PROPERTY FALL 2013

Table of ContentsLandlord-Tenant Law............................................................................................................................................................3

Types of Leases.................................................................................................................................................................3

Creating a Tenancy............................................................................................................................................................3

Assignments and Subleases...............................................................................................................................................3

Landlord Duties/Tenants Rights and Remedies.................................................................................................................4

Termination of Tenancy....................................................................................................................................................5

Fair Housing......................................................................................................................................................................6

Civil Rights Act...............................................................................................................................................................7

Fair Housing Act of 1968...............................................................................................................................................7

Real Estate Transactions.......................................................................................................................................................8

The Sales Contract.............................................................................................................................................................8

Marketable Title................................................................................................................................................................9

Duty to Disclose.................................................................................................................................................................9

Implied Warranty of Quality..............................................................................................................................................9

Deeds..............................................................................................................................................................................10

Real Estate Finance (Mortgages).....................................................................................................................................10

Recording........................................................................................................................................................................11

Title Insurance.................................................................................................................................................................11

Nuisance Law......................................................................................................................................................................12

Coase Theorem...............................................................................................................................................................13

Calabresi/Melamud.............................................................................................................................................................13

Wills, Estates, Present & Future Interests...........................................................................................................................14

Wills & Trusts..................................................................................................................................................................14

Freehold Estates & Life Estates.......................................................................................................................................15

Defeasible Estates...........................................................................................................................................................15

Future Interests...............................................................................................................................................................16

Rule Against Perpetuities................................................................................................................................................18

Common Law/Marital Property and Community Property.............................................................................................23

Marital Property (dominant system)...........................................................................................................................23

Community Property...................................................................................................................................................24

Equal Protection..............................................................................................................................................................24

Eminent Domain, Takings, and Zoning................................................................................................................................25

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Eminent Domain..............................................................................................................................................................25

Takings............................................................................................................................................................................25

Zoning.............................................................................................................................................................................28

Personal Property................................................................................................................................................................28

Finders.............................................................................................................................................................................28

Gifts.................................................................................................................................................................................29

Adverse Possession.............................................................................................................................................................30

Servitudes...........................................................................................................................................................................31

Easements.......................................................................................................................................................................31

Covenants........................................................................................................................................................................32

Common Interest Communities......................................................................................................................................33

Intellectual Property...........................................................................................................................................................34

Jurisprudence......................................................................................................................................................................34

General Property Themes...................................................................................................................................................35

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Landlord-Tenant LawTypes of Leases

Term of Years: lease continues until designated period ends WITHOUT need for notice Periodic Tenancy: lasts for initial fixed period (like 1 month) and continues for additional equal periods until

lease is terminated with notice Tenancy at Will: either party can terminate the tenancy, no fixed duration, no notice Tenancy at Sufferance: arises when T holdovers after termination of lease.

o L can evict or renew tenancy.

Creating a Tenancy Modern lease = combination of K and conveyance.

o Statute of Frauds applies: if lease is > 1 year, then must be in writing. Delivery of Possession

o American rule (minority): L’s only duty is to deliver legal possession. T’s responsibility to sue/evict holdover tenant.

Policy: efficiency argument – less economic waste (T’s interest to evict and more direct relationship to holdover T)

Hannan v. Dusch : P signed lease but another T occupied apt. L did not evict. Ct went with American rule because no express covenant creating L responsibility.

o English rule (majority): L’s duty to deliver actual and legal possession. Implied covenant: T would not enter lease if did not assume vacated premises Policy: L has superior ability to ensure property is vacant. L is least cost avoider.

Assignments and Subleases Assignment: transfer the enter interest in T’s part of estate (PE with L). Transfer can be under different terms. Sublease: transfer less than T’s remaining interest.

o Sublease doesn’t impact L-T relationship. Creates L-T relationship with T-S(sublessee)o L’s powers over S despite no legal rel’p: create K w/ S, evict T (so evict S), L sues S and other S’s as 3rd

party beneficiary Tests for assignment vs. sublease: has T retained any interest? What are parties’ intentions? Privity of Estate: Rel’p between L and person land was conveyed to.

o PE can only exist with ONE PARTY AT A TIME per Ko L can sue A if A breaches

o Affect use and enjoyment of land (touch and concern of land), actual/implied notice – assignee must know of covenant before acquiring interest, must clarify whether L&T

intended to extend to assigneeo Assignments: L-A. Subleases: L-T, T-S.

Privity of Contract: Rel’p between the parties responsible for K (can still exist without PE)o Assignments

L-T have PK unless novation (T1 and L release T from master lease) T-A have PK . T can sue A for indemnification if he pays because A broke lease. L-A have PK. if A assumes conditions of master lease. Then, L can sue A as 3rd party beneficiary

for recovery.

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Creates liability for breach PK remains until end of lease unless L grants T novation o Subleases

L-T and T-S. If S assumes conditions of master lease in agreement with T then also L-S

o Limits on transfer (Consent to assignment) Unless a lease expressly limits assignment or sublease T has free alienation. Most leases have

restrictions. Courts interpret restriction narrowly (if no assignment, sublease still allowed)

Limits on L’s power to deny consent Absolute prohibition on assignment (courts allow but disfavor) Assignments granted at L’s “sole discretion” Commercially objectively reasonable: requires commercially reasonable reason to deny

consento Kendall v. Pestana: P wants to buy interest from sublessee for airplane hanger

space but D unreasonably refuses to consent to assignment without increase in rent and other terms. Court required consent unless reasonable objection.

Policy: favors alienability of property and upholds K implying good faith and fair dealing

o Commercially reasonable factors: financial strength, building image, lessee might not succeed or is not financially responsible, legality, need to alter premises, nature of occupancy (office, factory), competition with L’s business interests in the same building

o Not commercially reasonable: personal taste, convenience, sensibility, higher rent, ethically opposed

Cannot violate anti-discrimination laws Remedies: A breaches, L can sue L or A. If L transfers future interest in land, tenancies go with the land/ new L

Landlord Duties/Tenants Rights and Remedies L has overwhelming bargaining advantage in apartments because L is repeat player

o Housing is increasingly decentralized because increase in number of housing ownerso Ex of unenforceable clause: Confession of Judgment clause: T agrees in advance to admit wrong to court

in future suito Unenforceable provision illegal lease

Commercial leases: caveat lessee: “Let the Tenant Beware”: losing relevanceo T has duty to maintain unless lease provision assigns repair to Lo L only has to deliver possession and not interfere with T’s possessiono T cannot move out if L damages, but can sue L for damages

Covenant of Quiet Enjoyment: implied covenant where L agrees not to interfere with T’s use and occupancy. Right not to be legally disturbed in your own leased premises.

o Constructive Eviction: if quiet enjoyment interrupted, T can move out and stop paying rent as if evicted Based on arising conditions preventing intended use Elements: 1) L’s wrongful act/failure to control condition 2) substantially interferes with QE 3)

was not part of original agreement between L&T 4) creates condition of constructive eviction

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Procedure: T must give notice, reasonable time to correct, vacate within reasonable time Remedies: Leave & recover damages (additional cost of relocating and renting a similar unit),

Stay & damages (value of premises – value as is, or rent - % decrease in value) Reste Realty v. Cooper : D claimed constructive eviction against P suing for rent. D leased

premises from P. Premises were continually flooded by rain runoff on driveway of P’s property. Court held constructive eviction: substantial breach of quiet enjoyment.

Implied Warranty of Habitability: only applies to residential leases. L has burden of repair, regardless of lease provisions

o Policy: increasing number of urban dwellers increase tenant rights. Tenants are not skilled in repair or negotiating leases.

Cons: reduces quantity of affordable housing because L incurs extra costs (Posner in Chicago)o Test: would a reasonable person find the premises uninhabitable, definted by

local housing codes and fitness for human habitationo Hilder v. St. Peter : P moved into apt owned by D. Apt was in poor state (broken toilet, no key, etc.) D

failed to fix, P fixed at own expense. Court held IWH.o Procedure: Provide L with notice of problem, allow reas. Time to fix, prove defect, take remedyo Remedies: rescind lease, reformation (remake K), compensatory/punitive damages, stay and withhold

rent, repair and deduct Constructive Eviction vs. IWH

o CE: more commercial, fewer remedies, broadero IWH: more residential, more remedies, narrower

Termination of Tenancy Residential leases favor tenants, but commercial favor landlord. Periodic tenancy: L&T can terminate for any reason Term of years tenancy: L terminates if T materially breaches lease covenant Methods of termination

o Surrender: T leaves premises and L accepts. Mutual agreement to release possession.o End: lease comes to normal endo Abandonment: T vacates 1) without justification, 2) lacks intent to return 3) defaults on rent. T still liable

for rent. L’s rights:

Common law:o Leave premises vacant and sue later for accrued rento Mitigate damages by reletting premises to new T. Sue T1 for unpaid amount.o Terminate lease.

Modern approach:o Acceleration clause: leave premises vacant. If T abandons, make all future rents

immediately payable (increasing jurisdictions discourage this)o L must make reasonable efforts to mitigate or damages will be reduced by

mitigation amount Policy: waste of unused resources, L least cost avoider, L better situated

to fill unit, better for apartment to be occupied Con: L shouldn’t be forced to accept or find replacement tenant.

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L must prove reasonable effort through: Advertising/offering/showing unit Market rent for comparable units Time remaining in original lease Cost of preparing property

L can recover even if efforts to relet are unsuccessful. If replacement unwilling to pay fair market value, do not have to relet.

CA rule: abandonment = anticipatory breach of K. full balance of upcoming rent due, discounted by mitigation of reletting

Sommer v. Kridel : T’s engagement broken and offered to surrender leased premises to L. L leaves vacant and does not take measures to mitigate. Court held must make reasonable attempts. (Legal changes of lease as K, not conveyance anymore.)

o Eviction: for tenancy at sufferance/holdover tenants If T defaults on material conditions in term of years or on lease obligation in periodic tenancy, L

can evict Cannot evict for discrimination or retaliation

Self-help eviction is discouraged. Policy: encourage summary proceedings to speed up litigation. Encourage judicial

process. Self-help gives L too much power over T and had potential for violence. Force: Traditional English rule allows L to use reasonably necessary force. Peaceable: modified view: L can retake possession through “peaceable” methods only. No self-help: most jurisdictions prefer this now

o Berg v. Wiley : T leased space from D to operate restaurant. Violated lease provisions like health codes and D’s demands for notice of remodeling. D changed locks and confronted T. Ct held P didn’t abandon, D can’t use self-help.

Unlawful detainer: notice to quit or fix breach in 3 days. Summary eviction proceedings: L gives T notice of eviction and opportunity to fix or leave.

Fair Housing (California’s Fair Housing law covers more than Federal FHA. (if exempt from federal, probably still covered/must comply according to CA’s law.)

No discrimination on basis of race, sex, ethnicity, national origin, age, religion

Covered by Act? §3601 (Fair Housing)

§1982 (Civil Rights Act)

Race Yes YesNational Origin Yes Yes (not explicit. It meant race. Today, it means national

origin)Gender Yes -Families/disabilities Yes -Exemptions - YesBroad enforcement options? Yes -

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Civil Rights Act Civil Rights Act 1866: prohibits private discrimination of race or ethnicity in rentals or sales of real property

o Only bars intentional discriminationo Jones v. Mayer : 1982: Civil Rights Act applied to private transactions

Fair Housing Act of 1968o Prohibits private discrimination in sale of rental of residential housing on the basis of

Race, color, religion, national origin (not same as language), people with children (familial status), sex, handicap

Implicit: failure to make reasonable accommodations for person to have equal opportunity to housing is illegal (ex. ramps for wheelchairs)

Disabled can make changes at their own expense. L can require return to original state before end of lease.

o DOES NOT prohibit discrimination on marital status or sexual orientationo EXEMPTIONS:

Sale or lease by owner of single-family dwelling (owns < 3 houses) Owner occupies rental housing w/ 4 or less units Purpose: to discourage discrimination for people who are in the industry of housing but still

allow autonomy for individual homeownerso Actions prohibited

Refusal to sell or rent after bona fide offer Refusal to negotiate Make unavailable or deny Discrimination in terms, conditions, facilities, services, etc Making, printing, publishing indication of preferences or discrimination Misrepresenting availability (not showing one unit to minority and showing it to a white

“tester”)o Remedies: violators subject to injunction, compensatory and punitive damages

Buchannan v. Warley 1917: banned zoning ordinances that resulted in racial zoning Shelley v. Kramer 1948: struck down restrictive covenants. Can’t be enforced by court. Index of Dissimilarity (professor’s paper):

o percentage of a city’s blacks that would have to move for integrationo 100 = apartheid, 0 = complete integration. Housing segregation hasn’t changed much. Discrimination is

more subtle. Proving discrimination

o Disparate treatment: focuses on Δ’s intent and how individual applicant is treated.o Disparate impact: focuses on discriminatory effect of Δ’s policy. (π must show Δ pursue policy that

disproportionately affected protected groupo Damages: average recovery for racial discrim = $100k.

Determining Fair Housing violationso Violation of §3604?

If yes, does Δ fall into exempt categories?o even if exempt, has Δ engaged in discriminatory advertising

if yes, there is a violation, regardless of exemption

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o even if exempt, has Δ engaged in racial discrimination? If yes, Δ violated Civil Rights Act Civil Rights Act (§1982) does not apply to discriminatory advertising

Affordable Housing issueo Chicago Board of Realtors v. Chicago : L sue Chicago over legislation passed to protect tenants (rent

control, IWH, etc.). Court sustained ordinance, Posner dissented: Each provision decreases efficiency. Less $ for L.

Low-income housing market will shrink Housing quality tradeoff with affordability Rent control = inefficient allocation of resources and no reasonable rate of ROI

Real Estate TransactionsThe Sales Contract

1. Finding a Buyer Seller’s brokers enter into listing agreement.

Issue: Seller’s brokers are on commission for each house they sell – biased towards making the sale with buyer – toes line of fiduciary duty

Brokers have fiduciary duty to their principal act in their best financial interest Licari v. Blackwelder : P’s inherit house and gets broker to avoid selling to neighbor. Broker sets up buyer

who buys for low price and then sells it to unwanted neighbor for significantly more. Broker made profit and violated fiduciary duty.

2. Execution of K to Purchase Comply with Statute of Frauds

Essential terms (parties, intent to buy/sell, purchase price/financing plan, description of property) – need not be formal or in single document

In writing Signed by party against whom enforcement is sought Exceptions:

Part performance: oral K + reasonable reliance Equitable estoppel: enforce oral sale K if buyer reasonably relied to his detriment on the

seller’s oral agmt to sell Leases < 1 year

Open escrow account and hire escrow agent (fiduciary duty to buyer and seller)3. Inspection

Physical condition of property, state of title4. Financing contingency (down payment, 30-45 contingency), Earnest money from escrow (usually 1% of

purchase price given to seller at time of signing of K – usually refund if inspection issue but not financing issue), title info, title insurance

5. Closing Seller executes/delivers deeds, pays brokers, wraps up mortgage

6. Remedies for default: Specific performance: abatements for defects Rescission: buyer recovers partial payment if seller breaches, seller can find another buyer if buyer

breaches

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Damages: benefit of the bargain (K price – fair market value) or seller keeps buyer’s deposit, or buyer receives some expenses back if seller breaches in good faith

Marketable Title Implied covenant of marketable title – legal title only, not physical condition of land

o Seller really owns propertyo Seller’s title is absolute and not shared with otherso Property is not subject to legal liabilities

Encumberances include: easement, covenant, lien, mortgage obligations, future interests/leaseholds/current shared interests

o Permissible encumberances: insignificant blemish, public land use regulations (or zoning ordinances), building code defects, visible encumbrances

Also cannot have restrictions exposing buyer to litigation, lower property value, property uninsurable, violation of zoning ordinance or covenants

o Lohmeyer v. Bower : P bought title from D. P discovered zoning violations. Ct held violations unmarketable title.

“Subject to encumbrances on record” – buyer waives protection that seller’s title is absolute and not shared with others. Also gives up protection for existing restrictions like easements. Still protected from unrecorded/unknown encumbrances.

Remedies: buyer must notify seller of title defect and allow time to fixo Buyer can sue seller and be excused from perfoming K or seek damages (like abatement of purchase

price, recovery of down payment)

Duty to Disclose Old Rule: Caveat emptor “let the buyer beware”

o BUT seller cannot intentionally misrepresent or actively conceal (commit fraud) Modified caveat emptor

o Latent defect is difficult to discover ANDo Seller creates conditiono Stambovsky v. Ackley : seller created haunted reputation of house but did not disclose to buyer.o Johnson v. Davis : seller did not disclose water leaks in house to buyer

Policy consequences: seller has better information – least cost avoider (buyer doesn’t have to pay for inspector)

Implied Warranty of Quality Accompanies sale of new home by people in the business of building (contractor, developer, etc)

o Allows buyer to recover if builder did not exercise standard of skill/care exercised by professional builders

Negligence standard: if negligent workmanship, buyer has cause of action. Cause of action also extends to subsequent buyers Property rule: liable for x number of years after work is completed (generally 6 years)

o only applies to residential, not commercial buildings. Commercial buildings are protected under contractual provisions.

Deeds Consummates the land transaction.

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Three types:o Quitclaim deed: relinquishes any title he may have (even if doesn’t have any interest) – like easement.o Special warranty: fee simple transaction. Most common – guarantees seller has done nothing to

compromise title – buyer is getting what seller got when seller acquired property.o General warranty: absolute guarantee of title. Buyer has full ownership – places huge liability on seller.

Valid deed requirementso In writing – SoFo Signed by grantoro Grantee/grantor must be namedo Contain words of conveyanceo Description of propertyo (Effective upon valid delivery – intent to transfer interest)

Deliveryo Requirements for valid delivery

Words or actions of conveyance Intent to IMMEDIATELY transfer interest (transferring at death/future interest doesn’t count) BUT delivery is presumed if

Grantee has physical possession of land OR Deed is recorded

Sweeney v. Sweeney : Maurice and his brother deeded Maurice’s home to each other. Held: valid delivery of second deed, so Maurice owned it at time of death. <= Maurice was fraudulent, but not considered by court.

Forgery: ineffective to transfer rights to subsequent purchasers (even if bona fide) Fraud: if bona fide purchaser, purchaser gets title and original owner has cause of action against person

committing fraud Death: if grantor dies before delivery, then revoked at seller’s death. Donor gives signed deed to donee: admit evidence of whether present transfer intended. If evidence clouds

intent, revoke.

Real Estate Finance (Mortgages) Mortgage = conveyance of interest in real property as security for paying a loan

o Mortgagor = borrower/owner; mortgagee = bank/lender Foreclosure: If the mortgagor defaults on loan payments to the bank

o Judicial foreclosure (some juris) – courts overseeo Power of sale foreclosure (some juris): private process, avoids foreclosure process

Procedure:o Mortgagor receives notice of foreclosureo Right of redemption: original owner can buy back property within statutory period after foreclosure

Another borrower protection: anti-deficiency statutes – limit ability of lender to get deficiency judgment.

o Public auction to sell property to highest bidder Price stands unless it is unreasonable

Murphy v. Financial Development Corp .: property was sold within a few hours of foreclosure. Held: lender has fiduciary duty to mortgagor – must take reasonable

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measures/due diligence to achieve fair value (not fair market value) of property upon foreclosure

o Money from sale pays off first mortgage, then second mortgage, etc If not enough money to pay off debt, possible deficiency judgment against mortgagor.

Predatory Lending: grant mortgage loans with teaser rates – interest rates go up after introductory period. Helps banks avoid checking whether buyers qualify for the true financial burden.

o Commonwealth v. Fremont Investment & Loan : granted many sub-prime loans that gave it the ability to foreclose.

Recording Policy:

o Protects bona fide purchasers from prior unrecorded conveyances and from losing valuable consideration

General rule: First in time: if no one records, first in time winso Exception: Notice and race-notice statute.o Race statute (very uncommon): first to record prevails, regardless of noticeo Notice statute: 1) subsequent BFP who provides 2) valuable consideration and 3) has no notice of prior

interesto Race-notice: 1) subsequent BFP who provides 2) valuable consideration 3) has no notice of prior interest

and 4) records first Types of notice:

o Actual notice: directly toldo Inquiry: reasonable buyer should have asked about property rightso Constructive notice: constructively notified if prior buyer recorded

Shelter Rule: if C buys from B, C is protected whether he has notice of A’s record if B had no notice of A’s title when B purchased from O. B was a BFP and thus had full title ownership rights to convey to C.

o Policy: prevents fraud, encourages productive use/land transfer, penalizes person who was in best position to avoid loss (seller is least cost avoider).

But, raises transaction costs (buyer has burden of doing title search)

Title Insurance Title insurance insures against defects in the record (status of legal title)

o Covers title held by anothero Defect/lien/encumbranceo Unmarketable titleo Insured owner has no right of access to lando Excludes:

Defects that can be found through inspection/survey of land Problems created by insured Defects not in public records Ordinance/regulation on land

Rogge v. Chelsea Title & Guaranty : Rogge purchased land with title insurance from Chelsea. Chelsea’s title search uncovers acre shortage in purchase description. Held: insurer has duty to disclose information affecting buyer’s decision, whether it falls under title search. (discourages malpractice).

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Possible solutionso System of title registration run by state – eliminates title insurance monopolies and reduces costs, runs

risk of ineffective state-run systemo Remove seller & buyer broker – buyer broker is paid on commission of sale so incentivized to encourage

buyer to buy – fiduciary duty conflict

Nuisance Law Externalities

o Demsetz: reduce negative externalities by assigning private property rights Private property better allocates resources and reduces costs of negotiation when internalizing

externalities Weaknesses: ignores benefits of communal property, role of culture/politics Ex) ocean fisheries

o Hardin: reduce negative externalities through social regulation Ex) carpooling

o Merge of Demsetz and Hardin: pollution credits Definition: interference with person’s private use and quiet enjoyment of land Public vs. private nuisance

o Public = activity prohibited by law affects public Aggregation of private nuisance

o Private = activity affecting one person or small set of individuals First in time? Relative economic harm/benefit Cost to remedy Negligence Health and safety

Estancias Dallas Corp. v. Schultz : Schultz’s enjoyment of residence interrupted by AC unit of Estancia’s apartment building. Held: balance of equities test – damage to Schultzes outweighed damage to public from nuisance.

Tests:o Balance of equities: gravity of harm > social utility? (private harm > public benefit?)

Gravity of harm Extent of harm Character of harm (ex: legitimate or malicious) Social value of π’s use Suitability of π’s location Burden on π to avoid harm (first in time – coming to nuisance?)

Utility of conduct Social value of Δ’s use/conduct Δ’s cost of avoidance/prevention Suitability of location

Remedieso Harm > utility injunction on Δ’s activityo Utility > harm damages or no recovery

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o Harm is substantial and unreasonable π receives damageso Temporary damages = damages for past harmo Permanent damages = damages for past and future harm.o Boomer v. Atlantic Cement Co .: Δ creates nuisance by emitting dust and noise from cement plant. Held:

injunction conditioned on paying permanent damages – Δ essentially permanently purchases right to nuisance from π’s.

o Spur Industries v. Del E. Webb Development Co .: Webb began developing residential areas near Spur’s ranch – ranch created nuisance of smell and flies. Held: Spur endangered public health but was first in time. Webb “came to the nuisance”. Use liability rule – Webb pays Spur to move.

Coase Theorem First Coase Theorem: assignment of property rights does not affect the amount of interference – most efficient

user will get the rightso Conditions for theorem to apply (aka absence of transaction costs)

Absence of bilateral monopoly (no two parties are locked into dealing with another) Absence of collective action and free rider problems (parties cannot hold out or free ride) Adequate wealth (parties can buy the rights they need) Knowledge of party’s best interest (what party’s best option is)

Second Coase Theoremo If transaction costs are high assign property interests to party that would buy them.o Court can set “level” of nuisance where marginal cost of nuisance generator = marginal benefit of

abatement for victimo Basically, property right goes to most socially valuable user

First Coase Theorem example: Cap and Tradeo Many parties, no opportunity to free ride, wealthy competitors, knowledge of pollution costs/permit

prices

Calabresi/Melamud Property Rules vs. Liability Rules

o Property rules: assign rights to people that can only be transferred by consent (voluntary transfer) Low transaction costs

o Liability rules: forces involuntary transfer of right in exchange for payment Short circuits negotiations but higher transaction costs

Boomer v. Atlantic Cement Co .: Atlantic paid permanent damages to π - basically a nuisance easement Spur v. Webb : π came to the nuisance – must pay for injunction. Alienability rules: rights that no one can give up, voluntarily or involuntarily Calabresi unifies Coase and Hardin

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Wills, Estates, Present & Future InterestsWills & Trusts

Will disposes of property owned at death – effective upon death. o Requirements

Executed validly Witnessed by 2 parties Exception: holographic will

Valid if in testator’s own handwriting and signed by him and testator is of sound mindo If no valid will intestate

Order of distribution: spouse issue (children) parents & parents’ descendants (siblings) grandparents & descendants

Divide shares based on representation if one person of a generation died

Trust: fiduciary relationship where trustee manages the property in the trust on behalf of the beneficiarieso Settlor: grantor/benefactoro Trustee: holds legal title and can invest/dispose of trust assets.

Can also be one of the beneficiaries

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o Beneficiarieso Creation of trust

Testamentary trust – must comply with statute of wills. Allows for increased flexibility (liquidate trust assets)

Inter vivos trust – interest in real property, must meet SoF. Avoids delay and cost of will administration.

Freehold Estates & Life Estates Fee simple absolute: no restrictions on alienability – infinite duration “To A and his heirs…” Life estate is a freehold interest – ownership for the that lifetime

o Life estate per autre vie: bound by original recipient’s lifetime – becomes measuring life even if sells life estate interest

o Life estate + remainder = 100% fee simple absoluteo Reversion: estate goes back to owner after recipient of life estate is deado Escheat: when you die without hours, title transfers to stateo Cannot commit waste

Affirmative waste: actively lowers property value Permissive waste: passively allows property to deteriorate Ameliorative waste: increase property value NOT considered waste If commit waste on life estate REVERSION

Woodrick v. Wood : Mother has LE with equal remainders to son and daughter. Mother wants to demolish deteriorating barn that is lowering property value. Daughter refuses. Held: for mother because ameliorative waste =/= waste.

Baker v. Weedon : Anna receives life estate and wants to sell part of property for livable income, but grandkids with remainder won’t allow sale. Held: partial sale or agreement with parties.

Ambiguous conveyances: prefer fee simple when language of conveyance is ambiguous – language must be clear to create partial interest

White v. Brown : Lide appointed niece to be executrix of estate and had sister-in-law to live in her home. Home was expressly not to be sold. Held: Lide conveyed fee simple absolute to sister-in-law because intention was not clearly conveyed in will. Not a life estate.

Present value of remainder: value of property / (1+r)^n (n = years to ownership)

Defeasible Estates Can terminate early upon occurrence of specified event or action

o CANNOT commit waste (otherwise reversion allowed) Fee simple determinable

o Creation: “so long as”, “while”, “during”o Duration: automatically terminates when specified event occurso Possibility of reverter – termination estate back to grantoro Ink v. City of Canton : Ink deeded land to city as long as it was used as public park revert to heirs if not

used as park. Held: Ink heirs receive damages but retain possibility of reverter. Fee simple subject to condition subsequent

o Creation: “on condition that”, “but if”, “provided however”o Duration: grantor gets right of entry – option to terminate estate

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o Right of entry: grantor can enter and retake property Fee simple subject to executory limitation

o Creation: future right of possession goes to transferee instead of grantoro Duration: third party interest divests from current owner’s interest

Restrictions on Alienation:o Disabling Restriction: grantee does not have power of sale

NOT allowed – fee simple, GENERALLY NOT for defeasible Allowed – life estates

o Forfeiture Restriction: grantee loses proceeds from sale. Grantor can stop transaction or get proceeds. NOT allowed – fee simple Allowed – defeasible AND life estates

o Promissory Restriction: contract not to sell NOT allowed – fee simple Allowed – defeasible AND life estates

o Policy governing free alienation: Prevents concentration of wealth (like RAP) Land to most valuable use (favoring commercial development and marketability) Favor current generation (past generations cannot accurately evaluate current gen’s interests) Creditors can recover debt

Balancing Test: Restrictions on alienationo Does condition discourage improvements too much?

Better to have broader classification (only for residential > only for cotton farming)o How constrained is universe of buyers?

Specify class of buyers restricted/confined too Is restriction too vague?

Better to be more specific on what is restrictedo How harsh is the penalty for violation?

Better to be less harsh o Does restriction efficiently regulate land-use?o Availability of restriction encourage charity?o Is goal of restriction reasonable and useful?

Future Interests Grantor’s Interests

o Reversion: grantor retains future interest when conveying an estate less than FSAo Possibility of reverter: O retains future interest when creating fee simple determinableo Right of entry: O retains future interest in taking back estate when creating fee simple subj to condition

subsequent Grantee/Transferee’s Interests

o Vested Remainders (immediately possessory at natural termination of prior Life Estate OR term of years – does not cut short prior interest)

Indefeasibly vested remainder: remainder in a PRESENTLY IDENTIFIABLE person. NOT subject to any limitations, conditions, or RAP.

Ex) “To A for life, then to B.”

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Vested remainder subject to divestment: (gets it UNLESS condition violated) remainder subject to condition subsequent (interest can be taken away)

Ex) B: “To A for life, then to B and his heirs, but if B does not reach age 21, then to C and her heirs.”

Vested remainder subject to open: remainder in one or more members of a class that may increase – ID certain but share of remainder uncertain

Note: AT LEAST ONE member of class must exist SUBJECT TO RAP Ex) Children of C: “To B for life, then to the children of C and their heirs”

Contingent remainder: (satisfy condition, THEN gets it) Subject to a condition precedent to become possessory Created in unascertainable person (condition not yet fulfilled) SUBJECT TO RAP Ex) B: “To A for life, and then if B reaches age 21, to B and his heirs” Ex) B: “To A for life, then to B if B returns to France” Alternate contingent remainders: if one party’s interest vests, then the complementary

contingent remainder fails. Contingent remainders can become vested.

o Executory Interest: future interest that divests interest away from another estate/interest SUBJECT TO RAP Can divest a vested future interest OR fee simple determinable Shifting executory interest: divests another transferee

Ex) C divests from B: to A for life, then to B, but if C returns from France, then to C. Springing executory interest: divests transferor

Ex) B divests from reversion: to A for life, then to B if B gives A a proper funeral.

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Present EstatesFuture Interests Held by Transferor

Future Interests Held by Transferees

Free

hold

sFee Simple Absolute n/a n/a

Def

easi

ble

Fees

Fee Simple DeterminablePossibility of Reverter

n/a

Fee Simple Subject to a Condition Subsequent

Right of Entry n/a

Fee Simple Subject to an Executory Interest

n/a Executory Interest

Life Estate

Reversion

Indefeasibly Vested Remainder

Vested Remainder Subject to Open

Vested Remainder Subject to Divestment

Executory Interest

Contingent Remainder

Contingent Remainder

Leas

ehol

ds Term of Years

Other Lease Interests

Rule Against Perpetuities Purpose: prevent living people from having too much control over property after they die avoid aristocracy Rule: A valid interest must vest, if at all, within 21 years of a life in being. must be certain to vest or fail

o 21 years plus any gestation period if can satisfy by pregnancy, RAP is not violatedo Entire class of persons must vest or fail within 21 years must CLOSE and gift vests to EVERY member

in class Process:

o 1) Does RAP apply to the interest? Includes:

Contingent remainders Vested subject to open (unless class closes) Executory interests Option to purchase/right of first refusal

o 2) When does perpetuities period begin? Deeds: effective upon delivery Wills: effective at death Trust: effective at death Inter vivos: effective when irrevocable

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o 3) Is the interest certain to vest of fail within 21 years? Class closed?

o 4) Is there a measuring life that validates the interest? Unborn spouse, potentially having kids after measuring lives die, issue of widow (might have a

different widow and have children after 21 years)o General guidelines:

If going 1 generation past lives in being with interests vesting by 21 probably valid Going 2 generations past lives in being probably void

Exception: to A for life, then to my first grandchild to reach 21. o Valid if devise rather than convey (if creator dead at the time – class of children

closed children are validating lives) Symphony Space v. Pergola Properties : Broadwest sold dance studio to Symphony and rents it back for $1/yr

(tax evasion) and paid for option to purchase at certain numbers of years, some more than 21 years. Held: Violated RAP because cloud of title.

Approaches to Resolving RAP Violationso Cy Pres: make the smallest modification to make interest valido Wait and See: see if it vests within 21 years.

Pros: upholds transferor’s intent, protects transferor from attorney error Cons: impairs marketability of land, ties up wealth from commerce, uncertainty of title

o USRAP: wait and see for 90 years if it vests or fails. If it fails, court can reform document to most closely follow transferor’s intent.

o Separability doctrine: cross out invalid interest and leave remaining interests as is.o Mutual mistake: both parties understand the same thing change to reflect meeting of the mindso Damages substitute for forfeiture: monetary fine.o Dynasty trust: put money in trust and give power of sale. No limit to length of trust.o Generation skipping tax: forces each generation to pay tax encourages each gen to increase wealth

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o Concurrent Interests

Numerous clausus: categories established and virtually finite.

Characteristic Tenancy in Common Joint Tenancy Tenancy in the EntiretyDefinition Each co-tenant owns

fractional share of entire parcel of land

Each spouse owns the whole parcel

Conditions None; default rule Specific intent, vesting, etc.“unity” of interest: 1) acquire title simultaneously; 2) in same deed/will; 3) equal parts; 4) equal right to possess whole

Parties must be married4 elements of “unity”

Equal shares required? No Yes, though this is eroding YesSurvivorship? No Yes YesRestrictions on transfer? No -No, but transfer converts

JT to tenancy in common-JT inalienable (right of survivorship – T1’s interest ends upon death – cannot devise)Swartzbaugh: lease doesn’t sever JTMortgage extinguishes at death

YesSawada: can create shield to creditors

Avoid probate when tenant dies?

No Yes Yes

Avoid taxes when T1 dies? No Yes YesHow to end? One party buys out others

OR petition for partition (Delfino)

Mutual agreement,Party transfers interestPetition for partition

DivorceDeathMutual agreement

>2 parties permitted? Yes YesWidespread? Universal Universal About 20 states (never in

community property states)

Tenancy in Common: DEFAULT PRESUMPTION unless explicitly stated otherwiseo Each co-tenant has an undivided fraction of interest (not necessarily equal) right of possession/use

of entire parcelo Transfer: may transfer part or all of interest without co-tenant’s consento Termination: buyout OR partition in kind/by saleo Delfino v. Vealencis : Tenants in common with Vealencis owning 30% interest and runs garbage hauling

business. Delfino wants partition by sale, but court holds partition in kind. Vealencis pays Delfino compensation for inability to divide property evenly.

Note: court should have calculated value of sale and given Delfino 70% of value.

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Joint Tenancy: must be explicitly stated “to A and B as joint tenants” or “to A and B with right of survivorship” o Each joint tenant owns EQUAL undivided shares in entire parcel

Right of survivorship: at one joint tenant’s death, surviving tenant owns entire parcelo Requires 4 unities

Time: acquire title at the same time Title: acquire by same deed or will Interest: must own equal fraction of estate Possession: must have equal right to possess entire parcel

o Transfer: Virtually inalienable Conveyance severs JT, grantee becomes tenant in common with other tenants, other tenants

are still JT to each other Lease DOES NOT SEVER JT. Mortgage (not treated as conveyance of title but as lien) mortgage terminates when

cotenant dies. (Harms v. Sprague: mortgage died with John. Sprague as joint tenant received entire property using right of survivorship. If Sprague had died first, mortgagee could go after entire property for payment)

Mutual agreement severs JT Partition in kind/by sale severs JT

o Swartzbaugh v. Sampson : Husband leases part of walnut farm to Sampson for boxing club against wife’s wishes. Held: JT can lease interest Sampson assumes all interest rights husband had for lease term.

Wife’s possible remedies: declare nuisance, demand access for conflicting use (if ousted fair market value), partition in kind

o Riddle v. Harmon : Mrs. Riddle had JT with husband but conveyed her share to herself without straw man to terminate joint tenancy. Held: court said straw man is archaic and allowed Mrs. Riddle to convey to herself. encourages fraud

Note: desk drawer deed: Wife could convey to herself and keep deed in drawer. Destroys deed if she survives, deed surfaces if husband survives.

o Joint Bank Accounts: depends on intent of parties, not on bank terms Convenience account: O wants A as JT to help pay O’s bills no right of survivorship Survivorship account: O wants A to have survivorship rights, but no current access Joint tenancy: O wants to make present gift to A of half of account’s funds, as well as

survivorship rights to whole sum Presumptions:

Account funds belong to each party PROPORTIONATE TO CONTRIBUTION unless there is clear contrary evidence of intent

Presumes RIGHT OF SURIVORSHIP unless clear contrary evidence of intento Creditors:

Can seize interest and sever JT during debtor tenant’s life. Interest disappears after debtor tenant’s life.

Tenancy in the Entirety: only exists between husband and wife with right of survivorship.o Requires 4 unities + marriageo Can create creditor shield: creditors of one spouse cannot access this interest because neither husband

nor wife can transfer interest

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o Termination: mutual agreement, divorce, deatho Sawada v. Endo : Mr. Endo gets in car accident but transfers ownership of property to kids before suit is

filed. Court: creditors cannot reach property interest regardless of transfer because of tenancy by the entirety.

Rights and Duties of Cotenants

ACCOUNTING RULES1) If cotenants are in possession, they share operating costs pro rata.2) If 1 cotenant in possession, entitled to contribution IF expenses > implied income (fair rental value).3) if 1 cotenant managing, share net profits with cotenants.4) if 1 cotenant extracting resources, share net profits.5) if 1 cotenant makes improvements, that cotenant receives any resulting gain or bears any resulting loss.6) Necessary repairs treated like operating costs; optional repairs treated like improvements.o Right to possession: each cotenant has right to use parcel

Liability for Rent: NOT liable to other cotenants for rent EXCEPTION: Ouster – cotenant in possession refuses request of another cotenant to

share possession of land can get fair rental value proportionate to his shareo Right to rent, income, profit

3rd parties: each cotenant gets pro rata share of rent from 3rd parties Minerals/natural resources: each cotenant entitled to pro rata income from NONRENEWABLE

resources of lando Liability for Mortgage/Tax Payments

Each cotenant must pay proportionate share of payments that could create a lien on property if left unpaid

Tenant has right to sue other cotenants if he pays more than his share EXCEPTION: cotenant in sole possession: cannot receive contribution UNLESS they

exceed the fair rental value of property for that periodo Liability for Improvements and Repair Costs

Cotenant who pays for these is NOT entitled to contribution UNLESS they have a prior agreement

EXCEPTION: repairs are necessary as operating expense (usually repairs are seen as improvements)

o Liability for Waste Treated like removing nonrenewable resources

o Partition options Property rules:

PREFERRED METHOD: Partition in kind: physical division of property in separate parcelso Owelty: if value of divided land is different, court will order compensation to

offset the difference Partition by sale: use when in kind is impracticable and owners’ interests better served

this way Liability rules:

Partition by sale with compensation

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BEST SOLUTION: Partition in kind with compensation

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CREDITORS’ RIGHTS IN TENANCY BY THE ENTIRETY

Group Rule Governing Tenancy by Entireties

Logic Interest reachable Effect in Sawado

I Husband controls; wife can inherit whole

(now abolished)

Common law interest left intact after Married Women's Property Act

In theory, husband's creditors should be able to reach all but the wife's right of survivorship

Conveyance to children fraudulent; Sawadas can recover almost the whole value of the house

II Both parties can alienate their interest, subject to the right of survivorship of the spouse

Gives woman the common law position of the man

Creditors of either spouse can reach the present interest and that spouse's right of survivorship

Conveyance to children fraudulent; Sawadas can recover at least half-interest in the house

III Neither party can alienate their interest

Gives man the common law position of the woman

Creditors cannot reach any of the interest, unless both spouses are involved (i.e., both are tortfeasors or joint debtors)

Conveyance arguably ok; Sawadas barred from recovering while Mrs. Endo is alive

IV Either party can alienate their right of survivorship

Protects the inviolability of the tenancy during the lifetime of the innocent spouse

Creditors can reach the survivorship interest

Conveyance to children probably fraudulent; Sawadas should be able to recover, but only to the value of the right of survivorship (not much)

Common Law/Marital Property and Community PropertyMarital Property (dominant system)

Husband and wife separately control assets Ownership: Spouse owns any property he/she acquires and any assets purchased by separate wage earnings.

Everything else goes into the “pot”. Divorce:

o Equitable distribution of marital property What is marital property is most of the “pot” primarily one spouse’s? If so, richer spouse gets

a bigger share of marital property. Marital property defined: 3 approaches

o All property acquired at any time marital propertyo All property acquired during marriage marital propertyo Only property acquired from earnings of each spouse DURING marriage

(excludes gifts/inheritances) marital propertyo Degrees/professional licenses majority = NOT marital property

NY: they are marital property. NJ: Reimburse costs of financing education.

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In Re Marriage of Graham (CO – mar. prop. state): Wife contributed to 70% financial support and husband completed BA and got MBA during first half of marriage. Held: Not marital property. TC erred in discounting + paying over time. Should do either one.

O’Brien (NY): increased earnings from medical degree acquired during marriage marital property. Error: should give property based on contribution of spouse (one spouse gets MP because other spouse got a degree)

Elkus v. Elkus : Mr. Elkus wants incrase in wife’s opera career success as marital property. Court: Mr. helped advance Mrs.’ Career potential (manager, “housewife”) entitled to either lump sum or portion of future earnings.

Prenups: enforceable if 1) sufficient disclosure of assets 2) full mutual knowledge of each other’s property 3) not unconscionably made

Goodwill: Reputation that generates future stream of profits divisible marital asset. Death:

o Surviving spouse takes EITHER What they would normally get from decedent’s will OR forced elective share of ½ of property

Community Property Everything spouses own goes into common pot ½ for each spouse

o General Rule: assume community property unless proven otherwiseo INCLUDES increased value to separate property due to community efforts (or efforts by a spouse during

marriage), not reasonable rates of return from investmento EXCEPTION: things acquired BEFORE marriage and gifts and inheritances are separate propertyo Partially paid for assets: 3 approaches

**Pro rata (CA & WA)**: % of property paid before marriage percentage as separate Inception of right (TX): separate or community determined when legal right acquired Time of vesting: determined when title passes

o Must have mutual consent to convey anything (small gifts okay)o Degree acquired during marriage – depends on jurisdiction

Divorce: divided equitable (equally in CA) between spouses, separate property retained by original owners Death: Spouse can transfer half of community property and all of separate property NO tenancy by the entirety MIGRATION:

o property initially characterized DOES NOT CHANGE unless both spouses consento MP CP: separate remains separate, subsequently acquired becomes communityo CP MP: CP remains CP but at death forced elective share – get statutory share + ½

Equal Protection Common Law Marriage: live together with marriage roles for x years can reap marriage benefits Varnum v. Brien :

o Levels of scrutiny: Standard (rational basis for legitimate scrutiny): logical demonstration + underlying goal

Ex) age classification for driving, income classification for taxes Immediate scrutiny: important government interest and substantially related

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Strict scrutiny: presumptively invalid and compelling state interest and necessary to achieve the interest

Ex) race classifications (affirmative action)

Eminent Domain, Takings, and ZoningEminent Domain

5th amendment of US Const.: “Nor shall private property be taken for public use without just compensation.”o Eminent Domain: liability rule – govt takes without consent & provides compensation

Purpose: protect against redistribution of wealth by requiring public purpose and compensation Avoids holdouts by individual owners and delay of development

o Test: is there a public use? Ultimate private ownership =/= taking improper under public use requirement

Berman v. Parker : Taking of department store to develop for another businessman okay Redistribution of land wealth to promote equality = public purpose

Hawaii Housing Auth. v. Midkiff : Court held program to decrease land oligarchy (buy land from landowners and lease it to homeowners to build their houses) – serves public purpose of redistributing land wealth to promote equality

Urban renewal: land given directly to private company for economic devt = public purpose Kelo v. City of New London : Court okayed goal of economic development when π’s

property condemned to revitalize city. New Means Test (Tom Merrill’s Economics of Public Use) – “public use” is too vague

o Public use if 1) necessary to overcome transaction costs 2) low CS lost 3) not rent-seekerso 1) how important is power of eminent domain? (how important are liability rules to this project?)

Is government unable to overcome transaction costs through property rules? (holdouts?)o 2) Are those losing their property holding a lot of consumer surplus?

CS: when condemning property, pay owners market value – but what about the additional value residents hold above market price (neighborhood value, sentimental value)

o 3) Are those receiving “rent-seekers”? Rent-seekers: private interests that capture government/public entities for own services – some

public benefit but a lot more private benefito Poletown Neighborhood Council v. City of Detroit : GM tells Detroit it will move plant unless City finds

and sells them big plot of land cheaply (condemn Poletown). Merrill’s test – NOT public use though high transaction costs through bargaining, too much CS (ethnic community) and GM is rent-seeker.

Compensationo Fair market value: valued at highest and best use it can be adapted for (including future use)o No compensation necessary for: goodwill, owners’ sentiment, economic value of rebuildingo Partial takings:

If reduces value of remaining parcel pay severance damages (reduction in value) If increases value can offset severance damages, but must still pay compensatory damages

Takings Exaction: Govt takes from private owner in exchange for a regulatory accommodation (favor)

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o Nollan v. California Coastal Commission : π wanted to improve house but commission wouldn’t approve project unless π granted easement across beachfront property so public could better access beach. Held: taking because no nexus – goal was to get people to see the beach from road.

Test for Takingo 1) Is there an exaction?

If yes, nexus between exaction and accommodation? (favor must be related to purpose of regulation)

If yes, is there a rough proportionality between exaction and accommodation?o Yes no takingo No taking

o 2) If no, is there public use? If no, taking prohibited.

o 3) If yes, permanent physical occupation? Yes taking, compensation required

o 4) If no common law nuisance/negative externality being eliminated? – must be common law nuisance affecting neighbors

Yes no taking even if property value drastically reduced No total wipeout of value that was not because of a limit that was part of original title?

Land deprived of all economically productive use Yes taking

o 5) If no, weigh Penn Central factors: Average reciprocity of advantage – if burdens imposed on owners by regulation offset by

benefits conferred on owners not a taking Diminution in value to claimant closer to 100%, probably a taking Extent to which regulation interferes with reasonable investor expectation

Conceptual severance: Look at “taken” portion as fraction of the whole (significant fraction or not?)o Pennsylvania Coal v. Mahon : Coal co. transfers property to Mahon, reserving rights to minerals.

Government passes Kohler Act, not allowing subsidence through mining (takes away support estate access from Penn Coal) Held: regulatory taking deprived Penn of 100% of support estate value.

o Keystone Coal : same facts but technology had improved. Held: no taking because the amount required to avoid subsidence was comparatively less with better mining technology.

Remedy = compensatory damages Lucas v. South Carolina Coastal Council : SC enacted Act after Lucas purchased 2 lots to build houses that barred

permanent structures on beachfront lot. Held: taking because “too far” – limit was not part of original title. Palozzolo v. Rhode Island : Palazzolo owned coastal wetlands land, got sole ownership after creation of Council

to protect wetlands. Held: not a taking because not total wipeout of value. Also had reciprocity of advantage (enjoyed public benefit of protected wetland) and investor expectations (full notice of regulation)

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Zoning Village of Euclid v. Amber Realty Co. : π intended industrial use for land but Euclid passed zoning laws dividing

parcel into 3 zones, decreasing value of land. Held: not a takingo Issues: Substantive due process (inhibits freedom of K vs. protecting public safety); equal protection

(creating class zoning? Or is there rational zoning criteria?); taking (require compensation? – usually no taking because doesn’t satisfy three factors unfair)

Purpose: separation of uses; groups interests; regulates future development Zoning process: 1) State passes enabling statute 2) “Comprehensive Plan” adopted by zoning commission 3)

Enact zoning ordinance (no total wipeouts) 4) Appoint administrative board to approve variance/exceptions Non-conforming use:

o Existing uses are grandfathered: new zoning laws/systems DO NOT AFFECT existing propertyo Most ordinances bar expansion of non-conforming useo Cannot be transformed into different non-conforming useo Abandonment terminates non-conforming useo Destruction of structure terminates non-conforming useo Nuisance – then cannot continue usingo Eminent domaino Problem with Artificial Monopoly: owner of nonconforming has monopoly because ordinance prevents

subsequent competitor market entry. Solution: amortization: owner of use recovers his investment and then right to continue use ends. Valid if time period is reasonable.

o Northwestern Distributors v. Zoning Hearing Board : zoning board enacts ordinance prohibiting adult stores after π already started operating adult bookstore. Allowed 90-day amortization period. Held: Rezoning existing nonconforming u se out of existence = per se taking. No phaseouts allowed.

Variances permitted if: 1) show hardship (conforming to zoning would prevent reasonable return on investment of property and 2) public interest (variance wouldn’t fundamentally change area)

Aesthetic zoning: majority = valid government purposeo Stoyanoff v. Berkeley : uniform theme of houses in neighborhood but one house desired to be built looks

“grotesque, modern” deviates from theme. Held: conserves property values and there was notice of Board passing this.

Personal PropertyFinders

Recover Possession Recover DamagesReal Property Ejectment TrespassPersonal Property Replevin TroverEstablish ownership Quiet Title

Driving Principles: RELATIVE OWNERSHIP & POLICY AGAINST SELF-HELPo Goals of Finder’s Law:

Get property to true owner Provide clarity of new ownership Discourage unlawful behavior

Rules:o Finder = first person to take possession of lost/unclaimed property

Requirements: intent to control AND act of control29

CA LAW: value > x turn into police and get it back if no claimanto Finder has superior title to ALL but true owner

Mislaid: consciously lose possession (put it down and forget) Lost: unconsciously lost possession

o Abandoned: deliberately/intentionally giving up property: finder has ABSOLUTE TITLEo Finder in a “public place” becomes “owner” (place = shop: Bridges v. Hawkewworth)o On private land, employee finder vs. owner belongs to owner (South Staffordshire v. Sharman)o On private land, finder is a trespasser to owner.o Tenant finder lessor owns it. (Elwes v. Brigg: tenant w/ 99 years lease finds embedded boat)o Possessor of land possesses EVERYTHING on land.

Hannah v. Peel : Peel was conveyed house subsequently requisitioned for quartering of soldiers. Soldier was stationed there and found brooch on window frame, turned it in. Peel sold it. P wanted brooch or equivalent damages. Held: For soldier b/c Peel was not physically in possession no right to brooch, didn’t know about it.

Armory v. Delamirie : chimney sweeper finds jewel and brings to goldsmith for identification. Held: damages to sweeper – value of best jewels fitting socket (efficient deterrence)

Popov v. Hayashi : Popov “catches” ball but does not maintain control of it. Hayashi picks it up in midst of mob chaos. Held: neither has superior title equal and undivided interest in ball.

Gifts Requirements: Intent, Delivery, Acceptance

o Intent: even if intent is after delivery still valid gift gift causa mortis (on deathbed) interpreted more strictly – can retract if recovers or at any time

before death If extremely valuable item, require SPECIFIC INTENT/DELIVERY (Newman)

o Delivery: PRESENT TRANSFER (no promises of future gift) – wrench of parting Actual delivery Constructive delivery: give someone means of accessing property (key) Symbolic: symbolizes intention of giving gift (piece of paper, property related to gift like saddle

for gift of horse) Middleman: Delivery made when donor delivers to donee’s agent OR donor’s agent delivers to

donee Bailment: one person owns it but another has possession bailor-owner/bailee-borrower

relationship determines liability Bailee liable for damage to property if he asks to borrow Bailor liable if he asks bailee to watch over property Mutually beneficial ordinary duty of care to prevent damage Neither/involuntary bailment no duty of care

Valid gift if it is a present gift of future interest (but might be high taxes upon appreciation)o Acceptance: presumption of acceptance UNLESS there is refusal.

Inter vivos gifts are IREVOCABLE Newman v. Bost : Van Pelt hands keys to Newman housekeeper/fiancée to bureau and “gives” her furniture in

house, bureau in Van Pelt’s room. Bureau contains life insurance policy. Held: furniture that keys open or in π’s room are gifts. No delivery of life insurance policy not for Newman.

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Gruen v. Gruen : Dad sends 2 letters giving painting to son for birthday but wants to keep painting til death. Held: okay to give present transfer of future interest. FRAUDULENT (indicated by second letter trying to avoid taxes)

Adverse Possession Goals: 1) encourage productive use (reward earners) 2) clarity of title 3) encourage active ownership (punishes

sleepers)Elements required:

o 1) open and notorious 2) actual entry 3) exclusive and continuous occupancy 4) adverse and hostile claim of right 5) for the statutory period

Hostility: AP has NO legal interest – legally incompatible with using land Bars tenants, cotenants, licensees; cannot AP government land, cannot AP against

future interests until they become possessory Open and Notorious: visible and obvious enough for reasonable owner to receive notice of AP Actual entry:

o Majority: enter land and use as ordinary owner (if vacation homes area, use as vacation home sufficient)o Minority (CA): must cultivate, improve, or substantially enclose property

EXCEPTION: color of title (see below) Exclusive and continuous occupancy: true owner or general public cannot be sharing with AP. True owner must

use as ordinary owner would. If multiple AP’s concurrently possessing, acquire title as tenants in common Adverse and hostile: true owner cannot have consented to occupancy (ex) maintains gate for AP)

o Objective test (Majority): Did true owner consent to possession? If no, AP valid.o Good faith test (Minority): AP has good faith mistake belief he owns property.

Statute of Limitations: o Change in ownership does NOT reset timer during owner’s line of succession

EXCEPTION: SoL does NOT apply to Stateo Tacking: if AP1 conveys title to AP2, combine their possessory time to satisfy SoL

Requires privity between AP’s Relativity of title: AP2 drives out AP1 AP1 can eject AP2 gap of recovering possession still

attaches to SoL. Howard v. Kunto : Summer homes – Kunto takes possession from Millers who occupied for a

long time – deeds incorrectly reference lots next to them. Kunto moves in, π sues to eject Kunto. Held: Summer possession = typical owner of area & tacking allowed (privity of estate – color of title). Court ruled for Kunto.

o Discovery rule: SoL begins running when reasonable owner discovers/should have discovered identity of possessor of property

O’Keefe v. Snyder : paintings disappear from gallery but she doesn’t report theft for 26 years. Held: SoL does not run until reasonable owner discovers through due diligence.

o Disability: minor, insane, in jail After SoL runs, add 10 years after disability ends OR get 21 year SoL, whichever is longer.

Disability MUST BE IN EXISTENCE when SoL CLOCK BEGINS Van Valkenburg v. Lutz : Δ cleared path on vacant lot to get to his, built house for brother, put trash and little

garden all on vacant lot. VV buys lot and kicks out Lutz. Lutz gets easement by prescription and tries to AP. Held:

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no AP because did not actively possess (did not improve land), knew land wasn’t his, de minimis use does not satisfy open and notorious poor reasoning

Color of Title: (belief AP is true owner through written document) – if you have color of title, you have constructive possession of ENTIRE parcel even if you only possess part of it

o If NO color title and improve part of land, owner might only lose the improved parto If have color of title over X’s and Y’s lots, deed conveyed by X, possessing X’s lot does not get X and Y

lots because Y had no reason to know of AP. Real property:

o O sells to A, then O sells to B Fraud BFP without notice BFP gets good titleo O sells to A, stranger sells to B Forgery BFP cannot get good title. Must go through AP.

Personal property:o Seller acquires through fraud and sells to BFP BFP gets title immediately.o Seller acquires through theft and sells to BFP BFP must go through AP.

Liability rule: AP values his improvements on land more than true owner uses land AP compensates true owner for acquired property

Property rule: provides windfalls to certain parties AP awards windfalls

Servitudes Applies when: 1) vertical privity between successor and predecessor AND 2) touch and concern land Trend: increased encouragement of using servitudes In general:

o Positive easement: ability to cross lando Profits: allow possessor to remove things from lando Licenses: revocable rights of accesso Ability to restrict use of lando Ability to require landowner to perform certain acts

Easements Definition: nonpossessory right to use land in possession of another

o appurtenant: runs with lando in gross: personal to holder of easement – does not run with land

Express easement: voluntary agreement by servient parcel – MUST BE IN WRITING Reserved easement: often when parcels severed and sold Implied easements

o Quasi-easement: apparent and continuous (or permanent) use of portion of property Easement by necessity: necessary for claimant’s enjoyment of land (landlocked parcel)

o Only when claimed parcel is severed from servient parcel (then reserve easement)o Endures only as long as necessary (gone when another way of access is available)

Easement by prescription: adverse possession: open/notorious, continuous, adverse, under claim of righto Must show use was NOT PERMISSIVE o AND owner DID NOT OBJECTo AND claimant’s right to use land was not like the others’ using it

Easement by estoppel: after giving neighbor license to use easement estopped from revoking easement after licensee invests in land in reliance on easement

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o Requirements: licensee expends substantial labor and money in reliance, licensor knows/reasonably expects reliance will occur

Fiction of lost grant: after 20 years presume grant of easement was made and lost. Othen v. Rosier : Othen seeks to enforce roadway easement on Rosier’s land. Held: seller did not reserve

easement because Othen’s land was not landlocked when Rosier purchased his parcel. Brown v. Voss : 3 parcels stacked on top of each other. Δ owns A. π bought B and C and wanted to build house

straddling property line, moving fill material for it on easement. Easement on lot A was only to access plot B. Held: no injunction because though misuse of easement, no additional harm.

Termination of Easementso Lapse: expires on own express termso Changed conditions: necessity for easement could disappear (no longer landlocked, new access, etc)o Merger: ownership of dominant and servient estates combined (what happened in Brown later)o Reverse prescription: oust easement holder and hold for statutory periodo Abandonment/misuse: requires intent to abandon or actions manifesting intento Failure of notice: failure to record and someone takes property without notice of easemento Injunction: but NO INJUNCTION if imposes unreasonable burden on servient estate AND benefits of

dominant estate outweigh servient estate burdens

Covenants Real covenant: promise concerning the use of land that benefits the original parties to the promise and their

successors 3rd Rest Creation of Servitudes

o Intent to create servitude running with the land o Compliance with SoFo Notice to the party that one seeks to bindo Can’t be illegal, unconstitutional, or violate public policy

Violating FHA: a) disparate treatment? (covenant’s purpose is to exclude particular people) b) disparate impact? (excludes people protected under FHA?) c) reasonable accommodations? If not large cost to community, should enforce and accommodate

o Affirmative obligations require strict vertical privity (affirmative covenant passes only when transfer entire interest or life estate)

Neponsit Prop. Owners Assoc. v. Emigrant Ind. Savings Bank : Δ subdivided land and sold it subject to covenant of annual charge on property owners. Neponsit transferred interest to property owners’ association – bank forecloses a house and refuses to pay.

Hill v. Community of Damien of Molokai : neighborhood covenant of only single family housing – group home for AIDS patients. Held: single family ambiguous in policy, group home lives like an ordinary family. If required occupants to be related, would violate FHA anyway. (disparate treatment, disparate impact, reasonable accommodation)

Termination:o Release (generally by purchase)o Changed conditionso Mergero Behavior of other parties

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Abandonment: pattern of disregard of covenant – must be OBVIOUS (multiple people stop following covenant of mowing lawn)

Acquiescence: defendant gave consent to violation Unclean hands: person trying to enforce covenant got it uncleanly Caches: unreasonable delay before brining suit of violation Estoppel: violation of behavior seemingly okay and violator becomes reliant on this behavior

o Recording problems: actual, constructive (reasonably would know), inquiry (reasonably would ask about – like if notices everyone follows a behavior)

Western Land Co. v. Truskolaski : Δ owned land and subdivided it subject to 1 family covenant. Later tried to build shopping center – owners tried to enjoin. Held: not enough changed conditions (pop. Growth, higher traffic, more commercial devt nearby) and covenant still had substantial value. Also unsympathetic to Δ applying covenants to his benefit.

Rick v. West : West has residential covenant on part of land but wants to sell to hospital. Held: changed conditions insufficient, cannot sell for non-residential use.

Liability Approach: measure change in property value with current and use and suggested alternate use by looking at comparable areas with alternate use

Property vs. Liability rules (modern approach moving towards liability rules)o Turn down requesto Eliminate covenanto Eliminate covenant and pay homeownerso Keep covenant and homeowners pay developer

Use ^ when market value does not reflect homeowners valuation of property Homeowners pay consumer surplus to developer (their value above developer’s valuation of

their property) requires changed conditions argument

Common Interest Communities Condominiums: each owner owns unit in fee simple, undivided share in common areas as tenant in common Cooperatives: each resident owns shares of residential corporation (which owns all units and building and land) Rules governing servitudes:

o CC&R’s in constitution means notice greater deference Florida 1: assumption of validity

Void if 1) unconstitutional 2) illegal 3) against public policy Florida 2: reasonableness – burden exceeds benefit (aggregate utility maximization) Business Judgment Rule: “all but unjust” – most deferential

o Regulations/statutes after living there No presumption of validity General reasonableness required Impact on individual and process because individual had no notice

o Restrictions on sale Pre-approval only upheld if rejections are reasonable Provisions that give association right of first upheld

Nahrstedt v. Lakeside Village Condo Association : condo has restriction against pets. Nahrstedt has 3 cats. Court: goes with Florida 1 because she had notice and it was in terms of initial deed.

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40 West 67 th Street Corp. v. Pullman : Crazy shareholder of cooperative causes trouble. Coop board voted to terminate his lease. Court upheld termination by referring to business judgment standard.

Valid or invalid servitudeso Valid: aesthetic bans, business restrictions, bans on religious services (if all encompassing)o Invalid: assembly bans, flag bans, green energy/public policy bans

Intellectual Property Intellectual property arose from the notion of intangible property created for the purpose of pursuing

commerceo Keeble v. Hickeringill : π had decoy pond to capture ducks. Δ shot guns to scare away ducks. Held:

interfering with business in a non-competitor way (better decoy pond would have been okay) Trademark: patent identifiable characteristics to create logo or trademark (no knockoffs)

o Test: show consumers contested logo/infringement and see if it makes them think of a specific brand or general product. If specific, then infringes upon trademark.

Copyright: statutory protection. Protects an idea. Lasts for 70 years. o Allowed to use for quotes in reviews, teaching, parodies

Patent: 17-22 years. Cannot patent discoveries. Can patent inventions/processes/machineso Goal: try not to create windfalls for first movers for a long period that disincentivizes other developers.o Also tries not to benefit first movers that invest little cost/resources but gain a lot

Trade Secrets: enforcing NDAs Personality: property rights of individual identity

o Enables individuals to exploit their own identities, prevents public confusion Cheney Brothers v. Doris Silk Corp. : Cheney made patterns and Doris Silk copied one that sold well. Held:

encourage competition so allowed. No copyright/patent.

Jurisprudence Methods of approaching a case Obvious precedent follows Precedent unclear: ask questions

o Will applying precedent produce unfair outcome?o Outcome legitimate to parties?o Outcome socially inefficient?

New rule:o New rule upheld by higher court or overturned?o Will rule fit into bright line test? Easy to apply to other cases?o Rule fits into new trend in the law?o Rule wins social legitimacy?

Issue new rule “The Metaphysical Club”

o Judges want to maintain legitimacy of judicial systemo Law is always changing

Conditions change (tech, economy) new facts new rules requiring widespread application To predict how judge will rule: (according to Holmes)

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o Think about social changes and conditions facing judgeo Combined with judge’s temperament and underlying legal reasoning

General Property Themes Least cost avoider to prevent conflict (nuisance,

recording) Clarity in defining property interests (RAP, recording,

numerous clausus) Protect good-faith purchasers (BFP) Alienability (RAP, lessor can sublease interest, can’t

prohibit sale of fee simple via covenant) Reward Labor (AP, giving cotenant fruit of his labor) Perfecting (recording)

Possession (abandonment, AP, avoid self-help)o Allow AP to protect interests

Contract vs. Conveyance duality Efficiency (waste, AP, nuisance) Realism vs. Formalism Good faith (sellers, landlords), fiduciary duty (super

good faith – brokers, lenders) Notice (protection of those taking on new property) Anti-discrimination

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