Property Law Outline—Spring 2011

Property Law Outline—Spring 2011

Professor Murray

Property Outline Spring 2011

Type of Property At Stake

General Topical Overview:It matters what the thing is!When we look at types of property, we are thinking about whether or not to grant property status in the first place

It allows a claim against everyone!Very powerful

Everyone can be excluded

Types of PropertyReal Property

Rights in land, airspace, and ground space/subsurfaceChattels/Tangible Personal Property

Jewelry, books, clothes, etc.Intangible Property

Stocks, licenses, patents, trademarks, etc.

Conceptual ThemesOppositional

The right of absolute ownershipExcluding others from YOUR property

AssociationalOur claim of property relies on how others accept our claim

Formative Experience of History Trends in Property LawBasis

English and Roman basis can be seen in estates as well as the division between people and things

FoundationConstitutional foundation of our own topics versus the indigenous people

Market StateProperty is within the free market exchangeProperty plays a transactual role within the markets

Unfair CompetitionAct/practice that causes economic injury to the commercial relations of another in the areas of deceptive marketing, infringement of trademarks and other indicia, or appropriation of intangible trade valuesAn unfair method of competition (INS v. AP)

Misappropriation

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Recovery can exist for an economic injury that results from a competitor’s commercial use of an intangible property derived from the labor of the injured business.Modern—must show:

P gathers information at costInformation is time-sensitive (“hot-news”)D free-rides on P’s effortsD is in direct competition with POthers could free-ride using the same technique

Institution Deciding Property RightsCourts

No public mandateMust follow precedentLess democratic accountability than Congress

CongressMore flexibility when creating laws (no precedent to follow)Can hold hearings and talk to their constituents Accountability to their citizensVoted into office by the people

Trespass to Chattel vs. ConversionTrespass to Chattel

A trespass may be committed by intentionallyDispossessing another of the chattel orUsing or intermeddling with a chattel in the possession of another

Might not recover the full valueConversion

An intentional exercise of dominion or control over a chattel which so seriously interferes with the right of another to control that the actor may justly require to pay the other the full value of the chattel.Stronger method of recovery—most likely will recover the full value

Tangible Property Issue (Moore v. Regents of Cal – took his blood cells)Property Law v. Tort Law

Property Law—conversion claimNo special relationship necessary, can go after everyone who interfered with him and his property

Tort Law—informed consent issue and breach of fiduciary dutyOnly recoverable relationship is between the injurer and the injured party

Conversional Liability Property LawWould effect medical researchIt took the doctor’s knowledge to do this, not just his blood

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This was a generic item—everyone has the exact same model in their bodiesDon’t want to promote selling your body for money from medical research

Minimizes the dignity and ethical issues of our bodyArguments by P

Right to privacy, publicityCould have limited conversion rights: limit to circumstances where P authorizes one particular use of bodily material but D uses it in an unauthorized manner

Real Life IssuesStem CellsSperm/Eggs

Divorce/Death

Policy ArgumentsScientific researchEthical interest in the dignity and interest of our bodiesLimited conversion remedy for actions taken outside the boundaries of consent by doctorWe should allow people to have a property right—our concern is in the equal distribution of the property reward

UNDERKUFFLER—4 Dimensions of Property

Theoretical Where do you get your claim to be at the table?

Origins of a particular property rightUse of one of the primary rights of ownership—usage undergone by the owner

SpatialWhat category of property does the item fall into?

In order to understand the property at issue, you must consider the space, area, or field to which the theoretical dimension must be applied Sometimes this is unclear and “muddy” The field to which our theory of rights applies

StringencyHow much protection to afford a property right?

How is our property protected?Rights to possess v. rights to excludeIn order to understand the property right at issue you must decide how much protection to afford a property right. Some rights of

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property (rights to possess, exclude, devise, etc.) have more power than other rights of property (the right to use)

TimeWere the properties rights established and defined by existing law at time of purchase?

The longer you have been exercising the right of ownership its more likely it will conform to your likingYou must decide at what moment or point in time is the content of the other dimensions determined

Acquisition of Property

General Topical Overview:1) We’re looking at competing claims of possession and deciding with rules who wins

a. Always think whose interests are competing?b. Come up with a rule of who should possess

2) Relativity of Title—True Owner’s Claim>Finder’s Claim>Third Party’s Claim3) These first two units shift analysis on the exam = brownie points

Familial Relationship

Marital Property

Community Property (Minority)Property acquired during the marriage is owned equally by husband and wife unless they have signed an enforceable premarital agreement to the contrary. Was developed as a way to ensure women received an equal share of the marital estate upon divorce.

Separate Property (Majority)The property earned by each spouse is his/her separate property during marriage unless they agree to the contrary. However, spouses have enforceable obligations to support each other during the marriage and, upon divorce, the property accumulated during the marriage will be equitably distributed between the parties according to factors like the duration of marriage, contributions of labor or resources, and need.Wisconsin—Marital Property: Must have a licensed marriage, must apply for petition of divorce, and then the marital estate is divided (including pensions and retirement $)

Acquisition by Gift

TestamentaryWritten in will or trustMust be written UNLESS it falls under an exception to SOF

Inter Vivos

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A gift between a living donor and donee that takes effect immediately, irrevocably, and unconditionallyElements:

Intent to Give Gift—conditions precedent (not gift), subsequent (is gift)Delivery—actual, constructiveAcceptance—acceptance is presumed if the gift is beneficial to the donee

Causa MortisDeath-bed gift; a gift athat is only effective up until the donor’s death, overrides a testamentary gift because it represents your last wish, can be given orally, must have a witnessElements:

Anticipation of Immediate Death (death must be knocking on the door)Actual DeathDonee Cannot Predecease the Donor

Possession

Main Questions:To what extent do you have to establish possession to assert a claim of ownership?

Is it enough to have physical control over the object and the intent to control OR the intent to exclude possession of others?

Fugitive PropertyProperty that moves—possession is contextual in relation to the norms of the custom!

Majority: pursuit itself is not enough to establish possession—you must have full control of the item at issue to gain possession

Minority: if there is an obvious pursuit and the catch is imminent, then pursuit is substantial and that person can assume ownership/property rights.

Captured/Found Property

ConversionElements for proof of claim:

Defendant controlsPersonal propertyBelonging to (owned by) plaintiff—(did P own/possess the item before D exercised dominion/control over the item?

Characterizing the disputed property:Captured or Abandoned Property

Captured Property has no true original owner

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Abandoned Property is the true owner voluntarily relinquished all rights to the property

THE PROPERTY BELONGS TO THE FIRST PERSON TO GAIN POSSESSION OF THE PROPERTY

Lost or Mislaid Property Circumstantial evidence is used to determine whether TO

accidentally lost the property or mislaid the property and will return to claim it.

Use circumstantial evidence to determine if TO intentionally placed the property in the location and then forgot to retrieve

o If YES mislaido If NO lost

Lost Property—generally is awarded to the finder because TO is unlikely to return and claim it

Mislaid Property—generally is awarded to the owner of the land for safekeeping for the TO when he returns. If it is not claimed for a reasonable amount of time, it can be re-characterized as lost/abandoned property and awarded to the finder.

Dispute concerning first possession between capturers or finders:Determine who has superior right from first possession (CAPTURED/ABANDONED):“First in time, first in right”

1. The Elements of PossessionPhysical Act: to what extent was the claimant successful in physically controlling the captured property or in excluding possession by others?State of Mind: did claimant intend to control and possess the captured property, or intend to exclude possession by others?

2. Occupancy and Labor TheoryOccupancy Theory: did claimant have reasonable expectations of ownership due to his occupation of the site where property was found? Labor Theory: Did claimant invest more time and effort into capturing the property?

3. Economic TheoriesExternalities: would the ruling reduce harmful side effects or increase beneficial side effects for other members of society?Tragedy of the Commons: would the ruling encourage over depletion of resources?

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Coase Theorem: would ruling reduce transaction costs or free rider problems in the future, thereby encourage private bargaining that could more efficiently allocate resources?

4. Public PolicyPromoting Established Societal Norms and ExpectationsDeferring to the Custom/Practice of Experts of FieldPromoting/Protecting Industry Expectations or RelianceImpact on Future Societal BehaviorImpact on Justice and Judicial Resources

Property found or captured on a private tractGeneral Rule: The private owner is presumed to own anything under, attached to, or on surface of land, even if he doesn’t know of the item, control the item, or intend to possess the item.Exceptions for Property Found in Quasi-Public Place (Mall, etc.):

Mislaid Property owner controlsCaptured, Abandoned, or Lost Awarded to capturer/finder

Trespasser Public Policy = no right to found property

Determining DamagesDetermine value of the converted property as measures of damage:Defendant No Longer Possesses: Highest amount possible re value of itemDefendant Has Added Labor: Based on the range of possible values (from original to current) and public policy/deterrence (did D know the property belonged to P?)

Sub-terrain Property

The Rule of Capture (THE MILKSHAKE THEORY)The owner of a tract of land acquires title to the oil and gas which he produces from wells drilled thereon, though it may be proved that part of such oil or gas migrated from adjoining land. You own what you capture—whoever captures it first owns that property. Even though there are multiple people with pre-possessory claims, the person who possesses the actual oil owns it.

Modification of the Rule of Capture—there’s a limit to how much you can drill; you can’t drill so much that it affects the property or the condition of other wells

Correlative Rights ApproachAllows legislatures to modify the common law rule by mandating that the parties share in the asset—they can require a just distribution of the asset. One person cannot “suck it dry.” Exists in Indiana, Ohio, and Kentucky.

Policy Outcomes

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Law of Capture—maximizes resource extraction, we as a society want this because we NEED OIL! But, it maximizes extraction at the expense of extinction of the resource.Correlative Rights Approach—allows for preservation of the asset/resource.

Property law is often the choice between two options and what do we want to choose to promote between the two options.

Found Property

Lost PropertyProperty is lost when the owner accidentally misplaces the property.

Mislaid PropertyProperty is mislaid when the owner intentionally leaves the property somewhere and then forgets about it.

Abandoned PropertyWhen the owner forms the intent to relinquish all rights in the property. Lost/mislaid property can become abandoned if the owner intends to give up any claim of right to the property.

Adverse PossessionElements:

Statutory PeriodMust possess for the relevant statutory period

WI 20 yrs., 7 for Color of Title, 10 for written instrument

SOL can be tolled if owner is an infant, insane, or incompetent

Actual PossessionThe adverse possessor must physically occupy the property in some manner

Visible (Open and Notorious)The acts of the AP are open and notorious so to put the true owner on notice that a person is committing adverse possession

ExclusiveThe use is of a type that would be expected of a true owner of the land in question for the statutory period. The adverse possession cannot be shared with the true owner.

ContinuousThe adverse possessor must exercise control over the property in ways customarily pursed by the owners of that property.

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Tacking: Succeeding periods of possession may be added together if the parties are in privity of one another. Privity is defined as the original adverse possessor transfers title to the property to the successor

Adverse or HostileState of Mind (4 Types):

1. Lack of PermissionRequirement of use without TO’s permission

2. Claim of Right (Wisconsin)Requirement to act towards the land like an actual owner would how would a normal, true owner use this land?Were they paying taxes?

3. Intentional DispositionRequirement of acting in bad faith—you must be aware that the property belonged to someone else and you intended to dispossess

4. Good FaithRequirement that you thought the land was yours and you mistakenly occupied land that wasn’t yours (usually border disputes dealing with property lines)

Color of TitleDoes the AP rely in good faith on a written document that purports to convey title to him? If yes, SOL is shorter and hostility element is satisfied.

Adverse Possession of Personal PropertyWhen does SOL start ticking?

Conversion RuleThe running of the SOL begins when the property is wrongfully taken (converted) and the owner is dispossessed of the property

Discovery RuleThe running of the SOL begins when the true owner discovers or reasonably should have discovered the location of their property. The focus is on whether the owner of the property acts promptly to discover the property.

Demand RuleUntil demand is made and refused, possession of the stolen property by the good faith purchaser for value is not considered wrongful—the true owner must make a demand for the property

Is the possessor a Bona Fide Purchaser?You cannot take title from a thiefExceptions:

Seller of Merchant of Ordinary Goods (Entrustment):A thief ENTRUSTS property to a merchant—sales to BFP is okay

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Fraud or Duress:Creditor gives property to a seller—sales to BFP is okay

Prescriptive EasementsThe elements differ from AP only by substituting “possession” for “use”Elements:

Actual UseOpen and Notorious UseHostile/Adverse Use

How would a reasonable user assert that particular property interest?Focus in particularly if this is a claim on private or public property

Public—right of use, there is an exceptionCannot have permission to use

Continuous UseExclusive UseStatute of Limitations

TrespassOne is subject to liability to another for trespass, irrespective of whether he thereby causes harm to any legally protected interest of the other, if he intentionally:

1. Enters land in the possession of the other, or causes a thing or a third person to do so, or2. Remains on the land, or3. Fails to remove from the land a thing, which he is under a duty to remove

P must establish intentional entry by D and a right to possession belonging to P

Defenses to TrespassNecessity:The entry is justified by the necessity to prevent a more serious harm

Consent:Both implied and express consent can be given from the conduct of the plaintiff, from the relationship of the parties, or from custom. The burden is on D who is asserting consent to plead and prove it. Implied could be just not saying “no” or stopping someone from entering.

Public Policy:Entry is encouraged by public policy.

The Common Law Right to Reasonable AccessImposes a duty on common carriers and innkeepers to serve members of the public without discrimination unless they had a good reason not to serve someone.

Must Provide Reasonable Access to General Public

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What is reasonable? Some states expanded the doctrine.

Assess what kind of space is at issue:Public—must give consent to general publicPrivate—do not have to give access to anyone they don’t want

Remedies to TrespassNominalTrivial damages for legal injury sustained (no harm occurred)CompensatoryAssessed for actual harm (compensate for damages)PunitiveAssessed for a malicious or wanton trespassStatutory (usually limited)

Civil Rights

Civil Rights Act of 1866Enacted by Congress after the Civil War§1891 Equal rights to enter into contracts§1892 Equal rights to own property

Civil Rights Act of 1964Applies to places of public accommodationLodging, restaurants, movie theatres, concert halls, sports arenas

Applies to specific categoriesRace, color, religion, or national origin (not gender)

Analysis:1. Is this person a member of the protected class?

The CRA of 1964 only applies to race, color, natural origin, and religion

2. Is this space a public accommodation?Must be within the list of enumerated categories, must effect interstate commerce, and must serve the public and be a private establishment.

3. This is complicated by a statutory that leaves statutory ambiguities

State Rights of Access are stronger than Federal Rights of Access

State Public Statutes > CRA of 1964 > CRA of 1866

Americans With Disabilities Act1. Is the person in a protected class?

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Very broad range of people2. What is a place of public accommodation

Vast list3. What type of discrimination is protected?

Any hindrance to entry

§12182—If you can prove the modifications necessary would “fundamentally alter the nature of such goods, services, facilities, privileges, advantages, or accommodations” they are not necessary.

Constitutional Conflicts re Civil Rights Private Clubs can exclude IF the person does not fit their viewpoints Forcefully including a member against their viewpoints is a violation of their right to exclude

Non-Discriminatory Access v. The Right to Expressive Association (Boy Scouts)Free speech is seen as more important than public access

The Right of Free Speech Access to Private Property (Shopping Mall)Mall as place to conduct business v. mall as place that is open to public

3 Main Categories of Access Situations1. Common Law Rules of Access2. Non-Discrimination Laws of Access3. Constitutional Claims of Access

a. Underkuffler Exclusioni. How do we characterize the space?

ii. Public v. Privateiii. Rules of exclusion and access

Right to Use

Diffuse Surface Water

Common Enemy RuleAllows the property owners the absolute freedom to develop their property without regard to their neighbors for liability for damage to their land caused by increased runoff of surface water.

“Damnum absque injuria” solution to land use conflicts:The defendant is privileged to develop its property and to expel unwanted surface water without liability for any resultant damage to the neighbors’ propertyUsed in 17 States

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Modifications: Negligence, Installation of Pipe Designed to Collect and Expel H2O

Natural Flow RuleInjured property owner has absolute security against harm caused by diffused surface water resulting from a neighboring owner’s development of his property. Neighbors can discharge water thru natural drainage pathways, but any development altering the amount, force, or direction of the water will result in liability for any resulting harm.

Adopts the Strict Liability Approach:The injured Plaintiff has the legal right to stop the defendant’s activity and to recover damages for harm already inflicted.

Has Been Replaced in a Lot of States:Might inhibit land development because most development will change drainage patterns.

To encourage development, most states have adopted exceptions to allow minor increases in the natural flow of surface water.

Some states limit the application of the doctrine to rural lands and use the reasonable test on urban lands.

BUT: If property development is profitable enough, then developers will do it anyways and pay the neighboring landowners.

Reasonable Use Test (Majority Rule)Requires the court to determine in specific cases whether the defendant’s conduct caused unreasonable interference with the neighbors’ use of their land.

Involves balancing test:1. The social benefit derived from the development of D’s property2. The availability of cost-effective means to avoid or mitigate the harm3. The gravity of the harm to P’s property

Substantial damage to neighboring property is likely to be unreasonable

Another Question:Does P collect damages or just an injunction?Key Analysis = Damages

Wisconsin = Reasonable Use TestEach possessor is legally privileged to make a reasonable use of his land even thought the flow of surface water is altered and thereby causes some harm to others, but incurs liability when his harmful interference with the flow is unreasonable.

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Court wants to balance the interests of the property owners’ use and adjacent owner’s use

Reflects a standard choice over a rule choice

Support Easements

Lateral SupportSupport the land receives from the adjacent land.SIDEWAYS MOVEMENTTrigger = Slope

NO RETAINING WALL/BUILDING SERVING AS SUPPORT:

1. No Structure on Land in its Natural ConditionOne who removes/withdraws/or causes deterioration of the support is STRICTLY LIABLE for ensuing damages.

2. There is a Structure on the Landa. If the land, in natural state, can completely support the structure: One who removes/withdraws/or causes deterioration of the support must do so in a non-negligent manner!

b. If the land, in natural state, cannot completely support the structure: P does not have a cause of action against one who removes/withdraws/or causes deterioration of support

RETAINING WALL/BUILDING SERVING AS SUPPORT

1. Support Built to Support Land is in its Natural Condition (Structure Existed for Awhile)One who removes/withdraws/or causes deterioration of the support is STRICTLY LIABLE for ensuing damages.

2. There is a Structure on the Landa. The unnatural lateral support was built before the structure (retaining wall followed by structure/building): P does not have a cause of action against one who removes/withdraws/or causes deterioration of support

b. The unnatural lateral support was built after the structure (retaining wall followed by structure/building): One who removes/withdraws/or causes deterioration of the support must do so in a non-negligent manner!

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Subjacent SupportSupport the land receives from the underlying strata.DOWNWARD MOVEMENTTrigger = Horizontal Movement

The owner has an obligation to provide subjacent support to unimproved land, as well as improved land and buildings.

Nuisance

Private NuisanceA substantial and unreasonable interference with the use or enjoyment of landP MUST HAVE A PROPERTY INTEREST THAT IS AFFECTED OR A BODILY HARM

Involves 2 Inquires:1. Is the interference in the interest substantial?

Normalcy Standard—Harm to use or enjoyment is substantial if it would it be offensive or inconvenient to the average person within the locality in questionIs the use hypersensitive?

2. Is the interference in the interest unreasonable?Unreasonable = “When the gravity of the harm outweighs the utility of the actor’s conduct”

Gravity of the Harm is Evaluated By: Utility of Actor’s Conduct is Evaluated By:1. The extent and character of the harm

involved

2. The social value that the law attaches to the type of use or enjoyment invaded

3. The suitability of the particular use or enjoyment invaded to the character of the locality

4. The burden on the person harmed of avoiding the harm

1. The social value that the law attaches to the primary purpose of the conduct

2. The suitability of the conduct to the character of the locality

3. The impracticability of preventing or avoiding the invasion

On both sides, the court considers:Fairness:1. The character of the harm

Aesthetic harms will be viewed as less serious than health/safety harms

2. Distributive considerations

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Is it fair to make an individual owner bear the costs of D’s socially beneficial activity, or should those costs be spread around to the owner causing the damage and its employees/customers?

3. FaultIs one of the owners engaged in a disfavored activity? Is the conduct appropriate for the area?Did P come to the nuisance?

Welfare:1. Costs and benefits

The costs and benefits of allowing the harmful conduct must be compared with the costs and benefits of prohibiting it

2. IncentivesWhat effects will liability or immunity have on incentives to engage in the respective activities?How will the distribution of the burdens and benefits of conflicting land use affect incentives to invest in safety or to engage in desirable economic activities?

3. Lowest cost avoiderWhich party can more cheaply avoid the cost?Should this party also bear the burden of paying that cost?

Common Unreasonable Interferences:Smoke, objectionable noise, odors Measured by senses of average person

Sunlight:Traditional Rule—Cutting off a neighbor’s sunlight by building next to the property line = no nuisance

Modern Approach—Blocking a neighbor’s roof solar collector can be enjoined as a nuisance

Private Nuisance – Remedies 3 Types:1. Property Rules

Fix an absolute entitlement either to engage in the conduct (no liability) or to be secure from the harm (injunctive relief ordering D to stop committing the harm)The parties negotiate on their own, so the price of entitlement would be fixed by private bargaining rather than by a court order

2. Liability RulesProhibit party from interfering with the interest of the other unless they are willing to pay court’s rule on damages

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If P is entitled to protection from harm D’s failure to prevent the harm results in damages

If D is free to engage in conduct no injunction unless P compensates D for economic losses associated with stopping (purchased/conditional injunction)

Court won’t enforce unless P pays damages to D for his losses

3. Inalienability RulesAssign entitlements and prohibit them from being sold or exchanged

The effect is to make the right to be free from harm inalienable

WHO HAS THE ENTITLEMENT P OR D?

Remedies Plaintiff’s Entitlement Defendant’s Entitlement

Property Rule:

P can get an injunction ordering D to stop the harmful conduct

If D wants to commit the harm, D must offer P enough $ to induce P to agree to give up P’s right to be free of harm.

(INJUNCTION)

D has legal liberty to commit the harm without liability.

If P wants to prevent the harm, P must offer D enough $ to induce D to agree to stop the harmful conduct.

(DISMISS THE COMPLAINT)

Liability Rule:

P can get damages from D for committing the harm, but no injunction.

D is free to commit the harm if D is willing to pay a damages judgment.

(DAMAGES)

P can stop D’s conduct if P is willing to pay damages as determined by a court to compensate D for D’s loss of profits.

(PURCHASED INJUNCTION)

Inalienability Rule:

D has no right to commit the harm.

Any agreement by P to allow D to commit the harm is unenforceable.

D has the right to engage in the protected activity.

Any agreement whereby D gives up the right to engage in the conduct is unenforceable.

INJUNCTION = D’s conduct causes more social harm than good (unreasonable) +D’s conduct causes substantial harm to P

DAMAGES = D’s conduct causes more social good than harm (reasonable) +

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D’s conduct causes substantial harm to P (unfair to burden P with costs of D’s socially useful conduct)

NO REMEDY = D’s conduct does not cause substantial harm to PORD’s conduct causes more social good than harm (reasonable) +It is not unfair to impose the costs of D’s activity on PORThe imposition of damages would put D out of business and avoiding this result (due to social value of D’s conduct) is more important than preventing harm to P

PURCHASED D’s conduct causes more social harm than good (unreasonable) + INJUNCTION = But it is fair to impose the cost of shutting down D’s activity on P (Ex:

when P comes to the nuisance)

Public Nuisance An unreasonable interference with a right common to the general peopleTraditional Example = obstruction of public highways Other Examples = prostitution, gambling, nude sunbathing, air pollution, and rock festivals

Wisconsin = have to suffer some sort of damage that is different from that of the general public

Factors:1. What interest is being invaded?2. Is the interference specifically injurious to the individual bringing the nuisance? It

cannot be the same kind of damage as the general public it must be damage of a different kind!

a. Is it substantial?b. Is it unreasonable?

Nuisance—Damages for Encroaching VegetationMassachusetts RuleSelf Help Rule Have to wait for the vegetation to come onto your property and then you can cut down only that part. The self-helper bears the burden without damages for restoration.

Cannot receive damages from evasive root structure

Virginia RuleVegetation must be noxious and a sensible injury must have occurred.

After a party gives notice, they have the right of action at law for a trespass committed.

Hawaii Rule

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If vegetation causes actual harm or poses imminent danger of harm, damages are awarded:Injunctive ReliefCutting down the tree or maintaining it in a manner not interfering with other interestsDamagesCompensatory damages for damage causedAffirmative Self Help

Burden Allocation—who is the most appropriate party to bear the risk?

The Right to Use: Use Conflicts

Use Conflicts in Absence of Agreement

Interference With Another’s Use and EnjoymentLateral SupportSubjacent SupportDiffuse Surface WaterNuisance

Use on Another’s Land

Prescriptive EasementAn easement created by adverse use

Irrevocable License/Easement by EstoppelA person cannot revoke a license if the owner grants the licensee the right to invest in improving property or otherwise induces the licensee to act in reasonable reliance on license.

License coupled with an interestA license coupled with an interest is one that gives licensee the right to remove a chattel of the licensee, which is on the licensor’s land. O sells a car to A that is located on O’s land, A has irrevocable license to enter and remove car.EstoppelIf the licensee has constructed substantial improvements on either licensor’s or licensee’s land, relying on license, the licensor is estopped from revoking licenseIssues: How long is it irrevocable, what about a good neighbor helping out?

Constructive Trust

Easement of NecessityAn easement by necessity may be granted to the owner of a landlocked parcel over remaining lands of the grantor to obtain access to the parcel. An easement of way to the public road is implied.

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Elements:1. The servient and dominant estates were part of an undivided tract2. Access to a public road3. The alleged easement is strictly necessary to reach the road and not just a more

convenient access.

The owner of the servient parcel has the right to locate the easement by necessity .

Easement Implied from a Prior UseAn owner divides her property and sells one parcel, retaining the other for herselfElements:1. Both servient and dominant estates must have been part of an undivided tract2. The use in question was a quasi-easement (an apparent and continuous use in

existence at the time the tract was divided)a. Apparent it is apparent if a grantee could, by a reasonable inspection of the

premises, discover the existence of use (e.g. a beaten path); it can be nonvisible

b. Continuous based on the idea that activities should be such that there is a great probability that the use was known to the parties at the time of the grant. Equals permanent physical change in the land for a particular use (e.g. paving roadway)

3. The use in question must be reasonably necessary for the enjoyment of the claimed dominant tenement

4. The parties intended the use to continue after the tract was divided

Use Conflicts Arising Within an Agreement ContextDOES IT SATISFY THE STATUTE OF FRAUDS??Wis. Stat. § 706.02

EasementBurden to Run with the LandIs a future owner of the servient estate obligated to allow the easement owner continued access or to control over her land under the terms of the original easement?

1. IntentEasements bind future owners of servient estate only if the grantor intends them to be bound. Could be in express language—“the easement is intended to run with the [benefited/burdened] land.”

Implied—if it is understood the nature of the burden is a permanent rightExpress—clear words of writing that claim the burden runs with the land

2. WritingThe required writing is the original writing creating the easement—the easement does not have to be included in subsequent deeds.

3. NoticeEasements are binding on owners only if they have notice of them. 3 kinds:

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Actual—if the subsequent actual owners know about the existence (Permanent Right—something granted to a utility company vs. Permissive Right—you can swim in my lake)

Constructive—if the deed conveying the easement is recorded in the registry of deeds in the proper place, and if it is in the proper chain-of-title (a search would lead to it); this means they should have known about the easement. A reasonable owner would have known

Inquiry—visible signs of use by non-owners (like telephone poles, utility lines, paths)—This means that a reasonable buyer would do further investigation to discover whether an easement exists.

Benefit to Run with LandAppurtenant (Passes with the Benefited Land)An appurtenant easement is attached to the land itself, and the benefit, thus, is enforceable by whoever owns the land.

Gross (Only Attached to a Single Owner of the Property)An easement in gross is not attached to the parcel at land and, therefore, doesn’t run with the land. The easement then belongs personally to the grantee and thus is only enforceable by the beneficiary of the easement rather than the occupant of the land Most Common = right of way for utility lines over property

Ambiguous TextWhen interpreting ambiguous text as to Benefit Running With Land interpret it as an Appurtenant Easement, because Easement In Gross creates hard-to-follow subsequent owners.

Use the Intent of the GrantorLook to Public Policy and Surrounding Circumstances

If the easement is one that would be useful separate from ownership of neighboring land (utility easement) = Gross

If the easement has little/no utility separate from ownership of neighboring lands and is useful to anyone who owns the benefitted land = Appurtenant

Severability from the LandAppurtenant easement cannot be severed from the land, they pass automatically to whoever owns the dominant estate.

Transferability of Easements

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Appurtenant Easements – are transferable when the dominant estate is sold/given awayEasements-n-Gross – were traditionally not transferable but can be now, especially with utility easements.

Easements for Commercial Purposes are Generally Transferrable

Misuse of Easement/Outside of Scope3 Issues to Determine1. Whether the use is of a kind contemplated by grantor

2. Whether the use is so heavy that it constitutes an unreasonable burden on the servient estate not contemplated by the grantor

a. Balance interests of easement owner and interests of servient owner

3. Whether the easement can be subdivideda. Appurtenant Easements

The benefits move to each portion of the dominant parcel upon its subdivision and transfer of various pieces.

b. Easements in GrossNonexclusive—when the grantor has reserved for her the right to use the easement WITH the grantee = NOT APPORTIONABLEExclusive—when grantor has no right to use the easement and it is all the grantee’s = APPORTIONABLE

Restatement—apportionable unless contrary to creating parties’ intent or unless it greatly increases the burden on servient estate.

Modifying and Terminating EasementsEasements last forever unless they are terminated.

Termination:1. By agreement in writing (release of the easement by the holder)2. By their own terms (deed expressly states easement lasts for 10 years, etc.)3. By merger (holder of servient estate becomes owner of dominant estate)4. By abandonment (if it can be shown that the owner of the easement indicated, by her

conduct, an intent to abandon the easement)Two Required Elements:

The person who holds the benefit must:Cease to use the easementIntend to abandon the easement

5. By Adverse Possession or Prescription by owner of servient estate or a 3rd party6. Because of Frustration of Purpose (no longer serves its intended purpose)

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Marketable Title ActsRequire easements to be rerecorded periodically (every 30-50 yrs.)

Restrictive Covenant/Equitable ServitudeFIRST does agreement satisfy the Statute of Frauds?

STEP 1: Privity Between PartiesVertical PrivityHorizontal Privity

STEP 2: If no privity, analyze as Equitable ServitudeSTEP 3: Burden to Run With the Land

WritingNoticeTouch and ConcernIntent

STEP 4: Benefit to Run With the LandWritingNoticeTouch and ConcernIntent

Restrictive CovenantDoes it satisfy SOF?

WritingMust be writing between originating parties

NoticeMust be notice for both PE and RC

Actual NoticePurchaser was actually aware of the covenant

Constructive NoticeA purchaser is on constructive notice if the covenant was recorded in the registry of deeds as part of the deed or lease creating the covenant or if a declaration containing the restriction was recorded prior to the transfer of property affected by the covenant.

A reasonable purchaser is expected to search the title to find out any restrictions on the property.

Inquiry Notice

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Professor Murray

Usually only applies to affirmative easements not relevant to restrictive or negative covenant

Buyer is on inquiry notice if any condition of the premises indicates that the property is so encumbered. Mostly relate to affirmative easements like right of way, and a buyer can observe and suggest that another party has an interest in some part of the land.

Intent to Bind SuccessorsExpressCovenant is made to “heirs or assigns”, “successors”, “intended to run with the land”, “to bind/benefit future owners”

ImpliedMost courts will hold that it runs with the land if it is the kind of covenant that was probably intended to run with the land.

If it passes the traditional “touch and concern” test = Implied Intent to Bind

Some courts will require clear evidence from the text or surrounding circumstances

Horizontal PrivityMutual Horizontal Privity1. If the covenant is in a lease transferring possession of land from

landlord to tenant2. If the covenant is in a deed dividing property ownership between

present/future interest (i.e. life estate and reversion)3. If the covenant is contained in a deed conveying ownership of land and

one or both parties owns an easement burdening property of the otherInstantaneous Horizontal Privity1. Placing covenant in a deed of sale that creates the restriction and

impliedly/expressly states that covenant is intended to benefit remaining land of grantor

a. Covenant in a deed of saleb. Express statement

Traditional—Strict Horizontal PrivityExcluded 3 Types of Relationships that are thought to be legit today:1. Excluded agreements among neighbors that weren’t simultaneous

conveyance of another property right (so new neighbors didn’t have to follow the covenant)

2. Grantor/grantee had to create covenant at same time as property transfer

3. Not holding on future owners of property within neighborhood.

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Vertical PrivityThe relationship between the original covenanting parties and their successors in interest

Requires the succeeding owner of the servient estate must receive the entire estate from the prior owner—should own an estate that lasted as long as the previous owner.

Strict Vertical PrivityWhen the grantor has to give successor every interest they own in the land

Relaxed Vertical PrivityThe burden is imposed on any future possessor of the burdened land and the benefit of the covenant on any future possessor of the land (if with notice)

Touch and ConcernTraditionallyCovenant ran with the land only if it “touches and concerns” the land

Modern ApproachA covenant meets this test if it has something to do with the use of the land and/or is connected with enjoyment of the land.

USE THIS ON EXAM AFTER YOU USE TRADITIONAL AND MODERN APPROACH:

***Reasonability Test – Adopted in Davidson Bros. CaseArea and duration of the covenantPolicy issues

Unreasonable restraint on trade Interferences with public interests

o Public Interest = both competitors and consumers Impact on the considerations exchanged **By limiting to physical touching, you limit the effects on 3rd

parties**

Policy Issues in covenants are analyzed under touch and concern

RemediesEquitable Servitude = InjunctionRestrictive Covenant = Damages

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Common Interest Communities

Homeowner AssociationA developer creates an organization—homeowner’s association—and they can enforce restrictive covenants

CondominiumsA developer of apartment building can create condo—the owners own individual units and the condo association owns the common areas. The condo association holds the restrictive covenants.

Conflicts develop because all the owners share the common areas (FL example regarding foreclosures and then nobody paying the condo assoc. fees)

Implied Reciprocal Negative Servitudes

General Plan RequiredA court will imply a reciprocal negative servitude ONLY if the evidence shows that the developer had a reasonably uniform general play for development of all lots of the same character.

It is inferred that purchasers bought in reliance on the general plan and expected to be able to enforce subsequently created servitudes on other lots that is equal to theirs.

Evidence of General PlanGeneral plan must exist at time of first sale of burdened lot. If plan is enacted later, then the previous houses aren’t burdened

Examples of Acceptable Evidence: Recorded plat with restrictions Presence of restrictions in all or most deeds to the property owned by the same

developer Restrictions in the last deed Observation by the owners of similar development of their land and conformity to

the written description Recording of declarations stating there was a common plan Statements in sales/advertising pamphlets

KEY: Remember that the covenant must be in place or be enforced PRIOR to the sale of the tract of land that is in dispute!

Developer can modify the restrictive covenants if it is REASONABLE because of the reliance interests of the purchaser at the time of purchase must be satisfied

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Termination of Real Covenant/Equitable ServitudeChanged Conditions Doctrine (applies to dominant estate)1. Dominant estate didn’t benefit anymore due to a change in circumstances2. The enforcement will no longer be of substantial benefit to the dominant estate3. “The relief is granted only if the purposes of the servitude can no longer be

accomplished.”

The Restatement alters the doctrine to:1. Includes easements2. Uses termination rules to substitute for controls that traditionally have been

applied thru touch and concern3. Suggests modification of the covenant instead of termination if the modification

will allow covenant to serve its purpose

Doctrine of Relative Hardship (applies to servient estate)The hardship to the defendant is great and benefit to plaintiff is smallWhat is “considerable magnitude?”

EstoppelBenefited party acts to lead reasonable person to believe covenant was abandonedBurden party acts in reliance thereonThen benefited party may be estopped to enforce the covenant

MergerIf the titles of benefited and burdened land come into the hands of one person, the covenant/servitude is merged into a fee simple

Acquiescence, abandonment, or unclean handsA dominant estate owner may be barred from enforcing the covenant if he has tolerated or failed to object to other violations of the covenant

LachesIf the covenant has been ignored or breached for a substantial period of time—but less than the time necessary for prescriptive rights—the court may find that unexcused delay in enforcing the covenant prompted investment in reliance on the failure to object to the violation and that enforcement of the covenant would be unconscionable.

Marketable Title ActsA restrictive covenant will be held violated if you do not properly record title.

OthersRelease, prescription

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Public Policy Limits on Restrictive Covenants

Common Law and Statutory Public Policy

Traditional ApproachTraditional Approach was to use touch and concern test to validate the kinds of covenants that could be created.

This was too restrictive however so they broadened it. It was too formalistic because it was unrelated to legitimate policy concerns.

Modern Approach

Looks to see if there are policy reasons not to impose a covenant against successor Considers that covenants increase the value of the land and are valuable property

rights in themselves. Balances the interests of owners of servient estates and owners of dominant estates

o Being free from obsolete/unduly restrictive servitudes VERSUS Controlling the use of neighboring land

o It recognizes that covenants can be meddlesome interferences with the free use to property and thus allows enforcement only where it can be shown to be reasonable to impose obligation on the owner.

o Obligations are reasonable if they benefit other owners in the community or if all owners are benefited by reciprocal obligations imposed on all owners in the community

Third Approach (Restatement) Goes even further in direction of protecting the interests of servitude beneficiaries CA Covenants are enforceable “unless unreasonable.”

o They won’t get struck down unless they violate public policy Invalid only if they are illegal, unconstitutional, or violate public policy

o Also if they are “arbitrary, spiteful, or capricious” or “unconscionable”o “It is in the public interest to recognize that individuals have broad powers to

order their own affairs”

Modern Approach REPLACES the “Touch and Concern” Test With Reasonableness Test:

Davidson Test for Reasonableness of the Enforceability of a Covenant1. Intention of parties at time of creation2. Whether the covenant had an impact on the considerations exchanged at execution

(value of covenant to parties at execution). 3. Is the covenant clear and express in setting the restrictions?

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4. Was the writing recorded in writing and did subsequent grantee have actual notice of covenant?

5. Reasonability concerning area, time, and duration. Covenants longer than lease usually are unreasonable.

6. Unreasonable restraint on trade or secures a monopoly for covenanter?7. Interference with public interest8. Do “changed circumstances” make the covenant unreasonable presently?

**Don’t analyze all factors, just pick the relevant ones and assess those to the facts**

Problems this is taking away public’s ability to enter into private arrangements on their own private property

Restraints on AlienationThe court uses a general test of reasonablenessIt is determined by “weighing the utility of the restraint against the injurious consequences of enforcing the restraint.”

Promote efficiency by allowing property to move to a more valuable useFree current owners from undue restrictions imposed by past ownersPromote equality by dispersal of property

Disabling Restraints—forbids owner from transferring her property interestPromissory Restraints—Covenant where grantee promises not to alienate his interestForfeiture Restraints—A future interest that will vest if owner attempts to transfer interest

Covenant Against CompetitionMay be considered to run with the land when they serve a purpose of facilitating orderly and harmonious development for commercial use.

Restriction: They might be unenforceable if they result in an unreasonable restraint of trade under either federal or state antitrust laws or under state common law

Constitutional Limits

Racially Restrictive Covenants

Shelley v. Kraemer Public Policy concern because the third-party seller wants to sell his house to a black

familyo It restricts his property rights

Today it would be a violation of Public Policy under the Common Law You need a state action in order to have a private arrangement ruled a violation of

the Equal Protection Clause

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o What made it a public policy problem is multiple people made agreements and it multiplied into significant discrimination because more than 2 people did this!

o The state action they found is that because a restrictive covenant cannot be enforced without state interaction in court

3 Primary Theories of State Action

Classic Liberal Thought (19th Century) Big distinction between private and public

o Private 14th Amendment does not reacho Public 14th Amendment does reach

State Action Doctrine ignores the race problem and the failure of current law to address these issues.

Instrumentalist View We cannot ignore the fact that when someone walks into a court house and says oh hey,

we’re 2 private actors and we’re going to discriminate, they cannot do that because it is showing that it is okay for this to happen

White person is unable to act in a free-market-exchange Black person cannot move into that neighborhood SHELLEY is this type of view We do not want to place courts in the position to support this type of behavior

o Courts are coercive in nature we ask the courts to settle rights of people

Contemporary View Libertarian notions of personal autonomy are crucial Back to private/public distinction

o But private behavior reflects person’s preferences o We are hesitant to interfere with a person’s individual preferenceso When one is acting as a private person he is practicing personal autonomy and

the court is hesitant to interfere with these rights By keeping certain things private we are allowing for a broader personal autonomy What values does the property system serve? CONFLICTS between the values

Real Estate Transactions

Broker Listings1. Exclusive Right to Sell

Gives broker exclusive right to collect commission, even if the sale is to a buyer the owner found without broker’s help.

2. Exclusive Agency

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Broker gets commission if sold by agency, but not if by the owner

3. Open (Nonexclusive)First person to sell property receives commission

Prohibited Listing ArrangementsNet-ListingRealtor gets $ that is more than sellers listing price – broker would list very low and sell high to get more $

Option ListingRealtor buys low and then can sell for whatever he wants

Structure of the Transaction

When is commission to realtor due?Traditional RuleThe broker’s commission was earned and due at the time the purchase and sale agreement was signed, regardless of whether the sale was actually completed.

Modern RuleThe broker’s commission is earned and due only if the sale is completed. Seller has the duty, however, to pay commission if the seller defaults and backs out of the deal without good reason.

Fiduciary Duties of the Broker: Duty to Warn of Potential DefectsBroker must reveal relevant information to the buyer or he could face a fraud suit.

Misrepresentations During the Real Estate Purchase and Sale Process

Caveat Emptor DoctrineLet the buyer beware.

Modern ApproachMoving towards full disclosure of all material facts must be made whenever elementary fair conduct demands it.

Expands the seller’s duty to disclose.

MisrepresentationConstitutes fraud, may give rise to damages as well as right to rescind.

An affirmative statement by the seller or broker to the buyer of a fact that is:1. Known to be false2. Material to the transaction

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3. Reasonably relied on by the buyer in deciding to purchase and4. Causes damage as a proximate result of the lie

If the misrepresentation is about a condition of the premises that is apparent to the buyer, fraud claim can be deniedISSUES resolve around what is known to be false and what is material to the transaction?

SuppressionAs long as the seller does not affirmatively lie to the buyer about the condition of the premises (misrepresentation), buyers are generally charged with notice of what an inspection of the premises would have revealed.

Some exceptions apply if a buyer conceals or attempts to suppress knowledge of the defect.Common Law NOT ACTIONABLEModern Approach If the buyer asks then you are required to tell them

i. You both have to know about the defect and work to conceal in order for it to be actionable

NondisclosureRequire sellers/brokers to disclose information about latent defects known to the seller and not readily discoverable by a buyer. Failure to disclose constitutes fraud—buyer can rescind sale and/or collect damages.

Common LawThe burden is placed on the buyer to discover defects (caveat emptor – buyer beware)

Moving to requiring disclosure:1. Moving to a more protecting rule2. Buyer doesn’t have access to all the information that seller does

When the seller knows facts material to the transaction, they have a duty to disclose

Who has the responsibility of a burden of the house? Who should bear the loss?

What information must be disclosed?States that impose liability for nondisclosure require disclosure of nonobvious information that a reasonable buyer would want to know about and that might affect the terms of the transaction—especially market value of the property—or induce buyer to back out of deal.

Merger ClauseMerger clause stating that written agreement embodies the whole agreement does not protect D from a claim of fraud.

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Waiver and DisclaimerYou can negotiate to waive these risk-allocation rules regarding defects of the house

Implied Warranty of Habitability In some states, this protects buyers of new residential real estate by imposing an implied warranty of habitability. Breach of this warranty may allow the buyer to rescind the sale or obtain damages.

Seller’s Failure to Provide Marketable TitleA marketable title is one that is free from reasonable doubt, but not every doubt—it must be one a prudent purchaser would accept.

A clearly proven adverse possession title is a marketable title. The seller must show written evidence or other proof admissible in court that proves the adverse possession.

The implied duty to provide marketable title ends at closing—after that, the seller is only responsible for warranties made in the deed, and a quitclaim doesn’t warrant title.

Good Record TitleConveyance by a sovereign state holding ownership (long ago), transfers of title from original grantee to seller on record, no recorded encumbrances or easements on property.

Main Defects (making title unmarketable)Encumbrances: Property interests in persons other than the grantor that seriously affects the value/usability of the property. Include possessory interests (conflicting leases/titles), nonpossessory interests (easements, covenants, mortgages, liens)

Chain of Title Defects: Mistakes or irregularities in documents or procedures by which title has been transferred or encumbered over time.

Buyer’s Failure to Obtain Good Faith FinancingThe buyer must attempt to gain financing in good faith and cannot just change her mind about the house and abandon attempts to complete the sale.

Remedies For Breach of the Purchase and Sale Agreement

Buyer’s Remedies

Specific PerformanceBuyer can get injunction ordering the seller to convey the property to the buyer by transferring title in exchange for the agreed-upon K price.

Damages

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Measured in most states by the difference between market value and K price, return of deposit, and any additional expenses the breach caused.

If seller believed he had a good title and acted in good faith, all buyer gets is the deposit and expenses back.

Buyer gets expectation damages only if the seller did not in good faith believe he had good title, willfully or arbitrarily refused to complete sale, or failed to perfect title when it was easy to do so. This is justified by the difficulties with the recording system and the fact that reasonable sellers can be mistaken about the state of their title.

RescissionThe buyer may seek to rescind the deal and recover down payment/deposit.

Will usually be abatement accounting for the hindrance.

Vendee’s LienPresumes that property belongs equitably to seller, who is obligated to purchase the property; also presumes that buyer has a lien on seller’s equitable title and that property can be sold so seller can give that money to buyer.

Seller’s Remedies

Specific PerformanceSeller may be able to sue the buyer for purchase price in exchange for seller’s handing over the deed, thus forcing the buyer to comply with the terms of the K.Seller might be able to find another buyer, and all money is the same.

DamagesMeasured by K price minus market price for property at time of breach, plus other expenses caused by the breach.

Rescission and Forfeiture of Down PaymentSeller may attempt to rescind the deal, keeping down payment the buyer paid. Usually the sales agreement has this stipulation included in it.

Vendor’s LienPresumes that property belongs equitably to buyer, who is obligated to purchase the property; also presumes that seller has a lien on buyer’s equitable title and that property can be sold so buyer can give that money to seller.

Deed and Title Protection

Essential Terms

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Deed must:1. Identify the parties2. Describe the property being conveyed

a. Must be sufficiently precise to locate the boundaries of the property (metes and bounds OR plats)

3. State the grantor’s intent to convey the property interest in question4. Contain the grantor’s signature

Constructive Delivery of DeedWriting a deed and engaging in conduct that demonstrates intent to transfer ownership is sufficient to constitute delivery.

Delivery is more likely to be established if deed is physically deposited in a safety deposit box or a third party, such as an attorney, with instructions to hand over the deed to grantee at grantor’s death.

Types of DeedsWarranty Deed: The seller warrants that the title is “free and clear of all encumbrances except any mentioned in the deed.” This is where you would put an easement if there was one.

Special Warranty Deed: Warranty deed that guarantees only against title defects created by grantor.

Quitclaim Deeds: The grantor in a quitclaim deed does not guarantee ownership rights but instead conveys the title he or she has. SHADY! It purports to transfer a tract to someone but it isn’t known if the person has the right to transfer it to the buyer. This raises a red flag.

Warranty of Title Contained in the Deed

Present CovenantsBreached at the time of the closing.

1. Covenant of Seisin: Grantor’s promise that he owns the property interest he is purporting to convey to the grantee

2. Covenant of the Right to Convey: Grantor’s promise that he has the power to transfer the property interest.

3. Covenant Against Encumbrances: Grantor’s promise that no mortgages, liens, leases, unpaid property taxes, or easements exist against the property except those listed in the deed itself.

Future covenantsBreached after the closing, at the time of disturbance to grantee’s possession occurs.

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4. Covenant of Warranty: Grantor’s promise to compensate grantee for any monetary losses occasioned by grantor’s failure to convey the title promised in deed.

a. General warranty deed: Covenants against all defects in title.b. Special warranty deed: Limits the covenant to defects in title caused by grantor’s

own actions but not acts of prior owners.c. Quitclaim deed: Name used for deed that contains no warranty/covenant of title

whatsoever. 5. Covenant of Quiet Enjoyment: Grantor promises that grantee’s possession will not be

disturbed by anyone with a superior lawful title. 6. Covenant for Further Assurances: Requires seller to take further steps to cure defects

in grantor’s title, like paying an adverse possessor to leave the property or paying to release an encumbrance.

Remedies for Deeds

EQUITYEquitable Estoppel

1. Representation of a material fact by the party estopped to the party claiming the estoppel that is contrary to the fact later asserted by the estopped party

2. Reliance on that representation by claiming party3. Party detrimentally changed their position due to the reliance

Waiver1. The existence at the time of the waiver of a right, privilege, advantage, or benefit that

can be waived2. Constructive/actual knowledge of the right3. The intention to relinquish the right

RatificationOccurs where a party with full knowledge of all the material facts makes an affirmative showing of his express or implied intention to adopt an act or contract entered into without authority.Occurs when you lead someone to believe you have true ownership of the property.

REMEDIES IN FRAUDULENT OR FORGED DEEDS

Void Title: Forgery cannot be used with subsequent purchasersTransfer no interest to grantee so you cannot use that as the basis of a transfer from grantee to a BFP

Forged Deed = VoidNo interest passes under a forged deed. The deed is not legally effective at all. Neither the donee nor a subsequent BFP who believes the deed is good takes anything. If the deed if forged and the grantor didn’t put the instrument into the chain of commerce so that another could be harmed, the grantor is protected. A subsequent BFP takes the risk of forgery.

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Voidable Title: Fraudulent If property passes from grantee to a BFP it cannot be rescindedFocus on what the status of BFP is! If they are truly a BFP then it cannot be rescinded

Fraudulent Deed = VoidableThe deed was signed by the grantor but procured by fraud is not void but voidable. The deed is not good (can be voided) against a fraudulent grantee, but is good against a subsequent BFP. The grantor has put the instrument into the chain of commerce, by which a subsequent BFP can be harmed. The grantor must take the risk if she delivers the deed, and she must suffer against a subsequent BFP.

Recording Acts (only used when there is an error in recording process)

Race StatutesThe person who records first prevails. This is true even if the person who records first knows about an earlier conveyance to someone else.

1. Acquires the land for value2. Records before the other

Notice Statutes A subsequent purchaser prevails over an earlier purchaser only if the subsequent purchaser did not have notice of the earlier conveyance. It protects any purchaser without notice against prior unrecorded interests even if the purchaser does not record first.

1. For value2. In good faith3. Without notice of the prior title claim

Race-Notice Statutes (Wisconsin)A subsequent purchaser prevails over prior unrecorded interests only if they (1) had no notice of the prior conveyance at the time they acquired the interest and (2) records before the prior instrument is recorded. MAJORITY RULE.

1. For value2. Good faith3. Without notice of the prior title claim4. The subsequent purchaser records before the other

The key issue is constructive noticeOccurs if the grantee would have found the title if he performed a reasonable search.

Type of Statute Typical Language EffectRace “No conveyance or mortgage of an interest in

land is valid against any subsequent purchaser whose conveyance is first recorded.”

Grantee who records first prevails

Notice “No conveyance or mortgage of an interest in Subsequent bona fide

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land is valid against any subsequent purchaser for value without notice thereof, unless it is recorded.”

purchaser (i.e., for value, without notice) prevails

Race-Notice “No conveyance or mortgage of an interest in land is valid against any subsequent purchaser for value without notice thereof whose conveyance is first recorded.”

Subsequent bona fide purchaser (i.e., for value, without notice) who records first prevails.

Other Recording Acts:

“Shelter Rule”A person who takes from a BFP will prevail over any interest over which the BFP would have prevailed. This is true even where such person had actual knowledge of the prior unrecorded interest. If a BFP gets a title that he doesn’t know has already been conveyed (but not recorded) then a 3rd party can get it from the BFP even if he knows about the original conveyance.

Chain of Title Problems

Chain of TitleThe chain of title includes those documents of which the purchaser has constructive notice. A purchaser is charged with notice of those conveyances of the property by her grantor recorded after the grantor acquired the property from his predecessor in title and recorded before a deed is recorded conveying title from that grantor to another. This is the standard title search—all documents found in a standard title search are in the chain of title.

“Wild Deed”A wild deed is a recorded deed to the property which is not recorded within the chain of title. Sometimes it means a recorded deed from a grantor who is not in the chain of title.

A wild deed does not serve as constructive notice to a subsequent purchaser who duly records. IT WOULD HAVE BEEN IMPOSSIBLE TO FIND IN RECORDS.

Estoppel by DeedIf a grantor purports to convey a property interest she does not own to a grantee, and the grantor subsequently comes to own the property interest by receiving the deed, ownership is automatically vested in the grantee.

By executing a deed without title, grantor is deemed impliedly to have covenanted that, when he obtains title, he will immediately convey it to the grantee. The doctrine of estoppel gives the grantee the thing bargained for and not merely damages.

Types of Title Indexes

Grantor-GranteeThe search is structured around the names of each party for land in the county at hand.

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Tract IndexAll documents affecting a certain parcel of land are indexed on a page for that parcel specifically

Modern move is towards the tract system; check laws in individual counties

Rights of Property Owners – Mortgages

Mortgage Vocabulary

MortgagorThe borrower or debtor

MortgageeThe lender

NoteA document that evidences the debt; the note is a personal obligation of the borrower, and the lender can sue the borrower on the note if the borrower doesn’t pay.

ForeclosureAfter default by the mortgagor, the mortgagee either manages a private sale or brings a lawsuit to foreclose on the property. If lawsuit, the court will issue a foreclosure decree, providing for public sale of the property by the court officer. The money will pay off the mortgagee and the leftovers go to mortgagor.

Deficiency judgment—the mortgagee can sue mortgagor if they get less money from sale than they loaned to mortgagor.

Equity of RedemptionThe borrower’s interest in the land and their right to pay off the rest of the note before foreclosure

Statutory Right of RedemptionAllows the mortgagor to buy back the property for the price bid at the foreclosure sale for a designated period (usually a year) after foreclosure.

Many states give the borrower a right to redeem for a fixed period of time after foreclosure by paying the same price.

Equity at the Common LawCourts have set aside foreclosure sales for inadequacy of price where the sale is so low as to shock the conscience of the court. The sale of the house by the mortgagee may be scrutinized to make sure proper notice was given to potential buyers. (Central Financial Services)

Present and Future Interests

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PROPERTY OUTLINE GRIDFEE SIMPES AND LIFE ESTATES

Present Interest Words to Create at Common Law

Duration Future Interest in Grantor

Future Interest in Grantee

Fee Simple Absolute

“and his heirs” Forever

Fee Simple Determinable

“so long as”“while”“during”“until”

As long as condition is met, then automatically to grantor.

Possibility of Reverter

Shifting Executory Interest

Fee Simple on Condition Subsequent

“provided that”“on condition that”“but if”

Until happening of named event and reentry by grantor

Right of Entry for condition broken

Shifting Executory Interest

Fee Simple Subject to an Executory Interest

To A for life, but if…, to B.

Until the event happens

Right of Entry Executory Interest

To A for so long as …and if not…, to B

As long as the condition is met then to a third party

Right of Entry Executory Interest

Fee Tail / Fee Simple Conditional

“and the heirs of his body”

Until A and his line die out

Reversion Remainder

Life Estate “To A for life” or “To A for the life of B”

Until the end of life

Reversion

“To A for life, then B”

Until end of A’s life then to B forever

Remainder

To A for life, but if…, to B.

Until the end of A’s life or the happening of the named event

Reversion Executory Interest

Problem of the Dead HandLimits placed on future interests can clog up the transaction market with restrictions long after one has passed away.

Hierarchy

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Could wind up having ownership of property concentrated in the hands of those who already own property and their descendants. Laws are necessary to prevent private owners from concentrating ownership by creating monopolies or centers of power.

Alienability of PropertyPromoted by giving grantors the freedom to determine to whom and under what conditions they will part with their property. Grantors should therefore be able to impose restrictions on the future use of their property; their ability to do so encourages them to part with their property. BUT nobody wants to buy property that is burdened with restrictions—core tension in the rules governing property interests.

Fee Simple AbsoluteProperty ownership without an associated future interest. Owner has the present right to possess and use the property, the right to sell or give it away, and the right to devise it by will or leave it to heirs.

Defeasible FeesPresent interests that terminate at the happening of a specified event (other than death of owner)Two Crucial Distinctions:

1. Is the future interest in the grantor or a third party?2. Does the future interest become possessory automatically when state event occurs or

does it become possessory only if the future interest holder chooses to assert his property rights?

Automatic transfer to the grantorWhen the future interest reverts automatically to the grantor on the happening of the stated event,

Present Interest = fee simple determinableFuture Interest = possibility of reverter

Holder of future interest gets an immediate right of possession (big for AP). If the holder doesn’t do anything to assert possession for the statutory period, title shifts back to the current possessor.

Transfer upon grantor’s assertion of property rightsIf the future interest owner chooses to assert her rights when the condition is violated or the stated event occurs, the property ownership shifts to her; if she does not assert her rights, ownership stays with the current owner.

Current Interest = fee simple subject to a condition subsequent Future Interest = right of entry (sometimes also called a power of termination)

If the folder of future interest doesn’t assert his right of possession, the title will remain with the present estate owner.

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Modern ApproachCourt applies one of 2 theories:

Doctrine of LachesPrevent the holder of a right of entry from waiting too long to assert her right of entry; laches prevents recovery when an unreasonable delay in asserting legal rights unfairly prejudices another.

Public PolicyStart running the statute of limitations at the moment the condition is violated, making right of entry effectively similar/identical to possibilities of reverter. This is so the violator isn’t always waiting to see if right of entry is exercised.

Transfer to a Third PartyWhen the future interest in a defeasible fee belongs to someone other than the grantor:

Present Interest = fee simple subject to executory limitationFuture Interest = executor interest

Ownership shifts automatically on the occurrence of the event—ownership shifts to a third party.

Life EstatesOwnership rights for the lifetime of an individual. A LE owner has no right to determine who owns the property after her death since ownership reverts to the reversioner or remainder holder.

ReversionIf property reverts to the grantor when the possessor dies, the future interest is called a reversionO to A for life

RemainderIf property reverts to a third party when the possessor dies, the future interest is called a remainder.O to A for life, then to B

Life Estate Per Autre VieIf a life estate for someone is sold to another individual, they have a life estate for the life of another or a life estate per autre vie.

Contingent and Vested Remainders

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Contingent RemaindersRemainders are contingent if one or both of two conditions are met:1. If the remainder will take effect only upon the happening of an event that isn’t certain to

happen2. If the remainder will go to a person who cannot be ascertained at the time of the initial

conveyance“O to A for life, then to B if B has graduated from law school”

Creates a contingent remainder because at the time of the original conveyance from O to A it is not certain that B will graduate from law school. (If B doesn’t graduate from law school, the property will revert to O on A’s death; if B later graduates, the property will spring to B.)

Destructibility of Contingent Remainders

Traditional Rule1. If they did not vest before the preceding life estate ended, the remainder was

destroyed. For instance, in conveyance “O to A for life, then to B if she has been elected president,” the remainder is destroyed if B had not been elected president before the death of A.

2. A merger destroyed contingent remainders—if subsequent deed overrules the first.

Modern ApproachContingent remainders are indestructible

Vested RemaindersInclude any remainders that are not contingent remainders. They are remainders to persons who are identifiable at the time of the initial conveyance and for whom there are no conditions precedent other than the natural termination of the prior life estate when the life estate owner dies.

There are 3 kinds:

1. Absolutely Vested Remainders a remainder not subject to change

2. Vested Remainders Subject to Open a remainder that may be divided among persons who will be born in the future. For example, a conveyance from “O to A for life, then to children of B.” It is subject to open because B might have more than just one child.

Rule of ConvenienceThe courts will close the class (i.e. no more children are eligible) once A dies so that the children can take possession then and not wait for other children.

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3. Vested Remainders Subject to Divestment a vested remainder that may be destroyed by an event that occurs after the original conveyance. For example, a conveyance from “O to A for life, then to B, but if B has flunked out of law school, the property shall revert to O” creates a vested interest in B that is subject to divestment (because if the condition, B flunks out of law school, is met at any time, B will lose his right to obtain the property on A’s death. Some vested remainders subject to divestment are equivalent to some contingent remainders.

The Rule in Shelley’s Case (only in real estate)When a devise or conveyance transfers a freehold estate to a person and in the same instrument also transfers a remainder to that same person’s heirs or the heirs of his body, and both estates are either legal or equitable, both are considered to be held by the first-named freeholder, either in life, in fee simple absolute, or in fee tail. Shorthand Elements:

1. A freehold estate given to a first transferee2. A remainder limited to the heirs of the first transferee in the same instrument3. A freehold and a remainder of the same quality – i.e. either both being legal or equitable

Doctrine of Worthier TitleWhen there is an inter vivos conveyance to a person with a remainder or executor interest to the grantor’s own heirs or next of kin, no future interest is created in the grantor’s heirs; rather, the grantor retains a reversion.

Fee Simple versus Life Estate

Edwards v. Bradley

A condition totally prohibiting the alienation of a vested fee simple estate or requiring forfeiture upon alienation is void. As an exception, conditions prohibiting alienation of land granted to corporate entities for their special purposes are valid.

A conditional limitation imposed upon a life estate is valid.

A LE may be created by implication as well as by explicit language, provided the will shows the requisite intent.

The intention of the testatrix is to be upheld if the will can be reasonably construed to effectuate such intent and if it is not inconsistent with an established rule of law. In addition, the language of the will “is to be understood in the sense in which the circumstances of the case show” that the testatrix intended.

Rule Against Creation of New Estates

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Prohibits owners from creating ownership packages that do not fit within one of the established estates; it helps ensure that sufficient rights are consolidated in owners so that they can act like owners.

This means the courts must interpret conveyances/wills to determine which estate the grantor intended to create.

Interpretations and Presumptions

Presumption against forfeituresIf it is possible to interpret the language to avoid loss of the property by the current owner, the courts will generally adopt this interpretation.

Future Interest v. Precatory Language (general statement of purpose, not legally binding)The presumption is to recognize a fee simple absolute with no future interests

Covenant v. Future InterestThe presumption is against the future interest and in favor of the enforceable covenant because this will keep title with the current owner.

FSD v. Fee Simple Subject to Condition SubsequentFS subject to condition subsequent is preferred because the current interest is not automatically forfeited when the condition is violated, thereby keeping ownership (for the time being) with the current owner.

LE v. FS (Defeasible or Absolute)FS interest is preferred

Interests of Current Owners v. Future OwnersInvolves a policy decision about the proper distribution of power over property between grantors and grantees.

Requiring forfeiture promotes the interests of the grantor in controlling the future use and disposition of property; it also creates security for neighboring property owners who may benefit by the condition.

The presumption against forfeitures promotes the interests of the current owners in controlling property in their possession, giving them greater freedom to change land uses as economic conditions and social values change; it also promotes social interests in deregulating economic activity to allow property owners the freedom to shift property to more valuable or desired uses.

Purpose Language

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When conveyances include language explaining the purpose of the transfer, most courts hold the language to be precatory and will interpret conveyance to have transferred all the interest the grantor owned. The burden is on grantor to be clear if they intend to retain a future interest.

Some courts are eager to find a future interest when the property is donated for charitable purposes.

Changed Conditions DoctrineDenies enforcement of covenants when circumstances are so drastically changed that they are no longer of benefit to the dominant estate. Does not apply to future interests.

Concurrent Ownership and Family Property

Tenancy in CommonEach co-owner is the owner of a separate and distinct share of the property, which has not been divided among cotenants. Each owner has a separate, undivided interest in the whole.

Equal shares are not necessary—it is presumed that all have equivalent shares.Cotenants do not need to have the same type of estates.

Right to PossessionEach tenant in common has the right to possess and enjoy the entire property, subject to the same right in each co-tenant. The tenants can come to whatever agreement on possession that they desire.

No Right of SurvivorshipWhen a tenant in common dies, her interest passes to her devisees or heirs. It does not go to the surviving tenant in common.

Joint TenancyEach cotenant owns an undivided share of property, and the surviving cotenant has the right to the whole estate. There is no limit to the number of persons who can be joint tenants. On the death of each joint tenant, the property belongs to the surviving joint tenants until only one is left—whoever lives the longest takes the entire property. Cotenants have been required to possess equal fractional interests in the property.

Right of SurvivorshipWhen each joint tenant dies, her property interest is immediately transferred to the other tenants.

This is not nice to potential future-interest holdersConsolidates ownership over the propertyTries to keep possession in whole

Severance

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If one joint tenant sells to another individual, then the joint tenancy is severed. A tenancy in common results from the severance.

Four Unities Requirement

THE JOINT TENANCY FOUR UNITIES REQUIREMENT

UNITY OF TIME Interest of each joint tenant must vest at the same timeUNITY OF TITLE All joint tenants must acquire title by same deed or will, or

by joint adverse possessionUNITY OF INTEREST Interest of each joint tenant must be equal in an estate of one

duration (equal interests) [MUST HAVE THE SAME ½ OR 1/3 OR WHATEVER]

UNITY OF POSSESSION Each joint tenant must have right to possession of the whole

PartitionThe owners may voluntarily partition the property or there may be a lawsuit to involuntarily partition the property. Voluntary PartitionYou can have a physical division of the property or a forced sale of the property and division of the proceeds among the owners.Judicial PartitionThe court may order the property physically divided among the co-tenants. If not feasible, the court can order the property sold and proceeds divided up equally.

Co-tenants can also agree to NOT partition the land (in deed and/or will)

Lease By Joint TenantOne joint tenant has the right to lease her interest in the property, even over the objection of the other tenant. Does it sever the joint tenancy?

Common Law—lease seversDestroys the unity of interest because the lessor joint tenant had only a reversionary interest and the other had a fee simple.

Modern View—lease doesn’t severThe surviving joint tenant takes the whole. But views are split concerning whether the survivor gets one half subject to the existing lease:

One says the lease is valid until the endThe other says that the lease is void upon the death of the joint tenant

Tenancy by EntiretyA form of joint tenancy available only to a legally married couple—it requires the four unities as well as the requirement of marriage. The surviving spouse has a right of survivorship.

No Severance Neither tenants by the entirety acting alone can do anything to destroy the right of survivorship

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No Partition Besides Divorce

Tenancy by the EntiretyA form of joint ownership available only to married couples. It is similar to joint tenancy, but:

1. The co-owners must be married2. The property cannot be partitioned except through a divorce preceding3. In most states, the individual interest of each spouse cannot be sold, transferred, or

encumbered by a mortgage without the consent of the other spouse, with the result that the right of survivorship cannot be destroyed by the transfer of the interest of one party

4. In most states, creditors cannot attach property held through tenancy by entirety to satisfy debts of one of the spouses.

Property rights used to give the husband the sole management powers, but this was overturned by EPC 14th Amendment

APPLIES TO ALL THREE TYPES OF COTENANCY

OusterAffirmative OusterThere is an intentional act that prevents one of the co-tenants from being in possession of the estate.

Constructive OusterCan be shown when it is impracticable for the co-owners to occupy the property or because the parties cannot be reasonably expected to get along sufficiently well (divorce).

RemediesCollection of reasonable rental value, suit for partition

Adverse Possession and OusterOne cotenant cannot obtain adverse possession against another unless the possessing tenant makes clear to the nonpossessory tenant that he is asserting full ownership rights in the property to the exclusion of the other cotenants.

Courts usually require some affirmative act by nonpossessory tenant this is because each cotenant has the legal right to possess the entire property; sole possession does not violate the property right of the other owners and does not, therefore, constitute a trespass.

Rent When One Tenant is in PossessionMajority RuleIf B is not ousted by A, A is entitled to use and occupy every part of the property without paying any amount to B. B cannot recover a share of rental value of the land unless B has been ousted by A or A agreed to pay B.

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RationaleThis rule promotes productive use of property. It rewards the cotenant that goes into possession.

Cost of UpkeepA has to bear the cost of ordinary expenses of upkeep (taxes, mortgage, repair, etc.). If taxes and mortgage interest exceed fair rental value, other cotenants must contribute.

Minority RuleA must account to B for B’s share of the reasonable rental value of the premises.

RationaleThis rule puts the burden on occupying tenant to show agreement not to pay. This induces the parties to come to an agreement because the occupying tenant has to pay the other if they don’t make an agreement and this avoids court costs and litigation.

Cost of UpkeepShared costs

Rent From 3 rd Party Must Be Shared

Wisconsin Rules

1. Common owners, ideally, share the cost expenses, including taxes, insurance, interest and principal payments.

2. Co-Tenancy carries a number of benefits in Wisconsin, including the ability of the co-tenant to receive a proportionate share of the net rents collected by another co-tenant after deduction of the property taxes, maintenance costs and any other property charges relating to the property. Wis. Stat. § 700.23.

3. A co-tenant, even when not in possession, may recover the co-tenant rents and profits from the co-tenancy. Wis. Stat. § 700.24. Additionally, in a partition, a co-tenant may have an equitable claim to off-set the partition by:

a. Business Value: Profits generated by the co-tenant from their actual use or working of the property for commercial operations.

b. Occupancy value: The imputed value arising from mere occupancy of the property by co-tenants when the fair market value exceeds the overhead costs of maintaining and servicing debts.

Interpretation of Ambiguity

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If ambiguous between joint tenancy and tenancy in common, the modern practice is to interpret the conveyance as a joint tenancy.

The traditional practice was to favor joint tenancies over tenancies in common.

Types of Common OwnershipI. Types of TenanciesTenancy in Common

In a tenancy in common, each tenant has a right of possession, no matter what fractional interest is available.

Rights of Enjoyment:

1. Right to Possess the Entire Parcel of Land

2. Duty to Pay Rent in Cases of Ouster3. Right to Pay Third Party Remuneration

Shared Jointly4. Maintenance of the Joint Property

(Accounting)

Tenancy in Common: Consequences

1. Fractional interest only relevant to purchase price.

2. When a tenant in common dies, the devise can pass by will or intestate.

3. Partition: You can file for a partition of the property.

Joint Tenancy

In a joint tenancy, each tenant has the right to possess the entire parcel. Unlike tenants in common, joint tenants have traditionally been required to possess equal fractional interests in the property.

Rights of Enjoyment:1. Right to Possess the Entire Parcel of Land2. Duty to Pay Rent in Cases of Ouster3. Right to Pay Third Party Remuneration Shared Jointly4. Maintenance of the Joint Property (Accounting)

Joint Tenancy: Consequences

1. Right of Survivorship: When a joint tenant dies, her portion is immediately transferred to the other tenants.

a. Severance: If one joint tenant sells to another individual, then the joint tenancy is severed. A tenancy in common results from severance.

2. Formalities of Creation: Unity of time, title, interest and possession.

3. Partition: You can file for a partition of the property.

Tenancy by Entirety

A tenancy by the entirety is a form of joint tenancy available only to the married couple.

Tenancy by Entirety: Consequences

1. Legal Marriage2. No Partition Except Divorce3. Consent to Encumbrance4. No Attachment of Property

B. Expenses and Benefits

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4. Common owners, ideally, share the cost expenses, including taxes, insurance, interest and principal payments.

5. Co-Tenancy carries a number of benefits in Wisconsin, including the ability of the co-tenant to receive a proportionate share of the net rents collected by another co-tenant after deduction of the property taxes, maintenance costs and any other property charges relating to the property. Wis. Stat. § 700.23.

6. A co-tenant, even when not in possession, may recover the co-tenant rents and profits from the co-tenancy. Wis. Stat. § 700.24. Additionally, in a partition, a co-tenant may have an equitable claim to off-set the partition by:

a. Business Value: Profits generated by the co-tenant from their actual use or working of the property for commercial operations.

b. Occupancy value: The imputed value arising from mere occupancy of the property by co-tenants when the fair market value exceeds the overhead costs of maintaing and servicing debts.

7. Ouster: An ouster can be accomplished only by such conduct as is sufficient both to exclude the non-occupying tenants and to communicate to them anintent to do so. Mere occupation of the property is not sufficient by itself to communicate ouster. There are two types of ouster: affirmative ouster (where there is an intentional act that prevents one of the co-tenants from being in possession of the estate); and constructive ouster: can be shown where it is impracticable fro the co-owners to occupy the property or because the parties cannot be reasonably expected to get along sufficiently well (divorce).

8. Partition: The owners may voluntarily partition the property or they may be a lawsuit to involuntarily partition the property. In a voluntary partition, you can have a physical division of the property or a forced sale of the property and division of the proceeds among the owners.

Initial Occupancy: Landlord’s Duty to Deliver Possession

Majority Rule: the landlord has the duty to deliver possession of the rented premises to the tenant at the beginning of the leasehold.

Minority/Traditional Rule: the landlord has the duty to deliver the RIGHT to possession but no duty to deliver actual possession—it is the new tenant’s responsibility to evict the holdover tenant by bringing ejectment or other appropriate proceedings.

Landlord’s Right to Inspect and RepairAccess:Give at least 2 days’ notice and may only enter at reasonable timesLandlord-Tenant

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Term of YearsTerm specified by the parties. The landlord holds a reversion in the property unless the landlord decides that upon the termination of the lease that the leasehold will revert to a third party. At that point, the third party holds a remainder.

Periodic TenancyThis tenancy renews at specified periods unless either party chooses to end the relationship.Notice is required to end the tenancy.

Tenancy at WillSimilar to a periodic tenancy but can be ended without notice by the landlord.

The death of the landlord ends the periodic tenancy.Tenancy at Sufferance

A tenant rightfully in possession who wrongfully stays over after the leasehold has terminated is a tenant at sufferance or a holdover tenant.

In Wisconsin, these categories organized in a slightly different manner:

a. Lease: an agreement, whether oral or written, for transfer of possession of real property, or both real and personal property, for a definite period of time. A lease is for a definite period of time if it has a fixed commencement date and a fixed expiration date or if the commencement and expiration can be ascertained by reference to some event, such as completion of a building. Wis. Stat. § 704.01(1).

JAVINS case that indicates a shift from a conveyance of property interest to a conveyance of contract arrangement

Until the middle of the 20th century conveyances had no implied warranty – instead it was seen as a property interest

2 very different views of a lease are demonstrated by warranty and quiet enjoyment:

K with a property interest attached Conveyance of property interest

Common Law = quiet enjoyment (actual & partial eviction) this is not favored anymore

Modern Law = Implied Warranty of Habitability this is favored

b. Periodic tenant: a tenant who holds possession without a valid lease and pays rent on a periodic basis. Includes a tenant from day-to-day, week-to-week, month-to-month, year-to-year or other recurring interval of time, the period being determined by the intent of the parties under the circumstances, with the interval between rent-paying dates normally evidencing that intent. Wis. Stat. § 704.01(2).

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c. Tenant at will: any tenant holding with the permission of the tenant's landlord without a valid lease and under circumstances not involving periodic payment of rent; but a person holding possession of real property under a contract of purchase or an employment contract is not a tenant under this chapter. Wis. Stat. § 704.01(5).

Transfers of Leasehold Interests

LeaseholdTenant’s right to possess the property in exchange for rent, subject to terms between the parties

Assignment/SubleaseTenants have full rights of possession over the property.

One of their most important rights is the right to sublet or assign:

Assignment Sublease1. Conveys all of the tenant’s remaining property interest without retaining any future interests to enter the property.

2. Under assignment, assignee undertakes all of the responsibilities of the tenant. (Privity of Estate).

1. Tenant retains some control to enter the property (End of the sublease; end of some condition can trigger the right of reentry).

2. Sub-tenant owes no responsibilities to landlord.

Approval of Lease Can the landlord include an approval clause in the lease with regards to subleases and assignments?

A tenant with a periodic tenancy of less than year-to-year or with a tenancy at will may sublease or assign the tenant's lease only with the consent or agreement of the landlord.

Any other tenant, in the absence of a restriction in the lease may sublet, assign or mortgage the tenant's interest in the lease. Landlords typically include a provision in the lease either completely forbidding subleases and assignments or permitting them only with the landlord's consent. A lease restriction on transfer applies only to voluntary transfers unless there is an express restriction on transfer by operation of law. 1 Wis. Prac., Methods of Practics § 13.29 (4th ed.)

AssignmentTenant gives someone else all his or her future rights to the property

Privity of EstateRelationship between the assignee and landlord—the tenant’s covenants run with the land.

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SubleaseThe tenant retains some future interest or right to control the property in the future

Under sublease, the landlord has no right to sue subtenant to enforce any of the covenants in the original lease. Exception is when subtenant directly promises to pay landlord—the subtenant could be sued as a third-party beneficiary of the contract between tenant and subtenant.

Lease covenants could be enforced by injunction as equitable servitudes, so long as subtenant has notice of them.

When the lease is silent, tenant can transfer her leasehold.

Kendall v. Ernest Pestana, Inc.

Restraints on AlienationMajority Rule: where a lease contains an approval clause, the lessor may arbitrarily refuse to approve a proposed signee no matter how suitable the assignee appears to be and no matter how unreasonable the lessor’s objection.

Minority Rule: where a lease provides for assignment only with the prior consent of the lessor, such consent may be withheld only where the lessor has a commercially reasonable objection to the assignment, even in the absence of a provision in the lease stating that consent to assignment will not be unreasonably withheld.

Commercially reasonably objections include—financial responsibility of proposed signee, suitability of the use for the particular property, legality of the proposed use, need for alteration of the premises, and nature of occupancy (office, factory, clinic, etc.)

Commercial Leases in WisconsinIs it an Assignment or Sublease?Is it Commercial or Residential?

If Commercial, is it reasonable?Factors:

1. Financial responsibility of the proposed assignee2. Suitability of the use for the particular property3. Legality of the proposed use4. Need of altercation of the premises

In a tenant-landlord relationship, both Implied Warranty of Habitability and Covenant of Quiet Enjoyment exist.

Use Implied Warranty for issues relating to the structure of the house you live in

Use Quiet Enjoyment if it is something outside the structure that is restricting your quiet enjoyment

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Covenant of Quiet EnjoymentThe landlord’s promise not to interfere with the tenant’s possession, use, and enjoyment of the property. If it is not express in a lease then it is always implied.

Breach of Quiet EnjoymentQuiet Enjoyment is breached by either Actual Eviction or Constructive Eviction:

1. Actual Eviction If a tenant is physically evicted from the entire leased premises by the landlord barring the tenant from the property, the rent obligation ceases entirely and it constitutes actual eviction—the lease is treated as terminated.

Damages for TenantMay collect damages for breach of covenant, trespass, or an injunction to fore landlord to reconvey to tenant

Partial Actual EvictionIf the landlord evicts the tenant from any portion of the leased premises, tenant’s rent obligation abates entirely until possession thereof is restored to him. The tenant may stay in possession and refuse to pay rent. The tenant also may move out.

Rationale Letting tenant not pay imposes a penalty on the landlord who interferes with the tenant’s use of any part of the premises. The rule is an efficient way to protect the tenant.

Restatement View (Modern View)Rejects the rule of complete rent abatement for partial actual eviction on the grounds that it is unjust to the landlord. It adopts a rule of partial rent abatement and gives tenant other remedies or damages for the breach of covenant.

2. Constructive EvictionOccurs when the landlord substantially interferes with tenant’s use and enjoyment of the leased premises so that the tenant can no longer enjoy the premises as the parties contemplated. The tenant may terminate the lease, vacate the premises, and be excused from further rent liability. The theory is that when a landlord allows the conditions to deteriorate such that living is impossible or uncomfortable, his actions are functionally equivalent to physically barring tenant from premises. (Minjak)

Elements:Substantial Interference Tenant’s use and enjoyment must be substantially interfered with (opposed to possession interfered with in actual eviction).

Objective measurement—what a reasonable person would regard as fundamentally incompatible with the use/enjoyment parties bargained for.

Courts take into consideration:Purposes the premises were leased forForeseeability of this type of interferencePotential duration of the interference

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Nature and degree of harm causedAvailability of means to abate the interference

Disclosure Prior to LeaseIf the landlord knows of defects in the premises, they may be under a duty to disclose to tenant. This is usually an argument that it is fraudulent for the landlord not to tell tenant about concealed and substantial defects.

Tenant’s KnowledgeIf the tenant knows of the interference before taking possession and then takes possession, the tenant has waived the interference.

Notice to LandlordPrior to claiming constructive eviction, tenant must give notice to landlord of what the objectionable conduct was and the landlord must fail to fix within a reasonable time.

Tenant Must Vacate Premises A tenant must vacate the premises before he makes a constructive eviction claim.

If tenant stays and doesn’t pay:

Traditional RuleThe tenant can raise constructive eviction defense ONLY if he moves out within a reasonable time period. If he stays, it would be evidence that the interference is not sufficiently serious to justify allowing the tenant to stop rent or end leasehold.

Modern Trend (Restatement View)Tenants can establish a defense of partial constructive eviction. Tenants can show that landlord’s actions have substantially deprived the tenant of the use and enjoyment of a portion of the property. This defense may allow tenant to remain living in the area that is livable. The remedy is a partial abatement of rent.

Restatement View (Modern View)Rejects the requirement that tenant must abandon the property before a claim of constructive eviction. The restatement gives tenant the right to (i) terminate, or (ii) stay on and receives damages or rent abatement or certain self-help options. This gives the tenant what they bargained for and doesn’t kick the tenant out, which would be bad if it was someone too poor to find decent housing elsewhere.

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Fault of LandlordThe interference with tenant’s quiet enjoyment must result from some act or failure to act by the landlord. Usually a tenant cannot claim constructive eviction from the act of a 3rd party (another tenant) unless the party’s acts were induced by, or committed with express/implied consent of the landlord.

Acts of the LandlordAny act of landlord (playing loud music at 2am, etc.) or failure to act (not providing heat, etc.) that substantially interferes with tenant’s use and enjoyment is sufficient for constructive eviction. For a tenant to claim constructive eviction for landlord’s nonfeasance (failure to act) the landlord must have some legal duty to act and, by not acting, the tenant is deprived of his use and enjoyment.(Most modern cases involve failure of landlord to furnish/repair heat/services in violation of express/implied covenant.)

Acts of Other TenantsWhether other tenant’s actions cause constructive eviction is dependent on whether the landlord can control the behavior of other tenants and can be found at fault for not controlling it.

General Rule: Landlord is not responsible for one tenant causing annoyance to another tenant even though the annoying conduct would be constructive eviction if done by the landlord and even though the landlord could legally control the other tenant’s conduct.

Exceptions:1. Landlord has a duty not to permit a nuisance on the premises.2. Landlord has a duty to control common areas that are under the

landlord’s control.

Modern Trend:Holds the landlord responsible for other tenant’s acts if landlord has the legal ability to correct the conditions and fails. Basis: Landlord is in a better position to stop it than the tenant is.

Restatement: 1. Interference that is MORE THAN INSIGNIFICANT (rather than CL significant)

2. Adopts Blackett Doctrine—making landlord liable for the acts of third parties “performed on property in which the landlord has an interest, which conduct could be legally controlled by him.”

3. Rejects abandonment requirement because it’s completely unavailable to tenants who for one reason or another cannot move.

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Implied Warranty of HabitabilityObligates landlords to comply with the housing code and to provide premises that are safe and suitable for habitation.

A violation of the implied warranty of habitability is a defense to an action by landlord for payment of rent. For the landlord to sue on the tenant’s covenant, the landlord must have performed his or her own. Under modern law, most states find a landlord has a duty of delivering habitable premises and of maintaining them in habitable shape.

Rationale A modern urban residential tenant doesn’t have time to inspect the premises and

put them in a tenantable condition The landlord knows more about the defects and is in a better position to fix them Housing codes are not effectively enforced and constructive eviction is not a

viable remedy in times of housing shortages Tenants have much less bargaining power than landlords in an urban area All merchants have implied warranties of fitness – this is similar

Scope of WarrantyHousing CodesThe basic validity of every housing contract depends upon substantial compliance with the housing code at the beginning of the lease term.

By signing a lease, the landlord has undertaken a continuing obligation to the tenant to maintain the premises in accordance with all applicable law.

WISCONSIN = Warranty in excess of the housing code

Fit for Human HabitationSome use this as the standard. The standard can be higher or lower than the housing code; it is just the basis of the warranty standard.

Others That Have Been Adopted Duty to Repair Duty to follow individual state warranties Compliance with “general community standards of suitability for occupancy.” Warranty to Provide Necessary Services

o Heat, hot water, broken windows, pest infection, or leaky roof

Notice to Landlord/When Does Violation StartGeneral Rule: The implied warranty is not violated until the landlord has been notified of the problem and had a reasonable opportunity to fix it. Other Rules: The violation starts when condition occurs or when landlord is notified

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Restatement: The landlord is not in breach until a reasonable time has passed after the tenant has given the landlord notice

Remedies

Terminate LeaseThe tenant may terminate the lease, vacate the premises, and recover damages. Damages may include relocation costs and the fair market value of the lease (difference between their agreed rent and the fair market rent the tenant has to pay now)

Continue Lease and Recover DamagesTenant may continue the lease and recover damages (normally a rent reduction) but court can figure damages in different ways.

Pay-For-Premises-As-Is Rule (Rejected)One damages method has the purpose of making the tenant pay only for the value of what he is receiving (premises as is).

Damages = Rent — Fair Market Value of Apartment As Is (during the occupancy as unsafe or unsanitary conditions) SO NO DAMAGES RECEIVED BECAUSE AGREEMENT WAS FOR RENTAL AS IS

Loss-of-Bargain Rule (Accepted)Another damages method is to attempt to give tenant what he bargained for. Damages then are abated from the monthly rent.

Damages = Fair Market Value As Warranted — Fair Market Value As Is

Damages for Discomfort and AnnoyanceDamages for emotional distress unaccompanied by physical injury

Continue Lease and Use Rent to RepairIf the landlord fails to repair after notice, the tenant may use a reasonable amount of rent to repair the defective conditions. Restatement also uses this when tenant gives notice first and then makes only reasonable expenditures.

Continue Lease and Withhold RentRestatement allows tenant to place his rent in escrow until the default is eliminated. The Restatement allows this.

Use Breach of Warranty as a Defense to Landlord’s Action for RentThe duty to pay is dependent on landlord’s performance (and maintaining habitability)

Waiver of Warranty by Tenant

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Professor Murray

A waiver of the implied warranty of habitability is not permitted.

URLTA ViewThe lease can switch the duty of repair to the tenant if (i) the agreement is not for the purpose of evading obligations of landlord and is set forth in a separate writing with additional consideration, and (ii) the work is not necessary to cure noncompliance with housing code.

Restatement ViewThe parties may agree to decrease landlord’s obligations unless the agreement is “unconscionable [shock the conscience] or significantly against public policy.”

Factors to Weigh: Extent that waiver interferes with enforcement of housing code Type of property leased Whether the waiver serves a reasonable business purpose/is result of

conscious negotiations Whether the waiver is part of a boilerplate lease document Whether the waiver impose unreasonable burdens on a tenant with

unequal balancing power Whether the parties were represented by council

See pg. 808 for policy reasons

Retaliatory EvictionRetaliatory eviction occurs when a landlord takes revenge against a tenant's actions by evicting, attempting to evict, or failing to renew that tenant's lease. A retaliatory eviction is generally preceded by a complaint made by the tenant regarding the condition of the property, or the tenant's assertion of a legal right.

In deciding whether a tenant establishes a defense of retaliatory eviction, the court considers the following factors that tend to show the landlord’s primary motivation was not retaliatory:

(a) The landlord's decision was a reasonable exercise of business judgment; (b) The landlord in good faith desires to dispose of the entire leased property free of all tenants; (c) The landlord in good faith desires to make a different use of the leased property; (d) The landlord lacks the financial ability to repair the leased property and therefore, in good faith, wishes to have it free of any tenant; (e) The landlord was unaware of the tenant's activities which were protected by statute; (f) The landlord did not act at the first opportunity after he learned of the tenant's conduct; and (g) the landlord's act was not discriminatory.

In addition, the tenant must demonstrate that it had been 6 months or less between the action and the eviction and must present that the action actually occurred.

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Property Law Outline—Spring 2011

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