13/01/2011 15:25:00

Property II Outline Real Estate

3 Kinds of listing agreements: 1. exclusive right to sell most frequently used by real estate brokers, it requires the seller to pay the listing broker a commission if a purchaser is found by anyone, even the seller 2. exclusive agency requires the seller to pay the listing broker a commission if anyone but the seller produces a purchaser. Thus, if a 3rd party locates a purchaser, the listing broker is entitled to a commission 3. open obligates the seller to pay a commission only if the broker produces a purchaser. Thus, seller may employ several brokers under such an arrangement General rule: absent special circumstances, the broker is entitled to a commission if he produces a customer ready, able, and willing to buy upon the terms and for the price given the broker by the owner. (execution of a purchase and sale agreement is usually seen as conclusive evidence of the sellers acceptance of the buyer) Rule held in Tristram case When a broker is engaged by an owner of property to find a purchaser for it, the broker earns his commission when (a) he produces a purchaser ready, willing and able to buy on the terms fixed by the owner, (b) the purchaser enters into a binding K with the owner to do so, and (c) the purchaser completes the transaction by closing the title in accordance with the provisions of the K if the K is not consummated b/c of lack of financial ability of the buyer to perform or b/c of any other default of his there is no right to commission against the seller.

Reason and justice dictate that it should be the broker who bears the burden of producing a purchaser who is not only ready, willing and able at the time of negotiations, but who also consummates the sale at the time of closing

Cultum v. Heritage House Realtors, Inc. Case about unauthorized practice of law Rule : although the completion of form earnest money agreements might be commonly understood as the practice of law, we believe it is in the public interest to permit licensed real estate brokers or licensed salespersons to complete such lawyer prepared standard form agreements; provided, that in doing so they comply with the standard of care demanded of an attorney Held : licensed real estate brokers and salespersons, when completing form earnest money agreements, must comply with the standard of care of a practicing attorney (didnt use reasonable care)

The interests for allowing the practice of law by non lawyers: 1. the ready availability of legal services 2. using the full range of services that other professions and businesses can provide 3. limiting costs 4. public convenience 5. allowing licensed brokers and salespersons to participate in an activity in which they have special training and expertise 6. the interest of brokers and salespersons in drafting form earnest money agreements which are incidental and necessary to the main business of brokers and salespersons Requirements for Sale of Land K: Must be in writing: (1) identification of the parties (2) description of the land

(3) purchase price (4) promises on both sides (grantor promises to convey and grantee promises to pay) and (5) signed by the party being sued (doesnt have to be both parties

Cash v. Maddox Discussed sale of land over the phone (oral) but parol evidence was a check that was cashed which proved there was a K. However, court wouldnt allow evidence and the check did not identify the location or shape of the land Every essential element of the sale must be expressed in the writing. The terms must be expressed with such definiteness, certainty and clarity that it may be understood without resorting to parol evidence to show the intention of the parties. The terms of the contract must be such that neither party can reasonably misunderstand them MINORITY NOW TRADTIONAL Dissent : When there is no ground for doubt of the K, applying the SOF would be encouraging fraud instead of discouraging. Parol evidence should be shown MAJORITY NOW MODERN

Part Performance for buyer to enforce oral RE K (1) B pays the S part or all of sales price AND takes possession of the property OR (2) B pays the seller part or all of sale price AND make improvements on the land Marketable Title Ownership and possession of real property that is readily transferable since it is free from valid claims by outside parties Prudent person would be willing to accept Quick facts about MT MT is implied and does not need to be in a K You can K for more or less than marketable title Marketable title is only needed at time of closing (you can K to sell something you dont have title to if you will at time of closing)

Installment Ks title transfers when your done paying can rescind if can prove cant be marketable title If S cannot produce marketable title, B generally may recover the escrow deposit and can recover actual damages OR specific performance

Objection to title An objection to a title must have some substantive merit in order to defeat a claim for specific performance of a K for the sale or real estate made by a vendor charged with producing good and marketable title Cannot object before closing because S still has time to gain marketable title UNLESS it is impossible to gain marketable title by closing

FL Statute You have 3 days to back out of agreeing to buy house What makes a title unmarketable? (1) O/S Mortgages (2) restrictive covenants (3) O/S reverter rights (4) encumbrance that Vendor cannot and will not remove from the property (5) easement on appreciable part of the property (6) variations of the names in of the grantees or grantors in the chain of title

Mutuality of damages entitles the seller & purchaser of real property to specific performance - A K for the sale of real property is specifically enforceable by the purchaser. Presumptively, real property is unique and damages at law are an inadequate remedy for breach of a K to sell it Executory Period the time after the sale but before the buyer moves in

S equitable owner of the balance of the purchase price B equitable owner of the real estate Common law / general rule: risk of loss (as long as not vendors fault) is on the buyer if no provision in the k

Financing Clause- obligation to obtain bank finance under purchase and sale agreement Intent is to protect buyer from involuntary breach and the risk is on the buyer not the innocent seller (seller gets deposit) Holmer v. Malas Malas agreed to buy and Holmer agreed to sell a family residence and was conditioned on D obtaining a loan to finance the purchase P claims D failed to diligently pursue in good faith Held: A K is too vague and indefinite to be enforced since the failure to specify at what rate the buyer is to obtain a mortgage loan causes a failure of a condition precedent to the enforceability of the K

Mortgages a conveyance of an interest in real property made to secure performance of an obligation (not a loan) Quick Facts on Mortgages: Typically evidenced by (1) mortgage deed and (2) a promissory note

Mortgage deed a document that conveys an interest in real property designed to secure performance of a debt Deed must include: Identity of parties o Mortgagor: is poor the owner of the real property, who borrowed money and secured the debt with a mortgage on the property o Mortgagee: has the money the lender of the money borrowed, to whom the mortgage is made Description of property o The property should be described with sufficient detail to put a subsequent bona fide on notice of the mortgage Intent to create a security interest o The mortgage deed should contain evidence of intent to create a security interest in the mortgagee Recording

Promissory note represents the mortgage obligation IOU Typically includes: Loan amount Interest rate o Fixed (set for the term of the loan) o Adjustable (may vary over the term of the lease) Loan term Payment schedule o Level payment mortgage The principal and interest are paid each month

o Balloon mortgage Small payments in the beginning and big payments at the end Prepayment clause Acceleration clause o If mortgagor defaults permits mortgagee to declare full amount Due on sale clause o Rest of mortgage due before property may be transferred Release When the mortgagor satisfies the mortgage, the mortgagee executes a document that releases the mortgage and should be recorded

Mortgage Theories Traditional title theory minority title theory view Mortgagee receives legal title to the mortgaged real property & has a right to take possession of and to collect rents and profits from the property if default Mortgagor retains an equitable interest in the property and will get title once she pays her mortgage in full Modern title theory majority title theory view Mortgagee holds title for security purposes only and view the mortgagor as the owner of the land Lien theory majority of all mortgage theories (FL) Mortgagee receives a lien Mortgagor retains legal and equitable title and possession to the mortgaged real property, unless and until foreclosure

Intermediate theory Mortgagor retains legal title until default occurs After default, legal title and possession pass to the mortgaggee Severance of Joint Tenancy Title Theory If 1 JT mortgages his interest in the property, the mortgagee receives legal title to that JTs undivided interest in the mortgage property 4 unities are destroyed and severs JT because of ^ Lien Theory No severance occurs when the mortgage is made However, a foreclosure will sever the JT

Waste Failure to make mortgage payments may constitute waste Life tenant o Person holding life tenant in a mortgaged property has a duty to pay the interest on a mortgage o Person holding the remainder has duty to pay the principal Leasehold tenant o Absent a leasehold provision to the contrary, a tenant for years or a periodic tenant has no common law duty to make mortgage payments

Other ways to commit waste: (1) make physical changes to real property negligently or intentionally that reduce the value of the property (2) fails to maintain and repair the property in a reasonable manner, except for repair of casualty damage or acts of 3rd parties not the fault of the mortgagor (3) fails to make timely payment of property taxes or gov. assessments secured by a lien that have priority over the mortgage (4) fails to comply materially with mortgage covenants respecting the physical care, maintenance, construction, demolition, or insurance against casualty of the property (5) retains rents to which the mortgagee has a right of possession

Remedies to waste Foreclosure Injunction to stop further waste Recovery of damages limited by the amount of the waste that has impaired the mortgagees security

Redemption Mortgagors equity the mortgagors interest in the mortgaged property is called the equity which is short for equity of redemption Modern Redemption in Equity At any time after default but before foreclosure, the mortgagor has the right to redeem the property by paying the debt due (the whole mortgage) The right to redeem may not be waived at the time the mortgage is created (no clauses) Statutory Redemption

About of the states have a fixed time period (6-12months) after a foreclosure sale has occurred for the mortgagor to redeem

Foreclosure Strict Foreclosure If mortgagor defaults, mortgagee held the fee simple absolute Under strict foreclosure a court of equity would declare the mortgagor to be foreclosed forever from redeeming the property from the mortgagee if the mortgagor did not pay the debt due by a certain date

Foreclosure Sale Today, a mortgagee may foreclose by forcing the sale of property after the mortgagor has defaulted on the promissory note either through a power of sale or by court order Must: o Be public o Be properly noticed o Be conducted in a reasonable manner (usually regulated by statute) o Result in a fair sale price fair is not necessarily the fair market price, rather through due diligence of mortgagee in conducting the foreclosure sale Distribution of proceeds in the following order: Government always first To the costs of the sale The mortgage

Junior lien holders terminated by the sale The mortgagor if any proceeds remain

Senior mortgage 1st mortgage Junior lien holders paid of chronologically Only pays for the note not the interest (can go after the buyer for interest in law suit bc its a k)????????? Effects on interest in property: Junior interests in the property are destroyed by foreclosure unless junior mortgage is not made a defendant in the judicial proceeding in the foreclosure or if junior does not get notice of foreclosure sale Senior interests not participating in the foreclosure are not affected by foreclosure sale

Purchase Money Mortgage a home financing technique in which buyer borrows from seller instead of a bank (sometimes when B cannot qualify for a bank loan for the full amount) Loan to acquire title to the real estate OR construct improvements on the real estate if the mortgage is given as part of the same transaction in which title is acquired Given priority over a lien to the property even if lien was recorded first Modification of Senior Mortgage: If a senior mortgage is modified, a junior mortgage prevails over the modification if the modification prejudices materially the holder of the junior mortgage Examples that materially prejudice o Increase in the amount of principal o Increase in the interest rate (if rate under the original mortgage was fixed) Examples that do not materially prejudice

o Extension of the mortgage maturity date o Rescheduling installment payments Transfers by Mortgagor subject to if mortgagor transfers property subject to the mortgage and mortgage payments are not made o mortgagee may foreclose or force the property to be sold o however, the transferee of the mortgage does not have personal liability (original transfer would) assumption if the transferee of real property assumes the mortgage and mortgage payments are not made o the mortgagee may foreclose or force to be sold o in addition, transferee of mortgage does have personal liability (can go after transferor and transferee) novation in a novation the transferee or real property and the mortgagee agree that o the transferee will assume the mortgage and mortgagor will be released from liability

Mortgage Alternatives Deed of Trust an instrument that grants a trustee under a land trust full power to sell, mortgage and subdivide a parcel of real estate. The beneficiary controls the trustees use of these powers under the provisions of the trust agreements The debtor/note maker is the settlor, who gives a deed of trust to a trustee who is closely connected to the lender In the event of a default, the trustee is directed to proceed with a foreclosure sale Deeds of trust are generally treated like mortgages

Installment Land Sale K (K for deed) The buyer takes possession under a K of sale and makes payments to the seller The seller delivers a deed and legal title only when the payments have been completed Remedy o Forfeiture allowing the lender to retake the property rather than foreclosure BUT some states require a foreclosure

Recording Statutes Race Statute Whoever records first prevails Notice Statute Subsequent purchaser cannot have notice AT TIME OF PURCHASE but does NOT need to record to prevail Ex A conveyance of an interest in land shall not be valid against any subsequent purchaser for value, without notice therof, unless the conveyance is recorded A deed recorded is constructive notice Race-Notice State Subsequent purchaser cannot have notice AT TIME OF PURCHASE AND must record first Ex 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 thereof, whose conveyance is first recorded

Anderson v. Anderson Statute can provide that there must be valuable consideration Sabo v. Horvath innocent good purchasers in good faith another word for notice majority rule (much controversy tho) a quitclaim grantee can be an innocent purchaser Chain of title period or evolution of a deeds title existence Wild deed deed recorded outside chain of title

Witter v. Taggart Rule: in the absence of actual notice before or at the time of purchase or of other exceptional circumstances, an owner of land is only bound by restrictions if they appear in some deed of record in the conveyance to that owner of that owners direct predecessors in title

Bank of Mississippi v. Hollingsworth Rule: possession of land by one under claim of title is notice to the world of such claim. a fence

Adverse Possession Elements: Exclusive Actual & uninterrupted Open & notorious Hostile Continuous for the statutory period *If you adverse possess you can have guests *Like prescriptive easement Exclusive Possessor ousts anyone who is on the property without the possessors consent. It derives from the notion that possession usually includes intent to exclude others. consequently, an adverse possession that fails for want of exclusivity probably lacks other requirements as well.

Actual and Uninterrupted Actual real possession, actually being on the land Constructive Possession and Color of Title o An adverse possessor can acquire title to an entire parcel of land even if he possessed only part of it (1) he actually possessed part of the parcel, and

(2) he entered onto that part based on a deed or a judgment that appeared to convey title to the entire parcel. o Color of title you are under the mistaken impression that the land is yours because its erroneously in the deed. Do you have to record it? Depends on the statute (statutes change) Statutory period is 7 years in FL Uninterrupted o No one has possessed the property during the statutory period without the possessors consent. o Interruptions by the owner: As successful ejectment action, followed by an execution of the judgment relates back to the date the owner filed the complaint, so that the action only has to be filed in time. But a complaint that is not followed up in court will not interrupt an adverse possession. o An act by the owner that constitutes a resumption of possession is an interruption (not accidental entry or entry based on possessors consent). To interrupt anothers possession, the owner actually must become a possessor by committing acts that would entitle the possessor to bring ejectment if the acts were committed by someone other than the owner.

Open and Notorious acts of possession are deemed sufficiently open and notorious if they are conducted in a manner which would put a person of ordinary prudence on notice of the claim Title to real property can be stripped away from a previous owner and granted to a person who has been in exclusive physical possession of the property for a designated period. The doctrine was developed to reward those who put land to a productive use and to protect them from the stale ownership claims of others who held formal title but neglected to utilize the property. the use of land cant be hidden has to be for the purpose of the land possessor does not have to have notice of his notorious use

Difference between Actual and Open & Notorious you can live in the house (actual) and not be open and notorious

Hostile Objective View (majority) o Lack of permission is all that is needed (only subjective is the possessor disclaimed intent to acquire title by adverse possession). o Knows land is owned by someone else Subjective View o More is needed. Possessor must have a certain state of mind throughout the time of his possession. However, the courts do not agree as to which state of mind is the correct one. o Has to have some sort of knowledge, whether you think it or know it States differ, its all about statute interpretation

Continuous for statutory period Not constant: Activity is carried on regularly in a manner that is consistent with the propertys normal use. Depends on the statute

Color of Title A document that purports to convey actual title but fails to do so. A typical example is a void deed. Because the adverse possessor is always someone who does not own the property, any deed by which he or she claims title is by definition void. The deed says the property is yours but its really not. Important why? o FL doesnt require it

o Some states require color of title to acquire by adverse possession. Thus, an adverse possessor of property who has no document supporting the possession gets nothing. Color of Title as Affecting Acts Required A few states: Color of Title enables ordinary use of the property to qualify as adverse possession, whereas more significant possessory acts, such as fencing or cultivating, are necessary if color of title does not exist. Color of Title as Affecting Time Period In a few states, a possessor with color of title needs fewer years of possession to adversely possess title than does a possessor without. Color of Title and Hostility In some states, a possessor with color of title is presumed to be hostile to the owner, whereas independent proof of hostility is otherwise needed. *Hint- Policy. Its not only about the elements.

**HYPO: John has Color of Title for lots 1 & 2. 1 & 2 are owned by two different people. Ally owns 1 and Andy owns 2. John only occupies lot 1. Does John have Color of Title? (He satisfies the statutory period). Andy never comes and says anything. Who owns what? John only gets lot 1, because Andy is not in constructive notice, its not open and notorious. Chaplin v. Sanders Ct. of Appeals- Actual notice meant there was no hostility, because the court looked at it subjectively. Supreme. Ct. of Wash? o Subjective or Objective standard for hostility o Objectively looked at possession Adverse Possession is a mixed question of law and fact

Carpenter v. Huffman Issue- Whether there is sufficient evidence to sustain the trial courts holding of privity of possession between Huffman and her brother Alex to allow her to tack her periods of possession onto his in order to establish title to the disputed strip by adverse possession.

Question #2 Pg. 511 What effect does a change in record ownership of the property have upon the running of the statute of limitations? Disability Provisions (relating to the statutory period) Minority o starts when you become an adult Insanity o starts when you become sane Imprisonment o starts when you are released from jail If you become any of these, the statutory time does not stop Some states will toll the statute of limitations Adverse possession commences when the title first descends

Ex. When the land is descended to a 12 year old, the statutory period starts at the kids 18th birthday. FL does not apply Chaplin- Hostility Carpenter- Possession, Tacking rule Pg. 505

Jarvis- Actual Marengo- Open & Notorious

Deeds What deeds need to comply with the Statute of Frauds (1) Name of grantor and grantee (2) Words of conveyance (3) Description of land --> more involved, detailed (4) Grantors signature (sometimes witness signatures) Description Metes and Bounds Government Survey Plat Types of Deeds General Warranty o promise no title defects exist Special Warranty o Grantor promises he did not create a title defect

Quitclaim o No warranties

Covenants of Title Present Covenants If breached, it is when title/deed is delivered Its personal in nature Do not run with the land (1) Covenant for seisin (2) Covenant of right to convey --> Exception: quitclaim deed The grantor warrants that he has ownership of the land which the deed purports to convey. *** 1 and 2 are basically the same (3) Covenant against encumbrances A guarantee from the grantor to the grantee that property conveyed in the deed is not subject to any outstanding rights or interest that would diminish the value of the land. o Mortgages o Liens o Restrictions o Easements/profits Future Covenants

After deed is delivered Run with the land Can be enforced by remote grantees who take through the covenantee grantee Defend against evictions Give damages and right to attorney & court fees (4) Covenant of Quiet Enjoyment (5) Covenant of General Warranty To defend the grantee (covenantee) against all lawful claims of the grantor or 3rd parties who would evict the grantee. ***4 and 5 are basically the same (6) Covenant of further assurances --> not applicable in US Chosen action--> Right to sue (for breach of covenant) Damages --> Money None of the covenants protect against trespass or a mere wrongdoer Covenants for title are in their nature contracts of indemnity and damage must be shown as a condition precedent to recovery for breach thereof. Indemnify the grantee for loss but the grantee must prove damage to recover. Grantor may limit the covenants in the deed

Wilcox v. Pioneer Homes Defendant conveyed the house and lot to plaintiffs by warranty deed. The survey revealed that the lot was narrower than the defendant had presented. The house was located 5 feet from the side line of the lot in violation of a Hope Mills City ordinance which provided for a minimum side lot requirement of 15feet. The house was also in violation of a restrictive covenant which provided that no structure shall be located less than 7 feet from the side lines of a lot. What is an encumbrance?

Any burden or charge on the land and includes any right existing in another whereby the use of the land by the owner is restricted. o Restrictive covenants are encumbrances Zoning Ordinances- Not Encumbrances Why is an unviolated public land use ordinance not a breach of the covenant against encumbrances?

Problem 33 Pg. 547 O conveyed BA to A by general warranty deed. A later discovered a recorded mortgage on BA even though the mortgage had been satisfied. A brought an action against O for breach of the covenant against encumbrances. Result? o There is no encumbrance, because the mortgage was paid off, A loses. o You can sell property with encumbrances, you just have to tell the buyer.

Foley v. Smith conveyed the land to the Smiths by statutory warranty deed. Issue 2- Where grantors convey land to grantees by statutory warranty deed, does a subsequent judgment obtained by a 3rd party which divests both the grantors and grantees of their interest in the land constitute a breach of the grantors covenants to the grantees? Issue 3- Does knowledge of the part of the grantees of land of an outstanding potentially superior claim to the land so conveyed of and by itself defeat the grantees right to recover the breach of covenant of warranty? Issue 4- When does the statute of limitations commence to run on an action for breach of covenants of warranty and of quiet enjoyment when title litigation is pending?

Issue 6- Are interest on money paid by grantees for property conveyed to them, and attorneys fees incurred by the grantees in unsuccessfully defending their title to such property, allowable items of damage in the grantees action against the grantors for breach of the covenants of warranty and quiet enjoyment?

Question #2 Pg. 552 Claims of adverse possession and prescriptive easement may raise questions regarding breach of title covenants. For example, a seller who conveys property burdened by a prescriptive easement breaches the covenant against encumbrances. Does a seller breach the covenant of seisin by conveying land in the possession of a hostile claimant whose adverse title has not yet ripened? Bosnick v. Hill

Types of notice Constructive o no actual notice, you should have been able to find it Inquiry o There was a behavior that could give you notice o ex. fence around property Actual Proffitt v. Isley all general warranty deeds The Isleys had incurred no expense because of of the outstanding mortgage on the property, and the mortgagee had made no effort to either evict appellees or foreclose the property. Therefore, appellees only cause of action was a technical breach of the covenant against encumbrances which could be brought against the grantor, Carter, with the recovery of only nominal damages.

Pg. 555 (1) A few states take the position that present covenants run with the land to subsequent grantees.

(2) Should all covenants of title run with the land without regard to privity of estate? (3) If all covenants of title ran with the land would there be any reason to continue to distinguish between present and future covenants? ****QUESTIONS ON SLIDE (CLASS 11) Delivery of Deeds Physical transfer is not necessary rather it refers to the grantors subjective intent. Intent can be demonstrated by words or conduct showing the grantors intent is that the deed has an operative affect. Title may pass even though the right of possession may be postponed to a future time. o Presumptions When the named grantee has possession of the deed, it is presumed delivery (rebuttable presumption). When the deed is in the possession of the grantor, the presumption is that there is no valid delivery. Where a deed is recorded there is a valid presumption that there has been delivery of the deed, because delivery typically precedes recordation. Parol evidence is admissible to prove grantors intent (including statements and conduct by the grantor). Chandler v. Chandler Issue: Whether there is a valid delivery of a deed where the deed is held by a third party depositary for safe keeping, subject to be returned to the grantors upon request, to be transferred to the grantee upon the death of the grantors. What was JWs subjective intent upon delivery of the deed to the bank? o JW gave unequivocal instructions to the third party to deliver the deed, upon his death, to his son JP, absent any expression or conduct of JW relative to his right to retrieve the deed.

Question #4 Pg. 561 O, the owner of a farm, prepared and signed a deed transferring the farm to S for life, remainder to Ss sons. Angry at this disposition, S tore up the deed in Os presence and threw it in a wastebasket. Thereafter O died, leaving the farm by will to Ss daughter. Ss sons claim the property. Who prevails? o Merger Real estate K is merged into a deed. Deed prevails over the K so anything in the K not in the deed is not enforceable (ex. covenant against encumbrances in real estate K but not it deed; there is no such enforceable covenant) unless it is a collateral undertaking incidental to the transfer of title.

Am National Self Storage v. Lopez-Aguilar K provision that seller warrants that water, sewer and electric service are presently available at the property line or lines of the premises with sufficient capacity to accommodate a 45K st. ft. office/warehouse building. Albrecht v. Clifford Specific to the implied warranty of workmanlike manner between a seller/builder and buyer or property. Policy- Implied Warranty (majority) o An implied warranty assures that consumers receive that for which they have bargained, an objectively habitable home; it protects purchasers from structural defects that are nearly impossible to ascertain by inspection after the home is built; and it imposes the burden of repairing latent defects on the person who has the opportunity to notice, avoid, or correct them during the construction process. Elements of the breacho (1) He purchased a new house from the defendant-buildervendor. o (2) The house contained a latent defect o (3) The defect manifested itself only after purchase

o (4) The defect was caused by the builders improper design, material, or workmanship o (5) The defect created a substantial question of safety or made the house unfit for human habitation. The claim must be brought within the 3 year statute of limitations and the 6 year statute of response. Waiver? o This warranty cannot be waived or disclaimed, it would serve no purpose. Should the implied warranty of quality apply to a builder who constructs an addition to an existing house? o Yes, only to the addition and whatever part of the house that was affected by the addition. The whole case is based on policy

Question #2 Pg. 568 Is a purchase limited to recovery on expressed warranties when a broader warranty is implied in that jurisdiction? No As is --> disclaims the implied warranty Question #2 Pg. 568 Expressed warranty has to be on the same subject as the implied warranty to get rid of the implied warranty. Comment #4 o Should a subsequent purchaser of a house be able to pursue implied-warranty-of-quality claims against the builder/vendor? Courts are split but it seems more sound that the reasonable expectation of any builder/vendor would foresee the subsequent sale (and neither the original purchaser or subsequent purchaser would know of the defect).

Question #5 Pg. 569

D, a commercial developer, conveyed an unimproved lot to P. Unknown to either party at the time, the lot had severe drainage problems which rendered it unfit for a sewage disposal system. P sues D, alleging breach of an implied warranty of fitness of the land for residential purposes. What result?

Question #6 Pg. 569 Should the implied warranty of quality extend to environmental defects in land on which new homes were constructed? If its patent its on the buyer If its latent its on the builder Vetor v. Shockey Does the implied warranty of habitability may extend to sellers of a used house that is not a builder? o No reason why, the distinction between purchase of new house and purchase of used house with respect to assumptions as to quality is wholly unrealistic; the only difference is in the degree of expectation. Didnt bring up misrepresentation and lost it. o If you dont bring up a cause of action you lose it. Misrepresentation is done before the K.

Lyons v. McDonald Issue- Whether the implied warranty should extend to the sales of used homes by non- builder vendors. Elements of Fraudulent Misrepresentation o (1) A material misrepresentation of a past or existing fact o (2) The representation was false o (3) The representation is made with knowledge or reckless ignorance of its falsity o (4) The representation causes detrimental reliance by another Johnson v. Davis

(2) The representors knowledge that the representation is false (3) An intention that the representation induce another to act on it; and o *Difference between Johnson and Lyons (4) Consequent injury by the part acting in reliance Holding? o Fraudulent misrepresentation by the Johnsons Dissent? o No fraud and no reason for rescission ***Does the seller breach the covenant of seisin when he conveys the property to someone adversely possessing the property and when the statute of limitations has not elapsed? Yes (present covenant) At the time of ejectment the statutory period starts running Had the statutory period completed they would have breached a general warranty deed Right to Exclude/Freedom of Alienation Pg. 601 - 625 Freedom of Alienation Unreasonable restraints on alienation

District Ct.- found for the Davises affirming the trial courts return of the $26,000, but reversed the award of $5,000 to the Johnsons as well as the courts failure to award the Davises costs and fees. Didnt breach the K because sellers did not breach anything Cause of action for fraud & misrepresentation Breach of K? o No o Seller told them if there was a problem theyd fix it and buyer never told seller to fix it. Fraudulent Misrepresentation (1) A false statement concerning a material fact

A restriction usually in a deed of conveyance, on a grantees ability to sell or transfer real property; a provision that conveys an interest and that, even after the interests has become vested, prevents or discourages the owner from disposing of it all or from disposing of it particular ways or to particular persons. Relates to life estate, fee simple, etc.

Rowe case Landlord tried to argue there was an implied covenant against assignment without the consent of the lessor. (rent + percentage of receipts). Julian Case Pg. 95 Silent consent clause in the lease premises may not be assigned or sublet without the written consent of the lessor. (must be reasonable rejection). Alby v. Banc One Financial Issue- Whether a restriction in a deed, which provides that the deed property automatically reverts to the grantor if the property is mortgaged or encumbered during the life of the grantor, is a valid restraint or alienation. Warranty clause o the Albys had a right of first refusal A restriction usually is a deed of conveyance, on a grantees ability to sell or transfer real property; a provision that conveys an interest and that, even after the interest has become vested, prevents or discourages the owner from disposing of it at all or from disposing of it particular ways or to particular ways or to particular persons. Purchaser was on notice because the clause was in the deed which was recorded o Reasonable? Court finds the clause to be reasonable and justified by the interest of the parties, and therefore valid. reasonable restraints on alienation are valid if justified by the legitimate interest of the parties.

Balance: Utility of the purpose served by the restraint against the injurious consequences that are likely to flow from its enforcement Legitimate purposes... Potential harmful consequences: o Impediments to the operation of a free market in land o Limits on the prospects of improvement, development, and redevelopment of land o Limits on the mobility of landowners and would be ____ Is the restraint limited in scope or time; the purpose of the restraint and whether the restraint and whether the restraint is supported by consideration. Whether a restraint is limited in scope or time is often highly significant. In addition to the scope and duration of the restraint, we look at the purpose of the restraint and whether the restraint is supported by consideration. Did a weights and balance test: Four things needed to determine whether alienation is reasonable o limited on time: yes o purpose of restraint: keep it in the family o consideration: yes, it was sold for a much lower price Dissent- Restraint in unreasonable because the cherished value our state places on free alienability outweighs the value to the Alby family of maintaining the property in family ownership. Majority is not following the common law

Smith v. Mitchell What is the difference between the preemptive right of first refusal and an option to purchase? An option creates in its holder the power to compel sale of land. A preemptive provision, on the other hand, creates in its holder only the right to buy land before other parties if the seller decides to convey it.

Held that any restriction on a landowners right to freely alienate his property, even though limited as to time and certain as to price, is void as an invalid restraint on alienation. Battle between 2 policies in the law: o Policy absolutely favoring alienability; vs. o One who has property should be able to convey it subject to whatever condition he desires to impose on the conveyance. Reasonableness of Right of First Refusal in this case o Pg. 610- reasonableness of the time given to the reason with the right to act (14 days) o (1) Duration (20 years) o (2) Determination of price (lowest amount the seller is willing to sell for) Specific performance? o Ability of the preemptive right holder to enforce that preemptive right against subsequent purchasers for value who are charged with notice of the right in the recorded chain of title.

Note 1 Pg. 611 NC statute- an option or a preemptive right of a right of first refusal with respect to an interest in land becomes invalid if it is not actually exercised within 30 years after its creation.

Question #2 Pg. 611 A covenant, recorded at the time a subdivision was created (constructive notice), provides that a homeowner who wants to sell must give the subdivision homeowners association a right of first refusal to purchase the property at a price established by impartial appraisal. The covenant further states that if the association does not exercise its right within 60 days, the property may be sold on the open market. Advise the association of the validity of this covenant. Determination of price is reasonable, determined by impartial appraisal. The 60 days are not reasonable, because its 60 +, since the process already takes 30-90 days to close.

Nuisance Pg. 625 - 637 Trespass Interfering with the quiet enjoyment of someones property Intent does not refer to wanting to intentionally wanting to be a nuisance, it means the person intends to do the act that causes the nuisance. Private nuisance Interference with a private land owners use of enjoyment of his land Damages or Injunction (Balancing Test) Harm to plaintiff must outweigh the utility of defendants conduct

Lecture on Right to Lateral/Subjacent Support Landowners are entitled to have his land receive the necessary physical support from adjacent and underlying soil. Lateral support o Right to support from adjoining soil o You do something on your land that damages your neighbors land o Strict Liability for lateral support with respect to land in its natural state. Example: A and B are adjoining landowners. A Ks a large excavation extending almost to the edge of his property, This causes Bs soil to run into As excavation, impairing the surface of Bs property. Does B have a COA against A? Yes Not always negligence, also strict liability With Strict liability you are responsible for damages. If there is a structure on the land the adjacent owners acts causing the soil under the structure to subside is only the responsibility of that adjacent owner if NEGLIGENT.

Majority: If an owner can prove that there would have been damage to the land in its natural estate any damage to a structure is not covered unless NEGLIGENT. State Statutes (Ordinances in many municipalities) contracting or expanding the common law right of lateral support. Typical o The owner of a building is granted limited protection from damage, even if the buildings wight contributes to the subsidence of his land. Water Rights/Mineral Rights Three classifications of Waters: (1) Lakes and streams on the surface (2) Underground or percolating waters (3) Surface waters (1) Lakes and Streams Riparian Water Rights All tracts of land that abut or touches lakes or streams is riparian. To be a riparian one only needs to be the owner of riparian land. Two Basic Rules o Natural Flow Theory Each riparian owner has a fundamental right to have the water remain substantially in its natural state. Free from any unreasonable diminishment in quantity and free from pollution. Each riparian is free to use the water for natural or artificial use so long as it is used only on riparian land and does so sensibly so as to not to affect the quantity or quality of the water. o Reasonable Use Theory

Each riparian owner has the right to use the maximum use of the water provided such use does not unreasonably interfere with the like use of other riparians. Each riparian may either use the water on riparian or non-riparian land so long as such use does not unreasonably interfere with the like use of other riparians.

Water Uses: Natural or Artificial Rule: Use of water for natural water use takes precedence over artificial use. o Natural Water Use (absolute right without regard to the effect which his use has upon other owners; the upstream owner has preferred status) Uses for daily sustenance of human beings such as household uses, consumption such as gardening, raising farm animals; small quantities for irrigation of small areas of farmland. o Artificial Use Irrigation, power, mining, and industrial purposes o One Limitation: Prior Appropriation (17 arid states; western states). Prior use is protected despite the use of water may impair other riparian owners. o Majority: Natural over Artificial Use

Underground/Percolating Water Majority Rule o If the withdrawal of water underneath the surface is used for reasonable use there is no legal redress for damage to neighboring land. If unreasonable use damaging neighboring land the neighbor can sue for damages. Ex. Wells

Surface Waters Three Theories (1) Common Law enemy Rule

o Unlimited discretion for landowner regardless of the affect on others (i.e. build dikes or drain water to get rid of it and not be liable to neighbors). o Minority: you can do anything you want with surface water (2) Civil-Law Doctrine o Minority: An owner may not channel the drainage or otherwise change its natural flow in any way. o You cant do anything you want with surface water (3) Reasonable Use doctrines o Owner may make only reasonable changes in the natural drainage pattern. o You can do anything that is reasonable with surface water

Right to Airspace Pg. 669 - 677 Old common law Ownership of land extended to the periphery of the universe Cujus est solum ejus est usque ad coelum no longer applicable in modern world A land owner has full enjoyment of the land, he must have exclusive control of the immediate reaches of the enveloping atmosphere. Otherwise buildings could not be erected; trees planted, feces, etc. Land owner owns at least as much of the space above the ground as he can occupy or use in connection with the land. The fact that he does not occupy it in a physical sense is not material. Match v. Dept. of Assessments of Baltimore City Purpose is to recognize airspace as an independent unit of real property, the owner of which is entitled to all the rights associated with land ownership. (Modern Trend) MacMillan, Inc. v. CF Lex Assoc.s Zoning resolution: A tract of land may be treated as a single zoning lot. The zoning lot merger must be executed by each party in interest. Plaintiffs consider themselves a party in interest and without its participation the merger is unavailing.

Taking / Eminent Domain 5th Amendment nor shall private property be taken for public use, without just compensation

Taking Clause: (1) is there a taking (2) is the interest of the claimant that has been taken private property (3) is the condemnation for a public use (4) is the payment offered by the government just compensation? (1) is there a taking a) originally meant the actual exercise of eminent domain b) 19th century expanded to physical invasion of private property by a governmental act (i.e. water engulfing ones land after a dam was built) c) the late 20th century has broadened it to include some regulation of private property with the practical effect of largely destroying its economic use

(3) is the condemnation for a public use some identifiable public benefit or purpose is being served by the taking revitalization or elimination of blighted areas Berman v. Parker

Kelo v. City of New London Dissent: the court has gone too far here for these purposes all private property is now vulnerable to being taken and transferred to another private owner, so long as it might be upgraded Most states have enacted statutes to overcome Kelo

City of Norwood v. Horney deteriorating area case Although economic benefit can be considered as a factor among others in determining whether there is a sufficient public use and benefit in a taking, it cannot serve as the sole basis for finding such benefit. Penn Central Transportation co. v. NYC Balancing test for a taking o 1) regulations economic impact on the landowner a) how much dimunition in value is enough to qualify as a taking? b) should transferable development rights (TDRs) be taken into account in the calculation? o 2) regulations interference with the landowners distinct investment backed expectations o 3) the nature of the action taken by the Government dissent: o (1) not seeking to prohibit conduct dangerous to the safety, health, or welfare of others o (2) a very small % of property owners in NYC for unique burdens, and hence could not be said to secure the Average reciprocity of advantage Loretto v. Teleprompter Manhattan Catv Corp. Traditional rule: a permanent physical occupation authorized by government is a taking without regard to the public interest it may serve o Cable wires were fixtures and an easement (partial taking First English Evangelical Lutheran.v. County of LA Can be compensated for a temporary restriction

o but court said bc of public safety to not be a temporary taking the ordinance substantially advanced the preeminent state interest in public safety and did not deny appellant all use of its property Inverse condemnation: when a landowner sues government for a taking bringing eminent domain because government enacted statute prohibiting certain things (didnt take land physically, restricted use of property) Property definition right to use, possess, exclude others (this is restricted) Lucas v. South Carolina Coastal Council Was a temporary taking and should get just compensation (but settled instead) To be a total taking you analyze: o The degree of harm to public lands and resources or adjacency private property, posed by the claimants proposed activities o The social value of the claimants activities and their suitability to the locality in question o The relative ease with which the alleged harm can be avoided through measures taken by the claimant and the government (or adjacent private landowners) Taking that requires just compensation: o (1) when property owner has suffered a physical invasion of his property OR o (2) when the regulation denies all economically beneficial or productive use of land o **but could be overridden by public interest court said government can prevent harmful or noxious uses without paying compensation

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Remember: Invalid claim may be cloud on title, but not an encumbrance Covenant of general warranty To defend the grantee (covenantee) against all LAWFUL claims of the grantor or 3rd parties who would evict the grantee Foley case o Also protects against known OR unknown defects in title Attorney fees are allowable items of damage for breach for covenants of warranty & quiet enjoyment A seller breaches covenant of seisin by conveying land in the possession of a hostile claimant whose adverse title has not yet ripended bc it is broken as soon as made, if grantor does not have possession, right of possession and complete title Majority: an existing violation of an ordinance is an encumbrance within the meaning of a warranty against encumbrances o Minority: existing violation is not an encumbrance Remedy to encumbrance unless grantee has paid off encumbrance or actually lost the estate in consequence then he will only get nominal damages (amount will be necessary to remove encumbrance if removed himself) Collateral agreements which are not usually included in the terms of a deed is not affected by the merger rule (collateral agreements which require for acts by seller that go beyond merely conveying good title and placing purchaser in possession) Foreclosure if clause permits power of foreclosure clause OR judicially (cant just do it without a clause) Ordinarily an adverse possessor of realty acquires title only to that portion of the realty which he actually occupied and possessed. One who occupies any portion of a parcel of realty under color of title constructively occupies the part not actually possession A subsequent purchaser is on inquiry notice if any persons possession would have been disclosed by a reasonable inspection of the realty Statute of limitations in adverse possession does not start running until potential plaintiff has a possessory right in the realty

General rule : donees do not qualify as bona fide purchasers under the recording system because a donee by definition does not give consideration Legal disability if the owner of realty is under a legal disability at the time AP begins, commencement of the statutory period is delayed until the legal disability has terminated o if the owner is not under a legal disability at the time the possession begins, however, the fact that he subsequently suffers a legal disability or that title subsequently passes to a person who is under a legal disability will have no effect on the running of the statutory period present covenants are breached at the time the deed is delivered thus a grantor cannot cure after the fact Lateral Support - The neighbor will also be strictly liable for damage to buildings on the landowner's property if the landowner can show that the weight of the buildings did not contribute to the collapse of the land. If the landowner is unable to make such a showing, the neighbor must be shown to have been negligent in order for the landowner to recover damages A general warranty deed is a type of deed where the grantor (seller) guarantees that he or she holds clear title to a piece of real estate and has a right to sell it to you. The guarantee is not limited to the time the grantor owned the propertyit extends back to the property's origins. A reasonably prudent buyer is not usually willing to buy a law suit, so doubt about the title held by a seller would make the title unmarketable (if about an adverse possessor)

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Study** Nuisance cases Lateral support with buildings