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Property Law OutlineSpring 2011 Professor Murray

Property Outline Spring 2011


Type of Property At Stake General Topical Overview: It matters what the thing is! When we look at types of property, we are thinking about whether or not to grant property status in the first place It allows a claim against everyone! Very powerful Everyone can be excluded Types of Property Real Property Rights in land, airspace, and ground space/subsurface Chattels/Tangible Personal Property Jewelry, books, clothes, etc. Intangible Property Stocks, licenses, patents, trademarks, etc. Conceptual Themes Oppositional The right of absolute ownership Excluding others from YOUR property Associational Our claim of property relies on how others accept our claim Formative Experience of History Trends in Property Law Basis English and Roman basis can be seen in estates as well as the division between people and things Foundation Constitutional foundation of our own topics versus the indigenous people Market State Property is within the free market exchange Property plays a transactual role within the markets Unfair Competition Act/practice that causes economic injury to the commercial relations of another in the areas of deceptive marketing, infringement of trademarks and other indicia, or appropriation of intangible trade values An unfair method of competition (INS v. AP)

Property Law OutlineSpring 2011 Professor Murray Misappropriation Recovery can exist for an economic injury that results from a competitors commercial use of an intangible property derived from the labor of the injured business. Modernmust show: P gathers information at cost Information is time-sensitive (hot-news) D free-rides on Ps efforts D is in direct competition with P Others could free-ride using the same technique Institution Deciding Property Rights Courts No public mandate Must follow precedent Less democratic accountability than Congress Congress More flexibility when creating laws (no precedent to follow) Can hold hearings and talk to their constituents Accountability to their citizens Voted into office by the people Trespass to Chattel vs. Conversion Trespass to Chattel A trespass may be committed by intentionally Dispossessing another of the chattel or Using or intermeddling with a chattel in the possession of another Might not recover the full value Conversion An intentional exercise of dominion or control over a chattel which so seriously interferes with the right of another to control that the actor may justly require to pay the other the full value of the chattel. Stronger method of recoverymost likely will recover the full value Tangible Property Issue (Moore v. Regents of Cal took his blood cells) Property Law v. Tort Law Property Lawconversion claim No special relationship necessary, can go after everyone who interfered with him and his property Tort Lawinformed consent issue and breach of fiduciary duty Only recoverable relationship is between the injurer and the injured party Conversional Liability Property Law Would effect medical research 2

Property Law OutlineSpring 2011 Professor Murray It took the doctors knowledge to do this, not just his blood This was a generic itemeveryone has the exact same model in their bodies Dont want to promote selling your body for money from medical research Minimizes the dignity and ethical issues of our body Arguments by P Right to privacy, publicity Could have limited conversion rights: limit to circumstances where P authorizes one particular use of bodily material but D uses it in an unauthorized manner Real Life Issues Stem Cells Sperm/Eggs Divorce/Death Policy Arguments Scientific research Ethical interest in the dignity and interest of our bodies Limited conversion remedy for actions taken outside the boundaries of consent by doctor We should allow people to have a property rightour concern is in the equal distribution of the property reward UNDERKUFFLER4 Dimensions of Property Theoretical Where do you get your claim to be at the table? Origins of a particular property right Use of one of the primary rights of ownershipusage undergone by the owner Spatial What category of property does the item fall into? In order to understand the property at issue, you must consider the space, area, or field to which the theoretical dimension must be applied Sometimes this is unclear and muddy The field to which our theory of rights applies

Stringency How much protection to afford a property right? How is our property protected? Rights to possess v. rights to exclude

Property Law OutlineSpring 2011 Professor Murray In order to understand the property right at issue you must decide how much protection to afford a property right. Some rights of property (rights to possess, exclude, devise, etc.) have more power than other rights of property (the right to use) Were the properties rights established and defined by existing law at time of purchase? The longer you have been exercising the right of ownership its more likely it will conform to your liking You must decide at what moment or point in time is the content of the other dimensions determined Acquisition of Property General Topical Overview: 1) Were looking at competing claims of possession and deciding with rules who wins a. Always think whose interests are competing? b. Come up with a rule of who should possess 2) Relativity of TitleTrue Owners Claim>Finders Claim>Third Partys Claim 3) These first two units shift analysis on the exam = brownie points Familial Relationship Marital Property Community Property (Minority) Property acquired during the marriage is owned equally by husband and wife unless they have signed an enforceable premarital agreement to the contrary. Was developed as a way to ensure women received an equal share of the marital estate upon divorce. Separate Property (Majority) The property earned by each spouse is his/her separate property during marriage unless they agree to the contrary. However, spouses have enforceable obligations to support each other during the marriage and, upon divorce, the property accumulated during the marriage will be equitably distributed between the parties according to factors like the duration of marriage, contributions of labor or resources, and need. WisconsinMarital Property: Must have a licensed marriage, must apply for petition of divorce, and then the marital estate is divided (including pensions and retirement $) Acquisition by Gift Testamentary Written in will or trust Must be written UNLESS it falls under an exception to SOF

Time

Property Law OutlineSpring 2011 Professor Murray Inter Vivos A gift between a living donor and donee that takes effect immediately, irrevocably, and unconditionally Elements: Intent to Give Giftconditions precedent (not gift), subsequent (is gift) Deliveryactual, constructive Acceptanceacceptance is presumed if the gift is beneficial to the donee Causa Mortis Death-bed gift; a gift athat is only effective up until the donors death, overrides a testamentary gift because it represents your last wish, can be given orally, must have a witness Elements: Anticipation of Immediate Death (death must be knocking on the door) Actual Death Donee Cannot Predecease the Donor Possession Main Questions: To what extent do you have to establish possession to assert a claim of ownership? Is it enough to have physical control over the object and the intent to control OR the intent to exclude possession of others? Fugitive Property Property that movespossession is contextual in relation to the norms of the custom! Majority: pursuit itself is not enough to establish possessionyou must have full control of the item at issue to gain possession Minority: if there is an obvious pursuit and the catch is imminent, then pursuit is substantial and that person can assume ownership/property rights. Captured/Found Property Conversion Elements for proof of claim: Defendant controls Personal property Belonging to (owned by) plaintiff(did P own/possess the item before D exercised dominion/control over the item? Characterizing the disputed property: Captured or Abandoned Property 5

Property Law OutlineSpring 2011 Professor Murray Captured Property has no true original owner Abandoned Property is the true owner voluntarily relinquished all rights to the property THE PROPERTY BELONGS TO THE FIRST PERSON TO GAIN POSSESSION OF THE PROPERTY Lost or Mislaid Property Circumstantial evidence is used to determine whether TO accidentally lost the property or mislaid the property and will return to claim it. Use circumstantial evidence to determine if TO intentionally placed the property in the location and then forgot to retrieve o If YES mislaid o If NO lost Lost Propertygenerally is awarded to the finder because TO is unlikely to return and claim it Mislaid Propertygenerally is awarded to the owner of the land for safekeeping for the TO when he returns. If it is not claimed for a reasonable amount of time, it can be re-characterized as lost/abandoned property and awarded to the finder. Dispute concerning first possession between capturers or finders: Determine who has superior right from first possession (CAPTURED/ABANDONED): First in time, first in right 1. The Elements of Possession Physical Act: to what extent was the claimant successful in physically controlling the captured property or in excluding possession by others? State of Mind: did claimant intend to control and possess the captured property, or intend to exclude possession by others? 2. Occupancy and Labor Theory Occupancy Theory: did claimant have reasonable expectations of ownership due to his occupation of the site where property was found? Labor Theory: Did claimant invest more time and effort into capturing the property? 3. Economic Theories Externalities: would the ruling reduce harmful side effects or increase beneficial side effects for other members of society? Tragedy of the Commons: would the ruling encourage over depletion of resources?

Property Law OutlineSpring 2011 Professor Murray Coase Theorem: would ruling reduce transaction costs or free rider problems in the future, thereby encourage private bargaining that could more efficiently allocate resources? 4. Public Policy Promoting Established Societal Norms and Expectations Deferring to the Custom/Practice of Experts of Field Promoting/Protecting Industry Expectations or Reliance Impact on Future Societal Behavior Impact on Justice and Judicial Resources Property found or captured on a private tract General Rule: The private owner is presumed to own anything under, attached to, or on surface of land, even if he doesnt know of the item, control the item, or intend to possess the item. Exceptions for Property Found in Quasi-Public Place (Mall, etc.): Mislaid Property owner controls Captured, Abandoned, or Lost Awarded to capturer/finder Trespasser Public Policy = no right to found property Determining Damages Determine value of the converted property as measures of damage: Defendant No Longer Possesses: Highest amount possible re value of item Defendant Has Added Labor: Based on the range of possible values (from original to current) and public policy/deterrence (did D know the property belonged to P?) Sub-terrain Property The Rule of Capture (THE MILKSHAKE THEORY) The owner of a tract of land acquires title to the oil and gas which he produces from wells drilled thereon, though it may be proved that part of such oil or gas migrated from adjoining land. You own what you capturewhoever captures it first owns that property. Even though there are multiple people with prepossessory claims, the person who possesses the actual oil owns it. Modification of the Rule of Capturetheres a limit to how much you can drill; you cant drill so much that it affects the property or the condition of other wells Correlative Rights Approach Allows legislatures to modify the common law rule by mandating that the parties share in the assetthey can require a just distribution of the asset. One person cannot suck it dry. Exists in Indiana, Ohio, and Kentucky. Policy Outcomes 7

Property Law OutlineSpring 2011 Professor Murray Law of Capturemaximizes resource extraction, we as a society want this because we NEED OIL! But, it maximizes extraction at the expense of extinction of the resource. Correlative Rights Approachallows for preservation of the asset/resource. Property law is often the choice between two options and what do we want to choose to promote between the two options. Found Property Lost Property Property is lost when the owner accidentally misplaces the property. Mislaid Property Property is mislaid when the owner intentionally leaves the property somewhere and then forgets about it. Abandoned Property When the owner forms the intent to relinquish all rights in the property. Lost/mislaid property can become abandoned if the owner intends to give up any claim of right to the property.

Adverse Possession Elements: Statutory Period Must possess for the relevant statutory period WI 20 yrs., 7 for Color of Title, 10 for written instrument SOL can be tolled if owner is an infant, insane, or incompetent Actual Possession The adverse possessor must physically occupy the property in some manner Visible (Open and Notorious) The acts of the AP are open and notorious so to put the true owner on notice that a person is committing adverse possession Exclusive The use is of a type that would be expected of a true owner of the land in question for the statutory period. The adverse possession cannot be shared with the true owner. Continuous The adverse possessor must exercise control over the property in ways customarily pursed by the owners of that property. 8

Property Law OutlineSpring 2011 Professor Murray Tacking: Succeeding periods of possession may be added together if the parties are in privity of one another. Privity is defined as the original adverse possessor transfers title to the property to the successor Adverse or Hostile State of Mind (4 Types): 1. Lack of Permission Requirement of use without TOs permission 2. Claim of Right (Wisconsin) Requirement to act towards the land like an actual owner would how would a normal, true owner use this land? Were they paying taxes? 3. Intentional Disposition Requirement of acting in bad faithyou must be aware that the property belonged to someone else and you intended to dispossess 4. Good Faith Requirement that you thought the land was yours and you mistakenly occupied land that wasnt yours (usually border disputes dealing with property lines) Color of Title Does the AP rely in good faith on a written document that purports to convey title to him? If yes, SOL is shorter and hostility element is satisfied. Adverse Possession of Personal Property When does SOL start ticking? Conversion Rule The running of the SOL begins when the property is wrongfully taken (converted) and the owner is dispossessed of the property Discovery Rule The running of the SOL begins when the true owner discovers or reasonably should have discovered the location of their property. The focus is on whether the owner of the property acts promptly to discover the property. Demand Rule Until demand is made and refused, possession of the stolen property by the good faith purchaser for value is not considered wrongfulthe true owner must make a demand for the property Is the possessor a Bona Fide Purchaser? You cannot take title from a thief Exceptions: Seller of Merchant of Ordinary Goods (Entrustment): A thief ENTRUSTS property to a merchantsales to BFP is okay 9

Property Law OutlineSpring 2011 Professor Murray Fraud or Duress: Creditor gives property to a sellersales to BFP is okay Prescriptive Easements The elements differ from AP only by substituting possession for use Elements: Actual Use Open and Notorious Use Hostile/Adverse Use How would a reasonable user assert that particular property interest? Focus in particularly if this is a claim on private or public property Publicright of use, there is an exception Cannot have permission to use Continuous Use Exclusive Use Statute of Limitations Trespass One is subject to liability to another for trespass, irrespective of whether he thereby causes harm to any legally protected interest of the other, if he intentionally: 1. Enters land in the possession of the other, or causes a thing or a third person to do so, or 2. Remains on the land, or 3. Fails to remove from the land a thing, which he is under a duty to remove P must establish intentional entry by D and a right to possession belonging to P Defenses to Trespass Necessity: The entry is justified by the necessity to prevent a more serious harm Consent: Both implied and express consent can be given from the conduct of the plaintiff, from the relationship of the parties, or from custom. The burden is on D who is asserting consent to plead and prove it. Implied could be just not saying no or stopping someone from entering. Public Policy: Entry is encouraged by public policy. The Common Law Right to Reasonable Access Imposes a duty on common carriers and innkeepers to serve members of the public without discrimination unless they had a good reason not to serve someone. Must Provide Reasonable Access to General Public 10

Property Law OutlineSpring 2011 Professor Murray What is reasonable? Some states expanded the doctrine. Assess what kind of space is at issue: Publicmust give consent to general public Privatedo not have to give access to anyone they dont want Remedies to Trespass Nominal Trivial damages for legal injury sustained (no harm occurred) Compensatory Assessed for actual harm (compensate for damages) Punitive Assessed for a malicious or wanton trespass Statutory (usually limited) Civil Rights Civil Rights Act of 1866 Enacted by Congress after the Civil War 1891 Equal rights to enter into contracts 1892 Equal rights to own property Civil Rights Act of 1964 Applies to places of public accommodation Lodging, restaurants, movie theatres, concert halls, sports arenas Applies to specific categories Race, color, religion, or national origin (not gender) Analysis: 1. Is this person a member of the protected class? The CRA of 1964 only applies to race, color, natural origin, and religion 2. Is this space a public accommodation? Must be within the list of enumerated categories, must effect interstate commerce, and must serve the public and be a private establishment. 3. This is complicated by a statutory that leaves statutory ambiguities State Rights of Access are stronger than Federal Rights of Access State Public Statutes > CRA of 1964 > CRA of 1866 Americans With Disabilities Act 1. Is the person in a protected class? 11

Property Law OutlineSpring 2011 Professor Murray Very broad range of people 2. What is a place of public accommodation Vast list 3. What type of discrimination is protected? Any hindrance to entry 12182If you can prove the modifications necessary would fundamentally alter the nature of such goods, services, facilities, privileges, advantages, or accommodations they are not necessary. Constitutional Conflicts re Civil Rights Private Clubs can exclude IF the person does not fit their viewpoints Forcefully including a member against their viewpoints is a violation of their right to exclude Non-Discriminatory Access v. The Right to Expressive Association (Boy Scouts) Free speech is seen as more important than public access The Right of Free Speech Access to Private Property (Shopping Mall) Mall as place to conduct business v. mall as place that is open to public 3 Main Categories of Access Situations 1. Common Law Rules of Access 2. Non-Discrimination Laws of Access 3. Constitutional Claims of Access a. Underkuffler Exclusion i. How do we characterize the space? ii. Public v. Private iii. Rules of exclusion and access Right to Use Diffuse Surface Water Common Enemy Rule Allows the property owners the absolute freedom to develop their property without regard to their neighbors for liability for damage to their land caused by increased runoff of surface water. Damnum absque injuria solution to land use conflicts: The defendant is privileged to develop its property and to expel unwanted surface water without liability for any resultant damage to the neighbors property Used in 17 States

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Property Law OutlineSpring 2011 Professor Murray Modifications: Negligence, Installation of Pipe Designed to Collect and Expel Natural Flow Rule Injured property owner has absolute security against harm caused by diffused surface water resulting from a neighboring owners development of his property. Neighbors can discharge water thru natural drainage pathways, but any development altering the amount, force, or direction of the water will result in liability for any resulting harm. Adopts the Strict Liability Approach: The injured Plaintiff has the legal right to stop the defendants activity and to recover damages for harm already inflicted. Has Been Replaced in a Lot of States: Might inhibit land development because most development will change drainage patterns. To encourage development, most states have adopted exceptions to allow minor increases in the natural flow of surface water. Some states limit the application of the doctrine to rural lands and use the reasonable test on urban lands. BUT: If property development is profitable enough, then developers will do it anyways and pay the neighboring landowners. Reasonable Use Test (Majority Rule) Requires the court to determine in specific cases whether the defendants conduct caused unreasonable interference with the neighbors use of their land. Involves balancing test: 1. The social benefit derived from the development of Ds property 2. The availability of cost-effective means to avoid or mitigate the harm 3. The gravity of the harm to Ps property Substantial damage to neighboring property is likely to be unreasonable Another Question: Does P collect damages or just an injunction? Key Analysis = Damages Wisconsin = Reasonable Use Test Each possessor is legally privileged to make a reasonable use of his land even thought the flow of surface water is altered and thereby causes some harm to others, but incurs liability when his harmful interference with the flow is unreasonable.

H2O

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Property Law OutlineSpring 2011 Professor Murray Court wants to balance the interests of the property owners use and adjacent owners use Reflects a standard choice over a rule choice Support Easements Lateral Support Support the land receives from the adjacent land. SIDEWAYS MOVEMENT Trigger = Slope NO RETAINING WALL/BUILDING SERVING AS SUPPORT: 1. No Structure on Land in its Natural Condition One who removes/withdraws/or causes deterioration of the support is STRICTLY LIABLE for ensuing damages. 2. There is a Structure on the Land a. If the land, in natural state, can completely support the structure: One who removes/withdraws/or causes deterioration of the support must do so in a non-negligent manner! b. If the land, in natural state, cannot completely support the structure: P does not have a cause of action against one who removes/withdraws/or causes deterioration of support RETAINING WALL/BUILDING SERVING AS SUPPORT 1. Support Built to Support Land is in its Natural Condition (Structure Existed for Awhile) One who removes/withdraws/or causes deterioration of the support is STRICTLY LIABLE for ensuing damages. 2. There is a Structure on the Land a. The unnatural lateral support was built before the structure (retaining wall followed by structure/building): P does not have a cause of action against one who removes/withdraws/or causes deterioration of support b. The unnatural lateral support was built after the structure (retaining wall followed by structure/building): One who removes/withdraws/or causes deterioration of the support must do so in a non-negligent manner!

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Property Law OutlineSpring 2011 Professor Murray Subjacent Support Support the land receives from the underlying strata. DOWNWARD MOVEMENT Trigger = Horizontal Movement The owner has an obligation to provide subjacent support to unimproved land, as well as improved land and buildings. Nuisance Private Nuisance A substantial and unreasonable interference with the use or enjoyment of land P MUST HAVE A PROPERTY INTEREST THAT IS AFFECTED OR A BODILY HARM Involves 2 Inquires: 1. Is the interference in the interest substantial? Normalcy StandardHarm to use or enjoyment is substantial if it would it be offensive or inconvenient to the average person within the locality in question Is the use hypersensitive? 2. Is the interference in the interest unreasonable? Unreasonable = When the gravity of the harm outweighs the utility of the actors conduct Gravity of the Harm is Evaluated By: 1. The extent and character of the harm involved 2. The social value that the law attaches to the type of use or enjoyment invaded 3. The suitability of the particular use or enjoyment invaded to the character of the locality 4. The burden on the person harmed of avoiding the harm On both sides, the court considers: Fairness: 1. The character of the harm Aesthetic harms will be viewed as less serious than health/safety harms 2. Distributive considerations Utility of Actors Conduct is Evaluated By: 1. The social value that the law attaches to the primary purpose of the conduct 2. The suitability of the conduct to the character of the locality 3. The impracticability of preventing or avoiding the invasion

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Property Law OutlineSpring 2011 Professor Murray Is it fair to make an individual owner bear the costs of Ds socially beneficial activity, or should those costs be spread around to the owner causing the damage and its employees/customers? 3. Fault Is one of the owners engaged in a disfavored activity? Is the conduct appropriate for the area? Did P come to the nuisance? Welfare: 1. Costs and benefits The costs and benefits of allowing the harmful conduct must be compared with the costs and benefits of prohibiting it 2. Incentives What effects will liability or immunity have on incentives to engage in the respective activities? How will the distribution of the burdens and benefits of conflicting land use affect incentives to invest in safety or to engage in desirable economic activities? 3. Lowest cost avoider Which party can more cheaply avoid the cost? Should this party also bear the burden of paying that cost? Common Unreasonable Interferences: Smoke, objectionable noise, odors Measured by senses of average person Sunlight: Traditional RuleCutting off a neighbors sunlight by building next to the property line = no nuisance Modern ApproachBlocking a neighbors roof solar collector can be enjoined as a nuisance Private Nuisance Remedies 3 Types: 1. Property Rules Fix an absolute entitlement either to engage in the conduct (no liability) or to be secure from the harm (injunctive relief ordering D to stop committing the harm) The parties negotiate on their own, so the price of entitlement would be fixed by private bargaining rather than by a court order 2. Liability Rules Prohibit party from interfering with the interest of the other unless they are willing to pay courts rule on damages

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Property Law OutlineSpring 2011 Professor Murray If P is entitled to protection from harm Ds failure to prevent the harm results in damages If D is free to engage in conduct no injunction unless P compensates D for economic losses associated with stopping (purchased/conditional injunction) Court wont enforce unless P pays damages to D for his losses 3. Inalienability Rules Assign entitlements and prohibit them from being sold or exchanged The effect is to make the right to be free from harm inalienable WHO HAS THE ENTITLEMENT P OR D? Remedies Plaintiffs Entitlement P can get an injunction ordering D to stop the harmful conduct If D wants to commit the harm, D must offer P enough $ to induce P to agree to give up Ps right to be free of harm. (INJUNCTION) P can get damages from D for committing the harm, but no injunction. Liability Rule: D is free to commit the harm if D is willing to pay a damages judgment. (DAMAGES) D has no right to commit the harm. Inalienability Rule: Any agreement by P to allow D to commit the harm is unenforceable. (PURCHASED INJUNCTION) D has the right to engage in the protected activity. Any agreement whereby D gives up the right to engage in the conduct is unenforceable. Defendants Entitlement D has legal liberty to commit the harm without liability. If P wants to prevent the harm, P must offer D enough $ to induce D to agree to stop the harmful conduct. (DISMISS THE COMPLAINT) P can stop Ds conduct if P is willing to pay damages as determined by a court to compensate D for Ds loss of profits.

Property Rule:

INJUNCTION = DAMAGES =

Ds conduct causes more social harm than good (unreasonable) + Ds conduct causes substantial harm to P Ds conduct causes more social good than harm (reasonable) +

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Property Law OutlineSpring 2011 Professor Murray Ds conduct causes substantial harm to P (unfair to burden P with costs of Ds socially useful conduct) NO REMEDY = Ds conduct does not cause substantial harm to P OR Ds conduct causes more social good than harm (reasonable) + It is not unfair to impose the costs of Ds activity on P OR The imposition of damages would put D out of business and avoiding this result (due to social value of Ds conduct) is more important than preventing harm to P Ds conduct causes more social harm than good (unreasonable) + But it is fair to impose the cost of shutting down Ds activity on P (Ex: when P comes to the nuisance)

PURCHASED INJUNCTION =

Public Nuisance An unreasonable interference with a right common to the general people Traditional Example = obstruction of public highways Other Examples = prostitution, gambling, nude sunbathing, air pollution, and rock festivals Wisconsin = have to suffer some sort of damage that is different from that of the general public Factors: 1. What interest is being invaded? 2. Is the interference specifically injurious to the individual bringing the nuisance? It cannot be the same kind of damage as the general public it must be damage of a different kind! a. Is it substantial? b. Is it unreasonable? NuisanceDamages for Encroaching Vegetation Massachusetts Rule Self Help Rule Have to wait for the vegetation to come onto your property and then you can cut down only that part. The self-helper bears the burden without damages for restoration. Cannot receive damages from evasive root structure Virginia Rule Vegetation must be noxious and a sensible injury must have occurred. After a party gives notice, they have the right of action at law for a trespass committed. Hawaii Rule 18

Property Law OutlineSpring 2011 Professor Murray If vegetation causes actual harm or poses imminent danger of harm, damages are awarded: Injunctive Relief Cutting down the tree or maintaining it in a manner not interfering with other interests Damages Compensatory damages for damage caused Affirmative Self Help Burden Allocationwho is the most appropriate party to bear the risk? The Right to Use: Use Conflicts Use Conflicts in Absence of Agreement Interference With Anothers Use and Enjoyment Lateral Support Subjacent Support Diffuse Surface Water Nuisance Use on Anothers Land Prescriptive Easement An easement created by adverse use Irrevocable License/Easement by Estoppel A person cannot revoke a license if the owner grants the licensee the right to invest in improving property or otherwise induces the licensee to act in reasonable reliance on license. License coupled with an interest A license coupled with an interest is one that gives licensee the right to remove a chattel of the licensee, which is on the licensors land. O sells a car to A that is located on Os land, A has irrevocable license to enter and remove car. Estoppel If the licensee has constructed substantial improvements on either licensors or licensees land, relying on license, the licensor is estopped from revoking license Issues: How long is it irrevocable, what about a good neighbor helping out? Constructive Trust Easement of Necessity An easement by necessity may be granted to the owner of a landlocked parcel over remaining lands of the grantor to obtain access to the parcel. An easement of way to the public road is implied. 19

Property Law OutlineSpring 2011 Professor Murray Elements: 1. The servient and dominant estates were part of an undivided tract 2. Access to a public road 3. The alleged easement is strictly necessary to reach the road and not just a more convenient access. The owner of the servient parcel has the right to locate the easement by necessity . Easement Implied from a Prior Use An owner divides her property and sells one parcel, retaining the other for herself Elements: 1. Both servient and dominant estates must have been part of an undivided tract 2. The use in question was a quasi-easement (an apparent and continuous use in existence at the time the tract was divided) a. Apparent it is apparent if a grantee could, by a reasonable inspection of the premises, discover the existence of use (e.g. a beaten path); it can be nonvisible b. Continuous based on the idea that activities should be such that there is a great probability that the use was known to the parties at the time of the grant. Equals permanent physical change in the land for a particular use (e.g. paving roadway) 3. The use in question must be reasonably necessary for the enjoyment of the claimed dominant tenement 4. The parties intended the use to continue after the tract was divided Use Conflicts Arising Within an Agreement Context DOES IT SATISFY THE STATUTE OF FRAUDS?? Wis. Stat. 706.02 Easement Burden to Run with the Land Is a future owner of the servient estate obligated to allow the easement owner continued access or to control over her land under the terms of the original easement? 1. Intent Easements bind future owners of servient estate only if the grantor intends them to be bound. Could be in express languagethe easement is intended to run with the [benefited/burdened] land. Impliedif it is understood the nature of the burden is a permanent right Expressclear words of writing that claim the burden runs with the land 2. Writing The required writing is the original writing creating the easementthe easement does not have to be included in subsequent deeds. 3. Notice Easements are binding on owners only if they have notice of them. 3 kinds: 20

Property Law OutlineSpring 2011 Professor Murray Actualif the subsequent actual owners know about the existence (Permanent Rightsomething granted to a utility company vs. Permissive Rightyou can swim in my lake) Constructiveif the deed conveying the easement is recorded in the registry of deeds in the proper place, and if it is in the proper chain-of-title (a search would lead to it); this means they should have known about the easement. A reasonable owner would have known Inquiryvisible signs of use by non-owners (like telephone poles, utility lines, paths)This means that a reasonable buyer would do further investigation to discover whether an easement exists. Benefit to Run with Land Appurtenant (Passes with the Benefited Land) An appurtenant easement is attached to the land itself, and the benefit, thus, is enforceable by whoever owns the land. Gross (Only Attached to a Single Owner of the Property) An easement in gross is not attached to the parcel at land and, therefore, doesnt run with the land. The easement then belongs personally to the grantee and thus is only enforceable by the beneficiary of the easement rather than the occupant of the land Most Common = right of way for utility lines over property Ambiguous Text When interpreting ambiguous text as to Benefit Running With Land interpret it as an Appurtenant Easement, because Easement In Gross creates hard-to-follow subsequent owners. Use the Intent of the Grantor Look to Public Policy and Surrounding Circumstances If the easement is one that would be useful separate from ownership of neighboring land (utility easement) = Gross If the easement has little/no utility separate from ownership of neighboring lands and is useful to anyone who owns the benefitted land = Appurtenant Severability from the Land Appurtenant easement cannot be severed from the land, they pass automatically to whoever owns the dominant estate. Transferability of Easements 21

Property Law OutlineSpring 2011 Professor Murray Appurtenant Easements are transferable when the dominant estate is sold/given away Easements-n-Gross were traditionally not transferable but can be now, especially with utility easements. Easements for Commercial Purposes are Generally Transferrable Misuse of Easement/Outside of Scope 3 Issues to Determine 1. Whether the use is of a kind contemplated by grantor 2. Whether the use is so heavy that it constitutes an unreasonable burden on the servient estate not contemplated by the grantor a. Balance interests of easement owner and interests of servient owner 3. Whether the easement can be subdivided a. Appurtenant Easements The benefits move to each portion of the dominant parcel upon its subdivision and transfer of various pieces. b. Easements in Gross Nonexclusivewhen the grantor has reserved for her the right to use the easement WITH the grantee = NOT APPORTIONABLE Exclusivewhen grantor has no right to use the easement and it is all the grantees = APPORTIONABLE Restatementapportionable unless contrary to creating parties intent or unless it greatly increases the burden on servient estate. Modifying and Terminating Easements Easements last forever unless they are terminated. Termination: 1. By agreement in writing (release of the easement by the holder) 2. By their own terms (deed expressly states easement lasts for 10 years, etc.) 3. By merger (holder of servient estate becomes owner of dominant estate) 4. By abandonment (if it can be shown that the owner of the easement indicated, by her conduct, an intent to abandon the easement) Two Required Elements: The person who holds the benefit must: Cease to use the easement Intend to abandon the easement 5. By Adverse Possession or Prescription by owner of servient estate or a 3rd party 6. Because of Frustration of Purpose (no longer serves its intended purpose)

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Property Law OutlineSpring 2011 Professor Murray Marketable Title Acts Require easements to be rerecorded periodically (every 30-50 yrs.) Restrictive Covenant/Equitable Servitude FIRST does agreement satisfy the Statute of Frauds? STEP 1: STEP 2: STEP 3: Privity Between Parties Vertical Privity Horizontal Privity If no privity, analyze as Equitable Servitude Burden to Run With the Land Writing Notice Touch and Concern Intent Benefit to Run With the Land Writing Notice Touch and Concern Intent

STEP 4:

Restrictive Covenant Does it satisfy SOF? Writing Must be writing between originating parties Notice Must be notice for both PE and RC Actual Notice Purchaser was actually aware of the covenant Constructive Notice A purchaser is on constructive notice if the covenant was recorded in the registry of deeds as part of the deed or lease creating the covenant or if a declaration containing the restriction was recorded prior to the transfer of property affected by the covenant. A reasonable purchaser is expected to search the title to find out any restrictions on the property. Inquiry Notice

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Property Law OutlineSpring 2011 Professor Murray Usually only applies to affirmative easements not relevant to restrictive or negative covenant Buyer is on inquiry notice if any condition of the premises indicates that the property is so encumbered. Mostly relate to affirmative easements like right of way, and a buyer can observe and suggest that another party has an interest in some part of the land. Intent to Bind Successors Express Covenant is made to heirs or assigns, successors, intended to run with the land, to bind/benefit future owners Implied Most courts will hold that it runs with the land if it is the kind of covenant that was probably intended to run with the land. If it passes the traditional touch and concern test = Implied Intent to Bind Some courts will require clear evidence from the text or surrounding circumstances Horizontal Privity Mutual Horizontal Privity 1. If the covenant is in a lease transferring possession of land from landlord to tenant 2. If the covenant is in a deed dividing property ownership between present/future interest (i.e. life estate and reversion) 3. If the covenant is contained in a deed conveying ownership of land and one or both parties owns an easement burdening property of the other Instantaneous Horizontal Privity 1. Placing covenant in a deed of sale that creates the restriction and impliedly/expressly states that covenant is intended to benefit remaining land of grantor a. Covenant in a deed of sale b. Express statement TraditionalStrict Horizontal Privity Excluded 3 Types of Relationships that are thought to be legit today: 1. Excluded agreements among neighbors that werent simultaneous conveyance of another property right (so new neighbors didnt have to follow the covenant) 2. Grantor/grantee had to create covenant at same time as property transfer 3. Not holding on future owners of property within neighborhood. 24

Property Law OutlineSpring 2011 Professor Murray Vertical Privity The relationship between the original covenanting parties and their successors in interest Requires the succeeding owner of the servient estate must receive the entire estate from the prior ownershould own an estate that lasted as long as the previous owner. Strict Vertical Privity When the grantor has to give successor every interest they own in the land Relaxed Vertical Privity The burden is imposed on any future possessor of the burdened land and the benefit of the covenant on any future possessor of the land (if with notice) Touch and Concern Traditionally Covenant ran with the land only if it touches and concerns the land Modern Approach A covenant meets this test if it has something to do with the use of the land and/or is connected with enjoyment of the land. USE THIS ON EXAM AFTER YOU USE TRADITIONAL AND MODERN APPROACH: ***Reasonability Test Adopted in Davidson Bros. Case Area and duration of the covenant Policy issues Unreasonable restraint on trade Interferences with public interests o Public Interest = both competitors and consumers Impact on the considerations exchanged **By limiting to physical touching, you limit the effects on 3rd parties** Policy Issues in covenants are analyzed under touch and concern Remedies Equitable Servitude = Restrictive Covenant = Injunction Damages

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Property Law OutlineSpring 2011 Professor Murray

Common Interest Communities Homeowner Association A developer creates an organizationhomeowners associationand they can enforce restrictive covenants Condominiums A developer of apartment building can create condothe owners own individual units and the condo association owns the common areas. The condo association holds the restrictive covenants. Conflicts develop because all the owners share the common areas (FL example regarding foreclosures and then nobody paying the condo assoc. fees) Implied Reciprocal Negative Servitudes General Plan Required A court will imply a reciprocal negative servitude ONLY if the evidence shows that the developer had a reasonably uniform general play for development of all lots of the same character. It is inferred that purchasers bought in reliance on the general plan and expected to be able to enforce subsequently created servitudes on other lots that is equal to theirs. Evidence of General Plan General plan must exist at time of first sale of burdened lot. If plan is enacted later, then the previous houses arent burdened Examples of Acceptable Evidence: Recorded plat with restrictions Presence of restrictions in all or most deeds to the property owned by the same developer Restrictions in the last deed Observation by the owners of similar development of their land and conformity to the written description Recording of declarations stating there was a common plan Statements in sales/advertising pamphlets KEY: Remember that the covenant must be in place or be enforced PRIOR to the sale of the tract of land that is in dispute! Developer can modify the restrictive covenants if it is REASONABLE because of the reliance interests of the purchaser at the time of purchase must be satisfied 26

Property Law OutlineSpring 2011 Professor Murray

Termination of Real Covenant/Equitable Servitude Changed Conditions Doctrine (applies to dominant estate) 1. Dominant estate didnt benefit anymore due to a change in circumstances 2. The enforcement will no longer be of substantial benefit to the dominant estate 3. The relief is granted only if the purposes of the servitude can no longer be accomplished. The Restatement alters the doctrine to: 1. Includes easements 2. Uses termination rules to substitute for controls that traditionally have been applied thru touch and concern 3. Suggests modification of the covenant instead of termination if the modification will allow covenant to serve its purpose Doctrine of Relative Hardship (applies to servient estate) The hardship to the defendant is great and benefit to plaintiff is small What is considerable magnitude? Estoppel Benefited party acts to lead reasonable person to believe covenant was abandoned Burden party acts in reliance thereon Then benefited party may be estopped to enforce the covenant Merger If the titles of benefited and burdened land come into the hands of one person, the covenant/servitude is merged into a fee simple Acquiescence, abandonment, or unclean hands A dominant estate owner may be barred from enforcing the covenant if he has tolerated or failed to object to other violations of the covenant Laches If the covenant has been ignored or breached for a substantial period of timebut less than the time necessary for prescriptive rightsthe court may find that unexcused delay in enforcing the covenant prompted investment in reliance on the failure to object to the violation and that enforcement of the covenant would be unconscionable. Marketable Title Acts A restrictive covenant will be held violated if you do not properly record title. Others Release, prescription 27

Property Law OutlineSpring 2011 Professor Murray

Public Policy Limits on Restrictive Covenants Common Law and Statutory Public Policy Traditional Approach Traditional Approach was to use touch and concern test to validate the kinds of covenants that could be created. This was too restrictive however so they broadened it. It was too formalistic because it was unrelated to legitimate policy concerns. Modern Approach Looks to see if there are policy reasons not to impose a covenant against successor Considers that covenants increase the value of the land and are valuable property rights in themselves. Balances the interests of owners of servient estates and owners of dominant estates o Being free from obsolete/unduly restrictive servitudes VERSUS Controlling the use of neighboring land o It recognizes that covenants can be meddlesome interferences with the free use to property and thus allows enforcement only where it can be shown to be reasonable to impose obligation on the owner. o Obligations are reasonable if they benefit other owners in the community or if all owners are benefited by reciprocal obligations imposed on all owners in the community

Third Approach (Restatement) Goes even further in direction of protecting the interests of servitude beneficiaries CA Covenants are enforceable unless unreasonable. o They wont get struck down unless they violate public policy Invalid only if they are illegal, unconstitutional, or violate public policy o Also if they are arbitrary, spiteful, or capricious or unconscionable o It is in the public interest to recognize that individuals have broad powers to order their own affairs Modern Approach REPLACES the Touch and Concern Test With Reasonableness Test: Davidson Test for Reasonableness of the Enforceability of a Covenant 1. Intention of parties at time of creation 2. Whether the covenant had an impact on the considerations exchanged at execution (value of covenant to parties at execution). 3. Is the covenant clear and express in setting the restrictions?

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Property Law OutlineSpring 2011 4. 5. 6. 7. 8. Professor Murray Was the writing recorded in writing and did subsequent grantee have actual notice of covenant? Reasonability concerning area, time, and duration. Covenants longer than lease usually are unreasonable. Unreasonable restraint on trade or secures a monopoly for covenanter? Interference with public interest Do changed circumstances make the covenant unreasonable presently?

**Dont analyze all factors, just pick the relevant ones and assess those to the facts** Problems this is taking away publics ability to enter into private arrangements on their own private property Restraints on Alienation The court uses a general test of reasonableness It is determined by weighing the utility of the restraint against the injurious consequences of enforcing the restraint. Promote efficiency by allowing property to move to a more valuable use Free current owners from undue restrictions imposed by past owners Promote equality by dispersal of property Disabling Restraintsforbids owner from transferring her property interest Promissory RestraintsCovenant where grantee promises not to alienate his interest Forfeiture RestraintsA future interest that will vest if owner attempts to transfer interest Covenant Against Competition May be considered to run with the land when they serve a purpose of facilitating orderly and harmonious development for commercial use. Restriction: They might be unenforceable if they result in an unreasonable restraint of trade under either federal or state antitrust laws or under state common law Constitutional Limits Racially Restrictive Covenants Shelley v. Kraemer Public Policy concern because the third-party seller wants to sell his house to a black family o It restricts his property rights Today it would be a violation of Public Policy under the Common Law You need a state action in order to have a private arrangement ruled a violation of the Equal Protection Clause 29

Property Law OutlineSpring 2011 Professor Murray o What made it a public policy problem is multiple people made agreements and it multiplied into significant discrimination because more than 2 people did this! o The state action they found is that because a restrictive covenant cannot be enforced without state interaction in court

3 Primary Theories of State Action Classic Liberal Thought (19th Century) Big distinction between private and public o Private 14th Amendment does not reach o Public 14th Amendment does reach State Action Doctrine ignores the race problem and the failure of current law to address these issues. Instrumentalist View We cannot ignore the fact that when someone walks into a court house and says oh hey, were 2 private actors and were going to discriminate, they cannot do that because it is showing that it is okay for this to happen White person is unable to act in a free-market-exchange Black person cannot move into that neighborhood SHELLEY is this type of view We do not want to place courts in the position to support this type of behavior o Courts are coercive in nature we ask the courts to settle rights of people Contemporary View Libertarian notions of personal autonomy are crucial Back to private/public distinction o But private behavior reflects persons preferences o We are hesitant to interfere with a persons individual preferences o When one is acting as a private person he is practicing personal autonomy and the court is hesitant to interfere with these rights By keeping certain things private we are allowing for a broader personal autonomy What values does the property system serve? CONFLICTS between the values Real Estate Transactions Broker Listings 1. Exclusive Right to Sell Gives broker exclusive right to collect commission, even if the sale is to a buyer the owner found without brokers help. 2. Exclusive Agency 30

Property Law OutlineSpring 2011 Professor Murray Broker gets commission if sold by agency, but not if by the owner 3. Open (Nonexclusive) First person to sell property receives commission Prohibited Listing Arrangements Net-ListingRealtor gets $ that is more than sellers listing price broker would list very low and sell high to get more $ Option ListingRealtor buys low and then can sell for whatever he wants Structure of the Transaction When is commission to realtor due? Traditional Rule The brokers commission was earned and due at the time the purchase and sale agreement was signed, regardless of whether the sale was actually completed. Modern Rule The brokers commission is earned and due only if the sale is completed. Seller has the duty, however, to pay commission if the seller defaults and backs out of the deal without good reason.

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

Misrepresentations During the Real Estate Purchase and Sale Process Caveat Emptor Doctrine Let the buyer beware. Modern Approach Moving towards full disclosure of all material facts must be made whenever elementary fair conduct demands it. Expands the sellers duty to disclose. Misrepresentation Constitutes fraud, may give rise to damages as well as right to rescind. An affirmative statement by the seller or broker to the buyer of a fact that is: 1. Known to be false 2. Material to the transaction 31

Property Law OutlineSpring 2011 Professor Murray 3. Reasonably relied on by the buyer in deciding to purchase and 4. Causes damage as a proximate result of the lie If the misrepresentation is about a condition of the premises that is apparent to the buyer, fraud claim can be denied ISSUES resolve around what is known to be false and what is material to the transaction?

Suppression As long as the seller does not affirmatively lie to the buyer about the condition of the premises (misrepresentation), buyers are generally charged with notice of what an inspection of the premises would have revealed. Some exceptions apply if a buyer conceals or attempts to suppress knowledge of the defect. Common Law NOT ACTIONABLE Modern Approach If the buyer asks then you are required to tell them i. You both have to know about the defect and work to conceal in order for it to be actionable Nondisclosure Require sellers/brokers to disclose information about latent defects known to the seller and not readily discoverable by a buyer. Failure to disclose constitutes fraudbuyer can rescind sale and/or collect damages. Common LawThe burden is placed on the buyer to discover defects (caveat emptor buyer beware) Moving to requiring disclosure: 1. Moving to a more protecting rule 2. Buyer doesnt have access to all the information that seller does When the seller knows facts material to the transaction, they have a duty to disclose Who has the responsibility of a burden of the house? Who should bear the loss? What information must be disclosed? States that impose liability for nondisclosure require disclosure of nonobvious information that a reasonable buyer would want to know about and that might affect the terms of the transactionespecially market value of the propertyor induce buyer to back out of deal. Merger Clause Merger clause stating that written agreement embodies the whole agreement does not protect D from a claim of fraud.

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Property Law OutlineSpring 2011 Professor Murray Waiver and Disclaimer You can negotiate to waive these risk-allocation rules regarding defects of the house Implied Warranty of Habitability In some states, this protects buyers of new residential real estate by imposing an implied warranty of habitability. Breach of this warranty may allow the buyer to rescind the sale or obtain damages. Sellers Failure to Provide Marketable Title A marketable title is one that is free from reasonable doubt, but not every doubtit must be one a prudent purchaser would accept. A clearly proven adverse possession title is a marketable title. The seller must show written evidence or other proof admissible in court that proves the adverse possession. The implied duty to provide marketable title ends at closingafter that, the seller is only responsible for warranties made in the deed, and a quitclaim doesnt warrant title. Good Record TitleConveyance by a sovereign state holding ownership (long ago), transfers of title from original grantee to seller on record, no recorded encumbrances or easements on property. Main Defects (making title unmarketable) Encumbrances: Property interests in persons other than the grantor that seriously affects the value/usability of the property. Include possessory interests (conflicting leases/titles), nonpossessory interests (easements, covenants, mortgages, liens) Chain of Title Defects: Mistakes or irregularities in documents or procedures by which title has been transferred or encumbered over time. Buyers Failure to Obtain Good Faith Financing The buyer must attempt to gain financing in good faith and cannot just change her mind about the house and abandon attempts to complete the sale. Remedies For Breach of the Purchase and Sale Agreement Buyers Remedies Specific Performance Buyer can get injunction ordering the seller to convey the property to the buyer by transferring title in exchange for the agreed-upon K price. Damages 33

Property Law OutlineSpring 2011 Professor Murray Measured in most states by the difference between market value and K price, return of deposit, and any additional expenses the breach caused. If seller believed he had a good title and acted in good faith, all buyer gets is the deposit and expenses back. Buyer gets expectation damages only if the seller did not in good faith believe he had good title, willfully or arbitrarily refused to complete sale, or failed to perfect title when it was easy to do so. This is justified by the difficulties with the recording system and the fact that reasonable sellers can be mistaken about the state of their title. Rescission The buyer may seek to rescind the deal and recover down payment/deposit. Will usually be abatement accounting for the hindrance. Vendees Lien Presumes that property belongs equitably to seller, who is obligated to purchase the property; also presumes that buyer has a lien on sellers equitable title and that property can be sold so seller can give that money to buyer. Sellers Remedies Specific Performance Seller may be able to sue the buyer for purchase price in exchange for sellers handing over the deed, thus forcing the buyer to comply with the terms of the K. Seller might be able to find another buyer, and all money is the same. Damages Measured by K price minus market price for property at time of breach, plus other expenses caused by the breach. Rescission and Forfeiture of Down Payment Seller may attempt to rescind the deal, keeping down payment the buyer paid. Usually the sales agreement has this stipulation included in it. Vendors Lien Presumes that property belongs equitably to buyer, who is obligated to purchase the property; also presumes that seller has a lien on buyers equitable title and that property can be sold so buyer can give that money to seller.

Deed and Title Protection Essential Terms 34

Property Law OutlineSpring 2011 Professor Murray Deed must: 1. Identify the parties 2. Describe the property being conveyed a. Must be sufficiently precise to locate the boundaries of the property (metes and bounds OR plats) 3. State the grantors intent to convey the property interest in question 4. Contain the grantors signature Constructive Delivery of Deed Writing a deed and engaging in conduct that demonstrates intent to transfer ownership is sufficient to constitute delivery. Delivery is more likely to be established if deed is physically deposited in a safety deposit box or a third party, such as an attorney, with instructions to hand over the deed to grantee at grantors death.

Types of Deeds Warranty Deed: The seller warrants that the title is free and clear of all encumbrances except any mentioned in the deed. This is where you would put an easement if there was one. Special Warranty Deed: Warranty deed that guarantees only against title defects created by grantor. Quitclaim Deeds: The grantor in a quitclaim deed does not guarantee ownership rights but instead conveys the title he or she has. SHADY! It purports to transfer a tract to someone but it isnt known if the person has the right to transfer it to the buyer. This raises a red flag. Warranty of Title Contained in the Deed Present Covenants Breached at the time of the closing. 1. Covenant of Seisin: Grantors promise that he owns the property interest he is purporting to convey to the grantee 2. Covenant of the Right to Convey: Grantors promise that he has the power to transfer the property interest. 3. Covenant Against Encumbrances: Grantors promise that no mortgages, liens, leases, unpaid property taxes, or easements exist against the property except those listed in the deed itself. Future covenants Breached after the closing, at the time of disturbance to grantees possession occurs.

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Property Law OutlineSpring 2011 Professor Murray 4. Covenant of Warranty: Grantors promise to compensate grantee for any monetary losses occasioned by grantors failure to convey the title promised in deed. a. General warranty deed: Covenants against all defects in title. b. Special warranty deed: Limits the covenant to defects in title caused by grantors own actions but not acts of prior owners. c. Quitclaim deed: Name used for deed that contains no warranty/covenant of title whatsoever. 5. Covenant of Quiet Enjoyment: Grantor promises that grantees possession will not be disturbed by anyone with a superior lawful title. 6. Covenant for Further Assurances: Requires seller to take further steps to cure defects in grantors title, like paying an adverse possessor to leave the property or paying to release an encumbrance. Remedies for Deeds EQUITY Equitable Estoppel 1. Representation of a material fact by the party estopped to the party claiming the estoppel that is contrary to the fact later asserted by the estopped party 2. Reliance on that representation by claiming party 3. Party detrimentally changed their position due to the reliance Waiver 1. 2. 3. The existence at the time of the waiver of a right, privilege, advantage, or benefit that can be waived Constructive/actual knowledge of the right The intention to relinquish the right

Ratification Occurs where a party with full knowledge of all the material facts makes an affirmative showing of his express or implied intention to adopt an act or contract entered into without authority. Occurs when you lead someone to believe you have true ownership of the property. REMEDIES IN FRAUDULENT OR FORGED DEEDS Void Title: Forgery cannot be used with subsequent purchasers Transfer no interest to grantee so you cannot use that as the basis of a transfer from grantee to a BFP Forged Deed = Void No interest passes under a forged deed. The deed is not legally effective at all. Neither the donee nor a subsequent BFP who believes the deed is good takes anything. If the deed if forged and the grantor didnt put the instrument into the chain of commerce so that another could be harmed, the grantor is protected. A subsequent BFP takes the risk of forgery.

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Property Law OutlineSpring 2011 Professor Murray Voidable Title: Fraudulent If property passes from grantee to a BFP it cannot be rescinded Focus on what the status of BFP is! If they are truly a BFP then it cannot be rescinded Fraudulent Deed = Voidable The deed was signed by the grantor but procured by fraud is not void but voidable. The deed is not good (can be voided) against a fraudulent grantee, but is good against a subsequent BFP. The grantor has put the instrument into the chain of commerce, by which a subsequent BFP can be harmed. The grantor must take the risk if she delivers the deed, and she must suffer against a subsequent BFP. Recording Acts (only used when there is an error in recording process) Race Statutes The person who records first prevails. This is true even if the person who records first knows about an earlier conveyance to someone else. 1. Acquires the land for value 2. Records before the other Notice Statutes A subsequent purchaser prevails over an earlier purchaser only if the subsequent purchaser did not have notice of the earlier conveyance. It protects any purchaser without notice against prior unrecorded interests even if the purchaser does not record first. 1. For value 2. In good faith 3. Without notice of the prior title claim Race-Notice Statutes (Wisconsin) A subsequent purchaser prevails over prior unrecorded interests only if they (1) had no notice of the prior conveyance at the time they acquired the interest and (2) records before the prior instrument is recorded. MAJORITY RULE. 1. For value 2. Good faith 3. Without notice of the prior title claim 4. The subsequent purchaser records before the other The key issue is constructive notice Occurs if the grantee would have found the title if he performed a reasonable search. Type of Statute Race Notice Typical Language No conveyance or mortgage of an interest in land is valid against any subsequent purchaser whose conveyance is first recorded. No conveyance or mortgage of an interest in Effect Grantee who records first prevails Subsequent bona fide 37

Property Law OutlineSpring 2011 Professor Murray land is valid against any subsequent purchaser for value without notice thereof, unless it is recorded. No conveyance or mortgage of an interest in land is valid against any subsequent purchaser for value without notice thereof whose conveyance is first recorded. purchaser (i.e., for value, without notice) prevails Subsequent bona fide purchaser (i.e., for value, without notice) who records first prevails.

Race-Notice

Other Recording Acts: Shelter Rule A person who takes from a BFP will prevail over any interest over which the BFP would have prevailed. This is true even where such person had actual knowledge of the prior unrecorded interest. If a BFP gets a title that he doesnt know has already been conveyed (but not recorded) then a 3rd party can get it from the BFP even if he knows about the original conveyance. Chain of Title Problems Chain of Title The chain of title includes those documents of which the purchaser has constructive notice. A purchaser is charged with notice of those conveyances of the property by her grantor recorded after the grantor acquired the property from his predecessor in title and recorded before a deed is recorded conveying title from that grantor to another. This is the standard title searchall documents found in a standard title search are in the chain of title. Wild Deed A wild deed is a recorded deed to the property which is not recorded within the chain of title. Sometimes it means a recorded deed from a grantor who is not in the chain of title. A wild deed does not serve as constructive notice to a subsequent purchaser who duly records. IT WOULD HAVE BEEN IMPOSSIBLE TO FIND IN RECORDS. Estoppel by Deed If a grantor purports to convey a property interest she does not own to a grantee, and the grantor subsequently comes to own the property interest by receiving the deed, ownership is automatically vested in the grantee. By executing a deed without title, grantor is deemed impliedly to have covenanted that, when he obtains title, he will immediately convey it to the grantee. The doctrine of estoppel gives the grantee the thing bargained for and not merely damages. Types of Title Indexes Grantor-Grantee The search is structured around the names of each party for land in the county at hand. 38

Property Law OutlineSpring 2011 Professor Murray Tract Index All documents affecting a certain parcel of land are indexed on a page for that parcel specifically Modern move is towards the tract system; check laws in individual counties Rights of Property Owners Mortgages Mortgage Vocabulary Mortgagor The borrower or debtor Mortgagee The lender Note A document that evidences the debt; the note is a personal obligation of the borrower, and the lender can sue the borrower on the note if the borrower doesnt pay. Foreclosure After default by the mortgagor, the mortgagee either manages a private sale or brings a lawsuit to foreclose on the property. If lawsuit, the court will issue a foreclosure decree, providing for public sale of the property by the court officer. The money will pay off the mortgagee and the leftovers go to mortgagor. Deficiency judgmentthe mortgagee can sue mortgagor if they get less money from sale than they loaned to mortgagor. Equity of Redemption The borrowers interest in the land and their right to pay off the rest of the note before foreclosure Statutory Right of Redemption Allows the mortgagor to buy back the property for the price bid at the foreclosure sale for a designated period (usually a year) after foreclosure. Many states give the borrower a right to redeem for a fixed period of time after foreclosure by paying the same price. Equity at the Common Law Courts have set aside foreclosure sales for inadequacy of price where the sale is so low as to shock the conscience of the court. The sale of the house by the mortgagee may be scrutinized to make sure proper notice was given to potential buyers. (Central Financial Services) Present and Future Interests

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Property Law OutlineSpring 2011 Professor Murray PROPERTY OUTLINE GRID FEE SIMPES AND LIFE ESTATES
Present Interest Fee Simple Absolute Fee Simple Determinable Words to Create at Common Law and his heirs so long as while during until Duration Forever As long as condition is met, then automatically to grantor. Until happening of named event and reentry by grantor Until the event happens As long as the condition is met then to a third party Until A and his line die out Possibility of Reverter Shifting Executory Interest Future Interest in Grantor Future Interest in Grantee

Fee Simple on Condition Subsequent

provided that on condition that but if To A for life, but if, to B. To A for so long as and if not, to B and the heirs of his body To A for life or To A for the life of B To A for life, then B To A for life, but if, to B.

Right of Entry for condition broken

Shifting Executory Interest

Fee Simple Subject to an Executory Interest

Right of Entry Right of Entry

Executory Interest Executory Interest

Fee Tail / Fee Simple Conditional Life Estate

Reversion

Remainder

Until the end of life Until end of As life then to B forever Until the end of As life or the happening of the named event

Reversion

Remainder

Reversion

Executory Interest

Problem of the Dead Hand Limits placed on future interests can clog up the transaction market with restrictions long after one has passed away. Hierarchy 40

Property Law OutlineSpring 2011 Professor Murray Could wind up having ownership of property concentrated in the hands of those who already own property and their descendants. Laws are necessary to prevent private owners from concentrating ownership by creating monopolies or centers of power. Alienability of Property Promoted by giving grantors the freedom to determine to whom and under what conditions they will part with their property. Grantors should therefore be able to impose restrictions on the future use of their property; their ability to do so encourages them to part with their property. BUT nobody wants to buy property that is burdened with restrictionscore tension in the rules governing property interests. Fee Simple Absolute Property ownership without an associated future interest. Owner has the present right to possess and use the property, the right to sell or give it away, and the right to devise it by will or leave it to heirs. Defeasible Fees Present interests that terminate at the happening of a specified event (other than death of owner) Two Crucial Distinctions: 1. Is the future interest in the grantor or a third party? 2. Does the future interest become possessory automatically when state event occurs or does it become possessory only if the future interest holder chooses to assert his property rights? Automatic transfer to the grantor When the future interest reverts automatically to the grantor on the happening of the stated event, Present Interest = fee simple determinable Future Interest = possibility of reverter Holder of future interest gets an immediate right of possession (big for AP). If the holder doesnt do anything to assert possession for the statutory period, title shifts back to the current possessor. Transfer upon grantors assertion of property rights If the future interest owner chooses to assert her rights when the condition is violated or the stated event occurs, the property ownership shifts to her; if she does not assert her rights, ownership stays with the current owner. Current Interest = fee simple subject to a condition subsequent Future Interest = right of entry (sometimes also called a power of termination) If the folder of future interest doesnt assert his right of possession, the title will remain with the present estate owner. 41

Property Law OutlineSpring 2011 Professor Murray Modern Approach Court applies one of 2 theories: Doctrine of Laches Prevent the holder of a right of entry from waiting too long to assert her right of entry; laches prevents recovery when an unreasonable delay in asserting legal rights unfairly prejudices another. Public Policy Start running the statute of limitations at the moment the condition is violated, making right of entry effectively similar/identical to possibilities of reverter. This is so the violator isnt always waiting to see if right of entry is exercised. Transfer to a Third Party When the future interest in a defeasible fee belongs to someone other than the grantor: Present Interest = fee simple subject to executory limitation Future Interest = executor interest Ownership shifts automatically on the occurrence of the eventownership shifts to a third party. Life Estates Ownership rights for the lifetime of an individual. A LE owner has no right to determine who owns the property after her death since ownership reverts to the reversioner or remainder holder. Reversion If property reverts to the grantor when the possessor dies, the future interest is called a reversion O to A for life Remainder If property reverts to a third party when the possessor dies, the future interest is called a remainder. O to A for life, then to B Life Estate Per Autre Vie If a life estate for someone is sold to another individual, they have a life estate for the life of another or a life estate per autre vie. Contingent and Vested Remainders

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Property Law OutlineSpring 2011 Professor Murray Contingent Remainders Remainders are contingent if one or both of two conditions are met: 1. If the remainder will take effect only upon the happening of an event that isnt certain to happen 2. If the remainder will go to a person who cannot be ascertained at the time of the initial conveyance O to A for life, then to B if B has graduated from law school Creates a contingent remainder because at the time of the original conveyance from O to A it is not certain that B will graduate from law school. (If B doesnt graduate from law school, the property will revert to O on As death; if B later graduates, the property will spring to B.) Destructibility of Contingent Remainders Traditional Rule 1. If they did not vest before the preceding life estate ended, the remainder was destroyed. For instance, in conveyance O to A for life, then to B if she has been elected president, the remainder is destroyed if B had not been elected president before the death of A. 2. A merger destroyed contingent remaindersif subsequent deed overrules the first. Modern Approach Contingent remainders are indestructible Vested Remainders Include any remainders that are not contingent remainders. They are remainders to persons who are identifiable at the time of the initial conveyance and for whom there are no conditions precedent other than the natural termination of the prior life estate when the life estate owner dies. There are 3 kinds: 1. Absolutely Vested Remainders a remainder not subject to change 2. Vested Remainders Subject to Open a remainder that may be divided among persons who will be born in the future. For example, a conveyance from O to A for life, then to children of B. It is subject to open because B might have more than just one child. Rule of Convenience The courts will close the class (i.e. no more children are eligible) once A dies so that the children can take possession then and not wait for other children.

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Property Law OutlineSpring 2011 Professor Murray 3. Vested Remainders Subject to Divestment a vested remainder that may be destroyed by an event that occurs after the original conveyance. For example, a conveyance from O to A for life, then to B, but if B has flunked out of law school, the property shall revert to O creates a vested interest in B that is subject to divestment (because if the condition, B flunks out of law school, is met at any time, B will lose his right to obtain the property on As death. Some vested remainders subject to divestment are equivalent to some contingent remainders. The Rule in Shelleys Case (only in real estate) When a devise or conveyance transfers a freehold estate to a person and in the same instrument also transfers a remainder to that same persons heirs or the heirs of his body, and both estates are either legal or equitable, both are considered to be held by the first-named freeholder, either in life, in fee simple absolute, or in fee tail. Shorthand Elements: 1. A freehold estate given to a first transferee 2. A remainder limited to the heirs of the first transferee in the same instrument 3. A freehold and a remainder of the same quality i.e. either both being legal or equitable Doctrine of Worthier Title When there is an inter vivos conveyance to a person with a remainder or executor interest to the grantors own heirs or next of kin, no future interest is created in the grantors heirs; rather, the grantor retains a reversion. Fee Simple versus Life Estate Edwards v. Bradley A condition totally prohibiting the alienation of a vested fee simple estate or requiring forfeiture upon alienation is void. As an exception, conditions prohibiting alienation of land granted to corporate entities for their special purposes are valid. A conditional limitation imposed upon a life estate is valid. A LE may be created by implication as well as by explicit language, provided the will shows the requisite intent. The intention of the testatrix is to be upheld if the will can be reasonably construed to effectuate such intent and if it is not inconsistent with an established rule of law. In addition, the language of the will is to be understood in the sense in which the circumstances of the case show that the testatrix intended. Rule Against Creation of New Estates

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Property Law OutlineSpring 2011 Professor Murray Prohibits owners from creating ownership packages that do not fit within one of the established estates; it helps ensure that sufficient rights are consolidated in owners so that they can act like owners. This means the courts must interpret conveyances/wills to determine which estate the grantor intended to create. Interpretations and Presumptions Presumption against forfeitures If it is possible to interpret the language to avoid loss of the property by the current owner, the courts will generally adopt this interpretation. Future Interest v. Precatory Language (general statement of purpose, not legally binding) The presumption is to recognize a fee simple absolute with no future interests Covenant v. Future Interest The presumption is against the future interest and in favor of the enforceable covenant because this will keep title with the current owner. FSD v. Fee Simple Subject to Condition Subsequent FS subject to condition subsequent is preferred because the current interest is not automatically forfeited when the condition is violated, thereby keeping ownership (for the time being) with the current owner. LE v. FS (Defeasible or Absolute) FS interest is preferred Interests of Current Owners v. Future Owners Involves a policy decision about the proper distribution of power over property between grantors and grantees. Requiring forfeiture promotes the interests of the grantor in controlling the future use and disposition of property; it also creates security for neighboring property owners who may benefit by the condition. The presumption against forfeitures promotes the interests of the current owners in controlling property in their possession, giving them greater freedom to change land uses as economic conditions and social values change; it also promotes social interests in deregulating economic activity to allow property owners the freedom to shift property to more valuable or desired uses. Purpose Language

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Property Law OutlineSpring 2011 Professor Murray When conveyances include language explaining the purpose of the transfer, most courts hold the language to be precatory and will interpret conveyance to have transferred all the interest the grantor owned. The burden is on grantor to be clear if they intend to retain a future interest. Some courts are eager to find a future interest when the property is donated for charitable purposes. Changed Conditions Doctrine Denies enforcement of covenants when circumstances are so drastically changed that they are no longer of benefit to the dominant estate. Does not apply to future interests. Concurrent Ownership and Family Property Tenancy in Common Each co-owner is the owner of a separate and distinct share of the property, which has not been divided among cotenants. Each owner has a separate, undivided interest in the whole. Equal shares are not necessaryit is presumed that all have equivalent shares. Cotenants do not need to have the same type of estates. Right to Possession Each tenant in common has the right to possess and enjoy the entire property, subject to the same right in each co-tenant. The tenants can come to whatever agreement on possession that they desire. No Right of Survivorship When a tenant in common dies, her interest passes to her devisees or heirs. It does not go to the surviving tenant in common. Joint Tenancy Each cotenant owns an undivided share of property, and the surviving cotenant has the right to the whole estate. There is no limit to the number of persons who can be joint tenants. On the death of each joint tenant, the property belongs to the surviving joint tenants until only one is leftwhoever lives the longest takes the entire property. Cotenants have been required to possess equal fractional interests in the property. Right of Survivorship When each joint tenant dies, her property interest is immediately transferred to the other tenants. This is not nice to potential future-interest holders Consolidates ownership over the property Tries to keep possession in whole

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Property Law OutlineSpring 2011 Professor Murray Severance If one joint tenant sells to another individual, then the joint tenancy is severed. A tenancy in common results from the severance. Four Unities Requirement THE JOINT TENANCY FOUR UNITIES REQUIREMENT UNITY OF TIME UNITY OF TITLE UNITY OF INTEREST UNITY OF POSSESSION Interest of each joint tenant must vest at the same time All joint tenants must acquire title by same deed or will, or by joint adverse possession Interest of each joint tenant must be equal in an estate of one duration (equal interests) [MUST HAVE THE SAME OR 1/3 OR WHATEVER] Each joint tenant must have right to possession of the whole

Partition The owners may voluntarily partition the property or there may be a lawsuit to involuntarily partition the property. Voluntary Partition You can have a physical division of the property or a forced sale of the property and division of the proceeds among the owners. Judicial Partition The court may order the property physically divided among the co-tenants. If not feasible, the court can order the property sold and proceeds divided up equally. Co-tenants can also agree to NOT partition the land (in deed and/or will) Lease By Joint Tenant One joint tenant has the right to lease her interest in the property, even over the objection of the other tenant. Does it sever the joint tenancy? Common Lawlease severs Destroys the unity of interest because the lessor joint tenant had only a reversionary interest and the other had a fee simple. Modern Viewlease doesnt sever The surviving joint tenant takes the whole. But views are split concerning whether the survivor gets one half subject to the existing lease: One says the lease is valid until the end The other says that the lease is void upon the death of the joint tenant Tenancy by Entirety A form of joint tenancy available only to a legally married coupleit requires the four unities as well as the requirement of marriage. The surviving spouse has a right of survivorship. No Severance Neither tenants by the entirety acting alone can do anything to destroy the right of survivorship 47

Property Law OutlineSpring 2011 Professor Murray No Partition Besides Divorce Tenancy by the Entirety A form of joint ownership available only to married couples. It is similar to joint tenancy, but: 1. The co-owners must be married 2. The property cannot be partitioned except through a divorce preceding 3. In most states, the individual interest of each spouse cannot be sold, transferred, or encumbered by a mortgage without the consent of the other spouse, with the result that the right of survivorship cannot be destroyed by the transfer of the interest of one party 4. In most states, creditors cannot attach property held through tenancy by entirety to satisfy debts of one of the spouses. Property rights used to give the husband the sole management powers, but this was overturned by EPC 14th Amendment APPLIES TO ALL THREE TYPES OF COTENANCY Ouster Affirmative Ouster There is an intentional act that prevents one of the co-tenants from being in possession of the estate. Constructive Ouster Can be shown when it is impracticable for the co-owners to occupy the property or because the parties cannot be reasonably expected to get along sufficiently well (divorce). Remedies Collection of reasonable rental value, suit for partition Adverse Possession and Ouster One cotenant cannot obtain adverse possession against another unless the possessing tenant makes clear to the nonpossessory tenant that he is asserting full ownership rights in the property to the exclusion of the other cotenants. Courts usually require some affirmative act by nonpossessory tenant this is because each cotenant has the legal right to possess the entire property; sole possession does not violate the property right of the other owners and does not, therefore, constitute a trespass. Rent When One Tenant is in Possession Majority Rule

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Property Law OutlineSpring 2011 Professor Murray If B is not ousted by A, A is entitled to use and occupy every part of the property without paying any amount to B. B cannot recover a share of rental value of the land unless B has been ousted by A or A agreed to pay B. Rationale This rule promotes productive use of property. It rewards the cotenant that goes into possession. Cost of Upkeep A has to bear the cost of ordinary expenses of upkeep (taxes, mortgage, repair, etc.). If taxes and mortgage interest exceed fair rental value, other cotenants must contribute. Minority Rule A must account to B for Bs share of the reasonable rental value of the premises. Rationale This rule puts the burden on occupying tenant to show agreement not to pay. This induces the parties to come to an agreement because the occupying tenant has to pay the other if they dont make an agreement and this avoids court costs and litigation. Cost of Upkeep Shared costs Rent From 3rd Party Must Be Shared Wisconsin Rules 1. Common owners, ideally, share the cost expenses, including taxes, insurance, interest and principal payments. 2. Co-Tenancy carries a number of benefits in Wisconsin, including the ability of the co-tenant to receive a proportionate share of the net rents collected by another co-tenant after deduction of the property taxes, maintenance costs and any other property charges relating to the property. Wis. Stat. 700.23. 3. A co-tenant, even when not in possession, may recover the co-tenant rents and profits from the co-tenancy. Wis. Stat. 700.24. Additionally, in a partition, a cotenant may have an equitable claim to off-set the partition by: a. Business Value: Profits generated by the co-tenant from their actual use or working of the property for commercial operations. b. Occupancy value: The imputed value arising from mere occupancy of the property by co-tenants when the fair market value exceeds the overhead costs of maintaining and servicing debts.

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Property Law OutlineSpring 2011 Professor Murray Interpretation of Ambiguity If ambiguous between joint tenancy and tenancy in common, the modern practice is to interpret the conveyance as a joint tenancy. The traditional practice was to favor joint tenancies over tenancies in common.
Types of Common Ownership Tenancy in Common: Consequences 1. Fractional interest only relevant to purchase price. 2. When a tenant in common dies, the devise can pass by will or intestate. 3. Partition: You can file for a partition of the property.

I. Types of Tenancies Tenancy in Common

In a tenancy in common, each tenant has a right of possession, no matter what fractional interest is available. Rights of Enjoyment: 1. Right to Possess the Entire Parcel of Land 2. Duty to Pay Rent in Cases of Ouster 3. Right to Pay Third Party Remuneration Shared Jointly 4. Maintenance of the Joint Property (Accounting) Joint Tenancy In a joint tenancy, each tenant has the right to possess the entire parcel. Unlike tenants in common, joint tenants have traditionally been required to possess equal fractional interests in the property. Rights of Enjoyment: 1. Right to Possess the Entire Parcel of Land 2. Duty to Pay Rent in Cases of Ouster 3. Right to Pay Third Party Remuneration Shared Jointly 4. Maintenance of the Joint Property (Accounting) Tenancy by Entirety A tenancy by the entirety is a form of joint tenancy available only to the married couple. B. Expenses and Benefits

Joint Tenancy: Consequences 1. Right of Survivorship: When a joint tenant dies, her portion is immediately transferred to the other tenants. a. Severance: If one joint tenant sells to another individual, then the joint tenancy is severed. A tenancy in common results from severance. 2. Formalities of Creation: Unity of time, title, interest and possession. 3. Partition: You can file for a partition of the property. Tenancy by Entirety: Consequences 1. 2. 3. 4. Legal Marriage No Partition Except Divorce Consent to Encumbrance No Attachment of Property

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Property Law OutlineSpring 2011 Professor Murray


4. Common owners, ideally, share the cost expenses, including taxes, insurance, interest and principal payments. 5. Co-Tenancy carries a number of benefits in Wisconsin, including the ability of the cotenant to receive a proportionate share of the net rents collected by another co-tenant after deduction of the property taxes, maintenance costs and any other property charges relating to the property. Wis. Stat. 700.23. 6. A co-tenant, even when not in possession, may recover the co-tenant rents and profits from the co-tenancy. Wis. Stat. 700.24. Additionally, in a partition, a co-tenant may have an equitable claim to off-set the partition by: a. Business Value: Profits generated by the co-tenant from their actual use or working of the property for commercial operations. b. Occupancy value: The imputed value arising from mere occupancy of the property by co-tenants when the fair market value exceeds the overhead costs of maintaing and servicing debts. 7. Ouster: An ouster can be accomplished only by such conduct as is sufficient both to exclude the non-occupying tenants and to communicate to them anintent to do so. Mere occupation of the property is not sufficient by itself to communicate ouster. There are two types of ouster: affirmative ouster (where there is an intentional act that prevents one of the co-tenants from being in possession of the estate); and constructive ouster: can be shown where it is impracticable fro the co-owners to occupy the property or because the parties cannot be reasonably expected to get along sufficiently well (divorce). 8. Partition: The owners may voluntarily partition the property or they may be a lawsuit to involuntarily partition the property. In a voluntary partition, you can have a physical division of the property or a forced sale of the property and division of the proceeds among the owners.

Initial Occupancy: Landlords Duty to Deliver Possession Majority Rule: the landlord has the duty to deliver possession of the rented premises to the tenant at the beginning of the leasehold. Minority/Traditional Rule: the landlord has the duty to deliver the RIGHT to possession but no duty to deliver actual possessionit is the new tenants responsibility to evict the holdover tenant by bringing ejectment or other appropriate proceedings. Landlords Right to Inspect and Repair Access: Give at least 2 days notice and may only enter at reasonable times Landlord-Tenant 51

Property Law OutlineSpring 2011 Professor Murray Term specified by the parties. The landlord holds a reversion in the property unless the landlord decides that upon the termination of the lease that the leasehold will revert to a third party. At that point, the third party holds a remainder. This tenancy renews at specified periods unless either party chooses to end the relationship. Notice is required to end the tenancy. Similar to a periodic tenancy but can be ended without notice by the landlord. The death of the landlord ends the periodic tenancy. A tenant rightfully in possession who wrongfully stays over after the leasehold has terminated is a tenant at sufferance or a holdover tenant.

Term of Years

Periodic Tenancy Tenancy at Will Tenancy at Sufferance

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

JAVINS case that indicates a shift from a conveyance of property interest to a conveyance of contract arrangement Until the middle of the 20th century conveyances had no implied warranty instead it was seen as a property interest 2 very different views of a lease are demonstrated by warranty and quiet enjoyment: K with a property interest attached Conveyance of property interest Common Law = quiet enjoyment (actual & partial eviction) this is not favored anymore Modern Law = Implied Warranty of Habitability this is favored b. Periodic tenant: a tenant who holds possession without a valid lease and pays rent on a periodic basis. Includes a tenant from day-to-day, week-toweek, month-to-month, year-to-year or other recurring interval of time, the period being determined by the intent of the parties under the circumstances, with the interval between rent-paying dates normally evidencing that intent. Wis. Stat. 704.01(2).

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Property Law OutlineSpring 2011 c. Professor Murray Tenant at will: any tenant holding with the permission of the tenant's landlord without a valid lease and under circumstances not involving periodic payment of rent; but a person holding possession of real property under a contract of purchase or an employment contract is not a tenant under this chapter. Wis. Stat. 704.01(5).

Transfers of Leasehold Interests Leasehold Tenants right to possess the property in exchange for rent, subject to terms between the parties Assignment/Sublease Tenants have full rights of possession over the property. One of their most important rights is the right to sublet or assign: Assignment 1. Conveys all of the tenants remaining property interest without retaining any future interests to enter the property. 2. Under assignment, assignee undertakes all of the responsibilities of the tenant. (Privity of Estate). Sublease 1. Tenant retains some control to enter the property (End of the sublease; end of some condition can trigger the right of reentry). 2. Sub-tenant owes no responsibilities to landlord.

Approval of Lease Can the landlord include an approval clause in the lease with regards to subleases and assignments? A tenant with a periodic tenancy of less than year-to-year or with a tenancy at will may sublease or assign the tenant's lease only with the consent or agreement of the landlord. Any other tenant, in the absence of a restriction in the lease may sublet, assign or mortgage the tenant's interest in the lease. Landlords typically include a provision in the lease either completely forbidding subleases and assignments or permitting them only with the landlord's consent. A lease restriction on transfer applies only to voluntary transfers unless there is an express restriction on transfer by operation of law. 1 Wis. Prac., Methods of Practics 13.29 (4th ed.) Assignment Tenant gives someone else all his or her future rights to the property Privity of Estate Relationship between the assignee and landlordthe tenants covenants run with the land.

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Property Law OutlineSpring 2011 Professor Murray Sublease The tenant retains some future interest or right to control the property in the future Under sublease, the landlord has no right to sue subtenant to enforce any of the covenants in the original lease. Exception is when subtenant directly promises to pay landlordthe subtenant could be sued as a third-party beneficiary of the contract between tenant and subtenant. Lease covenants could be enforced by injunction as equitable servitudes, so long as subtenant has notice of them. When the lease is silent, tenant can transfer her leasehold. Kendall v. Ernest Pestana, Inc. Restraints on Alienation Majority Rule: where a lease contains an approval clause, the lessor may arbitrarily refuse to approve a proposed signee no matter how suitable the assignee appears to be and no matter how unreasonable the lessors objection. Minority Rule: where a lease provides for assignment only with the prior consent of the lessor, such consent may be withheld only where the lessor has a commercially reasonable objection to the assignment, even in the absence of a provision in the lease stating that consent to assignment will not be unreasonably withheld. Commercially reasonably objections includefinancial responsibility of proposed signee, suitability of the use for the particular property, legality of the proposed use, need for alteration of the premises, and nature of occupancy (office, factory, clinic, etc.) Commercial Leases in Wisconsin Is it an Assignment or Sublease? Is it Commercial or Residential? If Commercial, is it reasonable? Factors: 1. Financial responsibility of the proposed assignee 2. Suitability of the use for the particular property 3. Legality of the proposed use 4. Need of altercation of the premises
In a tenant-landlord relationship, both Implied Warranty of Habitability and Covenant of Quiet Enjoyment exist. Use Implied Warranty for issues relating to the structure of the house you live in Use Quiet Enjoyment if it is something outside the structure that is restricting your quiet enjoyment

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Property Law OutlineSpring 2011 Professor Murray Covenant of Quiet Enjoyment The landlords promise not to interfere with the tenants possession, use, and enjoyment of the property. If it is not express in a lease then it is always implied. Breach of Quiet Enjoyment Quiet Enjoyment is breached by either Actual Eviction or Constructive Eviction: 1. Actual Eviction If a tenant is physically evicted from the entire leased premises by the landlord barring the tenant from the property, the rent obligation ceases entirely and it constitutes actual evictionthe lease is treated as terminated. Damages for TenantMay collect damages for breach of covenant, trespass, or an injunction to fore landlord to reconvey to tenant Partial Actual Eviction If the landlord evicts the tenant from any portion of the leased premises, tenants rent obligation abates entirely until possession thereof is restored to him. The tenant may stay in possession and refuse to pay rent. The tenant also may move out. Rationale Letting tenant not pay imposes a penalty on the landlord who interferes with the tenants use of any part of the premises. The rule is an efficient way to protect the tenant. Restatement View (Modern View) Rejects the rule of complete rent abatement for partial actual eviction on the grounds that it is unjust to the landlord. It adopts a rule of partial rent abatement and gives tenant other remedies or damages for the breach of covenant. 2. Constructive Eviction Occurs when the landlord substantially interferes with tenants use and enjoyment of the leased premises so that the tenant can no longer enjoy the premises as the parties contemplated. The tenant may terminate the lease, vacate the premises, and be excused from further rent liability. The theory is that when a landlord allows the conditions to deteriorate such that living is impossible or uncomfortable, his actions are functionally equivalent to physically barring tenant from premises. (Minjak) Elements: Substantial Interference Tenants use and enjoyment must be substantially interfered with (opposed to possession interfered with in actual eviction). Objective measurementwhat a reasonable person would regard as fundamentally incompatible with the use/enjoyment parties bargained for. Courts take into consideration: Purposes the premises were leased for Foreseeability of this type of interference Potential duration of the interference 55

Property Law OutlineSpring 2011 Professor Murray Nature and degree of harm caused Availability of means to abate the interference Disclosure Prior to Lease If the landlord knows of defects in the premises, they may be under a duty to disclose to tenant. This is usually an argument that it is fraudulent for the landlord not to tell tenant about concealed and substantial defects. Tenants Knowledge If the tenant knows of the interference before taking possession and then takes possession, the tenant has waived the interference. Notice to Landlord Prior to claiming constructive eviction, tenant must give notice to landlord of what the objectionable conduct was and the landlord must fail to fix within a reasonable time. Tenant Must Vacate Premises A tenant must vacate the premises before he makes a constructive eviction claim. If tenant stays and doesnt pay: Traditional Rule The tenant can raise constructive eviction defense ONLY if he moves out within a reasonable time period. If he stays, it would be evidence that the interference is not sufficiently serious to justify allowing the tenant to stop rent or end leasehold. Modern Trend (Restatement View) Tenants can establish a defense of partial constructive eviction. Tenants can show that landlords actions have substantially deprived the tenant of the use and enjoyment of a portion of the property. This defense may allow tenant to remain living in the area that is livable. The remedy is a partial abatement of rent. Restatement View (Modern View) Rejects the requirement that tenant must abandon the property before a claim of constructive eviction. The restatement gives tenant the right to (i) terminate, or (ii) stay on and receives damages or rent abatement or certain self-help options. This gives the tenant what they bargained for and doesnt kick the tenant out, which would be bad if it was someone too poor to find decent housing elsewhere.

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Property Law OutlineSpring 2011 Professor Murray Fault of LandlordThe interference with tenants quiet enjoyment must result from some act or failure to act by the landlord. Usually a tenant cannot claim constructive eviction from the act of a 3rd party (another tenant) unless the partys acts were induced by, or committed with express/implied consent of the landlord. Acts of the Landlord Any act of landlord (playing loud music at 2am, etc.) or failure to act (not providing heat, etc.) that substantially interferes with tenants use and enjoyment is sufficient for constructive eviction. For a tenant to claim constructive eviction for landlords nonfeasance (failure to act) the landlord must have some legal duty to act and, by not acting, the tenant is deprived of his use and enjoyment. (Most modern cases involve failure of landlord to furnish/repair heat/services in violation of express/implied covenant.) Acts of Other Tenants Whether other tenants actions cause constructive eviction is dependent on whether the landlord can control the behavior of other tenants and can be found at fault for not controlling it. General Rule: Landlord is not responsible for one tenant causing annoyance to another tenant even though the annoying conduct would be constructive eviction if done by the landlord and even though the landlord could legally control the other tenants conduct. Exceptions: 1. Landlord has a duty not to permit a nuisance on the premises. 2. Landlord has a duty to control common areas that are under the landlords control. Modern Trend: Holds the landlord responsible for other tenants acts if landlord has the legal ability to correct the conditions and fails. Basis: Landlord is in a better position to stop it than the tenant is. Restatement: 1. Interference that is MORE THAN INSIGNIFICANT (rather than CL significant) 2. Adopts Blackett Doctrinemaking landlord liable for the acts of third parties performed on property in which the landlord has an interest, which conduct could be legally controlled by him. 3. Rejects abandonment requirement because its completely unavailable to tenants who for one reason or another cannot move.

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Property Law OutlineSpring 2011 Professor Murray Implied Warranty of Habitability Obligates landlords to comply with the housing code and to provide premises that are safe and suitable for habitation. A violation of the implied warranty of habitability is a defense to an action by landlord for payment of rent. For the landlord to sue on the tenants covenant, the landlord must have performed his or her own. Under modern law, most states find a landlord has a duty of delivering habitable premises and of maintaining them in habitable shape. Rationale A modern urban residential tenant doesnt have time to inspect the premises and put them in a tenantable condition The landlord knows more about the defects and is in a better position to fix them Housing codes are not effectively enforced and constructive eviction is not a viable remedy in times of housing shortages Tenants have much less bargaining power than landlords in an urban area All merchants have implied warranties of fitness this is similar Scope of Warranty Housing Codes The basic validity of every housing contract depends upon substantial compliance with the housing code at the beginning of the lease term. By signing a lease, the landlord has undertaken a continuing obligation to the tenant to maintain the premises in accordance with all applicable law. WISCONSIN = Warranty in excess of the housing code Fit for Human Habitation Some use this as the standard. The standard can be higher or lower than the housing code; it is just the basis of the warranty standard. Others That Have Been Adopted Duty to Repair Duty to follow individual state warranties Compliance with general community standards of suitability for occupancy. Warranty to Provide Necessary Services o Heat, hot water, broken windows, pest infection, or leaky roof Notice to Landlord/When Does Violation Start General Rule: The implied warranty is not violated until the landlord has been notified of the problem and had a reasonable opportunity to fix it. Other Rules: The violation starts when condition occurs or when landlord is notified

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Property Law OutlineSpring 2011 Professor Murray Restatement: The landlord is not in breach until a reasonable time has passed after the tenant has given the landlord notice Remedies Terminate Lease The tenant may terminate the lease, vacate the premises, and recover damages. Damages may include relocation costs and the fair market value of the lease (difference between their agreed rent and the fair market rent the tenant has to pay now) Continue Lease and Recover Damages Tenant may continue the lease and recover damages (normally a rent reduction) but court can figure damages in different ways. Pay-For-Premises-As-Is Rule (Rejected) One damages method has the purpose of making the tenant pay only for the value of what he is receiving (premises as is). Damages = Rent Fair Market Value of Apartment As Is (during the occupancy as unsafe or unsanitary conditions) SO NO DAMAGES RECEIVED BECAUSE AGREEMENT WAS FOR RENTAL AS IS Loss-of-Bargain Rule (Accepted) Another damages method is to attempt to give tenant what he bargained for. Damages then are abated from the monthly rent. Damages = Fair Market Value As Warranted Fair Market Value As Is Damages for Discomfort and Annoyance Damages for emotional distress unaccompanied by physical injury Continue Lease and Use Rent to Repair If the landlord fails to repair after notice, the tenant may use a reasonable amount of rent to repair the defective conditions. Restatement also uses this when tenant gives notice first and then makes only reasonable expenditures. Continue Lease and Withhold Rent Restatement allows tenant to place his rent in escrow until the default is eliminated. The Restatement allows this. Use Breach of Warranty as a Defense to Landlords Action for Rent The duty to pay is dependent on landlords performance (and maintaining habitability) Waiver of Warranty by Tenant 59

Property Law OutlineSpring 2011 Professor Murray A waiver of the implied warranty of habitability is not permitted. URLTA View The lease can switch the duty of repair to the tenant if (i) the agreement is not for the purpose of evading obligations of landlord and is set forth in a separate writing with additional consideration, and (ii) the work is not necessary to cure noncompliance with housing code. Restatement View The parties may agree to decrease landlords obligations unless the agreement is unconscionable [shock the conscience] or significantly against public policy. Factors to Weigh: Extent that waiver interferes with enforcement of housing code Type of property leased Whether the waiver serves a reasonable business purpose/is result of conscious negotiations Whether the waiver is part of a boilerplate lease document Whether the waiver impose unreasonable burdens on a tenant with unequal balancing power Whether the parties were represented by council See pg. 808 for policy reasons Retaliatory Eviction Retaliatory eviction occurs when a landlord takes revenge against a tenant's actions by evicting, attempting to evict, or failing to renew that tenant's lease. A retaliatory eviction is generally preceded by a complaint made by the tenant regarding the condition of the property, or the tenant's assertion of a legal right. In deciding whether a tenant establishes a defense of retaliatory eviction, the court considers the following factors that tend to show the landlords primary motivation was not retaliatory: (a) The landlord's decision was a reasonable exercise of business judgment; (b) The landlord in good faith desires to dispose of the entire leased property free of all tenants; (c) The landlord in good faith desires to make a different use of the leased property; (d) The landlord lacks the financial ability to repair the leased property and therefore, in good faith, wishes to have it free of any tenant; (e) The landlord was unaware of the tenant's activities which were protected by statute; (f) The landlord did not act at the first opportunity after he learned of the tenant's conduct; and (g) the landlord's act was not discriminatory. In addition, the tenant must demonstrate that it had been 6 months or less between the action and the eviction and must present that the action actually occurred.

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