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Exam Guide 1
I. Right to Exclude v. Rights of Access 3
1. Trespass 3
A. PUBLIC POLICY LIMITS ON THE RIGHT TO EXCLUDE 3
State v. Shack, N.J. (1971) 3
Desnick v. American Broadcasting Companies, 7th Cir. (1995) 3
B. TRESPASS REMEDIES 4
Glavin v. Eckman, Mass. App. Ct. (2008) 4
Jacque v. Steenberg Homes, Inc., Wis. (1997) 4
2. Public Accommodations Laws 5
Uston v. Resorts International Hotel, Inc., N.J. (1982) 5
3. Copyright 6
A. ORIGINAL WORKS OF AUTHORSHIP 6
Feist Publications Inc. v. Rural Telephone Service Co., US (1991) 6
B. CONTRIBUTORY INFRINGEMENT 7
Sony Corp. v. Universal City Studios, US (1984) 7
Metro-Goldwyn-Mayer Studios Inc. v. Grokster, LTD., US (2005) 7
C. FAIR USE 8
Suntrust Bank v. Houghton Mifflin Co., 11th Cir. (2001) 8
II. Liberty to Use vs. Security 8
1. Nuisance 8
A. LAND USE CONFLICTS AMONG NEIGHBORS 8
B. SURFACE WATER 9
Armstrong v. Francis Corp., N.J. (1956) 9
C. POLICY ARGUMENTS 10
D. DEFINING UNREASONABLE LAND USE 11
Page County Appliance Center, Inc. v. Honeywell, Inc., Iowa (1984) 11
Fancher v. Fagella, Va. (2007) 12
E. LIGHT AND AIR 14
Fountainebleau Hotel Corp. v. Forty-Five Twenty-Five Inc., Fla. Dist. Ct. App. (1959) 14
Prah v. Maretti, Wis. (1982) 14
2. Lateral & Subjacent Support 14
A. LATERAL SUPPORT 15
Noone v. Price, W.Va. (1982) 15
B. SUBJACENT SUPPORT 15
Friendswood Development Co. v. Smith-Southwest Industries, Inc., Tex. (1978) 15
III. Immunity from Loss v. Power to Acquire 16
1. Adverse Possession: 16
A. TITLE VERSUS POSSESSION 16
Brown v. Gobble, W.Va. (1996) 16
Romero v. Garcia, N.M. (1976) 16
Nome 2000 v. Fagerstrom, Alaska (1990) 17
B. JUSTIFICATIONS FOR ADVERSE POSSESSION 18
2. Prescriptive Easements, Encroaching Structures, Border Doctrines, and Economic Analysis 18
A. PRESCRIPTIVE EASEMENTS 18
Community Feed Store, Inc. v. Northeastern Culvert Corp., Vt. (1989) 18
B. OTHER INFORMAL WAYS TO TRANSFER TITLE TO REAL PROPERTY 20
Somerville v. Jacobs, W.Va. (1969) 20
C. ECONOMIC ANALYSIS OF LAW 22
IV. Land Use Restrictions (Servitudes) 23
1. Overview of Terminology 23
2. Easements by Estoppel, Easements Implied from Prior Use and Necessity, and Constructive Trusts 25
A. LICENSES 25
B. EASEMENTS BY ESTOPPEL 25
Holbrook v. Taylor, Ky. (1976) 25
C. CONSTRUCTIVE TRUSTS 26
Rase v. Castle Mountain Ranch, Mont. (1981) 26
D. EASEMENTS IMPLIED FROM PRIOR USE 27
Granite Properties Limited Partnership v. Manns, Ill. (1987) 27
E. EASEMENTS BY NECESSITY 28
Finn v. Williams, Ill. (1941) 28
3. Express Easements; Running With the Land 28
Green v. Lupo, Wash. Ct. App. (1982) 29
Cox v. Glenbrook Co., Nev. (1962) 30
Henley v. Cablevision of St. Louis County, Inc., Mo. Ct. App. (1985) 30
4. Restrictive Covenants; Equitable Servitudes: 31
A. COVENANTS 32
B. CREATION OF COVENANTS 33
Winn-Dixie Stores, Inc. v. Dolgencorp, Inc., Fla. Dist. Ct. App. (2007) 34
Whitinsville Plaza v. Kotseas, Mass. (1979) 34
Davidson Brothers, Inc. v. D. Katz and Sons, Inc., N.J. (1990) 34
C. IMPLIED RECIPROCAL NEGATIVE SERVITUDES 35
Evans v. Pollock, Tex. (1990) 35
Sanborn v. McLean, Mich. (1925) 36
Riley v. Bear Creek Planning Committee, Cal. (1976) 36
5. Interpretation of Ambiguous Covenants; Homeowners Associations & Condominiums; Racial Restrictions 36
A. INTERPRETATION OF AMBIGUOUS COVENANTS 36
Blevins v. Barry-Lawrence County Association for Retarded Citizens, Mo. (1986) 36
B. HOMEOWNERS ASSOCIATIONS AND CONDOMINIUMS 38
Appel v. Presley Cos., N.M. (1991) 38
C. RACIALLY DISCRIMINATORY COVENANTS 39
Shelley v. Kraemer, US (1948) 39
Evans v. Abney, US (1970) 40
6. Public Policy Limits on Covenants; Anti-Competitive Covenants; Reasonableness Review of by-laws; Changed Conditions & Undue Hardship 40
A. ANTICOMPETITIVE COVENANTS 40
Davidson Brothers, Inc. v. D. Katz & Sons, Inc., Super. Ct. App. Div. (1994) 41
B. RULES AND BY-LAWS 42
O’Buck v. Cottonwood Village Condominium Association Inc., Alaska (1998) 42
Neuman v. Grandview at Emerald Hills, Inc., Fla. Dist. Ct. App. (2003) 42
C. CHANGED CONDITIONS 42
El Di, Inc. v. Town of Bethany Beach, Del. (1984) 42
D. RELATIVE HARDSHIP 43
E. OTHER EQUITABLE DEFENSES 43
F. STATUTES 44
Blakeley v. Gorin, Mass. (1974) 44
V. Estates System and Future Interests: 44
1. Contemporary Estates Systems 44
A. FEE SIMPLE ABSOLUTE 44
B. DEFEASIBLE FEES 45
C. LIFE ESTATES 46
D. FEE TAIL 47
2. Interpreting Ambiguous Conveyances; Presumption Against Forfeitures; Cy Pres Doctrine; Rule Against Creation of New Estates 47
A. INTERPRETATION OF AMBIGUOUS CONVEYANCES 47
Wood v. Board of County Commissioners of Fremont County, Wyo. (1988) 47
Cathedral of Incarnation in Diocese of Long Island, Inc. v. Garden City Co., App. Div. (1999) 48
Edwards v. Bradley, Va. (1984) 48
B. TRUSTS AND THE CY PRES DOCTRINE 49
C. REGULATORY RULES 49
Johnson v. Whiton, Mass. (1893) 49
D. RULE AGAINST PERPETUITIES 50
E. ANTI-FEUDAL PRINCIPLE 50
DePeyster v. Michael, N.Y. (1852) 50
VI. Public Policy Limits on Enforceability of Servitudes and Future Interests 51
1. Restraints on Alienation; Racial Conditions 51
A. RESTRAINTS ON ALIENATION 51
B. DIRECT RESTRAINTS 51
Horse Pond Fish & Game Club v. Cormier, N.H. (1990) 51
C. GRANTOR CONSENT CLAUSES 51
Northwest Real Estate Co. v. Serio, Md. (1929) 51
Riste v. Eastern Washington Bible Camp, Wash. Ct. App. (1980) 52
D. RIGHTS OF FIRST REFUSAL 52
Wolinsky v. Kadison, Ill. App. Ct. (1983) 52
E. LEASING RESTRICTIONS 53
Woodside Village Condominium Assoc. v. Jahren, Fla. (2002) 53
VII. Common Ownership 53
1. Joint Tenancy; Tenancy in Common; Tenancy by the Entirety; Marital Property 53
A. RIGHTS AND OBLIGATIONS OF CO-OWNERS 53
B. CONFLICTS OVER RENT AND POSSESSION 55
Olivas v. Olivas, N.M. Ct. App. (1989) 55
C. FAMILY CONFLICTS OVER USE OF COMMUNITY PROPERTY 55
Carr v. Deking, Wash. Ct. App. (1988) 55
Tenhet v. Boswell, Cal. (1976) 56
Kresha v. Kresha, Neb. (1985) 56
Swada v. Endo, Haw. (1977) 56
D. SEPARATE PROPERTY 57
E. COMMUNITY PROPERTY 57
F. OTHER ASPECTS OF MARITAL PROPERTY 57
VIII. Landlord/Tenant Law 58
1. Leaseholds: Consent to Sublease Clause; Duty to Mitigate Damages 58
A. LEASEHOLD ESTATES 58
Vasquez v. Glassboro Service Association, Inc., N.J. (1980) 59
B. CONFLICTS ABOUT OCCUPANCY 59
Kendall v. Ernest Pestana, Inc., Cal. (1985) 60
Slavin v. Rent Control Board of Brookline, Mass. (1990) 61
C. CONFLICTS ABOUT RENT 61
Sommer v. Kridel, N.J. (1977) 62
2. Constructive Eviction; Implied Warranty of Habitability; Retaliatory Eviction 63
A. CONSTRUCTIVE EVICTION 63
Minjak Co. v. Randolph, N.Y. App. Div. (1988) 64
Blackett v. Olanoff, Mass. (1976) 64
B. WARRANTY OF HABITABILITY 64
Javins v. First National Realty Corp, D.C. Cir. (1970) 64
C. RETALIATORY EVICTION 65
Hillview Associates v. Bloomquist, Iowa (1989) 65
Imperial Colliery Co. v. Fout, W.Va (1988) 65
Robinson v. Diamond Housing Corp, D.C. Cir. (1972) 66
IX. Real Estate Transactions 66
1. Real Estate Sales; Mortgages 66
A. STRUCTURE OF TRANSACTION 66
A. REAL ESTATE FINANCE 67
B. REGULATING FORECLOSURE PROCESS 68
Central Financial Services, Inc. v. Spears, Miss. (1983) 68
C. ORIGINS OF SUBPRIME MORTGAGE CRISIS 68
M&T Mortgage Corp. v. Foy, N.Y. Sup. Ct. (2008) 69
D. FORFEITURE AND INSTALLMENT LAND CONTRACTS 69
Stonebraker. v. Zinn, W.Va. (1982) 69
Sebastian. v. Floyd, Ky. (1979) 69
E. EQUITABLE MORTGAGES 70
Koenig. v. Van Reken, Mich. Ct. App. (1979) 70
X. Anti-Discrimination Law in the Housing Market 71
1. Discriminatory Treatment (Race, Gender, Familial Status) 71
A. DISCRIMINATION BY HOUSING PROVIDERS: 71
Asbury v. Brougham, 10th Cir. (1989) 71
United States v. Starrett City Associates, 2nd Cir. (1988) 71
B. THE CIVIL RIGHTS ACT OF 1866 72
City of Memphis v. Greene, US (1981) 72
C. SEX DISCRIMINATION: SEXUAL HARASSMENT 73
Edouard v. Kouzbal, Mass. (2002) 73
D. DISCRIMINATION BASED ON FAMILY STATUS 73
Human Rights Commission v. LaBrie. Inc., Vt. (1995) 73
2. Discriminatory Treatment (Marital Status, Sexual Orientation, Disability); Disparate Impact 74
A. DISCRIMINATION BASED ON MARITAL STATUS (UNMARRIED COUPLES) 74
McCready v. Hoffius, Mich. (1999) 74
B. DISCRIMINATION BASED ON SEXUAL ORIENTATION 74
State Ex Rel. Sprague v. City of Madison, Wis. (1996) 74
C. DISCRIMINATION AGAINST PERSONS WITH DISABILITIES 75
Poff v Caro, N.J. Super. Ct. Law Div. (1987) 75
D. DISPARATE IMPACT CLAIMS 75
Huntington Branch NAACP v. Town of Huntington, US (1988) 75
E. SEX DISCRIMINATION: SHELTERS FOR BATTERED WOMEN 75
Doe v. City of Butler, 3rd Cir. (1989) 75
XI. Zoning 76
1. Exclusionary Zoning; Prior Nonconforming Uses: Special Exceptions; Variances; Spot Zoning; Vested Rights; Equal Protection 76
A. EXCLUSIONARY ZONING 76
Southern Burlington County NAACP v. Township of Mount Laurel, N.J. (1975) 76
B. ZONING PROCESS 77
C. CONDITIONAL/CONTRACT ZONING 77
Durand v. IDC Bellingham, L.L.C., Mass. (2003) 78
D. PRIOR NONCONFORMING USES 78
Town of Belleville v. Parrillo’s Inc., N.J. (1980) 78
E. VARIANCES 78
Cochran v. Fairfax County Board of Zoning Appeals, Va. (2004) 78
F. VESTED RIGHTS 79
Stone v. City of Wilton, Iowa (1983) 79
G. LIMITS ON PREFERENTIAL ZONING 79
H. EQUAL PROTECTION, SUBSTANTIVE DUE PROCESS, AND FREE SPEECH 79
Village of Willowbrook v. Olech, US (2000) 79
XII. Regulatory Takings 80
1. Takings Clause; Ad Hoc Test; Just Compensation 80
A. PROPERTY AS MEDIATOR BETWEEN CITIZENS AND THE STATE 80
B. JUST COMPENSATION 81
C. REGULATORY TAKINGS PROBLEM 82
D. DETERMINATION OF TAKINGS 83
E. AD HOC TEST: FAIRNESS AND JUSTICE 84
Miller v. Schoene, US (1928) 84
Penn Central Transportation Co. v. New York City, US (1978) 84
Keystone Bituminous Coal Association v. DeBenedictis, US (1987) 84
Stop the Beach Renourishment, Inc. v. Florida Dept. of Environmental Protection, US (2010) 85
2. Categorical Takings 85
A. PHYSICAL INVASIONS 86
Pruneyard Shopping Center v. Robins, US (1980) 86
Loretto v. Teleprompter Manhattan CATV Corp, US (1982) 86
B. DEPRIVATION OF ECONOMICALLY VIABLE USE 87
Lucas v. South Carolina Coastal Council, US (1992) 87
Palazzolo v. Rhode Island, US (2001) 88
Tahoe-Sierra Preservation Council, Inc. v. Tahoe Regional Planning Agency, US (2002) 88
C. DEPRIVATION OF CORE PROPERTY RIGHTS: 89
Babbitt v. Youpee, US (1997) 89
Andrus v. Allard, US (1979) 89
D. VESTED RIGHTS: ESTABLISHED INVESTMENTS 89
Kaiser Aetna v. United States, US (1979) 89
Eastern Enterprises v. Apfel, US (1998) 89
3. Public Use 90
Kelo v. City of New London, US (2005) 90
Exam Guide
Hashtags
#exam – points to work into exam if possible/necessary
#policy – policy arguments (besides explicit arguments)
General Tips
▪ Analyzing Cases
Federal or state?
Common law or statute?
Criminal or civil?
Emphasize holdings or rules of law?
Constitutional basis (if any)?
▪ Recommended Approach (General)
Rules
Cases: facts/rules/holding/who won?
Arguments: (a) justice vs. rights, (b) outcomes, (c) rules vs. standards
▪ Recommended Approach (Arguments)
1) Identify type of argument
2) Identify what side of argument case is on
3) What is counterargument
4) Evaluate argument/counterargument (acknowledge costs/benefits of both)
▪ Policy arguments must be grounded with statutory text and/or legislative history when performing statutory interpretation
▪ Distinguishing Precedent (this is especially applicable to Question #1 – be sure to mention any cited cases in both sides of the argument!)
Identify significant factual differences between prior case and case at hand
Explain why as a matter of social policy the cases should be handled differently
▪ Standard of care
Strict liability
Reasonable use
➢ Negligence (focus on conduct)
➢ Nuisance (focus on consequences/results)
▪ Be on lookout for married couples – their property rights are often different (especially if divorce is involved)
▪ Framework for takings question (#3)
Precedent (focus on holdings of all major takings cases and analogize/distinguish)
Discuss any of the three factors that is relevant (a) character of government action, (b) interference w/ reasonable investment-backed expectations, (c) economic impact/diminution in value
Always include separate paragraph on “fairness and justice”
End with final paragraph summarizing recommendation
Singerisms
▪ Property is essentially a bundle of sticks”
▪ “Clear, consistent rules are incredibly strong argument in property law versus other bodies of law”
▪ “Property rights themselves come from the contract (e.g. deed), but people’s expectations generally come from custom.”
▪ “Economic analysis of law is nothing more than fancy cost-benefit analysis.”
▪ “Fair market value is default, but tends to undercompensate the owner.”
▪ Property differs from Contracts in that it represents a “bundle of rights” that may be disaggregated and transferred to other parties
▪ “Do not set up a life estate. Bad idea.”
I. Right to Exclude v. Rights of Access
1. Trespass
A. PUBLIC POLICY LIMITS ON THE RIGHT TO EXCLUDE
State v. Shack, N.J. (1971)
• Facts: Defendants enter private property to aid migrant farmworkers employed and housed there, and charged with criminal trespass after refusing to depart upon demand of owner
• Rule: ownership of real property does not include the right to bar access to governmental services available to migrant workers
• Rule: One should use his property as not to injure the rights of others
• Holding: Reversed and remanded; no possessory right invaded
Desnick v. American Broadcasting Companies, 7th Cir. (1995)
• Facts: ABC Primetime Live conducted undercover expose of eye surgery practice without consent of plaintiffs
• Rule: “Testers” posing as prospective buyers to gather evidence of discrimination are not trespassers even if they are private persons not acting under color of law (public policy)
• Holding: Entry did not infringe on the kind of interest the law of trespass protects; Interference was not with the ownership or possession of land
Common law trespass: unprivileged intentional intrusion on property possessed by another
• Intent requirement is met if D engaged in a voluntary act, such as walking onto the property
o Not necessary to show that the trespasser intended to violate the owner’s legal rights
• The intrusion occurs the moment the non-owner enters the property
• A trespass may occur either above or below the surface, such as digging under the surface or having a deck overhang on the property
• A trespass is privileged (and thus not wrongful) if:
o Entry is done with the CONSENT of the owner
o Entry is justified by the NECESSITY to prevent a more serious harm to persons or property
o Entry is otherwise encouraged by PUBLIC POLICY
Criminal Trespass: (State v. Shack) Initiated by federal, state, local government officials dealt with a criminal trespass, where the trespass is covered by a criminal statute. These proceedings may include arrest, criminal complaint or indictment, arraignment, plea bargaining and trial. Punishment may include imposition of a fine payable to the state, probation and incarceration.
Trespass to chattels: applies to personal property, allows owners of personal property to recover damages for intentional interferences with the possession of personal property. The owner is entitled to injunctive relief stopping any such interference with the chattel.
• Mere touching is not sufficient to constitute trespass, there must be some injury to the property or show either dispossession or intentional using or intermeddling with it
Right to roam: half the states still allow hunting on private land unless owner has posted “no trespassing” signs
B. TRESPASS REMEDIES
Glavin v. Eckman, Mass. App. Ct. (2008)
• Facts: Landscaper hired by defendants cut down oak trees on property of neighbor without neighbor’s permission. Plaintiffs had previously requested permission to cut the trees to enhance their ocean view, which was rebuffed.
• Rule: Judge has broad discretion to determine whether evidence other than fair market value is relevant to question of damages
• Rule: When applying restoration cost measure of damages, a test of reasonableness is imposed – cost of replacement or reconstruction must be reasonable, and replacement or reconstruction itself must be reasonably necessary
• Holding: Restoration cost upheld as measure of damages in lieu of value of timber cut or diminution in market value resulting from cutting; limiting damages to market value or diminution would encourage, rather than deter, self-help
Jacque v. Steenberg Homes, Inc., Wis. (1997)
• Facts: Defendant delivered mobile home over plaintiffs’ property despite their refusal to grant permission
• Rule: Factors court must consider when determining whether punitive damage award violates Due Process Clause: (1) degree of reprehensibility of the conduct, (2) disparity between harm or potential harm and the punitive damage award, (3) difference between remedy and civil or criminal penalties authorized or imposed in comparable cases
• Holding: Reversed and remanded; when nominal damages awarded for intentional trespass, punitive damages may also be awarded
Common measures of damages
1) Value of property damaged/removed
2) Diminution in value of property resulting from injury
3) Restoration cost
Incomplete defense of necessity: necessity justifies a trespass when needed to save lives or property
• If a trespasser damages property, law imposes on trespasser a duty to compensate the owner for the damage
2. Public Accommodations Laws
Uston v. Resorts International Hotel, Inc., N.J. (1982)
• Facts: Casino excludes plaintiff from blackjack tables because of card counting
• Rule: When property owners open their premises to the general public in pursuit of their own property interests, they have no right to exclude people unreasonably
• Rule: Property owners may exclude from their premises those whose actions “disrupt the regular and essential operations of the premises, or threaten the security of the premises and its occupants (e.g. the disorderly, the intoxicate, the repetitive petty offender)
• Holding: Absent a valid rule by the Gaming Commission, Upton may not be excluded as he is not threatening and has not disrupted operations
Common law: imposes a duty on innkeepers and common carriers (planes, trains, buses) to serve members of the public without discrimination unless they have a good reason not to provide services to a particular individual
• Uston extended right of reasonable access to all business open to public (minority rule)
Justifications for special obligations on innkeepers and common carriers
1) More likely to be monopolies than other businesses; denial of service tantamount to denying ability to travel or find a place to sleep away from home
2) Provide necessities whose denial places individuals at risk during travel
3) Hold themselves out as ready to serve public and public relies on this representation
Civil Rights Act of 1964: prohibition against discrimination or segregation in places of public accommodation)
• Does not prohibit discrimination on basis of sex
• #Singer – would read statute’s list of establishments as illustrative and not exhaustive (unlike courts), feels retail stores should be included
Civil Rights Act of 1866: right to make and enforce contracts, sue, be parties, give evidence; right to full and equal benefit of all laws and proceedings for the security of persons and property; right to inherit, purchase, lease, sell, hold, and convey real and personal property
• Regulates race discrimination only
• Applies to private conduct as well as legislation passed by state
• §1981 Includes the right to enter a store or other service provider
• Courts split on whether §1981 prohibits discriminatorily following people in stores:
- Minority of courts hold conduct violates right to contract under §1981 and/or right to purchase personal property under §1982
- “Right to make contracts” denied only when patron is “actually prevented and not merely deterred” from making purchase or receiving service (majority rule)
New Jersey Law Against Discrimination: prohibits discrimination; right to employment, accommodations, property; excludes private institutions, religious educational facilities, and private secondary or post secondary schools
Federal vs. state accommodations laws: state statutes and constitutional provisions may go further than federal law in protecting individual rights
Place of public accommodation: Some state courts interpret state public accommodations statutes to apply to membership organizations without a fixed place of operations (e.g. Boy Scouts)
Private clubs: Courts generally look to see whether organization (1) is selective in its membership, and (2) has limits on the number of persons who can join
• Example: Group limited to men, but with no other selection criteria and unlimited in size, is likely to be held a public accommodation
Americans with Disabilities Act of 1990: prohibits discrimination on basis of disability in employment and public accommodations; requires new construction of covered dwellings built after Jan. 26, 1993 to be designed to be accessible to persons with disabilities; prohibits discrimination by existing businesses on basis of disability and imposes obligations to make reasonable accessibility accommodations
• ADA requirements for alteration of existing facilities do not apply to buildings designated historical landmarks under federal or state law if alterations will “threaten or destroy historic significance of building
3. Copyright
Copyright Act of 1976: grants owners of “original works of authorship” that are fixed in a “tangible medium of expression” exclusive rights to copy, distribute, perform, or display those works publicly and to make derivative works from them
Copyright and Similarity to Trespass #Singer
• Fair use analogous to right to exclude
• Difficulty is that it is easier to define disputed “property” w/ respect to trespass than in copyright
A. ORIGINAL WORKS OF AUTHORSHIP
Feist Publications Inc. v. Rural Telephone Service Co., US (1991)
• Facts: Local telephone subject to state regulation that requires it to issue updated telephone directory annually and competes with defendant, which publishes area-wide directories, for yellow pages advertising. Plaintiff refuses to license its listings to defendant, who then uses them without consent.
• Rule: Originality is a constitutional requirement for copyright protection Art. I, §8
• Rule: Facts are never original; copyright in compilation does not extend to the facts it contains; compilation is copyrightable only to extent it features original selection, coordination, or arrangement
• Holding: Selection, coordination, and arrangement of white pages do not satisfy minimum constitutional requirements for copyright protection; defendant’s use of listings cannot constitute copyright infringement
B. CONTRIBUTORY INFRINGEMENT
Sony Corp. v. Universal City Studios, US (1984)
Holding: Supreme Court holds VCR manufacturer and retailers not liable for contributing to copyright infringement merely because VCRs can be used to copy works protected by copyright law
Rule: Manufacture or sale of product capable of “commercially significant non-infringing uses” is insufficient to constitute “contributory infringement,” even if VCRs were used by owners for infringing uses
Dissent: Adopts different test where copyright owner need prove only potential for harm to the market for the value of the copyrighted work, when the proposed use is an “unproductive one”
Metro-Goldwyn-Mayer Studios Inc. v. Grokster, LTD., US (2005)
• Facts: Defendants distribute free software allowing users to share files through peer-to-peer networks , are aware users employ their software primarily to download copyrighted files, and made no effort to filter copyrighted material or otherwise impede sharing
• Rule: One who distributes a device with the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringement by third parties.”
• Rule: “The classic instance of inducement is by advertisement or solicitation that broadcasts a message designed to stimulate others to commit violation.”
• Holding (Souter): Vacated and remanded; substantial evidence in plaintiff’s favor on all elements of inducement
• Concurring (Ginsburg): Under Sony rule, evidence insufficient to demonstrate a reasonable prospect of substantial or commercially significant non-infringing uses of products over time
• Concurring (Breyer): Evidence sufficient under Sony rule to demonstrate substantial or commercially significant non-infringing use; no need to modify Sony as it works to protect technology in its current form
C. FAIR USE
Suntrust Bank v. Houghton Mifflin Co., 11th Cir. (2001)
• Facts: Defendant published The Wind Done Gone, a fictional work based on Gone with the Wind. Plaintiff seeks injunctive relief.
• Rule: Copyright laws enacted to achieve main goals: (1) promotion of learning, (2) protection of the public domain, (3) granting of an exclusive right to the author
• Rule: Fair use of a copyrighted work, for purposes such as criticism or comment, is not an infringement of copyright
• Rule: Four fair use factors from Copyright Act: (1) purpose and character of the use, (2) nature of the copyrighted work, (3) amount and substantiality of the portion used, and (4) effect of use on potential market of original work
• Rule: 4 required elements for preliminary injunctive relief: (1) a substantial likelihood of success on the merits, (2) a substantial threat of irreparable injury if the injunction were not granted, (3) the threatened injury to P outweighs the harm an injunction may cause the D, (4) granting the injunction would not disserve the public interest
• Holding: Vacated and remanded; plaintiff did not establish likelihood of success on the merits and TWDG is entitled to a fair-use defense
II. Liberty to Use vs. Security
1. Nuisance
A. LAND USE CONFLICTS AMONG NEIGHBORS
Nuisance doctrine: Nuisance doctrine provides remedies for conduct that causes substantial and unreasonable harm to the use and enjoyment of land
• Typically involve activities “offensive, physically, to the senses which make life uncomfortable” such as noise, odor, smoke, dust
• Differs from trespass as it does not protect interest to exclusive possession, but to quiet enjoyment of land
• Differs from negligence as nuisance focuses on result of the conduct rather than conduct itself (is the interference unreasonable?)
Temporary and Permanent Nuisances
• Permanent nuisance: either irreparably injured P’s property or is of such a character that it is likely to continue indefinitely. In this case, the statute of limitations begins at the time the nuisance begins
• Temporary nuisance: can be alleviated by changes in the D’s conduct and the claim “accrues anew upon each injury” or occurs intermittently.
Courts resolve land use conflicts in four basic ways (“Entitlements”)
1) Privilege: defendant is privileged to use the land in the way P complains of, as conduct of which P complains does not violate any legal duties owed by the D to the P (“damage without legal redress”)
2) Strict Liability: P has an absolute right not to suffer a particular sort of harm caused by D’s activity; D is not legally entitled to engage in the activity without liability, unless he can get P to agree to let him do so, such as by paying P for permission (P effectively has power to veto D’s harmful activity)
3) Reasonableness: Reasonableness test represents a middle position: authorizes D to engage in the harmful activity if it is deemed to be reasonable, but not if the conduct and/or harm caused by it is deemed unreasonable.
- Factors: (a) extent of harm to P and social utility of P’s activity, (b) social benefits of D’s activity and what society would lose by preventing D from freely engaging in the activity, (c) overall relative social costs and benefits of the conflicting land uses of P and D, (d) availability of alternative means to mitigate/avoid the harm, (e) D’s motive, and (f) which use was established first
4) Prior use: awarded to the person who established the first use
Remedies adopted by courts: legal rights mean little unless injured party can secure redress to compensate prior injury or prevent future injury
1) Dismissal of complaint
- D may also fend off a lawsuit by P by bringing it himself; D asks the court to issue a declaratory judgment establishing that the D has the privilege to engage in the harmful activity without liability to the neighbor
2) Damages: most common
- Cost of restoration – the cost of repairing the damage and bringing the property back to its prior condition
- Diminution in the market value of the property
3) Injunction: an order to the D to do or not to do certain specified acts
4) Purchased injunction: The court may issue a conditional injunction, ordering the activity stopped on the condition that the P reimburse the D for the opportunity loss occasioned by ceasing the activity.
B. SURFACE WATER
Armstrong v. Francis Corp., N.J. (1956)
• Facts: Defendant built homes in a development and constructed drainage system that adversely impacted stream running through downstream properties including: discolored and foul water, flooding, erosion, and damage to masonry
• Rule: Reasonable use privileges each possessor to make reasonable use of land, even though flow of surface waters is altered and causes some harm to others,, but incurs liability when harmful interference with surface waters is unreasonable
• Holding: Court adopts the reasonable use doctrine due to flexibility
Diffuse surface water: “drainage from rain, melting snow, and springs… not amounting to a stream” State courts have followed three different rules:
1) Common enemy doctrine: allows property owners the absolute freedom to develop their property without liability for any resulting damage to neighbors caused by increased runoff of surface water
- This rule may be the law in about 17 states
2) Natural flow (“civil law”) rule: grants the injured property owner absolute security against injury from flooding caused by a neighboring property owner’s development of her property
- Today it persists in only a few states as it might inhibit land development because most development will change drainage patterns
3) Reasonable use test: requires decision maker to determine in specific cases whether the D’s conduct caused unreasonable interference with the neighbor’s use of their land
- This test is now the majority rule
C. POLICY ARGUMENTS
Three Kinds of Arguments
1) Rights: Deal with the parties themselves. Rights arguments can do multiple things such as
a. Justice in social relationships – appeal to fairness or justice in social relationships
b. Rights as freedom of action – deal with a landowner’s claim that they have the right to use their property as they wish
c. Rights as security – deal with a landowner’s claim that they have the right to have one’s property be protected from harm
d. Value judgments – raises question of where to draw the line between one possessor’s right to use their property freely and another possessor’s right to security
1) Social Utility: Deals with society as a whole
a. Promoting the general welfare by enacting appropriate incentives: appeal to goal of generating rules of law that promote socially desirable conduct and deter socially harmful conduct – two components:
1. Assert that particular legal rules create specified incentives that encourage or discourage certain kinds of behavior and
2. Evaluate that behavior by asserting that a particular rule is better than the alternatives either because it promotes socially desirable conduct (behavior that has greater social benefits than social costs) or because it discourages socially harmful conduct (an activity whose costs outweigh its benefits)
b. Promoting Competition: social welfare is maximized when the government deregulates economic activity by freeing property owners to develop their property as they see fit (shielding property holders from liability encourages investment in socially beneficial economic activities)
c. Protecting the security of investment: opposite of promoting competition, where it is said that no one will invest to develop property if the investment is not secure; the basis of the institution of property is to provide security for the justified expectations
1. Development generally should be encouraged, but not to the extent that its harmful effects outweigh its benefits
2. Land development benefits society, but it also may negatively affect neighboring property
3. By bringing private costs in line with social costs, the rules can encourage activity whose social benefits outweigh its social costs and discourage activity whose total social costs outweigh its social benefits
d. Balancing interests: assessing social utility arguments requires judgments about how people will actually respond to alternative legal rules
2) Formal Realizability or Administrability: Rigid rules versus flexible standards
a. Predictability versus justice in the individual case: unlike rights and social utility arguments, formal considerations concern the manner in which rules are expressed and implemented.
b. Rules: legal rules are sometimes defined in a way that allows mechanical application
1. Two major benefits of rules: restraint of official arbitrariness and certainty
2. Disadvantages include requiring particular results, even if the results seem unfair under the circumstances.
c. Standards: in contrast to rigid rules, legal doctrines are sometimes flexible and such doctrines take the form of standards or principles, other times standards take the form of lists of “factors” that are to be considered in adjudicating a case.
1. These have the benefit of obtaining justice in the individual case by allowing the decision maker to take account of all relevant circumstances
2. May offer less predictability, however over time as their application is elaborated through case law, standards can become more predictable
D. DEFINING UNREASONABLE LAND USE
Page County Appliance Center, Inc. v. Honeywell, Inc., Iowa (1984)
• Facts: Defendant placed computer, manufactured by Honeywell, with its travel agency and leaking radiation interfered with display television pictures at a nearby appliance store. Honeywell declined to manufacture non-radiation-emitting computer because it was neither cost nor consumer effective.
• Rule: Serious harms may be privileged if plaintiff demonstrates an “unusually sensitive” use of the premises; wrong to regulate defendant’s generally inoffensive activity
• Rule: Reasonableness is a function of (1) priority of location, (2) character of neighborhood, (3) nature of alleged wrong
• Holding: Reversed and remanded
Fancher v. Fagella, Va. (2007)
• Facts: Invasive roots of defendant’s tree damaged and displaced retaining wall between parties’ properties, displaced pavers on plaintiff’s patio, caused blockage of plaintiff’s sewage and water pipes, and impaired foundation of plaintiff’s house. Tree’s branches also deposit leaves and other debris onto plaintiff’s roof and rain gutters. Self-help proved ineffectual.
• Rule: Living trees and plants are not ordinarily nuisances, but can become so when they cause actual harm or pose an imminent danger of actual harm to adjoining property
• Holding: Adopts Hawaii approach with regards to “noxious” nature of plant and rules that equitable relief is not precluded even when a nuisance is found to exist
Trees and plants as nuisance: State courts have followed four different rules:
1) Massachusetts Rule: landowner’s right to protect property from encroaching boughs and roots of a neighbor’s tree is limited to self-help
2) Virginia Rule: intrusion of roots and branches from a neighbor’s plantings which are “not noxious in nature” and caused no “sensible injury” are not actionable at law, plaintiff limited to self-help
3) Restatement Rule: obligation on owner to control vegetation encroaching on adjoining land if vegetation is “artificial” (planted or maintained by a person), but not if the encroaching vegetation is “natural”
4) Hawaii Rule: living trees or plants not ordinarily nuisances, but can become so when they cause actual harm or pose an imminent danger of actual harm to adjoining property
Unreasonable harm in use and enjoyment of land: how do courts determine when an interference is unreasonable?
• Determine what INTERESTS are encompassed by the right to the use and enjoyment of land (freedom from pollution, noise, odors, and smoke)
• How serious must the interference be for the nuisance to be present? Traditionally it must be SUBSTANTIAL
• How do we determine whether the harm is UNREASONABLE?
- Rights or fairness
- Social utility (parties themselves) or welfare (society as a whole) analysis
Rights considerations in nuisance law: conflicts between defendant’s interest in free land use and plaintiff’s interest in being secure from harm
• Activity deemed nuisance
- Defendant’s conduct is disfavored (e.g. spite fences)
- Activity is one owners should not have to bear without compensation
• Activity not deemed nuisance
- Regulating activity goes too far in limiting freedom or causes unfair surprise (e.g. unusually sensitive plaintiff)
- Harmful activity established first (“coming to the nuisance”)
Restatement 2nd of Torts and unreasonable land use: defines land use as unreasonable when the gravity of the harm outweighs the utility of the actor’s conduct
• In evaluating the gravity of harm the courts look at:
- The extent and character of the harm involved
- The social value that the law attaches to the type of use or enjoyment invaded
- The suitability of the particular use or enjoyment invaded to the character of the locality
- The burden on the person harmed of avoiding the harm
• In evaluating the utility of the conduct the courts look at:
- The social value that the law attaches to the primary purpose of the conduct
- The suitability of the conduct to the character of the locality and
- The impracticability of preventing or avoiding the invasion
Social Welfare considerations in nuisance law: costs and benefits of activity
• On the social utility side, courts will consider:
- The character of the harm
- Distributive considerations: fair to make an individual owner bear the costs of D’s socially beneficial activity or should those costs be spread around to the owner causing the damage?
- Fault: Is one of the owners engaged in a disfavored activity? Is the conduct appropriate for the area? Did P come to the nuisance?
• On the welfare side, courts will consider:
- Costs and benefits
- Incentives
- Lowest cost avoider: Which party can more cheaply avoid the cost? Should this party also bear the burden of paying the cost?
Public nuisance: unreasonable interference with a right common to the general public (e.g. obstruction of public highways)
• Traditionally limited to claims only by public officials
• Trend is to allow any private citizen affected by nuisance to bring a lawsuit
E. LIGHT AND AIR
Fountainebleau Hotel Corp. v. Forty-Five Twenty-Five Inc., Fla. Dist. Ct. App. (1959)
• Facts: Defendant plans a 14-story addition that will cast a shadow over the cabana and swimming pool areas of the adjoining hotel, which was built a year before the defendant hotel.
• Rule: Property owner may put his own property to any reasonable and lawful use, as long as he does not deprive adjoining landowner of any right of enjoyment of his property recognized and protected by law
• Rule: In the absence of some contractual or statutory obligation, there is no common law right to free flow of light and air across the adjoining land of one’s neighbor
• Holding: Reversed; plaintiff establishes no legally recognized cause of action
Prah v. Maretti, Wis. (1982)
• Facts: Plaintiff’s home was first built in subdivision and he seeks to restrict neighbor’s home construction plans to guarantee access to sunlight across adjoining party to prevent reduction in efficiency of his solar-powered heating system
• Rule: Common law rules adapt to changing social values and conditions
• Rule: Reasonable use nuisance doctrine is applicable to light across adjoining property
• Dissent: Landowner’s right to use of property within limits of ordinances, statutes, and restrictions of record here such use is necessary to serve legitimate needs is a fundamental precept of a free society; policy decisions best left to legislature
Light and air: vast majority of US jurisdictions follow Fountainebleau, holding that, in the absence to the contrary, owners have absolute rights to develop their property without liability for any interference with their neighbor’s light and air interests (“no easement for light and air exists unless a contract creates it”)
• Exception is enjoinment of “spite fences” erected for sole purpose of harming neighbor
2. Lateral & Subjacent Support
Easement: limited right to do something on, or to control use of someone else’s property
• Affirmative easement: right to do something on someone else’s property
• Negative easement: right to prevent someone else from using their own property in a certain way
Support easements: landowners own both the surface and the earth beneath the surface unless they have sold the subsurface to others in the form of mineral rights
• Lateral support: support for neighboring land consisting of land along the side of the neighbor’s subsurface, holding it up; land must be sufficiently strong in its natural state to support weight of neighboring house (“servitude for lateral support of land”)
• Subjacent support: support for the surface from underneath
A. LATERAL SUPPORT
Noone v. Price, W.Va. (1982)
• Facts: Plaintiff’s home begins slipping down mountainside due to deterioration of defendant’s retaining wall below.
• Rule: No obligation to support added weight of buildings or other structures that land cannot naturally support
• Rule: Owner of land may be unreasonable in withdrawing lateral support needed by neighbor for artificial conditions (i.e. buildings) on neighbor’s land in: (1) making unnecessary excavation causing neighbor’s land to subside, and (2) negligence in failing to provide against risk of harm to neighbor’s structures (regardless of whether actor fails to realize risk or realizes substantial risk and fails to take precautions themselves or allow neighbor opportunity to take precautions)
• Holding: Summary judgment reversed; plaintiffs entitled to prove that disrepair of retaining wall would have led to subsidence of their land in its natural condition
Land versus structures: Owners withdrawing lateral support for neighboring land are strictly liable for any resulting damage to the land. No duty to support structures on neighboring land. Duty not to excavate in negligent manner. Obligated to provide temporary support for neighboring land during excavation and to notify neighbors if excavation poses risk to neighboring structures.
• Modern approach (Noone) imposes consequential damages for harm to both land and buildings if caused by removal of lateral support for land
Retaining walls: If retaining wall built on defendant’s land with purpose of maintaining lateral support for plaintiff’s land, defendant has strict obligation to keep wall in good repair to avoid loss of lateral support to plaintiff’s land.
• Obligations “runs with the land” and is binding on subsequent owners
• In absence of statute, owner is not obligated to keep it strong enough to support added weight of neighbor’s building(s)
• Defendant does have duty to act non-negligently in withdrawing support, by notifying plaintiff of any changes so plaintiff may take steps to support own structure
Measurement of damages: variety of approaches including: (a) cost of restoration, (b) diminution in value of property, (c) value of lost use of building plus amount representing permanent depreciation in building’s value
B. SUBJACENT SUPPORT
Friendswood Development Co. v. Smith-Southwest Industries, Inc., Tex. (1978)
• Facts: Plaintiffs allege defendant Exxon contributed to severe subsidence of land by continuing withdrawals of vast quantities of underground water from wells on defendant’s nearby lands.
• Rule: If landowner’s manner of withdrawing groundwater from land is negligent, willfully wasteful, or for purpose of malicious injury, and conduct is proximate cause of land subsidence, he will be liable
• Holding: Defendant liable
Subjacent support: Courts impose liability for undermining subjacent support only when negligence can be shown. Minority of courts impose strict liability for removal of subjacent support.
• Exception is when ownership of minerals beneath surface is separated from surface ownership – in absence of agreement to contrary, owner of surface has absolute right to not have subjacent support undermined by owner of mineral estate
III. Immunity from Loss v. Power to Acquire
1. Adverse Possession:
A. TITLE VERSUS POSSESSION
Basic Requirements for Adverse possession: forces transfer of title from title holder (“true” or “record” owner) to adverse possessor following unprivileged entry on property of another when following requirements are met:
1) Actual possession
2) “Open and notorious” (visible)
3) Possession has been exclusive
4) Continuous possession
5) “Adverse and hostile” (without owner’s permission)
6) For the statutory period
Brown v. Gobble, W.Va. (1996)
• Facts: Plaintiffs claim adverse possession of two-foot tract of land forming boundary with defendant’s property.
• Rule: Burden of proof is on party claiming adverse possession to prove by a clear and convincing standard of evidence all elements essential to title
• Holding: Reversed and remanded
Romero v. Garcia, N.M. (1976)
• Facts: Plaintiff and her deceased husband, son of defendants, purchased land from defendants, entered into possession, built a home on the land, recorded the deed, and lived in the home for 15 years until death of husband, when plaintiff moved to Colorado and remarried.
• Rule: Deed is sufficient for purpose of color of title even though deed is void for lack of signature of member of community
• Rule: Deed is not void for want of proper description if, with the deed and extrinsic evidence on the ground, a surveyor can ascertain the boundaries
• Holding: Affirmed
Nome 2000 v. Fagerstrom, Alaska (1990)
• Facts: Adverse possession claim in rural area suitable for homesites and recreational activities in warmer seasons. Defendants used cornerposts to stake off parcel, built a picnic area, placed a camper trailer, built an outhouse and fish rack, planted trees not indigenous to area, built a reindeer shelter, visited the parcel every other weekend, and walked along various paths on the land.
• Rule: Establishment of continuous, notorious, and exclusive elements does not necessarily depend on existence of significant improvements, substantial activity, or absolute exclusivity, only that land be used for statutory period as an average owner of similar property would use it
• Rule: Hostility is determined by application of objective test asking whether possessor “acted towards land as he owned it,” without permission of one with legal authority to give possession
• Rule: Absent color of title, only property actually possessed may be acquired by adverse possession
• Holding: Reversed and remanded
Jurisdiction-specific (non-standard) elements of adverse possession: some states require other things like: (1) color of title, (2) paid property taxes, (9) occupation in “good faith,” or (1) “act “under a claim of right”
Actual possession: absent a fence, one must demonstrate actual possession by engaging in significant activities on land such as: (1) building on the land and/or living on the land, (2) farming, (3) clearing the land, or (4) planting shrubs
Open and notorious: possessory acts must be sufficiently visible and obvious to put a reasonable owner on notice that their property is being occupied by a non-owner – sufficient acts include: (1) enclosing land by fence or wall, (2) building a structure, (3) clearing the land, (4) laying down a driveway, (5) mowing grass, (6) using strip for parking, storage, garbage removal, and picnics, (7) planting and harvesting crops
• Adverse possessor need not demonstrate that “true owner” actually observed or knew
Exclusive possession: use is of a type that would be expected of a true owner of the land in question; occasional entry by the true owner may not defeat adverse possession claim
Continuous possession (tacking doctrine): requisite possession requires such possession and dominion “as ordinarily marks the conduct of owners in general in holding, managing, and caring for property of like nature and condition”; in event of sale, succeeding periods of possession by different persons may be added together (“tacking”) if they are in privity with one another (original adverse possessor meant to transfer title to property to successor)
Adverse or hostile: use is non-permissive; any showing that true owner has permitted use will defeat the claim
Adverse Possessor’s state of mind: 4 approaches
1) Objective test based on possession, meaning the state of mind is irrelevant (majority rule)
2) Claim of right: adverse possessor must allege “claim of right” generally requires just treating the land as an average owner would
3) Intentional dispossession: adverse possessor must be aware that he is occupying property owned by someone else and must intend to oust or dispossess the true owner. This may be phrased as a “claim of right”
4) Good faith: only those who mistakenly occupy property owned by someone else can acquire ownership by adverse possession.
Defenses to (combating) adverse possession
1) Knock down fence or offending intrusion (self-help)
2) Grant permission/license (preferably in writing)
3) Bring lawsuit for trespass seeking injunctive relief
B. JUSTIFICATIONS FOR ADVERSE POSSESSION
Arguments for Adverse Possession:
1) Providing a degree of certainty of ownership to possessors of land by eliminating the possibility of stale claims to land title
2) Encouraging maximum utilization of land
3) Protect the expectations of the adverse possessor
Arguments against Adverse Possession:
1) Possessor could be given a prescriptive easement rather than pursue adverse possession
2. Prescriptive Easements, Encroaching Structures, Border Doctrines, and Economic Analysis
A. PRESCRIPTIVE EASEMENTS
Community Feed Store, Inc. v. Northeastern Culvert Corp., Vt. (1989)
• Facts: Dispute over use of shared gravel area between retail store and business. Vehicles entering plaintiff’s loading area would use the gravel area for turning and backing. Defendant purchased land in 1956, but a new survey in 1984 conclusively established bulk of gravel area used by plaintiff’s vehicles actually belonged to defendant. Defendant then erected barrier to prevent use of the area.
• Rule: Elements of prescriptive easement: adverse use, which is open, notorious, hostile, and continuous for statutory period, and acquiescence in use or possession by person against whom claim is asserted (same as adverse possession, but involving “use”)
• Rule: Extent of use must not be proved with absolute precision, but only as to general outlines consistent with the pattern of use throughout the prescriptive period
• Rule: Open and notorious use presumed to be adverse
• Holding: Reversed, plaintiff established sufficient evidence of prescriptive easement
Elements: same as for adverse possession, except claimant must show adverse “use” rather than adverse “possession”
• Most courts drop the “exclusivity” requirement
• Many courts require proof by clear and convincing evidence
• Successful claims result in right to continue kind and amount of use that persisted during the statutory period
Claim of right: use is not permissive but is engaged in by the claimant regardless of wishes of the owner of the land
• Generally superfluous with the non-permissive requirement
• Some courts interpret to impose requirement regarding adverse user’s state of mind, defeating claim if user did not intend to trespass but believed they had landowner’s permission
Acquiescence: competing interpretations of “acquiescence” element
• Merely means owner did not assert right to exclude by bringing a trespass action (renders the requirement duplicative and unnecessary)
• Landowner must have known about the use and passively allowed it to continue without formally granting permission
• Landowner would or should have known of use (duplicates “open and notorious” requirement)
Presumptions as to permission: most states presume use by a non-owner’s use of land is non-permissive
• Minority of courts presume that use (unlike possession) is presumptively permissive
• Some states protect owners from prescriptive easements over large bodies of unenclosed land under a “neighborhood accommodation exception”
Negative prescriptive easements: negative prescriptive easements cannot be acquired in the United States – justified on three grounds:
• Owner claiming prescription must be trespassing or otherwise interfering with true owner’s rights
• Lawful use of one’s own property does not place true owner on notice that they must bring a lawsuit to protect themselves against loss of rights
• Would interfere too much with free development of land
Acquisition by public: strong trend of modern cases is to recognize public may acquire prescriptive easements, while also presuming public access to private land is permissive in absence of clear evidence to contrary, defeating claim for prescription
B. OTHER INFORMAL WAYS TO TRANSFER TITLE TO REAL PROPERTY
Informal transfer doctrines: unlike adverse possession, rules may apply even when non-owners have occupied property in question with the true owner’s permission
Encroaching structures: Majority of states adopt relative hardship doctrine, refusing to grant injunctive relief where: (1) encroachment is innocent, (2) harm is minimal, (3) interference in true owner’s property interests small, and (4) costs of removal substantial – instead order payment of damages or a forced sale of property from landowner to owner of encroaching structure
• Minority of courts hold property owner has absolute right to an injunction ordering removal of encroaching structure, no matter cost involved or relative value of properties or extent of encroachment
• Removal of encroaching structure ordinarily ordered if builder knowingly built on neighboring property, without regard to relative hardship
Informal transfer doctrines: unlike adverse possession, rules may apply even when non-owners have occupied property in question with the true owner’s permission
Somerville v. Jacobs, W.Va. (1969)
• Facts: Plaintiffs thought they were building a coca-cola plant on their own property but built the factory on defendant’s lot, who were unaware of the construction. Defendant’s then claim ownership of building and its fixtures on theory of annexation.
• Rule: An improver of land owned by another who through a reasonable mistake of fact and in good faith erects a building entirely upon the land of the owner, with reasonable belief that such land was owned by the improver, is entitled to recover the value of the improvements from the landowner and to a lien upon such a property which may be sold to enforce the payment of such lien
• Rule: Alternatively, improver entitled to purchase land improved for value of the land less the improvements; if landowner refuses, must either pay improve the amount by which the value of his land has been improved or convey the land to the improver for the value of the land without improvements
• Holding: Defendants stand to be unduly and unjustly enriched at expense of plaintiffs
• Dissent: Nothing less than condemnation of private property for private use; he who made mistake must suffer hardship rather than he who was without fault; defendant should have option of purchasing building, selling property, or requiring plaintiff to remove the building from defendant’s property
Mistake: Courts generally rule that when builder mistakenly builds structure on land of another, landowner becomes owner of the structure built on their land
• Some courts take the position in Somerville and say a good faith mistake entitles builder to compensation, other courts say that trespassers cannot have the advantage of any benefits they have made to the property
Bad faith: Courts agree that one who deliberately builds on someone else’s property will not be granted a right to compensation and ordinarily will be required to remove the encroaching structure if the landowner so wishes
Betterment statutes: Some states have “betterment statutes” that allow choice between the owner selling the property to the builder or paying for the value of the improvements
Boundary Settlement: courts may uphold oral agreements between neighbors establishing the boundary between their properties if: (1) both parties are uncertain where the true boundary is or there is a genuine dispute over its location, (2) parties can prove the existence of an agreement over the boundary, (3) parties take possession to the agreed line
• Longstanding recognition of a boundary can be enforced even without oral agreement
• Can also be established by estoppel is one owner erroneously represents to another owner the boundary line and the second builds improvements in reliance that encroach on the true boundary; some states may even find estoppels in owner’s silence in face of knowledge neighbor is building encroaching structure
Laches: equitable defense based on circumstances which render inequitable the granting of relief to plaintiff, where plaintiff’s delay in bringing an action is “unexcused or unexplained” and circumstances change so that granting plaintiff relief would be inequitable to defendant, Plaintiff may not be able to bring the claim even if within statute of limitations
Dedication: transfer of real property from a private owner to a government entity, requires (1) an offer by the owner and (2) an acceptance by the public.
Riparian property/owners
Accretion of land (slow buildup of land caused by deposits of silt or sand) on a border that is a body of water belongs to owner
• Erosion of land shrinks owners rights
• Avulsion of land (sudden changes caused by earthquakes, floods, and other natural events) do not change property borders
Adverse possession of personal property: three different rules
1) Conversion rule: starts running of the statute of limitations when the property is wrongfully taken
2) Discovery rule: statute of limitations would start to run only when the true owner discovered or reasonably should have discovered where the stolen property is located (O’Keeffe)
3) Demand rule: until the demand is made and refused, possession of the stolen property by the good faith purchaser for value is not considered wrongful (Lubell); much more protective of the interests of the true owner)
C. ECONOMIC ANALYSIS OF LAW
Economic Analysis of law: Descriptive analysis explains the existing pattern of legal doctrine as a set of rules that promote efficiency. Prescriptive/normative analysis uses criterion of economic efficiency to help determine what the legal rules SHOULD be.
• Market value determined by how much individuals are willing and able to pay for entitlements
• Transactions include three elements: (1) initial distribution of property rights, (2) offer price by a non-owner, and (3) an asking price by an owner
Definitions of Efficiency
• Pareto Superiority: if someone gains by the change and no one is injured or made worse off by it (voluntary exchanges)
• Pareto Optimality: no further exchanges can be made that are Pareto superior, meaning no changes can be made without harming others or making them worse off
• Wealth maximization (Kaldor-Hicks criterion): the benefits of the change outweigh the costs, meaning the winners from the change could fully compensate the losers and still be better off. (“potential Pareto superiority”) This one is the criterion most often used in the economic analysis.
Externalities: Costs imposed on third parties by legal actors that are not taken into account in the actor’s on revenue-cost determinations
• Justice Brennan in Armstrong: those who profit from an activity should bear its costs – encompasses both a rights argument and a social utility argument
- Rights argument: those who benefit from an activity should not impose costs on others
- Social utility argument: economic actors should internalize their external costs to promote efficiency
Coase Theorem
1. If there are no transaction costs, it does not matter which legal rule is chosen because any legal rule will produce an efficient result
2. In the presence of transaction costs, the choice of entitlements by the courts may have an effect on efficiency. The courts may increase efficiency by assigning entitlements to the parties who would purchase them in the absence of transaction costs.
Criticisms of economic analysis
• Efficiency is a function of the initial distribution of wealth
• Offer/asking problem: result of transaction cost analysis dependent on which party is given entitlement initially and assumption that offer and asking prices are unlikely to differ much is arguably unwarranted
• Different ways of measuring efficiency
- Fair market value
- Auction (looks at the willingness and ability to pay of the parties and focuses on the amount they would OFFER to get the entitlement)
- Status quo (assign entitlement to the current owner and ask whether non-owners are willing and able to offer enough to get the owner to sell)
- Redistribution (conclude that existing allocations of entitlement are unfair or presumptively inefficient and alter them)
- Reverse auction (which party would ask the most to give up the entitlement; what is the asking price?)
- Social welfare (decouple efficiency analysis from reliance on market measures (focus more on a combination of dollar amounts and subjective consideration of the magnitude, character, and distribution of benefits and burdens)
• Difficulty of defining “voluntary exchange”: voluntary exchanges increase social wealth by making both parties better off in their own terms, while involuntary or coerced exchanges do not make both parties better off
• Difficulty of identifying transaction costs: deciding what is and is not a transaction cost is not always obvious
• Efficiency has a conservative bias because it gives greater weight to the interests of the wealthy and the large corporations that currently wield substantial economic power and also tends to privilege interests of property owners over those of non-owners
• Commodification: certain kinds of valued resources should not be traded in the market or otherwise treated as if they were commodities for sale (e.g. workplace safety conditions and slavery)
IV. Land Use Restrictions (Servitudes)
1. Overview of Terminology
Servitude: legal device that creates a right or an obligation that “runs with the land” or with an interest in the land, meaning it “passes automatically to successive owners or occupiers of the land or the interest in land with which the right or obligation runs”
License: permission informal and revocable at will (generally not considered servitudes)
Easement: permission intended to be permanent or irrevocable
Right of way: an easement where landowner is obligated to allow neighbor to use road or pathway for passage
Servitude estates
• Servient estate: the land “burdened” by the servitude
• Dominant estate: the neighboring land “benefitted” by the servitude
Affirmative Easement: right to do something on someone else’s land
Negative/restrictive servitudes: promises to restrict use of property
1) Negative easements
2) Restrictive covenants
3) Equitable servitudes
Covenants: agreements between landowners to restrict the use of their own land for the benefit of either their landlord or neighboring owners
Equitable servitude: the equity form of covenants with some of the technical requirements and land restrictions are relaxed, typically allowing for the right to obtain injunctive relief
Profit: special kind of easement where one has the right to remove minerals/oil/gas/trees from another’s property
Modern trend: Restatement (Third) abolishes the terms negative easement and equitable servitude
• All obligations RESTRICTING what one can do with one’s own land are now just negative or restrictive covenants
• AFFIRMATIVE rights to do something on someone else’s land are easements
Affirmative covenant: obligation to do something for the benefit of another owner (such as the duty of a condo owner to pay condo fees)
4 main issues with the law of servitudes:
1. What are the formal requirements to create a right or obligation that will run with the land? When are informally created expectations enforceable by or against subsequent owners?
2. When the meaning of a servitude is unclear, how should ambiguities be interpreted?
3. What are the substantive requirements for the validity of servitudes? Question involves both
a. Determining when the land use restrictions are immediately void as against public policy
b. Determining when rights or obligations although valid as contracts will not be allowed to run with the land
4. How can servitudes be modified or terminated?
2. Easements by Estoppel, Easements Implied from Prior Use and Necessity, and Constructive Trusts
A. LICENSES
• Permission to enter property (typically temporary); informal and revocable at will by the owner of the land. No writing required to create a license. Not transferable nor can they be inherited or left by will.
• Licenses are not classified as servitudes because they are revocable at will
• Licenses cannot be freely revoked in at least 4 circumstances:
1. License coupled with an interest: Owner sells personal property to another that is located on her own land generally gives permission enter the land to remove the property
2. Promise to grant license (e.g. theatre and movie tickets) – transferrable
3. Easement by estoppel
4. Constructive trusts
B. EASEMENTS BY ESTOPPEL
Easement by estoppel: converts a revocable license into an irrevocable easement if the owner grants the licensee the right to invest in improving the property or otherwise induces the licensee to act in reasonable reliance on the license (“oral easements” or “irrevocable licenses”)
• Elements: (1) permission, (2) reasonable reliance, (3) substantial investment, and (4) to avoid injustice
• Rationale is that to allow revocation would allow the grantor to commit a kind of fraud, whether intentional or negligent
• Some courts will only find an easement by estoppel if the grantor intended to grant an easement rather than a license
Holbrook v. Taylor, Ky. (1976)
• Facts: Appellants purchased property and gave permission for haul road to be cut for purpose of moving coal from a newly opened mine. Appellees later bought building site and used haul road with permission of appellants.
• Rule: Where a license includes right to erect structures and acquire an interest in the land in the nature of an easement by construction of improvements thereon, licensor may not revoke the license and restore premises to former condition after licensee has exercised privilege given by the license and erected improvements at considerable expense
• Holding: Prior use of roadway sufficient to establish easement by estoppel
C. CONSTRUCTIVE TRUSTS
Trust: property arrangement in which an owner (“settler”) transfers property to another person (“trustee”) with instructions to manage the property for benefit of a third party (“beneficiary”). Trustee has the legal title to the property while the beneficiary has equitable or beneficial title. Usually created via trust document or will
Constructive trust: courts can treat a property arrangement as if the grantor had created a trust arrangement regardless of the grantor’s intent. For example, when one party has been wrongfully deprived either by mistake, fraud, or some other breach, the court may impose upon the present holder of legal title a constructive trust for the benefit of that party.
• Elements: (1) breach of faith/trust, (2) deprivation of unowned property, and (3) unjust enrichment
• This is done to prevent unjust enrichment of the legal holder by holding that party as trustee for the beneficial use of the wronged party
• Some courts limit it to relationships between family members or others have a so-called confidential relationship
Rase v. Castle Mountain Ranch, Mont. (1981)
• Facts: Owners built and improved summer homes around lake with consent of former landowner. Cabin owners signed “license agreements,” but were never served with notice of termination and breached many provisions of the licenses. New landowner entered into contract to purchase property and seeks to expel cabin owners from the property.
• Rule: When the validity of the agreement is a fact in dispute, parol evidence is admissible, not to vary the terms of the instrument, but to show that what appears on its face as a valid, binding contract is in fact no such thing
• Rule: Courts may find creation of a constructive trust where conduct of grantor gives grantee an implied assurance of a somewhat permanent tenure of rights so that substantial investment is made in reliance on that assurance
• Holding: Result is equitable where cabin owners long-term rights and value of their improvements are recognized and landowner obtains method to eventual unimpeded title to property
Statute of frauds: every state has a statute of frauds that requires easements to be in writing to be enforceable, though there are already noted many exceptions to the statute of frauds (prescriptive easements, easements by estoppel, implication, necessity, constructive trusts). People can also buy and sell easements.
D. EASEMENTS IMPLIED FROM PRIOR USE
Easement implied from prior use (“quasi-easement” or “easement by implication”): arises when an owner of an entire tract of land or of two or more adjoining parcels, after employing a part thereof so that one part of the tract or one parcel derives a benefit of an apparent continuous and permanent nature, conveys or transfers part of the property without mention being made of these incidental uses, while retaining remaining parcel for themselves
• Elements: (1) common ownership of claimed dominant and servient parcels and subsequent conveyance or transfer separating that ownership, (2) before the conveyance or transfer, common owner used part of the united parcel for the benefit of another part, and use was apparent and obvious, continuous, and permanent, and (3) claimed easement is necessary (or “important to”) and beneficial to the enjoyment of the parcel conveyed or retained by the grantor or transferor
• Owner divides property and sells one parcel, retaining the other for herself
- Owner intends to retain an easement over the property conveyed to the buyer; burdened property (servient estate) is subject to an easement by reservation
- Owner intends to grant the buyer an easement over the property she is retaining; benefited property (dominant estate) is attached to an easement by grant
• Granted only if:
1) Two parcels were previously owned by a common grantor
2) Parcel was previously used for the benefit of the other parcel in a manner that was visible and continuous
3) Use is reasonably necessary or convenient for the enjoyment of the dominant estate
▪ Most litigation is on this third issue.
▪ Absolute necessity is NOT needed for an easement implied from prior use
Granite Properties Limited Partnership v. Manns, Ill. (1987)
• Facts: Plaintiff and predecessors in title owned 3 parcels of land and then convey the middle parcel to defendant. A shopping center on the east parcel and an apartment complex on the western parcel were both developed prior to the sale. Plaintiffs claim an easement providing access to the rear of the shopping center on the eastern parcel used by trucks for delivery. Plaintiffs claim a second easement in a driveway providing entry to the apartment complex on the western parcel.
• Rule: in absence of an expressed agreement to the contrary, the conveyance or transfer imparts a grant of property with all the benefits and burdens which existed at the time of the conveyance of the transfer, even though such grant is not reserved or specified in the deed
• Rule: in the case of an easement implied from pre-existing use, proof of the prior use is evidence parties probably intended an easement
• Holding: Affirmed; evidence of prior use of driveways sufficient to fulfill elastic necessity requirement
E. EASEMENTS BY NECESSITY
Easements by necessity: usually arises when an owner of land conveys to another an inner portion thereof which is entirely surrounded by lands owned either by the grantor or the grantor plus strangers
• Requires ABSOLUTE NECESSITY
• Some courts though will not grant an easement by necessity if the owner intended to sell and the grantee knew she was buying a landlocked parcel. Others though say the ultimate goal is promoting the development of property and prevent the property from becoming landlocked.
Finn v. Williams, Ill. (1941)
• Facts: Plaintiffs inherit tract of land and defendant inherits another tract, from what was once a single tract of land. Plaintiffs claim only available means of entry to their land from highway is by means of a right of way through defendant’s tract.
• Rule: Where an owner of land conveys a parcel which has no outlet to a highway except over the remaining lands of the grantor or over the land of strangers, a way by necessity exists over the remaining lands of the grantor
• Holding: When no other way of entry exists, subsequent grantees may avail themselves of the dormant easement implied in the deed severing the dominant and servient estates.
3. Express Easements; Running With the Land
Express easements: Most express easements are affirmative easements (such as rights of way) and were usually recognized only if they vested in owners of the neighboring land for the benefit of the use of that land (they were appurtenant to the benefited land)
• Created by deed (normally signed only by grantor)
• Can be created by a deed conveying easement alone or at same time parcel of property is sold
Third party easements: many courts no longer observe traditional rule and allow reservation of an easement in a third party (grantor O may sell a parcel of property to A, while reserving an easement over A’s property to a third party, B)
Statute of frauds: every state requires easements to be in writing to be enforceable
• Exceptions (prescriptive, by estoppel, implication, necessity, constructive trusts)
Limits on negative easements: Courts have recognized limited number of negative easements including: (1) lateral support, (2) light and air across adjoining land, (3) prevention of interference with flow of artificial stream, (4) conservation easements (land held for environmental purposes), (5) historic preservation easements, and (6) solar easements (access to sunlight for solar energy)
• Land use restrictions not within these traditional categories can still be created through covenants
• Justification for limiting recognized negative easements is that covenants that become overly burdensome or of insubstantial benefit can be wiped out through doctrines of changed conditions and undue hardship, which are not traditionally available to easements
Requirements for burden to run with the land: attached to the parcel so that any future owner of the parcel is similarly benefited or burdened by the easement. Easements created by implication, necessity, and estoppels are generally held to run with the land. Other easements run with the land only if following conditions are met:
1) In writing. This requirement is met even if it is not included in the subsequent deeds, subsequent owners are on notice if it is in the “chain of title”
2) Intent. Original grantor who created the easement intended it to run with the land.
- If the conveyance is ambiguous, the intent may be implied
- If easement appears not to be personal, but to convey a permanent right, courts ordinarily will hold it was intended to bind future owners
3) Notice. Three types of notice:
- Actual: subsequent owners in fact know of the existence
- Inquiry: visible signs would indicate such an easement and would trigger a reasonable buyer to do further investigation to discover if such a deed exists
- Constructive: deed conveying the easement is in the proper registry of deeds in the proper place and the deed is in the chain of title, this means subsequent owners should know of its existence.
Requirements for benefit to run with the land
• Appurtenant easement: benefit runs with the land, and if it does, it is treated as if it were attached to that particular parcel of land
- Can be indicated by recitation in the deed calling easement “appurtenant” or stating it is intended to benefit future owners of buyer’s property
• Easement in Gross: benefit does not run with the land and there is no “dominant estate”, belongs specifically to the grantee (e.g. right of way for utility lines)
Green v. Lupo, Wash. Ct. App. (1982)
• Facts: Defendants requested easement to section of north tract of plaintiffs’ property. Plaintiffs agreed in return for promise of an easement along the southern portion of defendants’ tract. Express terms were contained in written agreement. Occupants of plaintiffs’ mobile home development used easement as a practice motorcycle runway and defendants refused to grant easement as promised.
• Rule: Parol evidence may always be used to explain ambiguities in written instruments and ascertain the intent of the parties
• Rule: Strong presumption (in WA) that easements are appurtenant to land; not in gross when there is anything in the deed or situation indicating it was intended to be appurtenant
• Rule: Servient owner is entitled to impose reasonable restraints on a right of way to avoid a greater burden on the servient owner’s estate than that originally contemplated in the easement grant, so long as such restraints do not unreasonably interfere with dominant owner’s use
• Holding: Reversed and remanded; decree to be modified to declare easement for ingress and egress for road and utility purposes to be appurtenant to property
The test for distinguishing the two is the intent of the grantor: when ambiguous the court looks to surrounding circumstances and to policy consideration. If the easement has little utility separate from the ownership of the land, it will likely be construed as appurtenant
• Courts prefer appurtenant easements because they limit the number of people with easements and easements in gross create more uncertainty about land use rights
Severability from the land: courts generally hold appurtenant easement cannot be severed from the land and passes automatically to owner of dominant estate
Transferability of easements: easements in gross are generally held to be transferable now, especially if they are commercial in nature
Cox v. Glenbrook Co., Nev. (1962)
• Facts: Defendants propose to divide property into one acre parcels for residential development. Plaintiff owns adjoining property and operates a resort business. The road to the proposed development is narrow and unpaved, often wide enough for only a single car.
• Rule: owner of an easement may prepare, maintain, improve, or repair the way in a manner and to an extent reasonably calculated to promote the purposes for which it was created, but may not cause an undue burden upon the servient estate, nor an unwarranted interference with the independent rights of others who have a similar right to use
• Holding: Privilege of use of roads is appurtenant to dominant estate; owners may not widen the road and may not cause an undue burden on the servient estate having a similar right of use
Henley v. Cablevision of St. Louis County, Inc., Mo. Ct. App. (1985)
• Facts: Plaintiffs’ predecessors granted right to establish telephone service on or over rear five feet of all lots in subdivision and necessary easements. Easements conveyed to present holder.
• Rule: Where servient owner retains privilege of sharing benefit conferred by easement, it is said to be “common” or non-exclusive and therefore not subject to apportionment by owner
• Rule: owner of easement may license or authorize third persons to use its right of way for purposes not inconsistent with principal use granted
• Rule: easements in gross for commercial purposes are particularly alienable and transferable
• Holding: Narrow interpretation rejected, purpose of previous easements was acquisition and maintenance of electrical power and communications
• #Singer – court’s ruling here is wrong, if you agree with court, you support a broader reading of easements than has historically been followed
Scope: Three issues in determining if easement owner is going beyond the scope/misusing the easement:
1) Is the use a kind contemplated by the grantor?
2) Is the use so heavy that it is an unreasonable burden on the servient estate?
3) Can the easement be subdivided?
Kinds of uses: Many courts hold a general right of way may be used for any reasonable purpose and will interpret easements broadly (Henley)
Divisibility or apportionability: Most courts hold that benefits of an appurtenant easement move to each portion of the dominant parcel upon its subdivision and transfer of the various pieces, unless expressly forbidden
• Non-exclusive easement in gross: when grantor (owner of servient estate) retains right to use easement in conjunction with grantee, easement is generally held to be non-apportionable
• Exclusive easement in gross: grantor has no right to use easement in conjunction, easement is generally held to be apportionable
Modifying and terminating easements: easements last forever unless terminated:
1) By agreement in writing (release)
2) By their own terms (ex: easement states it will last for only 10 years)
3) By merger (when the owner of the servient estate becomes the owner of the dominant)
4) By abandonment if the owner shows by conduct the intent to abandon it
5) By adverse possession or prescription by the owner of the servient estate or third party
6) (Sometimes courts terminate) By frustration of purpose where the purpose of the easement is impossible to fulfill or that the easement no longer serves its purpose because of changed conditions,
4. Restrictive Covenants; Equitable Servitudes:
A. COVENANTS
Privity of estate: simultaneous interests in the same parcel of land
• Horizontal privity: relation between the original convenanting parties,where one piece of property is burdened for the benefit of another. There are two types of horizontal privity:
- Mutual: exists when two owners have a simultaneous interest in the same parcel of land, such as in landlord-tenant relationships. Can also be established when one parcel has an appurtenant easement over another’s parcel (Whitinsville) Mutual privity is missing if an owner sells land to another and the grantor retains no interests in the land being sold.
- Instantaneous: a covenant intended to burden one parcel for the benefit of another can become attached to both parcels if it is created at the moment the owner of one parcel sells the other parcel. Thus, a covenant contained in a deed of sale transferring a property interest will satisfy horizontal privity. This is demonstrated in Whitinsville when Kotseas granted the deed to Trust.
• Vertical privity: relation between the original covenanting parties and their successors in interests, exists when an owner succeeds to the interest held by an original covenanting party. In other words, the benefits and burdens are meant to run to succeeding owners of both parcels. The owner must transfer the entire estate that he owns, for example one who owns a fee simple and conveys a life estate has not created vertical privity. There are two types of vertical privity:
- Relaxed: imposes burden on any future possessor of the burdened land and the benefit of the covenant on any future possessor of the benefited land
- Strict: includes technical requirement that grantor not retain any future interests in the land
Rights and obligations of original covenanting parties: courts will generally allow enforcement by original covenantee after transfer of property only if agreement contains explicit language to that effect
• Many courts make exceptions to policy restricting enforcement of covenants whose benefit is held in gross when the covenant is held by a homeowners association on behalf of owners in the neighborhood, by a government entity, or by a charity
• Prior owner is not legally responsible for actions off subsequent owners of the burdened land
• Leases are treated differently from ales because landlords retain substantial powers to control the use of leased premises
Obligations of successors in interest: requirements for covenants to run with land are same as those for easements, plus additional requirements of that covenant “touches and concerns” the land and that “privity of estate” exists land use restrictions run with the land when:
1) Writing. Ordinarily reduced to writing as part of a lease or deed
- Developers may record a declaration of restrictions applicable to entire subdivision and/or a plat (map showing restrictions) before any lot is sold
- Most states find that a covenant in a prior-recorded declaration or plat meets writing requirement
- Representations in sales literature do not count as writings; must be in document transferring property interest or prior recorded document in chain of title
2) Notice. Three kinds of notice:
- Actual: subsequent owners actually informed or otherwise made aware
- Inquiry: any condition on premises indicated property burdened by covenant
- Constructive: covenant recorded in the registry of deeds
3) Intent to run with the land. Deed or lease including restrictive covenant deemed to show intent to run with land if it recites (1) covenant made to grantor or grantee and “their heirs or assigns” and/or (2) it “is intended to bind future owners” of the parcel or explicitly states covenant “intended to run with the land”
- Covenant benefiting owner of neighboring land presumptively intended to run with land so long as it touches and concerns the land
4) Touches and concerns. Obligation intended to and legitimately benefits current and future owners of the dominant estates.
- Burden side: obligation relates to use of the land and is intended to benefit current and future owners of the dominant estates
- Benefit side: obligation improves enjoyment of that land or increases its market value
- Restatement (Third) would abolish touch and concern test and provide covenants will run with land unless they are unconscionable, without rational justification, or otherwise violate public policy
5) Privity of estate. (see above)
• Four of the five requirements are formalities, while only one (touch and concern test) is substantive
- Formal requirements: regulate manner in which right or obligation is created; designed to ensure actors clearly communicate their intentions
Remedies: requirements for covenants to run with land are same as those for easements, plus additional requirements
B. CREATION OF COVENANTS
Winn-Dixie Stores, Inc. v. Dolgencorp, Inc., Fla. Dist. Ct. App. (2007)
• Facts: Winn-Dixie operates as anchor tenant of shopping center and lease grants exclusive right to sell groceries in the shopping center. Exception permits other stores to sell groceries, provided they devote no more than 500 square feet to groceries. Defendant begins operating a Dollar General store violating exclusive grocery provision.
• Rule: Covenant running with the land differs from a personal covenant in that former concerns property conveyed and occupation and enjoyment thereof, while latter is collateral or not immediately concerned with the property
• Holding: Grocery exclusive was a real property covenant that ran with the land and not a personal contract obligation
Whitinsville Plaza v. Kotseas, Mass. (1979)
• Facts: Defendants owned land that they sold subject to restrictive covenant promising not to use retained land in competition with discount store contemplated by grantee, and to only use it for enumerated business purposes. Defendants later leased portion of retained land to CVS for discount department store and pharmacy.
• Rule: Anticompetitive covenants do “touch and concern” the burdened land, because they limit land use
• Rule: Anticompetitive covenants do “touch and concern” benefited land, because they enhance its market value
• Rule: Covenant restraining competition will be enforced if it is reasonably limited in time and space and consonant with the public interest
• Holding: Both benefit and burden of covenant ran with land; remanded to determine whether anti-competitive covenant was reasonable
Davidson Brothers, Inc. v. D. Katz and Sons, Inc., N.J. (1990)
• Facts: Plaintiff operated supermarket and sold property subject to a restrictive covenant running with the land providing land would not be used as a supermarket or grocery store for 40 years. Closing imposed a hardship on nearby residents who were denied access to grocery store. Housing Authority purchased property and sought to rent it as a grocery store.
• Rule: Covenants will run with the land if they are reasonable; reasonableness determined by fact sensitive inquiry into present business conditions and other factors such as (1) covenant’s impact on considerations exchanged, (2) reasonableness concerning area and duration, (3) whether it violates public policy as unreasonable restraint on trade or otherwise interferes with public interest
• Holding: Remanded to determine whether enforcement would be reasonable
Winn-Dixie, Whitinsville, and Davidson deal with three issues: (1) did the covenant run with the land? (2) is it unenforceable in light of public policy or being unreasonable? (3) what should the remedy be?
• Keep in mind that in property law, damages are often though to be inadequate because of the unique value attached to the LOCATION of land and the desire to use particular unique structures. Granting injunctions though has always been discretionary.
- Benefits of injunction: (1) parties get to bargain to determine who values entitlement the most, and (2) avoid expense of litigation and inaccuracy of damage awards set by unknowledgeable third party
- Benefits of damages: litigation can produce a result where transaction costs might prevent the parties from bargaining to a mutually beneficial result
C. IMPLIED RECIPROCAL NEGATIVE SERVITUDES
Implied reciprocal negative servitudes: Invented to deal with the intent, notice, and privity of estate issues that arise when a developer imposes grantee covenants on all lots in a residential subdivision and when the developer intentionally or inadvertently leaves those restrictions off some of the lots.
• Many states require developers to file a declaration prior to selling individual lots that will describe the area covered by the common plan and recite the covenants applicable to the lots. If there is a common scheme, then covenants restricting land in a subdivision are mutually enforceable by and against all owners of the properties.
• Common plan applies to each owner partly because this is the intent of the developer/grantor and partly because of reliance on it by buyers
Evidence of common plan
1) Presence of restrictions in all or most deeds
2) Recorded plat (map) showing restrictions
3) Presence of restrictions in the last deed (suggests intended beneficiaries are other lots of development)
4) Observance by owners of similar development of their land and conformity to the written restrictions
5) Language stating covenants are intended to run with the land
6) Recording of a declaration stating covenants are intended to be mutually enforceable
Evidence of absence of common plan
1) Some deeds are unrestricted
2) Restrictions are non-uniform
Developer’s power to enforce covenants: there is a strong presumption against continued enforcement by absentee developers who no longer own property in the neighborhood.
Enforcement by homeowner’s association: homeowners associations have standing to enforce those servitudes if the declaration gives them that power
Evans v. Pollock, Tex. (1990)
• Facts: Plat for subdivision divides property into seven blocks A-G, does not further subdivide blocks C, D, E, and F, but does divide blocks A, B, and G into 31 lots. Deeds contain restrictive covenants prohibiting business or commercial use, restricting land to residential use, and providing that restrictions could be changed by vote of ¾ of the owners, with voting rights based on front footage holdings. Developers later attempted to sell block F and lots from block G for purpose of building marina, private club and condo.
• Rule: Provisions allowing waiver or modification of restrictive covenants by majority vote constitute strong evidence of general scheme or plan of development
• Holding: Restricted district need not be the whole subdivision nor include the whole retained tract; hilltop and block G were outside scope of restricted development plan
Sanborn v. McLean, Mich. (1925)
• Facts: Defendant sought to build gas station on land. Adjacent land had once been owned by a single owner who imposed restrictive covenants on 53 of the 91 lots, limiting them to residential purposes. No restrictions appear in chain of title to McLean lot.
• Rule: Uniform residential character of surrounding properties puts owner on inquiry notice to determine whether there were restrictive covenants on neighboring lots that might be interpreted to create a plan to restrict entire neighborhood to residential use
• Holding: Court imposed implied reciprocal negative servitude restricting McLean lot to residential purposes
Riley v. Bear Creek Planning Committee, Cal. (1976)
• Facts: Defendants built a snow tunnel on their lot without approval of architectural control committee acting under recorded declaration regulating land use. Declaration containing restrictions was not recorded until after they had purchased their lot and because of a mistake, their deed did not mention the restrictions.
• Rule: Restrictions must be in writing (statute of frauds) or referred to in the deed of the land sought to be restricted or appear in the chain of title to that parcel; evidence of knowledge of grantor’s intent is not admissible under parol evidence rule
• Holding: Defendants not subject to restrictions because there was no writing in their deed limiting the use of their land
• Dissent: Buyer cannot take deed with actual knowledge of a general plan of mutual restrictions applicable to entire subdivision and thereafter violate all restrictions with impunity merely because of inadvertent omission from individual deed
5. Interpretation of Ambiguous Covenants; Homeowners Associations & Condominiums; Racial Restrictions
A. INTERPRETATION OF AMBIGUOUS COVENANTS
“Dominant or benefitting owner in a covenant arrangement essentially becomes a “part-owner” of the servient or burdened lot #Singer
Blevins v. Barry-Lawrence County Association for Retarded Citizens, Mo. (1986)
• Facts: Appellant plans to establish group home for 8 unrelated mentally retarded persons. Appellees protest under restrictive covenant in subdivision, limiting property to residential purposes only, specifying single or double family dwellings.
• Rule: When there is any ambiguity of substantial doubt as to the meaning, restrictive covenant will be read narrowly in favor of the use of free property
• Holding: Reversed; intended use is residential and appellant does not intend to alter the existing structure, which is consistent with a single family home and thus does not violate the covenant
Presumptions: Courts traditionally interpreted ambiguous covenants in manner least burdensome to free use of land; today touchstone for interpretation is intent of the grantor
• Intent must be shown by express language in deed or declaration, supplemented with extrinsic evidence where necessary to interpret an ambiguity
• Restatement (Third) suggests it is no longer generally acceptable that courts should err on the side of unburdening property from restrictions; new approach favors security and reliance interests of those purchasing in reliance on restrictive covenants and limitations on land use may promote alienability
Restrictions to “single-family dwellings”
• Some courts, like Blevins, hold restricting property to “single-family dwellings” was intended to regulate architectural style rather than relationship among occupants
• Other courts hold such restrictions express clear intent to regulate use of dwelling as well as structure
Group homes as “dwellings”
• Some courts hold a group home provides an environment therapeutically designed to emulate a more conventional family environment and constitutes a “family” or define a “family” as “a stable housekeeping unit of two or more persons emotionally attached to each other and share a relationship that emulates traditional family values, promotes mutual protection, support, happiness, physical well-being and intellectual growth and is not in violation of the penal laws”
• Other courts have held “family” means “nuclear or extended” family and group home does not constitute a family because its occupants are unrelated by blood, marriage, or adoption
Public policy limits on restrictive covenants
• Several courts have held that covenants against operation of group homes are unenforceable because they violate strong public policies prohibiting discrimination against people with disabilities
• Other courts have held it is neither unreasonable nor against public policy as it does not impede furtherance of the public’s interest in developing alternative residential care for the elderly; it does prohibit the location of that care facility when it violates the contractual rights of the parties
B. HOMEOWNERS ASSOCIATIONS AND CONDOMINIUMS
Homeowners association (“common interest community association”): body created by declaration filed by developer prior to sale of the first lotto enforce to enforce the covenants or restrictions, usually by bringing lawsuits to compel compliance
• Common interest element is based on the fact that owners are burdened (or benefited) by servitudes that require them to pay fees to maintain commonly owned property or to finance the operations of the association
• Common conflicts: (1) unit owners vs. developers, and (2) owners vs. owners
Cooperative: different from a condominium, where entire building is owned by a single nonprofit cooperative corporation and then lease their individual units from the corporation
• Greater financial interdependence of cooperative owners makes this a more fragile structure than the condominium structure
Community land trusts and limited equity coops: purpose is to remove land from the speculative market, create housing for low income people, and keep that housing affordable
• Community land trusts: nonprofit corporation that generally has an elected board of directors and an open members that buys and holds title to property and while retaining title to the land, the trust sells the building located on the land to a low-income purchaser. This separation of owning the land and building requires a ground lease that as owner of the land, grants possessory rights to the owner of the building and often lasts a long period such as 99 years. A crucial aspect of this is the agreement that the building will be sold only to the community land trust or to another low-income owner at a price well below market value.
• Limited equity cooperative: similar to a community land trust, but organized like a regular cooperative; contracts allow sale of owner’s shares at a fixed price, preventing owner from benefiting from increases in the market value of the unit; often gives cooperative right of first refusal to purchase shares at the prearranged price
Appel v. Presley Cos., N.M. (1991)
• Facts: Defendant recorded restrictive covenants on subdivision that were used as sales tool plaintiffs relied on in purchasing a lot and constructing their home. Majority of owners have power to change membership of subdivision’s association, restore to it any of its powers and duties, and association may make amendments and/or exceptions to these restrictions, covenants and reservations without consent of owners.
• Rule: Restrictive covenants must be reasonable, with due regard for the property rights and investments of the persons who relied upon the residential covenants
• Holding: Reversed and remanded; exceptions applied in unreasonable manner, breaching covenants
Restatement (Third) and modification of declarations: “a developer may not exercise a power to amend or modify the declaration in a way that would materially change the character of the development or the burdens on the existing community members unless the declaration fairly apprises purchasers that the power would be used for the kind of change proposed.”
Management contracts: developer of a condominium initially owns all the units and therefore controls the condominium association and has substantial power to make policy for the condominium
• Many states have also passed statutes regulating these contracts, often providing ability to reject to supermajority vote
C. RACIALLY DISCRIMINATORY COVENANTS
Racially restrictive covenants: limits sale, lease, or occupancy of real property to members of a particular race or excludes members of a particular race or races
• Such covenants are unenforceable under constitutional, statutory and common law and may even subject those who enter into them to monetary liability under civil rights statutes.
• Covenants that prohibit sale or lease of dwellings to, or occupancy by persons on the basis of race violate federal civil rights statutes including the federal Fair Housing Act and the Civil Rights Act of 1866. Today it is also likely they would be held to violate public policy under common law.
State action doctrine: Fourteenth Amendment regulates conduct of state government and state officials, but not the conduct of private or nongovernmental actors
• Those who defend doctrine argue that it acts as a vital protector of individual liberty and privacy by exempting private conduct from regulation by constitutional doctrine
• Those who oppose doctrine argue that it raises the specter of government regulation of virtually all “private” conduct
• Constitutional right to equal protection of the law may be outweighed by a countervailing constitutional right to privacy and freedom of association
Shelley v. Kraemer, US (1948)
• Facts: 30 of 39 owners signed an agreement providing “no part of property or any portion thereof shall be, for said term of Fifty-years, occupied by any person not of the Caucasian race.” Plaintiffs, African-Americans, received for consideration a warranty deed to a parcel subject to said covenant. Trial court found that plaintiffs had no actual knowledge of restrictive covenant at time of purchase.
• Rule: Fourteenth Amendment erects no shield against merely private conduct, however discriminatory and wrongful, thus restrictive agreements alone cannot be regarded as a violation of any rights guaranteed by the Fourteenth Amendment
• Rule: Enforcement by state courts in imposing penalties or depriving parties of other substantive rights through restrictive covenants, without providing adequate notice and opportunity to defend, has long been regarded as a denial of the due process law guaranteed by the Fourteenth Amendment
• Holding: State action was present in the case as parties were willing participants in transaction that would have been completed absent intervention of the state courts
Evans v. Abney, US (1970)
• Facts: US Senator Bacon conveyed a park in trust to City of Macon, for use of white residents only. When city allowed African Americans to use the park, board of the managers sued to remove city as trustee and replaced by private board that could operate park on discriminatory basis.
• Rule: Public character of parks requires they be treated as a public institution subject to command of the Fourteenth Amendment, regardless of who has title under state law
• Rule: Closure of a city’s public pool to prevent integration is not a violation of the equal protection clause because it treats all races equally by denying everyone access to the pool (Palmer)
• Holding: Court initially ruled sole purpose of trust had failed and title reverted to grantor’s heirs. When appealed to Supreme Court again, Court held closing did not constitute a violation of equal protection clause because impetus to close park came from a private party and not state officials.
• Dissent (Brennan): Even when reverted to private owners, state statutes and court enforcement permits the closing of a public park for discriminatory reason after having been operated for nearly half a century, permeating the situation with state action
6. Public Policy Limits on Covenants; Anti-Competitive Covenants; Reasonableness Review of by-laws; Changed Conditions & Undue Hardship
Invalid covenants: covenants may be held invalid for violation of public policy for following reasons:
1) Anticompetitive
2) Discriminatory
3) Restraint on alienation
4) Speech, religion, association
A. ANTICOMPETITIVE COVENANTS
Anticompetitive covenants: Enforceable under common law only if reasonable (see Whitinsville Plaza v. Kotseas above, where it was established that reasonable anticompetitive covenants are ones that are “reasonably limited in time and space and product line and consonant with the public interest” and that “serve a purpose of facilitating orderly and harmonious development for commercial use.” (571)
• Most cases concerning anticompetitive covenants occur in the context of shopping center leases
• Most claims proceed on the basis of federal antitrust policy contained in the Sherman Antitrust Act
• The rule of reason requires the court to examine the circumstances to determine whether the operation of the covenant actually effectuates an unreasonable restraint on competition. The court will first define the relevant product/service market and the effective geographic area in which competition is likely to be present
• Second it will compare the anticompetitive effect of the covenant with its pro-competitive effect. An anticompetitive covenant may increase competition because it provides security that induces a new competitor to enter the market, thereby generating new business and competition.
Davidson Brothers, Inc. v. D. Katz & Sons, Inc., Super. Ct. App. Div. (1994)
• Facts: Plaintiff operated supermarket and sold property subject to a restrictive covenant running with the land providing land would not be used as a supermarket or grocery store for 40 years. Closing imposed a hardship on nearby residents who were denied access to grocery store. Housing Authority purchased property and sought to rent it as a grocery store.
• Rule: 8 factors to be used in determining reasonableness of anticompetitive covenant: (1) intention of parties, (2) impact on considerations exchanged, (3) clear and expressly stated restrictions, (4) writing, recorded and actual notice, (5) reasonable concerning area, time, and duration, (6) imposes unreasonable restraint on trade or secures monopoly, (7) interferes with public interest, and (8) “changed circumstances”
• Holding: Affirmed; covenant was so contrary to public policy that it should not be recognized as a valid, enforceable obligation
Reasonableness versus public policy: four rules of interpretation with respect to covenants:
• Touch and concern.
• NJ (“reasonableness”). Obligations reasonable if they benefit other owners in the community or if all owners are benefited by reciprocal obligations imposed on all owners in the community
• Cal (“unless unreasonable”). Enforceable unless unreasonable
• Restatement (Third) notes that servitudes are presumptively valid
Policies in favor of validity of servitudes: privacy and liberty in choice of lifestyle, freedom of religion, freedom of speech and expression, access to legal system, discouraging bad faith and unfair dealing, encouraging free competition, socially productive uses of land, protecting family relationships, protecting weaker groups in society from servitudes that exclude them from opportunities #policy
Policies against validity of servitudes: freedom of contract, freedom to dispose of one’s property, protection of legitimate expectation interests #policy
B. RULES AND BY-LAWS
O’Buck v. Cottonwood Village Condominium Association Inc., Alaska (1998)
• Facts: Condo board adopts rule prohibiting mounting of television antennae on building to protect roof and made cable system available as alternative. Condo declaration empowers board to adopt rules as long as they are non-discriminatory and to preserve uniform exterior appearance
• Rule: Unit owners may not rely on courts to strike down reasonable rules on grounds of differences in aesthetic tastes
• Holding: Board interests in enhancing marketability of units justifies small financial burden placed on owners
Neuman v. Grandview at Emerald Hills, Inc., Fla. Dist. Ct. App. (2003)
• Facts: Members of condo complain to Board about repeated use of common auditorium for religious services. Majority vote imposes prohibition of religious services “of any kind” in auditorium or other common elements
• Rule: Right to peaceably assemble has traditionally been interpreted to apply to right of citizens to meet to discuss public or governmental affairs
• Holding: Affirmed; prohibition is reasonable
Business judgment rule: more lenient than reasonableness standard (O’Buck); “so long as board acts for purposes of cooperative, within scope of its authority and in good faith, courts will not substitute their judgment for the board’s”
• Rationale: threatens stability of common living arrangement, hampers board effectiveness
C. CHANGED CONDITIONS
El Di, Inc. v. Town of Bethany Beach, Del. (1984)
• Facts: Chain of title for lot includes restrictive covenants prohibiting both sale of alcoholic beverages on property and non-residential construction. Since purchase of lot 15 years ago, BYOB policy permitted at restaurant on lot.
• Rule: Court will not enforce restrictive covenant where a fundamental change has occurred in the intended character of neighborhood that renders the benefits underlying imposition of the restrictions incapable of enjoyment
• Holding: Changed conditions in surrounding district make it unreasonable and inequitable to enforce restrictive covenant
• #Singer – Be prepared to address 3 possible interpretations on exam
1) FS determinable (“shall cause said lot to revert”)
2) FS condition subsequent (“condition”)
3) Covenant
Changed conditions: covenants will not be enforced if conditions have changed so drastically inside the neighborhood restricted by the covenants that enforcement will be of no substantial benefit to the dominant estates
• Restatement (Third): relief granted only if purpose of servitude can no longer be accomplished
• Restatement (Third): alters changed condition doctrine by (1) extends doctrine to easements, (2) uses termination rules to substitute for controls traditionally applied through “touch and concern” test, and (3) suggests modification of covenant in lieu of termination if modification will allow covenant to serve original purpose
• #Singer – ALWAYS ON EXAM – Don’t get this wrong – Not All changes in condition qualify to render covenant unenforceable
Damages versus injunctive relief: courts appear now to be ready to award either an injunction or damages for violation of a covenant running with the land whether or not strict vertical privity is present
D. RELATIVE HARDSHIP
Relative hardship: focuses on servient estate; covenant will not be enforced if harm caused by enforcement (hardship), will be greater by a “considerable magnitude” than the benefit to the owner of the dominant estate
• Restatement (Third): treats relative hardship as a factor to consider in determining availability and selection of remedies
E. OTHER EQUITABLE DEFENSES
Acquiescence, abandonment, or unclean hands: complaining party may be barred from enforcing the covenant if he has tolerated or failed to object to other violations of covenant
• P violated the covenant himself (unclean hands)
• P has tolerated previous violations of the covenant by the owner of the servient estate (acquiescence)
• P has tolerated violations of the covenants by owners of other restricted parcels in the neighborhood covered by the covenant (abandonment)
Estoppel: where dominant estate owner tells servient estate owner he will not enforce the covenant
Laches: covenant has been ignored or beached for a substantial period of time but less than the time necessary to establish prescriptive rights
Marketable title acts: state terminates restrictive covenants if not re-recorded after a period of time
Other ways to terminate covenants
• Language in the instrument that states it will terminate after a certain number of years
• Merger where the burdened and benefited estates come under ownership by the same person
• Release where all involved parties agree in writing to terminate or release the property from it
• Prescription where open and notorious violation of the covenant without permission for the statutory period may terminate the covenant by operation of the statute of limitations.
F. STATUTES
Blakeley v. Gorin, Mass. (1974)
• Facts: Commonwealth filled in tidal flats and sold lots for residential use, subject to restrictions in conformity with a comprehensive land use plan.
• Rule: Denial of specific enforcement of covenant may be warranted where: (a) changes in the character of the properties affected reduce need for restriction, (b) continuation of restriction impedes reasonable use of land and impairs growth of neighborhood or municipality inconsistent with public interest, (c) enforcement, except by money damages, is for any reason inequitable or not in the public interest
• Holding: Reversed and remanded; restriction not specifically enforced and damages awarded
V. Estates System and Future Interests:
• Present and future interests may be created by sale, lease, will or trust
• Future interests exist in the moment they are created
• Two most pressing problems with future interests are the problem of dead hand control and the problem of social hierarchy
1. Contemporary Estates Systems
A. FEE SIMPLE ABSOLUTE
Property ownership without an associated future interest. Owner has the right to possess and use the property, the right to sell it or give it away and the right to devise it by will or leave it to her heirs.
• Conveyance (technical term for transfer of an interest in real property) of fee simple accomplished by the following language:
- O to A
- O to A and her heirs
- O to A in fee simple
• Owners presumed to convey all interests they own in property they convey unless the conveyance states otherwise
• Language “A and her heirs” indicates fee simple, does NOT give A’s heirs any interests in property
B. DEFEASIBLE FEES
Present interests that terminate at the happening of a specified event, other than the death of the current owner.
• Categories create two crucial distinctions: (1) whether the future interest is in the grantor or in a third party, (2) whether the future interest becomes possessory AUTOMATICALLY when the stated event occurs or becomes possessory only if the future interest holder CHOOSES to assert his property rights.
- Fee simple determinable: future interest reverts AUTOMATICALLY to the grantor on the happening of the stated event. The future interest is a possibility of reverter. Can be established by the following language:
▪ O to A so long as used for residential purposes
▪ O to A while used for residential purposes
▪ O to A during residential use
▪ O to A unless used for nonresidential purposes
▪ O to A so long as used for residential purposes; if used for a nonresidential purpose, the property shall automatically revert to O
✓ In all of above, A has the fee simple determinable and O has the possibility of reverter
✓ Any language denoting that the ownership is limited to a time period during which certain conditions are met will generally be interpreted as evidence of the grantors intent to cut off ownership rights automatically when the condition is violated or met
- Fee simple subject to a condition subsequent: when the grantor chooses to retain for herself or her heirs the right to decide at the time the condition is violated whether to retake the property. The future interest is a right of entry (or “power of termination”) Can be established by the following language:
▪ O to A on condition that the property be used for residential purposes; in the event it is not so used, O shall have a right of entry
▪ O to A, but if used for nonresidential purposes, O shall have a right of entry
▪ O to A, provided that the property is used for residential purposes; if this condition is violated, O shall have a right of entry
✓ The vast majority of states now hold that future interests are alienable, devisable, and inheritable
✓ Modern approach is to treat possibilities or reverter and rights of entry the same, though traditionally there was a major difference for statute of limitation purposes
- Fee simple subject to executory limitation: conveyance of future interest in a defeasible fee to someone other than grantor. The future interest is called an executory interest. Identical to fee simple determinable, with ownership shifting automatically on the occurrence of the contingent event, except ownership shifts to third party rather than grantor. Can be established with the following language:
▪ O to A so long as used for residential purposes, then to B.
✓ #Singer – if executor interest observed on exam, just say “executor interest may be void as it is subject to the rule against perpetuities”
C. LIFE ESTATES
Present ownership rights held during the life of a designated individual
O to A for life
A will own the property during his lifetime and the future interest can be in the grantor or in a third party.
• Reversion: future interest if the property reverts to the grantor when A dies. Can be established with the following language:
- O to A for life
• Remainder: future interest if the property interest goes to a third party when A dies. Can be established with the following language:
- O to A for life, then to B
Life estates vs. fee simple: owner of a fee simple can choose who will own property after death; life estate owner has no right to determine who owns the property upon their death as ownership automatically shifts to grantor or remainder holder
• If a life estate holder, A, sells that interest to B, then B gets the property interest for the length of A’s life and then the property will shift to grantor or remainder holder. B’s interest in this case is a life estate for the life of another or a life estate per autre vie
• Contingent Remainders: remainders are contingent if one or both of two conditions are met: (1) if the remainder will take effect only upon the happening of an event that is not certain to happen or (2) if the remainder will go to a person who cannot be ascertained at the time of the initial conveyance
- For example, “O to A for life, then to B if B has graduated from law school,” creates a contingent remainder because at the time of the original conveyance from O to A it is not certain that B will graduate from law school. If B does not graduate from law school, the property will revert to O on A’s death, BUT if B later graduates from law school, the property will then SPRING to B. (modern approach views them as “indestructible”)
• Vested Remainders: include any remainders that are not contingent remainders, meaning they are remainders to persons who are identifiable at the time of the initial conveyance and for whom there are no conditions precedent (conditions that must occur before they will have the right to control the property). Three kinds of vested remainders:
- Absolutely vested remainders: remainder not subject to change
- Vested remainder subject to open: remainder that may be divided among persons who will be born in the future such as “O to A for life, then to the children of B.”
- Vested remainders subject to divestment: a vested remainder that may be destroyed by an event that occurs after the original conveyance, such as “O to A for life, then to B, but if B has flunked out of law school, the property shall then revert to O.” They can be functionally equivalent to some contingent remainders
D. FEE TAIL
Abolished in all but 4 states (Delaware, Maine, Massachusetts and Rhode Island). The purpose is to keep the property in a family dynasty, traditionally created by language:
O to A and the heirs of his body
2. Interpreting Ambiguous Conveyances; Presumption Against Forfeitures; Cy Pres Doctrine; Rule Against Creation of New Estates
A. INTERPRETATION OF AMBIGUOUS CONVEYANCES
Two policies are important in interpreting ambiguous conveyances: (1) the intent of the grantor, and (2) when the grantor’s intent is unclear, courts turn to public policy considerations where they attempt to further the free use and alienability of property by a presumption AGAINST finding a future interest
Wood v. Board of County Commissioners of Fremont County, Wyo. (1988)
• Facts: Land conveyed to Fremont County for purpose of building a hospital. County eventually sells to private company that closes hospital and puts premises up for sale.
• Rule: Language of conveyance that grants a fee simple estate in land for a special purpose, without stating the special circumstances (using words such as “so long as,” “until,” or “during”) that could trigger expiration of the estate, is not sufficient to create a fee simple determinable
• Rule: No provision will be interpreted to create a condition destroying an estate, such as a condition subsequent (using words such as “upon express condition that,” “upon condition that,” “provided that,” or “if”), if the language will bear any other reasonable interpretation
• Holding: Plain language of deed does not state intent of grantors to retain discretionary power of reentry (not a “fee simple subject to a condition subsequent”)
Cathedral of Incarnation in Diocese of Long Island, Inc. v. Garden City Co., App. Div. (1999)
• Facts: Premises conveyed for use of church, but restricted alienability and further restricted use to religious or educational purposes. Church is later in financial distress, files for bankruptcy, and seeks to sell property free of restrictions.
• Rule: State statutes may empower charities to bring suits to remove restrictions where they impede organization in achievement of its purpose
• Holding: Absent language in deed providing for automatic termination, no power of reverte (court does interpret use limitation to create right of entry without analysis)
Edwards v. Bradley, Va. (1984)
• Facts: Woman establishes conditions precedent in gift to daughter to prevent sale or settlement of debts with creditors. Daughter seeks to have children and spouses execute agreement consenting to her sale of farm and one granddaughter refuses. Daughter dies and directs farm be sold and proceeds distributed equally among her other children. Non-consenting daughter objects.
• Rule: conditional limitation imposed upon a life estate is valid
• Rule: life estate may be created by implication as well as by express language, provided will shows requisite intent
• Holding: Affirmed; court finds (despite lack of express language) a creation of a life estate to daughter, with remainders at death in fee simple to grandchildren
Rule against creation of new estates: prohibits owners from creating ownership packages that do not fit within one of the established estates; court must fit the future interest into an established category
Presumption against forfeitures: preference for construction that avoids recognition of future interest where language is ambiguous
• Future interest vs. non-binding precatory language? Fee simple absolute with no future interest
• Covenant vs. future interest? Enforceable covenant (keep title with current owner
• Fee simple determinable vs. fee simple subject to condition subsequent? Condition subsequent (current interest not automatically forfeited)
• Life estate vs. fee simple? Fee simple
Purpose language
• Majority of courts, like Wood, hold language in conveyances explaining purpose of transfer to be precatory – nonbinding
• Minority of courts hold purposive language to create fee simple subject to condition subsequent
Charitable use: in order to help preserve charitable uses, courts may interpret purposive language to apply presumption against forfeitures to noncharitable property, but not to charitable property
Changed conditions: not applicable to future interests
B. TRUSTS AND THE CY PRES DOCTRINE
Cy Pres doctrine (equitable reformation) applies to property given in a trust to a particular charitable purpose when it becomes impracticable or illegal to carry out the particular purpose and the settlor (creator of the trust) demonstrated a general intent to devote the property to charitable purposes, Court will direct the application of the property to some charitable purpose which falls within the general charitable intention of the settlor. If no GENERAL charitable intent, the trust fails and goes back to the donor or her heirs.
C. REGULATORY RULES
Main regulatory rules of future interests:
1) Rule prohibiting creation of new estates
2) Rule against unreasonable restraints on alienation
3) Rule against perpetuities
4) The interpretive rule prohibiting “waste” of the present estate
5) The prohibition on invalid racial conditions
6) Rule against unreasonable restraints on marriage
Rule against creation of new estates (the numerus clauses doctrine): a conveyance that doesn’t fit within any of the established categories must be interpreted to create the most closely analogous estate
• Limits number of packages of ownership bundles that can be created, facilitating exchange both by making it easier to determine what one is buying and by ensuring that owners have certain basic rights when they acquire those standard bundles
Johnson v. Whiton, Mass. (1893)
• Facts: Will devises property to granddaughter and her “heirs on her father’s side.”
• Rule: Cannot create a new kind of inheritance
• Holding: Judgment for defendant; contrary to public policy
D. RULE AGAINST PERPETUITIES
Rule against perpetuities: invalidates future interests that may vest too far into the future. Future interests are invalid unless they are certain to vest or fail to vest within the lifetime of someone who is alive at the creation of the interest or no later than 21 years after her death
• 3 steps to applying the rule:
1) Determine what future interests have been created, the rule applies only to NONVESTED interests (so possibility of reverter, right of entry, reversion or vested remainders do not apply) but executory interests, contingent remainders or vested remainders subject to open are subject to the rule
2) If there is a possibility of vesting more than 21 years after the death of all those alive at the creation then its invalid. Look for a “validating life” which is a person within whose lifetime or 21 yrs after death the interest is certain to vest if it ever does vest, if you can’t find a validating life, the future interest is void.
3) The solution for violating the rule is to strike out the offending language. For example, “O to A for residential purposes, then to B” violates the rule so we strike out the “then to B” part to be left with a fee simple determinable.
• Some states do a “wait and see” or “second look” test, letting the perpetuities period pass to see if the right has vested or not
• Court may also use Cy Pres to adjust a conveyance to fit within the rule, such as changing “O to A for life, then to the first child of B to attain 25 years of age” and change the 25 to 21
• Uniform Statutory Rule Against Perpetuities (USRAP) applies “wait and see” doctrine and limits perpetuities period to 90 years rather than “lives in being at creation + 21”
• 15 states have abolished or significantly altered the rule
E. ANTI-FEUDAL PRINCIPLE
DePeyster v. Michael, N.Y. (1852)
• Facts: Lessee covenanted that when they sold premises or any part of it, they would first offer it to the lessor and if lessor declined, lessor would permit lessee to sell or assign the premises in exchange for payment of ¼ of the purchase money. Lessor alleges lessee sold or assigned premises without paying ¼ of sale money.
• Rule: Where no reversionary interest remains in the lessor, there are no restraints upon alienation
• Holding: Affirmed; restrictive covenant invalid
Anti-feudal principle: law prohibits conditions creating relationships that seem too much like feudalism or deny the equal status of persons
VI. Public Policy Limits on Enforceability of Servitudes and Future Interests
1. Restraints on Alienation; Racial Conditions
A. RESTRAINTS ON ALIENATION
Restraints on alienation: Modern property law subjects restraints on alienation to reasonableness test
• Restraints on alienation of leaseholds more likely to be upheld than restraints on alienation of fee interests
• Sometimes held to be valid either to promote interests of grantors in controlling future use or enhancing the value of units to be marketed or to promote the interests of neighbors in ensuring compliance with covenants
• 5 types of restraints on alienation:
1) direct restraints on transfer
2) servitudes requiring the consent of either the grantor or the association to transfer property
3) rights of first refusal/preemptive rights
4) leasing restrictions
5) restraints designed to keep housing affordable by low and moderate income families
B. DIRECT RESTRAINTS
Horse Pond Fish & Game Club v. Cormier, N.H. (1990)
• Facts: Parcel of land restricted to prevent alienation of land from Fish and Game Club absent unanimous vote of membership or dissolution of club. Club later registers as charitable corporation. Later a land swap deal is contemplated but single member votes against deal.
• Rule: Rule of “reasonable restraints” generally does not apply in the case of a gift to a charitable trust or charitable corporation
• Holding: Reversed and remanded; court held restriction unreasonable
C. GRANTOR CONSENT CLAUSES
Northwest Real Estate Co. v. Serio, Md. (1929)
• Facts: Northwest prevented the sale of property to Serio based on a covenant restricting the alienation of the property, specifically one that prevented its grantees from selling a property before a certain date without its consent.
• Rule: Fee simple title conveys unrestrained power of alienation incident to absolute ownership
• Holding: Restriction inconsistent with fee simple title conveyed by deed and thus invited
• Dissent: Restraint on alienation intended to give developer power to control character of development to secure return and grant early purchasers security
Riste v. Eastern Washington Bible Camp, Wash. Ct. App. (1980)
• Facts: Land subdivided and sold only to members of Assembly of God Church. Owners later attempt to sell property contrary to restrictions.
• Rule: Clause in a deed prohibiting grantee from conveying land to another without approval of grantor, when grantor transferred a fee simple estate, is void as inconsistent with nature of estate in fee
• Holding: Outright grant of fee defeats claims of church
D. RIGHTS OF FIRST REFUSAL
Wolinsky v. Kadison, Ill. App. Ct. (1983)
• Facts: The Board of Directors for a condo complex exercised its right of first refusal regarding Wolinsky’s offer to purchase a condo after P had contracted to purchase the unit in the same complex where she was already living. P said the Board exercised its right of first refusal because she was an unmarried woman who would occupy the unit with her children.
• Rule: criteria for testing the reasonableness of an exercise of the right of first refusal is: (1) whether the reason for exercising the right is rationally related to the protection, preservation, or proper operation of the property and the purposes of the association as set in its governing instruments and (2) whether the power was exercised in a fair and nondiscriminatory manner
• Holding: Dismissal of plaintiff’s complaint improper as board may have exercised right of first refusal in discriminatory fashion
Total restraints on alienation of fee simple interests: uniformly held void and unenforceable to (1) promote dispersal of property ownership and prevent concentration of land in passive family dynasties, (2) encourage individual autonomy, and (3) promote social utility and efficiency
1) Disabling restraints: directly forbids owner from transferring interest (“O conveys Blackacre to A and her heirs, but any transfer of Blackacre shall be null and void”)
2) Promissory restraints: covenant by which grantee promises not to alienate interest in property (“O conveys Blackacre to A in fee simple. A promises [covenants] for himself, his heirs, and his assigns that Blackacre shall not be transferred”)
3) Forfeiture restraints: provides for future interest that will vest if owner attempts to transfer interest in the property (“O conveys Blackacre to A, but if A attempts to transfer the property, then to B and her heirs”)
Partial restraints on alienation of fee simple interests: courts sometimes uphold partial restraints on alienation lasting for limited time or limiting transfer of property to certain persons but not constituting wholesale prohibitions
Consent to sell clauses: covenants requiring owners to seek consent of grantor/developer to sell are usually struck down as unreasonable restraints on alienation
Rights of first refusal: generally held not to inhibit alienability and to be enforced, especially if held by condo association
Options to purchase: right to buy property likely to be held unreasonable restraint on alienation if for a fixed price with no termination date
Life estates: most courts uphold total restraints on alienation of life estates when they are in form of forfeiture or promissory restraints
E. LEASING RESTRICTIONS
Woodside Village Condominium Assoc. v. Jahren, Fla. (2002)
• Facts: The condo amended their declaration to prohibit owners from leasing their units during their first 12 months of ownership and to no more than 9 months in any 12 month period and no more than 3 units owned by any members could be leased at one time. The changes were made to address concerns that non-owner occupied condos were negatively impacting the quality of life at Woodside. Jahren didn’t comply and Woodside sought an injunction.
• Rule: The court said restrictions passed by a condo association will be presumed valid unless shown to be arbitrary, against public policy, or in violation of a fundamental constitutional right because condos and their forms of ownership are strictly created by statute.
• Holding: Respondents on notice of unique form of ownership when purchasing units and restriction does not violate public policy nor constitutional rights
VII. Common Ownership
1. Joint Tenancy; Tenancy in Common; Tenancy by the Entirety; Marital Property
A. RIGHTS AND OBLIGATIONS OF CO-OWNERS
Tenancy in Common: each tenant in common has “undivided interest”; no matter how small her fractional interest, has the right to possess the entire parcel unless all the co-tenants agree otherwise by contract.
• Can be transferred by the following language: “O conveys/devises Blackacre to A and B as tenants in common”
• When a tenant in common dies, his interest goes to his devisees under his will or to his heirs under state intestacy statute
Joint Tenancy: each joint tenant has the right to possess the entire parcel, but joint tenants have traditionally been required to possess equal fractional interests in the property.
• Can be transferred by the following language: “O conveys/devises Blackacre to A and B as joint tenants”
• Right of survivorship: when joint tenant dies, her property interest is immediately transferred to the remaining joint tenants in equal shares, so the joint tenants have no rights to devise their interests since it goes to the other joint tenants upon death
• Requirements to create joint tenancy: (1) the interest of each joint tenant must be created at the same moment in time (2) all joint tenants must acquire title by the same instrument or title, (3) all joint tenants must possess equal fractional undivided interests in the property and their interest must last the same amount of time, (4) all joint tenants must have the right to possess the entire parcel
• Severance: a joint tenancy is destroyed if one of the joint tenants sells their interest, so the right of survivorship is destroyed. Joint tenant who wishes to destroy the right of survivorship while retaining her life interest can convey her interest to another who conveys it back.
• Dual life estates with alternative contingent remainders: will establish an indestructible right of survivorship, can be created in language such as “O to A and B as life tenants, with a remainder in A if A survives B and a remainder in B if B survives A. “
Interpretation of tenancy in common versus joint tenancy: when ambiguous whether something is a tenancy in common or a joint tenancy, the practice is to interpret the conveyance as a tenancy in common.
Transferability of co-tenancy interests: Both joint tenants and tenants in common can transfer their interests without consent of their co-owners
Partition: both can sue for judicial partition, where the court may order the property physically divided among the co-owners and if that’s not possible the court will order the property to be sold and the proceeds divided among the co-owners in proportion to their ownership shares. Agreements among co-tenants not to partition jointly held property will likely be upheld today if they are reasonably limited in time and have a reasonable purpose.
Fiduciary obligations for commonly owned property
• If one co-owner chooses to live on property and another chooses not to, tenant in possession has no duty to pay rent to non-possessing tenant
• Duty to pay rent if possessing tenant ousted non-possessing tenants
• Right to share any rents paid by possessing third parties
• Right to lease interest without consent of other co-tenants; rents shared only if other co-tenants agree to be bound by leasehold, waiving possession rights for term of lease
• Duty to share basic expenses (e.g. mortgage payments, taxes, and insurance)
• Co-owner exclusively possessing bears burden of expenses
Ouster: explicit act by which one co-owner wrongfully excludes others from jointly owned property.
• Constructive ouster arises when property is too small to be physically occupied by all co-owners
Trespass: each co-owner possesses the whole and is entitled to invite others onto premises despite any objections of other co-owners
Adverse Possession and ouster: one co-tenant cannot obtain adverse possession against another unless the possessing tenant makes clear to the non-possessory tenant that he is asserting full ownership rights in the property to the exclusion of the other’s rights because otherwise there is no trespass.
Tenancy by the entirety: available only to married couples and has been abolished in most states though still available in about 20. Have been held to violate equal protection clause by defining property in discriminatory fashion.
• #Singer – same sex couples unlikely to be allowed to create tenancy by the entirety through contract
B. CONFLICTS OVER RENT AND POSSESSION
Olivas v. Olivas, N.M. Ct. App. (1989)
• Facts: Husband and wife separate and husband moves out. They hold home as community property during marriage and tenants in common afterwards.
• Rule: Constructive ouster is possible when emotions of divorce make it impossible for spouses to continue sharing community property
• Holding: Court did not find constructive ouster
C. FAMILY CONFLICTS OVER USE OF COMMUNITY PROPERTY
Carr v. Deking, Wash. Ct. App. (1988)
• Facts: Father and son own land as tenants in common, leasing it to farmer in oral agreement for 1/3 of crop. Son informs farmer he wants cash rent. Farmer declines and executes written crop-share lease with father, without consent of son.
• Rule: Co-tenant may lawfully lease his own interest in common property to another without consent of the other tenant and without his joining the lease; the leasee effectively becomes a co-tenant (“steps into the shoes” of leasing co-tenant)
• Rule: Non-joining co-tenant may not demand exclusive possession, but may demand co-possession
• Holding: Son not entitled to eject lessee, proper remedy is partition
Tenhet v. Boswell, Cal. (1976)
• Facts: Joint tenant leases interest in property to third person, without consent of joint tenant and dies during lease. Co-tenant seeks exclusive possession as surviving joint tenant.
• Rule: Lease does not sever joint tenancy; interest of decedent joint tenant extinguishes upon his death and lease of property also expires when lessor dies
• Holding: Lease no longer valid
• #Singer – feels this rule should be less forgiving in residential context than in business
Leases by one joint tenant and right of survivorship: courts are divided on whether leases sever joint tenancies
Kresha v. Kresha, Neb. (1985)
• Facts: Husband and wife co-own land. Father leases lands to son without consent of mother. Mother wins land in divorce and notifies son she is terminating lease. Son continues occupancy.
• Rule: Tenants in common may lease interest to third persons and party obtaining such property in divorce assumes it subject to any lease
• Holding: Father does not encumber interest of mother and she took lands subject to son’s continuing lease agreement
Mortgages and right of surviviorship: courts are divided on whether mortgages sever joint tenancies
Swada v. Endo, Haw. (1977)
• Facts: Plaintiffs injured in car accident. Defendant conveys property to their sons to keep it away from plaintiffs in settlement.
• Rule: Interest of one spouse in real property, held in tenancy by the entirety, is not subject to levy and execution by his or her individual creditors absent consent of both spouses.
• Holding: Court declines to set aside conveyance
• Dissent: spouses take equal rights and also equal disabilities and creditors of either spouse may levy and execute upon separate rights of survivorship
Tenancy in the entirety and the Married Women’s Property Acts: courts are divided on rights of spouses in tenancy in the entirety
• MA, MI, NC: possession and profits of estate subject to husband’s exclusive dominion and control
• AL, AR, NJ, NY, OR: interest of debtor spouse may be sold or levied upon, subject to other spouse’s contingent right of survivorship
• 10 states + DC: attempted conveyance by either spouse is void, estate may not be subjected to separate debts of single spouse
• KY, TN: contingent right of survivorship separately alienable and attachable by creditors
D. SEPARATE PROPERTY
Governs property rights of spouses in majority of US
During marriage: spouses own property separately, except to extent they choose to share it. Each spouse owns whatever property they possessed before marriage and is individually liable for prior debts. Property earned after marriage also owned separately.
On divorce
• Some states have statutes call for “equitable distribution” of property subject to (1) economic need, (2) rehabilitation, and (3) contributions of the parties
• Some states provide for “alimony” or periodic support payments
On death: many states provide for statutory forced share, allowing widow/widower to override will and receive a stated portion of estate
E. COMMUNITY PROPERTY
During marriage: property owned prior to and acquired after marriage are separately owned. Property acquired during marriage owned equally. Couples allowed to transmute property between separate and community property by written agreement. Often require consent of both parties with respect to conveyance or mortgage of real property and assets.
On divorce: Most states adopt “equitable distribution” principle
On death: generally do not have statutory forced share statutes as spouse already vested in ½ of community property
F. OTHER ASPECTS OF MARITAL PROPERTY
Premarital agreements: generally enforceable unless unconscionable
Homestead laws: almost all states have laws designed to protect interests of surviving spouse and children in family home from claims of deceased spouse’s creditors
VIII. Landlord/Tenant Law
1. Leaseholds: Consent to Sublease Clause; Duty to Mitigate Damages
A. LEASEHOLD ESTATES
Leaseholds: landlord agrees to transfer possession of property for specified period to tenant in return for periodic rental payments; possession ordinarily reverts to landlord
• Courts are more likely to take a common law approach to residential leases as opposed to commercial leases due to a lack of bargaining power and expertise
• About half of the states have adopted the Uniform Residential Landlord and Tenant Act
Categories of Tenancies:
• Term of Years: lasts for a specified period of time determined by the parties. Period can be of any length, but can be terminated before the end of the fixed period on the happening of some event stated in the lease agreement
- The landlord’s future interest is a reversion while interest in a third party is a remainder
- Death of either party does not terminate the tenancy
- Landlord entitled to evict only in material breach
• Periodic Tenancy: renew automatically at specified periods unless either the landlord or the tenant chooses to end relationship; no written lease or specified end (“month-to-month”)
- Many states require notice (usually a month’s notice) before either party can terminate
- Death of either party does not terminate the tenancy
• Tenancy at will: like a periodic tenancy except can be ended with no notice by either party
- Many states have basically abolished this by requiring notice
- Death of either party terminates the tenancy at will
• Tenancy at sufferance (holdover tenant): a tenant rightfully in possession who wrongfully stays after the leasehold has terminated
o Eviction proceeding and court judgment generally required to evict
o Landlord accepting rent checks from holdover tenant may be held to have agreed to new tenancy
Statute of Frauds: most states require leases longer than one year be in writing. Oral periodic tenancies generally enforceable for less than one year (includes “month-to-month” tenancies)
Regulation of landlord-tenant relationships
• Procedural regulations: impose formal requirements for creating relationship: (1) procedures for termination, (2) notice and eviction proceeding, (3) summary process
• Substantive regulations: define parties’ obligations to each other including housing codes and common law rules
Vasquez v. Glassboro Service Association, Inc., N.J. (1980)
• Facts: Glassboro supplies living quarters for migrant workers and discharges worker unable to speak English and without funds to return home, not permitting him to remain overnight in barracks despite open spaces
• Rule: In absence of contractual provision or legislation addressing issue, courts are empowered to exercise equitable jurisdiction in revising contracts or otherwise devising remedy where there is inequality in bargaining power
• Holding: Dispute concerning dispossession of migrant farmworker should proceed in a summary judgment manner
Summary process versus self-help: owners entitled to self-help to remove licensees but not tenants; must make used of summary process for expeditious
License versus lease: leases are found where owner transfers exclusive “possession” of a defined space
Easement versus lease: courts have held that an agreement to place a billboard on a sign is an easement as it grants a license and no “possessory” rights
Freedom of contract, unequal bargaining power, and minimum standards
• Contracts should be regulated when parties have unequal bargaining power
• Freedom of contract: parties should be free to make whatever arrangements suit their purposes
• Contracts should be regulated to ensure they comply with minimum standards compatible with legal framework of free and democratic society
B. CONFLICTS ABOUT OCCUPANCY
Initial occupancy
• Majority rule: landlord has duty to deliver actual possession at beginning of leasehold and failure to do so is breach of lease; entitles tenant to terminate and recover damages, or affirm, withhold rent, and recover damages
• Minority rule: landlord only has duty to deliver right of possession; tenants responsibility to evict holdover tenant and legally obligated to pay even while not in possession; only remedy is against holdover tenant and not landlord
Right to marry and receive visitors: non-disclaimable right to receive visitors (State v. Shack) or to live with new spouse
Tenant’s duties not to commit waste: leases generally have clause obligating tenant not to harm premises or otherwise “commit waste” and that tenant “covenants not to disturb the neighbors, interfere with quiet enjoyment of property, or cause a nuisance”
Landlord’s right to transfer reversion: new owner does not obtain immediate right to possess property subject to leasehold
• If property is mortgaged and foreclosed on, lease or mortgage takes precedent based on whichever was established first
• In absence of statute to contrary, tenant’s lease ends immediately in foreclosure
• If landlord owns property subject to life estate, tenant’s lease ends immediately when landlord dies
Tenant’s right to assign or sublet
• When the lease is silent about assignment or sublease: A tenant can transfer her leasehold by assignment or sublease; promotes alienability
o Assignment conveys ALL the tenant’s remaining property interests, whereas a sublease retains some future interests. Main difference in practice is that an assignment has any covenants run with it, whereas a sublease does not have covenants run with the land and landlord cannot sue to enforce it unless the subtenant expressly promises to follow them, such as paying rent to the landlord. Landlord can sue original tenant.
• When the lease prohibits assignment or sublease: restraints on alienation of leaseholds (“no subletting” or “no assignment”) likely to be upheld in courts; protects landlord from being forced to accept less creditworthy substitute tenant
• When lease requires landlord’s consent: modern trend is to focus on intent of parties. Uniform Residential Landlord and Tenant Act (URLTA) imposes obligation of good faith in performance of all residential landlord-tenant leaseholds
Kendall v. Ernest Pestana, Inc., Cal. (1985)
• Facts: Hangar space leased at San Jose airport, assignable subject to landlord’s consent. Landlord refused consent of assignment without potential lessee consenting to increased rent and other unfavorable terms.
• Rule: where a lease provides for assignment only with the prior consent of the lessor, such consent may be withheld only where the lessor has a commercially reasonable objection to the assignment
• Rule: Factors the landlord can reasonably consider are (1) financial responsibility of the proposed assignee, (2) suitability of the use for the particular property, (3) legality of the proposed use, (4) need for alteration of the premises, and (5) nature of the occupancy.
• Holding: Adopts minority rule supported by Restatement (Second)
• Dissent: contributes to proliferation of unnecessary litigation
Slavin v. Rent Control Board of Brookline, Mass. (1990)
• Facts: Tenant allows unauthorized person to occupy apartment without landlord’s consent and Board refuses to evict due to implicit lease provision for landlord to not withhold consent unreasonably.
• Rule: lease provision requiring the landlord’s consent to an assignment or sublease permits the landlord to refuse arbitrarily or unreasonably
• Holding: Adopts majority rule; should not impose on residential landlords a reasonableness requirement they have not agreed to
Commercial leases: trend toward adopting implied reasonableness term in lease clauses giving landlord right to consent
End of the tenancy: landlord’s right to recover possession v. tenant’s right to remain (just cause eviction and foreclosure)
Landlord’s eviction rights
• Landlord entitled to evict tenant for material breach
• Tenant with term of years cannot be evicted absent material breach
• Landlord has no obligation to renew a leasehold
• Entitled to end periodic tenancies by giving requisite notice
Exceptions
• Federal and state antidiscrimination statutes prohibit landlords from failing to renew on discriminatory grounds
• Tenants in rent controlled units are protected from eviction absent just cause
• States/localities may regulate eviction for purposes of converting apartment units into condominiums
• Federal law protects occupants from eviction if landlord acts in retaliation for asserting right to habitable premises
C. CONFLICTS ABOUT RENT
Main rights reserved by landlord: (1) right to receive the agreed upon rent, (2) right to have the premises intact and not damaged, subject to normal wear and tear (tenants duty not to commit waste), (3) landlord’s reversion, or the right to regain possession at the end of the lease term
Landlord Remedies when tenant fails to pay rent
• Possession and back rent
• Holdover tenant and renewal of the tenancy: if a holdover tenant continues to pay tent then most states say the new tenancy is a periodic tenant based on the rent payment (e.g. acceptance of one month’s rent establishes “month-to-month” tenancy); landlord also free to sue for possession
• Self-help: almost all states hold landlord may not use self-help
Landlord’s duty to mitigate damages:
• Accept tenant’s surrender: landlord agrees the tenant will not be legally obligated to pay the future rent
- Landlord can still sue for back rent owed
- Landlord may also sue for damages based on the breach of the lease (agreed upon rental price – fair market price)
• Re-let on the tenant’s account: refuse surrender and, after notice to tenant, seek new and re-let the apartment on the tenant’s account.
- Landlord may sue the for the difference between the old rental price and the new rent if the new rent is lower than original (new rent must be reasonable)
• Most states require LL to mitigate damages: landlord can no longer do nothing and wait until the end of the lease term to sue for back rent
Sommer v. Kridel, N.J. (1977)
• Facts: Defendant paid first month’s rent and security but then decided to abandon lease due to changed circumstances. Defendant wrote letter that was not answered by landlord. Third party sought rental, but was told it was already rented to defendant. Landlord then sues defendant prior to re-letting apartment.
• Rule: Landlord has a duty to mitigate damages where he seeks to recover rents due from defaulting tenant
• Holding: Reversed and remanded
Duty to mitigate damages: almost all states now require both parties to residential leases to mitigate damages and also extend duty to commercial leases
Arguments for duty to mitigate damages: efficient because it encourages landlords to rent premises rather than leaving vacant, wastes scarce resources (housing) and forces tenant to abandon employment prospects elsewhere (“social utility” argument) #policy
Arguments against duty to mitigate damages: no efficiency loss as landlord bargained for right to not have to seek another tenant prior to end of lease term, landlord owns property right that cannot be taken from landlord without compensation
Rent acceleration clauses: clauses that attempt to contract around duty to mitigate by making rest of rent due immediately if tenant abandons premises or otherwise materially breaches; essentially “liquidated damages”
• Some courts enforce on grounds parties voluntarily agreed to them, but will not enforce if clause constitutes a “penalty” or amount owed is “unconscionable” (must constitute reasonable estimate of actual damages likely to be suffered by landlord)
Burden of proof: landlord has burden to persuade decision maker that they tried to mitigate damages
Security deposits: may be regulated by: (1) limiting amount, (2) requiring deposit be placed in separate account, or (3) requiring landlord repay security deposit with interest at termination
2. Constructive Eviction; Implied Warranty of Habitability; Retaliatory Eviction
Landlord-tenant litigation
• Claims by landlord against tenant seeking (a) back rent, (b) possession, (c) damages
• Tenant may respond by (a) denying breach, (b) raising defenses, or (c) counterclaiming for damages, abatement (reduction in rent), or injunctive relief
Actual eviction: landlord breaches lease by physically barring tenant from property (e.g. placing new locks on door) and tenant’s obligation to pay rent ceases entirely
• Partial eviction constitutes breach of lease and allows tenant to move out without liability for rent
• If tenant chooses to remain following partial eviction
- Traditional rule alleviates rent obligation completely
- Trend is to abate rent to fair market value of remaining portion
A. CONSTRUCTIVE EVICTION
Constructive eviction: landlord substantially interferes with tenant’s quiet enjoyment of property and renders it unsuitable for occupancy, either in part or in whole, so that the tenant is forced to leave the premises.
• Restatement (Third) abandons traditional requirement that tenant abandon premises before taking advantage of constructive eviction doctrine
Minjak Co. v. Randolph, N.Y. App. Div. (1988)
• Facts: Plaintiffs signed lease for loft space used as residence and music studio. Health spa equipment business on floor above creates massive water leaks and sand in plaintiff’s loft. Landlord commences construction work that sends dust into loft causing health issues and bricks/concrete falls on plaintiffs.
• Rule: tenant may assert the defense of constructive eviction for the nonpayment of rent, even if he has abandoned only a portion of the demised premises due to the landlord’s acts
• Holding: NY invents concept of “partial constructive eviction”; punitive damages sustained
Blackett v. Olanoff, Mass. (1976)
• Facts: Plaintiffs warranty of quiet enjoyment violated by nearby premises leased by landlord to bar/cocktail lounge.
• Rule: When a landlord permits conduct of third persons that substantially impairs the right of quiet enjoyment of other tenants, and disturbing condition is natural and probable consequence of permitted conduct, it is a constructive eviction
• Holding: Affirmed
B. WARRANTY OF HABITABILITY
Landlord’s obligations to provide habitable premises
• Before 1970s, courts held landlords had no implied duty to repair rented premises or implied representations that apartment was in habitable condition; also held obligations of landlord and tenant were independent and not contingent on other party’s performance (obligation to pay rent enforceable even if landlord in breach of covenant to repair)
• Modern trend repudiates lack of duty to repair and maintain and independent covenants rule
Javins v. First National Realty Corp, D.C. Cir. (1970)
• Facts: Appellants defaulted on rent but alleged numerous violations of housing regulations as an equitable defense
• Rule: leases of urban dwelling units contain an implied warranty of habitability, and a breach of this warranty gives rise to the usual remedies for breach of contract
• Holding: Appellants entitled to equitable defense
Implied warranty of habitability: majority of states have adopted non-disclaimable implied warranty of habitability by statute or common law for residential tenancies (e.g. lack of heat or hot water, broken windows, pest infestations, leaky roofs)
• Many courts hold that the implied warranty is not violated until the landlord has been notified of the problem and had a reasonable opportunity to fix it,
Tenant’s Remedies: remedies available to vindicate tenant’s rights under implied warranty of habitability
• Rescission or right to move out before the end of the lease term
• Rent withholding: right of tenant to stop paying rent and remain in premises
• Rent abatement: most states reduce the rent by a percentage that reflects the seriousness of the violation and the amount of discomfort experienced by the tenant.
• Repair and deduct: tenant may be able to pay for the needed repairs and then deduct the cost of the repairs from the rent paid
• Injunctive relief or specific performance
• Administrative remedies: procedures for enforcement by local housing inspectors
• Criminal penalties
• Compensatory damages
Commercial leases: few states find an implied warranty of suitability for intended purposes to commercial leases
C. RETALIATORY EVICTION
Retaliatory eviction: allegation of retaliatory eviction shifts burden of proof in eviction proceeding back to landlord to present evidence rebutting presumption of retaliatory eviction
Hillview Associates v. Bloomquist, Iowa (1989)
• Facts: Tenants formed tenant’s association. Meeting between association representatives and management becomes violent. When tenant’s refused to sign new park rules, all families who participated in violent meeting evicted.
• Rule: Tenants may organize and join a tenant’s association and may participate in activities designed to legitimately coerce a landlord into taking action to improve living conditions without fear of retaliation
• Rule: Engaging in physical threats or violence is not a legitimate method of coercion
• Rule: Factors defeating defense of retaliatory eviction: (1) decision was reasonable exercise of business judgment, (2) landlord in good faith desires to make a different use of the leased property, (3) landlord lacks the financial ability to repair the leased property, (4) landlord was unaware of the tenant’s protected activities, (5) landlord did not act at first opportunity after learning of conduct, (6) landlord did not act in discriminatory fashion
• Holding: Tenants who did not actually participate in physical altercation (although present) entitled to defense of retaliatory eviction
Imperial Colliery Co. v. Fout, W.Va (1988)
• Facts: Plaintiff employed as coal miner and resides in lot allegedly owned by mining company. Plaintiff eventually evicted for failure to pay rent, but alleged retaliatory eviction based on participation in union activity and strike.
• Rule: retaliatory eviction defense must relate to the tenant’s exercise of rights incidental to the tenancy
• Holding: Plaintiff not entitled to retaliatory eviction defense
Robinson v. Diamond Housing Corp, D.C. Cir. (1972)
• Facts: Landlord brings lawsuit against plaintiff seeking to end month-to-month tenancy after she successfully defends against eviction proceedings on breach of warranty of habitability
• Rule: Landlord’s right to discontinue rental of all units in no way justifies partial closing designed to intimidate remaining tenants
• Holding: Court held tenant could successfully raise defense of retaliatory eviction
• Dissent: Landlord must be able to exercise discretion with respect to property and ruling will discourage business investment for rental purposes
How long may tenant stay?: unclear how long tenant may remain following retaliatory eviction defense
• Some states apply doctrine to landlord’s refusal to renew
• Some states prohibit retaliatory eviction of month-to-month tenants, but allow landlords to refuse renewal of term-of-years or fixed term leases
• Some stats specify fixed time where retaliatory eviction is prohibited
IX. Real Estate Transactions
1. Real Estate Sales; Mortgages
History of real estate in America: all cases may be viewed in context of either
• Rising market prices – case for decades until late 2000s
• Falling market prices – case post-subprime mortgage crisis
A. STRUCTURE OF TRANSACTION
Types of broker (also “agent” or “realtor”) listing agreements
1) Exclusive right to sell: gives broker right to collect commission if property is sold to anyone during contract, even if sale is to buyer found without broker’s help
2) Exclusive agency: entitles broker to commission, or share, if property sold through their efforts or any other broker, but not if property is sold by owner
3) Open (nonexclusive): entitles broker to commission only if they are first person to procure buyer ready, willing, and able to buy
Unauthorized practice of law: if broker drafts deeds, mortgages, or other documents transferring interest in real property, express opinions on status of titles or zoning law, or conduct closings, they may be found to have engaged in unauthorized practice of law
Obligations between broker and buyer
• Broker to buyer: fiduciary obligations that may permit claim of fraud if broker fails to reveal relevant information
• Buyer to broker: some courts hold that when prospective buyer solicits broker and broker finds satisfactory property which owner agrees to sell at price offered, and buyer knows broker will earn commission for sale, law implies a promise on part of buyer to complete transaction with buyer
Dual agency: unless prohibited by law, single person may be in business of representing both buyers and sellers and will deal with both sides on a single transaction; some states have statutes requiring disclosure
Sales contract: when parties agree on price and general terms they move on to sales contract or “purchase and sale agreement” which is a written contract where seller agrees to convey title at specific future date of closing
Executory period: period between signing of purchase and sale agreement and closing where arrangements such as inspection, financing and researching of title are taken care of
Closing and post-closing: if parties intend promises of purchase and sale agreement to be enforceable after closing, deed must normally provide explicitly that purchase and sale agreement will “survive the deed”
• Some obligations survive deed although not explicitly mentioned
A. REAL ESTATE FINANCE
Mortgages: borrowing money from bank or other lending institutions to finance real estate purchase entails two separate contracts: (1) note and (2) mortgage
1) Note: borrower’s promise to repay principal with interest (creating personal liability to repay money)
2) Mortgage: series of promises to maintain insurance on property, pay property taxes, maintain property so that it does not become dilapidated and lose market value (pledge of property as collateral to secure payment of note)
• Mortgagee: lender
• Mortgagor: buyer-homeowner
Foreclosure: forced sale of property
• Practice of most states is to order foreclosure sales where mortgagee either manages private sale or brings suit to foreclose on property; if sale does not bring in enough to pay off debt, lender may bring an action in some states for deficiency judgment against mortgagor for difference
• Statutory right of redemption allows mortgagor to buy back property for price bid at foreclosure sale within designated period after foreclosure and generally allows mortgagor to remain in possession of property in interim
“First in time, first in right”: when property owners take out multiple mortgages, first mortgage has priority over later mortgages if recorded and second mortgagee was aware of it
• In foreclosure process, proceeds paid to first mortgagee, with remaining assets going to second mortgagee, and so on (Countrywide)
Equitable subrogation: someone who assumes rights or obligations of another steps into their shoes and assumes whatever rights or obligation they had to extent necessary to prevent unjust enrichment (Bank of America)
• Restatement (Third) adopts this position
B. REGULATING FORECLOSURE PROCESS
Central Financial Services, Inc. v. Spears, Miss. (1983)
• Facts: Man takes out loan and gives his son half, expecting the son to contribute to repayment. Loan is secured with real property as collateral and falls into delinquency. In foreclosure sale there are no competitive bids and bank bids amount due plus costs of foreclosure. Bank then sells property for substantially more (2x plus original indebtedness) and buyer then sells for even more (3x original indebtedness).
• Rule: Mere inadequacy of price is not sufficient to set aside a foreclosure sale unless the price is so inadequate as to shock the conscience of the court
• Holding: Sale of property within 12 days at a price 2 ½ times bid in foreclosure sale is inequitable; difference between amount bid and the price received by the bank in the resale are to be used in computing amount due to man
C. ORIGINS OF SUBPRIME MORTGAGE CRISIS
Causes of subprime mortgage crisis
1) Instead of going to banks, prospective buyers seek assistance from mortgage brokers with incentives to obtain higher cost loans
2) Deregulation starting in 1980
3) With usury deregulation, lending institutions realized they could induce people to buy homes with adjustable rate mortgages (ARMs)
4) Securitization of loans
5) Risk posed by subprime mortgages compounded by leverage
6) Banks bought and sold credit default swaps as insurance
Causes of subprime mortgage crisis: real estate boom-bust cycle no longer confined to real estate sector, property owners and financial firms; due to securitization, effects broader and deeper
Truth in Lending Act of 1968: bans practices including balloon payments (large payments exceeding regular payment amount), negative amortization (small monthly payments that do not fully pay off loan and can increase overall amount of debt), and prepayment penalties
M&T Mortgage Corp. v. Foy, N.Y. Sup. Ct. (2008)
• Facts: Plaintiff alleges “reverse redlining” due to 30-year mortgage for property in minority neighborhood with an interest rate of 9 ½%
• Rule: mortgage granted to minority buyer for property purchase in minority area carrying interest rate exceeding 9% creates rebuttable presumption of discriminatory practice
• Rule: Lender accused of reverse redlining bears burden of proof to show mortgage was not product of unlawful discrimination
• Holding: plaintiff is victim of reverse redlining
D. FORFEITURE AND INSTALLMENT LAND CONTRACTS
Installment Land Contracts: alternative financing arrangement for purchasing real property, where buyer makes down payment to seller and signs contract promising to pay rest at specified times and amounts; at end of contract, seller conveys title to the property to the buyer
• Normally allows seller to regain possession of the property on default
• Some states implicitly or explicitly prohibit by making protections of mortgage foreclosure statute non-disclaimable
• Ordinarily allows seller to keep payments already made by buyer as liquidated damages (subject to “penalty” interpretation)
Stonebraker. v. Zinn, W.Va. (1982)
• Facts: Parties enter into installment land contract for house and land. Contract provides for liquidated damages in event of default equivalent to amount paid at time of abandonment. Purchasers abandon due to inability to pay for necessary repairs and monthly payments.
• Rule: When determining whether amount forfeited by purchaser through liquidated damages under installment land contract is so grossly disproportional to constitute penalty or forfeiture, courts take into account (1) loss of fair rental value, (2) costs of sale, (3) depreciation, (4) attorney fees, and (5) other directly related expenses
• Holding: Retention by sellers was not excessive
Sebastian. v. Floyd, Ky. (1979)
• Facts: Forfeiture clause in contract to buy house and lot provided for termination of contract and retaining all previous rent payments as liquidated damages. 7 installment payments were missed, but purchase ultimately paid an amount equivalent to 40% applied to principal.
• Rule: Where purchaser of property has given a mortgage and subsequently defaults on payments, his entire interest in the property is not forfeited
• Holding: Rule treating seller’s interest as lien will best protect interests of both buyer and seller, fulfilling expectations of seller and protecting buyer’s equity
2 key questions in forfeiture
1) Forfeiture: does seller have right to regain possession and retain payments made by buyer?
2) Right of redemption: does buyer have a right to continue in possession after default by paying off some or rest of purchase price?
Universal mortgage foreclosure protection: address both forfeiture and right of redemption by holding installment land contracts are equivalent to mortgages and therefore must be governed by same rules (Sebastian)
Treating some installment land contracts as mortgages: extends mortgage protections to only some installment land contracts using factors such as: (1) amount of equity in property, (2) length of default period, (3) willfulness of default, (4) improvements to property, and (5) maintenance of property
Forfeiture: some states hold buyer has no right of redemption under installment land contracts and only question is whether payments retained sufficiently exceeds seller’s damages to constitute forfeiture
E. EQUITABLE MORTGAGES
Equitable mortgage: declared when transfer of deed intended to provide security of loan rather than sale of property
• Factors to determine whether equitable mortgage exists: (1) existence of debt, (2) relationship of parties, (3) availability of legal assistance, (4) sophistication and circumstances of each party, (5) adequacy of consideration, and (6) who retains possession (Flack)
Koenig. v. Van Reken, Mich. Ct. App. (1979)
• Facts: Plaintiff owns home subject to three mortgages. Real estate taxes were delinquent and foreclosure proceedings had been initiated under one of the mortgages. Defendant represented that he could service the mortgages and pay the taxes for a 10% fee. Plaintiff signed an agreement outlining terms, a warranty deed conveying property to defendant, and a lease agreement allowing plaintiff to remain in premises with an option to repurchase from defendants. Defendant prepared all documents and plaintiff had no legal counsel. When plaintiff missed a monthly payment she was evicted.
• Rule: Controlling factor in determining whether deed should be deemed a mortgage is the intention of the parties
• Rule: Adverse financial condition of grantor coupled with inadequacy of the purchase price for the property
• Holding: Transaction constituted a mortgage to secure a loan
X. Anti-Discrimination Law in the Housing Market
#Singer – Housing generally regulated by both federal law (e.g. Fair Housing Act) and state law, always look to see if issue is reached by state law
1. Discriminatory Treatment (Race, Gender, Familial Status)
A. DISCRIMINATION BY HOUSING PROVIDERS:
Asbury v. Brougham, 10th Cir. (1989)
• Facts: Plaintiff (who is black) attempts to rent apartment and is told there are no vacancies and does not offer assistance with application process despite being qualified to rent. Plaintiff’s sister-in-law (who is white) goes the next day and is treated completely differently.
• Rule: Three part burden of proof analysis for §1982 and FHA claim: (1) plaintiff must come forward with proof of prima facie case of discrimination, (2) burden shifts to defendants to produce evidence of legitimate reasons, and (3) burden shifts back to plaintiff to show offered reasons were pretextual
• Rule: Establishing prima facie case requires plaintiff to prove: (1) racial minority, (2) applied for and qualified to rent, (3) denied opportunity, and (4) housing opportunity remains available
• Rule: punitive damages may be awarded when conduct involves reckless or callous indifference to the federally protected rights of others
• Holding: Affirmed; substantial evidence and a reasonable basis for jury’s verdict
United States v. Starrett City Associates, 2nd Cir. (1988)
• Facts: Large housing development seeks to maintain specific racial distribution in complex to prevent “tipping” though selective screening of applicants.
• Rule: Fair Housing Act may prevent the use of rigid racial quotas of indefinite duration to maintain a fixed level of integration in public housing when such practices restrict minority access to public housing
• Holding: Affirmed; Title VIII does not allow use of rigid racial quotas of indefinite duration to maintain fixed level of integration (illustrates disparate impact)
The Fair Housing Amendments Act of 1988 amended the Act of 1968 by prohibiting discrimination against families with children (familial status) and against persons with disabilities and lengthened the statute of limitation from 6 months to 2 years.
• Remedies include injunctive relief and compensatory and punitive damages
Who is liable and standard of liability: claims under the FHA can be based either on a showing of discriminatory treatment or disparate impact
• Discriminatory treatment (intent) claims involve intentionally treating members of protected class differently so as to deny particular persons housing opportunities
• Disparate impact (results) claims allege that the defendant’s facially neutral policies have a disproportionate, exclusionary impact on members of a protected group and that the impact is not justified by legitimate government or business objectives
• Racial steering also violates the FHA by otherwise making unavailable housing because of race. It is considered a form of redlining, which is a practice of marking territory within a municipality in which brokers and lenders will refuse to help individuals obtain housing for discriminatory reasons.
• Two categories of people have standing to sue under the FHA, those who are directly injured by discriminatory acts and those who have sufficient incentive to litigate the case
Who has standing under Fair Housing Act?: those who are directly injured and those who have sufficient incentive to litigate the case
• Those denied housing opportunities
• Whites denied housing because of association with minorities
• White persons against a realtor engaging in “racial steering” as a denial of “right to social, professional, business, economic, political, and aesthetic benefits of interracial associations arising from integrated communities
• Testers
• Organization devoted to promoting equal access if discriminatory conduct requires it to devote extra resources to identify available housing and counteract discriminatory conduct
Advertising: advertisements limiting housing to whites clearly violate Fair Housing Act; Communications Decency Act of 1996 (CDA) immunizes internet service providers for liability resulting from material posted on their websites by third parties
B. THE CIVIL RIGHTS ACT OF 1866
§ 1982 states that “all citizens of the United States shall have the same right, in every state and territory, as is enjoyed by white citizens thereof to inherit, purchase, lease, sell, hold, and convey real and personal property.”
• Jones v. Alfred Mayer (1968) held that §1982 applied to private acts of discrimination as well as to discriminatory legislation
• Today, almost all cases brought under the FHA also allege a violation of §1982
City of Memphis v. Greene, US (1981)
• Facts: Memphis closed one end of West Drive, a street crossing a white neighborhood, preventing traffic from a predominantly black community from obtaining access to the street. Black residents filed suit claiming that the closing violated section 1982 since the city acted with discriminatory intent.
• Rule: §1982 not violated unless property interests of plaintiffs are implicated by municipal/official action (1) benefiting white property owners but similarly refused to similarly situated minority owners, (2) depreciating value of property of minority owners, or (3) severely restricting access to homes of minority owners or otherwise restricting use of property
• Holding: No violation of §1982
• Dissent (Marshall): plain and powerful symbolic message of “inconvenience” is ignored
C. SEX DISCRIMINATION: SEXUAL HARASSMENT
Edouard v. Kouzbal, Mass. (2002)
• Facts: Landlord attempted to secure a “date” from plaintiff by offering her a reduction in her rental deposit. She refused and the landlord’s harassment continued where he slapped her butt, squeezed her breasts and attempted to rape her. Landlord was found criminally guilty of assault with intent to rape and plaintiff filed a complaint of sexual harassment with the MA Commission Against Discrimination
• Rule: Lessee may establish a claim of sexual discrimination against a landlord for (1) quid pro quo or (2) hostile environment harassment
• Rule: Prima facie case of quid pro quo harassment requires demonstration plaintiff: (1) member of protected class, (2) subject to unwelcome sexual contact, (3) terms and conditions of situation adversely changed, and (4) change causally connected to rejection of sexual advances
• Rule: no proof of physical injury or psychiatric consultation is necessary to sustain an award for emotional distress
• Holding: Award of monetary damages appropriate compensation for emotional distress
Addition of sex discrimination to Fair Housing Act: Sex discrimination was added to the FHA in 1974, in addition to prohibitions on discrimination on basis of race, color, national origin, and religion
Sex discrimination by a landlord: Supreme Court has said sexual harassment is sexual discrimination in the employment arena, at least when it is a male supervisor and a female employee. Several courts have said the same applies in a landlord/tenant relationship.
Same-sex harassment: Supreme Court has held same-sex sexual harassment may constitute discrimination, but only if harassment is because of sex
D. DISCRIMINATION BASED ON FAMILY STATUS
Human Rights Commission v. LaBrie. Inc., Vt. (1995)
• Facts: The McCarthys claimed the LaBries unlawfully discriminated against them by prohibiting them to reside in their mobile home park with minor children
• Rule: Evidence of discriminatory practice prior to civil rights legislation, coupled with post-legislation pattern of maintaining status quo, may be sufficient to establish intent to continue discrimination
• Rule: Privately imposed occupancy limits that limit or exclude persons with minor children are unreasonable and in violation of state and federal law
• Holding: Affirmed; defendants failed to show actions against McCarthys were reasonable or that limit was reasonable
2. Discriminatory Treatment (Marital Status, Sexual Orientation, Disability); Disparate Impact
A. DISCRIMINATION BASED ON MARITAL STATUS (UNMARRIED COUPLES)
McCready v. Hoffius, Mich. (1999)
• Facts: Defendants refused to rent property to plaintiffs when they learned they intended to live together but were unmarried. When sued, the defendants said the Civil Rights Act did not protect unmarried cohabitation and if it did it was unconstitutional since it violated their religious beliefs.
• Rule: Landlord cannot reasonably claim that refusal to rent to cohabiting couples based on conduct and not marital status when marital status is what makes conduct immoral in landlord’s opinion
• Rule: Civil Rights Act does not violate Free Exercise Clause of First Amendment
• Rule: Compelling state interest possibly violating defendant’s religious freedom is evaluated by whether (1) belief is sincerely held, (2) belief is religious in nature, (3) state regulation imposes burden, (4) compelling state interest justifies burden, and (5) less obtrusive form of regulation available
• Holding: Defendant’s exercise of religion under First Amendment is not violated by requiring compliance with Civil Rights Act
Uncertainty in the law: Jurisdictions are split as to whether such statutes cover and protect unmarried cohabitants – two issues:
1) Is refusal to rent to unmarried couple prohibited discrimination because of marital status or allowable exclusion on basis of conduct?
2) Do such statutes violate constitutional rights of landlords to exercise of free religion
B. DISCRIMINATION BASED ON SEXUAL ORIENTATION
State Ex Rel. Sprague v. City of Madison, Wis. (1996)
• Facts: D’s refused to rent as a housemate to someone due to her sexual orientation despite making the offer aware of her sexual orientation.
• Rule: Renters may disclaim unqualified right to constitutional protection in privacy of home under First Amendment when renting housing for profit
• Holding: Affirmed; statute unambiguously applied to housemates
Prohibiting housing discrimination on the basis of sexual orientation: at least 17 jurisdictions have passed statutes prohibiting housing discrimination based on sexual orientation
Stereotyping as sex discrimination: Supreme Court has found sex discrimination where a woman was denied a promotion due to complaints she was “too bossy” and did not behave “like a woman” (Price Waterhouse)
C. DISCRIMINATION AGAINST PERSONS WITH DISABILITIES
Poff v Caro, N.J. Super. Ct. Law Div. (1987)
• Facts: Property owner refuses to rent to homosexuals fearing they may later acquire AIDS
• Rule: Discrimination based on perception of a handicap is within protection of applicable statutes prohibiting discrimination against persons with disabilities
• Holding: Conduct here if proven is within provisions of law prohibiting discrimination against persons with disabilities
D. DISPARATE IMPACT CLAIMS
Huntington Branch NAACP v. Town of Huntington, US (1988)
• Facts: Huntington zoning regulations did not allow housing projects in white neighborhoods. 95% of the town was white and the small percentage of black residents were concentrated in two neighborhoods. Housing Help Inc determined it could only foster integration by locating a project in a white neighborhood but Huntington zoning regulations allowed this type of housing only in a single area already occupied by black residents.
• Rule: Prima facie case of disparate impact is established by showing challenged practice of defendant has a discriminatory effect, need not show discriminatory intent
• Rule: Balance should be more readily struck in favor of plaintiff when seeking only to enjoin municipal defendant from interfering with own plans rather than attempting to compel defendant itself to build housing
• Holding: Ordered specific performance based on strong showing of discriminatory effect
Disparate impact claims: plaintiff may create rebuttable presumption of unlawful disparate impact (1) by showing statistical evidence of significantly greater impact on class of protected persons, (2) that policy or practice tends to perpetuate segregation
• Plaintiffs should rely on local statistics focusing on relative percentages rather than absolute numbers
E. SEX DISCRIMINATION: SHELTERS FOR BATTERED WOMEN
Doe v. City of Butler, 3rd Cir. (1989)
• Facts: Three battered women claimed that a City of Butler ordinance restricting transitional dwellings to six persons was sex and familial status discrimination
• Rule: Established that the FHA prohibits discrimination based on familial status, which may include single-parent families living communally
• Holding: Remanded for consideration of familial status discrimination; sex discrimination claim rejected
XI. Zoning
1. Exclusionary Zoning; Prior Nonconforming Uses: Special Exceptions; Variances; Spot Zoning; Vested Rights; Equal Protection
A. EXCLUSIONARY ZONING
Southern Burlington County NAACP v. Township of Mount Laurel, N.J. (1975)
• Facts: NAACP sued Mount Laurel saying that their zoning scheme violated the NJ constitution by failing to provide for low-income housing outside of depressed areas. The trial court said it was sufficient that Mount Laurel had made a bona fide attempt to comply with the Supreme Court decision and upheld the new ordinance enacted in response. NAACP appealed contending a mere attempt to provide such zoning did not discharge Mt. Laurel’s constitutional obligation.
• Rule: every municipality must, by its land use regulations, presumptively make realistically possible an appropriate variety and choice of housing
• Rule: Municipality may properly zone for and seek industrial ratables to create a better economic balance for the community vis-à-vis educational and governmental costs engendered by residential development, provided that such was done reasonably and as part of and in furtherance of a legitimate comprehensive plan
• Holding: Municipalities must zone for living welfare of people and not benefit of local tax rate
Minority rule: Mount Laurel doctrine is minority rule and few states have explicitly interpreted their state constitutions to limit exclusionary zoning
Efficiency Arguments for government mandated exclusionary zoning
• Arguments for: efficient; prevent creation of protected subdivisions that fail to account for externalities of limiting low-income housing to urban areas; artificially increase cost of low-income housing
• Arguments against: inefficient; effectively imposes tax on new construction; exacerbate existing shortage of low-income housing
Has inclusionary zoning worked?: Those who have benefited are more likely to be elderly people and whites (because inclusionary zoning is more likely to occur in suburban areas)
B. ZONING PROCESS
Constitutional source for zoning authority: Supreme Court upheld power of states to enact zoning laws that limit development rights, finding “justification in some aspect of the police power, asserted for the public welfare” (Village of Euclid)
Zoning enabling acts: State governments are ultimate repositories of the “police power,” authority to enforce regulations promoting health, safety, and welfare and delegate zoning power to municipalities through zoning enabling acts
• Use zoning: divides municipality into districts regulating kinds of uses allowed within each district
• Area zoning: regulates size of lots, height of buildings, and requirements to set back structures a certain distance from borders
Comprehensive plan and zoning ordinance: zoning enabling act generally requires municipal government to establish comprehensive plan
• Zoning ordinance (or “by-law”): governs land use in municipality; prepared by planning commission and adopted by city council
• Rezoning petitions: petitions from particular landowners seeking amendments to zoning law
Zoning board of adjustment: local agency administering zoning law with power to grant variances and special exceptions
• Variance: a permit to develop a parcel in a way that otherwise violates the zoning ordinance. Variances are granted in cases of special hardship
• Special exception: permits to develop in ways conditionally authorized by zoning ordinance
Planned use developments: establish overall density requirements and then work directly with developers to construct rational mixed use scheme (greater flexibility)
C. CONDITIONAL/CONTRACT ZONING
Contract or conditional zoning: negotiating with owner over zoning change and then allowing rezoning subject to specified conditions
• Often challenged in court as: (1) unauthorized by zoning enabling act, (2) inconsistent with comprehensive plan, (3) illegal preferential ‘spot zoning,” or (4) unconstitutional law making on ground laws should not be negotiated with private party
• Bilateral agreements: involve promises on both sides (“often called “contract” zoning)
• Unilateral agreements: commitments by owner to agree to certain conditions to induce rezoning (often called “conditional” zoning)
• Contract zoning is more likely to be struck down when bilateral than when unilateral
• #Singer – Courts have become much more hospitable to contract zoning in last 25 years
Durand v. IDC Bellingham, L.L.C., Mass. (2003)
• Facts: Defendant had sought unsuccessfully to develop a parcel of land and later offered the town an 8 million dollar gift if the town voted to rezone the parcel and allow development of a power plant. The town meeting voted to approve the rezoning of the site.
• Rule: Enactment of a zoning bylaw by voters is a legislative act carrying a strong presumption of validity
• Holding: Reversed
• Dissent: A municipality may not relinquish its police power by contract
D. PRIOR NONCONFORMING USES
Town of Belleville v. Parrillo’s Inc., N.J. (1980)
• Facts: Defendant operated a restaurant when Belleville enacted a zoning ordinance designating the area in which Parrillo’s was located as a residence zone. They then made certain renovations to the premises and opened it as a discotheque and shortly after applied for a discotheque license as required by the town’s ordinance. The application was denied but defendant continued business as usual.
• Rule: an existing nonconforming use may continue only where it is a continuance of substantially the same kind of use as that to which the premises were devoted when the zoning ordinance was passed
• Holding: Reversed and remanded for conviction
E. VARIANCES
Cochran v. Fairfax County Board of Zoning Appeals, Va. (2004)
• Facts: Cochran and other neighbors appealed three decisions of three local zoning boards that allowed variances in zoning ordinances for three families constructing buildings on their land. The landowners seeking the variances had other options but argued the plans for the additions or construction of their homes was most beneficial in the requested way.
• Rule: No authority to grant a variance unless the effect of the zoning ordinance interferes with all reasonable beneficial uses for the property, taken as a whole
• Holding: Reversed and vacated; each variance fails to meet standard
Variances: Most states are very restrictive when it comes to granting zoning variances and only allow them when application of zoning ordinance to particular owner results in “exceptional and undue hardship”
• Variance not granted where hardship is self-imposed
• Hardship will generally not be found as long as there is an alternative economically viable use for the property
• Variances are generally granted to relax lot and building restrictions, not use restrictions and some states expressly prohibit use variances entirely.
• In practice zoning boards routinely grant variances if the requested variance is not a dramatic change in the structure and if no one objects to the ranting of the variance, in effect the zoning boards ignore the law.
F. VESTED RIGHTS
Stone v. City of Wilton, Iowa (1983)
• Facts: Plaintiff purchased land for housing project depending on multi-family zoning of tract, incurring expenses for architectural fees and engineering services. Also secured federal loan commitment. Zoning subsequently changed to single-family homes due to inadequacies of sewer, water, and electrical services.
• Rule: City’s comprehensive plan is always subject to reasonable revisions designed to meet the changing needs and conditions of a community
• Holding: Affirmed; valid and applicable ordinance
Majority rule: Most states agree with Stone standard and owners have vested rights if they have invested substantially in reliance on regulations
• Many states require granting of building permit to find vested right
• Minority of states grants vested rights with site-specific plan approved for development
G. LIMITS ON PREFERENTIAL ZONING
Special exceptions: permits to develop in ways that are conditionally authorized by the zoning ordinance. Unlike variances, there is a presumption that the owner can engage in the permitted use so long as the established conditions are met.
Spot Zoning: refers to selective rezoning by the municipal legislative body of a single parcel or small group of parcels of land. Spot zoning gives the owners a discriminatory benefit that is inconsistent with the zoning of the surrounding area, is detrimental to the community, and is not justified as a police power measure designed to promote the public welfare. It is difficult to win a spot zoning challenge since municipalities are generally entitled to rezone land when this is deemed to be in the public interest (as shown by Durand)
H. EQUAL PROTECTION, SUBSTANTIVE DUE PROCESS, AND FREE SPEECH
Village of Willowbrook v. Olech, US (2000)
• Facts: Olech wanted to connect her property to the Village’s water supply, but the Village conditioned the connection on the grant of a 33 foot easement. Plaintiff objected because surrounding landowners were only subjected to a 15 foot easement and claimed that the village was seeking revenge because she had previously won an unrelated lawsuit against the Village.
• Rule: purpose of the Equal Protection Clause is to secure every person within the state’s jurisdiction against intentional and arbitrary discrimination
• Holding: Affirmed
Equal protection
• Certain classifications, such as racial distinctions, are deemed inherently suspect and thus presumptively unconstitutional, upheld only if necessary to achieve a compelling governmental interest
• Other classifications, such as sex distinctions, are subject to intermediate scrutiny, upheld if they bear a substantial relationship to an important governmental objective
• Most socioeconomic legislation is subject to rational basis test, upheld only if classification is arguably rationally related to a legitimate government purpose
Substantive due process: due process clause protects owners from deprivation of property rights by “arbitrary and capricious” government actions; easier to prove when governmental authority denies permit or zoning classification to owner similarly situated to another previously granted a similar permit
XII. Regulatory Takings
1. Takings Clause; Ad Hoc Test; Just Compensation
A. PROPERTY AS MEDIATOR BETWEEN CITIZENS AND THE STATE
Defining versus defending property rights
• State must have the power to pass laws regulating and limiting use of property to protect public health, safety, and welfare
• Property rights must at the same time be defended from illegitimate encroachment by the state
Takings clause: Fifth Amendment prohibits federal government from “taking” private property for public use without just compensation, limitation held applicable to state governments through fourteenth amendment which prohibits states from “depriving” persons of property “without due process of law”
Police power: power of state governments to pass legislation regulating private conduct to protect the public health, welfare, and safety; when state acts within legitimate sphere of police power, infringement on private property interests is damnum absque injuria – damage without legal redress
Eminent Domain: State’s power to take or condemn private property, expropriating it, paying just compensation to the owner, and transferring the property to some use designed to further public welfare such as the state taking property to build a new highway.
Elements of Takings Clause: (1) a taking (2) for public use (3) without just compensation
• Regulatory takings law involves determining circumstances under which government acts or regulations require compensation to property holders whose interests are negatively affected by government regulation
Eminent domain power and condemnation process: statutes define procedures by which condemnation occurs, most require condemning agency attempt to negotiate purchase of property for a fair price before filing condemnation lawsuit; often results in government paying more than fair market value (inefficient)
B. JUST COMPENSATION
Measurement of just compensation: compensation measured by the damage suffered to the owner, not the benefit attained by the government and the standard is fair market value, not asking price.
• Some states mandate payment of 125 or 150% of the fair market value (“super-compensation” statutes)
Moving costs and business goodwill: Supreme Court has refused to grant compensation for goodwill or going-concern value; any costs associated with move and any liability to move elsewhere are merely incidental results of the taking and are uncompensable
• One exception is when there is a temporary taking, entitling business owner to compensation for loss of goodwill
Statutory compensation
• Some states have passed legislation providing for compensation of goodwill when business is inextricably tied to particular location
• Some states also allowed compensation for business losses if business is not easily movable because of the unique character of the property
Partial Takings: If a state takes 40 acres from an owner of a 100 acre tract, it must compensate the owner not only for the fair market value of the 40 acres but for any reduction in value to the remaining 60 acres caused by the taking of the 40, called severance damages; Supreme Court allowed any increase in value though can be used to offset the amount owed for the taking, but many states do not allow such an offset.
C. REGULATORY TAKINGS PROBLEM
Mugler v. Kansas (1887) Supreme Court ruled that the prohibition of manufacturing and selling alcohol was not a taking of plaintiff’s brewery with little value as anything else. The Court said, “a prohibition simply upon the use of property for purposes that are declared, by valid legislation, to be injurious to health, morals, or safety of the community, cannot, in any just sense, be deemed a taking or an appropriation of property.” In other words, laws cannot constitute unconstitutional takings of property as long as they are intended, in good faith, to protect the public from harm of any kind, as long as they do not amount to an actual “taking” of title to the property or deprive the owner of possessory rights.
Powell v. Pennsylvania (1888) Court outlawed the manufacture of oleomargarine and clarified Mugler, holding that the law is permissible if passed for the purpose of protecting public health and preventing fraud. Legislation would not be struck down even if “value of owner’s property employed therein would be entirely lost and he be deprived of the means of livelihood.
Hadacheck v. Sebastian (1915) Court upheld an ordinance prohibiting operation of a brickyard even though the owner had made excavations on the land that prevented it from being utilized for any other purpose and was lawful at the time it was established. Homes were subsequently built around it and the operation of the brickyard constituted a common law nuisance despite the neighbors coming to the nuisance. The legislation was upheld on the grounds that no one could have a vested right to commit a nuisance and an operation that was not a nuisance initially might become so when circumstances changed.
Buchanan v. Warley (1917) Court found zoning laws prohibiting the sale of real property on the basis of race deny property rights by due process of law and therefore are not a legitimate exercise of the police power because they “annul the civil right of a white to dispose of his property if he saw fit to do so to a person of color and of a colored person to make such disposition to a white person.” Focus was on elementary “right to acquire” property and denial of the right to sell.
Pennsylvania Coal Co. v. Mahon (1922) Homeowners sued to prevent PA Coal Company from mining under their property in a way that would remove subjacent support and cause a subsidence of the surface and of their house, even though the P’s had contracted to allow such digging, because a subsequent statute required all mining companies to conduct operations in a way that did not undermine support for surface structures. Court said that the statute exceeded the legitimate scope of the police power by wrongfully infringing on constitutionally protected property rights because “it affects the mining of coal under streets or cities in places where the right to mine such coal has been reserved” “The general rule at least is that while property may be regulated to a certain extent, if regulation goes too far it will be recognized as a taking.”
Village of Euclid v. Amber Realty Co. (1926) A developer purchased a 68 acre parcel for industrial purposes and challenged a zoning law that prohibited industrial uses on most of the parcel and caused a 75% reduction in the market value of the land. Court said the ordinance served a legitimate public interest and thus did not unconstitutionally deprive the plaintiff of protected property rights even though the value decrease was substantial.
Nectow v. City of Cambridge (1928): Vacant lot was bisected by a new zoning ordinance. A vacant part of the parcel of 100 ft was zoned for residential use and the city was going to widen a street that would reduce the lot to 65 ft leaving no ability to use the land for residential purposes. Court said the statute as applied to this portion of land impermissibly infringed on constitutionally protected property rights (seemingly at odds with Euclid though). Court pointed out that there seems to be an easy way to accomplish the goal while avoiding the parcel at issue. Further, there was no public benefit promoted by the ordinance, “health, safety, convenience, and general welfare of the inhabitants of the part of the city affected will not be promoted by the disposition made by the ordinance of the locus in question.” Court judged the application of the zoning law impermissible because the public purposes underlying the law were not thought to justify its imposition.
D. DETERMINATION OF TAKINGS
Ad Hoc test. Supreme Court has been unable to develop “set formula” for determining when “justice and fairness” require compensation by government of economic injuries caused by public action. “Ad hoc” test focuses on three major factors:
1) The “character of the government action”
2) The protection of “reasonable, investment-backed expectations”
3) The “economic impact” of the regulation on the particular owner
Categorical takings. Supreme Court has clarified there are only “two categories of regulatory action that generally will be deemed per se takings”
1) Government mandated “permanent physical invasions of property”
2) Regulations that “completely deprive an owner of ALL economically viable use of her property”
Analysis of takings cases. Vast majority of cases will be analyzed under ad hoc test of Penn Central and upheld as legitimate exercises of the police power. There are however three categories of cases that have significantly more chance to be deemed unconstitutional takings of property under the ad hoc test:
1) Deprivation of certain core property rights or estates in land (such as in Babbitt)
2) Retroactive deprivation of vested rights belonging to owners who invested in reasonable reliance on a prior regulatory authorization (as in Kaiser Aetna)
3) Required dedication of property imposed as conditions on land use development permits when those “exactions do not substantially advance the same interests that land-use authorities asserted would allow them to deny the permit altogether.” (as in Dolan and Nollan)
E. AD HOC TEST: FAIRNESS AND JUSTICE
Miller v. Schoene, US (1928)
• Facts: VA statute called for the destruction of red cedar trees infected by cedar rust which destroys apple trees within a 2 mile radius and the only practicable method of controlling the disease and protecting apple trees is the destruction of all infected red cedar trees within that radius.
• Rule: When forced to such a choice the state does not exceed its constitutional powers by deciding upon the destruction of one class of property in order to save another which, in the judgment of the legislature, is of greater value to the public
Penn Central Transportation Co. v. New York City, US (1978)
• Facts: Penn Central wasn’t allowed to construct 50 story office building above the terminal after the terminal was designated as a landmark.
• Rule: When health, safety, morals, or general welfare would be promoted by prohibiting particular contemplated uses of land, Court has upheld land-use regulations that destroyed or adversely affected recognized real property interests
• Rule: depriving realization of an “opportunity cost” is not a taking
• Rule: Court unlikely to find “taking” where law doesn’t interfere with the present uses of property
• Holding: Affirmed NYC’s Landmarks Law not a taking
Keystone Bituminous Coal Association v. DeBenedictis, US (1987)
• Facts: Coal companies under a state statute were required to leave coal in place for support reasons (27 million tons of coal), depriving them of essentially all value of the support estate that they had previously purchased from the owners of the surface estates.
• Rule: Court less likely to find “taking” where law protects public from “a significant threat to the common welfare” and property as a whole retains significant economic value
• Holding: Did not constitute taking
Central principle of takings clause. Regulations are not unconstitutional takings if they are “properly treated as part of the burden of common citizenship”
Character of government action. State generally empowered to legislate to protect the public without compensating those whose property interest suffer a resultant economic impact
• Is law legitimately preventing harm of others or illegitimately requiring owner to contribute a benefit to community?
• Does law illegitimately impose disparate impact on a few owners or constitute a legitimate general regulatory law affecting a class of property appropriately subject to heightened restrictions?
Economic impact
• The greater the diminution in value, the more likely the regulation will be characterized as a taking, though no owner is guaranteed the most beneficial use of the property
• A key question is how to identify the “denominator” against which the deprivation will be compared
Interference with reasonable investment-backed expectations
• A regulation is more likely to be held a taking if a citizen has already invested substantially in reasonable reliance on an existing statutory or regulatory scheme
• A regulation is less likely to be a taking if the regulation prevents the owner from realizing an expected benefit in the future, imposing a mere opportunity cost
Stop the Beach Renourishment, Inc. v. Florida Dept. of Environmental Protection, US (2010)
• Facts: Florida legislature passes Beach and Shore Preservation Act that establishes erosion control line on beaches subjecting land seaward of line to state control for beach restoration and nourishment. Beachfront property owners allege taking of littoral rights.
• Rule: Takings Clause bars the STATE from taking private property without paying for it, no matter which branch is the instrument of the taking
• Rule: The Takings Clause only protects property rights as they are established under state law, not as they might have been established or ought to have been established
• Holding: Affirmed, no violation of Fifth and Fourteenth Amendments
2. Categorical Takings
#Singer – Believes there are 2 additional categorical takings
• Core property right (Babbitt, Hodel)
• Vested rights (Kaiser Aetna)
#Singer – categorical/per se takings are simply an “intensification” of the ad hoc factors so they are unequivocally takings
• Character of government action → permanent physical occupation
• Diminution in value → no economically viable use
• Interference w/ reasonable investment backed expectations → vested rights
A. PHYSICAL INVASIONS
Pruneyard Shopping Center v. Robins, US (1980)
• Facts: PruneYard had a policy prohibiting any visitor to engage in publicly expressive activity, including the circulation of petitions, not directly related to its commercial purposes and applied this without discrimination. Appellees sought to circulate opposition to a UN resolution against “Zionism.”
• Rule: Where state actions adopt time, place, and manner regulations to minimize interference with its intended use of property, fact that action permits a “physical invasion” of property cannot be viewed as determinative
• Rule: Physical invasion must also unreasonably impair the value or use of property and “reasonable investment backed expectations”
• Holding (Rehnquist): Appellants failed to demonstrate that right to exclude others was so essential that state-authorized limitation of it constitutes a “taking”
• Dissent (Marshall): limits on governmental authority to abolish “core” common law rights, including trepass
• Dissent (Powell): state may not compel a person to affirm a belief they do not hold
Loretto v. Teleprompter Manhattan CATV Corp, US (1982)
• Facts: NY law required landlords to permit a cable TV company to install its cable facilities on property. Installations occupied portions of roof and side of building, taking up very little relative space of building.
• Rule: When a physical intrusion reaches extreme form of a permanent physical occupation, a taking has occurred
• Rule: constitutional protection for the rights of private property cannot be made to depend on the size of the area permanently occupied
• Rule: an owner suffers a special kind of injury when a stranger directly invades and occupies the owner’s property
• Holding (Marshall): Reversed; regulation is a permanent physical invasion and thus a taking, distinguishes Pruneyard as temporary physical taking
• Dissent (Blackmun): states have long exercised police power to provide utility connections, mailboxes, smoke detectors, fire extinguishers; installment arguably increases building’s value and marketability
• #Singer – THIS MAKES NO SENSE
Cases finding taking on basis of permanent physical invasion rule. State generally empowered to legislate to protect the public without compensating
• Pumpelly v. Green Bay Co. (1872) Court finds taking when statute authorizes building of dam and flooding of plaintiff’s land (“total destruction of property and value”)
• United States v. Causby (1946) Court found taking where military aircraft flew so close to ground that it rendered plaintiff’s home inhabitable and completely frustrated their attempts to operate their chicken farm (“owner must have exclusive control of immediate airspace for full enjoyment of land”)
• Kaiser Aetna v. United States (1979) Court finds taking where government requires owners of private marina to provide public access to lagoon (“investment backed expectations”)
• Nollan v. California Coastal Commission (1987) Court found a taking when a regulatory commission required a beach front owner to grant a public easement of passage along the beach as a condition of obtaining a variance to expand the house
Cases finding no taking despite a forced physical invasion by a stranger. Generally uphold constitutionality of anti-discrimination laws, including fair accommodation, fair housing, and employment discrimination
• Heart of Atlanta Motel, Inc. v. United States. (1964) Court finds no taking where Civil Rights Act of 1964 requires hotels and motels accept customers regardless of race
Physical invasions by those in contractual relationships with owner. Supreme Court has repeatedly upheld anti-eviction laws granting tenants right to continue renting their apartments, even if those laws authorize occupation beyond end of the lease term; similar result with mortgage moratorium statutes
• Block v. Hirsh. (1921) Court upheld statute permitting physical possession of apartments after termination of leases set at rent controlled levels
• Home Building & Loan Association v. Blaisdell (1934) Court upheld mortgage moratorium law (“temporary taking” and bank entitled to rent as compensation)
• Yee v. City of Escondido (1992) Supreme Court upheld anti-eviction law for mobile home owners (did not authorize an “unwanted physical occupation” but regulated park owners “use of property” and thus did not amount to per se taking)
Does the landlord have a right to occupy their own land?. State courts have generally upheld anti-eviction laws against takings challenges, even when those laws prevent the landlord from converting the property to another use
• Same laws often have exceptions allowing landlord to go out of business and devote property to uses other than residential rental
B. DEPRIVATION OF ECONOMICALLY VIABLE USE
Lucas v. South Carolina Coastal Council, US (1992)
• Facts: Beachfront Management Act enacted after plaintiff purchased parcels barred him from erecting any permanent habitable structures.
• Rule: The fact that a particular use has long been engaged in by similarly situated owners ordinarily imports a lack of any common-law prohibition, as does fact that other landowners, similarly situated, are permitted to continue use denied to claimant
• Rule: when the owner of real property has been called upon to sacrifice all economically beneficial uses in the name of the common good, that is, to leave his property economically idle, he has suffered a taking
• Holding (Scalia): Reversed and remanded
• Concurrence (Kennedy): Where taking deprives property of all value, test must be whether deprivation is contrary to reasonable, investment-backed expectations
• Dissent (Blackmun): petitioner may enjoy other attributes of ownership, such as “right to exclude others”
• Dissent (Stevens): Wholly arbitrary and effectively freezes state common law
Palazzolo v. Rhode Island, US (2001)
• Facts: Plaintiff was denied permits to develop his waterfront property and cited Lucas in arguing he had been denied all economically viable use of his land.
• Rule: States are not insulated from takings claims merely because an owner has acquired title after a regulatory law went into effect
• Holding: Reversed and reserved judgment
Tahoe-Sierra Preservation Council, Inc. v. Tahoe Regional Planning Agency, US (2002)
• Facts: A construction moratorium was placed around Lake Tahoe to formulate a plan to prevent loss of the lake’s “exceptional clarity and extended to 6 years. Plaintiffs’ argued this was a taking under Lucas.
• Rule: Only a 100% diminution in value triggers the Lucas rule, any lesser deprivation of value is governed by the multifactor Penn Central
• Holding (: Court refused to find a temporary building moratorium was a per se taking
• Dissent (Rehnquist): functional effect of moratorium was to temporarily deny owners all economically viable use of land
Facial versus “as applied” challenges to regulations. Facial challenge is a claim that enforcement of regulation would necessarily constitute a taking of private property in every case and is under no circumstances constitutional; Challenge to “as applied” regulation argues effect of regulation on particular parcel constitutes a taking
• Facial challenged likely to succeed only where law imposes permanent physical invasion of property (Loretto) or completely extinguishes core property right (Babbitt)
• Otherwise, owner must demonstrate economic impact on particular parcel to show taking
Ripeness. Supreme Court has held claim that one’s property has been unconstitutionally taken without just compensation is premature (not “ripe”) if agency empowered to regulate land use has not made final decision on scope of permitted development
• Generally require owner apply for permit to develop land and be denied, and exhaust all appeals and administrative remedies available under state law
• Municipal actor cannot avoid takings challenges by repetitive and unfair procedures never resulting in final determination of permissible scope
Environmental protection laws. Courts have traditionally upheld these regulations, even when they have severely limited land development (analogous to nuisance laws preventing owners from using land in way injurious to community)
C. DEPRIVATION OF CORE PROPERTY RIGHTS:
Babbitt v. Youpee, US (1997)
• Facts: Indian Land Consolidation Act (ILCA) sought to address problem with fractioned allotment of Indian property by escheating certain small interests to Indian tribes upon death of current owners.
• Rule: Allowing a decedent to leave an interest only to a current owner severely restricts the number of potential successors and amounts to a taking
Andrus v. Allard, US (1979)
• Facts: Eagle Protection Act and Migratory Bird Treaty protect bird species by prohibiting sale of eagle feathers, including those acquired prior to passage of act
• Rule: Where an owner possesses a full “bundle” of property rights, destruction of one “strand” of the bundle is not a taking, because aggregate must be viewed in its entirety
D. VESTED RIGHTS: ESTABLISHED INVESTMENTS
Kaiser Aetna v. United States, US (1979)
• Facts: Private, fee-paying marina club is compelled by federal government to provide free public access to its lagoon after investing in expensive construction project to connect the lagoon to navigable waters.
• Rule: Taking exists where action interferes with “reasonable investment backed expectations” or imposes a forced physical invasion by strangers
Eastern Enterprises v. Apfel, US (1998)
• Facts: Company signed earlier labor agreements obligating it to contribute certain amounts to trust funds established for payment of health benefits to retired coal miners. 1992 statute required contribution for retired miners who worked for it before 1966 even though it left coal business in 1966.
• Rule: Takings clause applies only to takings of specific property interests and not general obligations to pay money from whatever funds one possesses
• Holding: Retroactive liability effects unconstitutional deprivation of property
3. Public Use
Kelo v. City of New London, US (2005)
• Facts: City of New London approved development plan projected to create jobs, increase tax and other revenues, and revitalize an economically distressed city. In assembling the necessary land, the city purchased property from willing sellers and sought to use eminent domain to acquire the remainder.
• Rule: State may not take property of one for the sole purpose of transferring it to another private party, but may transfer property if purpose of taking is for future “use by the public”
• Rule: Promoting economic development is a traditional and long accepted function of government
• Rule: The fact that the government’s pursuit will often benefit private parties is not alone fatal to the plan
• Rule: When legislature’s purpose is legitimate and its means are not irrational, empirical debates over wisdom of takings are not to be carried out in federal courts
• Holding (Stevens): Affirmed; proposed condemnations for economic development are for a public use within meaning of Fifth Amendment
• Concurrence (Kennedy): heightened standard of review, less deference
• Dissent (O’Connor): taking only when condemnation affirmatively harms public
• Dissent (Thomas): objection based on textual interpretation of “public use”
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