property notes fall 2013

8/12/2019 Property Notes Fall 2013

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PROPERTY Fall 2013

CLASS ONE

INTRODUCTION TO PROPERTY:

Why Study Property? What is Property? (Real vs. Property)

o Real property! Fixtures (start out as personal property but when become affixed

they become real)! Land! Farming! Historical background

Medieval times: distinguished and refined ones socialrelationship

! Special! Unique!

o Personal property (tangible and intangible)! Has become a function of the wall street capital markets! Modernization of property: turning it into cash! Books, cars, jewelry! Intangible:

Good will or an idea! Needs to be replaced

o What other courses involve property issues?! Contracts! Leases! Landlord/tenant law! Personal jurisdiction! Lis pendens! Judgment liens! Tort law: Fraud, misrepresentation, premises liability! Criminal law: trespassing! Constitutional law: imminent domain, taking, right to take

someones property, estate and local government! Family law! Trust and estates! Intellectual property: copyrights, patents! Corporations

o Why special rules/courses for property?! It is unique

Selective views or attributes that make property different! Limited/finite

o What is different about real property from other types of property?


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How do you acquire property?o True owner vs. possessor

! Acquire rights by finding something! Inherit! Purchase it

! Adverse possession If you possess property for a period of time, you acquire

rights to it! Imminent domain:

Federal or state may acquire property involuntarily! Theft! Title action! Equity! Estoppel! Discovery

Major issues in property lawo Ownership: what does it mean to say that X owns something?o Right to exclude vs. Right of Accesso Right to use, Possess, and enjoy propertyo Right not to be injured by someone elses use of propertyo Right to transfer (disaggregation)

! Limits on Disaggregation Limits on ability to slice and dice Restrictions which void on public policy

o Immunity from loss! Loss of Property

Forfeiture provisions Contracts Different theories of way to lose property

o Due process of lawo Freedom to contract

! Trianglestatute, common law, and K In NY cannot hire a surrogate to carry a child

o Relationship between K & property law! Why do rules change over time?

No duty for a landlord to mitigate damages! A lot of K principles:

Whether a Landlord has to be reasonableo Justifications?! Equity! Justice! Utilitarian! Social Relationships! Possession! Expectation


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o History! Social context! Statute of Frauds (dates back to 1600s)

o Why certain property concepts have been discarded and some haveremained

o

Formal sources of property rights (leases and contracts, deeds and wills)! Informal (oral promises, possession over time, familyrelationships, social customs and norms)

o Possession! Relational aspect between true owner, possessor, and the rest of the

world True owner trumps the possessor Want certainty of ownership

o Bundle of rights (slice and dice)! Concurrent owners (joint tenant)! Present and future owners

! Vertical division! Family/entity ownership! Different estates (lease vs. FSA)

SYLLABUS AND COURSE REQUIREMENTS:1. Textbook, Supplement, Reference Materials

a. Statutes are in the supplement2. Syllabus & Reading

a. Index to all topicsb. Assigned reading

i. Who is suing whom for what?

c. Rule statement needs to come from either statute (mandatory, defaultrule), contract (parties provided answer to the question) or common lawd.

3. Blackboard Website4. Final Exam, Grades Practice Exams, PLA questions, etc.

a. Closed bookb. Practice exams

5. Lateness and Attendance Policy6. Class Capture/Videotape7. Powerpoints (ahead of class and final)8. Participation

9. Office Hours10. CRES Breakfast forums11. Professional Development12. Desk microphones13. 5 minute break14. Seating chart15. Review 10-15 min before class starts

END OF CLASS DISCUSSION


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CLASS TWO August 29, 2013

Landlord/Tenant LawLeaseholds

Duty to Deliver Possession Lease Transaction

o Landlord/Owners: All rights to use, exclude, enjoy (Landlord Lessor)! Landlord can still sell and mortgage the land

Ownership is not absolute: The landlords rights are limitedbecause the tenant has the right for 10 years of exclusivepossession of the property

Can be separated into different rights & interests Two different entities can have different legal rights in the

same parcel of property Lease of land is both property of tenant and landlord

(simultaneous rights) o Does NOT have right of possession

! 10 year lease (Leasehold) Leasehold Estate: (K that does the conveyance) Landlords Right to use in future after 1/1/2020 (LL record

title future interest LL Reversion) (Tenant Lessee) Tenants Right to Use for 10 years till 1/1/2020 (Present

Interest Lease) (Tenant Lessee)o Exclusivity (important use): granting exclusive use and space to tenant

! Tenant cannot mortgage or sell lando Right of possession: How would you figure out ones presence?

! Inquiry: Physical presence, keys, furniture, etc. Land records, but the property itself

o What does it mean to have a property right in the future?! Cant enjoy it until sometime in the future

Present and Future Interests:o Tenant has a present possessory interesto There is also a future possessory interest (whenever leasehold terminates)

! If LL retains future interest: reversion! If LL transfers the future interest to a 3

rd

party: remainder Landlords are sometimes referred to as Lessors Tenants: Lessees Lease: Estatehold Lease Landlord: (lord of the manor)


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Lease vs. Contract:

o Lease:! Conveyance (a present transfer) and a contract (instruments of

transfer)

! Covenants are independent (default of party x doesnt excuseperformance of other party)! Two principle promises contained within lease

Tenants promise to pay rent Landlords promise that tenant peacefully enjoy property

(Covenant of quiet enjoyment)! Whether one party performs promise or not, has nothing to do with

the other party defaulting on their promise! Common law: (Landlord/tenant law) the tenant has to pay rent

(monthly), irrespective of whether or not landlord is performing hispromise

Covenants are independent of each other Means that you dont have an excuse for not paying rent

o Contract:! Covenants are dependent (default of party x excuses performance

of other party) Protects the other party Modern contract law: modified law: made it more rational

Classification System of Leaseholds (fixed period of time- beginning & end)o Term of years (tenancy for a term)o Periodic Tenancy (fixed period of duration and continues automatically

until either landlord/tenant gives notice of its termination)! Express: in writing! Implied: (harder because of Statute of Frauds)

Exceptions: Equity Example: Month to month or year to year

! Automatically turn over and continue over to the next periodunless its terminated (needs to have action to terminategivenotice)

Common law: Notice must be given equal to the length ofthe period

o Advance, sufficient notice required, and has to be

the end of the montho Ex.: One year needs 6 months to terminateo Tenancy at will:

! Have no fixed duration! Lasts as long as either party desires it to last! No advance notice is required! Both parties have the right to terminate! Under common law: Landlord can terminate lease at any time


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! Doesnt give a period of time! Automatically terminates:

If landlord/tenant dies If landlord decides to transfer

! May only be terminated in less than 30 days (New York)

! Common law: if one party had the right to terminate the lease, theother party also has the right to terminate But only if you first determine that the lease is a tenancy at

will** (Final exam questions): provisions of a lease saysTenant has the option to terminate 50 days notice

o What kind of lease is this? (Right to terminate doesnot make it a tenancy at will)

! Existence of termination option does not change the propertyclassification of that lease

! Dont get confused: Tenancy at will: pay rent at the end of each month? Is it

still a tenancy at will, or periodic tenancy?o Implied K to a periodic tenancy if paying at the end

of each montho Tenants paying rent monthly, is a practical matter

because landlord has accepted rent and impliedlycreated periodic leasehold

o Holdover Tenancy (Tenancy at Sufferance)! Three year lease expiring happens automatically, doesnt require

any action Contract with a 2 months notice: (K will override rule)

o Statute if applicable (at least)! 232-a: Might not apply because it states no monthly tenant, or

tenant from month to monthOR

o Common Law Notice equal to the period (one month) *the default rule Can always vary the rule by a Contract (to fashion a rule that meets the parties

needs) Problems on Page 422:

o Question 1: On October 1, L leases Whiteacre to T for one2 yearbeginning October 1. On the following September 30, T moves outwithout notice

! What are Ls rights? Tenant doesnt have to give notice because itis a term of years

Year to year contract! What if the lease had been to T from year to year beginning

October 1? Periodic Tenancy: 6 months


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o Is it a lease or a license? (page 428)! Factors:

The intention of the parties; Easier to get a licensee out vs. a tenant; The number of restrictions on use; The exclusivity of possession; The degree of control retained by the granting party

(landlord or licensor); The presence or absence of incidental services, etc.

o More incidental services, the less likely! If lease what type of lease?

Ability to use property pretty freely More restrictions the more likely the less consistence Examples:

o (1) A rents from B the right to erect a billboard onland owned by B

o (2) A contracts with B to install and operate acosmetics concession in Bs department store;

o (3) A rents a room for two months in Bs rusticcountry inn;

CLASS THREESeptember 3, 2013

Duty to Deliver Possession (Hannan v. Dusch)Thursday September 26 th Class Cancelled

Hannan v. Dusch (Pg 438) (What default rule is going to apply in the absence of acontractual rule)

Who is suing whom for what?o Hannan is the lessee (tenant) suing the landlord

What remedy is he seeking?o Damages

What type of Lease?o Term of years Lease (Whenever you see a lease, determine which type of

lease it is**)o

No notice is needed to be given because the term is set, and it expires oncethe term ends. Background facts:

o Existing tenant remained in the premises when the old lease ended.o No express covenant at all (regular contract law: if theres no express

covenant, whats left? Need to argue there is some sort of impliedcovenant)


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o Landlord was able to give T2 legal, but unable to give actual possessionbecause of a holdover tenant

Did LL promise to deliver possession? What is the legal argument?

o Landlords argument

! Landlord said he did not breach any express terms in the lease! Relies on the actual words of the lease (claiming he neverpromised that he would put the tenant into actual possession onlyduty is to give the legal right of possession

o Tenants argument! Depends upon the case of there being an implied duty or covenant

to deliver actual duty of possession of the premises (whether thelandlord has to take actions against the holdover tenant)

Analysis:o Court says: Whether the landlord has the duty to oust a trespassero Legal Possession vs. actual possession:

Lease between Landlord and tenant 1 (1/1/02-12/31/2012) vs. Lease Between Landlordand tenant 2 (1/1/13-12/31/2016)

1/1/13: Tenant 1 still in possession

Difference between legal possession and actual possessiono Legal: Whether or not Landlord gave someone else all the rights

! Has no obstacle in the form for better possession that wouldprevent tenant from obtaining premises

o Actual: Either in or not! Trespasser might be in actual possession but not in lawful

possession (fact based determination)! What constitutes actual possession: does not require standing

vigilant in space 24/7. Legal determination that is based on something physical

Two different rules (US and English) Landlord only has to guarantee legal possession, not actual

o Implied covenant re: legal possession, but not actualo American Rule vs. English Rule: both have in common: the duty to deliver

legal possession.o UK Rule: implied duty to deliver legal and actual possessiono American (old NY common rule): implied duty only to deliver legal

possessiono Discuss commencement date vs. Contract execution dateo Legal possession: simply the right of possession, not actually physically in

possession, but whether or not you legally have the right of possession Re: American rule: landlord is not bound to put tenant in legal possession

o All T2 has at its disposal is that nobody has a better right of possessiono Tenant has the duty to sue the holdover tenanto Both landlord and tenant2 have an issue with holdover tenant1


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! Landlord is in a better position to oust the prior tenant Clearly knows whether prior tenant is leaving

! Landlord can protect himself by putting in a term in the prior leaseas a disincentive to T1

! Bring a suit to evict T1

! Easier for landlord to bring a suit because original lease was withT1 and LL. More resources, better relationship, etc.

o US Rule: No duty to deliver actual possession ! Someone shouldnt be responsible for the tort another person ! Landlord not at fault ! Why should we imply for something that the parties are arguing

for ! T2 has sufficient legal and equitable remedies to protect

themselves ! tenant has greater incentive to use these remedies

! Very risky for landlord to not have a buffer from the beginning ofthe lease to the end Tenant should have an express provision that the landlord

is held liable for a breach of covenant to deliver actualpossession at a specified date and have some remedy if thatcovenant is breached

Tenant should also have an express provision (conditionprecedent) rent should be conditioned upon delivery ofpossession

o If theres a breach of that promise, rent does nothave to be paid

o Right to put an outside date terminating the lease ifthe T1 has not left

o Right to have an express provision of landlordpromising not to enter into an extension, etc. try toget as much from the landlord as possible

What would T2 do if were in a NY jurisdiction if the tenant can evict theholdover?

o T2 has the legal right of possession, and does not have to provide notice ofeviction or suing

Request leases of prior agreement (looking to see what the expiration date is)

NY Real Property Law 223-a: Remedies of lessee when possession is not delivered.In the absence of an express provision to the contrary, there shall be implied in everylease of real property a condition that the lessor will deliver (legal and actual) possessionat the beginning of the term. In the event of breach of such implied condition the lesseeshall have the right to rescind the lease and to recover the consideration paid. Such rightshall not be deemed inconsistent with any right of action he may have to recoverdamages.

*Statutory default rule*


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NY Law Relating to duty to deliver possession:Contract:

Statute: UK Rule, in the absence of an express provision to the contrary Common Law: American Rule: only legal possession

What we will do next week: Look at sample leases Subleasing & Subletting assignment Ernst case Look at the Agenda, and go through 1-7 for first class on subleasing

PropertyCLASS FOUR : September 10, 2013

NY Law Relating to duty to deliver possession:

Contract:

Statute: Common Law:UK Rule, in the absence of an express American Rule:provision to the contrary Only legal possession

When analyzing an exam problem weigh out both rules, but state that our jurisdictiongoverns the rule.

Lease Excerpts: (Supp, page 21)Example 1:

Sample Lease Section 2.3: What remedy does a tenant have to a holdovertenant from a prior lease?

o Citing NY Law 223-a: Absence of an express provision to the contrary o In this example, there is an express provision to the contrary of 223-a,

and therefore according to the K rule, the K overrides NY law.o Tenant Remedy: rent abatement o If landlord defaulted in their promise (of possession), the tenant is

obligated to pay rent (pursuant to the contract rule) Sample Lease Section 1.02:


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o Section (d) of the lease: provides an express provision to the contrary ofSection 223-a of the Real Property Law

Textbook (pg 442) Questions:2. L and T2 execute a lease for a specified term. T2 takes possession and pays rent

for several months. T2 then learns that L had earlier leased the premises to

another tenant (T1) for the same term. T2 remains in possession but stops payingrent. L sues T2 for unpaid rent; T2 counterclaims for rent already paid. Whatresult?

Lease btw LL and T1 Lease Btw LL and T21-1-00 12-31-20 1-1-13 12-31-20

1/1/13 T2 learns that there is a T1T2 takes possession with legal right, BUT T1Hasnt ejected yet

What does delivery of legal possession mean? In some ways actual possession trumps legal possession Two possibilities:

o Take possession and you have the lawful right to do soo Take possession and you dont have the lawful right to do so

What happens when T2 shows up and kicks T1 out?o T2 in possession, but with someone with better title comes and takes

possession (breach of quiet enjoyment - Hannan v. Dusch)

SUBLEASES/ASSIGNMENTS:1. Basics of Landlord & Tenant Relationship:

A. Privity of Contract Landlord----(Lease as Contract)------ " TenantB. Privity of Estate Landlord----(Lease as Conveyance)-- " Tenant

Landlord -------Lease--------TenantPrivity of KPrivity of Estate

LL has all Rights--- " LL and T enter into Lease -- " LL Reversion/Tenant

Lease, by virtue of being a legal document, a legal relationship developsbetween the two.

Legal relationship arises by virtue of contract (Privity of contract)


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o Privity of K exists when theres a contractual relationship between twoparties

o Anytime you have a contract with enforceable promises, thatconstitutes a privity of contract

! Dont sue for a breach of privity of contract, just sue for breach

of contracto Privity of Estate: theoretical relationship (legal nexus)! Legal relationship between holder of reversion (landlord) and

the holder of the possessory estate (Tenant or, after anassignment: T2 whoever happens to be the then, currentpossessory holder)

Landlord now has a legal relationship with assignee! LL still has right of reversion! Exists and describes legal relationship between holder and

possessory of estate (Tenant) and the holder of the reversion(Landlord)

! Both have interests in the same property Dont have absolute rights

Legal theories re: tenant and the landlord:o Breach of K arising re: privity of estateo Can sue for tort (arising out of duty of care)o Real covenant (property related) vs. Personal:

! Promise of quiet enjoyment is a real covenant! Covenants pertaining to the land (quiet enjoyment, payment of

rent, etc.)o Potential conflict arises from the ability of holding some property

rights! Landlord (reversion)! Tenant (right of possession)

Want to encourage free transfer of property Encourage ability to transfer property to someone else

What is an assignment?o Term used to show something is being transferred (or conveyed): not a

contract [original Tenant is assignor and T2 is assignee]! Landlord-----Lease--- " Tenant--- " T2 Assignee:

LL has all the rights----Lease----(LLReversion/Tenant)- " (LL Reversion/Tenant2)

o Neither landlord nor tenant can sever privity of relationship absent alegal justification (i.e. breach)

o T2 has privity of estateo Tenant1 has rights (possession, exclusivity, enjoyment, etc.) and

transferred it to T2! Legal consequences:

Landlord is not suing Assignee T2 for breach of privityof estate but is suing for breach of contract (promises)

o No Privity of K between landlord and assignee:


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! Landlords response: someone elsespromise will be binding on T2, eventhough T2 did not personally make thatpromise

o Unlike personal promises (i.e. student loan,

etc.), if there is privity of estate, someone elsespromise (T1) will be binding, and LL can suefor breach of K the person he is in privity ofestate with.

o An assignment does not automatically sever a contractual relationshipunless the following occur(s):

! Release Tenant can be released if landlord chooses to do so

o T2 now has a legal relationship with the LLsolely by virtue of the relationship to the same

piece of property! T2 (party in actual possession) ought topay the rent because he is primarilyliable (equity question)

! Full performance (will not be sued for breach of promise) Legal Consequences of Assignment?

o Property Law Magic ! By virtue of relationship between holder of

reversion/possession o LL has all Rights - " Lease (Privity of K) Privity of Estate severed "

LL Reversion/Tenant1 -----Assignment-----LL reversion/Tenant2

! LL can sue Tenant1 for breach of K because of T1s promisesin original lease If T2 claims innocence of obligation to pay rent:

o LL can argue that since he has Privity of Estatewith T2, the holder of the possessory estateassume liability for promises conveyed in K

o LL can sue either parties for breach of K:! T1 (assignor) because of Privity of Contract! T2 (assignee) because of Privity of Estate

When T2 assigns their lease to T3, what is the legal significance of subsequentassignments?

o Privity of K goes away by:! Release! Full performance

NOT by death

T2 ASSIGNS TO T3: When T1 transferred to T2 severing its privity of estate, they still had privity

of K


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With T2 there was no contractual relationship with LL just the estate, andwhen T2 transferred out of property, so was the relationship

o LL cannot sue T2 for breach of K because there was no contractualrelationship between them

o LL can sue T1 for privity of contracto LL can sue T3 because theres privity of estate between LL and T3

How can Privities be Created Under Contract Law?A. Lease as Contract:

a. Landlord -----Lease -------Tenant

How can Privity of Estate be created: By virtue of relationship between holder ofreversion/possession.

o Whoever is in possessiono Assignment is a conveyance (NOT A CONTRACT)

! No contractual relationships between T1 and T2 T2 doesnt really have to sign anything

Assume assignment and assumption, what are the legal relationships between LL,T1 and assignee?

o Legal consequences by T1 to T2? How to Sever Privities:

o Privity of K?! Fully perform promise! Satisfaction! Discharge! Innovation! Release (expressed)

*If the facts are murky re: whether there is a release, thereis no release

o MUST BE EXPRESSED (not implied)o Privity of Estate?

! Transferring possessory interest LL transferring a reversion

o Unilateral action of one party Assignment since it changes the relationship between

holder of reversion and holder of possessory estate FOUR SCENARIOS: Either T1 is released or not - OR -Either T2 assumes

the lease or noto Scenario 1:

! Who Can LL sue when theres neither assumption nor release? LL can sue T1 under theory of privity of K because

contractual relationship remains (ASSIGNMENT DOESNOT CAUSE OR EQUAL RELASE)

o Scenario 2:! LL can sue T1 for privity of K


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! LL cannot sue T1 for Privity of Estate ! LL can sue T2 for privity of estate! LL can sue T2 for privity of K (because assumed all obligations in

K)

o Scenario 3:! LL cannot sue T1 for privity of K or privity of estate (been

released from K) ! LL can sue T2 for privity of K and privity of estate because

assumed obligations from K and is the possessory holder of theestate

o Scenario 4:! LL cannot sue T1 for privity of K or privity of estate because he

was released and is not possessory holder of estate ! LL can sue T2 for privity of estate because hes the possessory

holder of the estate, but not privity of K because he did not assumeobligations of K *NOTE: T2 Can always be sued under Privity of Estate (because of property law always privity of estate) . (Only time T2 couldnt be sued was when they hadntassumed and then subsequently assigned to T3).

**We will have at least 2 questions of one or two of the above scenarios **

***For Thursday:*Start with the law of Suretyship [what happens when the LL sues one party (T1)]

*Then discuss subleasing*Discuss Earnst case*Read Rowe v. A&P also

CLASS FIVE: September 12, 2013

Legal consequences of an Assignment by T1 to T2?o Privity of Ko When not released, T1 still remains liable

Privity of Estateo Always exists between landlord and the possessory holder of the estate

When a tenant enters into an Assignment, he transfers all interest and rights toassignee. Tenant still obligated because of the contractual nature of the lease Special promises (real covenants) runs with the land because of the legal

relationship between these two parties, each of which has interest in the property. Suretyship: The principle upon which party can get a remedy (T1 getting sued for

T2s failure to pay rent, even though he was obligated by K)


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o Creditor gets paid by third party who pays off debt for the other (T1) whofailed to pay debt (T2)

o Where Third party (T1) pays off debt from someone whos primarilyliable of someone whos ought to pay LL (T2)

o If T1 wins,o

In every scenario, landlord can sue assignee (under different theories likeprivity of estate)o It is who ought to pay the debt, not whos liable o (Very tested area on the bar )

! i.e. insurance lawo ***If someone other than the person who ought to be paying, this should

trigger a suretyship question***! LL sues Assignee (T2)

Question: Who can T2 sue?o Not T1 for suretyship because no equity to be done

because they were the ones who were supposed to

pay anywayo If LL can sue BOTH T1 and T2:

! If LL v. T2 and LL wins: Does T1 have any remedies? No. Because LL already won from who ought to pay

o When LL sues T2 not a suretyship questiono When LL sues T1 and wins it HAS to be Privity of K

! Then T1 can sue T2 for suretyshipo **Regarding: Scenario 3 and 4 fact pattern, will ask a suretyship question

BUT THIS IS NO SURETYSHIP

SUBLEASING

Assignment transferring all of right retaining nothing

vs.

Sublease (trying to get someone to take possession of lease and pay for it) must be for a period of time less than the entire lease Legal relationship between tenant and subtenant

o Tenant wears 2 hats:! Tenant with the Landlord; and! Sublandlord by virtue of the sublease

o Creates a privity of KAND

o Creates privitiy of estate (Sublandlord with Subtenant) and (Sublandlordwith original LL)

! Not with subtenant and LL! Sublandlord has reversionary right at the expiration of the sublease

(takes back into possession)


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Relational aspect of property law When lease between Sublandlord as the Landlord, then

Landlord has reversionary right Ernst v. Conditt:

o Sublease v. assignment How to identify whether its a sublease or

assignment! What is the difference between sublease & assignment (and what

are the consequences of that difference?)o Legal question: is the instrument an assignment or sublease?

! Essential to figure out if Ernst wins If assignment: LL has a legal relationship and right

(because there is privity of K or privity of estate)o Sublease (subtenants argument):

! LL (Ernst)---lease---T(Rogers)Rogers(SubLL)---sublease---sub-tenant (Conditt)

o ORo Assignment (Landlords Argument):

! LL(Ernst)-----lease----------T1(Rogers)o Tenant has no right to assign or sublet without consent of the LLo Unless theyre released, theyre going to be liableo Conditt argues he cannot be sued because he is in a subleaseo An assignment is an instrument of conveyance

! A sublease is an instrument of conveyanceo In the lease, the parties use the term sublease and the parties are arguing

it is dispositive! Right of re-entry arises in any lease/sublease by virtue of default

o D argues Rogers still remained liable throughout his sublease! But the argument is not supportive since Rogers can still remain

liable in a sublease and an assignmento Court says two different approaches:

! Formalistic Rule (Common law): An assignment contains the whole term leaving no interest

or reversionary right Sometimes the facts used under formalistic, might also be

used for modern rule approach A sublease arises when less than everything is transferred It is regardless of intent, form of document, and what you

labeled it, look at what the document does formalistically.! Modern Rule:

looking at the intention of the parties Cardinal rule adopted for construing rigid instruments Plainly appears that they intended assignment

o Can LL sue assignee?! Yes, because under any scenario, T2 is liable under privity of

estate


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o Since Rogers retained liability does not constitute a reversionPROBLEMS:

3(a). What rights does LL have v. T1?1. First determine whether relationship between T1 and T2 = assignment or

sublease?2. Second:a. Common/Formalistic rule: Look at what was stated in the lease

i. Anything less than a transfer of the entirety of the remainder of theterm = sublease (NOT ALL = SUBLEASE)

ii. (ALL = ASSIGNMENT) If everything is transferred for the entireterm = assignment

1. Applying facts here: T1 subleases to T2 for one year, out ofhis three year lease, so therefore according to commonlaw/formalistic approach = sublease

b. Modern rule: Look at intentions of the partieso

Rule: Determine what the intentions are! Applying Modern rule must look at the intent of the parties.If the parties intended assignment, it is treated asassignment, and vice versa. According to facts, we cannotestablish the parties intent because we are only informedthat the parties subleases, transfers, and assigns thereforenot establishing anything.

Answer: This is probably a sublease:Landlord can sue T1 because privity of K and privity of EstateCannot sue T2 because neither privity of K nor privity of Estate

NEXT CLASS:Questions 3(b) and (c) and the following cases: Rowe v. A&P :

o Is there an implied prohibition against assignment if silent?! If lease is silent re LLs consent, under what circumstances, if any,

will a court imply a requirement to obtain LLs consent? Kendall v. Pestana:

o Does LL have to be reasonable Can LL unreasonably withhold consent?! If lease explicitly requires consent (but doesnt set standard for

denial of consent), can LL unreasonably withhold consent?


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a. Applying facts here: According to thecommon/formalistic rule, since T1 transferred to T2the balance of the term, the relationship here isequivalent to an assignment. It is not a subleasebecause transfer was not less than the original lease.

b. Modern rule: Look at intentions of the parties (intent rule helps to decidesublease/assignment)o Rule: Determine what the intentions are

! In a jurisdiction that follows the intent rule: ApplyingModern rule must look at the intent of the parties. If theparties intended assignment, it is treated as assignment, andvice versa.

! Applying the facts here: we cannot determine what theactual intentions of the parties are since the fact patterndoes not state it.

3(c) LL leases to T for a term of three years at a monthly rent of $1,000; in the lease Tcovenants to pay the rent in advance on the first of each month and covenants to keepthe leased premises in good repair.

Six months later T assigns her entire interest to T1 who agrees in the instrument ofassignment to assume all the covenants in the lease between L and T;

Three months later T1 assigns his entire interest to T2;Three months after that T2 assigns his entire interest to T3.T3 defaults on rent payments and fails to keep the premises in good repair

L sues T, T1, T2, and T3. What are the liabilities of the four tenants to L and as amongthemselves?

LL-----lease----(3 years)-----original tenant Assignment to T1 with assumption

o T1 assignment with T2; no assumption! T2 assignment to T3; no assumption

T3 has privity of estate

Who can sue and under what legal theory?*Unless release is expressly stated, LL can sue all tenants under privity of K.

** LL can sue T1 for privity of K***T3 is the holder of the possessory estate***privity of K between LL and t1 by virtue of privity of K (assumption)****no K between LL and T2, no privity of estate between LL and T2***** can sue T3 and win, but if he sues T1, T1 can open suit v. T3 for suretyship


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Quick review of suretyship. Equitable remedy If LL can sue both T1 and T2:

o If LL v. T1 and LL wins, T1 v. T2 Rowe v. A&P:

Lease is silent. The legal question is under what circumstances will a court implya requirement to obtain LLs consent for an assignment?

o Must argue notwithstanding the absence of an express release, there is animplied provision

o LL argues:! reliance on special skill! percentage rent

o Court requires specific evidence: LL entered into lease in reliance upon a special skill or

ability and theres no evidence of sucho I.e. Nassau hotel case (Percentage rent and reliance

on parties to run the hotel)o Here: theres base rent (LL will be paid regardless

of who is the tenant)! Percentage rent was extra and it also never

kicked in (when revenues exceed a certainthreshold)

LL was also an attorney doesnt help his case since heshould already know rules of property

Parties neglected to include provision in their leaseo Court applies the Default Rule: transferability: permit for transfer of

assignees or subleases

Kendall v. Pestana: (Pg. 450)1st:Landlord ----------lease-------Tenant--------sublease-------------------subtenant(san jose) (Perlicht) (Bixler)

Assignment of Ts interest to Pestana AssignmentPestana (T1/Assignee) Kendall(proposed subT)

Leaseo Sublease

! Assignment Proposed Assignment (what parties are fighting about)

When consenting or rejecting a proposed assignment do the reasons have to bereasonable, or can they be unreasonable.

Majority Rule vs. Minority Rule:o Majority: May refuse consent even if arbitraryo Minority Rule: LL must be commercially reasonable where no provision

exists in lease


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Restatement: LL cant unreasonably withhold consent, unless a freely negotiatedprovision gives LL such right

o Look at the words following reasonable! where no provision exists in the lease

Traditional rule where LL can withhold consent when its arbitrary:o There must be a commercially reasonable objectionArguments for and against the majority/minority rule

Majority Rule vs. Minority Rule:

Majority Rule (traditional rule):Lease is a conveyance; LL should have control over property; freedom of ownership andcontrol; LL should only have to look to original Tenant[lease is property law conveyance]

Respects the Contract; Unambiguous reservation of right to LL; T could havebargained for clause; court shouldnt rewrite K (contract interpretation)

Stare decisis; reliance LL deserves increase in FMV or property

Minority Rule (modern approach):Lease is more like a contract; LL can have control, but must be reasonable; originalTenant is stilly liable; Duty to mitigate is now rule in many states; LL can still have sayover who is assignee (examples); good faith and fair dealing; commercially reasonable

Its not unambiguous; K was not explicit; intent; not rewriting K; just requiringgood faith

Law is changing; not universally held rule; changing view of K nature of the lease LL cant get more than bargain; increase in FMV doesnt belong to LL; consent

not a way for LL to make more money Examples of LL reasonably withholding consent:

o Proposed Assignees financial stabilityo Suitability of the particular property useo Legality of useo Whether proposed assignee will be making alterationso Personal taste or opinionso Making more money has nothing to do with protection of landlord and

ownership of property

Is LLs consent required?Various possibilities in K:

1. Lease is silenta. Rowe v. A&P: no implied prohibition

2. Lease states: tenant may not assign3. Lease states: tenant may not assign, without LLs consent

a. Majority rule: OK to refuse consent, even if arbitraryb. Minority rule/Kendall: must be commercially reasonable


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1(a): Assume Kendall rule applies. LL refuses consent since proposed transferee isconsidering space in another building owned by LL? (no split in analysis)

For his economic protection, LL can reasonably refuse consent because it wouldbe unreasonable to refuse consent solely because the LL wanted to do a deal with thatparty. Kendall says reason to erfuse consent has to relate to the protection of the LL and

the ownership of his property. Not for personal taste, convenience or sensibility LL cant get more than bargain Increase in FMV doesnt belong to LL Consent not a way for LL to make more money It must be related to a real property interest It must protect the LL in the ownership and operation of the property

o Not for personal taste, convenience or sensibility of LLo But only for the protection of LL in its ownership and operation of

property of the particular property not for its general economicprotection (see p. 453)

Question 2:Lease expressly prohibits assignments . T1 wants to assign to T2. LL refuses consent tothe assignment since LL wants to enter into direct lease with T2 and capture rentincrease. Sine lease only prohibits assignments, Tenant transfers lease minus one dayafter LL refuses consent to assignment.

What is the issue?

Rule 1 : To determine whether consent required, need to determine if transfer minus 1day is an assignment or sublease.Jurisdictions follow either formalistic rule or look at intentDescribe the rules:Formalistic rule : if transfer all, assignment; if not all, sublease.Intent rule : rule is that characterization/nature of instrument is determined by intent ofthe parties. The words used may be evidence of the parties intent -- not dispositive.Application of facts: Applying formalistic rule, this instrument is a sublease because thefacts state transfer minus a day and a sublease doesnt transfer all. It is not anassignment because not all is transferred. Applying the intent rule, it would most likelybe an assignment because T states that she wants to assign but because LL refusesconsent she instead transfers for all minus a day. Showing her intent to be of anassignment.

If state follows formalistic rule, its a sublease [here the facts indicate the transferwas for one day less than remaining term].

If state follows intent rule, it [might be/probably is/is] an assignment [since that iswhat initial tenant wanted to do in the first place and this transfer was just asubterfuge] . But note that specific words actually used tends to undercut the intentargument. However the question states T wishes to assign to T1.


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Issue 2:So the transfer is a sublease OR assignment depending on jurisdiction. Therefore, weneed to determine if LLs consent was required in connection with an assignment and/orsublease.

Rule 2: The general rule is that the common law favors free transferability. Subleasesand assignments are permitted unless expressly prohibited by lease because of generalcommon law rules favoring free transfer. [Source: common law]. (If there is a provisionin the lease that requires it, well enforce it.). We generally dont read in impliedprohibitions except in unusual circumstances. [See Rowe v. A&P]If however there is an express provision in the Lease requiring consent, then law willenforce the provision and LLs consent is required. [Source: K and common law]restrictions on alienation are permitted and enforceable just disfavored and readnarrowly.

*If the lease says so, it is. If it is, then consent is not required.

Here the lease restricts assignments, but not subleases. Therefore,A: since the lease does not expressly prohibit subleases, tenant may freely sublease.Landlords consent is NOT required because of general common law rules of freetransfer. (Source: Contract and common law) Formalistic jurisdictions***Initial conclusion 1: therefore, in jurisdiction that determines that the transfer is asublease (Formalistic), LLs consent not required and t1 may transfer to t2.

B: Here, this lease expressly prohibits assignments and the common law will enforce thatprovision. So, LLs consent is required.

Application A: dealing with if transfer is a sublease: ENDApplication B: If in a jurisdiction that determines that the transfer is an assignment, thisparticular lease expressly prohibits assignments. Therefore, LLs consent is required:END (SCENARIO 3)

Is Landlords refusal to consent reasonable?

Rule 3: if LLs consent is required and there is no standard, there is modern rule andtraditional rule regarding LLs ability to withhold consent.

Traditional LL can unreasonably withhold consent for any reasonModern: LL must be reasonable (Kendall)

Application:Here there is no standard of consent in Lease. (Source: lease)If in traditional jurisdiction and jurisdiction determined that the transfer is an assignment,LL can therefore withhold consent for the transfer in sole and absolute discretion


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If in modern jurisdiction (and jurisdiction determined that the transfer is an assignment)LL can only withhold consent for the transfer if reasonable, what are the rules onreasonability?Subrule: factors for reasonability are: (Describe Kendall)

Application: Here (describe facts), therefore LLs refusal to consent is unreasonable sinceLL is NOT basing refusal

Conclusion 1: if in jurisdiction that follows formalistic rule, instrument is a sublease(formalistic). Under modern or traditional, LLs consent not required since the lease issilent on subleases. It only restricts assignments. Therefore, T1 may transfer/sublease toT2. (ROWE)

Conclusion 2: Intent Jurisdiction: and determines assignment, and follows modern rule:re: consent (LL must be reasonable), LL may not refuse consent since LL is unreasonable(economic gain is not a valid reason).

If lease says assignments and subleases are prohibited, no need to figure outsublease/assignment re: intent required. Need to figure out whom LL needs to sue.If prohibited both: Erndst v. Conditt analysis.

Dumpors Rule (Q3) : In jurisdictions following Dumpors rule (consent to assignment 1deemed consent to future unless expressly reserved), if LL sues T1, what result?*Consent is going to keep applying unless you do something.

Representing a LL consenting to assignment, what are you going to advise?Drafting express clause stating T1 agrees that one consent does not result

in further subsequent assignments. T1 needs to seek consent.

**Reason why this clause is in there is to undue Dumpors Rule. Reason you put in thelanguage is so that it does not apply.

LL--------lease------T [Prime Lease: no assign/sublet without consent.] Consent of LL toassignment to T1 (no assumption)

Tenant 1: is there still privity of estate?T1 assigns to T2 without consent?

LL can sue if in Dumpors Rule jurisdiction T1 for privity of K and T2 for privity ofestate.

NY Section 226-b:

Most of which varies by contract

If you have a commercial lease that contains no provision at all, no implied restrictionsRowe v. A&P


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Form of the statute (one para deals with assignments, one para with subleasesdiff rules)*Very first clause: unless a greater right is conferred by the lease, the tenant rentingresidence may not assign without consent from LL, which consent could be reasonablywithheld.*Protection of T: provided owner releases tenant with consent.

Remedy: release (would prefer release than entering assignment), LL can sue us byprivity of K, the whole purpose of getting out of lease is assignment.If reasonable, T not released as T cant assignIf unreasonable, T released but no assignmentNot quite the same as Assignment = OKProvision(6) Any provision of a lease or rental agreement purporting to waive a provisionof this section is null and void.

The Tenant Who Defaults (Self-Help)In this section we examine:Diff rights and remedies of the landlord on two different versions of the world:

Tenant is in Possession: Whether LL can take self help to retake possession (Forcibleentry/change locks), if T is in possession & defaults; and

Tenant is NOT in Possession: Whether after T abandons possession, does LL have aduty to mitigate damages?

Sommer v. Kridel: YES, duty to mitigate Kenneth Cole cases (NY): NO DUTY TO MITIGATE (True in residential

context also)

TENANT IN POSSESSION:

Berg v. Wiley (page 460) Tenant failed to finish remodeling and comply with health code violations and LL

wanted them out Description of Lease: Who is suing whom for what?

o T1 is suing LL What are 2 legal questions?

o Did T abandon/surrender the premises? (p.462)! Review standard for court?

Sufficiency of evidence to support the jurys finding thatBerg had not abandoned or surrendered?

o Not really asking this question. Really asking iftheres sufficient evidence to support jurys findingthat tenant did not abandon?

No error T was still in legal possession (no abandonment; no offer to

terminate lease) Lease is still in effect


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o Was LLs retaking possession lawfully? Is Self-help wrong as a matter oflaw? (p.462)

! Common law rule: LL can use self help to retake premises from atenant-in-possession (without incurring liability for wrongfuleviction) so long as 2 conditions met:

LL must be legally entitled to possessiono Holdover tenant ORo Breach of lease AND lease contains a reentry clause

ANDo Re-entry must be peaceable

Therefore: T may recover damages for wrongful eviction ifeither

o LL not entitled to possession ORo Not peaceable

! LLs argument: no violence, (actual or threatened violence couldgive rise to damages)

How can you have that if tenant was not there?! Holding: Court couldnt resolve this case! What is non-peaceable entry when the tenant is absent?! Whats wrong with LLs self-help?! New standard (growing minority)

Analysis of first legal question: Did tenant impliedly offer to terminate the lease?o If they did, by abandoning, then LL accepts that offer, and cannot sue for

wrongful conviction.o Surrender & Abandonment by a tenant

! Tenants offer to terminate the lease: Express offer (an agreement to surrender) Implied offer (by abandonment or surrender)

! Landlords acceptance of offer to terminate Lease Express (an agreement whereby LL agrees to accept) Implied (are LLs actions inconsistent with or repugnant

to the continuation of the original lease?)o Express agreements satisfy the statute of frauds (in writing)o Implied agreements (examine intent of LL and T; contract standards)

Next Tuesday: Finish this case, and duty to mitigate, and next assigned material (quietenjoyment)


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PROPERTY; CLASS EIGHT: September 24, 2013

In this section we examine:

Surrender & Abandonment by the tenant:o Tenants offer to terminate the lease: ! Express offer (an agreement to surrender)

! Implied offer (by abandonment or surrender)o Landlords acceptance of offer to terminate lease:

! Express (an agreement whereby LL agrees to accept)! Implied (are LLs actions inconsistent with or repugnant to the

continuation of the original lease? Common Law Rule Re: Self Help:

o LL may use self-help to retake premises from a tenant-in-possession(without incurring liability for wrongful eviction) so long as 2 conditionsmet:

! LL must be legally entitled to possession Holdover tenant OR Breach of lease AND lease contains a re-entry clause

! AND Re entry must be peaceable

! Therefore T may recover damages for wrongful eviction if either (i) LL not entitled to possession OR (ii) not peaceable

Courts Holding and Reasoning:o Holding?o What is non-peaceable entry when the tenant is absent?o Whats wrong with LLs self help?o New Standard (growing minority)

Policy reasons having a good alternative that doesnt even allow the possibility ofthreatened force, pushing towards that ALL self-help is wrong.

o Common law rule/Modern Law: this would be a breach of the peace! Self help is never available to dispossess tenant

o Want a higher standard, not a speedier one Written notice and opportunity cure:

o Self help:! Enforceable: If self-help is not available

LANDLORDS DUTY TO MITIGATESommer v. Kridel/ NJ & Kenneth Cole/NY

Facts: Kridel entered into a lease May 19 th notifies LL he was expressly surrendering possession (offer to

terminate) Sommer doesnt allow anyone else to rent it, even though there was inquiry


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Rule: Traditional/Common Law (majority rule): Landlord has no duty to mitigate

o Why should LL have to concern themselves after tenant is given absoluteright

Modern Rule (applied by the Sommer Court):

Analysis: Distinction is not viable Duty to mitigate with contracts Implied duties Basic notions of fairness and equity would dictate LL has this duty Crazy for him to stay by an empty apartment and not collect rent

o Matter of fairness Cheapest cost avoider Plaintiff could have avoided damages Modern motions of fairness (away from Property Law)

LL needlessly increased damages by turning away possible new tenant whowanted to rent out surrendered apartment LL has a reasonable effort to mitigate

o Try to rent the apt as soon as possibleo Advertisements in local newspaper

! Providing proofo Hire a real estate agent to show the apt.o Keep a log of who saw the apartment

! Burden of proof: does LL have to prove that they mitigated or doesthe Tenant have to prove that LL didnt reasonably mitigate.

o Each case judged on its own facts

Tenant will be liable for LLs cost to mitigate Does LL have to rent to anyone? Dont have to accept an unsolved or unsuitable tenant Returns the property to productive use Opposition to duty to mitigate:

Holy Properties v. Kenneth Cole:Landlord has 3 options (page 44, sup.):

Do nothing and collect full rent from T ( no duty to mitigate)o LL is ok with empty spaceo LL is able to collect rent from tenant

Accept Ts surrender (terminating the lease), re-enter premises and relet premisesfor LLs own account (tenant has no liability) ( lease is terminated)

o Rent market is rising o LL wants to capture increase value o Tenant unable to assign or sublease

Notify that LL is entering and reletting for Ts benefit ($$ goes to LLs expenses,then to Tenants rent liability)(tenant still liable) ( duty to mitigate)

o Dceclining market or


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o LL is unable to collect rent from original T o LL doesnt want space empty o This is the Classic mitigation scenario where LL tries to minimize

Ts damages Why pick one over the other?

o The middle bubble (option 2) if rent has gone up, LL can benefit withincreased rent and new tenanto Tenant will be liable for rent difference if rent goes up and LL mitigated

by reletting premises. Economic reasons why you would not want to do nothing Presumably able to collect rent Doing nothing and suing is not a great option Can the parties agree that the LL has to mitigate?

o Enforce K provisions giving LL righto Enforce a clause that says Tenant agrees that LL doesnt have to mitigate

at all?

Next Class: Quiet enjoyment & Marketability

Sept 26 th class cancelled by Professor

CLASS NINE : OCTOBER 1, 2013

Introduction to Breach of Covenant of Quiet Enjoyment

Breach of the Covenant of Quiet Enjoyment Covenant of quiet enjoyment (must prove existence of it)

o Express (in writing)o Implied (common law, judge, court)

Breacho Actual Eviction: when a tenant is physically ousted

! By LL (protect against ouster): under what circumstances areliving conditions so miserable that a tenant chooses to leave?

! By 3 rd partyo Constructive Eviction by LL (protect against actions similar to ouster)o What is Constructive Eviction by LL?

Reste Realty v. Cooper (p. 438) What were LLs arguments?

o Waivero Condition was not a permanent interference with the use of quiet

enjoymento Def stayed too long to prove unlivable conditions

Background facts:o Reste successor to Donigan


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o Joy Cooper is Tenant! 1958 signs lease no.1 for 5 years, using ground floor space for

commercial purposes! 1 year later enters into a new 5 year lease

How did the court respond to Landlords arguments?o Waiver:! Def relied on original LLs promise, cant be a waiver if she relied

on the promiseo Court said def did not stay too longo Flooding not permanent interference

! Court defines permanence: regular reoccurrence and sufficientlyserious

! It was permanent although not constant! It was regular and persistent! Doesnt have to be everlasting and unending! If regular and serious enough to substantially interfere with use and

enjoyment for purpose of lease (in effect, defining constructiveeviction)o Test for constructive eviction was clearly met by above factorso Definition of premises in this lease did NOT include the driveway

Did the LL breach a covenant justifying tenants removal from the premises?o One mode of analysis is.

! Breach of the Covenant of Quiet Enjoyment Express (this lease contained an express covenant-existence

of a promise pg. 486) Implied

o Majority rule: implied covenant of QE in all leaseso Old NJ Rule: no implied covenant simply because

of the LL/T relationship. There must be an expressagreement or use of some words that imply thecovenant. (Note: NJ now has implied covenant ofQE)

So if there is a covenant of quiet enjoyment, was there a breach??? Constructive eviction (pg 486)

o Any act or omission of LL (or anyone acting by, through, or under LL ORhaving superior legal title) which renders premises

o Substantially unsuitable for the purpose for which they are leasedo Seriously interferes with beneficial enjoyment of premises

! Other examples of breach of covenant of QE- pg 486-7! Noisy garbage truck is not a breach of QE bc not in direct control

of LL LLs act or omission (not fixing driveway and/or not properly paving property) Other theories:

o Breach of dependent covenants:! Stewart v. Childs (older case) covenants independent! Higgins v. Whiting (newer case)- covenants are dependent


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! A breach of a dependent covenant is a material failure ofconsideration

K: Promise + consideration (Covenants are dependent) Tenants point of view is almost always paying rent Most important promise is to pay rent Absence of an express provision, most courts will read in

an implied promise in the leaseo Also similar to implied duty to deliver legal and

actual possessiono Implied warranty against latent defects

! (K type argument) Actual eviction:

o 3rd party having paramount title (legal right) dispossesses Tenant! LL leases to T1 (doesnt take possession)! LL leases to T2 (takes possession)! T1 arrives and asserts legal right over T2! Review Hannan Case (pg 439)

Actual Eviction by LL:o LL wrongfully evicts and/or forces T off premises

! Ex. Self help in Berg v. Wiley

Looking at Hannan:o Court made 3 diff points: (when there is no express covenant is there an

implied covenant to possession?)! (1) evicted by LL or someone claiming possession (covenant of

quiet enjoyment)! (2) duty to deliver possession at the commencement date! (3) evicted by trespasser

No question of covenant because it is expressly in leaseo Question of breach:

! Actual eviction by tenant! Actual eviction by LL

Constructive Eviction:o A way of proving the breacho Any wrongful act or omission of LL

! Or anyone acting by, through, or under LL or having superior legaltitle which renders premises:

o Substantially unsuitable for the purpose for which they are leased orseriously interferes with beneficial enjoyment of premises AND (This isthe part that makes it constructive)

o Tenant therefore abandons tenant is required to abandon premises (haveto prove tenant did or did not do something)

! Element of abandoning premises is standard of actual eviction


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! LL so disregarded obligations by either doing or failing to dosomething, it is as if they actually evicted tenant

Abandonment = dispossession (no longer in possession)o Serious abandonmento Have to make sure the party actually left

o Promise to pay rent is the hallmark of a LL/Tenant relationship(commercial or residential)! Promises that were once dependent became independent

Questions on Bottom of Page 491:o Can you have a breach of the Cov QE for a Tenancy at Will?o Is there a breach of Cov QE if:

! LL fails to control excessive noise of neighbors! Cigarette smoke! Criminal activity

o Page 491; Question 2(a):! LL fails to control excessive noise made by neighboring tenants of

T who commonly party long and loudassume disturbance inquestion is not noise but cigarette smoke seeping in. Did LLbreach cov of QE due to 2 nd hand smoke?

First state whether cov of QE is express or impliedo If nothing expressed, law implies cov QE in every

lease Whether there is a breach:

o Actual or Constructive eviction?! No actual eviction! Only way T can prevail is if they can prove

constructive eviction: Constructive eviction is:

o Any wrongful act or omissionof LL (or anyone acting by,through, or under LL) ORhaving superior legal titlewhich renders premises:

! Can refer to statutesto support the act oromission aswrongful

! Noise statute applies

to occupantsthemselves

! Also refer to the leasein question to see ifthey refer to noiseissue

o Substantially unsuitable forthe purpose for which they


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are leased OR seriouslyinterferes with beneficialenjoyment of premises; AND

o Tenant thereafter abandons tenant is required to abandon

premises! Applying rule tofacts: (this is not astrict liability offense)(1) Here we do notknow whether Tabandoned premises;(2) question ofwhether this smokingis so severe/constantit truly interferes with

daily QE: again factsare not indicative ofthis factor; (3) weknow that the LLfailed to control thenoisy Tenants,however factormentions anywrongful act oromission. 2 nd handsmoking might not

equate to wrongful. NY Section 227 (Supp. Page 60):o 227: When tenant may surrender premises:

! Where any building is destroyed or injured by the elements, or anyother cause as to be untenantable, and unfit for occupancy, and noexpress agreement to the contrary has been made in writing, thelessee or occupant may, if the destruction or injury occurredwithout his or her fault or neglect, quit and surrender possession ofthe leasehold premises, and of the land so leased or occupied; andhe or she is not liable to pay to the lessor or owner, rent for thetime subsequent to the surrender. Any rent aid in advance or

which may have accrued by the terms of a lease or any other hiringshall be adjusted to the date of such surrender. (Default statutemaking it fragile and easy to undo)

Now look at Implied Warranty of Habitability Hilder v. St. Peter: Suit for breach of implied warranty of habitability

Court rejects argument that abandonment is a requirement Background facts:

o Lease was a conveyance


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o Provision to deliver (Hannan)o Courts analysis:o Policy Reasons:o New Rule (safe, clean and fit for human habitation housing)o Implied warranty exists for cov. of QE

! Recognized dependency of covenants: Tenant does not have to pay rent when there has been a

breach of an implied covenant For Thursdays class: Tenant calls you up and tells you

theyre living in horrible conditions, how do you translatethe law to advice???

For Thursday: read through Lohmeyer v. Bower

CLASS TEN: OCTOBER 3, 2013

Intro to Coneveyancing Purchas and Sales ContractsStatute of Frauds

Intro to Unit 2: Purchase and Sale of RE

Seller (deed) " Buyer# $$$$

In a lease: The conveyance (transfer) happens in the leaseo LL hereby conveys to T1

Why do we care if theres an enforceable K?o No legal relationship between seller and buyer Pre-K

Trying to pin point at what point LL and buyer in privity of K together First:

o Is there an enforceable promise?! When was the K formed?

Tells us where on the timeline the line can be drawn.o Whats the legal relationship between the buyer and seller after the

promise has been performed? Concept of an allocation of risks:

o Stuff happens Equity allocates some of the benefits of the buyer at the concept stage

o If you get the benefits, you dont get the loss Why even bother with a contract of sale?

o You need to have a closing.o The only way to convey property is through a deed

Contracts of Sale:o Why have a K of sale?


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! No more than conditions and covenants! Contains mutual promises (if it doesnt contain mutual promises,

not enforceable)! Protects the parties! Lock in the price! Only way of locking in price of mutual promise is a Ko Conditions and Covenants

! Closing conditioned upon certain items true and untrue! Subject to Contingent upon! most of the K is a bunch of conditions

o Purpose of Condition?! We let parties set the terms of their promises as long as youre not

attaching the term thats void because its against public policyo Policy goals behind Statute of Frauds:

! Prevent fraud or perjury! Most state has some version of it (varying)! Property lasts a long time! If the K for sale is for purchase and sale of house for $5000 and

property w Hickey v. Green: Payee left blank, issue identifying the parties(Want specific performance)

Payee has to endorse the checko Seller pleads SOF as defenseo Reasonable Reliance, change of position

! Purpose of change of position: Who is suing whom for what? Does the Statute of Frauds apply? Is Statute of Frauds satisfied? Is there an exception to the SOF? Page 506: (Court takes SOF seriously)

o This is equity: a lot of leeway (variety) in how quick a court will takeseriously equity

Example of a court that has a higher standard (variance) Walker case in its enforcement of SOF: Higher bar to find an equitable exception Likely issues in SOF cases:

o Disputes as to what constitutes a writingHypothetical:

In New York, Buyer sees a for sale sign. B says to S that she wants to buy it. Bgives S a $500 check to S as down payment. Later that evening B changes hermind. Can S sue B?

o Opposite facts of Hickeyo Answer under NY GOL 5-703 (page 87)

! Conveyances and contracts concerning real property required to bein writing.


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1. An estate or interest in real property , [other than alease for a term not exceeding one year],. . . cannot becreated , granted, assigned, surrendered or declared, unless--by act or operation of law, or

--by a deed or conveyance in writing, subscribed by the

person creating , granting, assigning, surrendering ordeclaring the same . . .. (Doesnt apply in this hypo):o Deals with property law, can you sign the lease

orally 2. A contract for the leasing for a longer period than one

year, or for the sale, of any real property, or aninterest therein , is void

unless the contract or some note or memorandum thereof,expressing the consideration, is in writing, subscribed bythe party to be charged . . ..

4. Nothing contained in this section abridges the powersof courts of equity to compel the specific performance ofagreements in cases of part performance.

o (Codification of form of possession)o Legislature does not diminish equity powero Standard for equity in NY statute.

! Need a way of computing the price! Exceptions?

Bc timeframe is so short, no time for buyer to havereasonable reliance or incur any irreparable injury

! Answer: If claim is going to fail for enforceability it will be because

lacking an essential term (price)o Some courts will disagree on that matter.

Next Class: Marketable title

CLASS ELEVEN: October 8, 2013

Marketability Equitable Conversion

MARKETABLE TITLE: Different types of title

o Record title! If you went to the land records shows who owns title but not

dispositive of ownershipo Insurable title

! What the title insurance is willing to insure


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o Marketable title! Quality of the title! Common law implies promise of seller to convey title in sale! Buyer can terminate K and dont have to close if title not

marketable

Seller has time to cure prior to closing! Law assures to buyer a title free from reasonable doubt but notevery doubt

! When presented with title problem applying vague standards tosomething specific

! Reasons why you might need a standard of something less thanperfect

Difficult for any transaction to close because the buyerwould always be able to claim imperfection

Recognition that every property has some problemo Standard of imperfection would make it an

impossible standard Marketable Title Defects:

o Chain of title:! Rare but if they happen, almost always mean total title failures! Low probability, high cost if the event occurs (insurance

companies take this onpaying small premium and shifts riskonto 3 rd party)

Fraudulent transfers Forged deed (if you discover deed was forged prior to

closing, you dont have to close) Incapacity Duress Improper acknowledgement Deed wasnt delivered

o The world of encumbrances (much more likely): Reduces value of theproperty

! Third party rights that someone might have relating to (1)monetary, possessory rights, or use

! Monetary: right to money that creates a title problem Lien: (almost always liens) describes certain rights of the

lienholder that give them the right to sell property in

satisfaction related to debt (property matter)o Not recorded in land recordso Mortgage lien (voluntary transaction)o Unpaid taxes (federal and state level)o Mechanics liens: particular kind re: someone doing

work on the house Mortgage

o If theres no debt, mortgage is meaningless


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! Possessory: (tenant) Lease

o Important in commercial real estate because valueof property is relative to lease

! Uses:

Easemento If your neighbor has an easement across your

property to get to the lake, it interferes with the useo (Cannot be a nuisance because thats a tort)o Zoning law not an encumbrance (not a third party

private right ---law of general applicability)! One of the reasons why every buyer will be able to walk away! (not leaking roofs, ugly paint, people moving in next door) has to

be something about the title that causes the reduction of the valueof the property

o Encroachment:

! An illegal intrusion upon property! Something physical built on some property that you dont own Fences Air conditioners hanging over property line Garage

! Example: Owner of Lot Bs garage encroaches on lot A

o Is lot A unmarketable?! Yes, because B is encroaching onto Lot A

o Is Lot B unmarketable?! No. There may be a problem though. Lot A

could go to court and force Lot B to movehis garage. But B owns all of lot B

A cannot interfere with Bs use ofany portion of whats inside his lotsquare

Lot A Lot Bo o o o


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o As ability to sue b with the overhang is not a righttitle of interest that A has in Bs property

o A only has a right of exclusive possession! *There will be a question on this*

o As property unmarketable because the piece of garage interferes with useo An unrecorded deed suggests possibility of litigation because you dont

have titleo

Visibility is impt. component because it gives the justification! Invisibility is a tough standard Common law definition of marketable title is implied in all contracts

o Default rule is implied in the K! Free transferability (whats not prohibited is permitted)

o If every title has an encumbrance, every buyer has an option Contractual variations on the standard of marketability:

o Under what circumstances can the buyer rescind (lawfully terminate,refuse to close, etc.)

o S covenants to deliver marketable title: very buyer friendlyo S covenants to deliver marketable title, subject to the recorded citibank

mortgage (smaller than 1) Buyer doesnt have to close if anything otherthan citibanko subject to all encumbrances of record creates a smaller exception

(Cannot use an encumbrance of record to get out of closing)o subject to all encumbrances very limited on buyer having the right not to

close Lohmeyer v. Bower:

o S covenants to deliver marketable title, subject to all encumbrances ofrecord

o Court reformulated what was expressly written to make it read: Scovenants to deliver marketable title, subject to all encumbrances of

record (so long as not violated)! But it is not that version because it was silent.o This court read into K to mean so long as not violatedo What did K say?

! Free and clear of all encumbrances except taxes, subject however,to all restrictions and easements

o Restrictive covenant renders title unmarketable because it interferes withuse

!"#$%

&'('&%


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o Encumbrance of record if not violated was read into ito Problems of the property:

! Zoning violationo Mere existence of restrictive covenant makes title unmarketable:

! In the absence of an agreement to contraryall restrictive

covenants make title unmarketable! Could write K diff. saying buyer only has to close if ..o Mere existence of zoning does not render title unmarketableo Violation of zoning and violation of restrictive covenant make title

unmarketable! Violation NOT mere existence

o This case is not the end all dealing with marketabilityo A K case where they read in so long as not violatedo Need to determine whether to read in so long as not violated or noto Mere existence of a restrictive covenant renders title unmarketableo This case changed the standard by reading in so long as not violated o

K at issue read in so long as same have not been violated ! If you put in the standard court cannot undue that so easily ! In absence of something, court can sometimes read in additional

terms

Thursday:10 minutes on Equitable ConversionBrown case, etc. (2 classes of material)

CLASS TWELVE: OCTOBER 10, 2013

MarketabilityEquitable ConversionDoctrine of MergerDeeds

Marketability: The standard of title the seller needs to deliver at closing which is impliedin all contracts of sale.May be modified (common law default rule)Standard less than perfection

What renders title unmarketable:

Chain of title defecto Forge deedo Encumberances (more likely)

! Dont result in a total title failure decreases value of property! Right title of interest in someones property! Title typically relates to $ possession or use

Mechanic liens Judgment liens


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Mortgages! Possessory rights:

Releaseso Easementso Restrictive covenants

! Encroachment! Standard modified by K (infinite number of possibilities) 5 standard examples

o (which is more seller friendly vs. buyer friendly)o which direction youd want to move negotiation

! Buyer: Seller offered v.2. that is good from

buyers point of view Lohermeyers case:

o K Sets up all encumbrances of recordo Read in so long as not violated

! Treated K as if it was written same was as K v.3. Applied rule: (not general rule of marketability)

o Marketability (general rule): all things rendered titleunmarketable

o But for this particular K, buyer doesnt have toclose if seller does not deliver marketable title butcan deliver title of record

! Court added so long as not violated! If there was any encumbrance of record that

was violated, buyer didnt have to close Similarly if encumbrance not of

record, that would not be picked upeither

o Exception (sellers promiseto deliver marketable title) ismodified by encumbrances ofrecord

o Anything else not of record,would give buyer opp. Not toclose bc seller promised todeliver marketable title

! Encroachment is notan encumbrance ofrecord

o Once Court said so long asnot violated rest. Cov. Wasviolated and loh. Could getout of K


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o Violation of zoning code inthis jur. Also is anencumbrance title notmarketable

! NOT TRUE

EVERYWHERE*PRINCIPALLYNEW YORK

o Absence of a K provision, the mere existence of a restrictive cov. Renderstitle unmarketable

o K clause that they signed said subject to all easements and encumbrancesof record mere existence is not enough to give buyer an out

! VIOLATION of it, rose to the level and not included in Klanguage that the buyer wouldnt have to take subject to thesematters because they were violated once read in conditions solong as not violated

Only have to take subject so long as not violated This K is v.3. although written v.4.

o Only in absence of anything related to violations isCourt able to read in so long as not violated

! Had parties written in expressly even ifviolated no doubt buyer wouldnt have toclose because he agreed to take even ifviolated

! Where nothing in K re: whether covenant orencumbrances could not be violated, courtread in so long as not violated

Read in reasonability in the absenceof saying you can be unreasonable

Re: marketability question:o K provision thats absolutely silent as to marketability (probably wont

have that not difficult, seller has high standard and buyer would alwaysfind something)

o Asked to answer marketability question:! Go hunting for K provision that applies! K interpretation:

Does your K clause give buyer right to refuse close becauseof marketability OR do they still have to close

notwithstanding (depends on how its written)o Leaking roofso Noisy neighbors

! Not render title unmarketable If value of property declines because

it is not a marketable title problem Its a PROBLEM but NOT

marketable title.


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Not mere existence of encumbrance that renders titleunmarketable its the VIOLATION

o All encumbrances render title unmarketable but Kprovision changes our standard (cant closenotwithstanding the fact that property unmarketable

bc you agreed to take property subject restrictionsof record)! Try not to confuse Loh. Holding dealing

with this K provision clause with generalprinciples of marketability (all these thingsrender title unmarketable)

Equitable Conversion: Some property law magic happens moment of time K of saleis signed (everything else happens at closing: what to do to have effective transfer orproperty).

Property law concept: at the moment in time that you have an enforceable K ofSale: whether you have closed yet, (probably havent because typically of K of

sale at closing)o Equitable title of sale passes to the buyero Mere legal title remains with the seller

! Why: Equity considers what was promised to have been done, ashaving been done

Considers what you promise to do in the future as if youalready did it

Equity is la la land considers what you promise to do ashaving been done

o Why we allow specific performanceo Consequences: deals with issues of loss (why do you want a K of Sale in

the first place: because stuff happens)! Dont know if property worth more or less at closing (hopefully

worth same)! Things happen during executory period:

Ex. Fire damage General market conditions (interest rates lower)

! Under common law: if EC occurs at moment of time that you haveenforceable K of sale, equity is treating as if the closing happenedat the K signing (didnt actually happen)

Questions re: who bears the loss/risk: treat it as IF IT DIDhappen

o Only fair that buyer gets both downside and upside! Ex. 100,000 K, property goes up to 120,000

buyer still pays $100,000 Court says fair to get both

down/upside How do you protect yourself against

fire damage? (property originally


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worth $80k) inefficient to requireboth parties to get insurance

o Issue during executory period: things happenaffecting value of property

! Common law doctrine of EC: closing in effect equitably occurred,

buyer will get treated for benefit as well as downside Characterization issues: are u going to characterize sellers interest as a realproperty interest or buyers interest as real property interest

o At moment ec occurs: buyer deemed to have real (equitable) propertyinterest. Seller has K right to receive proceeds at closing.

o Ex.: Grandpa signs K, and dies during executor period and will says leavereal property to randy and personal property to peter:

! Under EC: must determine if Grandpa was seller: did not havereal property interest, he was title holder, just had a right toproperty proceeds. Peter would be entitled to $$ at closing, notRandy. Simple characterization issue (multiple choice questions

on final).! K says one person gets real property and the other gets personal Only relevant if will treats real/personal property

differently Wills treat real/personal property differently Certain legal issues that are unique to real that arent true

for personal property interest! If Grandpa was the buyer and dies during exec. Period:

(Wrong answer): does grandpas death terminate K? Nomore than an assignment terminates the lease. No morethan any property transfer has any effect on K

o Only thing that affects is full performance, etc.NOT DEATH

o Can write in K this K is terminated if party dies:not fun though.

Randy would get property at closing (estate has to pay forit)

Important thing: Remember what equitable conversion is: Splitting of equitableinterest (real property with legal title interest)

o Another way we see that various parties have bifurcated rights in thesame leased land

o Ex.: each buyer/seller has diff interest rightsDoctrine of Merger: What happens when buyer accepts Deed at closing. Act ofaccepting deed is considered to be evidence that the buyer is deemed to have beensatisfied with sellers obligations. At that moment in time, K merges into deed. Atthe point of closing, only legal relationship left between seller/buyer is in deedbecause property law doctrine of merger. Deed may/may not contain promises.

After closing youre back to where you started from with no legal relationship?


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o Not exactly because seller has continuing liability with any promises madein deed, or K of sale, fraud, or tort, nondisclosure, misrepresentation, lyingstealing, cheating, etc.

Deed may or may not contain covenants and only those covenants that buyer willbe able to use in order to sue seller after the closing.

If buyer wants to sue seller during exec. Period, based on K of sale. Onlydocument both signed.o Buyers dont sign deed

! Deed: instrument of transfer may/may not contain promises.! If buyer discovers property unmarketable after closing, can they

sue seller for marketability problem after closing? No. bceverything seller promised during exec. Period is deemed satisfiedat closing.

! Marketability wont come to the rescue, other legal theory,promise in deed, fraud, title insurance claim but NOTmarketability.

! MC answer inviting you to choose it for title issue after closingRUN AWAY: because impossible. Marketability only has ameaning during executor period.

All promises after closing are deemed merge. Why have a deed in the first place?

o We like having a merger: if there is a dispute after closing, simplifieswhere you have to look to see if any agreement exists between seller/buyer

! What do we need in order to have a transfer of property: Deedbecame substitute of livery (delivery) of seisin (possession)

! Before SOF (statute of uses) the way people transferred property,they would have a ceremony:

Seller would pick up dirt with a twig and hand it over tobuyer, bring neighbors to witness it.

! Statute of Uses (1536): you may use a deed to transfer property! Prior to 1536, had to do dirt thing livery of seisin! SOF: Deed must be used, it is required! NY Statute: Have to have an instrument of writing signed by

grantor (buyer doesnt have to sign it) Identify parties Identify land

! If Grandpa signs a deed: has property been transferred? Deed has to be delivered to grantee or someone acting on

behalf, and has to be accepted (because propertys have tohave value)

o Dont have to accept deed.o Typical circumstances: presume acceptanceo But MAKE SURE PARTY DELIVERS IT

! Transfer does not happen moment signedname


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o Dont have to record deed, acknowledge it, ornotarize to have effective transfer

o Malpractice not to record a deed, but as a matter ofproperty law, deed is not required to be recorded.(makes good sense) but doesnt have to be

! Once signed deed and delivered to party, have an effective transferof property

! Personal property: no need to have writing because it is movable! Ks of sale: governed by regular K law (consideration, offer,

acceptance, etc.)! To have a transfer of property: no need to have above, can happen

as a result of a gift (often)! Property system has gone from ceremonial (dirt) to paper oriented

(SOF requiring deed and its delivery)! Changing doctrine because its based on livery of seisin (which is

outdated)o

EC: K of sale stageo Merger: act of delivering deed (full performance of K)o Deed being required in order to effectively transfer property (Statute of

Fraudsthe only way)! Deed says hereby transfer lot 12

Hand over to whomever transferring property to Deed may/may not contain other promises Deed contains no promises (quit claim) instrument of

conveyance Two more common:

o Full warranty deedo General Warranty deed (GWD): Contains the

MOST promiseso Bargain and sale Deed (NY calls it special warranty

deed or covenant against grantors acts)o Real estate forms (supplement)

! Practitioner in NY Form: In presence of (not legally required, no witness, notary,

etc., no colored ink) Distinguish full covenant deed vs. others are the promises

contained:o Present covenants and future covenantso Name of Buyer/Sellero Grant and Leaseo Consideration of $1

! Recording statute only protects bona fidepurchasers, put it in to get benefit

o Has to be signed by seller and deliveredo Promises contained in paragraphs: (treated as 3

present and 3 future)


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! Present covenants: Covenant of Seisin: often goes hand

in hand with right to convey title (sosimilar) I owe the land and havethe right to transfer land

Covenant of Right to Convey Title(see above) Covenant against encumbrances

(property is free of encumbran

property notes fall 2013

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