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PROPERTY
What is equitable servitude? Read 634, 637
I. Landlord & Tenant (Continuation)
A. Assignments
1. Implied Assignment Rule:
a.Court ruled that when
a person other than the lessee is in possession of the leased premises, paying rent to the
lessor, there is a presumption that the lease has been assigned to that person in
possession (IMPLIED ASSIGNMENT RULE). His interest is regarded as arising out of the
implied assignment. He stands in the same position as the assignee who occupies the land
under a written assignment. And that person is estopped from denying the assignment or
objecting that it is not in writing.
2. A covalent that binds a
person in an assignment "touches and concerns the land"
a.
The following is the Clark test: When the parties as laymen would normally regard the
covenant bound up with the land, aiding the promisee as a landowner or hampering the
promisor in a similar capacity it runs with the land. Also parties must measure the legal
relations of the parties with and without the covalent.The following is the Bigelow test:
If the promisor's legal relations to the land is lessened--the burden of the covalent runs
with the land; if the relationships is increased making his legal interests more valuable
by the increase--the benefit of the covalent runs with the land.
3. Covenants only run with
the estate if the entire estate goes; if there is a assignment not a sublease.
4. when the covalent runs
with the land; it needs to have something to do with the real estate. Rent, improvements
usually run with the land; business improvements usually don't
B. When LL transfer the land
1. When LL transfers to
another landlord: he uses a deed. Then the second LL calls the T and tells T to give him
the money. Tenant must attorn (to recognize LL2 as the LL and to start paying rent) If
there are some covenants in the original lease (LL will pay the taxes on the property-T
will make necessary repairs on the property) L2 is only held to the covenants for the
length of the lease--a renewal does not bind him. Both covenants which touch and concern
the land will run with the tenant. What about returning a deposit? It does not touch and
concern the land. L1 would still be liable under privity of K. L2 not responsible under he
expressly assumes the duty to do so
II. Landlord's Rights and Remedies/Tenant's Duties
A. Duties
1. T. has a duty to not make
a change as to affect a vital and substantial portion of the premises which would change
its characteristic appearance, the fundamental purposes of its erection or the uses
contemplated
2. keep it wind and weather
tight--keep the elements out of it
3. not to commit a nuisance
4. if he signs a K to do so,
he has a duty to repair and maintain the premises--common law used to require him to do so
B. The Holdover Tenant
1. Unlawful Retainer
(procedure to remove tenant whose lease has expired) a.k.a. summary ejectment/forcible
entry; how to make it quick:
a. go to a court of
limited jurisdiction
b. tight time limits on
answer, and when case has
to come to trial
c. limit issues that
can be discussed
2. treat the holdover as a
trespasser and take steps to recover possession and damages equal to the FRV of the
property
3. renew the lease sustaining
the same terms and conditions of the original lease
C. When Tenant Abandons the Premises
1. LL effects a surrender and
the T is liable for rent accrued and for damages
2. let the premises lie idle
and sue for rent as it comes due
3. retake possession and
attempt to mitigate damages
a. If
you don't make an attempt to mitigate them, its the amount you could have gotten them-the
amount I could have mitigated them. For many years, the idea that a landlord did not have
to mitigate was the law. That prevents a valuable piece of real estate from being used
properly. The majority view is in favor of litigation.
III. LL's Duties regarding possession
A. Holdover's
1. IT'S THE TENANT'S
RESPONSIBILITY TO GET RID OF THE OLD TENANT THAT HOLDS OVER. THIS IS THE MINORITY VIEW.
VIRTUALLY EVERY CASE IN THE LAST 30 years hold that it's the landlord's duty to get rid of
previous tenants.
B. Implied Warranty-Does it exist?
1. IMPLIED Warranty of GOOD
TITLE: generally no implied warranty with sales of real estate. Is there an implied remedy
for a lease?
C. Power to Demise:
1. By this covenant a lessor
warrants that he has such interest in the leased premises as enables him to convey the
interest he purports to convey to the lessee.
D. Implied Covalent of a Quiet Enjoyment: T has right
to quiet enjoyment without the interference of the LL.
1. title
2. LL duty to get out
holdover tenants
3. actual eviction: you are
actually kicked out
4. partial eviction: eviction
from part of the premises
4. constructive eviction: To
prove a constructive conviction, you have to move out. You can't claim it if you don't
move out. The T. use and enjoyment must be substantially interfered with. This is measured
by what a reasonable person would regard as fundamentally incompatible with the use and
enjoyment that was implied.
a.
How to prove
(1) show an implied covenant of quiet enjoyment
(2) show that this covenant has been breached to the extent the person
has to leave the premises
E. Defects Before v. Defects After:
1. the problems that arise
out of the land are the person's problem.
2. Warranties only apply to the first owner of
the house only.
3. caveat enter: if you don;t like it, don't
lease it. All the problems are the tenants not the LL
IV. Duties Respecting Fitness and Repair of Leased Premises
A. A purchaser of property has no right to rely upon
the representations of the vendor of the property as to its quality, where he has a
reasonable opportunity of examining the property and judging for himself as to its
qualities.
B. There is no implied warranty that leased premises
are fit for the purposes for which they are let. When an action is based on fraudulent
concealment, a duty to disclose the truth must be shown. the rule of caveat emptor applies
in the relation of landlord and tenant unless material representations constituting fraud
are specifically alleged, or there is a showing of a fiduciary relationship between the
parties.
1. Doctrine of Caveat Emptor:
Buyer beware; take it at your own risk; can't go back
C. What to do if land is destroyed?
1. AT LEAST six states had
legislation providing that if the premises are so destroyed or injured as to be
untenantable or unfit for occupancy, the tenant may surrender possession and avoid further
liability for rent. (AZ, CONN. MICH, MINN, MISS., WIS)
2. MAJORITY OF STATES THAT
REQUIRE THE LANDLORD TO RESTORE but are limited to instances in which they can recover.
3. STATUTES usually give the
tenant the option to terminate the lease; you can't make the landlord restore the property
if he doesn't want to.
If the tenant stays in
, there is no general duty on the landlord to restore unless there is a WARRANTY OF
HABITABILITY.
4. Courts usually don't make
the LL make repairs because they don't want to babysit
V. Fitness of Leased Premises: LL's Tort Liability
A. Previously the LL was not held liable, but the
trend now is that they are being held liable...
B. The exceptions to the previous non-liability trend
are:
1. undisclosed dangerous
conditions known to lessor and unknown to lessee
2. conditions dangerous to
persons outside the premise
3. premises leased for
admission to the public
4. parts of land retained in
lessor's control which lessee is entitled to use
5. where lessor contracts to
repair
6. negligence by lessor in
making repairs
7. the furnished house
exception
VI. Easements:
A. Definition: a grant of an interest in land which
entitles a person to use the land possessed by another.
1. Types of Easements
a.
affirmative: the owner has the right to go onto the servient land
b.
negative (covanent): the owner of a negative easement can prevent the owner of the
servient land from doing something on the servient land
2. All easements are either
appurtenant to other land or in gross.
a.
appurtenant: if an easement benefits its owner in the use of another tract of land, it is
appurtenant. The land benefitted is called the dominant land; the land burdened is the
servient land. This land usually is but is not always adjacent to the dominant land. Every
easement has servient land but not dominant land (ok, does it benefit him in using his own
or another person's land? I have two definitions)
(1) it is attached to the dominant tenement and passes with the
tenement to any subsequent owner of the tenement-can't be separated and turned into an
easement in gross unless the owners of the dominant and servient make an agreement to do
so.'
(2) courts favor this kind of easement more
b. in
gross: does not benefits its owner in the use and enjoyment of his own personal land, but
merely gives him the right to use the servient land; does not benefit the owner of the
easement in the use of land belonging to the owner but benefits the owner's business or
benefits the owner in some other way.
(1) there is no dominant land
(2) its ok to use it with different land but it must benefit you
wherever you are (?)
3. A profit a prendre: right
to take something off another person's land that is part of the land. The usual profit is
in gross
a.
you can divide this kind of easement but you can only use it as "one stock"
(1) the penalty for violating the rule is an injunction or damages; the
minority of cases have even allowed forfeiture
4. License: permission to go
upon land belonging to the licensor. Can be oral or in writing; can be revoked at any
time.
a.
License compared to Estate and Easement
License Estate
Easement
Scope Limit
Unlim
Limited
Revoc Yes No
No
Exclus N Y Can be
either but
presumed
to be no
Writ N
Y
Y w/except
Dur
Pre. For b/dep Pre.fr b/d
5. Why care if it is an
easement or an estate?
a.
person who has estate gets minerals; easement doesn't
b.
easements have limited purposed; estates generally do not
c.
may be limitations in dividing up easements
d. if
you quit using easements,. you can loose it through abandonment; estates can't be loss
this way
e.
easements are non-possessory; estates are
6. personal easements: can
not be transferred
7. +commercial easements: can
be transferred but can't be divided up unless used as "one stock; ; also
apportionable so you can keep some for yourself
8. Exclusive Easements (in
gross): this one allows the grantee to divide the rights granted. The rationale is that
one who retains no right to use the easement is not harmed when the use of the easement is
shared by the grantee with others. ITS CALLED EXCLUSIVE BECAUSE IT EXCLUDES THE OWNER AND
POSSESSOR OF SERVIENT TENEMENT FROM PARTICIPATING IN THE RIGHTS GRANTED
9. Non-exclusive( in gross):
can be apportioned must be used as one stock; arises when the servient owner retains the
privilege to share the benefit conferred by the easement. They are not subject to
apportionment by the easement owner because his retained rights might be diminished if the
grantee shares his right with oth4ers.
10. What you can do with an
easement is defined in the original transaction when you created the easement or if not
explained w/in the reasonable expectations of the parties
11. the law does allow
changed in scope to accommodate technology as long as the same basic use is preserved.
12. +if you subdivide land,
all the people who use the land can continue to use it as long as it is reasonable
13. you cant use the easement
if appurtenant to another land to benefit another piece of land--the majority agrees with
this view; minority will allow it
14. Impossible to have an
easement on your own land
15. There can be estates
(corporeal) and easements in fee simple (incorporeal)
16. Easement by
Estoppel:EASEMENT BY ESTOPPEL: TAKES THE PLACE OF A WRITING; RELIANCE; THE MAINTENANCE IS
ANOTHER FACTOR ON THE DETRIMENTAL RELIANCE. THEORY OF REASONABLE DETRIMENTAL RELIANCE. CAN
YOU REASONABLY RELY ON HAVING AN EASEMENT?
17. You can't reserve an
easement for anyone but yourself. Thus if D deeds to Buyer 7 an easement and reserves a
part of it to buyer 6--that is not legal. A dozen states have thrown this rule out the
window. Its will be an appurtenant if you write it before you transfer the land. Reserving
a piece for yourself is a smart move
18. If no additional burden
is placed on the servient land, the dominant estate may be divided or partitioned and the
owner of each part can cliam a right to the easement
B. Scope of an Easement:
1. the D does not have a
right to the injunction for the P's misuse of an easement that does not create any actual
damage or increased burden on the D's property
2. reasonable changes in
technology are allowed to the land
3. such use as the fact and
circumstances show were within the reasonable contemplation of the parties at the time of
the conveyance are allowed
4. Can a servient land owner
grant additional easements?
a.
no, if it is exclusive
b.
not non-exclusive, ok
(1) yet if the second easement is unreasonably burdensome , the rights
of the first easement holder will prevail
5. the court will solve the
problem it is currently faced with and doesn't worry about future scope problems because
the future cannot be decided with certainty
6. can't force an easement
owner to use a different easement if it's specifically located--if it is not specifically
located, the court will allow the owner of the servient land to make a reasonable decision
on its location
7. Easements can extend a
reasonable height into the air
8. A person can enlarge and
expand his dominant land if he at the time of the drafting of the covenent drafting, he
reserves the power of attorney or appointment to enlarge the land.
9. amgibuities resolved in
favor of the grantee
10. The general rule is that
an easement cannot be extended by the owner of the dominant land to another land--such an
extention constitutes an unreasonable increase of the burden on the servient land which
was NOT intended when the easment was made up
11. a servient owner has the
right to use land so long as it does not interfere with the rights of the owner of the
easement;
C. How to write one:
1. is it an easement in
profit or an estate
2. appurtenant or in gross
a. what is the dominant
land
3. scope: what can they do
with it
4. maintenance: who has
the obligation to maintain it
5. is it exclusive or
non-exclusive-can be either one
6. how long does it last
7. durations
8. location (if no location
given, then servient land can choose)
9. parties
10. subdivision
11. enjoinment?
D. Creation of Easements:
1. Prescription: you can
terminate any type of easement by prescription
a.
Requirements:
(1) open and notorious
(2) reasonable form of continuity: regular use; uninterupted use
(3) 10 years
(4) non-permissive/hostile; extremely; no permission can be acquired
where the use is permissive; very important
(5) don't need to be exclusive
(6) actual possession
(7) not necessary to pay taxes
(8) no color of title needed
(9) acqueiescene
(a) to know or should have known about prescription and yet not do
anything about it
(b) a estoppel which shows "reasonable detrimental reliance"
will obtain an easement here
b.
How to stop a prescription from occurring:
(1) sue for injunction w/in 10 year period
(2) give permission to use the right of way (a license of agreement;
can't force agreement)--dominant owner executes a deed to a servient (release of the
easement)
c.
people who get land through prescription will always be guilty of trespass, though they
didn't harm the land
d.
Although the use of aa prescriptive
easement are not confined exactly to the actual uses made during the prescriptive period,
the use must be consistent with the kind of use by which the easement was created
e.
Prescriptive rights can not be acquired for
(1) negative easements
(2) easements by neccesity
(3) public lands
2. Implied: Whitman says only
dummys that don't write out an easement have one of these
a.
How to get one:
(1) Requirements
(a) the dominant and servient lands where once under the same ownership
(b) there was a subsequent severance
(c) before the severance there was a pre-existing use
(d) must be a necessity forming
the basis of the easement; neccessary to the beneficial enjoyment
of the land
(e) apparent: gives notice that you are buying a lot with an easement
on it; if the easement is buried, and the D. tells you about it--it satisfies the need to
be apparent.
i) public policy protects a bona fide purchaser against a hidden
easement of which he had no actual or constructive notice
(f) continuous not sporadic
(g) necessary: desirable to maintain the value of property
b.
Implied grant v. Implied Reservation"
(1) Implied Grant: must be apparent, the reason for this is to uphold
the reliance interest Reasonable necessity required
(2) Implied Reservation: A lot of necessity required
(3) Some courts differentiated; some don't
c.
Arises the moment that two plots of land are no longer in common ownership
3. Necessity: lasts only as
long as the necessity lasts
a.
use arising at severance
b.
courts are undivided whether or not strict neccesity is needed or reasonable neccesity
c.
there must have been a necessity at the time of the easement
d.
can't tell where it is until you go to court (all the others you can tell where it is at)
e.
usually comes from a landlocked parcel
f.
there are 8-9 states that have statutes where the state delagate to private people (the
landlocked person) power of eminent domain when they pay for it
g.
common law allows one to have an easement of necessity for free
h.
why go with the statutory version then?
(1) you get to decide where to put it
(2) gives you direct access (common law will give you a round a bout
way)
4. Express
a.
must satisfy S.O.F.; THE OTHER THREE DON'T NEED TO BECAUSE THEY ARE CREATED BY ACTIONS NOT
WORDS
b.
must be written; if not it is a license
c.
grant or reservation
d.
the law presumes that before you buy land you will look at it
e. if
you are a bonafide purchaser of a express easement (one who has, made a reasonable
investigation) you take free of the easement if the easement is not recorded. If you are
not, then you are subject to the easement
It is questionable if this rule applies to
the other three ways
5. Estoppel: where with he
knowledge of the licensor a person has spent money improving the land or for other
purposes expanded energy in good faith in the use of the land
6. Reservation: grantor of
any possessory land may reserve an easement over the land granted
E. Termination of Easement:
1. if easement owner also
becomes owner of the servient land; this is a merger
2. fee simple defeasible
which occurs after a certain event
3. abandonment: if the non
use has been as long as the adverse possession period in your state-doesn't always need to
be 10 years (intent to not use the easement must be shown)
a.
difference between abandonment and prescriptive termination:
(1)
b.
deed transferred to another owner/release
c.
government can take away your land; can't enjoin them
d.
you can abandon part of your easement without abandoning the whole thing and still be ok
4. Rails to Trails Act: Not a
direct abandonment; can be converted into trals; train tracks are easements in gross
5. prescriptive blockage:
losing an easement because you allow someone to block it for 10 years
6. if the owner of the
appurtenant land attempts to change the land into a easement in gross severing it from the
dominant estate
7. when neccesity ends
VII. Restrictive Covenants (Negative Easements): right to prevent
someone from doing something on the land; promise of landowner not to do something
A. Example: B---B/L-----horizontal privity needed.
Two people make up a covanent with each other. They decide that the burdened person won't
raise pigs on his land. Then the benefitted person deeds his entire land to another
person. That person also wants the burdened land person not to raise pigs on the land. He
does not have to show horizontal privity, but he has to show vertical privity, intent,
touch and concern in order to show that the benefit of the land runs with the benefitted
land. Now lets say the burdened person deeds it to another person. The benefitted land
owner wants now to show that the burden still runs with the burdened land in law. In order
to do that he has to show horizontal privity. To do this, he must show that at the time
the original parties covenanted it was:
1. between landlord/tenant,
or
2. one person had an interest
in the other person's land
3. conveyance in deed
*4. He also needs to show
intent, t/c, and notice
*5. the burdened person can
always bring up as a defense the fact that he never recieved notice of the burden.
B. Equitable servitudee
1. same thing as negative
easement but equity doesn't require privity
C. Criteria that it runs with the land
1. touch and concern
a. a
covenant to buy something from a certain place does not touch and concern the land because
it deals with the way to do business not with the property; Whitman says this is debatable
b.
use of real estate does touch and concern the land
c. in
LL/T the burdened/benefitted land are two separate pieces of land--they are side by side
owned by two people; in fee simple it is just one piece of land
2. intent
3. notice to the burdened
party: only the burdened party needs to recieve it not the benefitted party
4. privity: may or may not
require it
a.
for certain kinds of action in covenants, you don't have to find privity: injunctions,
equity.
b.
privity only required at law
c.
types
(1) horizontal: between the original members (LL/T)
(a) not required to enforce a covalent in equity
(b) Requirements in law
i) LL/T relationship
ii) covalent is part of deed transaction
iii) one party has interest in the other party's land--broad is
summations interest in the same land; narrow version is mutual relationship existing
through an easement
(2) vertical: 1 of the original people and their successors
(assignment) gives away his entire estate to a sceond person
(3) General Rules
5.Real estate can be bound under a restrictive
covalent because it can't be moved; but chattel, which is movable can not be bound. Also
real estate has the ability to generate positive generalities; it is efficient to let it
run with the land
6.Previous owner can not bind a future owner
with a covent to do business with a
particular entity
7.In order to show a successful covenant, you
must show benefit on the benefitted land
and the burden running with the burdened land
8.no privity required to have the benefit run
9. a covenant that does not
run with the land will not be enforced against a subsequent vendee
D. How does American Law Compare with English Law
1. Affirmative burdens:
English courts do not allow it. American courts do; in most cases it is a promise not to
do something. Restrictive covenants usually dealt with racial restrictions; some had to do
with paying damages
2. A covalent in gross has no
benefitted land
Easements in gross are
not recogzined in England
3. The running of benefits
does not apply to horizontal privity. You do, however, have to have horizontal privity to
run with the burdened land (to have the burden run with the burdened land)
VIII. Vendor/Purchaser:
A. real estate brokers
1. performs a useful function
of bringing vendors and purchasers together.
2. ussually employed by the
vendor who lists his property
3. types of listing
agreements
a.
open listing: vendor may list the propery for sale with as many brokers as she wishes; she
can even list under a multiple listing bureau. If her property is listed with more than
one broker, the broker who first communicates to the vendor an offer to purchase on terms
the vendor agrees to is entitled to commission
b.
exclusive: vendor agrees not to list it for sale with any other broker; also agrees this
broker is entittled to a commission even if the sale is actually brought about by another
broker or the vendor himself. If this agreement exists and a sale is made through another
broker, she may be compelled to pay commision to both brokers unless they decise to split
a single commision. (5-7% on the sale)
(1) exception: you can write in the agreement names of people that if you sell the
property to that the agent does not get commission
4. the real estate broker can
only sell the property; he can not enter into a binding K
5. if when the closing date
comes, the buyer calls and says he can't buy the house, then what? If the person is ready,
wiling and able, they should be able to have their commision. There are 8-10 states that
don't follow this rule--they hgave to have a sale. Thus, when entering into a contract,
modify the listing agreement to make it absoulely sure there is a closing before you have
to pay the broker.
6. if you go to a real estate
agent and ask him to show you some houses, unless you specifically ask him to be your
broker, he is the subagent of the other agent.
7. theoreticallly the person
can represent both parties but that puts the agent in a difficult position especially when
both sides are relaying to him confidential info
8. New housing can be
"marketed" by the builder-degvekoper through a local real estate brokerage firm
or can be marketed through the builders own sale's organization without a broker. These
builders-developers hyave their prices fixed--there is no haggling
B. Attorney
1. examine the abstracts
2. in some states they do the
title searches
3. draft bonds, notes,
mortgages
C. Executory Session
1. this is the time in
between the signing and the closing (the performance of the K)
2. title search
a. in
the midwest, the private party will prepare a abstract document for you.
b. a
title plant is a privately owned duplicate of the public record; it is ussually better
organized becaue it is indexed by parcel not by party
c.
utah is one of eight state that has its plans organized by parcel.
d.
title companys have subplanted attorney search
(1) they do two things
(a) provides information
(b) indemnity for law suits incase information is bad
e.
sellers can provide either an abstract (handed down from owner to another--75-100 to bring
it down to search) or a title/insurance policy (75-100). This provides evidence. In
general east of Miss. the buyer can pay for own title search/insurance--west of
Mississippi-seller buys it. In the cases where the buyer gets a another titlte insurance
policy or lender, he will get two of these
f.
title companies are strictly liable?
3. must arrange financing
during the executory period
4. appraisal if you get
institutional financing: may use their own appraiser or allow buyer to use an aproved
appraiser
5. inspection of
peropery--hire someone to look for defects property
6. third party warranty
7. survey: he carries
malpractice insurance. In order to make a claim against a survey company, you have to
prove negligence.
D. Financing
1. Often the vendor will have
an existing mortage with some lending firm
2. Ways of financing
a.
purchaser will ussually get mortgage from a mortgage lender--institutional lender such as
a savings and loan association, a savings bank, a commercial bank, or a mortgage company
b.
bank is the mortgagee, person is the mortgagor. A person gives a mortgage.
c.
When the vendor enters into a K with the purchaser, the vendor ussually has his own
mortgagee. The purchaser now will get his own mortgagee. When the vendor passes the deed
to the purchaser. The purchaser will transfer a note to his mortgagee. That mortgagee then
will pay a certain amount to the P who transfers it to the V who transfers the money to
his mortgagee. The mortgagee then releases the vendor making the only existing transaction
that between the purchaser and his mortgagee. (pays the vendor the difference betweeen the
mortgage debt and the agreed purchase price
3. at closing they all sign;
sends check to real estate agent
4. if they paid in cash, take
off the new mortgage part?
5. ways to take over loan
a.
New Third Party Loan: new loan takes subject to the old loan; the vendor allows him to pay
him his part and take the property "subject to the mortgage.
b.
the vendor allows the purchaser to make payments to himself. PURCHASE MONEY MORTGAGE.
Vendors is wearing two hats; selling real estte and acting as vendor. Like installment K
but different
c.
mix and match:
(1) you can have as many mortgages as you want
(a) Problem: first vendor doesn't like it
(2) loan to value ratio
d.
"due on sale": accelarate the maturity of the mortgage debt if and when the
property is sole. Enables a mortgage lender to impose upon the purchaser the necessity to
agree to increase the interest rate on the the debt or to refinance by obtaining a loan at
a higher finance rate
6. The federal government in
the Title II of the National Housing Act of 1934 set up "Federal Housing
Administrative Mortgage Insurance"
a.
provides for the creation of a mutual insurance fund to insure private mortgage lenders
against losses on eligable mortgage loans underwritten by the FHA.
7. the federal government
also set up a secondary mortgage market
a.
FNMA, FHLMC, and GNMA are resale markets for mortgage loans originated by institutional
lenders. They buy federally insured or guaranteed mortgage loans and
"conventional" (not federally insured) loans and both agencies package pools of
mortgage loans for resale to investors They also raise funds through bonds and debentures
which are sold on capital market. How this works is that the purchaser's mortgagee assigns
the mortgage to Fanny mae who pays for it. Sometime FNMA will buy less which in the long
run with grant them a profit. This assignment right has a lot of value
b.
GNMA: gurantor of mortgage backed securities--bonds collateralized by pools of mortgages
and issued by lenders.
8. Why Mortgage insurance
(reasons why as a borrower)
a.
Lender will loan you more money if you have morgage insurance. Ussually will lend you up
to 95% appraised value (in the case of VA--100%)
b. if
you want to buy a house without a large down payment, mortgage insurance is a good
investment
9. the VA, FHA ussually
prefer it if you make all repairs before they make you a loan so in case of a foreclosure
your house meets the minimum property standards, and they can sell your house
E. Discrimination in the Sale of Real Estate:
1. the federal government
under President Kennedy's leadership began fighting discrimination in 1962.
He told them in an
executive order to take all neccesary steps to prevent discrimination in housing programs
supported or aided by the government or they would recieve no financial assistance
2. 14th Ammendment probhibits
federal and state actions but not private actions against those who refuse to sell becaue
of race, national origin etc
3. the Fair Housing Act
(Title VIII of the Civil Rights Act of 1968) contained a sweeping prohibition of
discrimination in the sale or rental of housing based upon race color, religion or
national origin. 1974 ammendment added on the basis of sex and 1988 added handicap (other
than use of drugs)(handicapped people can modify their dwellings) and "familial
status"
a.
applies to everything except any one single family house sold or rented by owner or places
for no more than 4 people if the owner occupies one of the places
b.
another exception are elderly residents, they should not have to be required to endure
children near by
c.
AIDS: Whitman says they are protected but the book says that the landlords don't need to
rent to anyone whose tendency would result in a substantial physical damae to the property
of others.
4. 42 USCA 1982: all citizens
of the US shall have the same right in every state and territory as is enjoyed by white
citizens thereof to inherit, purchase, lease, sell, hold and convey real and personal
property. This applies to private actions (the court here says that this only deals with
racial discrimination and not on grounds of religion or national origin.
5. Violations
a.
Secretary of HUD investigates and tries to bring reconcilliation
b.
HUD may authorize Attorny general to take temporary relief in courts
c. if
at a state level w/act similar to federal one, claim will be referred
d.
makes a charge
e.
ALJ: up to 50,000 relief
f.
federal court w/AG help
g.
private civil action can be filed in fed or state court
h. If
AG finds a "pattern or practice" of violation exists, he may bring a civil
action---100,000
F. Principle Documents used in Real Estate Sales
1. The Earnest Money K:
a.
stabilizes the contract for a short period of time between agreement on the terms of the
sale and the closing--
b.
person deposits earnest money when signing it
c. $
applied against the purchase price if everything works out
2. What kind of memorandeum
has to exist in order to fulfill the statute of fraud?
a.
Requirements
(1) some require the price/terms (if not cash)
(2) description of the property--need a legal description (ie. Block B,
Ridgefield School, Plat Block 20 etc
(3) Buyer and Seller
(4) the word "sale"
(5) signature against the person charged
b.
Statute of Frauds v. Parole Evidence Rule
(1) SF tells us the minimal amount we need in writing; it says nothing
about things that are not included in the writing but that we want to fail
(2) PER may tell us things that we need in the writing. If it
contradicts something in the writing, it will be called on it
c. if
you sue someone, do you need the writing as evidence; no.
d.
the contract is not null and void if it is not satisfied; it is just unenforceable; it is
as if the K had never been signed
e. if
neither of us can enforce the K can we get our $ back--yes.
f. by
admitting there was a oral agreement, it eliminates the need to have a statute of frauds.
However the problem here is that the person can lie.
g.
Normal stat of frauds say the person charged must by the person charged; however, 8-9
states says that the vendor has to be the one that signs it. The courts now hold that
there must be some sort of assent.
h.
standarized forms:
(1) most K for sale of real estate are more formal and detailed than
what the Stat of Frauds expects
(2) Lawyers with a sizeable real estate practice often develop their
own contract forms
(3) if changes are to be made of the standarized clauses, it will be at
the request of the purchaser
(4) any unusual circumstances should call for a special tailored form
G. Part Performance Against Seller
1. even where no written
memorandum exists, an oral K for the purchase and sale of land may come enforcible by the
virtue of the equitable doctrine of "part performance"
2. this is not part of a
statute, but instead something the court has made up
3. you can only get equitable
performance of injunctive relief; you can't get damages in $.
4. payment "substantial
portion of the purchase price", possession, substantial improvements "valuable
and permanent improvments" will ussually get you part performance--case law requires
2 of the 3
a. 2
conceptual basis
(1) good evidence there is K
(2) not only did they do the act but they unequivocally referable to
the alledge K--difficult to compensate the purchaser fairly by a money judgment for
restitution.
(3) the courts now are moving away from the unequivocal referable and
closer to reliance
5. there are some cases that
hold if a K has been fully performed on one side, stat. of fraud drops out?
H. Part Performance--Acts of the Vendor Against the
Buyer
1. improvements specifically
requeted by the buyer
2. taking the house off the
market
3. purchase of alternative
property
4. how can the vendor use the
purchaser's actions against him--
5. Restatment Second of
Property can be used if they can show reliance--either party can use his or her own acts
of reliance to enforce the k
6. Specific Performance will
allow you to transfer to the buyer the risk of selling the property when they don't go
through with the sale.
7. The non-braching party has
the following remedies
8. damages
9. specific performanc
10. restitution and
rescission (wimp remedy; most people want blood)
11. courts ussually won't
give spec. performance when the person has given too much $
I. Documents Required for Completion of Sale
1. Deed of Conveyance:
transfer the vendor's interest in the land to the purchaser
2. Mortgage: discussed above
(deed of trust; a conveyance of the legal title to a trustee, to hold as securoity for a
debt, in trust to reconvgey to the debtor if the degbt is paid, and if it is not paid, to
sell the land and pay the creditior out of the proceeds
a.
self-amortizing mortgage: draft mortgages so as to require the mortgagor to repay the
mortgage loan over a long term in equal monthly installments, each consisting partly of
principal and partly of interest.
3. Mortgage Bond or note:the
obligation is embodied in this note
4. title retention contract:
this is where the vendor extends credit to the purchaser--person keeps an installment
contract; the purchaser shall pay the price in stated periodic installments and the vendor
shall deliver the deed to the purchaser when they have been paid in full
5. the ESCROW AGREEMENT:
conducts the title exam, handles the delivery, records the deed, the trust deed or
mortgage and insures the title of the lender and purchaser
6. Closing:
a.
closing agent's tasks
(1) look to see what liens or enxumbrances exist on the property--find
out what amount will be neccesary to get rid of them
(2) get copies of the deed
(3) obtain funds from the buyer and the lender
(4) arrange for surveys, pest inspections etc
(5) complete the adjustments between buyer and seller on property
taxes, assessments, insurances
(6) see that all things are recorded and mailed
(7) pay any one that needs to be paid
b.Other things to
consider:
1..
suppose nothing else in the contract about closing date---lending institution might be a
little late--April 1 fcomes and go and the institution does not go though. April 10 come
purchaser comes through and says everything is now ready. Calls the vendor up. Vendor says
puchaser breached the contract.
2.
Damages is not appropriate if the purchaser is seeking specific performanc
3.
Can the vendor charge the extra intermin damages? Did the purchaser really breafch? Yes he
can charge them. There are times when there is no interim damages. ie when there is a
lease. Then he gets more rate. Late party can still enforce the K.
4. If
the clause says we need our loan commitment by a certain date, we can withdraw the
contract. If he doesn;t then they start a new contract
5.
Whitman says you need to include the word "condition"
6.
Financing condition
7.
the vgendor knwos the purch is trying to get financing--purchaser comes back and say I
tried. The vaendor then offeres to have a purchase money mortgage. Does the p. have to do
it? If the clause finds for a institutional mortgage loan, that's the only kind they have
to get. What if the evidence shows the person never tried to get loan?
8.
covenant v. condition:
9.
Time is a essence: if the party who is late knows the other party has an important need to
close on time, that circumstance will make time of the circumstances
10. a
volitile market can make time be an essence.
11.
what if someone calls, and decides that right then he is making time of the essece. It
does work/ Makes time of the essence. What avout if the vendor calls the purchaser on
March 28? Will it work? No If you are going to make a unilaterla time of the essence, then
you must give him reasonable time.RESPA
J. The basics behind RESPA are:
1. real estate brokers have a
lot of power to take their people to services that give them kickbacks and referral fees.
2. RESPA was passed saying
that getting refferal fees and kickbacks was illegal
3. Real estate people didn't
like it. They started buying interests in title companies. They then began taking their
people to title companies. At the end of the year, these companies would then give the
brokers a percentage of the profits made during the year.
4. Congress said this was ok
because they were not getting $ on a per referal basis but rather end of year
5. the brokers also began to
buy lending institutions. The set up CLO. if a person needed a loan, the broker would let
him use this computerized system to look up lending institutions for a fee
6. is this not a indirect
violation? Here it is the person paying the money and not the lending institution
7. HUD says ok--but need to
disclose relationship. And also there was no limit to the fee charged. Also said could
just have 1 lending institution on computer and not many.
K. Problems
1. If contract doesn't
specify what kind of deed the buyer is to recieve, which is it--you have what is offered
in the area--locality
2. if someone has legit
title, warrantly or quitclaim, you will get the same thing; only difference is that the
title isn;t fee simple absolute
3. after the closing, can the
purchaser sue for breaching the issue of marketable title: once you take the eed it
doesn't make a difference; you can't sue
4. Exceptions: if you are
under a mistake, if you were defraauded (damages or recissin here), if you have a
quitclaim deed, y
5. vendor will deliver
quitcdlaim deed to purchaser, does hte vendor still have a duty to supply marketable
ti4el, yes
6. types of deed you have
doesn't have anything to do with title--you still are coveneting to convey marketable
title.
7. How much time do you have
to examin the title and tell the vgendor of the problems if it doesn't say: REASONABLE
AMOUNT OF TIME. What if you discover an easement and tell the vendor. SHE HAS A REAOSNABLE
TIME TO CURE IT.
8. Sometimes affected by a
closing date. lSuppose the purchaser says there is a prob and vendor could cure, but it's
an easement that hasn't been used for a bunch of years; vendor proceeds diligently but by
closing it isn' done? YOU MUST GIVE A REASONABLE TIME, EVEN IF K SAYS, "TIME IS OF
THE ESSENCE.
9. Court would say you must
have told them earlier, so the vendor gets an extension on the closing date.
10. warranty deed will pass
after acquired title. but noone knows what this means? Suppose the vendor at the closing
delivers a warranty deed, and then purchaser finds that the vendor never had title. What
if the vendor then five years later get title to this. IT GOES ACTUALLY O THE PURCHASER OF
FIVE YEARS PREVIOUS. (because he said he would get it last time). So you should check
later to see if the vendor actually acuquired title.
11. Is it possible to have a
good title but not a marketable title? Yes
12. You should not have to
buy this property on the basis of adverse property if you don't want to (the courts think
so)
13. We need to bind the
original owner with the title; If you can get the guy, you can settle in court. thsi
transsaction here between vendor and pur is not binding on the previous owner who is not a
party in court here (even though he should have gained it in succession)--no one should
have to buy it until it has been established in court.
14. suppose he looks at the
title and sees there are problems with it, the purchaser then comes tto you and says it no
good, what are there remedies? the purchaser can get all the out of pocket expenses that
he had in reliance.
15. Loss of bargain
damages/expectation damages--If purchaser sues he wants to buy s this at 100k fmv anow is
110 k--does he get damages. Case law is divided. Some says breach is breach. Others depend
on whether vendor was acting in good faith--if he was in good faith, can't get
damages--person doesn't hagve good title. Says other guy has it by adverse
possession--goes down the street, sees it is 110 K.
16. If 10 acres deal, and you
buy 8, the court will give you an abatement. Some will tell 10 acresre more or less.
17. If interest rates go up,
some cases say you can get expectation damages
L. If the earnest broker is holding the money,most
states say the real estate holder must put it in a trust fund M.
Equitable Conversion: since a court of equity would force the vendor to
the vendee, then the title has already past. As soon as the K is signed and is
enforceable, then if the property is burned etc. then that is no excuse for the purchaser
to not buy the property
1. the purchaser as
"equitable owner" must bear the loss only if it does not arise from the neglect,
default or unwarrantable delay of the vendor in carrying out the contract--vendor must
bear the loss if
a. at
the time of the loss, she was not in a position to convey the loss
b.
the vendor had delayed unreasonably in clearing his title
c.
vendor's title is defective
d.
vendor had an option to cancel
2. "as is" clause:
this clause has no warranty of
3. purchaser should carry
enough fire insurance to protect seller
4. saying that you are buying
insurance does not mean you are assuming the risk
5. what if the damage occured
after the contract was signed before the closing, could specific performance be made to
occur? No for specific performance but yes the court will say either repair the damage or
lower the price.
6. if just little bit of
damage, he can get the price reduced, but still has to perform
7. if a lot, purchaser gets
to rescind
8. what if purchaser doesn't
want to rescind the K, but wants a reduction,
9. when you draft a clause,
its really important to say what exactly to do.....
10. substantial v.
nonsubstantial loss: kitchen example is nonsubstantial.
11.example is nonsubstantial.
M. Vendor and Purchaser Risk Act: Proffesor
Willingston
1. if when neither the legal
title nor possession of the subject matter of the K has been transferred, all or a
material part is destroyed and it is not the purchaser's fault or is taken by emminent
domain, the vendor can not enforce the K and the purchaser should get a refund of money
paid
2. if when either the title
or the possession has been trnasfered, and all or any part is destroyed and it is not the
vendor's fault the purchaer can not recover
3. if there is a substantial
loss, purchaser can rescind
4. if there is a material
part destroyed without fautlt, the vendor cannot enforece the K and the purchaser is
entitled to get his money back
5. if either title,
possession passed,,,,,purchaser problem
6. suppose a non material
loss accure. can purchaser get resicssion-assume you cant
7. suppose you have a
material loss and no title or posseession has passed and purchaser can recover moeny; can
purchaser get back titlle surch expense, survey, teport to title insurance surey, our of
pociket cost, no
8. dcourts gernaerlly do this
werher title turens out to be unmarketable
9. vendors have risk of
loss;; only scratches the surface
N. Insurance:
1. where the vendor is
insured and the purchaser has the risk of loss, most cases required the insured vendor to
gigve the purchaser credit against the purchaser price for the insurance proceeds which
the vendor has recieved
2. vendor is the one that is
more likely to carry insurane
3. if vendor is more likely
to have insurance, argument against the common law decision of equitable coversion where
purchaser carries the risk; equitable con is out of sinc with real world
4. suppose a k has no clause
of risk of loss, common law govern and risk of loss to purchaser but the vender had fire
insurance then vendor thinks he can recover twice--through the insurance and through the
purchawer--court will give credit to the purchaser for the insurance coverage and payment
loss that was given; but vendor presiums already paid during the prioed in question will
be born bvy the purchaser; court gives the pur the beneifts of the insurance that they
hadn't paid for until ater the fact.
5. vendor stll has an
insurable interest.
6. court will give the
abatement of the cost of the fire insurance.
7. overlapping coverage:
eavch company is liable for fraction of the loss--pro rata to the loss.
8. why are the courts not
running around giving specific performance, the judge doesn't want to get into the details
of if it was done, did it meet the specifications, etc. this is too sticky for them
scotty-------not cut and dried enough.
9. the great major ct:
vgendor has insurance; purchaer gets the benefit by abating the price.
10. what if the vendor has no
insurance and th4e purchaser has it ---purchaser doesn;t have to pay the vendor. they
should't be able to collect from the insurance company at all. (purchaser)
