PROPERTY OUTLINE:
PROPERTY OUTLINE
Armstrong
I. Concurrent Ownership
A. COTENANTS
Cotenants- owners of a shared estate
- when an estate is owned by more than one person
Three Types of Cotenancies
1. joint tenancy- (usually between related parties)
a. grants each cotenant the right of survivorship--**Key Characteristic**
b. terminates at death (not inheritable or devisable)
c. conveyance
▪ right to partition
▪ when it is conveyed the grantee becomes a tenant in common (before it can be conveyed, it must be severed and converted into a tenancy in common with each tenant possessing an equal fractional share)
▪ inter-vivos conveyance severs joint tenancy
▪ transfer of one tenant’s share ends the joint tenancy (just that part of it, not the whole)
d. interests must be in equal shares—if it is not in equal shares, it is not a joint tenancy
e. considered to be possessing the entire estate, rather than a fractional share
- must now use specific language to create (i.e. jointly with right of survivorship, as joint tenants and not as tenants in common”… “jointly” may not be enough)
- *married couples tend not to use joint tenancy because there are some drawbacks for tax purposes
2. tenancy in common (most common form of concurrent ownership)
a. NO right of survivorship
b. Separate fractional shares, in undivided proportions
o not necessarily equal shares
c. Conveyance:
o Inheritable and devisable
o when it is conveyed the grantee becomes a tenant in common
o can be conveyed separately (do not need the permission of the others)
o *if someone dies without a will, the property is split equally between his/her heirs, and they become tenants in common
**creditors: in a joint tenancy or a tenancy in common, creditors can collect on a lien on the property.
3. tenancy by the entirety- (only married couples can hold this—except same-sex couples can in Hawaii)
a. only recognized by ½ of the states
b. right of survivorship
c. no right to partition
d. one spouse cannot convey his/her share individually
e. must now use specific language
**if a will does not specify what type of cotenancy is being created:
- common law presumes joint tenancy
- modern law presumes a tenancy in common (if you see inheritance now, it will always be TIC, not joint tenancy)
1. Right to Shared Possession
Right to Possess
- each cotenant has the right to possess “the entire premises” and has the right to transfer his possessory right, by lease or license, to any other person
o ex. Tompkins v. Superior Court- case where roommate got in trouble and the police incidentally found weed in the roommate’s room
Ouster
- can’t really have a co-tenant removed from a TIC b/c each tenant has a right to possession
- when an ouster occurs, the person in possession is considered a trespasser
Legal Consequences of an Ouster
1. request for rent
o Does the tenant in possession owe the other tenant rent? (accounting)
o no, b/c if both tenants have the right to possession, they don’t owe the other one
o there is only a duty to pay if one tenant excludes the other (ouster)
2. can destroy the right of survivorship
3. the ousted party can ask for a partition
-you can ask for a partition at any time (you may just want out)
4. if the ousted co-tenant does not establish his right within the statute of limitations, he can lose his rights
- the measure of damages for an ouster is fair rental value
*have to have very clear evidence that the ousted tenant was denied his right to enter the premises or to take possession
3 Basic Kinds of Causes of Action:
1. action for contribution (one has made payments and seeks reimbursement)—you are only guaranteed reimbursement for things that are necessary, other things are up for dispute—you can recover your share of discretionary improvements if they increase the value of the house
- limitations on contributions (ex. insurance would be considered necessary, but remodeling the kitchen or adding a garage would be considered discretionary)
o if you increase the value of the property by remodeling the kitchen, you can’t sue the other cotenant for contribution, but you can recover your share when the property is being sold
▪ you get the increase in value, not the cost of repairs
2. accounting— when one co-tenant asks the second co-tenant for the reasonable rental value of the property (the money the second co-tenant is making when the other is not in possession)
- the tenant in possession is only required to give the tenant out of possession a share of the rent (accounting) if the second tenant was ousted, if the second tenant voluntarily leaves, he is not entitled to any share of the rent
o ex. Barrow v. Barrow- case of husband and wife, where wife moved away and wants husband to pay her rent for the time he lived in the house
- if one co-tenant rents out his share, the other co-tenant can still technically use it, so the co-tenant does not owe him a share of the rent
o as long as his right to possess has not been interfered with
- majority- cannot use accounting, unless there is an ouster
- minority- tenant in possession has to pay accounting, regardless of whether there was an ouster
o ex. A must account to B for B’s share of the reasonable rental value of the property if B is out of possession
3. partition (in this case you can ask for contribution and accounting)
*matters who is in possession
Right to Partition
- every cotenant has a right to partition (except for a tenant by the entireties), but not necessarily to the type of partition she prefers
Partition in Sale- is when the cotenants split the proceeds from the sale
- Improving co-tenant gets the value at time of sale, not the cost of the improvement (improving tenant bears the risk, if the improvements don’t add value, she still does not get anything)
Partition in Kind- when you are actually physically dividing the property
- the court grants partition in kind to any cotenant that asks for it, as long as it can make a fair and equitable division of the property
- common law—courts preferred it if doesn’t decrease the value of the property
- *courts usually won’t uphold partition clauses in a written agreement, unless it is for a reasonable time
- owelty- in if there is any discrepancy in value, the co-tenant who is getting the greater value may have to pay the difference to the other tenant
- Minerals: a cotenant cannot select and take for himself party of the property jointly owned and thus make partition.
o Ex. White v. Smyth- where one of 9 lessees of a whole ranch, selected the best spot with the best rock. The court found that the co-tenant must account for the net amount received for the minerals as they are extracted. But, if the co-tenant is in the business fo processing and selling minerals, the extracting co-tenant is accountable for the net profits realized from her processing business..
2. Joint Tenancy
Right of Survivorship is the key characteristic of joint tenancy.
*a conveyance to grantees “jointly” does not create a joint tenancy.
Severance of a Joint Tenancy
Joint Tenancy Unities
-these are necessary and required for the creation and continuance of a joint tenancy
-destroying any of these severs the joint tenancy and extinguishes the right of survivorship
1. Time 2. Interest 3. Title 4. Possession
1. Time—interests must be created at the same time
Good: “O deeds to A and B as joint tenants with the right of survivorship”
Bad: “O deeds to A as my joint tenant with the right of survivorship”
2. Interest—interests must be in equal shares
Good: O deeds to “To A, B and C as joint tenants with right of survivorship in equal shares”
Bad: “To A, B and C as joint tenants with right of survivorship, one half to A and one quarter each to B and C.”
3. Title—interests must be created by a single instrument
Good: O deeds “To A and B as joint tenants with the right of survivorship”
Bad: O deeds “To A as my joint tenant with right of survivorship”
4. Possession—each joint tenant must have an equal right to possession of the whole
English rule: a lease by one of the joint tenants can sever the tenancy during the term of the lease
American: it is not severed in this way
Slayer statutes- any act inconsistent with the joint tenancy will sever it.
- if one joint tenant murder the other, most courts hold this severs the joint tenancy, converting it into a tenancy in common. Therefore, the murderer cannot take the victim’s share by right of survivorship.
o ex. Duncan v. Vassaur
B. MARITAL PROPERTY
1. Tenancy by the Entirety
- English common law- a conveyance of land to a married couple automatically created a tenancy by the entirety (a couple could not own by joint tenancy or be tenants in common)
- American law- in states that recognize tenancy by the entirety, a couple can choose which form they want (this needs to be clearly specified)
o if they don’t specify, most states will assume a tenancy by the entirety
- *unlike joint tenancies, tenancy by the entirety cannot easily be severed unilaterally
o severance requires the consent of both spouses
- -at common law (before Married Women’s Property Acts), the husband had control of the property
- the property is considered to be owned by a single entity, not by either spouse unilaterally
- both spouses have a right to rental profits
- neither spouse can alienate the other from the property
- the spouses have the right to survivorship—so if one dies, the other automatically gets all the property rights
Creditors
- creditors need permission by both spouses to collect b/c neither spouse can transfer his/her interests alone.
Divorce
- ends the tenancy by the entirety, generally giving each spouse an equal interest in the property as a tenant in common, unless the divorce decree specifies otherwise
2. Death
English Common Law- awarded a surviving spouse a share of the land owned by the deceased spouse (called a legal life estate)
Modern American Law- statute grants the survivor a percentage of the deceased spouse’s estate (1/3 or 1/2 )
-if the will gives the survivor less, they can choose to disaffirm the will and go with the mandated share.
-Uniform Probate Code (UPC) grants the surviving spouse 50%
3. Divorce
Equitable division of property
(sees marriage as an economic partnership to which both parties contribute)
-replaced a separate title system
*each spouse is to own exactly what he/she owned while they were married
Two Categories:
Separate property- property acquired by a spouse prior to the marriage and gifts (including inheritances and devises)
Marital property- everything else (including income) that is acquired by either or both spouses during the marriage and before the execution of a separation agreement
*in most states, the court has to give each spouse all of that person’s separate property, but it can decide how to divide up the marital property
ex. O’Brien v. O’Brien—a medical license acquired during the marriage was considered marital property to be divided because of a direct or indirect contribution by the non-title-holding spouse
-this can be financial or nonfinancial contributions (caring for the home and family)
ex. Goldstein v. Goldstein- held that contingency cases in a law firm are too speculative to be considered marital property (and it would violate the attorney client privilege)
4. Community Property
- nine states use this to define marital property (all West of the Mississippi, except Wisconsin)
- sees marriage as an “economic partnership,” where the couple accumulates wealth together
o all income earned during the marriage belongs to the both spouses equally
- **in all nine states, the spouses are allowed to own separate property
California:
- CA is a common law state, but uses community property for marital property
- CA mandates an equal division of community property if the couple divorces
*any couple that has ever had a domicile in a community property state is subject to that state’s regime with respect to property they acquired while domiciled there
Common Law States:
- separate title- each spouse holds a separate title or ownership to the property
o but the wealthier party may owe the other a duty of support
o surviving spouse has the right to inherit a share of the deceased spouse’s estate
o in divorce, each spouse has a claim to an equitable share of the “marital property,” which redistributes property owned by the wealthier spouse to the poorer spouse
II. Real Estate Transfers
Four Stages of Sales Transactions:
1. Pre-Contract
2. Executory Contract (1-3 months)
3. Closing (1-2 hours)
4. Post-Closing
1. Pre-Contract
- standard realtor’s commission is 5-7% of the sales price
- realtor’s have access to the multiple listing service (MLS)
- B finds house he wants to purchase, and then submits a written offer to purchase to S
o this initiates negotiation
o if the house is listed with a broker, he transmits the offer to S
- now two brokers are involved in contract preparation and negotiation
o Listing broker- hired by seller
o Selling broker- contacted by buyer
o both brokers split the seller’s commission when the sale is over
2. Executory Contract Stage (from the moment of contract formation until closing)
- S accepts B’s offer, a binding contract is formed
- when the contract is signed, the buyer usually makes a deposit
o the deposit is negotiable, but typically 2-10% of the price
Long Contract Time Between Contracting and Closing:
- seller must make arrangements to move to another residence
- buyer must also make moving arrangements
- buyer must apply for a mortgage loan (very rare that buyer will pay all cash for a house)
- professional inspections are conducted
- a title search is conducted
- title company makes sure that the people selling the property actually have title
- title searches are public record—anyone can look it up
3. Closing Stage
a. once mortgage loan applications, inspections and title searches are done, closing is scheduled
b. B pays S, S conveys the property by a warranty deed
-closing statement- reflects payment of the purchase price and shows the expenses incurred by both parties
c. the mortgage lender funds its loan at closing, allowing B to pay the full price to S
d. if S still has existing mortgage on the property, arrangements are made for using part of the price to pay off that mortgage loan
e. closing:
closing ceremony
-face-to-face meeting attended by B, S, and the professionals
-lasts an hour or two
-sign lots of paper
escrow closing
-S, B and professionals all submit documents separately to an escrow agent
-agent holds all of the items until everything is complete
f. B gets the right to possession of the house at completion of closing
4. Post-Closing Stage
a. deed and mortgage instrument are recorded immediately after closing
b. the original deed is sent to B
c. title insurance policies are issued only after closing, after recording the documents
Possible Problems Post Closing:
-often B will have a problem with the physical condition of the property
-title problems can surface
A. CONTRACTS OF SALE
Requirements of Contract:
- must satisfy the Statute of Frauds- must be in writing
o the names of the parties
o a description of the land; AND
o an intent to sell and buy the land
o S of F requires that it must be signed by the party being charged (the seller)
ex. Ward v. Mattuschek—showed it must be in writing, signed by the party to be charged
- should address the title search process
- the quality of title and how it is to be documented
- the buyer’s right to inspect the property
- payment of the price including provisions for the B to obtain mortgage financing
- time for performance of both parties’ obligations
- remedies for both parties
o specific performance is always available for the breach of the contract for the sale of land (instead of money damages) if the thing is “unique”
▪ every piece of property is considered to be “unique”
Exceptions to the Statute of Frauds:
Doctrine of Part Performance- courts protect buyers who demonstrate substantial reliance upon an oral contract
- (1) usually B must have taken possession under the oral contract
- (2) part performance has to be something other than payment (it is not seen to be enough of an indicator of the buyer’s commitment)
o the more knowledge the seller had of the buyer’s reliance, the more likely that the seller will be bound if he had knowledge that the buyer relied
- (3) in most states, B must have changed his position by paying some or all of the contract price or improving/repairing the property (reliance to his detriment)
Doctrine of Equitable Estoppel- (alternative to part performance) focuses on the Seller’s actions in allowing the Buyer to change his position in reliance on the oral contract.
Risk of Loss
- this occurs if the property is destroyed by flood, fire, or other cause that is not the fault of either party
- usually this is covered in the contract, but if not, follow the rule in that jx
Theory of Equitable Conversion- based on equitable principles that permit the buyer to be considered the equitable owner of the land at the moment of the signing of the contract (buyer has equitable title)
- seller still has legal title until he is paid by buyer, but buyer has risk of loss
- buyer and seller are co-owners while the contract is executory
- if one party is entitled to specific performance the other party has to be entitled to specific performance too (buyer is entitled to land, seller is entitled to money)
Equitable Title Shifts the Risk of Loss
Common Law Majority- buyer has the risk of loss from the moment of contracting because the buyer is entitled to specific performance as soon as the contract is signed
- he is then responsible for the condition of the property, despite not having a present right of occupancy or control
- if buyer refuses to take the property, seller can sue for specific performance of the contract price or sue for damages
o damages- the loss in value of the land due to the fire or other cause.
- Unmarketable title- if seller’s title is unmarketable, and the seller cannot get specific performance, equitable conversion will not take place, and the risk of loss will not shift to the buyer
o For it to shift to the buyer, the seller must prove that he is entitled to specific performance
- Insurance:
o English Rule: insurance policy was a personal contract, so seller is entitled to the insurance proceeds and does not have to give them to the buyer
o American Rule: feels that the English rule gives sellers a windfall, so they think buyer should get the proceeds, and seller should credit them to the purchase price.
o Jx’s differ on this
o if seller is insured, and buyer is in possession
▪ jx’s differ on this—some say buyer, some say person who is insured (seller)
Minority- seller continues to bear the risk until actual transfer of the title
- They say there is a condition implied in the contract that if the loss is substantial and the terms of the agreement show that the building constituted an important part of the subject matter of the contract, the contract is not binding.
o Therefore, buyer can rescind and recover any money spent
▪ Ex. if the buyer was buying the land to tear down the building and build a new one, the building is not material to the contract, so they should still have to buy it.
- *growing number of jx’s are putting the risk of loss on the right to possession of the property at the time the loss occurs
- Insurance:
o Buyer’s often take out “buyer’s insurance” on a purchase of real property (especially commercial buildings), so if the building is destroyed, they are paid by the insurance company.
CA’s Risk of Loss Provision:
- risk of loss follows transfer of title or possession (Uniform Vendor and Purchaser Risk Act at Civil Code §1661)
- this means whoever is in possession of the property bears the risk of loss
B. PROPERTY QUALITY
Before the Contract is Signed:
Caveat emptor doctrine (“let the buyer beware”)—this is common law view—PRO-SELLER
- Old View- seller does not have to disclose any defects in the contract, unless a defect was fraudulently concealed (some states still have this view)
o Exception: must reveal a situation that could impair the value where seller created it and a physical inspection by the buyer would not have revealed the defect
▪ Ex. Stambovsky v. Ackley- where the seller publicized her house locally as haunted by poltergeists, and the buyer was from out of town, so he had no reason to know. The court held that buyer could rescind the contract for sale.
- this does not apply in CA
- there is no liability for patent defects—obvious on a reasonable inspection—that the buyer discovers after closing
- does not apply to defects that are not reasonably discoverable by inspection (latent defects)
- the buyer bears the risk that there are defects in the house
- even under this doctrine, a seller can not misrepresent or conceal patent defects
*this can be overruled by a statutory duty to disclose
Duty to Disclose—PRO-BUYER
- generally seller has a duty to disclose, when he knows of facts materially affecting the value or desirability of the property which are known or accessible only to him, and not to the buyer
o Reed v. King—the seller actively concealed that a woman and her children had been murdered, knowing it decreased the value of the home, and there was no way the buyer would ascertain this upon reasonable inspection
- real estate brokers have a duty to disclose material defects to a buyer that are unknown and unobservable to him
o this varies by jx
- when the contract contains an “as is” clause, the sellers have no duty to disclose latent defects, even though they are aware of them, but they cannot actively conceal them or misrepresent the condition of the property
o ex. Donnelly v. Taylor—bats found in the basement after P bought the house “as is” and P could not prove that the sellers actively concealed this defect
- in most states, there is a duty to disclose latent defects
o but if buyer discovers a latent defect in the executory stage, he usually cannot go back and rescind the contract
* most states now have laws requiring the seller to fill out disclosure forms, listing all known defects
California’s Duty to Disclose
- in CA, there is a bigger duty to disclose
o deaths in the house
o do NOT have to disclose HIV or AIDs
o if neighbors are nuisance have to disclose
- CA requires real estate brokers for the seller to conduct a diligent inspection of the property and reveal discovered defects to the buyer
Disclosure Statutes
- federal: lead paint and pipes
- state: ex. history of flood
Nondisclosure Statutes
- they relieve seller (and Broker) from liability for failure to disclose certain events
o homicide, suicide, other felonies, and past occupants with AIDS and HIV
- this immunity does not apply if seller makes an affirmative misrepresentation
Doctrine of Implied Warranty of Quality:
- more and more states are imposing an implied warranty of quality
- if there is a defect in the workmanship or bad materials used, buyer can bring a cause of action against the builder or contractor
o this is easy if you are the first purchaser, but if you are the second and find there is a construction problem that causes the house to be less valuable, there is a problem (because there is no direct connection between those two)
- some states allow the second purchaser to sue within a certain about of time that the house was built (ex. some states allow you to sue if the house was build less than ten years ago—this is usually the maximum amount of years)
TITLE AND DEEDS
Covenants of Title
- normally, the extent of seller’s liabilities for some defects in title is governed by the covenants of title contained in the deed. If the deed contains no covenants of title, the seller is not liable if title fails.
o There are no covenants of title implied in the deed.
Types of Title
1. Good Record Title- perfect title (rare)
2. Merchantable/Marketable Title (standard)
- title which is free from reasonable doubt, and a title is doubtful and unmarketable if it exposes the party holding it to the hazard of litigation—title free from litigation
- the defect must be of substantial character and one from which he may suffer injury
o Loehmyer v. Bower- the house sold was in violation of a city zoning ordinance, so the court held that is was unmarketable b/c violations of legal restrictions can lead to risk of litigation. The court gave them the remedy of seisin
▪ Zoning requirements usually don’t affect marketable title
o Sinks v. Karleskint- title was unmarketable because there was no access to the property
- Three Things that would Make a Title Unmarketable
o Chain of title defects
o Recorded encumbrances
o Unrecorded encumbrances
3. Insurable Title- where a title company will issue insurance on a title
- gives you time to clean up any defects before you transfer title
- Title Insurance
o it will pay the buyer if there is any defect in title that affects the marketability of the property
o almost always a part of the typical residential real estate transaction
o generally it is to protect the lender (covering the bank, not the individual)
Types of Deeds
1. General Warranty Deed
- The general warranty deed warrants that the seller will indemnify the buyer against any defects in title, be they created by the grantor herself or a by a previous grantor.
- It warrants title against defects arising before as well as during the time the grantor had title.
2. Special Warranty
- a warranty that only covers defects arising during the grantor’s tenure, not defects arising prior to that time.
- Basically only guarantees that he has done nothing to make title defective
3. Quitclaim Deed
- Warrants nothing
- grantee has no protection, grantor is only giving as much title as he has, if any
- deed is granted “as is”
Six Deed Covenants
- The general warranty deed contains six warranties (also referred to as deed covenants), although two of them are essentially identical.
- A warranty deed will contain all or most of the following six covenants
Present Covenants
- these covenants can only be breached at the time of conveyance (when they are made)
- the S of L for recovery in breach starts running when the deed is delivered.
- These cover present and past owners
- When you make a present covenant, you are not only making a covenant to that purchaser, but you are also making a covenant with future purchasers.
o Covenant of seisin: grantor promises that he owns the estate he now claims to convey
o Covenant of right to convey: grantor promises that he has the power to make this conveyance—no temporary constraints on grantor’s right to convey
▪ there is no legal impediment to the grantor’s ability to convey the property.
▪ ex. of someone who has legal title but they don’t have the right to convey
• underage
• power of attorney taken away
o Covenant against encumbrances: grantor is saying there are no encumbrances on the property, such as easements, liens, mortgages or restrictions
Future Covenants
- breached when a purchaser is disturbed in possession or enjoyment of the property or a legitimate superior claim is asserted against him.
o Constructive eviction- does not need actual eviction, could be when the grantee is enjoined from using the property b/c he violates a restrictive covenant
- The statute of limitations begins to run when someone challenges the purchaser’s rights—at a future date.
o Covenant of further assurances: The grantor covenants to perform whatever acts are necessary to perfect the purchaser’s title, if it turns out to be imperfect.
o Covenant of general warranty: the grantor will defend the grantee against interference with the quiet enjoyment or disturbance in possession of the property by anyone with superior title.
o Covenant of quiet enjoyment- same as covenant of general warranty.
Contracts and Deeds
Common Law- Merger Doctrine
- when seller and buyer sign a contract for the sale of land, the contract may call for a marketable title, but even if it does not, it is implied
- but, once the buyer accepts the deed, the buyer can only sue on the covenants in the deed.
- Acceptance of the deed discharges the seller from his contractual obligations
- **the contract merges into the deed, so buyer cannot sue on the contract anymore
o But many jx have reject this, so if it does not apply, then you can get damages for the contract
Modern Law- says you can sue on both the contract and the deed.
Implied Covenants
From the use of the word "grant" in any conveyance the following covenants on the part of the grantor for himself and his heirs to the grantee, his heirs, and assigns, are implied, unless restrained by express terms contained in such conveyance:
- (1) Covenant of seisin- That previous to the time of the execution of such conveyance, the grantor has not conveyed the same estate, or any right, title, or interest therein, to any person other than the grantee;
o I have not done this transfer to anyone else.
o What is the other warranty created by using the word grant in California???
▪ Covenant free from encumbrances
- (2) Covenant Against Encumbrances- That such estate is at the time of the execution of such conveyance free from encumbrances done, made, or suffered by the grantor, or any person claiming under him.
o Such covenants may be sued upon in the same manner as if they had been expressly inserted in the conveyance.
DELIVERY
- Rule of Law: a deed, to be operative as a transfer of the ownership of land, or an interest or estate therein, must be delivered, otherwise it is void.
- Title passes upon delivery
o It cannot be cancelled or taken back once delivered (except by a writing under the Statute of Frauds)
Delivery in General
- In most jurisdictions, a valid delivery of a deed requires it pass beyond the control or domain of the grantor
- Relinquishment of control over the deed may be established, even if the deed is in possession of the grantor at her death, by proof of facts which show that there was intent to pass title and to explain the grantor's subsequent possession.
o However, in order for a delivery effectively to transfer title, the grantor must part with possession of the deed or the right to retain it before death
o Ex. Wiggill v. Cheney- where the grantor put it in the security box with D’s name on it before her death, the court held that P delivering it to D after grantor’s death does not constitute delivery, b/c grantor was in possession of the deed at the time of her death
▪ The outcome would have been different if the grantee had access to the security box
- An effective deed requires delivery, actual or constructive, without exclusive control or recall.
- An effective legal delivery of a deed requires:
o (1) intent by the grantor to make a present transfer; and
▪ Blancett v. Blancett – the court held that there may be no legal delivery of a deed without intent to make a present transfer.
▪ Caruso v. Parkos- where a grantor has conveyed his or her property, he cannot subsequently, by withdrawing or destroying the deed, or by other acts indicating a change of intention, affect the completed transaction.
o (2) a transfer of dominion and control. (the deed has left the grantor)
- Recording generally presumes delivery.
o Delivery to one co-tenant or reservation of an estate equals delivery to all cotenants, where the grantor is also the grantees
- A delivery is voidable if procured by undue influence
Three Requirements of Conveyance:
- (1) Properly executed written instrument which complies with the Statute of Frauds
- (2) delivery
- (3) acceptance
Conditional Delivery
- some jx allow this, some don’t
- conditional delivery to grantee
o if title is ineffective, then grantee has it and there is no condition
o majority approach- the delivery is good, but the condition is not good
▪ title is in the grantee with no conditions
▪ this also applies for oral conditions (violating the Statute of Frauds)
o modern approach- they are both good—condition is effective and title goes to the grantee
- conditional delivery to a 3rd party (MOST MODERN APPROACH)
o condition is effective with title in the grantee
▪ unless the condition is the right to revoke, then there is no delivery
o *used all of the time (called an escrow—grantor will deliver the deed to the independent escrow agent and say you can give this deed to the buyer once the conditions have been met—whatever the parties have decided)
▪ Grantor is relinquishing control when she gives the deed to the third party
• Grantor’s attorney does not count as an independent third party
Escrow
- Example:
o If you have an agreement that the grantor will give deed to escrow agent on 2/14
o then the grantee will pay purchase price by 2/20
o if the grantee does not make that payment on 2/20, the conditions are not met and the escrow agent does not give deed to grantee
o if grantor dies during escrow—if the grantee pays by the 2/20, then the property is his, if he has not paid, the conditions are not met and it goes back to the estate
C. RECORDING SYSTEM
Common Law Priority
- all states maintain public records that reflect ownership claims to land
- Basic Rule: “first in time, first in right”
o exception: if the “first in time claim was an equitable title claim and a BFP acquired legal title without notice of the earlier claim, the BFP wins (legal title should control to break the tie)
- under deeds, the dates of delivery controls, rather than the date of execution (signing)
Recording Process
- differs by state
- to qualify for recording a deed or other instrument must be acknowledged
o notary publics acknowledge most instruments (deed is then “notarized”)
o public offices (ex. judges) can also acknowledge a signature
o if not acknowledged, the deed is “defective” and cannot be recorded
- after acknowledgement, the person takes the original deed to a public office in the county and pays a filing fee
o the office makes a copy of original
o adds the item to public record
o enters references into the index system
- this can then be used later to check the Seller’s claim of good title
o the system can reveal title defects (outstanding mortgages or tax liens, easements, future interests, cotenancy shares, or no record title at all)
Title Search Process
Four Steps
1. the title examiner must discover the chain of title
a. first link = the sovereign
b. last link= present owner
c. the search usually goes back a set time (ex. 50 years)
2. look for adverse recorded transfers by the present owner and by all prior owners in the chain of title
a. the searcher checks the records of deeds and other instruments in the county where the property is located
b. this can show if the owner conveyed the deed to someone else
3. read carefully all of the recorded instruments found in Steps 1 and 2
4. searcher consults other records, in addition to recorded instruments, for adverse interests
*some states have name indexes, and some have tract indexes
Types of Recording Acts
- “first in time, first in right” still applies today unless the second taker can show entitlement as a BFP under a recording act
Three Types
1. race statute- the first person to record their instrument wins
a. only 3 states use this
2. notice statute- a second purchaser, who doesn’t know about the prior unrecorded interest, wins (the last good faith purchaser with no notice)
a. half of the states have this statute
3. race-notice statute- the second purchaser must both record first, and take without notice of the prior interest (this makes it harder for BFPs to prevail)—you do not have to be the last good faith purchaser, but you have to be a good faith purchaser when you purchase
a. the other half of states use this (including CA)
*even if you have won the “race,” you will not win unless you are a good faith purchaser
Notice
- notice is evaluated at the time the grantee pays value
- Three Kinds
o Actual notice- the purchaser who has actual knowledge of the prior interest is disqualified
o Constructive Notice- the purchaser is charged with notice of all recorded interests—everything that a proper search of public records should reveal.
o Inquiry Notice- the purchaser who knows facts that suggest that someone might have an unrecorded interest has a duty to inquire further—the purchaser is charged with whatever information that inquiry would have revealed.
▪ He has a duty to inspect the land
- Good faith Purchaser (BFP)- one who purchases land without notice of any suspicious circumstances which would put a reasonable person on inquiry.
o the burden of proof falls on the litigant to prove that he was without notice, actual or constructive, of another’s rights or interest in the land.
- Shelter Rule: once the second purchaser gets the protection of the recording system (under the recording act), all subsequent transactions are sheltered from any previous claims (any third purchaser is sheltered by the second purchaser’s proper recording)
III. Housing
A. HOUSING DISCRIMINATION
Fair Housing Act
a) cannot refuse to sell or rent to someone based on race, color, religion, sex, familial status or national origin
b) discriminate against someone in the rental/sale terms or conditions based on race, color, religion, sex, familial status or national origin
c) cannot advertise any preference based on race, color, religion, sex, familial status or national origin
d) cannot say something is not available (when it is) based on these qualities
e) cannot do any of these things based on a handicap of the buyer/renter (or any person who will reside in the dwelling
*many states have added sexual orientation to this list
Exemptions from FHA:
- a single family house sold or rented by an owner (as long as he does not own more than three single family homes at any one time)
- religious organizations, nonprofit organizations, private clubs
Prima Facie Discrimination Case
*P must establish a prima facie case of discrimination by showing:
- (1) He is a member of a protected class and D knew or suspected (had reason to know) that he was
- (2) that he applied for and was qualified to rent the property in question
- (3) that D rejected his application
- (4) that the property remained available thereafter.
- After P shows all elements of a prima facie case, the burden shifts to D to show that the reasons for rejecting applicant was for some reason other than discrimination (non-discriminatory reasons)
- then burden shifts back to P to introduce evidence that the reasons are pretextual
o ex. Neithamer v. Brenneman Property Services, Inc.- where HIV positive guy applies for rental proprety and is denied b/c of his status. The court found that he satisfied all elements of the prima facie case (D had reason to know b/c P said his lover die of AIDS, P offered to have a co-signor and put down first and last month’s rent- he was qualified)
FHA §3617
- unlawful to intimidate, threaten or interfere with a person regarding his right to enjoy or exercise any right granted or protected by this act
Familial Status Claims
- P must show that D discriminated against her “in the terms, conditions, or privileges of rental of a dwelling because of familial status”
o Familial status- one or more children under 18 living with a parent or legal guardian (42 U.S.C. §3602(k))
▪ the act prohibits landlords from refusing to rent to (or evicting) a person b/c that person has children living with them
o ex. Woodard v. Fanboy, L.L.C. (and Davis)- where LL evicted T because she had two children living with her, and the LL made up stories and blamed things on the kids, but the court found there was not enough evidence to uphold her familial status claim. (The court did find for her on the gender discrimination claim).
IV. Private Land Use Restrictions
Foundational Question: In what circumstances are private devices better equipped to govern land use decisions than legislative/administrative alternatives?
A. OVERVIEW OF LAND USE
- ultimately the owner of creation is God
o Checkermallow flower
- there are many restrictions on land use that protect the land and the community
B. EASEMENTS
- property owners enter into a wide variety of private-law arrangements that address the desirable use of land
o estate system (defeasible estates, concurrent ownership, and leases)
o easements
o profits
o covenants
o licenses
Servitudes: the generic term that describes legal devices private parties can use to create rights and obligations that run with the land.
o includes: easements, profits and covenants
- Easement- the right to make a specific limited use of land possessed by someone else
- Profit- the right to remove something of value from another’s land (ex. timber or fish)
o seen as a subcategory of easements
- Covenant- restricts a person’s use of land
- License- personal relationship between grantor and grantee
o Revocable at will of the servient estate
o Can become irrevocable if the party who holds the license makes substantial expenditures on reasonable reliance on the license
▪ This continues to be irrevocable as long as the reliance continues
o Not transferable (except if grantor intends it to be transferable)
o usually an interest of lesser importance than a servitude because generally it is nontransferable and it’s revocable by the landowner
Look at How it Was Created:
- if the interest was not expressly written, it will either be an prescriptive easement (based on reliance and estoppel) or irrevocable license
Easements
- these are a way that a person can obtain the right to use someone else’s land or surrender a right to use her own land in a specified way (nonpossessory way to use land that is owned by someone else)
- can have a duration agreed to by the parties, it may be for a term of years, or for the lifetime of the holder and they may be defeasible
- *although easements may be assigned to a third party, the third party’s use cannot exceed the rights expressly conveyed to the original easement holder.
o Ex. Marcus Cable Associates v. Krohn- the court did not allow the cable company to extend the easement, given to them by the electric company, to be used for cable wires in addition to the electric wires
- The extent of an easement is decided by the intent of the party who created it
o the manner, frequency, and intensity of an easement may change to take advantage of technological advance, but only for purposes for which the easement was created
- some easements are created by an express writing, some are implied as a matter of law
o express easements must satisfy the Statute of Frauds (two types):
▪ express grant- of the right to use the land
▪ express reservation- allows a grantor who conveys an estate to continue to use the conveyed land
o implied easements: do not have to be in writing
**If the use of easement exceeds scope it is considered a trespass
Dominant v. Servient
- dominant tenement- land that benefits from an easement
- servient tenement- land that is burdened by the easement
Appurtenant v. In Gross
- easement appurtenant- allows the owner of the dominant tenement to use the servient tenement.
o involves two pieces of land and two landowners—serves another piece of land
o usually divisible
o allows multiple owners to use the land
o automatically transfers with the conveyance of the dominant estate
- easement in gross- benefits the owner without regard to that person’s ownership of any other property—there is no dominant tenement
o benefits a specific person rather than a piece of land
o not transferable nor inheritable
▪ ex. an easement to put electric utility lines on another’s property (utility easement is the most common type of easement)
Affirmative v. Negative
- Affirmative Easements- provide a right to make a physical entry upon the servient tenement.
o *much more common
- Negative Easements- allow the holder to restrict the servient possessor from using her land in an otherwise permissible way
o These are considered problematic b/c they are hard to observe on property
o They are expressly created—very easy to create, hard to terminate
o Must be in writing—Statute of Frauds
▪ Don’t need to worry about privity here
o English Rule: Only for (LASS)- Light, Air, Support, & Stream water from an artificial flow
▪ ex. conservation easement where the government restricts development
▪ ex. agricultural easement—owner has to keep their land as farmland—can’t develop it
Prescriptive Easements
- occurs from a use of another’s land adverse to the owner of that land or the owner’s interest in the land against which a servitude is sought
o not a permissive use
- must satisfy the characteristics of adverse possession (open, continued, and hostile use for the statutory period—ex. 20 years)
o except here, the owner only gets an easement, not title
o usually courts do not require that it be adverse, courts will usually find a prescriptive easement even when the owner allows the use
- the presumption of a prescriptive right can be rebutted by proof that the use was by permission or not under a claim of right
- members of the general public cannot, by regular use, create a prescriptive easement on behalf of a landowner
Implied Easement (Two Types): (these only occur if a tract of land is subdivided into two or more parts, and used to be owned by one single owner)
- easement by necessity-occurs when a grantor conveys to another an inner portion of land surrounded by land owned by the grantor or the grantor and others.
o The grantee will have a right of way across the retained land of the grantor
o This also occurs when the grantor retains the inner portion, but conveys the surrounding parcel to another
o Must show:
▪ A party must show common ownership of the two parcels (before this was severance of the landlocked parcel)
▪ Most jx’s require that the owner of the landlocked parcel cannot access a public roadway from his or her own property (LANDLOCKED)
o This easement terminates when the necessity ends
- Easement implied from prior use:
o Arises when there has been a “separation of title, a use before separation took place which continued so long and was so obvious as to show that it was meant to be permanent, and it must appear that the easement is necessary to the beneficial enjoyment of the land granted or retained”
o claimant must show 4 things:
▪ (1) the relevant parcels of land had been in common ownership
▪ (2) the uses were exercised at the time of conveyance dividing ownership of the property (quasi easements- the use was not an easement b/c it would have been on the owner’s own property)
▪ (3) the use had been so long and continuous and so obvious as to show that it was meant to be permanent (not merely temporary use); AND
▪ (4) at the time of the severance, the easement was necessary for the proper and reasonable enjoyment of the dominant tract (not as high a standard as easement by necessity)
• ex. Thompson v. EIG Palace Mall- the court found that the restaurant’s use of the mall’s parking lot was not necessary for the restaurant and therefore they did not satisfy all 4 elements to prove an “easement implied from prior use”
Ways to Find out About Easements Before Purchasing Land:
- Reviewing the chain of title
- Searching other public records that may reveal other non-recorded right, such as judgments or liens; AND
- Inspecting the land itself
Profits
- an easement that confers the right to enter and remove timber, minerals, oil, gas, game or other substances form land in the possession of another
o can be an easement in gross (personal right to use the land) or an easement appurtenant (runs with the land)
Easement by Estoppel
- court will imply an easement created by estoppel when:
o (1) the owner of the servient estate “permitted another to use that land under circumstances in which it was reasonable to forsee that the user would substantially change position believing that the permission would not be revoked”
o (2) the user substantially changed position in reasonable reliance on that belief, AND
o (3) injustice can only be avoided by establishing a servitude
- The landowner is estopped from denying existence of the rights
- This will terminate if the fairness of changed circumstances no longer requires the easement to continue
Express Easements- when precise language is employed to create an easement, such terminology governs the extent of the usage.
- this does not preclude the scope of an easement being adjusted to accommodate changing times to serve the original purpose, as long as the change is consistent with the terms of the original grant
o ex. Preseault v. United States- an easement for railroads uses cannot be converted to an easement that includes hiking passages—the activities are not for the same purpose
Ways to Terminate an Easement
- (1) Expiration- an easement for a specified period of time expires at the conclusion of that time
- (2) Consent- Both parties can expressly consent to release the servient tenement from the easement (usually the easement owner is compensated by payment, but not always)
- (3) Merger- easement automatically ends by merger if the same person now owns the dominant tenement and the servient tenement
- (4) Prescription- if the servient owner uses the land adversely to the dominant owner for a sufficient period
- (5) Forfeiture- if the dominant owner abuses the easement in a way that cannot be solved by an injunction, or upon a failed attempt to convert an easement appurtenant into an easement in gross
- (6) estoppel- if the servient tenement owner relies upon the statements of the easement owner
- (7) condemnation- government can terminate an easement if it exercises its eminent domain power to obtain the easement.
- (8) Abandonment- they are not simply ended by non-use—there also must be acts by the owner of the dominant tenement clearly showing either a present intent to relinquish the easement OR a purpose inconsistent with its future existence
o ex. Presault v. United States—the owners of the easement for railroad removed all of the railroad equipment, which was considered abandonment
- (9) changed circumstances- this is only for easements by estoppel
- (10) necessity ending- this is only for easements by necessity
C. COVENANTS
- covenant- an agreement duly made to do, or not to do, a particular act
o generally describes promises relating to real property that are created in conveyances or other instruments
o Purpose: concerns about how someone else uses their land
o English Rule: only real covenants ran with the land, and you needed privity of estate.
- Types of Covenants:
o Negative- calls for the covenantor to refrain from doing some act
o Restrictive- the required performance limits the uses that can be made by the owner or occupier of land (usually when the grantee agrees to refrain from using the grantor’s property in a particular manner)
▪ A common grantor must establish a general scheme by conveying the majority of his subdivided lots subject to a restriction that reflects the general scheme.
o Affirmative- calls for the covenantor to do some act, either on or off the land of the covenantor (ex. paying money, supplying goods or services, etc.)
▪ imposes an affirmative burden on the grantee
Real Covenants: enforced by damages
- Requirements of Real Covenants (that run with the land):
o (1) intent to have the covenant run
o (2) touches and concerns the land (must involve using the land, satisfied with restrictions on land use b/c it says what you cannot do with the land)—logical connection to use and enjoyment of the land
▪ Unless a real covenant’s benefit “touches and concerns” some estate in land, the benefit cannot run to the covenantee’s grantee.
▪ Unless the burden “touches and concerns” some estate in land, the burden cannot run
o (3) privity of estate between the parties
▪ horizontal privity- evidence that the original parties to the covenant had some mutual interest or successive interest either in the land burdened by the covenant or the land benefited by it
• can be shown by easement between two parties, or if the covenant concerns land transferred by one party to the other
o separate land owners are NOT in horizontal privity
• look to the time of the creation of the covenant to determine whether horizontal privity exists
• ** when you are not suing the original covenantor, you need horizontal privity
• you only need horizontal when you are suing for damages (not an injunction)
▪ Vertical privity- where the party seeking to enforce the covenant and the party against whom it is to be enforced are successors in title to the property of the covenantee and covenantor.
• (the most easily satisfied)
• Must convey the whole estate (ex. if you have a fee simple, you must convey a fee simple, cannot just be a life estate)
• *if there is a transfer of the fee, then vertical privity is satisfied
o ex. Columbia Club Inc. v. American Fletcher- a person typically cannot be held liable for breach of contract unless it is shown that he was a party to the contract. (privity of contract is necessary)
Difference between real covenants and equitable servitude:
- owner must convey the entire estate (vertical privity) for real covenants—tenants are not considered to own the whole estate!
Burden of a Real Covenant to Run to Successors:
1. must be in writing-
2. notice
3. intention to bind successors
4. horizontal privity
5. vertical privity
Benefit of a Real Covenant:
1. writing
2. notice
3. intention to bind successors
4. “loose vertical privity”
Public Policy
- the courts look to increasing the public good
- when court is looking to enforce a real covenant, they only will refuse to enforce it if it is against public policy
Equitable Servitudes: enforced by injunction
- equitable servitudes sink their tentacles into the land (like a land squid)
- Requires:
o Intent- if you want your successors to be able to enforce it, you must intend for future beneficiaries
o Touches and Concerns- the covenant affects the parties’ use and enjoyment of the real property in question.
o Notice- to be enforceable, the subsequent purchaser must have notice
▪ Ex. Turk v. Moxhay- purchaser had notice of the covenant, but ignored it
o Writing
o **Horizontal Privity is NEVER required between the contracting parties
Implied Reciprocal Negative Servitudes (DOES NOT NEED TO BE IN WRITING)
- Some subdivisions have express conditions, but some do not, so they are implied on the lots that don’t have express conditions
- generally, covenants must be express and set forth in a writing that complies with the Statute of Frauds
o exception: reciprocal negative easement/implied equitable servitude
▪ Implied- lot is not bound by written covenant
▪ Reciprocal- an owner of two or more related lots sells one lot with restrictions to benefit the retained lot, so the servitude becomes mutual
▪ Negative- restriction on use rather than affirmative obligation (though some jx may allow affirmative)
Servitude- as in equitable servitude: enforced through injunction rather than through damages
o Requirements (you need to show):
▪ common owner
▪ scheme or plan at outset of subdivision
▪ restrictions benefit retained land of owner
▪ binds subsequent purchasers with notice (usually inquiry)
o Ex. Fong v. Hashimoto- general scheme is when land is divided up into lots to be sold with deeds with uniform restrictions, and this restrictive covenant did not specify which lots had the height restrictions in the Hawaiian subdivision. The restrictions were written for some lots, so the court held that it was implied for the rest.
Restrictive Covenants
- Courts must enforce covenants, conditions, and restrictions contained in the recorded declaration of a common interest development “unless unreasonable
o restriction will be enforced unless P can show that it is unreasonably burdensome and outweighs the benefits for the whole community (not on an individual basis)
o courts will generally uphold decisions made by the HOA, as long as they are in good faith, are consistent with governing documents, and comply with public policy
- CA Rule: An equitable servitude will be enforced unless:
o it violates public policy,
o it bears no rational relationship to the protection, preservation, operation or purpose of the affected land, OR
o it otherwise imposes burdens on the affected land that are so disproportionate to the restriction’s beneficial effects that the restriction should not be enforced.
▪ Ex. Nahrstedt v. Lakeside Village Condominium Association- where the court did not find the restriction against having pets to be unreasonable, even though they did not disturb the quiet enjoyment of the property—the burden of the restriction did not outweigh the benefit of not having pets
- Public Policy Arguments:
o this restricts your own autonomy inside your house
o but, the condo complex will argue that there is a very small living space and there have to be rules like this to maintain this small living space
o preserving property value is seen as a legitimate interest by the courts, so if the condo complex can make that argument, the court will uphold it
o problems with restrictions: you do have situations where people are governed by rules they did not agree too (usually it is only the owners who had a say in the rules, not potential renters)
Five Defenses to Enforcement of a Restrictive Covenant:
Abandonment: a covenant is abandoned when it has been continually and substantially violated
- but a few violations do not constitute abandonment
o ex. Peckham v. Milroy- the D claimed the covenant against home businesses had been abandoned b/c four other homes in the subdivision ran businesses, but the court found this was not “habitual or substantial” b/c there are this is four out of 1600 homes.
Laches (must prove all three elements):
- (1) knowledge or reasonable opportunity to discover on the part of a potential P that he has a cause of action against a D
- (2) an unreasonable delay by the P in commencing that cause of action
- (3) damage to D resulting from the unreasonable delay
Equitable Estoppel: (must prove all 3 elements)
- (1) an admission, statement or act inconsistent with the claim asserted afterwards
- (2) action by the other party in reasonable reliance on that admission, statement, or act; AND
- (3) injury to that party when the first party is allowed to contradict or repudiate its admission, statement or act
- **silence can lead to equitable estoppel:
o where a party knows what is occurring and would be expected to speak, if he wished to protect his interest, his acquiescence manifests his tact consent
**equitable estoppel and laches acknowledge that a covenant exist, but provide an equitable basis for the refusal of the courts to enforce it
Doctrine of Changed Conditions:
- *most common affirmative defense to the enforcement of a covenant
- applies when the character of the neighborhood has changed since the covenant was made so that the benefits of the covenants cannot be substantially realized
Unconstitutional Covenants
- the court will not enforce a restrictive covenant if it violates the Constitutional rights of the party
- this also applies when enforcing an injunction
o ex. Shelley v. Kramer- (very important case)—where owners signed an agreement that none of the lots could be occupied by anyone other than the Caucasian race and Black people bought the lot without knowledge of the covenant, so the neighbors brought suit to prevent them from taking possession of the property—the U.S. Supreme Court refused to enforce this.
D. NUISANCE LAW
- Private nuisance- nontrespassory use of one’s own property in ways that harm the property uses of a neighbor in a way that is substantial and unreasonable
o the owner owns up to the sky and down to the center of the Earth
o a private party can bring a public nuisance action only if the party has suffered a special injury that is different from that suffered by the public at large.
- Public nuisance- an action that harms the public at large—contrary to the public good
o most public nuisances are defined by some statutes or regulation
o P can get damages for the violation of the statutes
o *zoning is a larger scale way to regulate public land use
Issues of “Nuisance”:
- **actions can be both public and private nuisances
- nuisance does not require a physical invasion
- if it is a trespass, you are entitled to an injunction
o so, if there is a physical invasion, you should file a trespass claim, not a nuisance claim
- question of unreasonableness is based on competing uses
o The court tries to balance the utility of D’s conduct with the gravity of the harm
▪ ex. a business could harm a residential property, but it contributes to the economic base
▪ ex. Luensmann v. Zimmer-Zampese & Associates- D’ race car track was a good addition to the community—not a nuisance
o RS §827- Factors Used in Determining the Gravity of the Harm
▪ (a) the extent of the harm involved;
▪ (b) the character of the harm involved
▪ (c) the social value that the law attaches to the type of use or enjoyment invaded;
▪ (d) the suitability of the particular use or enjoyment invaded to the character of the locality; AND
▪ (e) the burden on the person harmed of avoiding the harm
o RS §828- Factors Used in Determining the Utility of Conduct
▪ (a) the social value that the law attaches to the primary purpose of the conduct;
▪ (b) the suitability of the conduct to the character of the locality; AND
▪ (c) the impracticability of preventing or avoiding the invasion
o to decide the social utility of the D’s conduct, you have to look at the broader picture
▪ ex. opening the liquor store by the schoolyard is unsuitable for a particular location)
▪ ex. Spur Industries v. Del E. Webb Development Co.- cattle feed lots caused unpleasant smells
- zoning laws
o a landowner’s compliance with zoning laws does not automatically bar a nuisance claim—compliance with the law is not the controlling factor
- Who can bring nuisance claims?
o a holder of a license to enter property and any other person who doesn’t have an actual property interest in the land will not be able to pursue a nuisance claim
- Spite fences:
o a fence erected maliciously, and with no other purpose than to shut out the light and air form a neighbor’s window, is a nuisance
- Reasonable Man Standard- whether a particular annoyance or inconvenience is sufficient to constitute a nuisance depends upon its effect upon an ordinarily reasonable man
Factors Used to Decide Nuisance:
- mitigating the harm: P’s ability to avoid the harm is a relevant but not a conclusive factor
o ex. Spur case-- if P moves to the cattle feedlot (nuisance), the court finds this to be relevant
▪ but the need for land use, is an overwhelming social utility
- Super Sensitivity of P
o Ex. the case where the neighbor moved next door to a drive-in movie theater
▪ court said in most cases, the movie theater lights would not cause a nuisance, so they were not going to grant an injunction, because the neighbors were super sensitive to the light
- Balancing to Decide injunctions
o -have to show that a legal remedy (monetary damages) is inadequate
o -another remedy is that the D will pay damages, instead of getting an injunction
- Balancing the Hardships
o you have to show that the harm was more than the good
- “Coming to the Nuisance” Doctrine
o the residential landowner may not have relief if he knowingly came into a neighborhood reserved for industrial or agricultural endeavors and has been damaged thereby.
Nuisance Per Se: (if you prove this, you don’t have to prove nuisance):
- (1) P can prove this by proving that the activity was a nuisance at all times, under any circumstances, and in any location
o Ex. junk yard- stinky all of the time
o Ex. race track is only loud at night and only on certain nights
- (2) the second way to prove this, is by proving a violation of law
o however, violation of a statute without further evidence of nuisance is not enough to prove the claim
o the activity has to be a nuisance at common law
▪ ex. drag racing is not considered a nuisance at common law—no statutes prohibit this
Nuisance in Fact: (3 elements)
- (1) intentional use of property
- (2) that is unreasonable; and
- (3) causes substantial harm to a reasonable person
Third Party Actions:
- for D to be liable for third parties actions that create a nuisance on their land, D must both:
o (1) know that the activities are being carried on and will involve an unreasonable risk of causing the nuisance; AND
o (2) consent to the activity or fail to exercise reasonable care to prevent it
▪ Ex. Mark v. Oregon- the state (D) failed to implement the management plan to prohibit nudity on public beaches so P is entitled to injunction
V. Governmental Land Use Restrictions
A. ZONING
Zoning ordinances- zoning law is an effort to arrange the use of land in a manner that provides the greatest benefit to the public
- An attempt to regulate competing uses of land
- all the states needs to show is that they have a good reason for this ordinance, and the court will uphold it—must show ordinance advances public welfare
o as long as it is not arbitrary or unreasonable the court will uphold it
- Decisions to Uphold Zoning Laws
o Excluding buildings for businesses and trade in some areas is in the interest of the health and safety of the community
o Zoning is preventative b/c it requires permit and nuisance, you have to wait for the harm
Zoning Tools or Mechanisms:
- Variance
o allows a non-conforming use when strict enforcement of the ordinance would cause unnecessary hardship b/c of the unique nature of the property
▪ cannot obtain this if it is self-inflicted hardship (includes buying the land with knowledge of the restriction)
o courts are more likely to reverse the issuance of a variance than the denial of a variance
- special exceptions (conditional use)
o a use permitted by the ordinance in a district where it is not necessarily incompatible, but where it might cause harm if its location is not monitored
o the use is only authorized upon special approval by the board on a case-by-case basis
- Cluster Zoning
o Legislative decision regarding the appropriate density for an entire area instead of specific lots
- Planned Unit Development
o allow an area within a zoned region to be developed as a whole—usually subdivisions
o They allow the subdivision to be developed in a way that gets around zoning requirements
o There is need to produce more housing, so there is a provision that allows developers to build smaller house in these “Planned Unit Development”
- Changing the Ordinances
- Conditional Rezoning
o A city may agree to amend its zoning regulation only if certain conditions are satisfied
▪ ex. abide by federal approval to build on wetland, condo requirements, etc.
- Contract Rezoning
o Involves an enforceable reciprocal agreement between the developer and the local government
- Historic Preservation-
o Allows restrictions on neighborhoods, buildings, or other structures to maintain their historical value
o Aesthetics alone is a legitimate purpose for government regulation
▪ Ex. New Orleans case where P was prohibited from putting up a large ugly sign in a historically preserved neighborhood
General Challenges to Zoning Ordinances:
- Threshold: there must be a state enabling act
o Not really an issue, b/c every state has an enabling act
- Constitutionality
o Takings—Has a taking of private property occurred?
o Is the zoning a legitimate exercise of police power (not arbitrary and capricious)?
▪ Has to be conforming with the act—can’t go beyond their power
o Does the city have the right to outlaw what would otherwise be legal uses in certain areas?
• Yes, the ordinance is valid, as long as it is not arbitrary and capricious
- Failure of the ordinance to comply with the comprehensive plan
- Exclusionary – totally excludes an otherwise legitimate use
o (Two Ways to Show this):
o (1) Dejure exclusion- an ordinance, on its face, totally bans a legitimate use
o (2) De facto exclusion- where an ordinance permits a use on its face, but when applied act to prohibit the use throughout the municipality
▪ Then the burden shifts back to the state to show that the ordinance bears a substantial relationship to public health, safety, and welfare
• **This is a slightly higher standard (has to show that it actually improves public welfare, not just that it can)
- Non-Conforming Uses
o when a zoning ordinance goes into effect, there are usually existing buildings or uses that do not conform with the new regulations for the zoning districts where they are located
o Grandfather clause- these uses are permitted to occur until they are abandoned or destroyed by an Act of God, even though they violated the zoning ordinances.
▪ ex. Snake River case- the zoning ordinance cannot outlaw previously existing non-conforming uses
- Termination of Non-conforming Uses:
o Abandonment- two elements:
▪ (1) an intention to abandon; AND
▪ (2) some overt act or failure to act that implies the owner’s renunciation of the use
o discontinuance or non-use for a prescribed period
o amortization- a grace period allowing the owner the time to conform to the zoning law (usually b/t 1-30 years)
o voluntary or involuntary
- spot-zoning- is a challenge to zoning decisions
o when you allow something ONLY for a small piece of land within the zoning district (ex. if they allowed someone to build a drug store in a residential area, but didn’t actually change the laws, only allowed this specific store)
Public Policy:
- Opponents say zoning is:
o Unnecessary
o Inefficient—forces low income residents to travel farther to work
o Expensive to maintain
o Hostile to private property interests
B. GROWTH CONTROLS
- Exclusionary zoning- suburban zoning regulations that prevent the migration of low and middle-income persons (can affect race b/c many minorities fall in the lower income)
o Ex. Petaluma case where the P’s claimed that the ordinance restricting only 500 homes to be built was exclusionary.
- Inclusionary zoning- zoning laws that encourage the development of low income housing
o Ex. conditioning building permits on a developer’s agreement to provide low income housing
- **courts are split on the legality of these two zoning techniques
VI. Takings
Main Questions to Ask:
1. Why should government have power to take the land?
2. What constitutes government taking?
3. Why should they have to pay?
4. How much should they have to pay?
A. THE POWER OF EMINENT DOMAIN
Eminent domain
- seen as a compromise between the public good and the protection and indemnification of private citizens who property is taken to advance that good
- Two Requirements:
o (1) Public use
▪ a use which benefits the whole community or promotes the general interest in its relation to any legitimate object of government
▪ It is not necessary for the entire community to enjoy the improvements
• Ex. anything that promotes education, recreation or pleasure of the public
▪ Does not allow government to take the property and sell it to other private entities for private use
▪ This is decided on a case-by-case basis
o (2) Just compensation
▪ the owner of the condemned property must be made whole but is not entitled to more. (5th amendment)
▪ should put the owner in as good a position as if his property had not been taken
- Even intangible property can be condemned
o Ex. the Oakland Raiders case, which held that a franchise is property and can be “taken”
Three-Part Test to Determine When Condemned Property can Be Given to Private Entities:
- (1) public necessity of the extreme sort otherwise impracticable
o Ex. corporations who benefit the public that need the land to continue their public work (i.e. railroads, bridges, etc.)
- (2) where the property remains subject to public oversight after transfer to a private entity
- (3) where the property is selected because of "facts of independent public significance," rather than the interests of the private entity to which the property is eventually transferred.
Just Compensation
- fair market value standard- the owner is entitled to receive what a “willing buyer would pay in cash to a willing seller” at the time
o this does not necessarily compensate for all values an owner may derive from his property (its value of the owner may differ from its value to the taker)
o **the court has previously determined that nontransferable values arising from the owner’s unique need for the property are not compensable, and has found that this divergence from full indemnification does not violate the 5th Amendment
o Does not compensate for moving expenses
- Reasonable necessity standard- courts have applied this standard to determine if the entity has an obligation to continue providing the facilities taken
o if they do have an obligation, then they will be compensated for the extra money spent on substitute facilities
B. WHAT CONSTITUTES A “TAKING”?
Taking- occurs when a property owner challenges a government action, saying that it takes away their property rights, which entitles them to just compensation
- the right to exclude is the essence of property ownership
- sometimes in order to get a permit, the government requires that the owner of the property give something to the government
o ex. give them an easement
How to Determine if it is a Taking:
- if the government is using physical occupation, it is considered a taking
- look at whether the government is authorizing a “permanent physical invasion”, then a taking has occurred.
o Ex. cable box on the side of the apartment building, even though it is small, is considered a taking
o Ex. Presault v. U.S.- U.S. had to pay just compensation b/c the government had allowed people to trespass on their property, although the RR easement had been abandoned
- Eminent domain- the government says I want an easement and offers to pay for it, if you say no, they file a claim to acquire title to your property
o this is a government taking of your property
- Government Restrictions- gov. restrictions on the use of property constitutes a “taking”
o Police power:
▪ You don’t have to show that the solution the government has chosen is the best solution, there just has to be some rationale behind it
▪ As long as it is reasonable, the court will allow it
• Ex. Hadacheck v. Sebastian- court did not pay the property owner for the difference in value of what his property was worth as a clay manufacturer, and what it is worth with big holes in the dirt, after saying that a restriction prohibits making bricks (b/c they did not keep him from making the bricks, just from making them on that property)
o A restriction imposed to protect the public health, safety or morals from dangers threatened is not a taking.
- Regulations- while property may be regulated to a certain extent, if regulation goes too far it will be recognized as a taking.
o How do we determine if a regulation has gone too far?
▪ Diminution in value of the property
• Ex. Pennsylvania Coal v. Mahon-- When diminution reaches a certain magnitude, there must be some exercise of eminent domain and compensation to sustain the act.
▪ Extent of the public interest involved
• If the extent of the damage to the public is great, then that goes against allowing the government taking
▪ Reciprocity of benefits- where the police power being exerted is to confer benefits on the property of a neighbor
• Ex. a dividing wall between the two properties
- Historical Preservation—not a “taking”
o Ex. Penn Central- the court held that the owner could not allow a 50 story building to be built on top of the landmark, and this was not considered a “taking”
Regulatory v. Physical Takings
- “taking”- more readily found when interference with the property is a physical invasion by the government as opposed to when interference arises from some public program adjusting to the benefits and burdens of economic life to promote the common good
- “regulatory taking”- transpires when some significant restriction is placed upon an owner’s use of her property for which “justice and fairness” require that compensation be given
Compensation:
- 5th Amendment
- its plain language requires the payment of compensation whenever the government acquires private property for a public purpose, whether the acquisition is the result of a condemnation proceeding or a physical appropriation
o but it does not mention regulations that prohibit a property owner from making certain uses of her private property
- Two categories of Takings are always compensable:
o (1) regulations that compel the property owner to suffer a physical invasion of the property, regardless of how small, or how important the public purpose behind it
▪ Ex. the cable box on the side of the NY apartment building
▪ Where permanent physical occupation of land takes place, the government must give compensation, no matter how much public interest is involved
o (2) regulations that deny all economically beneficial or productive use of the land
▪ Here the government can only deny compensation if the land uses were not part of the land owners title to begin with
o Exception: If what the government is prohibiting would be considered a nuisance at common law, then it is not a taking, b/c you would not have the right to do it anyway
To Decide a “Taking”:
1. first ask what is the value after regulation
a. If value is 0, then go to Lucas—and you can use “common law nuisance”
b. If more than 0, go to Pennsylvania Coal
Personal Property
- personal property may not be entitled to compensation, you would have to used the analysis in Penn Central, which is a “situational approach”
Nuisance Analysis (4 steps):
1. the degree of harm to public lands and resources posed by claimant’s proposed activities
2. the social value of the claimant’s proposed activities
3. their suitability to the locality in question
4. the relative ease with which the harm can be avoided by measures taken by the claimant and the complainant alike
Four Instances in Which a Taking Never Occurs:
- (1) government may regulate to prevent a nuisance because there is never any right to use your property to engage in a nuisance
- (2) government can “take” property pursuant to a forfeiture statute because of the traditional fiction it was the property itself that committed the offense.
- (3) the government cannot be liable for a taking when it acts pursuant to its navigation servitude to maintain navigable waters
- (4) government does not “take” property it destroys to prevent a wider disaster
o Ex. destroying buildings to prevent a fire from spreading
Situational v. Categorical Test:
- Situational- (Pennsylvania Central)
o Inquiry into all of the relevant circumstances in particular cases (or are they “essentially ad hoc, factual inquiries”?)
o THREE PART TEST
o (1) What is the economic impact of regulation?
o (2) Does the government action interfere with “reasonable investment backed expectations”?
▪ What is the primary purpose of what the property owner wants to do?
o (3) What is the character of the government action?
▪ ex. Tahoe-Sierra Preservation Council, Inc. v. Tahoe Regional Planning Agency- the court found that even though the moratorium took away the economic value of the land temporarily, it was not a taking that requires just compensation, b/c the land would regain its value as soon as the prohibition is lifted.
- Old Categorical Rule
o when government physically takes possession of your land, they must pay
- A New Categorical Rule: (Lucas case is called the “categorical test”)
o Regulatory Takings Per Se
▪ when a regulation denies all economically beneficial or productive uses of land, it is a categorical taking, unless the state can justify its actions as preventing a common law nuisance; OR
o ex. Lucas v. South Carolina Coastal Council- When P bought two lots of land with the intention of building homes on them, the two lots were not areas that needed permits when he bought them. Two years later, SCCC passed legislation requiring builders on beach areas to obtain a permit, after which he could not build, making them valueless
o Ex. Phillip Morris, Inc. v. Reilly (intellectual property)- where the government wanted to put regulations on tobacco companies, requiring them to disclose the ingredients of their tobacco, rendering the product valueless. The product would not be valuable if it was made available to everyone. The court found that the public was not benefited enough by this regulation to outweigh the harm from the company’s disclosure of trade secrets.
Exactions
Analysis for Exactions:
- Exactions- when developers want project approval or building permits, the local government with sometimes impose conditions that require developers to provide goods and services or pay fees before getting project approval. These conditions usually benefit the city, but not the developer.
o Ex. Nollan- where the city made developer allow a public path across his property for beach access. The court held that there must be some nexus [logical connection] between an exaction and the regulation excepted in exchange for it.
o Ex. Dolan case- said even when a nexus exists, there must also be some “rough proportionality” between the thing exacted and the development permitted in exchange.
Dolan Analysis for Exactions
- Is there an “essential nexus” between the legitimate state interest” and the [permit] condition enacted by the city?
o If YES- what is the degree of connection b/t the exactions and the projected impact of the proposed development?
o There must be a reasonable relationship between the required dedication and the impact of the proposed development. The required dedication must be related both in nature and extent to the impact of the proposed development
*Reminder*
- A strong public desire to improve the public condition will not warrant achieving the desire by a shorter cut than the constitutional way than paying of the change.
- when an exaction is demanded the court is going to be suspicious, b/c it oculd be an attempt by the gov to get around just compensation
Public Easements
- a permit that is subject to a public easement involves an exaction
- a permit condition that serves the same legitimate police-power purpose as a refusal to issue the permit is not a taking if the refusal to issue the permit would not constitute a taking
- but, the condition on the permit must serve the same governmental purpose as a development ban
- restrictions on property rights through exactions must substantially advance a legitimate state interest
o ex. Nolan v. California Coastal Commission USSC 1987—There would have been a taking if the state regulation had directly imposed such an easement of access b/c it would have amounted to permanent physical occupation.
- There needs to be an essential nexus (close connection) between the state interests being advanced and the permit condition exacted by the city
o the ends have to be legitimate and the means must substantially advance that legitimate state interest
Dolan v. City of Tigard
- Dolan owned a plumbing supply shop near a creek and applied for a permit to redevelop her store. The permit was granted by the City, subject to flood plan requirements for a bikeway.
- The City can condition its approval of a P’s building permit on the dedication of a portion of property for flood control and traffic improvements, so long as there is a reasonable relationship between the easement and P’s proposed new building
- A land use regulation does not affect a taking if it substantially advances legitimate state interests and does not deny an owner economically viable use of his land. Under the doctrine of unconstitutional conditions, the government cannot require a person to give up a constitutional right [such as the right to receive just compensation when property is taken for public use] in exchange for discretionary benefit conferred by the government where the benefit sought has little or no relationship to the property.
- A city cannot require a property owner to dedicate private property for some future public use as a condition of obtaining a building permit when such future use is not occasioned by the construction sought to be permitted. A strong public desire to improve the public condition will not warrant achieving the desire by a shorter cut that the constitutional way of paying for the change.
Takings Analysis
- (1) Does the government action constitute a permanent physical invasion of privately owned property?
o YES- per se taking
▪ Permanent physical invasion does not mean that someone is sitting on the property—involves a public entity that can pass on property that is considered a taking.
o Temporary physical taking invasion calls for the balancing test
o When case is filed, if finding in favor of property owner, Government often abandons the regulation
- (2) Is the government conditioning the issuance of a building permit on the grant of a public easement?
o Nollan—the exaction is a taking unless it is related to a specific need or burden caused by the proposed building
▪ must substantially advance a legitimate state interest
o Dolan- What is the required degree of connectedness between the exactions imposed by the city and projected impacts of the proposed development? Rough proportionality?
- (3) Is the government regulating a nuisance or protecting the public from a “public harm”?
o YES- then not a “taking”
▪ Hadacheck v. Sebastian- where the court upheld a zoning ordinance prohibiting the continuation of a brickyard in a residential area. The court found there was no taking for regulation of a nuisance or public harm.
- (4) Is the government regulating activity that doesn’t create a nuisance?
o If some value remains—use Pennsylvania Coal Test
▪ If government regulates something that is not a nuisance and regulation is so expensive that it doesn’t leave beneficial use for process
▪ if Diminution in value goes too far, it will be a taking
▪ extent of public interest
▪ reciprocity of advantage- if the regulated owner gets some advantage, the regulation is within police powers
• ex. zoning (landowner loses the rights to commercial uses, he is protected from economic loss from commercial uses next door)
▪ The court might find a taking if the action interferes with distinct investment-backed expectations and causes a severe economic loss
• Governemtn should not be able to hurt investors by destroying their expectations—the reliance interests of investors deserves protection
o If no economically beneficial use remains, use Lucas
▪ Regulation’s economic effect on the landowner
▪ Extent to which regulation interferes with distinct investmest-backed expectation
• More than a purchase of property and expectation of making money
• Attempt to get permits turned down (specific activities that landowner went through in order to invest and develop property
▪ Character of the governemet action
▪ Penn Central did not require compnetstaion from government
• if there is diminution in value, one is entitled to see if it is a taking
o no set number to say it is a taking, unless it is zero
o but closer to zero equals greater diminution in value
- (5) Has the regulation reduced the property value to zero?
o Lucas Test: compensation is owed unless activity constitutes common law nuisance
o If value is reduced to zero, unless legistlation meets standards that a court would impose for a nuisance, that law is invalid unless the state pays compensation
Constitutional Analysis
Potential Factors in the Takings Clause “Balancing” Analysis
- Ends:
o Nature and strength of the public interest
- Means:
o “Substantively advance legitimate state interest”
o “essential nexus” between the end and the condition
o “rough proportionality” between the condition and the impact
o Permits “reasonable beneficial use” of the property
- Harms to Property Owner or the Lessee
o Economic impact
o Extent to which harms “frustrate distinct investment-backed expectations”
- Alternatives
o To whom—challenger or the government?
o Relevance of the necessity of the government’s action?
Recent Case Law
- Kelo v. City of New London (2005)
o The city approved a development plan that had been submitted by the development agency
▪ Included: hotels, restaurants, stores, residences, and office space; and some portions would be used for marinas, and support services.
▪ The city authorized the agent to purchase property in the development area or to acquire it by eminent domain. The agent purchased most of the required property, but the nine owners refused to sell.
▪ The court found that the developmental plan served a public purpose and therefore constituted a public use under the Takings Clause of the Fifth Amendment. The plan was not adopted to benefit a particular class of identifiable individuals. Although the owners’ properties were not ruined, the City’s determination that a program of economic rejuvenation was justified was entitled to deference (respect). There was no basis for exempting economic development from the broad definition of “public purpose.” The Court did not require a reasonable certainty that the plan would bring public benefits.
RISK OF LOSS
1) Loss on buyer when contract of sale signed (Equitable conversion)
RISK PASSES TO BUYER
Negotiations *
for CONTRACT DEED
Purchase OF SALE Escrow (Merger)
| |
|
| | | | | | | |
IWQ duty stat. market- risk fina- deli- SoF
to of able of ncing very to deed
disclose frauds title loss escrow war.
2) Loss on seller until title conveyed
RISK PASSES TO BUYER
Negotiations *
for CONTRACT (Merger)
Purchase OF SALE Escrow DEED
| |
| | |
| | | | | | | |
IWQ duty stat. market- risk fina- deli- stat
to of able of ncing very to of
disclose frauds title loss escrow frauds
3) Loss on seller until time agreed upon for conveying title (how is this different from 2?)
4) Loss on party in possession
5) Loss on seller unless contract or relations create inference of different intention
6) Massachusetts Rule:
If value of building constitutes a large part of total value of estate (and contract shows that it is an important part of the subject matter), risk of loss is on the seller until title transfers. If buildings are not a material part of the contract, specific performance available to seller with abatement in purchase price.
7) Uniform Vendor and Purchaser Risk Act:
Unless contract says otherwise, risk of loss for destruction of all or material part of subject matter is on seller until either (a) title or (b) possession of the subject matter of the contract has been transferred
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