property spring 2013 (smith)
TRANSCRIPT
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The Leasehold
I. The Leasehold [nonfreehold estate] a. Term of Years
i. An estate that lasts for some fixed period of time or for a period computable by a formula that results in fixing calendar dates for beginning and ending
ii. Common law: no limit on number of years permitted iii. Modern law: state statutes typically limit duration iv. Termination:
1. notice unnecessary bc fixed duration 2. Death of L or T: no effect on term of years 3. Term of years determinable:
a. condition subsequent: L to T for 10 years “so long as used for a school” OR b. terminable by one party: L to T for one year, with a proviso that L can
terminate at any time b. Periodic Tenancy
i. A lease for a period of some fixed duration that continues for succeeding periods until either L or T gives notice of termination
1. EX) “To A from month to month” or “To B from year to year.” ii. Creation:
1. Agreement of parties 2. Operation of Law
a. Holdover after expiration of the term: L may consent to T’s staying over and hold T liable for the rent of another term
b. T takes possession under invalid lease: Entry by T creates a tenancy at will, and payment of periodic rent converts the TW to a Periodic Tenancy by operation of law i. Notice will be required even though parties may think the invalid lease
will end without notice iii. Termination has to be on the final day of the period (see problems for examples)
1. Notice: required; period automatically extended until proper notice is given; notice must state the last day of the period, and the notice must be equal to the length of the period itself (exception: yr to yr reqs only 6 mos) a. EX) notice given on Jan. 20 to terminate a month to month tenancy on Feb 20
is insufficient; nor will it terminate on the last day of Feb bc it does not specify that date
2. Restatement: abandons common law rule and says that if the date stated in the notice for termination is not the end of a period or is too short a time before the end of a period, the notice will be effective to terminate at the earliest possible date after the date stated. (better honors intentions of party)
3. Death of Landlord or Tenant has no effect on the duration of the term of years or the periodic tenancy
iv. Types: 1. Year to year
a. Notice: i. Common law: 6mo notice required to terminate yr-‐to-‐yr tenancy ii. Modern law: statutes will govern notice requirements
b. EX) annual rent payable monthly – generally interpreted to be year-‐to-‐year 2. Less than a year
a. Notice must be given equal in length of the period, but not to exceed 6 mos. i. EX) for a month-‐to-‐month, must give a full month’s notice ii. Court will make the notice effective on the earliest date it could be
effective under common law principles c. Tenancy At Will
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i. A tenancy of no fixed period that endures so long as both L and T desire ii. Unilateral power to terminate a lease can be negotiated on a term of years or a periodic
tenancy 1. SPLIT: if a leasehold has no certain duration but is terminable at will by one party
a. Tenancy at Will i. some courts imply a power of termination in the other party since there is
no certain duration, thereby creating a TW, where both can terminate b. Determinable LE
i. other courts say that if the agreement does not create a term of years/periodic tenancy, but the tenancy is to continue so long as T wills, T has a LE determinable
2. Restatement: you should be able to negotiate that for either party, but it might be an unconscionable term in the contract and therefore unenforceable a. EX) L to T “for 10 years OR until L sooner terminates”
i. Creates a term of years determinable b. EX) L to T “for as long as T desires to stay on the land.”
i. Creates a life estate determinable, terminable at his will or on his death iii. Termination
1. Common law required no notice; modern statutes generally require some notice 2. When one party ends it OR at the death of one of the parties 3. TW can’t be assigned, so it terminates if L attempts to convey, or T attempts to assign,
the property iv. Modern Law requires a period of notice in order for one party to terminate a TAW
1. 30 days or a time equal to the interval bw rent payments d. Tenancy at Sufferance: Holdovers
i. When a tenant remains in possession (holds over) after termination of the tenancy 1. Leaving items does not constitute a holdover unless they interfere with L’s use of the
premises 2. An ill tenant is not liable as a HO tenant bc not staying on voluntarily
a. But L may still have a remedy – T will have to pay for the period he was on the premises preventing L from leasing to someone else
ii. Common law 1. Tenant friendly 2. L’s 2 Remedies:
a. Eviction (plus damages) i. Treat HO tenant as trespasser ii. Get special damages (those caused directly by the HO)
b. Consent (express or implied) to create a new tenancy i. Usually any new agreement will be limited to one year (even if original
lease was for like 5 years, etc) ii. Even if L decides to treat HOtenant as trespasser, if he subsequently
accepts and deposits rent checks, he implicitly agrees to a month-‐to-‐month tenancy (or other period, depending on the facts)
iii. In Most Jxns, holding over gives rise to a periodic tenancy subject to the terms of the original lease; generally limited to one year tenancy
iv. Ways to Deal with Holdovers 1. Statutes specify length of the holdover tenancy 2. Some convert hold over tenant into a tenancy at will and provide that the tenant
shall be liable for the reasonable value of use/occupation – even though this may be less than the rent agreed upon in the original lease
3. Ls may demand double rend from HO tenants (fairly common) v. Damages
1. Common law: FRV of leased premises, plus any special damages (rent in original lease is good evidence of FRV)
2. Rights of Incoming Tenant:
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a. Conventional Common Law: incoming T with the right to possession can evict a holdover tenant and recover damages as measured by FRV (evidenced in original lease)
b. Restatement: incoming T should also be able to consent and treat HO tenant as subletter as L can
II. The Lease a. Defined: an instrument that proclaims itself as a lease may not be one (could instead be a loan, LE,
or license); and one that does not identify itself as a lease may nevertheless be one b. Both conveyance and contract:
i. Conveyance: transfers a possessory interest in land ii. Contract: contains a number of promises
c. SOF: requires leases for more than 1 year be in writing i. Where a jxn does not permit oral leases for a term less than a year, it usually will hold that
entry under an oral lease plus payment of rent creates a periodic tenancy not subject to the SOF
ii. Oral lease to commence in the future: valid under the SF if the term does not exceed one year iii. If the oral lease has an option to renew for another one-‐year term, it is treated as a 2yr lease
and is void under SF bc no longer falls into short-‐term lease exception of SF d. Form Leases Most Common
i. Lack of bargaining power? Maybe not. Competition should be an equilizer ii. Real issue: monopoly power iii. Statutory leases – but conflict if L has political power + market power
III. Selection of Tenants [unlawful discrimination] a. Fair Housing Act 42 U.S.C. § 3604 (1968) – product of civil rights movement of 60s
i. Protects: race, color, religion, sex, familial status (specifying ratio of adults to kids), and national origin, handicap, maybe sexual harassment under § 3604(b) “conditions of premises”
ii. Does not protect: marital status, sexual preference, profession iii. § 3604(c) deals with advertising
1. What if advertising says “only people of certain languages?” a. Probably a violation bc can the statute protects people of “national origin” and
languages can be read to prefer people of certain national origin iv. § 3603(b) is an exemption provision, applies to everything except 3604(c), the advertising
provision [SO, if someone violates by discriminatory advertising, but lives in a situation exempted by the statute, the exemption does not extend to the advertising violation]
1. 3603(1): single family homes a. EX) “Wanted: Female to share 2bdrm apt.”
i. Violation of FHA? No. ii. Exemption provision: people renting a room in the apartment in which
they are living are no prohibited from preferring a specific gender 2. 3603(2): small space with no more than 4 families living independently there and
owner occupying one of those units v. § 3604(f)(3): discrimination based on handicap
1. L must make reasonable accommodations to allow handicapped persons to use the premises (waiving no pet policy, construction, etc.)
2. AIDS considered a handicap vi. Approaches discrimination by making a disparate treatment claim (you were treated
differently than another gender/class of persons) 1. Prima Facie Case:
a. You were part of an FHA protected class (racial, gender, familial group) b. You tried to get housing (rent/buy) that you were legitimately/objectively
qualified to obtain BUT the landlord/seller did not rent/sell the housing to you and instead it remained available OR went to someone not in my protected class
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2. Then, burden shifts to L to prove that he did not discriminate; if he can, then 3. Burden shifts back to P so show he did
vii. Disparate Impact Claim 1. Demonstrate that the action/practice is one that would make a discriminatory impact
rather than actual discrimination 2. Burden shifts if it is a governmental D – they must show they have a governmental
purpose w/o discrimination 3. If private owner, they must show some underlying business purpose to explain their
practice b. 42 U.S.C. § 1982 (1866) – product of post civil war statute
i. No prohibition on discriminatory advertising ii. It doesn’t specifically protect “national origin” as a classification BUT “race” at that time was
interpreted as synonymous with national origin – so probably a violation iii. Does not apply to advertisements
IV. Delivery of Possession a. L has the duty to transfer to T at the beginning of the tenancy the legal right to possession b. English Rule (majority):
i. Must give T actual possessory rights to property at time of lease ii. Delivery of possession: there needs to be an express condition iii. L must make sure previous T has left the premises so it’s actually available iv. Implied term of the lease that L will make sure premises are actually available for use by
incoming T v. Incoming T’s remedies against L:
1. Not necessarily obligated to pay rent while kept out of premises 2. Damages: loss of business, cost of renting other place, cost of ousting 3. Terminate lease – and still sue for damages
vi. Rationale: 1. L in better position to know status of current T/likelihood of holdover
c. American Rule (minority): i. If the lease doesn’t speak to the issue of holdover T, then L does not owe T actual possession
of the premises at the beginning of the lease; and L hasn’t violated any duty to the new T ii. L has a duty to the incoming T
1. If L leased it for longer to the initial T and then granted a new lease covering the same time period, THEN there’s a cause of action against L
2. L has obligation to give T legal right to the property but NO DUTY to give actual possessory rights at the time of the property
iii. Incoming T’s remedies: 1. evict Holdover T and recover damages 2. Treat HT as tenant for another term, with rent payable to incoming T
iv. Still, parties can negotiate to put a contrary term in the lease 1. Caveat: URLTA, adopting English rule, does not allow parties to agree otherwise
v. Rationale: 1. Unfair to hold L responsible for wrongful acts by 3rd party not actually in L’s control 2. Statutes provide remedies for incoming T in these situations 3. Ls may be discouraged from entering into new leases
V. Subleases and Assignments a. Assignment: T or L may freely transfer his interest in the premises
i. L assigns the reversion, the assignee and the T are in privity of estate OR ii. T transfers his entire remaining term of his leasehold, the assignee comes into privity of
estate with L iii. IF a T’s assignee breaches a covenant in the lease (fails to pay rent), L can sue the assignee bc
of privity of estate and can also sue the original T bc of privity of K 1. Privity of estate makes L and assignee liable to each other on the covenants of the
original lease that run with the land 2. Privity of Contract: Obligations bind regardless of whether in privity of estate
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a. T remains a surety; so if T2 fails to pay rent, L may still sue T1; The only way T1 can escape rent liability is by a release; just because L consents to the assignment and accepts rent from T2 does not waive L’s rights against T1
3. Many people can be in privity of K with L; only 1 party can be in privity of estate with L
4. Exceptions – when assignee would be in privity of K with original owner: a. Novation: L consents to assignment to T2 and releases T; a new K bw L and T2
is formed; now privity of K and privity of estate bw L and T2 b. 3rd party beneficiary doctrine: enter into a K for the benefit of someone else
i. (pledgers: my own life insurance plan I won’t collect on my policy, but my beneficiaries would); someone who is not party to the K nevertheless has rights to enforce it bc it was for their benefit
ii. EX) K bw T and T1 to transfer the leasehold; this K could arguable be a 3rd party benefic K for the benefit of the L: for example, T and T1 may agree that T1 will assume covenants of original Lease, so L could be seen to benefit from the K in a jxn that recognizes 3rd party benefic Ks
5. Theory of Subrogation: if T is forced to pay L based upon defaults by other people; In exchange for paying off L, T implicitly acquires L’s rights: he can turn around and assert the same rights L could have asserted against other liable parties; he has subrogated L’s rights bc he had to pay off the L
iv. Partial Assignment: when lessee transfers all of his interest in some physical part of the premises
b. Sublease: i. If a T transfers less than the entire remaining term of his leasehold, there’s a sublease, and T
becomes landlord of the sublessee ii. Sublessee is not in privity of estate with L and cannot sue or be sued by L
1. Since the Sub has made no K with L, he cannot sue or be sued on K either c. Covenants against Assignments/Subleases
i. Majority rule: is a lease covenant says lessor must obtain L’s written consent to an assignment, L can arbitrarily reject assignments
ii. Minority rule: requires a commercially reasonable objection for rejecting the assignment 1. financial responsibility for new T, but cannot consider new L’s general economic
advantage 2. Rationale:
a. Want the property to be used b. the lease is both a conveyance and a contract
i. alienation: L would restrain alienation by refusing consent (property law favors transferability)
ii. implied covenant of good faith/fair dealing (K law favors also) iii. Waiver of covenant:
1. may expressly or impliedly waive the covenant against assignment or sublease; generally happens when L accepts rent from the assignees with the knowledge of the assignment
2. Rule in Dumpor’s Case: where L expressly consents to one assignment, the Rule states that the covenant thereafter becomes unenforceable (once waived, is destroyed) a. Restatement: rejects RDC b. Exceptions to Rule:
i. If the covenant not to assign w/o consent of L is expressed as binding on lessee and his assigns, then an assignment with consent of L does not free assignee from the binding force of the covenant.
ii. If L, in consenting to an assignment, expressly says the consent is to that assignment only, and not to future assignments, then RDC doesn’t apply
iv. Residential Leases: Generally, the reasonable objection standard does not apply to residential leases
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d. Covenants running’s to Assignees VI. L’s Remedies: The Tenant Who Defaults
a. Means of Assuring Performance i. Options for L under minority view:
1. Distress 2. Statutory Liens 3. Security Deposits
a. Common law: put in an escrow acct and return to T at termination of lease, minus any damages to premises
b. To withhold security deposit, L must provide an itemized list of why 4. Rent Acceleration
a. To avoid the rule that L must wait to sue for rent, the clause provides that the rent for the balance of the term shall become payable in full on T’s default of payment of rent
5. Waiver of service and Confession of Judgment b. The Tenant in Possession
i. Common law/Majority: forcible reentry/self help; L could, w/o notice to T, enter upon premises and seize whatever chattels he found and hold them as security until rent was paid SO LONG AS
1. L was legally entitled to possession and 2. His means of reentry was peaceable
ii. Modern trend/minority: move away from self-‐help; require L to seek judicial remedy 1. Should T be able to bargain away this anti self-‐help protection in exchange for lower
rent? iii. L’s remedies:
1. Eviction: 2. Summary Proceedings (3-‐10 days) 3. Temporary Restraining Order (as soon as judge will sign; sort of like injunction)
iv. c. The Tenant Who Has Abandoned Possession
i. When T abandons, L has three options: 1. Terminate the lease, 2. Let the premise lie idle and sue T for rent, or 3. Retake possession and attempt to re-‐let
ii. L’s remedies 1. Termination of Lease:
a. Surrender i. L terminates the lease on T’s abandonment; T liable only for rent accrued
and damages caused by abandonment ii. L no longer has remedy of lien or distress upon termination of lease
b. Anticipatory Breach i. Common law did not allow: if L wanted damages, L had to keep the
lease alive (rather than terminate), wait until rent was due, and then sue ii. Majority law allows: if T makes it clear he will pay no further rent; L’s
damages are determined by the [rent agreed upon in lease] – [FRV over the value of the term]
2. Sit Idle a. Duty to Mitigate Damages
i. Common Law: L has no duty to mitigate damages if T abandons, so no duty to find replacement
1. Rationale: a. T can’t by his wrongdoing impose a duty on L (property
view of lease) b. Abandonment of property encourages vandalism, and law
shouldn’t encourage that conduct
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2. Restatement: follows common law; no duty to mitigate damages if T abandons
ii. Modern Trend/majority: 1. L has duty to mitigate damages and L has burden of proof to
show he has tried b. Rent Acceleration Clause
3. Repossess and Re-Let a. If duty to mitigate: L must repossess b. If no duty to mitigate: SPLIT if L enters
i. JXN 1: L’s Repo deprives T of possession and effect a surrender, excusing T from further liability
ii. JXN 2: reentry by L effects a surrender only if L intends to terminate the lease; otherwise, L is acting as an agent for T in re-‐letting
VII. Landlords Duties, Tenant’s Rights, and Remedies [regarding condition of leased premises] a. Common Law
i. Leases subject to the doctrine of caveat lessee: 1. Lessee beware; generally, L has no obligation to provide suitable premises 2. Exceptions: in which L has a duty to provide suitable premises
a. short term leases for furnished dwellings – The lessee isn’t going to be there for an extended amount of time; immediate occupancy
b. disclose latent defects in the premises (one that is not readily observable) – even after inspecting the property, T may not be aware of the demise; object of caveat lessee is to make T do their homework;
c. Maintaining common areas used by all tenants: L in better position to maintain common areas and weird economic incentives for Ts if they were responsible for hallways (free riders, etc.)
d. L must undertake carefully any repairs that he promised or volunteered to make: T may have made their decision to rent in reliance on said promises (would not have rented had L not promised to repair)
e. abstain from fraudulent misrep as to the condition of the premises: similar to rationale above
f. Immoral conduct and nuisances: L in better position to deal with this issue (if another T is using their apartment for immoral activities…L can better address problem)
b. Covenant of Quiet Enjoyment i. T’s right of quiet enjoyment of premises without interference by L ii. If not expressed, it is implied in every lease iii. American Law of Property: iv. Dependent covenant:
1. At Common Law, covenants in leases were independent, so if L didn’t do what he was supposed to do, that didn’t excuse T from paying his rent (his part of the covenant) BUT
2. T’s covenant to pay rent was always dependent on L’s performance of the Cov. of QE; so if L breaches CQE by evicting T, T released from obligation to pay rent
v. Breach: CQE can be breached by actual or constructive eviction c. Actual Eviction
i. Complete Actual Eviction 1. Physical eviction of T from the entire leased premises terminates T’s rental obligation
ii. Partial Eviction by L 1. If T is evicted from any portion of the leased premises his rent obligation abates
entirely until possession of that part is restored to him; 2. T may stay in possession and refuse to pay rent 3. Rationale: obligation to pay rent rests on T’s possession of the entire leasehold 4. Restatement:
a. rejects rule of total rent abatement for partial actual eviction bc unjust to L
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b. adopts a partial rent abatement rule iii. Partial Eviction by paramount title
1. T evicted by 3rd party with paramount title, 2. T’s remedies:
a. Terminate the lease, b. Recover damages, or c. Receive a proportionate rent abatement
3. If T remains in possession, he is liable for the reasonable rental value of the portion he possesses (distinct from partial eviction by L, where T can remain in possession w/o paying rent) a. Rationale: recording statutes – T should have constructive knowledge of
paramount title d. Constructive Eviction
i. Through the fault of L, there is a substantial interference with T’s use and enjoyment of the leased premises; does not require physical expulsion from possession
ii. T’s remedies 1. Terminate lease, 2. Vacate premises, and 3. Be excused from further rent liability
iii. Expansion of dependent promises 1. Make T’s obligation to pay rent dependent on L’s performance of her CQE 2. Gives T the remedy of terminating the tenancy
iv. Covenant Not to Compete 1. A covenant by L that he will not compete with or rent to a competitor of T will
generally be deemed so important to T’s enjoyment that breach of the covenant by L is treated as constructive eviction
i. Elements of Constructive Eviction 2. Substantial Interference
a. Consider purposes for which leased, foreseeability, potential duration, nature/degree of harm caused; available means to abate the interference
b. Disclosure prior to Lease: If L knows of defects, may have duty to disclose c. Tenant’s Knowledge: If T knows of the interference before taking possession,
he has waived the interference d. Notice to L:
i. T must give notice to L before claiming constructive eviction and ii. L must fail to remedy situation within a reasonable time
3. T must vacate the premises a. T cannot remain in possession and refuse to pay rent or receive damages
under Constructive Eviction; rent obligation continues if he stays on i. T takes a risk in abandoning possession, though, bc court could find no
constructive eviction 1. Declaratory Judgment: way for T to stay on and know, before
vacating premises, whether constructive eviction is constituted b. Damages After Vacating
i. When T vacates, the lease is terminated BUT T can recover from L damages suffered because of the constructive eviction
ii. EX) Diff bw rent paid and reasonable rent value; cost of finding new premises; loss of profits
c. Restatement: i. rejects requirement that T must abandon property before claiming CE ii. T has right to 1) terminate OR 2) stay on and receive damages or a rent
abatement iii. Rationale: T should receive what he has bargained for
4. Fault of Landlord
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a. The interference with T’s QE must result from some act or failure to act on part of L i. Where T claim constructive eviction for breach of CQE, L must have some
legal duty to act b. Can’t claim CE from acts of 3rd party unless that party’s acts were induced by or
committed with the consent (express or implied) of L i. Generally, L not responsible for acts of other Ts ii. Exceptions:
1. nuisance: L has duty not to permit a nuisance on the premises 2. common areas: L has duty to control common areas
e. The Illegal Lease: transitional document; on the way to implied warranty of habitability f. The Implied Warranty of Habitability
i. Common law: L had no duty to provide habitable premises (caveat lessee) ii. Modern Law: IWH, L has duty to maintain a safe, healthy, functioning premises iii. Allows T to maintain possession while withholding rent (at com law, T couldn’t do that
unless what L did was so severe as to constitute a constructive eviction) iv. Can often glean the standard of habitability by housing codes v. Cannot be waived vi. Latent defects: T must notify L and give him reasonable opportunity to remedy vii. Remedies for T
1. Breach: reformation, rescission (get out of lease), or reformation of K 2. Damages:
a. Diff bw value of the dwelling as T was told it would be and the value of the dwelling as it is (loss of the bargain)
b. Discomfort and annoyance c. Punitives sometimes
3. Repairs made – T can deduct from rent viii. Approaches to calculating Damages
1. Hilder: [FRV as warranted] – [actual value] a. The lease rent doesn’t necessarily equal the FRV b. More T friendly
2. Kline: [lease rent] – [actual value] a. L can say “I don’t owe you anything bc while your place is crappy, we reflected
that in the rent” 3. Percentage Diminution : but how to calculate? by footage available or time you
spend in a particular part of building? ix. T can enforce his rights
1. Withhold rent (dependent covenant) 2. Get money back for repairs or reduce rent accordingly
x. Constructive Eviction Still Necessary 1. IWH only applies to residential leases, so CE needed for commercial leases 2. Some residential leases not covered by IWH
a. single-‐family residences b. agricultural leases
3. IWH more advantageous that CE a. can remain in possession and withhold rent b. L has duty to provide habitable premises; before, L just had duty to comply
with common law exceptions c. Damages tend to be better
g. Retaliatory Eviction i. Common Law: L could evict T when they complain ab status of premises ii. Modern Law: prohibits retaliatory eviction
1. If L freely evicts someone, that undercuts any advantage that T would have from IWH VIII. Tenant’s Duties; Landlord’s Rights and Remedies
a. Waste
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i. T replaces defective portions of the apartment 1. T might be liable to L for taking anything they may have repaired during the tenancy 2. If T has lease obligation to repair, then he can not take away those repairs when he
leaves 3. Law of Fixtures: when something that used to be moveable/personal property gets
attached to real property; thereafter treated as fixed, real property ii. Affirmative Waste: T tears down a building iii. Permissive Waste: failure of T to act, allowing things to fall into disrepair
1. Common law: T had duty to repair to extent necessary to prevent permissive waste 2. Modern Law:
a. maj says T has no obligation to make repairs; b. instead, L has duty to maintain the property (rise of IWH)
b. Frustration of Purpose (Impossibility of Performance): excuses both parties from further performance of their obligations under the lease (ex: building burns down)
IX. The Problem of Affordable Housing a. Economic effects of ordinances:
i. Cost/Status: if cost to L goes up, rent rises or L won’t maintain the property to offset ii. Supply: owners would sell rather than rent bc selling the house would have to meet the
standards of the ordinance b. Rent control hurts poorer Ts and newer Ts
i. Poorer Ts: if L are trying to provide low cost housing, but have to pay more to do so, then that cost will be passed along to Ts looking to get lower value housing
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Transfers of Land
I. Intro to Buying/Selling Real Estate a. lenders generally req borrowers to contribute 10-‐20% of purchase price as down payment b. Title not transferred immediately upon signing the agreement, bc both buyer and seller must do
certain things bw the signing of the K and the closing: i. Seller:
1. Pay off existing loans on the property 2. pay the broker’s commission 3. pay legal/other fees 4. pocket the rest
ii. Buyer: 1. Title search (by attorney or title company) 2. Mortgage contingency: must obtain a mortgage loan within a given time or she can
rescind the K and get her deposit back 3. Second contingency: inspect; if too expensive to remedy the inspection, can rescind
(this is contentious) 4. get the deed, sign a promissory note for the loan, execute a mortgage or deed of
trust in favor of the lender, and pay attorney’s fees c. Policy of title insurance:
i. issued by title insurance company ii. assures lender and buyer that they have good title to property (defend against adverse
claims) d. Transfer of title:
i. Some jxns: transfer deed with all parties physically present ii. Other jxns: transfer deed by 3rd party escrow agent
e. II. Brokers
a. Hired by sellers to attract prospective buyers i. Fiduciary duty of loyalty/good faith; must act in best interest of client (seller)
1. Have duty to find a buyer at the best price to seller based what they know ab property
2. Traditionally employed by sellers so fiduciary duty owed to seller, but buyers recently known to hire buyer’s broker who owe fiduciary duties to prospective buyers and share commission earned by the listing agent when the property is purchase
b. Types of Brokers i. Listing Broker: empowered to serve as the seller’s agent in selling the property ii. Selling Broker: more indirect relationship with seller; receive their compensation by
splitting the listing broker’s commission (interested buyer initiates the relationship w/ a selling broker who then introduces the buyer to sellers and listing brokers)
1. but the selling broker’s duties are to the seller not the buyer c. Dual Agents
i. When both buyer and seller hire the same person ii. Complicated bc the broker owes the buyer and seller the same duty of good faith and loyalty iii. Many states permit it if the dual agent reveals her dual agency to both parties early on iv. Positive: can negotiate a lower commission
d. Disclosure Requirements i. Some states require written disclosure that the broker is the seller’s agent not the buyer’s ii. Brokers must tell buyer of any material defect known to the broker and unknown to the
buyer iii. Some jxns say that the broker has a duty to diligently visually inspect the property for hidden
defects
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iv. GA Rule: must disclose who broker is working for and any latent defects of which broker is aware
e. MLS: multiple listing service i. Brokers and appraisers can share residential listing info, for a fee, on one main database
1. Have to be a licensed broker (illegal restriction on trade/competition?) 2. Anti-‐trust laws: designed to preserve competition in the market
ii. Problems with price fixing f. Listing agreements:
i. An employment K bw a real estate broker and a seller (most states req writing) ii. Types of Listings:
1. open listing: least protective; S retains right to sell property herself or use a diff broker w/o paying the open listing broker commission; broker gets commission only if she finds a buyer before the owner
2. exclusive agency listing: a. only one broker, the exclusive agent, to sell the property b. specified period of time (period of commission could run out) c. owner can still find buyer w/o broker’s help, in which case, broker not entitled
to comission 3. exclusive right to sell listing: most protective for brokers; O must pay that broker if
any buyer purchases the property during the specified duration of the listing, no matter who found the purchaser (these are most common)
a. highest probability of closing bc broker has most incentive to move g. Commission
i. Traditional/Majority rule: broker gets commission once he finds a buyer who is “ready, willing, and able” to buy – even if the sale doesn’t close
1. would also get commission if the seller and also buyer defaulted 2. O can avoid these dangers through contract, making the commission conditional on
actual sale ii. Minority: broker is not entitled to commission until the property closes
1. but broker still gets commission if the seller, through her own frustrating conduct, does not act in good faith and backs out of the agreement before closing
iii. Custom: most brokers decline to pursue commission when transaction fails to close to maintain friendly relations/referrals
h. Attorneys v. Brokers i. Generally, brokers not allowed to draft legal docs, offer advice, or carry out property closings
1. legal education, more knowledgeable ii. Many jxns allow brokers to de simple/standardized legal forms if they are incidental to his
usual tasks III. The Contract of Sale
a. Statute of Frauds i. To satisfy the SOF, there must be a memo of sale that at minimum:
1. Is signed by the party to be bound 2. Describes the real estate 3. States the price
a. essential term b. if no price agreed upon, a ct can imply an agreement to pay a reasonable price c. some jxns demand that they refer to a price and indicate a method they intend
to use in fixing it 4. Some states: require in addition to the previous 3 requirements, all the material or
essential terms of their agreement ii. Exceptions to SOF:
1. Part performance: a. allows specific enforcement of oral agreements when particular acts have
been performed by one of the parties to the agreement
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b. traditional ways of invoking doctrine of part performance: payment (all or part of purchase price), possession, or making valuable improvements
2. Estoppel: a. Protects detrimental reliance (which may take the form of part performance;
overlapping) i. Maj view: can just pay part ii. Has to be unequivocally related to the K of sale; be able to look at the
acts and say they had to have done this bc there was a K of land b. Applies when unconscionable injury would result from denying enforcement
of the oral K after one party has been induced by the other seriously to change his position in reliance on the contract
c. May apply when unjust enrichment would result if a party who has received the benefits of the other’s performance were allowed to rely on the SOF
d. of purchase price iii. Electronic Transactions: new legislation says electronic signatures are sufficient
1. caselaw goes both ways 2. Is hitting send sufficient? sometimes.
b. Marketable Title i. A title reasonably free from doubt, which a prudent purchaser would accept; perfect title not
required ii. Always implied in the K; but parties can negotiate the it be waived iii. Rationale:
1. low risk transfer; helps determine how much risk new O is taking on 2. not easy to produce a chain of title w/o any Q that current owner has good title (lack
of records, etc.) iv. General rules:
1. MT means an “unencumbered FS” 2. Mortgages, liens, covenants, and easements make title unmarketable unless buyer
waives them a. Waiver does not waive the violation of the encumbrance when B doesn’t know
of the violation 3. Mortgages: not an encumbrance if S pays it off before closing 4. Zoning Restrictions don’t make property unmarketable 5. Restrictive covenants generally do (can’t build house less than 2 ft high)
a. But, if the deed says “subject to all restrictions and easements of record applying to this property,” then the restriction doesn’t make it unmarketable
b. BUT where those restrictions attached to the land have been violated, the violations of the restrictions (not the restrictions themselves) make the title unmarketable
6. Easements: as long as it’s obvious, courts say that easements don’t make a property unmarketable; but if it lessens the value of the property, it might
7. Adverse Possession: a. majority: must be clearly proven; seller must offer buyer written evidence
that the buyer can use to defend suits challenging title b. minority: marketable title cannot be shown by AP unless a quiet title action
has eliminated the record owner’s rights 8. Record search: many jxns limit the time to which you must look back in the records;
risk can be covered by warranties of title or title insurance c. Equitable conversion: if there’s a specifically enforceable contract for the sale of land, equity
regards as done that which ought to be done; the buyer is viewed in equity from the date of the K – thus having equitable title i. Title doesn’t pass until closing where title passes through use of a deed ii. Until then, legal title remains with the Seller iii. EC treats buyer as equitable owner until deed passes to them
1. buyer’s interest as equitable owner treated as his real property
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2. seller’s legal interest is treated as personal property iv. Views/Applications:
1. Majority: burden/risk of loss on the purchaser (applying equitable conversion) a. criticism: seller in possession in better position to protect against loss
2. Minority: loss is on seller until legal title is conveyed (declining to apply EC) 3. Massachusetts:
a. If loss is substantial: the risk of loss is on seller if loss is substantial and the terms of K show that the building constituted an important part of the subject of the K
b. If loss is not substantial: either party can enforce the K, though an abatement in purchase price may be given
4. 4th: the risk of loss is placed on the party in possession (also view of uniform Vendor and Purchaser Act)
v. Inheritance: if EQ has occurred, the seller’s interest is personal property (right to the purchase price), and the buyer is treated as owner of the land
d. Duty to Disclose Defects i. Traditionally, Caveat Emptor:
1. no duty to disclose any info concerning the premises unless there is a confidential or fiduciary relationship bw the parties or some conduct on the part of the seller constitutes active concealment; no rescission permitted by mere non-disclosure at common law but
a. affirmative misrepresentation: rescission would be grated b. silence: could be grounds for rescission if:
i. active concealment: seller intentionally hides info ii. nature of relationship bw parties: fiduciary relationships; one is
responsible for protecting the other’s interest c. seller contributes to the allegation (i.e. reporting haunting) and then later
decides to deny it in order to sell, he can’t do that d. Latent/material defects: those that would be a deciding factor for buyer in
making the deal but would be something buyer would be unlikely to uncover ii. Modern Trend:
1. Increasing majority moving away from caveat emptor and imposing a duty to disclose unknown defects nondisclosure equated with fraud or misrepresentation
iii. JXN Splits 1. NY: follows common law 2. CA: must disclose neighborhood noise/other nuisances
iv. JXNS requiring disclosure: 1. Is it a latent defect? 2. Is it really material to the deal or not?
a. Objective test: reasonable person would attach importance to it in deciding to by OR
b. Subjective test: whether the defect affects the value or desirability of the property to the buyer
v. Megan’s Law 1. Sex offenders living nearby? not really a latent defect bc info available to public, but
materiality test points to yes, it should be disclosed vi. Hazardous Waste Disposal
1. CERCLA: imposes SL for cleanup costs of a hazardous waste site upon any a. current owner or operator of a site containing hazardous waste, b. prior owner or operator at the time it was contaminated, c. generator of hazardous waste, d. transporters of hazardous substances
2. BFP Defense: available where a. the release of hazardous materials took place before the purchaser bought the
property
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b. The purchaser made all the appropriate inquiries into the previous ownership and uses of the property, and
c. the purchaser “exercises appropriate care with respect to hazardous substances found at the facility”
3. Purchaser of contaminated property held liable under CERCLA may sue their sellers for contribution
e. Merger Doctrine i. Once the deal is accepted, the previous K merges into the deed, so you can only bring an
action on the contents of the deed ii. After closing, when the deed has been delivered, you cannot go back and sue on things in the
1st K you signed bc contract theory that the K merges into the deed which becomes the final expression of the parties’ transaction, and you must look to it for the obligations that may givce rise to suit
iii. Where it arises: warranty of quality construction wouldn’t apply to the deed bc that’s an independent/collateral obligation, separate from the basic transfer of real property
iv. Exception to Merger Doctrine is fraud 1. ex) selling something you know you don’t own; delivering quitclaim
f. The Implied Warranty of Quality i. Common law: implied warranty of quality where there is privity of K
1. Builder had no liability to buyer absent an express warranty [caveat emptor] ii. Modern trend: most courts are moving away from privity req’t and impose an implied
warranty of habitability on the sale of new homes 1. Rationale: Initial owner has a better chance to see defect, but not necessarily better
equipped to evaluate the quality of the building iii. Limitations on Builder’s Duty to Subsequent Purchasers
1. Must have a latent defect (can’t be obvious) 2. Must be brought w/i a reasonable time – you’re only liable for a certain period of
time 3. Builder must do his work with workmanlike standards
iv. Tort or Contract Theory 1. Tort:
a. Runs to all persons who buy the product b. Liability can’t be waived/disclaimed by provision in the K c. the SOL runs from the time of discovery
2. K: a. Runs only to those in privity of K w/ builder b. Can be disclaimed by K provision (must be by B in clear/unambig lang) c. the SOL runs from the date of the conveyance
v. Commercial buildings: implied warranty of habitability only applies to sale of housing g. Remedies for Breach of Sales Contract
i. NOT governed by uniform rules like the UCC bc property not sold intrastate ii. Damages [legal remedy]
1. [downward market: buyer breaches; seller gets damages a. [purchase price] – [FMV at time sold] – [any payment received] = damages
2. upward market: seller breaches; buyer gets damages a. seller’s subsequent profit from re-‐sale of profit b. [k price] – [FMV at time of breach]
3. special damages: the result of the natural and probable cause of the breach iii. Retention or Return of deposit (seller or buyer)
1. Common law: S keeps deposit so long as it isn’t more than 10% of the K price a. Rationale:
i. deterrence: keep people from having excessive down payment ii. fairness: letting seller keep everything, where there is no liquidated
damages clause, isn’t fair, and 10% is a fair approximation of damages
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iii. anything above 10% is punitive 2. Minority/Restatement:
a. Seller doesn’t keep the whole deposit but only that portion that covers their actual damages
b. Calculate actual damages to seller; anything above that is given back to B as restitution
3. Efficient Breach: a. Maximize potential value of land flow to most socially beneficial uses b. Some people should be allowed to breach where performing the K would lock
someone into an inefficient allocation c. Should be able to breach as long as you compensate the other party for any
damages 4. Liquidated damages provision: still have to negotiate a penalty and call it
liquidated damages a. must be reasonable
iv. Specific Performance [equitable remedy] 1. only available where legal remedy is inadequate 2. Sometimes B wants that property so paying money doesn’t remedy the harm 3. When it’s S who wants to enforce, court less reluctant
a. The remedies at law are adequate bc give S what he’s really seeking in the transaction ($$)
v. Rescission: h. Damages and Breach of Marketable Title
i. English Rule: Flureau if you really thought you had marketable title, then there’s a limitation on the damages owed to B (good faith standard)
ii. American Rule: B gets benefit of the bargain damages (expectations standard) 1. More generous to the buyer – better records to trace ownership over time, so S in
better position to know whether he has marketable title i. Time of the essence clause: unless the parties expressly provide that time is of the essence, a
court will give the parties a reasonable time for performance IV. The Deed
a. Warranties of Title i. Types of Warranties
1. General Warranty Deed: warrants title against all defects in title, whether they arose before or after the grantor took title
2. Special Warranty Deed: contains warranties only against the grantor’s own acts but not the acts of others
a. EX) if the defect is a mortgage on the land executed by the grantor’s predecessors in ownership, the grantor is not liable
3. Quitclaim Deed: contains no warranties of any kind ii. Consideration
1. Can give a deed that is legally binding without consideration (gift) 2. BUT giving consideration is customary to let you know it was a sale rather than a gift 3. For purposes of the recording statutes, gift v. sale matters
iii. Content 1. Deed must contain a description of the parcel of land conveyed, locating the parcel by
description of its boundaries 2. Customary references:
a. natural/artificial monuments b. directions and distances from the starting point (metes and bounds) c. reference to a gov’t survey, recorded plat, or some other record, and d. reference to the street and number/name of the property
3. Reference points and water boundaries
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a. accretion: natural forces gradually shift a river and cause the adjacent land to recede or advance by the build of new soil; owner of adjacent land gains or loses land as the water boundary shifts
b. avulsion: sudden change in the course of a river (as after a flood), and the boundaries do not change
iv. Seal: deed must be signed, sealed, and delivered 1. Common law: seal req’d 2. Modern law: almost anything can be a seal (the word seal, the initials L.S., the place of
the seal, a ribbon, a scrawl, a scratch) v. Forgery and Fraud
1. A forged deed is void 2. Tax Stamps
a. indicate value of property b. people might pay more taxes to get more stamps and make property look
more valuable 3. Two Kinds of Fraud
a. Fraud in Execution: i. O is misled in the document he thinks he’s signing ii. Courts treat as a forged deed and O wins over BFP iii. EX) O signs papers on secretary’s desk; one is a deed from O to
secretary; he signs it; Secretary conveys to BFP; O wins b. Fraud in Inducement:
i. A deed procured by fraud, unlike a forged deed, is effectual to pass title to BFP
ii. O was induced to sign a bad deed iii. BFP wins over O (preventable fraud) iv. EX) O gives bad check to X who later gives to BFP; BFP wins
vi. Indenture and Deed Poll 1. Ways of providing copies of deeds when both grantor and grantee wanted a copy 2. Indenture:
a. deed written out twice on a single sheet of parchment and signed at the end of each copy by both grantor and grantee
b. parchment cut into two pieces in an irregular line 3. Deed poll:
a. signed by only the grantor b. called deed poll bc top wasn’t indented but polled (even shaved)
vii. Six Covenants in a General Warranty Deed 1. Present Covenants:
a. Covenant of seisin: grantor warrants that he owns the estate he’s conveying i. Run with the land? SPLIT
1. American Rule: NO, present covenants do not run w/ the land 2. English Rule/minority: YES, the successor in interest can be
assigned the right to sue on this ii. Damages: return of all or a portion of purchase price iii. EX) A buys 100 acres and title fails as to 20 acres; A gets one-‐fifth of
the purchase price (not mkt value) back iv. EX) If A struck a good bargain and the mkt value is significantly
higher than A paid, A does not get the benefit of her bargain b. Covenant of right to convey: G has right to convey
i. same basic function as covenant of seisin, but possible to have seisin but no right to convey
ii. ex) a trustee may have legal title but be forbidden by the trust instrument to convey it
c. Covenant against encumbrances: there are no encumbrances on the property (mortgages, liens, easements, and covenants)
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i. Visible/known easement 1. If it affects title: included in the covenant regardless of
knowledge 2. If it affects physical condition of land: usually excluded from
the covenant bc w/i the contemplation of bargaining parties 3. Easements involving private right of ways that burden the
land, regardless of grantee’s knowledge, constitute a breach of encumbrances
ii. Damages: 1. If easily removable (mortgage) = cost of removal 2. If not easily removable (restrictive covenant or easement) =
[value of land encumbered] – [value of land unencumbered] 3. In any case – damages capped by purchase price
2. Future Covenants: a. Covenant of general warranty: the grantor warrants that he will defend
against lawful claims and will compensate the grantee for any loss that the grantee may sustain by assertion of superior title
i. Grantor is not liable for legal fees incurred by the grantee in successfully defending title, bc the 3rd party’s claim is not lawful
ii. Grantor is liable for grantee’s legal fees only if grantee loses to a superior lawful claim
b. Covenant of quiet enjoyment: grantor warrants that the grantee will not be disturbed in the possession and enjoyment of the property by assertion of a superior title
i. basically identical to covenant of general warranty c. Covenant of further assurances: grantor promises that he’ll execute any
other document required to perfect the title conveyed viii. Present and Future Covenants
1. Present Covenants: a. broken at time deed is delivered b. SOL begins to run on the date of delivery
2. Future Covenants: a. Broken when the grantee or his successor is evicted from the property, buts
up the paramount claim, or is otherwise damaged b. SOL begins to run at the time of eviction or when the covenant is broken in
the future c. Run with the land – creating continuing obligations
ix. Encumbrances 1. Types
a. Pecuniary charge: mortgage or tax lien b. Estates or interests: in the property less than a fee (leases/LE/dower rights) c. Easements or servitudes: on the land (rights of way, restrictive covenants,
profits) 2. Violations of Marketable Title
a. Building code violation not an encumbrance w/ regard to covenant against encumbrances
b. Zoning code violation does subject person to a greater risk of authorities coming so it could be encumbrance
c. Court more likely to find encumbrance if remedy sought is rescission rather than damages
d. Knowledge of seller i. Latent violations that do not appear on land records that are
unknown to S do not constitute an encumbrance for purposes of warranty deed
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ii. Violations of which S has knowledge, however, do constitute an encumbrance
x. Covenants Running with the land 1. For a covenant to run with the land to a successor claimant, the convenantee must
convey to the successor either title or possession, something to which the covenant can attach
xi. Estoppel by Deed: 1. If a grantor conveys land to a grantee that the grantor does not own, and the grantor
warrants the land, if grantor subsequently acquires title to the land, the grantor is estopped to deny that he had title at the time of the deed and that title passed to the grantee
2. When grantor does get title to the lot he fraudulently conveyed, that title will automatically be transferred to his grantee and he is estopped from claiming that he owns it bc he previously gave it to someone else
3. Chain of title issues: deed executed on one date but nothing to show that he actually owned the property on that date; so finding chain of title will depend on the rules of that jxn (does he have to search conveyances after acquisition)
b. Delivery i. Valid Conveyance:
1. Actual or constructive delivery of the deed to grantee or 3rd party, and 2. A present intention by grantor to divest himself of the conveyed interest
ii. To be effective, a deed must be delivered with the present intent to pass title iii. Doesn’t have to be handed over – just an act that evinces an intent to be immediately bound by
the transfer (if no intention, considered revocable) 1. ex) placing deed in safe-‐deposit box
iv. Manual delivery 1. Rebuttable presumption of present transfer 2. Physical possession of deed is not conclusive that it was legally delivered 3. Must be a present intent to pass title 4. Assent: assumed with the deed is beneficial to receiving party
v. Upon receipt of purchase price, grantor hands deed to grantee (intending to make immediate transfer of title), OR
vi. In anticipation of Closing, grantor gives deed to 3rd party (escrow agent) who hands over deed upon closing
1. Grantor intends to transfer title when all conditions are fulfilled 2. Agent is agent of both grantor and grantee grantor cannot recall the deed from the
agent 3. Relate back: when agent delivers the deed to grantee, the title of the grantee will
relate back to the date grantor handed deed to the agent (avoids need for a will to pass title if grantor dies before agent delivers)
vii. Conditional Delivery: 1. can only be made by placing the deeds in the hands of a third party to be kept until
the happening of the event upon which the deed is to be delivered to the grantee 2. the mere transfer of a deed from the grantor to the grantee may override the
grantor’s explicit declaration of intention 3. relate back: after the condition is satisfied, there is a conveyance which is
considered to have been delivered at the time of the conditional delivery (so the delivery itself relates back, but ownership passes at the time of the condition)
4. SOF: can’t attach an oral condition to the delivery of the deed to a grantee a. illusory transfer: to get around elective share; some jxns say no
viii. Delivery w/o Handing over: 1. If grantor intends to pass title to the grantee now, there has been a delivery even
though possession may be postponed until G’s death
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2. If grantor intends that no interest should arise until death, no delivery during life has taken place and the deed will not take legal effect at death bc G intended it to be a Will
3. NOTE: see relate back of title when G gives to a 3rd party, it will take legal effect on his death
ix. Revocation clause 1. When grantor retains power to revoke the deed it is not upheld as a delivery 2. Revocation clause in the deed? 3. SPLIT:
a. some permit b. traditional view: deed must be delivered or not.
x. Revocable Trust 1. Grantors sign instrument retaining right to revoke the trust and reclaim legal title,
but on death title passes to ____. Legal title held in grantors as trustees. a. LE in grantors (for the life of the survivor if HW or joint owners) b. Remainder in grantee upon their death (or other condition)
2. Valid in all states 3. No delivery requirement 4. No recording requirement (though advisable) 5. Can revoke at any time during life (or the survivor can revoke after the death of the
other 6. NON-‐PROBATE –
a. probate only necessary when beneficiary is not entitled to property under some valid inter vivos instrument and must get legal title changed to him at O’s death
xi. SOoooo 1. Deed:
a. delivery b. dominion/control
2. Revocable Trust: a. intent to create a trust b. satisfy SOF if interest in land
V. The Mortgage a. Terms/procedure
i. Mortgage: 1. Borrower issues a promissory note and 2. A mortgage, a second document that agrees that the land will be sold if the debt is not
paid off, gives lender security 3. Recorded: subsequent purchasers take subject to the mortgage but is not
responsible for the debt 4. SO: creditor can foreclose a property even though new owner not responsible for
debt; OR if the subsequent purchaser assumes the warranty, they could lose the property and be liable for a deficiency judgment for any excess not met at foreclosure
ii. Mortgagor: the Buyers (the ones taking out a loan) iii. Mortgagee: the lender (the ones giving the loan) iv. Equity [of redemption]: mortgagor’s interest in the property (how much they’ve paid on it)
1. Equity = [FMV] – [Debt] v. Title theory of mortgage: mortgagee takes legal title to land and mortgagor has only equity
of redemption [minority] vi. Lien Theory of mortgage: mortgagor keeps legal title and the mortgagee has only a lien on
the property [majority] vii. Deficiency Judgment: if house doesn’t bring in enough at sale to cover the mortgage, allows
mortgagees to bring suit against the personal assets of homeowners viii. Anti-deficiency Statutes: regulates what can be obtained; limits the ability of mortgagee to
file an action for deficiency judgment
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ix. Refinance: 1. to get a better interest rate or 2. borrow new money against the house if it has risen in value since original purchase
b. Mortgage Backed Loans i. Bundle lots of mortgages and sell to investors ii. more risk in buying a single mortgage but bundle them bc even if some are bad, overall will be
a good investment iii. Attract investments from overseas, etc. who want to get into lower risk real estate investment
c. Types of Mortgages i. First and Second Mortgages: same property can be used to secure more than one loan
1. First is one given first in time 2. Second mortgage is take subject to the rights of the first mortgage 3. Upon foreclosure, the holder of a second mortgage is entitled to share in the sale
proceeds only after the first mortgage has been fully satisfied 4. EX1) foreclosure sale profits go to payment of 1st mortgage 1st
a. any remaining funds after paying off 1st mortgage go to 2nd mortgage 5. EX2) 1st mortgagee getting paid; can 2nd mortgagee enforce their mortgage?
a. Equity of Redemption: can try to enforce their mortgage by foreclosing on their mortgage (the amount to which they have right – whether in lien or title) and selling the property, but only in a way that protects the rights of 1st mortgagee
b. Can have a foreclosure sale and whatever comes in goes to 2nd mortgage; any excess goes to homeowners; but the 1st mortgage stays and whoever buys the property takes subject to the first mortgage
ii. Fully Amortizing: 1. fixed monthly payment 2. pay more interest at the beginning and more principle at the end 3. at the end of the period, you’ve paid off the debt
iii. Adjustable Rate: 1. no fixed interest rate – can change during the year every year 2. a limited amount on change and a cap on how high
iv. Postpone Principal Payments: for a period you only pay interest v. Negative Amortization:
1. requires balloon payment at the end OR 2. refinancing of the debt
d. Foreclosure sale i. If a buyer defaults on his loan/doesn’t perform, the lender may have the property sold
(“foreclose the mortgage”) and apply the proceeds of sale to the amount due on the note ii. Any amount exceeding the debt goes to the borrower OR to the amt due on any second
mortgages iii. Can be valuable in extinguishing junior liens on the property (see ex above) iv. Requirements:
1. Notice to borrowers (we’re going to foreclose) so they have a reasonable opportunity to satisfy the debt
2. Advertise the sale – publish info in paper/public places v. Lender’s Duty to Buyer
1. Exercise reasonable effort to obtain a fair/reasonable price under the circumstances [buyer wants his equity back]
2. But no incentive bc he only gets back debt owed 3. Remedy:
a. Can set a minimum upset price to ensure a fair price (minimum bid below which none will be accepted)
b. Pay commission to lender for any amount over the outstanding debt c. List the property w/ an agent
vi. JXNS Approach to Foreclosure
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1. Judicial Foreclosure a. Any clause in the mortgage giving mortgagee the power to sell land on
default, w/o judicial proceedings, is void b. Requirements:
i. Notice to borrower ii. Public sale
2. Private Power of Sale a. gives lender some right to the property in the even they don’t pay their loan
back b. differs from standard mortgage – lender can sell the property to collect
money w/o judicial foreclosure c. Common law: mortgagee couldn’t bid on the property at the sale
i. Deed of Trust created to avoid judicial foreclosure and the rule ab mortgagee bidding at sale
d. Not allowed to bring deficiency action against homeowner vii. Deed of Trust
1. Borrow conveys title to 3rd party (usually lender) to hold in trust to secure payment of the debt to the lender
2. Trustee is given the power to sell the land w/o going to court if the borrower defaults 3. Quicker/less costly no judicial supervision, no notice req’t 4. Trustee can sell the land upon default at a public sale out of court and the lender can
bid at trustee’s sale viii. Mortgagee’s Rights in Foreclosure
1. Ask for stop on foreclosure (before sale) 2. Ask for sale to be set aside (after) 3. Seek damages from lender for improperly conducting process
ix. Payment Theories for Mortgagees 1. Expectations Theory: pay only that which he reasonably expects to receive 2. Subordination-Agreement Theory:
a. When parties have entered into a K subordinating one claim to the other’s x. Land-Purchase Contract
1. Defined: a. An agreement by buyer to buy land and pay for it over a period of years b. S agrees to deliver title at the end of the period c. B takes possession and seller keeps title until final payment (that is the
security) 2. Remedies available to S:
a. Call in balance immediately OR b. Declare K terminated and repossess (disfavored bc disregards buyer equity) c. Foreclosure (favored by courts bc protects buyer equity)
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Title Assurance
[gilberts, ch. 11] I. The Recording System
1. Intro i. Common law: Prior in Time
1. Prior in time, prior in effect – Legal effect given to conveyances in accordance with the time of execution
a. EX) O to A; then O to B, where B doesn’t know of A’s deed. A prevails over B on the theory that O conveyed title to A and had nothing left to convey to B
2. Continues to control unless a person can qualify for protection under an applicable recording act
ii. Under the recording acts, a subsequent BFP is protected against prior unrecorded interest iii. Equitable Doctrine of BFP Exception:
1. If the prior interest was equitable, equity would not enforce it 3against a subsequent purchaser of a legal interest who didn’t know of the prior equitable interest and paid valuable consideration
2. EX) O contracts to sell to A. A has equitable title. O later conveys to B, and B is a purchser for value without notice of A’s equitable interest. The subsequent conveyance to B cuts off prior equity in A.
iv. Judgments: 1. should be recorded 2. if there is an outstanding judgment against the Seller, creditors can get to debtor’s
property, so if the property as been attached as a lien to secure a judgment, a buyer would want to know bc he would buy subject to the judgment
3. 2. Title Search
i. Constructive notice: “had you done a proper title search, you would have seen _____”; imputed to have the knowledge that a proper search would have provided
3. The Indexes i. Types:
1. Tract Index a. Index by block and lot, can see prior recorded instruments conveying,
mortgaging, or otherwise dealing with the lot 2. Grantor-‐Grantee Index
a. more complicated b. First to grantee index to discover from whom each previous owner took title c. Then, to grantor index to ascertain what transfers each owner made
ii. Government Survey 1. Prime meridian (34) Range Lines, baselines, townships, etc 2. Jefferson’s Gridiron System – promotion of an agrarian egalitarian society; and easy to
describe in deeds/auctions 4. Types of Recording Acts [before you can take advantage of the recording system, you must claim
status as BFP = good faith purchaser w/o notice] i. Race Statute [minority, NC and LA]
1. The 1st to record wins 2. Knowledge of prior claim is irrelevant
a. BUT if the other has recorded, it gives constructive notice, and subsequent purchaser loses
b. EX) if he actually knows, but the 1st hasn’t record – subsequent purchaser prevails
ii. Notice Statute [50% of states]
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1. Subsequent purchaser cannot have notice (actual or constructive) of prior purchaser 2. Protects a subsequent BFP without notice even if he has failed to record 3. Shelter Rule: a person who takes from a BFP protected by the recording act has the
same rights as his grantor a. BUT does not extend to grantor: if O repurchases from B (the 2nd person he
conveyed to), O cannot prevail over A (the 1st person he conveyed to) b. doctrine of estoppel would also probably apply
4. Gift: if received as a gift, can’t claim status as good faith purchaser for value bc they didn’t purchase it (haven’t suffered loss)
iii. Race-Notice Statute 1. A subsequent purchaser is protected against prior unrecorded instruments only if the
subsequent purchaser a. Has no notice of prior instrument and b. Records before prior instrument is recorded
2. Everything in notice statute plus record 1st 5. Inquiry Notice
i. Actual Notice: actually knows of prior instrument not BFP ii. Record Notice: if an instrument is recorded, any subsequent purchaser has record notice and is
not BFP iii. Inquiry Notice: [some cts don’t recognize inquiry notice and only protect subsequent
purchasers who have no actual or record notice; if they have “inquiry notice” could still be protected] something happened that should have raised suspicion and led to inquiry
1. From Quitclaim Deed – bc looks suspect to convey w/o warranty of title 2. From Possession – if a third party in possession of the property, even if the purchaser
did not inspect 3. From Neighborhood – restrictions in deeds from a common grantor if a uniform
scheme for development of the subdivision is obvious from the neighborhood 4. Into Unrecorded instruments – if a recorded instrument expressly refers to an
unrecorded instrument [harper v. paradise] 6. Chain of Title Problems
i. Name spellings – where to check 1. Doctrine Idem Sonans: Absolute accuracy in spelling not required if the
pronunciations are practically alike a. Doesn’t apply where the written name is material b. Most likely to apply in smaller towns where there won’t be a lot of the same
name 2. Hyphenated names: insufficient to provide constructive notice (not req’d to look for
hyphens) 3. Diminutives: most say must search under diminutives 4. Married women: If you know of her maiden name or previous married name, look
under those ii. Reciprocity of Restriction:
1. Where grantor binds his remaining land by writing, reciprocity of restriction bw the grantor and grantee can be enforced
2. Subsequent purchaser from the common grantor acquires title subject to the restrictions in the deed to the earlier purchaser
3. SPLIT [50/50] a. Some jxns require you to look at all deed from a common grantor; b. Some jxns allow you to focus only on the chain of title for your particular
parcel i. EX) an easement or restrictive covenant on Wacre that appears in a
prior deed of Bacre from the common owner of the two is not in the purchaser’s chain of title to Wacre
iii. Prior deed recorded after a later purchaser with notice has recorded subsequent deed
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1. Morse: a purchaser is not bound to examine the record after the date of a recorded conveyance to discover whether the grantor made a prior conveyance recorded later
2. Woods: a deed recorded late – after another deed from the same owner – gave constructive notice to subsequent purchaser (title searching substantially increased)
3. see estoppel by deed 7. Persons Protected by the Recording System
i. Designed to circumvent the common law “prior in time” rule so that a 2nd in time purchaser can prevail if they can prove they were a good faith purchaser for value
ii. BFP: good faith buyer for value 1. Shelter Rule: protects those to whom protected BFPs convey
iii. Donees: 1. Generally not protected under the recording system bc they do not give value 2. But where the donee is the 1st person with an interest, it may be protected
iv. Creditors: protected only if they have a lien [which would be recorded] 1. merely lending money to the record owner does not give priority over unrecorded
instruments 2. At a foreclosure sale, the buyer (generally creditor) is protected as a subsequent BFP
for value if the buyer has no notice of the unrecorded claim at time of sale v. Quitclaim deeds: JXNS are split
1. Majority: QC deed treated same as GWD for notice purposes 2. Minority:
a. purchaser buy QC can’t be BFP w/o notice bc the deed warrants suspicion b. all subsequent purchasers are also on notice by operation of QC
vi. Outstanding Interests and Partial Payment: 1. Generally: where a buyer has notice of an outstanding interest and pays consideration,
he does so at his own risk 2. BUT: where a buyer receives notice of an outstanding interest (ex: 1st right of refusal)
subsequent to paying some but not all of the purchase price, authorities SPLIT: a. Majority: protanto rule protect only to the extent of payments made prior
to notice i. award land to holder of the outstanding interest and award buyer the
payments he has made ii. award buyer a fractional interest in the land proportional to the amt
paid prior to notice iii. allow buyer to complete the purchase but to pay the remaining
installments to the holder of the outstanding interest b. Minority: partial payment of the consideration is insufficient to render buyer
BFP 3. Waldorff: careful if the 2nd in time purchaser pays subsequent to someone else (1st
in time) having an outstanding interest, then the pro-‐tanto rule applies; but in Waldorff, the issue was that a 1st in time purchaser got an interest, didn’t record it, and a 2nd in time purchaser (bank) secured a mortgage… so there, the outstanding interest came subsequently
8. Marketable Title Acts i. Generally:
1. people protected by adverse claims 2. statute works in conjunction with the recording statute 3. Limits the amount of time for which you have to do a title search by creating
conditions under which competing claims to the land on record can be extinguished/no longer treated as effective
4. EX) p 613 a. OX in lease for 99 years in 1889 b. in 1890, O sells to A, mentioning the lease to X in the deed to A c. in 1920, AB, but deed does not mention the lease d. in 1941, BC, no mention of 99 year lease
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e. 1960: C’s title to Bacre would be free and clear of the 99 year lease when the 1920 deed from AB had been on record for 40 years
5. Constructive notice: immaterial ii. “Root of Title”
1. Two chains that make competing claims to the same property 2. Root of title for C is the 1920 deed from A to B (the recorded interest at least 40 years
in the past) 3. Once you find the root of title, the MTA extinguishes competing chains of title that
haven’t been subj of record activity since the root of title (so here, 99 yr lease extinguished)
4. Prevent Extinguishment: periodically re-‐record the interest 5. Certain Interests don’t have to be recorded
a. mineral rights, easements, interests of persons in possession, claims of federal gov’t
II. Title Insurance 1. Insures the accuracy of records by agreeing to defend the record title if litigated 2. get it.
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The Law of Nuisance
[gilberts ch. 8] I. An Intro to the Substantive Law
1. Nuisance: an unprivileged interference with a person’s use and enjoyment of land i. Prima Facie Case:
1. P has possessory interest in the land 2. D has done an affirmative act that interferes with P’s use and enjoyment of her
property 3. The interference is substantial and unreasonable and 4. The burden of the interference outweighs its benefit (unless SL applies)
2. Private Nuisance: i. Conduct that causes a substantial interference with the private use of land and is either:
1. Intentional and unreasonable or 2. Unintentional but negligent, reckless, or abnormally dangerous (SL)
ii. P suing on nuisance must 1. Have a property interest that is affected OR 2. Allege bodily harm as the result of the nuisance
iii. Intentional Nuisance 1. Prima Facie Case
a. Unreasonable conduct that b. Interferes with private use and enjoyment of the land and c. The gravity of the harm outweighs the utility of the actor’s conduct
2. Reasonableness a. Evaluate based on reasonable person w/ normal sensibilities b. NOT a nuisance if most people wouldn’t be affected c. EX) odorless gasses that special P is affected by is not a nuisance
3. Tests for Intent a. Jost Test: threshold test
i. If D’s conduct creates a certain level of interference with a person’s use/enjoyment of someone’s land, that is automatically unreasonable
b. Restatement 1st: Risk-Utility Test i. If gravity of harm outweighs the benefit of the harm, it’s unreasonable
1. Extent and character of the harm 2. Social value of P’s use 3. Suitability to the locality in question 4. Burden on P of avoiding the harm 5. Cost to D in preventing the harm
c. Restatement 2d: potential compensation test i. If conduct is socially useful, D can compensate harmed Ps where
1. The harm is serious and 2. Compensating P would make the continuation of the conduct
feasible 3. Could be unreasonable if they haven’t compensated people when
they could have iv. Unintentional Nuisance
1. Effect of the conduct is substantial 2. Conduct’s effect invades an interest in the use and enjoyment of land 3. The conduct is negligent, reckless, or ultra-‐hazardous
a. not a question of unreasonableness where conduct is unintentional 3. Public Nuisance: the interference is with a right common to the general public 4. Hybrid – public/private Nuisance:
i. Can a private party claim a public nuisance? Isn’t that gov’t job? ii. Private citizens are members of the public – can any one bring public claim?
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iii. Generally need more than one citizen iv. TEST:
1. statutory declarations of conditions deemed to be public nuisances (yes) 2. special injury beyond what other general members of the public experience (no)
5. Distinguish Nuisance from Trespass i. Nuisance – protects person’s interest in their use/enjoyment of land
1. Intangible invasion – smell, light, sound ii. Trespass – protects interest in exclusive possession of land
1. Have to prove a physical invasion by a tangible thing iii. Sometimes, it can be both sewer system that overflows on neighbor’s property
6. Intentional Nuisance v. Intentional Trespass i. Intentional torts 1) result in liability regardless of the gravity of the harm and 2) don’t assess
reasonableness of conduct ii. Intentional nuisance requires
1. substantial invasion and 2. unreasonable conduct
II. Remedies (and more substantive law) 1. Damages [court awards]
i. Generally, D who creates nuisance bears financial cost of moving it ii. Compensate P for damages iii. Buy D’s land iv. Payment of Permanent Damages would effect a servitude on P’s land and preclude future
recovery by future grantees 2. Injunction [P & D make decision ab injunction]
i. Balancing the equities – comparative hardship 1. Think: relative social costs (increased rent? proximity of affected land) 2. Efficiency want to allocate property rights to places that will result in the greatest
total social value 3. Basically the restatement test of reasonableness but do it again when you get to
injunction ii. If awarded injunction for past harm, P has to bring suit as long as D is creating the nuisance
3. Injunction conditioned on payment of permanent damages: i. Only goes into effect if D doesn’t pay past/present/future damages
4. Coming to the Nuisance Doctrine i. Can bar nuisance claim if P came to D’s land after D was already using it in the interfering way ii. If deemed a nuisance, court might make P (one claiming nuisance) bear financial burden of
making D remove the nuisance since it existed before P came iii. If public nuisance – more like to grant bc might affect public health/
III. Nuisance and Environmental Controls 1. Use authorized by Zoning Ordinance:
i. that D’s use of her land is consistent w/ local zoning is not controlling in an action for private nuisance
ii. Though the ordinance may permit the use, it might still be an unreasonable inference with the particular adjoining parties
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Private Land Use: The Law of Servitudes
[gilberts, ch. 7] I. Easements
1. Ways to Create Easements i. Express written grant ii. Prescription iii. Estoppel iv. Implication
1. Prior Use 2. Necessity
2. Ways to Terminate Easements i. Release – expressly release in writing ii. Expiration – not all deeds have expiration date iii. Removal of Necessity iv. Merger – if owner of easement becomes owner of servient tenement v. Estoppel – servient owner reasonably relies upon a statement or representation by the
easement owner (like said they would stop using/said they’d release?) vi. Abandonment – nonuse + unequivocal manifestation of intent to release vii. Condemnation – gov’t taking viii. Prescription – if servient O wrongfully prevents the easement from being used for the
prescriptive period 3. Historical Background/Terminology
i. Profits a prendre: rights to take off the land things that were thought of as “part” of the land (ex: timber, minerals, wild game, and fish)
ii. Incorporeal hereditaments: certain intangible rights that descended as real property to the primogenitary heir (eldest son)
iii. Classifications of easements 1. Affirmative easement: owners grants someone the right to enter or perform an act on
the servient land 2. Negative easement: owner is forbidden from doing something on his land that might
harm a neighbor 3. Easement appurtenant: benefits the easement owner in the use of land belonging to
that owner; granting an easement over one piece for the benefit of the other piece a. usually transferable b. if unclear, courts construe as easement appurtenant c. Where the easement “last so long as” – easement is determinable
4. Easement in gross: benefits the easement owner personally rather than in connection with use of land which that person owns
a. only a servient estate, no dominant tenement b. may be alienable or inalienable
iv. Dominant tenement: the easement attaches to and benefits the dominant tenement v. Servient tenement: the land subjected to the easement
4. Creation of Easements i. Easements (and profits) are interests in land and therefore subject to SOF
1. Generally requires written instrument signed by party to be bound, but notwithstanding the SOF, easements may sometimes be created by fraud, part performance, estoppel, implication or prescription
ii. OVERIEW: Ways to Create Easement 1. express written grant 2. implication
a. necessity (othen) b. prior existing use (van sandt)
3. prescription: uses property long enough under right conditions
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4. estoppel: dominant tenement owner relies on statements by servient tenement owner iii. In a third party
1. At common law – couldn’t reserve an easement in a 3rd party a. Rationale:
i. BFP w/o notice is adequately protected by recording statutes ii. Parties rely on the common law rule
2. Some courts (minority) reject this: a. Defeats parties’ intent b. Fairness to parties in the transaction (one pays less and then can turn around and
pay more) 3. Restatement: permits easement to be created in a 3rd party 4. Arises when: generally arises in context of easement in gross
iv. Reservations/Exceptions: 1. Reservation: a provision in a deed creating some new servitude which did not exist before
as an independent interest 2. Exception: a provision in a deed that excludes from the grant some preexisting servitude
on the land v. Licenses
1. Permission to do something that would otherwise be trespass 2. Revocable 3. Sometimes becomes irrevocable:
a. Where you remove some chattel from the property i. Coupled with an interest called a profit, can become irrevocable
b. Estoppel: under certain conditions, you will be estopped from revoking the license, making it effectively an easement
4. Easement by Estoppel a. if you have changed your position substantially in form or reliance
(improved/invested), that can make your license irrev and essentially make an easement by estoppel
vi. Easements by Prescription 1. No express permission to the easement, 2. Similar to AP – asserting a right to use the property which acknowledging that the
property belongs to someone else 3. If permission – not adverse, so not by prescription
a. Holbrook – use of road wasn’t Adverse bc it had been used many times before in various circumstances with permission of O
4. Exclusive use: not necessary for easement by prescription – just establishing right to use rather than title there’s no reason you shouldn’t be able to use it along with the owner
a. It’s exclusive in the sense that it belongs to me and not other people 5. Lost Grant theory: owner must acquiesce to the use
a. If O gives permission, that permission makes the use not adverse so no easement by prescription
b. If O can show through evidence like a letter that they did not acquiesce in the use of the property, that’s enough to prevent the creation of an easement by prescription
6. Jxn that doesn’t follow lost grant theory – sending letter saying “stop using my property” is enough to stop creation of an easement by prescription
7. Restatement: you have to actually interrupt their use of the property somehow before you can prevent the creation of the easement
8. EX) Golf Balls a. will country club get easement by prescription for golfers to go retrieve their golf
balls? b. McDonald found that easement had been created by continued retrieval of balls
over long time; so to avoid this, you need to interrupt it tell them to stop, put up
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a fence to keep people from coming in; negotiate agreement with country club to keep them from getting an easement: grant them permission (that you can revoke at any time) which prevents the satisfaction of requirements to get an easement by prescription
vii. Easement by Estoppel 1. License becomes irrevocable by estoppel 2. User has changed use substantially in form of reliance, making license irrevocable and
creating easement by estoppel 3. Arises when:
a. Oral discussions – no title search to find i. SOF: interest in land ought to be in writing
b. Improvements made c. Removal of chattels profits
4. Restatement: a. expectations that create the servitude will also define its scope and terms b. If they were initially permitted to do so (even as licensee), creates expectations
that they will always at minimum permit that use viii. Quasi-Easement:
1. When O makes use of one part of his land for the benefit of another part (ex: waste traveling through the easement)
2. If it’s just an interest in using your own property, you don’t have the someone else req’d to have an easement – so it’s a quasi-‐easement
ix. Easements by Implication 1. O had a quasi-‐easement, she burdened one party of her property to benefit another part 2. Generally implied in two situations:
a. prior existing use; apparent and continuous use of a portion of the tract existing when the tract is divided (quasi-‐easement);
b. easement by necessity: the claimed easement is necessary to the enjoyment of the claimant’s land and that necessity arose when the claimed dominant parcel was severed from the claimed servient parcel
3. Easement Implied by Prior Use a. Conveyance of property (unity of ownership common owner cuts it into
smaller pieces) i. ex) sever 2 estates and there is a prior existing use of the property
b. Reasonable necessity for use/enjoyment of the quasi-‐dominant estate c. Continuous use
i. Intended continuation – at time of division – to continue the prior use ii. Existing use – prior use must be existing at the time of division (implied by
the element of intended continuation) d. Apparent prior use (not necessarily visible) e. Restatement Factors
i. whether claimant is the conveyor or the conveyee ii. the terms of the conveyance iii. the consideration given for it iv. whether the claim is made against a simultaneous conveyee v. the extent of necessity of the easement or profit to the claimant vi. whether reciprocal benefits result to the conveyor and the conveyee vii. the manner in which the land was used prior to its conveyance, and viii. the extent to which the manner of prior use was or might’ve been known to
the parties (speaks to foreseeability/intention) 4. Easements Implied by Necessity
a. Requirements: i. unity of ownership
1. sever 2 estates and the easement is necessary as a result ii. necessity not convenience
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iii. necessity existed at the time of severance 1. if it gets created, will be at the time of severance
b. Majority only requires “reasonable necessity” c. Can’t be a matter of mere convenience d. Terminates when the necessity is removed
x. Public Trust Doctrine 1. Ownership over land flowed by tidal waters, which extend to the mean high water mark,
is vested in the State in trust for the people; covers wet sand area of beach 2. State owns for the benefit of the public and the public can use it if they want 3. Public must be given reasonable access – whatever is reasonably necessary for the
enjoyment of the ocean 4. Recognizes a limitation on landowner’s right to exclude people from their property (like
state v. shack – migrant farm workers) 5. Could this be considered a “Taking”? Esp if Leg enacted? Should it be compensated?
a. Argue yes: taking some interest b. Argue no: not taking any interest bc was never given to private owners; was
always held in trust by State xi. With RRs
1. When a RR for its purposes acquires an estate in land for laying track and operating RR equipment thereon, the gov takes the least amt of the estate necessary, and that typically means an easement not a FS estate
2. Condemnation a. Where it was a condemnation proceeding, courts treat as easement b. Even if deed says “FS”, if the conveyance was done w/ the threat of condemnation,
courts convey as easement [presault] c. SO you can convey FS to RR for strip of land if there is no condemnation threat
5. Assignability of Easements i. Doctrine of Mountjoy’s Case: For an easement to be assigned, it must be used by the
controllers of the easement “as one stock” 1. Rationale: if you grant an assignment and then allow them to assign without working
together/getting consent of others, there’s a concern that the lake might get overused (the easement being used more than originally envisioned by ice company when it made the grant to frank)
2. Majority: do not follow this non-‐divisibility rule ii. Restatement: EIG may be divided unless
1. contrary to intent of parties in creating easement or 2. the division unreasonably increases the burden on the servient estate
iii. Easements in gross: assignable for commercial exploits, but not for personal enjoyment iv. Easements appurtenant: run with the land, attached to the land
6. Scope of Easements i. General Rule:
1. An easement appurtenant to one parcel of land may not be extended by O of dominant estate to other parcels owned by him (brown v. voss)
2. Extension of the use of an easement to benefit a non-‐dominant estate constitutes a misuse of the easement
3. Misuse of an easement is a trespass ii. Restatement:
1. expectations that create the servitude will also define its scope and terms; fact that they initially permitted them to do so, creates expectations that they will always at minimum permit them to do that
2. owner of dominant tenement can subdivide its tracts and still use easement so long as a. it is to accommodate normal development of the dominant estate; and b. it does not cause unreasonable damage to/interfere unreasonably with the
enjoyment of servient estate (otherwise nuisance) 3. O of servient tenement should be able to move the easement in certain conditions if
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a. they are the ones paying for it and b. if it doesn’t significantly lessen the utility of the easement/increase burdens on
the owner of the easement in its use and enjoyment/frustrate the purpose for which the easement was created
c. ** better rule: can make dominant tenement more valuable; servient tenement should be able to change to make their property more valuable
iii. Changing the Scope: 1. Traditionally: can’t alter w/o permission of dominant tenement owner 2. Restatement:
a. O of servient tenement should be able to unilaterally move the easement if i. they are the ones paying for it and ii. it doesn’t significantly lessen the utility of the easement or iii. increase the burdens on O of easement in its use and enjoyment or iv. frustrate the purpose for which the easement was created
3. Minority: servient tenement should be able to change to make their property more valuable (efficiency)
iv. Determining Scope: Was it a foreseeable use of the easement? 1. Foreseeability: Expectations the parties would have originally had for its use/purpose 2. New use shouldn’t be more burdensome to O 3. Scope may be adjusted in face of changing times to serve the original purpose, so long as
the change is consistent with the terms of the original granty 4. Easement by prescription: the kinds of activities that create the E also serve as limitations
that will sustain it v. Remedies for exceeding scope
1. Injunction a. increased burden on servient estate (vol of use) b. actual and substantial injury sustained by person seeking injunction
vi. If there’s a “taking” 1. When there’s already an easement there and you exceed the scope, the taking is only to
the extent to which it is exceeding the easement 7. Negative Easements
i. Right of dominant O to stop the servient O from doing something on the servient land ii. differ from affirmative easement bc saying what the servient owner can’t do; whereas
affirmative easements say what activities the servient owner is permitted to do 8. Conservation and Other Novel Easements
i. Allows landowner to grant something like a negative easement (a restriction on their use of the property) to a gov’t organization or charity 1. Historic areas: people want areas to stay as they are
ii. With respect to land in the future: can’t be used for something else in the future; could be problematic bc restricts future use
iii. Can you make the land useable in the mktplace notwithstanding the conservation easement? 1. gov’t could use its power of eminent domain and condemn the property subject to the
conservation easement iv. IF benefit is in gross, burden will not run unless preempted by statute saying otherwise
II. Covenants Running with the Land 1. Historical Background
i. Real Covenants: Covenants Enforceable at Law 1. An agreement/promise respecting the use of land that runs to the owner of the property
and w/o materially increasing the burden of performance 2. Affirmative covenants: promise to do something 3. Negative covenants: promise not to do something
a. EX) A & B promise to only use lots for residential purposes 4. Requirements for Covenants that run with the land
a. Intention of Parties i. language of the covenant itself
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ii. circumstances surrounding the covenant b. Touch and Concern the Land
i. has to do with the use of the land itself – restriction on what you can do w/ the land
ii. easement in gross does not satisfy c. Privity of Estate
i. Asking: An estate in land is an interest in the land being transferred from one person to another, and depending on the particular reqs for privity, you are asking whether the kind of estate transferred is one that would allow the running of the burden or the benefit
1. burden: asking whether successor’s of B (the promisor) are bound by that promise
2. benefit: whether successors of A (promisee) can enforce the promise, or can only A enforce it?
ii. Horizontal Privity 1. Relationship of original parties to the covenant 2. Burden:
a. Generally requires successive grantor-‐grantee rel bw A&B (472)
b. Massachusetts: both parties have an interest in the same piece of land
c. Restatement: horizontal privity is not req’d for burden to run with land at law
3. Benefit: horizontal privity is not required iii. Vertical Privity: horizontal privity not required
1. Relationship bw an original covenanting party and some successor of that original party
2. Burden: successor has to obtain the entire estate of the original covenanting party
3. Benefit: successor can obtain the same or some lesser estate of the original covenanting party
5. For Burden to Run a. Intention b. TC the Land c. Privity
i. Horizontal privity 1. Generally: Requires successive grantor-‐grantee relationship bw A&B
(472) 2. Massachusetts: both parties have to have an interest in the same
piece of land 3. Restatement: horizontal privity is not required for burden to run w/
the land at law ii. Vertical privity
1. Traditionally: same estate rule (so doesn’t run to APor) 6. For Benefit to Run
a. Intention b. TC the Land c. Privity
i. Horizontal privity 1. The running of the benefit does not require horizontal privity
ii. Vertical privity 1. Successor can succeed to the same estate OR a lesser estate than the
original covenanting party 7. Restatement 3d: Distinguishes bw affirmative and negative promises; eliminates
distinction bw RC and ES
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a. Negative promises: i. Don’t worry about privity ii. All owners/possessors of burdened land are bound by negative covenants iii. All possessors of benefitted land are entitled to enforce the covenant iv. (like easement)
b. Affirmative promises: i. Separate rules for lessees, life tenants, and APors; also distinguishes bw
benefits and burdens ii. Lessees:
1. the benefit of covenants to repair, maintain, or render services runs to lessees
2. the burden: only the affirmative covenants that bind lessees are those that can more reasonably be performed by a person in possession than by the holder of the reversion
iii. LTs: both the benefits and burdens of affirmative covenants run to legal LT iv. APors:
1. Burden: APors who haven’t yet gained title are liable on the affirmative covenants burdening the property, but
2. Benefit: the benefits of affirmative covenants run to APors who have not yet gained title to property only under limited circumstances
a. Where the covenant was to repair, maintain, or render services to the property, or
b. The benefit is one that can be enjoyed by the person in possession w/o diminishing the benefit’s value to the owner of the property and w/o materially increasing the burden of performance on the party obligated to perform the covenant
c. Touch and Concern: i. Negative Covenants:
1. you may not do something on the land 2. typically held to TC the land if they really are ab land use 3. EX) caulett: right to build 1st building
ii. Affirmative Covenants: 1. English law: ACs do not TC land 2. American Law: move away; pretty well accepted that AC to provide
fees for HOA in common-‐interest community TC land ii. Equitable Servitudes: Covenants Enforceable in Equity
1. Equitable servitude: a covenant respecting the use of land enforceable against successor owners or possessors in equity regardless of its enforceability at law
a. English Standard regarding horizontal privity: i. Burden of a covenant will not run at law; not enforceable at law against the
successor owner [no damage award] b. American Standard: burden should run at law
i. Fairness: presumably negotiated a lower sale price due to the covenant; wouldn’t be fair if purchaser could then turn around and sell it for a much higher price
2. Main difference is the remedy available: a. Real Covenant seeks Damages; b. Equitable Servitude seeks Injunction c. P has option to decide but general preference is an equitable injunction to prevent
the person from breaking the promise PLUS can sell the injunction if they prefer to terminate the promise; allows for negotiation
3. Benefit In Gross and ES a. Common Law: If the benefit is in gross, the burden will not run in equity
i. Transaction costs ii. Diminishes value/marketability of land
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b. Restatement: i. Burden may run in equity if benefit in gross BUT ii. the benefit may be in favor of someone you can’t find, so you can seek
termination/modification of covenant if you can’t find the beneficiaries (need consent of any known beneficiaries)
c. EX): reserve the right to build first dwelling on premises i. Too vague ii. Doesn’t TC – personal to grantee iii. Benefit in gross rather than associated w/ a dominant tenement
4. Burden in gross a. OK bc benefit attached to land bc doesn’t affect value/marketability
i. EX) someone agrees to trim hedges monthly 5. Enforcing Equitable Servitude:
a. Intention of parties that burden/benefit run to successors of original parties b. Notice of subsequent purchaser of the covenant (party to be bound)
i. Exception: covenants run in equity against those successors who give no consideration (donees, heirs, will beneficiaries) whether or not they have notice
1. Fundamental principle of recording system – it is designed to protect only subsequent purchasers against prior interest of which they have no notice
ii. Not required as part of elements of what makes real covenants enforceable (but probably required anyway by virtue of recording statutes, if you can show BFP w/o notice)
c. Touch and Concern the land i. English Rule:
1. An affirmative covenant to do something like pay money cannot be deemed to TC the land for purposes of the running of the covenant
2. Only Negative Covenants could run w/ the land ii. American Rule: generally depart from English Rule and expand TC
1. HOA: where the affirmative easement (to pay money) gives right of common enjoyment to other property owners, it is deemed to TC
2. Bigelow’s Test: a. If covenanter’s legal interest in land is rendered less valuable
by the covenant’s performance, then the burden TCs b. If the covenanter’s legal interest in land is made more
valuable by the covenant’s performance, then the benefit TCs c. Circular: can’t know how it affects the value unless it’s
complied with 3. Still – most are hestitant to find TC of aff covenants
a. Issue order that will require continuing judicial supervision b. Enforcement may impose large personal liability on successor c. Aff obligations are unlimited in time d. Clogs on titles
4. Covenants to pay money – most courts say no TC 5. Restatement:
a. All covenants (unless illegal, fraudulent, or against pub policy) are at least initially valid for TC
b. Instead, focus is on subsequent validity d. Privity
i. Horizontal 1. Burden: doesn’t need 2. Benefit: doesn’t need
ii. Vertical
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1. Burden: doesn’t need; all subsequent owners/possessors are bound by the servitude just as with an easement
2. Benefit: a. Generally: don’t need; runs to all assignees; although some
jxns do require it (except w/ regard to HOAs) b. APor: the benefit may run (not litigated) c. 3rd party beneficiary: prob needs to show vertical privity
i. HOA: regarded as acting as agents of landowners who are in vertical privity so can enforce the covenant even though technically no privity on benefit side
2. Creation of Covenants i. Express Covenants:
1. Deeds 2. Written Agreements
ii. Implied Restrictions and the SOF 1. Will only be Implied ES; RC has to be in writing, signed by covenantor 2. Cannot have ES by prescription (no notice of party to be bound?) 3. Notice
a. For purposes of implied covenants, notice may be constructive or inquiry i. Constructive notice: imply that you have notice, had you done what you
should’ve done ii. Inquiry notice: circumstances were sufficient to indicate that some restriction
might exist and that they have a duty to inquire 1. (generally applied where there is a general plan/subdivision) 2. uniform character of neighborhood generally sufficient
4. General plan/Common Plan of Development: a. If there is a subdivision being developed pursuant to a common plan of
development, even if some restrictions don’t get written down w/ respect to every lot, some courts will imply that those restrictions apply to all lots
b. Majority: will imply negative restrictions from a general plan (inquiry notice) c. California:
i. Won’t imply equitable servitude bc needs to be in writing to prevent fraud ii. Reqs interest in land to be conveyed in writing; the interest of the neighbors
to prevent building of commercial uses must be in writing 1. A recorded map might work as a writing 2. An advertisement might work
d. Massachusetts: same-‐ish 5. Equitable Servitude by Prescription?
a. No. iii. Restatement 3rd: eliminates distinction bw real covenants and equitable servitudes iv. Remedies:
1. Real Covenant: can seek damages (bc covenant at law) 2. Equitable Servitude: can seek injunction 3. A person seeking to enforce the covenant has the option to decide if it’s real or equitable,
depending on which remedy they prefer a. Generally, the preference is an equitable injunction to prevent the person from
breaking the promise PLUS they can sell the injunction if they prefer to terminate the promise and get money later; allows for negotiation
3. Scope of Covenants and FHA Violation i. Restrictive Covenant – Single Family Residence
1. Definition of family may come from other local ordinances 2. Usually arise w/ discrimination claims 3. 3 causes of action for discrimination under FHA
a. Discriminatory Intent: is it intentional discrimination against ____?
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b. Disparate Impact: P only needs to prove that D’s conduct actually or predictably results in discrimination or has a discriminatory effect
c. Reasonable Accommodation: a refusal to make reasonable accommodations in rules, policies, practices, or services (variances?), when such accommodations may be necessary to afford a handicapped person equal opportunity to use/enjoy dwelling
4. What activity is non-residential? a. Bread and breakfast? – some say residential b. Piano lessons? – probably residential c. Training dogs? yes
ii. Covenant not to allow Caucasians 1. FHA exemption: applies to people who don’t own more than 3 single-‐family houses at one
time a. Developer can’t defend using this exemption
2. Mayers: violation of FHA §3604(c) for recording deeds containing racial covenants a. can’t make print or publish any notice statement or advertisement w/ respect to
the sale b. So – recording the deed got you around the exemption bc it wasn’t an
advertisement for sale 4. Termination of Covenants
i. Merger: if same person acquires title to the burdened land, and all the benefitted land, the covenant is extinguished by merger
ii. Changed Conditions[rick v. west] 1. Zoning Change – will not override restrictive covenants
a. Zoning changes do not modify or change a covenant unless they make compliance with the covenant illegal
2. Changed conditions within the affected area: conditions have so thoroughly changed that the covenant can no longer achieve its purpose
3. Changed conditions in the surrounding area: nature and character of the surrounding area has so changed that it would be inequitable to enforce the servitude; must prove that all the benefitted lots have lost the benefit of the covenant
4. Restatement § 7.10: Modification and Termination of Servitudes bc of Changed Conditions
a. When a change has taken place making it impossible as a practical matter to accomplish the purpose for which the servitude was created, a court may modify the servitude to permit the purpose to be accomplished. If modification is not practicable, or would not be effective, a court may terminate the servitude. Compensation may be awarded to beneficiaries.
b. If the purpose of the servitude can be accomplished, but bc of changed conditions, the servient estate is no longer suitable for uses permitted by the servitude, a court may modify to permit other uses under conditions designed to preserve the benefits of the original servitude
c. These rules govern conservation servitudes as well 5. Massachusetts: statute makes damages rather than an injunction the only remedy in
many cases of changed circumstances 6. Reverse Damages: when restrictive covenants should not be enforced unless the parties
who seek enforcement pay compensation to the parties who maintain that changed conditions have rendered the restrictions unenforceable
iii. Abandonment 1. Can’t abandon FS title to property wants someone identifiable bc obligations related to
property ownership 2. Pennsylvania: cannot abandon real property held in fee simple with perfect title; intent
to abandon is irrelevant 3. Widespread violation of the covenant w/o enforcement
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a. Reasonable Person Test: avg person would conclude that the use restriction ahs been abandoned
b. Frustration of Purpose Test: the covenant’s purpose has been so frustrated that enforcement would seriously impair the value the value of burdened lots w/o producing any substantial benefit
4. Restatement §7.12 – Modification and Termination of Certain Affirmative Covenants: a. Covenant to pay money terminates after a reasonable time if the instrument that
created the covenant does not specify the total sum due or a definite termination point
b. Terminated if the obligation becomes excessive in relation to the cost of providing the services or facilities or to the value received by the burdened estate
iv. Condemnation (Eminent Domain): 1. When gov’t takes the burdened land for a purpose inconsistent w/ the restrictive
covenant 2. Easement: Gov’t must pay compensation to the easement owner 3. Restrictive Covenant: majority says gov’t must pay damages to the Os having the benefit 4. Affirmative Covenant to pay money: must pay beneficiary for the loss of the benefit 5. In Florida
a. Negative covenant: benefit of the restrictive covenant not compensable if the gov’t violates the covenant
b. Affirmative covenant: gov’t must pay compensation to the benefitted party for the loss of the stream of income (the benefit)
c. Rationale: right of compensation for violation of a restrictive covenant in a subdivision would place on the public an “intolerable burden” bc of the difficulty of measuring damages to all the individual lot owners; but damages for condemning an affirmative covenant to pay a set sum of money is easily ascertainable and therefore compensable
v. Express Waiver or Release 1. Release: all holders of the benefit expressly release the covenant, it is extinguished
a. Even if one holder on a small lot can enforce b. Fairness and expectations c. If terminate, have to share w/ the promisees of the covenant any profits made
from its termination 2. Waiver: all benefit holders expressly waive the covenant to permit a specific
nonconforming use, the covenant remains alive to bar other nonconforming uses 5. Common Interest Communities
i. Types 1. HOAs 2. condominiums 3. cooperatives
ii. Privity: not a problem bc original owners are all in privity w/ the developer and subsequent purchasers are in privity w/ the original purchasers
iii. TC land: usually satisfied; 1. negative covenants almost always held to TC bc adversely affecting all homeowners so
affecting all the property 2. affirmative covenants to pay HOA dues are almost always held to TC
iv. Restatement 3d: 1. the distinctive feature of common-‐interest communities is the obligation that binds the owners
of individual lots to contribute to the support of common property, or other facilities, or to support the activities of an association whether or not the owner uses the common property or facilities or agrees to join the association
2. Direct and Indirect Restraint on Alienability a. Direct: a direct restraint is valid “if reasonable”; those that clearly interfere with the
operation of the free market economy
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i. ex) no transfer w/o consent of community, rights of 1st refusal, eligibility reqs of purchasers
b. Indirect: invalid only if it “lacks rational justification (more lenient); those that limit the potential market for the property i. ex) pet, paint color, or planting restrictions
3. Regulation in Original Document and Subsequent Regulations a. Original Document: deferential standard
i. rationale: original restrictions have been recorded so people know what they are buying into; presume unanimous consent
b. Subsequent: reasonableness standard applied here i. Rationale: owners not necessarily buying into those regulations bc put into
place after they’ve already moved in; majority rule of owners v. Condominiums
1. Each unit is owned (in FS) and financed separately a. Failure of one owner to pay mortgage interest or taxes does not jeopardize the other
unit owners 2. Common areas are owned by the unit owners as TICs 3. Each owner becomes an association member and must abide by its laws 4. Each unit owner is liable for a monthly charge to maintain common facilities and insure against
liabilities vi. Cooperatives
1. Mostly in NY 2. Title to the land and building is held by a corporation 3. Residents are both owners of the cooperative corporation and tenants of the corporation
a. Residents own all the shares of stock in the corp. and control it through an elected board of directors
b. Each resident has a long-‐term renewable lease of an apt unit 4. Business Judgment Rule:
a. Corporate governance b. Corp owned by shareholders but run by board of directors making policy decision c. BD makes decisions, shareholders can challenge d. Court very deferential to BD people living there are in better position to make
those decisions 5. Collective Mortgage
a. The investment of one person (unlike in condominium) depends upon the financial stability of others i. Courts will defer to the “business judgment” approach to enforceability
b. Strong incentive to screen applicants to ensure they can carry their share c. Allows for social screening as well
i. Discrimination: if the applicant can prove racial or ethnic discrimination, the cooperative will have to admit the applicant or pay damages
vii. Enforcement of Restrictions in Common-Interest Communities 1. Generally
a. Declaration: the operative document for a common interest development, setting forth, among other things, the restrictions on the use/enjoyment of any portion of the development; aka master deed
b. The restriction must be i. uniformly enforced against all residents ii. Must be reasonable
1. not arbitrary, 2. against public policy, or 3. burdens substantially outweigh its benefits
c. Rationale: i. stability ii. protects expectations/predictability
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iii. problems could arise in HOAs as to people who chose to live there in reliance on the covenants
2. Approaches to Enforceability a. “Reasonableness”: enforceable unless unreasonable
i. Rationale: governing boards will enact rules and make decisions that are reasonably related to the promotion of the health, happiness, and peace of mind of the project owners, considered collectively
b. “Presumption of validity” unless arbitrary or in violation of public policy or a constitutional right i. Rationale: courts disinclined to question the wisdom of agreed-‐to restrictions
c. “Originating document”: i. Covenants in the master deed: restrictions that predate the purchase of individual
units is given greater deference (strong presumption of validity) ii. Covenants imposed by HOA: restrictions imposed by HOAs after the owners have
acquired title are not given the same “presumption of validity” and are valid only if reasonable
iii. Rationale: 1. Serves the best interest of the majority of owners who may be presumed to
have chosen not to alter or rescind such restrictions 2. Avoids the burden and expense of highly particularized and lengthy
litigation 3. Protects the general expectations of condo owners that restrictions in place
at the time they purchase their units will be enforceable a. purchaser has constructive notice of the restrictions in a master
deed d. “Business Judgment”: financial decision making requires a board to exercise its
discretion in good faith and with regard for the best interests of the community association/its members (greatest degree of deference given to condominium boards) i. Rationale: protects the board’s business decisions and managerial authority from
indiscriminate attack
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Legislative Land Use Controls: Zoning
[gilberts ch. 8] I. An Intro to the Substantive Law
1. Historical Background i. Euclidean Zoning:
1. Districts are graded from highest (sing-‐family residences) to lowest (worst kind of industry)
2. Cumulative zoning: higher uses are permitted in areas zoned for lower uses, but not vice versa
a. Non-‐cumulative zoning: prohibiting houses and commercial in industrial zones (industrial parks); an attempt to preserve large tracts for future industrial use
3. Overt licensing of segregation by class: bc protects the value of land owned by the propertied class and the values of the class itself
4. Assumptions of EZ a. Separation of uses is good b. You ought to be able to live around people who are more like you c. Glorification of single family promotes American dream/good life d. Class bias benefits those w/ resources to live in single-‐family area
ii. Constitutionality of Zoning 1. Due Process TEST: can’t deprive someone of life, liberty, or property w/o due process of
law a. Whether the provisions are arbitrary/unreasonable b. Having no substantial relation to the public health, safety, morals, or general
welfare (police power) 2. Zoning in general is held to be constitutional 3. Specific claims of unfairness will be dealt with individual in order to avoid barring zoning
altogether 4. General presumption of validity attaches to a zoning ordinance 5. Can evaluate as procedural due process or substantive due process (more controversial)
iii. Takings 1. Can a severe reduction in value of P’s land by the zoning ordinance constitute a “Taking”
for which gov’t will have to compensate? a. PA: yes, there is a compensable taking if the gov’t “goes to far” b. Majority: zoning ordinances are generally upheld in the face of taking allegations
2. Structure of Authority Underlying Zoning i. State Police Power:
1. State gov’ts have a certain residual power to regulate for the public 2. Specifically, to regulate/protect the public health, safety, morals, or general welfare 3. Constitutionality Test: provision cannot be arbitrary and unreasonable, having no
substantial relation to the public health, safety, morals, or general welfare [police power] 4. Fed’l Gov’t has no police power 5. Restrictions within the Police Power
a. Methods of construction, height of buildings, space bw buildings (fire), overcrowding (health)
b. Industries creating a nuisance ii. Enabling Legislation
1. The Standard State Zoning Enabling Act a. Most states have some version b. Permits division of municipalities into districts (zones) in accordance with a
comprehensive plan c. Regulations made with reasonable consideration to
i. Suitability of a district for particular uses, ii. View to conserving the value of buildings, and
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iii. Encouraging the most appropriate use of land 2. To enact a Zoning ordinance under the SSZEA
a. Planning commission i. Big picture planning/ general rules
b. Board of adjustment i. Application of the rules/whether exceptions should be granted ii. Grant variances (people who seek exceptions) iii. Ripeness Doctrine: suit not ripe for resolution by the court; P must petition
to the board for relief first 3. Zoning Ordinances applied to New Uses
a. O must apply for building permit denying permits who want to build something incompatible w/ that area
b. Before you can use a built building inspection and certificate of occupancy (gov’t can deny the cert of occupancy to enforce zoning)
4. The delegation of legislative authority cannot a. go beyond the authority given the locality under the zoning act (ultra vires) or b. conflict with the state constitution c. constitutionality test:
iii. The Comprehensive Plan 1. Statement of the local governments objectives and standards for development 2. Generally, the plan itself is not binding but must be implemented by actual zoning
ordinances 3. 50% states: don’t require 4. 50% DO require, but judicial attitudes vary:
a. plan needn’t be written in a separate document from the ordinance itself b. the statement of purpose in the zoning ordinance’s preamble is evidence of an
underlying plan c. scheme of regulations in the ordinance constitute “the plan”
5. Even when written plan exists, zoning regulations inconsistent w/ it are not necessary invalid so long as considered a) reasonable and b) in the public interest
i. Rationale: 1. future is too unpredictable 2. Technological changes affect land use
6. Changing Uses and Land Use Planning a. How changes in the past have changed needs for land use and then project
forward – what kind of things might happen in the future? b. Rise of the Internet changes patterns of land use:
i. smaller office spaces ii. online shopping = decrease in shopping malls/parking lots
c. Rise in gas prices: i. people want to live car-‐free ii. public transportation
d. Social changes: much more common for singles with their own living space; more smaller living spaces; or if trying to save money – more demand for multi-‐family homes; longer life spans
II. The Nonconforming Use 1. When zoning is introduced some existing land uses aren’t in conformity with the uses permitted 2. Generally permitted to continue to exist because their immediate abatement would amount to
i. a taking w/o just compensation OR ii. an unreasonable exercise of the zoning power
3. Forced Phase-Out: i. Amortization period:
1. The zoning law may specify a period after which the nonconforming use must cease a. Must be long enough to avoid charge of Taking or
i. (if immediate – unconstitutional)
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b. Denial of substantive due process 2. Forbid improvements to a nonconforming use
ii. Majority: Valid if reasonable amortization period 1. Balancing of Factors:
a. public gain to be derived from speedy removal of nonconforming use b. private loss which removal would entail
iii. Minority: Invalid per se 4. Changes
i. Change of Ownership: 1. Per Se JXN:
a. Right to maintain a nonconforming use runs with the land; b. it survives a change of ownership
2. Amortization JXN: a. The right ends at the termination of the period, whether or not property has
changed owners 3. Generally: can sell it when nonconforming use and the new owner can continuing using
the nonconforming use [change of title doesn’t affect permission to use] not all agree ii. Expansion:
1. Some say yes nonconforming use may expand to meet natural changes (ex: increased demand)
2. Some say no iii. To a different non-conforming use:
1. Some jxns: no 2. Some jxns: yes but only if the change reduces the impact of the use on the zone in
question a. ex) changes to apt building: same structure, but more apts inside
i. courts are split as to whether this change is permitted iv. Stop Using Property for the non-conforming purpose
1. Some jxns will deny it based on discontinuance a. Diff from abandonment bc there may still exist the intention to resume the non-‐
conforming use 2. Other jxns will only deny if there is an abandonment
5. To Avoid Interference with Land Use by Zoning i. Hope for per se jxn ii. Argue Unreasonableness iii. Vested Rights Doctrine
1. a pre-‐existing operation is protected 2. a proposed use might be protected if sufficient commitments have been made in reliance
on existing zoning requirements that are subsequently changed in a way that invalidates the proposed use
3. Variables: how far the developer has gone in obtaining gov’tal approval, money invested in good faith, and on what money has been spent
4. Kicks in before you start running a business that violates the new ordinance? (got permit, bought building, but ordinance passed before opened door for business)
a. will protect IF you show good faith, improvements, investments (depends on jxn) iv. Estoppel
1. When developers rely reasonably and to their detriment on the issuance of a permit and proceed to make substantial expenditures
2. Must be in good faith 3. Can’t erroneously interpret a zoning map and then claim estoppel 4. Person who induced reliance can’t stop 5. EX) If gov’t has acted in a way that you’re relying upon (grant permit), you might be able
to claim that they’re estopped a. some courts say that O should have realized the mistake b. Estoppel only protects reasonable reliance
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6. Termination of Permission to Continue Non-conforming use i. Destruction:
1. the nonconforming use is destroyed (by act of God or otherwise); 2. new replacement structure or new use must conform to the current zoning law (?)
ii. Abandonment 1. Intent: most jxns req’t intent to abandon nonconforming use 2. Discontinuance: some ordinances say discontinuance of the nonconforming use for a
specified period terminates permission for the use a. considered discontinued use even if owner intends to resume the nonconforming
use later iii. Condemnation by Eminent Domain
III. Zoning Flexibility Devices 1. Why allow exceptions?
i. something unanticipated that would be to the public’s benefit ii. bribes iii. subject to discretion/abuse
2. Variances i. Uses that are expressly prohibited by the ordinance but granted bc strict compliance w/ the
ordinance would impose an unnecessary hardship on O ii. P must show
1. Unnecessary hardship on P if imposed 2. Negative Criteria
a. Can’t be in violation of public interest b. Can’t be adverse to the intent/purpose of the ordinance
3. EX) O’s reliance on an erroneously issued building permit does not constitute a hardship entitling him to a variance
iii. Unnecessary Hardship 1. Cannot be self-‐imposed/inflicted 2. Evidence of hardship
a. have they tried to sell/obtain land to meet reqs? iv. Options for deciding to grant or not
1. Grant variance 2. Deny variance (risking taking claim) 3. Try to purchase land from neighbors to meet the req’s 4. Sell land to neighbors OR purchase from them
a. Grant variance conditionally: unless neighbors will purchase the land, the variance will be granted
b. Rationale: Transfers financial cost onto the people who would benefit from ordinance
v. Types of Variances 1. Use variance
a. Permission to violate the ordinance as to the uses permitted/prohibited b. More prospective of conflicting land uses if use variance
2. Area Variance a. Permission to violate the ordinance to alleviate siting problems (setback req’s or
minimum yard area) 3. Special Exceptions (special-use/conditional-use permit)
i. These are permitted by the ordinance, subject to certain conditions 1. Variance – asking for permission to violate 2. Special Exception – asking to take advantage of some conditional exception the ordinance
allows in certain specified conditions ii. Must be in harmony w/ general intention/purpose of the ordinance [cope] iii. 4 Factors in Granting
1. Certain Requirements Mt 2. Use not Adverse
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3. Purpose Upheld 4. Value Maintained
iv. Non-‐Delegation Doctrine 1. Idea that legislatures have limits on how much of their authority they can delegate to
someone else 2. Needs to be a bit more specific guidance to legitimize their discretion 3. “Health, safety, general welfare” formulation of the State’s Police Power
4. Zoning Amendments and the Spot Zoning Problem i. Spot Zoning:
1. a zoning amendment that delivers special private benefits (and no public benefits) to a small parcel which is not in conformity with the comprehensive plan
2. Island of non-‐conforming use can’t show rational basis relating to public health, safety, and morals [police power]
3. Illegal if: a. Not in public interest but only for the benefit of O b. Not in accord w/ the comprehensive plan
ii. Zoning Amendments: 1. How to characterize [affects the standard of review] legislative or adjudicative action? 2. If judicial: would be presumptively invalid
a. dealing with particular lots [legislative dealing with large areas] 3. If legislative: would be presumptively valid unless
a. arbitrary or capricious or b. inconsistent w/ comprehensive plan
4. Rational Basis [due process] Test for legislative actions: a. Unsupported by any rational basis for supporting the furtherance of public heath,
safety, morals, or general welfare; b. Otherwise, violation of due process
5. Plebiscites i. A direct vote of citizens on some public question; ii. Two forms:
1. Referendum: to electorate for final decision 2. Initiative: from petition of citizens to the ballot 3. *both viewed as legislative actions
iii. Generally not allowed for small-‐scale zoning [small voter turnout] iv. Flip of non-‐delegation doctrine?
1. THAT: didn’t want legislative power delegated to adjudicative body 2. NOW: don’t want an adjudicative power [what happens to a particular lot] delegated to
people themselves 6. Contract Zoning
i. Bilateral agreement bw O and zoning authority ii. Some jxns suspicious iii. Issue: exactions gov’t agrees to let you do something if you do XYZ, but sometimes these
are challenged as takings 7. Conditional Zoning: unilaterally agrees to use land in a specified manner 8. Floating Zones:
i. We know we want to have a hospital somewhere, not sure the best place, so we set out rules about where it might go
ii. Later, when someone proposes where, then we’ll nail it down 9. Cluster Zoning
i. Flexibility device ii. Allow developers to do something in a pattern that’s not exactly in line w/ the Plan iii. Same total # acreage but bring house closer together iv. Area variance
10. PUD: planned unit developments i. Similar to cluster zoning
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ii. Not just confined to housing (includes services too) iii. area and use variances
IV. Expanding the Aims (and Exercising the Muscle) of Zoning 1. Aesthetic Regulation
i. Traditionally – was beyond scope of police power (beauty is subjective) ii. Modern Majority uphold aesthetic land use regulations banning uses that result in lower
property values iii. Architectural Review
1. Even if builder complies with all city ordinances/codes, could still be denied by AR 2. Cont 3. Two Factors
a. Conformity of proposed structure to the existing character of neighborhood b. Likelihood that it will not cause substantial depreciation of neighboring property
values 4. Constitutional delegation of police power
a. Majority i. Berman yes: it is within the power of the legislature to determine that the
community should be beautiful as well as healthy, spacious as well as clean, well balanced as well as carefully patrolled
ii. Will generally base their reasoning on “property values” but it’s really ab aesthetics
iii. Rule: aesthetics alone will justify a regulation, provided there are adequate standards that are appropriately applied
b. Minority: some still waffle on the issue and some are opposed to aesthetic regulation
c. Generally less hesitancy in context of historic zoning/historic preservation legislation
5. Void for Vagueness: a. [Anderson v. city of Issaquah] b. Whether there is enough specificity in guidance given to police power violation
of due process i. deprived of life/liberty/property? ii. Euclid
1. substantive due process challenge: rational use of police power iii. Anderson
1. procedural due process challenge: notice of what law requires is a fundamental principle of due process
2. could be void for vagueness bc no notice c. Unconstitutional deprivation of property w/o due process
i. Doesn’t have to be super specific bc aesthetics are subjective BUT it must ii. Give effective or meaningful guidance to applicants, professionals, or public
enforcers iii. Technical words
d. Arbitrary and capricious standard (Equal protections clause test) e. Rational relationship test
i. Permissible governmental end ii. Rational means for ordinance in achieving that end iii. Deferential test: doesn’t have to perfectly accomplish the gov’ts goal as long as
it will rationally help you get there f. clearly erroneous standard
6. Criticism of Architectural Review: a. limits creativity and stifles free expression by killing art
7. Private Restrictive Covenants: a. private architectural restrictions are governed by a different standard than public
restrictions
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b. specific standards not necessary c. architectural community only has to act reasonably and in good faith
8. Nuisance: can’t claim nuisance based on aesthetics (too ugly) iv. Free Speech
1. When a zoning law infringes upon a protected liberty, it must be narrowly drawn and must further a sufficiently substantial gov’t interest
2. Content-based regulation of speech a. Subject to Strict scrutiny and presumptively void b. Gov’t must prove that the restriction is necessary to accomplish a compelling
government objective i. EX) no political speech
c. Secondary effects exception: i. secondary effects – consequences that are not produced by the
communicative impact of speech ii. when the law discriminates on the basis of speech content but does so to
regulate the secondary effects of speech, the law is presumptively valid iii. “time, place, and manner” shift not ban
d. Adult Entertainment: 3. Content-neutral regulation of speech
a. Subject to more relaxed scrutiny i. EX) no amplified speech in the park bw midnight and 6AM
b. Invalid if: i. Broader than reasonably necessary to achieve a gov’t purpose other than
speech regulation or 1. gov’t attempt to give one side of a debatable public question an
advantage in expressing its views to the people ii. So Restrictive that they fail to leave open alternative channels of
communication 1. laws that foreclose an entire medium of expression are generally
invalid, even if they are completely free of content or viewpoint discrimination (like signs) bc effect is to suppress too much speech
iii. Time place and manner restrictions: 1. Not based on content/viewpoint in speech but making people take
their speech to more convenient places or times 2. You can regulate this, but you have to leave open ample alternatives
c. Signs i. commonly held that governments can regulate the physical characteristics of
signs to avoid clutter/maintain property values ii. advertising home businesses: some courts say they may not be banned
v. Free Exercise of Religion 1. Religious Land Use and Institutionalized Persons Act of 2000:
a. prohibits land use regulations that impose substantial burdens on religious exercise unless
b. Strict Scrutiny Test the gov demonstrates that i. the regulation is in furtherance of a compelling gov’t interest ii. it is the least restrictive means of furthering that interest
2. Controls on Household Composition i. Rational Basis Test:
1. Two Part: a. End that is permissible for gov’t to pursue b. Rational means for ordinance in achieving that end
2. Deferential standard: doesn’t have to perfectly accomplish the gov’ts goal as long as it will rationally help you get there
ii. Strict Scrutiny Test [majority] 1. Two Part:
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a. Compelling and substantial gov’t interest b. There is no less restrictive means of accomplishing that interest
2. Applies when: intruding on some fundamental constitutional right a. Residential: people’s choice of who they live with is very person and should have
freedom to do it iii. Moore: Hybrid test bw SS and RBT justified by the fact that there were important
constitutional interests involved iv. Laws that substantially interfere with the constitutionally fundamental liberty of people to
marry/associate together in a traditional family relationships are presumptively void even if the purpose is to promote a compelling gov’t purpose [the purpose is valid but the means is not] 1. EX) ordinance that cuts into the family itself – invalid 2. EX) ordinance limiting occupancy to 2 unrelated persons -‐ valid
v. Subject to strict scrutiny vi. Constitutionally guaranteed right of privacy – entwined w/ the freedom of association vii. Family:
1. Laws interfering w/ the ability of unrelated persons (not by blood, marriage, or adoption) to live together are presumed valid and subject only to minimal scrutiny and will be constiutional notwithstanding the availability of less restrictive alternatives
2. majority: liberty of unrelated persons to live together in a group is not constitutionally fundamental
3. minority: the choice of household companions involves deeply personal considerations as to the kind/quality of intimate relationships w/i the home; unrelated persons can live together as a functional family
4. see also note 2, 782 (family in context of restrictive covenants limiting to single-‐family)
viii. FHA: 1. mandates of this law can collide w/ local zoning laws limiting occupancy by unrelated
persons when handicapped people seek to live together in group homes for various therapeutic purposes
2. Prohibits discrimination against handicapped but it exempts from that “reasonable local restrictions regarding the number of occupants permitted to occupy a dwelling”
a. codes within exemption: those that cap the total number of occupants in order to prevent overcrowding of a dwelling (i.e. if limits occupancy of unrelated persons v. occupancy of a house in general)
b. codes outside the exemption: those designed to preserve the family character of a neighborhood, fastening on the composition of households rather than on the total number of occupants living quarters
3. The FHA exempts only total occupancy limits, not occupancy limits based on the familial composition of the household
4. EX) Ordinance limiting to family and 2 unrelated persons. Bars occupancy by a group of 10 to 12 recovering alcoholics/addicts living together in a substance abuse treatment program an invalid discrimination of handicapped persons under the FHA bc pertains to the type of occupants rather than the number of occupants.
a. Will have to figure out if by not allowing them to be there, whether they are failing to accommodate
3. Exclusionary Zoning i. Unlike typical Euclidian Zoning [can put stuff anywhere], here if you have it zoned industrial,
you can’t have residents ii. Often used by suburban communities to
1. restrict/bar particular uses (apartments, small houses on small lots, mobile homes) 2. foreclose entry by particular people, especially poor and racial minorities 3. fiscal concerns – low property taxes 4. Like industrial properties (corps pay taxes) and don’t like children (expensive)
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a. industrial users pay higher taxes but consume fewer munincipal resources than other kinds of residents
b. Target elderly people or those w/o kids iii. Exclusionary Zoning Techniques
1. minimum housing cost [disfavored by courts] 2. minimum housing size [mixed reviews] 3. minimum lot size [upheld] 4. minimum setback [upheld] 5. prohibitions on mobile homes [almost always upheld] 6. prohibitions on multifamily housing
iv. Plaintiffs must show discriminatory intent v. Mount Laurel II
1. Every municipality – not just developing ones – must provide a realistic opportunity for decent low-‐income housing, except where (like in urban areas) the poor represent a disproportionately large % of the population as compared to the rest of the region
2. Affirmative measures: inclusionary zoning 3. “Builder’s Remedy”: trial court can allow a developer to go forth w/ a low income project
even though the municipality hadn’t granted a permit if the court finds that the municipality hadn’t fulfilled its Mount Laurel obligations
4. Regional Contribution agreements: suburbs can, with council approval, compensate cities for agreeing to absorb up to half of the suburbs’ fair-‐share obligation
vi. Exclusionary Zoning in Other States 1. NJ: Mount Laurel – attacks exclusionary zoning 2. Other States: follow tradition that zoning ordinances are presumptively constitutional
a. apply rational basis test 3. PA: reqd to provide zoning for all types of housing 4. NY: ordinances annulled if they don’t include districts for multiple housing when area
needs req’d them 5. MA: non-‐profits and NGOs have a way around 6. CT: expedited judicial appeals by any developer of an “affordable housing project”
vii. Tiebout Hypothesis 1. The specialization of municipalities and the competition among them will enhance the
efficiency of metropolitan organization bc people will congregate w/ others of similar tastes and therefore be more likely to get the public goods they most prefer
2. Everybody living in the locality pays the same amount of taxes [head taxes] viii. Waring Blender Model
1. Calls for all land uses and all types of households to be represented in each neighborhood in proportion to their representation in the entire metro area
2. Produces great diversity within neighborhoods but no diversity between neighborhoods, limiting the variety of residential choices available
4. Inclusionary Zoning i. Devices designed to require/encourage developers to supply low and moderate-‐income
housing ii. Requirement:
1. Conditioning a building permit on the builder’s agreement to provide a certain number of units for lease at below-‐market rents
2. Courts are divided on the legality of this iii. Incentive
1. Lifting density requirements in exchange for the builder’s agreement to build more low-‐income units
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Eminent Domain and the Problem of Regulatory Takings
I. The Power of Eminent Domain: Sources and Rationales 1. [start]: to do:
i. finish outline ii. print it iii. read it iv. barbri lectures v. take an exam [check sample answer] vi. book problems vii. conceptualize outline viii. TAKE EXAMS
2. Defined: i. Gov’t acquisition of property [gets title] to satisfy whatever governmental purposes it wants to
pursue power to tell landowners you will transfer property to us whether you want to or not ii. Power of gov’t to take property from owners and reallocate it to governmentally preferred
uses [forced transfer] with just compensation (distinguishes police power from eminent domain) 1. Grand scheme: urban renewal program 2. Self-‐serving transfer: post office
iii. Duty to Compensate: 1. Fairness: compensation for property 2. Deterrence: discourages efficient landuse if not 3. Posner: gov’t would take more land instead of taxation 4. Protects Politically Powerless: more likely to compensate powerful people as a matter of
course 3. Constitution
i. Bill of Rights: to restrain Fed’l gov’t 1. “Shall not take private property for public use w/o compensation”
a. No technical restriction on taking property for non-‐public uses b. Assumes that if exercising ED power, it will be for public use
ii. 14th Amendment: restraint on State gov’t, so though 14th amendment, the bill of right restrictions on fed’l govt are incorporated as state restriction
4. Private Party Transfers i. CANNOT take the property of A for the sole purpose of transferring it to another private party,
even if A is paid just compensation… EXCEPT ii. Three instances recognized by Court:
1. Instrumentalities of commerce a. RR, gas lines, canals
2. Privately Owner Public Service providers a. Utility commission
3. Facts of Independent Public Significance a. ex) condemnation of blighted property b. the public goal was accomplished by the taking itself though the land was later
transferred to private people c. Dealing with the blight was the independent significance that brought the need for
the Taking Power d. Diff from situation where you don’t get a public benefit unless transfer to private
parties 5. Theories of Eminent Domain
i. High transaction Costs – in settings w/ high transaction costs people must be allowed to use the courts to shift resources to a more valuable use
ii. Land assembly through private transactions 1. Should gov’t just have to cope with assembly problems just as private developers must?
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2. Bilateral Monopolies a. Holdouts – when the cost of the land becomes very high, people owning the land
will be tempted to hold out for a very high price – a price in excess of the opportunity cost of the land
iii. Opportunity for corruption 6. Persuasion
i. Aristotle: 3 elements of persuasion 1. Ethos (Character of speaker) 2. Pathos (appeal to hearers) 3. Logos (logical argument making)
II. The Public Use Puzzle (and Just Compensation)
1. Scope of Eminent Domain Power i. Property may only be taken, under the 5th Amendment, for “public use”; gov’t can’t condemn
for private use; Scope hinges on meaning of “public use” ii. Definition of Public Use
1. Broad View: Advantage or benefit to the public [dominates] – gives gov more latitude 2. Narrow View: actual use or right to use of the condemned property by the public
2. Tests for “public use” i. If you take for public purposes, some private person will benefit, but that’s ok as long as it’s
being taken for public use ii. “Use by Public” and “Public Purpose” Tests
1. Traditionally very narrow, but has since broadened into the Public Purpose Test 2. Does it serve a public purpose 3. Will not survive test if there is a clear showing that its purpose is “to favor a particular
private party with only incidental public benefits” iii. Public Ends Test
1. Takes on a broad view of “public use” 2. If the ends are sufficiently “public” the test is passed 3. EX1) where the condemned property remains subject to public oversight after transfer:
a. the property is transferred to a regulated public utility 4. EX2) where the property is taken not in the interests of private parties to whom it is
transferred, but “because of facts of independent public significance” a. to clear blighted land
iv. Public Means Test 1. Whether the power of ED is really necessary to accomplish whatever aim the gov’t has in
mind 2. Requires eminent domain to assemble land on behalf of enterprises generating public
benefits (this is really a hybrid means-‐ends test) a. rights of way, RR, highways
v. Level of Scrutiny in determining public use 1. SPLIT
a. strict scrutiny: requires a showing that the project’s aims cannot be achieved by some means less intrusive than eminent domain
b. deferential standard: afford legislatures broad latitude in determining what public needs justify the takings power
vi. JC and Public Use 1. If the taking passes public use test, it may go forward upon payment of just compensation
as fixed by court 2. If the taking fails the public use test, the gov’t may only go forward by purchasing the
property though voluntary transactions with owners 3. Takings for economic development
i. JXN splits 1. Majority: presumptively valid so long as
a. reasonably necessary to achieving city’s intended public use? and
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b. for reasonably foreseeable needs? 2. Minority: imposed heightened standard of review
ii. SCOTUS authority: 1. Kelo: public economic development
a. made it difficult to prove taking for private use b. just have to say that some public person will be furthered by the ED power c. Here, tax based any time the gov’t can take and give somethign that would
increase taxes or be a better use, it would be ok under Kelo d. HOW TO WIN: more of an argument if there are more single-‐lot takings
2. O’Connor Dissent: a. Economic Development as public purpose is troubling bc nearly any lawful use of
real property can be said to generate some incidental public benefit b. Emphasizes 3 exceptions and says maj goes too far c. Test of whether the gov’t has a stupid staff smart people can always come up
for some reason by the public will benefit 3. Once Q of public purpose has been decided, the amount and character of land to be taken
for the project is w/i the discretion of the State – Deference generally given to city plans 4. Just Compensation and Public Use
i. General Rule: measure by FMV 1. Doesn’t fully compensate condemnees 2. Not all property is for sale [subjective, sentimental value giving property higher value to
O than they could get on the mkt] 3. Is it really just if there is a loss being compensated? Maybe not but hard to accurately
measure subjective values of property 4. Nature of forced sale compromises autonomy of owners 5. Some proposed solutions
a. Canada: special advantages generated by the land may be recovered if condemnee proves
b. England: FMV plus 10% to soften blow of compulsory taking c. Ellickson: system of bonuses, defined in legislative schedules to compensate for
losses of personal value ii. Condemnation of Part
1. Diminution of Value: a. Gov’t use makes it less desirable than its ordinary use [ex: landfill] b. If condemnation devalues the tract, does that get reflected in our award of just
compensation? c. Yes: when JC awarded, you get the FMV of the part taken but ALSO an award of
damage to any part remaining in ownership of L 2. Increase in Value
a. SPLIT: i. Give gov’t credit: natural flip-‐side of having to pay damages where reduces
value ii. Don’t give credit: FAIRNESS not fair if the person whose land is partially
taken has to pay when a neighbor whose land is also increased in value doesn’t
iii. Downzoning In Anticipation of Condemnation 1. Most courts say it’s not just to compensate for just the value of residential property
where gov’t has down-‐zoned knowing it would condemn later 2. You cannot downzone someone’s property simply for purpose of later acquiring it for
eminent domain proceedings 3. Problematic: it would be very difficult to prove that the reason they changed zoning was
for future eminent domain proceedings iv. Intergovernmental Takings
1. The substitute Facilities Doctrine: The state/city is entitled not merely to mkt val but to the cost of obtaining or constructing the equivalent of what had been taken
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2. Abandoned in 1984 SCOTUS said to treat public condemnees like private ones III. Physical Occupations and Regulatory Takings
1. Regulations that interfere substantially with O’s right to use, dispose or possess property may be takings
2. Some states req’t gov’t to attempt a negotiated purchase before initiating a condemnation actoin 3. Two Per Se Categorical Rules
i. Permanent Dispossession 1. Rule: when by government authority there is permanent physical occupation on
someone’s property, there will be a per se taking a. Rationale: Virtually complete interference of property rights such that O can’t use,
dispose of, or exclusively possess that portion of the property in ways inconsistent w/ the gov’ts use of it
b. EX) a regulation requiring apt buildings to install smoke detectors/fire extinguishers in all common areas not a taking within Loretto bc there the owner is L and he has choice of what to buy and where to put it; in Loretto it was a 3rd party what to put there and where to put it
2. Permanent physical occupation: there is a taking to the extent of the occupation without regard to whether the action achieves an important public benefit or has only minimal economic impact on the owner
a. Servitudes: even if the gov’t physically invades only an easement physically still must pay compensation
b. Flight Nuisance: i. Planes invading airspace over O’s land considered a taking by most jxns
(noise and vibration damage) ii. O has all area above and below the land, theoretically iii. If not in flight path, but similar damage caused no taking
c. Irrelevant whether O had previously occupied the space on which the gov’t physically occupies [loretto]
d. Temporary occupations are not a per se taking 3. Temporary Physical invasion:
a. No taking per se [avoid difficult line-‐drawing problems] b. Only if balancing test indicates c. If the action strips all utility from an O’s possession, the action may be treated as a
gov’t invasion of property that constructively dispossesses the owner 4. Rationale for permanent invasion rule
a. O has no right to possess the occupied space b. No power to control the use of the property c. Empties property of value bc the purchaser will also be unable to make any use of
the property d. O disturbed in exclusive owernship *share w/ stranger) e. Avoids difficult line-‐drawing problems f. Few problems of proof
ii. Nuisance Abatement 1. Rule: under state police power, gov’t can control uses of property that are deemed
nuisances w/o being deemed a taking of property a. no taking per se even if the regulations bar all economically viable uses of the
property b. Rationale: property rights don’t give permission to create a nuisance; nothing
taken by forbidding what was never lawful 2. Where city “comes to the nuisance,” should they have to pay? 3. EX) Competing Uses: Diseased trees killing healthy trees
a. Taking: i. Efficient preserves more valuable trees
b. No Taking: i. Efficiency doesn’t mean no compensation
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ii. Owner of cedars shouldn’t have to subsidize apple industry 4. Historically, courts distinguished bw
a. Regulations that seize public benefits (compensation required) b. Regulations that control private harms inflicted on the public (no compensation
req’d) [public bad test] iii. Economically Viable Use
1. If the gov’t regulation denies all economically viable use of the land, there is a taking 2. State can’t evade duty to compensate under Lucas by leaving O with a token interest 3. Exception: if abating a nuisance, not a taking even if depletes all economically viable uses 4. NOTE: it doesn’t have to make the land itself valueless, it merely has to deny economically
viable use of the land a. ex) the brick land case land still had value when gov’t prohibited the most
valuable use of it 5. Do we have a conceptual severance issue?
a. Scalia: state courts in Penn Central looked not just at that piece of property but at all the property the person owns in the area and find effect on value of all of property in a region; Scalia rejects this and instead suggests
iv. NO compensation required when: 1. Nuisance abatement 2. Civil necessity [burn a house to stop a fire] 3. Public use (subj to balancing tests) 4. Average reciprocity
4. Rules Based on Measuring and Balancing i. Mahon: Regulations affecting use
1. “goes too far” regulations that amount to a taking are those that go too far. [helpful] 2. Could be a taking but won’t be every time bc incompatible w/ Euclid and forms of
regulations that court has approved 3. Holmes: gov’t would be stalled if it had to pay for every move it makes 4. Rationale:
a. Long-‐recognized existence of the police power b. Owners still get value from property w/ limitations c. Ownership is a right to do what you want within legal limits d. If you own property, you do so with the reservation of some legal interest in the
gov’t [they may come in and regulate] ii. Average Reciprocity of Advantage
1. The people who bear burden of the regulation are also advantaged by the regulation as applied to others [you have to leave coal but so does neighbor]
2. Situations where you are being burdened but doesn’t advantage you at all and advantages others at your expense could be a taking
3. Plymouth Coal: a. If you own mineral rights under property, you can take a lot, but you have to leave
a pillar of coal b. Purpose: avoid injury caused by floods
iii. Conceptual Severance: 1. What interests in land are considered? The land as a whole? or certain property rights
viewed in isolation? [the denominator problem] a. Approach 1:
i. Denominator = the entire bundle (all rights in land) ii. Numerator = what is taken away by the statute
b. Approach 2: i. Denominator: value of the whole ii. Numerator = diminution in value
c. Approach 3: [majority in penn coal] i. Denominator = what statute takes away ii. Numerator = what statute takes away [one stick]
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2. Can you carve out interests for separate examination? Depends a. Reasonable expectations of owner in light of background State law whether
and to what degree the state’s law has accorded legal recognition and protection to the particular interest in land
3. Is gov’t taking all of a small thing or part of a larger thing? 4. [Penn Coal]
a. majority: gov’t took all of a particular set of rights b. j. brandeis: the gov’t didn’t take all of a small thing but a part of a larger thing
look at the property as an entire estate iv. BALANCING TESTS
1. average reciprocity of advantage? 2. public use? 3. diminution in value [prob wont count if sentimental]
a. take into account stuff on the land and under it 4. economically viable use of land
v. Penn Central Balancing 1. All economically viable use not taken could still be a taking depending on balancing
factors a. Regulation’s economic effect on the landowner b. The extent to which the regulation interferes with reasonable investment-‐backed
expectations c. The character of the gov’t action [legitimate gov’t purpose]
2. Economic Impact a. Deprivation of ability to get revenue b. Diminish current revenue or prevents excess revenue? c. TRDS: factor in bc can get revenue off diff property
i. not just compensation but they reduce economic impact of the regulation 3. Investment-Backed Expectations
a. Whether someone has invested money w/ a certain set of expectations b. inherited property:
i. may be more difficult to prove regulatory taking? ii. take into account investments by earlier family
c. Can’t be an interference with the primary expectations they ahd when acquired property
4. Legitimate Gov’t Purpose a. physical invasion more likely to be a taking b. public program adjusting benefits and burdens of economic life less likely c. Airspace: taking req’ing just compensation
vi. Regulation Prior to Ownership 1. [palazzolo] Owner not precluded from bringing takings claim simply bc the contested
regulation was in place prior to his ownership a. a regulation cannot be a background principle for some owners and not for others
2. Here, no taking under Lucas bc not denied economic value bc retains $200K in development under State’s wetlands regulations
a. PENN BALANCING will determine bc won’t survive under Lucas 5. Temporary Regulations
i. Originally: If some regulation were a taking, then state could: 1. rescind the regulation and not pay compensation or 2. keep regulation and pay compensation
ii. First English Rule: said they still had to pay just compensation from time regulation in effect until it got rescinded
iii. Can you take the First English Rule and mix it with the Lucas rule? 1. Regulation denies you of all economic use of land for a temporary time 2. SCOTUS says NO
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a. Lucas does not apply for a temporary regulation for a fixed period of time; only applies when it’s a permanent regulation
b. First English: it’s a remedial question dealing with whether there has been a taking or not
iv. Temporary Moratorium could constitute a taking even if you don’t rely on Lucas rule: Penn Central Balancing Test 1. Can’t focus on a period of time to the exclusion of the full length of time that the property
exists 2. What if it is scheduled to expire in 150 years?
a. applying Penn Central the economic impact of that regulation may be sufficient to make it a taking
3. 2 years moratorium to make plans but keep having successive renewals on ban on development?
a. Conceivably a taking 6. Exactions
i. Test: 1. Would it be a taking if viewed independent of the condition? 2. Essential Nexus 3. Rough Proportionality
ii. Nollan 1. Public trust doctrine 2. court analogizes to Loretto people walking could be like a permanent physical
occupation 3. Court does find a legitimate public interest ab the consequences of building the bigger
house psychological barrier; people don’t know about the public beach 4. Commission: but if we can deny the permit, we can grant the permit and ask the Nollans
to solve the problem 5. Although general rule: can attach a condition to the granting of a permit so long as
a. The condition serves the same gov’tal purpose as to the development [nollan], and b. Exaction is roughly proportional in nature and impact to the problem created by
the land use 6. here, the imposed exaction helps people get to the park but it doesn’t help people see the
beach, which was the interest involved 7. TESTS:
a. legitimate public interest b. economically viable use of the land c. Per se tests
i. Loretto ii. Nuisance iii. Lucas
d. Exactions: iii. Dolan: rough proportionality test
1. Degree to which it creates a problem and the degree to which the exaction will help solve the problem
2. some individualized determination that the req’d thing is related in nature and impact
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Problems and Hypos problems pg. 364
• 1. a) L has no rights against T bc he doesn’t have to give any notice beyond the lease itself; L does have a reversionary interest, and can find a new tenant, but no rights against T
• b) year-‐to-‐year periodic tenancy so has to give 6 month notice; since he did not, then T continues to be own the hook for another period (1year)
i. neither T nor L gave proper notice in this HYPO, so both would be bound for another year • c) month-‐to-‐month periodic tenancy (some would say it’s year-‐to-‐year bc it specifies an annual
rate) ii. at common law, year to year req’d 6 mos, though modern law statutes will govern iii. for month-‐to-‐month, need a full month’s notice
• why should L get 4mos rent from T? iv. the notice given by T was improper bc tried to give notice in the middle of the month
(period) – they should have given a full month’s notice, so L says there was no legal or adequate notice of termination of the tenancy
v. court will make the notice effective on the earliest date it could be effective under common law principles, so he’ll have to pay for one month, but not for subsequent months.
vi. if you have to give 30 days notice to terminate a tenancy at will, does that make it a month-‐to-‐month periodic tenancy? yeah.
at common law, if L or T dies, that automatically ends a tenancy at will. OR if L conveyed the property or if T attempted to assign the property, at common law, that could end the tenancy at will. problems pg. 368 2. T has a tenancy at will
• if you give one party the right to terminate at will, then the right goes to both parties and either can terminate at will
• Garner shows that parties can negotiate an agreement giving the tenant only the right to terminate
• what ab an agreement giving L the right to terminate? vii. Why treat L differently? viii. Restatement: you should be able to negotiate that for either party, but it might be an
unconscionable term in the contract and therefore unenforceable i. This would create a FSD in T ii. Restatement: in this case, it should end at L’s death
3. • supposed to be able to (at least in theory) determine the maximum length of the tenancy – so not
Term of Years • Not Periodic tenancy bc contemplates that it is going to keep going month to month until the war
ends • Tenancy at will? no. • So what do you do? you can’t create a new estate (numerus clausus), so you’ll have to squeeze it
into one of the three: • some courts said it can be a term of years bc there is a day when the war will end • other ct said tenancy at will (but only bc of TERRIBLE logic based on deductive reasoning)
note 2, p. 372: Mississippi Statute for remedies for a holdover tenant: • double rent – pay 2x if you holdover.
note 3: • tenant who stays past bc sick child = not holdover, bc not voluntary but there still may be a
remedy against T (will have to pay for the period of time they are actually in the premises and preventing L to rent to someone else)
P. 380, Q 3: • “For rent: Furnished basement apartment in private white home.”
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• violation of FHA? o 3604(c): deals w/ how you advertise, so this is a violation of the FHA o 3604(a): no violation bc of the exemption provision of 3603(b)
1. acts that would ordinarily violate the FHA are not violations bc exempted 2. 3603(1): sale of single family homes by the owner will be exempted in some
situations (but that doesn’t apply here) 3. 3603(2): small place, no more than 4 families living independently in the same
place, and the owner occupies one of those units, then the FHA does not apply to that.
4. SO this woman would not violate – but does that also exempt her based upon her advertisement? No. Bc 3603(b) says that “nothing in section 3604 shall apply to these exemptions EXCEPT subsection (c) which is the advertisement section… so her exemption does not apply also to her violation by advertisement
5. Under SCOTUS reading in the Jones case, she would be liable; the civil war statute does not include a prohibition on discriminatory advertising so she would not be
6. Her advertisement probably does not violate FHA; but decision not the rent based on race does not; VICE VERSA under civil war statute.
o What if the advertisement had not contained the word “white”? 7. Now, probably no violation of FHA bc of exemption and ad is clean 8. BUT still violates § 1982 (civil war statute)
o What if ad had said “only to renters who speak certain languages”? 9. FHA protects people of national origin; this could be read to prefer people of
certain national origin, though it says speaking a language – so probably violates FHA w/ respect to advertisement provision
10. §1982: doesn’t apply to ads; no violation o What if she discriminates against German people in renting the apartment in her home
11. No violation of FHA 12. Civil Rights at of 1866 (§1982)?:
a. it doesn’t specifically protect national origin as a classification BUT “race” at that time was interpreted as synonymous with national origin – so probably a violation
o Regular exclusion of black models in ads as a violation? 13. potential violation of FHA depending on who is included in advertising
o Purpose of exclusion is to keep the complex integrated? 14. violation of 3604(A) refusal to sell/rent 15. maj found that it violated FHA 16. dissent said that FHA had mult purposes and one is to maintain housing
integration page 380-81
• Note 4(a) o Landlords have 8 single-‐family houses o avoid turnover o limit occupancy to 4 persons – are they discriminating against a couple w/ 3 kids? no
justified based on maintaining the economic value of the property could be discrimination based on familial status (specified meaning, relates to
having minor children) may be defensible on grounds of preservation of property
• Note 4(b) o violation: Familial status discrimination – specifying ratio of adults to children
• Note 4(c) o Marital status not covered under FHA so NOT a violation under FHA o BUT sometimes states/cities have their own fair housing code, so could violate some
local legislation, but no violation of the federal act
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• Note 4(d) o FHA does not prohibit sexual preference discrimination so no violation
• Note 4(a) – sexual harassment of female tenant o could violate 3604(b) – conditions of rental/provision of services
P. 382, • (f): refusing to rent to someone with AIDS is prohibited bc AIDS considered a handicap • (g): if it is just an apparent threat, and it is possible to make reasonable accommodations to allow
them to live there, there may be an obligation on L to make it possible for mentally disabled person w/ threatening behavior to live there
• (e): if it is possible for the landlord to reasonable accommodate the tenant, who needed a dog, then they should; no-‐pet policy will only prevail if such reasonable accommodations are not possible
• State and local legislation: o No prohibition on discriminating based on profession
• Note 6, page 383: o “Wanted: Female to share 2bdrm apt.” o Violation of FHA? No.
Exemption provision: people renting a room in the apartment in which they are living are no prohibited from preferring a specific gender
FHA exemption 3603(b)(2) exemption BUT the exemption provision applies to everything of than 3604(c) [the advertising provision] SO are those advertisements that specify a gender a violation of § 3604(c)?
YES. but this is problematic: the FHA makes it legal for Pat to prefer a female roommate – can legally
decide to rent or not based on gender; BUT it also makes it illegal to advertise that fact; so here, there is a 1st Amendment question. Does the 1st amendment allow the fed’l gov’t to ban an advertisement proposing a legal transaction?
problems p.387-88 1. no-‐ landlord violates his duty, which includes making sure the new tenant can use the land 2. T is probably still obligated to pay rent – even if someone else has a lease; that hasn’t interfered with T’s ability to use/possess; T might be able to terminate lease Problems p 393: 2(a)
• Sublease bw T and T1; L not getting paid; He can sue T, arguing privity of K, making T liable (breach of K); ALSO privity of estate bc T didn’t convey his entire interest in the estate (sublease);
• Could L sue T1 for non-‐payment of rent? NO. no privity of estate; he’s not in privity of K either (no new agreement bw K and T1 and nothing to indicate that the K is a 3rd party beneficiary K);
• So if T just disappeared, does that mean that L just can’t get rent from T1? o L can terminate lease with T and evict T1
• What if T1 had agreed in the transfer to pay the rents of the original K? o no privity of estate, but maybe privity of K
2(c): • LT T1 (assign, assuming covenants of original lease) T2 T3 • L has cause of action against T, given that rent not being paid/premises not kept in good
condition; L not in privity of estate with T (bc entire estate assigned to T1) BUT he’s still in privity of K with T, which would give him a cause of action for nonpayment of rent and keeping in non-‐repair;
• Can L release T from obligation under an assignment? T might negotiate a release of their liability, but assuming none has been negotiated, they’re still on the hook for the original lease
• Cause of action against T1? Once T1 gives it up to T2, T1 is not in privity of estate with L; but he could be in privity of K with L? depends on whether the “assumption of covenants” is read as a 3rd party beneficiary (lessor becomes a 3rd party beneficiary bw K relationship bw T and T1 and
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can enforce the K between those two bc they are essentially the ones who would benefit from that K… this depends upon the jxn)
• T2 transferred the estate when the breach occurred, so not in privity of estate bw L and T2; no real factual basis for arguing privity of K; so no legal remedy
• L v. T3? YES covenants ran with the land to T3, so he is in privity of estate but not privity of K • Suppose L decides to go after T and T has to pay the back rent; does T have remedies against
people further down the line? YES. T1 – T has K with T1 that says T1 will assume all covenants. What about T3? Yes. Theory of subrogation. ix. T was forced to pay the landlord based upon defaults by other people; so T gets implicitly
in exchange for paying off the landlord is that he acquires L’s rights; he can turn around and assert the same rights L could have asserted against other liable parties; he has subrogated L’s rights bc he had to pay off the L
Problems, page 402: 1(a)(1): maybe commercially reasonable 1(a)(2): commercially reasonable 2): jxn follows maj rule, prohibits assignments but doesn’t prohibits subleases; can he prohibit assignment for all but one day?
• technically, there would still be a remainder and this is still technically a sublease, so L can do that
3) L is not in privity of K with T1; so why does L think that T1 is liable for rent not being paid by T2 once T1 has already moved out? Theory of privity of estate. when there is an assignment, the leasehold has been transferred to someone else; so L was in privity of estate with T1, but T1 assigned it on to T2, so why does L think he is in privity of estate with T1?
• T1’s assignment was improper bc he did not get L’s permission • So is L right? does T1 have to pay for the rent for the period that T2 was supposed to be paying
it? • Argue for T1:
o not in privity of estate with L because, according to the Rule in Dumpor’s Case, if you consent to an assignment, then the effect is to eliminate the requirement that you approve assignments unless you specifically reserve that right for future transactions; so if you’re in a jxn that supports Dumpor, then T1 prevails.
o The Restatement disapproves of Dumpor’s rule [jxnal split!] • Argue for L: clause in K says you have to get L’s approval
Note 2, page 408:
• should tenant be able to bargain away that protection (in a jxn that bars self-‐help by L) – in exchange for lower rent
Page 417, Note 1
• If L relets on T’s account for less than the fair rental value and less than the original rent? o Lease Rent/FRV/Actual rent (less than FRV) o Does T have to pay the diff bw the lease rent and the FRV or the diff bw the lease rent
and the actual rent? (less than FRV) FRV. They can’t get a lower amount and expect T to pay the difference
• L relets on T’s account and finds a T1 willing to pay more than the original lease specified. Who should get the additional money?
o T should get it: it’s his apartment; he has possession to property; L serves as agent acting on behalf of T (like if you sublet it, you get to keep additional revenue)
o L should get it: Problems, page 429 1)Tenancy at will – either party can end it at either time
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• L says not liable for damages to T on theory of constructive eviction because it was a tenancy at will; he could have told T to move out tomorrow and I wouldn’t have violated any covenant; I can actually evict them, so why can’t I constructively evict them?
• Does this argument work? NO. Trial court said it’s a tenancy at will so no cause of action. The appellate court said it wasn’t a tenancy at will btu rather a periodic tenancy, and there could be liability bc for at least a period of time L had an obligation to the covenant of quiet enjoyment
2) T vacates before the end of a lease term and L brings an action to recover rent; can T defend against rent action based upon theory of constructive eviction
• L argues: 2a) 2b): no constructive eviction; L had an obligation to do something “under duty to maintain common areas” but L did that; and the covenant of quiet enjoyment doesn’t make them an ensurer against acts by third parties, they just have to take reasonable steps to comply with their obligations 2c) L does nothing ab some loud protesters; T claims constructive eviction
• L has a duty to maintain common areas, which include parking lot/inner lobby; there is constructive eviction; L had promised to provide security guards and had not done that
3) Can T bring action for declaratory judgment, seeking declaration that certain breaches of quiet enjoyment – wants judge to say that L has breached the covenant of quiet enjoyment and as a result T is subject to constructive eviction; but T hasn’t moved out yet so should they be able to seek a declaratory jucgment?
• This is to guard against risk of moving out and having court declare that they had no constructive eviction
• Here, ct said it was an option they could pursue problems page 439
• 4(a): L still responsible to provide habitable premises • 4(b): this is not covered by the IWH; but T would want to fit those amenities within the IWH bc
easier for them to proceed/ seek remedy; court said that IWH did not extend to all of the expectations of T, only those things hat affect health, safety, and material function of premises
• 4(c): T can waive the IWH? no. It is not subject to waiver by T; so even if T knows ab the problems, moves in knowing they exist, he may still be able to raise a breach of IWH in litigation w/ L
• 5: from T’s p.o.v. what is it that makes the IWH advantageous compared to prior law (constructive eviction/quiet enjoyment, etc)
o 1. right to remain in possession and still withhold the rent (couldn’t before bc only could withhold rent w/o a constructive eviction, and can’t have constructive eviction unless you move out)
o 2. now, duty on L to provide habitable premises; under prior law, that generally was not required; L had no general duty to provide habitable premises, simply had to comply w/ common law exceptions (like maintaining common areas, etc)
o 3. IWH applies not just at the outset of the lease but throughout the lease term (L has to fix stuff as it comes up); prior law usually only applied to issues present at the outset of the lease; so from T’s perspective it’s advantageous bc it’s a continuing duty of L
o Damages tend to be better for T under IWH problems page 441 1): L is not liable for the injury from the horse fall; if there’s a defect that exists at the outset of the lease, and L knew or should have known of the defect and knew or should’ve known that T couldn’t be respoinsible for the defect
• whether defect existed at outset of the lease: court said, since it was a month to month tenancy, then if defect existed at the beginning of one of those months, then L would be liable;
• this is a weird theory 2): exceptions page 428 imposing a duty on L; here no duty 3a): L has duty, must maintain reasonable care in maintaining common areas and lack of speed bumps could be unreasonable 3b): no fence? ?? split authority as to L’s duty here
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4): L is not liable for injuries; no duty to protect against criminal acts of 3rd parties based upon common law theory to maintain common area, though, might impose a duty
• common area exception deals with the physical common areas; but some argue that common areas include providing security in common areas, especially where L knows of criminal conduct in the area
5): exculpatory clause protecting L from liability against T for injuries sustained on the leased premises? • ?
Problems on P. 462 – 1)
• a. Why would seller care if buyer was married? Affects a lot in community property state. Even in sep prop states, seller would want to know about dower/elective share, etc.
• b. Does not specify JT, TIC, etc. Why does it matter what form of title the tenant intended to take? If JT, right of survivorship has an effect on what happens to prop on death. Under TIC, co-‐tenants interest may pass to third party.
• c. Good and merchantable title – Why does it matter? Is it good enough? Yes, generally. Is good and merchantable title satisfied by AP? It can be if evidence is good enough.
• d. Suppose recorded covenant restricts land. Is buyer bound? Depends. 2) Contract to buy house still under construction – Would be good to have an express warranty as to the quality of construction, but the reasonable security is to check out the builder’s practices. Problem on 467 – B would have a duty to disclose material information about P’s willingness to pay. problems page 477: 2a) SOF complied with when O deeded it to A; but the SOF not complied with when A gave it back to O; SO A owns the property 2b) Deed does not have to be legally recorded; it is legally effective when it was delivered, even if it wasn’t recorded;
• Can O create a JT by a deed from O O+A? some jxns allow this; assume here you can. • A whites out her name and then the deed gets recorded; doesn’t comply with SOF; still would be
O+A upon O’s death p. 526, problem 4 purchase price
• encumbrances: if easily removable (just the cost of moving) if not (difference in value of land with encumbrance and without it)
breach of covenant of seisin: • depart from standard K principle
p. 531, problem 2 A B (in GWD) at $20K
• B C at $15K O comes in to oust C a) deed from B to C is quitclaim deed: B can’t be sued by C bc no warranties in quitclaim deed; so can be recover from A?
• B would have to show damages which he can’t do • B sold it for less to C bc O had been nosing ab and people were starting to get nervous ab
whether O really owned the property (“????) b) deed from B to C is a GWD; Can B recover from A?
• C kicked off the property, B has a GWD out there which he might have to make good, so he wants to be protected, so he brings an action against A, but he hasn’t been damaged yet.
• if damage he’s worried ab is suit by C, well C hasn’t sued yet. • could be some warranties in A’s deed that would run to C as well • could the court order A to pay money into an escrow acct to cover the potential of a future
damage action by C, and once the SOL runs, and C never sues, then the money goes back to A c) deed from B to C is GWD; C sues and actually recovers $15 from B. How much can B recover from A?
• B says: $20K
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• caselaw going either way d) would answers be diff if jxn follows rule of rockafeller v. gray? what difference would htat make?
• RULE: cause of action like covenant of seisin is implied assigned from B to C when B transfers the property to C
SO in a) and b), then B couldn’t sue A bc B no longer has the benefit of that covenant once B has transferred to C bc the cause of action goes with the property to C in c) where C has sued B and recovered, B could file an action against A after having to pay C; the causes of action that C could assert are transferred to B once having paid C. problem 3, 531 a) A B (GWD at $15K) C (QCD at $12K) D (GWD at $20K)
• O ousts D when FMV of property is $24K • D could sue C for breach of covenants in C’s deed to D (present covenants bc no title to property
so breach of covenant of seisin; future covenants also bc disturbed in possession by ouster by O) and could recover $20K from C based upon those breach of warranty claims
Can D sue B? • NO.
Can D sue A? • yes based on the future covenant in A’s deed
o is possession critical? you don’t have to be in possession beofer you take advantage
Can sue A based on future warranties bc those run with the land • can bring action against A for $15K (plus interest)
Can D sue A based upon the present covenants in the AB deed? • ONLY in Rockafeller jxn where they say the cause of action is assigned in the transfer • in traditional jxns, no; the present covenants not typically held to run with the land
Can C bring cause of action before D sues him? No bc he has no damages
• he sees a suit coming and would like to prepare • can’t sue B bc QCD • can’t sue A bc D holds title and therefore has the benefit of the causes of action (in Rockafellar
jxn) if not in that jxn, the future coventas have run with the land; only the present covenants are still with C; but in any event, he can’t sue until he’s had to pay
• In a non Rocka, wonce D has recovered from C, C has benefit of cause of action future in the Deed • in Rock, C can bring cause of action for the present covenants in the deed
Can D get his $20 from C and then sue A claiming “I was actually damaged by $4K more?”” problem 4, page 531 a) A B for $10K and 20 yrs later, paramount title asserted by O and Bacre worth $125K
• does A or B bear the risk of loss for increase in value? • when B brings suit against A, he can only recover $20; he bears more risk • B could have protected himself:
o title search o if he saw a risk, he could get a title insurance policy
note 3, page 536: • seller ready to deliver deed to buyer, but buyer doesn’t have money yet; seller says I’ll give you
this deed now on condition that you pay me by the first of the next month. buyer takes the deed/records; but doesn’t pay; under Sweeney, what is seller’s remedy?
o Title passes to the buyer – that condition is ineffective upon delivery • cause of action for breach of K: sue for amount owed to seller
problems page 462 1)
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• a. Why would seller care if buyer was married? Affects a lot in community property state. Even in sep prop states, seller would want to know about dower/elective share, etc.
• b. Does not specify JT, TIC, etc. Why does it matter what form of title the tenant intended to take? If JT, right of survivorship has an effect on what happens to prop on death. Under TIC, co-‐tenants interest may pass to third party.
• c. Good and merchantable title – Why does it matter? Is it good enough? Yes, generally. Is good and merchantable title satisfied by AP? It can be if evidence is good enough.
• d. Suppose recorded covenant restricts land. Is buyer bound? Depends. 2) Contract to buy house still under construction – Would be good to have an express warranty as to the quality of construction, but the reasonable security is to check out the builder’s practices. (same problems – but lauren’s) [1]
• [seller’s marital status]: could be a community property state; dower; homestead rights – want to know if the spouse has any rights in the property
• does it matter if buyers were [purchasing as joint tenants/tenants in common/tenants by entirety], and then one dies – right of survivorship matters
• [paragraph 15, the deed – tells what the sellers are going to provide]: is “good and merchantable title” satisfied by a title based on adverse possession? – yes, as long as there’s good evidence for adverse possession
• [recorded covenant with restriction]: see paragraph 15 – K has a term saying that these things can’t void
[2] • gives builder a lot of discretion • could advise to make sure there’s an express warranty, so that builder can’t substitute cheap
materials • best protection: check out the builder
Problem on 467 – B would have a duty to disclose material information about P’s willingness to pay. problems page 477: 2a) SOF complied with when O deeded it to A; but the SOF not complied with when A gave it back to O; SO A owns the property 2b) Deed does not have to be legally recorded; it is legally effective when it was delivered, even if it wasn’t recorded;
• Can O create a JT by a deed from O O+A? some jxns allow this; assume here you can. • A whites out her name and then the deed gets recorded; doesn’t comply with SOF; still would be
O+A upon O’s death problem 1, 582
• • B prevails • How? O didn’t own the property when he died, so how can H claim ownership as heir and
transfer to B? o If B does a title search, it looks for all the world that O was the title owner at the time he
died, so you protect someone like H who thinks he’s inherited, so B can be a good faith purchaser for value
problem 2 • OA (doesn’t record)
o O B (BFP but doesn’t record) A records C (BFP)
B records • C records
• In notice statute, who wins bw B and C?
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o C wins bc he gave value when he purchased land; no actual or constructive notice of B’s prior interest bc A had recorded and it look like OA C
• Who wins bw A and B? o B bc B doesn’t have notice of A’s purchase (doesn’t know of it and if he did a title search,
he wouldn’t have found the deed from O to A) • In a race notice jxn?
o C wins over B o C must not only purchase w/o notice but also record first; but B recorded before C o Shelter rule: a person who takes from a BFP protected by the recording act has the
same rights as his grantor; necessary if the recording act is to give C the benefit of his bargain by protecting his market (A’s ability to sell protected)
The rule does not apply to O; if O repurchased Bacre from A, O would not prevail over B
Problem 3 • O owns Bacre (worth $50K)
o borrows $10K from A (mortgage); A does not record o borrows $14K from B (mortgage); B has notice of A’s prior mortgage and B records o borrows $5K from C (mortgage); C has no notice of A’s interest and records
• Bacre drops in value bc of waste; foreclosure sale, it sells for $20K o How do we distribute among A, B, & C? – parties should be given their expectations o Circular priority: each mortgagee has a claim inferior to another and superior to
another A has priority over B;
A is 1st in time and B took with notice of A’s prior mortgage C has priority over C
B would have priority; C had constructive notice of B’s interest bc recorded
C has priority over A? C would win bc C didn’t have notice of A’s mortgage (in notice jxn bc no
notice) (in race notice bc he recorded 1st and took w/o notice) • Give their expectations? (what they should have expected if there is a foreclosure sale, given
their mortgage interest) o A expects ____ (last in line); he should’ve expected that if he didn’t record, someone
would beat him; so he gets the leftover $5K o B expects $10K bc notice and records o C expects: 2nd in line behind a $____mortgage; so $5K to satisfy his reasonable
expectations • Often, the money is distributed as if there was a contractual subordination of A’s claim to C’s; so
the way they actually come out, imagine that A and C entered into a K in which A agreed to subordinate his claim to C’s
o if we allocate $10K to satisfy A’s first mortgage; then hypothesize a subordination agreement where A agrees to subordinate his claim to C’s, then what happens?
C would get $5 first and then whatever doesn’t go to C can be given to A so C gets $5, A gets $5 and the leftover $10 goes to B
• What if all the figures in the problem, except the original value, were just $5K – so only one person gets paid off
o applying expectations theory, who gets paid? B can’t expect to get anything bc he knows he’s 2nd in line behind $5K mortgage
held by A C can’t expect to get anything bc if he does a title search knows that B has a $5K
mortgage SO the $5K goes to A; even though that doesn’t seem fair
o applying subordination agreement theory: A and C have entered into a K subordinating A’s claim to C’s; $5K comes in at
foreclosure sale
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C gets it: even though C knows ab B’s mortgage BECAUSE B’s mortgage is
subordinate to A’s bc B knows of A’s mortgage, and A’s mortgage is subordinate to C’s by the agreement
• must have signature notarized before they’ll accept deed for recording purposes • can’t properly record via telephone (again notarization req’d)
example 9, page 595
• once O transfers to A, then a doctrine of estoppel by deed kicks in and A is estopped from preventing B from claiming ownership bc A had already deeded to B peviously
o if it was jut A—B and then O—A, then B would be ok, but now we have to worry ab C who omes on the scene
o C does a title search and finds a deed from A B and then a deed from O A and now A has transferred to C and the question is whether C has notice of B’s claim.
Argue No notice: Argue Yes notice: C should have done a more extensive title search
example 10 • purchase history
o O A (not rec) o O B (not BFP) o O A (rec) o B C
• shelter rule has no application • C would argue he has no notice of A’s interest; arguing that he is not bound to examine the
record after the day of the conveyance to find if the… o Instead,
• A thinks the title searcher should search under the owner of the present time problems pg 597 2(a)
• in a notice jxn: E WOULD WIN o C claims estoppel by deed which would give C title over B and probably over A as well o BUT then could D or E claim to be entitled to priority under the notice-‐recording
statute? Does D have reason to know of a competing claim by C? C recorded deed from B,
but this does not give D notice bc D would probably look from OA; he wouldn’t know that A transferred to B; so if D does the title search, he won’t find bC deed (it’s a wild deed, unconnected to the chain of title)
o What about E? E says he’s a BFP bc no notice of prior interest in the property E does not have notice bc A didn’t record, so E wouldn’t know to look for
transfer from A D No deeds from O on the record; so unless he has actual notice, then E could
claim that he’s a BFP for value w/o notice of any prior interest SO E WOULD WIN in Notice JXN
• In a race-‐notice jxn: o C would win o Did C record? He records a deed, but did he record 1st w/i the meaning of the recording
statute? argue that he has not recorded: C has actually handed to the recording office a
deed from BC, but this does not satisfy his obligation to record before E to defeat E’s claim under a race notice statute? No. that was not sufficient to defeat E bc if E’s title searcher can’t find the deed from BC, it shouldn’t be treated as having been recorded first under a race notice statute
o what does it mean to be the 1st to record?
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some say: put your own deed on record but whatever else is necessary for a title searcher to find it
o E ought to win bc recorded before C in the relevant sense but his complete chain of title is on the record
2(b) • notice jxn:
o always start w/ last person and see if they can establish what they need to establish to win
o last person to get an interest here is D; at the time he gets the interest, does he satisfy the requirements to be protected under a notice statute?
he knows ab the deed from O—B but not a conveyance to A bc A doesn’t record until after D gets his interest
• race-‐notice jxn: o A would win o he’s the 1st to record and if he did a title search, as 1st to record, he prevented anyone
else from establishing priority under race notice statute 2(c): (playing off 2b) A conveys to E who prompty records
• notice jxn: o go back to example 10 and split of authority to find out whether E has notice of a prior
interest or not o A comes to E and says “I’ll sell oyu a piece of property” E hires a title searcher. Under
what rules would the title searcher find out ab a competing interest and under what rule would the searcher not find out?
MORSE jxn: E wins Not required to title searcher would not find out ab a competing interest in the
property bc would stop his search once he finds the recorded conveyance; once he finds in grantee indexes and finds that A has an interest that he received from O; and then the title searcher doesn’t have to look at O at later points in time to figure out whether O transferred property to someone else later
Woods: must search under O’s name up until today to find out if O transferred to anybody else. if he did that, he would find out ab O to B transfer
• race-‐notice jxn: E prevails o A had title; records 1st, prevents B from establishing priority over A
question 3, page 597: • When C finds the deed, the deed is dated June 1st, 2005; even though that deed was not recorded
until Aug. 15th, he still has to look for anything in the records after the date June 1st which is on the deed; so if he does aproper title search should go back to June 1st, even thogh it got recorded late; if he did that, he’d find out ab the mortgages
note 1, 611
• shouldn’t have to • could be too burdensome • more burdensome than bank in waldorff having to check w/ all occupants of condo to see if they
have any unrecorded interest? o there you can just give them notice o here, they already know that leasee lives there
pg. 614, problem 1:
• forged deeds typically a nullity • but, in the Marshall case, a MTA was applied in a circ like this with the effect of eliminating C’s
interest; • effectively, it rehabilitated the forged deed through the operation of the MTA bc of its work in
conjunction w/ the MTA
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• problem 1: C’s interest was extinguished by the MTA note 2, p 676 how to draft document to carry out McG’s intent and not violate the common law rule that an easement can’t be reserverd in a 3rd party
• accomplish the same thing in two docs that you can’t accomplish in one doc o EX 1.
ONE deed: easement bw O and church (K arragement) Another Doc that conveys the deed OR
o EX 2 deed 1: deed property to church property doc 2: church deeds to Petersen, reserving an easement for itself, OR
o EX 3 doc 1: deed from O to Petersen and doc2: Petersen deeds an easement to the church
note 2, page 681 • can Taylor build a new house using the right of away across Holbrooks land?
o argue no: the others were licensees and that’s revocable o argue yes: restatement expectations that create the servitude will also define its
scope and terms; fact that they initially permitted them to do so, creates expectations that they will always at minimum permit them to do that
• est by estoppel that you’ve improved/invested already problem 2, 695
• what should court do? can’t leave middle piece with no access • grant an easement over one of the 4 parcels and make it fair to all siblings? someone will have a
burden of easement over their property • pick place that causes the least damage to anyone – whichever place is most efficient to give
access to lot 5 and cause least interference w/ anyone else’s use of property, but still have one lot owner bearing the burden equalize the burden by requiring payments from the people who aren’t burdened to the people who do have to bear the burden of the easement
Note 3, when does an easement by necessity end? • when the necessity end, the easement disappears • Question on 696: once new sewer line is available, the easement does not disappear necessity
doesn’t end bc in Van Sandt, the implied sewer easement was not an easement by necessity but an easement by prior existing use
HYPO: Equitable Conversion relevant when 1. someone has a will and has entered into a K for purchase of a piece of property and in the will they leave all of their personal property to A and all of their real property to B; what do we do ab this K for purchase of real property?
• if you just apply the legal rules on title, then the seller owns it; it would go to A bc the property is still personal property
• BTU if the ct applied theory of equitable conversion, then it would go to B; court would there be saying that even though testator doesn’t yet have legal title to property, they do have equitable title in the property bc K that could be specifically enforced by ct of equity, and so ct treats it as real property so it’ll go to B under the will
o K also provides for payment of the property; if the testator’s interest in the property goes to B, then A might end up paying for the property that goes to B
o when person dies, their estates pays off their debts (and A got all the personal property) 2. K for sale of house, and before closing, the house burns down
• Maj rule: applying doctrine of equitable conversion, the buyer would be seen as title owner and would assume risk of loss bc at signing the buyer has equitable title at signing
o Criticisms of Maj. Rule: buyer doesn’t have possession; so seller, being in possession, is in better
position than buyer to prevent a fire from occurring
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before closing, the seller is more likely to have insurance on the property; if seller has insurance on the property and the ct says the risk of loss is really on the buyer, does seller just get to collect? no. the insurance would go to the benefit of the buyer
To protect against this: say risk stays with seller until closing Min. view: loss on seller until legal title is conveyed
problem 2, 695
• what should court do? can’t leave middle piece with no access • grant an easement over one of the 4 parcels and make it fair to all siblings? someone will have a
burden of easement over their property • pick place that causes the least damage to anyone – whichever place is most efficient to give
access to lot 5 and cause least interference w/ anyone else’s use of property, but still have one lot owner bearing the burden equalize the burden by requiring payments from the people who aren’t burdened to the people who do have to bear the burden of the easement
Note 4, 736 – does foreclosure terminate easement? problems, 744 [1] Running of the Burden of the Covenant A B for residential purposes only
• BC; C wants to build apartment complex • a) whether burden of covenant runs to C?
o arguably yes; only useful if it binds the parties to the covenant and their successors; so, circumstances may suggest intention; the language of the covenant suggests an intention for it to run/bind their successors
[2] Running of the Benefit of the Covenant • distinction bw the burden and benefit of the covenant?
o Burden: who has to comply with the covenant o Benefit: who can insist on compliance with the covenant?
• Here, don’t have to worry ab running of the burden bc A doesn’t have a successor; A still owns it and is one of the original parties, so he is bound for sure; Instead, the question is whether C can enforce the covenant against A
• Requirement for running of benefit: Problem 750: if injunctive relief had been sought in problem 1, pg 744:
• C sues on injunction based on violation of equitable servitude • A could not get damages based on jxn following horiz privity rule BUT could get injunction bc no
req of horizontal privity Problems page 767 [before class] [1] a) no flag of any kind including USA flag can be displayed
• Touch and Concern: yes bc negative covenant, affects value • Restatement: no – unconstitutional (1st amendment violation)
b) no sign except house location # displayed nor Christmas lights outside • TC: yes bc negative covenant • R3d: not unconstitutional bc its not gov’t doing it; probably fine
c) no solar energy device installed • TC: yes bc negative covenant • R3d: probably fine; may violate public policy which serves to promote use of alternative energy
d) no house used to provide day care for nonresidents of the house • TC: yes bc negative covenant • R3d: probably fine;
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o arguably unreasonable restraint on trade OR maybe spiteful depending on circs e) upon sale, 10% gain paid to developer
• TC: maybe; it’s affirmative covenant, so court more hesitant; here, unlikely bc the developer isn’t like the HOA acting as an agent of property owners; developer isn’t like 3rd party beneficiary
o Bigelow’s test: probably does substantially affect legal relations o but distinguish from Nep: bc there, the money went to communal enjoyment; here –
does it just go to developer? • R3d: probably initially valid but subsequently invalid (unconscionable)
money not going towards the use/community benefit; just going to a developer note 5, 772
• zoning ordinances apply generally applicatable requirements, but sometimes people can ask for exception and that would be a variance
• here, someone wants a variance, and city says maybe but wants something in exchange: o developer to limit the use of 5 apts to low income families
• Does this particular covenant run with the land? o it is a negative or affirmative covenant?
affirmative covenant: would affect ability to enforce it later on against the city argue that benefit of the covenant is in gross:
• the benefit is in favor of the city in the use/enjoyment of some land that the city owns; but no particular piece of land made more valuable by the covenant; SO benefit in gross – the burden won’t run w/ the land bc later they may split up the land
• if you want it to be long term proposition: the devloper may not be the one who owns the land later on; will the burden run w/ the land? if the benefit is in gross, the burden wouldn’t; if the covenant is affirmative, that might affect TC of land (cts less willing to find aff covenants to TC land); issue of privity – no real grantor-‐grantee relationship as to city and developer, so not horizontal privity which would affect whether the covenant would run w/ the land at law (no horiz privity req for eq serv to run w/ land)
note 2, 785 • it could be a restraint on alienation; bc you can only sell to certain people would be a restraint • some courts got around this:
o diff bw restraint on alienation and restraint on use 785: can’t sell to Yankees? no redwoods? who can purchase/live on property
• Concern w/ horizontal or vertical privity?: o make sure he transfers pieces to people and whoever purchases from them will be in
vertical privity • Do the restrictions TC the land?
o purchase/live on property? probably doesn’t TC; • would it be violation of equal protection as interpreted in Shelley v. Kreimer?
o restrictions o different levels of scrutiny applied depending on the violation
racial violation = stricted level of scrutiny rational basis test may be a diffent standard
• restraint on alienation problem o to extent its telling you who can purchase it, might be a restraint on alienation
question 1, 796-‐97
• Restatement 3d that allows you to modify/terminate covenants to pay money • if that applied in Pocono would it have allowed a modification?
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o NO. it’s a common interest commnity (1) if it doesn’t tell you the total amt you’ll have to pay or when the covenant
terminates, then it terminates after a reasonable time (2) if covenants are in exchange for services, if obligation becomes to excessive
compared to the value received by the burdened estate (3) provision doesn’t apply bc it’s a common-‐interest association
• Is it unconscionable? o typically deals with circumstnaces when the covenant was 1st entered into o here, it wouldn’t apply bc they voluntarily entered into the agreement
question 2, 796: • how to get out of obligation to keep paying money to HOA who is doing nothing for them:
o create a corporation and transfer title of the property to the corporation o giving it to a next door neighbor to use for a garden o if it were acquired by AP, does the burden of the covenant run to an APor?
depends if real covenant or equitable servitude and the particular privity requirements
809: legislation enacted protecting pet owners against HOAs 810: have people w/ pet allergies been deprives of ability to live w/i a pet-‐free facility
• servere pet allergies: could you argue handicap and say the state law is violation of FHA? o handicapped: physical or mental condition that substantially impairs a major life
activity note 1, 846
• value of A’s land reduced • 1[a]: rezoning probably not a taking • 1[b]: if you have an existing business and city tells you to stop immediately, likely to be declared
a taking requiring just compensation What is the difference?:
• Rather be B bc at least making some money; his investment has paid off in a way that A’s has not and still B gets to claim the taking
• Could be an encourgement for use – o more protection to B bc B making productive use of property o creative incentive for investments like B made bc people like b would be less likely to
invest in more expensive property uses if risk that they could be subject to a zoning restriction limiting their use
Note 3, 916: [1] FHA violation?
• purchased the house w/ the expectation that they could use it as group home • 3604(f) – unlawful to refuse to sell or rent or make unavailable/deny a dwelling to a person bc of
a handicap • argue: by purchasing the house, the neighbors are making it available to someone w/ a handicap
– excluding a group from being able to purchase it [2]
• zoning ordinance might violate FHA, • but would the act of filing a suit to enforce an ordiance, would that be a separate violation of the
FHA? • suit should be subject to liable under FHA if it was intentionally targeted to ____ a group under
the FHA PERMANENT PHYSICAL INVASION HYPO: city regulation requiring apartment buildings smoke detectors/fire extinguishers in all common areas; is this a taking w/i the rule of Loretta?
• NO. o That is different because the L would be the owner of the things “invading”
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o In loretta a 3rd party installing note 3, 972: Causby
• Alleged taking: noise caused by flights • Gov’t taking bc they own all the area above and below the land • Here, planes are authorized by gov’t to take off and land over P’s prop in a way that’s invading
the airspace over P’s property and causing damage via noise • Is this a taking? yes. • What if you’re not in the flight path, but similar damage caused? No taking has to be right
over. Does this make sense? EXAM: 3hrs 15MC Essay: 90 lines CHECK online for sample essay Rule: bring book, notes, outline Content: based on 2nd semester but may assume you remember some things Review Session: May 9th afternoon CHARTS Summary of Leasehold Estates: Gilberts, 226 Comparison of Civil Rights Act and FHA: Gilberts, 231 Assignment v. Sublease: Gilberts, 280 Actual v. Constructive Eviction: Gilberts, 241 T’s Remedies for Breach of Implied Warranty of Habitability: Gilberts, 250 Financing and Foreclosure: Gilberts, 466 Covenants in Lease Running to Assignees: Gilberts, 287 SIDE BY SIDE of RC and ES tests CREATE. WAYS LANDUSE IS CONTROLLED
1. covenants imposed by private parties 2. Nuisance imposed by judicial branch [judicial zoning] 3. Zoning Ordinance legislature [local, city council, zoning commission] 4. Statute legislature [state agencies]