2.
MBE DRILLS REAL PROPERTY
REAL PROPERTY QUESTIONS
Question 1
A landowner properly conveyed a lot to
my brother, and on my brothers death, to my
daughter. The brother took up possession
of the lot and lived there for two years. He
then conveyed my interest in the lot to his
girlfriend. The girlfriend took up residence on
the lot. Since she has been living there, she has
been sent two county property tax bills, which
she has refused to pay. The county is now threat-
ening to bring an action to force a judicial sale of
the lot to cover the tax deficiency. The daughter
files an appropriate suit asking the court to evict
the girlfriend from the lot and to compel her to
pay the taxes for her period of occupancy.
The court will rule that:
(A) The girlfriend has a life estate in the lot for
the period of her own life, and she must pay
the taxes on the property.
(B) The girlfriend has a life estate in the lot for
the period of the brothers life, and she must
pay the taxes on the property.
(C) The girlfriend has a life estate in the lot for
the period of the brothers life, but she does
not have to pay the taxes on the property,
because taxes are the responsibility of the
remainder grantee.
(D) The daughter owns the lot, because the
brothers attempt to convey his interest to
his girlfriend forfeited his interest.
Question 2
A landowner provided in his will that his
property would pass on his death to his son
for life, then to my eldest grandchild living at
my sons death for life, remainder to my great-
grandchildren, share and share alike. When the
landowner died, he was survived by his wife, his
son, his sons son, his daughter, and his daugh-
ters daughter. The sons son was the eldest of the
two grandchildren. After the landowners death,
his son had another child, and his daughter had
two more children. When the son died many
years later, the sons eldest son had predeceased
him, and seven great-grandchildren (of the
landowner) had been born.
At the sons death, in whom is title to the
property vested?
(A) The landowners heirs.
(B) The grandchildren living at the landowners
death.
(C) The daughters eldest daughter for life,
remainder to the great-grandchildren.
(D) The daughters eldest daughter for life,
remainder to the landowners heirs.

Question 3
A landowner owned a parcel of land in the
mountains. His will devised the parcel to my
nephew, his heirs and assigns, so long as it is
used for camping and recreational purposes,
otherwise to the underprivileged youth club.
The residuary clause of his will left all his
property not devised in the remainder of the will
to his daughter, who was also his sole heir when
he died. His daughter died intestate a few years
later, leaving a son (the landowners grandson) as
her only heir.
The jurisdictions decisional law follows the
common law Rule Against Perpetuities, and a
statute provides that future estates and interests
are alienable, and may be devised or inherited,
all in the same manner as possessory estates or
interests.
Which of the following best describes the
interests of the grandson and the underprivileged
youth club in the parcel?
(A) The grandson has a possibility of reverter
and the underprivileged youth club has an
executory interest.
(B) The grandson has an executory interest and
the underprivileged youth club has nothing.
(C) The grandson has a possibility of reverter
and the underprivileged youth club has a
contingent remainder.
(D) The grandson has a possibility of reverter
and the underprivileged youth club has
nothing.
MBE DRILLS REAL PROPERTY 3.
Question 4
The owner of a shopping center entered into
a two-year lease with a tenant who was opening
a greeting card shop. When the lease still had
14 months left to run, the tenant decided to sell
his business and inventory to a successor. When
the tenant told the mall owner that he planned to
assign his lease to the successor, the mall owner
objected, citing a clause in the lease requiring
consent to any assignment and providing that
any attempted assignment without consent is
grounds for terminating the lease. The tenant
assigned the lease to the successor anyway. The
successor operated the card store in the same
manner as the tenant, the only difference being a
change of the stores name.
Does the mall owner have any recourse
against the tenant or the successor?
(A) Yes, he may evict the successor and
collect damages from the tenant because
nonassignment clauses are valid and
enforceable.
(B) No, the nonassignment clause is invalid in
this case because the owner has a duty to
mitigate damages.
(C) No, because the successor is operating the
same type of business as the tenant, and the
owner has suffered no damages resulting
from the assignment.
(D) No, because nonassignment clauses are
invalid restraints upon alienation.
4. MBE DRILLS REAL PROPERTY

Question 5 If the hotel sues the attorney and the court

determines that the parties created a tenancy, for
An attorney was staying at a hotel while how many additional days lodging will he be
traveling to work on a case. The normal room required to pay?
charges were $150 per night. The attorney made
a deal with the hotel management to pay $700 (A) None, because a tenancy at will was
per week for his room for an indefinite period. created.
The attorney never told the hotel management
exactly how long he planned to stay or how he (B) Three days, because a periodic tenancy was
would pay, but each Sunday he would present created.
the cashier with a check for $700, plus any
additional taxes and room charges, to pay for (C) Seven days, because a periodic tenancy was
the previous weeks lodging. He did this for four created.
weeks, and then the case he was working on was
settled. On a Thursday morning, before check- (D) Ten days, because a periodic tenancy was
out time for that day, the attorney tendered the created.
hotel cashier a check for $400 plus additional
charges incurred from Sunday through
Wednesday nights. The cashier promptly took
the check and then demanded that the attorney
pay an additional $1,000 plus taxes for 10 more
days lodging, covering the rest of the week
plus an additional week because he did not give
a weeks notice that he planned to vacate. The
attorney refused to pay the additional charges.

Question 6
Seventeen years ago, a lumberjack purchased
Lot 1, which is adjacent to Lot 2 and Lot 3. A
public road runs along the far side of Lots 2 and 3.
At the time of the purchase, he asked the owner of
Lot 2 to grant him an easement to use the paved
way across Lot 2 to haul logs to the public road.
The owner of Lot 2 agreed. The lumberjack paid
nothing for the easement, and the deed granting
the easement was properly recorded. For six
months, the lumberjack hauled logs across Lot 2.
The lumberjack then negotiated with the owner of
Lot 3, and she granted him a license to haul logs
on the gravel road across Lot 3 to the public road,
a shorter distance than the route across Lot 2.
The lumberjack paid the owner of Lot 3 a modest
annual fee for this privilege. Since that time, the
lumberjack has never used the paved way across
Lot 2 for any purpose. Six months ago, the owner
of Lot 2 conveyed the lot to a buyer, and two
weeks ago, the buyer had a chain-link fence built
around the perimeter of Lot 2, which blocked the
lumberjacks access to the paved way crossing
Lot 2. One week ago, acting within her rights, the
owner of Lot 3 revoked the lumberjacks license
to use the gravel road crossing Lot 3. The next
day, the lumberjack demanded that the buyer of
Lot 2 remove the chain-link fence because of the
easement, but the buyer refused. The state has
a 15-year prescription and adverse possession
period.
Which of the following best represents the
lumberjacks rights under the circumstances?
(A) The lumberjack may use the paved way
across Lot 2, because the revocation of his
license to use the gravel road crossing Lot 3
means that he has an easement by necessity
to cross Lot 2.
(B) The lumberjack may compel the buyer to
allow him to use the easement, because
nonuse of an easement does not constitute
abandonment.
(C) The lumberjack has no right to use
the easement across Lot 2, because he
abandoned the easement.
MBE DRILLS REAL PROPERTY 5.
(D) The lumberjack has no right to use the
easement across Lot 2, because the
easement reverted to the owners of Lot 2 by
prescription.
Question 7
An uncle died leaving a piece of real property
to his nephew, who lived out of state. The nephew
never bothered to visit the property. A neighbor
noticed that the lot was now unoccupied. Not
one to miss an opportunity, the neighbor leased
the lot to a tenant. The lease was in writing and
the tenant agreed to pay the neighbor an annual
rent, which she always did promptly. After the
tenant had been leasing the property from the
neighbor for 15 years, the nephew took a trip to
the state to look at the property. On discovering
the tenants occupancy, the nephew filed suit to
quiet title, joining the neighbor in the action. The
statute of limitations for bringing an ejectment
action for trespass to real property in the state
where the property is located is set at 10 years.
Whom shall the court declare to be the owner
of the property?
(A) The nephew, because a lease to a third
party does not constitute occupancy by the
neighbor.
(B) The nephew, because he was unaware that
another was occupying the property.
(C) The neighbor, because the nephew
abandoned the property.
(D) The neighbor, because occupancy by
a tenant is sufficient possession by the
neighbor to invoke adverse possession.
6. MBE DRILLS REAL PROPERTY
Question 8
A father owned a piece of property located
near the state university. His son was a student
at the university, and the father allowed the
son and the sons classmate to live in the large
house on the property rent free. On the sons
20th birthday, the father handed the son a
signed instrument of conveyance containing
the following language: I give the property to
my dearly beloved son on the condition prece-
dent that he receive a college degree before he
reaches the age of 30, and if he does not receive
the degree by his 30th birthday, to my beloved
daughter. The son promptly recorded the deed.
Shortly thereafter, the son asked his classmate
to start paying him rent. An argument evolved
out of the sons request and the son told the
classmate to get off his property. The classmate
refused to leave and the son filed suit to evict
him.
How will the court rule?
(A) The son loses, because the son is attempting
a retaliatory eviction.
(B) The son loses, because the classmate is the
fathers tenant and not the sons.
(C) The son wins, because he has a fee simple
subject to divestment.
(D) The son wins, because the fathers convey-
ance cuts off the classmates tenancy.
Question 9
The fee simple owner of an unimproved
parcel of wooded land orally agreed to sell it
to a buyer under an installment land contract.
The buyer agreed to pay $5,000 down and $100
a month for the next 10 years, and the owner
would retain the deed until the buyer finished
paying the installments.
After making the down payment, the buyer
moved onto the property and began clearing
some of the trees for a road and a cabin. He
regularly made the payments for several months
but then was killed by a falling tree. His properly
executed will conveyed his real estate to a friend
and the remainder of his estate, consisting of
personal property and $200,000 in cash, to his
son. During the next several months, his estate
failed to make payments on the installment
contract. The owner then notified the estate that
he was rescinding the deal and asserting owner-
ship of the parcel, and offered to return the
amount the buyer had paid him, less expenses, as
restitution.
The buyers estate initiated a quiet title action,
naming the owner, the friend, and the son as
parties. The estates filings indicated that it
was prepared to complete the conveyance and
redeem the land by paying the accelerated full
balance of the contract from the proceeds of the
estate.
If the court determines that the friend will
receive title to the parcel free of any obligation
on the installment contract, it will apply all of
the following doctrines EXCEPT:
(A) The doctrine of equitable conversion.
(B) The doctrine of part performance.
(C) The equitable mortgage doctrine.
(D) The doctrine of exoneration.
 MBE DRILLS REAL PROPERTY 7.

Question 10 How will the court most likely rule in this

In a deed to a parcel of land, the landowner
inserted a covenant binding the purchaser, his
heirs, and assigns to offer the landowner, his
heirs, and assigns the right of first refusal to
purchase the property when it was offered for
sale. The property was conveyed to the purchaser,
and the deed containing the right of first refusal
was duly recorded. After the purchaser lived on
the property for 23 years, he was approached
by a developer who wanted to purchase the
property. To get around the right of first refusal,
the purchaser deeded the property as a gift to
his friend, who was willing to act as a straw
man. The friend recorded the deed, which did
not contain the right of first refusal covenant, and
the friend then sold the land to the developer for
$200,000, giving the proceeds of the sale to the
purchaser. The developer knew nothing about the
right of first refusal because he inspected only
the friends deed from the purchaser. When the
original landowner learned of the sale, he filed
suit to compel conveyance of the land to him,
backing it up with a $200,000 letter of credit.
case?
(A) The original landowner will prevail,
because a deed with the covenant granting
the right of first refusal was in the devel-
opers chain of title.
(B) The original landowner will prevail,
because the purchaser and the friend acted
in bad faith.
(C) The original landowner will not prevail,
because the covenant is void under the Rule
Against Perpetuities.
(D) The original landowner will not prevail,
because the covenant, although enforceable
against the purchaser personally, does not
run with the land.

The jurisdiction in which the property is

located has an unmodified common law Rule
Against Perpetuities and the following recording
statute: Any conveyance of an interest in land,
other than a lease for less than one year, shall
not be valid against any subsequent purchaser for
value, without notice, whose conveyance is first
recorded.
8. MBE DRILLS REAL PROPERTY

Question 11 The court should rule that title to the property

belongs to:
A husband and wife bought an expensive
home. Title was issued in the name of the (A) The husband, as sole tenant.
husband, the wife, and the wifes mother as
joint tenants with rights of survivorship. (B) The husband and the mother, as joint
The mother did not occupy the house, and tenants.
the husband and wife paid all of the upkeep
expenses, including the state and local real (C) The husband and the mother, as tenants in
estate taxes. Three years later, the wife died common.
suddenly of a stroke. Her will devised all of her
real property interests to her son from a previous (D) The husband, the mother, and the son, as
marriage. The probate court has been asked to tenants in common.
rule on the distribution of the house.
 MBE DRILLS REAL PROPERTY 9.

Question 12 (A) No one, because the developer had actual

knowledge of the lien when he purchased
A state statute provides as follows: the property.

Any judgment properly filed shall, for
10 years from the date of filing, be a
lien on the real property then owned
or subsequently acquired by any
person against whom the judgment is
rendered.
(B) The creditor only, because the party holding
the judgment lien has taken no action as of
yet to enforce it.
(C) The creditor and the aunt, because the
buyer conveyed by special warranty deed.

A landowner conveyed a lot in that state to (D) The buyer and the aunt, because they
his aunt, who had had a judgment lien recorded were aware of the judgment lien but did
against her two years earlier in the county in not mention it in their deeds, but not the
which the land was located. One year later, the creditor, because she was not aware of the
aunt conveyed the property to a buyer by general lien.
warranty deed. The deed did not mention the
lien, but the buyer was aware of it. Two years
later, the buyer conveyed the property to a
creditor by special warranty deed. The creditor
was not aware of the lien and her deed also made
no mention of it. One year after that transaction,
the creditor conveyed the property to a devel-
oper by general warranty deed. The developers
deed did not mention the lien but the developer
was aware of it. The next year, the developer
entered into a contract to convey the property to
an entrepreneur. The entrepreneurs title search
disclosed the judgment lien against the aunt,
and the entrepreneur refused to proceed with
the transaction because title was not market-
able. The developer brought an action against the
entrepreneur for specific performance and was
denied relief. He then brought an action against
the aunt, the buyer, and the creditor for breach of
warranty.

Assuming that all transactions concerning the

property were promptly and properly recorded,
and that the party holding the judgment lien has
taken no action as of yet to enforce it, which
parties, if any, will be liable to the developer?
10. MBE DRILLS REAL PROPERTY
Question 13
A woman arranged with a bank to take out
a loan for $30,000, secured with a mortgage
on her home. On June 3, the woman executed
the note and the mortgage, and the bank gave
her a certified check for $30,000. On June 4,
the woman sold her home to a wealthy buyer
for $150,000 in cash. The buyer knew nothing
about the mortgage. On June 5, the buyer
recorded her deed to the property. Two hours
after the buyer recorded, the woman fled the
country.
On the evening of June 8, which was a
Saturday, the buyer presented her niece with a
deed to the property as a gift. At 10 a.m. on June
10, the bank recorded its mortgage. At 2 p.m.
on June 10, the niece recorded her deed. After
the woman missed her first mortgage payment
on July 1, the bank employees went to the title
office. They discovered the deeds to the buyer
and her niece. The bank demanded that the niece
satisfy the $30,000 mortgage. The niece filed an
appropriate suit to determine the various inter-
ests in the property.
The recording statute in the jurisdiction reads,
in relevant part: A conveyance of an estate in
land shall not be valid against any subsequent
purchaser for value, without notice thereof,
unless the conveyance is recorded.
The court should rule that:
(A) The niece owns the property subject to the
banks mortgage, because the niece is a
donee.
(B) The niece owns the property subject to
the banks mortgage, because the bank
recorded before the niece.
(C) The niece owns the property free of the
banks mortgage, because the buyer was
a bona fide purchaser for value without
notice.
(D) The niece owns the property free of the
banks mortgage, because the bank does not
qualify as a bona fide purchaser for value.
Question 14
A landowner owned a large tract of mineral-
rich land in a sparsely populated area. He
entered into a lease with a prospector who was
interested in developing the land for mining. The
term of the lease was two years and gave the
prospector an option to buy the property at any
time after the first year. The prospector did not
record the lease. Six months later, the prospector
left the land for a period of time to prospect in
Mexico, leaving no goods on the land that would
identify him. The landowner then conveyed the
property in fee simple to a developer, who had
inspected the property while the prospector was
in Mexico and was unaware of the prior transac-
tion. The developer did not immediately record
her deed. After three months in Mexico, the
prospector returned to the land and encountered
the developer.
A statute in the jurisdiction provides, in part:
No conveyance or mortgage of an interest in
land, other than a lease for less than one year, is
valid against any subsequent purchaser for value
without notice thereof whose conveyance is first
recorded.
If the developer brings an action to quiet title,
how should the court rule?
(A) The developer takes title subject to the
prospectors leasehold interest and his
option to purchase, because the prospector
acquired his interest first.
(B) The developer takes title subject to the
prospectors leasehold interest but not his
option to purchase, because he does not yet
have the power to exercise the option.
(C) The developer takes title subject to the
prospectors leasehold interest and option
to purchase regardless of whether she now
records, because she will have had notice of
the prospectors interest before recording.
(D) The developer takes title free of the
prospectors leasehold interest and option,
because the prospector failed to record
before the developer purchased the property
without notice of his interest.

Question 15
An investor financed the purchase of a lot
through a mortgage on the property held by a
bank. The mortgage contained a due-on-sale
clause, requiring the mortgagor to pay off the
mortgage when the property is sold. The investor
made all of his mortgage payments in a timely
manner. Five years later, he sold the property to
a buyer. The investor told the buyer that there
was a mortgage on the property but he did not
mention the due-on-sale clause. The buyer paid
the investor the asking price for the property.
The investor pocketed the proceeds without
paying off the bank mortgage.
Which of the following best states the effect
of the due-on-sale clause on the buyers interest
in the property?
(A) The bank can foreclose on the property.
(B) The buyer must agree to assume the
mortgage on the property.
(C) The only effect of the clause is that the
buyer is personally liable on the mortgage.
(D) The clause has no effect, because due-on-
sale clauses are generally void as contrary
to public policy.
MBE DRILLS REAL PROPERTY 11.
Question 16
A real estate investor purchased a home by
taking out a $160,000 mortgage. After a few
months, he sold the home to a buyer. According
to the terms of the agreement signed by the
parties, the buyer took the house subject to the
mortgage and agreed to assume payment of
the mortgage. A recession struck the area and
the buyer found himself in financial difficul-
ties. The buyer sold the home to a company
that buys otherwise unsellable houses. Under
the terms of the agreement signed by the
parties, the company agreed to take subject
to the mortgage. All deeds and the mortgage
were properly recorded. After two months, the
company ceased making mortgage payments.
The bank that held the mortgage unsuccessfully
demanded payments from the company, the
buyer, and the investor. The bank properly insti-
tuted proceedings to foreclose, and the house
was put up for judicial sale. Because the reces-
sion had severely depressed property values, the
house sold for only $120,000. After the $120,000
was applied to the mortgage, $37,800 was still
owing on the principal amount.
From whom can the bank seek judgment to
cover the deficiency?
(A) The real estate investor only.
(B) The real estate investor and the buyer.
(C) The buyer and the company.
(D) The real estate investor, the buyer and the
company.
12. MBE DRILLS REAL PROPERTY

Question 17 How should the proceeds be divided?

An entrepreneur purchased several acres (A) $18,000 to the bank and nothing to the
of scrub-covered land of little apparent value. credit union.
Shortly thereafter, an international conglomerate (B) $9,000 to the bank and $9,000 to the credit
announced plans to develop a theme park on a union.
tract immediately adjacent to the entrepreneurs
scrubland. The plan caused real estate values (C) $3,000 to the bank and $15,000 to the
in the surrounding area to skyrocket. Rather credit union.
than resell his land for a substantial profit, the
(D) Nothing to the bank, $15,000 to the credit
entrepreneur decided to build a variety of tourist-
union, and $3,000 to the entrepreneur.
oriented facilities on the land. To finance his
project, the entrepreneur obtained a loan from a
bank in exchange for a $20,000 mortgage on his
land. The bank promptly recorded the mortgage.
A few days later, the entrepreneur went to a
credit union and took out a $15,000 mortgage
on the land. The credit union knew of the banks
mortgage, and the credit union promptly recorded
its own mortgage. A few weeks after that, the
entrepreneur went back to the bank and, after
full disclosure of the credit unions mortgage,
obtained another advance of $15,000 from the
original bank mortgage, increasing the amount
borrowed against the mortgage from $20,000 to
$35,000. The bank promptly recorded the change.
After spending much of these funds on retainers
for architects, builders, and attorneys, the entre-
preneur was upset to learn that the county council
summarily rejected the theme park proposal. The
entrepreneur made no more mortgage payments
to the credit union, but continued to make
payments to the bank. The credit union brought
a foreclosure action against the entrepreneur and
included the bank as a party. The value of the
land in the area had plummeted, so the proceeds
at the foreclosure sale were just $18,000 after
attorneys fees and court costs.
 MBE DRILLS REAL PROPERTY 13.

REAL PROPERTY ANSWERS

Answer to Question 1

(B) The girlfriend has a life estate pur autre vie and can be compelled to pay the property taxes.
A life estate is an estate that is not terminable at any fixed or computable period of time, but
cannot last longer than the life of a particular person. A life estate pur autre vie (for the life of
another) is a life estate measured by the life of someone other than the life tenant. Such an estate
will be created when the grantor conveys a life estate to A, and A later conveys his interest to
B. B owns an estate measured by As life; it ends when A dies. Here, the brother received a life
estate in the lot because the property would go to the daughter on the brothers death. When the
brother conveyed his interest to his girlfriend, she received a life estate only for the period
of the brothers life. Under the doctrine of waste, the holder of a life estate is entitled to all the
ordinary uses and profits of the land, but she cannot lawfully do any act that would injure the
interests of the person who owns the remainder. If she does, the future interest holder may sue
for damages and/or to enjoin such acts. Permissive waste occurs when the life tenant fails to take
reasonable measures to protect the land, such as paying property taxes that are due. A life tenant
is obligated to pay all ordinary taxes on the land to the extent of its reasonable value. Thus, the
girlfriend is obligated to pay property taxes for her period of occupancy. The daughter holds a
remainder interest in the lot because she will acquire it when the brother dies; therefore, she can
protect her interest by compelling the girlfriend to pay the taxes. (A) is incorrect because the
girlfriend only received the interest that the brother had, which was an estate for his life. He did
not have the power to convey a life estate for the period of the girlfriends life. (C) is incorrect
because, as discussed above, a life tenant has a duty to pay such taxes. (D) is incorrect because
there was nothing in the landowners conveyance of the life estate to his brother that prevented
him from conveying his interest to another. Despite the general rule against restraints on alien-
ation of property interests, a restraint on the transfer of a life estate that causes it to be forfeited
if a transfer is attempted is a valid restraint on alienation. However, any such restraint must be
specified in the conveyance itself. Here, no restraint on alienation existed in the conveyance to the
brother; thus, he was free to convey his interest to his girlfriend.

Answer to Question 2

(D) The daughters eldest daughter takes a life estate pursuant to the landowners will as the eldest
grandchild living at the sons death, but the remainder to the landowners great-grandchildren is
void because it violates the Rule Against Perpetuities. The Rule Against Perpetuities requires that
an interest in property, to be valid, must vest, if at all, not later than 21 years after some life in
being at the creation of the interest. In the case of a will, the perpetuities period begins to run on
the date of the testators death, and measuring lives used to show the validity of an interest must
be in existence at that time. An interest that violates the Rule is void and is stricken. However,
all other interests created in the instrument of transfer that are valid under the Rule are given
effect. Here, at the time the interests are created (the landowners death), the sons life estate vests
immediately. The next life estate (to the eldest grandchild living at the sons death) will vest, if
at all, on the death of the son, a life in being at the creation of the interest. Thus, the life estate
to such eldest grandchild (which turned out to be the daughters eldest daughter) is valid under
the Rule. However, the gift to the landowners great-grandchildren may not vest within a life in
being plus 21 years. A grandchild born after the landowners death (who is therefore not a life in
being) may survive the son as the eldest grandchild of the landowner, and may live for 21 years
after the sons death. In that event, the gift over to the great-grandchildren would vest outside of
lives in being plus 21 years. It does not matter that the grandchild who actually survived the son
14. MBE DRILLS REAL PROPERTY

as the eldest, the daughters eldest daughter, was alive at the landowners death (and therefore a
life in being). The interest is void because there is a possibility, viewed at the time the interest is
created, that it will not vest within the period under the Rule. Therefore, the attempted gift of a
remainder to the great-grandchildren is void under the Rule, and is stricken. The failure of this
gift leaves a reversion in the testator, the landowner, which will pass to his heirs. (A) is incor-
rect because it ignores the fact that, despite the invalidity of the attempted gift to the landowners
great-grandchildren, the daughters eldest daughters life estate remains valid and takes effect. (B)
incorrectly states that title goes to the grandchildren living at the landowners death. According
to the landowners will, the only interest to be given to any grandchild was a life estate, to be
given to the eldest grandchild living at the sons death. Thus, only the eldest grandchild living at
the sons death is entitled to an interest, and then only to a life estate. (C) is incorrect because,
as explained above, the remainder to the great-grandchildren is stricken as violative of the Rule
Against Perpetuities. Thus, the remainder goes to the landowners heirs rather than to the great-
grandchildren.

Answer to Question 3

(D) The attempted contingent gift to the underprivileged youth club is void under the Rule Against
Perpetuities. Under the common law Rule Against Perpetuities, an interest must vest, if at all,
within 21 years of a life in being. The devise to the nephew gives him a fee simple determinable
subject to an executory interest and attempts to give the underprivileged youth club an execu-
tory interest in fee simple. However, the underprivileged youth clubs interest is void under the
Rule because the parcel might be used for noncamping or nonrecreational purposes long after
any life in being plus 21 years. Thus, what remains is the nephews fee simple determinable
interest. Since the landowner did not otherwise provide who would take if the underprivileged
youth clubs interest failed, he was left with a possibility of reverter. Such an interest is not subject
to the Rule Against Perpetuities. As the landowners sole heir, his daughter took his possibility
of reverter, and on her death, her heir, the grandson, took the interest. Thus, the grandson has a
possibility of reverter and the underprivileged youth club has nothing, making (D) correct and
(A) incorrect. (B) is incorrect because an executory interest is a future estate of transferees. The
grandsons interest arises through descent from the landowner, the transferor, and so it must be
a possibility of reverter rather than an executory interest. (C) is incorrect; remainders, whether
vested or contingent, do not follow fees simple, including fees simple determinable, because
remainders follow the natural termination of the preceding estate (a life estate) and fees simple
do not naturally terminate. Any interest following a fee simple determinable is either a possibility
of reverter (if held by or through the transferor) or an executory interest (if held by or through the
transferee).

Answer to Question 4

(A) The nonassignment clause is valid and the mall owner may enforce it by terminating the lease and
regaining possession of the store. Nonassignment clauses in leases are valid and enforceable even
though strictly construed, and allow the landlord in most states to refuse to consent to an assign-
ment even if the refusal is unreasonable. If a tenant makes an assignment in violation of a nonas-
signment clause in the lease, the transfer is not void. However, the landlord may terminate the
lease if specifically provided by the nonassignment clause. Alternatively, he may sue for damages
if he can prove any. Only (A) upholds the validity of the nonassignment clause. (B) is incorrect.
While most courts require a landlord to mitigate damages where a tenant unjustifiably abandons
the property, this duty does not affect the landlords power to terminate the lease because of a
breach of the lease agreement. The tenant will still be liable to the mall owner for any damages
 MBE DRILLS REAL PROPERTY 15.

from the unauthorized assignment, including the cost of evicting the successor. (C) is incorrect
because most states do not require that a landlords refusal to accept a new tenant be reasonable.
Furthermore, the fact that the successor is operating the same type of business does not mean
that the mall owner has suffered no harm, since she might be a much poorer credit risk than the
tenant. (D) is incorrect. As an exception to the general rule that any restriction on the transfer-
ability of a legal interest in property is void, a provision in a lease prohibiting the lessees assign-
ment or subletting of her leasehold interest without the consent of the landlord is given effect in all
jurisdictions.

Answer to Question 5

(D) The attorney must pay 10 days lodging because his notice to terminate will not become effec-
tive until then. In the usual case, a hotel guest is treated as a licensee rather than a tenant. Here,
however, the court found that the parties created a tenancy because they specifically agreed to a
week-to-week arrangement at a special weekly rate. A periodic tenancy arises when the parties
do not fix the duration of the tenancy. It continues from period to period and is automatically
renewed for another period until terminated by the giving of proper notice. The period is gener-
ally based on an express understanding between the parties or an implied understanding based
on the payment of rent. The attorneys arrangement with the hotel constitutes a periodic week-
to-week tenancy because it was of indefinite duration and rent was paid each week. To termi-
nate a periodic tenancy of less than one year, a full period in advance of the period in question
is required by way of notice. For a week-to-week tenancy, notice at least one full week prior to
vacating would have to be given prior to the beginning of the period. Thus, the attorneys notice
had no effect on his liability for that weeks rent and would operate as one weeks notice starting
at the beginning of the next week. (A) is incorrect. If the parties had expressly agreed that either
party could terminate at any time, a tenancy at will would have been created and the attorney
would be liable for nothing. However, the payment of rent on a regular periodic basis will cause
a court to treat the tenancy as a periodic tenancy. (B) is incorrect because it does not take the one
weeks notice requirement into account. (C) is incorrect because the notice must fix the last day
of the period as the date of termination rather than some intervening day. Thus, the notice period
does not begin to run until the end of the current week.

Answer to Question 6

(B) The lumberjack has a valid easement, which was created by express grant, properly recorded,
and presumed to be of perpetual duration. It is enforceable against the buyer, the subsequent
purchaser of the servient estate, because nothing has occurred to terminate the easement. While
an easement may be extinguished by abandonment, mere nonuse does not qualify as abandon-
ment. Rather, there must be a physical manifestation of an intent to permanently abandon (e.g.,
building a permanent structure blocking access to the easement). Because the lumberjack did
not manifest an intent to permanently abandon, (C) is incorrect. (A) is incorrect because the
lumberjack has an easement created by express grant, not implied by necessity. An easement by
necessity arises by implication when the owner of a tract of land sells part of the tract and by
this division deprives one lot of access to a public road or utility line. Aside from the fact that
the lumberjack has an express easement and need not resort to one by implication, nothing in
these facts indicates that the lumberjack purchased Lot 1 from the owner of Lot 2 or that the
paved way through Lot 2 was Lot 1s only access to any public road. (D) is incorrect because the
easement was not interfered with for the 15-year prescription period. For an easement to termi-
nate by prescription, the owner of the servient tenement must so interfere with the easement as to
create a cause of action in favor of the easement holder. The adverse use must be open, notorious,
16. MBE DRILLS REAL PROPERTY

continuous, and nonpermissive for the requisite period. The original owner of the servient estate
apparently did nothing to interfere with the lumberjacks easement. His successor, the buyer, did
everything necessary to terminate the easement by prescription, but his adverse use has lasted
only six months instead of 15 years.

Answer to Question 7

(D) The neighbors leasing the property to the tenant for 15 years will allow him to acquire title by
adverse possession. Title by adverse possession results when the owner of real property does not,
within the period set by the statute of limitations, take legal action to eject a possessor who claims
adversely to the owner. The owner is thereafter barred from bringing suit for ejectment and title
to the property vests in the possessor. For one to obtain title by adverse possession, the possession
must be (i) actual and exclusive (i.e., not in conjunction with the true owner or the public at large),
(ii) open and notorious (i.e., such as the usual owner would make of the land), (iii) hostile, and
(iv) continuous throughout the statutory period. Here, the neighbors act of leasing the property
is a kind of use that a true owner would make of the property; thus, it is an actual possession
even though the neighbor himself is not living on the property. The tenants occupancy is open
and notorious, because the nephew discovered it as soon as he came to look at the property.
The neighbors possession is exclusive because he has allowed only his tenant to enter onto the
property. It is hostile (adverse) because the neighbor acted without the true owners permission
and in derogation of the true owners rights, and it is continuous because his tenant has occupied
the property throughout the 15 years. Having satisfied all of the requirements for adverse posses-
sion, the neighbor should be declared to be the owner of the property. (A) is incorrect because a
lease to a third party does constitute actual possession by the neighbor. Leasing the property is a
type of use that a true owner would make of the property, and occupancy by the adverse possess-
ors tenant would give the true owner notice that a trespass is occurring. (B) is incorrect because
the nephews ignorance of the fact that the property was occupied is not an excuse. The tenants
occupancy was sufficiently apparent to put the nephew on notice that a trespass was occurring.
His failure to visit the property during the statutory period provides him with no defense. (C) is
incorrect because the nephews abandonment of the property is not sufficient to bestow title by
adverse possession on the neighbor. The neighbor must satisfy the adverse possession require-
ments to obtain title.

Answer to Question 8

(B) The son cannot evict the classmate because he is not yet the owner of the property. The instru-
ment of conveyance signed by the father conveyed only a future interest and not a present estate.
A future interest is an estate that does not entitle the owner thereof to possession, but it will or
may in the future become a present interest. Because the fathers estate is not a life estate, the
future interest conveyed to the son is an executory interest. Furthermore, it is a springing execu-
tory interest because it divests the estate of the transferor, the father (i.e., the fathers fee simple
will be cut short if and when the son receives his degree before age 30). Because the father has
retained his present estate, which is a fee simple subject to the springing executory interests of his
son and his daughter, only the father would have the power to evict the classmate. The son, as the
holder of a future interest, has no right to possession of the property and therefore has no cause of
action against another in possession. (A) is incorrect. If the son had acquired a present possessory
interest in the property, nothing in the facts would have prevented him from evicting the class-
mate, regardless of his motivation. (C) is incorrect because the language of the fathers convey-
ance clearly indicates that he is conveying a future interest rather than a present interest. (C)
would have been correct if the father had used the following language in his conveyance: to my
 MBE DRILLS REAL PROPERTY 17.

son; provided, however, that if he does not receive a college degree by his 30th birthday, title shall
pass to my daughter. The son would have had a fee simple subject to divestment by the daughters
executory interest. Here, however, the father expressly stated that the sons receipt of a college
degree was a condition precedent to the transfer of the property. Hence, the son has only a future
interest and not a fee simple of any kind. (D) is incorrect. If the father had conveyed his present
interest in the property, the classmates tenancy would have been terminated by operation of law
because it was, at most, a tenancy at will. However, the father conveyed only a future interest to
the son, so the conveyance had no effect on the classmates tenancy.

Answer to Question 9

(C) The court will not apply the equitable mortgage doctrine in making its determination. A landowner
needing to raise money may sell the land to a person who will pay cash, giving the buyer
an absolute deed rather than a mortgage. If the court concludes that the deed was really given as
security for a loan, rather than a true conveyance, it will treat the deed as an equitable mortgage
and require that the lender foreclose it by judicial action, like any other mortgage. Here, there
was no such security arrangement between the owner and the buyer; rather, they entered into an
installment land contract arrangement. Thus, the equitable mortgage doctrine would not support
the courts determination that the friend receive title to the parcel. (A) is incorrect because
equitable conversion is applicable here. Under that doctrine, once a contract is made and each party
is entitled to specific performance, equity regards the purchaser as the owner of the real property.
If the purchaser dies before title has passed, his interest is characterized as real property in his
estate and will go to the taker of the estates real property on closing, which in this case is the
friend. (B) is incorrect. Although the Statute of Frauds applies to land sale contracts, the doctrine
of part performance allows a court to order specific performance despite the absence of a writing
if additional facts are present. In most jurisdictions, part performance can be established by two of
the following: (i) possession of the land by the purchaser; (ii) making of substantial improvements;
and/or (iii) payment of all or part of the purchase price. Here, the buyers estate could be entitled to
specific performance of the contract because he had (i) moved onto the property, (ii) begun clearing
trees, and (iii) made several payments before his death. (D) is incorrect. The court is applying
the doctrine of exoneration, which is followed by a few states. The doctrine provides that when
a testator makes a devise of real property that is subject to a mortgage, the devisee is entitled to
have the mortgage satisfied out of the testators residuary estate. Thus, the court will order that the
mortgage be paid from the $200,00 cash residuary that was left to the buyers son.

Answer to Question 10

(C) The court is likely to rule against the original landowner because the covenant providing for the
right of first refusal violates the Rule Against Perpetuities. Under the Rule, no interest in property
is valid unless it must vest, if at all, no later than 21 years after a life in being at the creation of the
interest. In contrast to options, rights of first refusal are presumed to be personal to the holder and
not assignable unless the instrument indicates otherwise, and, therefore, they are not subject to the
Rule. However, because the interest here ran to both parties heirs and assigns, there was no limit
on the original landowners right of first refusal; therefore, it could easily have been exercised
beyond the perpetuities period, and so it violates the Rule. (A) is incorrect. The recording statute
quoted by the question is a race-notice statute. Under a race-notice statute, a subsequent bona fide
purchaser, such as the developer, is protected if he records before the prior grantee. To qualify as
a bona fide purchaser, a person must, at the time of the conveyance, take without actual, construc-
tive, or record notice of the prior interest. Since the deed to the purchaser was recorded, the
developer had record notice of the right of first refusal because it was in his chain of title. Had
18. MBE DRILLS REAL PROPERTY

the covenant been within the perpetuities period, the developer would not have been protected
by the recording act. However, since the covenant is void, the original landowner has no right to
the property. Similarly, (B) is incorrect. The bad faith transaction of the purchaser and his friend
would not have overcome the covenant had the covenant not violated the Rule. In light of the
fact that the covenant is void, however, their bad faith is irrelevant. (D) is incorrect because the
covenant runs with the land. The requirements for the burden of the covenant to run are met in
this case: The fact that the original covenanting parties intended the right of first refusal covenant
to run to their successors is indicated by the use of the language heirs and assigns. The notice
requirement was fulfilled by recording the deed. The horizontal privity requirement is satisfied by
the fact that the original landowner and the purchaser shared an interest in the land independent
of the covenant, i.e., as grantor and grantee. The necessary vertical privity is also present, because
the friend and the developer held the entire durational interest held by the original landowner
when the covenant was made. Last, the covenant runs with the land because it touches and
concerns the land; i.e., it diminishes the landowners right with respect to the property.
Answer to Question 11
(B) The husband and the mother hold the property as joint tenants. A joint tenancy carries the right
of survivorship. When one joint tenant dies, the property is freed from her concurrent interest.
The survivors retain an undivided right in the property, which is no longer subject to the interest
of the deceased co-tenant. Because the husband, the wife, and the mother held the property as
joint tenants with rights of survivorship, the wifes death freed the property of her interest and the
husband and the mother each hold an undivided one-half interest in the property. Their rights of
survivorship continue. (A) is incorrect because, as stated above, the mother also has an interest in
the property. Although the mother did not live in or contribute to the purchase or upkeep of the
house, this does not affect her status as a joint tenant. Each co-tenant has a duty to pay her share
of taxes on the entire property, but if a tenant in sole possession pays the taxes, he may receive
reimbursement for an amount that exceeds the propertys rental value. Thus, the husband may
be able to compel contribution from the mother, but she has not forfeited her right of survivor-
ship. (C) is incorrect because the joint tenancy was not severed or partitioned. A conveyance by
one joint tenant may sever a joint tenancy, resulting in a tenancy in common. However, a testa-
mentary disposition by one joint tenant has no effect (see below) and thus does not work a sever-
ance. (D) is incorrect because the son does not have an interest in the property. A will is effective
only at death and is inoperative as to joint tenancy property because, at the instant of death, the
decedents rights in the property evaporate. Thus, the wife had no interest in the property to
convey to the son at her death.
Answer to Question 12
(B) The developer will prevail only against the creditor because only the creditor has committed
an actionable breach of the covenant against encumbrances. A grantor making a conveyance by
general warranty deed generally makes five covenants for title, and warrants against title defects
created both by herself and by all prior titleholders. The covenant of seisin, the covenant of right
to convey, and the covenant against encumbrances are present covenants and are breached, if at
all, at the time of conveyance. The covenant for quiet enjoyment and the covenant of warranty
are future covenants and are breached only on interference with the possession of the grantee or
his successors. Unlike the future covenants, the present covenants do not run with the grantees
estate and cannot be enforced against the covenantor by successive grantees in most jurisdictions.
Here, because the party holding the judgment lien has not taken any action to enforce it, there
is no disturbance of possession and the future covenants have not been breached. Since the only
covenant that has been breached was the covenant against encumbrances, only the developers
 MBE DRILLS REAL PROPERTY 19.

grantor, the creditor, is liable. (A) is incorrect because most jurisdictions hold that a covenant
against encumbrances is breached even if the grantee knew of the encumbrance, particularly if it
is an encumbrance on title, such as a mortgage or lien, rather than a physical encumbrance such
as an easement. (C) is incorrect, even though it is true that the buyer will not be liable because
she conveyed by special warranty deed, which covenants only that the grantor herself did not
create any title defects. As discussed above, the aunt is not liable to the developer because any
future covenants she made have not been breached. (D) is incorrect because, as discussed above,
neither the aunt nor the buyer has breached any covenant owed to the developer, regardless of their
knowledge of the lien. On the other hand, the creditor has breached her covenant against encum-
brances despite her ignorance of the judgment lien.

Answer to Question 13

(C) The niece owns the property free of the mortgage because the buyers status as a bona fide
purchaser without notice brings the shelter rule into play. In general, a person who takes from a
bona fide purchaser will prevail against any interest that the transferor-bona fide purchaser would
have prevailed against, even if the person taking the property has actual or record notice of the
prior interest. Hence, the buyers status as a bona fide purchaser without notice shelters her
niece from the banks interest, and (C) is correct. (A) is incorrect because the nieces sheltered
status as a transferee of a bona fide purchaser makes the fact that the recording act does not
directly protect donees irrelevant. (B) is incorrect because a pure notice recording statute requires
actual or constructive notice at the time of the conveyance. When the buyer conveyed to her
niece, the bank had not yet recorded. (D) is incorrect because mortgagees for value are treated as
purchasers under the recording act.

Answer to Question 14

(A) The developers ownership of the land is subject to the prospectors interest because the prospec-
tors interest was first in time. The common law rule that priority is given to the grantee who was
first in time still applies unless operation of the jurisdictions recording statute changes the result.
The statute in this question is a race-notice statute, under which a subsequent bona fide purchaser
is protected only if she records her interest before the prior grantee does. While the developer
is a bona fide purchaser, she must still win the race to the recording office to prevail over the
prospectors prior interest. Since neither party has recorded in this fact pattern, the developer will
take the property subject to the prospectors prior interest. (B) is wrong because the prospectors
option is treated as an interest in land just like his leasehold interest, regardless of the fact that it
cannot yet be exercised. (C) is wrong because the developer probably would prevail if she were
to record now. Under the recording statute, it is irrelevant that the developer became aware of the
prospectors interest at a later point; at the time of the conveyance to her, she did not have notice
of his interest and therefore qualifies as a bona fide purchaser. Had she recorded when she first
encountered the prospector, she would have prevailed. Even if she were to record now, she could
still prevail if the prospector does not record first. (D) is wrong because it states the result under
a notice statute. In contrast to a notice statute, the race-notice statute in the question would still
permit the prospector to prevail even though he failed to record before the developer purchased
the property, as long as the developer does not record before he does.

Answer to Question 15

(A) Unless the buyer pays off the entire loan, the bank can foreclose on the property. When a mortgagor
sells his mortgaged property and gives a deed, the grantee takes subject to the mortgage, which
20. MBE DRILLS REAL PROPERTY

remains on the land. A mortgage containing a due-on-sale clause allows the lender to demand
full payment of the loan if the mortgagor transfers an interest in the property without the lenders
consent. Under federal law, due-on-sale clauses are generally enforceable. Here, the bank appar-
ently did not consent to the transfer and the investor did not pay off the mortgage. The mortgage
remained on the property and will allow the bank to foreclose unless the buyer extinguishes the
mortgage by paying off the entire loan. (B) is incorrect because the bank cannot require the buyer
to assume the mortgage, which would make the buyer personally liable on the loan (i.e., make
him liable for the balance of the loan if the bank forecloses and the foreclosure sale does not bring
in enough to pay off the loan balance). However, the bank can foreclose even if the buyer does not
agree to assume the mortgage. While the original mortgagor remains primarily and personally
liable, if the mortgagor has not paid off the mortgage and the grantee (the buyer) does not pay, the
mortgage may be foreclosed because it remains on the land. (C) is incorrect because there is no
indication that the buyer signed an assumption agreement. The due-on-sale clause will allow the
bank to foreclose but will not make the buyer personally liable for any deficit after the foreclosure
sale. (D) is incorrect. While some states refused to enforce these clauses unless the lenders
security was endangered by sale to a poor credit risk, federal statute makes due-on-sale clauses
enforceable even if the lender is using it simply as an opportunity to raise the interest rate when
the property is sold.

Answer to Question 16

(B) The bank can require either the investor or the buyer to pay the deficiency. When a mortgage is
foreclosed and the proceeds of the foreclosure sale are insufficient to satisfy the mortgage debt,
the mortgagee can bring a personal action against the mortgagor for the deficiency. The mortgagor
remains personally liable on the mortgage loan regardless of any subsequent transfers of the
mortgaged property. Hence, the real estate investor remains liable to the bank for the deficiency
because he was the original mortgagor. The buyer is also liable for the deficiency because he
assumed payment of the mortgage. When a grantee signs an assumption agreement, promising
to pay the mortgage loan, he becomes primarily liable to the lender (who is a third-party benefi-
ciary of the assumption agreement), while the original mortgagor becomes secondarily liable as a
surety. Thus, the bank can seek judgment against either the real estate investor or the buyer for the
deficiency, making (B) correct and (A) incorrect. (C) and (D) are incorrect because the company
is not liable for the deficiency. When a mortgagor sells property and conveys a deed, the grantee
takes subject to the mortgage, which remains on the land (unless the proceeds of the sale are used
to pay off the mortgage). However, a grantee who does not sign an assumption agreement does
not become personally liable on the loan. Instead, the original mortgagor remains primarily and
personally liable. Here, the company only took subject to the mortgage, without assuming it.
Thus, it cannot be required to pay the deficiency.

Answer to Question 17

(C) The credit union should have its mortgage fully satisfied from the proceeds of the foreclosure sale,
and the remainder should go toward satisfying the banks junior interest. As a general rule, the
priority of a mortgage is determined by the time it was placed on the property. When a mortgage
is foreclosed, the buyer at the sale will take title as it existed when the mortgage was placed on the
property. Thus, foreclosure will destroy interests junior to the placing of the mortgage but will not
discharge senior interests, which remain on the property. However, where a landowner enters into
a modification agreement with the senior mortgagee that makes the mortgage more burdensome,
the junior mortgage will be given priority over the modification. In particular, if a junior mortgage
is placed on the property and the senior lender later makes an optional advance while having
 MBE DRILLS REAL PROPERTY 21.

notice of the junior lien, the advance will lose priority to the junior lien. (An optional advance
is one that the senior lender is not contractually bound to make.) Here, the senior mortgage of
the bank was modified by the additional advance after creation of the junior mortgage with the
credit union; hence, the increase in the debt to the bank will not have priority over the credit
unions interest. Therefore, the proceeds of the foreclosure sale will be applied first to satisfy the
$15,000 mortgage of the credit union that is being foreclosed, and the balance of $3,000 will go
toward the $15,000 modification of the banks mortgage. This leaves a $12,000 deficiency, for
which the entrepreneur might be liable, and leaves the original $20,000 mortgage of the bank,
which remains on the property in the hands of the foreclosure sale buyer. (A) is wrong because
the banks senior interest on the property is not affected by the credit unions foreclosure action;
since the entrepreneur is not in default on that mortgage, the bank is not entitled to recover
foreclosure proceeds for it. (B) is wrong because the foreclosure proceeds are not divided propor-
tionally between the interests affected by the foreclosure; they are first applied to fully satisfy
the foreclosed mortgage, and whatever is left over is applied toward any junior interests in order
of priority. (D) is wrong because the banks additional advance is junior to the credit unions
mortgage and is wiped out by its foreclosure; hence, the balance of the proceeds after the credit
unions mortgage is satisfied will be paid to partially satisfy the banks junior interest.