Property – Spring 1999 Outline

 

  1. Real Estate Transactions
    1. steps in the process to buy a house:
    1. consult a real estate agent
    2. buyer should employ an attorney to draft a contract
    1. statute of frauds: requires that there be a written contract, signed by the parties that contains the essential terms of the deal such as identification of parties, description of the property, and terms and conditions
    1. if the contract is not signed by the parties the contract is not enforceable
    2. parol evidence is admissible to clear up ambiguities
    1. exceptions to the statute of frauds - oral contracts:
    1. part performance: if the buyer pays all or part of the purchase price, and enters into possession, and makes improvements, the contract is enforceable. allows the specific enforcement of oral agreements when particular acts have been performed by one of the parties to the agreement
    2. estoppel: applies where unconscionable injury would result from denying enforcement of the oral contract after one party has been induced by the other seriously to change his position in reliance on the contract. Estoppel also may apply where unjust enrichment would result if a party who has receive the benefits of the other’s performance were allowed to rely upon the Statute. used in states in which part performance is not recognized
    3. revocation - a written contract for the sale of land can be revoked by an oral agreement of both parties in a majority of states
    1. agreement of the purchase price and sign a contract
    2. agent will assist buyer in getting the financing for the house; an appraisal will be ordered; credit report obtained
    3. time of performance
    1. time of essence: if one party does not tender performance by the specified date, the other party is excused from performance
    1. must have marketable title: title reasonably free from doubt, one which a prudent purchaser would accept; Implied in contract
    1. encumbrances on marketable title include:
    1. title acquired by adverse possession (modern cases hold otherwise) - most states hold that marketable title can be based upon adverse possession - must be clearly proven
    2. mortgages and liens
    3. easements - an easement that lessens the value of the property makes title unmarketable
    4. covenants - restrictions on use of the property makes title unmarketable
    5. encroachments
    1. zoning restrictions – generally do not affect the marketability of title; an existing violation does render title unmarketable
    2. waiver – any of the above-mentioned title defects can be waived in the contract of sale
    1. obtain title insurance; 3 ways:
    1. examine the abstracts
    2. certificate of title from a national company
    3. local title insurance
    1. the closing: execute and deliver deeds
    2. deed and mortgage are sent to the courthouse for attachment of revenue stamps and recording and payment of necessary fees
    1. equitable conversion: if there is a specifically enforceable contract for the sale of land, equity regards as done that which ought to be done
    2. Remedies for breach of the sales contract
    1. remedies of the buyer
    1. rescission - the buyer may rescind the contract and recover down payment
    2. specific performance - since land is unique, a court of equity may order a seller to convey the title if the buyer tenders the purchase price
    3. damages - buyer can sue for money damages rather than specific performance
    1. remedies of the seller -
    1. rescission - upon breach by the buyer, the seller can rescind the contract
    2. specific performance
    3. damages – the difference between the contract price and the market value of the land on the date of the breach
    4. liquidated damages – if the buyer defaults in performance, the seller may keep the deposit as liquidated damages
    1. Seller’s liability for Defects on the Property
    1. Failure to disclose - if the seller knows or has reason to know of the defect, the defect is not obvious or apparent, and the defect is serious and would probably cause the buyer to reconsider the purchase if known.
    2. misrepresentation (fraud) – if a seller made a false statement of fact to the buyer and that buyer relied on the statement and that it materially affected the value of the property
    3. active concealment – the seller is liable as above, if the seller took steps to conceal a defect in the property
    4. disclaimers of liability – "as is" - this is NOT sufficient to overcome a seller’s liability for fraud, concealment, or failure to disclose; specific disclaimers are likely to be upheld
    5. implied warranty of quality – extends to a buyer of a new house: the house is designed and constructed in a reasonably workmanlike manner and suitable for human habitation
    1. common law: no implied warranty of quality because real property is different than personal property
    2. minority view – allows a later owner of the house to recover from the original builder despite lack of privity

 

  1. The Deed
    1. formalities
    1. statute of frauds - requires a writing signed by the party to be bound (grantor)
    2. words of grant - any words indicating an intent to make a transfer will suffice
    1. Types of deeds
    1. general warranty deed – warrants title against all defects in title, whether they arose before or after the grantor took title; express warranties usually contained:
    1. covenant of seisin – the grantor warrants that he owns the estate tht he purports to convey
    2. covenant of right to convey – grantor warrants that he has the right to convey the property
    3. covenant against encumbrances – warrants that there are no encumbrances on the property (no mortgages, liens, easements, covenants)
    4. covenant of general warranty – grantor warrants that he will defend against lawful claims and will compensate the grantee for any loss that the grantee may sustain by assertion of superior title
    5. covenant of quiet enjoyment – warrants that the grantee will not be disturbed in possession and enjoyment of the property by assertion of superior title
    6. covenant of further assurances – grantor promises that he will execute any other documents required to perfect the title conveyed
    1. special warranty deed – contains warranties only against the grantor’s own acts but not the acts of others
    2. quitclaim deed – contains no warranties of any kind; merely conveys whatever title the grantor has, if any, and if the grantee of a quitclaim deed takes nothing by the deed, the grantee cannot sue the grantor
    1. Estoppel by deed
    1. if a grantor conveys title to land that he does not own, and the grantor warrants title to the land, then if the grantor subsequently acquires title to the land, the grantor is estopped to deny that he had title at the time of the deed and that title passed to the grantee
    1. Delivery
    1. delivery refers to the grantor’s intent; it is satisfied by words or conduct evidencing the grantor’s intention that the deed have some present operative effect (that title pass immediately and irrevocably)
    1. manual delivery – delivery requirement is satisfied when the deed is delivered by mail, agent or messenger, or physical transfer
    2. presumed delivery – if the deed is handed to the grantee, acknowledged by the grantor before a notary, or recorded
    3. cancellation – title is effective upon delivery and therefore cannot be canceled
    1. Breach of covenants
    1. present covenants - they are breached when made, at time of conveyance, if at all - covenant of seisin, of right to convey, against encumbrances
    1. covenant of seisin - breached if the grantor does not own the property at the time the covenant is made
    1. knowledge of the defect is not a defense - the covenants of seisin and against encumbrances are breached even though the grantee knew of the defect in title or of the encumbrance
    1. damages - injured party should be put in the same position as he would have been in had the contract been performed
    1. warranties of quality
    1. common law - caveat emptor - builder of houses had no liability
    2. current trend - implied warranty of habitability in new homes - warrants that the building is free from defective materials and is constructed in a sound and workmanlike manner
    1. subsequent purchasers - may have difficulty recovering because of lack of privity; about half the courts have held that the builder has liability to subsequent purchasers regardless of lack of privity
    2. commercial buildings do not have an implied warranty of habitability

 

  1. Title Assurance: Recording Acts
    1. something
    2. misspelled names in record: an abstract of judgment that contains a misspelled name does not impart constructive notice
    3. Types of recording acts
    1. race statute – between successive purchasers of a property, the one who wins the race to record prevails; very few states have this statute
    2. notice statute – if a subsequent purchaser had notice of a prior unrecorded instrument, the purchaser could not prevail over the prior grantee, for such would work a fraud on the prior grantee; the subsequent purchaser must have had no actual or constructive notice at the time of purchase
    3. race-notice statute – a subsequent purchaser is protected against prior unrecorded instruments only if the subsequent purchaser
    1. is without notice of the prior instrument and
    2. records before the prior instrument is recorded
    1. actual notice: knowledge of the prior deed obtained from any source (newspaper, word of mouth)
    2. constructive notice: notice that can be gained though an examination of the record
    3. Chain of title problems: the recorded sequence of transactions by which title has passed form a sovereign to the present claimant; the period of time for which records must be searched and the documents which must be examined within that time period
    1. wild deeds: a recorded deed that is not connected to the chain of title; it does not give constructive notice because the subsequent bona fide purchaser cannot feasibly find it
    2. deeds recorded late: a deed recorded after the grantor is shown by the record to have parted with title through another subsequent instrument is not constructive notice in most states
    3. deed recorded before grantor obtained title: split of authority
    1. majority: a recorded deed obtained from a grantor who had no title at that time but who afterwards obtains title is not constructive notice to a subsequent purchaser from the same grantor
    2. minority: is constructive notice
    1. Inquiry notice: a subsequent grantee is bound to make reasonable inquiry; he will be held to have knowledge of any facts that such inquiry would have revealed (even if none was made)
    2. Mother Hubbard clause - a provision in a deed that attempts to sweep within it other parcels not specifically described
    1. generally are not valid against subsequent purchasers of the undescribed land

 

  1. Title Insurance
    1. developed because of the inadequacies and inefficiencies of the public records in protecting private titles
    2. guarantees that the insurance company has searched the public records and insures against any defects in the public record, unless such defects are specifically excepted from coverage in the policy
    3. how it works
    1. bought by one premium paid at the time the policy is issued
    2. premium is based on the amount of insurance purchased - ordinarily is the amount of the purchase price of the property
    3. title insurance company agrees to defend at its expense all litigation against the insured based upon a defect insured against in the policy
    4. measure for damages for breach of a title insurance contract - if the title fails, the insured receives the consideration paid; if breach is by an encumbrance, the insured receives the difference in value of the property with the encumbrance and without the encumbrance

 

  1. Nuisance - an unprivileged interference with a person’s use and enjoyment of their land; one must use property so as not to injure that of another; primarily set down by common law courts
    1. characterized as a process of judicial zoning - utility, fairness, expectations, and incentives are considered in an effort to promote constructive patterns of land use
    2. want to allocate resources justly and efficiently
    3. types of nuisances
    1. private nuisance - conduct that causes a substantial interference with the private use of land and is either (i) intentional and unreasonable, or (ii) unintentional but negligent, reckless, or resulting from an abnormally dangerous activity (for which there is strict liability)
    1. public nuisance - an act that interferes with general community interests or comfort of the public at large; an unreasonable interference with a right common to the general public
    1. examples: air pollution, loud noises, houses of prostitution, public gaming, harboring vicious animals, storing dangerous explosives
    2. test: substantial harm caused by intentional and unreasonable conduct or by conduct that is negligent or abnormally dangerous
    1. nuisance per se (absolute nuisance) - liability no matter how reasonable the defendant’s conduct
    1. activities designated to be a nuisance by statute
    2. examples: abnormally and unduly hazardous activities (storage of explosives)
    1. nuisance per accidens -
    2. unintentional nuisances - risk of harm makes the conduct unreasonable
    3. intentional nuisances - an intentional and unreasonable act that continues over time and is known to interfere with another’s enjoyment of land; gravity of harm outweighs the utility of the actor’s conduct
    1. factors to consider in what constitutes unreasonable interference
    1. depreciation of property value - use of property that depreciates the value of surrounding property is not enough by itself to constitute a nuisance
    2. discomfort - serious discomfort (noise, odors, smoke) is enough
    3. fear of harm - significant factor if the use puts person in fear of harm
    4. character of neighborhood - great importance in determining nuisances
    5. social value of the conflicting uses - want to avoid more serious harms
    6. priority in time - if P has "come to the nuisance" he has a less appealing case
    1. lateral and subjacent support
    1. lateral support - owner of neighboring land has a duty to provide the support that the subject parcel would need and receive under natural conditions; ordinarily there is no right to support of structures on the land
    1. the right of lateral support can be waived; also can be expressly expanded
    1. subjacent support - same rules as lateral support, arises when on person owns surface rights and another person owns some kind of subsurface rights
    1. Remedies
    1. Injunction - get D to stop what is causing the nuisance
    2. damages
    1. temporary damages
    2. permanent damages - compensation for total economic loss caused by D’s actions in the past and in the future
    1. four ways of resolving nuisance claims:
    1. grant plaintiff injunctive relief - D can then bargain with P to get the right transferred back to him
    2. let the activity continue if the defendant pays damages
    3. let the activity continue by denying all relief
    4. abate the activity if the plaintiff pays damages

 

  1. Servitudes (easements and covenants) - defined primarily by private arrangements in light of market forces
  1. creation of easements (an interest in land) -
  1. creation by express grant - must be a writing signed by the grantor; if oral permission is given to enter the land, a license is created (to satisfy Statute of Frauds)
    1. licenses - permission given by the occupant of land allowing the licensee to do some act that otherwise would be a trespass
    1. two exceptions to rule that license is revocable
    1. a license coupled with an interest cannot be revoked (incidental to ownership of a chattel on the licensor’s land)
    2. a license that becomes irrevocable under the rules of estoppel (very similar to an easement)
  1. creation by reservation - a provision in a deed creating some new servitude which did not exist before as an independent interest; a grantor may convey land and reserve for himself an easement over the land
  2. creation by exception - a provision in a deed that excludes from the grant some pre-existing servitude on the land
  3. servitude created by estoppel - if improvements have been made on the land (such as a road), and the true owner knows of them and does not object, an easement by estoppel is created
  4. by implication - created by operation of law, and Statute of Frauds does not apply
    1. easement from existing use (AKA quasi easement)- easement is implied on the basis of an apparent and continuous use or a portion of the tract existing when the tract is divided; can be implied only over land granted or reserved when the tract was divided and only in favor of the dominant tenement; the use must exist at time of tract division and must have been continuous, apparent, and reasonably necessary to the enjoyment of the dominant parcel
    2. easement by necessity - easement is implied when the court finds the claimed easement is necessary to the enjoyment of the claimants land and that the necessity arose when the claimed dominant parcel was severed from the claimed servient parcel

factors to consider if it is necessity or not; it must be shown:
  1. other types of easements
  1. easement in gross - benefits a person personally and not as an owner of land; gives one the right to use the servient land

    2. i. modern trend is to hold easements in gross transferable (can be assigned)

  2. easement appurtenant - benefits the owner of the easement in the use of the land belonging to the owner
  1. easement by prescription - like adverse possession
    1. the usual elements for adverse possession must be shown:
  1. public prescriptive easements - obtained by long continuous use by the public under a claim of right
    1. landowner must be put on notice, by the kind of extent of use, that an adverse right is being claimed by the general public, not by individuals

ii. adverse possession elements must also be shown
  1. theory of implied dedication - seeks a substitute for a grant in an implied dedication
  2. beach access - (majority) - in most states public beach is the part from the water to the mean high-tide line; this is held in public trust
  1. hard to establish prescriptive easement because most courts hold access is with permission of the owner
  2. to get around this, some courts have used the public trust doctrine:
    1. fore-shore area is public
    2. the dry sand area is also in public trust, because people cannot enjoy the wet sand area without use of the dry sand area (Matthews v. Bay Head Improvement Association)
  1. termination of easements
  2. negative easements