Property Outline

Introduction

Property is all around us. Nearly everything we see is property of some sort. This computer is property, the desk I’m at is property, even the mints I purchased is property. As a result, this class will have several fields. Instead of flowing naturally from one step to the next (like Civil Procedure or Contracts), this class is organized by categories. We will explore one field of property one week, then a completely new field the next. As such, each large heading will be a new kind of property with different rules for managing that property.

Why we Recognize Property

Property is created by the law. Without the law, there is no property. The Declaration of Independence states several rights that people have. Property is not one of them. As such, property is given. But how? There are five theories of how this works.

First Possession Theory

This is the first come first serve basis. The first person to take possession of something is the owner of it. This can be whether there is property already present, or if a person is creating property.

Labor Theory

Labor theory is when you labor on a property and therefore you have a property interest. So, you add value to the property, it thus becomes your property. One example is writing a school paper. You put work into that assignment, thus, that paper is your property.

Utilitarian Theory

You own the property because you want to maximize happiness for the community. In other words, you want to put rules on who owns the property to make the most use of the property. An example of this is is a farmer who is allowed to own the property, with the comfort of protection against intruders, prepares the plan to be most useful.

This theory can be used for pretty much every argument and all you are trying to determine is who has the better argument.

Civic Republican Theory

You own property to encourage civil involvement in the politics of the country. In other words, the government allows private ownership so that the people care about what happens to the property. On this subject, the book says “we want you to come to the government as right holders, not as beggars.”

Personhood Theory

This is when an individual has a personal attachment to an object to where it becomes a part of your identity. As a result, you have a claim of ownership (since it is really a part of you). Family heirlooms, pets, childhood homes, etc. are all examples.

All of these theories overlap. For instance, planting a garden may cause you to be attached, but there was also labor involved. So, it is up to the court to determine which theories should be more heavily involved.

Pierson v. Post – Fox Hunting

This is a classic example of how one determines when property ownership begins. Although this case applies only to wild animals on unowned land, we can see how each theory plays a role.

• First Possession – The first to possess the fox claims it (clear rule)
• Labor – The one who puts in the most work for the fox claims it (Dissent’s opinion)
• Utilitarian – You want to encourage the eradication of the fox (Both arguments have a claim)
• Civic Republican – Engagement in civil action to determine who owns the fox
• Personhood – Which party has hunting foxes as more their identity?

White v. Samsung Electronics – Vanna White Ad

This case is about a celebrities right to publicity. Ultimately it is another example of how the theories above may apply and why we may want to protect or not protect this right of property.

What is Property

Property is not the ownership of something, instead it is a collection of rights one has directed towards something. For instance, I do not own this computer, instead, I have the right to transfer (sell or give away) or use the computer. There are four main rights in this bundle of rights that we discussed.

• Transfer
  • Sell
  • Give
  • Devide
• Exclude
• Use – Posses
• Destroy

Right to Transfer (Alienate)

The legal word to transfer is to alienate.

The law regulates The who, what, and how property is transferred. Below are some examples.

For who, the law restricts insane people from transferring. Children are also limited to transfer, depending on the capacity of the property.

For what, the law prevents you from selling military pensions. Additionally, the law prevents you from selling (although you can give away) body organs such as a kidney.

For how, the law provides rules for creating a will, division of an estate at divorce, or the transfer of a deed.

Generally, property is transferrable. Johnson v. M’Intosh is an example of an exception to the rule.

Chain of title refers to the line of ownership from one owner to the other. The United States government is considered the first possessor of title. This rule may be considered to have come from Johnson v. M’Intosh.

Johnson v. M’Intosh – Claim from purchasing tribal lands.

There are three main takeaways from this case:

• You can trace all titled land back through the chain of title towards the United States.
• This claim of title from the United States ultimately comes from adoption (England) and from conquest.
• Native American Tribes are unable to transfer land to anyone other than the United States government.

Right to Exclude

This right refers to the property owner’s exclusive right to use of the property. In other words, anyone but the property owner is excluded unless they are privileged by some way to access the property. Some of these privileges include consent or necessity.

Additionally, this right of action is often seen as one of the more important rights in the “bundle of sticks.”

Finally, courts have found several ways to enforce this right. We have explored ejectment in the past. The first case below explores a cause of action for the tort of trespass.

Jacque v. Steenberg Homes, Inc. – Path for Mobile Home

From this case we learn that people generally have a right to exclude others from their property. If people trespass on your property, they have committed a tort, even if there is no harm done to the property. However, there is a harm committed, both to society, and to the individual. That is, the threat of losing sole access to the property.

So, even if there is no apparent harm resulting in compensatory damages. The actual harm can still result in nominative and punitive damages. The three purposes of this finding are: First, to deter people from trespassing; Second, to provide a consequence for those who do; Third, to protect the legal property system.

State v. Shack – Farming Camps

Even so, that does not mean that the right to property is absolute. This case discusses finding balance between landowners restricting the rights of others on their land v. the rights of exclusivity of the landowners. What we lear is that property owners, for the good of society, cannot restrict the human rights of others but can still restrict solicitors, or ask people to identify.

It appears that there may be a conflict between the past two cases. When does one have the exclusive right to what happens on the property v. when they do not? Are they compatible? I think so, but that’s up for you to decide.

Right to Use

Traditionally, the rule is that the property owner has the right to use the property in whatever way they desire, as long as there is no harm to others from that use. The following cases explore some of those exceptions.

Sundowner, Inc. v. King – Spite Fence

We learn from this case that intent matters as does the use of the structure. We also need to consider the harm caused to the others. If the harm is only annoyance, then it may not be enough to find that the fence is a nuisance, as long as there is a use to the fence.

Prah v. Maretti – Solar Panels v. View

Under the common law, the sunlight could be blocked for three reasons

• Property owners could do what they want if they did not cause physical damage to the neighbor
• Sunlight was only for enjoyment
• There was an interest in not impeding the development of land.

This court changed the traditional common law by addressing these points:

• There are increasing regulations on the use of land that benefits society.
• Sunlight is now being used as a source of energy, not just for enjoyment.
• Third, society no longer desires the unimpeded development of land.

Ultimately, there needs to be a purpose, other than aesthetics, to restrict the rights of others to use.

Right to Destroy

The final right in our bundle is the right to destroy. For the most part this is straightforward. Most property naturally decays and sometimes it is meant for destruction (like eating an apple). However, things become more tricky when the property has significant value (other than monetary value, that is). So, what restrictions can be put on the right to destroy?

Eyerman v. Mercantile Trust Co. – #4 Kingsbury Place

The court considers several public policy considerations to determine if people have the right to destroy.

• First, the preservation of the estate.
• Second, the interest of the neighbors.
• Third, the interest of the public.

Because there was no good reason to destroy, the home was preserved.

Real Property

Real property is land and anything attached to that land.

Adverse Possession

Adverse possession refers to one’s ability to possess the land after undisputed occupancy of the land for an established period of time. So, if A lives on B’s land for 10 or so years without B’s discovery, A could be entitled to title of the land.

Elements

The standard rule for adverse possession is: Possession changes when the possessor maintains the land for an 1) actual, 2) exclusive, 3) open and notorious, 4) adverse and hostile, and 5) continuous for the required of time.

Gurwit v. Kannatzer – On the West of the Road

Actual – Must have possession, but there is no need to possess the entirety of the land.

Exclusive – The only people who use the land are the adverse users (or others with the permission of the adverse user). If the true owner claims use of the land, there is no exclusion.

Open and Notorious – Everyone “knew” who owned the land, there was no attempt to hide it. Notice must be provided to the true owners (done at the time of suit). Any reasonable search by the true owner would have discovered the use.

Continuous – The land must be used continually for the nature and purpose of the land. For “wild” land, this use can be minimal.

Adverse or Hostile – The possession comes without the permission of the true owner. If they have permission, there is no adverse possession (e.g. tenant has permission to be in the area so possession is not adverse to the true owner’s wishes).

Van Valkenburgh v. Lutz – Farming plot

Sometimes States add additional requirements to the common law approach. Here, New York added the requirements of 1) Substantial Enclosure (property boundaries) and 2) Cultivation and improvement.

This case is one of the most famous adverse possession cases. Although they met the common law elements, there was heavy dispute on these additional requirements. For instance, the majority said that the land was not cultivated and improved because the Lutz had left it scrappy and did not manage it well. However, the dissent said that they had put a garden there and had cleared most of the land for use of the garden.

Possessor’s State of Mind

Fulkerson v. Van Buren – Church

If a party is aware that the other individual is the true owner, and recognizes that ownership, possession is not adverse.

Proving Adverse Possession – Tacking and Disability

Howard v. Kunto – 50 feet off

Each person was on the wrong land. The Kuntos had only been on the land for a year while the previous owners had been on the land for more than 10 years. Between the two, the statutory time of continuous possession had been met. So, the Kuntos could still claim adverse possession.

The rule of law: If party A meets all the elements of adverse possession and party B meets all the elements of adverse possession, then they can aggregate their time together (as long as there is privity between the parties.

Privity is a reasonable connection of successive occupation of the property. Family members can establish a reasonable connection. So can a purchase of the land.

Disability

The timeframe changes when the actual owner has a disability. For our purposes, a person is disabled if they are a minor, lack mental capacity, or are in prison. However, the disability must be existing at the time adverse possession begins. There are two approaches:

1. The clock for adverse possession does not begin until the disability is removed.
2. There is a limited amount of time after the disability ends in which time the suit must be brought.

There are a few more rules to note:

• The disability must exist at the beginning of the possession period.
• Death ends all disabilities.
• Disabilities are not allowed to be tacked.
• Disability does not shorten the statutory time requirements.

Personal Property

Personal property are items that are moveable (e.g. a computer or chair).

Adverse Possession of Chattels

Reynolds v. Bagwell – Violin

The statutory time of possession is considerably shorter for personal property (2-6) years.

All the elements of adverse possession need to be met for the statutory period. There is an additional element of “lack of concealment.” If the item was concealed during the time, then the statute of limitations will not start to run. A way to show lack of concealment is through continued use and no modifications are made. If modifications are made, they should occur after the statutory period has lapsed.

O’Keeffe v. Snyder – Stolen Violin

This case is an example of the discovery rule. The rule states that: the cause of action (statute of limitations) will not start until the “injured party discovers, or by exercise of reasonable diligence and intelligence should have discovered, facts which form the basis of a cause of action.”

So, the owner needs to show that they exercised reasonable diligence to discover, otherwise, the clock starts ticking.

Rule of Capture

State v. Shaw – Catching fish

This is a variation of Pierson, capturing a natural resource. Here, the first person to exercise a certain control over the resource takes possession. If anybody utilizes that resource then they have carried off the possession of another.

Popov v. Hayashi – Who caught the ball?

Sometimes it is difficult to determine who actually captures an item. The court determines that some may have a higher claim than others. This is called a pre-possessory interest. If nobody else has a similar interest, then that person takes possession. If somebody has an interest that matches, the court has a hard time telling who should obtain possession. Here, the court says that both have a similar interest. Thus, the ball should be sold and the proceeds split evenly between the parties.

Rule of Finders

People lose and find property all the time. There are four categories of found property:

• Lost – unintentionally and involuntarily parting.
• Mislaid – Voluntarily parted, but unintentionally forgotten.
• Abandoned – Voluntarily and intentionally parted.
• Treasure Trove – Concealed long ago.

A finder only maintains possession, not ownership, of the property. If the statutory period runs after finding, then the finder becomes the new owner.

Armory v. Delamirie – Lost Jewel

The finder has a higher claim of possession than anyone other than the true owner. This includes future possessors, even if the finder was a thief of the item.

Hannah v. Peel – Lost British Broach

Here, the rule of law is that a land owner (where the item was found) is presumed to have a better claim than the finder. However, when the property is unoccupied (or not controlled by the land owner) then the finder has a better claim.

• If the finder is the trespasser = land owner has possession.
• If the finder was a social guest on occupied land = land owner has possession.
• Additionally, if the item was embedded into the land = land owner has possession.
• Finally, if the item was found in an open, public area = finder has possession.

McAvoy v. Medina – Mislaid wallet

Mislaid property is property that is voluntarily placed but unintentionally forgotten. This is different than lost property where it was involuntary placed and unintentionally forgotten.

Mislaid property goes to the land owner, not the finder. The purpose of this is to ensure the easiest way of returning to the true owner if they come to reclaim the property (the true owner is more likely to return to the land rather than an individual).

Courts generally determine that property is lost if it is on the ground while mislaid would be placed on a table.

Benjamin v. Lindner Aviation, Inc. – Money in plane wing

This case was an example of the differences between property categories. Additionally, it showed how the difference determines who maintains possession of the property.

Gifts

Inter Vivos

An inter vivos gift is an ordinary gift from one living person to another. The three elements for a valid gift of this type is “donative intent, delivery, and acceptance.” These gifts are almost never revokable.

Gruen v. Gruen – Life Estate in Painting

Donative intent needs to be immediate and present. “I give you the painting when I die” v. “I give you the painting, but I want to keep it until I die.” The difference here is when ownership changes. In the first statement, the title transfers at the time of death (and must be included in a will). In the second statement, the title transfers at the time of the statement and the donor only maintains a possessory interest.

Delivery of a gift can be manual, constructive or symbolic. A constructive delivery is when you are delivered a physical method to access to the item (like a key to a chest). A symbolic delivery is an external device that transfers title to the donee. The letters here count.

Acceptance is presumed if the item is of value.

Causa Mortis

Brind v. International Trust Co. – Jewelry

These are gifts that are given when the donor contemplates death. As a result, there is an additional element to the traditional three: “the donors anticipation of imminent death.” Significantly, these gifts are easily revokable. For instance, if the donor changes their mind before death, the gift is revoked. Additionally, if the donor does not end up passing, the gift is revokable. Finally, if the donor passes from a cause other than the one contemplated, the gift is revokable.

Engagement Rings

Ultimately, it is only a gift as long as the marriage takes place. As a result, the giver is the person who retains ownership (if the marriage does not take place).

Another consideration would be who was at fault for the break-up. Some courts say that the person who is at fault does not get to retain the ring.

Intellectual Property

There are three main kinds of protected intellectual property: copyright, patents, and trademarks. However, if a copyright is infringed, then the fair use doctrine may apply as a defense.

Copyright

“To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.”

U.S. Const. Art. 1 § 8

To establish a copyright, three elements must be met:

1. Originality – Not copied
2. Work of authorship
   1. Literary works
   2. music
   3. dramas
   4. pantomimes and dances
   5. pictures, graphics, and sculptures
   6. motion pictures
   7. sound recordings
   8. architectural works
3. Fixation – created in a physical form.

Eldred v. Ashcroft – CTEA

Copyright was extended from life of author plus 20 years to life of the author plus 70 years. Eldred challenged that law and it became a debate about the purpose of the constitutional clause v. the Congressional power of the clause.

Fair Use Defense

Harper & Row, Publishers, Inc. v. Nation Enterprises – President Ford

Worry about infringement can be mitigated by the fair use defense. 17 U.S.C. § 107 states the fair use doctrine as such:

“Use of a copyrighted work . . . for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research, is not an infringement of copyright.”

There are several factors to consider:

• Purpose of the use – Commercial (-) or purposes in statute (+).
• Nature of the copyrighted work – Nonfiction (+) or fiction (-).
• The amount and substance of copyright used – Minimal (+) or substantive (-).
• The effect of market value for use of the copyright – Minimal (+) or vast (-).

Patents

A patent is an invention and protects the inventors rights to exclude others from making, selling, or using the patented item.

There are five elements to a patent.

• Patentable subject matter – Process, machine, manufacture, composition of matter. You are unable to patent laws of nature (such as math).
• Utility – Needs to be useful (even if it is only minimal)
• Novelty – Must be new
• Nonobviousness – Unique from what a normal person would think of.
• Enablement – Detailed to enable someone to make and use the item.

The takeaways are the elements, that the patent only lasts for 20 years, and how fragile patents really are (could be easily challenged).

Trademarks

Sounds, symbols, and words can be examples of trademarks.

The elements for a trademark include:

• Distinctiveness – Separates the mark from others products
• Non-functionality – If it is functional, it is a patent. Trademarks are different because they do not affect the use, cost, or product quality. A product is functional if it has a use or purpose.
• First use in trade – First to use is the first to claim within that market. The same trademark can be used by several companies as long as they are not in the same trade.

While patents and copyright has the goal of increasing the arts and sciences, trademarks are there to protect the consumer from poor products.

Estates and Future Interests

We have talked about how people have a bundle of rights to property. In fact, the compilation of all that property forms an estate. General terms to know are noted below:

Deed – Done by a living person. The verb to issue a deed is a Grant or Convey by Grantor (person selling), Grantee (person receiving).

Will – Done by a person who makes preparations for their death. The verb is Devise. The person who issues the will is the testator to the beneficiary.

Intestate – Death without a will. The verb is to descend to the heir. A person does not have an heir until death. Before death, those individuals are anticipatory heirs (relatives).

Modern Freehold Estates

To determine which type of freehold estate is in question, you need to look at the language of transfer. There are two parts of this language: First, the words of purchase refer to who the transfer goes to. Second, the words of limitations refer to what kind of rights are transferred (e.g. fee simple).

Fee Simple Absolute (Fee Simple)

Cole v. Steinlauf – Bad Deed

A fee simple means that the estate owner has all the rights of possession for all of time. These rights include the right of alienability, devisability, and descendibility.

The ways to convey a fee simple:

• O conveys to B and his heirs.
• O conveys to B.
• O conveys to B in fee simple absolute.
• O conveys to B for ever and ever.
• O conveys to Inc., its successors, and assigns.

Ultimately, the takeaway is that if the language is ambiguous, assume that the transfer is a fee simple. Significantly, if the language includes “and their heirs” it is not putting a possessory right on the heirs.

Life Estate

White v. Brown – House

A life estate is when an individual has the right to possess the estate for their life. However, once the possessory passes, the estate returns to the original owner.

• The person possessing the life estate is called a life tenant.
• When the estate is to return to the original possessor, it is called a reversion.
• When the estate is to pass onto another at the expiration of a life estate, it is called a remainder.

Here are the ways to convey a life estate:

• O conveys to B for life.
• O conveys to B for all of B’s life.
• O conveys to B for as long as B lives.
• O conveys to B for life. B then conveys the estate to C.
• O conveys to B for life, then C for life.
• O conveys to Google for life.

Woodrick v. Wood – Waste Barn

There are two traditional doctrines of waste:

• Voluntary waste – an action that significantly reduces the value of the property.
• Permissive waste – failing to reasonably care for the estate (e.g. paying property taxes).

As a life tenant, you cannot abuse or destroy the property (waste) because the future interest holders maintain an interest in the land. Under common law, you cannot alter the property even if it significantly benefits the property.

However, the modern rule is that if the alteration increases the value of the property, it is not considered waste and the alteration can take place.

Fee Tail

Fee tails are no longer common. In England, they were eradicated in 1925. In the United States, only 4 states recognize a fee tail as valid, Delaware, Maine, Massachusetts, and Rhode Island.

A fee tail is when the possessor passes on the estate to the immediate descendants. So, if A passes on an estate to B “and the heirs of his body” then once B dies, the estate goes onto the descendants. However, if the line of descendants ends, then A has the reversion and will retain the estate in fee simple.

In the states that do not recognize a fee tail, the language of transfer is interpreted to be a fee simple.

Fee Simple Defeasible (Three Types Below)

A fee simple defeasible is a fee simple that could continue forever or end when a certain event (outlined in the words of duration) occurs.

Fee Simple Determinable

This is when the fee simple defeasible automatically reverts back to a fee simple at the occurrence of an event. For example, “A conveys to B and his heirs so long as the land is used as a farm.” The following words limit the duration of the fee simple.

• So long as
• While
• Until
• During

The future interest of a fee simple is a possibility of reverter.

Fee Simple Subject to Condition Subsequent

A fee simple subject to a condition subsequent works like a fee simple determinable except the condition does not automatically revert the estate back to the original owner. Instead, the owner must take an additional step to reclaim possession. For example, “A conveys to B and his heirs provided that the land is used as a farm, and if not, then A may re-enter and reclaim.” The following words limit the duration of the fee simple.

• Provided that
• But if
• On condition that
• In addition, the conveyance should include the words “Right to re-enter and reclaim.”

The future interest is the right of entry.

Fee Simple Subject to Executory Limitation

Any of the key words mentioned in the other methods of creating a fee simple defeasible would be satisfactory to create a fee simple subject to an executory limitation. The main difference is that once the event occurs, another party has a future interest in the life estate. For example, “A conveys to B and his heirs as long as the land remains a farm, but if not, then to C.”

The key factor is to know who holds the future interest.

We had two cases to illustrate what happens when the language is unclear

Mahrenholz v. County Board of School Trustees of Lawrence County – Schoolhouse

If the language is ambiguous (but you know it is a fee simple defeasible) error on the side of fee simple subject to condition subsequent.

Metropolitan Park District v. Unknown Heirs of Rigney – 60 year old park

Adverse possession time starts when the person with a future interest forfeits their interest. If they do not forfeit their interest, then possession can still transfer if a reasonable time has passed after the breach.

Future Interests

A future interest is simply a person’s right to possess a fee simple estate at a future time. Naturally, we have already mentioned several future interests associated with present possession.

• Fee Simple – None
• Life Estate – Reversion or Remainder
• Fee Tail – Reversion
• Fee Simple Determinable – Possibility of reverter
• Fee Simple Subject to a Condition Subsequent – Right of entry
• Fee Simple Subject to an executory – Executory Interest

There are two main categories of future interests containing several future interests:

• Retained by the transferor (Grantor’s Future Interest)
  • Reversion
  • Possibility of reverter
  • Right of entry
• Created in a transferee (Transferee’s Future Interest)
  • Remainder
    • Vested
      • Indefeasibly vested remainder
      • Vested remainder subject to divestment
      • Vested remainder subject to open
    • Contingent remainder
  • Executory interest – Shifting or Springing

Future Interests Retained by the Transferor

These are interests when the transferor gives the right of possession to less land than they already have (e.g. A gives a portion of his land to B).

A reversion is typically created when A conveys a live estate that does not create a fee simple in a third party. So A would have a possessory interest to have the estate revert back after the life estate expires.

A possibility of reverter occurs when the transferor gives a fee simple determinable. Ultimately, there is a possibility that a condition could occur and if so, the possessory interest would automatically revert back to the transferor.

A right of entry is created when the transferor gives a fee simple subject to a condition subsequent. When the condition occurrence does not automatically return to the transferor, the transferor has the right to reenter and reclaim the property. However, they must exercise that right to retain possession.

Each of these future interests are alienable, devisable, and descendable.

Future Interests Created in a Transferee

Remainders

There are two elements to establish a remainder. 1) the interest must be capable of becoming possessory (sociable, hanging around a life estate). 2) the current interest does not divest interest from a prior transferee (patient).

Vested

If a remainder is vested, the party needs to be 1) an ascertained person (alive and identifiable at the time of transfer) and 2) is not subject to any condition precedent (instead the condition is subsequent).

1. Indefeasibly vested remainder: The holder of this remainder is certain to acquire an estate in the future with no conditions attached. To A for life then to B. B holds indefeasibly vested remainder in fee simple.
2. Vested Remainder Subject to Divestment: This is a remainder that is vested but right to possession could be cut short because of a condition subsequent (not precedent, which makes it a contingent). To A for life, then to B, but if B does not survive A, then to C. B holds a vested remainder subject to divestment (in fee simple subject to an executory limitation).
3. Vested Remainder Subject to Open. Vested remainder held by one or more living members of a group or class that may be enlarged in the future. To A for life, then to B’s children. B’s children hold a vested remainder subject to open (in fee simple subject to an executory limitation).

Contingent

If either of the elements above are not met, then the remainder is contingent. If we are unable to tell the difference, the default is a contingent remainder. Here’s the main difference in grammar.

Contingent

• “then to B if B…”

Vested Remainder Subject to Divestment

• “then to B, but if B…”

Executory Interests

An executory interest is the exact opposite of a remainder. That is, the executor must divest (take possession from) either the estate from the transferor (springing) or the interest of another transferee (shifting) to take possession.

Rule Against Perpetuities

The rule against perpetuities is designed to put a time limit on how long an interest is allowed to not be ascertainable.

So, the way this works is that the future interest will vest (when uncertainty is removed) or forever fail between the conveyance and 21 years after death of the parties. Otherwise, the conveyance is void.

However, this analysis only needs to be done if we determine that the future interest is an executory interest, contingent remainder, or a vested remainder subject to open.

Jee v. Audley – Never too old

The takeaway from this case is that RAP does not deal with science. A person can still have a child even after they are several years beyond childbearing ability.

RAP Reforms

• Wait and See approach -This approach means that the courts will wait to see whether the vestment happens within the 21 years. If not, then it becomes void.
• Uniform Statutory Rule Against Perpetuities
• Cy Pres
• Savings Clause

Complete Steps for analysis (from present interest to RAP)

1. Determine present interest.
2. Determine who has the future interest (grantor or transferee).
3. Then, if the future interest is in a transferee, determine if it is a remainder or executory interest
4. If the future interest is a remainder, determine if it is a vested or contingent remainder.
5. If the future interest is a vested remainder, determine whether it is a:
   1. Indefeasibly vested remainder
   2. Vested remainder subject to divestment
   3. Vested remainder subject to open
6. If the future interest is an executory interest, contingent remainder, or vested remainder subject to open, conduct a RAP analysis
   1. Determine which future interests have been created by the conveyance.
   2. Identify the conditions precedent to the vesting of the suspect future interest. What has to happen before a future interest holder can take?
   3. Find a measuring life. Look for a person who is alive at the date of the conveyance and ask whether that person’s life or death is relevant to the condition’s occurrence.
   4. Ask, “Will we know, with certainty, within 21 years of the death of our measuring life, if our future interest holders will or will not take?

Concurrent Ownership

Modern Concurrent Estates

There are three modern concurrent estates

• Tenancy in common (Most common)
  • A conveys to B and C. B and C have the right to use all of the law and their interest is divided equally. When the land is sold, they would both have an interest. These interests are freely alienable, devisable, and descendable.
• Joint tenancy
  • A conveys to B and C as joint tenants with right of survivorship. That means when B dies, C (the survivor) would have the remainder of the property. However, four elements need to be met: Unity of time, title, interest, and possession. In other words, if the parties receive the property at a different time, different deed, have disproportionate interest, or unequal rights of possession, the joint tenancy is instead a tenancy in common. As such, this interest is alienable (but it becomes a tenancy in common), but it is not devisable or descendable.
• Tenancy by the entirety (Joint Tenancy + marriage)
  • A conveys to B and C as tenants by the entirety. This is like a joint tenancy but ads another unity element: unity of marriage. The only way this tenancy ends is through death, divorce, or spousal agreement.

James v. Taylor

Under the common law, any ambiguity in a deed would be resolved by looking at the intent of the creator of the deed. If that was the case, then the present facts would have created a joint tenancy with the right of survivorship. However, an Arkansas statute favors a tenancy in common when there is ambiguity.

Severance

A joint tenancy is severed if one party conveys their interest to another. A tenancy in common is created by the remaining parties and the person who the interest was conveyed to. The following case addresses what happens if that interest is instead leased instead of conveyed.

In sum, severance only applies to joint tenancy. The severance transitions the joint tenancy to a tenancy in common by removing the right of survivorship.

Tenhet v. Boswell

The issue of a lease does not sever joint tenancy. As a result of this case, the lease lasts for either 10 years (the term of the lease involved) or the life of the lessor, whichever happens first.

Partition

If there is a conflict that cannot be resolved, the parties can go to court for a partition. This will end the cotenancy and distribute the assets of such.

Ark Land Co. v. Harper – Coal land

Options to resolve disputes include:

1. Selling the property and dividing equally
2. Buying out the other party
3. Asking the court to partition.
   1. Partition by sale (Sell and divide equally)
   2. Partition by kind (Providing a physical division of the land – default because one party may not want to sell. So, there must be a good reason to partition by sale instead of kind).

Thus, the party wishing the sale must show:

1. No convenience to partition in kind
2. Interests of the parties will be promoted by the sale
3. Interests of other parties will not be prejudiced by the sale.
4. Maximization of economic value
5. Lack of evidence of longstanding ownership and sentiment.

The takeaway: This test refers to both financial and sentimental/emotional interests.

Cotenant Rights and Duties

Esteves v. Esteves – Parents and Son

Parties are able to create their own rules for who has what duties and responsibilities. However, when parties do not create such an agreement (typical), States have created rules to understand how these responsibilities are divided depending on who is using the land.

• Each covenant is responsible for pro-rata share
• Does not owe rent to co-tenant out of possession absent ouster
• Improvement cannot compel contribution but does increase cotenant’s share at partition
• Profits from land (rent, mineral resources) are divided in pro-rata shares
• A confidential relationship exists among cotenants, so if a cotenant purchases a lien holder’s claim against property, must give the other cotenant a reasonable time to pay share and acquire proportionate interest.

Marital Property

Separate Property System (Majority Approach)

Spousal rights can be divided into three categories: during the marriage, at divorce, and at death.

During the marriage, anything that was owned by one party continues to be owned by that party. However, they can choose to have a concurrent ownership or gift property one to another.

At divorce, the property owned by each is divided in a way that is just and fair (equitable distribution). Factors could include who contributed more, who has the most income needs, health concerns, etc. This is divided from property that is generated during the marriage.

At death, the surviving spouse receives a forced share where they can either take through the will or receive a defined portion of the decedent’s estate (usually 1/3 or 1/2). So, even if the spouse devises all the estate at death to anyone other than the spouse, the spouse can still take their forced share.

Community Property System (9 States Approach)

During the marriage, anything earned by either spouse is owned equally by both spouses. Anything owned prior to the marriage is still owned separately.

At divorce, the property is divided equally but some states consider equitable distribution factors. Previously owned property is not subject to this division.

At death, the decedent can devise up to half of the shared property and all of the previously owned property.

Tenancy by the Entirety

Sawada v. Endo – Protected in Hawaii

Tenancy by the entirety has several benefits:

1. There is a right of survivorship
2. There is no unilateral severance
3. And there are creditor protections.
   • There is a policy reason for the adoption of this rule. The tenancy by the entirety restricts unilateral action by one spouse. Therefore, the court wants to protect the family interest of the entirety estate.The exception to this rule in the jurisdiction is if the interest was a tax lien. Governments are the only creditors that can attach their interest.

Defining Marital Property

Guy v. Guy – Degree?

The majority rule is that a professional degree is not marital property.

Unmarried Couples

Should there should be a claim for palimony (compensation for living together)? Best approach is to have cohabitating couples enter a contract to protect financial interests.

Leases

The relationship between property and contract law

Creating the Tenancy

Selecting the Tenant

Traditionally, landlords had exclusive right to determine who they could issue a lease to. However, legislation has limited this right.

Neithamer v. Brenneman Property Services, Inc.

The Fair Housing Act is codified as 42 U.S.C. § 3604. This act applied to the sell and rental of property. Unless there are certain exceptions (See 3603(b) and 3607), sellers and renters were not allowed to discriminate based on race, color, religion, sex, familial status, or national origin in refusing sell or rent, making terms, and advertising.

There is an exception to selling/renting, and making terms. However, these exceptions do not apply to advertising:

1. Rooms or units in dwellings containing living quarters occupied by no more than four families liming independently of each other,
2. Single-family house by an owner if he owners fewer than three houses and does not use a real estate.

Most of the time there will be no direct evidence to show that there was discrimination. So, this case focuses on how to prove there was discrimination without that direct evidence.

First, this property is subject to the FHA because the owner was using a real estate agent.

Because it is subject the act, the court then uses the burden shifting analysis to determine whether there was discrimination.

1. Plaintiff must show:
   1. They are a protected class and the defendant knew of that class (must provide sufficient “clues” to show the defendant was suspected the plaintiff’s class.).
   2. Qualified for the property
   3. Application was rejected
   4. Property remained available.
2. Defendant must show:
   • There was a nondiscriminatory reason to reject the application
3. Plaintiff must show:
   • The reason was pretext

Fair Housing Council of San Fernando Valley v. Roommate.com, LLC.

A dwelling was an independent housing unit (coving the whole unit, kitchen, bathroom, etc. instead of selecting one part of a unit to be a dwelling). Thus, a room within a unit is not a dwelling.

Even if the party is exempt from the FHA, they may not discriminate against race based on the Civil Rights Act.

Selecting the Estate

While ownership is a freehold estate, leases create non-freehold estates. There are four ways to create a tenancy estate:

1. Term of years tenancy
   • This is a lease that lasts for a specified period (e.g. 1 year, 5 years, or 10 years). At the end of the term the tenant’s possession automatically expires.
2. Periodic tenancy
   • This is a lease that is automatically renewed after the initial period has run (e.g. month-to-month). To terminate this lease, notice must be given at least a month in advance for month-to-month leases and at least six months in advance for year-to-year leases.
3. Tenancy at will
   • The lease will last indefinitely until one party terminates it. Either the tenant or the landlord can terminate the lease at will.
4. Tenancy at sufferance
   • This is considered a wrongful tenancy, where the expiration has run but the tenant has not left the premises. The landlord is then left with two options. First, they could evict the tenant (being a trespasser). Second, they could renew the tenant’s lease. Many jurisdictions have limited the ability for the second option.

Effel v. Rosberg

The question in this case is to determine what non freehold estate exists. Rosberg wants this to be a tenancy at will. Effel wanted a lease for life.

A party cannot create a different kind of freehold estates (thus, this is a tenancy at will). Why? Simplicity and unity of law.

Negotiating the Lease

There are three factors that limit the ability to negotiate a lease. First, the statute of frauds (must be in writing if the term could exceed a year). Second, standard forms (pre-prepared contracts ready for the tenant to sign after dealing with price and term). Third, rent control (regulations by states and cities that limit how much a landowner can charge for possession).

Delivering Possession

Keydata Corp. v. United States

Here, the issue is “what is the default rule for how to deliver?” There are two approaches of what it means to deliver possession:

1. The American rule – Possession of a property will not be withheld, but there is no requirement for the landlord to deliver (simply give legal right). Recovery of damages would be against the holdover tenant, not the landlord.
2. The English rule – If the lease is silent on a requirement to deliver, then it is assumed that the landlord has to deliver. Recovery of damages would be against the landlord.

The reason why the rule matters is because it determines who has a duty. Here, the court adopts the English rule (and the rule outlined in the Restatement 2d of Property [applied in this class]). Largely, the landlord has greater authority and resources to enforce lease terms and to protect the new tenant from damages.

On the other hand, the American rule is adopted by a lot of states. The main reason for this is because we want to protect the landlord liability for the wrongs of a third party (the holdover party).

Condition of the Premises

Substandard Housing

With the industrialization of the United States, many poor urban areas were populated but with inhabitable conditions. Mice, filth, decay, and disrepair were the conditions of the areas. See In re Clark, 96 B.R. 569 (E.D. Penn 1989). Zoning laws tried to help resolve the issue but many of these were ignored. Many landlords refused to make repairs so they could make as much profit as possible.

Marketization did not resolve the problem because many landlords relied on standard forms which provided little to no actual remedy. The zoning laws were ignored and often were an issue with racial segregation to these downcast neighborhoods.

Constructive Eviction

There are two main ways for an eviction to happen, constructive and actual. Actual eviction is a process taken by the landlord to remove the leasee from the premises. The act ends the lease because the leasee no longer has quiet enjoyment of the place. Constructive eviction is often taken by the tenant who argues that certain conditions made by the wrongful conduct of the landlord make the location not habitual to the point where habitation is the “functional equivalent” of actual eviction.

Fidelity Mutual Life Insurance Co. v. Kaminsky – Abortion on the weekends

Often there is a covenant of quiet enjoyment. In this case, the covenant was express. However, the covenant can also be implied. An implied covenant of quiet enjoyment is the ability to use the land without any interference by the landlord. Traditionally, this was only breached by actual conviction. Later, the courts determined that the conduct of the landlord can be so egregious that their actions constructively evict the tenant.

There are three elements of constructive eviction:

1. Wrongful conduct . . .
2. . . . by the landlord . . .
3. . . . that substantially interferes with the tenant’s use.
   • Even interfering with the property once a week substantially interferes with the use.

Result: The tenant does not have to pay the remainder of the rent.

JMB Properties Urban Co. v. Paolucci – Loud neighbors

Adds the fourth element:

• The defendant needs to leave within a reasonable time following the procedure below:
  1. Give the landlord notice of the issue.
  2. Allow the landlord a reasonable time to resolve the issue.
  3. Leave

Implied Warranty of Habitability

While the constructive eviction doctrine can be used to protect either residential or commercial tenants, it is most often used by commercial tenants. This is because most residential tenants are protected under an implied warranty of habitability.

Wade v. Jobe – Sewage in the basement

Prior to the rule adopted here, the tenant was responsible for all repairs under the doctrine of permissive waste because of the rule of caveat emptor (let the buyer beware).

Here, the court transitions to a modern approach by adopting the warranty of habitability. Policy reasons for this adoption is that the tenant and the landlord lack the skills to make repairs, so it makes sense to put the responsibility on the landlord. Additionally, there is an unequal bargaining power, where the landlord has much more bargaining power. Finally, the norms of society push for higher quality of housing codes.

“The warranty of habitability requires that the landlord maintain ‘bare living requirements,’ and that the premises are fit for human occupation.”

Remedy options:

• Withholding rent until the landlord fixes the issue.
• Repair and then later deduct the cost from the rent.
• Sue for damages
• Terminate the lease

Landlords and tenants are not allowed to waive warranties of habitability.

Also note that what is determined as bare living requirements vary from state to state. Additionally, the remedies vary from state to state.

Transferring the Tenant’s Interest

Generally, a tenant or a landlord has the right to transfer their interest to a third party. The real question often becomes, “is the transfer an assignment or a sublease?”

Ernst v. Conditt – Go-Cart

There is a combination of contract law and property law. By entering into the lease, the parties enter into a contract which imposes duties based on the contract. However, there is also privity by estate which outlines the responsibilities of landlords and tenants based specifically on property law.

Privity of Estate and Privity of Contract

The question comes down to, “who is liable to the landlord?” Under an assignment, the original tenant may be liable under privity of contract and the assignee is liable under privity of estate. Under a sublease, only the original tenant is liable because both privity of contract and estate is tied to them. So, the answer to the question, “who is liable?” is extremely dependent on whether the transfer was an assignment or sublease. The basis for a privity of estate is occupation (there is no need for a contract to be present). See the chart below.

Determining if the transfer is an assignment or sublease:

• The language is not deterministic, evaluate the transferred interest instead?
  • If the original tenant transfers all possession for all of the remaining lease term, the transfer is an assignment.
  • If the original tenant transfers less than they have (keeping a reversion), the transfer is a sublease.

Note from the chart above that there is no legal relationship between a landlord and a sublessee (while there is a relationship between a landlord and the tenant or assignee). The remedy for a defaulted sublessee is through the original tenant or by eviction of the sublessee.

Kendall v. Ernest Pestana Inc. – Airplane Hanger

Although a lease can usually be freely transferred, many leases have clauses that limit the ability to transfer. There are three main types of clauses: sole discretion (landlord can deny transfer for any reason); reasonableness (must be commercially reasonable to deny transfer); silent consent (the clause does not articulate any standard for refusal).

When the clause is silent to the standard, jurisdictions are required to determine the standard (whether reasonableness or sole discretion). California determined that the default should result in a “reasonableness clause” when the consent clause is silent.

Ending the Tenancy

Abandonment

A tenant abandons the lease when they vacate the premises without cause (with cause would be constructive eviction, not abandonment), plan on never returning, and stop paying rent. In this situation, the landlord has three ways to recover.

• First, the landlord can wait until the lease ends and sue for all the rent.
• Second, the landlord can terminate the lease.
• Third, the landlord can rent out the property again, and then sue for the balance of rent not covered during the original lease term (mitigate the damages).

Sommer v. Kridel – Chose to not rent

The main takeaway from this case is that the remedies available to the landlord have been more narrow. For instance, landlord is no longer able to sue for all the rent. Instead, the only remedies available is to terminate the lease or mitigate damages and then sue for the remaining balance.

The standard:

• The landlord has to exercise reasonable efforts to mitigate damages by treating the abandoned apartment as another vacant stock (what is the usual practice for advertising a vacant apartment?).

Security Deposit

At the inception of the lease, many landlords collect a security deposit which may be used to repair or clean an apartment, or to cover defaulted rent while the landlord seeks a suitable replacement. However, several jurisdictions have passed regulations concerning the security deposit, ensuring that it is used for specific purposes, not used for ordinary wear and tear, and is not withheld due to bad faith. Additionally, in most situations, the landlord has the burden to show good cause for withholding a security deposit and must show the tenant the itemized uses that were utilized within a reasonable time.

Eviction

Elk Creek Management Co. v. Gilbert – Bad electricity

Under the common law, a landlord could evict for any reason. However, states have increasingly restricted the landlord’s ability to evict.

For example, states restrict retaliation for the tenant’s actions including: making complaints, becoming a part of the union, testifying against the landlord, previously won a lawsuit against the landlord. Note that the statute only protects these specific actions. After the action occurs, the landlord is not allowed to: increase rent or decrease service, terminate the tenancy, or threaten action for possession.

So, the tenant needs to show that the activity was a substantial factor in the decision to evict. If a landlord wishes to engage in one of those actions (for a good reason), and the tenant had recently engaged in a protected activity, the landlord should wait a while so there is no accusation that the activity occurred because of the tenant’s protected activity.

Berg v. Wiley – Peacefully evict

There are two ways to evict:

• Self-help (landlord maintains the right to re-entry). Self-help is only available if:
  • Landlord is entitled to possession
  • Re-entry is peaceable.
• Judicial enforcement.
  • Contested evictions can last 3-6 months.
  • Uncontested evictions occur within 3-10 days.

Takeaway from this case:

• Most states do not allow a landlord to self-evict.

Selling Real Property

There are three main steps to the sell of real property: the purchase contract, closing, and title protection.

The Purchase Contract

Statute of Frauds

There are three main requirements to meet the statute of frauds. First, the writing must list out the essential terms such as the party identities, the price, and property description. Second, the contract must be in writing, either formal or informal. Third, the contract must be signed.

Hickey v. Green

1. Essential terms
   1. Parties and
   2. Price and
   3. Property Description
2. Writing
   1. Formal or
   2. Informal
3. Signature by party against whom enforcement is sought

However, enforcement can still happen if there is an exception.

1. Equitable estoppel (reasonable reliance)
2. Part performance

Marketable Title

Of course, for a person to sell property, they have to be authorized to sell that property. Otherwise, their title is not marketable. There are three main ways a title is not marketable:

1. The seller is attempting to sell more interest than they have (e.g. selling a fee simple when there is only a life estate).
2. The title is subject to an encumbrance (impediment).
3. There is reasonable doubt about either the interest or the encumbrance.

When you enter into a contract, you are not purchasing the land. Instead, you are purchasing the title.

The idea of this principle is that the title needs to be free from barriers which may subject the buyer to litigation.

Lohmeyer v. Bower

There are typically only two types of encumbrances. Private and public.

1. Private Encumbrance
   1. Presence of a private encumbrances makes title unmarketable, unless encumbrance is mentioned in the murchage agreement, “subject to all restrictions and easements of record that do not significantly affect the use or value of the property.”
   2. However, a violation of a private encumbrance renders title unmarketable.
2. Public Encumbrance
   1. Public encumbrances like zoning ordinances do not make title unmarketable. All land is subject to public regulation.
   2. However, a violation f a public encumbrance renders title unmarketable.
   3. Note that there is a difference between housing codes (condition/value of the property) and zoning ordinances.

The existence of a public encumbrance does not make a title unmarketable. Instead, a violation of a public encumbrance makes a title unmarketable.

Note, that the existence of a private encumbrance makes a title unmarketable. Other examples of private encumbrances include mechanic’s lien, easement, or mortgage. However, if the buyer is warned of those encumbrances at the time of the contract, then they accept those encumbrances. In this case, the private encumbrance would be a restriction in the record that the buyer agreed to. However, even though the encumbrance was in the record, the title is still unmarketable because it was a violation.

Equitable Conversion

Brush Grocery Kart, Inc. v. Sure Fine Market, Inc.

During the executory period, there is a split about who owns what. The buyer is the equitable owner (owns the real property and bears the risk of loss). The seller is the legal owner who owns the purchase price. This is the default rule unless the contract says otherwise (so write your way out of it!).

This remains true even when one or both of the parties die in this period.

Duty to Disclose

Traditionally, a seller did not need to disclose any property defects to the buyer. However, the doctrine has long since expired, requiring sellers to disclose any known material defects that affect the value of the property or defects that are not readily discovered by the buyer.

The purpose of the following cases are to help define material and readily discoverable.

Stambovsky v. Ackley – Haunted House

Simply, the rule states that the seller must disclose known material defects that affect the value of the property and defects that are not readily discoverable by the buyer.

The policy arguments that justify this disclosure include:

1. Ensure the quality of the property
2. Protect buyers from predatory business
3. The seller is in the best position to be aware of defects
4. Encourage marketability of the property.

Strawn v. Canuso – Next to Landfill

Here, the question presented is whether a seller needs to disclose off-site conditions that may materially affect the value of the property. This question is significant because there are so many factors that could affect the value and enjoyment of the property including noise, shaking, etc. from nearby train stations or airports.

The policy reasons to disclose include:

1. There is unequal bargaining power between the professional seller and the residential buyer.
2. Trust in the market between residential sellers and buyers.

Additionally, a buyer is under no obligation to disclose to the seller something that may increase the value of the property.

Takeaways

Sellers must disclose if:

1. Conditions are created by the seller.
2. Professionals must disclose certain off-site conditions that affect the property.
3. Jurisdictions pass statutes stating what certain conditions need to be disclosed.
   1. About half have said that there is no need to disclose tragic situations within the home. “Stigma statutes”

Closing

At closing, an escrow agent is given the necessary parts of the deal to complete the purchase. First, the buyer puts the purchase price forward along with the promissory loan. Second, the bank advances the mortgage and the loan. Finally, the seller delivers the deed.

The Deed

The deed requires actual delivery which means that there is the intent to deliver at the time of delivery.

Rosengrant v. Rosengrant – Who gets the farm?

Delivery requires two parts

1. Donative intent
2. Immediate delivery with an objective method of transfer.

Remedy for Breach

Courts generally disfavor specific performance. However, specific performance may be a remedy for breach if damages are inadequate. Often, real property is unique, often creating a cause for specific performance.

Giannini v. First Nat’l Bank of Des Plaines – Why not have a different condo?

Even when units are similar, there may be unique differences why a person may prefer one unit over another.

Note that other methods of remedy include damages and rescission.

Title Assurance

When a person purchases a property, they are in reality purchasing a title which gives the purchaser rights to the property. If a person purchases a property without a title, then they actually purchased nothing at all. Thus, the purchaser wants to ensure that they purchase a good title and title assurance becomes necessary.

Within the United States, there are three main ways to ensure title assurance:

1. Title covenants (promises that the title are good)
2. Title opinions based on the search of public records (lawyer advice)
3. Insurance

Note that each method still leaves some gaps of assurance. Thus, purchasers usually utilize two or more methods.

Title Covenants

Most contracts contain title covenants. However, most of the covenants depend on the type of deed received and the scope of the promises made within the deed.

• General Warranty Deed (Grantor warrants against all defects, before and after possession)
• Special Warranty Deed (Grantor warrants against all defects after possession)
• Quitclaim Deed (No warranties)

Within the general and special warranty deeds, there are typically six covenants including:

1. Seisin (Actual ownership of portrayed conveyance)
2. Right to Convey
3. Against encumbrances
4. Warranty
5. Quiet enjoyment
6. Further Assurances

The first three covenants are called present covenants. This means that a breach occurs at the time of deed delivery if the covenant is false. The remaining covenants are future covenants.

Brown v. Lober – Missing land rights

A breach of the covenant of seisin occurs when the grantor issues more than they have. A claim may be made as long as the statute of limitations (10 years here) has not passed.

A breach of quiet enjoyment occurs when the grantee is actually or constructively evicted by the actual titleholder. If the land has been vacant, there is no constructive eviction.

Title Opinions Based on Search of Public Records

Recording System

The recording system is the process by which the owner records with the jurisdiction that they were conveyed title to the deed. The recording system also records any encumbrances on the property, such as an easement or mortgage. The point of the recording system was to help determine who has the best claim of title when disputes arise.

How to Search for a Title

1. Locate the deed in the recording system
   1. Grantor-Grantee index (most common) – Sorted by name
   2. Tract index – Sorted by identification number
2. Evaluate the condition of the deed

The grantor-grantee index is alphabetical depending on which side you start with (grantor or grantee). A person searching the records starts with the grantee index, working back in time (to the sovereign), to see when the deed was transferred then recorded. From that point, the search moves to the grantor index, moving forward in time, seeing if there is any inconsistency with who sold what to who.

The Recording Acts

To have any claim, the purchaser must be a bona fide purchaser.

Analysis:

1. Determine what kind of jurisdiction is present (race, race-notice, or notice)
2. Apply the jurisdiction to the problem
   1. Race – first to record
   2. Race-notice – last to convey without notice but first to record (subsequent bona fide purchaser who records first)
   3. notice – last to convey (subsequent bona fide purchaser has priority)

Notice

There are three kinds of notice:

1. Actual notice – knowledge of prior interest
2. Record notice – knowledge based on a reasonable search of the records
3. Inquiry notice – knowledge based on investigating suspicious circumstances.

The case below deals with inquiry notice and if occupancy of a home is a “suspicious circumstance.”

Raub v. General Income Sponsors of Iowa, Inc. – Which bank takes priority?

Notice that the recording acts protect mortgages, deeds, easements, etc. equally. Nothing in this case showed that there was anything wrong in the record. Although the deed was induced by fraud, the record was clean. As such, the question is whether the banks needed to be on inquiry notice. The answer is no.

Title Insurance

Title insurance is usually purchased to go along with the covenants promised in the deed. You can say that the purpose of insurance is to double cover any potential title defects.

Insurance is often provided to lenders and owners, using standard forms. The standard form for owners includes five parts:

1. A cover page (scope)
2. Exclusions (potential risks the company is not willing to cover such as encumbrances agreed to by the parties)
3. Schedule A (specific details about the property and which parts are insured)
4. Schedule B (exceptions based on specific property details)
5. Conditions (procedure requirements)

Notice the difference between exclusions and exceptions. Exclusions are things the insurer will not cover in any policy while an exception is related to specific property defects. Notice also that the purpose of insurance is to cover hidden defects, thus covenants are designed to protect against the apparent defects.

Finally, insurance companies may have a duty to defend (pay attorney fees) and indemnify (compensate for losses).

Financing

Nearly all homes are financed when they are purchased. Below is an overview of how this works.

First, the borrow creates an obligation by drafting a promissory note to repay the loan.

Second, the borrow provides security, such as a mortgage or deed of trust, which places an encumbrance on the property as collateral if the borrower fails to repay.

Third, the lender has the right to foreclose on the property, through the security, to collect proceeds from a default.

Finally, both the lender and the seller have certain rights after the foreclosure which will be discussed.

Creating the Obligation

A borrower promises to pay back a loan and as a result has obligated themselves to payback the loan. The formal writing of an obligation is done through a promissory note.

Assuming v. Taking Subject

When a subsequent buyer assumes the loan, then they adopt the remainder of the loan and are subject to enforcement. If they fail to make payments, the previous borrower can sue for damages.

However, if the new buyer takes the property subject to the loan, then they will not be personally liable for any defaults but the original purchaser would be liable.

Providing the Security

Types of Securities:

1. Mortgage
2. Deed of Trust
3. Installment Land Contract
4. Equitable Mortgage

Mortgage

A mortgage is the traditional way to provide security on a loan. In essence, the borrower promises to pay back the loan. If the borrower fails to make payments, the lender has the right to take possession of the property, foreclose, and use the proceeds to cover the losses sustained. Mortgages are considered encumbrances on the property

There are three main loan theories:

1. Title – The lender has title and the right to possession at the time of the loan.
2. Intermediate – The lender maintains title but does not have the right of possession until default.
3. Lien – The borrower maintains title and possession until default. Iowa is a lien theory jurisdiction.

Foreclosure is the usual method of recovery.

Deed of Trust

The courts consider the deed of trust the same as a mortgage. In essence, the deed of trust is simply a mortgage with a third party attached. What it provides is for a trustor (the borrowers), through the trust of a third party (the trustee), to protect the home for the beneficiary (the lender).

Installment Land Contract

An installment land contract is a contract where the lender retains title of the property and the borrower retains possession while making installment payments. If the borrower misses a payment, then the lender has the right to reclaim the property.

Slone v. Calhoun – Rent to Buy

The takeaway: There is no difference between an installment land contract and a money purchase mortgage.

Equitable Mortgage

Zaman v. Felton – Selling to avoid foreclosure

This is a situation where the court is trying to determine if this is a sale or a disguised mortgage.

Factual Steps:

1. Felton was in financial distress.
2. She sold to Zaman for 200,000 with the option to buy back for 237,000
3. She retains possession of the property.

Felton sees this transaction as a loan (equitable mortgage). Zaman sees this transaction as a sale. To determine the answer, the court considers the following factors:

1. Statements of retaining ownership
2. The price received is much less than the value of the home
3. The existence of an option to repurchase
4. Continued possession by the homeowner
5. Homeowner continues to keep ownership duties
6. Disparity in bargaining power and sophistication
7. Irregular purchase process
8. Financial distress of the homeowner, including the imminence of foreclosure

Foreclosing on the Security

Borrower’s Rights Before Foreclosure

If the borrow defaults, they can avoid foreclosure in two ways. First, if they make up the missed payment before acceleration (e.g. the bank demanding the full amount of the mortgage) occurs. Second, the borrower can may back the entire debt anytime before the foreclosure sale occurs (called equitable redemption).

Judicial Foreclosure

This is foreclosure through the judicial system. A complaint is filed by the lender, an answer is made (but not usually) by the borrower, and a judgment authorizing foreclosure is provided. Thus, the borrower is notified of the time and place when the property will be sold. An action is held for the sale of the property, which goes to the highest bidder. Finally, the judge confirms the sale.

Nonjudicial Foreclosure (Power of Sale)

Same as judicial foreclosure but without judicial oversight. The foreclosed party may still have a judicial remedy if the foreclosing party is deeply unfair.

Results of Foreclosure

There can be several interests on a home at once, including multiple mortgages. Thus, there are two principles that occur when a home is foreclosed.

First, foreclosure eliminates the mortgage that the lender provided and any lesser interests. For example, assume there are three mortgages; M1, M2, M3, each recorded in order of priority. If M1 forecloses, then all three mortgages are cleared (M2 and M3 being lesser in interest and M1’s mortgage cleared with the foreclosure). However, if M2 forecloses, it only wipes out M2’s and M3’s mortgage while M1 remains.

Second, foreclosure sale proceeds are distributed first to the foreclosing lender, then to any lesser interests, then to the borrower. So, if M1 forecloses then sells, All proceeds will be used to cover M1, then M2, then M3, then the borrower. If M2 forecloses, the proceeds cover M2, M3, then the borrower.

Special Priority Rules

Purchase Money Mortgage – Whether recorded or not, a purchase money mortgage has priority over other mortgages, liens that arise prior to mortgagor’s acquisition of title, but priority is subject to being defeated by subsequent mortgages under recording acts. (A purchase money mortgage is when a borrower gets a loan from a bank, specifically for the purchase of a home).

Future Advance Mortgage – If the lender is obligated to make additional loans, the new loan takes priority from date of original mortgage. If making a loan is options, then there is no priority over subsequent interests.

Deed in Lieu of Foreclosure – Conveys title to lender instead of going through foreclosure. Junior interests are not terminated. The lender takes title subject to those junior interests.

Rights after Foreclosure

Protecting the Borrower

The borrower has only two main rights after foreclosure occurs:

1. Statutory right of redemption. A borrower can regain title by purchasing it from the highest bidder within a specified time (usually a year). They will pay the sales price, plus interest and costs, to exercise this right. Usually this action decreases the sale price at foreclosure.
2. Setting aside the sale. The sale may be set aside if the price is substantially below the market value (about 20% less) or if there was a procedural irregularity (lack of notice or trying to discourage bidding).

Protecting the Lender

Although lenders can receive a deficiency judgment (the sale of the home was less than the amount left on the mortgage) for foreclosure, the practice is fairly disfavored. For example:

1. Fair value. Deficiency judgment may be allowed if the property value does not exceed the initial loan amount.
2. Prohibition. Deficiency judgments are not allowed at all.
3. Judicial Approach. Deficiency judgments may be invalidated by a judge because of the inadequate of the sales price or unfair process.

Land Use

Restrictions are made to limit how landowners may use their property.

Private Land Use Easements

Easements give a non possessor of a piece of land to use the land for a variety of reasons. There are 5 difference kinds of easements:

1. Prescriptive easement
2. Implied easement by prior existing use
3. Easement by necessity
4. Express/Grant easement
5. Easement by estoppel

Of these 5, an express easement is the only type that is is agreed between the parties involved. All the other easements are imposed by a matter of law without the permission of the owner.

Other Definitions:

• Dominant tenement – the land benefited by the easement
• Servient tenement – the land burdened by the easement
• Dominant owner – the easement owner (owner of dominant tenement)
• Servient owner the owner of the servient tenement
• Appurtenant easement – easement owner uses the land (most applied)
• Easement in gross – not connected to holder’s use, but is personal
• Affirmative easement – allows holder of easement to use the land (most applied, e.g. “passing though”)
• Negative easement – prevents servient from using land

Creating Easements

Express Easement

Express easement may be allowed: by grant or by reservation. A grant easement is when the servient owner grants an easement to the dominant owner. A reservation easement is when the dominant owner conveys some land to another but reserves an easement for continued use.

An easement must be in writing that:

1. Identifies the parties
2. Describes the land parcels involved
3. Describes the location of the easement on the servient land
4. States the purposes of the easement

Millbrook Hunt, Inc. v. Smith – Fox Hunting part 2

“An easement implies an interest in land ordinarily created by a grant, and is permanent in nature. A license does not imply an interest in land, but is a mere personal privilege to commit some act or series of acts on the land of another without possessing any estate therein.”

Implied Easement by Preexisting Prior Use

Emanuel v. Hernandez – Split Driveway

The elements require:

1. Severance of title by a common owner
2. Apparent, existing, and continuous use of easement prior to severance
3. Necessity at the time of severance

The purpose of this easement is to support the intent of the owner who severed. So, the point of the doctrine is to repair a mistake that occurred at the time of separation. As such, the factors are pretty limited to prevent use except in those rare circumstances.

Easement by Necessity

Berge v. State of Vermont – Boating to Property

Easement by necessity requires:

1. Severance of title to land in common ownership.
2. Necessity for the easement at the time of severance. For instance, a landlocked parcel.

The policy reasons for the practical standard is so that landowners have good access to their land.

Prescriptive Easement

O’Dell v. Stegall – Gravel Road

Quite simply, this is an easement that is created by maintaining adverse possession of the property. The elements follow:

1. Open and notorious
2. Adverse and hostile
3. Continuous
4. For a statutory period.

Other takeaways:

• The party requesting an easement must show the elements (they have the burden)
• Although similar to adverse possession elements, it is trimmed down (taking out the exclusive requirement)

Irrevocable License

Kienzle v. Myers – Pipe Neighbors

In this case, nothing was written down which may have created an express easement. As such, an easement by estoppel (equitable estoppel) would be the only viable option for the Myers. The elements here were met:

1. A landowner allows another to use the land
2. The new user uses the land in good faith in that license by making improvements to the land at their cost
3. The landowner reasonably knows that such reliance would occur.

Note that the easement lasts only as long as the anticipated reliance lasts.

Interpreting Easements

Marcus Cable Associates, L.P. v. Krohn – TV or no TV?

The rule for how easements can be used as time passes:

• According to the Restatement Third of Property, the manner, frequency, and intensity can change over time as long as the original purpose of the easement does not change.

The reason why this is such a big deal is because the courts want to protect property and the right to exclude, more than they care about the right to use (no matter the benefit).

Terminating Easements

Preseault v. United States – Walkway

Abandonment:

• Here, an easement is abandoned when there is no termination date and when the owner takes some action that is inconsistent with continued use.
• In other words, the equation for abandonment follows: non-use + intent to abandon (actions that are inconsistent with continued use) = abandonment.

Other ways an easement may be terminated:

• Prescription – adversely reclaiming the land
• Term – easement expires
• Condemnation of the servient land
• Estoppel – Reliance that the easement was terminated
• Merger – New owner has possession of both easement and servient land
• Misuse
• Release – agreement to end the easement in writing.

Land Use Restrictions

Purpose of including restrictions are to make the land more attractive to prospective buyers.

Traditional Approach

Preliminary Definitions:

• A covenant is a promise to do something or not do something with the land.
  • An affirmative covenant is agreeing to do something (e.g. I promise to plant a garden, grow trees, etc.).
  • On the other hand, a negative covenant is the promise to not do something (e.g. I promise not to paint my house red).

Real Covenants

Definitions:

• Real covenant – promise about how the land will with benefit and burden both original parties and successors (covenant running at law).
• Burden – the duty to perform the promise.
• Benefit – the right to enforce the promise.

Elements to show a burden exists for future successors:

1. Compliance with the Statute of Frauds
2. Intent to bind successors.
3. “Touch and concern” land: The executed document must be related to the enjoyment, occupation, or use of the property.
4. Notice of the covenant to the successor.
5. Horizontal privity: Focuses on the relationship between original parties. There are three potential ways to prove this relationship, depending on the jurisdiction.
   1. When the parties have a similar mutual interest in the affected land (e.g. landlord and tenant).
   2. When the parties have a grantor-grantee relationship (successive interest).
   3. Some jurisdictions have no requirement to prove horizontal privity.
6. Vertical privity refers to the relationship between the original party and the successor. To prove this relationship, all that needs to be shown is that the successor received all the estate. This is rarely required in most jurisdictions.

Elements 1-3 must also be shown for the benefit to pass to successors.

Deep Water Brewing, LLC. v. Fairway Resources Ltd. – Blocking the View

Steps for analysis:

1. Determine who got what and when for future privity analysis.
2. Figure out who has the benefit and who has the burden.
   • Determine what is trying to run to successors (benefit or burden).
3. Work through the required elements.
   • Although this is only a benefit and does not need to do a full analysis, Washington requires horizontal privity to exist (not required analysis for the bar exam).
4. Provide a remedy of damages if the elements are satisfied.

Equitable Servitudes

Gambrell v. Nivens

Summary:

Remedies:

• Real Covenant
  • Breach of damages
• Equitable Servitude
  • Injunction against use

Restatement Approach

The Restatement simply combines real covenants and the equitable servitude into one doctrine called “the covenant that runs at law.” The Restatement creates a servitude which has the following elements:

1. First, the property owner intends to create a servitude which burdens the property.
2. Second, the conveyance satisfies the statute of frauds
3. Finally, the servitude is not “arbitrary, unconstitutional, unconscionable, or violative of certain public policies.”

Common Interest Communities

A common interest community (CIC) is a group of residential housing that is subject to 1) restrictions and 2) regulated by a homeowners association (HOA).

There CICs are created by declaration. The declaration has four parts:

1. The establishment of a HOA.
2. List of CC&Rs.
3. Financial dues to the HOA.
4. Outlining ownership rights of residents (homeowners have a fee simple and an undivided interest in a common area such as a swimming pool or community center).

Enforcing Restrictions

Defenses to enforcing the CC&Rs.

1. Unreasonableness
2. Abandonment
3. Changed conditions

In addition to these defenses, individuals can be released from restrictions the same way they overcome easements (e.g. merger, condemnation, release, etc.).

Nahrstedt v. Lakeside Village Condominium Association, Inc. – Unreasonable, Pets

Unreasonableness factors:

1. Arbitrary (no rational relationship to the purpose or preservation of the properties).
2. Harm outweighs the benefit.
3. Violates public policy.

Fountain Valley Chateau Blanc Homeowner’s Association v. Department of Veterans Affairs Unreasonable, Cleanliness

In Nahrstedt, the pet standard was reasonable while the requirement to clean here was unreasonable.

Fink v. Miller – Abandonment, Roof

Standard:

“Violation so great as to lead the mind of an average person to conclude the restriction is abandoned.” The court considers the number who violate, the nature and the severity of the violation.

Vernon Township Volunteer Fire Department, Inc. v. Connor – Changed Conditions, Serving Alcohol

Standard:

The changed circumstances have altered the events so much that there is no longer a substantial benefit that extends to the owners through enforcement of the restriction.

Governing the Development

The HOA is the governing organization within a CIC. Some of their responsibilities include:

1. Maintain common areas
2. Enforce CC&Rs
3. Amend and supplement CC&Rs
4. Collect assessments
5. Any other necessary administrative actions

What if you want to challenge the authority of the HOA to change governance?

Schaefer v. Eastman Community Association – Ski Hill

This case shows an application of the business judgment rule. The courts often do not want to get involved in business decisions if the HOA acted in good faith for the benefit of the community. Here, there was no express violations of the covenants so the court’s did not want to alter based on good faith for the benefit of the community.

Nuisance

Restatement 2d Torts § 821D defines private nuisance as “a nontrespassory invasion of another’s interest in the private use and enjoyment of land.” To prove nuisance, five elements must be met:

1. Intentional – Acts with the purpose or has knowledge (or is certain to know) that the acts will have a harmful result.
2. Nontrespassory – No physical entry into the land.
3. Unreasonable – Two options: gravity of harm, or weighing gravity of harm v. utility of the conduct.
4. Substantial interference – Real invasion of plaintiff’s interests.
5. Use and enjoyment of land – Conduct must interfere.

Boomer v. Atlantic Cement Co., Inc. – Polluting Cement

For the third element, the court only follows the gravity of harm approach, instead of weighing the consequences (although they ultimately do in the decision).

What should be the remedy? To provide an injunction or pay just damages? This court recognizes that a harm has occurred and says that an injunction should be provided, but damages may be made in lieu of the injunction.

Thomsen v. Greve – Smoke in the air

For the unreasonable element, the court is to evaluate whether the gravity of the harm outweighs the utility of the conduct. Factors that are considered for the harm include:

1. “the extent of the harm involved;
2. the character of the harm involved;
3. the social value that the law attaches to the type of use or enjoyment invaded;
4. the suitability of the particular use or enjoyment invaded to the character of the locality; and
5. the burden on the person harmed of avoiding the harm.”

As for the utility, considered factors include:

1. “the social value that the law attaches to the primary purpose of the conduct;
2. the suitability of the conduct to the character of the locality; and
3. the impracticability of preventing or avoiding the invasion.

In this case, the plaintiffs were awarded both an injunction and damages.

Land Use Regulation: Zoning Basics

Traditionally, landowners had the right to do whatever they wished with their property. However, due to the rapid development of industrialization in the United States, this private use without any public intervention caused serious concerns. As such, there became a need for property to be subject to land use regulation, not just private restrictions.

Zoning Basics

To address the issue, zoning ordinances were first passed with the idea that each homeowner would have its own garden, away from commercial or industrial areas. This idea was called the “garden city” first established in England. As such, zoning ordinances were passed to protect this garden, starting first in New York in 1916, then expanding greatly throughout the 1920s.

Constitutionality of Zoning

Village of Euclid v. Ambler Realty Co. – Zone Challenge

Euclid was a major development of how zoning laws were allowed. Ultimately, Euclidian zoning was the standard (and still is in most places). This is a rigid standard. As long as there is a rational basis based on health, safety, and public welfare (police powers) the ordinance will likely be found constitutional.

Here, Alder is arguing that the 14th Amendment provides substantive due process (by removing liberty and property rights) and equal protection. This protection would prevent the ordinance from going into effect. However, as mentioned, the court rejects that argument based on the police powers utilizing a rational basis test. The rational basis test just asks if the ordinance was arbitrary & unreasonable. That simply means if there was a reasonable connection between the ordinance and the intended goal. Ultimately, very few zoning ordinances will be found unconstitutional.

Typical Zoning Ordinance

A zoning ordinance is a city legislative act containing:

1. the text of the ordinance (setting out the zone types) and
2. maps that implement the ordinance.

Nonconforming Uses

If a property is not conforming with the zoning ordinances before the zoning ordinance was passed, then that property is protected from the ordinance (no need to adjust to comply). This protection passes from one owner to the next.

Rigid or Flexible Zoning

To preserve the intergrity of zoning, the zoning founders limited how parties may escape a zoning ordinance: through amendment, variance, or special exception.

Zoning Amendments

Although amendments may be made to the original ordinance, these amendments are discouraged. First, many amendments would decrease the legitimacy of the comprehensive zoning plan. Second, many amendments may influence bribery (if a land is valued more for one use rather than another). As such, any amendment needs to follow the same approach taken in Euclid.

Variances

Zoning law allows city lawmakers to provide variances, or options, for applications if literal enforcement would produce significant hardship on the property owner.

Detwiler v. Zoning Hearing Board of Lower Salford Township – Narrow Home

“To establish a right to a variance, a landowner must show that the effect of a zoning ordinance is to burden property

1. with an unnecessary hardship
2. that is unique to the property;
3. that the hardship was not self-inflicted;
4. that the granting of the variance will not have an adverse impact on the public health, safety and welfare;
5. and that the variance sought is the minimum variance that will afford relief.”

First, even if there is another available purpose, agriculture, the limitation on another use is an unnecessary hardship.

For the third element, a hardship is not self inflicted merely by knowing of the ordinance. Self-infliction occurs if the homeowner purchases with the specific intent to obtain a variance.

Fourth, granting the variance does not adversely affect the public welfare or interest if it negatively affects the value or public use of neighboring lots. Self-interest is not a good reason to contradict a variance.

Conditional Uses or Special Exceptions

Zoning ordinances write in exceptions. If individuals meet and apply for those exceptions, they may be authorized to use the property in a way different from the original intention. In other words, a different use is conditioned on meeting different zoning requirements authorized in the zoning ordinance.

New Approaches to Land Use Regulation

Zoning laws a moving more towards flexibility. As such, the following tools may be used to alter preexisting zoning ordinances.

1. Conditional zoning – see above
2. Floating zone – A zone that is detailed but not applied to the land until someone applies for it.
3. Cluster zone – A residential zone that limited the number of homes but allows the developer to choose where those homes are located.
4. Planned unit development – A cluster zone that authorizes the developer to apply the zone for all uses (residential and commercial alike).

Eminent Domain

Eminent Domain is the Constitutional authority for a government to take private property for public use. The process of this taking is called condemnation. Without this power, citizens would be able to refuse selling property that is needed for public use (e.g. building of an interstate), or raise prices extremely high. However, there are two limitations to eminent domain. First, the taking must be for public use. Second, the property owner must be justly compensated for the taking (fair market value). See U.S. Const. Amend. 5.

Defining Public Use

Can government take property from private owner A and give it to private owner B? See next case.

Hawaii Housing Authority v. Midkiff – Oligarchy

Yes.

Public use is defined as: “The ‘public use’ requirement is thus coterminous with the scope of a sovereign’s police powers.” In other words, the public use is defined as anything that the police powers would allow. Thus, the court applies the rational basis test.

A situation that would not satisfy the public use would be corruption (e.g. taking to give to one really influential individual).

Eminent domain statutes are passed by the legislature. Because the court applies a rational basis test, they strongly defer to the legislature, even if they believe the statute promotes bad policy.

Berman v. Parker

This earlier case allowed eminent domain to be used to clean up a slum area by selling it to other private developers.

Scope of Public Use

Can the government take from private owner A and give to private owner B for nearly any reason?

Kelo v. City of New London – Big Development

The majority simply believes that they are applying Berman and Midkiff. The standard: economic development is a good exercise of police powers allowing eminent domain. In addition to the majority, the concurrence is saying that there should be a heightened sense of scrutiny when the plan is simply there for economic development. So, the concurrence would ask if the intention of the project is to benefit a specific party. If there is a specific party that is named, then the concurrence would ask if the public benefit was sufficiently high (balancing test).

However, the main argument from the dissent is that this case is not consistent with Midkiff. In Midkiff, the taking was to remove an inherent harm. Here, the ownership was doing no harm. Essentially, the majority’s opinion would expand public use to be applied in any situation as long as there was a slight improvement.

Takeaway:

• Economic development is a recognized public use.
• This opinion is controversial.

Takings

There are two kinds of takings: Physical (e.g. seize to build a freeway) and regulatory. Our focus is on understanding how a regulatory taking functions.

Traditionally, lawsuits against the government for regulatory takings were not permitted. The Suprme Court said that as long as the regulation had a valid police power purpose, then no taking had occurred.

However, with the passage of time, the regulatory takings doctrine was permitted. Consequently, acts and regulation that moved to significantly limit the use of property without just compensation were deemed unconstitutional.

Mugler – The State limited the manufacture of alcohol and thus put Mugler out of business with little property value.

Hadacheck – State prohibited manufacture of bricks within city limits.

Pennsylvania Coal Co. v. Mahon – Stopping the Mine

Both of these cases were not takings. Historically, a regulation was not a taking if the purpose was to mitigate a noxious use or nuisance.

Property may be regulated to an extent. But when the regulation goes too far, then it will be considered a taking requiring just compensation. However, this still leaves the question, when does the regulation go too far? The court is going to consider:

1. Diminution of value – Would decrease the value of the estate significant.
2. Public interest – The regulation was minimizing a public nuisance (weaker point for the majority)
3. Reciprocity of advantage – Whether the burdens on the property owner are offset by the benefits of the regulation (balancing test, everyone is treated the same way under the regulation.

The Central Standard

Penn Central Transportation Co. v. City of New York

To determine if a taking has occurred, the court adopts a three factor balancing approach:

1. Economic impact of the regulation on the claimant – Against Penn Central
2. The extent the regulation has interfered with the distinct investment-backed expectations – Against Penn Central
3. The character of the governmental action – Against Penn Central
   1. Permanent physical occupation – favor taking
   2. Temporary physical invasion – favor taking
   3. Widespread benefits – Less likely to be a taking
   4. Limit widespread harm – No taking

For the first factor, the court is going to consider the loss that occurs as a result of regulation.

Second, the factor looks at the reasonable expectations when they originally entered into the agreement (look at the preexisting use at the time of purchase).

Generally, the more physical in nature, the more likely a taking has occurred. Additionally, the courts will consider the purpose of the regulation (to limit a nuisance, etc.).

Three Categorical Tests

Permanent Physical Occupation

Loretto v. Teleprompter Manhattan CATV Corp.

Standard:

• When the invasion of property is a permanent physical occupation, no matter the reason, a per se taking has occurred.

How can you tell the difference between permanent physical occupation and temporary physical invasion? A permanent physical occupation is defined as a regulation that allows the government or third-party to regularly use the property. A good example would be the building of a dam that regularly floods the owners property. The reason for this rule is to preserve the ability to exclude others from the property.

What about regulations that do not have a third-party? For instance, regulations that require landlords to install smoke detectors or mailboxes. This is not a taking according to Loretto because the landowner still have the ability to choose the placement of those items.

Loss of all Economically Beneficial use of the Land

Lucas v. South Carolina Coastal Council

Standard

• A regulation that results in the loss of all economically beneficial use of the land is a taking. However, if the economically beneficial use of the land was unlawful before the regulation was enacted (e.g. nuisance. This is a reappearance of the noxious use test outlined in Mugler and Hadacheck), the new regulation does not constitute a taking. These laws must be enacted before the landowner took title.

Economic value = market value

Beneficial or productive use = Any other economically potential uses

A complete deprivation of economically beneficial or productive use is fundamentally the equivalent of a permanent physical occupancy.

A consequence of this standard, and specifically the exception, is that the application will vary from state to state (each state has different property laws).

Judicial Takings

When the judicial branch interferes with the common law in such a way that a homeowner is deprived of a use of the property, a potential taking may occur. This is unsettled law, but there is some idea that the a court decision may constitute a taking.

No Essential Nexus or Lack of Rough Proportionality

An exaction is when the government requires a developer to either transfer land to the government or cover some fees for development to obtain approval for any development. Exactions are considered a taking: 1) if there is no essential nexus between the exaction and a legitimate state interest; or 2) the exaction is not roughly proportional to the impact of the project.

The essential nexus element is defined in Nolan v. California Coastal Commission. 483 U.S. 825 (1987). Quite simply, an essential nexus is a relation between the exaction and the interest to be persevered.

As for the roughly proportional impact, the element is outlined in Dolan v. City of Tigard. 512 U.S. 374 (1994). Roughly proportional means that what is given up must also benefit the landowner to the same amount of what is being given up.

Analysis

1. Start with categorical rules.
   1. Permanent Physical Occupation
   2. Loss of all Economically Beneficial Use of Land
2. If the categorical rules does not result in a taking, follow the Penn Central analysis
   1. Economic impact of the regulation on the claimant
   2. The extent the regulation has interfered with the distinct investment-backed expectations
   3. The character of the governmental action

Disclaimer

The content contained in this article may contain inaccuracies and is not intended to reflect the opinions, views, beliefs, or practices of any academic professor or publication. Instead, this content is a reflection on the author’s understanding of the law and legal practices.