Manns Property Spring 2011THEMES TO CONSIDER

o Social Contexto Formal vs. informal sources of rightso Alienability dilemmao Contractual freedom and minimum standardso Social welfareo Justified expectationso Distributive justiceo Utilitarianism/Cost-Benefit analysis

PROPERTY RIGHTS

Bundle of Rights – limited and relativeI. Question to ask: What set of rights and duties does the owner have with respect to which people

and vice versa?II. Three ways to think about protecting property rights

A. Property Rule- protect owners entitlement- owner must give consent before entitlement can be taken away (Jaque v. Steemer)

B. Liability Rule- entitlement can be taken away without the entitlement-holder’s consent, only upon payment of the court-appointed damages

C. Inalienability Rule- can’t sell entitlement (at least not at the time)III. Privilege to use

A. Limits- Can’t harm others in the use of your property (externalities)B. Potential nuisance effect

IV. Right to exclude & right to control use of property (MOST IMPORTANT RIGHT) “Your home is your castle”

A. Theft, trespass- legal protectionsB. Can order injunctions, order to remove, damagesC. Limits- necessity, emergency

1. Public policy- government can potentially trump private property rights if the activity has a public purpose and just compensation is given (takings law)

D. Things to recognize1. Competing policies and social context2. Fact that property rights are limited and relative as rights and duties are always

exercised in a rational wayE.Significance of right to exclude

1. Security- property used effectively because owner doesn’t fear interference or ouster (no short-term focus of stripping the land of all its value as quickly as you can)

a. Prevents allowing anyone to use/exploit propertyb. Invest time and labor and funds into propertyc. If don’t have security in exercising property rights, won’t invest in it (detriment

to society)2. Efficiency- guard against overuse of land3. Other facets of property rights turn on exclusion power

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Manns Property Spring 2011F.Extent to which you use your property determines your right to exclude others

1. Everything in your property is your own dominion, so have absolute right to exclude private parties

a. Jacque v. Steenberg 2. The more you open up your property by letting more people on, the more you open up

to letting people exercise their own rights on the propertya. State v. Shack

3. Common carriers, innkeepers open up property to the public for more expansive usea. Uston v. Resorts International

V. Power to transfer ownershipA. Complete or partial sales

1. Easement- right of accessB. Transfer whole property for period of time

1. LeaseC. Enforceability

1. Recording system for real property- legal recording system in each jurisdiction2. State recognizes new owner or designate

D. Limits- can’t impermissibly discriminate on who you rent/sell toVI. Immunity/freedom from taking or damage without consent

A. Protection from encroachment by others, from state conducting actual seizures, from regulatory takings (effective occupation of property through regulation)

B. Limits- statute of limitations, need for blameworthy activity (negligence or intent to damage); police can seize contraband without compensation, forfeiture of property used to commit a crime

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Manns Property Spring 2011

1- PRIVILEGE TO USE AND ENJOY (most basic right)

I. Factors:A. Intent to Control – mental stateB. Notice of Control – physical acts of demonstrating controlC. Effective Exploitation Through Control – whether/to what degree social value is produced

II. Default = Rule of Capture First in time, first in rightA. Possession leading to ownershipB. Policy

1. Simple, universal rule (clearly determine who owns what)2. Easily administrated objective rules3. Lockean labor dimension4. Incentivize and protect investment in resources

C. Potential problems:1. Wasteful competition2. There isn’t always a clear winner

D. Is there constructive possession?E. First in time, First in rightF. Wild Animals:

1. Have to mortally wound, even if not the one in pursuit2. Factors:

a. Social Customsb. Productivity Incentives

3. Right to Exclude:a. If you’re trespassing, the rule of capture doesn’t apply

4. Pierson v. Post : Post is closing in on a fox, Pierson intervenes and kills ita. Have to mortally wound the fox to possess itb. Spectrum of possible PROXIMITY rules to establish possession

i. Spottingii. Pursuing (putting others on notice that you want it)

iii. Closing in (DISSENT)(A) Pursuit within reasonable prospect of capture(B) He invested energy and time, and was closing in on the wild animal(C) Other party has moral duty not to interfere with the pursuit he sees in

progress iv. Wounding (MAJORITY)

(A) Mortal wounding by not abandoning pursuit(B) No right to claim exclusive possession until successfully reduce it to his

possession through mortal wounding(C) About results, not effort(D) Property should go to those who succeed in actually producing

something of value (not just who works the hardest to get it)v. Trapping

vi. Killing3

Manns Property Spring 2011c. Dissent: Lockean theory- Post invested time and energy

5. Policy Considerations:a. Eliminate dispute about ownership- mortally wounding is bright-line ruleb. Decreases litigationc. What about awarding fox to owner of land?

G. Personal Property:1. Was there malicious interference?2. Property must be intentionally abandoned3. Possession requires physical control and intent to control or exclude others4. Popov v. Hobayashi : P caught Bonds’ 73rd homerun ball- not clear that ball was secure, lost his

balance, attacked by crowd, H got the ball. P sued H for conversiona. Ball is like a wild animal- when it was hit, it became intentionally abandoned propertyb. Court decides on basis of pre-possessory interest- sell the ballc. Policy Considerations:

i. Preserve social peaceii. Promote investment in industries

iii. Reward and encourage due diligenceH. Problems with Rule of Capture:

1. Supply-side:a. No incentive to cultivate open-access resources

2. Demand-side:a. Likely to generate waste

3. Tragedy of the CommonsIII. Open Access:

A. Tragedy of the Commons:1. Resource held in common is vulnerable to overexploitation

B. No exclusions or governanceIV. Community Property:

A. Restricted to access by members of a particular communityB. Governed by strong sense of social norms

V. Is there a pre-possessory interest?:A. If you’ve made a significant but incomplete effort, you’re considered to have the interests

VI. Water Rights: Surface or Groundwater? Eastern or Western State?A. Challenges presented by water rights

1. Fugitive – often not in one place2. Replenishable

a. Volume always changingb. Issue of ongoing right to use

3. Different contexts – Regulations vary by region (where water is in a given place)a. Surface watersb. Aquifiers/Groundwater

B. Surface Waters:1. Eastern States - Riparianism:

a. Land is adjacent to water- riparian rights are tied to (appurtenant) the land and can’t be alienated separately

b. Factors to Balance:4

Manns Property Spring 2011i. Social value of useii. Cost-benefit analysis for affected parties

iii. Extent of potential harmc. Natural use takes priority over artificial use

i. i.e. drinking, household use, livestock take precedence over irrigation, power, dams

d. Rights are shared- tied to the land 2. Western States - Prior Appropriation:

a. First in time, first in righti. First to use the water has first right to that increment of water for that activityii. “Waterfall” of property rights

b. Appropriator can divert water out of original basinc. Water use must be beneficial to owner d. Rights terminate if beneficial use stops

i. Unlike Riparian rightsii. The nature of the benefit need not be the same over time

e. Transferability is allowed but limitedf. Extensive regulation and oversight by water boards

3. Minority Rule - Mixed Riparianism and Prior Appropriation:a. First in time/first in right, combined with riparian reasonableness concerning water useb. Balancing test of broader beneficial use and potential harm if there are competing

claims4. Riparianism is middle ground between Prior Appropriation and Rule of Capture - vested right

in the water, but limited right of capturea. Requires sharingb. Balance relative utility of competing usesc. Reasonable use without waste

C. Aquifers/Groundwater :1. Aquifer :

a. Natural well of water, can rapidly be consumedb. Less replenishable than rivers and streamsc. Use of one aquifer on one property may come at the expense of other neighbors as

water levels go down2. Three forms of regulation

a. Minority Rule- Free Use/Absolute Ownership:i. Each surface owner can withdraw as much water as he wantsii. Prohibition of waste

b. Eastern States- Reasonable Use:i. Owners of surface land can engage in reasonable use if they use the water on

their surface tractsii. Correlative Rights:

(A) Shared use as each owner can use water in equitable wayiii. Liable if your withdrawal unreasonably harms neighbors or exceeds reasonable

sharec. Western States- Prior Appropriation:

i. First in time, first in right5

Manns Property Spring 2011ii. First to use the water has the first right

VII. Finders: Is there a string of finders or takers?A. Absent evidence of superior title, law presumes in favor of possessionB. Willcox v. Stroup : W found Confederate military papers in attic, SC state archive got restraining order

against him selling them1. Absent superior title, law presumes in favor of possession

a. Possession is evidence of ownership in cases where no party can establish title by preponderance of evidence

b. Possession is 9/10 of the law2. Policy Considerations:

a. Promotes stabilityb. Incentivizes possessors to invest in use of their property

i. If possession meant uncertainty, would under-invest, not maintain the propertyC. Finder wins over subsequent possessor, even w/out official title

1. Policy Considerations:a. Entrusting goods to another is efficient practiceb. Prior possessors expect to prevail- law is justc. Protection of peaceable possession- deter disruptions that would be invitations for

stealing property from findersd. Protecting a finder who reports the find rewards honestye. Protecting a finder rewards returning useful item to society

D. Finder v. Owner of Premises :1. Owner claims actual or constructive possession

a. Property owners have stronger claims over things found on premises than the finderb. Someone who’s allowed on the property is effectively a licensee – can’t just take

things that are found there2. When finder is trespasser:

a. Landowner winsb. Discourage trespass and unauthorized entries

3. When finder is employee:a. Employer wins

4. When finder is on premises for limited purposes:a. Landowner wins

E. When object is found under the soil:1. Landowner wins

a. Owners of land expect that the objects under the soil belong to them2. Exception- Treasure trove:

a. Finder wins unless trespassingF. When object is found in private home:

1. Owner wins2. Homeowners intend to exclude everyone and admit only for specific limited purposes that

don’t include finding property3. Owners has strong expectations that everything in their home is theirs

G. When owner is not in possession of the property:1. If invitee finds it- he keeps it

H. Native American artifacts:6

Manns Property Spring 20111. When found on tribal or federal lands, belong to tribe with strongest connection

VIII. Is the property Lost or Mislaid?:A. Lost :

1. Accidentally and casually lost2. Finder owns

B. Mislaid :1. Intentionally place and then forgotten2. Owner retains title3. More likely to come back and look for mislaid property

C. Finder’s Statutes:1. Require finder to report find to the police, then aware finder with the property after the

statutory period is satisfiedD. Abandoned :

1. Anyone can claim abandoned property2. Hard to know what’s abandoned- unless there is unequivocal indication (like a note)

IX. Relativity of Title (See p. ____) PRIOR POSSESSOR WINSA. Prior peaceable possessor ousted by subsequent possessor has the right to recover possession even

if the prior possessor cannot demonstrate that she has title1. Proof of title isn’t necessary to dispossess second possessor2. All that matters is whether the prior possessor has stronger claim to the property than the

other partyB. Rule applies to object acquired through theft, trespass, or ouster

1. Policy:a. Concern about violent self-help if give second possessor a stronger claimb. Administration costs – prior possessors would face costly litigation to prove that

they’re not theivesX. Genetic/Personal Information:

A. Property Rights in Cells/Genetic Information : Can property right be owned by others but not independently alienable?

1. Inalienable to individual, alienable to patent-holder researchers2. Moore v. Regents of UCLA : M was treated at UCLA, cells were taken from his spleen and used

to develop patented cell line. M sued for conversion, breach of fiduciary duty, and breach of informed consent

a. UCLA breached fiduciary duty and informed consentb. M doesn’t have property interest in his cells- No conversion

i. People don’t general consciously retain property rights in removed body partsii. No expectation to retain right to excised cells

iii. The cell line at issue is factually and legally distinct from M’s excised cellsc. Policy Considerations:

i. Lockean – cells gain value when they’re transformed by doctorsii. Balance interests

(A) 3rd party information costs(B) Scientists might not always be able to know who exactly cells came

fromiii. Numerus Clausus issue- leave property law (definitions of what is property) up

to the legislature, not the courts7

Manns Property Spring 2011iv. Disclosure obligations protect patients , don’t need tort liability for conversion

(A) As long as the doctor discloses research and economic interest that may affect his judgment

v. Where do body parts lie on the spectrum of what’s actual property and what’s alienable?

(A) Personhood concerns about commodifying body parts(B) Concern of exploitation of the poor and body harvesting(C) Loss of control absent effective property rights protection

d. Dissent i. Property is complicated – there’s no catch-all principles for different sorts of

casesii. Law doesn’t expressly prohibit sale of body parts or fluids for research (and M

is being prevented from being able to sell his cells if he wanted to)B. Right of Publicity :

1. Assignable during life and is inheritable and devisable2. Protects private citizens from reproductions of their likeness without consent3. MLK Center for Social Change v. American Heritage Products: AHP sold plastic busts of MLK,

MLK’s wife sued for injunction for violation of right of publicitya. Right of publicity is logical extension of right of privacy to protect public figuresb. Protect private citizens from reproductions of their likeness without consentc. Right of publicity is assignable during one’s life and is inheritable and devisable d. Policy Considerations :

i. Encourages effort and creativity- productive use of one’s lifeii. Inheritable to protect against loss of value if one dies early in life

iii. Right to protect reputation from effects of commercial exploitationC. Labor and Investments : Did someone create something that got stolen?

1. Lockean labor theory as basis for awarding property rightsa. You only reap what you sow

2. Intl News Service v. Associated Press : INS took competitor AP’s news stories about WWI, AP sought an injunction

a. Property analysis focuses on P’s rights- created news through their effortsb. Right to exclude others from hot news

3. Copying hot news is unique- product is valuable for only a short period of timeD. Case for Legislative Expertise:

1. Broad power of investigation2. Legislature can provide clearer definitions of permitted and unpermitted actions (aren’t

limited to creating a rule from the case at hand)3. Time limits on rights and remedies and proscribe penalties and remedies

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Manns Property Spring 20112- RIGHT TO EXCLUDE AND CONTROL (most important right)

I. Recognize competing policies and social context and fact that property rights are limited and relativeII. Default rule for right to exclude: generally there is a right to exclude those you don’t want on your property

if you don’t open it up to outsidersA. Doesn’t matter why owner says people can’t come onto his property

III. The more property is opened to the public, the greater the legal obligations may be imposed on owner to allow access (the more the owner’s privacy and right to exclude diminishes)

A. Land closed off to othersB. Land open to certain peopleC. Land open to the general public

IV. Do you have the right to exclude?A. Absolute right? (strict liability for trespassers)

1. Right to control what you own a. Autonomy, privacy, dignityb. Efficiency grounds – maximize social welfare by delineating property rightc. Laws guard against violent self-help (recourse to judicial injunctions)

B. Jacque v. Steenberg 1997 (p. 28)- Alternative, lawful route for D to take was dangerous and expensive, so crossed P’s property without damaging it.

1. Principles to consider regarding right to excludea. Personal autonomy- court imposes strict liability for privacy incursion (sense of

security should be free from violation)b. Societal interest in protecting real property and deterring intentional trespassc. Deter self-help- trespass protection designed to prevent owners from doing extreme

things like building tall wall or fenced. Freedom to contract- intentional disregard for property rights would make people

allow contracting processe. Deterrent value- damages need to be substantial enough to deter people from

trespassing (if the fine is more than what trespasser will benefit, will be deterred)V. Did you open up the property to other residents?

A. Right to exclude may not be absoluteB. Can exclude visitors of other residents of the propertyC. Balance competing interests of owner and resident

1. Owner’s right to use and security vs. resident’s right of privacy and free associationD. State v. Shack 1971 – Ambiguous state of migrant workers. People trying to help migrant workers

entered Tedesco’s farm without permission to speak with migrant workers (not tenants). They were told to leave because they wouldn’t meet with the workers in Tedesco’s presence. Charged with trespass.

1. Narrow holding- under NJ common law, real property owners don’t have the right to bar access to government services available to migrant workers

2. Competing interests at stake in determining property rights- opening property to the public erodes right to exclude.

a. Migrants’ interests vs. property owner’s interestsb. Considerations

i. Accommodate right of owner and right of people on the property

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Manns Property Spring 2011ii. Migrants shouldn’t be insulated from government-funded or other charitable

efforts to help themiii. Migrants should be entitled to rights of privacy and non-interference with right

to live with dignityc. Farmer’s rights:

i. To farm without interferenceii. Interest in his own and employees’ security

iii. Right to exclude (balanced against rights and interests of the workers)d. Migrant workers’ interests:

i. Not being isolatedii. Being allowed to receive visitors

iii. Live with dignity and enjoy associations customary among citizensiv. Privacy

VI. Did you open up a business to the public?A. Majority Rule:

1. Businesses open to the public- unrestricted right to exclude except for common carrier and innkeepers

B. Minority Rule:1. All business owners who open premise to public have no right to exclude people unreasonably2. Uston v. Resorts International Hotel 1982 (p. 16) Card counter excluded from casino. Court

holds that all property owners (not just common carriers) who open premises to the general public have no right to unreasonably exclude people. No laws against card counting. (*minority rule- most hold that as long as not unlawfully discriminating, can refuse people from business premises)

a. Majority rule- businesses open to the public have unrestricted right to excludei. Exception

(A) Common carriers/innkeepers- for whom public has a right of reasonable access

(B) Anti-discrimination laws hedge ability to keep people outii. Right to exclude is qualified by anti-discrimination laws

b. Minority Rule (Followed by Uston) – all business owners who open premises to the general public have no right to unreasonably exclude

c. Someone who opens property to the public has less privacy interests and free association interests at stake (compared to State v. Shack)

VII. Do any exceptions apply?A. Consent of ownerB. Justified by necessity to prevent more serious harm:

1. Ploof v. Putnam: a. Can moor ship to private dock if necessity- if owner pushes you off dock, you can sue

for damages to ship2. Vincent v. Lake Erie Transportation:

a. Necessity isn’t complete defenseb. If ship damages dock, you have to pay to fix it

C. Encouraged by public policy D. Involuntarily forced onto the landE. Common Carrier/Innkeeper- need reasonable basis to exclude

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Manns Property Spring 2011F. Anti-Discrimination LawG. Adverse possession-

1. Overt, actual, continuous occupation of another’s land without consentH. Government regulation/Takings

VIII. Is there trespass to personal property?A. Trespassing : no need to show actual harm to the land or other injury

1. Unprivileged intentional intrusion on property possessed by another2. Intent satisfied by voluntary act- don’t have to intend to trespass3. Requires physical intrusion – interference with owner’s right to exclusive possession4. Entails strict liability

B. EXCEPTION TO TRESPASS = Lawful Trespass 1. Consent of owner2. Justified by necessity (incomplete defense if damage was done to the property)3. Public policy justifications (stopping a crime, saving someone’s life)

C. Trespass to Chattels :1. Limited to personal property2. Damages for intentional interference with possession of personal property3. Must prove actual damage4. Intel Corp. v. Hamidi 2003- does trespass to chattels apply to computer systems?

a. In the case of a computer, sending out mass emails is only tortuous if the computer is damaged or functioning impaired

IX. Does right to roam apply? – custom permits one to enter onto another’s property (generally limited to unenclosed, rural land) without trespass as long as there is no injury to the land

A. One can enter onto another’s unenclosed property without a trespass as long as there’s no injury to the land

B. Posting Laws:1. ½ of states- can hunt unless land is prominently posted2. Affirmative burden of notification on possessor

C. More efficient in a case where there are a lot of people who live off the land (hunting)D. Landowner is lowest cost avoider and should be responsible to put up fences, etc. if he wants to keep

people outE. Trespass by livestock – laws vary by region and custom

1. Eastern states – fencing-in lawsa. Owners are responsible to keep their animals in so they don’t escape and harm other

people’s property2. Western states – fencing-out laws

a. Concerned landowners must put up fences to keep others’ livestock outb. Otherwise, land is fair game

X. Significance of Right to Exclude:A. 1- Security- puts property to most productive useB. 2- Efficiency- owner can guard against overuse of landC. 3- Key to other rights

XI. 3 types of protection:A. Property Rule Protection-

1. Entitlement owner must consent before entitlement can be taken away2. Jacque

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Manns Property Spring 2011B. Liability Rule-

1. Entitlement can be taken away without the entitlement holder’s consent upon payment of court-awarded damages (fair market value)

C. Inalienability Rule-1. Can’t sell the entitlement at a given time

XII. Factors to Consider:A. Extent to which property owner has opened property to publicB. Can’t unreasonably use property to harm othersC. Analysis of the meaning and social purpose of property rightsD. Property rights are not absolute

XIII. Exceptions to the right to excludeA. NecessityB. Involuntary entry (being forced to enter the property, not mistaken entry)C. Common Carrier (need reasonable basis to exclude)D. Antri-Discrimination LawsE. Right to Roam (right to access land for hunting unless owner puts up fence or posts no trespassing

signs)F. Adverse PossessionG. Government Regulations/Takings

XIV. WAIVERS of right to Exclude:A. License :

1. Give informal permission to another to use property of another for a narrow purpose2. Temporary3. Revocable at any time

a. Automatic revocation if the owner conveys the land or does something inconsistent with the continuance of the license (like puts up a fence)

4. Licensee never has possession of the landa. Right is nonexclusive and shared with owner

5. Irrevocable license : Licenses can become irrevocable under certain circumstancesa. Easement by estoppel

i. License coupled with an interest ii. Promise to grant a license (like a ticket to an upcoming event- if airline wants to

revoke an airplane ticket, they have to compensate)iii. Constructive Trust-

(A) Really a subset of easement by estoppels6. Different than an invitee – enters for a purpose (like a repairman)

a. More like a contractb. Higher standard of care for the host than with a license

7. Different than a lease a. Lessee has possession of the landb. Lessee has exclusive right of access

B. Bailment :1. Owner temporarily transfers his possession (chattel) to a non-owner for a limited purpose2. Rightful possession of a chattel by non-owner3. Two criteria :

a. Actual physical control12

Manns Property Spring 2011b. Intent to exercise physical control

4. Bailee’s Duty of Care :a. Based on purpose of bailmentb. Mutual benefit/Non-gratuitous:

i. Beneficial to both partiesii. Bailee must use ordinary diligence to protect object from damage or loss

iii. E.g. house sitter – both owner and sitter benefit c. Benefit of Bailor/Gratuitous:

i. Benefit is solely for bailorii. Bailee is liable for gross negligence

iii. E.g. Car parked in manned garaged. Sole benefit of bailee:

i. Benefit is solely for baileeii. Baliee must use extraordinary care in protecting from loss or damages

iii. E.g. loaned textbookC. Easement:

1. Grant of irrevocable permission to use or limit use of property owned by anotherD. Covenant:

1. Right arising from promise respecting the use of land by one landowner to another

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Manns Property Spring 20113- POWER TO TRANSFER

I. Enforceability:E. Recording system

II. Limits:F. Public Accommodation Laws

XV. Relativity of Title :A. Prior possessor who was ousted has right to recover possession even if he can’t demonstrate that he

has titleB. Not a defense for current possessor to claim that prior possessor is not true ownerC. Prior possessor just has to have stronger claim than subsequent possessor.D. Applies to objects acquired through theft, trespass, or ousterE. Tapscott v. Lessee of Cobbs : Rives sold land to Lewis, no proof that she ever fully paid. Lewis died

and T took possession w/out pretense of title. Cobbs is L’s heir and wants to eject T.1. Prior peaceable possessor who was ousted by subsequent possessor wins even if she can’t

demonstrate that she has titlea. Proof of title isn’t necessary to dispossess the second possessor b. If not in physical possession of the property, can be seen as having constructive

possessionF. Policy considerations:

1. Concern about violence, self-help2. Administrative cost concern- Prior possessors would face costly litigation to prove they aren’t

thieves3. Constructive possession for prior owner because she has stronger claim

XVI. Nemo dat :A. You can’t give what you don’t have

1. Can’t give a better title than he has2. Derivation principle - transferee’s rights derive from those of the transferor

B. Default Rule = Nemo dat + First in time, first in right1. A to B2. A to C3. B is rightful owner4. Must track back to ultimate root of title

a. Importance of recording real and personal propertyC. Personal Property :

1. Absolute nemo dat2. Purchaser of stolen goods from thief does not have title to that property

a. Even if it was a good faith purchaserb. If the chain of title started with theft, the original owner still has title

3. UCC’s Limited Good-Faith Exceptions (relieves harshness against good faith purchasers) a. 1- GFPFV of property obtained based on fraud (the property was initially obtained

through fraud in inducement, duress, undue influence, mistake, breach of fiduciary trust)

i. Title is voidable when property held by party committing fraud(A) True owner can sue to get property back

ii. After sold to GFPFV, owner can only sue fraudulent party for damages14

Manns Property Spring 2011(A) Unfair for original owner to be able to void the good faith purchaser’s

titleb. Merchant Exception :

i. Owner entrusts the good to a dealer who then sells it, GFPFV gets to keep it, even if original owner challenges title

ii. Owner has action for damages against dealeriii. Policy Considerations:

(A) Owner can still sue the dealer(B) Owner is least cost avoider, has incentive to carefully choose who to

entrust property to(C) Reliance interest of purchasers from a dealer

c. Can’t always let GFPFV’s keep stolen propertyi. Thieves are likely judgment proof (real owner may have no one to sue)ii. Fraud- thieves can effectively launder money by quickly selling stolen goods to

good faith purchasersiii. Owner isn’t lowest cost avoider when it comes to people stealing their

property (as opposed to the case where an owner entrusted a dealer to sell property)

D. Fraud and Forgery :1. Exception with GFPFV. Don’t want to

a. Cut off genuine purchasers who have made a good bargainb. Facilitate fraud

2. Forged Deed - Void:a. GFPFV does not prevail

i. Don’t want to encourage the unscrupulous to steal property by forging deeds then selling them

ii. Would be the equivalent of money launderingb. As if the transaction never happenedc. Harder to detect than fraud- you can record to protect against fraud

3. Fraud Title - Voidable:a. 1st purchaser is partly to blame in cases of fraud as could easily protect his interests by

recording (he knew he was entering into a transaction, but was deceived)4. Problems with Forgery Exception for GFPFV:

a. GFPFV can’t rely as much on recording system- if deed was forged, they lose5. Zurstrassen v. Stonier : Brothers own two vacant lots- R forges K’s signature and sells quit-

claim deed to GFPFV, who sells under warranty deed to another GFPFVa. Forged deed is void and provides no legal title or protection for GFPFVb. If K had ratified the fraud by failing to act diligently in discovering the forgery, K would

be estopped form challenging sales6. McCoy v. Love : Elliot tried to cancel a deed claiming forgery- She didn’t want to tell all of her

property, but Russell wrote it in K and she was illiterate. Russell sold to 3d party, who sold to Love

a. Fraud in the inducement- deed was voidable, but after GFPFV title was legalE. Policy Considerations- Why owner can recover when GFPFV buys from thief:

1. Thieves are often judgment-proof2. Danger of fraud

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Manns Property Spring 20113. Difficult to avoid thieves4. Property may have high personal value to owner that can’t be recovered through damages

4- IMMUNITY FROM TAKING OR DAMAGE WITHOUT CONSENT

II. Protection against encroachments III. Limitations:

A. Statute of limitationsB. Need for blameworthy activity (negligence, intent)

RECORDING ACTSCOMPETING CLAIMS FOR REAL PROPERTY

Everything ultimately comes down to recording (http://www.youtube.com/watch?v=jsVgi8hoFFc)

I. Title (recorded in a timely manner) gives enough legal rights to determine possessor rightsA. Always ask: Has someone recorded? Why haven’t they recorded? Is there a good faith purchaser for

value?II. Delivery to Establish Transfer of Real Property

A. To establish transfer, key terms must be described1. Parties2. Property description3. Grantor’s intent to convey4. Grantor’s signature

B. Delivery -1. Deed must be delivered to grantee2. Purpose: Clearly establish grantor’s intent to part with property and that grantee owns the

property3. If it occurs, title passes immediately to the grantee (return to grantor has no effect)

C. Significance of possession/recording :1. Presumption that grantor intended transfer2. The presumption can be rebutted through extrinsic evidence:

a. Transfer meant to occur at deathb. Default on installment land contract (mortgage foreclosure)c. Safety deposit box with notarized deed that was never delivered

i. Some courts require physical deliveryii. Other courts okay with constructive deliver

D. Need for delivery requirement 1. High stakes of valuable property2. Expense of fact-intensive inquiries3. Possession is a key indicator of ownership

III. Recording system - Covers Deeds, mortgages, leases, easementsA. Central registry at each localityB. Common Law:

1. First in time, first in right2. A → B, then A → C

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Manns Property Spring 2011a. B winsb. Regardless of whether or not B recorded

C. Recording Acts :1. A → B who doesn’t record, then A → C who records

a. C winsD. Why record for real but not personal property :

1. Real Property :a. Valuableb. Doesn’t movec. Not transferred oftend. Use is importante. Often multiple ownership is desiredf. Establishes noticeg. Create incentive for people to feel secure in investing in real property

2. Personal Property :a. Only registered if it is exceptionally valuable or it serves as a security b/c owner is

borrowing against it (e.g. art)b. Moves aroundc. Less valuabled. Transferred oftene. Use is importantf. Multiple ownership is less important

E. Grantor-Grantee Index : 1. Separate files kept for grantors and grantees

a. Grantor Index:i. Alphabetically & chronologically listed by grantor’s last name

b. Grantee Index:i. Alphabetically & chronologically listed by grantee’s last name

2. Index Descriptions: Bare outlines of each transactiona. Names of grantor and granteeb. Description of landc. Type of interest conveyed, date recordedd. Books and pages where document can be found

3. Marketable Title Acts : varies depending on how many decades you go back to confirm that the chain of title is intact

a. Have to re-record ownership and confirm that chain of title is intact every certain number of years (generally 30 to 40)

b. Claims deemed extinguished if not re-recorded, searchers need not enquire furtherc. Policy considerations:

i. May curb Adverse Possession claims by establishing that valid claim not recorded w/in 30 to 40 years is extinguished

4. Steps to a Title Search :a. 1- Go backward through grantee index to find links in chain of title (find the root)

i. Index is sorted alphabetically and chronologicallyb. 2- Go forward through grantor index to find out what has been done with the property

i. Beginning with date of execution of transfer date of original recording17

Manns Property Spring 2011ii. Make sure there aren’t multiple conveyances or mortgages

c. 3- Examine tract index if the jurisdiction has itd. Potential Problems :

i. Possibility of adverse possessionii. Standard title search might entail examining wills and liens filed at other offices

iii. Was it a Donation?(A) If so, common law applies (B) First in time, first in right

5. Possibility of Tract Recording System:a. List tracts of land, rather than grantor and granteeb. Recording is based on locationc. Lowers search costs- buyer focuses on the parcel, not chain of title

F. Before you close a land purchase :1. Search title for adverse interests

a. Will lose if buy in the face of a previously recorded interest (constructive notice)G. After you close a land purchase :

1. Record immediatelya. Puts subsequent potential purchasers on noticeb. Win race to courthouse against any prior unrecorded interests

H. Types of Recording Acts 1. Baseline Principle : Nemo dat (can only convey what you have) + Common law (first in time,

first in right)2. 1- Race Regime

a. Only accepted in NC and LAb. First to record wins, even if he knows about an earlier conveyancec. A → B, then A → C

i. C records firstii. C wins

d. Advantages:i. Strong incentive to record

(A) GFPFV would have constructive notice of land ownership, so would only purchase if can immediately record

e. Disadvantages:i. Harsh, bright-line ruleii. Potential for abuse

3. 2- Notice Regimea. GFPFV wins unless he has notice of earlier conveyanceb. Three types of Notice

i. Actual Notice :(A) Purchaser knows about earlier conveyance

ii. Constructive Notice :(A) Existence of a record of another owner in recording system

iii. Inquiry Notice :(A) Implied notice based on facts(B) Facts suggest someone else owns the property- reasonably purchaser

would have investigated18

Manns Property Spring 2011c. Moral dilemma: someone doesn’t want to find out if the property has been recorded

(people might be colluding with the seller)i. Shelter Rule

(A) If a subsequent purchaser buys from a GFPFV, he will prevail in any situation where that GFPFV would have prevailed

(B) Applies even when they had actual knowledge of prior unrecorded interest

(C) Gives GFPFV full protection of the recording statute(D) If the subsequent purchaser is the original owner, he can’t claim the

shelter rule (1) He is the one who created the situation(2) The rule is intended to thwart potential collusion

d. A → B, then A → C i. If C doesn’t know about sale to B → C wins as GFPFVii. If B records before C purchases → B wins because of constructive notice

iii. If C knows of B’s purchase → B wins because of actual noticeiv. If C sees someone other than A living on the property → B wins because of

inquiry noticee. Estoppel by Deed

i. A cannot claim superior title to B if A grants to B before A has title and later receives title

ii. Doesn’t prevent C, a GFPFV, from winning if A sells official title to C and B hasn’t recorded

f. Advantages:i. Gets around potential for outright fraud by subsequent purchasersii. Greater fairness

iii. Gives incentive to record quickly(A) Provide constructive notice to subsequent purchasers(B) Protects against subsequent sales by grantor

g. Disadvantages:i. Some reduction in certaintyii. Disputes about who knew what and when

4. 3 - Race-Notice Regimea. Subsequent purchaser wins only if:

i. 1- He is a GFPFV with no noticeii. 2- He records before prior instrument is recorded

b. Eliminates moral hazard of unscrupulous second purchaser knowingly recording before initial purchaser

c. Advantages:i. Eliminate unfairness of pure race approach of unscrupulous subsequent

purchaserd. Disadvantage:

i. Doesn’t give strong incentive for B to record5. 4 - Mixed Regime

a. Grace period for prior transferees to prevail over GFPFVb. If file within certain amount of time of another party’s GFPFV, prior transferee prevails

19

Manns Property Spring 2011I. Personal Property Recording :

1. Planes/Ships:a. Federal registration with race-notice regime

2. Cars:a. State registration

3. Art:a. No centralized registry for title of art works

4. Intellectual Property:a. Patent:

i. Recording act w/ three-month grace period to register assignments/conveyances

b. Trademark:i. Recording act w/ three-month grade period for assignments under Lanham Act

c. Copyright:i. Loser regime- Failure to register does not invalidateii. Register b/c you can get statutory damages when actual damages are hard to

proveJ. Limits of Title Searches :

1. Quitclaim Deed :a. Transfers whatever rights the grantor has, w/out any warranty that there are such

rightsb. May be a sign to buyer that seller isn’t sure he has anything to sell (he might not have

full title to the property)i. Should place duty on buyer to ask seller why choosing that form of deed

c. Doesn’t necessarily raise red flags- burden is implicitly on buyer to protect himself through due-diligence

d. Hard to tell what reasonable inquiry duty is place on buyers2. Adverse Possession :

a. Establishes new chain of title i. But no notice b/c adverse possessor doesn’t need to recordii. Creates problems for people relying on land records

b. Title by Adverse Possession trumps recorded conveyancesc. Policy Considerations:

i. Almost impossible to realize that AP claim existsii. Raises information costs- “gotcha” game for purchasers

iii. No incentive for AP to file quiet title action, give notice, or record(A) Requiring AP to record might be unfair, as AP’or is probably on land

thinking it’s already his- doesn’t know he has to record just because he met statutory period

3. Wild Deed :a. Deed is recorded but can’t be located in chain of title

i. Very difficult or expensive to findii. Subsequent purchaser cannot feasible find the record when conducting a title

searchb. No constructive noticec. A → B who doesn’t record

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Manns Property Spring 2011i. Then B → C who does record

(A) Deed is wild because no link from A → Cii. Then A → D who records

iii. D wins under race regimeiv. D wins under race-notice regime if no actual or inquiry notice

d. Solution:i. When C records, he should make sure the transfer from A to B was also

recorded to make sure transfer of title is completeii. If another party (non-GFPFV) already recorded, file quiet-title action and place

notice of litigation pending on earlier recordinge. Sabo v. Horvath : Seller occupied federal land in AK, sells quitclaim deeds to H’s, then

receives govt title, then sells to S’si. Race-notice Regimeii. S’s are GFPFV and first to record

(A) No constructive notice of H’s recording because it was a wild deed-

(1) Wouldn’t turn up under typical title search because it preceded document by which seller gained title- Researcher would look for grant to seller, then go for buyer’s listings to see how he got title

(B) Burden was on H’s to re-record after Seller got title in order to establish constructive notice

(C) Inquiry notice might be established if there was a visible presence of other people on the land

iii. H couldn’t have prevented the problem- he knew that seller did not have title at the time of sale. He could have avoided the problem by waiting to lose until seller had title or by re-recording the interest after seller got title

iv. Most courts agree 4. Off-record matters that still bind or deprive GFPFV:

a. Adverse Possessionb. Forgeries and Frauds (title is voidable)c. Incapacity of Grantord. Deficiencies in formality of instrumente. Liens

IV. Registration System:A. Ex ante approachB. Used in Germany, Australia, and UKC. Registrar makes an effort to determine quality of title being place on registry, then the record

become definitiveD. Registrar acts as mini quiet-title judgeE. Downsides:

1. Expensive- administrative costs2. Potential for error

V. Adverse Possession Exception A. Recording doesn’t protect a subsequent purchaser against prior interests that have arisen by

operation of law21

Manns Property Spring 2011B. GFPFV can usually rely on recordings for titleC. BUT

1. Adverse possessor doesn’t have to put others on notice to indicate ownership2. Title by adverse possessor doesn’t have to be recorded

a. ALSO trumps recorded conveyancesD. Policy concerns :

1. May be almost impossible for a GFPFV to know that adverse possession claim exists2. Imposition of information costs on third party purchasers who have to be concerned that

there may be adverse possession

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Manns Property Spring 2011ADVERSE POSSESSION

Five Main Requirements:I. 1- Satisfy Statute of Limitations:

A. Varies by State, usually 10 to 20 yearsII. 2- Open and Notorious Possession:

A. Occupation must be sufficiently visible and obvious to put a reasonably diligent owner on notice 1. Don’t have to show that true owner actually knew (too hard to establish)2. Ex- Build a fence or wall, structure, mow grass, plant

B. Physical indicator that you’ve been thereC. I.e. stakes in each corner of the property isn’t sufficient- not like a fence or wallD. Show that owner knew you were there and did nothing

III. 3- Actual and Exclusive Control:A. Exclusive Control :

1. No sharing with the owner or the public at largea. Doesn’t mean that no one can set foot on the propertyb. Exclusivity that would be expected by the true owner

2. Must be actual possession targeted for adverse possessiona. If claiming whole property, must be reasonable proportion between occupied section

and property as a wholeb. Need to be clear on the scope of what you’re adversely possessing

3. Determining exclusivity depends on nature of property and community standards4. For the Public/Large Groups:

a. Not allowed in most jurisdictionsB. Actual Control :

1. Must be of the sort expected for the type of land at issue2. Acts must be reasonably interpretable as assertion of ownership3. Clear cut assertion to control of the whole parcel

a. Make ordinary use of the landb. Hold land under color of titlec. Build an enclosure/wall

C. ***If all elements apply but this one, try prescriptive easements***IV. 4- Continuous Possession:

A. For entire statute of limitations periodB. Continuous enough of a presence that it would be sufficient to give a true owner notice of your

pending adverse possession claimC. Only the degree of occupancy and use that average owner would make of the property

1. Don’t have to be present 24 hours a day2. Can be seasonal if that is typical for this type of property

D. Tacking is permitted if it’s in privity1. Have to show that predecessors established all five elements2. Each party voluntarily and deliberately transferred3. Not allowed if there was ouster or abandonment4. Privity requirement:

a. Conveyance from previous adverse possessor (written or verbal) can establish privity and tack onto statutory period

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Manns Property Spring 2011i. Must be voluntary and deliberate transfer (sale, gift, in a will, intestate

succession)b. Can’t tack on if you oust prior adverse possessor or prior possessor abandons

5. Policy Considerations:a. Possessor has something he can pass to anotherb. Owner had cause of action for statutory periodc. Allows for speedier clearing of title in resolving record title and adverse title (record

title vs. possessory “title”)d. Maximizes ability to transfer to highest-value user

6. Brown v. Gobble : Property line dispute over tract along boundarya. G’s say earlier owners, B’s, adversely possessed, then sold to the F’s, then to the G’s.

Now Browns want to build a road on itb. G’s have valid adverse possession claim

V. 5- Adverse or Hostile Possession:A. Use must be non-permissive

1. Consent negates adverse possession claim2. Presumption is that possession is non-permissive3. If the adverse possessor gets notice that he has permission to use the land for a little while

and then must get off, he loses adverse possession claim (statute of limitations gets reset) B. Tests for Adverse State of Mind:

1. Lack of Permission :a. Did owner give possession?b. Majority Rulec. Pragmatic, objective testd. Easier to administer than other tests

2. Claim of Right :a. Did adverse possessor intend to appropriate land and present himself to the world as

the owner?b. Subjective testc. Intent implied by adverse possessor acting as average owner would act – present as an

owner3. Intentional Dispossession :

a. Did adverse possessor know he didn’t own it and take it anyway?b. Subjective Testc. Efficiency in ensuring land is being usedd. Screens out inadvertent adverse possessione. Unseemly to reward blatant wrongdoers

4. Good Faith :a. Did adverse possessor believe it was his property?b. Subjective Testc. Supports reliance, investment-backed expectationsd. Endowment effect- value on what we believe we owne. Hard to prove

VI. Nome 2000 v. Fagerstrom : Adverse possession disputeA. Court holds that D established all 5 elements for 10 year statutory period on one part of parcelB. Didn’t establish open and notorious and actual and exclusive possession for other part

24

Manns Property Spring 2011VII. Possible Standards:

A. Clear and Convincing EvidenceB. Preponderance of the Evidence (more likely than not)C. Beyond a Reasonable Doubt

VIII. Exceptions :A. Disability :

1. Statute of limitations doesn’t begin if true owner had disability that prevented him from suing at start of adverse possession

2. Minority, Insanity, Imprisonment3. Statutory cap for exceptions:

a. Tolling only lasts for duration of one disabilityb. Max tolling period is 20 years

B. Government-Owned land :1. Can’t adversely possess land owned by federal, state, or local government

IX. What about the Elderly?:A. Policy Considerations:

1. Minors and insane have guardians, elderly don’t2. Incentives to scout out potential adverse possession targets?

X. Boundary Settlement:A. Oral Agreement upheld if:

1. Both parties are uncertain about the boundary (not a case of information asymmetry)2. Party can produce evidence substantiating the agreement3. Parties took or relinquished possession based on agreement4. Policy considerations:

a. Honoring oral agreements in cases of ambiguity is low-cost way to resolve potential conflict

b. Evidentiary problemB. Acquiescence :

1. Adjoining owners occupy parcel up to given boundary line that is “mutually recognized and accepted” for long period of time

2. Policy Considerations:a. Reliance argumentb. No clear that acquiescence doctrine tells us anything more than a regular adverse

possession analysis wouldC. Estoppel :

1. If true owner erroneously represents boundary as on his propertya. and other owner improves or makes investments in reliance on this boundaryb. true owner is estopped from challenging new boundary

2. Policy Considerations:a. Reliance argumentb. Entrapment danger – entrapping someone into a false boundary agreement

D. Laches :1. True owner has reasonable opportunity to discover adverse possession, but there is

unreasonable delay in suit and damages due to delay (e.g. investment based reliance)2. Court can deny injunctive relief for owner even if statutory period hasn’t been satisfied if

unreasonable delay asserting rights would lead to inequitable outcome25

Manns Property Spring 20113. Policy Considerations:

a. Reliance argumentb. How do you know how long is too long?

E. Accretion :1. Applies when there has been a gradual shift in the river2. Recognize new borders3. Some owners lose land and some gain land4. Policy Considerations:

a. If not applied, we’d be left with an orphaned section of river – as river lines shift, owner wouldn’t be able to access parts

b. Psychological argument - Shifting land may seem more prominently connected to land on the other side of the river after the river shifts

c. (Can make similar arguments for avulsion- hard to know which to apply)F. Avulsion :

1. Sudden and pronounced change in river2. Boundaries stay the same as before (recognize the pre-existing borders)3. Creates one dramatic winner and one dramatic loser

XI. Theft of Personal Property: A. Conversion :

1. Statute of Limitations begins upon misappropriation a. Whether or not the true owner realized the property was missing

i. Theft doesn’t have to be “open and notorious”b. Keeps ticking until victim files suit

2. Cause of action for return of wrongfully taken property (and damages)3. Harsh rule

B. Discovery Rule :1. Statute of Limitations begins when owner discovers (or reasonably should have discovered)

that property was stolenC. Demand Rule :

1. Cause of action begins when victim demands property from thief’s successor in interest2. Party like a museum might not want to disclose the theft and avoid the thief making the

property harder to recover (by running away or selling it)XII. See Prescriptive Easements p. _____

A. Modified version of adverse possessions + EasementsB. Adverse assertion of possessory rights to enter or control another’s property over time

26

Manns Property Spring 2011COVENANTS

Promise to or not to do somethingGenerally supersede zoning laws

I. Compared to easements, Covenants are more about substantive/invasive restrictions on use or non-use benefiting another party

A. Distinction turns on accessB. Prescribe a system of (private) governance

1. Can create a negative duty (e.g. no buildings over 12 stories high) or 2. Positive duty (e.g. must maintain the wall)

II. Standard Title Covenants A. Grantor is held to be making promises about the state of his ownershipB. Types of Covenants

1. Present Covenants (run with the land)a. Seisin, Conveyance

i. Promise that grantor owns property interest and right to conveyii. I.e. ensure that land isn’t adversely possessed, or that the grantor has a fee

simple absolute (and not fee simple subject to condition subsequent, etc.)b. Against Encumberances

i. There are no encumberances against the propertyii. No impending titles, mortgages, leases, leins, easements

2. Future Covenant (do not run with the land)a. *Warranty – promise to compensate for losses from failure to convey title

i. General Warranty Deed protects purchaser against all defectsIII. Do Present Covenants Apply?:

A. Breached at time of conveyanceB. Of Seisin:

1. Promise that grantor owns property interest & purporting to conveyC. Of Right to Convey:

1. Primarily relevant in adverse possessiona. May have action against grantor

D. Against encumbrances:1. No mortgages, leases, liens, easements

IV. Do Future Covenants Apply?:A. Of Warranty:

1. Promises to compensate for losses from failure to convey title2. General Warranty Deed:

a. Protects against all defects in titleb. Most common

3. Special Warranty Deed:a. Protects against defects in title caused by grantor, but not by previous owners

B. Of Quiet Enjoyment:1. Promise that grantee’s possession will not be disturbed by other claimants with superior title2. Similar to covenant of warranty

C. For Further Assurances:1. Rarely used

27

Manns Property Spring 20112. Requires grantor to cure defects in title (pay off lien holders)

V. Breach of Covenants:A. Damages:

1. Ouster by party with superior title2. Grantor liable for breach of warranty of title3. Measure damages by cost of property, not value

a. Lose value of appreciation4. Solution- Title insurance:

a. Mitigates some of recording system’s shortcomingsb. Private companies paid to investigate title- vouches that title is accurate and assumes

financial risk if it’s wrongc. Pre-req for mortgages

VI. Potential to Change Covenants:A. Super-Majorities:

1. Some covenants have unanimity requirements to change covenant for number of years, then supermajority after that

B. Covenants have built-in methods for changing/terminating themVII. Real Covenants :

A. Written promise to do something or not to do something on the land1. Generally listed in the deed

B. May be binding on subsequent purchasers if burden and benefit run with the land1. Policy Considerations:

a. Provides security that neighboring parcels won’t be used in ways that conflict with your parcel

b. Transaction costs could thwart reaching an agreement about land usec. Covenants maximize property values by preserving residential character of

neighborhoodsd. Provide deterrence of allowing easy enforcement of land use restrictionse. Dead hand is allowed to control present land use and preferences

i. Potentially technology stiflingf. Land is less alienable when covenants run with it

C. For covenant to be binding on successive owners, the burden and benefit must run with the landD. For Burden to Run with the Land : (easier for benefit to run with land than for burden to- don’t want

to burden people with things they don’t have notice of)1. If it does, focus is monetary damages

a. Can secure injunctive relief (equitable servitude) in certain circumstances- for that kind of relief, only need to touch a concern (privity doesn’t matter)

i. Exceptions to Horizontal and Vertical Privity for injunctive relief(A) Owner who was intended beneficiary of covenant but wasn’t a

successor in interest to either of the original covenanting parties (NO VERTICAL PRIVITY) can potentially secure injunctive relief when it is absolutely necessary that they be a beneficiary

(1) E.g. barring property’s use as a bar to protect an adjacent school can be enforced even if the school wasn’t a party to the transaction

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Manns Property Spring 2011(B) Earlier purchasers can potentially get injunctive relief if the covenant

expressly states intent to benefit earlier purchasers2. First, there Must be a writing (a written promise to or not to do something)3. Intent :

a. Both parties intend for successors to be bound by covenantb. Can be inferred from circumstances or language

4. Notice to secondary purchaser:a. If covenant isn’t recorded, GFPFV with no notice isn’t boundb. Need recording to satisfy notice requirement

5. **Horizontal Privity:a. When the covenant was created, the promisor and promisee shared some interest in

land independent of the covenanti. The farther the two parties are from each other, the less likely it is that the

covenant runs with the landb. Contexts:

i. Mutual Privity (A) Landlord-Tenant Lease

(1) On-going relationship/repeat-player relationshipii. Instantaneous Privity

(A) Grantor-Grantee Deed for Land(B) Grantor-Grantee Deed for Easement(C) Mortgagor-Mortgagee Contract for Land (D) Relationship Established at the moment of transfer- when the two

parties negotiate covenants contractually(1) Part ways after the transfer

c. THIRD PARTIES: Covenant must be made with an accompanying property conveyance to run with the land and be binding on third parties

d. May be satisfied based on mutual easements if the easements had been included with the restrictive covenants

i. To run with the land, Covenants must come at the time of property transfer (or time leasehold relationship is created)

6. Vertical Privity :a. Focus on the type of estate at issueb. Required for damages

i. Not required for injunctive relief if it’s absolutely clear that the other party was an intended beneficiary or

ii. If the covenant clearly states that it was intended to benefit earlier purchasersc. Successor in interest must hold the entire durational interest held by the covenantor

when she made the covenantd. Successor must step fully into the previous owner’s shoes in order to be subjected to

damagesi. A sells to B, B sells to Cii. C steps into the shoes of B

(A) C and B have vertical privity(B) C is liable for monetary damages if he violates the covenant

e. Winn-Dixie Stores v. Dolgencorp, Inc. : exclusive grocery covenant29

Manns Property Spring 2011i. Landlord-tenant covenant ran with the landii. Intent

iii. Notice(A) Recording of commercial lease (provides notice for party moving in,

who’s bound by the covenant not to comete)iv. Touch and concernv. Horizontal privity between P and landlord

vi. No vertical privity between D and landlord(A) D (tenant in one unit) doesn’t have the same interest as the owner of

the whole complex or another tenant in the complexvii. P can seek damages from landlord, but not from D because no vertical privity

viii. Can secure injunction – don’t need vertical privityf. Whitinsville Plaza v. Kotseas : reasonable covenants against competition may be

considered to run with the land when they serve a purpose of facilitating “orderly and harmonious development for commercial use”

i. Intentii. Actual and constructive notice

iii. Horizontal privity(A) Deed of sale(B) Fact that original covenanters created mutual easements in each end of

the shopping centeriv. Vertical privity for D

(A) But not for the other party (CVS) because they only have a lease(B) D is liable for damage for breach, but CVS isn’t

v. Touch and concern(A) Anti-competitive covenants touch and concern burdened land because

limited land use of servient tenement (B) Touch and concern benefited land of dominant tenement by enhancing

market valueb7. Touches and Concerns the Land :

a. The farther parcels are removed geographically, the less probably it is that the court will find that they touch and concern

b. Function of the test = ensure that social utility of the covenant outweighs the fettering of the burdened property

c. Covenant makes burdened land less valuable and benefitted land more valuablei. To run with the land, Burden must diminish the landowner’s rights, privileges,

and powers in connection with his enjoyment of the landd. Negative Covenant :

i. To touch a concern, it must restrict servient tenant’s use of his land(A) Prohibit certain uses(B) Diminish value of the land(C) Connection to burdened parcel must be clear

e. Affirmative Covenant :i. Must require servient tenant to do something, increasing his obligations in

connection with his enjoyment of the landf. Covenants to Pay :

30

Manns Property Spring 2011i. Courts are split on whether they touch and concern the landii. May be unrelated to land, even though formally part of property transfer

iii. Don’t generally make the covenant run with the land(A) The farther away the properties are, the more tenuous the connection(B) If you move to a property with a covenant to pay a membership at a

club ten miles away, there’s probably not enough of a connection to touch and concern

g. Covenants not to Compete :i. Davidson Brothers v. D. Katz & Sons ii. Majority Rule :

(A) They touch and concern the land b/c they materially affect the value of the land

iii. Minority Rule:(A) They only touch and concern the land if they’re reasonable(B) Factors:

(1) Whether covenant had an impact on considerations exchanged(2) Area and duration(3) Whether unreasonable restraint of trade(4) Whether it interferes w/ public interest

E. For Benefit to Run with the Land :1. FIRST need a written promise, then go into analysis…2. Intent :

a. Same as above3. Vertical Privity :

a. Benefits run to the assignees of the original estate or any lesser estateb. So, Anyone possessing a derivate estate can seek to enforce the benefit against the

servient tenant (can lease land or buy part of it)4. Touches and Concerns :

a. Same as aboveb. Ask:

i. Is the benefited property benefited by the covenant on another property?(A) Increases the value of the benefited parcel(B) Decreases the legal duties or(C) Increases the legal rights of the owner

c. Have to establish that the benefit is connected to the land (by establishing how it benefits the owner)

5. Notice :a. Generally assumed because there’s a greater incentive to advertise benefits to

prospective buyersF. Termination of real covenants (similar to terminating easements):

1. By Written Releasea. Signed by owners of benefited estates b. Likely in exchange for compensationc. In the case of subdivision restrictions, if one owner releases his right to enforce, it

won’t bind others2. By Terms of agreement

31

Manns Property Spring 2011a. Time limited or conditional on a specific situationb. Language in the deed specifies

3. By merger if all burdened properties come under same ownershipa. Automatically terminated when burdener and benefited estates come into common

ownershipb. No longer serve any purpose since nobody needs an agreement with himself to use or

refrain from using land in a specific way4. By adverse possession/prescriptive easement

a. If a covenant is adversely possessed- violated openly, notoriously, without permission, and for statutory period, it’s unenforceable

5. By Marketable Title Act limits6. By Eminent Domain

G. Equitable Bases for terminating Reasons not to Enforce Covenants or Equitable Servitudes :1. Equitable Estoppel

a. Servient property owner reasonably relies on promise not to enforce covenant (or the fact that beneficiaries act as if the covenant is abandoned)

b. Implications of a promise not to enforcei. Admission, statement or act inconsistent with the claim asserted afterwardsii. Action by the other party in reasonable reliance on that admission, statement,

or actiii. Injury to that party when the first party is allowed to contradict or repudiate its

admission, statement, or act2. Laches

a. Knowledge or reasonable opportunity to discover violation, yet unreasonable delay in suit (damages due to delay)

3. Complaining Party has tolerated or failed to object to other violations of the covenanta. Acquiescence:

i. Complaining party has Tolerated previous violations by servient estate, so can’t selectively allege violations

b. Abandonment:i. Tolerated violation of covenants by owners of other restricted properties, so

can’t selectively enforce against this offenderc. Unclean hands:

i. If you violate the covenant yourself, you can’t enforce against others4. Changed conditions/circumstances:

a. Fundamental change to intended character of neighborhood that extinguishes benefits of covenant, so enforcing restriction would be inequitable

b. Substantial change isn’t enough- must deprive covenant of usefulness to all landowners

c. Very narrow doctrined. Changes that affect border parcels but not interior parcels don’t trigger changed

circumstancese. El Di v. Bethany Beach :

i. No-liquor-sales covenant isn’t enforced because of fundamental change in town’s character

ii. Covenants become unenforceable when32

Manns Property Spring 2011(A) Fundamental change has happened in the intended character of the

neighborhood that(B) Renders the benefits of the restrictions incapable of enjoyment

f. Changes that affect only border parcels (and not interior ones) will not trigger changed circumstances

i. People with border lots probably paid less to begin withg. This doctrine applies to covenants, but not easements (*except easements by

necessity- those are implicitly subject to changed circumstances analysis)i. Easements are generally between two parties and involve lower transaction

costsii. Easements tend to be about more serious problems of access

5. Undue hardship/relative hardship:a. Burden to the servient estate far outweighs benefit to dominate estate

i. Consider reliance of burdened partyb. Doesn’t have to be extreme difference

H. Remedy:1. Damages

VIII. Significance of privity A. Necessary for damagesB. Not necessary for injunctive reliefC. Horizontal

1. Required for burden to run at law2. Not required for benefit to run at law

D. Vertical 1. Required for burden to run at law 2. Not required for benefit to run at law

IX. Personal Covenants/Covenants in Gross:A. If benefit and burden don’t run with the landB. Only binding on the original covenanting parties

X. Equitable Servitudes : Gap fillerA. SUBSET OF COVENANTSB. If benefit or burden doesn’t run with the land, but equity will enforce against assignees of the

burdened land who have noticeC. Remedy :

1. Injunction or 2. specific performance against violation of the covenant

D. Often in writing, but can be implied (like from a common plan)E. For Equitable Servitude Burdens to Run with the Land : (elements same as real covenants)

1. Intent (Language or circumstances)2. Notice 3. Touch and Concern the land

F. For Benefits to Run with the Land :1. Intent 2. Touch and Concern 3. Notice is implied because seller wants to emphasize the benefits to get more value for the

property33

Manns Property Spring 2011G. Privity of Estate Not needed : (neither horizontal nor vertical)

1. Courts frame equitable servitudes as an equitable property interest in the land itself, rather than an in personam right against the owner of the servient tenement-

2. No Privity of estate is needed for burden or benefit to run with the landXI. Implied Reciprocal Negative Servitudes : applies only to negative covenants or equitable servitudes. (NOT

affirmative covenants)A. Can also have implied reciprocal negative easements (that limit height to allow light/air flow)B. Two Requirements

1. Common Plan (court determines common plan for covenant restrictions benefiting all purchasers whether or not covenant in deed)

a. Restrictions in all or most deeds in areab. Recorded plat (map) showing restrictionsc. Presence of restrictions in last deed (notice problems)d. Conformity of other owners with written restrictionse. Language stating covenants intended to run with landf. Recorded declaration stating covenants are mutually enforceable

2. Notice a. Actualb. Inquiry – look at the neighborhoodc. Record – prior deeds in chain of title

C. Implied beneficiaries of covenants - Common plans 1. i.e. uniformity among covenant restrictions in different parcels on the property/development2. If covenant in subdivision is silent about who holds its benefit, any neighbor is entitled to

enforce the covenant if a common plan existed when he purchased the lot3. Look at development and see how people use their land

a. Inquiry notice – assume: even if you don’t have a written covenant, you’re bound by other people’s covenants

b. Signs that there is common plan:i. Restrictions on all or most (more than half, really) deeds in the areaii. Recorded map showing restrictions

iii. Presence of restrictions in last deed (notice)iv. Conformity by owners with written restrictionsv. Language stating covenants intended to run with the land

vi. Recording declaration stating that covenants are mutually enforceablec. Signs that there is no common plan

i. Many deeds are unrestrictedii. Restrictions are non-uniform

D. Development Problem : When developer subdivides land into many parcels and only some deeds have negative covenants, negative covenants or equitable servitudes binding all the parcels may be implied

1. Unclear whether earlier properties can sue to enforce covenants against later property salesa. Intent – may be unclear which properties are intended to benefit from/be burdened

by covenantsb. Notice – may be missing because a property owner doesn’t know whether he owes an

obligation where an earlier purchaser tries to enforce the covenantsc. Privity – earlier purchasers doesn’t have privity with later purchasers (so can’t enforce

covenants)34

Manns Property Spring 20112. Possible solution:

a. Filing of Declaration :i. Developers record a declaration prior to selling individuals lotsii. Describes area covered by common plan and delineates covenants constraining

development propertiesiii. Grantee Covenant -

(A) All properties bound to each otheriv. Grantor Covenant -

(A) Developer bound to sell all properties in development subject to the covenant

v. Recording establishes constructive notice to all purchasersE. Policy Considerations:

1. Preserves benefit of covenants to subdivision as a whole2. May be unfair to party who gets deed without restrictive covenants3. Buyer shouldn’t get windfall of developing a property in a way that deviates from

neighborhood4. Puts all buyers on notice of need to do title search of surrounding properties if there appears

to be a common scheme5. Rule is somewhat predictable- visual inspection puts buyers on notice6. Also unpredictable because buyer has to search all nearby deeds7. Increases costs of title searches to investigate neighboring properties8. Unfair to buyers who don’t get what they bargained for

35

Manns Property Spring 2011SERVITUDES

General term for variety of private legal mechanisms to control use and access to real property License Easement Covenant Equitable Servitude Profit

EASEMENTSOwner’s basic powers of inclusion and exclusion

“Right of way”

I. Grant of irrevocable permission to use or limit use of property (“servient tenement” or “burdened land”) owned by another for a specific purpose (something gets to pass through, whether it’s light, air, person)

A. Interest in real property that is severable from primary parcel- Can be sold, but can’t be used to serve other property later acquired

B. Features of easements1. Conveys the right of a particular use of a third party’s land (as opposed to possession) 2. Created by grant

a. Rather than a license3. Irrevocable

a. Licenses are revocable (unless estoppel applies)4. Creates general duty for third parties not to interfere

a. Independently enforceable by easement holderb. Holder can keep others from interfering with the land’s use

5. Holder has no right to possess and enjoy the land (right to use is one stick in the bundle- the bundle includes all property rights)

C. Policy Considerations (criticisms):1. Complicates the standard “bundle of rights”2. Notice issue- difficult for outside purchasers to know what rights exist, unless they’re

recordedII. TERMINATING EASEMENTS :

A. By written release of the easement holderB. By own terms upon time expirationC. By merger if dominant and servient estates come into same hand

1. No need for an easement if you own the land2. If there’s an ownership transfer, you need to recreate the easement

D. By affirmative act of abandonment1. Disuse and action manifesting an intent to relinquish2. Simple disuse is not enough

(No bright line)E. Adverse possession/prescriptive easement:

1. By owner of servient estate or 3rd party2. E.g. owner of servient estate blocks easement and owner of easement fails to challenge for

adverse possession/prescription period36

Manns Property Spring 2011F. Frustration of Purpose:

1. Minority viewa. Particular purpose of easement has become obsolete

2. Restatement approacha. Changed conditions have made it impossible as a practical matter to accomplish

easement’s purposeb. Complications have arisen

G. Marketable Title Act Limits1. Just like other real property interests, easements must be re-recorded regularly to be binding

on future purchasers2. Eliminate easements that grantee cares so little about as to not make the effort to re-record

H. Eminent Domain- government taking of easement with market compensationI. Equitable exception to enforcing the easement

III. Two major Types of EasementsA. Affirmative Easements – owner has the right to go onto the land of another (servient tenement)B. Negative Easements – owner of the easement can prevent the owner of the servient land from doing

some act on the landIV. Easement by Grant

A. Most easements are created with express, written grantsB. Easement created without writings by estoppel, prescription, implication are Exceptions to general

ruleV. Easements appurtenant:

A. SIGNIFICANCE 1. Attached to the dominant tenement and passes with it to subsequent owners (runs with the

land)2. If servient tenement is transferred, new owner takes it subject to the burden of the

easement, unless he is a GFPFV with no notice of the easement (whether by actual, inquiry, or constructive notice)

B. Right of special use benefits adjacent landowner in use of another tract of land (a piece that belongs to another parcel of land)

C. Dominant tenement :1. Land benefitted2. Cannot impose unreasonable burden on servient estate:

a. Expectations of partiesb. Focus on normal development of dominant parcelc. Consider zoning regulations, circumstances, foreseeability

D. Servient tenement :1. Land burdened2. Has duty to respect right of access3. Restatement- May change the locations/contours of an easement without dominant tenant’s

permission if it doesn’t significantly reduce its usefulness or frustrate its purpose4. Ex- easement for one property owner to access road on another’s property

E. **Judicial preference in case of ambiguity1. Policy Considerations:

a. Appurtenant easements limit number of possible easement holders

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Manns Property Spring 2011b. Presumption likely reflects intentions of the parties when easement is conveyed

between neighborsc. Construing easement as appurtenant protects utility of the tract for future users

i. If it’s personal, the easement might be hard to located. Could increase uncertainty about future burdens

2. If easement falls short of easement appurtenant criteria, it will generally be treated as a non-transferable easement in gross

F. If benefit and burden run with the land:1. Attached to dominant tenement and passes with it to subsequent owners2. If servient tenement is transferred, new owner takes it subject to burden of easement

a. Exception: GFPFV with no actual, inquiry, or constructive noticeG. Scope Limiting:

1. Servient owner may impose reasonable restraints a. To avoid greater burden than originally contemplated

i. Can’t impose unreasonable additional burden on the servient estate:(A) Original expectations of the parties at the time of the easement(B) Normal development of the dominant parcel

b. So long as such restraints do not unreasonably interfere with dominant owner’s use2. Factors for limiting the scope :

a. Intent of grantorb. Unreasonable/Undue Burden from expanding usec. Divisibility of Easement:

i. Appurtenant - dominant parcel can be subdivided unless expressly prohibited(A) Each remaining parcel obtains benefit of easement

ii. In gross - apportionable to third parties if commercialH. Running with the Land:

1. Benefit transfers to succeeding dominant or servient tenement- it’s linked to the propertya. Focus on grantor’s intent

2. Easements by estoppel, implication, and necessity run with the land if:a. They are intended to do so and it’sb. Reasonably necessary to enjoy the dominant estatec. Focus on intent of the grantor of the easement

3. Criteria to make sure burden runs with the land to succeeding owners of servient tenement:a. Writing :

i. Original language creating the easementii. Doesn’t have to be included in subsequent deed for servient tenement

iii. (If you want to make sure the burden passes on, record and create constructive notice)

b. Intent of grantor :i. May be impliedii. Look to:

(A) Language creating the easement(B) Circumstances surrounding its creation

c. Notice - GFPFV Exceptioni. Can be actual, inquiry, or constructive

I. Cannot use an easement to serve other property interests later acquired38

Manns Property Spring 20111. Additional burden not necessarily anticipated by original grantors

J. Cox v. Glenbrook Co. : G owns resort, granted Q a right-of-way easement; C inherited Q’s easement and want to widen the road

1. Easement is appurtenant to C’s landa. Benefit can be transmitted to subdivided parcels

2. C can’t widen the road because it’s outside scope of easement grant3. Limited right of the easement holder to improve the easement

a. Allowed to maintain, repair, etc. as necessary to promote the purpose of the easementb. But cannot make any changes that will cause an undue/unreasonable burden on the

servient estatei. That would frustrate the purpose of the easementii. ***LOOK AT THE INTENT OF THE PARTIES***

VI. Easements in gross:A. Easement doesn’t benefit the owner of the easement in the use and enjoyment of the land

1. Separate from the land – doesn’t benefit or burden itB. Gives easement owner right to use servient landC. Disfavored by courtsD. Personal easement in gross

1. Not transferable or apportionable unless expressly stipulated by the parties2. Ex- right to swim in lake

E. Commercial or economic easements in gross1. Transferable and apportionable to reflect growing use/need for commercial easements2. Ex- RR’s use them when laying down tracks

F. Henley v. Continental Cablevision : Utility co’s had easement in gross on strip of land, co’s sold out to new company who installed cables, subdivision objected

1. Easement in gross was exclusive and apportionable- grantor retained no right to use the easement

a. If it wasn’t exclusive, it wouldn’t have been apportionable2. Clear from deed that this was what was intended3. No undue burden from cable wires to servient estate

G. Policy:1. Construing easements as personal might reduce uncertainty about future burdens- make

them nontransferable 2. Someone is more likely to grant an easement if he knows who is going to be accessing his

propertya. Since easements appurtenant are permanent, people may be less likely to grant them

for fear of expansionb. Though, you can limit the scope through deed or transfer

3. If the easement is personal, it won’t last as longVII. Profit:

A. Right to take something off another’s land that is part of or a product of the landB. E.g. extraction of surface minerals

VIII. Public Easement:A. Authorize the general public to use land for designated purposeB. E.g. roads, highways, waterways, ocean

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Manns Property Spring 2011C. As opposed to private easements, which authorize specific parties to use the land for a designated

purposeIX. Rule Against Reserving an Easement in a Third Party:

A. Seller can establish easement to benefit self on property that is being soldB. Feudal Rule against reserving an easement for a third party when making a sale of property

1. Can get around it by adding a layer of paperwork- Transfer party to 3rd party easement beneficiary, then 3rd party transfers property to purchaser

C. We prefer a point-to-point system of property transfer1. This creates more possibility for ambiguity

X. Easements Without Formal Grant of Easement A. Prescriptive Easements:

1. Adverse assertion of possessory right to enter or control another’s property over timea. Adverse possession that falls short

2. Acquired by long-standing use3. Potential default if adverse possession doesn’t meet exclusivity or continuous use

requirementsa. Even if don’t get adverse possession, court can grant prescriptive easement,

preventing original owner from barring you to access the property 4. Elements :

a. Satisfy Statutory Periodb. Open and notorious use

i. Visible c. Actual use of property

i. Exclusive use not neededii. If real owner uses the property too, doesn’t destroy prescriptive easement

claimd. Continuous or uninterrupted use:

i. Continuous use of prescriptive easement w/out landowner’s interference is presumptive evidence of existence (can sustain a judgment in the absence of evidence of mere permissive use)

ii. Not necessary to continually use like an owner- just like someone who has an easement

(A) Happens often enough to put property owner on noticeiii. Ex- use of a trail through a property

e. Adverse possessioni. No permissionii. If given permission at any time, statute of limitations clock is reset

5. Community Feed Store v. Northeastern Culvert : P and predecessor’s customers have been using part of D’s land to turn around since 1920s; D build barrier in 1984 to stop them

a. P has prescriptive easement- no exclusive possession6. Should adverse user have to pay for prescriptive easement?

a. If adverse user refuses to pay, it’s unclear whether owner has cause of action to demand payment

b. Takes less to establish prescriptive easement, so stronger case for compensating owner

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Manns Property Spring 2011c. If adverse user has stronger reason for use, real benefit is accrued from forced sale of

right of accessd. Liability discourages adverse users from seeking clarificatione. Payment would undermine deterrent value of entitlement flipping for negligent

owners7. Negative Prescriptive Easements :

a. Don’t existb. No right to unobstructed light and air

B. Easement by Estoppel : Focus on reliance and investment and injustice of denying easement1. Elements to claim estoppel

a. Consent/permission (license)b. Induces investmentc. Reasonable relianced. Injustice or inequitable to allow the permission to be revoked

i. Easement likely ends when injustice ends2. Policy Considerations:

a. Reward labor when done in good faithb. Hard to prevent license from turning into easement by estoppel

i. Someone can take advantage of good will and turn it into a land ownership right

3. Holbrook v. Taylor : Haul road on H’s property, T’s built a house and only reasonable route of access is H’s road

a. Easement by Estoppel because H’s let T’s use the road while building the house and T’s improved the road

b. No prescriptive easement i. No adverse useii. Permission was given

C. Easement by Implication :1. Elements

a. Prior unity of ownership of a single tract followed by sale of part of the landb. Before the separation, one portion was used for the benefit of the other (either the

portion retained or the one conveyed)i. Ex- driveway on one part benefitted another part

c. Use of the property was apparent, obvious, and continuous (open and notorious- visible or reasonably discoverable)

d. Easement is reasonably necessary to enjoyment of the parcel of land (not just desirable or preferable)

i. Without easement grantee cannot enjoy use of property granted to him for purposes to which similar property is customarily devoted

ii. Weigh costs and benefits of granting/denying easement 2. Policy Considerations:

a. Gap filling- intent is inferred (though not explicit in the deed)b. Concern about bilateral monopolist thwarting efficiency-enhancing accessc. Terms could be unclear to parties and third partiesd. Writing may not fully reflect parties’ intentions

41

Manns Property Spring 20113. Granite Properties v. Manns : GP owned all properties, sold parcel B to M, but parcels A and E

kept using the driveways until M told them to stopa. GP established Easement by Implication- all elements satisfied

D. Easement by Necessity : Occurs when owner severs landlocked portion of their land by conveying it to another who has no access to public road

1. Elements a. Common ownership prior to severanceb. Owner of now-landlocked parcel can’t access public roadway from his propertyc. Necessity must be absolute- inconvenience isn’t enoughd. If necessity ceases, easement ends but can come back if necessity arises again

2. Can’t usually be created for owner who sells property and makes himself landlocked3. Policy Considerations:

a. Landlocked land will be underutilized—useless if it can’t be accessedb. Concern about bilateral monopolist thwarting efficiency-enhancing accessc. Purchaser of landlocked property should buy an easement with it

i. Possible alternative: “Private takings” approach- landlocked owner obtains easement and compensates burdened owner

d. Encourages efficiency4. Finn v. Williams : CW gives 40 acres to B, gives 100 acres to ZW, then B gives 40 acres to F and

ZW refuses to left F cross his landa. Easement by necessity- severance without an assured way to public roads

i. Lasts until necessity endsb. Though F bought a landlocked property- it might be his problem

XI. Equitable flexibility vs. Bright line Approach to Easements A. In favor of writing

1. Predictability2. Administrability3. Writing makes terms clear to parties, court, third parties4. Encourage parties to think through the deal and anticipate issues5. Fairness/rights

a. Both parties can turn to and rely on the terms in the writingb. Freedom to bargain

6. Utilitya. Keep property rights clearb. Avoid costly litigation

B. Against writing1. Doctrine is all about gap filling2. Fairness

a. Writing doesn’t always reflect parties’ intentionsb. Elements themselves ensure notice

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Manns Property Spring 2011NUISANCE

Intersection of right of possession and right to excludeBasic question of reconciling competing uses of property

Protects possessor of land from substantial and unreasonable interference with the use and enjoyment of the land

I. Nuisance = actionable non-trespassory invasion of someone’s interest in the use and enjoyment of landA. *Unreasonable interference with right of use and quiet enjoyment of land (doesn’t require physical

intrusion)B. Sic Utere = use your property so that it doesn’t harm someone else’s

II. Two questions to ask:A. Is the defendant’s activity a nuisance? (Liability?)B. If so, what can be done about it? (Remedy?)

III. Very fact-sensitiveA. Concern with rigid rulesB. Different factors contribute to fairness or social desirability C. Certainty and predictability are sacrificedD. Both competing interests are substantial

1. Difficult to state plain rule telling which interest to prefer IV. Balancing test – Does the gravity of the harm outweigh the social value of the activity alleged to cause

harm?V. 1- Unreasonable conduct in social terms (not reasonableness of the person)

A. Balancing test - Social harm outweighs social utility of actor’s conductB. CONCERNS:

1. Fairness Concerns a. Extent and Character of harmb. Distributive considerationsc. Who is at faultd. Which use was first (Prescription / reliance considerations)e. Motive- Is spite or malice the sole factor?

i. Spite Rule:(A) To secure an injunction, must establish that spite was the sole motive,

not a mixed motive(B) Need affirmative evidence of spite/malice (e.g. someone outright

saying his spiteful intent)2. Welfare Concerns

a. Costs and Benefits to Societyi. Social value of the activity and suitability of conduct vs. extent of harm to

affected owner and social utility of owner’s useb. Incentive effects on parties for investment and use of landc. Lowest cost avoider- Burden to avoid harm

i. Availability of alternative means to mitigate or avoid the harm?ii. Practicability of preventing or avoiding invasion?

C. FACTORS TO FOCUS ON1. Is the nuisance getting worse?2. Custom and context3. Value of competing uses (cost-benefit)

43

Manns Property Spring 20114. Asymmetry (nonreciprocal impact)

D. Noninvasive harms :1. Aesthetic nuisances and unusually sensitive plaintiffs aren’t recognized

E. Coming to the Nuisance (building or buying in the face of nuisance):1. Nuisance preceded P’s use of the property 2. Incomplete defense- just a factor courts consider3. May affect remedy4. Policy Considerations:

a. Problematic to say only the existing owner can sue for nuisance- usually allow buyers to step into shoes of seller

b. Economic efficiency/honoring expectationsc. Person who comes to the nuisance knows about it, could go somewhere elsed. Times and circumstances change – the previously present thing could have been

appropriate at one time, but isn’t anymoree. Consider fairness and social utilityf. Person who comes to the nuisance knows about it and can go somewhere else to

avoid itg. Person with established use has right to continue doing it

i. First to invest counts on continued useii. Lockean theory- first user has added value to land through labors (should

protect/encourage such investment)

VI. 2- Substantial injury to Plaintiff:A. Focus on the result

1. Does the conduct cause substantial harm not justified by social utility?B. Extent of harmC. Character of harmD. Social value attached to type or use of enjoyment invadedE. Suitability of particular use or enjoyment invaded to character of localityF. Burden on person harmed to avoid the harm

VII. 3- Balance of the Equities:A. Social value of alleged tortfeasor’s conductB. Suitability of use in the localityC. Ability to avoid the interferenceD. Duration and degree of the harmE. Character of the harm

VIII. Remedies:A. Damages for past or future conduct w/out injunction:

1. Conduct is reasonable but harm to P is substantial2. Shouldn’t burden P with costs of D’s socially useful conduct3. Stigma Damages:

a. Diminished value of property when hazardous activity nearbyb. Consider substantiality of harmc. Consider whether gravity of harm outweighs usefulness of disposal site

B. Injunction:1. Conduct is unreasonable and causes substantial harm to P

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Manns Property Spring 2011C. Purchased Injunction:

1. Conduct is unreasonable, but it’s fair to impose burden on P for paying D to shut down use2. Applies to P who comes to the nuisance

D. No Remedy/Dismissal:1. No substantial harm to P2. Conduct is reasonable and it’s fair to burden P with effects of D’s conduct3. Conduct is reasonable but harm to P is substantial, so don’t want to burden P with the costs of

D’s socially useful conductIX. Themes to remember:

A. Property rights limited to protect rights of others 1. Nuisance is about resolving conflict between one owner’s freedom of action and the

neighbor’s interest in security2. Therefore, may have to limit one’s freedom to use his land if it means protecting his

neighbor’s right not to have his property harmedB. Range of solutions to adjudicate conflict between freedom of action and security

1. One extreme: property owner’s absolute freedom of action regardless of externalities2. Other extreme: strict liability for uses of property that negatively affect neighbors3. In between:

a. Prior appropriation - first in time establishes priorityb. Prescription - longstanding use establishes priorityc. Reasonableness tests (reasonable use, negligence, nuisance)d. Forced Sharinge. Strict Liability

C. Range of Remedies 1. Injunction – court balances equities on both sides

a. Conduct is unreasonable (does more harm than good) ANDb. Causes substantial harm to P (more social harm than good)

2. Damages but no injunction a. Conduct is reasonable (does more social good than harm) BUTb. Harm to plaintiff is substantialc. Unfair to burden P with costs of D’s socially useful conduct

3. No Remedy /Dismissala. No substantial harm to P,b. Conduct is reasonable, and not unfair to burden plaintiff with costs of D’s conduct, orc. Conduct is reasonable, but harm to P is substantial (shouldn’t burden P with costs of

D’s socially useful conduct)4. Purchased Injunction

a. Conduct is unreasonable BUTb. Fair to impose burden on P to pay D to stop conduct

i. Unfair to impose burden on Dc. E.g.

i. Coming to the nuisanceii. Or plaintiff profits from the activity that’s being infringed upon

5. Combination of injunction and damages a. May allow courts to make impacted party whole in a way that relying solely on one

remedy or another couldn’t45

Manns Property Spring 2011D. Policy Considerations :

1. Rights, fairness, or justice2. Maximize social utility (general welfare or economic efficiency)3. Administration: Rules vs. Standards:

a. Rules - promote predictabilityb. Standards - promote flexibility and justice in individual cases

4. Institutional Role Considerations:a. Relative consideration of roles of courts and legislatures

X. Page County Appliance v. Honeywell : P sells TVs, D put in computer that interfered with cable signalsA. Remanded to determine whether use is reasonableB. Priority in time of use has considerable weightC. Apply standard of “normal person in particular locality”

1. Avoid ruling according to unusually sensitive P2. Focus on unreasonable interference rather than negligence3. Reasonableness of conduct is based on

a. Function of the manner in which and the place where business is conductedb. Circumstances under which defendant operatesc. Utility and merit of D’s conduct d. Priority of locatione. Character of neighborhoodf. Character and gravity of the alleged harm

XI. Fontainebleau Hotel v. Eden Roc : Two hotels next to each other, F tries to build tower that would cast shadow on ER’s pool, ER seeks injunction

A. Court dismisses- the maxim that prohibits use of property that injures another only refers to injuring legal rights

1. Landowner doesn’t have legal right to free flow of light and air, so there’s no cause of action2. There is no legal right to free flow of light and air

B. There is no such thing as negative prescriptive easement (in this case – even if injury exists, there’s no legal cause of action)

C. If structure serves useful and beneficial purpose, there’s no cause of actionD. Policy behind making Fontainebleau internalize cost of the invasion of space

1. Pro a. F is depriving ER of economically valuable sunshine, but not paying the costs of

deprivationb. Tower could potentially be located in a different part of the property that wouldn’t

negatively affect ER2. Con

a. ER is trying to externalize cost of maintaining a sunny pool area on Fb. Even though the pool was there first, ER could have anticipated competing uses by

neighborsc. If ER wants to protect air space, they should buy an easement

XII. Prah v. Maretti : P built solar panels on house, M bought lot next door and house blocked the panels, P suedA. Nuisance analysis focus:

1. Extent of harm to P2. Suitability of solar heat in the neighborhood3. Availability of remedies

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Manns Property Spring 20114. Costs to D in avoiding the harm

B. Potential claim for nuisance- big societal interest in solar panels1. Common law adapting to changing social values

LAW AND ECONOMICS

I. Efficiency :A. Result is efficient if gain to the winners exceeds loss to the losersB. Caveat : Just because result efficiently enhances overall welfare doesn’t mean it doesn’t have

distributive effectsII. Need for Rules to Make Markets Work:

A. Can’t have a functioning market without well-defined property rights1. System of legal rules and enforcement to create certainty

B. Markets are never perfect in real world1. Costs aren’t always internalized, and parties may not consider social costs if not forced to

internalize them2. Some externalized costs that affect neighbors aren’t compensated for

C. Potential for imposing legal liability to force internalization of costsIII. Coase Theorem :

A. Focus on negotiation costsB. World without Transaction Costs

1. Impediments to bargaining2. Difficulties in negotiating an agreement3. Categories:

a. Bargaining costs (negotiation, legal and financial fees)b. Information costs (obtaining perfect information)

i. Parties may lack information about the effects of their actionsc. Administrative costs (litigation or enforcement of deal)d. Agency costs (hiring other people)e. Strategic bargaining costs (holdout and freerider problems)

4. When transaction costs are significant, goals are to:a. Give the entitlement to the party that values it the mostb. Place the burden on the party who can more cheaply avoid the conflict

C. Focus is on spillovers from one parcel of land that interferes with the use and enjoyment of another parcel of land

D. If there were no transaction costs to bargaining:1. Assignment of liability for social coasts would have no effect on the use of resources2. Parties would bargain and agree to the use that maximizes their joint wealth

E. How legal institutions or rules allocate rights matters a lot1. Create property rules that promote efficient use of resources2. Courts should resolve disputes over incompatible uses of property in the way that the parties

would resolve them if as if there were no transaction costsa. Maximize joint welfare

F. Transaction costs matter, but allocation can matter moreIV. Shortcomings of Economic Analysis:

A. Biased toward wealthy47

Manns Property Spring 20111. Values that people place on benefits is shaped by the initial distribution of wealth

B. Significance of strategic behaviorC. Offer/Asking problem of third parties

1. A buyer may offer a lot less than the asking price would beD. Coercion/unequal bargaining power not consideredE. Difficulty of identifying transaction costs (vs. cost of purchase)F. Biased toward status quo – people are more interested in keeping what they haveG. Commodification- some things shouldn’t be sold

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Manns Property Spring 2011PRESENT ESTATES AND FUTURE INTERESTS

Created at the same timeI. Created at the same time

I. O to A for life then to BII. A has life estate

III. B has remainder – future interest becomes “possessory” (he has the right to use, sell, etc.) when A dies

II. Possession of land changes upon condition occurringIII. Courts more likely to honor covenants than future interests

I. All parties are part of a covenant agreement, whereas future interests might be a third party who wasn’t involved in the agreement

IV. Interpreting Ambiguous Conveyances I. Presumption against forfeitures of ownership of property in absence of clear language (limiting

language)1. Need specific language for creating certain interest2. Need to say what kind of estate you’re creating to have presumption against

forfeiture3. Court will uphold presumption of fee simple because forfeitures are disfavored4. Strictly construe defeasible fee language so language of deed must unequivocally

indicate intent to create defeasible fee5. Wood v. Board of County Commissioners

a. Deed held not to have created fee simple determinable because it lacked the special language like “so long as,” “until,” “during”…

i. No mention of automatic expiration if purpose for granting land is breached ii. No mention of time frame for memorial

b. Also no language indicating fee simple subject to condition subsequenti. No language “upon express condition that,” “provided that,” “but if”…ii. No language giving grantor right of entry if property ceased to be used as

intended (as a memorial hospital)II. Cathedral of the Incarnation v. Garden City Co.

1. No fee simple determinable because no language providing for automatic termination of parcels if church fails to abide by condition

III. Edwards v. Bradley - Fee simple generally preferred over life estate under presumption against forfeitures

1. Fee simple=less restrictions on alienation (compared to life estate)2. Life estate may be created by implication3. Life estate subject to executory limitation- executory limitation burdens estate with

debtV. Interests in land

I. Possessory vs. non-possessory estates1. Possessory estates grant general power of management and control over resources-

decide who comes and who goes2. Non-possessory estate conveys limited enumerated power to control a single type of

entry or use (e.g. easement of way- holder can cross property owned by another person)

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Manns Property Spring 2011II. Questions to ask:

1. WHAT TYPE OF INTEREST IS AT STAKE?2. WHO IS RECEIVING THE FUTURE INTEREST? (grantor or third party?)3. If grantor: IS THE TRIGGERING OF THE FUTURE INTEREST AUTOMATIC (possibility of

reverter)? NOT AUTOMATIC (right of entry)?III. Future Interests Retained by Grantor - Reversionary Interests

1. Reversion- follows natural end of the life estate or leaseholda. O to A for life. O automatically retains a reversion, as estate goes back to O after A’s

death2. Possibility of reverter- follows fee simple determinable

a. O to A so long as [condition], then to O or O’s heirs automatically get the property back if condition takes place

3. Right of entry- optional power of termination following a condition taking placea. O to A provided that [condition]—if condition happens, then O can exercise right of

entryb. Laches applies (adverse possession runs longer than laches)

i. Must exercise right of entry within a reasonable period of time ii. Adverse possession process triggers if fail to exercise right of entry

IV. Possessory estates in land 1. Freehold

a. Fee simple absolute- default ownership, no time limiti. If no condition is attached to fee simple, it is fee simple absolute

(A) Subject to restrictions like covenants and easements(B) When owner dies, the property goes to successive owner

ii. Owner has all property rights- can sell, give away property(A) O to A(B) O to A in fee simple(C) O to A and her heirs

iii. Ambiguous deeds construed in favor of fee simple conveyanceb. Defeasible fees- interest held until the occurrence of a stated even other than the

present owner’s death (terminable) (*Different estates can be terminable, other than fee simple- can have “ subject condition to condition subsequent” etc.)

i. If there’s no defeasible fee, do covenant/equitable servitude analysisii. Fee simple determinable

(A) Fee simple, future interest reverts to the grantor automatically upon the occurrence of an event

(1) If the third party who the land goes to isn’t paying attention, it becomes an adverse possession scenario

The reverted property becomes a fee simple absolute- the new owner can do whatever he wants

(B) Duration emphasis(C) *O to A so long as/while/during/unless/ until x

iii. Fee simple subject to condition subsequent - fee simple continues indefinitely, unless stated event happens- then grantor can exercise his future interest by asserting property right

(A) Not automatic50

Manns Property Spring 2011(B) Condition emphasis(C) *O to A, provided that/on condition that/but if x, then right of

entry (**“right of entry” might not always be specified)iv. Fee simple subject to executor limitation - fee simple where contingent future

interest that is triggered by a condition subsequent belongs to someone other than the grantor

(A) Third party automatically gets property upon occurrence of condition subsequent

(B) Future interest is an executory interest(C) *O to A so long as x, then to B(D) *O to A but if x, then to B

c. Life estate – ends with the death of a person i. People less likely to invest in a life estateii. Remainder can’t follow fee simple interest; only life estate

iii. Like fee simple absolute, except comes to an end with death (usually of the estate holder).

iv. Future interest (A) Reversion to grantor

1. Presumption is that property reverts to the grantor after grantee’s death, unless another beneficiary is specified

(B) Remainder in a third party1. The third party has incentive to monitor that A doesn’t waste

the landv. *O to A for life then to B

(A) A could sell the property to C, but he would only get the life estate pur autre vie- as long as A is alive. When A dies, B has remainder in fee simple

vi. Future Interests Created in Grantee:(A) Remainder- future interest created in a third party grantee that

becomes a present possessory estate when the prior estate expires (like the end of a life estate)

1. Vested- condition precedent is an express condition for the remainder to come into effect

a. Indefeasibly vested remainderb. Vested remainder subject to complete divestmentc. Vested remainder subject to open

2. Contingent3. Natural Closing of a class and Rule of Convenience

(B) Executory Interest- future interests created in a third party transferee that divest or cuts short a previous interest. Occurrence of condition cuts short fee simple title and triggers executor interest

1. Two typesa. Springing- cuts short an interest in the grantor

i. O to A for life, then fee simple to B five years after A’s death

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Manns Property Spring 2011ii. Reversion goes to O, but then fee simple

(executor interest) springs to B five years after A’s death

b. Shifting- cuts short an interest of a granteei. O to A, but if [condition] then to B

2. *A to B, but if [condition], then to C (who has executory interest)vii. Vested Remainder

(A) Remainder is vested if:1. Given to a person currently living and ascertainable

(identifiable) and2. No condition precedent- other than the expiration of the

present (or other preceding) estate(B) Indefeasibly vested remainder - certain to become possessory in

the future, cannot be divested1. All remainder recipients are established2. No condition subsequent3. *O to A for life, then to B and C, O’s grandchildren

a. Remainder recipients established (CHECK)b. No condition subsequent (CHECK)c. Remainder is indefeasibly vested

4. A vested remainder may not be certain to become possessory. a. *O to A for life, then to A’s children

i. A has one child, B, so B has a vested remainder because B is ascertainable.

ii. But, A may have no other children in his life, and B could die before A, so the vested remainder is not certain to become possessory.

(C) Vested Remainder Subject to Open (vested subject to partial defeasance)

1. Remainder vested in a group/class of people2. At least one of whom is currently ascertainable3. Percentage shares are not fixed because more people could

become class membersa. Partial defeasance=class members lose a portion of their

stake when more members are added4. *O gives life estate to A, then remainder to B’s children (some of

whom are born, but all aren’t necessarily born yet)(D) Vested Remainder subject to Complete Divestment (vested

subject to complete defeasance)1. Grantee is known BUT2. Remainder is subject to being divested by a condition

subsequent (don’t know if that condition will happen)3. *O gives life estate to A, and remainder to B, but if B drinks

alcohol before he is 21, remainder goes to Ca. If A dies before B is 21, B gets property

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Manns Property Spring 2011b. But if B subsequently violates the condition, land reverts

to Oviii. Contingent Remainder

(A) Remainder is contingent if it is:1. Limited to an unascertained person OR2. Subject to a condition precedent (condition more than

expiration of predecessor’s estate)(B) O gives life estate to A, then remainder to B’s (as of yet unborn)

child(C) O gives life estate to C, and then remainder to D if D graduates

law school (condition precedent)(D) Doctrine of Destructibility of Contingent Remainders- if

contingent remainder fails to vest before the end of the preceding life estate, reversion to grantor-

1. Not Followed2. Now: if there is no vested remainder when the life estate

expires, property temporarily reverts to grantor, but goes to third party remainder if/when the contingency is satisfied

3. O gives life estate to C, then remainder to D if D graduates from law school (condition precedent)

a. If C dies before D graduates from law school, then reversion to O until D graduates from law school (then he receives fee simple)

d. Natural Closing of a Class - occurs on an event that prevents the further creation of class members

i. The even closes the class naturally because there cannot be any more members

ii. O conveys life estate to A, then remainder to B’s children(A) If B is dead, then the class of B’s children naturally closes

because no more children can be addede. Rule of Convenience - closes a class when the time designated for distribution arrives

i. If at the time exist some members of the class entitled to distributionii. May be more potential class members who come into being later, but door is

closed to them(A) Like children who are subsequently born, but they don’t satisfy

criteria because they’re born too late(B) Class members who fail to vest because they don’t satisfy the

condition precedent (like graduating from law school by age 30)iii. Class members who are around when the class closes can still fail to vest their

interest if the fail to meet a condition precedent (like meeting age threshold for vesting)

iv. **If no one is entitled to distribution at the time designated for distribution, then must wait for the natural closing (i.e. grantor’s death)

v. O conveys life estate to A, then remainder to B’s children. At the time of A’s death, B has two children.

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Manns Property Spring 2011(A) Rule of Convenience: give estate to B’s 2 existing children at the

time of A’s death(B) Doesn’t matter if B has more children later- the class is closed

vi. O conveys life estate to A, then remainder to B’s children. At the time of A’s death, B has no children.

(A) Temporary reversion to O, until B has a child(B) If other children are born to B, then they will have equal shares

in the estatevii. O conveys life estate to A, then remainder to B’s children who reach 25. B has

child C who is 20.(A) Possibility 1

1. At the time of A’s death, C is 24 (contingent remainder subject to open)

2. Temporary reversion to O, with C receiving property when she reaches 25

3. C must share interest in estate with any of B’s subsequent children who reach 25

(B) Possibility 2 1. At the time of A’s death, C is 252. C receives estate in fee simple3. If B has other children who are alive at the time of transfer to C,

they will share in the estate with C when they reach 254. If B has children born after the time of transfer to C, they have

no future interest in the estatef. Fee tail

i. Non-transferable life estateii. Restricted to blood descendents

iii. *O to A and heirs of his body2. Nonfreehold

V. Future interests retained by grantorVI. Non-Possessory estates

VI. Trusts and the Cy Pres Doctrine:I. Changed Circumstances:

1. Circumstances surrounding trust or bequest of land may change in unforeseeable ways

2. Cy Pres :a. Grantor of trust has expressed general charitable intent, but particular charitable

purpose becomes impossible or impracticable to fulfill because of changed circumstances

b. Trust can be changed if related general charitable intent can still be fulfilled with judicial modification of interests created

c. Often applies when performing something would be wastefuld. Courts can designate fund to nearest possible purpose or just reasonably similar one

II. In re Certain Scholarship Funds Broad charitable intent to assist students in pursuit of higher education

1. Court applied cy pres to lift gender and religious restrictions on the scholarship54

Manns Property Spring 20112. Changes in the attitude of society made discrimination on the basis of sex and religion

unacceptable VII. Numerus Clausus:

I. Legislatures define potential categories of estatesII. Certain packages of property conveyance that deviate from presently defined estates and future

interests won’t be recognized1. i.e. prohibition of fee tail

III. Johnson v. Whiton 1. A will cannot create a new form of inheritance- can’t create a new property right

outside of the established forms2. Issues of alienability

IV. Policy Considerations:1. Prevents excessive fragmentation of many co-owners for one property2. Concern about hold-out problem when many people all own small piece of property

(anti-commons problem)3. Measurement costs- expensive if there were tons of options to choose from and your

lawyer had to help you choose4. Strikes balance between complete standardization and complete customization5. Legislatures have option to create or destroy new forms of property at will- they could

be more creative if they wanted to be6. Law is frustrating grantor’s intent

VIII. Rule Against Perpetuities :I. Future interest must be certain to vest or fail to vest within 21 years after the death of a person alive

at the time of the creation of interest (“Life in being plus 21 years after their death”)1. Must know all the people who can receive in the interest2. If it’s a contingent estate, don’t know all the people, or there are conditions precedent

II. If there’s any possibility that the interest will vest outside of life-in-being plus 21 years, the interest is void (court will strike offending language)

III. Need a validating life as a reference point to determine if the interest will vest1. Corporations - validating life is zero

a. Flat 21 year restrictionb. Avoid immortality c. Exclusively corporate “contractual transactions” aren’t subject to RAP

IV. Charities are exempt from RAP –both present and future interest owners must be charities1. RAP still applies if only one interest is a charity

V. Vesting 1. Under the RAP

a. Make interest clearb. Eliminate suspense

2. Must vest:a. in terms of the person andb. the economic interest

3. May not occur if:a. Identity of taker is not determined orb. There is a contingency that hasn’t happened yet

VI. Analysis :55

Manns Property Spring 20111. Identify the Future Interest:

a. Only non-vested interests are subject to RAPi. Executory Interests – third party defeasible fees (vesting means:)

(A) Taking possession ii. Contingent Remainders –

(A) Identify the taker and(B) All conditions precedent are satisfied(C) *O to A for life, then to B’s children (children aren’t alive yet)

1. Contingent Remainder Subject to Open2. RAP satisfied because all of B’s children will vest or not vest

within B’s validating lifeiii. Vested Remainders Subject to Open because some of the remainders are

contingent and some are open(A) Close the class(B) *O gives A life estate and remainder to current first graders from

certain school that graduate from college1. Don’t know if anyone will graduate2. Identity and scope are contingent3. Will know whether the interest vests or doesn’t vest within their

lifetimeiv. Options to purchase propertyv. Rights of first refusal or pre-emptive rights

vi. If the interest is vested, analysis is over(A) *O to A for life, then to B (B already exists) = VESTED

REMAINDER(B) No RAP issue

b. Exemptions from RAP:i. Future interests retained by grantor are treated as vested on creation

(A) Reversions (O to A for life)(B) Possibility of Reverter (O to A, so long as the property is used as

a school)(C) Right of Entry

ii. Certain Third Party interests:(A) Indefeasibly vested remainder

1. Know who the person is and condition precedent has taken place

(B) Vested remainder subject to divestment 2. Apply the RAP time limit- Life-in-Being plus 21 Years

a. Must vest (or fail to vest) in terms of person and economic interestb. Determine the validating life (key!)c. Main concerns for vesting

i. Contingent Remainder:(A) Identity of taker is ascertained(B) All conditions precedent are satisfied

ii. Executory Interest:(A) Taking of possession

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Manns Property Spring 2011iii. Vested Remainder Subject to Open:

(A) Class closes(B) All members of class must vest or not vest w/in statutory period

3. If Future Interest Violates Rule:a. Violation = all interests don’t vest or not vest within life in being plus 21 years

i. *O to A for life, then to A’s grandchildren(A) Don’t know if all members of the class will exist within A’s life

plus 21 yearsb. Two options :

i. Court will attempt to remedy the violation by striking the offending language/clause

(A) Strike “then to A’s Grandchildren”(B) Result: reversion to O (or O’s heirs at law)(C) If the entire conveyance has to be struck, reversion to grantor

and his heirs at lawii. Modern Rule is a wait-and-see approach:

(A) Wait through RAP period, then give the remainder to grandchildren alive at time of A’s death and strike contingent remainders of grandchildren at that time

VII. Purpose:1. To determine up-front whether vesting can take place, so that future interests that will

not vest will be invalidated2. Individuals involved can go on with their lives and plan accordingly without facing a

cloud of uncertaintyVIII. Possible Alternatives :

1. Wait-and-see for common-law RAP period or 90 yearsa. See if interests vests remotelyb. If not, interest is validc. Wait and see if additional children are born before condition occurs or before end of

RAP period/90 years2. Cy Pres: Interpretation and Implication Approach:

a. Honor grantor’s intentb. Drafters or courts insert perpetuities saving clause or reform an interest

i. E.g. change 25 to 21 yearsc. Refuse to invalidate certain gifts if it fails to vest for an entire class within the

perpetuities periodd. Not an all-or-nothing approach

i. If interest fails with just one child because child could be born too late, other children will still get the interest

3. Uniform Statutory Rule Against Perpetuities:a. Wait-and-see rule with 90 year cap for donative transfers (gifts, wills, trusts)b. Can petition court to reform a disposition in way that most closely approximates the

transferor’s manifested plan of distributionc. Adopted in more than ½ the states

4. Abolition or Partial Abolition of RAP:a. Dynasty trust under tax-free gift provisions

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Manns Property Spring 2011b. Some states have abolished RAP outrightc. Some states have limited time frame where trust must hold principald. Statutory cutoff for Defeasible fees to prevent perpetual conveyances of possibility of

reverter from heir to heire. Marketable Title Acts

i. Must re-register the restriction every 30-40 years for it to be binding

DOCTRINE OF WASTEI. Governs relationship between present and future possessor to reduce conflicts of interest between

present and future interest holdersII. Life tenant :

A. May use property for her benefitB. May not treat property in a manner that injures the rights of holders of the remainder interestC. Can’t engage in action or inaction that reduces the value of the remainder’s interest- potential

liabilityD. Maintains estateE. “Quasi-trustee”

1. Has fiduciary duty to remaindermen (cannot injure their rights) (like a trustee)2. BUT may use property for exclusive benefit

III. Types of waste (voluntary, permissive, and ameliorating)A. Voluntary/Affirmative Waste:

1. Affirmative action beyond right of maintenance that causes harm to premises2. Depletion of natural resources by life tenant (unless normal use of property)3. Open Mines Doctrine:

a. Can use land according to its existing purpose when life estate is receivedB. Permissive/Neglect Waste:

1. Life tenant’s failure to maintain the property2. Life tenant has obligation of ordinary repairs, but not replacements3. Normal wear and tear is okay4. Repair obligation is limited to amount of rents and profits or to reasonable rental value

of the propertya. If there are no rents and profits, obligation is limited to reasonable rental value of the

property5. Areas of potential conflict :

a. Taxesa. Life tenant must pay all taxesb. But tax sale will eliminate future interest

b. Mortgagesa. If property is conveyed with mortgage attached, life tenant has to pay interest

on mortgage, but future interest holder pays principalf. Insurance

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Manns Property Spring 2011i. Life tenant doesn’t have to insure, but has insurable interest

C. Ameliorative Waste :1. Affirmative action where life tenant alters property in a way that increases the value

of the property2. If “changed conditions” have undermined the property’s previous value, then life

tenant can tear building down without incurring liability3. If conditions haven’t undermined property’s previous value, life tenant is liable for

ameliorating waste, even if overall value of property is enhancedIV. Remedies :

A. Compensatory damages for damages sustainedB. Injunctive relief in equityC. Receivership

1. Tenant’s neglect is so severe that a third party needs to be placed in charge of the property to manage it for the life of the tenant and remaindermen

D. Remainderman has to take affirmative action to bring life tenant to court, BUT isn’t required to bring suit during life tenant’s lifetime

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Manns Property Spring 2011COMMON OWNERSHIP

Sharing both possessory (like present estates and future interests) and non-possessory (like easements and covenants) interests

Both possessory and non-possessory rights can be shared by two or more people Multiple people can have the same rights to control property at the same time

I. Tenancy in Common -Default common ownership estateA. Each tenant in common has a separate but undivided interest in the wholeB. Interests don’t have to be equal (e.g. 40/60 split)C. Can sell/lease interest without consent of other partyD. No right of survivorship

1. I.e. Tenant in common doesn’t receive the other’s interest when he diesE. Unity of possession is requiredF. Each co-tenant must have the right to possess the whole, but doesn’t have to exercise that rightG. Can exclude outsiders but not each other unless there’s a contract that allows

II. Joint Tenancy - Interests of both parties treated as one interestA. Harder to create than tenancy in commonB. Right of survivorship

1. UNLESS joint tenancy is severed during life, the interest will pass to the other owners upon joint tenant’s death

2. No interest passes when one dies – the interest just extinguishesC. Each co-owner has separate but undivided interestD. Unity of possession in the wholeE. One party’s leasing doesn’t sever joint tenancy

1. Lease is merely a transfer of present possessory interest 2. Tenhet v. Boswell

a. Lease doesn’t extend beyond the death of the leasing party because his death extinguishes his interest

3. Focus on intent of joint tenantsa. Did the grantor express intent that the two parties are joint tenants?

F. Requires four unities/formalities at time of creation of the joint tenancy- all must be equal1. Time:

a. Each interest is acquired at same timeb. Interests vest at same timec. I.e. A can’t get the joint tenancy before B

2. Title:a. All must acquire title by same instrument or by adverse possession

3. Interest:a. All must have same type and durationally identical interestsb. Don’t have to be identical portions

4. Possession:a. Each must have the right to possess the whole

5. By destroying one of the unities, joint tenancy can be severeda. Unity destroyed by unilateral act such as selling to a third partyb. Unilateral exit option

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Manns Property Spring 2011III. When joint tenancy is severed (by a unilateral act like selling to a third party) tenancy in common is createdIV. When one joint tenant leases interest:

A. Lease extinguished when lessor diesB. Lessor’s interest is extinguished, so there’s nothing left to lease

V. Governance Principles for Tenancy in Common and Joint Tenancy A. Right to exclude others, but can’t exclude other insidersB. Unilateral exit option-

1. If you can’t get along with other tenant in common or joint tenant, you can seek partition2. Don’t have the same recourse to courts with common ownership as you do with waste

regimesa. Generally, common ownership happens within familiesb. Really the only solution is exiting the relationship altogetherc. More incentive for self governanced. http://www.youtube.com/watch?v=59Hj7bp38f8

C. Proportional sharing of maintenance costs based on relative stake1. No duty to share costs of major improvements

a. As opposed to in a waste contact, life tenant has to maintain propertyb. If joint or tenants in common have to come to a consensus for every major

improvement, probably wouldn’t get a lot donec. Can’t force individual parties to contribute to major projects

2. Some JDs- can bring accounting action to make co-tenant pay maintenance costsD. Rent and Profits from Co-Tenant’s Activity:

1. No claim for other co-tenant’s2. Ouster Exception :

a. If one co-tenant ousts other, ousted party can sue for rent and profitsb. Elements :

i. Exclusive possession by one co-tenantii. that necessarily excludes the other co-tenant from exercising right of

possession andiii. refusal to accommodate clear and unequivocal demand to use land

c. Could be constructive ouster:i. Character of property makes joint occupancy impossible or impracticableii. Make it so bad to live there that the other party is constructively ousted

iii. Not automatic – ousted party has to prove that he was pushed outiv. Olivas v. Olivas :

(A) Divorce can cause constructive ouster- not automatic(B) Should fault matter? Policy Considerations:

(1) Spouse who leaves for another person(2) Spouse who stays faithful shouldn’t have burden of paying rent

to other spouse(3) Perverse incentive for cheating spouse so wife will throw him

out and she’ll have to pay rent(4) Fault can be hard to determine

(a) Should court have to make that judgment?3. Accounting Exception :

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Manns Property Spring 2011a. Co-tenants have right to proportional rents from 3rd party possessing whole property if

they agree to be bound by leasehold, waiving their own rights to possess propertyb. Accounting judicially enforced if tenants agree to be bound by the leasehold

VI. Carr v. Deking A. Joint tenant or tenants in common can lease his interest without co-owner’s permissionB. The opposing tenant has two remedies:

1. Accept the leasing party’s lease and receive half his share of rent2. Seek partition to get ½ of the property

C. Policy Considerations:1. Leases are a form of alienation of property- allows more efficient use2. Restraints on alienation are disfavored3. Giving co-owners right to veto lease would allow them to unreasonably block efficient

transfers4. Veto power of cotenant is inconsistent with right to undivided possession5. Lease transfers only that interest and tenant in common always has partition option6. Giving each owner power to possess or lease lets each benefit7. Co-owners have moral obligation to work out agreement8. If co-owner refuses to consent, other co-owner can seek partition9. Co-owners have legit interest in having say over who else gets possession10. Rational for requiring co-tenant’s consent may be particularly strong in case of farming

VII. Terminating Leases upon Divorce:A. Policy Considerations- For Terminating Leases:

1. Lessee can protect interests by title search and make both spouses convey lease2. Third parties should anticipate the possibility of a blocking spouse3. Spouse co-tenant shouldn’t have to protect herself

B. Policy Considerations- Against Terminating Leases:1. If lessees all have to fear divorce, significant impact on alienability- all rental values would be

decreased

VIII. Tenancy by Entirety A. Limited to marriageB. Only available in a few statesC. Right of survivorshipD. Each co-owner has separate and undivided interestE. No unilateral exit option as long as couple is married

1. Partition only possible through divorce proceedingsF. Modern Approach :

1. Property can’t be sold without consent of other spouse2. Creditors can’t attach property of either spouse

a. Need to be on notice that there are assets that can be seized3. Policy Considerations:

a. Keep marital real property available for benefit and use of entire familyb. If property can be reached by creditors, property would be sold b/c it’s impractical to

partition a single-family homec. Protection against creditors of a single spouse may make sense in contractual terms

since creditors can decide62

Manns Property Spring 2011d. Protection for tenancy in entirety appears to provide no way for creditors in tort to

protect themselvesG. Couple can opt to hold property as joint tenants or tenants in common

IX. Problems that come up in Co-Ownership Cases A. Resolving rights of co-owners

1. Question of co-tenant veto power- rights allocation a. Give one the power to enter into a lease or the other power to block it

2. Neither choice will foster relationship between two co-ownersa. Still self-governance challenges

3. Back-up remedy of partitionB. Resolving rights of third parties

1. If allow objecting co-tenants to block leases, that may hurt third parties2. Purchasers should be expected to check the state of title, but not necessarily with lessees

(especially with short term leases)

X. Community Property A. Limited to marriageB. Followed in 9 states, all formerly SpanishC. Property acquired before marriage:

1. Treated separately from marriage community property as long as not commingled2. Doesn’t automatically become community property upon marriage

D. Anything acquired during the marriage is part of the “marital estate”E. Property acquired after marriage by gift, devise, bequest, or inheritance:

1. Treated separately from marriage community property as long as not commingledF. Community property can be managed without consent of other spouse, but each spouse acts as

fiduciary of other for good of community1. Interests in real property and assets in business:

a. In some jurisdictions, both spouses must agree to mortgage or convey interests in real property and assets in business

2. Different rules on creditors (depends on state):a. Dual Consentb. No Consentc. Limit Portion Reachable by Creditors

G. Each spouse can freely dispose of his half of the estate through a will1. If no will, all goes to surviving spouse

H. No unilateral exit option as long as couple is married1. No partition of community property2. Can only end in divorce

I. Couple can opt to hold property as joint tenants or tenants in commonJ. Policy: Family’s interest in self-governance, maintaining family ties

XI. Separate Property StatesA. No special rules for married couplesB. Policy Considerations:

1. Relationship between spouses different than other co-owners63

Manns Property Spring 20112. Sharing and acting as a unit more important in marriage3. Spouses voluntarily agree to assume responsibility for each other4. Responsibilities to children- stable environment5. No need to complicate things by adding new forms of ownership6. Not all couples choose to marry or can marry7. Unfair to give some access to form of ownership not available to others

C. Spouses can co-own property as joint tenants or tenants in commonD. Spouses can’t be left out of each other’s wills without consent

1. But spouse can give away property before deathE. Division of property upon divorce:

1. Marital property - a. Subject to divisionb. Equitable distribution based on need, status, rehabilitation, contribution, fault

2. Individual property -a. Not subject to division

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Manns Property Spring 2011LEASEHOLDS

A way to divide property interests over time

I. Landlord-Tenant Relationship:A. Tenant gets right to possess property for some periodB. Landlord retains right of reversion after rental period, or remainder goes to third party

II. Types of Leaseholds:A. Term of Years:

1. Agreement for a leasehold for a specified period2. Tenancy ends automatically at end of period3. Parties must take action if they want lease to continue4. Leases for more than a year typically must be in writing5. More certainty than a periodic tenancy

B. Periodic Tenancy: default leasehold if there’s ambiguity1. Often month-to-month lease2. Renews automatically if parties don’t take action to end it

a. Typically notice is required to endb. Often notice must be at least one period unitc. If a terms of years lease ends, and tenant begins paying on a monthly basis, a periodic

tenancy has been createdi. Until tenant or the landlord terminate the relationship with notice

3. May or may not be pursuant to a written lease4. Lease invalid under SOF may lead to a periodic tenancy if the tenant moves in and starts

making periodic paymentsC. Tenancy at Will: gets the landlord marginal revenue until he can find a more permanent resident

1. Either party can end lease at any time without advance notice2. Not of much importance because periodic rent payments will create a periodic tenancy unless

the parties explicitly provide otherwisea. i.e. must explicity enter into a tenancy at will

3. Eliminated entirely in many states by adoption of statutory notice requirementsD. Tenancy at Sufferance/Holdover Tenant: Term applied to a tenant who overstays end of her

leasehold1. Tenant at sufferance is there wrongfully

a. But may be entitled to certain protections b. Such as a prohibition on self-help by the landlord (unlike a trespasser or squatter)

2. Landlord’s options :a. Evict through notice and judicial eviction proceedingb. Grant legal tenancyc. If landlord accepts rental checks from tenant then court may find periodic tenancy

established based on period checks givenIII. Substantive Regulations :

A. Generally implied by courts from leasehold contract or from common lawB. Tenant’s Right to Quiet Enjoyment :

1. Implied even if not expressC. Right to an Implied Warranty of Habitability

1. Increases housing costs65

Manns Property Spring 2011D. Housing Codes :

1. Statutory alternative in setting conditions for leased propertyIV. Procedural Regulations : Regulate creation and termination of landlord-tenant relationship

A. Self Help (like landlord changing locks) vs. Judicial Process 1. Trespasser doesn’t get any process

a. Self-help is permitted to oust/exclude from propertyb. Courts disfavor self help

i. Favor judiciary process(A) Formal notice and eviction proceedings(B) “Summary process”

2. Tenant (even holdover) is entitled to processB. Process :

1. Notice and eviction proceeding or summary process (expedited judicial proceeding)V. Burden on Landlords- Policy Considerations:

A. Pro 1. Tenant generally in position of uneven bargaining power

a. Focus on lower socioeconomic classes b/c shortage of affordable housingb. May not want tenant to be able to freely bargain away rights even if she would

otherwise choose to do so to get a lower priceB. Limiting contractual freedom

1. Or maybe it’s appropriate to limit contractual freedom to enhance opportunities in the long run?

C. Con 1. Less agreements entered into because of rules2. Higher cost of leaseholds to tenants3. Courts and legislatures shouldn’t interfere4. Limits of paternalism- state doesn’t necessarily know what’s best for tenants

D. Less concern about unequal bargaining power in commercial contextVI. Migrant Workers:

A. Vasquez v. Glassboro : 1. Migrant workers aren’t tenants protected under NJ Anti-Eviction Act

a. Not protected by legislation that says that a landlord may not remove a tenant except upon showing of good cause and with notice and judicial eviction proceedings

2. Public policy- contract must include implied provision that workers be given a reasonable time to find alternative housing

3. They aren’t tenants, but they can only be evicted through summary processB. Legislative v. Judicial Role :

1. Courts :a. Should modernize outdated common-law rulesb. Legislature and earlier court decision have recognized the vulnerability of migrantsc. Preference for judicial process over self helpd. Failure of the political process to provide protections for migrant workers (majority

doesn’t always account for the minority)2. Legislatures :

a. Expressly addressed problem of tenant evictionb. Decided not to give migrant workers special protection

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Manns Property Spring 2011c. Should be afforded deferenced. Courts are undermining common law and adding uncertainty to the lawe. Result may be less employment of migrant workers- higher costs of eviction will drive

them to illegal immigrantsC. Freedom of contract vs. judicial intervention

1. Pro freedom of contract (and efficiency)a. Efficient property allocation when people can freely contract without state

interferenceb. Market competition prevents exploitationc. Heavy regulation gives people fewer housing options, making poor people more poord. Paternalist judges shrink the options of the poor

2. Pro Judicial intervention a. Unequal bargaining power between tenants and landlords – poor tenants have no

market/contracting powerD. License vs. Lease :

1. Uniform Residential Landlord and Tenant Act: a. Adopted by ½ of statesb. Students living in dorms have revocable licenses, not a leasec. Apartment managers and others living on premises have licenses if access to the

property is part of their employment relationshipd. Implication- Streamlined eviction processes for students and apt managerse. Dorm Hypothetical : 4 students being evicted from dorm- all given 24-hour notice to

vacate. Should the substance of what looks like a landlord-tenant relationship supersede what is formally a license agreement?

i. Dorm contract says it’s a “license” to occupy the dorm in exchange for rent, can cancel with 24 hours notice

ii. Local statute - tenants can’t be evicted with less than 1 month’s noticeiii. Court eviction hearing or university self help?

(A) Self help:(1) Terms of the contract

(a) Students freely agreed to license terms(b) Chose dorm rather than apartment(c) Chose university

(2) University interest in strict control(a) Reduced tuition rates b/c no litigation

(B) Court eviction hearing:(1) Agreement is unenforceable- students are substantively tenants

under local statute(a) Purpose of statute is to give time to find new place to live(b) If they’re tenants they are entitled to notice and judicial

process(2) Lease is unconscionable- unequal bargaining power, unfair

terms(3) Students have imperfect information- don’t know what “duty to

mitigate” means(4) Courts should protect students from dumb mistakes

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Manns Property Spring 2011(5) Student pays rent for entire semester at the beginning of the

year- reliance on staying thereVII. Tenant Duties :

A. Payment of rentB. Keep premises intact and not damaged (within normal wear and tear)C. Reversion to landlord at end of lease term

VIII. Landlord Remedies - Self-Help vs. Judicial Process:A. Forcible self-help by landlords is banned

1. Policy Considerations:a. Risk of violenceb. Preference for judicial resolution of disputesc. Landlord shouldn’t be a judge of his own rights

B. Judicial Procedures for Intervention:1. Quick way for landlords to reclaim possession with short notice and judicial response times

(actually can take about 4 months)2. Names:

a. Summary proceedings/processb. Forcible entry and detainerc. Unlawful detainerd. Summary ejectment

IX. Landlord’s Duty to Mitigate Damages:A. When tenant wrongfully vacates a lease, landlord’s options:

1. Accept the surrender:a. Take back the propertyb. Forgive tenant for future rentc. Rights landlord retains :

i. Sue for back rentii. Damages for remaining months of lease:

(A) Tenant’s rent minus fair market valueiii. Lost rent while landlord is looking for new tenant (at the vacating tenant’s rate)iv. Damages to cover advertising and search costs to find new tenant

d. Landlord doesn’t have to re-let the property, but he can only recover difference between tenant’s rent and fair market value

2. Re-let on tenant’s account:a. Landlord must act reasonably in seeking a replacement tenant for remainder of leaseb. Tenant is still on the hook until the landlord can find a new tenant for the price he was

paying (even if it’s less than the fair market value)i. Liable for any difference between what he owes under the lease and what

reasonable rent the replacement tenant paysc. Rights landlord retains :

i. Sue for back rentii. Damages for remaining months of lease:

(A) Tenant’s rent minus reasonable rent paid by new tenant(1) Reasonable rent principle is designed to protect tenants

iii. Damages to cover advertising and search costs to find new tenantd. Notice of refusal varies by state:

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Manns Property Spring 2011i. Landlord has to tell tenant that landlord is re-letting property on tenant’s

behalf but will hold tenant liable for lost rente. If new lease is for longer than the remaining term of tenant’s period, tenant will be off

the hook for future damages if new tenant defaultsf. Landlord internalizes the risk

3. Wait and sue for rent/damages at the end of the term: out of date approacha. Traditional Rule:

i. Landlord must wait until the end of the lease term to sue to receive damages covering all unpaid rent

b. Modern Rule :i. Can’t just passively wait to sueii. Must act reasonably to seeking replacement tenant

(A) Means that landlords options are accepting surrender or re-letting on original tenant’s behalf

(1) Tenant remains liable for (a) Back rent and the period that the property is vacant

before the new tenant is secured(b) Costs of locating a new tenant

4. Landlord has burden to prove that he used reasonable diligence in attempting to re-let the property

a. No formula for determining whether landlord used reasonable diligence to mitigateb. Must treat the vacated apartment as available (lot lost volume seller issue)

B. Policy Considerations- Pro Mitigation Requirement:1. Fairness :

a. Landlord is only person able to mitigate if tenant can’t subletb. Rule should be to mandate a default of reasonable consent to assign/sublet or to

mandate that landlord engage in reasonable diligence in duty to mitigatei. Can’t give landlord reason to sit on his hands and let damages accumulate

2. Efficiency :a. Desirability of having vacant apartment put back into housing stock- prevent inefficient

use of resourcesb. Landlord is compensated, so he still gets benefit of the bargainc. Tenant able to make more optimal choices

3. Burden on landlord :a. In best position to mitigateb. Tenants could be barred from assignment/sublease- might not have a choice to

mitigateC. Policy Considerations- Anti Mitigation Requirement:

1. Fairness :a. Landlord bargained for right not to have to find another tenant

i. Shouldn’t have to spend time and energy finding a replacement2. Efficiency :

a. Not necessarily inefficient to have apartment emptyi. In a big building, a number of units are usually empty

b. If landlord wanted a shorter lease, he would have negotiated for itX. SUBLEASE/ASSIGNMENT

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Manns Property Spring 2011XI. Assignment:

A. Tenant 1 conveys all remaining property rights to Tenant 2B. Vertical Privity - not holding back any interest

1. Tenant 2 is bound by covenants that touch and concern the land2. Tenant 2 literally steps into the shoes of Tenant 1

C. Landlord and Tenant 2 are in Privity of estate1. Landlord can enforce covenants directly against Tenant 22. They’re not in Privity of contract because they didn’t reach an agreement with each other

D. Tenant 2’s responsibilities :1. All of Tenant 1’s obligations2. Rent

E. Tenant 1’s responsibilities :1. Liable to landlord if Tenant 2 breaches covenants/fails to pay rent

XII. Sublease:A. Tenant 1 retains some future interest while giving Tenant 2 a present possessory interestB. No vertical Privity (Tenant 1 is holding something back)C. No Privity of estate or privity of contract between Landlord and Tenant 2

1. Covenants don’t run with the land2. Landlord can only sue Tenant 1 for damages

D. Potential for landlord to enforce equitable servitudes against Tenant 2:1. Don’t need privity2. Landlord has to establish that Tenant 2 had notice

a. Likely inquiry notice since tenant would reasonably want to know what covenants apply

b. Courts split over whether covenant to pay rent can be enforced by injunction XIII. Commercial Leases:

A. Kendall v. Ernest Pestana B. Landlord can withhold consent only if there is a commercially reasonable objection

1. Overturn majority rule that lessor can arbitrarily refuse a proposed assignee2. Policy Considerations:

a. Reasonableness rule may spur more litigation for existing contractsb. Future contracts may rely on default of no assignment or sublet c. The duty to mitigate damages may be enough to spur resolution of cases d. Tenants will pay more to reflect added burden of potential litigation over

reasonableness as well as to compensate landlords for reduced control over propertiesC. Commercial reasonableness is a question of fact. Key factors are:

1. Creditworthiness/financial reputation of assignee2. Proposed use of the property

a. Need to alter premises?b. Nature of occupancyc. Legality of proposed use

D. Reason is considered unreasonable if the lessor is leveraging consent to get more rentE. Dissent - Don’t need a reasonable excuse to withhold consent:

1. Plain Language:a. Lease clearly states no assignment or subletting without consentb. Four-corners approach

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Manns Property Spring 20112. Expectation Argument:

a. Lessor has clear expectations of landlord discretion to approve or not approve assignees

3. Institutional Choice:a. Should be statutory decision to update lease law

XIV. Residential Leases:A. Slavin v. Rent Control Board of Brookline Landlord can withhold consent for assignment/subletting

arbitrarily or unreasonably when the lease requires the landlord’s approval of an assignment or sublease

1. Unlike a commercial lease, residential leases refuse to impose an implicit reasonableness requirement on landlords

B. Policy Considerations- Reasonableness Standard:1. Residential tenants are less sophisticated than commercial tenants and less likely to rely on

lawyers2. Informational asymmetry3. Lack of bargaining power4. Landlord is generally a commercial player- commercial standards should apply5. Similar alienability concerns apply in residential and commercial contexts6. Unfair to punish residential tenants just because stakes are smaller

C. Policy Considerations- No Reasonableness Standard:1. Contractual duties of good faith and fair dealing aren’t easy fit into leasehold context2. Can’t assume that landlords are necessarily commercial or sophisticated3. Smaller landlords may be personally impacted by assignee’s or subletter’s choice4. Residential tenants may want greater control because residential leases are generally shorter

and less reputational constraints for individual tenants5. Plain meaning- parties should get what they bargained for6. Tenant’s shouldn’t get a windfall just because court retroactively read in an implicit provision

XV. Constructive Eviction : Outgrowth of “covenant of quiet enjoyment”A. If landlord breaches tenant’s implied covenant of “quiet enjoyment” of the premises, tenant doesn’t

have to pay rent1. Allows tenant to extricate herself form lease obligations

B. Tenant doesn’t have to pay rent if :1. Landlord is responsible for a disturbance2. That is so substantial that it’s equivalent to physical eviction3. Disturbance is a natural and probable consequence of anything the landlord permitted to

happen or had control overa. i.e. Landlord is subject to liability for actions and omissions regarding a third party

tenant causing disturbanceb. landlord is in the best position stop other tenants’ objectionable conduct

C. No need to vacate the premises to claim constructive ouster:1. Minjak v. Randolph :

a. Tenant can assert constructive eviction defense even if tenant only abandoned a portion of the premises due to landlord’s action

b. Entitles tenant to withhold a portion of the rent that corresponds to unusable portion of the premises

2. Might not be financially feasible for them to vacate71

Manns Property Spring 20113. Tenant vulnerable to double-rent gamble

D. If tenant wanted to claim Nuisance:1. Remedy would be damages and injunction2. Tenants would still have to pay rent

E. Landlord generally isn’t liable when one residential tenant annoys another:1. Policy Considerations:

a. Landlord is aware of incompatible uses- should internalize financial consequencesb. Covenant of quiet enjoyment should mean that tenant should have expectation of

using units undisturbed at nightc. Tenant could have nuisance action against other partyd. Landlord doesn’t intend/isn’t making the disturbancee. Did landlord make reasonable efforts to stop the disturbance?

XVI. Implied Warranty of Habitability:A. Implied in every residential leaseB. Requires landlords to meet requirements of local housing codeC. Violations can be raised as defense in eviction proceedingsD. Javins v. First National Realty Corp. : created implied warranty

1. Old rule was out of datea. Era of Consumer Protection

2. Too hard for people to make repairs themselves3. Inequality of bargaining power between landlord and tenant4. Substandard housing impacts poor the most5. Changed circumstances

a. Modern circumstances are different than when the old rule was developedb. People rent to have a place to live, not for the land itself c. Landlords are more capable of dealing with maintenance

i. Has access to all areasii. Has financial incentive to hire someone to make repairs

6. Changes in other areas of the law7. Housing Code requires warranty of habitability- this creates a private right of action as a way

to enforce the codea. Policy Considerations:

i. Furthers policies legislature endorsed in the housing codeii. Back-and-forth between legislature and courts makes for current law

iii. Landlords can’t complain about being forced to comply with existing housing code obligations

iv. Democratically-elected legislature should initiate such a major changev. Legislature set up specific regulatory school without a private cause of action

involvedE. Remedies :

1. Terminate lease and move out:a. Tenant might not be able to move or may want to remain in that locationb. Concern that other tenants will still move in, which won’t stop landlord from offering

inadequate housing2. Withhold rent:

a. Safeguard- pay rent into escrow account72

Manns Property Spring 2011b. Calculating Deductions:

i. Reduce rent by a proportion based on seriousness of violations or compare market value as warranted with market value as delivered

3. Repair and deduct the cost of repairsa. There is often a limit to how much the tenant can unilaterally spend on repairsb. Give landlord notice of the problem, and landlord hasn’t remedies in a reasonable

period of time4. Action for specific performance for landlord to make necessary repairs

F. Contracting/ bargaining out of warranty of habitability :1. Policy Considerations- Pro:

a. Freedom of Contract :i. Could be equal bargaining powerii. Effect on tenant’s circumstances

b. Self Determination :i. Let tenants decide if they want sub-standard housing for lower rentii. Inefficient to make people spend money on something they may not want

c. Wealth Distribution :i. Not fair to transfer wealth from landlord to tenant

2. Policy Considerations- Con:a. Unequal bargaining power - no one would voluntarily agree to live in an uninhabitable

apartmentb. Tenants unlikely to understand what they’re giving upc. No one forced the landlords to become landlords- they must meet minimum standards

if they want to make moneyd. Only landlords have capacity/incentive to repaire. Rent withholding is only effective way to get landlord’s attention

3. Warranty generally can’t be waiveda. Common exception- handyperson who agrees to undertake his own repairs in a

separate, good-faith agreement4. Most jurisdictions hold that the warranty covers conditions that existed at the beginning of

the lease term, even if they were obviousG. Constructive eviction is broader than implied warranty of habitability

1. Applies to commercial and residential leaseholds2. Covers disturbances other than those due to physical condition of the building (like a noisy bar

in a nearby building that the landlord controls)3. Implied warranty goes a step further in allowing tenants to repair and deduct

XVII. Retaliatory Eviction:A. Barred because of concern that landlord could evict tenant for raising an implied warranty of

habitability claim1. Hillview Associates v. Bloomquist - under state statute, evidence of a complaint within 6

months before the eviction creates a presumption that the landlord’s conduct was retaliatoryB. Raised as defense during summary eviction proceedingC. Claim must relate to tenant’s exercise of a right incidental to the tenancy

1. Policy Considerations:a. Ban is intended to protect tenants’ ability to exercise rights guaranteed to themb. No reason to believe tenants need other special protection from landlords

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Manns Property Spring 2011c. Landlord should remain free to deal with tenants as they see fit, as long as they don’t

prevent tenants from exercising their rightsd. Tenants have less bargaining power than landlordse. Protection may need to go beyond strict tenancy relationship

D. Triggers for Presumption of Retaliation :1. Tenant complains to governmental agency for violations affecting health/safety2. Tenant complains to landlord3. Tenant has organized or become member of tenants’ association4. Tenant exercising rights and remedies laid out in statute5. Landlord takes action:

a. Increasing rentb. Decreasing servicesc. Bringing or threatening an eviction actiond. Failing to renew a rental agreement after certain trigger events

6. Presumption puts burden of production on landlord to show possible non-retaliatory reason for eviction:

a. Reasonable exercise of business judgmentb. Good-faith desire to dispose of entire lease propertyc. Good-faith desire for different use of leased propertyd. Lack of financial ability to repair leased propertye. Unaware of tenants’ protected activitiesf. Landlord didn’t act at first opportunityg. Landlord’s act wasn’t discriminatory

7. If landlord produces non-retaliatory reason for eviction, tenant has burden to prove retaliation by preponderance of evidence

E. Robinson v. Diamond Housing : 1. Egregious violations of warranty of habitability2. Landlord suit for back rent, tenant raised retaliatory eviction defense3. Landlord wants to take house off rental market, gave proper notice4. Court gives landlord options:

a. Repair the property and then kick tenant outb. Go out of business for all rental units- can’t selectively evict

TAKINGSPower to compel a transfer of property rights in return for just compensation

I. Eminent Domain:A. Fifth Amendment - “nor shall private property be taken for public use, without just compensation”B. Aspect of government power or sovereignty

1. Possessed by Federal government and the 50 statesa. Can be delegated to local governments, administrative agencies, common carriers, and

private utility companiesC. Statutory requirements :

1. Must determine:a. Delegated power is broad enough to encompass the use of the power for the

proposed project74

Manns Property Spring 2011b. That the project is for a legitimate public purposec. The exercise of eminent domain is necessary

2. Some statutes also required that the property is blightedD. Two key requirements:

1. Public Use2. Just Compensation

II. Public Use Requirement:A. Takings must benefit the public B. Exercise of eminent domain power must be rationally related to a conceivable public purposeC. Role of courts in determining what’s public purpose and rational means for achieving purpose:

1. Extremely limited2. Very deferential to legislative judgment

D. Biggest area of Controversy: Transfer of property to private hands for commercial/economic development:

1. Taking for purely private benefit:a. Invalid

2. Taking for use by general public:a. Valid

3. Taking for economic development:a. Heightened rational basis scrutiny :-/b. Kelo v. City of New London - city doesn’t violate 5th Amendment if it takes private

property and sells it for private development in the hopes that the development will help the city’s bad economy

i. Even though the land isn’t used by the public it’s considered public useii. Read it as “public purpose”

4. Taking to breakup land ownership oligarchy that restricts free market:a. Valid

5. O’Connor’s Dissent in Kelo:a. Takings where government takes title:

i. Valid b. Takings followed by uses open to public (common carriers):

i. Valid c. Takings justified by some other public purpose:

i. Problematic category :-/E. Factors to consider :

1. Who is benefitting2. How many people are impacted after the project is completed3. Whether locality lied about its purpose4. How seriously government officials considered the public dimension of the proposed private

developera. Did they make a good-faith effort to make sure that a public use would be taking

place?F. Courts need to make sure that the cited public use for the taking isn’t a pretext for a private benefit

III. Just Compensation Requirement:A. Owner must be paid fair market value for the property takenB. Fair Market Value = Price a willing buyer would pay a willing seller

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Manns Property Spring 2011C. Doesn’t include the subjective value to the owner or the impact on goodwill/going concern of a

business1. Easier to ascertain2. BUT doesn’t award verifiable costs like moving costs, or legal fees to fight the taking3. Sole focus is fair market property value

D. Owner isn’t entitled to an award based on the after-condemnation value of property in the areaIV. Holdouts :

A. Incentives:1. Subjective valuation of the property2. Some states pay 125% or 150% of fair market value- can negotiate for better price3. Federal legislation requires compensation for moving costs, lost personal property from the

move, and reasonable expenses for searching for a replacement business, but doesn’t pay for goodwill or going concern value of businesses

4. Could reap surplus from redevelopmentV. Partial Takings/Single Parcel Rule :

A. If government takes a portion of a parcel, the owner gets the fair market value of what is taken 1. Plus severance damages2. Minus benefits to remaining part of land

B. Focus is special benefit or loss to the property from severanceVI. Opportunity Cost Approach : highest and best use appraisal

A. Creates efficient incentives for government because it makes the government base its decisions on the true costs of takings

B. Disincentivizes the government from structuring its projects in potentially undesirable waysC. Tempers perverse incentives for property owners- dating the opportunity cost at the time that the

government’s takings plan becomes known will disincentivzie hasty efforts at development that are designed to increase takings competition

VII. Quick Take Statutes :A. Streamline eminent domain proceedings by transferring title to the condemning authority before all

contested issues raised have been resolvedB. Alter relative bargaining power of government and individualC. Owners are entitled to a hearing on the statutory authority for the condemnation and public use

before title passes, but owners are not entitled to possess property until end of litigationVIII. Regulatory Takings :

A. Two types of cases1. Exercises of police powers (eminent domain)- government acts to protect health, safety,

welfare and moral of the citizenrya. Doesn’t require compensation

2. Exercises of eminent domaina. Seizure of property for public purposeb. Just compensation

B. If government regulates use and enjoyment of property in particularly severe way, regulation may be deemed to be a taking

1. Difficult for burdened party to get compensation for regulatory taking2. Hard to prove a regulation took all value of the property

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Manns Property Spring 2011IX. Categorical takings

A. Per se Takings :1. Permanent physical occupation2. Government invades the property itself and authorizes third parties to permanently physically

occupy3. Functional equivalent of depriving the owner of title4. Policy Considerations:

a. Permanent occupation is more severe deprivation than use regulation- denies owner all aspects of ownership with respect to property taken

b. Owner suffers particularly severe injury to autonomyc. Permanent occupations demarcate bright-light ruled. Whether there is a permanent occupation is easy to prove

5. Permanent, Physical Occupation:a. Loretto v. Teleprompter Manhattan CATV Corp. – Requirement to let cable company

install cables without just compensation is a physical takingi. Permanent, physical occupation of private propertyii. Authorized by the government

6. Not a physical taking if: a. Owner permits use of property under one set of terms and government intervenes to

change the termsb. Government rules create easement

7. Permanent, physical occupations should be subject to per se rule of takings liability:a. Any physical occupation impacts owner’s right to exclusive possessionb. Permanent occupation is a more severe deprivation than a use regulation- denies

owner all aspects of ownershipc. Owner suffers particularly severe injury to autonomy when government forces the

owner to permit a stranger to occupy part of her propertyd. Permanent occupations make a bright-line rule about how large occupation must be

before there is a takinge. Easy to prove if it’s a physical occupation

8. Loretto dissent:a. Difficult to distinguish between permanent and temporary occupations and between

occupations and regulations of useb. Bright-line rule requires compensations where it isn’t justified

9. No physical taking when owners voluntarily permit people to use property on one set of terms and the government intervenes to change the terms

10. Government rules that create public easements are physical takingsB. Denial of 100% of Economic Use:

1. State has to compensate landowner when regulatory action denies all economically beneficial or productive use of land

a. Total deprivation of beneficial use is the equivalent of physical appropriationb. Lucas v. South Carolina Coastal Council – state must compensate landowner when

regulatory action denies all economically beneficial or product use of land, unless the prohibited use of the land constitutes a nuisance under state common law

2. Harm-Prevention Exception :

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Manns Property Spring 2011a. Not a taking if use would have been wrongful and illegal under state nuisance laws or

traditional property lawi. Protect human life and safetyii. Factors to Consider:

(A) Degree of harm to public lands and resources or adjacent private property posed by P’s proposed activities

(B) Social value of P’s activities and their suitability to the locality(C) Relative ease with which alleged harm can be avoided through

measures taken by P and the government or adjacent landowners(D) Whether similarly situated owners traditionally engaged in that use(E) Whether similarly situated owners are permitted to continue in the use

denied to Pb. Potential basis to deny takings claim: If the owner knew at the time he acquired title to

the property that the state could potentially restrict use to guard against harmful or noxious use

3. If the state can show that the proscribed use interests were not part of the owner’s title to begin with, they don’t have to pay compensation

4. No liability for destruction caused to forestall grave threats to lives and property of others5. If the diminution in value is less than 100% (“Ad hoc takings balancing test”)

a. Penn Central Transportation Co. v. City of NY – no taking took place when Preservation Commission prevented the Penn Central RR from using air rights to build an office building above Grand Central

b. 3- Three-Factor Balancing Test: [the government has better chances of winning under this test]

i. Extent of diminution of value :(A) Less than 100% reduction in value isn’t a taking(B) Measure diminution of value of whole parcel, not a discrete property

right(C) Focus on whether the regulation deprives the owner of a reasonable

return on existing investment(D) Transferable Development Rights mitigate diminution of value concern

ii. Interference with reasonable investment-backed expectations :(A) Has owner substantially invested in reliance on existing statutory or

regulatory scheme?(B) Less likely to be a taking if:

(1) Government imposes an opportunity loss(2) Change in law was expected such that the owner’s reliance was

not that reasonable(C) Weigh factors against the interest of fairness and justice:

(1) Is obligation imposed as a burden of citizenship, or should it be shared by whole community?

(2) Disparate impact test- is a particular owner being impacted by a government impact way more than other owners?

(3) Distributive fairness is ultimate goaliii. Character of the Government Action :

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Manns Property Spring 2011(A) Does it cause a physical invasion of the property or merely adjust the

burdens and benefits of economic life to promote the public good?(B) Most likely to be a taking if:

(1) Forced physical invasion(2) Deprivation of core property right(3) Individualized extraction of a benefit for the good of the general

community(4) Forced redistribution of bargained-for contractual rights from

one party to another, rather than a regulatory program(5) Transfer of property from one party to another(6) Regulation that extends beyond a legitimate state interest

(C) Less likely to be a taking if:(1) Regulation of property use rather than forced invasion(2) Regulation advancing an average reciprocity of advantage

(a) Applies equally to all owners- not singling-out(3) Government regulation to protect the public interest from a

nuisance(4) Regulation of ongoing contractual relationship that forces the

transfer of some property interests from one party to another(5) When government has to mediate between incompatible

property interestsc. All three factors must be weighed against the interests of fairness and justice

i. Is the obligation imposed as a burden of citizenship? Should it be shared by the whole community?

ii. Disparate impact test (A) Is a particular owner being impacted by a government action way more

than other owners?(B) To the extent that he is being unfairly singled out?

iii. Ultimate Goal : distributive fairness (**Not efficiency)

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