Adverse Possession (P.

281-287, 289-311) transforms trespassers into owners Elements: OCEANS Open & Notorious: Must be sufficiently visible and obvious to put a reasonable owner on notice that her property is being occupied by a non-possessor. Adverse possessor does not need to show that the true owner observed or knew about the adverse possessors use of the property, rather the true owner is charged with seeing what a reasonable inspection would disclose. Continuous: Must exercise control over property in the ways customarily pursued by owners of that type of property - requisite possession requires such possession and dominion as ordinary marks the conduct of owners in general holding, managing, and caring for property of like nature and condition. o Tacking: succeeding periods of possession by different persons may be added together if successors are in privity with one another (original AP purported to transfer title to the successor, no ousting or hostility) Exclusive: Use as a type that would be expected of a true owner of the land in question. Adverse claimants possession cannot be shared w/ true owner of the land (although occasional entry of the owner may not defeat the claim). Actual Possession: Must physically occupy the property in some manner the ordinary use to which the land is capable and such an owner would make of it. o Enclosing the property by a fence, treating it as ones own, building on land, living on land, conducting business on land, farming, clearing the land, planting garden or shrubs Non-Permissive (Adverse or Hostile): Showing that the true owner has permitted the use will defeat the claim. Adverse possessor must show that her use was non-permissive. o Objective Test (most states): Presumption of non-permissiveness in favor of AP once all physical elements are met. Here, the adverse possessors state of mind is irrelevant. o Subjective Tests: Subjective Test based on Claim of Right: Means a possessors intention to appropriate and use the land as his own to the exclusion of all others. Generally dont require proof of what adverse possessor was thinking; only requires that adverse possessor acted towards land as average owner would act (intention need not be expressed but may be implied by a claimants conduct) collapses claim of right test into actual possession test. Subjective Test based on Intentional Dispossession: Adverse possessor must be aware that she is occupying property owned by someone else and must intend to oust and dispossess the true owner. Usually limited to boundary disputes. Here, mistaken occupation will not give rise to AP claim. Most courts reject this test b/c it rewards wrongdoers (intentional trespassers) and fails to

protect innocent persons who have mistakenly occupied neighboring land. Subjective Test based on Good Faith: Require good faith occupation for AP claim to prevail only innocent possessors who mistakenly occupy property owned by someone else (trespassers or squatters can not obtain title b/c no good faith claim of right) opposite of Intentional Dispossession test. Some states have shorter SOL period if possession was in good faith (LA). Statutory Period: Varies widely (5-40 years) o Payment of property taxes by AP o Whether AP had color of title: written mistake or the appearance of good title but actually there is no title or some defect in the title; backdoor way of getting good faith; may have lower SOL but usually not an additional requirement for OCEANS o Tolling: many states will toll SOL if true owner is under a disability such as infancy, insanity, or incompetence
Brown v. Gobble (1996): SOL is 10 years and D only claimed ownership for 9.5 BUT tacking applied b/c previous owners had used land from 1937-1985 and predecessors interest was passed onto Ds.

Border Disputes

Squatters
Nome 2000 v. Fagerstrom (1990): Disputed parcel is 7.5 acres in Alaska that Nome 2000 (P) holds title to. Fagerstroms (D) are Native Alaskan family who started using land seasonally in 1940s consistent w/ native system use and their use of the parcel increased over the years the quality and quantity of acts required for AP claim depend on character of land in question. The conditions of continuity and exclusivity require only that land be used for the statutory period as an average owner of similar property would use it if land is rural a lesser exercise of dominion and control may be reasonable. (1) Use was continuous b/c went beyond casual/ occasional and evidenced purpose to exercise exclusive dominion over property. (2) Use was notorious b/c if landowner had checked on the land would have noticed that someone was using it, and community members thought Ds were owners. (3) Use was hostile b/c the possessors acted as if they owned land w/out asking permission for its use (state of mind of Ds irrelevant court used objective test); that others were free to pick berries and fish on land is consistent w/ conduct of hospitable landowner and does not undermine continuity or exclusivity. (However, Ds use of certain hiking trails did not constitute dominion and control over the south portion of the land sufficient to demonstrate AP.)

Prescriptive Easements (p.311-319) PE claims result in the right to continue the kind and amount of use that persisted during the statutory period Elements are the same as for AP except claimant must show adverse use rather than adverse possession and most courts have dropped exclusivity requirement Open: Occasional/sporadic use is likely to violate continuity requirement Notorious Adverse: Most states presume that use is non-permissive. Minority of states assume that use, unlike possession, is permissive rather than adverse (i.e. neighborly gesture)

Acquiescence: Usually not an additional element by itself owner may have known or should have known about the use and therefore acquiesced to it, but did not formally give permission acquiescence is not enough to destroy claim b/c its not the same as giving permission Continuous Statutory Period PE may be asserted under a Claim of Title or a Claim of Right Claim of Title: Claimant took possession under a deed which is for some reason defective. Actual and exclusive occupation of any part of the deeded premises carries with it constructive possession of the whole. Claim of Right: Arises from open, notorious, and hostile possession of land at issue. Generally means that use is not permissive but is engaged in regardless of the wishes of the owner. Must be determined by the extent of the actual occupation and use. Community Feed Store, Inc. v. Northeastern Culvert Corp. (1989): Facts: Community Feed
Sore (P) claimed a PE over a portion of a gravel area owned by Northeastern Culvert (D). Community Feed used the parcel of land that was between its building and Northeastern Culverts building as a turning and backing up area for trucks making deliveries to the store. Use was continuous from 1956-1984. A survey in 1984 showed that D owns most of the area and D erected a wall to discontinue Ps use. P brought suit. Trial Court found for D b/c use was not stated w/ enough specificity. P appealed. Issue: Is general outline of consistent use sufficient to establish a PE? Court says yes. The extent of the use need not be absolute but P needed only to show the general outline of a consistent pattern of use with certainty. Court also applied general presumption that open and notorious use is adverse to ownership and BOP switches to true owner to show permission existed (not acquiescence) which D was unable to do.

Good Faith Requirement: Warsaw v. Chicago Metallic Ceilings (1984): Adverse possessor clearly knew it was
using a neighboring lot adversely. Warsaw (P) built a large commercial building with insufficient space for its trucks. Its trucks had to travel onto Chicagos (D) property to turn and position, which they did for 7 yrs. When D wanted to develop his own land, P brought prescriptive easement claim but D continued to build anyways. Court ruled for P and attained a PE for continued use of Ds property (D was required to remove its structure at its own expense). Troubling because wrongdoer knowingly trespassed and wound up taking property rights from innocent party. Arguments against good faith requirement: Social utility: why put land to waste, promotes maximum utilization of land, assigns ownership based on value, provides repose and security in investment. Fairness: True owner watched and didnt do anything, didnt live up to his duty to take care of his property/retain his rights to it. Certainty: promotes security and is predictable Arguments for good faith requirement: Fairness: People with superior knowledge of the law can take advantage and shouldnt be rewarded.

No Negative PEs: Fountainbleu Hotel v. Forty-Five Twenty-Five: Two oceanfront properties

quarreled about the Ds plan to build an addition that would cast a shadow over Ps pool and one builds higher, blocking sun of neighboring hotels pool. Hotel goes after prescriptive easement for air and light Court says fact that one had enjoyed light and air on ones property for years will not create an easement for light and air that prevents ones neighbor from building on her property (problem with ascertaining where the trespassing is action of using sunlight is not open and notorious)

Relative Hardship Doctrine (pg319 322) If the encroachment is innocent (the result of a mistake), the harm minimal, the interference in the true owners property interests small, and the costs of removal substantial, the courts often refuse to grant an injunction ordering removal of the structure. Instead, they will either: i. Order the encroaching party to pay damages to the landowner to compensate for the decrease in market value of the owners land (effectively an easement) or ii. Order a forced sale of the property from the landowner to the owner of the encroaching structure with damages equal to the value of the land taken and possibly a premium to compensate for the involuntary nature of the transfer in ownership. (Seems like a derivative of eminent domain). However, if the cost of removal is not substantial or the interference with the neighbors ability to use its property is substantial, removal may be ordered. Factors looked at when the encroachment is minimal and the cost of removing the encroachment is most likely substantial: Whether the owner acted in good faith or intentionally built on the adjacent land and, Whether the hardship incurred in removing the structure is disproportionate to the harm caused by the encroachment. Mere inconvenience and expense are not sufficient to withhold injunctive relief. The relative hardship must be disproportionate. i. Removal of the encroaching structure is ordinarily ordered if the builder knowingly built on neighboring property. Although removal will not be ordered in cases of innocent mistake or oversight where the encroachment is slight and the damage to the owner of the buildings by their removal would be greatly disproportionate to the injury, removal will be ordered without regard to relative hardship where it appears that the defendant acted with a full knowledge of the complainants rights. Finders - The fact that the owner has either lost or mislaid his property does not lead to the divestiture of his title. Title to such property persists despite the fact that it has been lost or mislaid. The owner relinquishes title when he abandons the property. Wilcox v. Stroup: Involves Civil War documents. There is a rebuttable presumption that those in possession of property are the rightful owners of that property. Possession is ninetenths of the law. Charrier v. Bell: Objects found in burial plots are not abandoned property; instead, they belong to the descendants and cannot be acquired over the objection of the descendants. Lost Property - Property is lost when the owner has accidentally and involuntarily parted with his possession and does not know where to find it. To determine whether property is lost, the key factor is the place where it is found: judging from the place found, would a reasonable

person conclude that the owner had accidentally and involuntarily parted with possession of it and does not know where to find it? Example: A wristwatch found on the floor in a public place will likely be regarded as lost property. Judging from the place where found, it is reasonable to conclude that one would not intentionally place a wristwatch on the floor. Mislaid Property - Property is mislaid when, judging from the place where found, it can be reasonably determined that it was intentionally placed there and thereafter forgotten. Example: A briefcase found on a desk, table, or counter will likely be regarded as mislaid property. Judging from the place where found, it is reasonable to conclude that the item was intentionally placed there and thereafter forgotten. Abandoned Property - Abandoned property is property that the owner has voluntarily relinquished all ownership of without reference to any particular person or purpose. It is necessary to show an intent to give up both title and possession. Example 1: Allowing refrigerators to remain in a building that the owner of the refrigerators knew was to be destroyed was held to be an act of abandonment. Example 2: A tenants act of leaving her apartment for one week and being in arrears for one weeks rent was held to be not enough to constitute abandonment of the property in the apartment. The landlord padlocked the tenants door and attempted to charge an extra fee before allowing the tenant to enter again. It was held that the tenant had not abandoned her property and so the landlord had converted the property.

General Rules for Lost or Mislaid Property: Once it is established that property is lost or mislaid, you must discuss who has the right to possess the property as against the whole world except the true owner. Finders of Lost Property (General Rule Finder Entitled to Possession Except Against True Owner) If property is categorized as lost, the one who reduces it to possession becomes its finder. Possession is physical control coupled with an intention to assume dominion over the object. The intent may be manifested by an effort to keep others, or may be implied, as in the case of an article discovered on the land of an owner. Generally the finder of lost property is entitled to possession of it as against all except the true owner. Example 1: Chimney sweep who found a jewel had superior rights to it as against a jeweler whom he had entrusted jewel for appraisal. Example 2: The act of placing markers over the spot where a wrecked steamboat was located was held not to be a sufficient exercise of dominion and control by the plaintiff to allow him to claim title to the abandoned property. Exceptions to the general rule Trespasser - To penalize one who trespasses onto private property, most courts would hold that a trespasser-finder will not be allowed to secure possessory rights in the lost property. The right of possession will therefore fall to the owner of the place where the item of property is found (locus in quo).

Highly Private Locus - Where a chattel is found in a highly private locus, the owner of the locus in quo, and not the finder, will acquire the possessory rights. Several explanations have been given for this rule. One is that the owner of a highly private locus possesses, by definition, everything within the locus, and therefore possesses the item that has been lost. Another reasons set forth is that the true owner, having lost property in such a private locus, will more likely return to the place to recoup his property. Private Place -For the finder to be deprived of his possessor right in the lost article, the place of discovery must be highly private. The rule is generally applicable only to locations wherein the public is not invited, e.g., a home. Public Place - If the place of discovery is open to the public, then the finder becomes entitled to the right of possession. The mere fact that the place of discovery is privately owned is not sufficient to render it a highly private locus. Buried Articles - On a theory of constructive possession, it can be held that the owner of real property possesses all that which lies beneath the surface of his land. On this basis, if one finds an article buried beneath the surface, the right of possession out to belong to the owner of the locus rather than the finder Finders of Mislaid Property - The finder of mislaid property does not acquire the right to possession. The owner of the locus in quo becomes entitled to possess the mislaid property against all the world except the true owner. Rationale: Since, by definition, mislaid property is that which has been intentionally placed where found and thereafter forgotten, when the true owner realizes where he has mislaid his property he will return to that location to retrieve his property. On this basis, in an effort to return the property to its owner, the right of possession is given to the owner of the locus in quo and not the finder. Treasure Trove Right of Finder: Treasure trove, according to the common law, belonged to the finder as against everyone in the world except the true owner. Modern View: Today, many states apply the usual rules applicable to lost property in dealing with treasure trove. No exception is made today for the handling of treasure trove problems. Bona Fide Puchasers (pg 181 183) UCC 2-403: A bone fide purchaser will prevail over the true owner when the true owner has entrusted the property to a merchant who regularly deals in such goods. If an owner is induced to sell his property by fraud or duress, the seller (owner) may recover the property from the buyer unless the buyer has subsequently transferred the property to a bona fide purchaser. When UCC does not apply, use common law You can convey to someone else only what you own. (Nemo Dat) A thief ordinarily has no right to transfer title to a third party. Autocephalous Greek Orthodox Church of Cyprus v. Goldberg & Feldman Fine Arts, Inc, some valuable Christian mosaics were stolen from a church on the island of Cyprus after it was
invaded by Turkey. Years later, they wound up, through a series of transactions, in the hands of defendant art dealers. The court held that a thief never obtains title to stolen items, and one can pass no greater title than one has. Therefore, one who obtains stolen items from a thief never obtains title to or right to possession of the item. In addition, the thief cannot pass any title to any subsequent transferees, including subsequent purchasers even if they are bona fide purchasers.

When an owner voluntarily entrusts another with possession of her property, the law sometimes gives the grantee the power to transfer title to a bona fide purchaser. When a possessor has the power to transfer title to a bona fide purchaser, we say the possessor has voidable title; although the true owner has the right to recover property from someone to whom she entrusted the property, the law may give that possessor the power to divest the true owner of title by transferring title to a bona fide purchaser. Licenses - Licenses privilege their holder to go upon the land of another (the licensor). Unlike an affirmative easement, the license is not an interest in land. It is merely a privilege, revocable at the will of the licensor. (Although license may acquire some of the characteristics of easements through Estoppel). The statute of frauds does not apply to licenses, and licensees are not entitled to compensation if the land is taken by eminent domain. Licenses maybe revoked at any time and are completely specific to the people (grantee and grantor) and as such are not assignable, alienable and are terminated upon death of a party or transfer of property Licenses may be construed as contracts or parts of a contracts and as such, breach of contract damages may be applicable. Easement by Estoppel Creation of Easement By Estoppel - Three elements are commonly required to create an easement by Estoppel: A license, typically for access purposes; The licensees expenditure of substantial money or labor in good faith reliance; The licensors knowledge or reasonable expectation that reliance will occur. License - The license may be either express or implied. In some states, an implied license can arise based solely on the conduct of the parties (e.g., If A never sought permission and B failed to object to As continuing use of the road). Reliance by Licensee The licensees reliance often consists of improvements to the servient estate that directly benefit the licensor, such as paving or repairing an access road. Alternatively, the construction of a home, barn, or other improvement on the licensees property may be sufficient, as in Holbrook v. Taylor. But can extensive reliance on an informal oral statement ever be truly reasonable? 1. As expenditure of $25,000 in reliance on Bs offhand comment may be inherently unreasonable, absent unusual circumstances (e.g., a longterm friendship or family relationship). 2. Reliance is more likely to be found reasonable if the parties clearly intended to create a permanent right of access. Knowledge of the Licensor The licensor must know, or have reason to believe, that reliance will occur. In Holbrook, B knew about As plan to build the cabin when he consented to As use of the road; and B also observed A using the road for this purpose. Holbrook v. Taylor: A owns Blackacre, a landlocked parcel that adjoins Redacre, a parcel owned by B; Redacre adjoins a public highway. An old private road travels from the highway, across Redacre, and reaches Blackacre, but A has no right to use this road. Planning to build a vacation cabin on Blackacre, A asks permission to use the road for this purpose and B replies: Sure! With Bs consent, A widens and improves the road. B observes A use the road to haul materials,

machinery, and workers to the building site. A eventually spends $25,000 to build the cabin. Can B now block A from using the road? No, reliance was based on the license, known by the grantor. Policy Rationale for the easement by Estoppel i. The policy rational for easement by Estoppel is usually explained in terms of equity: it would be unfair to allow the licensor to revoke the license after the licensee has substantially relied to his detriment. ii. A secondary theme is that the doctrine facilitates the productive use of land. Efficiency is served by allocating the right to A, who values it more highly than B does. iii. But two countervailing concerns lead most courts to construe the doctrine narrowly: It discourages neighborly conduct. Second, the easement by Estoppel undermines the policies served by the Statute of Frauds. Easement Implied from Prior Use Creation of Easement Implied by Prior Use Required Elements Three elements are required for an easement implied from a prior existing use: Severance of Title to land held in common ownership (common grantor), An existing, apparent, and continuous use when severance occurs, and Reasonable necessity for the use at time of severance. Elemental Analysis Severance of Title A tract of land held in common ownership must be divided into two or more parcels; at least one parcel must be transferred to a new owner and at least one must be retained by the original owner. Example: Suppose S owns Greenacre, a 100-acre tract of unimproved land that adjoins a public highway on its southern border. For years before the sale, S regularly reached the north half of Greenacre by using a gravel road that runs from the highway across the south half of the land. On January 1, S conveys the northern half of Greenacre to B. The severance of title requirement is met on these facts because S divided Greenacre into two parcels, selling one to B and retaining the other. Existing, Apparent, and Continuous Use The second element is an apparent and continuous use of part of the tract for the benefit of another part, which already exists when title is severed. In other words, while the common owner still owns both parcels, s/he must use one parcel in a manner that benefits the other parcel. This preexisting use must be so apparent and continuous that the parties presumably intended it to continue. Case law has substantially diluted the traditional requirement that the use be apparent. The term was once limited to readily visible uses, such as roads, surface pipelines, and the like. But most courts have redefined the

term to include uses that are discoverable through reasonable inspection, even if not readily visible. The main impetus leading to this transformation was the problem of the underground sewer pipe. Most courts require that the use be continuous or permanent, as opposed to temporary, sporadic, or occasional. This requirement is typically explained in terms of notice to the parties. The use must be sufficiently continuous so that the parties would reasonably expect it will continue after severance of title. Reasonable Necessity Most states only require a showing of reasonable necessity. In other words, the easement must be convenient or beneficial to the use and enjoyment of the dominant estate, but need not be absolutely necessary. This standard is usually met if the owner of the dominate estate would be forced to expend substantial money or labor in order to provide a substitute for the easement. Policy Rationale This easement is most commonly justified in terms of party intent. If an existing use is sufficiently apparent when a parcel is divided, the parties were on notice of the use and presumably expected or should have expected that it would continue. i. Under this view, the failure to grant or reserve an express easement is merely an oversight that the law rectifies by recognizing an implied easement. ii. In addition, under utilitarian theory, this easement serves the policy goal of promoting the productive use of land. It reflects a bias in favor of continuing land uses that already exist, absent an affirmative objection by a party. Easement by Necessity Creation of Easement Required Elements Severance of Title to land held in common ownership; and Strict necessity for the easement at the time of severance. Elemental Analysis Severance of Title The first element severance of title merely requires ownership of a tract of land, followed by conveyance of part of the tract to a new owner. Necessity at Time of Severance Most courts still recite the traditional rule that strict necessity is required. In order to establish an access easement under this approach an owner must prove that the severance of title caused the property to be absolutely landlocked. In other words: The parcel must be entirely surrounded by privately-owned land, without touching any public road; and The owner must not hold an easement or other legal right of access to cross the adjoining land to reach a public road.

Under this view, if the owner has any legal means of reaching the land regardless of how inconvenient, expensive, or impractical it may be no strict necessity exists. Minority View: Reasonable Necessity The minority view endorsed by the Restatement 3rd of Property only requires reasonable necessity for the easement. The easement must be convenient or beneficial to the normal use and enjoyment of the dominant estate. Policy Rationale The policy rationale underpinning the easement by necessity has two strands: societys utilitarian interest in encouraging productive use of land and the parties presumed intent. Under the utilitarian view, courts feared that landlocked parcels might remain idle and wasted. Judicial recognition of easements by necessity allowed the cultivation, improvement, and occupancy of these lands. Efficient utilization of land. Under the presumed intent view, a grantor presumably intends to convey everything that is necessary for the grantee to make beneficial use of the land. Thus if grantor R conveys an apparently landlocked parcel of land to grantee E, the law presumes that R also intended to convey an access easement to E over Rs retained land. The party-intent approach is still the dominant influence. A. Running with the Land 1. Requirements for the Burden to Run with the Land: Express a. A central question about easements concerns the circumstances under which they run with the land. i. An easement that runs with the land is treated as if it were attached to that parcel so that any future owner of the parcel is benefitted or burdened by the easement. In addressing this issue, one should look at it from both sides. The first question is whether the burden runs with the land 1. Is a future owner of the servient estate obligated to allow the easement owner continued access to or control over her land under the terms of the original easements? Easements created by implication, necessity, and estoppels generally are held to run with the land if they were intended to do so and are reasonably necessary for the enjoyment of the dominant estate. b. Easements that do not fit into one of these exceptions run with the land to burden future owners of the servient state only if: i. The easement is in writing, ii. The original grantor who created the easement intended the easement to run with the land, and iii. Subsequent owners of the servient estate had notice of the easement at the time of purchase of the servient estate. c. Elemental Analysis i. Writing

The easement may be described in detail in the deed granting the property or the deed may refer to an earlier, recorded writing. 1. For Example: If a deed states that this conveyance is subject to the easements and restrictions contained in the deed from O to A, recorded at Bk. 29837, Page 214, the buyer can search the recording office to find the earlier deed and the writing requirement is satisfied. 2. The writing requirement is satisfied even if the easement is not included in subsequent deeds to the servient estate; this is because future buyers are on notice of the writing in the earlier deed if it is in the chain of title and can be found by searching the deeds in the recording office. 3. The required writing is the original writing creating the easement. The easement does not have to be included in subsequent deeds. It is good legal practice, however, to include a specific reference to existing easements when either the dominant or servient estate is transferred. ii. Intent Easements can bind future owners of the servient estate only if the grantor intends them to be bound. 1. Intent may be clearly stated, as when the deed creating the easement states that the easement is intended to run with the [benefitted and/or burdened] land. 2. If the conveyance is ambiguous as to the grantors intent, intent may be implied. 3. If the easement is one that is not likely to have been intended to be merely personal, such as a right given to a friend to swim in ones lake, but a permanent right, such as a right to lay utility lines across the servient estate, courts ordinarily will hold that it was intended to bind future owners of the burdened parcel. If the writing is ambiguous, then courts will go outside of the writing and look at parol evidence to determine the intent of the parties. iii. Notice Easements are binding on subsequent owners only if they have notice of them. Three kinds of notice exist 1. First, if the subsequent owners in fact know about the existence, they have actual notice. 2. Second, if there are visible signs of use by non-owners, such as telephone poles, aboveground utility lines, or a path across the property, the owner may be put on inquiry notice. This means that a reasonable buyer would d further investigation to discover whether an easement exists. Massachusetts does not have an inquiry notice requirement. 3. Third, if the deed conveying the easement is recorded in the proper registry of deeds in the proper place, and if the deed is in the chain of title meaning that a title search of prior owner of the property would lead to discovery of the dead then subsequent owners are deemed to be on constructive notice. This means that whether they actually knew

or did not know about the easement, they should have known. A reasonable buyer of property would conduct a title search and discover the existence of the easement. Owners are bound by easements they would have discovered had they performed the usual title search. a. The recording system provides buyers of real property notice of prior encumbrances placed on the land they are buying and ensures that one selling land had the power to do so. b. Most jurisdictions have a registry of deed where deeds, easements, mortgages, and long-term leases can be recorded or filed. These instruments are indexed under the name of the grantor and the grantee. Separate indexes are kept for grantors and grantees. i. In the grantor index, all instruments are listed both alphabetically and chronologically by the grantors last name. ii. In the grantee index, all instruments are listed both alphabetically and chronologically by the grantees last name. 2. Tests for Burden to Run with the Land Implied: Easements bind future owners of the servient estate only if the grantor intends for them to be bound. a. To determine if a burden runs with the land if it is an implied (not express in deed) easement, a court will ask: i. Is it reasonably necessary for the dominant estate? ii. Was there intent that subsequent purchasers would be bound? iii. Is purchaser on notice? 3. Requirements for the Benefit to Run with the Land (Appurtenant versus in Gross) a. The second question is whether the benefit runs with the land. i. Is the easement owned by the person to whom it was originally granted or by whoever happens to own the parcel of land it was intended to benefit? If the benefit runs with the land, it is treated as if it was attached to that particular parcel of land and is called an appurtenant easement. If it does not run with the land, it is not attached to a particular parcel of land and there is no dominant estate; such easements are called easements in gross. b. The test for distinguishing appurtenant easements from easements in gross is the intent of the grantor. i. A recitation in the deed that calls the easement appurtenant or states that it is intended to benefit future owners of the buyers property will answer this question. B. SCOPE; APPORTIONMENT (IN GROSS) 1. Scope a. Courts enforcing easements are often called upon to interpret the arrangement in order to determine the scope and intended beneficiaries of the interest. The key to interpretation employed in all these cases is the reasonable intent of the original parties. What would the parties reasonably have provided had they contemplated the situation now before the court? What result would reasonably serve the purposes of the arrangement? i. General Rules of Construction

If, as typically happens , the language used is general, the following rules of construction usually apply: 1. Ambiguities are resolved in favor of the grantee (unless the conveyance is gratuitous); 2. Subsequent conduct of the parties respecting the arrangement is relevant; 3. The parties are assumed to have intended a scope that would reasonably serve the purposes of the grant and to have foreseen reasonable changes in the use of the dominant estate. The rule of reasonableness will be applied only to the extent that the governing language is general. If the location or scope of the permitted use is spelled out in detail, the specifics will govern, and reasonable interpretation will be excluded. b. Three issues arise in determining whether the owner of an easement is misusing it by going beyond the scope of activities contemplated by the grantor: i. Whether the use is of a kind contemplated by the grantor, ii. Whether the use is so heavy that it constitutes an unreasonable burden on the servient estate not contemplated by the grantor, and iii. Whether the easement can be subdivided. c. Kinds of Use Encompassed by the Easement. i. The first issue is what kinds of activities are encompassed by the easement. E.g., can a general right of way initially used for road purposes be used to place utility lines? Many courts hold that a general right of way may be used for any reasonable purpose. Some courts disagree and hold that rights of way are limited to the specific purposes contemplated at the time they were created. 1. E.g., One court has held that a general right of way does not include a right to erect poles and maintain electric wires on or next to roadway. On the other hand, another court held that digging a trench to bury telephone lines does not exceed scope of utility easement. Unreasonable Additional Burden The owner of an easement may be clearly engaged in the kind of activity contemplated by the easement but may still exceed the scope of the easement. 1. E.g., the court in Green v. Lupo, although allowing motorcycle use over the road, stated that such use could be limited and regulated to protect the legitimate interests of the owner of the servient estate. Similarly, the court in Cox required the trial to determine whether the subdivision of the dominant estate would impose an unreasonable additional burden on the servient estate. Defining whether an activity constitutes an unreasonable additional burden on the servient estate beyond that contemplated at the time the easement was created depends on the grantors intent. 1. When the grantors intent is ambiguous, courts must balance the interests of the easement owner in freedom to develop his property

d.

e.

f.

g.

against the interests of the servient estate owners in security from having their property overly burdened in a way they could not anticipate or should not have had to anticipate. Divisibility or Apportionability i. The question of divisibility of appurtenant easements generally arises when the owner of the dominant estate subdivides the property and attempts to transfer to new owners rights to use the easement to obtain access to their property. Most courts agree with the Cox court in holding that an appurtenant easement benefits the entire dominant estate and is apportionable among subsequent owners if the dominant estate is divided. When dealing with easements in gross, the question of divisibility of the easement is referred to as the issue of apportionability. When an easement in gross is non-exclusive meaning the grantor, or owner of the servient estate, has reserved for herself the right to use the easement in conjunction with the grantee the easement is generally held to be non-apportionable; the grantor herself could sell further rights to others so long as those new easements did not interfere with the use of the existing easement by the first grantee. 1. The courts presume that under these circumstances, the grantor would want to retain the right to obtain the economic benefits of any future easements. When, however, the easement is exclusive meaning the grantor has no right to use the easement in conjunction with the grantee the easement is generally held to be apportionable. Since the grantor has no right to grant other easements, the grantee is not interfering with any rights the grantor might have to sell or lease use of the easement to others. Extension of the Use. i. In Brown v. Voss, an owner of a road easement wanted to use the easement across the servient estate not only to obtain access to the dominant estate but to reach a subsequently acquired lot on the other side of the dominant estate. The traditional rule and probably still majority rule would prohibit this extension of the use of the easement. Changing the Location of the Easement. i. Can the owner of the servient estate change the location of the easement? The traditional rule prevents this; the owner of the servient estate must first obtain the consent of the easement holder to relocate it. 1. However, some recent cases and the Restatement 3rd of Property, would allow the servient estate owner, at her own expense, to make reasonable changes in the location or dimension of an easement, at the servient owners expense, to permit normal use or development of the servient estate if the changes do not significantly lessen the utility of the servitude, increase the burdens on the owner of the easement in its use and enjoyment, or frustrate the purpose for which the easement was created. Easements by Necessity or Implication

i. In the case of easements by necessity, the extent of the necessity determines the scope of the easement. Because there is no underlying written instrument to interpret, courts will look instead to the circumstances giving rise to the easement. ii. Similarly, with other implied easements, the quasi-easement will provide the starting point for the courts construction of the scope of the easement. Modifications in the easement will be enforced to the extent that they are necessary for reasonably foreseeable changes in the use of the dominant parcel. h. Use of Servient Estate i. Absent an express restriction in the original agreement, the owner of the servient estate may use her land in any way she wishes so long as her conduct does not interfere with performance of the easement. Duty to Repair 1. If the holder of the benefit is the only party making use of the easement, that party has the duty to make repairs (e.g., fill in potholes on a right-of-way) and, absent a special agreement, the servient owner has no duty to do so. If the easement is non-exclusive and both the holder of the benefit and the servient owner are making use of the easement, the court will apportion the repair costs between them on the basis of their relative use. i. Effect of Use Outside Scope of Easement i. When the owner of an easement uses it in a way that exceeds its legal scope, the easement is said to be surcharged. The remedy of the servient estate owner is an injunction of the excess use, and possibly damages if the servient estate has been harmed. However, the excess use does not terminate the easement or give the servient landowner a power of termination. 2. General Rules: Once it is est. that an easement exists, questions arise as to the types of uses to which it may be put by the holder of the easement, and the rights of the owner of the servient tenement. The manner in which the easement was created often has an important bearing on these questions. a. Expressly Created Easements: When the easement is created by an express written conveyance, the terms of that conveyance will normally control. If a conveyance is ambiguous, the court will look at the circumstances surrounding its making to determine the partys intent. b. Implied Easement: easement created by implication the court will look to the use as it existed prior to the conveyance, what the parties might reasonably have expected. c. Prescriptive Easement: the allowable use is determined by reference to the adverse use that continued during the statutory period and created the easement. The holder of the easement is limited to eh same general pattern of use. Test is that the present use must be sufficiently similar to the older use that the court may conclude that the property owner would not have objected to the new use. i. Increase the Burden: an important factor is whether the new use represents a greater burden on the servant tenement than the old use.

d. Enlargement by Prescription: Regardless of the original use, an easement can always be enlarged by Prescription. 3. Development of Dominant Estate: Regardless of how the easement was created (i.e. whether by implication, prescription, etc.), the Court will allow a use that increases dues to the normal, foreseeable development of the dominant estate, so long as this does not impose an unreasonable burden on the servient estate. a. Example: A right of way easements is created by prescription in favor of the sole house then located on a dominant tenement. After the easement is created, 2 more houses are built on the dominant property. The residents of all 3 houses may use the right of way, since the basic use as a pedestrian right of way remains unchanged, the increased use is a function of normal development, and the increase in the burden is slight. b. Reasonable Development Contemplated: Resolution of this question is likely to depend in part upon whether the easement was created expressly, by implication or by prescription. 4. Normal Development: But regardless of how the easement was created, the court will normally allow a use that arises from the normal, foreseeable, development of the dominant estate, where this would not impose an unreasonable burden on the servient estate. 5. Use for Benefit of Additional Property: The holder of the dominant estate is normally not allowed to extend his use of the easement so that additional property owned by hi (or by others) is benefited. 6. Servient Owners Right to Relocate Easement: Courts are in dispute about whether the servient owner may relocate the path of the easement to a different part of the servient owners property. a. Common Law Approach: At CL, the rule has been that the path of the easement is fixed, and the servient owner may not relocate the easement to a different portion of the servient owners property, even if this doesnt cause an extra burden to the dominant owner. b. Modern Approach: But the modern approach (and that in the 3rd Restatement) is that the servient owner may relocate the easement if this doesn't materially inconvenience the dominant owner. K. MODIFYING & TERMINATING EASEMENTS 1. Termination of Easements: Last forever unless they are terminated. a. An easement, like any other property interest, may be created to last in perpetuity or for a limited period of time. To the extent the parties to its original creation provide for the natural termination of the interest, such limitations will control: i. Misuse/Scope???? An easement will not be terminated due to misuse or outside of scope; rather the servient estate can get an injunction to stop any activity that is outside the scope. If an injunction is ineffective to prevent misuse, some courts hold that misuse by the easement holder will extinguish the easement in cases where injunctive relief is wholly ineffective. However, even in jurisdictions that accept this doctrine in theory, it is very rarely used. ii. Merger or Unity of Title

By definition, an easement is the right to use the lands of another for a special purpose. On this basis, the ownership of the easement and of the servient estate must be in different persons. If ownership of the two comes together, the easement is extinguished. 1. Complete Unity Required a. For an easement to be extinguished there must be complete unity of ownership as between the interest held in the easement and that held in the servient estate. In other words, if the holder of an easement acquires an interest in the servient estate, the easement is extinguished only if he acquires an interest in the servient estate of equal or greater duration than the duration of the easement privilege. Conversely, if the holder of the servient estate acquires the easement interests, the title acquired must be equal to or greater than her interest or estate in the servient estate. If there is incomplete acquisition of title, the easement will not be extinguished. 2. No Revival a. If complete unity of title is acquired, the easement is extinguished. Even though there may be later separation, the easement will not be automatically revived. iii. Express Release An easement may be terminated by a release given by the owner of the easement interest to the owner of the servient estate. A release requires agreement of both owners and is, in effect, a conveyance. The release must be executed with all the formalities that are required for the valid creation of an easement. 1. Appurtenant Easement a. The basic characteristic of an easement appurtenant is that it becomes, for the purpose of succession, an incident of possession of the dominant estate. The basic characteristic requires that the easement interest not be conveyed independent of a conveyance of the dominant estate. However, an easement appurtenant may be conveyed to the owner of the servient estate without a conveyance (to the same grantee) of the dominant estate. This is an exception to the general alienability characteristics of an appurtenant easement. 2. Easement in Gross a. The basic characteristic of an easement in gross is that unless it is for a commercial purpose, it is inalienable. However, an easement in gross can be released, i.e., can be conveyed to the owner of the servient estate. This is an exception to the general characteristics of an easement in gross. 3. The Statute of Frauds a. The Statute of Frauds requires that every conveyance of an interest in land that has a duration long enough to bring into play a particular states Statute of Frauds (typically one year) must be

evidenced by writing. This writing requirement is also applicable to a release of an easement interest. If the easement interest that is being conveyed has duration of greater than one year, it must be in writing in order to satisfy the Statute of Frauds. An oral release is ineffective, although it may become effective by estoppels. iv. By Its Own Terms: Limited Time or For Limited Purpose If the parties to the original creation of an easement set forth specific conditions upon the happening of which the easement will terminate, the conditions will be recognized. On this basis, the following conditions are valid: an easement granted so long as repairs are maintained, an easement granted so long as X is the holder of the dominant estate, an easement granted until the dominant estate is used for commercial purposes, and time constraints as well. v. Abandonment An easement can be extinguished without conveyance where the owner of the privilege demonstrates by physical action an intention to permanently abandon the easement. To work as abandonment, the owner must have manifested an intention never to make use of the easement again. The intent to abandon is often evidenced by an act that is inconsistent with continued use of the easement. 1. Physical Act Required a. An abandonment of an easement occurs when the easement holder physically manifests an intention to permanently abandon the easement. Such physical action brings about a termination of the easement by operation of law and therefore no writing is required, i.e., the Statute of Frauds need not be complied with. 2. Mere Words Insufficient a. The oral expression of the owner of the easement that he does not intend to use the easement again (i.e., wishes to abandon) are insufficient to constitute an abandonment of the easement. For words to operate as a termination, such expression will only be effective if it qualifies as a release. In other words, the Statute of Frauds must be complied with. 3. Mere Non-Use Insufficient a. An easement is not terminated merely because it is not used for a long period by its owner. To terminate the easement, the non-use must be combined with other evidence of intent to abandon it. Non-use itself is not considered sufficient evidence of that intent. vi. Adverse Possession Adverse Possession 1. Focuses on the conduct on the servient estate. What the servient estate does something that is contrary to the rights of the easement holder. 2. Adverse Possession can be cited as an alternative to abandonment. Mere non-use is not going to get him there.

a.

Lets assume in Glenbrook, Glenbrook expands the golf-course over the easement, Detrick decides not to do anything about it. 15 Years later, Detrick wants to use the easement. Glenbrook can argue that the easement was terminated through adverse possession. A third party could adversely possess both against the property owner and the easement holder.

b.

vii. Estoppel While the assertions of the holder of the easement are insufficient to work a termination unless there is valid compliance with the requirements of a release, an easement may be extinguished by virtue of reasonable reliance and change of position of the owner of the servient estate, based on assertions or conduct of the easement holder. For an easement to be extinguished by estoppels, three requirements must be satisfied, there must be: 1. Some conduct or assertion by the owner of the easement, 2. A reasonable reliance by the owner of the servient estate, 3. Coupled with a change of position. viii. Destruction of Servient Estate If the easement is in a structure (e.g., a staircase), involuntary destruction of the structure (e.g., by fire or flood) will extinguish the easement. Voluntary destruction (e.g., tearing down a building to erect a new one) will not, however, terminate the easement. Note: According to Graham, if an easement is destroyed by natural causes, then she believes that the easement holder should be able to rebuild as long as it is within the scope of the easement.

ix. Tax Sale of Servient Estate If the servient estate is sold at a tax sale: 1. Easements Appurtenant: will generally not be extinguished, since such easements increase the value of the dominant estate; therefore it would be unfair to deprive the dominant owner of the benefit for which he is paying taxes.

2. Easements-in-Gross: is generally extinguishable by a tax sale of the servient estate.

I. COVENANTS A. Preliminary Information Basic Thoughts About Covenants a. Running with the land portion is the toughest part of Covenants. b. Covenants are a big part of Real Estate Laws. 2. Easements v. Covenants a. Negative Easements are Limited. i. Air & Light, Lateral Support and Flow of Stream Negative Easements are allowed. b. You cant have an affirmative easement on your own land. c. Beneficiary of Covenant (Dominant Estate) may require owner of Servient Estate to do or not to do something on their land. i. Examples: J promised T to maintain the fence on her property that divided the two parcels of land. (Affirmative Covenant To do something on ones own land). J promised T to never erect a fence between their properties so that his view of the ocean is never blocked. (Negative Covenant To not do something on ones own land). d. Easier to terminate a covenant but harder to enforce a covenant whereas easier to enforce an easement but harder to terminate. e. Easier to distinguish between affirmative easement and affirmative covenant. 3. Major Issues To Keep In Mind In Regards To Covenants a. Creation of Covenants (Express v. Implied; Only express covenants will be taught by Professor Graham). i. Examples of Implied Easements: Promissory Estoppel Negative Reciprocal Housing Covenants (Email Graham to get a definition of this again). b. Interpretation of Ambiguous Covenants. c. Termination & Modification of Covenants (Remedy: Damages or Injunctions based on facts) d. Public Policy and Fair Housing Act. e. Are subsequent owners bound (or does the benefit run with the land)? In order for the benefit/burden to run with the land, it depends on whether or not the subsequent owners had Notice of the restrictions. B. Creation of Covenants 1. England Law: a. The Law of Real Covenants(The Spencers Case): Affirmative Covenant binding on the successor in interest, if: i. It was in Writing; ii. It was Intended to be binding on future tenants iii. It Touched & Concerned the land, and iv. There was Privity between the covenanting parties. Simultaneous Privity: both parties have simultaneous interest in the tract of land. Instantaneous Privity: restriction was imposed at the moment a property interest was transferred from one owner to another. b. Equitable Servitudes (Tulk v. Moxhay): No privity of estate required between the original covenanting parties but the following are necessary: i. The covenant must be in writing; ii. It was intended to run with the land; iii. It touched & concerned the land; and iv. The current owner had purchased with notice of the restriction. United States courts adopted both real covenant and equitable servitudes law. a. The law of real covenants expanded the definition of privity. 1.

2.

Some states did by expanding the concept of simultaneous privity from the landlord-tenant relationship to situations in which one owner owns an easement in the property of the other and/or both owners have mutual easements in each others property. [MA recognizes Simultaneous Privity]. ii. Most courts expanded the privity concept by adopting the instantaneous privity doctrine: they found privity to exist if a covenant was created in the context of a transfer of property through a grantor-grantee relationship. A covenant included in a deed of sale restricting use of the parcel might bind future owners of the property conveyed. At the moment the deed passes from seller to buyer, the parties have a fleeting, instantaneous, simultaneous interest in the property, and the covenant was thought to attach itself to the property interest conveyed from seller to buyer. b. The Law of Real Covenants and Equitable Servitudes are being merged. The Restatement 3rd of Property abolishes the distinction. i. The law of Real Covenants was developed in the law courts in England and was enforced by the legal remedy of damages, while Equitable Servitudes were enforced by Injunctions, the remedy of the equity courts that invented the doctrine. ii. Today, covenants are likely to be enforceable either by damages or injunctive relief as long as they were in writing, intended to run with the land, the owner of the burdened estate was on notice of the restriction, and the covenant is one that is appropriate to impose on subsequent possessors of the servient estate for the benefit of future owners of the dominant estate. C. Interpretation of Ambiguous Covenants 1. Presumptions a. Courts traditionally interpreted ambiguous covenants in the manner that would be the least burdensome to the free use of land. i. Restrictive covenants are regarded unfavorably and are strictly construed because the law favors the free and untrammeled use of real property. ii. Some courts state that covenants should be construed against the drafter; this usually means the grantor or developer. The effect of such a presumption is generally to limit the effects of covenants in restricting land use. The policy basis of this traditional presumption is: 1. To promote the free use of land; 2. The rights of owners to be free from control by others, and 3. The free alienability of land. b. The touchstone of interpretation of covenants seems to intent of the grantor. i. Intent must be shown by express language in the deed or a declaration but may be supplemented by extrinsic evidence where necessary to interpret an ambiguity. ii. When the dispute involves subsequent purchasers, the interests of those who seek to use their property as they wish conflicts with the reliance interests of those who believed that the neighboring property would be restricted. iii. The modern under the Restatement 3rd is that limitations on land use may promote rather than impede alienability. Rules to Look to Interpret Ambiguous Covenants in order to determine the Intent of the Grantor a. Language of the covenant; b. Ambiguous: i. Traditional Rule: Presumption in favor of free use of property if ambiguous. ii. Restatement Rule: Security and Reliance Interests of Dominant Estate. c. Purpose Interpretation of Covenants a. Residential Only/Single-Family Dwelling i. Disruption of Residential Activities? (Density, Parking, Traffic, Safety and etc). ii. Preserve Market Value of Property? iii. Identity of Occupants? Landlord Tenant Relationship v. Group Home Relationship

i.

2.

3.

4.

Landlord provides accommodations to tenants and care to the building only. Whereas, a group home not only provides accommodations to the occupants but also provides care to the occupants (care of occupants is a service being provided). 5. Public Policy a. Policy of State (Issues of Interpretation/Non-Enforcement) i. Several courts have held that although the operation of group homes violates covenants limiting property to single-family dwellings, those covenants are unenforceable because they violate strong public policies prohibiting discrimination against persons with disabilities. ii. Restrictive covenants that discriminate against persons with disabilities may violate federal civil rights statutes, including the Americans with Disabilities Act of 1990 and the Fair Housing Act of 1968, as amended in 1988. b. Non-Discrimination c. Fair Housing Act: Disabilities, Race, Familial Status/Children. D. Terminating & Modifying Covenants 1. Ways to Terminate and Modify a Covenant a. Changed Conditions Doctrine b. Undue or Relative Hardship Doctrine c. Statutory Regulations d. Public Policy. Changed Conditions Doctrine a. Black Letter Law: Covenant unenforceable if fundamental change in intended character of neighborhood renders benefit underlying imposition of restriction incapable of enjoyment. b. Covenants will not be enforced if conditions have changed so drastically inside the neighborhood restricted by the covenants that enforcement will be of no substantial benefit to the dominant estates. i. The change must be so radical as to defeat the essential purpose of the covenant or render the covenant valueless to the parties. ii. Some state statutes also require covenants to be of actual and substantial benefit in order to be enforceable (Mass. Gen. Laws ch. 184 30). MA Statute: Unenforceable by damages or injunction if it is not of ACTUAL and SUBSTANTIAL benefit at time of proceeding. 1. Covenant that is of actual and substantial benefit enforceable by damages only: a. Changed Character, etc. b. Conduct of persons entitled to enforce it renders it inequitable (e.g., unclean hands). c. Impedes reasonable use of land for which it is most suitable. d. Inequitable or not in public interest. iii. The changed conditions doctrine may also apply when substantial changes have occurred outside the restricted subdivisions. The changed conditions doctrine is likely to apply to changes outside the restricted subdivision only when those changes have so adversely affected so many lots in the subdivision that enforcement is pointless. Determining when a covenant is no longer of substantial benefit is not a precise science. iv. Restatement 3rd alters the changed conditions doctrine in several crucial ways. It extends the doctrine to easements. It uses termination rules to substitute for controls that had traditionally been applied through the touch and concern test. It suggests modification of the covenant in lieu of termination if modification will allow the covenant to serve its original purpose. 1. Under this test, only if modification is not feasible is termination allowed. 2. Also, if the purpose of the servitude can be accomplished but because of changed conditions the servient estate is no longer suitable for any use permitted by the servitude, a court may modify the servitude to permit other uses under conditions designed to preserve the benefits of the original servitude. v. Damages versus Injunctive Relief

a. b.

2.

3.

4.

Damages were traditionally not awarded for breach of a covenant unless privity of estate was present under real covenants law, while injunctive relief was available even in the absence of privity. Because most owners want enforcement by injunctive relief and because it makes little sense to make it harder to obtain damages than injunctive relief (the reverse is usually the case), the courts appear now to be ready to award either an injunction or damages for violation of a covenant running with the land whether or not strict vertical privity is present. Undue Or Relative Hardship Doctrine a. Black Letter Law: Covenant not enforceable if harm caused by the enforcement to the servient estate is greater by a considerable magnitude than the benefit to the owner of the dominant estate. b. Unlike the changed conditions doctrine, which focuses on whether the covenant remains of substantial benefit to the dominant estate, the relative hardship doctrine focuses on the servient estate. i. A covenant will not be enforced if the harm caused by enforcement, that is, the hardship to the owner of the servient estate, will be greater by a considerable magnitude than the benefits to the owner of the dominant estate. If the hardship is great and the benefit small, the courts may refuse to enforce the covenant. If, however, the benefit of the covenant is substantial, the courts are unlikely to apply the doctrine even if the hardship to the servient estate is substantial. c. The Restatement 3rd treats the relative hardship doctrine not as a basis for terminating or modifying servitudes, but, rather, as a factor to consider in determining the availability and selection of appropriate remedies. i. If compliance with a covenant is unreasonable because the burden is great and the benefit small, the Restatement 3rd concludes that non-enforcement may be appropriate, but some amount of damages are probably appropriate to compensate the servitude beneficiary for the loss of the benefit of the covenant, small as it may be. Other Possible Way to Terminate A Covenant i. Acquiescence, Abandonment, or Unclean Hands: i. The complaining party may be barred from enforcing the covenant if he has tolerated or failed to object to other violations of the covenant. Toleration may indicate an intent to abandon the covenant, and the defendant may reasonably rely on the failure to enforce the covenant in investing in her property. This may occur if the plaintiff: 1. Has violated covenant himself (unclean hands) or 2. Has tolerated previous violations of the covenant by the owner of the servient estate (acquiescence) or 3. Has tolerated violations of the covenants by owners of other restricted parcels in the neighborhood covered by the covenant (abandonment). ii. Estoppel i. An owner of a dominant estate who orally represents to the owner of a servient estate that she will not enforce the covenant may be estopped from asserting her interests in enforcing the covenant if the owner of the servient estate changes his position in reliance on the oral statement. iii. Laches. i. If the covenant has been ignored or breached for a substantial period of time but less than the time necessary to establish prescriptive rights the court may find that unexcused delay in enforcing the covenant prompted the investment in reliance on the failure to object to the violation and that enforcement of the covenant would be unconscionable. iv. Marketable Title Acts (30 Years, 20 Years in MA) i. As with easements, many states have marketable title statutes that terminate restrictive covenants if they are not re-recorded after a specific period of time. Marketable Title Act of Massachusetts applies for covenants signed after 1969.

In Massachusetts, it is required that if you have a restrictive covenant then you must record it with the Registry of Deeds within 30 years of signing the document and must rerecord every 20 years thereafter for it to be enforceable. v. Expiration in Instrument i. Many subdivisions or condominiums associations are subject to covenants that terminate within a stated number of years unless they are periodically renewed by the homeowners association or condominium owners association. In Massachusetts, if no expiration date is listed in the instrument then by operation of law it automatically expires after 30 years. vi. Merger i. As with easements, if the burdened and benefitted estates come under the ownership of the same person, the covenants will terminate. vii. Release i. All parties affected by the covenant both burdened and benefitted estates may agree in writing to terminate the covenant or release the property from it. viii. Prescription i. Open and notorious violation of the covenant without permission for the statutory period may terminate the covenant by operation of the statute of limitations E. Discriminating Conditions 1. A racially restrictive covenant limits the sale, lease or occupancy of real property to members of a particular race or excludes members of a particular race or races. a. Historically, most restrictive covenants were used to exclude African Americans from residential communities. 2. Now such covenants are unenforceable under constitutional, statutory, and common law and may even subject those who enter into them to monetary liability under civil rights statutes. 3. Until the 1948 decision of Shelley v. Kramer, the practice of including the covenants in deeds restricting ownership, possession, and occupancy of the land to white persons was widespread. a. Moreover, in the vast majority of states, such covenants were valid and enforceable. b. A minority of states, by common law or statute, declared such covenants void and unenforceable as contrary to public policy. 4. Racially discriminatory restrictive covenants are unenforceable due to the covenants being unconstitutional and in violation of the 14th Amendment. a. The action of state courts imposing penalties or depriving parties of other substantive rights without providing adequate notice and opportunity to defend, has, of course, long been regarded as denial of the due process of law guaranteed by the 14 th Amendment. 5. Covenants that prohibit sale or lease of dwellings to, or occupancy by, persons on the basis of race violate federal civil rights statutes, including federal Fair Housing Act (as amended in 1988), and the Civil Rights Act of 1866. 6. The 14th Amendment provides Nor shall any State deprive any person of life, liberty, or property, without due process of law, nor deny to any person within its jurisdiction of the equal protection of the laws. a. The 14th Amendment regulates the conduct of state government and state officials but not the conduct of private or non-governmental actors. Covenants (Express); Running with the Land 1. Elements for Running with the Land a. Real Covenant Law Damages or Injunction i. Writing ii. Touch and Concern iii. Intent iv. Notice v. Privity b. Equitable Servitude Injunction Only i. Writing ii. Touch and Concern

F.

2.

3.

iii. Intent iv. Notice. Writing i. Covenants are ordinarily reduced to writing as part of a lease or deed transferring property rights. Developers of residential subdivisions may similarly include covenants in the deed to each parcel of land they sell restricting the use of each parcel. Alternatively, they may record a declaration of restriction applicable to entire subdivision and/or a plat (a detailed map showing the restrictions) before any lot is sold. 1. The deed or lease subsequently granted may or may not contain an explicit reference to the declaration or plat. a. Some states may require that the restriction be specifically mentioned in the deed or lease, even if only by reference to the earlier recorded declaration or plat. b. Most states, however, find that a covenant in a prior recorded declaration or plat meets the writing requirement on the ground that the buyer is on notice of the prior recorded restriction and thus is bound by it in good conscience, making the restriction enforceable as an equitable servitude. References made in sales literature do not count as writings; the requirement is that the restriction be in the document transferring the property interest or a prior recorded document in the chain of title. Some courts relax the strict writing requirement and apply the equitable doctrine of Estoppel to enforce representations made in sales literature or orally when the buyers rely on them. 1. The equitable doctrine of Estoppel holds a person to a representation made or a position assumed where otherwise inequitable consequences would result to another whom, having the right to do so under all of the circumstances of the case, has in good faith relied thereon and been misled to his injury... Other courts, however, refuse to enforce oral representations or sales promises not included in prior-recorded documents. Notice i. The notice requirement is intended to protect the owner of the servient estate. It is formal because an owner wishing to create an enforceable covenant can ensure that appropriate notice is provided to future purchasers of the burdened parcels. The owner of the dominant estate who attempts to enforce the covenant is obviously on notice of it; the real question is whether the owner of the burdened estate knew or should have known the parcel was restricted when she purchased the land. The three kinds of notice are actual, inquiry, and constructive. 1. Actual Notice a. A buyer or lessee is on actual notice of the covenant if he was actually told about it or was otherwise made aware of it. 2. Inquiry Notice a. The buyer or lessee is on inquiry notice if any condition of the premises indicated that the property was burdened by a covenant. i. Inquiry notice is likely to be important only in the context of affirmative easements, such as rights of way, which a buyer can observe and which suggest that another party may interests in the land. ii. The unobservable condition of the land is unlikely to put a reasonable buyer or lessee on notice of a restrictive or negative covenant. 3. Constructive Notice a. A buyer or lessee is said to be constructive notice if the covenant was recorded in the Registry of Deeds along with the deed or lease creating the covenant or if a declaration containing the restriction was recorded prior to sale. b. Such recording puts the purchaser on constructive notice of the covenant; a reasonable person is expected to search the title to find out whether the property is burdened by land use restrictions, and the buyer is deemed to know what she would have discovered had she performed a search of her chain of tile. c. Courts reason that the buyer is obligated to search all grants made by the seller during the time the seller owned the land being purchased (or at least all the deeds to

4.

5.

contiguous land) to determine whether any of those written instruments includes reference to the land in question. i. If O has encumbered Lot 2 by a promise in a prior deed to Lot 1, then O has no power to transfer ownership to Lot 2 free of the restriction and B is on notice of the restriction because B can find out about the purchase by researching the deeds granted by the owner of the land during the time of ownership. d. Two ways to register with the Registry of Deeds (Massachusetts was the 1 st state to have a registry of deeds Grantor/Grantee Index was created in Massachusetts) i. Plat Only 1 or 2 states do it. Indexed by Property Address ii. Grantor-Grantee Index (Majority of States do this) Important to look in both indexes to make sure you locate any and all restrictions on the property Good way to keep yourself from being subject to a malpractice lawsuit. Indexed first by Grantor Name Second, Indexed by Grantee Name Intent to Run with the Land i. A deed or lease that includes a restrictive covenant will be deemed to show the grantors intent for the covenant to be binding on future possessors if it recites: That the covenant is made to the grantor or grantee and their heirs or assigns and/or That it is intended to bind future owners of the parcel described in the deed or explicitly states that the covenant is intended to run with the land. ii. What happens if the deed fails to include this language but merely states, for example, that the grantor agrees not to use his retained property for operation of a gas station? Should the courts presume this covenant was intended to run with the land in the absence of language explicitly stating so? The courts generally hold that a covenant benefitting the owner of neighboring land is presumptively intended to run with the land so long as it touches and concerns the land. Privity of Estate i. The concept of Privity of Estate is confusing. On one hand, it contains the core principles of servitudes law; one piece of property is burdened for the benefit of another (so-called horizontal privity) and these benefits and burdens run to succeeding owners of both parcels (vertical privity). At the same time, the law of privity developed maddeningly complicated technical limitations that were unrelated to any legitimate policy concerns. Moreover, privity in its technical sense was never required under equitable servitudes law to obtain an injunction to enforce a servitude. For these reasons, the Restatement 3rd proposes formally abolishing the privity requirement. 1. Horizontal Privity a. Regulates the relationship between the original covenanting. Because land use restrictions both limit the free use of land and may make it less alienable, they were traditionally thought to be unjustified unless the burden on land was outweighed by a compensating benefit to some other property owner. The horizontal privity requirement served to promote this purpose. Two types of horizontal privity exists: i. Mutual Privity Test Exists when two owners have a simultaneous interest in the same parcel of land. 1. The traditional example is the landlord-tenant relationship; the tenant has a present possessory interest in the land and the landlord has a future interest called a reversion a right to recover possession at the end of the lease. Massachusetts developed an alternative test for mutual privity: 1. Mutual (AKA Simultaneous) Privity: this is the approach that Massachusetts has adopted. In order for privity to exist between parties then there must be an easement between the parties. a. It does not matter who has the easement between the grantor or grantee. i. Easement by Grant

2.

ii. Easement by Reservation iii. Mutual Easements iv. Note: Implied Easements are allowed. If there is an implied easement then mutual privity can be satisfied however in most cases there is usually an express easement. Mutual Privity is missing when one owner sells land to another and the grantor retains no interests in the land being sold. ii. Instantaneous Privity Test (Majority Rule but Massachusetts rejects it). A covenant is intended to burden one parcel for the benefit of another can become attached to both parcels if it is created at the moment the owner of one parcel sells the other parcel. Thus a covenant contained in a deed of sale transferring a property interest will satisfy the horizontal privity requirement. b. What kind of relationships does horizontal privity exclude? The two most important situations that do not satisfy the horizontal privity test are: i. Agreements between neighbors that are not part of a simultaneous conveyance of another property right; Example: A contract among all the owners in a neighborhood to restrict the property to residential uses. Neighbors are not in privity of estate with each other merely because of their physical location near each other. ii. Agreements between grantors and grantees that are not made at the same time as the conveyance of the property interest burdened or benefitted by the covenant. Example: A covenant made one week after the sale of a parcel; this does not satisfy the privity requirement because at the moment the grantor no longer owns the property of the grantee. iii. In both these cases, the parties can create privity of estate by selling all their parcels to a lawyer who sells them all back to the owners with the covenant contained in the new deeds. The ability to create horizontal privity by using a straw person is the reason why the privity requirement is a mere formality and the reason why it does not seem sensible to retain the requirement. Vertical Privity a. Refers to the relationship between the original covenanting parties and subsequent owners of each parcel. i. A relaxed vertical privity requirement would impose the burden on any future possessor of the burdened land and the benefit of the covenant on any future possessor of the benefitted land. This essentially the approach taken by equitable servitudes law and the Restatement 3rd. ii. Real covenants law adopted a strict vertical privity doctrine that included the technical requirement that the grantor not retain any future interests in the land. Thus vertical privity is present when an owner sells her property but not when she leases it. b. What relationships are excluded from the vertical privity idea? The three most important situation that do not satisfy the vertical privity test are: i. Successors in interest who have an estate of lesser duration than the prior owner; A landlord-tenant relationship. ii. Neighbors who are intended beneficiaries of the covenant but are not successor owners or possessors of the parcels owned by the covenanting parties; and Most courts hold that an owner is entitled to enforce a land use restriction by injunction as an equitable servitude in the absence of horizontal or vertical privity if the covenantor intended to benefit the owner of that parcel despite the lack of strict or relaxed vertical privity. At the same time, most courts are reluctant to allow such an owner to enforce a covenant unless it is absolutely clear that she is an intended beneficiary.

6.

Most courts will allow any landowners in the vicinity who are intended beneficiaries of the restriction to enforce it whether or not they derive their titles from one of the covenanting parties. However many (perhaps most) courts will not find neighbors outside the chain of title to be intended beneficiaries unless the document creating the covenant mentions their names (with the words heirs and assigns) or otherwise clearly designates their parcels as dominant estates intended to benefit from the covenant. iii. Owners who derive their tile from the grantor who imposed the restriction but who purchased their land before the sale of the parcel burdened by the covenant. Involves owners who derive their title from the grantor of the property sold with a restrictive covenant but who purchased their lots before the sale of that property. Traditionally, the restriction is thought to benefit the grantors remaining land and not land previously sold by the grantor, unless the conveyance expressly states that it is intended to benefit the owners of those previously sold lots. Substantive Policy Requirements: The Touch and Concern Test. a. Touch and Concern (Benefit & Burden) i. Use and Enjoyment and/or ii. Market Value and/or iii. Interests as land owners b. Courts have traditionally allowed covenants to run with the land only if they touch and concern the land. i. In general, the test is intended to identify the kinds of obligations that should run with the burdened estate because they are intended to and legitimately will benefit current and future owners of the dominant estate. Where the burdens and burdens created by the covenant are of such a nature that they may exist independently from the parties ownership interest in land, the covenant does not touch and concern the land and will not run with the land. ii. On the burden side, an obligation touches and concerns the burdened estate if it relates to the use of the land and the obligation is intended to benefit current and future owners of the dominant estate. iii. On the benefit side, an obligation touches and concerns the dominant estate if it improves enjoyment of that land or increases its market value. iv. Restrictive covenants that limit land use, such as covenants limiting the land to residential purposes or prohibiting the sale of liquor on the land will almost certainly touch and concern both the dominant and servient estates. a. They touch and concern the servient estate because they restrict the use of the land; b. They touch and concern the dominant estate because the restriction is intended to benefit the owners of the dominant estates whoever they happen to be and because most purchasers of the dominant estates would consider the right to enforce the covenant as increasing the value or attractiveness of the benefitted land. c. The traditional refusal to enforce covenants when the benefit is held in gross is an application of the touch and concern test. i. If Benefit in Gross, Burden May Not Run. Affects free use and marketability or alienability of property. Dead-Hand Problem Some exceptions dependent on Jurisdiction: 1. Government Entities, 2. Charities, 3. (Historic or Conservation covenants). 4. MA Exceptions for Benefit in Gross are listed in Mass. Gen. Laws Ch. 184, Sections 31 & 32. ii. As a policy matter, the beneficiary of a covenant who owns no land benefitted by the covenant traditionally could not enforce the covenant in gross because the burden of the covenant to the servient estate was not offset by a compensating benefit to other land.

iii. The Restatement 3rd allows enforcement in gross if the beneficiary can demonstrate a legitimate interest in enforcing the servitude. This approach retains a review for the substantive legitimacy of allowing enforcement by a beneficiary who wants to enforce the covenant for reasons other than their effect on improving the use or value of another parcel of land. d. Affirmative obligations have often caused problems for the courts. 1. It is now well accepted that obligations to pay dues to homeowners associations to maintain common areas of condominiums or residential neighbors touch and concern the land because they increase the value of the dominant estates and are associated with mutual obligations among owners that legitimately pass with ownership of the land. 2. However, other kinds of affirmative obligations are more controversial. a. Example 1: A covenant to the effect that the owner of one parcel was to supply steam heat to the owner of the neighboring property touched and concerned the land because it affected the legal relations of the parties to the covenant as owners of particular parcels of land. b. Example 2: A contract between P (Gas Company) and the prior owner of Ds land that granted P the right to withdraw water from Ds land touched and concerned the land. c. Example 3: A promise by a subdivision developer to supply water from a well on its retained land to its grantee buyers did not touch and concern the land because it did not substantially affect the ownership interest of landowners in the Orchard Hill subdivision because water was to be supplied for only six months out of the year and the homeowners had other available sources of water. 3. Covenants to pay money (other than dues to homeowners associations) also raise problems for the courts. a. Example 1: In Castlebrook, Ltd v. Dayton Properties Ltd. Partnerships, the court held that a covenant to return a tenants security deposit did not touch and concern the land and hence was not binding on a successor landlord. b. Example 2: In Chesapeake Ranch Club, Inc., v. C.R.C. United Members, Inc., the court held that a covenant to pay dues to belong to a recreational facility did not touch and concern the land. But see Streams Sports Club, Ltd v. Richmond, holding the opposite. 4. Courts have also had trouble with affirmative covenants that require owners to continue particular uses, although some courts have enforced such covenants. e. The touch and concern test has sometimes been used to invalidate covenants that violate public policy. 1. Reasonableness, not esoteric concepts of property law, should be the guiding inquiry into the validity of covenants at law. a. The Restatement 3rd would abolish the touch and concern requirement and provide instead that covenants will run with the land unless they are unconscionable, without rational justification, or otherwise violate public policy. However, many courts still retain some version of the touch and concern requirement. b. The Restatement 3rd seems to reintroduce the touch and concern element through the back door by providing that only appurtenant benefits and burdens should run with the land and then defining those as benefits and burdens tied to the ownership or occupancy of land because they obligate the owner or occupier of a particular unit or parcel in that persons capacity as owner c. In addition, the Restatement 3rd notes that a servitude is appurtenant rather than in gross or personal only if it serves a purpose that would be more useful to a successor to a property interest than it would be to the original beneficiary. II. ESTATE SYSTEM & FUTURE INTEREST A. The Estate System (Present & Future Interest) 1. Law of Servitudes & Estate System a. Bundle of Rights: Power to transfer and use b. Regulation of private agreements that attempt to divide specific property entitlements in the same parcel among several parties. c. Policy Concerns

2.

3.

4.

i. Feudalism to Market Capitalism ii. Wide Dispersal/Increased Access to Property iii. Free Use & Alienability (Probably the most important one!) Division of Ownership Over Time a. Landowners may own property in common in two ways: i. They may own property concurrently: A husband and wife, for example, may own their home jointly; roommates may rent an apartment together. In these cases, they possess the property together and work out among themselves how it will be used. ii. A different way owners may share ownership is by divvying up ownership rights over time; with one owning the present right to possess the property and the other a future power to take possession from the present owner is specified circumstances. The legal system authorizes owners to divide present from future ownership. 1. The present estate holder has the right to possess the property while her property rights last; 2. The future interest holder will obtain the right to possess the property when and if the present interest terminates. b. Present and future interests may be created by sale, lease, will or trust. i. A seller may create a future interest in a deed. ii. A landlord or lessor necessarily creates a future interest either orally or in a written lease because the property will revert to the landlord when the lease term expires. iii. A testator (one who dies leaving a valid will) may create a future interest by devising or bequeathing property in a will. The act of leaving property by a will to a beneficiary is called devising the property; the act of leaving personal property is called bequeathing the property. iv. If someone dies without leaving a valid will, the property is divided up among the persons identified in the state intestacy statute. Those who inherit property under the state intestacy statute are called heirs. v. A settlor (one who establishes a trust) may create a future interest in a trust document. A trust is a property arraignment in which ownership rights are controlled by one person (the trustee) for the benefit of another identified individual (the beneficiary). The person establishing a trust, the settlor, does so in a written trust document. Statute of Quia Emptores: Modern Implications a. Right of fee simple owner to transfer (alienate); b. Right of heirs to inherit land if not transferred before death (earlier law); c. Effect: Destroyed feudal system and promoted the alienability of property. d. New System: Private property/holdovers. The Perpetual Conflict Between the Generations: Dead Hand Control & Alienability a. Two forces in the growth of land: desire to avoid feudal incidents and the wish to control the future use and ownership of land by keeping land in the family. b. The conflict between the generations was perpetual: i. Grantors wanted to control the future use of their property, while grantees wanted both to be freed of restrictions placed on them by their ancestors and to be free to impose their own restrictions on future generations. This conflict created a cycle of restrictions followed by legal mechanisms to avoid the restrictions 1. The courts wanted to protect both the grantors right to control the future use and ownership of property and the grantees right to be free of control by the dead hand of the past when circumstances changed. c. The statute Quia Emptores created a deep paradox. i. Although intended to protect feudalism, it did so by enshrining at the core of the common law of property the key principle of promoting the alienability of property. Alienability is promoted by giving grantors the freedom to determine to whom and under what conditions they will part with their property. At the same time, no one can use property that is burdened with restrictions; no one wants to purchase such property, and it

5.

6.

is therefore not alienable. This dilemma creates a core tension in the rules governing property interests. Important Distinctions To Keep in Mind a. Interests in Land i. Non-Estate (Owner Does Not Have Possession) Easements Profits Covenants ii. Estate (Owner has possession, either present or future). Fee Simple Fee Tail Life Estates Future/Interests Landlord/Tenant b. Estates i. Freehold Fee Life Future Interests ii. Non-Freehold (associated with Landlord/Tenant Leaseholds) Term of years Period of tenancy Tenancy at will. c. Estates can be created by: i. Transfer or Sale (Deed) (Inter vivos while still alive) ii. Lease iii. Will (Devise) iv. Trust (Wont spend any time on it) v. Note: If no heirs left then the land escheats to the state. Fee Simple Interests a. Fee Simple Absolute i. Property owner without an associated future interest is called a fee simple or fee simple absolute. An owner of a fee simple interest in real property has the present right to possess and use the property, the right to sell it or give it away, and the right to devise it by will or leave it to her heirs. Because no one owns a future interest in the property, no other individual has any presently identifiable legal right to obtain ownership of the property in the future. Depending on what the fee simple owner chooses to do with the property, future owners include potential buyers, grantees by gift, beneficiaries of a trust, and devisees (if the owner leaves a will) or heirs (if the owner dies intestate, or without a will). ii. A conveyance (technical word for a transfer of an interest in real property) of a fee simple interest can be accomplished by the following language: O to A O to A and her heirs O to A in fee simple. iii. Under current law, owners are presumed to convey all the interests they own in property they convey unless the conveyance states otherwise. iv. The language A and her heirs is technical in nature; it indicates a fee simple interest in A. The words and her heirs do not give As heirs any interests in the property. It is up to A whether or not she wants to leave the property to her heirs or sell it or leave it to someone else. The language identifying the named owner A is referred to as words of purchase because it identifies who owns the property;

b.

The language and her heirs is referred to as words of limitation because it describes the kind of estate owned by A (a fee simple) rather than identifying who owns the property. Defeasible Fees i. Present freehold interests are divided mainly into interests held for life and those held until the happening of some stated event (other than the present owners death). Present interests that terminate at the happening of a specified event, other than the death of the current owner, are called defeasible fees. The categories of a defeasible fees relate to two crucial distinctions: 1. Whether the future interest is in the grantor or in a third party, and 2. Whether the future interest become possessory automatically when the stated event occurs or becomes possessory only if the future interest holder chooses to assert his property right. a. When the future interest belongs to the Grantor: In this situation, two kinds of defeasible fees can be created: i. Automatic Transfer: When the future interest reverts automatically to the grantor on the happening of the stated event, the present interest is called a fee simple determinable and the future interest is called a possibility of reverter. Any language denoting that the ownership is limited to a time period during which certain conditions are met will generally be interpreted as evidence of the grantors intent to cut off ownership rights automatically when the condition is violated or met. When the condition is violated, ownership automatically shifts to O or her heirs or Os devisees. ii. Transfer upon grantors assertion of property rights: Instead of providing for automatic transfer of the property rights upon violation of the condition, the grantor may choose to retain for herself or her heirs the right to decide, at the time the condition is violated, whether to retake the property. 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. The current interest is called a fee simple subject to a condition subsequent and the future interest is called a right of entry (sometimes also referred to as a power of termination). Traditionally, a major difference between possibilities of reverter and rights of entry involves the statute of limitations for adverse possession. 1. When a condition in a fee simple determinable is violated or occurs, the possibility of reverter kicks in automatically, giving the holder an immediate right of possession. The statute of limitations starts running immediately, and if the holder of the possibility of reverts does nothing for the statutory period, title will shift back to the current possessor. 2. However, a right of entry does not become possessory until the holder asserts a right of possession; if the holder of the right of entry never asserts the right, the title will remain with the present estate owner. Theoretically, this means that violation of the condition in a fee simple subject to condition subsequent does violate anyones rights such as the statute of limitations is triggered only when the holder of the right of entry demands a right of possession from the present estate owner. 3. However, the modern approach is to treat the two types of future interest the same under one of two theories: a. First, the court may apply the doctrine of laches to prevent the holder of a right of entry from waiting too long to assert her

b.

c.

right to entry; laches prevent recovery when an unreasonable delay in asserting legal rights unfairly prejudices another. b. Second, as a policy matter, it seems inappropriate for the one who violates a condition to face the perpetual possibility of a claim by the current holder of the right of entry. For this reason, the modern but not universal approach has been to start running of the statute at the moment the condition is violated, making the rights of entry effectively similar if not identical to possibilities of reverter. When the future interest belongs to a third party: When the future interest in a defeasible fee belongs to someone other than the grantor, the present interest is called a fee simple subject to executory limitation, and the future interest is called an executory interest. These interests are identical to the fee simple determinable, with ownership shifting automatically on the occurrence of the contingent event, except that ownership shifts to a third party rather than reverting to the grantor. (O to A as long as used for residential purposes, then to B). i. Shifting From Grantee to Grantee ii. Springing From Grantor to Grantee Fee Tail: Is an estate whose purpose is to keep the property in a family dynasty. i. The traditional words to create a fee tail are O to A and the heirs of his body. This conveyance traditionally created a set of life estates in A. As lineal descendants, their descendants, and so on, until the blood line ran out, at which point the property would revert to O or Os heirs; every fee tail is followed by either a reversion or a remainder to take effect when the blood line runs out. Because of its effect on marketability, the fee tail has been substantially abolished in the United States and is recognized in only four states (Delaware, Maine, Massachusetts, and Rhode Island). 1. Some states interpret a fee tail as a fee simple absolute (California); 2. Others permit the fee tail but allow the fee tail owner to convert it to a fee simple by conveying the property in fee simple to another (Mass. Gen. Laws Ann. Ch. 183 45). 3. Some states have interpreted fee tails as life estates in the present owner with a remainder in fee simple in her issue. (Colorado).

7.

Life Estates a. Reversions and Remainders i. Present ownership rights can be held during the life of a designated individual. A conveyance from O to A for life creates a life estate interest in A. This means that A owns the property during his lifetime. The future interest following a life estate can be either in the grantor or in a third party. 1. If the property reverts to the grantor when A dies, the future interest is called a reversion; 2. If the grantor designates a third party to obtain ownership when A dies, the future interest in the third party is called a remainder. ii. Difference between Life Estate and a Fee Simple Estate The owner of a fee simple can choose who will own the property after her death by either writing a will or availing herself of the state intestacy statute. In contrast, a life estate owner has no right to determine who the property on her death will since ownership automatically shifts to the reversioner or remainder holder. 1. If a life estate owner, A, sell her property to a buyer, B, the buyer gets exactly what the seller had: an estate for the life of A. Thus, when A dies, the property will shift to the reversioner or remainder holder. Bs interest is called a life estate for the life of another or a life estate per autre vie. (O to A for life Reversion, O to A for life, then to B Remainder).

b.

Contingent and Vested Remainders i. Rules to keep in mind Does not follow a fee estate Same time and instrument Does not cut short the prior estate. ii. Remainders are further divided into two kinds: Contingent Remainders 1. Remainders are contingent if one or both of two conditions are met: a. Condition Precedent: If the remainder will take effect only upon the happening of an event that is not certain to happen, or i. For example, a conveyance from 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 does not graduate from law school, the property will revert to O on As death; if B later graduates from law school, the property will then spring to B the majority current law). b. If the remainder will go to a person who cannot be ascertained at the time of the initial conveyance. i. For example, a conveyance from O to A for life, then to children of B, creates a contingent remainder in the children of B if B has no children upon the conveyance from O to A; this is the case because the children cannot be individually identified at the time of the conveyance from O to A. Vested Remainders 1. Includes any remainders that are not contingent remainders. They are therefore remainders to person who are identifiable at the time of the initial conveyance and for whom there are no conditions precedents other than the natural termination of the prior life estate when the life estate owner dies. Vested owners are of three kinds: a. Absolutely Vested Remainders: This is a remainder that is not subject to change. Best kind to have! b. Vested Remainders Subject to Open: This is remainder that may be divided among persons who will be born in the future i. For example, a conveyance from O to A for life, then to the children of B, is a vested remainder if B has any living children at the time of the conveyance from O to A; it is subject to open because any children of B born after the conveyance from O to A may share in the property rights they will own the property jointly. Under the rule of convenience the courts will close the class when A dies so that the children can take possession at As death; they will not have to share the property with any after-born children. c. Vested Remainders Subject to Divestment: This is vested remainder that may be destroyed by an event that occurs after the original conveyance. i. 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 remainder in B (since B is ascertained at the time of the conveyance to A and there are no conditions precedent to Bs taking the property) that is subject to divestment (because if the condition is met at any time if B flunks out of law school B will lose his right to obtain the property on the death of A). ii. Destructibility of Contingent Remainders The law formerly provided that contingent remainders were destroyed in two circumstances. 1. First, contingent remainders were destroyed if they did not vest before the preceding life estate ended. 2. Second, contingent remainders were destroyed by merger.

For example, A conveyed property to each of his daughters, B and C. Each deed provided that the daughter would own the property during her natural life and that it would go to her children if she have any at her death, but if she did not children to her heir or heirs. Since each of the alternative remainders were contingent, the parents retained a reversion. However, after the conveyance to the daughters, the parents conveyed new deeds to the daughters transferring their reversion to the daughters. Under the traditional doctrine, since the prior estate (the reversion in the original grantor) had terminated by merger with contingent remainders before those contingent remainders became vested, they were vested. Only a few states follow the traditional rule. The modern approach holds that contingent remainders are indestructible. iii. Doctrine of Worthier Title (Still followed in many states) Many states will interpret a conveyance from O to A for life, remainder in the heirs of O as O to A for life, remainder in O. The remainder in Os heirs is converted into a reversion in the grantor. In the past this was an absolute rule; today, however, in many states it is simply a rule of construction that can be overcome by sufficiently clear language indicating that the grantor actually intends to give a remainder to his own heirs. 1. Doctrine of Worthier Title: A has a life estate, O has a reversion and O can dispose of it as he wishes. The rule does have a current policy justification. Os heirs cannot be determined until O dies. This, if for some reason it becomes necessary or appropriate to sell a fee simple interest in the property, it is not possible to do so until the death of O. iv. Rule in Shelleys Case Only Applies to Heirs! The Rule in Shelleys Case is similar to the doctrine of worthier title. It converts a remainder in the grantees heirs into a remainder in the grantee. Thus, O to A for life, remainder to As heirs becomes O to A for life, remainder to A. Since A owns both the life estate and the remainder, the two are merged into a fee simple. Thus, the rule converts O to A for life, remainder to As heirs, into O to A in fee simple absolute. The rule was similarly intended to respond to medieval tax evasion schemes, but it has been abolished in the vast majority of states. 1. The Rule can be avoided by careful drafting. The grantor can create a leasehold for a fixed term (a term of years) rather than a life estate to avoid operation of the rule. a. For example, O to A for 100 years if A lives so long, then to As heirs, avoids operation of the rule. v. Regulation of Future Interests Future interests generate conflicts between the interests of prior owners in controlling future use and disposition of their property and the interests of current owners in asserting controlling over the property. 1. Three kinds of legal rules regulate future interests: a. First, the rules give some guidance on how to interpret ambiguous conveyances; the most important doctrine of this kind is the presumption against forfeitures. b. Second, property law limits the ways in which owners divide property interests. i. To create an effective temporal division of property rights, ownership interests must be in the form of one of the established estates; a general rule prohibits the creation of new estates. c. Third, the legal rules regulate the substance of future interests by preventing owners from creating certain kinds of future interests. i. Some prohibitions, such as the rule against perpetuities and the rule against restraints on alienation, are intended to promote the relatively free transfer in the market place. ii. Other doctrines are intended to protect interests in equality and liberty. vi. Trusts Trustee has fiduciary obligations to act in the best interests of the beneficiary and is subject to liability to the beneficiary for mismanaging the trust assets.

a.

Trusts are called equitable interests in property since they originated in the equity courts. They can be created in forms that correspond to all legal estates described above, including life estates and defeasible fee. a. For example, a settler could grant property to X in trust for A for life, then to As children. vii. SUMMARY No future Interest: Fee Simple Absolute Defeasible Fees 1. Future interest in grantor or her heirs: a. Automatic Transfer i. Current Interest: Fee Simple Determinable ii. Future Interest: Possibility of Reverter 2. Transfer only if future interest owner asserts her interest a. Current Interest: Fee Simple Subject to Condition Subsequent b. Future Interest: Right of Entry 3. Future Interest in Third Party a. Current Interest: Fee Simple Subject to Executory Limitation b. Future Interest: Executory Interest Life Estates 1. Current Interest: Life Estate 2. Future Interest: a. In Grantor: Reversion b. In Third Party: Remainder i. Vested Remainders Absolutely Vested Remainders 1. Best Kind to have 2. All the future interest owners are ascertainable and there is no condition precedent to the future interest owner taking the property. Vested Remainder Subject to Open 1. Some but not all future interest takers are ascertainable 2. No condition precedent 3. Rule of convenience: When A dies, only the children who were born prior to As death get the property. Class Gift Closes when A dies. Promotes Alienability Vested Remainder Subject to Divestment ii. Contingent Remainders Condition Precedent or Unascertained Person viii. Estate Systems: Freehold Interests Words Often Used Future Interest to Create Present Interest Fee Simple Absolute Fee Simple Determinable The Interest To A and her heirs So long as While During Until In Grantor Possibility of Reverter In Third Person -

1.

Unless Fee Simple Subject to Condition Subsequent Provided that On Condition But if Fee Simple Subject to Executory Limitation Until (or Unless) . . ., Then to, But if , then to . . ., Life Estate 8. For Life Reversion Remainder Executory Interest Right of Entry for condition broken (or power of termination) -

9.

Regulatory Rules a. Future interests are regulated by both common law rules and statutes. The main structural rules include: i. The rule prohibiting the creation of new estates; ii. The rule against unreasonable restraints on alienation; iii. The rule against perpetuities; iv. The interpretive rule prohibiting Waste of the present estate; v. The prohibition on invalid racial conditions; and vi. The rule against unreasonable restraints on marriage. b. Rule Against Creation of New Estates i. Courts follow a general rule against the creation of new estates. A conveyance that does not fit within any of the established categories (including fee simple absolute subject to covenants, defeasible fees, life estates, leaseholds, and in some states, fee tail) must be interpreted to create the most closely analogous estate. This rule has both formal and substantive dimensions. 1. Formally, it means that grantors must put their conveyances in a recognizable form if they want courts to recognize the package of rights they intended to create. 2. Substantively, it means that certain packages of rights will not be recognized. This limits the number of packages of ownership bundles that can be created, facilitating exchange both by making it easier to determine what one is buying and by ensuring that owners have certain basic rights when they acquire those standard bundles. One important example is the abolition of the fee tail. 1. A conveyance that purports to create a perpetual series of life estates will not be honored; it keeps the property in a single family and takes it out of the real estate market, thereby infringing on both the autonomy of future owners and social welfare. The few states that recognize the fee tail allow it to be converted to a fee simple or transmute it into a life estate, burdening the property for one or two generations but not permanently. a. The rule against creation of new estates helps consolidate property rights, either immediately or over time, in a single owner. It does this by limiting the power of grantors to create particular future interests. Interpreting Ambiguous Conveyances; Presumption Against Forfeitures a. Sometimes grantors do not use traditional language to create one of the estates. Other times, grantors use conflicting language, seeming to create on estate in one phrase and another estate in another phrase.

i.

b.

c.

In either case, courts must interpret the conveyance to determine what types of current and future interests were created and who owns the property. Two conflicting rules of interpretation dominate court discussions on this issue: On one hand, courts often proclaim their fealty to the goal of effectuating the grantors intent to the extent it can be discerned from language in the deed or will or, possibly, from the surrounding circumstances. On the other hand, when the language is ambiguous, most courts also voice a preference for a construction of the language that will avoid recognition of a future interest. 1. This is especially so if recognition of the future interest would mean that the present possessor lost her title to the future interest holder. This rule of interpretation creates a 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 language. a. If the choice is between a future interest and precatory language (a statement of purpose not intended to be legally binding), the presumption is to recognize a fee simple absolute with no future interest. b. If the choice is either a covenant or a 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. c. If the choice is either a fee simple determinable or fee simple subject to a condition subsequent, the fee simple subject to condition subsequent is preferred because the current interest is not automatically forfeited when the condition is violated, thereby keeping ownership (at least for the time being) with the current owner. d. If the choice is between a life estate and a fee simple (defeasible or absolute), a fee simple interest is preferred. Policies Behind The Presumption Against Forfeitures i. The choice of preferring either the interests of the current owner or the interests of the future interest holder involves policy decision about the proper distribution of power over property between grantors and grantees. Enforcing the condition in the original conveyance by 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 from by the condition. In contrast, the presumption against forfeitures promotes the interests of 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 owners the freedom o shift property to more valuable or desired uses. At the same time, the presumption against forfeitures may further the grantors interest, on the theory that the grantor presumably intended to give away any interests she has and would be likely to make it very clear if she intended to retain a future interest. Purpose Language i. When conveyances include language explaining the purpose of the transfer, such as in Wood, the vast majority of courts agree with Wood and will hold the language to precatory not intended to have any legal significance and will interpret the conveyance to have transferred all the interests the grantor owned. If the grantors owned a fee simple, the courts presume that is what they intended to convey. This result follows from the presumption against forfeitures and protects the interests of the grantee placing the burden on the grantors to be clear if they intended to retain a future interest in the property. ii. However, the courts are not unanimous on this score. The courts sometimes find a future interest in the absence of language clearly creating one. For Example, in Forsgren v. Sollie, a conveyance was interpreted to create a fee simple subject to a condition subsequent when the deed stated both that the property was conveyed on the condition that the grantee construct a partition fence and, in a later

sentence, that the property was conveyed to be used as and for a church or residential purposes only. The court interpreted the language to create right of entry in the grantor to retake the property if it were ever used for any purpose other than as a church or residence. iii. Although most courts are reluctant to find a future interest in the absence of clear language creating one, some courts are eager to find a future interest when the property is donated for charitable purposes. In the absence of a future interest, the owner is entitled to shift the property to a noncharitable use, thereby possibly violating the intent of the grantor and harming the public interest by ending the charitable use. Property is often more valuable if sold on the open market than when reserved for charitable purposes. iv. On the other hand, it is not clear that recognition of a future interest will promote charitable uses. After all, if the grantors had prevailed in Wood and reclaimed the property, they could have used the property for any purpose including a non-charitable one. v. When a deed states a charitable purpose for property or restricts its use to charitable purpose, courts have attempted to achieve the charitable purpose by adopting a number of different interpretations. Most courts hold the language to be precatory, applying the presumption against forfeitures. 1. Under this approach, grantor who wants to create enforceable restrictions on use should do so by creating a charitable trust. 2. However, from time to time, courts have rejected this approach. Some courts grant substantial legal effect to language of purpose and may interpret it to create future interest. Other courts have interpreted the purpose language or use restriction as an enforceable covenant, allowing the covenant to be enforced in gross at least in the context of charitable property. Still other courts have imposed a constructive trust on the property, obligation the current owner to use it for charitable purposes or transfer it to someone who will so use it. d. Constructional Preferences i. Fee Simple Absolute (Precatory Language; statement of purpose not intended to be legally binding); ii. Fee Simple Absolute with Covenant; iii. Fee Simple Subject to Condition Subsequent; iv. Fee Simple Determinable; v. Fee Simple v. Life Estate Fee Simple Preferred 10. Restraint on Alienation a. Reasonable Restraints Doctrine i. Modern Trend ii. To determine reasonableness, ask the following questions: Is it limited in duration? Is there a reasonable purpose for the restraint? If the answer to both of these questions is yes, then the restraint on alienation will be upheld. b. Total Restraints on Alienation of Fee Simple Interests i. Restraints on alienation are covenants or conditions that restrict the ability of the owner of real property to sell or give away the property. The traditional rules distinguish 3 types of restraints. Disabling Restraints 1. Forbids the owner from transferring her interest in the property. a. Example: O conveys Blackacre to A and her heirs, but any transfer of Blackacre shall be null and void. b. Disabling restraints are far worse than promissory or forfeiture restraints because no one is entitled to waiver the restraint. Forfeiture and promissory restraints, in contrast, do not necessarily take the property out of the market; the owner burdened by the condition or covenant has the power to bargain with the

b.

c.

d.

future interest holder or the owner of the dominant estate to induce her to give up her rights. A covenant beneficiary can abandon the covenant and a forfeiture condition can be destroyed if the beneficiary of the future interest conveys the future interest to the present on estate owner, thereby merging the two estates and destroying the condition. Promissory Restraints 1. A covenant by which the grantee promises not to alienate his interest in the property. a. Example: O conveys Blackacre to A in fee simple. A promises [or covenants] for himself, his heirs, and his assigns that Blackacre shall not be transferred. Forfeiture Restraints 1. Provides for a future interest that will vest if the owner attempts to transfer her interest in the property. a. Example: O conveys Blackacre to A, but if A attempts to transfer the property, then to B and her heirs. Total restraints on alienation of fee simple interests, whether in the form of disabling, promissory, or forfeiture restraints, are uniformly held void and unenforceable. The policies underlying the rule against total restraints on alienation of fee simple include: 1. Promoting dispersal of ownership of property and preventing concentration of land in passive family dynasties, 2. Encouraging individual autonomy by vesting control of resources in current owners, and 3. Promoting social utility and efficiency by allowing property to be transferred to its most valued use. Formalism; Repugnant to the Fee i. Courts traditionally have held that an absolute restraint on alienation is repugnant to the nature of a fee simple interest in real property. The argument seems to be that a fee simple is a property interest that is by definition alienable so a restraint on alienation cannot attach to it. ii. In contrast, reasonable restraints on alienation are valid, even if they attach to fee interests. The reasonableness formulation is the more modern one and is increasingly the rule articulated in the case law. It has been adopted by the Restatement 3rd Of Property. The Restatement 3rd provides that reasonable is determined by weighing the utility of the restraint against the injurious consequences of enforcing the restraint. Partial Restraints on Alienation of Fee Simple Interests. i. Courts sometimes uphold partial restraints on alienation that last for a limited time or limit the transfer of property to certain persons but do not constitute wholesale prohibitions on transfer. They may uphold such restraints either because they do not unduly limit the ability the transfer the property or because the restraint has a legitimate purpose that justifies the limit on alienability. Partial restraints on alienability may even increase alienability because grantors may be more likely to part with their property if they can control the future use or disposition of it. Nonetheless, restraints that totally prohibit alienation of fee interests for a period of time are generally held void. Those limiting transfer to particular persons are sometimes upheld. Consent to Sell Clauses and Preemptive Rights i. Covenants that require owners to obtain consent of the grantor or developer of the subdivision or condominium are usually struck down by the courts as unreasonable restraints on alienation. ii. In contrast to covenants giving grantor/developers the continuing power to consent to sales, covenants that grant such powers to a homeowner or condominium association are ordinarily upheld either if: Require the association to act reasonably or Are in the form of preemptive rights that ensure that the owner can transfer the unit for its fair market value to the association or its members or that require the holder of the preemptive right to match any bona fide offers made by a third party. iii. Rights of first refusal obviously limits the current owners power to determine to whom the property will be transferred and may therefore inhibit the alienability of the property

e.

f.

g.

h.

i.

j.

k.

considerably. If they do not limit the discretion of the association in any way, they are likely to be struck down unless the court reads a reasonableness requirements into the covenant. Options i. An option to purchase is a right to buy property when one chooses to do so. It is a right to force an owner to sell. It is therefore the opposite of a preemptive, which kicks in only when the current owner chooses to sell. Options are likely to be held to be unreasonable restraints on alienation if they are for a fixed price and have no termination date. However, if they are for a limited time or ensure that the owner can receive fair market value, they are likely to be upheld. Cooperatives i. Discretionary powers over transfer are likely to be upheld in the special case of cooperatives because of the greater financial interdependence of the owners. At the same time, such powers may be utilized for purposes other than financial security; as with any such power, they may be used to exclude potential buyers thought to be undesirable and may be a cover for discrimination. Restraints on alienation of property held for use by low-income persons are likely to be upheld because the restraints serve the competing public purpose of preserving affordable housing that would not otherwise be created by ordinary market forces. Life Estates i. Most courts uphold total restraints on alienation of life estates when they are in form of forfeiture or promissory restraints. Disabling restraints on life estates, however, are generally not enforced, again because a disabling restraint inflexibly refuses to identify anyone who has the power to waive enforcement of the restraint. One reason courts sometimes uphold restraints on alienation of life estates is that life estates are not alienable to a large degree anyway. Some courts treat life estates as they do fee simple interests, holding that restraints on alienation of life estates are void under all circumstances. Equitable Interests i. Courts generally uphold restraints on alienation of beneficial or equitable interests in property. The settlor or trustor may direct, for example that the beneficiary has no right to alienate her beneficial interest; this arrangement is sometimes called a spendthrift trust because it protects the beneficiarys right to a continuing stream of income from the trust by limiting the beneficiarys power to alienate the right to receive that income. A settlor may also direct the trustee not to sell the trust assets, and such limitations will ordinarily be enforced. If those assets become unproductive, the trustee may go to court for approval of a sale of the assets to generate income for the beneficiary in line with the settlors intent; such approval may be granted under the cy pres doctrine. Leaseholds: Limitations On Subletting i. Courts ordinarily uphold limitations on the transfer of leaseholds. A lease stating that the tenant may not sublet or assign the leasehold, for example, is likely to be enforced. Complications arise, however, when the lease simply requires the consent of the landlord before the tenant sublets or assigns the leasehold. Indirect Restraints on Alienation i. Some private controls on land use are so severe that they make the property very difficult to sell. Such restraints are sometimes struck down as indirect restraints on alienation, on the theory that the grantor should not be able to do indirectly what he could not do directly. If limitations on use of property are so extensive that the property cannot be used for any legitimate purposes, the property has no value and therefore is unalienable since no one would want to purchase it. In such cases, courts may find such limitations on use void as indirect restraints on alienation. Such claims, however, are difficult to win. The Restatement 3rd for example, invalidates indirect restraints only if they lack a rational justification. Obsolete restrictions are generally handled by the doctrines of changed conditions and relative hardship. Low Income Housing i. In recent years, charitable organizations called community development corporations (CDCs) have established housing for low-income families. To ensure that the housing remains

available for such families, it is often subject to restraints on alienation that prohibit the leasing the property or sale to a family that is not a low-income family. l. Constructive Trusts i. In Alsup v. Montoya, the testator left property to his daughters for life with a provision that the property not be sold. Some 50 years later, the daughters brought an action for a declaratory judgment that the property be sold because it could no longer be used profitably for agricultural purposes, the buildings had deteriorated, and the fertility of the land had declined. The court allowed both the life estates and the future interests to be sold, despite the restraint on alienation, on the equitable ground that this was what the grantor would have wanted under the circumstances and because a failure to allow the sale would have resulted in waster of the property. 11. Discriminatory Conditions a. In Charlotte Park and Recreation Commission v. Barringer, the court construed a deed by Osmond Barringer, who, along with several other persons and city of Charlotte, conveyed land to a public agency, the Charlotte Park and Recreation Commission, to use as a public park for use by the white race only. The deed provided that title was to revert automatically to the grantors or their heirs if the park should ever be used by non-white persons, on the condition that the grantors or their heirs pay $3,500 to the park commission. Racial segregation of the public park was later held unconstitutional; the park manager therefore no longer had the power to exclude non-whites from the park. i. The question was whether the unconstitutional condition could be enforced by a court judgment affirming the possibility of reverter in the grantors heirs. The Barringer court held that the transfer of ownership occurred automatically at the moment the condition was violated and that no state action was therefore involved in transferring ownership from the park commission to the Barringers heirs. The court also held, however, that the conveyance from the city of Charlotte, which contained a similar condition and possibility of reverter, could not be enforced, on the ground that the unlawful condition had been made initially by a state governmental body and therefore constituted illegal state action. b. In contrast, in Capital Federal Savings and Loan Association v. Smith, the court refused to enforce the future interest, instead vesting fee simple title in the purchaser. In that case, a group of property owners signed a covenant in 1942 agreeing for themselves, their heirs, and their assigns not to sell or lease the said above described lots and parcels of land owned by them respectively . . . to any colored person or persons, and covenant and agree not to permit any colored person or persons to occupy said premises during the period from this date to January 1, 1990. It further provided that if any parcel were conveyed or leased in violation of the covenant, the interest of the African American owner shall be forfeited to and rest in such of the then owners of all of said lots and parcels of land not included in such conveyance or lease who may assert title thereto by filing for record notice of their claim . . . i. The court held that regardless of whether the restriction was a covenant or an executory interest, the policies underlying Shelley v. Kraemer applied. c. Shelleys Rule 14th Amendment does not allow states to discriminate on the basis of race. i. Fair Housing Act and State Law apply to private property whereas Shelleys rule extends to state action only. III. COMMON OWNERSHIP A. Varieties Of Common Ownership 1. Property may be held by more than one person in many different ways. a. Property rights may be divided among several, or even many, persons with specific sticks in the bundle of rights that make up property allocated to different persons or groups. i. Examples include: Landlord & Tenant; Present & Future Interests; and Dominant & Servient Estates subject to servitudes. b. Property rights may be shared as well as divided. In other words, more than one person may have the right to control the same resource; both may have the right to the same stick in the bundle. i. For Example:

A wife & husband may together own a condominium apartment in an urban building as joint owners. 1. In this arrangement each has a concurrent right to possess the entire condominium unit. 2. They also share with other condominium owners the right to use common areas of the building. a. Disputes about the use and condition of common areas such as whether to pay for a new roof must be worked out in conjunction with the other condominium workers. 2. There are many different forms of common ownership. a. Some forms are relatively simple, granting common owners substantial freedom to manage the property as they see fit. i. Some common owners do this in consultation with one another; other owners formally or informally designate one or more persons to act as manager of their common property. b. These forms include common ownership of residential property, in the form of: i. Tenancy in common or ii. Joint Tenancy; or iii. Tenancy by the Entirety. c. Common ownership of businesses in the form of partnerships. d. In some states, spouses own all property acquired during the marriage jointly as community property. a. In these arrangements, the co-owners may manage the property informally by making decisions together from time to time, or they may enter formal contracts allocating their respective rights and responsibilities. 3. Other forms of common ownership allocate powers over the resource between owners and managers. a. In these forms, owners who retain ultimate power over the resource elect a board of managers to take charge of the day-to-day operations of the property. i. In business corporations, for example, shareholder-owners elect a board of directors, which in turn chooses the managers of the company. ii. Other examples include charitable trusts, such as private hospitals or universities, initially established by a state charter or by a private founder who endows the institution and sets up its management structure; this structure often consists of a board of trustees that chooses the president of the institution, who runs the institution in conjunction with subordinates hired to provide needed services. 4. Property is also owned in common by government entities. a. The federal government is one of the largest landowners in the United States. Significant chunks of property also are owned by state and local governments. b. Voters elect political leaders who pass laws delegating to administrative agencies the power to manage public lands such as schools, parks, highways, and government office buildings. 5. Similarly, American Indian nations own substantial amounts of land on reservations. a. While some reservation land is owned individually in fee simple by members of each tribe, other land is held communally by the tribe as a whole; in turn, parcels of this communally held trial land may be assigned by the tribal government to individual tribal members. Each tribal government and court system has its own method of overseeing the allocation and regulation of tribal land. B. Rights & Obligations Of Co-Owners 1. Tenancy In Common a. Each tenant in common, no matter how small her fractional interest, has the right to possess the entire parcel unless all the co-tenants agree otherwise by contract. i. Each co-tenant has an undivided interest, meaning that each owner has the right to possess the whole property; the fractional amount is important only for such questions as how the purchase price will be divided when the property is sold. b. When a tenant in common dies, his interest goes to his devisees under his will or to his heirs under the state intestacy statue if he has not left a will or otherwise disposed of the property. c. A tenancy in common may be transferred by the following language in a deed or will: i. O conveys [or devises] Blackacre to A & B as tenants in common.

2.

O conveys [or devises] Blackacre to A, B, & C as tenants in common, with a undivided interest in A, a undivided interest in B, and a undivided interest in c. Joint Tenancy a. Like tenants in common, each joint tenant has the right to possess the entire parcel. Unlike tenants in common, joint tenants have traditionally required to posses equal fractional interests in the property. b. Right of Survivorship i. The main difference between joint tenancy and tenancy in common is the right of survivorship. When a joint tenant dies, her property interest in immediately transferred to the remaining joint tenants in equal shares. 1. Example: a. In joint tenancy owned by A, B, and C, each with a 1/3 undivided interest, As interest when she dies goes to B and C (that is, half to B and half to C). The result is that B and C own the property as joint tenants, each possessing a undivided interest in the property. If A tries to devise her 1/3 interest, her will would have no effect; she has no right to devise her interest [However, A can easily obtain this result by severing the joint tenancy and creating a tenancy in common, in which case she would be able to devise her interest, discussed below]. c. Formalities of Creation i. Certain formalities were traditionally required to create a joint tenancy. These are often to as the: Unity of Time: this means that the interest of each joint tenant must be created at the same moment in time; Title: all joint tenants must acquire title by the same instrument or title (joint tenancy does not ordinarily arise by intestate succession); Interest: all joint tenants must possess equal fractional undivided interests in the property and their interest must last the same amount of time; and Possession: all joint tenants must have the right to possess the entire parcel. ii. Some states have passed statutes that abolish one or more of these formalities. iii. Other states have abolished joint tenancies entirely. d. Severance i. In a joint tenancy, the right of survivorship is a highly contingent one because a joint tenant who transfers her property interest can destroy the right of survivorship of her fellow owners. Example: 1. If A and B own property as joint tenants, each owner has the right to obtain full ownership of the property when the other co-tenant dies (the right of survivorship). If A sells her one-half undivided interest to C, however, the joint tenancy is severed, and Bs right of survivorship is destroyed. The result is that B and C will own the property as tenants in common. ii. A joint tenant who wishes to destroy the right of survivorship while retaining her life interest can convey her interest to another who conveys it back. Example: 1. If A and B own as joint tenants, A may convey her interest to a third party (a straw person), who reconveys the interest back to A. Because this destroys the unity of title and time, A and B will now own the property as tenants in common rather than as joint tenants. iii. Can an owner achieve the same result by conveying her interest from herself as joint tenant to herself as tenant in common or otherwise designating an intent to destroy the right of survivorship? Traditionally, this could not be done, but the procedure was approved in Riddle v. Harmon, 162 Cal. Rptr. 530. Statutes in some states formally allow this procedure.

ii.

3.

4.

5.

6.

iv. Severance occurs only between the selling owner and the remaining owners; it does not change the relations of the remaining owners among themselves. Example: 1. If A, B, and C own the property as joint tenants, and A conveys his interest to D, the result is that D owns a 1/3 interest as a tenant in common with B and C, who each own a 1/3 interest as joint tenants with each other. When D dies, her 1/3 interest will go to her heirs or devisees. However, when B dies, his interest goes to C as a surviving joint tenant, who will then own a 2/3 interest as a tenant in common with D. v. Joint tenancies may be created by the following language in a deed or will: conveys [or devises] Blackacre to A and B as joint tenants. conveys [or devises] Blackacre to A, B, and C as joint tenants. e. Joint Tenancy v. Dual Life Estates with Alternative Contingent Remainders. i. It is possible to create an indestructible right of survivorship if one uses the form of life estates and remainders. Example: 1. O to A and B as life tenants, with a remainder in A if A survives B, and a remainder in B if B survives A. a. This conveyance creates alternative contingent remainders in A and B. Whoever dies second will obtain the remainder and, hence, the property in fee simple absolute. A conveyance of As life estate will not destroy the contingent remainder. Interpretation Problems and Presumptions a. What happens if the conveyance is ambiguous as to whether the grantor intended to create a tenancy in common or a joint tenancy? i. The current practice is to interpret the conveyance as a tenancy in common [However, jurisdictions that have the tenancy by the entirety, a form of joint tenancy only available to married couples, may presume that a conveyance to a married couple is held in a tenancy by the entirety]. ii. This presumption has been imposed in some states by statute, in others by common law. It replaces the traditional practice which favored joint tenancies over tenancies in common. Transferability of Co-Tenancy Interests a. Joint tenants and tenants in common are free to transfer their interests without the consent of their co-owners. i. Tenants in common may leave their interests to devisees by will; ii. Joint tenants cannot do this because their interests will automatically go to their surviving joint tenant(s) when they die. However, when a joint tenant transfers his interest, the right of survivorship is destroyed and the grantees interest is held as a tenancy in common with the other owners. Partition a. Joint tenants or tenants in common have the power to file a lawsuit for judicial partition of commonly held property. i. In these proceedings, the court may order the property physically divided among the coowners. If this is not feasible or appropriate, the court will order the property to be sold and the proceeds divided among the co-owners in proportion to their ownership shares. b. Co-owners may also agree among themselves to partition the property, either through physical division or by sale; this is called voluntary partition. i. Co-tenants sometimes agree among themselves not to partition jointly held property; grantors also sometimes attempt to prevent partition by including restrictions against partition in a deed or will. Such agreements not to partition constitute restraints on alienation and were traditionally held to be void. However, today courts are likely to uphold them if they are reasonably limited in time and have a reasonable purpose. c. Note: Statutes prohibit partition of common areas of condominiums. Fiduciary Responsibility of Co-Tenants or Joint Tenants to Share the Benefits & Burdens of Ownership.

a.

Concurrent owners are legally obligated to share certain benefits and burdens of ownership, although they are free to vary these arrangements by contracts. i. Sharing the Benefits of Ownership Each co-owner has the right to possess the entire parcel. a. If one co-owner chooses to live in the commonly owned property and the other coowner chooses not to live there, the general rule provides that the tenant in possession has no duty to pay rent to the non-possessing tenant. This is the case because the possessory tenant is doing what she is legally entitled to do. However, some courts hold that there is a duty to pay rent and some states have imposed this obligation by statute. Co-tenant possessing must pay carrying expenses so long as they do not exceed fair market rental value. 1. Hypo a. A & B as co-tenants, each owning interest. A in exclusive possession. A pays taxes and mortgages in the amount of $1,200 per month and FRV is $1,000 per month. Recover from B? $200/2 = $100. Joint tenants and tenants in common do have a duty to pay rent to their co-owners if they ousted them. 1. Ouster refers to an explicit act by which one co-owner wrongfully excludes others from the jointly owned property. 2. Some courts also hold that co-owners in possession have a duty to pay rent if the property is too small to be physically occupied by all the co-owners; this situation is sometimes described as constructive ouster because the co-owners out of possession have been effectively excluded from the property. 3. Note: The amount of rent owed is the fractional share of the rental value owned by the co-owners out of possession; a co-owner with a 1/3 interest in possession would have to pay only 2/3 of the fair rental value of the property to her co-owners out of possession. In addition to sharing the right to possess the property, co-owners have the right to share any rents paid by 3rd parties who are possessing the property. A co-tenant also has the right to lease his interest without obtaining the consent of the other co-tenants. In this case, the lessee obtains the lessors rights, including the right to possess the entire parcel. The co-tenants then have a right to share in the rents but only if they agree to be bound by the leasehold, thereby waiving their own rights to possess the property. The share of the rent belonging to each co-owner is based on that owners fractional interest in the property. ii. Sharing the Burdens of Ownership Co-owners generally have a duty to share basic expenses needed to keep the property, including mortgage payments, property taxes and other assessments, and property insurance, in accordance with their respective shares. Co-tenants have no duty to share the costs of major improvements, such as adding a new room on a house, unless they agree to do so. Some courts will hold that co-owners also have a duty to share basic maintenance and necessary repairs of the premises so that it does not become dilapidated. However, the authorities are mixed on this question, with some cases holding that there is no duty to pay for ordinary repairs unless they agree to do so. These courts seem reluctant to get into the business of determining what ordinary repairs are necessary. In most states a co-owner who exclusively possesses the premises must bear the entire burden of expenses (including taxes, repairs, and mortgage payments) if the value of her occupation of the premises exceeds those payments. If the share of expenses that would ordinarily be borne by the tenants out of possession is less than the rental value belonging to the tenants out of possession, no action for contribution may be brought. iii. Accounting

In many states, co-owners can bring a judicial proceeding for an accounting to require their co-owners to pay their portion of maintenance expenses or to force co-owners to hand over the requisite portion of rents earned from third parties who possessed the commonly held property. 7. Adverse Possession & Ouster a. One co-tenant cannot obtain adverse possession against another unless the possessing tenant makes clear to the non-possessory tenant that he is asserting full ownership rights in the property to the exclusion of the other co-tenants. b. In most states, if one co-tenant who lives in a house for 40 years or who collects rents for that period of time without sharing those rents with his co-owners will not acquire his co-tenants property interest by adverse possession. The courts generally require some affirmative act by which the non-possessory tenant is put on notice that he co-owner is claiming adversely to the non-possessory tenants interests. i. The reason for this is that each co-tenant has the legal right to possess the entire property; sole possession does not violate the property rights of the other owners and does not, therefore, constitute a trespass. ii. The statute of limitations generally starts running only upon commission of an unlawful act such as trespass. C. Conflicts Over Transfers By One Co-Owner 1. The basic rules of co-tenancy provide that co-owners have the right to possess the entire property, the right to transfer their individual fractional interests, the right to share rents earned by the property in proportion to their ownership interests, and the duty to share maintenance and upkeep expenses. What happens when co-owners cannot agree among themselves who will possess the property or how it should be used? a. The short answer is that they may resort to the legal procedures of requesting an accounting, and ultimately, partition. i. But an accounting is generally useful only as to financial matters for example, if one coowner has failed to pay her proportional share of the mortgage payments. ii. Partition is a drastic remedy that may very well result in the sale of the property; in that case, neither co-owner may wind up having the right to possess the property. Should some legal remedy short of partition be available to deal with conflicts about possession? Or should that be left to the parties themselves? The following cases address this question in the context of transfers of possession by one co-owner without the consent of the other. a. Family Conflicts over Use of Common Property i. Carr v. Deking, 765 P.2d 40 (580 1988) Facts: P and his father owned a parcel of land as tenants in common. The land was leased to D from 1974 through 1986 pursuant to a year to year oral agreement in exchange for 1/3 of the annual crop as rent. P paid for 1/3 of the fertilizer. In 1986, P informed D that he wanted cash rent beginning with the 1987 crop year. D instead of responding to P discussed the lease with Ps father. Ps father and D, unbeknownst to P, executed a written 10-year crop-share lease. Under this lease, D agreed to pay all fertilizer costs. P neither consented to nor ratified this lease and never authorized his father to act on his behalf. Issue: The issue is whether one of the tenants in common can enter into a lease with respect to his own undivided interest in the property without the consent of the other tenant and without his joining in the lease. Rule/Holding: A co-tenant may lawfully lease his own interest in the common property to another without the consent of the other tenant and without his joining in the lease. Reasoning: Each tenant in common of real property may use, benefit and possess the entire property subject only to the equal rights of co-tenants. P, as the non-joining cotenant, is not bound by this lease of the common property to D. D (as lessee) steps into the shoes of the leasing co-tenant and becomes a tenant in common with the other owners for the duration of the lease. A non-joining tenant may not demand exclusive possession as against the lessee, but may only demand to be let into co-possession. b. Death

2.

Tenhet v. Boswell Facts: Raymond Johnson and P owned a parcel of property as joint tenants. Johnson, without Ps knowledge or consent, leased the property to D for a period of 10 years at a rental of $150 per year with a provision granting the lessee an option to purchase. Johnson died some 3 months after the execution of the lease. Issue: The issue is whether the partial alienation (lease) of Johnsons interest in the property effects a severance of the joint tenancy. The second issue is whether P takes the property unencumbered by the lease if in fact the lease did not sever the joint tenancy. Rule: Civil Code Section 683 provides in part: A joint interest is one owned by two or more persons in equal shares, by a title created by a single will or transfer, when expressly declared in the will or transfer to be a joint tenancy . . . Holding: Partial alienation of Johnsons interest in the property did not operate to sever the joint tenancy. P takes the property unencumbered by the lease if in fact the lease did not sever the joint tenancy. D. Notes & Questions Mortgages and The Right of Survivorship a. Courts are divided on the question of whether mortgages sever joint tenancies. i. In Harms v. Sprague, 473 N.E.2d 930, two brothers, William and John Harms, owned real estates as joint tenants. John had granted a mortgage in his interest before his death. A mortgage is a security interest in the property, giving the holder of the mortgage (the mortgagee) the power to initiate a sale of the property to pay off a debt. Most states describe the borrower who grants the mortgage as the owner or title holder and the bank or lend who takes the mortgage as a lien holder. A minority of states retain the older title theory in which the lender takes title to the property, subject to an equity of redemption in the borrower who grants the mortgage. The Illinois Supreme Court held that a mortgage give by one joint tenant of his interest in the property did not sever the joint tenancy. E. Tenancy By The Entirety 1. A form of joint tenancy available only to married couples. a. It has been abolished in the majority of states, but is still available in about 20 states including Massachusetts. b. Its current form is similar to joint tenancy, except that: Co-owners must be legally married; a. Property cannot be partitioned except through a divorce proceeding; b. 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 transfer of the interest of one party; and In most states, creditors cannot attach property held through tenancy by entirety to satisfy debts of one of the spouses. States that have the tenancy by the entirety may have a constructional preference for interpreting a conveyance to a married couple as intended to create a tenancy by the entirety but not so in Massachusetts. In Massachusetts you must expressly state that you want to create a tenancy by the entirety. An individuals interest in tenancy by the entirety property is subject to a tax lien for unpaid taxes. Tenancy by the entirety was the traditional way for married couples to hold property. a. This form of joint ownership gave the husband the sole power to manage and control the disposition of the property. b. Similarly, states with community property systems, which provide that all property acquired during marriage is owned jointly by both spouses, traditionally gave management powers to the husband. c. These arrangements have been held to violate the equal protection clause by defining state property law in a way that discriminates on the basis of sex. Sawada v. Endo a. Facts: On November 30, 1968, Ps were injured when struck by a motor vehicle operated by Kokichi Endo. Helen Sawada filed her complaint for damages against Kokichi. On the date of the 1.

i.

2.

3. 4.

5. 6.

7.

8.

accident, Kokichi Endo was the owner, as a tenant by the entirety with his wife, Ume Endo, of a parcel of real property. By deed, dated July 26, 1969, Endo and his wife conveyed the property to their sons. This document was recorded in the Bureau of Conveyances on December 17, 1969. Both were aware at the time of the conveyance that their father had been involved in an accident, and that he carried no liability insurance. b. Issue: The issue is whether the interest of one spouse in real property, held in tenancy by the entireties, is subject to levy and execution by his or her individual creditors. c. Holding: The interest of one spouse in real property, held in tenancy by the entireties, is not subject to levy and execution by his or her individual creditors. a. Reasoning: By the very nature of the estate by the entirety, it is a unilaterally indestructible right of survivorship, an inability of one spouse to alienate his interest, and, importantly, a broad immunity from claims of separate credits remain among its vital incidents. Notes & Questions a. Marital Property & Male Privileges i. In Robinson v. Trousdale County, the court explained that the traditional rule granting control of tenancies by the entirety to the husband was based on a judicially decreed recognition of the traditional pattern of married women being forced into a subservient and supportive role that is inherently unequal, patently unfair, and at variance with the concept of equality mandated by contemporary standards of justice. b. Married Womens Property Acts i. Many courts have interpreted their Married Womens property statutes to abolish the tenancy by the entirety. ii. Others have interpreted them to remove the husbands rights of control over the jointly owned property. iii. A small number of states held until recently that their Married Womens Property Acts had no effect on tenancy by the entirety, thereby leaving the possession and profits of the property in the control of the husband as well as allowing future creation of new tenancies by the entirety. These states, including Massachusetts, Michigan, and North Carolina, have abolished the husbands prerogative by court decision or statute. (See Mass. Gen. Laws. Ch. 209, 1). c. Creditors Rights to Reach Tenancy by the Entirety Property i. Some states have held that creditors cannot reach property held in the form of tenancy by the entirety to satisfy debts of one spouse without the consent of the other spouse; Other states have held that creditors can attach the life interest of a tenant by the entirety, subject to a right of survivorship in that tenants spouse. In these states, courts have discretion to deny a partition of the property while it is still being occupied by the other spouse. d. Presumptions i. Although ambiguous conveyances are normally interpreted as tenancies in common rather than joint tenancies, jurisdictions that have the tenancy by the entirety may presume that a conveyance to a married couple is held in a tenancy by the entirety, not the case in Massachusetts. e. Homestead Laws i. Homestead laws may protect the surviving spouses ownership and occupancy rights in the family home free from demands of the decedents creditors. The effect of such laws may be to prevent the homeowner from transferring or encumbering her interests in the family home without the consent of both spousal owners. f. Constructive Ouster: i. If one of the parties in a divorce case remains in possession of the community residence between the date of the divorce and the date of the final judgment dividing the community assets, then there may be a form of constructive ouster, exclusion, or an equivalent act which is created as to the right of common enjoyment by the divorced spouse not in possession. This exclusion render the divorced spouse in possession of the community residence liable to the divorced spouse not in possession for the use and occupation of the residence between the date of the divorce and the date of the final judgment. To hold otherwise would mean that

both divorced spouses should have continued to live with each for the interim or that both should have abandoned the property. IV. LANDLORD TENANT LAW A. Leaseholds 1. Commercial & Residential Tenancies a. Two Types of Tenancies i. Residential Tenancies Involve renting property for the purpose of establishing a home; ii. Commercial Tenancies Involve any non-residential use, including operation of a business for profit or operation of a non-profit institution such as a church, hospital, or university. b. The vast majority of the rules are the same for both types of tenancy, but there are some differences: i. Even when the rules are the same, courts analyze the two situations separately, on the assumption that the underlying policy considerations and the justified expectations of the parties may differ. In general, courts are more inclined to adopt common law rules regulating the terms of residential leases than of commercial leases, on the assumption that commercial tenants are more likely to have sufficient bargaining power and expertise to shape the contractual arrangement in their best interests, while residential tenants are less likely to bargain for appropriate terms in the contract that reflect their justified expectations. Categories of Tenancies a. There are four major types of tenancies or leaseholds: i. Term of Years Lasts for a specified period of time determined by the parties. The period can be of any length. A term of years ends automatically at the agreed-upon time, but it may be terminated before the end of the fixed period on the happening of some event or condition stated in the lease agreement. 1. The future interest retained by the landlord is called a reversion. 2. If, at the time the lease is signed, the owner provides that the property will shift to a third party at the end of the leasehold; the future interest in third party is called a remainder. The death of either party does not terminate the tenancy. The landlord is not entitled to evict the tenant before the end of the term; the only exception occurs when the tenant is breaching a material term of the lease, such as the covenant to pay rent. ii. Periodic Tenancy Renew automatically at specified periods unless either the landlord or the tenant chooses to end the relationship. 1. For example, many tenants have no written leases or specified end to their tenancy but pay monthly rent to the landlord. These arrangements create month-to-month tenancies, a form of period tenancy; they renew automatically each month if neither party notifies the other than he intends to end the relationship. By statute or common law, notice is required before either party can terminate the relationship and end the periodic tenancy. Many (but not all) states require a months notice to end a month-to-month tenancy. The death of either the landlord or the tenant does not terminate the tenancy. 1. The heirs or devisees of the deceased landlord or tenant may choose to end the tenancy unless some statute or common law rule prevents this. Under this arrangement, the landlord can only evict the tenant by providing the requisite notice that the tenancy will not be renewed. iii. Tenancy at Will Similar to a periodic tenancy except that it can be ended with no notice by either party.

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In Massachusetts, generally a 30 day notice is required or equal to the interval between days of payments, if longer. 2. Note: Different notice period for eviction due to non-payment of rent. Many states have effectively abolished tenancies at will by requiring notice before a tenancy can be terminated; if the required notice is the same as that for a month-to-month tenancy, no real difference distinguishes the two. In addition, traditionally, the death of either the landlord or the tenant terminates the tenancy at will. Although the landlord still needs to give the statutorily required notice to evict, the landlord may have an absolute right to do since the tenancy is at an end. In contrast, the landlord under a periodic tenancy may not be able to terminate the tenancy if the tenant has a defense to eviction, such as violation of the implied warranty of habitability. iv. Tenancy at Sufferance A tenant rightfully in possession who wrongfully stays after the leasehold has terminated is called a tenant at sufferance or a holdover tenant. 1. The term is intended to distinguish between a tenant who wrongfully retains possession after the end of the lease term and a trespasser, who never had a right to possess the property. The legal procedures for ejecting trespassers often differ in significant ways from those for evicting holdover tenants. 1. It may be lawful for an owner to physically eject a trespasser herself (this is called self-help) or to call on the police to do so, while an eviction proceeding and a court judgment are generally required to evict a tenant, including a tenant at sufferance. A landlord who accepts rent checks from a holdover tenant may be held to have agreed to a new tenancy calculated by the rental payment schedule (monthly checks creating a month-to-month tenancy). Statute of Frauds a. Every state has a statute of fraud, which requires that interests in real property be in writing to be enforceable. i. Significant exceptions to this principle include adverse possession, prescriptive easements, and easements by Estoppel, and necessity. b. Most states requires that leases of more than one year be in writing, while leases of one year or less are enforceable whether they are written or oral. c. Oral periodic tenancies are generally enforceable under the statute of frauds so long as the period is a one year or less; month to month tenancies satisfy this condition because although they could last more than one year in total, the relevant period one month is less than a year. Oral tenancies at will are valid as well. d. Statute of Frauds Handout i. Leasehold estates are commonly created by an agreement in writing signed by both landlord and tenant. ii. The agreement usually describes the parties and the premises being leased, specifies the duration of the estate created and the rent, and recites the covenants or promises undertaken by each of the parties. iii. But to what extent is a writing required? Most of the American statutes, however, allow oral leases for only one year or less rather than the three year period of the English Statute. Only a few American statutes retain the language of the English Statute from the making thereof. 1. However, under the usual American statute an oral lease for one year is valid even though the term is to begin at some time (e.g., three months) in the future. Usually no requirement that the lease be signed by the lessee in order to be enforceable against him, Statutes in Massachusetts and Maine differ:

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They differ from the usual statutes in that they contain no exception for short term leases but provide, in effect, that an oral transfer of an estate in land creates only a tenancy at will. [For Mass See Mass. Gen. Laws C. 183, 3]. a. Massachusetts Statute Provides: i. An estate or interest in land created without an instrument in writing signed by the grantor or his attorney shall have the force and effect of an estate at will only, and no estate or interest in land shall be assigned, granted or surrendered unless by such writing or by operation of law. iv. What is the effect of a leasing arrangement that does not comply with the local Statute of Frauds? Example: Suppose that L, owner of commercial property, orally leases it to T for 5 years at an agreed rental of $6,000 per annum, payable in equal monthly installments, the tenancy to begin on January 1, 1980 and to end on December 31, 1984, that the agreement further provides that L will furnish heat for the premises and will make all necessary repairs to the outside and inside of the building. If T enters into possession under this agreement, what are the rights and obligations of the parties? 1. The agreement is not void; it is, of course unenforceable against the lessor so far as it purports to create an estate for 5 years in the lessee. But T is lawfully in possession and holds as some sort of tenant. a. In most jurisdictions, the tenancy is one from year to year if the rent reserved in the oral agreement is payable annually, and if the rent is payable monthly the tenancy is one from month to month. In Massachusetts & Maine, due to the explicit language of the statutes, the tenancy is one at will. Moreover, the oral agreement regulates the amount of rent payable and the duty of the landlord with respect to furnishing heat and the making of repairs. It is only the duration of the tenancy that is affected by the Statutes of Frauds. v. Even though a lease fails to comply with an applicable Statute of Frauds it may be given full effect under the doctrine of part performance. Entry into possession and payment of rent by the lessee do not take the case outside the Statute of Frauds, but where the parties have undertaken substantial performance in accordance with the terms of the oral lease, such as making substantial improvements to the premises as required by the lease, full effect is given to the lease. Regulation of Landlord-Tenant Relationships a. In most states, landlord-tenant relationships are heavily regulated by both common law and state and federal statutes. i. Procedural Regulations Impose formal requirements for creating the landlord-tenant relationship for example, some require writing for leases of more than one year. Also define the procedures required to terminate the relationship; 1. These procedures ordinarily require notice and an eviction proceeding and court judgment to evict the tenant from the property. 2. Also provide for expedited court proceedings, often called summary process, to allow relatively quick evictions. ii. Substantive Regulations Define the parties obligations to each other. Common law rules also govern the mutual obligations of the parties and impose implied terms in the contract. Common law doctrines, and some statues, define the circumstances under which a breach of the agreement by each of the parties entitles the other party to end her performance of her contractual obligations. 1. Example 2. The landlords failure to comply with the housing code may relieve the tenant partially or totally of the obligation to pay rent.

1.

iii. Some implied terms are waivable by the parties, who may contract around them by agreeing to different arrangements. Other implied terms are compulsory or non-waivable; any contractual term purporting to waive or alter the implied term is void and unenforceable. 5. Tenants Right to Stay versus Landlords Right to Recover Possession a. Landlord is entitled to evict the tenant, if the tenant breaches material terms of the lease. i. The main reason for eviction is failure to pay rent or failure to pay rent on time. b. Is the landlord entitled to evict the tenant who has not breached any terms of the leasehold? ii. A tenant with a term of years a one-year lease, for example cannot be evicted before the end of the term unless the tenant has breached the lease. The landlord has no obligation, however, to renew a leasehold. Thus, a landlord is entitled to refuse to renew a one-year lease for any reason. Landlords are also entitled end periodic tenancies, such as month-to-month tenancies, by giving requisite notice. c. There are some exceptions to the general principle that landlords may evict tenants at the end of the lease term. i. First, federal and state anti-discrimination statutes prohibit landlords from failing to renew leaseholds if the landlords motivation is discriminatory. ii. Second, tenants in units that are subject to statutory or local rent control ordinarily are protected from eviction unless the landlord can show just cause. iii. Third, some states or localities also regulate eviction for the purpose of converting apartment units into condominiums. iv. Fourth, federal law protects occupants of public housing from eviction without just cause. v. Fifth, tenants are protected from eviction if the landlords motivation is to retaliate against them for asserting their right to habitable premises by calling the house inspector, for example, to report housing code violations. New Jersey has adopted a general statute allowing eviction in most private rental housing units only if the landlord can establish one of a number of stated just causes for eviction. Other states generally grant landlords freedom to choose whether to renew a term of years or to terminate a periodic tenancy, subject to the specific exceptions noted above. B. Conflicts About Rent (Duties, Rights & Remedies) 1. Landlords Remedies When Tenant Breaches and Refuses to Leave: Summary Process a. Possession and Back Rent. i. If the tenant wrongfully stops paying rent or breaches other material terms in the lease and continues to occupy the premises, the landlord may sue the tenant for back rent (rent already due but not paid) and for possession (to evict the tenant and to be able to re-rent the apartment to someone else). ii. Tenants may respond to such claims by asserting defenses, such as rights based on the implied warranty of habitability and retaliatory eviction. The tenant may also argue that the landlords attempt to evict the tenant constitutes unlawful discrimination based on family status, disability, race or gender. b. The Holdover Tenant and The Renewal of the Tenancy i. What happens if the tenant wrongfully holds over after the end of the lease term and continues to pay rent? Landlord may choose to accept a new tenancy relationship with the holdover tenant. 1. Most states hold that the new tenancy is a periodic tenancy based on the rent payment; if the landlord accepts a rent check for one months rent, a new month-tomonth tenancy is established. 2. A minority of states hold that a new term is created if the landlord accepts rent from a holdver tenant who was originally occupying under a term of years. a. In these states, the tenant is bound to another term of the same length as the original term. 3. The tenant who holds over wrongfully is obligated to pay rent to the landlord for the time during which she occupies the premises. Landlord could treat the tenant as a tenant at sufferance or a holdover tenant, and sue for possession.

1.

2.

If the landlord chooses to sue for possession, does the landlord have the right to collect rent from the holdover tenant before the eviction proceedings are completed? a. Some states hold that the acceptance of the rent check proffered by the holder tenant necessarily creates a new tenancy whether the landlord intends to create a new tenancy. To evict the tenant, the landlord may have to go through the procedures to evict a month-to-month tenant, including providing the requisite notice. a. The landlord may attempt to avoid this result by suing immediately for possession and either: i. Refusing to accept the tenants proffered checks (or returning them to the tenant) or ii. Cashing the checks while writing on the back of each check that the landlord is not agreeing to renew the tenancy but is merely using the check to cover the rental value of the property from the tenant at sufferance.

Self-Help i. Almost all States now hold that the landlord may not use self-held, at least in the residential context and often in the commercial context as well. ii. The law today is generally that the landlord must evict the tenant through court proceedings. In Berg v. Wiley, the Court argued that the legislature had provided a summary procedure to allow landlords a relatively quick judicial process for a court order allowing the landlord to recover possession. 1. This procedure protected the landlords rights adequately and prevented the landlord from taking the law into his own hands. Self-help, the court argued, is likely to become violent; moreover, the landlord may be mistaken about his right to possession, and he should not be the judge of his own rights. The court noted that the landlord could also go to court for an immediate temporary restraining order to prevent the tenant from destroying the property. d. Summary Process i. Most states have statutes providing for summary process. ii. The statutes are called by a variety of names, including forcible entry and detainer, unlawful detainer, summary proceedings and summary ejectment. iii. Summary process statutes often limit the issues that can be addressed in the lawsuit; for many years they were interpreted in ways that prevented tenants from raising defenses to the landlords claim that she was entitled to possession of the premises However, in recent times, tenants have been allowed to raise an increasingly diverse number of defenses chief among them the implied warranty of habitability. Some states, however, still prevent the tenant from rasining defenses, such as the landlords violation of implied warranty of habitability, in summary proceedings. 1. U.S. Supreme Court has upheld this practice. e. Notice To Quit For Non-Payment Right To Cure i. Notice Massachusetts: 14 days. 1. Provision to waive notice in residential lease is void. ii. Cure Massachusetts 1. At Will: Generally within 10 days from notice to quit. 2. Under Lease: By answer date of the summary process action (rent, plus interest and costs). iii. Commerical Leases 14 days or lease terms. C. Landlords Remedies When Tenant Breaches and Leaves 1. Landlords Duty to Mitigate Damages a. A different set of problems ensues if the tenant breaches the lease for a term of years by ceasing rent payments and moves out before the end of the lease term. The right to sue for possession is of

c.

no use since the tenant has already given up possession. In this situation, the landlord can choose among three remedies. i. Accept the Tenants Surrender: By moving out before the end of the lease term and ceasing rent payments, the tenant makes an implied offer to the landlord to end the term of years. The landlord may, if she chooses, accept the tenants surrender of the lease. This means that the landlord agrees that the tenant will not be legally obligated to pay the future rent. 1. Note: However, the landlords acceptance of the tenants surrender does not mean that the tenant is relieved of all financial liability. a. Landlord may still choose to sue the tenant for back rent owed but not paid for the time before the tenant abandoned the premises by moving out. b. In addition, the landlord may sue immediately (without waiting until the end of the lease term) for damages for breach of the lease which is different from the amount of future rent. i. Damages are likely to be measured by an estimate of the amount the landlord lost because of tenants failure to perform his obligations under the contract. This amount is not the remaining rent, but the agreed-upon rental price minus the fair market price. 1. If the rental price is the same as or below the market price, damages are zero (plus the cost of locating the new tenant). a. The court is likely to add to the computation of damages the reasonable cost of finding a replacement a cost the landlord would not have had to bear if the tenant had not breached. ii. Re-let on the Tenants Account The landlord may refuse to accept the surrender; instead, the landlord may, after notice to the tenant, actively look for a new tenant and re-let the apartment on the tenants account. 1. When a new tenant is found, the landlord may sue the former tenant for the difference between the old rental price and the new rent received from the new lessee, if the new rent is lower than the original. The new rent must be reasonable. An issue that has often arisen in this context is how the landlord can make clear that she is refusing to accept the tenants proffered surrender of the lease. 1. In some states, the very act of re-letting the apartment will be taken as evidence that the landlord has accepted the surrender of the leasehold. 2. In others, the act of re-letting does not preclude the landlord from asserting that she did not accept the surrender. 3. In still others, the landlord must notify the tenant that she is re-letting on the tenants account and she refuses to accept the surrender in order to hold the tenant to the rent later. Why does it matter whether the landlord is held to have accepted the surrender? 1. Consider a situation in which the tenant under a one-year lease moves out after six months. The landlord finds a new tenant, who agrees to a month-to-month tenancy at the old rent. But this second tenant moves out after four months, with two months left on the year lease. But this second tenant moves out after four months, with two months left on year lease. The landlord looks for, but is unable to find, a new tenant. a. If the landlord has accepted the first tenants surrender, then the landlord cannot sue the original tenant for the last two months rent. b. If the landlord has not accepted the tenants surrender, then the tenant will be obligated to reimburse the landlord for the last two months rent. iii. Wait and Sue for the Rent at the End of the Lease Term versus Mitigate Damages. Traditional rule is that the landlord may do nothing, wait for the end of the lease term, and then sue the tenant for the remaining unpaid back rent. Rent comes due periodically. 1. Under a one-year lease with monthly rental payments, each rental payment is not due until that month arrives.

Thus, the landlord could not immediately sue for the remaining rent in the middle of the lease term. b. To sue the tenant immediately for monetary compensation in the middle of the lease term, the landlord must ask for damages (rental price minus fair market price); to sue for the entire rent itself, the landlord must wait until the lease term ends. Most states, however, now reject this option. Instead, they have started to apply the contract doctrine that requires the aggrieved party to mitigate damages. 1. States that require the landlord to mitigate damages place an obligation on the landlord to act reasonably in seeking another tenant. a. If the landlord fails to mitigate damages by finding another tenant and waits until the end of the lease to sue for the accumulated back rent, the amount of damages will be reduced by the amount that would have been avoided had the landlord mitigated damages by acting reasonably to find a replacement tenant. [Actual Rent Fair Rental Value, plus interest and costs]. b. If the landlord does mitigate damages, he can still recover from the tenant the reasonable costs of finding a new tenant, the rent for the premises while the premises were vacant and the landlord was looking for a new tenant, and the difference between the rental price and the new rent paid by the replacement tenant if it is lower than the original rent. c. The law in Massachusetts is not clear: i. If the court looks at this as a conveyance of a property interest as opposed to a contract then the court could side with the landlord. However, courts tend to view it as a contract most of the time and duty to mitigate is arguable. The argument for a conveyance of a property interest is that the landlord has no right to recover it till the end of the term and therefore cannot infringe on the tenants present interest. 2. The duty to mitigate damages is not an enforceable obligation in the sense that the landlord must attempt to re-let the premises. The landlord is perfectly free to leave the premise vacant. a. The rule simply means that, in a lawsuit against the tenant for back rent, the landlord can recover only the difference between the market rent and the contract rent provided for in the rental agreement with the original tenant, plus the cost of finding a replacement tenant. 3. Some scholars argue that the duty to mitigate damages is efficient because it encourages landlords to rent the premises rather than leaving them vacant. a. Others argue, however, that there is no such efficiency loss. The landlord bargained for the right not to have to look for another tenant before the end of the lease term. This right is a property right that the landlord owns; the tenant has no right to take this right from the landlord without offering adequate compensation. 4. Acceleration Clauses a. Some landlords attempt to contract around the duty to mitigate damages through an acceleration clause, making the rest of the rent due immediately if the tenant abandons the premises or otherwise breaches the lease in a material way. i. This is a form of liquidated damages, whereby the parties agree to the amount of damages due if one of them breaches. This remedy goes beyond waiting until the rent is due to sue to collect it; it allows the landlord to obtain the rest of the rent immediately upon breach and, if enforceable, would allow the landlord also to rent out the premises to another tenant. ii. Some courts enforce such provisions on the ground that the parties voluntarily agreed to them; however, they generally also police the term and will not enforce the caluse if it constitutes a penalty or if the amount owed in unconscionable. iii. Most courts will not allow such a clause to waive the duty to mitigate damages; while the remaining rent payments are what the landlord could

a.

have expected to receive . . . over the term of the lease, the landlord is also expected to attempt to re-let the premises and the accelerated rent payments will be reduced by the damages that would have been avoided by re-letting. 5. Burden of Proof a. Landlord has the burden to persuade the decision maker that he tried to mitigate damages and the amount lost because of the inability to do so. This appears to the majority rule at least in the case of residential tenancies. However, some states impose the burden on the tenant. D. Conflicts About Occupancy [Delivery of Possession, Sublet & Assignment]. 1. Landlords Duty to Deliver Possession a. Under the current majority rule, the landlord has the duty to deliver possession of the rented premises to the tenant at the beginning of the leasehold. i. If a prior tenant wrongfully holds over after his lease term expires, the landlord has an obligation in most jurisdictions to remove the prior tenant within a reasonable period of time by either instituting eviction proceedings or convincing the holdover tenant to leave. ii. Failure to deliver actual possession of the premises to the new tenant constitutes a breach of the lease by the landlord. The tenant who has been shut out may either terminate the lease and recover damages as compensation for having to find another place to live or affirm the lease, withhold rent for the period during which she could not occupy the premises, and recover damages for the cost of temporarily renting alternative housing while the landlord undertakes eviction proceedings to remove the prior tenant. b. A minority of jurisdictions follow the traditional rule, under which the landlord has only the duty to deliver the right to possession but no duty to deliver actual possession. i. In those states, it is the new tenants responsibility to evict the holdover tenant by bringing ejectment or other appropriate proceedings. Since the landlord is not in default under the minority rule, the new tenant is legally obligated to pay the rent even though she is not in possession. The new tenants remedy is to go after the holdover tenant for damages. Tenants Right to Leave and Transfer the Leasehold v. Landlords Right to Control Occupancy a. Transfer of the Landlords Reversion i. The landlord-tenant relationship divides property rights between the landlord and the tenant. The tenants leasehold includes the right to possess the property in exchange for rent, subject to other terms of the agreement between the parties; The landlords rights include reversion the right to obtain possession when the lease term ends and the bargained-for right to collect rent from the tenant, again subject to other terms of the agreement between the parties. ii. Either party may transfer her property interest. What happens if the landlord sells the property? 1. The new owner receives what the landlord was able to sell, that is, the landlords reversion and the current right to collect rent and enforce the other terms of the lease. 2. The new owner does not obtain immediate right to posses the property; the tenants leasehold interest survives. 3. The new owner, of course, may end a month-to-month tenancy, for example, by giving one months notice, just as the prior landlord could have done this. 3. Tenants Right to Assign or Sublet i. In defining the rights of tenants to transfer their possessory rights, we must distinguish three different situations. When the Lease is Silent 1. Can the tenant transfer her leasehold? The answer is yes, unless the lease restricts the tenants ability to transfer the leasehold. a. Restraints on alienation of other property interests are often upheld by the courts, including restraints attached to leaseholds and condominium. 2. If the lease agreement does not say anything about assignment or sublease, the general rule is that the tenant is entitled to transfer her possessory interests in the

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premises either by assignment or sublease. The courts justify this rule by reference to the policy of promoting alienability. a. The transfer of the leasehold is called either an assignment or a sublease. i. An assignment conveys all the tenants remaining property interests without retaining any future rights to enter the property. ii. Under a sublease or sublet the tenant retains some future interest or the right to control the property in the future. A sublease exists, for example, if a tenant has six months remaining on the lease and sublets the apartment to someone else for four months; since the tenant retains the right to regain possession for the last two months of the term of years, the transfer is a sublease rather than an assignment. A sublease may also exist if the tenant retains a right of entry that can be exercised if the subtenant violates one or more of the terms of the sublease agreement. Why is it important to know whether the arrangement is a sublease or an assignment? a. Traditionally, under an assignment, the new tenant the assignee is responsible directly to the landlord for all the undertakings under the original lease. i. In other words, the tenants covenants including the covenant to pay rent and other covenants in the lease agreement run with the land. Courts have traditionally used the concept of privity of estate to explain why the assignee is directly liable to the landlord for covenants made by the original tenant to the landlord. ii. Suppose the tenant assigns his remaining 6 months on the lease to a new tenant called the assignee. The assignee fails to pay rent. The landlord may sue the original tenant for the unpaid rent because the original tenant remains in a contractual relationship with the landlord; the assignment does not relieve the tenant of the obligation to pay rent to the landlord. However, the landlord may instead choose to sue the assignee directly for the unpaid rent. Since the covenant to pay rent runs with the land, the assignee is directly liable to the landlord for the unpaid rent. b. In contrast, under a sublease, the lease covenants do not run with the land as real covenants. The landlord has no right to sue the sub-tenant to enforce any of the covenants in the original lease, including the covenant to pay rent, if the requested relief is damages. i. The only exception is when the subtenant expressly promises the tenant to pay the rent to the landlord. In that case, the landlord may be able to sue the subtenant as a thirdparty beneficiary of the contract made between the tenant and subtenant; in other words, the landlord is the intended beneficiary of the subtenants promise to the tenant. However, lease covenants probably can be enforced by injunction as equitable servitudes, so long as the subtenant has notice of them. ii. The difficult question is whether the landlord can sue the subtenant for an injunction ordering the subtenant to comply with the covenant to pay rent. Some courts will not grant an injunction since the payment of rent is a money payment and resembles the payment of damages. Others grant an injunction because it constitutes enforcement of an affirmative covenant, even though that covenant requires the payment of money.

Suppose that the tenant sublets the apartment for 4 of the remaining 6 months, and the new tenant (called the sub-tenant) fails to pay the rent. a. Under this arrangement, the landlord can sue the original tenant (who remains contractually bound to pay the rent), but a court may hold that the landlord cannot sue the subtenant for the rent. i. Note: If neither the tenant nor the subtenant pays the rent, the landlord can evict the tenant (sue for possession from the tenant) and end the leasehold, thereby terminating the subtenants right of possession since the subtenant can possess only what the tenant has a right to possess in the absence of a separate agreement with the landlord. ii. Note: In either case, if the landlord chooses to sue the original tenant for the rent, the original tenant has a right to be reimbursed by the new tenant for the amount owed to the landlord. This is true whether the new tenant is an assignee or a subtenant. The tenant ordinarily will bring the subtenant into the lawsuit as a 3rd party defendant, claiming that, if the tenant is liable to the landlord, then the subtenantassignee is liable to reimburse the tenant for this amount. iii. The tenant may choose to sublet for a rental amount different from the amount owed to the landlord. Whether the new rent is less or more than the original rent, the tenant remains liable for the original amount only to the landlord. When the Lease Requires the Landlords Consent 1. Leases may provide for subletting or assignment only with the landlords consent. These clauses may be phrased either in the negative or the affirmative, that is, no subletting without the landlords consent or subletting allowed subject to the landlords consent. a. Traditional doctrine held that, in order to promote alienability of leaseholds, a lease that limits subletting but not assigning will be strictly construed to limit only subletting. b. However, the modern trend is to focus on the intent of the parties; since modern usage sometimes employs the term subletting to mean any transfers of the leasehold interest, a clause that provides for no subletting without the landlords consent may very well be interpreted to prohibit subletting or assigning without the landlords consent. 2. An issue that has occasioned much litigation recently is the question whether a criterion of reasonableness should be implied in the phrase no subletting without the landlords consent. This issue has arises in both residential and commercial contexts. The law is currently unsettled in this area, as the following cases illustrate. a. Kendall v. Ernest Pestana, Inc. i. Facts: City of San Jose assigns 14,400 sq. feet at the airport to Perlicht. They enter into a 25 year lease with Bixler on 1-1-70, who builds up a business until he decides to sell to PL/appellant Kendall et al. in 1981. Sometime between 1970 and 1981, Perlichts assign their interest to DF/appellee. The lease required written consent of the lessor before the lessee could assign his interest, and failure to do so would render the lease voidable at the option of the lessor. Bixler and PL/appellant sought this consent from Perlichts successor in interest, appellee, who arbitrarily refused because appellee was seeking increased rent and other more onerous terms. PL/appellant brought this suit.

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Issue: The issue is whether, in the absence of a provision that such consent will not be unreasonably withheld, a lessor may unreasonably and arbitrarily withhold his or consent to an assignment. iii. 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. iv. Reasoning: Under the minority rule, the determination whether a lessors refusal to consent was reasonable is a question of fact. Some of the factors that the Trier of fact may properly consider in applying the standard of good faith and commercial reasonableness are: 1. Financial responsibility of the proposed assignee; 2. Suitability of the use for the particular property; 3. Legality of the proposed use; 4. Need for alteration of the premises; and 5. Nature of the occupancy, i.e., office, factory, clinic, etc. Denying consent solely on the basis of personal taste, convenience or sensibility is not commercially reasonable. Nor is it reasonable to deny consent in order that the landlord may charge a higher rent than originally contracted for. b. Slavin v. Rent Control Board of Brookline, i. Facts: Article XXXVIII of the Brookline Rent control by-law provides that the landlord must apply to the Board for a certificate of eviction. If the board finds that the facts attested to in the landlords petition are valid and the tenant violated an obligation of his tenancy. The lease between the Plaintiff landlord and defendant Barry Myers states that he may not assign or underlet any part or the whole of the premises, nor shall permit the premises to be occupied for a period longer than a temporary visit without first obtaining on each occasion the assent in writing of the landlord. ii. Issue: The issue is whether a tenants obligation, as specified in a residential lease, to obtain the written consent of a landlord before assigning the lease or subletting or permitting other occupants implies as a matter of law an obligation on the landlords part to act reasonably in withholding consent. iii. Rule/Holding: No such necessity of reasonable alienation of residential building space that requires an imposition on residential landlords a reasonableness requirement to which they have no agreed. iv. Reasoning The reasonableness requirement in commercial leases: 1. First, courts have exhibited concern that commercial landlords may exercise their power to withhold consent for unfair financial gain. However, in a rent control jurisdiction like Brookline there is little economic incentive to withhold consent in the residential lease context because the landlord has such limited control over the rent that can be charged. 2. The second concern that appears to have motivated the commercial lease decisions is a desire to limit restraints on alienation in light of the fact that the necessity of reasonable alienation of commercial building space has become paramount in our ever-increasing urban society. However, the court has ruled previously that a commercial lease provision requiring a landlords consent prior to an assignment, with no limitation on the landlords ability to refuse, is not an unreasonable restraint on alienation. The lease prohibits assignment and subletting altogether. E. Covenant Of Quiet Enjoyment; Constructive Eviction

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Overview a. Landlord will not substantially interfere with tenants use and enjoyment (Constructive Eviction) b. Landlord will not deprive tenant of any of the space during the lease (Actual Eviction) c. Dependent Covenant Express & Implied Terms In The Landlord-Tenant Relationship a. Governed partly by the express terms of any written lease but also governed by implied terms. i. Implied terms need not be written down or even explicitly discussed to be legally binding. May or may not be waivable by the parties. One important term implied in every landlord-tenant relationship by common law or statute is the covenant of quiet enjoyment by which the landlord impliedly promises not to disturb the tenants quiet enjoyment of the property. Actual Eviction a. Introduction i. Physical Exclusion From Possession Traditional Rule: Entire rent abatement for actual or partial eviction. Restatement 2nd: Partial rent abatement (fair market value as opposed to contract price) for partial actual evictions. Remdies: 1. Termination 2. Damages 3. Injunction. b. Notes i. If the landlord breaches the lease by physically barring the tenant from the property, the tenants obligation to pay rent ceases entirely. The tenant may sue the landlord for damages for trespass and may seek an injunction ordering the landlord to reconvey possession of the premises to the tenant. The placement of new locks on the door constitutes actual eviction. ii. What happens if the landlord bars the tenant from only part of the leased property? A partial actual eviction constitutes breach of the lease and provides the tenant with ample justification to move out before the end of the lease terms; the tenant will not be liable for the rent after moving out. iii. What happens if the tenant chooses to stay? Traditional Rule: relieves the tenant of the obligation to pay rent completely even though the tenant continues to occupy the rest of the premises. However, the trend seems to be to abate the rent to the fair market value of the property that remains. Constructive Eviction a. Introduction i. Substantial Interference [Purposes, Foreseeability, Duration, Nature & Degree] ii. Wrongful Act or Failure To Act By Landlord [Some Degree Of Fault or Foreseeability] iii. Remedies Vacate Premises or Rent Abatement or Damages b. Rule 1 i. A tenant may assert as a defense to the non-payment of rent the doctrine of constructive eviction, even if he or she has abandoned only a portion of the demised premises due to the landlords acts in making that portion of the premises unusable the tenant. Considerations of social policy and fairness dictate such a result. Example: 1. Minjak Co. v. Randolph a. Facts: Tenants started living in loft space pursuant to a commercial lease even though Landlord was aware that it would be used for residential purposes. Twothirds of the loft was used as a music studio and the remainder for residential purposes. The 5th floor tenant started to operate a health spa equipment business.

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Tenants suffered over 40 separate water leaks from the 5 th floor ruining their clothes and other items as well as musical instrument. Tenants complaint to landlord went unheeded. Landlord commenced construction work in the building. Landlord had the elevator shaft removed on respondents side and workers threw debris down the elevator shift. There were many examples given of dangerous construction and other conduct interfering with respondents ability to use and enjoy possession of their loft. From 1981 until the time of trial, music studio portion of the loft was completely unusable. Issue: whether a tenant asserting the defense of constructive eviction to nonpayment of rent must completely abandon the property or would abandonment of a portion suffice? Holding: Abandonment of a portion of the property is sufficient in allowing the defense of constructive eviction.

Notes i. Theory is that when the landlord allows the conditions in the apartment to deteriorate such that living in the apartment is either impossible or uncomfortable; her actions are functionally equivalent to physically barring the tenant from the premises. ii. What happens if the tenant stops paying rent and fails to move out? Traditional rule: tenant can raise a defense of constructive eviction only if he moves out within a reasonable period of time. 1. To establish constructive eviction, the tenant must claim that the landlords interference with the tenants quiet enjoyment of the premises is so substantial that nobody in his right mind would stay there; the place is inhabitable and, therefore, the landlords actions are equivalent to barring the door. If, however, the tenant stays, then this can be used as evidence that the interference is not sufficiently serious to justify allowing the tenant to stop paying rent or ending the leasehold. Modern Rule: Tenants could establish a defense of partial constructive eviction. 1. Under this doctrine, tenants can show that the landlords actions have substantially deprived the tenant of the use and enjoyment of a portion of the property. The defense may allow the tenant to continue living in the remaining part of the premises from which the tenant does not claim to have been constructively evicted. The remedy for partial constructive eviction is likely to be a partial, rather than complete abatement of the rent. 2. The Restatement 2nd of Property provides that there is a breach of the landlords obligations if, during the period the tenant is entitled to possession of the leased property, the landlord, or someone whose conduct is attributable to him, interferes with a permissible use of the leased property by the tenant.The Restatement 2nd departs from traditional law in several respects: a. First, it defines constructive eviction as interference that is more than insignificant rather than requiring the interference to be substantial. b. Second, it adopts the Blackett Doctrine, making the landlord liable for the acts of 3rd parties performed on property in which the landlord has an interest, which conduct could be legally controlled by him. c. Third, it rejects the traditional requirement that the tenant abandon the premises before taking advantage of the constructive eviction doctrine, on the ground that it makes the law completely unavailable to tenants who for one reason or another cannot move, e.g., indigent urban apartment dwellers in many cities, and available only at great risk to others, who must first deprive themselves of such benefit as they deriving from the premises before getting a ruling on whether they were justified in doing so. iii. Landlords Liability for Acts of Other Tenants Traditional Rule which appears to hold in most states provides that constructive eviction may be shown only if the landlord has acted in a way that interfered with the tenants interest in quiet enjoyment.

F.

Under the traditional rule, landlord is not responsible for the acts of other tenants unless the lease specifically includes an obligation to control the conduct other tenants. The trend appears to be that of the Blackett Doctrine adopted by the Restatement which makes the 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. iv. Note: Massachusetts Rules Common Areas & Unlawful Activity 1. Liable for breach of covenant of quiet enjoyment for failing to take any measures to remove from the area of its control persons engaged in unlawful activity. Criminal Conduct Generally 1. Landlord not free to ignore reasonably foreseeable risks of harm to tenants in common areas. Implied Warranty Of Habitability 1. Definition a. Material Defect (Materially endanger health and safety of Tenant) b. Sounding in Contract with strict liability c. Possible Factors to Keep in Mind when looking to see if the warranty has been breached: i. Seriousness of defect and impact on habitability ii. Length of time iii. Landlords notice iv. Tenants conduct v. Can premises be made habitable within a reasonable time. Javins v. First National Realty Corp Benchmark Case a. Facts: Landlord filed separate actions against Tenants seeking possession of apartments on the grounds that each of the tenants had defaulted in the payment of rent due. Tenants admitted they had not paid the rent but alleged the numerous violations of the housing regulations as an equitable defense. b. Issue: Whether housing code violations which arise during the term of a lease have any effect upon the tenants obligation to pay rent. c. Holding: A warranty of habitability is implied by operation of law into leases of urban dwelling units covered by housing code regulations and that breach of this warranty gives rise to the usual remedies for breach of contract. d. Reasoning: i. Why the old common law rule of caveat lessee was abandoned: First, the old rule was based on certain factual assumptions which are no longer true; on its own terms, it can no longer be justified. 1. Rule originated in the middle ages and was well suited to an agrarian economy; the land was more important than whatever small living structure was included in the leasehold, and the tenant farmer was fully capable of making repairs himself. Second, the consumer protection cases require that the old rule be abandoned in order to bring residential landlord-tenant law into harmony with the principles of holding sellers of property responsible for the quality of their product. Third, the nature of todays urban housing market also dictates the abandonment of the old rule. Majority Rule a. The implied warranty of habitability has been adopted in almost all states by statute or common law for residential tenancies. i. Some states measure the landlords obligations by reference to state or local housing codes, holding that the warranty is breached when the landlord fails to comply with applicable building code provisions so as to materially impair health and safety. ii. Other courts, however, have measured the landlords obligations independently of the applicable housing code, holding that landlords have an obligation to conform with general community standards of suitability for occupancy.

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Examples of problems that are likely to violate the implied warranty include lack of heat or hot water, broken windows, pest infestation and leaky roofs. b. If a landlord fails to provide a necessary service (must be material defect considerations: seriousness of defect and impact on habitability; length of time; LLs notice; Ts conduct; can premises be made habitable within reasonable time), such as heat or hot water, does the tenant have an immediate right to a rent reduction when the problem occurs to compensate for the lowered rental value of the premises, or does the landlord have a grace period within which to fix the problem? i. Many courts hold that the implied warranty is not violated until the landlord has been notified of the problem and had a reasonable opportunity to fix it. ii. However, some courts find a violation the moment the condition occurs and others hold that the violation starts when the landlord is notified. c. According to Javins, the implied warranty of habitability is non-disclaimable or non-waivable; it constitutes a compulsory term in the contract the parties have no power to alter by agreement. This position is supported in most jurisdictions by statute or common law. i. Even if Tenant assumes the risk for defects obvious and disclosed at the beginning of the tenancy, the implied warranty of habitability is not waived. ii. If the defect arises after the commencement of the lease then landlord must have notice before he is liable for breach. Remedies a. Various remedies are available to vindicate the tenants rights under the implied warranty of habitability: i. In most states, the remedies available to tenants come from a combination of common law doctrines and specific statutory provisions, some of which may explicitly modify or limit common law remedies: Rescission, or The Right to Move Out Before the End of the Lease Term: 1. The landlords violation of his contractual obligation to provide a habitable apartment entitles the tenant to stop performance of her contractual obligations. Thus, the tenant may repudiate the contract and move out before the end of the lease term without being liable for rent for the months remaining on the lease. This is the case when breach of the warranty of habitability results in a material change in housing conditions even when that change would not amount to constructive eviction. Rent Withholding 1. If the landlord breaches the implied warranty of habitability, the tenant ordinarily has the right to stop paying rent and continue living in the premises. If the landlord sues the tenant for back rent owed or possession on the grounds of non-payment of rent, the tenant can raise the violation as a defense to the claim for back and to the eviction proceedings. If the case goes to trial, the tenant may be required to repay a portion of the unpaid rent to the landlord. a. Note: This distinguished the implied warranty of habitability from constructive eviction doctrine, which ordinarily requires the tenant to move out to become entitled to stop paying rent before the end of the lease term. 2. It is advisable for tenants who are contemplating rent withholding to determine whether any statutes regulate their ability to withhold rent. a. These statutes may, for example, require that the tenant give notice to the landlord of the defect in the premises before the tenant is entitled to withhold rent. b. They may also limit rent withholding to situations in which the tenant has verified the complaint by calling a local housing inspector to document the existence and seriousness of the housing code violation. 3. Also advisable for tenants who stop paying rent to the landlord to deposit the usual rental amount in a separate account, called an escrow account. a. If it turns out that the tenant was not entitled to withhold rent, the court will order the tenant to pay back rent to the landlord.

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Finally, tenants would be well advised to notify the landlord of the problem, before withholding rent; courts are unlikely to find a violation of the implied warranty unless the landlord has been notified of the problem and then failed to correct it within a reasonable period of time. Rent Abatement 1. When the landlord violates the implied warranty of habitability, the tenant ordinarily is entitled to a reduction in the rent, also known as rent abatement. a. The tenant can sue the landlord for a declaratory judgment that the landlord has violated the implied warranty of habitability and ask the court to order the landlord to reimburse the tenant for all or a portion of the rent previously paid to the landlord during the period of the violation. b. Usually, however, the tenant withholds rent, waits to be sued by the landlord for back rent or possession, and then argues that the rent should be abated for the period of the violation. i. When the case is adjudicated, the court ordinarily will determine what, if any, portion of the rent withheld should be paid back to the landlord. If the violation of the implied warranty is quite serious, the landlord may get nothing for the period of the violation. If the violation is less serious, the court may rule that the tenant is obligated to pay a portion of the rent, such as 25 or 50%. c. The amount of the rent deduction depends on the test used in the jurisdiction. i. Some states apply a fair market value test. ii. Most states simply reduce the rent by a percentage amount that reflects the seriousness of the violation and the amount of discomfort experienced by the tenant. Repair and Deduct 1. The tenant may be able to pay for needed repairs herself and then deduct the cost of the repairs from the rent paid to the landlord. Local statutes may regulate this practice by limiting the amount deducted or the kinds of repairs allowed. Injunctive Relief or Specific Performance 1. Some states, by statute or common law, allow tenants to bring a lawsuit against the landlord for an injunction ordering the landlord to comply with the housing code by making needed repairs. Administrative Remedies 1. Finally, many states provide administrative remedies. a. The local housing code may include procedures for enforcement by local housing inspectors. i. The aggrieved tenant may be able to call the local housing inspector to ask for a rapid inspection of the apartment. If the inspector finds material violations of the housing code, the inspector may then contact the landlord herself and order repairs to be made. If the landlord fails to make repairs, the inspector may be empowered to bring a court action for injunctive relief, ordering the landlord to comply with the housing code. The inspector may also seek civil damages against the landlord as provided by statute; these damages are paid to the state rather than to the tenant. Criminal Penalties 1. State building code statutes may provide for criminal penalties, including fines and imprisonment, for landlords who fail to fix dangerous and unlawful conditions in their apartment buildings. Compensatory Damages 1. Sometimes tenants bring claims for compensatory damages against landlords for violation of the implied warranty either as independent lawsuits or as counterclaims to landlord suits.

A claim for damages may seek an amount of money that exceeds the rent rather than merely a reduction in the rent or reimbursement for some of the rent already paid. b. Damages might exceed the amount of the rent if the violation harms valuable personal property of the tenant such as the expensive musical equipment owned by the tenant in Minjak, or if the tenant seeks reimbursement for costs of staying in a hotel while premises were uninhabitable. Ordinarily, however, courts are likely to assume that a judgment for breach of the duty of habitability cannot exceed the agreed-upon rent on the grounds that the rental amount constitutes the value of what was lost by the tenant. b. Commercial Leases i. While most courts have adopted the modern view that the covenants in commercial leases are dependent rather than independent, some have retained the older view that they are independent. On the other hand, while a few states find an implied warranty of suitability for intended purposes to commercial leases, most still do not do so, holding that commercial leases have no implied warranties unless they state so explicitly. G. Retaliatory Eviction 1. Hillview Associates v. Bloomquist a. Facts: Tenants formed a tenants association to address concerns regarding health, safety and quality of living at Landlords apartments. Tenants lodged several complaints with the landlord. After the meeting, landlord served tenants with 30-day termination notices. b. Issue: Whether a landlord has ability to evict tenants for no reason other than for retaliation. c. Holding: Landlord cannot evict tenants for retaliatory reasons. d. Rule: i. In deciding whether a tenant has established a defense of retaliatory eviction, the following factors must considered to determine if the landlords primary motive was not retaliatory: Landlords decision was a reasonable exercise of business judgment; Landlord in good faith desires to dispose of the entire leased property free of all tenants; Landlord in good faith desires to make a different use of the leased property; Landlord lacks the financial ability to repair the leased property and therefore, in good faith, wishes to have it free of any tenant; Landlord was unaware of the tenants activities which were protected by statute; Landlord did not act at the first opportunity after he learned of the tenants conduct. Landlords act was not discriminatory. Imperial Colliery Co v. Fout a. Facts: Tenant by landlord as a coal miner. For 6 years, he has leased a small house trailer lot from Imperial Colliery Company. It is alleged that Milburn and Imperial are inter-related companies. On February 14, 1986, P advised D that his lease would be terminated as of March 31, 1986. Ds attorney corresponded with P and gained a two-month extension of the lease. Subsequently, Ds attorney sent another letter asking for another extension to which P did not reply. On June 11, 1986, P sued for possession of the property. D asserted as a defense that Ps suit was brought in retaliation for his involvement in the United Mine Workers of America and, more particularly, in a selective strike against Milburn. Ps retaliatory motive was alleged to be in violation of the 1 st Amendment Rights of speech and assembly. b. Issue: Whether the retaliation motive must relate to the tenants exercise of a right incidental to the tenancy. c. Holding: The retaliation motive must relate to the tenants exercise of a right incidental to the tenancy. d. Reasoning: The central theme underlying the retaliatory eviction defense is that a tenant should not be punished for claiming the benefits afforded by health and safety statutes passed for his protection. These statutory benefits become a part of his right of habitability. If the right to habitability is to have any meaning, it must enable the tenant to exercise that right by complaining about unfit conditions without fear of reprisal by his landlord. In this case, Tenant argues that he was evicted due to his involvement in the United Mine Workers of America union but that has no relation to the tenants exercise of a right incidental to the tenancy.

a.

2.

How Long May the Tenant Stay? a. Most courts hold that the landlord may not evict the tenant until the landlord can show a legitimate, non-retaliatory business reason for the eviction. They may not refuse to renew a lease or grant a periodic tenancy in place of term of years for retaliatory reason. However, the Utah Supreme Court criticized this approach. Noting that we cannot saddle the landlord with a perpetual tenant, and requiring the landlord to show that his actions are the result of retaliatory motives will be a very difficult burden for a landlord to overcome, the court held that the tenant should be permitted to remain until the landlord has made the repairs required by law. The court held that the tenant may be evicted anytime after repairs have been made as long as the tenant is also given sufficient time, without the pressure normally exerted in a holdover eviction proceeding, to find other suitable housing. b. Other states have dealt with the issue by statute. i. Some states expressly apply the retaliatory eviction doctrine to the landlords refusal to renew a tenancy, including a term of years. ii. Some states have interpreted their statutes to apply to non-renewal of a tenancy. iii. In contrast, some states have held that their statutes prohibit retaliatory eviction of month-tomonth tenants but allow landlords to refuse to renew term-of-years or fixed term leases for retaliatory reasons. iv. Still other states adopt a middle position, prohibiting retaliatory eviction for a specified time. For example, California prohibits a landlord from retaliating against a tenant for exercising rights protected by the implied warranty for 180 days but allows landlords freedom to seek not to renew a periodic tenancy or to increase the rent or otherwise change the terms of the leasehold after that time. 4. Massachusetts Rule a. Defense To An Action Of Summary Process i. Reporting violation to board of health or other regulation dealing with residential premises. ii. Commencing a proceeding to obtain damages or enforce laws dealing with regulation of residential premises. iii. Organizing or joining tenants union or similar organization. iv. Reporting violations dealing with Landlords obligation to provide certain services etc. b. Presumption Of Reprisal or Retaliation i. Within 6 months of tenant taking such action as listed above Landlord commences action against tenant or sends a notice to quit or rent increase. c. Rebut Presumption (Clear & Convincing Evidence) i. Action not in retaliation and landlord has sufficient independent justification. ii. Landlord would have taken such action even if tenant had not taken any action or made a report or engaged in such activity. d. Damages: i. Not less than one months rent or more than three months rent or actual damages sustained whichever is greater. H. Consumer Protection Legislation; Lead Paint 1. Consumer Protection Legislation a. Massachusetts Consumer Protection Act (93A) i. Definitions Trade and commerce shall include the advertising, the offering for sale, rent or lease, the sale, rent, lease or distribution of any services and any property, tangible or intangible, real, personal or mixed . . ., and shall include any trade or commerce directly or indirectly affecting the people of this commonwealth. ii. Unfair Practices; Legislative Intent; Rules & Regulations Unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce are hereby declared unlawful. . . iii. Civil Actions & Remedies; Class Action; Demand for Relief; Costs; Exhausting Administrative Remedies Any person . . . who has been injured by another persons use or employment of any method, act or practice declared to be unlawful by section two . . . may bring an action in

3.

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the superior court, or in the housing court . . . whether by way of original complaint, counterclaim, cross-claim or third party action, for damages and such equitable relief, including an injunction, as the court deems to be necessary and proper. . . At least 30 days prior to the filing of any such action, a written demand for relief, identifying the claimant and reasonably describing the unfair or deceptive act or practice relied upon and the injury suffered, shall be mailed or delivered to any prospective respondent. Any person receiving such a demand for relief who, within 30 days of the mailing or delivery of the demand for relief, makes a written tender of settlement which is rejected by the claimant may, in any subsequent action, file the written tender and an affidavit concerning its rejection and thereby limit any recovery to the relief tendered if the court finds that the relief tendered was reasonable in relation to the injury actually suffered by the petitioner. In all other cases, if the court finds for the petitioner, recovery shall be in the amount of actual damages or 25 dollars, whichever is greater; or up to three but not less than two times such amount if the court finds that the use or employment of the act or practice was a willful or knowing violation of said section, two or that the refusal to grant relief upon demand was made in bad faith with knowledge or reason to know that the act or practice complained of violated said section two. For the purposes of this chapter, the amount of actual damages to be multiplied by the court shall be the amount of the judgment on all claims arising out of the same and underlying transaction or occurrence, regardless of the existence or non-existence of insurance coverage available in payment of the claim. In addition, the court shall award such other equitable relief, including an injunction, as it deems to be necessary and proper . . . If the court finds in any action commenced hereunder that there has been a violation of section two, the petitioner shall, in addition to other relief provided for by this section and irrespective of the amount in controversy, be awarded reasonable attorneys fees and costs incurred in connection with said action; provided, however, the court shall deny recovery of attorneys fees and costs which are incurred after the rejection of a reasonable written offer of settlement made within 30 days of the mailing or delivery of the written demand for relief required by this section. Definitions as Graham Stated Them: i. Deceptive: Failure to disclose to consumer any fact which had it been disclosed would have influenced the consumer not to enter into the transaction in question. ii. Unfair: Principles of fair dealing which the conscience of the community may progressively develop. When is 93A not applicable? i. Billings v. Wilson Facts: Wilson (tenant) rented an apartment from Billings (landlord). The apartment is the 1st floor of a two-family house. The landlord owns the house and occupies the 2 nd floor apartment. This one apartment is the only rental property with which the landlord is concerned. The tenant began to withhold her rent because of violations of the State Sanitary Code. The landlord commenced a summary process action, seeking possession and rent. The tenant filed an answer and counterclaim alleging breach of the warranty of habitability, interference with quiet enjoyment, retaliation, and violation of Mass. Gen. Laws ch. 93A . . . The judge declined to submit ch. 93A counterclaim to the jury, and ruled that the rental activity in which the landlord was engaged was not trade or commerce: within the meaning of 2 of that statute. Issue: The issue is whether 93A is applicable to the situation where landlord only has one apartment. Holding: 93A is not applicable to the situation where the landlord only has one apartment because the landlord was not engaged in trade or commerce. Reasoning: 1. Provisions of ch. 93A were not available against defendants who as private individuals sold the plaintiffs their home, where the transaction was private in nature and in no way undertaken in the ordinary course of a trade or business. . .

d.

When employing the term persons engaged in the conduct of any trade or commerce the Legislature intended to refer specifically to individuals acting in a business context. 3. Whether the transaction takes place in a business context must be determined from the facts of each, and that in each case the court must examine the nature of the transaction, the character of the parties involved, and the activities engaged in by the parties. Landlords Liability to Tenants i. Consumer Protection Legislation Most states have passed legislation specifically regulating landlord-tenant relations. 1. Some states, for example, have enacted statutes codifying the implied warranty of habitability. 2. In addition, many states have passed general consumer protection statutes. In recent years, many courts have held that tenants may bring claims against landlords as consumers of housing services. Why do tenants bring claims under consumer protection acts when they have remedies under a statutory or common law implied warranty of habitability? 1. They do so because some unfair trade practices or consumer protection statutes provide for multiple damages or reimbursement for attorneys fees or both. Multiple damages are awarded both to punish the wrongdoer and to deter wrongful conduct. Legislatures fear that compensatory damages may not be enough to deter fraudulent conduct since defendants may simply factor possible liability into their cost-benefit calculations, thus treating it as a cost of doing business. If the benefits of such conduct outweigh the costs, businesses may simply continue the unlawful conduct, thereby defeating the purpose of the legislation, which aims to protect consumers from such activity in the first place. Various issues arise in these cases. 1. First, courts must determine whether tenants are protected by general consumer protection statutes that prohibit unfair or deceptive trade practices in the sale of goods and services to consumers. a. Courts commonly hold that rental housing constitutes a service that is bought by tenants as consumers, thus enabling tenants to sue under these statutes. b. Some courts, however, have held that the presence of specific landlord-tenant legislation, such as the Uniform Residential Landlord & Tenant Act, demonstrates a legislative intent to exclude tenants from coverage under other statutes and that tenants therefore cannot obtain additional remedies under general consumer protection legislation. Second, courts must define what kinds of conduct constitute unfair or deceptive practices. 1. The Massachusetts Supreme Judicial Court has held that including illegal and unenforceable clauses in residential leases constitutes an unfair and deceptive practice that injures tenants, even if the landlord never attempts to enforce the clause and the tenant admits never having read the clause. In the absence of reliance, however, damages are nominal. 2. Other kinds of conduct held to constitute unfair or deceptive trade practices include retaliatory evictions and the failure to maintain rental housing in accordance with the housing code. ii. Landlords Tort Liability to Tenants Strict Liability v. Negligence 1. Can the tenant sue the landlord damages that exceed the amount of the rent during the period of the violation? a. This question is usually described as the extent of the landlords tort liability to the tenant for injuries resulting from the landlords violation of her duty to provide habitable premises. 2.

2.

Are landlords liable for injuries to tenants caused by defects in the premises that may or may not result from the landlords failure to take adequate care in maintaining the habitability of the premises? a. Under the traditional rule, landlords were immune from liability to tenants for injuries arising out of the condition of the premises. b. Under the current practice, however, landlords are liable to tenants for injuries arising out of the landlords negligence, including negligent failure to comply with housing codes or the implied warranty of habitability. 3. Should landlords be liable only when tenants can prove that the landlord acted negligently (acting so as to cause a foreseeable and unreasonable risk of harm), or should a strict liability standard apply, making the landlord liable if a defect in the premises caused the plaintiffs injuries, regardless of whether the landlord could have foreseen and prevented the harm by reasonable maintenance? a. A negligence claim is based on an allegation that the landlord is at fault or has acted unreasonably by not taking proper precaution or investing sufficiently in safety. A strict liability claim is based on the unreasonably dangerous condition of the building or the landlords failure to comply with the housing code, regardless of whether a reasonable landlord would have known of and corrected the defect. b. The prevailing rule is that the landlord is liable for harms to tenants only if she has acted negligently. This means that the landlord may be relieved of liability if the injury is caused by a latent defect of which the landlord could not reasonably have been aware. Damages for Emotional Distress 1. A number of courts have allowed tenants to recover damages for IIED resulting from a landlords violation of statutory duties and the implied warranty of habitability. These cases ordinarily involve extreme and outrageous conduct such as the sexual harassment, persistent lack of heat and severe pest infestation present in Haddad v. Gonzalez.

2.

Lead Paint a. Lead Paint Poisoning i. Landlords Obligations Under 6 Chipping Paint etc. or in area accessible to children Remove or contain it. b. Statute i. Whenever a child under 6 years of age resides in any residential premises in which any paint, plaster, soil or other accessible material contains dangerous levels of lead, the owner shall remove or cover said paint, plaster, soil or other materials as required by this section so as to make it inaccessible to children under six years of age. Whenever any such residential premises containing said dangerous levels of lead undergoes a change of ownership and as a result thereof, a child under 6 years of age will become a resident therein, the new owner shall remove or cover said paint, plaster, soil or other materials as required by this section so as to make it inaccessible to children under 6 years of age. Mass Gen. Laws ch. III, 197(a). c. Landlords Liability i. The owner of any residential premises shall be liable for all damages caused by his failure to comply with the provisions of this statute. The owner of any residential premises who is notified of a dangerous level of lead in paint, plaster, soil or other material present upon his premises . . . and who does not satisfactorily correct or remove said dangerous conditions shall in addition to the provisions in the preceding paragraph be subject to punitive damages, which shall treble (triple) the actual damages found. Mass Gen. Laws. Ch. III 199. d. Ankiewicz v. Kinder i. Facts: This case arises out of the alleged lead poisoning of the P, a minor under the age of 6. The complaint asserted 3 counts against the defendants, landlords of the apartment occupied by the plaintiff and his parents, alleging 1. Negligence, 2. Breach of the implied warranty of habitability, and 3. Violation of the lead poisoning prevention law. Mass. Gen. Laws ch. III,

190-199A. D filed a 3rd party complaint against the Ps mother for contribution, alleging that she negligently allowed her child to ingest lead-based paint found in the apartment. The trial judge dismissed the landlords claim for contribution on the statutory cause of action . . . ruling that the Massachusetts contribution statute, which applies only to liability in tort and does not apply to causes of action arising under Mass. Gen. Laws ch. III 190-199A. ii. Issue: whether the Legislature intended to impose liability on parents of lead-poisoned children when it enacted the lead poisoning prevention law. iii. Holding: The Legislature did not intent to impose liability on parents of lead-poisoned children when it enacted the lead poisoning prevention law. iv. Reasoning: Although the statute imposes strict liability on a property owner for injuries sustained by children under 6 years of age who ingest lead based paint that the owner fails to remove as the statute requires, it explicitly provides that such a property owner is not exclusively liable. Mass. Gen Law ch. III, 199 (The Remedy provided by this section is not exclusive and supplements any existing statutory or common law cause of action). A rule of exclusive owner liability would not only run counter to this specific provision, but would also unfairly force owners to should the entire burden of liability, with no right of contribution against other parties potentially at fault, such as negligent building inspectors, lead-based paint manufacturers, and paint removal contractors. V. Anti-Discrimination Law In The Housing Market A. Fair Housing Acts; Discriminatory Treatment (Race) 1. Policies/Themes a. Property, Social welfare, equality & liberty i. Antidiscrimination law is crucial to many areas of legal practice, including property (employment, banking, environmental law, family law). Many of the rules we have studied relating to general property concepts are based on similar policy concerns as AL, to regulate private property use and transfer to ensure that power over valuable resources is not unduly concentrated in the hands of a few (restraint on alienation, RAP etc). Issue of right of access to the market place in order to promote equality norms and ensure individual liberty. b. Statutory Interpretation i. Practice in reading a statute. Cases help us address issues of interpretation and implementation of this and related statutes. Also look at exceptions and exemption to law. c. Victim v. Perpetrator Perspectives (Intent v. Disparate Impact) i. See when we look at the cases that you have two types of discrimination, discriminatory treatment or intentional discrimination (from the perpetrators perspectives) and the more difficult disparate impact claims (from the victims perspective, e.g., may not be motivated by Ds intentional wrongful conduct but still has a discriminatory effect on the victim.) d. Private v. Public Discrimination i. Most of our time on private discrimination in the sale or rental of housing; but other types such as exclusionary zoning or variances which raises public discrimination concerns. Seen both in the context of public accommodation law as well as covenants and the estate system. Fair Housing Act a. Protected Class i. Cannot discriminate based on: Race; Color; Religion; Familial Status (Means what, one or more person under 18); or National Origin b. Covered Conduct i. Discrimination in the sale or rental of dwellings: Dwellings: building or structure designed for occupancy as a residence. Also covers under 3605 discrimination in real estate financing. c. Exemptions & Exceptions i. 3603

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Single family house sold or rented by an owner if owner does not own more than 3 such homes, Does not use a rental or sales service to sell (i.e., real estate broker, etc.) and does not advertise rental or sale in violation of 3604. Or Rooms or units which is occupied by no more than 4 families if owner actually maintains and occupies one of such living quarters as their residence. ii. 3607a Religious organizations can rent or sell property to persons of the same religion to persons of same religion unless membership restricted on account of race, color or national origin. Private clubs not in fact open to the public who lodges their members. iii. 3607b Housing for older person (Intended and occupied solely by persons 62 years or older) or At least intended and operated to be occupied by at least one person 55 years old and older AND qualifying factors such as: 1. Evidence that it is housing for older persons including existence of SIGNIFICANT FACILITIES and services designed to meet social and physical needs of older persons, at least 80% of units occupied by at least one person 55 years or older. Who Can Enforce Law? i. Any aggrieved person can commence civil action in U.S. district court or State Court within 2 years of occurrence or termination of alleged discriminatory housing practice. ii. Relief includes damages (actual and punitive, as well as injunction or restraining order, costs and attorneys fees). Remedies i. The Fair Housing Amendments Act of 1988 (FHAA) amended the Fair Housing Act of 1968 (FHA) significantly by prohibiting discrimination against families with children (familial status) and against persons with disabilities (handicap). ii. It also beefed up the 1968 act by extending statute of limitations from 6 months to two years and by eliminating a $1,000 on punitive damages. Who is Liable and Standard of Liability? i. Claims under the FHA can be based either on a showing of discriminatory treatment (intent) or disparate impact. Discriminatory treatment claims involve intentionally treating members of the protected class differently from others so as to deny particular persons housing opportunities. Disparate impact claims allege that defendants actions have a disproportionate, exclusionary impact on members of a protected group and that impact is not justified by legitimate government or business objects. Prima Facie Case For Discriminatory Treatment Claims i. Asbury v. Brougham describes the traditional elements of a prima facie case under the Fair Housing Act. For a claim based on discriminatory treatment. The proof necessary to establish a prima facie under the FHA also establishes, a prima facie case of racial discrimination under 1982. In order to establish her prima facie case, P had to prove that: 1. She is a member of a racial minority; 2. She applied for and was qualified to rent an apartment or townhouse in Brougham Estates; 3. She was denied the opportunity to rent or to inspect or negotiate for the rental of a townhouse or apartment; and 4. The housing opportunity remained available. Stated Generally: 1. Member of protected class 2. Covered Conduct 3. Applied For and Was Qualified 4. Denied Opportunity by D 5. Housing Opportunity Available at time of inquiry.

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Note: This test, articulated in Asbury, applied only to claims based on the defendants refusal to sell or refusal to lease to plaintiff. A landlord who selectively takes a particular apartment off the market, refusing to rent it to anyone so as to avoid renting it to a member of a protected class, may be violating the statute on the ground that such conduct constitutes a refusal to deal or otherwise makes unavailable or denies housing because of race. Defendants Justification i. If the plaintiff can produce evidence of the various elements of the prima facie case, the burden shifts to the defendant to show a non-discriminatory reason for the differential treatment. If the defendant fails to assert any such justification and the fact finder is persuaded that the plaintiff has proved the prima facie case, the plaintiff will prevail. ii. If the defendant articulates and produces evidence of non-discriminatory reasons for its actions, plaintiff must show that those reasons are pretextual. If plaintiff shows that the defendants justification was pretextual, the jury may conclude (but is not required to conclude) that the real reason for the denial was discriminatory. Racial Steering i. Many cases brought under the FHA concern claims against realtors who have engaged in racial steering. This practice involves showing African American customers housing in certain areas and white customers housing in other areas. It also involves not telling African American customers about the availability of housing in certain areas. Such practices violate the act by otherwise making unavailable housing because of race, and violating the express prohibition against in real estate-related transactions in 42 U.S.C. 3605, which prohibits discrimination by real estate brokers. Racial steering is a form of redlining; a practice of marking territory within a municipality in which brokers and lenders (and possibly sellers) will refuse to help individuals obtain housing for discriminatory reasons. ii. Proving that a realtor has engaged in racial steering often involves the use of testers. Testers are individuals who, without an intent to rent or purchase a home or apartment, pose as renters or purchasers for the purpose of collecting evidence of unlawful . . . practices. Testers may approach a realtor who has told an African American customer that no housing is available in a certain area; If the realtor shows houses in that area to the white buyer that were not shown to the African American buyer, it may be possible to draw an inference that the realtor was discriminating against the initial buyer on account of her race. Similarly, white tester may approach a seller to see whether the seller offers different terms than were offered to a prior potential African American purchaser. iii. Standing Who is entitled to bring a lawsuit under the FHA? 1. Two categories of persons have standing to sue to enforce the statute: a. Those who are directly injured by the discriminatory acts, and i. Those who are denied housing opportunities in violation of the act have standing to sue. It is also clear that the statute protects whites who are denied housing because of their association with African Americans. b. Those who have sufficient incentive to litigate the case. i. The Supreme Court held that testers have standing to bring claims in federal court under FHA against realtors and sellers who have engaged in racial discrimination. ii. Finally, the Court held that an organization devoted to promoting equal access to housing could bring a lawsuit against a realtor who engaged in steering if it could demonstrate that the defendants steering practices caused it to devote extra resources to identify available housing and counteract the defendants steering practices. iv. Advertising Advertisements that limit housing to whites clearly violate the provisions of FHA that makes it unlawful to make, print, or publish . . . any notice, statement, or advertisement, ii.

with respect to the sale or rental of a dwelling that indicates any preference, limitation or discrimination based on race, color, religion, sex, handicap, familial status, or national origin, or an intention to make any such preference, limitation or discrimination. Can the housing provider indirectly demonstrate an interest in customers of a certain race? 1. In Ragin v. New York Times Co., the court held that a newspapers practice of publishing real estate advertisements almost always showing white models in a city with a significant population of African Americans and other minorities might violate the FHA by showing a discriminatory preference. The district court held that the ultimate issue for the fact finder was whether to an ordinary reader the natural interpretation of the advertisements published in the newspaper is that they indicate a racial preference in the acceptance of tenants. 3. Massachusetts Fair Housing Laws a. Protected Classes: i. Same as federal law plus: Age, Ancestry, Marital Status, Sexual Orientation, Being a Veteran, or Receiving Public Assistance, Subsidies, or Other Government Benefits. b. Who is covered i. Owner, ii. Lessee, iii. Sublessee, iv. Licensed real estate broker, v. Assignee, vi. Managing Agent, or vii. Persons furnishing financing of residential or commercial space. c. What is covered i. Rental and sale of property; ii. As well as advertising and notices; or iii. Oral or Written inquiries. d. Statute of Limitation i. Within year of alleged discrimination or defense asserted in court or brought before MCAD. e. Some Exemptions i. Owner-occupied Two-Family Dwelling 1 or 2 units if not advertised or listed w/ broker or public offering. What if owner occupied but advertised or listed? 1. Exception for owner-occupied two-family homes ii. Two or three family house where one unit is occupied by an elderly or infirm person who would suffer a hardship by the presence of children. iii. Elderly housing (refer to federal law). B. Discriminatory Treatment (Familial/Marital Status) 1. Familial Status a. Does family include single individuals? i. Yes. b. What is family status? i. One or more persons under 18 who are domiciled with parent or legal custodian or designee of such parent or custodian with written permission. c. Pregnant person is covered as well. d. Non-traditional families not covered by federal FHA but may be covered under MA law dealing with sexual orientation, marital status, etc. e. Are prospective foster parents covered? i. Covered by FHA b/c designees of person having legal custody, but also not literally w/in meaning b/c not securing legal custody.

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What is meaning of legal custody? Did legislature mean those w/ ultimate legal authority (parent or state) or those who are legally entrusted to care for children? Doesnt seem to make sense Congress would exclude foster parents; why would it allow discrimination in one setting and not other especially when kids w/ must need in foster care setting? Would discourage foster care and serve no real public policy goal. f. Does housing for older persons apply? i. D claimed that moving gradually toward such homes, and that at least 80% of units in park occupied by at least one person 55 yrs or older. But must also meet other requirements 3607(b)(2)(c)(I) such as significant services for elderly or if not practicable that such housing necessary to provide important opportunities for elderly, 80% occupancy rate, and publication and procedures as housing for persons over 55. Here court held did not meet standards b/c no on-site facilities and off-site facilities did not qualify b/c not enough of a connection between two available to any community member or senior citizen. Marital Status a. McCready v. Hoffius i. Facts: D (a married couple) own residential property which they rent. In June 1993, P (unmarried couple) answered Ds ad about the property. D refused to rent it to P when they learned that P were unmarried, but intended to live together. D told these P that unmarried cohabitation violated his religious beliefs. P filed two separate actions in circuit court. D moved for summary disposition, arguing in part that P failed to state a claim upon which relief could be granted, because Civil Rights Act does not protect unmarried cohabitation. D argued alternatively that, if the act protects unmarried cohabitation, it is unconstitutional, because it would force D to violate their sincerely held religious beliefs against unmarried cohabitation. ii. Holding: The states interest in providing equal access to housing to all regardless of their membership in prescribed categories supersedes Ds religious rights. iii. Reasoning: The sole factor that D employed in determining that P were unworthy of renting their available apartments was Ps marital status. The Legislatures intent to prohibit discrimination based on this factor is made clear by the inclusion of marital status in the act. The language is simple, and its meaning not difficult to comprehend. It seeks to prohibit discrimination based on whether a person is married. Nothing in the legislative history of the Civil Rights Act limits the term marital status to protecting married couples only. Discrimination Based On Sexual Orientation a. State Ex Rel. Sprague v. City of Madison i. Facts: Appellant (Hacklander-Ready) leased a 4-bedroom house. She had the owners permission to allow others to live with her and share in the payment of rent. In the fall of 1988, appellant (Maureen Rowe) began with her and paying rent. In April 1989 they advertised for housemates to replace two women who were moving out. They chose Appellee (Sprague) from among numerous applicants. They knew her sexual orientation when they extended their offer to her. Appellee accepted their offer and made a rent deposit on May 4, 1989. However, the following day Hacklander-Ready informed Appellee that they were withdrawing their offer because they were not comfortable living with a person of her sexual orientation. ii. Holding: unambiguously prohibits any person having right of rental to refuse to rent to any person because of the persons sexual orientation. iii. Reasoning: Appellants gave up their unqualified right to such constitutional protection when they rented housing for profit. Discrimination Based On Disability a. Reasonable Accommodations of Persons with Disabilities i. The Fair Housing Act, as amended by the Fair Housing Amendments Act of 1988, provides that it constitutes illegal discriminatory conduct to: Refuse to permit, at the expense of the handicapped person, reasonable modifications of existing premises occupied or to be occupied by such person if such modifications may be necessary to afford such person full enjoyment of the premises except that, in the case of a rental, the landlord may where it is reasonable to do so condition permission for a modification on the renter agreeing to restore the interior of the premises to the condition that existed before the modification, reasonable wear and tear excepted . . .

ii.

The statute further provides that the landlord may not refuse to make reasonable accommodations in rules, policies, practices, or services when such accommodations may be necessary to afford such person equal opportunity to use and enjoy a dwelling. b. Obligations regarding the disabled? i. Obligation to make reasonable modifications? Owner must permit person to make physical modifications at own expense but may condition it on restoring interior if reasonable to do so. 1. Owner must make reasonable accommodations in rules and procedures and services 2. All buildings built after 1988 must have certain features 3. NOTE: MA law the same What constitutes reasonable accommodation? 1. Example: Could not evict T who violated no pet rule by keeping cat where T had a psychiatric disability and had emotional attachment to cat and cat did not bother neighbors. Same w/ seeing eye dog equal opportunity to use and enjoy dwelling. What about reasonable modifications? 1. Grab bars in bathroom w/ reinforced walls by placing blocking between studs. Can require to remove bars but not blocking b/c wont interfere w/ next Ts use. c. Persons With Aids i. Poff v. Caro Facts: he landlord refused to rent because he believed that the three males would likely get AIDS because they were homosexuals. At the present time AIDS is more prevalent in the homosexual community. That may be changing. In any event the fact that a homosexual is more likely to get AIDS does not afford a valid basis for a belief that these three homosexual men will become infected with AIDS. Issue: The issue is whether a property owner violates the New Jersey Law against Discrimination by refusing to rent to homosexuals because the owner fears that the homosexuals may later acquire the disease known as AIDS. Holding: Discrimination based on a perception of a handicap is within the protection of the Law Against Discrimination. VI. REAL ESTATE TRANSACTIONS A. Structure Of Transaction; Purchase & Sale Agreement; Fraud; Title Protection Structure Of Transaction a. Steps In Real Estate Transaction i. 3 Step Process

b.

Questions To Keep In Mind ISSUES i. What are the brokers rights and obligations? ii. What constitutes a binding contract, offer to purchase and purchase & sale agreement? iii. What constitutes a breach of contract by buyer or seller prior to closing?

c.

iv. What rights and obligations survive closing/transfer of deed? Brokers i. In most cases sellers hire real estate brokers (also called agents or realtors) to help sell the property. The seller normally signs a contract with the broker by which the broker agrees to look for prospective buyers and show the property to them, perhaps for a set period of time such as 6 months, in exchange for a commission, which is often 5 to 7 percent of the sale price. The agreement may also set the asking price, or the amount the seller would like to get for the property. ii. There are 3 basic types of broker listing agreements: Exclusive Right To Sell 1. This arrangement gives the broker the right to collect the commission if the property is sold to anyone during the period of contract, even if the sale is to a buyer that the owner found without the brokers help. Exclusive Agency 1. This entitles the broker to the commission, or a share of the commission, if the property is sold by her efforts or the efforts of any other broker, but not if the property is sold by the owner. Open or Non-Exclusive 1. The broker is entitled to a commission only if she is the first person to procure a buyer who is ready, willing, and able to buy. If anyone else, including the seller, finds a buyer first, the broker gets no commission. iii. It is quite clear that the seller has a duty to pay the commission if the seller himself wrongfully backs out of the deal after the broker has found a ready, willing, and able buyer. But what happens if the buyer refuses to complete the transaction? Traditional Rule: Broker was entitled to the commission even if the buyer refused to complete the transaction. Modern Rule: Broker is only entitled to the commission once the purchase has gone through especially since the commission is normally taken out of the purchase price paid by the buyer. 1. Broker Entitled To Commission From Seller In Massachusetts If: a. Produces ready, willing and able buyer at terms fixed by owner, b. Purchaser enters into a binding contract to do so, c. Sale is consummated in accordance with, if not, failure is due to the wrongful act or interference by seller and not any default of the purchaser. iv. Many brokers use multiple listing services established by the local real estate board. Each broker who is a member of the listing service registers every exclusive listing she receives with the listing service. Other brokers will then have access to that information and can attempt to sell the property as well. If any sale goes through, the commission is shared by the listing service and the broker who arranged for the sale. Any broker who finds a buyer will share the commission with the broker hired by the seller. v. Brokers Duties To Buyer Although the broker is formally the agent of the seller, many buyers feel that the broker is also working them. The buyer may deal exclusively with one broker, who shows her a range of places and helps her find a property that suits her needs. Although there is no formal contractual arrangement with the broker, the courts may impose on the broker certain fiduciary obligations toward the buyer. 1. Example: a. If the broker fails to reveal relevant information to the buyer, the buyer may sue the broker for fraud. Misrepresentation (Misfeasance) v. Duty To Disclose (Non-Feasance) 1. Common Law Liability for Misrepresentation of Affirmative Statement In All Jurisdictions: a. Known to be false, b. Material to transaction, c. Buyer reasonably relied on,

d. Not known or accessible to the buyer, e. Duty to disclose. 2. Common Law Liability For Fraudulent Concealment or Non-Disclosure in SOME Jurisdictions: a. Representing seller, b. Has actual knowledge, c. Of Material facts, d. Not known or accessible to the buyer, e. Duty To Disclose. 3. Keep In Mind: Some Jurisdiction moving toward a more stringent standard: a. Duty to disclose material facts that would be: i. Discoverable ii. By a Reasonably Competent & Diligent Inspect iii. By Broker. vi. Brokers Duties In Massachusetts Common Law 1. Misrepresentation or Fraud: Liability, tort. 2. Non-disclosure: No Liability 93A Consumer Protection: 1. Buyers and brokers are covered by the statute. 2. Greater rights under 93A. 3. Deceptive or unfair practices and acts. 4. May distinguish from on and off property defects or defects directly affecting property(e.g., failure to disclose conservation commission restriction on property, failure to disclose insect damage, property encumbrance, etc.) 5. Unfair or Deceptive Act: a. Non-disclosure of material fact or defect: Condition that is of sufficient materiality to affect habitability, use and enjoyment of property, market value which is not known or readily observable by buyer. i. What constitutes a material fact? Cannot make any misrepresentations or false statements but NO DUTY TO DISCLOSE home is psychologically impacted. vii. Buyers Duties To Broker What happens in the buyer attempts to arrange with the seller to buy the property independent of the broker to save the cost of the brokers commission? 1. Ordinarily, the broker can sue the seller for breach of the listing agreement. But suppose the seller no longer has the money for some reason; can the broker sue the buyer as well? a. Some courts have held that when a prospective buyer solicits a broker to find or to show him property which he might be interested in buying, and the broker finds property satisfactory to him which the owner agrees to sell at the price offered, and the buyer knows the broker will earn a commission for the sale from the owner, the law will imply a promise on the part of the buyer to complete the transaction with the owner. viii. Buyers Brokers It has become increasingly common for some home buyers to hire their own brokers to advise them in purchasing a house. Such brokers work for the buyer, not the seller, and may perhaps be more trusted to tell the buyer whether the price being asked by the seller is reasonable. Buyers brokers are paid a percentage of the sale price, a fixed fee, or an hourly rate. Conflicts may arise when a real estate agency provides brokers services to both buyers and sellers, since the buyers broker will be attempting to minimize the sale price, while the sellers agent will try to get as much as possible for the property. Unless the law prohibits it, a single person may be in the business of representing both buyers and sellers, and it is possible that the seller will deal with a buyer who has engaged the same

d.

agent. Many state statutes that regulate such potential conflicts of interest, mainly by requiring disclosure that a broker is acting as a dual agent. Many states now also allow a designated agency, in which one broker in the agency represents the seller, while another represents the buyer in the transaction. Some states are experimenting with allowing brokers to act as transaction brokers, in which they do not represent either the seller or the buyer; instead, they act as professionals, giving independent advice on the transaction. Sales Contract i. Unlike sellers, buyers are generally not limited to one broker; they may contact and deal with several brokers. There is usually no oral or written agreement between the buyer and broker; the broker is officially working for the seller although the broker may indeed want to be helpful to the buyer in order to consummate a sale. ii. When the parties agree on a price and on the general terms of the transaction, they proceed to the formal step in the transaction: The Purchase & Sale Agreement. The Purchase and Sale agreement is a written contract, generally prepared by a lawyer who may work either for the buyer or the seller. 1. In the purchase and sale agreement, the seller agrees to convey title at a specific date in the future when the closing will take place. The buyer makes an immediate down payment or deposit (sometimes called an earnest money deposit) that often amounts to 10% of the purchase price; the buyer also promises to pay the rest of the purchase price at the closing. The date of closing is negotiated by the parties, and is often one or two months after the purchase and sale agreement is signed. 2. The buyers obligations are normally made contingent on: a. Sellers ability to convey marketable title; b. Buyers ability to get adequate financing for the rest of the purchase price; and c. Inspections of the premises for structural defects, termites, and environmental hazards, such as radon and toxic waste generated by a leaking oil tank. iii. Formalities: Statute of Frauds v. Part Performance & Estoppel Part Performance 1. The part performance doctrine allows an oral sales contract to be enforced if the buyer has taken substantial steps to complete the transaction. Courts rely on three factors that ordinarily will suggest that a contract has been made: a. Payment of all or substantial part of the purchase price; b. Taking possession of the property; and c. Making substantial improvements on the land. 2. The states differ on whether all three are required or only one or two of the three. Payment of part of the purchase price is generally not enough to trigger the doctrine because the buyer can be made whole by having the money returned (with interest). However, payment of the purchase price in combination with one or both of the other factors is likely to be sufficient because they ordinarily would not occur without a promise to convey. Estoppel 1. An alternative basis for the part performance doctrine is estoppel. When the seller makes a promise on which the buyer relies substantially, it is not fair to allow the seller to claim that she did not make a promise if this would cause detriment to the buyer who reasonably relied on the promise to convey. The elements of promissory estoppel demand evidence that establishes: a. The existence of a clear and definite promise which the promisor should reasonably expect to induce action by the promisee; b. Proof that the promisee acted to its detriment in reasonable reliance on the promise; and c. A finding that injustice can be avoided only if the court enforces the promise. Constructive Trust 1. A third method of avoiding the statute of frauds is the constructive trust doctrine, which may be applied to prevent unjust enrichment when property has been acquired

in such circumstances that the holder of the legal title may not in good conscience retain the beneficial interest. This doctrine may apply if the funds of one person are used to acquire property, but title is held in the name of another. What Constitutes A Writing 1. Many cases deal with the question concerning what constitutes a writing sufficiently specific to satisfy the statute of frauds. What must the memorandum contain in order to satisfy the statute? 2. In general, it must do the following with reasonable certainty: a. Identify the parties to the contract and show that a contract has been made by them or offered by the signatory to the other; b. Indicate the nature of the contract and its subject matter; c. State the essential terms of the promises to be performed under the contract; d. Furthermore, the memorandum must be signed by the party against whom enforcement is sought or, as the original statute put it, the party to be charged. iv. What Constitutes A Breach Of Contract Misrepresentation & Fraudulent Non-Disclosure 1. Misrepresentation a. An outright lie or misrepresentation of facts has always constituted fraud and may give rise to liability for damages as well as a right to rescind the sale. Misrepresentation consists of an affirmative statement by the seller or broker to the buyer of a fact that: i. Is known to be false, ii. Material to the transaction, iii. Is reasonably relied on by the buyer in deciding to purchase, and iv. Causes damage as a proximate result of the lie. b. If the misrepresentation is about a condition of the premises that is apparent to the buyer, a fraud claim may be denied on the ground that a reasonable buyer would have inspected the premises and discovered the evident defect, and thus any reliance on the sellers statement was unreasonable. c. Even if there is a merger clause, most of the time fraud or misrepresentation will still be allowed to nullify the contract. 2. Suppression a. Courts traditionally held that sellers are under no obligations to disclose defects in the houses they are selling. Real estate sales are governed by the doctrine of caveat emptor let the buyer beware. This doctrine still appears to be majority rule in the case of apparent defects. As long as the seller does not affirmatively lie to the buyer about the condition of the premises (making a fraudulent misrepresentation), buyers are generally charged with notice of what an inspection of the premises would have revealed. However, some courts began to make exceptions if the buyer acted to conceal the defect or otherwise suppress knowledge of it by a potential buyer. 3. Non-Disclosure a. The traditional rule of Caveat Emptor still followed in a number of states (Massachusetts follows it). In recent years, there has been a trend to require sellers and brokers of real estate to disclose information about latent defects known to the seller and not readily discoverable by a buyer. The failure to disclose such defects constitutes fraud and will entitle the buyer to rescind the sale and/or obtain damages caused by the fraud. b. Note: generally this obligation has not been extended to commercial property. c. Keep in mind that if there is a merger clause (or as is) it may bar the nondisclosure claim however if the non-disclosure was extreme enough then it may override the merger clause. 4. What Information Must Be Disclosed? a. In general, states that impose liability for non-disclosure require disclosure of non-obvious information that a reasonable buyer would want to know about and

5.

6.

7.

that might affect the terms of the transaction especially the market value of the property or induce the buyer to back out of the deal. b. Many cases imposing liability on sellers or brokers for fraudulent non-disclosure concern information about defective conditions that pose a risk of harm and that would not be apparent to a reasonable observer. i. Example: Defendants have been found liable for fraudulent non-disclosure when they have failed to disclose that the building was infested by termites, that the roof leaked and that the property was located next to a landfill contaminated with toxic waste and that federal environmental officials had written a report against use of the site for human habitation. c. Failure to disclose defective conditions may give rise to liability even when they have not been proven to be dangerous but are nonetheless material to the transaction in the sense that most buyers would want to know about them. i. Example: Imposing liability for fraudulent non-disclosure on both the seller and the real estate broker hired by the seller because they failed to reveal that the house was insulated with urea formaldehyde foam insulation, a substance that had been banned in future house construction by the federal government. d. Other kinds of information have also been deemed relevant. i. Example Seller was held liable for failing to disclose that a woman and her four children were murdered in the house 10 years prior to the sale. The court reasoned that the murder of innocents is highly unusual in its potential for so disturbing buyers they may be unable to reside in a home where it has occurred. This fact may foreseeably deprive a buyer of the intended use of the purchase. Murder is not such a common occurrence that buyers should be charged with anticipating and discovering this disquieting possibility. Accordingly, the fact is not one for which a duty of inquiry and discovery can sensibly be imposed upon the buyer. Legislation a. Note that in 1992 Congress passed the Residential Lead-Based Paint Hazard Reduction Act, requiring sellers and landlords of housing built before 1978 to provide buyers or lessees with a lead hazard information pamphlet and to disclose the presence of any known lead-based paint. Waiver a. In Danann realty Corp v. Harris, P alleged that it was induced to lease a building held by defendants because of oral representations, falsely made by the defendants, as to the operating expenses of the building and as to the profits to be derived from the invested. The court held that generally a merger clause stating that the written agreement embodies the whole agreement does not protect the defendant from a claim of fraud. The court distinguished this case, however, noting that the contractual language was more specific. Where a person has read and understood the disclaimer of representation clause, he is bound by it. As a matter of law, the allegation of plaintiffs that they relied upon an oral statement made to them is in direct contradiction of the representation provision of the contract. The presence of such a disclaimer clause is inconsistent with the contention that plaintiff relied upon the misrepresentation, and was led thereby to make the contract. b. The Danann rule continues to be the law in many jurisdictions. c. Other courts, however, reject the Danann rule, holding instead that a fraud claim is still available despite an as is clause or a non-reliance clause when the seller affirmatively lies about the condition of the premises. Implied Warranty In The Sale Of New Residential Real Estate

e.

In contrast to the traditional caveat emptor doctrine still applicable in some states to the sale of used residential housing, most states now protect 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. vi. Sellers Failure To Provide Marketable Title The purchase and sale agreement ordinarily requires the seller to be able to deliver marketable tile at the date set for the closing. The sellers inability to do this will excuse the buyer from the deal. What kinds of defects in the title are sufficiently serious to justify allowing the buyer to get out of the deal? 1. The main defects that make the title unmarketable are encumbrances and chain of title defects. a. Encumbrances are property interests in persons other than the grantor that seriously affect the value or usability of the property. These include possessory interests, such as conflicting titles and leases, and non-possessory interests, such as easements, covenants, mortgages, and liens. b. Chain of title defects are mistakes or irregularities in the documents or procedures by which title has been transferred or encumbered over time. i. Example: A prior deed may turn out to have been forged, or the present deed may misdescribe the property. vii. Sellers Breach Of Warranty Of Habitability It is now well established that an implied warranty of habitability exists in the builders initial sale of new homes but not in the sale of older homes. The implied warranty goes by many names, including habitability, fitness, quality or good workmanship. viii. Buyers Failure To Make Good Faith Efforts To Obtain Financing Bushmiller v. Schiller 1. Facts a. Buyer changed her mind after signing the purchase and sale agreement and made no serious effort to obtain financing. The buyer argued that her obligations under the contract were contingent on her getting financing and that since she had not obtained financing she was free to back out of the deal and recover her $13,000 deposit. The seller claimed that the agreement contained an implied good faith term under which the buyer impliedly promised to make good faith efforts to obtain financing. Since the buyer failed to do this, the seller argued that he was entitled to keep the $13,000 deposit and to recover damages from the buyer of the difference between the contract price and the lower price at which the seller could sell the property to a third party. 2. Holding a. The court held that the buyer must undertake reasonable efforts to obtain financing and that the buyer was not contractually justified in simply changing her mind about the house. Remedies For Breach Of The Purchase & Sale Agreement i. Buyers Remedies A buyer whose seller has breached the purchase and sale agreement has four remedies: 1. Specific Performance a. The buyer can obtain an injunction ordering the seller to convey the property to the buyer by transferring title in exchange for the agreed-upon contract price. 2. Damages a. The buyer may seek damages, measured in most states by the difference between the parcels market value at the time of breach and contract price (expectation or benefit of the bargain damages), return of the deposit, and any additional expenses occasioned by the breach. b. A significant number of states refuse to give the buyer expectation damages if the seller acted in good faith and believed he had good title at the time he entered the agreement; in these situations, the buyer may recover only the

a.

deposit, plus expenses. The buyer is entitled to expectation damages only if the seller did not in good faith believe he had good title, willfully or arbitrarily refused to complete the sale, or failed to perfect title when it was easy to do so. 3. Rescission a. The buyer may seek to rescind the deal and recover the down payment or deposit. 4. Vendees Lien a. Rarely used, this remedy is based on the premise that the sellers breach of the purchase and sale agreement creates a debt owned by the seller to the buyer, that is, the amount of the deposit, which is secured by a lien on the property. The property can therefore be sold to raise the funds to pay back the deposit. ii. Sellers Remedies The seller whose buyer has breached the purchase and sale agreement also has four remedies: 1. Specific Performance a. The seller may be able to sue the buyer for the purchase price in exchange for the sellers handing over to the buyer the deed to the property, thus forcing the buyer to comply with the terms of the contract. However, this remedy may not be available everywhere. The theory behind specific performance for the buyer is that the land is unique and that a money judgment will not put the buyer in the position she would have been in had the contract been performed. While this is true, money is not unique; the seller should not care whether the purchase price comes from the buyer or someone else. 2. Damages a. The seller may elect to sue for damages, measured by the contract price minus the market price of the parcel at the time of breach, plus other expenses occasioned by the breach. 3. Rescission & Forfeiture Of Down Payment a. The seller may simply attempt to rescind the deal, keeping the down payment or earnest money deposit paid by the buyer. Usually, the purchase and sale agreement explicitly provides the seller with the right to keep the down payment if the buyer breaches the contract. 4. Vendors Lien a. Rarely used, this remedy presumes that the property belongs equitably to the buyer, who is obligated to purchase the property; it also presumes that the seller has a lien on the buyers equitable title and that the property can be sold to satisfy the buyers obligation to pay the rest of the purchase price to the seller. iii. Risk Of Loss During The Executory Period: Equitable Conversion What happens if the house burns down during the executory period after the purchase and sale agreement has been signed but before the closing? Who bears the risk of loss the seller or the buyer if the contract does not answer the question? Must the buyer complete the transaction despite the loss, or may the buyer rescind and get her earnest money deposit back? 1. Many courts hold that the risk of loss in on the buyer, under the doctrine of equitable conversion. Because the buyer has the equitable right to have the contract specifically enforced, for certain purposes it is appropriate to treat the buyer as if the transaction had already been completed. Thus, courts have often treated the buyer as the equitable owner during the executory period, despite the fact that the seller may retain the right to possess the property until the closing. This rule, however, has been subject to much criticism. Moreover, this allocation of the risk rarely comports with the parties buyer. In addition, the seller is much more likely to have insurance than the buyer. Finally, the seller is certainly in a better position to exercise care to avoid the loss. For these reasons, some courts have begun to reject the doctrine and place the risk of loss during the executory period on the seller, thereby allowing the buyer to get out of the deal.

f.

In practice, most purchase and sale agreements explicitly place the risk of loss on the vendor, and in any event, most vendors have homeowners insurance. Deeds & Title Protection i. Formalities Essential Terms 1. The deed must: a. Identify the parties; b. Describe the property being conveyed; c. State the grantors intent to convey the property interest in question; and d. Contain the grantors signature. 2. Most deeds are and should be recorded to protect the grantees rights. a. To be recorded, most states require the deed to be acknowledged by a public notary or other official and some require one or more witnesses to the transaction. b. The land being conveyed must be described in the deed. i. The description must be sufficiently precise to locate the boundaries of the property. Those boundaries may be defined by reference to official surveys, plats, or by metes and bounds. Metes and Bounds 1. This system starts at a defined point (usually described by a natural or artificial monument such as a fence or a street edge) and identifies the direction and distance of the first border, then the second, and so on, until returning to the original point. ii. If a deed contains a mistaken description of the property, either party may sue to reform the deed. Delivery (General Rule: Physical Possession) 1. A deed must be delivered to the grantee to effectuate a transfer of ownership. The purpose of the delivery requirement is to ensure that the grantor intends to part with the property and to clarify who owns it. 2. When people give real property, as a gift, ordinarily to family members, problems of delivery are common. a. First, a person sometimes obtains physical possession of a deed, and may even record the deed, when the owner does not intend to transfer ownership. Possession of the deed or recording it, or both, may give rise to a presumption that the grantor intended to transfer ownership of the land. Most courts hold that this presumption can be overcome by extrinsic evidence that the original owner did not intend to transfer ownership, such as oral testimony that the owner intended to transfer ownership only at her death or evidence of an installment land contract providing that the buyer obtain title only after all the payments are made to the seller. b. Second, someone may make out a deed in front of a notary public granting ownership of her home to her daughter, place the deed in a safety deposit box in her bank, and tell her daughter that she has given her the property on the condition that the daughter allow her to continue living in the house until her death. What happens if the woman then dies without having shown the deed to her daughter and leaving a will providing that her property be divided equally between her daughter and her son? The son claims a half interest in the house; her daughter claims that she owns it because her mother gave it to her before she died. Has the deed been delivered? i. Some courts are reluctant to find delivery unless the deed has been physically handed over to the donee or to a third party who has instructions to deliver the deed. ii. Most courts, oddly enough, find that delivery can occur even if the deed is not physically delivered to the donee. Rather, they adopt a doctrine of constructive delivery and hold that writing a deed and engaging in conduct that demonstrates an intent to transfer ownership is sufficient to constitute

2.

ii.

delivery. An intent to transfer ownership is more likely to be established if the deed is physically deposited in a safety deposit box or with a third party. iii. Many courts hold that delivery of a deed to a third party, such as an attorney, with instructions to hand over the deed to the grantee at the grantors death constitutes a delivery of a vested remainder to the grantee, with a life estate retained by the grantor. Title Covenants Warranties Of Title 1. One form of additional assurance is the title covenant or warranty of title contained in the deed. Six standard covenants have developed. a. Present Covenants: These covenants are breached, if at all, at the time of the conveyance (closing). That is when the statute of limitation states to run. i. Covenant of Seisin This covenant is the grantors promise that he owns the property interest (the estate) he is purporting to convey to the grantee. Thus, an owner of a leasehold would breach this covenant if he purported to convey a fee simple. Similarly, an owner of a one-half interest as a tenant in common would breach the covenant if he purported to convey full ownership of the property as a sole fee simple owner. ii. Covenant Of The Right To Convey This constitutes the grantors promise that he has the power to transfer the interest purportedly conveyed to the grantee. Although in most cases the same as the covenant of seisin, it might differ in several instances. 1. Example: a. A life estate burdened by an enforceable restraint on alienation would violate this covenant if the owner purported to convey it to the grantee. Similarly, if the property were adversely possessed by someone other than the seller, the seller would have record title (seisin) of the property but not the right to convey it. iii. Covenant Against Encumbrances This is the grantors promise that no mortgages, leases, liens, unpaid property taxes, or easements encumber the property other than those acknowledged in the deed itself. b. Future Covenants: These covenants are breached at all, after the closing, when the disturbance to the grantees possession occurs. The statute of limitations starts to run when the grantees possession is disturbed. i. Covenant of Warranty By this covenant, the grantor promises to compensate the grantee for any monetary losses occasioned by the grantors failure to convey the title promised in the deed. 1. General Warranty Deed: A general warranty deed covenants against all defects in title. Warrants against acts of previous owner 2. Special Warranty Deed: A special warranty deed limits the covenant to defects in title caused by the grantors own acts but not by the acts of prior owners. 3. Quitclaim Deed: This is the name generally used for a deed that contains no warranty (or covenant) of title whatsoever. It purports to convey whatever interests in the property are owned by the grantor. It does not, however, promise that the grantor in fact owns the property interest that the grantor claims to own or, indeed, any interest. It suffices to transfer whatever property interests the grantor has to grantee, but does provide the buyer with any real assurance that the grantor has the right to convey the interest the grantor purports to convey.

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Note: i. In Massachusetts, there is still a warranty as stated by the following Massachusetts Statute: A deed in substance following the form entitled Quitclaim Deed shall when duly executed have the force and effect of a deed in fee simple to the grantee, his heirs, and assigns to his and their own use that at the time of the delivery of such deed the premises were free from all encumbrances made by [the grantor], and that [the grantor] will, and his heirs, executors .shall warrant and defend the same to the grantee and his heirs and assigns forever against the lawful claims and demands of all persons claiming by, through or under the grantor, but against none other. ii. Covenant Of Quiet Enjoyment The grantor promises by this covenant that the grantees possession will not be disturbed by any other claimant with a superior lawful title. This covenant is substantially the same as the covenant of warranty. iii. Covenant For Further Assurances Rarely used, this covenant requires the seller to take further steps to cure defects in the grantors title, such as paying an adverse possessor to leave the property or paying the owner of an encumbrance to release the encumbrance. Remedies For Breach Of Warranty Of Title The most widely used covenant is the covenant of warranty. If it turns out that the seller did not have the right to convey the property interest the deed purported to convey, the buyer can sue the seller for breach of warranty of title. This covenant runs with the land and can be enforced by subsequent grantees as well. The damages for breach of the covenants of warranty, seisin, right to convey, and quiet enjoyment are generally measured by the price paid for the property that has been lost. This price is generally near the FMV of the property at the time of the closing. If the breach is discovered after the closing, the ousted buyer will not be able to recover the market value of the property at the time the buyer was ousted; moreover, the market value may be much higher than the original price. The damages for breach of the covenant against encumbrances is either the cost of removing the encumbrance or the difference between the value of the property without the encumbrance and with it.

a.