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Real Property Bar Outline

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Real Property outline

1. PRESENT POSSESSORY ESTATES a. Fee simple absolute ("to A" "to A and his heirs") i. Absolute ownership of potentially infinite duration ii. Freely devisable, descendible and alienable. iii. Reasonable restraints on alienation for a limited time are permitted but a complete restraint is void.

1. Void means that you ignore the restriction

2. Exception for the right of first refusal. b. Fee tail ("to a and the heirs of his body") i. Devise used to lock the property into the grantee's family. ii. Modernly this rule has been abolished and the language will create a FSA. c. Life estate ("To A for life" "to A for the life of B") i. Never measured by time or years.

1. Ex. "To A for 200 years if he lives that long". No LE is created. ii. Life estate may arise by implication. Ex. "To B after the death of A" iii. Life estate pur autre vie - Life estate measured by a life other than the grantees

1. Ex. "To A for the life of B"

2. Effect of life tenants death before the measuring life dies: a. CL - Seisin is vacant and anybody takes b. Modern - Passes to the estate of the deceased life tenant iv. Alienation - Complete restraints on alienation of a LE are VALID.

1. Ex. "To A for life, but if she tries to sell it, then to B" v. Future Interest

1. In grantor - Reversion / In 3rd party - Remainder d. Waste i. Life tenant is entitled to all ordinary uses and profits from the land ii. Life tenant must maintain the property and not do anything to hurt future interest holders. iii. Voluntary/affirmative waste - affirmative action beyond the right of maintenance that causes harm to the premises.

1. Exploitation of natural resources. LT must not consume or exploit natural resources on property unless: a. Necessary for repair and maintenance. b. When it is the normal use of the land. (Granite quarry, coal mine) c. Life tenant may continue the prior use. d. Expressly or impliedly permitted by the grantor. iv. Permissive waste / Failure to maintain - when land is allowed to fall into disrepair

1. The LT does NOT have to insure the property and is NOT liable for damages caused by a 3rd party tortfeasor. .

2. Life Tenant must a. Maintain the premises in reasonably good repair i. i.e. obligated to make reasonable repairs but not replacements. (leaky roof, only required to patch) b. Pay ALL ordinary taxes on land to the c. *Holder of the future interest must make sure taxes are paid because a foreclosure sale will eliminate the future interest. 1

d. Pay interest (but not principal) on mortgages e. Pay special assessments for public improvements of a short duration.

3. Limited Obligation of LT a. The LT's repair, tax and mortgage obligation is limited to the extent of income or profits from the land i. If no income is received then the LT obligated up to the extent of the premises fair rental value if the LT is using the land. ii. If the LT is not using the land, then the LT has no repair, tax or mortgage obligation. v. Ameliorative waste - Substantial change that increases the value of the land.

1. LT may commit ameliorative waste (alter or demolish existing buildings if: a. The market value of the future interest is not diminished; and either i. All the future interest holders consent, or ii. Changed conditions have made the property relatively worthless. b. Note: Leasehold tenant may not commit ameliorative waste. e. Defeasible fees (3 types) - Words of mere desire/hope/intention are insufficient to create a defeasible fee. (Grantor must use clear durational or conditional language) i. Fee simple determinable (Durational language)

1. Ex. So long as, during, while, until

2. Ends automatically upon the happening of a stated event.

3. Devisable, descendible and alienable, BUT always subject to the condition

4. FI in grantor is a possibility of reverter. ii. Fee simple subject to condition subsequent (Conditional language)

1. Ex. Provided that, but if, on the condition that.

2. Grantor must use clear durational language and carve out right to reenter

3. Not automatically terminated BUT can be cut short at grantors option if condition occurs

4. Devisable, descendible, but NOT alienable.

5. FI in the grantor is a right of reentry. (power of termination) iii. Fee simple subject to executory interest "To A, but if X occurs, then to B"

1. Same language as a fee simple determinable / condition subsequent BUT interest AUTOMATICALLY goes to someone other than grantor

2. FI in 3rd party is an executor interest a. Shifting - Grantee to grantee / Springing - Grantor to grantee f. Future Interests i. Reversion - future interest in the grantor when the grantor conveys away less the full durational estate that the grantor had.

1. Devisable, descendible and alienable ii. Remainder - Future interest in favor of a 3rd party that takes effect immediately upon the natural termination of the prior freehold estate. (Follows a life estate)

1. Vested remainder - A remainder is vested if it is both created in an ascertained person and NOT subject to any condition precedent a. Indefeasibly vested remainder - Holder certain to acquire an interest in future with no conditions attached. (To A for life, then to B) i. Note - Remainder holders have standing to sue for waste.

2 b. Vested remainder subject to complete divestment - Remainderman exists BUT his right to possession could be cut short because of condition subsequent. (A for life, then to B unless he uses it as a bar) c. Vested remainder subject to open - Remainder vested in group of takers, at least 1 of whom is qualified to take BUT each class member's share is subject to partial divestment because additional takers can still join the class. i. Class closes whenever any member can demand possession ii. Children in the womb at the time of the class closing join the class iii. Surviorship of a class member to the time of closing is usually unnecessary to share in a future gift, unless survival was made an express condition.

1. Certain terms imply survivorship (widow, heirs, issue, next of kin)

2. Contingent remainder a. Remainder is contingent if it is created in an unascertained person or is subject to a condition precedent or both b. If the condition precedent is met during the previous estate it becomes an indefeasibly vested remainder c. Freely alienable / transferable d. Freely devisable, descendible provided survival is not a condition to the interest's taking. e. Rule of destructibility of contingent remainders (CR) i. CL - Contingent remainder was destroyed if it was still contingent at time of preceding estate ended ii. Modern - rule has been abolished and the interest will revert back to the grantor and the contingent taker will get an executory interest which will vest when the condition is met. f. Doctrine of Merger - When one person acquires the present interest and the future interest after a contingent remainder, the contingent remainder is extinguished. (To A for life then to B's Kids) B has no kids. If O buys A's life estate, the contingent interest in B's kids is eliminated. iii. Executory interest

1. A future interest created in a 3rd party which is not a remainder.

2. Shifting - Grantee to grantee / Springing - Grantor to grantee

3. Freely alienable / transferable

4. Freely devisable, descendible provided survival is not a condition to the interest's taking.

5. EI holders do not have STANDING to sue for waste.

2. RAP a. RULE - No interest in property is valid unless it must vest, if at all, not later than 21 years after some life in being ("measuring life") at the creation of the interest i. If there is any possibility that the interest might not vest in time, the interest is VOID ii. Only applies to

1. Contingent remainders, executory interests, vested remainders subject to open, options to purchase, and the right of first refusal.

2. Doesn't apply to grantor's interest or any interest that is already vested 3

b. The perpetuities period begins to run: (1) Will - From the testators death (2) Deed - From the date of delivery (3) Irrevocable trust - from the date of creation (4) Revocable trust - from the date it became irrevocable. c. Void interests - If the interest is VOID you cross out the language that violates the rule. i. A gift to an open class that is conditioned on members surviving beyond 21 years violates RAP.

1. Ex. To A for life, then to A's children who reach 25. Even if A has a kid who is currently 30 the interest is void. (Bad as to one, bad as to all) ii. An executory interest with no time limit violates RAP iii. Options and the right of first refusals over 21 years violate RAP.

1. Exception - Options to purchase held by the current tenant. iv. Fertile octogenarian / precious toddler d. Savings Clause - May include a savings clause (To A, but if beer is consumed on the property during A or B's life or within 21 years of the death of A or B, then to C) e. RAP Charity exception - a gift from one charity to another charity doesn't violate RAP because of public policy. (RAP also does not apply to charitable trusts) f. Reform of RAP - Wait and see (Statute must be given on test or else apply CL)

3. Concurrent estates a. Joint tenancy (right of survivorship) i. Interest is alienable, but not devisable or descendible (Cant leave in a will) ii. Creation of JT

1. 4 unities (TTIP) + express intent must be present at the outset - a. Title taken at the same time b. By the same title (same instrument) c. With identical interests d. And, with rights to possess the whole

2. Grantor must clearly express right of survivorship because there is a presumption for tenancy in common. a. If the intent of the grantor is unclear, it will be presumed that a TIC was created. iii. Severance of JT - Severance occurs when any one of the 4 unities is destroyed

1. Conveyance - JT can transfer her interest during her lifetime (even secretly) a. Buyer will become a tenant in common, and a JT will remain between remaining tenants.

2. Contract of Sale - A JT's mere act of entering into a contract for sale of her share severs the JT as to the contracting parties interest.

3. Creditor's Sale - NO severance until the judgment sale actually takes place.

4. Leases - States are split whether this causes severance.

5. Partition (Voluntary or involuntary) a. Voluntary agreement - peaceful way to end relationship b. Partition in kind - court action for physical division of property on its face. Must be in the best interests of all JT's (often agricultural land) c. Forced sale - court action if in best interests of all JT's and partition by kind is impracticable. The proceeds are then divided proportionately.

6. Mortgage a. Title theory (minority) - Severance - title passes from the mortgagor to the mortgagee and back to the mortgagor when the mortgage is paid off. b. Lien theory (majority) - NO Severance - a lien attaches to title but title is NOT transferred. 4

b. Tenancy by the entirety - (4 unities of TTIP + marriage) i. Right of survivorship ii. Not severable by a unilateral act of one co-tenant. i.e. conveyance and mortgages by one party are ineffective iii. NO right of partition iv. Creditors of only 1 spouse can't touch this tenancy v. Can be terminated by death, mutual agreement, and divorce.

1. Divorce causes the tenants to take 1/2 TIC each. c. Tenancy in common i. Each co-tenant (CT) owns an undivided part and each has right to possess whole ii. Presumption in favor of tenancy in common. iii. No right of survivorship and tenants can hold unequal shares. iv. Each interest is descendible, divisible, and alienable. v. TIC have a right of partition. (Voluntary or involuntary) d. Rights and Duties of Co-Tenants i. Possession - Each co-tenant has the right to possess the whole of the property

1. Absent ouster a co-tenant in exclusive possession is not liable to others a. Also, absent ouster a CT can't claim adverse possession b. Ouster - Keeping a co-tenant off the property or claiming a right of exclusive possession. ii. Rents and Profits - A co-tenant in possession has the right to retain profits from her own use of the property, EXCEPT

1. Agreement to the contrary to share profits

2. Lease of the property by a co-tenant to a 3rd party

3. Depletion of natural resources iii. Encumbering the Property - Each co-tenant may encumber their OWN interest in the tenancy. The bank may foreclose only on their individual interest. iv. Contribution for Preservation of Property

1. Repairs - current right of contribution for necessary repairs provided that he has told other CT's of the need for the repairs.

2. Improvements - (Non necessary repairs) No current right of contribution but may be recouped at the sale of the property or partition.

3. Taxes and Mortgages - Each CT is responsible for his fair share of governmentally imposed obligations (taxes / mortgage payments / assessments for curbs), based upon his undivided share in the property.

4. LANDLORD TENANT LAW a. Leasehold - an estate in land, under which tenant has present possessory interest in leased premises and landlord has a future interest (reversion) i. Note - Covenants in the lease are generally independent. i.e. if one party breaches a covenant the other party can recover damages but must still perform his promises under the lease and cannot terminate the landlord tenant relationship. b. Types of leaseholds/nonfreehold estates (4 types) i. Tenancy for years - lease for a single fixed period of time

1. Leases of OVER 1 year need to be in writing to satisfy the SOF (1 year ok)

2. Ends automatically at its termination date (NO notice necessary to terminate)

3. The landlord has a right of reentry, which allows him to terminate the lease if the tenant breaches any of the leases covenants. (failure to pay rent) 5

ii. Periodic tenancy - continues for successive periods until terminated by proper notice by either party

1. Creation a. Express agreement - L to T from month to month b. Implication - L to T with rent payable monthly c. Operation of law - Holdover tenancy or invalid lease under SOF

2. Termination a. Notice must be given 1 full period in advance and on the end of the period of tenancy (effective date) b. For year to year lease - 6 months notice is required iii. Tenancy at will - Tenancy for no fixed duration. Either party can terminate at anytime without notice.

1. Creation a. Must be created by express agreement that says the lease is terminable at any time otherwise monthly payments will create an implied periodic tenancy.

2. Termination a. May be terminated without notice by any party with power to do so i. Note: If only the tenant has a right to terminate the landlord cannot terminate, but if only the landlord has the right to terminate either the landlord or the tenant may terminate. b. May also be terminated by operation of law - i.e. death, assignment or commission of waste by the tenant, transfer of title by the landlord, or lease by the landlord to a 3rd party. iv. Tenancy at sufferance - Arises when tenant wrongfully remains in possession after the expiration of a lawful tenancy. Landlord has two options:

1. Evict - Sue in trespass and recover damages

2. Impose a new periodic tenancy. a. If the old tenancy was for less than a year then the tenancy will be measured by the period covered by the rent payment. b. If the old tenancy was for more than a year in the commercial setting the landlord may impose a new year to year lease. c. If the landlord gives the tenant notice of the rent increase before the expiration of the lease, the landlord may demand the higher rent amount c. Tenants duties i. Tenants duty to repair

1. A tenant must NOT commit waste on the leased premises a. Voluntary Waste - Intentionally or negligently damages the property or exploits minerals from the property. b. Permissive Waste - Fails to take reasonable steps to protect the premises from damage from the elements. The tenant is liable for all ordinary repairs excluding ordinary wear and tear and has a duty to report deficiencies promptly. c. Ameliorative Waste - Tenant may not alter the property to increase its value. The tenant will be liable for restoration. i. Exception - Long term tenant who makes changes consistent with the changes in the neighborhood.

2. Destruction of premises - If the property is destroyed without fault of the landlord or tenant the tenant may stop paying rent and may terminate the lease. 6

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