CH-48-49 Interests in Real Property – Smith and Robersons Business Law : Chapter Notes

This Document Contains Chapters 48 to 49 Chapter 48 INTERESTS IN REAL PROPERTY Freehold Estates [48-1] Fee Estates [48-1a] Fee Simple Estate Qualified or Base Fee Estate Life Estates [48-1b] Future Interests [48-1c] Reversions Remainders Leasehold Estates [48-2] Creation and Duration [48-2a] Definite Term Periodic Tenancy Tenancy at Will Tenancy at Sufferance Transfer of Interests [48-2b] Transfers by Landlord Transfer by Tenant Tenant's Obligations [48-2c] Destruction of the Premises Eviction Abandonment Landlord's Obligations [48-2d] Quiet Enjoyment Fitness for Use Repair Landlord's Liability for Injury Caused by Third Parties Concurrent Ownership [48-3] Tenancy in Common [48-3a] Joint Tenancy [48-3b] Tenancy by the Entireties [48-3c] Community Property [48-3d] Condominiums [48-3e] Cooperatives [48-3f] Nonpossessory Interests [48-4] Definition of Easements [48-4a] Types of Easements [48-4b] Creation of Easements [48-4c] Express Grant or Reservation Implied Grant or Reservation Necessity Dedication Prescription Profits `a Prendre [48-4d] Licenses [48-4e] Cases in This Chapter Home Rentals Corp. v. Curtis Tucker v. Hayford Wood v. Pavlin Borton v. Forest Hills Country Club Chapter Outcomes After reading and studying this chapter, the student should be able to: • Identify and explain the freehold interests: (1) fee simple, (2) qualified fee, (3) life estate, (4) remainder interest, and (5) reversionary interest. • Distinguish between a vested and contingent remainder. • Explain the primary rights and obligations of landlords and tenants. • Identify and explain the various forms of concurrent ownership of real property. • Identify and describe the various ways in which an easement may be created. TEACHING NOTES Interests in real property may be divided into possessory and nonpossessory interests. • Possessory interests, or estates, may also be characterized in two different ways: (1) as freehold estates (those that exist for an indefinite time or for the life of a person) and (2) less-than-freehold estates, also known as leasehold estates (which exist for a predetermined time). • Nonpossessory interests in property include easements, profits `a prendre, and licenses. Interests in property may be owned by one person or concurrently by two or more persons, each of whom is entitled to an undivided interest in the entire property. *** Chapter Outcome *** Identify and explain the following freehold interests: (1) fee simple, (2) qualified fee, (3) life estate, (4) remainder interest, and (4) reversionary interest. 48-1 FREEHOLD ESTATES A freehold estate is a right of ownership of real property for an indefinite time (fee estate) or for the life of a person (life estate). The most valuable estates in real property are usually present estates that combine immediate possession with ownership at least for life. 48-1a Fee Estates Fee estates include the right to immediate possession for an indefinite time and the right to transfer the interest by deed or will. Fee estates include both fee simple and qualified fee estates. Fee Simple Estate— Fee simple means that the property is owned absolutely and can be sold or passed on by will or inheritance; this estate provides the greatest possible ownership interest.. Fee simple is the largest estate in land; all other estates derive from it. A fee simple is created by any words that indicate an intent to convey absolute ownership: e.g. “to B in fee simple” or “to B forever.” The presumption is that a conveyance is intended to convey full and absolute title in the absence of a clear intent to the contrary. Qualified or Base Fee Estate — an estate in land that is less than a fee simple estate because it will terminate on the happening of a contingent event. A qualified fee estate is also known as a base fee, conditional fee, or fee simple defeasible. The holder of a qualified fee interest may transfer the property by deed or will, and the property may also pass by intestate succession. All transferees, however, take the property subject to the initial condition imposed on the interest. 48-1b Life Estates A life estate is an ownership right in property for the life of a person. A remainder is the ownership estate that takes effect when the prior life estate terminates. The property may either revert to the grantor and his heirs, or to another party: for example, “to Alex for life and then to Mario and his heirs.” Alex is the life tenant, and Mario is the remainderman. A life tenant may make reasonable use of the property as long as he does not commit “waste,” (any act or omission that permanently injures the realty or unreasonably changes its characteristics or value). 48-1c Future Interests Not all interests in property carry the right to immediate possession, even though the right and title to the interest are absolute. For example, when property is devised by will “to Andrew during his life and then to Barbara and her heirs,” Barbara has a definite, existing interest in the property, but she is not entitled to immediate possession. Future interests are two types: reversions and remainders. Reversions — A reversion is the grantor’s right to the property on the death of the life tenant — created when, for example, Anderson conveys property “to Benson for life” and makes no disposition of the remainder of the estate. A reversion can also occur after a defined period, as when property is conveyed “to Caldwell for ten years.” Reversions may be transferred by deed or will and may pass by intestate succession. A conditional reversionary interest exists where property may return to the grantor or his successor because an event on which a fee simple estate was to terminate has occurred. Remainders — A remainder is an estate in property that will take effect on the termination of a prior estate created by the same instrument. Unlike a reversion, a remainder is held by a person other than the grantor or his successors. *** Chapter Outcome *** Distinguish between a vested and contingent remainder. A vested remainder is one in which the only contingency to possession by the remainderman is the termination of all preceding estates created by the transferor. A contingent remainder is one in which the right to possession depends on the happening of some event in addition to the termination of the preceding estates. NOTE: See Figure 48-1: Freehold Estates. 48-2 LEASEHOLD ESTATES • A lease is both a contract and a grant of land. • Contract: The owner of the land, the landlord, grants to another, the tenant, an exclusive right to use and possess the land for a definite or ascertainable period. • Grant: The possessory term granted by the landlord is an estate in land called a leasehold estate. The landlord retains a reversion in the property. • A leasehold estate has two principal characteristics: (1) it continues for a definite or ascertainable term and (2) carries with it the tenant’s obligation to pay rent to the landlord. The Uniform Residential Landlord and Tenant Act, which was promulgated by the Uniform Law Commission, provides a comprehensive system for regulating the relationship between landlords and a tenants and governs most persons who reside in rental housing. The Revised Residential Landlord and Tenant Act of 2015 includes new articles covering the disposition of tenant property, lease termination in case of domestic violence or sexual assault, and security deposits. It has not yet been adopted by any State. 48-2a Creation and Duration The usual requirements for a contract apply. In most jurisdictions, leases for a term longer than a specified period — generally either one year or three years — must be in writing. (A few states require that all leases be in writing.) Definite Term — Automatically expires at the end of the term. No notice to terminate is required. Periodic Tenancy — A lease of indefinite duration that continues for successive periods unless terminated by notice. A periodic tenancy may arise by implication, when no term is stated in the lease. This creates a tenancy at will. Either party may terminate a periodic tenancy at the expiration of any one period but only on adequate notice to the other party. Absent a specific agreement as to notice in the lease, the common law requires six months’ notice in tenancies from year to year — shortened, however, by statute in most jurisdictions to periods ranging between 10 and 90 days. In periodic tenancies of less than one year, notice of one full period in advance is required at common law. Tenancy at Will — A lease which allows either party to terminate at any time or which does not specify a duration. No notice is required to terminate. Tenancy at Sufferance — A tenancy at sufferance arises when a tenant fails to vacate the premises at the expiration of the lease. A tenancy at sufferance exists until the landlord either dispossesses the tenant or holds her for another term. 48-2b Transfer of Interests Both the tenant’s possessory interest and the landlord’s reversionary interest in the property may be freely transferred in the absence of contractual or statutory prohibition — the one major exception: the tenancy at will. Transfers by Landlord — The landlord may transfer either her reversionary right or her rights under the lease, including the right to receive rent. The party to whom the reversionary interest is transferred takes the property subject to the tenant’s leasehold interest, if the transferee has notice of the lease. Transfers by Tenant — A tenant may dispose of his interest either by (1) assignment or (2) sublease. Most standard leases expressly require the landlord’s consent to an assignment or subletting of the premises. A tenant who transfers all interest in a leasehold has made an assignment. Although the assignee is bound to pay rent, the original tenant is not relieved of her contractual obligation and will have to pay if the assignee fails to pay the rent. Thus, both the original tenant and the assignee are liable to the landlord. In a sublease, the tenant transfers less than all of her rights in the lease and thereby retains a reversion in the leasehold. The sublessee has no obligation to the landlord but only to the original tenant. *** Chapter Outcome *** Explain the primary rights and obligations of landlords and tenants. 48-2c Tenant’s Obligations The leasehold estate carries only an implied obligation of the tenant to pay rent, but the lease contract almost always contains an express promise or covenant by the tenant to pay a specified amount of rent at specified times. Most leases provide that if the tenant breaches any of the covenants in the lease, the landlord may declare the lease at an end and regain possession of the premises. Under common law, the tenant’s failure to pay rent when due gives the landlord only the right to recover a judgment for the amount of the rent but does not give him the right to oust the tenant from the premises. In most jurisdictions, however, the common law rule has been changed by statute to allow the landlord to dispossess the tenant for nonpayment of rent, even if the lease provides no such right. Unless the lease makes specific provisions to the contrary, the tenant is under no duty to make repairs to the leased premises. Nevertheless, the tenant is obliged — by law, so it need not be stated in the lease — not to cause substantial injury to the premises. Destruction of the Premises — If the tenant leases land and a building that is subsequently destroyed by fire or some other chance event, the tenant is still obliged to pay rent under the common law. Most states, however, have modified this rule to exclude tenants who occupy only a portion of a building and who have no interest in the building as a whole, such as apartment tenants. Most leases contain clauses covering the accidental destruction of the premises. Eviction — When the tenant breaches one of the covenants in her lease, such as the covenant to pay rent, the landlord may remove her from the premises according to a specific lease provision or under a statute authorizing him to do so. The landlord can generally terminate the tenancy if a tenant repeatedly disturbs other tenants and neighbors, such as by throwing loud parties or selling drugs, or otherwise violates the lease or the law. This removal of the tenant is an eviction and causes termination of the lease. Abandonment — The tenant’s wrongful surrender of possession of the property. In that event, the landlord’s reentering or reletting the property terminates the tenant’s obligation to pay rent. The landlord who desires to hold the tenant to his obligation to pay rent must either leave the premises vacant or have a survival clause in the lease that covers this situation. 48-2d Landlord’s Obligations Under common law, the landlord has few obligations to her tenant. Quiet Enjoyment — The tenant’s right to physical possession, use, and enjoyment of the premises free of the landlord’s interference. The landlord breaches this covenant whenever he wrongfully evicts the tenant. Eviction need not be actual. Under the doctrine of constructive eviction, a failure by the landlord in any of her obligations under the lease that causes a substantial and lasting injury to the tenant’s beneficial enjoyment of the premises is regarded as being, in effect, an eviction of the tenant. Under such circumstances, the courts permit the tenant to abandon the premises and terminate the lease. CASE 48-1 HOME RENTALS CORP. v. CURTIS Appellate Court of Illinois, Fifth District, 1992 236 Ill.App.3d 994, 602 N.E.2d 859, 176 Ill. Dec 913 http://scholar.google.com/scholar_case?case=12032393052396288209&hl=en&as_sdt=2&as_vis=1&oi=scholarr Harrison, J. [In February 1989, Home Rentals agreed to rent a single-family residence to Chris Curtis, Ed Domaracki, Mike Fraser, and Carson Flugstad (tenants), all of whom were students at Southern Illinois University. The terms of the written lease stated that the lease was to commence on August 17, 1989, and to expire on August 13, 1990. The tenants were to receive the premises in “good order and repair,” rent was to be $740 per month, and a $500 deposit was required. The tenants initially paid $1,980 to cover the deposit and advance rent for the last two months of the lease. Although the house was fine when the tenants signed the lease in February, when they arrived on August 15, it was not. The electricity had not yet been turned on. Roaches had overrun the rooms, and the kitchen was so filthy and so infested by bugs that food could not be stored there. The carpet smelled, and one could see outside through holes in the wall. The bathrooms were unsanitary, no toilets worked, one of the bathtubs did not drain, and an open sewage drain emptied bathroom wastewater onto the basement floor. The tenants notified Home Rentals on the 16th that the place was uninhabitable because of the filth and roaches. Home Rentals responded that the tenants should just clean the place up and that it would reimburse them. Accordingly, the tenants attempted to clean the house, but the roach problem continued even after professional extermination, and Home Rentals did nothing about the plumbing. The tenants were never able to stay in the house. On August 21, the tenants finally sought housing elsewhere. They advised Home Rentals that they would not be living in the house, returned the keys, and reported the condition of the house to the city of Carbondale’s Code Enforcement Division. The city notified Home Rentals on August 25, 1989, that it had found numerous city code violations and warned the corporation that the house would be posted “occupancy prohibited” unless all violations were corrected within 72 hours. By August 28, 1989, eleven days after the tenants’ lease was to have commenced, Home Rentals had finally remedied all the violations. The city withdrew its threat, but Home Rentals did not rent the house to anyone else. Instead, it sued the tenants for breach of the lease and claimed $6,900 for all twelve months under the lease, less the deposit. The tenants denied the allegations and raised as affirmative defenses breach of the implied warranty of habitability and constructive eviction. Based on the latter theory, they asserted a counterclaim seeking the return of the $500 deposit and the $1,480 they had paid in advance rent. The circuit court of Jackson County found for the tenants in the amount of $1,980, and Home Rentals appealed.] A constructive eviction occurs where a landlord has done “something of a grave and permanent character with the intention of depriving the tenant of enjoyment of the premises.” [Citation.] Because persons are presumed to intend the natural and probable consequences of their acts, constructive eviction does not require a finding that the landlord had the express intention to compel a tenant to leave the demised premises or to deprive him of their beneficial enjoyment. All that is necessary is that the landlord committed acts or omissions which rendered the leased premises useless to the tenant or deprived the tenant of the possession and enjoyment of the premises, in whole or part, making it necessary for the tenant to move. * * * At oral argument, counsel for Home Rentals asserted that defendants did what they did simply because “the premises did not meet their expectations.” The inference, of course, was that defendants were overly particular and that their expectations were unrealistic. It is scarcely unreasonable, however, for tenants paying $740 per month to expect flushing toilets, sewage-free basements, and kitchens that are not overrun with roaches. These are things that Home Rentals failed to provide. What Home Rentals did provide was a house that was clearly and unquestionably unfit for people to live in. As a result, defendants had no alternative but to vacate the premises. Home Rentals correctly points out that a tenant may not abandon premises under the theory of constructive eviction without first affording the lessor a reasonable opportunity to correct the defects in the property [citation], but such an opportunity existed here. Home Rentals’ president, Henry Fisher, admitted that he actually inspected the premises as early as August 13. * * * Considering the magnitude of the problems, four days was opportunity enough for Home Rentals to act. Constructive eviction has been found in analogous circumstances where an even shorter period was involved. [Citation.] We note, moreover, that there is no indication that giving Home Rentals additional time would have made any difference. In the four days before defendants left, the only action the company took at all was to send someone out to spray for bugs, which did not work, and to dispatch a man with a plunger. In the end, it was only because of the intervention by the City of Carbondale that Home Rentals implemented the necessary remedial measures. * * * For the foregoing reasons, the judgment of the circuit court of Jackson County is affirmed. Affirmed. Fitness for Use — Under common law, the landlord is under no obligation to maintain the premises in livable condition or to make them fit for any purpose. Most courts, however, now impose an implied warranty of habitability that requires leased premises to be habitable including adequate weatherproofing; heat, water and electricity, as well as clean, sanitary, and structurally safe premises. These courts also have held that the covenant to pay rent is conditioned on the landlord’s performance of this warranty. Some states have statutes requiring landlords to keep residential premises fit for occupation. Zoning ordinances, health and safety regulations, and building and housing codes may also impose duties on the landlord. CASE 48-2 TUCKER v. HAYFORD Washington Court of Appeals, Division 3, 2003 118 Wash App. 246, 75 P.3d 980 http://scholar.google.com/scholar_case?case=4713939053717898068&hl=en&as_sdt=2&as_vis=1&oi=scholar Sweeney, J. We again note that a claim for personal injuries by a tenant can be premised on three distinct legal theories: contract (a rental agreement), common law obligations imposed on a landlord, and the Washington Residential Landlord-Tenant Act of 1973 (Landlord-Tenant Act), [citation], * * * Here, the tenants claim that they became sick part of their tenancy. The trial judge dismissed all of their causes of action—contract, Landlord-Tenant Act, and common law—concluding that the Landlord-Tenant Act limited all rights to those specifically enumerated in the act. We conclude that the tenants’ showing on summary judgment is sufficient to support causes of action based on contract, the Landlord-Tenant Act, and the common law. We therefore reverse the summary dismissal of their claims. Facts Robert Hayford bought a lot and mobile home in Kennewick, Washington from Mike Kirby in 1994. A domestic well supplied water to the home. The well water was tested on December 8, 1993. On March 15, 1994, the Benton Franklin District Health Department wrote to Mr. Kirby that: (1) the nitrate level of the well water was 8.8 mg/L; (2) the well was free of bacterial contamination; (3) the sanitary seal was improperly installed and maintained; and (4) chemicals were stored within 100 feet of the well. And “to protect and improve” the water system, the health department recommended that: (1) the sanitary seal be properly installed; and (2) the chemicals be stored at least 100 feet from the well. The health department also recommended that the well be tested yearly * * *. Mr. Hayford “thumbed through” the report but depended on his real estate agent to call any problems to his attention. And the agent apparently did not. Mr. Hayford leased the home to Don Tucker and Shalee Miller (now Tucker) in October of 1998. Mr. and Ms. Tucker asked if the well water was drinkable. Mr. Hayford said it was as long as a “Brita” filter was used. He said that the nitrates were a bit high. The Tuckers have four children, one was born after they moved out of the home. The Tuckers signed a written residential lease prepared by Mr. Hayford. They ultimately extended the tenancy through August 1, 2000. The Tucker family all became ill. The family’s pediatric nurse practitioner suggested that they test their well water. The test, dated March 28, 2000, showed bacteria in the water. The Tuckers told Mr. Hayford. He had the well repaired and that solved the problem. The Tuckers moved out of the home on May 15, 2000. They sued Mr. Hayford for damages for personal injury arising from contaminated water. [The trial court granted Hayford’s motion for summary judgment.] Discussion The Tuckers sued for damages based on their contract (obligation to perform major maintenance and repair, and covenant of quiet enjoyment); violation of the Landlord-Tenant Act; and negligent misrepresentation as to the water quality. * * * * * * Contract Claims Obligations Imposed by This Contract * * * The tenant may recover for personal injuries caused by the landlord’s breach of a repair covenant only if the unrepaired defect created an unreasonable risk of harm to the tenant. The Restatement (Second) of Torts §357 (1965) provides that the lessor of land is liable if (a) the lessor has contracted to keep the land in repair; (b) the disrepair creates an unreasonable risk that performance of the lessor’s agreement would have prevented; and (c) the lessor fails to exercise reasonable care in performing the agreement. [Citation.] The contract defines the extent of the duty when a landlord’s duty arises out of a covenant. * * * Notice * * * under this provision of the Restatement becomes an issue when the particular condition under consideration is inside the residence where the landlord has no right to enter. But that is not the case here. The source of water here was an outside well, which the landlord had physical access to. Actual notice is not then required. Here the lease includes (1) an express covenant of quiet enjoyment and (2) requires that the lessor maintain and repair the leased premises. * * * Quiet Enjoyment No Washington case directly addresses the impact of drinking water on one’s quiet enjoyment of his home. Washington does, however, recognize the relationship of water and habitability. In [citation] the court held that without water, a property is uninhabitable. [Citation.] * * * Other jurisdictions have also held that a property without potable water is uninhabitable. It is well settled that unsafe drinking water renders a home uninhabitable. And that by definition interferes with the quiet enjoyment of the home. * * * Major Maintenance and Repair A health inspector recommended that this well be tested at least annually for bacteria. The question then is whether a reasonable person knew or in the exercise of ordinary care should have known that this well should have been tested annually—as part of the major maintenance of this home. Again, the evidence, viewed in a light most favorable to the Tuckers, includes high nitrate levels together with a recommendation for yearly bacteria testing. That is a sufficient showing to support a breach of the major maintenance and repair covenant of this lease, if proved. Duties at Common Law Traditional Common Law Landlord Liability Common law landlord liability requires a showing: “(1) latent or hidden defects in the leasehold (2) that existed at the commencement of the leasehold (3) of which the landlord had actual knowledge (4) and of which the landlord failed to inform the tenant.” [Citation.] The landlord need not discover obscure defects or dangers, nor does the law impose any duty to repair defective conditions. [Citation.] A “landlord is liable only for failing to inform the tenant of known dangers which are not likely to be discovered by the tenant.” [Citation.] The Tuckers moved into this home in 1998. The well was last tested in 1993. It was not tested again until after the Tuckers tested it in 2000. But this was after the Tuckers got sick. It had not then been tested for the five years prior to the Tuckers’ moving in despite a recommendation by the health department that it be tested annually. This well was not then maintained at the time the property was leased to the Tuckers. And the condition of the water was certainly hidden or latent as to the Tuckers. Mr. Hayford did not warn the Tuckers. Mr. Hayford was aware of the report that required the annual testing. * * * * * * Implied Warranty of Habitability A landlord is subject to liability for physical harm caused to the tenant and others upon the leased property with the consent of the tenant or his subtenant by a dangerous condition existing before or arising after the tenant has taken possession, if he has failed to exercise reasonable care to repair the condition and the existence of the condition is in violation of: 1. an implied duty of habitability; or 2. a duty created by a statute or administrative regulation. Restatement (Second) of Property §17.6 (1977). * * * Residential Landlord-Tenant Act * * * The Uniform Residential Landlord and Tenant Act (Uniform Landlord-Tenant Act) was drafted by the National Conference of Commissions on Uniform State Laws in 1972. [Citation.] While Washington made “substantial changes” to the Uniform Landlord-Tenant Act when it adopted its own Landlord-Tenant Act, our state’s version still reflects a “strong [Uniform Landlord-Tenant Act] influence.” [Citation.] * * * The purpose of the Uniform Landlord-Tenant Act was twofold: “‘simplify, clarify, modernize and revise’” landlord and tenant law, and to “‘encourage landlords to maintain and improve the quality of housing.’” [Citation.] Washington’s Landlord-Tenant Act The Landlord-Tenant Act requires the landlord to “keep the premises fit for human habitation” and to particularly maintain the premises in substantial compliance with health or safety codes for the benefit of the tenant. [Citation.] It requires the landlord to make repairs, except in the case of normal wear and tear, “necessary to put and keep the premises in as good condition as it by law or rental agreement should have been, at the commencement of the tenancy.” [Citation.] It lists the landlord’s obligations. [Citation.] And it lists the tenant’s remedies: (1) terminate the rental agreement; (2) “[b]ring an action in an appropriate court, or at arbitration if so agreed, for any remedy provided under this chapter or otherwise provided by law;” or (3) pursue the other remedies available under the Landlord-Tenant Act. [Citation.] * * * [Many] jurisdictions allow a tenant’s cause of action arising from statutory duties under its versions of the Uniform Landlord-Tenant Act. And Washington commentators appear to agree. We conclude that the Washington Residential Landlord-Tenant Act of 1973 provides a cause of action for the injury sustained here. * * * We reverse the trial court’s summary judgment order. Repair — Absent a specific provision in the lease or a statutory duty to do so, the landlord has no obligation to repair or restore the leased premises. She is obligated, however, to repair and keep in safe condition those parts of the premises that remain under her control, such as the stairways, elevators, lobbies, and other common areas. The landlord is responsible for external repairs and repairs to central equipment serving individual units such as central heating and air, plumbing and electrical systems. Landlord’s Liability for Injury Caused by Third Parties — Many states are requiring landlords to maintain leased premises in good repair and are holding them liable for negligent failure to do so. 48-3 CONCURRENT OWNERSHIP Two or more persons who hold title concurrently have concurrent ownership and are generally known as co-tenants. Each is entitled to an undivided interest in the entire property, and neither has a claim to any specific part of it. Each may have an equal undivided interest, or one may have a larger undivided share than the other. *** Chapter Outcome *** Identify and explain the various forms of concurrent ownership of real property. 48-3a Tenancy in Common • This is the most frequently used form of concurrent ownership. • Each co-owner has both an undivided interest with no right of survivorship and the right to possession but claims no specific portion of the property. • There is no right of survivorship, so the interests of tenants in common may be devised by will or pass by intestate succession. • By statute in all states, a transfer of title to two or more persons is presumed to create a tenancy in common. • Tenants in common need not have acquired their interests at the same time or by the same instrument, and their respective interests may differ as to duration and scope. • Tenancy in common is terminated by transferring all interests to one person or by partitioning (dividing property into individually owned pieces) 48-3b Joint Tenancy A joint tenancy is co-ownership whereby each tenant holds an undivided interest with a right of survivorship. The most significant feature of joint tenancy is the right of survivorship. On the death of a joint tenant, title to the entire property passes by operation of law to the survivor or survivors. Neither the heirs of the deceased joint tenant nor his general creditors have a claim to his interest, and a joint tenant cannot transfer his interest by executing a will. However, any joint tenant may sever the joint tenancy by conveying or mortgaging his interest to a third party. To sever a joint tenancy is to forfeit the right of survivorship: following severance, the tenancy becomes a tenancy in common among the remaining joint tenants and the transferee. • To sustain a joint tenancy, the common law requires four unities: Time — All the tenants’ interests must take effect at the same time. Title — All tenants must acquire title by the same instrument. Interest —All the tenants’ interests must be identical in duration and scope. Possession — The rights of possession and enjoyment must be identical. • Only unity of possession is required of a tenancy in common. CASE 48-3 WOOD v. PAVLIN Court of Appeals of Missouri, Southern District, Division One, 2015 467 S.W. 3d 323 Scott, J. In 1991, Mr. and Mrs. Wood effectively gift-deeded a 266-acre farm to their sons, Johnny and Russell, as joint tenants with right of survivorship. Five months before Russell died in 2011, he transferred his interest into his revocable trust without notice to Johnny. Johnny sought judicial relief in 2013, alleging Russell's transfer was ineffective and that Johnny owned the whole farm as surviving joint tenant. Alternatively, if the transfer was effective, Johnny sought half the farm's value from Russell's successor trustee on an unjust enrichment theory. The trial court dismissed for failure to state a claim. An amended petition likewise was dismissed with prejudice. This appeal follows. *** "Joint tenancy is based on the theory that the tenants share one undivided estate, with the distinctive characteristic of the right of survivorship." [Citation.] Such tenancies may be severed by one co-tenant's conveyance, which "destroys the joint tenancy and thereby destroys the right of survivorship." [Citation.] As Johnny acknowledges, Missouri has recognized this right to sever since before the Civil War. [Citation.] "As therefore a joint tenancy of this nature may be destroyed at the pleasure of either tenants [Citation.] A right to sever also is our national norm. "Any joint tenant may unilaterally sever his or her joint tenancy interest, and the consent of the other tenants to the severance or termination is not required. Therefore, a joint tenant has the absolute right to terminate a joint tenancy unilaterally." [Citation.] "It is not necessary that consent to the termination of a joint tenancy be obtained from the other joint tenants." [Citation.] *** We affirm the judgment of dismissal. 48-3c Tenancy by the Entireties Not recognized by all states, tenancy by the entireties is co-ownership, with survivorship, by husband and wife; it is a form of ownership in which neither spouse may convey separately his or her interest during life. Divorce terminates this tenancy. NOTE: See Figure 48-3: Rights of Concurrent Owners. 48-3d Community Property Under the community property system, one-half of any property acquired by either the husband or the wife during their marriage belongs to each spouse. The only property that belongs separately to either spouse is property acquired before the marriage or acquired subsequent to marriage by gift or inheritance. On the death of either spouse, one-half of the community property belongs outright to the survivor; the interest of the deceased spouse in the other half may go to the heirs of the decedent or as directed by will. The community property system is used in Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Puerto Rico Texas, Washington, and Wisconsin. 48-3e Condominiums The purchaser of a condominium both acquires ownership of the unit and becomes a tenant in common with respect to common facilities, such as the land, hallways, parking areas, and so forth. The transfer of a condominium conveys both the separate ownership of the unit and the share in the common elements. All states have statutes authorizing this form of ownership. 48-3f Cooperatives Cooperatives involve an indirect form of common ownership. A cooperative, usually a corporation, owns the dwelling units and then leases the units to its shareholders as tenants, who acquire the right to use and occupy their units. Ownership of shares in a cooperative is not ownership of the real property those shares represent. 48-4 NONPOSSESSORY INTERESTS A nonpossessory interest in land entitles the holder to use the land or to take something from it — but not to possess the land. Includes easements, profits a prendre and licenses. 48-4a Definition of Easements An easement is a limited right to use another’s land in a specific manner. An easement is created by the acts of the parties or by operation of law; it has all the attributes of an estate in the land. Easements may exist for many different uses, such as to erect power lines, to run a ditch or a driveway across another’s land, or to lay pipe under the surface. 48-4b Types of Easements 1. Appurtenant easements: The rights and duties in these easements pertain to the land, not to the individuals who create them, and pass with the land when it is sold. Appurtenant easements are by far the more common. 2. Easement in gross: This is personal to the particular individual who receives the right; it is an irrevocable personal right to use another’s land. CASE 48-4 BORTON v. FOREST HILLS COUNTRY CLUB Missouri Court of Appeals, Eastern District, Division Five, 1996 926 S.W. 232 http://scholar.google.com/scholar_case?case=18361502037276936849&hl=en&as_sdt=2&as_vis=1&oi=scholar Ahrens, J. Plaintiffs, Gene and Deborah Borton, appeal from the trial court’s grant of summary judgment in favor of defendant, Forest Hills Country Club on plaintiffs’ claims for injunctive relief and money damages due to golf balls hit onto their property from defendant’s golf course. Plaintiffs also appeal from the summary judgment in ; favor of defendant on its counterclaim asserting it had gained an easement allowing its members to hit errant golf balls onto plaintiffs’ property. We reverse and remand. The developer of defendant’s golf course began to sell lots for residential use adjacent to the golf course in 1963. The developer filed and recorded a set of deed restrictions on all the residential lots adjacent to the golf course in November, 1963. Paragraph 11 of these deed restrictions recites: All owners and occupants of any lot in the Forest Hills Club Estates Subdivision shall extend to one person, in a group of members or guests playing a normal game of golf on the Forest Hills Golf and Country Club, or their caddy, the courtesy of allowing such person or caddy the privilege of retrieving any and all errant golf balls which may have landed or remained on any lot in the subdivision. However, care shall be exercised in the retrieving of such golf ball to prevent damage to any lawn, flowers, shrubbery, or other improvement on the lot. Plaintiffs purchased a residence adjacent to the fairway on the eleventh hole on defendant’s golf course in March, 1994. The general warranty deed to plaintiffs provided that the property was subject to the set of deed restrictions and covenants. Because of the proximity of the tee boxes on the eleventh hole to plaintiffs’ home, thousands of errant golf balls have been hit onto plaintiffs’ property since they purchased their residence. * * * Plaintiffs concede that paragraph 11 of the deed restriction gives defendant and its members some right with respect to retrieving errant golf balls. Plaintiffs argue, however, that the right created in paragraph 11 is simply a license. Defendant contends it has an easement over the Borton’s property, either by express grant via paragraph 11 in the deed restriction or by prescription. Both a license and easement give the grantee the right to go onto the grantor’s property for a limited use. [Citations.] A license is a personal right and as such, may be revoked at the will of the licensor. [Citation.] An easement, by contrast, gives the grantee an interest in the property of the grantor and thus runs with the land and is binding upon successive landowners. [Citations.] In the instant case, since the original developer of the property properly recorded and filed the deed restrictions, those restrictions created property interests that run with the land and are binding on successive landowners. [Citations.] Thus, plaintiffs do not have the power to revoke or modify the rights granted to defendant in paragraph 11 of the deed restrictions. Therefore, the deed restrictions in paragraph 11 are in the nature of an easement in favor of defendant and its members to retrieve errant golf balls hit onto plaintiffs’ property during a normal game of golf. * * * Since the terms of paragraph 11 are binding upon the parties and run with the land, we hold that defendant was granted an express easement by paragraph 11 of the deed restrictions. * * * Plaintiffs may recover * * * if they can demonstrate that defendant’s current use of the easement constitutes a greater burden to their land than what was contemplated or intended. [Citations.] The defendant did not address plaintiffs’ [claims] in its cross motion for summary judgment, and did not submit summary judgment facts to demonstrate that there is no material issue of fact in dispute as to this issue. Thus, the trial court’s dismissal of plaintiffs’ [claim] was premature and must be reversed. The trial court’s judgment granting defendant an easement over plaintiffs’ property is reversed with instructions to enter judgment that defendant was granted an express easement by paragraph 11 of the deed restrictions. The trial court’s dismissal of plaintiffs’ [claim] is reversed and remanded for further proceedings. *** Chapter Outcome *** Identify and describe the various ways in which an easement may be created. 48-4c Creation of Easements By express grant or reservation— This is the most common way to create an easement. In an easement by express grant, one party expressly transfers the easement to another party. In an easement by reservation, one party expressly reserves the right to retain an easement in property that is being transferred. By implied grant or reservation — An easement may be created when the owner of adjacent properties makes an apparent and permanent use in the nature of an easement, then conveys one of the properties without mentioning an easement. By necessity — An easement may be created by law when an owner conveys a parcel of land to which the only access is over her remaining land. By dedication — When the owner of land subdivides it into lots and records the plan of the subdivision, she has dedicated to the public all streets, alleys, parks, playgrounds and beaches shown on the plat. By prescription — This easement is created in most states if a person uses a portion of land owned by another in a way that is (1) adverse to the rightful owner’s use, (2) open, and (3) that continues uninterrupted for a specific period (varies from state to state). 48-4d Profits `a Prendre Profit `a prendre is the right to remove the natural resources such as petroleum, minerals, timber, and wild game from the land of another. The right may arise by prescription or through an act of the parties (in the latter case, requires all the formalities of the grant of an estate in real property). 48-4e Licenses A license is permission to use the property of another and is revocable by the owner at any time. Chapter 49 TRANSFER AND CONTROL OF REAL PROPERTY Transfer of Real Property Contract of Sale [49-1] Formation [49-1a] Marketable Title [49-1b] Implied Warranty of Habitability [49-1c] Deeds [49-2] Types of Deeds [49-2a] Warranty Special Warranty Quitclaim Formal Requirements [49-2b] Description of the Land Quantity of the Estate Covenants of Title Execution Delivery of Deeds [49-2c] Recordation [49-2d] Secured Transactions [49-3] Form of Mortgages [49-3a] Rights and Duties [49-3b] Mortgage Regulation [49-3c] Transfer of Mortgage Interests [49-3d] By Mortgagor By Mortgagee Foreclosure [49-3e] Adverse Possession [49-4] Public and Private Controls Zoning [49-5] Enabling Acts and Zoning Ordinances [49-5a] Variance [49-5b] Nonconforming Uses [49-5c] Judicial Review of Zoning [49-5d] Invalidity of Zoning Ordanance Zoning Amounts to a Taking Subdivision Master Plans [49-5e] Eminent Domain [49-6] Public Use [49-6a] Just Compensation [49-6b] Private Restrictions on Land Use [49-7] Covenants Running with the Land [49-7a] Restrictive Covenants in Subdivisions [49-7b] Termination of Restrictive Covenants [49-7c] Validity of Restrictive Covenants [49-7d] Cases in This Chapter Conway v. Cutler Group, Inc. Kelo v. City of New London Cappo v. Suda Chapter Outcomes After reading and studying this chapter, the student should be able to: • Explain (1) the essential elements of a contract of sale of an interest in real property, (2) the meaning and importance of marketable title, and (3) the concept of implied warranty of habitability. • Describe the fundamental requirements of a valid deed and distinguish among warranty, special warranty, and quitclaim deeds. • (1) Describe the elements of a secured transaction, (2) distinguish between a mortgage and a deed, and (3) distinguish between an assumption of a mortgage and buying subject to a mortgage. • Define and give examples of (1) adverse possession, (2) a variance, (3) a nonconforming use, and (4) eminent domain. • Describe the nature and types of restrictive covenants. TEACHING NOTES The law is and always has been very cautious about the transfer of title to real property. In contrast with personal property, which may be transferred easily and informally from owner to owner, real property can be transferred only through compliance with a variety of formalities. Title to land may be transferred (1) by deed, (2) by will or intestate succession and (3) by open, continuous, and adverse possession by a nonowner for a statutorily prescribed period of time. In addition to the legal restrictions placed on the transfer of real property, a number of other controls apply to the use of privately owned property. Governmental units impose some of these, including zoning and the taking of property by eminent domain. Private parties through restrictive covenants impose others. TRANSFER OF REAL PROPERTY The most common way of transferring real property is by deed. Usually, such transfers involve a contract for the sale of the land, the subsequent delivery of the deed, and the payment of the agreed-upon consideration. However, the transfer may also be made as a gift. *** Chapter Outcome *** Explain (1) the essential elements of a contract for sale of an interest in real property, (2) the meaning and importance of marketable title, and (3) the concept of implied warranty of habitability. 49-1 CONTRACT OF SALE 49-1a Formation General contract law governs the sale of real property. Thus, to be enforceable under the statute of frauds, a contract for the sale of land must be in writing and signed by the parties. The simplest agreement should contain (1) the names and addresses of the parties, (2) a description of the property to be conveyed, (3) the time for the conveyance (called the closing), (4) the type of deed to be given, and (5) the price and manner of payment. 49-1b Marketable Title A contract for the sale of land carries with it an implied obligation on the part of the seller to transfer marketable title — that is, title free from (1) encumbrances (such as mortgages, easements, liens, leases, and restrictive covenants), (2) defects in the chain of title (the record of successive ownership of the property) appearing in the land records (such as a prior recorded conveyance of the same property by the seller), and (3) events that deprive the seller of title, such as adverse possession or eminent domain. If the title search reveals any defect not specifically expected in the contract, the seller has materially breached the contract. The buyer’s remedies for breach include specific performance with a price reduction, rescission and restitution, or damages for loss of bargain. 49-1c Implied Warranty of Habitability The traditional common law rule with regard to improvements to the land is caveat emptor — let the buyer beware. Under this maxim, the buyer must inspect the property thoroughly before the sale is completed, since any undiscovered defect would not be the seller’s responsibility. The seller is liable only for any misrepresentations or express warranties he may have made about the property. A majority of states have relaxed the common law rule in sales by one who builds and then sells residential dwellings. In these instances, the builder-seller impliedly warrants a newly constructed house to be free of latent defects — that is, those defects not apparent upon a reasonable inspection of the house at the time of sale. In some states, this implied warranty of habitability benefits only the original purchaser; other states have extended it to subsequent purchasers for a reasonable time. In addition, many jurisdictions now require all sellers to disclose hidden defects that materially affect the property’s value, if reasonable examination would not reveal such defects. CASE 49-1 CONWAY v. CUTLER GROUP, INC. Supreme Court of Pennsylvania, 2014 99 A. 3d 67 McCaffery, J. In September 2003, The Cutler Group, Inc. ("Appellant") sold a new house in Bucks County to Davey and Holly Fields. After living in the house for three years, Mr. and Mrs. Fields sold the house to Michael and Deborah Conway ("Appellees"). In 2008, Appellees discovered water infiltration around some of the windows in the home, and, after consultation with an engineering and architectural firm, concluded that the infiltration was caused by several construction defects. On June 20, 2011, Appellees filed a one-count complaint against Appellant, alleging that its manner of construction breached the home builders' implied warranty of habitability recognized by this Court in Elderkin v. Gaster, [citation]. Appellant filed preliminary objections in the nature of a demurrer, arguing, inter alia, that, as a matter of law, the warranty recognized in Elderkin extends from the builder only to the first purchaser of a newly constructed home because there is no contractual relationship between the builder and second or subsequent purchasers of the home. Recognizing that courts have traditionally required a showing of privity of contract before permitting a party to proceed with a warranty claim, the trial court concluded that the question presented was "one of policy as to who will bear the burden for damages caused by latent defects ... [in] relatively new residential dwellings." [Citation.] The trial court sustained Appellant's preliminary objections on the ground of lack of privity between the parties, and dismissed Appellees' complaint with prejudice. Appellees appealed to the Superior Court. In a unanimous, published opinion, the Superior Court reversed. *** Appellant then petitioned for allowance of appeal in this Court, and we accepted the following issue for review: Did the Superior Court wrongly decide an important question of first impression in Pennsylvania when it held that any subsequent purchaser of a used residence may recover contract damages for breach of the builder's implied warranty of habitability to new home purchasers? In Elderkin, [citation] this Court adopted the implied warranty of habitability in the context of new home sales: "We thus hold that the builder-vendor impliedly warrants that the home he has built and is selling is constructed in a reasonably workmanlike manner and that it is fit for the purpose intended —habitation." [Citation.] With the adoption of this warranty, the Elderkin Court rejected as anachronistic, in the context of residential real estate transactions, the traditional doctrine of caveat emptor—the rule that "in the absence of fraud or misrepresentation[,] a vendor is responsible for the quality of the property being sold ... only to the extent ... he expressly agrees to be responsible." [Citation.] The Elderkin Court explained that the doctrine of caveat emptor was rooted in the view that a vendor and a purchaser were on equal footing, with equal knowledge and bargaining power regarding the transaction at issue. However, residential real estate purchases in the modern era are transactions not just for land, but for a reasonably constructed and habitable home, for which the purchaser "justifiably relies on the skill of the developer," who not only "hold[s] himself out as having the necessary expertise with which to produce an adequate dwelling, but [also] has by far the better opportunity to examine the suitability of the home site and to determine what measures should be taken to provide a home fit for habitation." [Citation.] Accordingly, the Elderkin Court concluded that "[a]s between the builder-vendor and the vendee, the position of the former, even though he exercises reasonable care, dictates that he bear the risk that a home which he has built will be functional and habitable in accordance with contemporary community standards." [Citation.] *** Here, the Superior Court extended that implied warranty to circumstances where the parties were not in privity of contract and the residence was not newly constructed, but rather had been occupied for several years. The Superior Court concluded that the public policy considerations that compel the implied warranty of habitability were not attenuated merely because the original buyer sold the residence to a subsequent buyer. [Citation.] *** Although neither this Court nor the Superior Court has previously addressed the specific issue raised here, courts in many other jurisdictions have addressed it and have reached varying resolutions. *** While noting that states had split on this issue, the Iowa court emphasized that the implied warranty did not arise from any language in the contract between the builder and the original purchaser, but rather was a judicial creation. Thus, the court reasoned, the implied warranty was not extinguished when the original purchaser sold the home to a subsequent purchaser, and contractual privity was not required for maintenance of an implied warranty action against the builder. *** A different result was reached by the Vermont Supreme Court, which recently declined to eliminate the requirement for contractual privity in a claim for breach of the implied warranty of habitability. [Citation.] The Vermont court reasoned that the existence of the implied warranty of habitability and the rationale underlying it are "founded on a sale.” * * * *** After careful review of the arguments of the parties, the comments of amici, and the reasoned decisions of our sister states on this issue, we conclude that the question of whether and/or under what circumstances to extend an implied warranty of habitability to subsequent purchasers of a newly constructed residence is a matter of public policy properly left to the General Assembly. *** It is well established that the courts' authority to declare public policy is limited. * * * The right of a court to declare what is or is not in accord with public policy does not extend to specific economic or social problems which are controversial in nature and capable of solution only as the result of a study of various factors and conditions. It is only when a given policy is so obviously for or against the public health, safety, morals or welfare that there is a virtual unanimity of opinion in regard to it, that a court may constitute itself the voice of the community in so declaring. * * * The order of the Superior Court is reversed. *** Chapter Outcome *** Describe the fundamental requirements of a valid deed and distinguish among warranty, special warranty, and quitclaim deeds. 49-2 DEEDS A deed is a formal document transferring any interest in land. The party who transfers property by a deed is called the grantor; the transferee of the property is the grantee. 49-2a Types of Deeds The rights conveyed by a deed vary, depending on which of the three basic types is used. Warranty — By a warranty deed, the grantor promises the grantee that the grantor has a valid title to the property. • In addition, the grantor, either expressly or implicitly, obliges herself to make the grantee whole for any damage the grantee suffers, should the grantor’s title prove defective. • A warranty deed includes certain promises or covenants, the most usual being title, against encumbrances, quiet enjoyment, and warranty. These constitute an assurance that the grantee will have undisturbed possession of the land and will be able, in turn, to transfer it free of the adverse claims of third parties. • A phrase common in a warranty deed is “convey and warrant;” also, in a number of states, the phrase “grant, bargain, and sell” is used together with the seller’s covenant that she will “warrant and defend the title.” Special Warranty — deed warrants only that the title has not been impaired, encumbered, or made defective because of any act or omission of the grantor. The grantor warrants the title as it concerns his own acts or omissions; does not warrant title as to the acts or omissions of others. Quitclaim — By a quitclaim deed, the grantor says, in effect, “I make no promise as to what interest I have in this land, but, whatever it is, I convey it to you.” Quitclaim deeds are used most often in transfers requiring persons who appear to have an interest in land, such as heirs, to release their interest. Common phrases are that the grantor “conveys and quitclaims” or “quitclaims all interest” in the property. 49-2b Formal Requirements Any interest in land that is of more than a limited duration falls within the statute of frauds and must be in writing. The wording in almost all deeds, whatever the type, follows nearly the same pattern: Description of the Land — must be clear enough to permit identification of the property conveyed. Quantity of the Estate — description of type of estate being conveyed to grantee (e.g., life estate). Covenants of Title — promises concerning the title, such as title, against encumbrances, quiet enjoyment and warranty, assure undisturbed possession of the land and ability to later transfer title to someone else. Execution — the grantor’s signature, a seal, and acknowledgment before a notary public or other official authorized to verify the authenticity of documents. 49-2c Delivery of Deeds A deed does not transfer title to land until it is delivered. Delivery, or an intent that the deed is to take effect, is evidenced by the acts or statements of the grantor. Physical transfer of the deed is usually the best evidence of intent, but it is not necessary. 49-2d Recordation In most states, recording a deed is not necessary to pass title. However, unless the grantee has the deed recorded, someone who in good faith subsequently purchases the same property for value will acquire title superior to that of the grantee. Recordation consists of delivering a duly executed and acknowledged deed to the recorder’s office in the county where the property is located. There, a copy of the instrument is inserted in the current deed book and is indexed. Once recorded, documents such as deeds, easements, and mortgages or deeds of trust become public records. The purpose of recordation is to give constructive notice to the rest of the world that an interest in property has been conveyed. In some States, called notice States, unrecorded instruments are invalid against any subsequent purchaser without notice. In notice-race States, an unrecorded deed is invalid against any subsequent purchaser without notice who records first. Finally, in a few States, known as race States, an unrecorded deed is invalid against any deed recorded before it. At least twenty-six States have adopted the Uniform Real Property Electronic Recording Act. This Act permits the electronic filing of real property instruments as well as systems for searching for and retrieving these land records. *** Chapter Outcome *** (1) Describe the elements of a secured transaction, (2) distinguish between a mortgage and a deed, and (3) distinguish between an assumption of a mortgage and buying subject to the mortgage. 49-3 SECURED TRANSACTIONS A secured transaction involves • a debt or obligation to pay money and • the creditor’s interest in specific property that secures performance of the obligation. A security interest in property cannot exist apart from the debt it secures: discharging the debt in any manner terminates the interest. When real estate secures a debt, the debtor is referred to as the mortgagor; the creditor is the mortgagee. 49-3a Forms of Mortgages A mortgage is a security interest in land. The mortgage instrument must be in writing, must contain an adequate description of the property, and must be executed and delivered. A deed of trust is nearly identical to a mortgage; it differs in that the property is conveyed not to the creditor as security but to a third person, who acts as trustee for the creditor’s benefit. As with all interests in realty, the mortgage or deed of trust should be promptly recorded to protect the mortgagee’s rights against third persons who acquire an interest in the mortgaged property without knowledge of the mortgage. 49-3b Rights and Duties Mortgagor’s rights: (1) In most states, the mortgagor retains title and is entitled to possession of the premises to the exclusion of the mortgagee, even if the mortgagor defaults. Only through foreclosure (sale) or through the court appointment of a receiver can the right of possession be taken from the mortgagor. (2) The mortgagor has the right to redeem his mortgaged property by paying the debt that the mortgage secures. This right of redemption can be defeated only by operation of law. Mortgagor’s duty: The mortgagor has a duty not to commit waste, which would impair the security. For example, the debtor’s failure to pay taxes or to discharge a prior lien may impair the security of the mortgagee. Mortgagee’s rights: (1) The mortgagee has a right to recover the amount of the debt. (2) And he or she has the right to foreclose the mortgaged property upon default to satisfy the debt. Foreclosure is an action through which the mortgagee takes the property from the mortgagor, ends the mortgagor’s right in the property, and sells the property to pay the mortgage debt. If the debt is not fully satisfied by the sale of the property, the mortgagee may obtain a deficiency judgment for the balance and enforce payment of this amount out of the mortgagor’s other assets. The mortgagor’s default by nonperformance of other promises in the mortgage also may give the mortgagee the right to foreclose. For example, the mortgage may provide that the mortgagor’s failure to pay taxes is a default that permits foreclosure. Mortgages also commonly provide that default in the payment of an installment makes the entire unpaid balance of the debt immediately due and payable, permitting foreclosure for the entire amount. NOTE: See Figure 49-1: Fundamental Rights of Mortgagor and Mortgagee 49-3c Mortgage Regulation In July 2010, President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), the most significant change to U.S. financial regulation since the New Deal. One of the many stand-alone statutes included in the Dodd-Frank is the Mortgage Reform and Anti-Predatory Lending Act of 2010, which modifies the Truth-in-Lending Act to make mortgage brokers and lenders more accountable for the loans that they make. The Dodd-Frank requires that lenders ensure a borrower’s reasonable ability to repay the loan; prohibits unfair and deceptive lending practices (especially with respect to subprime mortgages); expands protection for borrowers of high-cost loans; and requires lenders to disclose the maximum amount a consumer could pay on a variable rate mortgage, with a warning that payments will vary based on interest rate changes. 49-3d Transfer of Mortgage Interests By Mortgagor — A purchaser who assumes the mortgage takes the property and is personally liable for payment to the mortgagee. This requires an assumable mortgage and the consent of the mortgagee. If the property is taken subject to the mortgage the transferee's liability is limited to the value of the property. Assignments approved by the mortgagor are permitted and should be in writing. By Mortgagee — Mortgagee has the right to assign the mortgage without consent of the mortgagor. 49-3e Foreclosure After default by the mortgagor the property is sold to pay the debt. Some mortgages provide that upon default of one installment payment the entire balance is due and payable. In most states foreclosure is accomplished by judicial sale although some do provide for a power of sale clause that allows public auction of the property without judicial decree. Where the sale of the property does not cover the total debt the mortgagee has a right to a deficiency judgment for the balance owed. *** Chapter Outcome *** Define and give examples of (1) adverse possession, (2) a variance (3) a nonconforming use, and (4) eminent domain. 49-4 ADVERSE POSSESSION This is a very rarely used method of transfer of title to land. It is involuntary and takes place without any deed or other formality. In most states, a person who openly and continuously occupies the land of another for a statutorily prescribed period, typically 5 to 20 years, will gain title to the land by adverse possession. The possession must be actual — such as living on the land, farming it, or building or maintaining structures on it — and it must be adverse, that is, in opposition to the owner’s interest. Any act of dominion by the true owner, such as his entry on the land or assertion of ownership, will stop the period from running. By statute, some jurisdictions have established shorter periods of adverse possession where possession is accompanied by some other claim, such as the payment of taxes or an apparent, even if invalid, claim of title. PUBLIC AND PRIVATE CONTROLS 49-5 ZONING • Is the principal method of public control over land use. • The validity of zoning is rooted in the police power of the state, which is the inherent power of the government to provide for the public health, safety, morals, and welfare. Police power can be used only to regulate private property, never to “take” it. • It is firmly established that regulation having no reasonable relation to public health, safety, morals, or welfare is unconstitutional as a denial of due process of law. 49-5a Enabling Acts and Zoning Ordinances The power to zone is generally delegated to local city and village authorities by statutes known as enabling statutes. A typical enabling statute grants municipalities the following powers: (1) to regulate and limit the height and bulk of buildings to be erected; (2) to establish, regulate, and limit the building or setback lines on or along any street, trafficway, drive, or parkway; (3) to regulate and limit the intensity of the use of lot areas and to regulate and determine the area of open spaces within and around buildings; (4) to classify, regulate, and restrict the location of trades and industries and the location of buildings designated for specified industrial, business, residential, and other uses; (5) to divide the entire municipality into districts of such number, shape, area, and class(es) as may be deemed best suited to carry out the purposes of the statute; and (6) to set standards to which buildings or structures must conform. Under these powers, the local authorities may enact zoning ordinances, consisting of a map and its accompanying descriptive text. The map divides the municipality into districts designated principally as industrial, commercial, or residential, with possible subclassifications. A special use is a use authorized by the zoning ordinance but only upon specific approval by the zoning authorities on a case-by-case basis. Special uses include churches, schools, hospitals, homes for the disabled, and cemeteries. 49-5b Variance A variance permits a deviation from the zoning ordinance. It may be granted by zoning authorities to a landowner when application of the zoning ordinance would cause the owner “particular hardship” that is unique or peculiar to the property. It must affirmatively appear that the property as presently zoned cannot yield a reasonable return on the owner’s investment. 49-5c Nonconforming Uses A zoning ordinance may not immediately terminate a lawful use that existed before it was enacted. Rather, this nonconforming use must be permitted to continue for a reasonable time. A nonconforming use may be terminated (1) when the use is discontinued, (2) when a nonconforming structure is destroyed or substantially damaged, or (3) when a nonconforming structure has been permitted to exist for the period of its useful life, as fixed by authorities. 49-5d Judicial Review of Zoning Although zoning traditionally is viewed as being a legislative activity, it is subject to judicial review to determine if the ordinance is invalid, has been applied unreasonably, or amounts to a confiscation of property. Invalidity of Zoning Ordinance — A zoning ordinance may be invalid as a whole either because it bears no reasonable relation to public health, safety, morals, or welfare; because it involves the exercise of powers not granted to the municipality by the enabling act; or because it violates the State or U.S. Constitution. Zoning Amounts to a Taking — Another form of attack is to show that zoning restrictions amount to confiscation or a “taking.” It is not sufficient that the property owner will sustain a financial loss if the restrictions are not lifted. But when the owner can show that the restrictions make it impracticable for him to use the property for any beneficial purpose, he should prevail. Deprivation of all beneficial use is confiscation. 49-5e Subdivision Master Plans Most states have legislation enabling local authorities to require municipal approval of every land subdivision plat. 49-6 EMINENT DOMAIN The power to take private property for public use, known as the power of eminent domain, is recognized as one of the inherent powers of government both in the U.S. Constitution and in the constitutions of the States. Under both Federal and State constitutions, the individual from whom property is to be taken is entitled to due process of law. 49-6a Public Use The power to take private property for public use is known as the power of eminent domain. It is one of the fundamental powers of government, recognized in the U.S. Constitution and the state constitutions. But there is also • a direct constitutional prohibition against taking private property without just compensation (Fifth Amendment to the U.S. Constitution) and similar provisions in the state constitutions; • an implicit prohibition against taking private property for other than public use; • and an entitlement to due process of law to the individual from whom property is to be taken. 49-6b Just Compensation The measure of just compensation is the fair market value of the property as of the time of taking. NOTE: See Figure 49-2: Eminent Domain. CASE 49-2 KELO v. CITY OF NEW LONDON Supreme Court of the United States, 2005 545 U.S. 469, 125 S. Ct. 2655, 162 L.Ed.2d 439 http://scholar.google.com/scholar_case?case=1101424605047973909&q = 545+U.S. = 469&hl=en&as_sdt=2,10 Stevens, J. In 2000, the city of New London approved a development plan that, in the words of the Supreme Court of Connecticut, was “projected to create in excess of 1,000 jobs, to increase tax and other revenues, and to revitalize an economically distressed city, including its downtown and waterfront areas.” [Citation.] [The plan proposed to replace a faded residential neighborhood—Fort Trumbull—with office space for research and development, a conference hotel, new residences, and a pedestrian “river-walk” along the Thames River. The project, to be built by private developers, is intended to build upon a $350 million research center built nearby by the Pfizer pharmaceutical company. In assembling the land needed for this project, the city’s development agent has purchased property from willing sellers and proposes to use the power of eminent domain to acquire the remainder of the property from unwilling owners of fifteen properties in exchange for just compensation. The unwilling owners claimed that the taking of their properties would violate the “public use” restriction in the Fifth Amendment of the United States Constitution. The trial court granted a permanent restraining order prohibiting the taking of some of the properties located in parcel. The Supreme Court of Connecticut held that all of the City’s proposed takings were valid. The United States Supreme Court granted certiorari to determine whether a city’s decision to take property for the purpose of economic development satisfies the “public use” requirement of the Fifth Amendment.] * * * Two polar propositions are perfectly clear. On the one hand, it has long been accepted that the sovereign may not take the property of A for the sole purpose of transferring it to another private party B, even though A is paid just compensation. On the other hand, it is equally clear that a State may transfer property from one private party to another if future “use by the public” is the purpose of the taking; the condemnation of land for a railroad with common-carrier duties is a familiar example. Neither of these propositions, however, determines the disposition of this case. * * * The disposition of this case therefore turns on the question whether the City’s development plan serves a “public purpose.” Without exception, our cases have defined that concept broadly, reflecting our longstanding policy of deference to legislative judgments in this field. * * * Those who govern the City were not confronted with the need to remove blight in the Fort Trumbull area, but their determination that the area was sufficiently distressed to justify a program of economic rejuvenation is entitled to our deference. The City has carefully formulated an economic development plan that it believes will provide appreciable benefits to the community, including—but by no means limited to—new jobs and increased tax revenue. As with other exercises in urban planning and development, the City is endeavoring to coordinate a variety of commercial, residential, and recreational uses of land, with the hope that they will form a whole greater than the sum of its parts. To effectuate this plan, the City has invoked a state statute that specifically authorizes the use of eminent domain to promote economic development. Given the comprehensive character of the plan, the thorough deliberation that preceded its adoption, and the limited scope of our review, it is appropriate for us, as it was in [citation], to resolve the challenges of the individual owners, not on a piecemeal basis, but rather in light of the entire plan. Because that plan unquestionably serves a public purpose, the takings challenged here satisfy the public use requirement of the Fifth Amendment. To avoid this result, petitioners urge us to adopt a new bright-line rule that economic development does not qualify as a public use. Putting aside the unpersuasive suggestion that the City’s plan will provide only purely economic benefits, neither precedent nor logic supports petitioners’ proposal. Promoting economic development is a traditional and long accepted function of government. There is, moreover, no principled way of distinguishing economic development from the other public purposes that we have recognized. * * * Petitioners contend that using eminent domain for economic development impermissibly blurs the boundary between public and private takings. Again, our cases foreclose this objection. Quite simply, the government’s pursuit of a public purpose will often benefit individual private parties. * * * Our rejection of that contention has particular relevance to the instant case: “The public end may be as well or better served through an agency of private enterprise than through a department of government—or so the Congress might conclude. We cannot say that public ownership is the sole method of promoting the public purposes of community redevelopment projects.” [Citation.] * * * Alternatively, petitioners maintain that for takings of this kind we should require a “reasonable certainty” that the expected public benefits will actually accrue. Such a rule, however, would represent an even greater departure from our precedent. “When the legislature’s purpose is legitimate and its means are not irrational, our cases make clear that empirical debates over the wisdom of takings—no less than debates over the wisdom of other kinds of socioeconomic legislation—are not to be carried out in the federal courts.” [Citation.] * * * A constitutional rule that required postponement of the judicial approval of every condemnation until the likelihood of success of the plan had been assured would unquestionably impose a significant impediment to the successful consummation of many such plans. Just as we decline to second-guess the City’s considered judgments about the efficacy of its development plan, we also decline to second-guess the City’s determinations as to what lands it needs to acquire in order to effectuate the project. “It is not for the courts to oversee the choice of the boundary line nor to sit in review on the size of a particular project area. Once the question of the public purpose has been decided, the amount and character of land to be taken for the project and the need for a particular tract to complete the integrated plan rests in the discretion of the legislative branch.” [Citation.] In affirming the City’s authority to take petitioners’ properties, we do not minimize the hardship that condemnations may entail, notwithstanding the payment of just compensation. We emphasize that nothing in our opinion precludes any State from placing further restrictions on its exercise of the takings power. Indeed, many States already impose “public use” requirements that are stricter than the federal baseline. * * * The judgment of the Supreme Court of Connecticut is affirmed. *** Chapter Outcome *** Describe the nature and types of restrictive covenants. 49-7 PRIVATE RESTRICTIONS ON LAND USE Private restrictions on the use of land, imposed by the owners of the land, are called restrictive covenants. 49-7a Covenants Running with Land A restrictive covenant that binds not only the present owners of the land but also subsequent owners is said to “run with the land.” Such a running covenant involves promises that are enforceable under the law of contracts. • Thus, most courts require restrictive covenants to be in writing. • Also, the parties who agree to the covenant must intend that the covenant bind their successors. • The covenant must “touch and concern” the land, affecting its use, utility or value. • A restrictive covenant binds only those successors who have actual or constructive notice of the covenant. 49-7b Restrictive Covenants in Subdivisions In subdivisions, the more common restrictive covenants include those that • limit the use of property to residential purposes, • restrict the area of the lot on which a structure may be built, • provide for a special type of architecture, • and specify a minimum house size. Restrictive covenants will bind purchasers of lots in the subdivision if they are actually brought to the attention of subsequent purchasers or recorded by original deed or by means of a recorded plat or separate agreement; the effect is as though the restrictions had actually been inserted in those purchasers’ deeds. 49-7c Termination of Restrictive Covenants A restrictive covenant may end by the terms of the original agreement — for example, after 35 years unless a specified majority of the property owners reaffirm the covenant. A court will not enforce a covenant if changed circumstances make enforcement inequitable and oppressive. CASE 49-3 CAPPO v. SUDA Appellate Court of Connecticut, 2011 126 CONN.APP. 1, 10 A.3D 560 http://scholar.google.com/scholar_case?q=private+restrictive+covenants+ON+REAL+PRoperty&hl=en&as_sdt=2,34&as_ylo=2011&case=871487323647805637&scilh=0 Dupont, J. [Plaintiffs, Thomas Cappo and certain other neighbors who reside on Ox Yoke Lane in Norwalk, Connecticut, seek to enforce a restrictive covenant against the defendants, Mark R. Suda, Jr., and Michelle L. Suda, from resubdividing the defendants' property and from constructing a second dwelling. The defendants admit that the properties belonging to the plaintiffs and the defendants are depicted on a "Map Showing Section Two of Cricklewood, Norwalk . . . as Map No. 3714" (Section Two) and admit that their deed contains a reference to restrictive covenants as set forth in volume 416 at page 118 of the Norwalk land records. This restriction, as provided in their warranty deed, states, "Said tract is subject to the following restrictions: 1. No more than one dwelling together with an attached garage shall be constructed thereon." The trial court granted summary judgment in favor of the plaintiffs, and the defendants appealed.] In general, restrictive covenants fall into three classes: (1) mutual covenants in deeds exchanged by adjoining landowners; (2) uniform covenants contained in deeds executed by the owner of property who is dividing his property into building lots under a general development scheme; and (3) covenants exacted by a grantor from his grantee presumptively or actually for the benefit and protection of his adjoining land which he retains. . . . With respect to the second class of covenants, any grantee under such a general or uniform development scheme may enforce the restrictions against any other grantee. [Citation.] It is undisputed that the restrictive covenants pertaining to the plaintiffs' and defendants' properties are in the second class of covenants. * * * The defendants claim that, although a restrictive covenant that prohibits resubdivision for the purpose of building an additional dwelling was contained in their deed, that restriction has been abandoned because resubdivisions have occurred in surrounding properties, which the defendants contend are part of the same subdivision as their property. The parties reside in a subdivision referred to as Section Two. All thirteen of the lots in Section Two have been developed, and none of the lots contain more than one dwelling. Two other parcels originating from the same grantor and developed into abutting subdivisions exist, namely, "Cricklewood" and "Bow End Road." Resubdivisions have occurred in Cricklewood. The court held that the three subdivisions, Section Two, Cricklewood and Bow End Road, were not a single general plan of development and, accordingly, rendered summary judgment in favor of the plaintiffs. We agree that the subdivisions are separate and not part of one plan of development and, therefore, agree with the court that the Section Two restrictions have not been extinguished or abandoned as a result of resubdivisions that occurred in Cricklewood. * * * When uniform covenants are contained in deeds executed by the owner of property who is dividing his property into building lots under a general development scheme, any grantee under such a general or uniform development scheme may enforce the restrictions against any other grantee. [Citation.] The owner's intent to develop the property under a common scheme is evidenced by the language in the deeds. [Citation.]. * * * There are several factors that help to establish the existence of a common grantor's intent to develop the land according to a uniform plan. These factors include (1) the common grantor's selling or stating an intention to sell an entire tract of land, (2) the common grantor's exhibiting a map or plot of the entire tract at the time of the sale of one of the parcels, (3) the actual development of the tract in accordance with the restrictions, and (4) a substantial uniformity in the restrictions imposed in the deeds executed by the common grantor. [Citation.] "The factors that help to negate the presence of a development scheme are: (1) the grantor retains unrestricted adjoining land; (2) there is no plot of the entire tract with notice on it of the restrictions; and (3) the common grantor did not impose similar restrictions on other lots." [Citation.] Once a common scheme has been established, it is possible to find that the restrictive covenants are not enforceable because they have been abandoned. [W]hen presented with a violation of a restrictive covenant, the court is obligated to enforce the covenant unless the defendant can show that enforcement would be inequitable. . . . [A] [c]hange in circumstances. . . may justify the withholding of equitable relief to enforce a covenant. . . . Such a change in circumstances is decided on a case by case basis, and the test is whether the circumstances show an abandonment of the original restriction making enforcement inequitable because of the altered condition of the property involved. [Citation.] Any such change in conditions must be so substantial so as to frustrate completely the intent of the original covenant so that it would be inequitable to enforce it. [Citation.] Such a change in circumstances includes repeated violations of the restrictions without effective action to enforce them. [Citation.] * * * The defendants admitted that the thirteen parcels in Section Two were developed under a common scheme using substantially uniform restrictions. Excepting the defendants' property, none of the owners of the parcels in Section Two have sought or received resubdivision approval, nor have repeated violations of the restrictions occurred in Section Two. Thus, the deed restrictions have not been abandoned. The plaintiffs met their burden to obtain summary judgment by demonstrating the absence of any genuine issue of material fact and showing, as a matter of law, that they were entitled to enjoin the defendants from resubdividing their lot and building a second dwelling in contravention of the restrictive covenant. * * * We agree with the trial court that the restrictions in the Section Two deeds have not been extinguished or abandoned as a result of resubdivisions that occurred in Cricklewood, and we agree that the two subdivisions were not developed under a common scheme. Thus, the defendants' claims fail. 49-7d Validity of Restrictive Covenants Although restrictions on land use have never been popular in the law, the courts will enforce a restriction that apparently will operate to the general benefit of the owners of all the land the restriction will affect. The usual method of enforcing such agreements is by injunction to restrain a violation. However, under the Fourteenth Amendment, a state or municipality cannot impose any racial restrictions by statute or ordinance. In 1947, the Supreme Court held that because state courts are an arm of state government, those courts cannot enforce private racial restrictive covenants. Instructor Manual for Smith and Robersons Business Law Richard A. Mann, Barry S. Roberts 9781337094757, 9780357364000, 9780538473637