is delivered.

a. Present Covenants
When does the statute of limitations for breach of a present covenant
begin to run? breached at delivery

The three present covenants:

• The covenant of seisin: Seisin: grantor owns

• The covenant of the right to convey: Right to convey: grantor can transfer

• The covenant against encumbrances: against encumbrances: no servitudes/liens

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 REAL PROPERTY

NOTES Note that the rule regarding visible and known encum-
CMR brances is different for the real estate contract (pre-clos-
Exam Tip
ing) and the deed (post-closing). For real estate contracts,
remember that a purchaser is generally presumed to have contract-
ed to accept the land subject to visible easements (and therefore
such easements do not impair marketability). For deeds, remember
that most jurisdictions hold that the covenant against encumbrances
is breached even if the grantee knew of the encumbrance (whether
or not it is visible).

b. Future Covenants
The next three covenants are future covenants. A future covenant is
not breached, if ever, until the grantee is disturbed in possession.

When does the statute of limitations for breach of a future covenant

begin to run? breached if grantee disturbed in possession

The three future covenants:

quiet enjoyment: no 3rd party
lawful claims
• The covenant for quiet enjoyment: Grantor promises that grantee
will not be disturbed in possession by a third party’s lawful claim
of title.

warranty: grantor will defend

• The covenant of warranty: Grantor promises to defend against
reasonable claims of title by a third party and to compensate the
grantee for any loss sustained by the claim of superior title.

The covenant for quiet enjoyment and the covenant of

CMR warranty are generally considered to be similar covenants
Exam Tip
for title.
further assurances: grantor will
• The covenant for further assurances: Grantor promises to do
perfect

whatever is needed to perfect grantee’s title if it later turns out to

be imperfect.

Warrants against all defects in title 12.3.3 The Special Warranty Deed
(only for grantor themselves) This deed contains the same covenants as the general warranty
If it concerns any issue with deed, but here the grantor makes those promises only on behalf
predecessors, the grantor will of himself. (Note: Grantor makes no representations on behalf of his
bounce predecessors in interest.)

12.3.4 Statutory Special Warranty Deed

Many states have statutes that provide for what type of deed is
conveyed by the use of the word “grant” in a conveyance without
a designation of the type of deed. Often these statutes provide for
a deed that creates by implication two limited assurances against

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acts of the grantor (not her predecessors): (1) that the grantor has not
conveyed the same estate or any interest therein to anyone other NOTES
than the grantee and (2) that the estate is free from encumbrances
made by the grantor.

12.3.5 Damages and Remote Grantees

Present covenants can’t be enforced by remote grantees, but future
covenants run with the grantee’s estate. If there are successive
conveyances by general warranty deed and the last grantee is
evicted by lawful claim of title, he may sue anyone up the line. Some
states allow him to recover to the extent of consideration received by
a defendant-covenantor. Other states limit recovery to the lesser of
what he paid or what the defendant-covenantor received.

12.4 DEFECTIVE DEEDS

A void deed will be set aside by the court even if the property has
passed to a bona fide purchaser, but a voidable deed will be set
aside only if the property has not passed to a bona fide purchaser.
Void deeds include those that are forged, were never delivered,
were issued to a nonexistent grantee (for example, a grantee who
is dead at the time of delivery), or were obtained by fraud in the
factum (that is, the grantor was deceived and did not realize that she
was executing a deed). Voidable deeds include those executed by
minors or incapacitated persons, and those obtained through fraud
in the inducement, duress, undue influence, mistake, and breach of
fiduciary duty.

Watch for a situation in which a joint owner attempts to

CMR convey property by forging the signature(s) of the other
Exam Tip
owner(s). Such a conveyance would be valid as to the
interest of the owner whose signature is genuine but void as to the
other owner(s). Thus, if one joint tenant executes a deed for the
entire property with his own signature and the forged signature of
the other joint tenant, the conveyance works a severance; the buyer
would hold as a tenant in common with the joint tenant whose
signature was forged.

12.4.1 Fraudulent Conveyances

Even when a deed complies with the required formalities, it may
be set aside by the grantor’s creditors if it was made: (1) with actual
intent to hinder, delay, or defraud any creditor of the grantor; or (2)
without receiving a reasonably equivalent value in exchange for the
transfer, and the debtor was insolvent or became insolvent as a result
of the transfer. However, the deed will not be set aside as against any
grantee who took in good faith and paid reasonably equivalent value.

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REAL PROPERTY

Void Deeds Voidable Deeds Fraudulent Conveyances

Forged Deeds Executed by minor Coneyance with intent to

hinder, delay, or defraud
grantor’s creditor
No Delivery Executed by one without
mental capacity
Conveyance made without
receiving equivalent value
Dead or Nonexistent Deed obtained by fraud by insolvent debtor
Grantee in inducement (or one who becomes
insolvent because of
the transfer)
Deed obtained by duress
Deed obtained by fraud
or undue influence
in factum
(grantor did not know
what they were signing)
Deed obtained by mistake

Deed through breach of

fiduciary duty

CMR Chart

NOTES

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12.5 CLOSING DOCUMENTS NOTES

Most real estate closings require more than the exchange of a
deed. They are complex events involving the signing of numerous
documents and sometimes last-minute negotiations (usually over
whether a particular fixture will remain part of the property or
whether the seller will pay to repair a portion of the property that was
damaged between the contract date and the closing date). Below are
a few of the most critical closing documents.

12.5.1 Closing Disclosure

Residential mortgage lenders must provide a closing disclosure to
mortgagors at least 3 business days prior to closing. This disclosure
must provide details about the mortgage, including: (1) principal,
interest, and payment amounts (including taxes and insurance); (2)
closing costs; (3) potential surprises to mortgagors (for example,
future changes in interest rates or balloon payments), and (4) cash
required to close. If the mortgagee fails to provide the disclosure, the
mortgagor may be able to cancel the mortgage or recover damages.

12.5.2 Notification of Defects

A seller of residential property must provide a form to the buyer at
closing, notifying the buyer of any physical defects of which the seller
is aware. A seller who fails to disclose a known defect that must be
disclosed in this form will be liable for the defect after closing.

12.5.3 Environmental Report

An owner of real property must generally pay to cure any environ-
mental damage (for example, soil contaminated by leaked gasoline)
to the property, even if the damage occurred before the owner
owned the property. As a result, buyers of commercial real estate
often ask sellers to guarantee that the property complies with
environmental laws. Sellers want to avoid making these guarantees,
and the parties must ultimately negotiate an environmental report,
to be signed by both parties at closing, that identifies which environ-
mental guarantees the seller makes.

12.6 CONVEYANCE BY GIFT AND WILL

In addition to sales, real estate may be conveyed by gift or will. A
deed may validly convey real property by inter vivos gift so long as
there is: (1) donative intent, (2) delivery, and (3) acceptance. In the
case of real estate passing by will, consider the following:

12.6.1 Ademption
If property is specifically devised or bequeathed in the testator’s will,
but the testator no longer owns it at the time of death, the gift fails.

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REAL PROPERTY

Ademption applies only to specific bequests, which can be satisfied

NOTES only by the delivery of a particular item, not by money. A gift of land
is always a specific devise. If the testator specifically devises property
and then sells or gives away a part of that property, only that portion
is adeemed; the remainder passes to the devisee.

a. Land Under Executory Contract

By statute, the ademption doctrine does not apply to the proceeds
of a contract for sale of land that was executory at the time of the
testator’s death (that is, the devisee gets the proceeds in place of the
land). These statutes take precedence over the equitable conversion
doctrine. In addition, ademption does not apply when the contract is
entered into by the representative of an incompetent testator.

b. Other Proceeds Not Subject to Ademption

When property is damaged or destroyed before the testator’s death
but the casualty insurance proceeds are not paid until after the testa-
tor’s death, ademption does not usually apply. The beneficiary of the
specific bequest takes the insurance proceeds. Similarly, ademption
usually does not apply to property condemned by the government
where the taking was before death but the condemnation award was
paid after death.

12.6.2 Exoneration
At common law and in some states, the devisee of specific property
is entitled to have the land “exonerated” by the payment of liens
and mortgages from the testator’s residuary estate. However, a
majority of states have statutorily abolished the exoneration doctrine,
requiring the will to expressly provide for payoff.

12.6.3 Lapse and Anti-Lapse Statutes

A lapse occurs when the beneficiary of a gift in a will dies before
the testator. Under the common law, if a lapse occurred, the gift was
void. However, nearly all states now have statutes that prevent lapse
by permitting the gift to pass to the predeceasing beneficiary’s living
descendants under certain circumstances. These statutes vary as to
the scope of beneficiaries covered by the statute.

a. Degree of Relationship to Testator

Many of the anti-lapse statutes apply only when the named benefi-
ciary is a descendant of the testator. Others apply if the beneficiary is
more remotely related, such as a descendant of the testator’s grand-
parent. Others apply to any relative, and still others apply to any
beneficiary at all.

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 REAL PROPERTY

y Descendants Are Substitutes

The anti-lapse statute does not save the gift for the prede-
NOTES
ceasing beneficiary’s estate; rather, it substitutes the beneficia-
ry’s descendants for the beneficiary. Thus, property will never
pass under the anti-lapse statute to a predeceasing beneficia-
ry’s spouse.

b. Application to Class Gifts

If a class member within the coverage of an anti-lapse statute
predeceases the testator leaving surviving issue, the statute will
apply and the issue will take the deceased class member’s share of
the gift.

c. Anti-Lapse Statute Does Not Apply If Contrary Will

Provision
The anti-lapse statute does not apply if there is a contrary will provi-
sion; for example, the gift is contingent on the beneficiary’s surviving
the testator.

12.6.4 Abatement
If the estate assets are not sufficient to pay all claims against the
estate and satisfy all devises and bequests, the gifts are abated
(that is, reduced). Absent a contrary will provision, estates in most
states abate in the following order: (1) property passing by intestacy,
(2) the residuary estate, (3) general legacies, and (4) specific devises
and bequests.

12.6.5 Conflict of Laws Issues

To the extent that a will disposes of real property, its validity and
effect are determined by the law of the state where the property is
located. With respect to dispositions of personal property, the law of
the testator’s domicile at the time of their death controls the validity
and effect of the will.

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REAL PROPERTY

THE SALE OF LAND

This chart represents the chronological progression from contract through recording.

Parties Enter into Land Sale Contract Time Between Contract and Closing

1. Contract must be memorialized in 1. Buyer investigates Seller’s title and if

writing (Statute of Frauds) defective, Buyer must notify Seller
2. Presumption that time is not of the and give Seller an opportunity to
essence unless so stated cure
2. During this time, the risk of loss is
3. Implied covenant of marketability arises on Buyer

Closing

1. Title passes if deed is validly executed

(writing describing property signed by
the grantor) and delivered (intent by
grantor to immediately part with control)
2. When title passes, the land sale contract
is extinguished (along with the implied
covenant of marketability) • Recordation
3. Only basis for a suit by Buyer after title
passes is an express covenant, if any, in • Buyer records deed to protect her
the deed. There are six possible title against a subsequent purchaser
covenants: for value.
• Seisin
• Right to Convey
• Encumbrances
• Quiet Enjoyment
• Warranty
• Further Assurances

CMR Chart

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 REAL PROPERTY

13 THE RECORDING SYSTEM NOTES

What happens if a grantor is a double-dealer and conveys the very
same parcel to more than one grantee? Who gets the property?

At common law, the rule was simple: first in time, first in right. In
other words, whoever received the interest first was entitled to the
property. The second grantee was out luck regardless of the circum-
stances. Because this rule encouraged nefarious grantors to commit
fraud by placing the losses on unsuspecting subsequent purchasers,
the recording acts were enacted to protect bona fide purchasers
from prior interests that they could not know about. Practically any
kind of instrument affecting an interest in land can be recorded,
including deeds, mortgages, contracts to convey, or judgments
affecting title to property.

Recording gives notice to the world that title to property has been
transferred. So, any subsequent purchaser will have constructive
(or record) notice of the conveyance. Because, as you’ll soon see, a
bona fide purchaser by definition lacks notice of a prior conveyance,
proper recording prevents a later taker from becoming a subsequent
bona fide purchaser (“BFP”).

Note, however, that a subsequent BFP is not protected by the

recording acts against interests that arise by operation of law (for
example, prescriptive and implied easements, or title by adverse
possession). Why? Because in such instances there is no instru-
ment to record, so the recording acts do not apply and subsequent
purchasers take subject to these interests.

Our Model: The Case of the Double Dealer

O conveys Blackacre to A. Later, O conveys Blackacre, the same
parcel, to B. O, our double dealer, has skipped town. In the battle of
A vs. B, who wins?

Remember three brightline rules for race, notice, and race-notice

jurisdictions:

• In a race jurisdiction, B wins, if he records properly before A does.

took meaning the time you closed
• In a notice jurisdiction, B wins if he was a BFP when he took, on the land contract
regardless of whether he records before A does. In a notice state,
the last BFP to take wins.

• In a race-notice jurisdiction, B wins if B is a BFP and he records

properly before A does.

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 REAL PROPERTY

In both a notice and race-notice state, to prevail in a recording system

NOTES question B must demonstrate that when he took he was a BFP. A
BFP is one who purchases Blackacre for value without notice that
someone else (in our model, A) got there first.

13.1 BONA FIDE PURCHASERS

To be a bona fide purchaser, a grantee must:

• Be a purchaser (or a mortgage lender), not one who received the

property by gift, will, or inheritance

• Pay valuable consideration

take without notice that another • Take without notice (actual, constructive, or inquiry) of the prior
purchaser (in this case A), got there conveyance
first
Bona fide purchasers prevail over prior transferees in notice jurisdic-
tions. They also prevail in race-notice jurisdictions if they win the race
to record. If the subsequent grantee does not qualify as a BFP, they
are not protected by the recording act and the common law rule of
first in time applies.

Recording acts sometimes refer to “good faith” purchas-

CMR ers in place of bona fide purchasers. You can treat these
Exam Tip
terms as synonymous (a good faith purchaser is one who
acquires property for valuable consideration, in good faith, and
without notice of another’s prior claim to the property).

13.1.1 Purchaser for Value

The recording statutes protect purchasers. Donees, heirs, and
devisees are not protected because they don’t give value.

a. Two Routine Value Questions

• The bargain basement sale:

HYPO 13A
B remitted substantial pecuniary
consideration B paid $50,000 cash for Blackacre, when its fair market value is
estimated at $100,000. Is B a purchaser for value?

• The case of the doomed donee: recording statutes do not protect

donees, heirs, or devisees unless the shelter rule applies.

HYPO 13B
B loses unless the shelter rule applies
B is O’s heir, or devisee, or donee. In a recording statute question,
what happens to B?

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 REAL PROPERTY

13.1.2 Notice NOTES

“Without notice” means the purchaser had no actual, constructive
(record), or inquiry notice of a prior conveyance at the time they paid
consideration and received the interest. The three forms of notice
that a buyer potentially may be charged with are:
had no AIR notice
that someone beat
A I R: you to it
B learns of A (literal knowledge) prior to closing, B
A: learns of A
INQUIRY AND RECORD
I: B charged with what inspection would've revealed. are both forms of
Buyer has duty to inspect CONSTRUCTIVE NOTICE
R: B on notice of deeds properly recorded in chain of
title
a. Actual Notice
What does actual notice mean?

b. Inquiry Notice
Whether he examines Blackacre prior to closing or not, B is on inquiry
notice of whatever an examination of Blackacre would have revealed.

• The buyer of real estate has a duty to inspect the premises before
transfer of title, to see, for example, whether anyone else is in
possession. I would be on inquiry notice if
someone else was in possession
at or prior top our closing, whether
• If another is in possession, B is charged with inquiry notice of I bothered to inspect or not.
that fact, regardless of whether B actually bothered to inspect
or not. But B did a walk through of the
house during closing and house
was vacant, so no IN
• Thus, in our model of the double dealer, if A had taken pos-
session, B would be on inquiry notice of that fact, thereby
defeating B’s status as a BFP.

• Inquiry notice also means that if a recorded instrument makes ref-

erence to an unrecorded transaction, grantee is on inquiry notice
of whatever a reasonable follow-up would have revealed.

c. Record Notice—Chain of Title

B is on record notice of A’s deed if, at the time B takes, A’s deed was
properly recorded within the chain of title.

Although no one has a legal duty to perform a title

CMR search, a subsequent purchaser will be charged with the
Exam Tip
notice that such a search would provide, whether or not
she actually searches.

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 REAL PROPERTY

In our model, what if A has not recorded, or has not recorded

NOTES properly at the time B takes? Assume that B is a BFP. Does B win?

In a race state, B wins if she It depends on the type of recording statute the jurisdiction has
records first. enacted.
In a notice state, B wins if she is
last BFP to take
13.2 TYPES OF RECORDING ACTS
The examiners will not tell you which type of statute to apply; they
In a race-notice state, B wins if she will give you the language of the statute.
is a BFP, and B records BEFORE A
does.
13.2.1 Race Statute
Under a pure race statute, notice of a prior conveyance by the
Race Statute, grantor doesn’t matter. The first party to record wins. Only a few
states have a pure race statute. The language of a typical race statute
A conveyance of an estate in land
shall not be valid against a looks like this:
subsequent purchaser for value
unless the conveyance is FIRST A conveyance of an estate in land shall not be valid against a
RECORDED subsequent purchaser for value unless the conveyance is first
recorded.
irrespective of BFP

13.2.2 Notice Statute

Under a notice statute, a subsequent purchaser who had no notice
of a prior conveyance by the grantor will prevail over a prior grantee
the last BFP to enter the fact pattern who failed to record. Typical notice statute language looks like this:
wins.
A conveyance of an interest in land, other than a lease for
less than one year, shall not be valid against any subse-
quent purchaser for value, without notice thereof, unless the
Notice Statute
conveyance is recorded.
A conveyance of an estate in land
shall not be valid against a
The subsequent purchaser under a notice statute prevails
subsequent purchaser for value,
CMR
Exam Tip even if they don’t record. As long as they had no notice
without NOTICE thereof, unless the
conveyance is recorded. of the prior conveyance, they win. But if they don’t want
the same thing to happen to them, they will have to record to put
other subsequent purchasers on notice of their interest.

EXAMPLE
O conveys to A, a BFP, on January 1. A does not record. O conveys
to B, a BFP, on January 15. B has no notice of the conveyance to A. B
prevails over A. It is irrelevant whether A records after January 15 or
before B records, because B had no notice of A at the time he took.
(This distinguishes notice and race-notice statutes.)
If, at the time B takes, he is a BFP, he wins. It won’t matter that A
may ultimately record first, before B does. It won’t matter, in the A
vs. B contest, that B never records.

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 REAL PROPERTY

13.2.3 Race-Notice Statute NOTES

To be protected under a race-notice statute, the subsequent
purchaser must not have any notice of the prior grant and must
record first. Typical race-notice language looks like this: Race-Notice Statute

A conveyance of an interest in
Any conveyance of an interest in land, other than a lease for land shall not be valid against any
less than one year, shall not be valid against any subsequent subsequent purchaser for value,
purchaser for value, without notice thereof, whose convey- without NOTICE thereof, whose
conveyance is FIRST
ance is first recorded. RECORDED.

EXAMPLE
Now to win, B must
O conveys to A, a BFP, on January 1. A does not record. O conveys 1) be a BFP
to B, a BFP, on January 15 for valuable consideration. B has no no- 2) win the race to record

tice of the conveyance to A. A records on January 18. B records on

January 20. A prevails over B because B did not record first.

HYPO 13C
On March 1, O conveys to A, a bona fide purchaser who does not
record. On April 1, O conveys the same parcel to B, a bona fide
purchaser, who does not record. On May 1, A records.
B, the last BFP to take
Who takes Blackacre in a notice jurisdiction?
A for rest
Who takes in a race-notice jurisdiction?

Who takes in a race jurisdiction?

In determining who is a BFP for purposes of protection of

CMR the recording statutes, remember that the purchaser must
Exam Tip
be without notice at the time of conveyance. It does not
matter if she learns of an adverse claim after the conveyance but
before recording.

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REAL PROPERTY

RECORDING STATUTES

Type of Statute Typical Language Effect

Notice “No conveyance or mortgage of an Subsequent bona fide
interest in land is valid against any purchaser (i.e., for value,
subsequent purchaser for value without notice) prevails.
without notice thereof, unless it is
recorded.”

Race “No conveyance or mortgage of an Grantee who records

interest in land is valid against any first prevails.
subsequent purchaser whose
conveyance is first recorded.”

Race-Notice “No conveyance or mortgage of an Subsequent bona fide

interest in land is valid against any purchaser (i.e., for value,
subsequent purchaser for value without notice) who
without notice thereof whose records first prevails.
conveyance is first recorded.”

CMR Chart

NOTES

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An easy way to spot the different statutes is to look for NOTES

CMR the words “notice” and “first.”
Exam Tip

• “First” only = race statute

• “Notice” only = notice statute

• “Notice” & “first” = race-notice statute

13.2.4 Chain of Title

Back to our original model, note that in either a notice or race-no-
tice jurisdiction, B’s status as a subsequent BFP would be defeated
if A had promptly and properly recorded before B took. In other Chain of Title: Sequence of recorded
docs capable of giving record notice
words, A’s proper recordation: to later takers

To give record notice to subsequent takers, the deed must be It is established through a title search
recorded properly, within the chain of title. The chain of title is the of the grantor-grantee index.
sequence of recorded documents capable of giving record notice to
subsequent takers.

How is the chain of title established in most states? Deed is recorded properly when it is
recorded within the chain of title.

Note three discrete chain of title problems:

a. Transferees from BFP—The Shelter Rule

Anyone who takes from a BFP will prevail against any interest the Shelter Rule
BFP would have prevailed against. In other words, the transferee Anyone who takes from a BFP
“takes shelter” in the status of her transferor, and thereby “steps into will prevail against any interest
the BFP would've prevailed
the shoes” of the BFP even though she otherwise fails to meet the against.
requirements of BFP status. This is true even if the grantee had actual The transferee takes shelter in
notice of a prior unrecorded conveyance. the status of her tranferor
She steps into the shoes of the

HYPO 13D
grantor BFP.

O conveys to A, who does not record. Later, O conveys the same

parcel to B, a BFP, who records. B then conveys to C, who is a C would prevail because under the
shelter rule, C steps into B's shoes. B
mere donee or who has actual knowledge of the O-to-A transfer. was a BFP who recorded first in a
In the contest of A vs. C, who prevails? notice or race-notice jurisdiction

aims to protect B (the BFP) by making it easier for B to transfer

What is the shelter rule trying to do? successfully without being weighed down O's double dealing

b. The Problem of the Wild Deed

A “wild deed” is a recorded deed that isn’t connected to the chain
of title. It doesn’t impart constructive notice because a subsequent
purchaser could not feasibly find it.

O sells Blackacre to A, who does not record. Then, A sells to B. B

records the A-to-B deed.

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No b/c O-A link is missing.
Is the A-to-B deed connected to the chain of title?
NOTES
The A-to-B deed, therefore, is a wild deed.
Wild Deed • The rule of the wild deed: If a deed, entered on the records
Recorded deed that isn't connected
(A to B), has a grantor unconnected to the chain of title (O to
to chain of title (incapable of giving A), the deed is a wild deed and is incapable of giving record
constructive notice) notice of its existence.

O, our initial grantor and dirty double dealer, then sells Blackacre to
C. Assume that C has no actual or inquiry knowledge of the O-to-A
or A-to-B conveyances. C records.
C wins O has skipped town. In the contest of B vs. C, who prevails?
No
Does it matter whether this is a notice or race-notice jurisdiction?
C wins in Notice state b/c she is last
BFP to take. In a notice state, the Why does C win in a notice state?
last BFP to enter your fact pattern
wins.
Why does C win in a race-notice state?
C wins in a race-notice state to record a wild deed is never
because C is a BFP who records.
Remember: B’s recording is a nullity. to record at all.

c. Estoppel by Deed
In 1950, O owns Blackacre. He is thinking about selling it to X, but for
now decides against it. In 1950, X, who does not own Blackacre, sells
1960 conveyance shoots back in it anyway, to A. A records. estoppel by deed comes to A
time to A's benefit.
rescue
In 1960, O finally sells Blackacre to X. X records.

In 1970, X, a double dealer, sells Blackacre to B. B records.

A owned BA b/c of estoppel by deed.
• As between X and A, who owned Blackacre from 1960-1969?

Estoppel by Deed The rule: One who conveys realty in which he has no interest (here,
X back in 1950), is estopped from denying the validity of that convey-
- Grantor purports top convey to
grantee realty they don't own
ance if he subsequently acquires the title that he had previously
purported to transfer (here, the 1960 O to X sale).
- Grantor later acquires title to the 1970: B owns as long as B
property • Who owns Blackacre in 1970? records AND IS A BFP.

B is the last BFP to take.

- Title autmoatically vests in grantee
• Why does B win in a notice state?
- Grantor is estopped from deny
validity of reacquisition conveyance • Why does B win in a race-notice state? B is a BFP who records properly
FIRST.
- But watch out for BFP. Early B’s title searcher would not find A’s deed. Why not? A recorded too early and is a
recording is outside chain of title. nullity so his title wont be found.
Remember: A’s 1950 recording is a nullity. A recorded too early. Thus,
A’s deed won’t be connected to the chain of title. So, a grantee is
The assumption is no one
86 sells acre unless they first
own it, and A didn't own it in
1950.
 REAL PROPERTY

entitled to assume that no one sells or conveys land until they first own
it. Thus, B’s title searcher would have no reason to discover X’s 1950 NOTES
pre-ownership transfer to A.

d. Deeds Recorded Late

A deed recorded after the grantor parts with title through a subse-
quent deed is not constructive notice in most states (but is in some
“race-notice” jurisdictions).

EXAMPLE
O conveys to A on March 1. O conveys to B on April 1. B records on
April 10. A records on April 15. B conveys to C on May 1. If C has no
actual or inquiry notice of the O-A deed, he will prevail. Most states
would hold that A’s deed was recorded late and was not in C’s chain
of title.

e. Deed in Chain Referring to Instrument Outside Chain

Reference to another instrument in a recorded document that is in
the chain of title may impart constructive notice of the instrument
referred to—even if it is unrecorded or not itself in the chain of title.

f. Restrictive Covenants—Deeds from Common Grantor

Courts are split on whether deeds to adjacent lots or lots in a subdi-
vision, executed by the same grantor and containing restrictions and
easements involving the subject lot, are within the chain of title of the
subject lot. The better view is that they are not.

13.3 JUDGMENT CREDITORS

A plaintiff who obtains a money judgment can place a judgment lien
on the defendant’s real property by filing the judgment in the appro-
priate county office. Whether judgment creditors are protected by
the recording statute against a prior unrecorded conveyance by the
defendant depends on the state statute, but most states do not grant
them protection. Unlike mortgage lenders, who are the same as any
other BFP, judgment creditors and lienors aren’t usually protected by
the recording acts. Because they aren’t covered by the recording act,
their notice or lack of notice of prior claims is irrelevant.

Most states have statutes requiring a lien holder to record

CMR or file the lien in order for it to be enforceable. Don’t
Exam Tip
confuse this with the recording act; this type of statute
doesn’t mean a lien is protected by the recording act.

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REVIEW ACTIVITY
NOTES
In 2015, Jerry sold Blackacre to Tiffany. Tiffany did not record but
Tiffany assuming possession of immediately assumed possession of Blackacre, where she continues
BA gave world inquiry notice.
to live. In 2020, Jerry sold Blackacre, the same parcel, to Chris by
statutory special warranty deed. Chris recorded the deed but never
Two promises Jerry makes for assumed possession. Thereafter, Jerry fled the jurisdiction. Blackacre
himself: he owns the parcel AND
parcel is free from encumbrances
is in a state whose recording statute provides:
In a notice jurisdiction A conveyance of an interest in land is not valid against any
subsequent purchaser for value without notice thereof, unless
For Chris to win, he would need to the conveyance is recorded.
prove he is BFP, AND he would have to
be the last BFP to enter. He would fail This jurisdiction has a 10-year statute of limitations for claims of
because of Notice required -> ie he is
charged with inquiry notice b/c Tiffany
breach of warranty in a deed.
assumed possession Identify this recording statute.
Tiffanyt would win lawsuit b/c Chris is Chris has now endeavored to assume possession of Blackacre, but
not BFP, b/c had inquiry noted to him, to his surprise he finds Tiffany in possession. In the lawsuit brought
regardless of whether he actually know
or actually bothered to inspect.
by Chris against Tiffany, who prevails?
If Jerry returns to the jurisdiction, may Chris sue Jerry for breach of
Yes, b/c Jerry broke promise and
claim is timely
the promises Jerry made when he delivered to Chris a statutory spe-
cial warranty deed?

Once we get to the closing, the

May Chris sue for breach of Jerry’s implied promise, in the land con-
contract dies. The promise to provide tract, to provide marketable title to Chris at closing?
marketable title is in the k, and the k
died.

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14 MORTGAGES NOTES
Because real estate is so expensive, most people can’t afford to pay
cash for it. Most people go to a bank or other lending institution for a
loan. To secure the debt, the borrower gives the lender a mortgage
(along with a promissory note representing the loan) on the property.
If the loan isn’t paid, the lender may foreclose the mortgage.
Foreclosure involves selling the property to pay the debt.

14.1 MORTGAGOR AND MORTGAGEE

The borrower is called the mortgagor, and the lender is the
mortgagee. It’s important to commit these to memory so that you
don’t take valuable time sorting them out on your exam.

14.2 PROMISSORY NOTE AND MORTGAGE

The mortgage transaction involves two documents: the promis- Involves two docs:
sory note and the mortgage. The note is the mortgagor’s personal promissory note: represents
obligation. This means that the mortgagee is not limited to the land debtor's personal obligation i.e says
when seeking a remedy for default. If the mortgagor quits paying, in the event debtor defaults, the
lender can be made whole and can
in addition to foreclosure, the mortgagee has the option to sue the come after any qualifying assets
mortgagor personally for payment of the note. The mortgage is the
agreement that says that if the mortgagor quits paying, the land can AND

be sold to pay the mortgagee. the mortgage: is the agreement that

if debtor quits paying, the land can
Most typically, the debtor/notemaker is also the mortgagor; in other be sold to pay the mortgagee
words, one person, the mortgagor, is giving the mortgage along with
the note to the lender, the mortgagee. However, it is also possible
for the debtor/notemaker and mortgagor to be different people (for
example, if a mother agrees to place a mortgage on her house to
secure a loan given to her daughter).

14.3 PURCHASE-MONEY V. NON-PURCHASE-MONEY Purchase-Money Mortgage:

MORTGAGE Lender's security interest in real

There are two primary ways to mortgage Blackacre: the purchase- estate that their loan enables debtor
money mortgage and the non-purchase-money mortgage. The
to acquire. i.e a lien, ie. a mortgage
on the very parcel its loan enables
purchase-money mortgage is an extension of value by a lender who the debtor to acquire.
takes as collateral a security interest in the very real estate that its
loan enables the debtor to acquire.

HYPO 14A
Jack and Rebecca borrow $100,000 from Bank to finance their
purchase of a home, granting Bank a security interest in that new
home to collateralize the loan. This is a purchase-money mortgage
because Bank took a lien in the very realty that its loan enabled
Jack and Rebecca to purchase. Classify the parties:

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Jack and Rebecca are:

NOTES
Bank is:

Non-Purchase-Money Mortgage: HYPO 14B

When the lender does not extend
Now, later in life, Jack and Rebecca, having paid off that mortgage
the value to enable debtors to in full, seek to borrow $100,000 from Valley Finance to help
acquire land. finance their children’s education, granting Valley a security
A collaterlization in land to finance interest in their home. This is a non-purchase-money mortgage.
the debtor's new venture. Valley Finance’s loan did not enable Jack and Rebecca to purchase
the realty that is now the subject of its lien. Classify the parties:

Jack and Rebecca are: JR mortgagor

Valley Finance is: Valley is mortgagee

14.4 CREATION
Our model: C, a creditor, is thinking of lending O $300,000. O
offers Blackacre as collateral.
Synonamous Names for Legal
Mortgage: - a debt (note) + lien in land to
A mortgage is the union of two elements: secure debt (mortgage)
mortgage deed - In writing (legal mortgage)
deed of trust 14.4.1 Writing
sale leaseback The mortgage typically must be in writing to satisfy the Statute of
security interest in land
Frauds. This is the legal mortgage.

14.5 TRANSFER OF INTERESTS

While both the mortgagee or the mortgagor may transfer their inter-
ests, on the bar exam, you are far more likely to encounter a transfer
by the mortgagor.

14.5.1 Transfer by Mortgagee

For the bar exam, you need to know that a mortgagee may transfer
their interest and how that is accomplished. The creditor-mortgagee
can transfer her interest by:
• Indorsing the note and delivering it to the transferee, or

• Executing a separate document of assignment

A mortgagee can freely transfer the note, and the mortgage automat-
ically follows a properly transferred note.
recording statutes protect
mortgages
14.5.2 Transfer by Mortgagor—Assumption or Subject To
if recorded, mortgage sticks with When a mortgagor transfers the property, the buyer either assumes
the land the mortgage or takes the property subject to the mortgage. What’s
the difference? If a grantee assumes the mortgage, they’re agreeing
to be personally liable on the mortgage note. If they take the

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property subject to the mortgage, they are not agreeing to personal

liability; the mortgagee’s only recourse is foreclosure (they cannot NOTES
maintain a suit against the grantee).

a. Effect of Assumption
If the grantee signs an assumption agreement, they become primarily
liable to the lender, while the original mortgagor is secondarily
liable as a surety. However, the mortgagee may opt to sue either
the grantee or the original mortgagor on the debt. If no assumption
agreement is signed, the grantee is not personally liable on the loan,
and the original mortgagor remains primarily and personally liable.

Remember that once a grantee has assumed a mortgage,

CMR any modification of the obligation by the grantee and
Exam Tip
mortgagee discharges the original mortgagor of all liability.

b. Due-on-Sale Clauses
Due-on-sale clauses, which appear in most modern mortgages, allow
the lender to demand full payment of the loan if the mortgagor trans-
fers any interest in the property without the lender’s consent.
Recording statutes protect mortgages
If O, our debtor-mortgagor, sells Blackacre, which is now mortgaged,
what happens to the mortgage? If recorded, it remains on the land.

Generally, when a mortgagor transfers title to the property, the The transferee assumes no
grantee automatically takes the property subject to the mortgage. personal liability. Only the
The grantee will not be personally liable on the mortgage unless they ORIGINAL DEBTOR
MORTGAGOR is personally liable.
specifically assume the mortgage. But, the mortgage remains on
the land as long as the mortgage instrument was properly recorded.
(Remember: recording statutes protect mortgagees.) What this
means is that while the grantee is not personally liable on the debt,
if the mortgagor defaults and the mortgage instrument was properly
recorded, the mortgagee can foreclose on the land.

HYPO 14C
Yes, b/c recording statutes
On January 10, Madge took out a $50,000 mortgage on Blackacre apply to mortgages as well as
with First Bank. First Bank promptly and properly recorded its deeds. Buyer takes subject of
properly recorded lien.
interest on January 10. Thereafter, on January 15, Madge sold
Blackacre to Buyer. Buyer had no actual knowledge of the lien.
Buyer promptly and properly recorded its deed. Does Buyer hold
subject to First Bank’s mortgage?

14.5.3 Effect of Recording Acts

All recording statutes apply to mortgages as well as deeds. Thus, a
subsequent buyer takes subject to a properly recorded lien. Does it

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matter which recording statute the jurisdiction in the above hypo has
NOTES enacted?
b/c it had record notice when it took. In a notice state, Buyer takes subject to the lien because:
b/c it had record notice and First Bank
recorded first
In a race-notice state, Buyer takes subject to the lien because:

HYPO 14D
Assume now that on January 10, Madge took out a $50,000
mortgage on Blackacre with First Bank. On January 15, Madge
sold Blackacre to Buyer. Buyer had no knowledge of the lien. On
January 20, First Bank recorded its mortgage in Blackacre. On
January 30, Buyer recorded its deed to Blackacre. Does Buyer
hold subject to First Bank’s mortgage?

This time, it depends on which recording statute has been

enacted. in race-notice: yes, b/c bank won the
race to record.
In a race-notice jurisdiction:
in notice: buyer wins as long as it was a
In a notice jurisdiction: BFP when it recorded.

In a notice state, a subsequent BFP prevails over a prior grantee or

mortgagee who has not yet recorded properly at the time the BFP
takes.

Who is Personally Liable on Debt?

14.5.4 Who Is Personally Liable on the Debt If O, Our
- If O(mortgagor) sells Blackacre to Debtor-Mortgagor, Sells Blackacre to B?
B: If B has “assumed the mortgage,” both O and B are personally
--B "assumes mortgage": Both O
liable. B is primarily liable, and O remains secondarily liable.
and B
--B takes "subject to mortgage": If B takes “subject to the mortgage,” B assumes no personal liability.
Only O, but if recorded, Blackacre Only O is personally liable. But, if recorded, the mortgage remains on
the land. Thus, if O does not pay, the mortgage may be foreclosed.
can be foreclosed

14.6 FORECLOSURE

14.6.1 How to Proceed

Suppose that our debtor-mortgagor has defaulted on the loan and
our mortgagee-creditor must look to the land for satisfaction. How
must the mortgagee proceed?

The mortgagee must foreclose by proper judicial proceeding. At

foreclosure, the land is sold. The sale proceeds go to satisfying the
debt.

a. Deed in Lieu of Foreclosure

The mortgagor may tender to the mortgagee a deed in lieu of foreclo-
sure, which permits the mortgagee to take immediate possession

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without a foreclosure sale. Since the deed in lieu of foreclosure is not

an actual foreclosure, it doesn’t operate to terminate any junior liens NOTES
that may be present on the mortgaged real estate.

14.6.2 Sale Proceeds Are Less or More than Amount

Owed
What if the proceeds from the sale of Blackacre are less than the
amount owed?
mortgagee brings deficiency
action
By contrast, what if there is a surplus?

Junior liens are paid off in order of their priority. Any remaining
surplus goes to the debtor.

HYPO 14E
Assume that Blackacre has a fair market value of $50,000 and is
subject to three mortgages executed by its owner, Madge. First
Bank, with first priority, is owed $30,000. Second Bank, with second
priority, is owed $15,000, and Third Bank, with third priority, is owed
$10,000. Assume that First Bank’s mortgage is foreclosed, and that
Blackacre is sold for $50,000. How will the funds be distributed?

Off the top: Attorneys’ fees and expenses of the foreclosure and
then any accrued interest on First Bank’s mortgage. (Assume for
purposes of this hypothetical that these items are zero.)

The sale proceeds are then used to pay off the mortgages in the
order of their priority. Each claimant is entitled to satisfaction in
full before a junior lienholder may take. Thus, First Bank takes
$30,000. Then, Second Bank takes $15,000. Third Bank takes the
remaining balance, $5,000. Third Bank should be able to proceed
for a deficiency judgment. (Note that Third Bank comes up short.
It should proceed against the debtor, Madge, for a deficiency
judgment.)

HYPO 14F surplus goes to debtor

Now assume the same facts as above, except that Blackacre is

sold at First Bank’s foreclosure sale for $60,000. What result?

14.6.3 Effect of Foreclosure on Various Interests

Priority among interests in foreclosure is the most heavily tested
aspect of mortgages. The default rule is that the priority of a
mortgage depends on when it was placed on the property. First in
time, first in right again. A buyer at a foreclosure sale takes the title as
it existed when the foreclosed mortgage was placed on the property.
All interests senior to that one remain on the property, and all

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interests junior to that one are extinguished. Those interests include

NOTES junior mortgages, liens, leases, easements, and all other types of
interests.
Effects of Foreclosure on Interests
a. Junior Interests
- Junior interests terminated (paid in As noted, foreclosure terminates interests junior to the mortgage
descending order from sale proceeds) being foreclosed but does not affect senior interests. This means
assuming funds are left over after full
satisfaction of superior claimants that junior lienholders will be paid in descending order with the
proceeds from the sale, assuming funds are left over after full satis-
- Necessary parties: all junior lien
faction of superior claims. Junior lienholders should be able to
holders + debtors
proceed for a deficiency judgment. But once foreclosure of a superior
- Senior interests unaffected (buyer claim has occurred, with the proceeds distributed appropriately,
takes subject to them)
junior lienholders can no longer look to Blackacre for satisfaction.

y Necessary Parties:
Who are the necessary parties to the foreclosure action?

Is the debtor-mortgagor also a necessary party to the foreclo-

sure action? Yes

The debtor-mortgagor is considered a necessary party and

must be joined, particularly if the creditor wishes to proceed
against the debtor for a personal deficiency judgment.

Failure to include a necessary party results in the preservation

of that party’s claim, despite the foreclosure and sale. Thus, if
a necessary party is not joined, their mortgage will remain on
the land.

b. Senior Interests
Foreclosure does not affect any interest senior to the mortgage being
foreclosed. The buyer at the sale takes subject to such interest.

Is the buyer personally liable on the senior debt?

If they tell you a junior creditor's
mortgage has foreclosed upon land, it No. But as a practical matter, if the senior mortgage is not paid,
will not affect First Bank's mortgage. sooner or later the senior creditor will foreclose against the land.
Foreclosure does not affect
any interest senior to the HYPO 14G
mortgage being
Blackacre has a fair market value of $50,000 and is subject to
foreclosed. The buyer at the
three mortgages executed by its owner, Madge. First Bank, with
sale takes subject to such
first priority, is owed $30,000. Second Bank, with second priority, is
interest
owed $15,000, and Third Bank, with third priority, is owed $10,000.
Now, suppose that it is Second Bank’s mortgage that is being
foreclosed. (First Bank’s mortgage exists, but it is either not in
default or its holder has not yet taken action to foreclose it.) Will the
foreclosure affect First Bank’s mortgage?

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 REAL PROPERTY

Foreclosure does not affect any interest senior to the mortgage

being foreclosed. NOTES
Is the foreclosure sale buyer personally liable to First Bank?

No. Only the debtor, Madge, is personally liable to First Bank.

But, if she cannot repay the debt, First Bank (whose lien was
properly recorded) is entitled to foreclose on Blackacre. What
this means is that because First Bank’s mortgage was properly
recorded, it sticks with the land. Thus, if debtor Madge cannot
pay back First Bank, First Bank can foreclose on the land. With
that in mind, the foreclosure sale buyer, albeit buying at Second
Bank’s foreclosure sale, nonetheless has a strong incentive to
pay off First Bank’s lien. Otherwise, Blackacre is subject to a
later foreclosure action brought by First Bank if and when debtor
Madge is unable to pay off First Bank’s lien.

Considering that, how should bidding proceed at the foreclosure

sale brought by Second Bank?

Buyer should bid up to $20,000, which represents Blackacre’s

fair market value of $50,000 minus the $30,000 buyer needs to
discharge First Bank’s mortgage.

How will the $20,000 proceeds from the sale be distributed?

$15,000 goes to Second Bank (which is now satisfied in full). $5,000

goes to Third Bank. Third Bank has come up short and should
proceed against debtor Madge for the amount still owed to it.

Buyer then applies the $30,000 that it had set aside to pay off First
Bank.

14.6.4 Priorities
As a creditor, you must record. Until you record, you have no priority.
Once recorded, priority is determined by the norm of first-in-time,
first-in-right. What does that mean? Means the creditor who records first
takes first.
a. Purchase-Money Mortgage
Remember the purchase-money mortgage? A mortgage given to
secure a loan that enables the debtor to acquire the encumbered land.

HYPO 14H
C lends O $100,000 so that O can purchase Blackacre. C takes as
collateral a security interest in Blackacre, the very parcel that C’s
extension of value enabled O to acquire. What is C?

What is C’s priority? If it records properly, it has

first proirity

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NOTES HYPO 14I

C1 lends $200,000 to O, taking a security interest in all of O’s real
It's permissible and called a estate holdings, “whether now owned or hereafter acquired.” Is
FLOATING LIEN. that permissible?
Why would debtor grant creditor a
floating lien? Why would debtor O grant a creditor a floating lien?
When the loan on the front end is
undercollateralized, in that context, C1 records the mortgage note. Six months later, C2 lends O
$50,000 to enable O to acquire a parcel known as Blueacre, taking
back a security interest in Blueacre and recording that interest.
C2 has first priority, the parcel it
Subsequently, O defaults on all outstanding obligations. All that he
financed. has left is Blueacre. Who has first priority in Blueacre, C1 or C2?
The purchase money mortagee who
properly records its mortgage should
be entitled to first priority as to the
b. Subordination Agreements
parcel that its loan enabled the By private agreement, a senior creditor may agree to subordinate
debtor to acquire. its priority to a junior creditor. Subordination agreements are permis-
sible.

14.6.5 Redemption
Equitable Redemption: a. Redemption in Equity
Equitable redemption is universally recognized up to the date of sale.
- Debtor can redeem land prior to
foreclosure sale by paying What that means is that at any time prior to the foreclosure sale the
- Cut off by foreclosure sale debtor has the right to redeem the land by freeing it of the mortgage.

Once a valid foreclosure has taken place: the right to equitable

redemption is cut off.

How is the right of equitable redemption exercised when the note

does not contain an acceleration clause? (An acceleration clause
permits the mortgagee to declare the full balance due in the event of
default.)
Acceleration clause would entitle a
lender to essentially accelerate the
loan and call in the entire What if the mortgage or note contained an acceleration clause?
outstanding balance owed
immediately due and payable in the The validity of acceleration clauses is generally accepted. Such
event of any debtor default. clauses may permit acceleration for failure to pay the mortgage debt
If note doesnt contain AC, and as well as for defaults in mortgage covenants such as an obligation to
debtor has defaulted, how would pay taxes, maintain insurance, or avoid the commission of waste.
she equitably redeem land?
By paying off MISSED loan plus
May a debtor/mortgagor waive the right to redeem in the mortgage
accrued interest.
itself? No clogging equity of redemption.
If mortgage or note DOES contain debtor cannot waive the right to
AC, debtor must pay ENTIRE 14.7 MORTGAGE ALTERNATIVES redeem in mortgage itself.
BALANCE plus accrued interest.

14.7.1 Deed of Trust

Some states call a security interest in land a deed of trust rather
than a mortgage. The debtor/notemaker is the trustor. The trustor

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gives a deed of trust to a third-party trustee, who is usually closely

connected to the lender (the beneficiary). On default, the lender NOTES
instructs the trustee to foreclose the deed of trust by sale.

14.7.2 Absolute Deed

An absolute deed, if given for security purposes, can be treated by
the court as an “equitable” mortgage to be treated as any other
mortgage (that is, creditor must foreclose by judicial action).

14.7.3 Installment Land Contract

An installment purchaser obtains legal title only when the full contract
price has been paid off. Forfeiture clauses, allowing the vendor
upon default to cancel the contract, retake possession, and retain all
money paid, are common and generally enforceable.

14.7.4 Equitable Vendor’s Lien

This lien does not result from an agreement but rather arises by
implication of law when a seller transfers title to the buyer, and the
purchase price or a portion thereof remains unpaid.

14.8 SALE-LEASEBACK
A landowner may sell her property for cash and then lease it back
from the purchaser for a long period of time. Like an absolute deed,
this may be treated as a disguised mortgage.

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NOTES ZONING, CONDOMINIUMS, AND NATURAL

RIGHTS
zoning is exercise of state and
local gov police powers. 15 ZONING
Pursuant to its police powers, government may enact statutes to
All states enact ENABLING
Legislation: enabling legislation
delegates to the local government reasonably control land use for the protection of the health, safety,
the capacity to pass zoning morals, and welfare of its citizens. The zoning power is based on
ordinances in furtherance of the
police powers to reasonably the state’s police power and is limited by the Due Process and Equal
control land use. Protection Clauses of the Fourteenth Amendment, and the “no taking
without just compensation” clause of the Fifth Amendment. Cities
and counties can exercise zoning power only if so authorized by a
state enabling act.

Variance 15.1 THE VARIANCE

- Permission to depart from zoning The variance is the principal means to achieve flexibility in zoning.
restriction The variance grants a landowner permission to depart from the
- BOP: Show undue hardship + no literal restrictions of a zoning ordinance. What must a proponent of a
diminution to neighboring property
values variance show?

The variance is granted or denied by administrative action, typically

in the form of a zoning board. Usually, a variance will not be granted if
the hardship has been created by the applicant themselves.

Zoning ordinances are generally invalid if they have no

CMR reasonable relation to public welfare, are too restrictive,
Exam Tip
are discriminatory as to a particular parcel, are beyond
the grant of authority, violate due process, or are racially
discriminatory.

15.2 THE NONCONFORMING USE

Nonconforming Use: 15.2.1 Elimination of Once Lawful Use
Previously allowed use cannot be
eliminated all at once unless just
Say a once lawful, existing use is now deemed nonconforming by a
compensation paid new zoning ordinance. Can the once lawful use be eliminated all at
once?

15.2.2 Changes to Nonconforming Use

A nonconforming use cannot be extended or intensified in ways
that constitute a substantial change, but insubstantial changes are
permitted. Owners can make reasonable changes to repair their
premises and make them practicable for their purposes. If there is
any doubt as to whether a change is substantial or insubstantial, the
doubt is resolved against allowing the change.

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15.3 CUMULATIVE ZONING NOTES

There are two types of zoning ordinances: cumulative and noncumu-
lative.
Cumulative Zoning:
15.3.1 Cumulative Zoning Ordinance
A cumulative zoning ordinance creates a hierarchy of uses of land, Land ranked and categorized to
create hierarchy of uses (single-
where a single-family home the highest use, followed for example family home is highest use)
by a two-family home (which is a lesser use), and then an apartment
building (an even lesser use), and then a strip mall (even lesser), and
then a factory (even lesser). Under a cumulative zoning ordinance, Any higher use.
What mean? -> check 15A
land that is zoned for a particular use may be used for the stated
purpose (meaning, that particular use) and for what other use?

HYPO 15A
The township of Utopia zones a strip of vacant land for commercial Yes because a single family home is
use. A, who owns land in the strip, wants to build a single-family a higher use than commercial use for
land.
home there. Under a cumulative ordinance, can A build? No vice versa.

Why?

15.3.2 Noncumulative Zoning Ordinance

Under a noncumulative zoning ordinance, land may be used only for
the purpose for which it is zoned.

HYPO 15B
No -> strip may only be used
The township of Utopia zones a strip of vacant land for commercial commerically
use. A, who owns land in the strip, wants to build a single-family
home there. Under a noncumulative ordinance, can A build?

Why?

15.4 SPECIAL USE PERMIT

A special use permit is one that must be obtained even though the
zoning is proper for the intended use. It is often required for hospi-
tals, funeral homes, drive-in businesses, and so on.
Must be obtained even though zoning proper Compare with variance.
for intended use (e.g. hospitals, drive-ins) Variance is permission to depart
xhecklist needed to satisfy from list of allowable ways to use
land.

Needed b/c certain uses present safety

concerns e.g hospitals
general safety concerns.

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NOTES 16 CONDOMINIUMS AND HOMEOWNERS’

ASSOCIATIONS
16.1 CONDOMINIUMS
holds tenant in common respect to In a condominium, each owner owns the interior of their individual
other parts unit plus an undivided interest in the exterior and common elements.
Because condominium unit ownership is treated as fee ownership,
the ordinary rules against restraints on alienation apply. What are
some examples of common elements? common walkways, hallways

16.2 HOMEOWNERS’ ASSOCIATIONS

Homeowners' Association:

-each condo owner is member

16.2.1 Membership
The owner of each condominium is a member of the homeowners’
-oversee common elements association (HOA). The members vote to elect a board, which
-board enforces covenants,
manages the property. The association is usually a legal entity, such
conditions, restrictions as a corporation or LLC. What does the HOA oversee?
-special assessment = one-time fee
if due don't cover an expense 16.2.2 Association Rules
Most HOAs pass charters and bylaws that place requirements
or restrictions on each owner’s use of her property. These rules
contained in what’s called a declaration of covenants, conditions,
and restrictions (or CC&R) that prescribe what owners can and
cannot do with their property. For example, CC&Rs might prohibit
pets or the posting of “for sale” signs or require that balconies be
kept free of trash.
The board overseen with the
Who enforces the CC&Rs? HOA

16.2.3 Fees
Each condominium unit owner must pay regular (for example,
monthly) dues to the HOA which are used by the association to
maintain the common elements. But what if the monthly fees are
insufficient to pay necessary expenses (for example, a major roof
repair is needed)? One time fee is assessed against all of the residents.

16.3 COOPERATIVES
In a cooperative, title to the land and buildings is held by a corpora-
tion that leases individual apartments to its shareholders. Because of
their economic interdependence and because the individual owners
are regarded as tenants, a direct restraint on the alienation of an
individual interest is valid.

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17 RIGHTS INCIDENTAL TO OWNERSHIP OF LAND NOTES

(NATURAL RIGHTS)
17.1 IN GENERAL Lateral Support:
An owner of real property has the exclusive right to use and possess
the surface, the airspace, and the soil of the property. - Right to have land supported in
natural state
- If landowner causes adjacent
17.2 RIGHTS TO LATERAL AND SUBJACENT SUPPORT OF land to subside:
LAND --Land in natural state: strict
liability
--Land improved: liability if
17.2.1 Lateral Support negligent
Ownership of land includes the right to have the land supported in its
natural state by adjoining land.

a. Support of Land in Natural State

A landowner is strictly liable if their excavation causes adjacent land natural state: means unadorned,
to subside (meaning, slip or cave in). pristine

b. Support of Land with Buildings

If land is improved by buildings and an adjacent landowner’s excava-
tion causes that improved land to cave in, the excavator will be liable If the land caves in due to
only if negligent. However, strict liability will apply to the defendant neighbor excavating on their land,
then excavator will be liable if
excavator’s actions if the plaintiff shows that, because of the defen- NEGLIGENT
dant’s actions, the plaintiff’s improved land would have collapsed
even in its natural state. In other words, for strict liability to apply,
plaintiff must show that the improvements on their land (for example,
the shrubs, the fountain, the structures) did not contribute to their
land’s collapse.

17.2.2 Subjacent Support

An underground occupant of land (for example, a mining company)
must support the surface and buildings existing on the date the
subjacent estate was created. Liability for subsequently erected
buildings requires negligence.

17.3 WATER RIGHTS

Different rules apply to watercourses, groundwater, and surface
waters.

17.3.1 Watercourses (Streams, Rivers, and Lakes)

There are two major systems for determining allocation of water Riparian Doctrine:
in watercourses: the riparian doctrine and the prior appropriation - Water belongs to those who own
land bordering watercourse
doctrine. A boundary line also can be affected by accretion or - Riparians share right of reasonable
avulsion. care

a. Riparian Doctrine
Under this doctrine, the water belongs to those who own the land

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bordering the watercourse. Riparian rights attach to all contiguous

NOTES tracts held by the same owner as long as one of the tracts abuts the
water. Riparian owners can use water only in connection with the
riparian parcel.

y Natural Flow Theory

Under this theory, a riparian owner’s use is enjoinable if it results
in substantial or material diminution of the water’s quantity,
quality, or velocity.

This is the theory in place. y Reasonable Use Theory

Under this theory, which is the most common, all riparians share
the right of “reasonable use” of the water (that is, one owner’s
use is not enjoinable unless it substantially interferes with the
use of other riparian owners). In determining “reasonable” use,
courts balance the utility of the owner’s use against the gravity
of the harm. Six factors are helpful in making this determination:
alteration of flow, purpose of use, pollution, extent of use, desti-
nation of water taken, and miscellaneous conduct that may give
rise to litigation.

y Natural vs. Artificial Use

Under either theory, natural uses (human uses, for example,
consumption, gardening) prevail over artificial uses (for example,
irrigation, manufacturing).

b. Prior Appropriation Doctrine

Prior Appropriation Doctrine:
Under this doctrine, the water initially belongs to the state, but the
-Water belongs to state right to divert it and use it can be acquired by an individual through
-Right to divert/use can be acquired their actual use, regardless of whether or not they happen to be a
through actual use
irrespective of whether or not she riparian owner. Appropriative rights are determined by priority of
happens to be a riparian owner beneficial use. The norm for allocation is first in time, first in right.
simply by PRIORITY OF Thus, a person can acquire the right to divert and use water from a
BENEFICIAL USE
watercourse merely by being the first to do so. Any productive or
beneficial use of the water, including use for agriculture, is sufficient
to create the appropriation right. Note that an appropriative right can
be lost by abandonment.

17.3.2 Groundwater (Percolating Water)

SURFACE OWNER can make
reasonable use of ground water
Groundwater is water beneath the surface of the earth that isn’t
confined to a known channel. Four doctrines determine rights in
groundwater:

a. Absolute Ownership Doctrine

This doctrine is followed by only a few states. The owner of overlying
land can take all the water they wish, for any purpose, including
export.

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b. Reasonable Use Doctrine

Many eastern states follow this doctrine. It is like absolute ownership,
NOTES
but exporting is allowed only if it does not harm other owners who
have rights in the same aquifer.

c. Correlative Rights Doctrine

In some states, owners of overlying land own the underground water
basin as joint tenants, and each is allowed a reasonable amount for
his own use.

d. Appropriative Rights Doctrine

This doctrine is followed in many western states. Priority of use (not
ownership of overlying land) is determinative.

e. Restatement Approach
A few states follow the Restatement approach, under which a surface
owner may pump groundwater unless it (1) unreasonably harms
neighboring landowners, (2) exceeds the pumper’s reasonable share,
or (3) directly and substantially affects surface waters and unreason-
ably harms surface water users.

17.3.3 Surface Waters

Surface water is water without a channel that passes over land, such
as water coming from rain, springs, or melting snow, which has not yet
reached a natural watercourse or basin. A landowner can use surface
water within their boundaries for any purpose they desire. Questions
on surface water usually concern liability for changing natural flow by
dikes, drains, and so on. Liability depends on which theory the state
follows.

a. Natural Flow Theory

Under this theory, followed by many states, owners cannot alter
natural drainage patterns. This rule has been “softened” in most
states to allow “reasonable changes.”
Apply Common Enemy Rule:
Owner can take any protective
b. Common Enemy Theory measure to get rid of surface water/
Under this theory, followed by many states, an owner can take any combat its flow
protective measures to get rid of the water or combat its flow (for
example, dikes or drainage changes). The rule has been modified by
many courts to prohibit unnecessary damage to others’ lands.

c. Reasonable Use Theory

There is a growing trend to apply this theory, which involves balancing
the utility of the use against the gravity of the harm.

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NOTES Remember that the above theories apply to redirecting

CMR surface water. A landowner can capture (for example, by
Exam Tip
a dam or in barrels) as much surface water as they wish.
Surface water can be diverted to any purpose on or off the land.
Owners below have no cause of action unless the diversion was
malicious.

17.4 RIGHTS IN AIRSPACE

The right to airspace above a parcel is not exclusive, but the owner is
entitled to freedom from excessive noise.

17.5 RIGHT TO EXCLUDE—REMEDIES OF POSSESSOR

The possessor of real property has the right to exclude others. Their
remedies for invasions include actions for:

a. Trespass (land invaded by tangible physical object);

b. Private nuisance (land invaded by intangibles such as odors or

noise);

c. Continuing trespass (land repeatedly invaded by trespasser);

and

d. Ejectment or unlawful detainer to remove a trespasser or

tenant. This action can be joined with a demand for money
damages.

To remove a trespass, you bring an has a right to be free from

ejectment action (also known as unlawful nuisance. Intentional
detainer action) unreasonable interference
of use of enjoyment of
property
doesnt have to be
tangible, physical, object
@lawprofpaula

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APPENDIX—PRESENT ESTATES AND FUTURE NOTES

INTERESTS

18 ESTATES IN LAND
“Estates in land” are possessory interests in land. These interests
may be presently possessory (present estates), or they may become
possessory in the future (future interests). These topics are complex
and account for only one or two questions on the MBE. That said,
you still need to know them both for those questions and for your
essays. These topics are dealt with in depth in your Present Estates
and Future Interests CMR. We’ll briefly cover the highlights here for
context.

18.1 PRESENT POSSESSORY ESTATES

A present possessory estate is an interest that gives the holder the
right to present possession.

18.1.1 Fee Simple Absolute

A fee simple absolute is the largest estate recognized by law. It’s
typically what we think of as full ownership of real property.

18.1.2 Defeasible Fees

Defeasible fees are fee simple estates (that is, of uncertain or poten-
tially infinite duration) that can be terminated upon the happening of
a stated event.

a. Fee Simple Determinable (and Possibility of Reverter)

A fee simple determinable terminates upon the happening of a
stated event and automatically reverts to the grantor. It’s created
by durational language, such as “for so long as,” “while,” “during,” or
“until.” For example, O “to A for so long as no alcoholic beverages are
consumed on the premises” gives A a fee simple determinable. The
accompanying future interest in O is called a possibility of reverter. If
alcohol is served on the premises, the estate automatically goes back
to O.

b. Fee Simple Subject to Condition Subsequent (and Right

of Entry)
A fee simple subject to a condition subsequent is created when the
grantor uses words like “upon condition that,” “provided that,” “but
if,” or “if it happens that.” In contrast to the fee simple determinable,
here, if the stated event happens, the grantee’s estate continues until
the grantor exercises her right to terminate by bringing suit or making
reentry. The grantor’s future interest is thus called a right of entry or
power of termination. This right must be expressly reserved.

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c. Fee Simple Subject to an Executory Interest

NOTES If a fee simple estate terminates upon the happening of a stated
event (because it is determinable or subject to a condition subse-
quent) and then passes to a third party rather than reverting to the
grantor or giving the grantor a right to terminate, the third party has
an executory interest.

18.1.3 Life Estate

Life estates are what they sound like: they’re ownership interests
for life. When the interest ends, the land either goes back to the
grantor (whose future interest is a reversion), or, more commonly,
to a third party (whose future interest is a remainder). Usually, a life
estate is measured by the life of the grantee, called a “life tenant”
(for example, O “to A for life”). A life estate measured by the life of
someone other than the life tenant is a life estate pur autre vie (for
example, O “to A for the life of B”).

a. Rights and Duties of Life Tenant—Doctrine of Waste

A life tenant is entitled to any ordinary uses and profits of the land
but can’t do anything that injures the interests of a remainderman
or reversioner. A future interest holder may sue for damages or to
enjoin such acts, and if they spend money to perform the life tenant’s
obligations (see 2), infra), they’re entitled to reimbursement.

y Affirmative (Voluntary) Waste—Natural Resources

Generally, a life tenant cannot consume or exploit natural
resources on the property (like timber, minerals, or oil). Under
the open mines doctrine, if mining was done on the land prior to
the life estate, the life tenant can continue mining—but is limited
to the mines already open.

y Permissive Waste
A life tenant is obligated to preserve the land and structures in
a reasonable state of repair and pay certain carrying charges
(such as mortgage interest and ordinary taxes). Permissive
waste occurs when a life tenant fails to do so.

y Ameliorative Waste
Ameliorative waste is a change that benefits the property
economically. Now, a life tenant may alter or even demolish
existing buildings if:

• The market value of the future interests is not diminished; and

either

• The remaindermen do not object; or

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• A substantial and permanent change in the neighborhood

conditions (for example, a change from residential to 90% NOTES
industrial) has deprived the property in its current form of rea-
sonable productivity or usefulness.

18.1.4 Estate for Years, Periodic Estate, Estate at Will,

Tenancy at Sufferance
These present estates are considered in Module 3, which concerns
the landlord-tenant relationship.

18.2 FUTURE INTERESTS

A future interest gives its holder the right or possibility of future
possession of an estate. Despite the fact that possession is in
the future, a future interest is a present, legally protected right in
property.

18.2.1 Future Interests in Transferor—Reversionary

Interests
Future interests retained by a grantor following a defeasible fee or
a life estate are called reversionary interests. There are only three
capable of creation in the grantor: the possibility of reverter, the right
of entry, and the reversion.

18.2.2 Future Interests in Transferees

If a future interest is held by someone other than the grantor, it has to
be either:

• A contingent remainder, OR

• A vested remainder, of which there are three types: (1) the in-
defeasibly vested remainder, (2) the vested remainder subject
to complete defeasance (also known as the vested remainder
subject to total divestment), and (3) the vested remainder subject
to open, OR

• An executory interest (of which there are two types: (1) the shifting
executory interest, and (2) the springing executory interest).

18.2.3 Future Interests in Transferees—Remainders

A remainder is a future interest in a third person that can become
possessory on the natural expiration of the preceding estate.
Remainders always follow life estates. The remainder can’t divest a
prior estate, and it can’t follow a time gap after the preceding estate.
A remainder must be expressly created in the instrument creating
the preceding possessory estate. They may be either contingent
(subject to a condition that must occur before the remainderman can
take) or vested. Only contingent remainders are subject to the Rule
Against Perpetuities.

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EXAMPLES
NOTES
1) “To A for life, and on A’s death to B and his heirs.” A has a present
possessory life estate. B has a remainder in fee simple.
2) “To A for life, and on A’s death to B if B survives A.” A has a life es-
tate; B has a contingent remainder in fee simple. The transferor has
a reversion, which will become a possessory estate on the termina-
tion of A’s life estate if B predeceases A. Here, B’s taking is subject
to a contingency, stated as a condition precedent, that he must
survive A in order to take.

a. Vested or Contingent
Vested remainders are either indefeasibly vested (not subject to
divestment or diminution), vested subject to total divestment (subject
to a condition subsequent), or vested subject to open (a class gift).
Remainders are contingent if they are in unborn or unascertained
persons or if they are subject to a condition precedent.

18.2.4 Future Interests in Transferees—Executory

Interests
There are two and only two future interests that can be created in a
transferee: remainders and executory interests. An executory interest
is an interest that divests the interest of another. So, remember: If it
is not a remainder because the preceding estate is not a life estate,
then it must be an executory interest.

EXAMPLES
1) “To A and her heirs; but if B returns from Canada, then and in that
event to B and his heirs.” A has a fee simple subject to an executory
interest. Because the future interest is created in a transferee, it has
to be either a remainder or an executory interest. B’s future interest
is not a remainder because it does not follow the natural termination
of the preceding estate (here, A’s fee simple estate). If B’s interest
does take in present possession, it will divest A’s fee simple, and
title will shift to B.
2) O conveys “to A for life, remainder to B and his heirs, but if B
predeceases A, to C and his heirs.” C’s interest does not await the
expiration of B’s vested remainder, but instead may cut it short.

18.3 THE RULE AGAINST PERPETUITIES

The Rule Against Perpetuities provides that, to be valid, an interest in
property must vest or fail not later than 21 years after a life in being
at the time of the creation of the interest. If there is any chance the
interest will vest after that time, the interest is void and is stricken
from the grant. In other words, an interest is void if there is any

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possibility, no matter how remote, that it might vest (or fail) more than
21 years after some life in being at the creation of the interest. The NOTES
Rule applies to executory interests, contingent remainders, class
gifts, options and rights of first refusal, and powers of appointment.

18.3.1 When Perpetuities Period Begins to Run

The validity of an interest under the Rule is determined at the time
the interest is created. That means that when an interest is created
in a will, the perpetuities period begins to run on the date of the
testator’s death.

18.3.2 “Must Vest”

An interest vests for purposes of the Rule when it becomes: (1)
possessory, or (2) an indefeasibly vested remainder or a vested
remainder subject to total divestment.

18.3.3 “Lives in Being”

Any lives can be used to show the validity or invalidity of an interest,
but no lives are of any help unless they are somehow connected with
the vesting of an interest.

EXAMPLE
“To A for life, then to such of A’s children as attain the age of 21.”
Here, the relevant measuring life is A. All of A’s children are going to
attain age 21, if at all, within 21 years after A’s death. (This includes a
child in the mother’s womb at A’s death, for the perpetuities period
includes any period of gestation actually involved.)

18.3.4 Interests Exempt from Rule

The following interests are exempt from application of the Rule
Against Perpetuities: a charitable gift following a charitable gift,
vested interests (other than open class gifts), and reversionary inter-
ests.

18.3.5 The Rule in Operation—Common Pitfall Cases

Interests that typically violate the Rule Against Perpetuities on the bar
exam are discussed in great detail in the Present Estates and Future
Interests CMR. They include:

• An executory interest that follows a defeasible fee

• An age contingency beyond age 21 in an open class

• The fertile octogenarian (people are conclusively presumed to be

capable of having children regardless of age) and

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• The unborn widow or widower (widows and widowers are not

NOTES determined until the spouse’s death and may not be the same
spouse as when the interest was created)

18.3.6 Perpetuities Reform Legislation

Most states have enacted statutes designed to eliminate some of the
harsh results of the common law Rule Against Perpetuities:

a. A “wait and see” statute, under which the validity of an

interest following one or more life estates is determined on
the basis of facts existing at the end of the life estate rather
than at the creation of the interest;

b. A cy pres approach, under which an invalid interest is

reformed to comply with the Rule and carry out the grantor’s
intent as nearly as possible; and

c. The Uniform Statutory Rule Against Perpetuities, which

provides an alternative 90-year vesting period. The Uniform
Rule takes a “wait and see” approach in determining whether
an interest actually vests within 90 years.

18.4 THE RULE AGAINST RESTRAINTS ON ALIENATION

Generally, any restriction on the transferability of a legal (as opposed
to an equitable) interest in property violates the common law Rule
Against Restraints on Alienation and is void.

18.4.1 Types of Restraints on Alienation

There are three types of restraints on alienation: (1) disabling
restraints, under which attempted transfers are ineffective; (2)
forfeiture restraints, under which an attempted transfer forfeits the
interest; and (3) promissory restraints, under which an attempted
transfer breaches a covenant. A disabling restraint on any legal
interest is void. Forfeiture and promissory restraints may be valid,
depending on the nature of the restraint and the interest involved.

18.4.2 Restraints on a Fee Simple

Any total restraint on a fee simple—either forfeiture, disabling,
or promissory—is void. The grantee may ignore the restraint and
freely transfer the property. Partial restraints may be valid. Although
absolute restraints on fee simple estates are void, a forfeiture or
promissory restraint for a limited time and for a reasonable purpose
may be upheld.

18.4.3 Restraints on a Life Estate

Forfeiture and promissory restraints on life estates are valid.
However, disabling restraints on legal life estates are void.

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18.4.4 Options and Rights of First Refusal NOTES

The right to have the first opportunity to purchase real estate when
it becomes available, or the right to meet any offer, is valid if reason-
able (for example, by specifying fair market value or other reasonable
price).

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