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PROPERTY OUTLINE
Professor Laser
CONCEPT OF PROPERTY
Property → human intervention rather than natural right
1. WHY DO WE RECOGNIZE PROPERTY?
5 Theories of Property: Protect First Possession o First come, first serve for unowned property becoming owned o Less relevant today because almost every tangible thing is already owned by someone o Pierson v. Post (1805) Encourage Labor o Labor + natural resources = acquire property rights o Each person is entitled to the property produced from their own labor o Labor added value o Buying did not deny another’s chance to use land o Con: Taking more property than what is within the scope → depleting its value for the common good Maximize Societal Happiness o Means toward an end to best serve common good (Bentham) o Maximizing happiness through measuring what is best for common good through transactional costs of labor/resources More owners/interests = more informational costs to ensure that land is being used at highest potential o Con: difficult to measure what is beneficial to society o Optimal production Typically fall under utilitarian justification per economic utility Universality – scarce resources must be owned by someone Exclusivity – unable to exclude means no incentive to improve property Transferability – ability to buy/rent another dwelling Efficiency = willingness to pay Ensure Democracy o Jefferson’s approach to landowners using independent political judgment vital for democracy (own land = get to vote) o Relationship with state; having a stake in society o Personal security/independence guaranteed when protected through public institutions o Republican thought Not abolition of private property, but rather ensure that everyone has some Property rights are necessary to freedom Versus solely depending on government as beggars
o Property theory of democracy – Measuring by money/economic interest would imply that those controlling the money subsequently means that they get a greater say in society Facilitate Personal Development o Personhood theory – Property is necessary for development; an extension of one’s self; connection to tangible things o Need control over external environment to constitute personal entities o Often gauged by kind of pain considered by loss o Radin – right to personhood property should be given priority over conflicting claim by owner of non-personhood property
2. WHAT IS PROPERTY?
Categories: Real property – consists of rights in land and things attached to land o Buildings, fences, trees Personal property – refers to rights in moveable items and intangible things o Chairs, pens, computers Fixtures – items of personal property that are physically attached to real property o Chandeliers, smoke alarms
Bundle of Rights: Right to Transfer o Generally, any owner can freely alienate any of her property to anyone o The law sometimes regulates who can transfer, what can be transferred, and how the transfer can be made Ex: May have to satisfy the statute of frauds; can’t sell your organs Right to Exclude o Essential stick in the bundle, dealing primarily with the tort doctrine of trespass o Trespass doctrine – unwarrantable entry without privilege, consent, or necessity, and regardless of intent/bad faith o Negative Effects Individuals act rational for themselves, but not for others Supposed to be offset by market action through incentive of doing cost/benefit analysis “Hold out” - someone looking for permission to use, but owner refusing to grant even when it would be most beneficial to society o Property is recognized and limited by serving human values Singer – non-owners have a right of access to property based on need/some other important social policy Court has repeatedly held that citizens cannot be excluded from privately owned shopping centers for exercising free speech rights o Move for absolutism? Sole and despotic dominion versus relative property rights Right to exclude has been moved to top priority of bundle
Does the object have value? Is that value enough to justify its construction? o Prah v. Maretti (1982) Right to Destroy o The scope of an owner’s right to destroy is unclear o In practice, the law rarely intervenes to prevent destruction o Eyerman v. Mercantile Trust Co. (1975) (woman stated in her will that she wanted her house destroyed upon her death; the court held that the will cannot be upheld if it hurts others’ property interests)
Implications of the “Bundle of Rights” Approach:
Property rights are defined by government o Relative; often conflict with each other Property rights are not absolute Property rights can be divided o Owners have obligations Property rights evolve as law changes o Stability of title o Rights should be certain and predictable
OWNING REAL PROPERTY
Consists of rights in land and things attached to land
ADVERSE POSSESSION
Elements: ACTUAL o Must physically use the land in the same manner that a reasonable owner would o In most jurisdictions, activities such as gathering firewood, cutting small amounts of timber, grazing cattle or other animals, or removing minerals are considered sufficient “actual” possession of wild and undeveloped land. EXCLUSIVE o The possessor is not sharing with the true owner or the public at large OPEN & NOTORIOUS o The possessor’s occupation must be sufficiently apparent (visible and obvious) to put the true owner on notice that a trespass is occurring Activities such as clearing brush, cultivating crops, building fences and other structures, or posting signs HOSTILE (ADVERSE) o The possessor does not have the true owner’s permission to be on the land o States may require (1) good faith; (2) bad faith; or (3) have no state of mind requirement CONTINUOUS
o Requires only the degree of occupancy and use that the average owner would make of the property given the character, location, and nature of the land o Separate periods of adverse possession may be “tacked” together to make up the full statutory period Privity is satisfied if the subsequent possessor takes by descent, by devise, or by deed purporting to convey title (show reasonable connection between successive occupants) FOR STATUTORY PERIOD o Period ranges from 5 to 40 yrs. (most commonly 10, 15, or 20 yrs.) o Problems: Tacking – if X transfers to Y, Y can combine years with X (so long as all of the other adverse possession elements are met by both X and Y) The land must be transferred in some fashion Privity – usually established by will or deed (must be some formality) Disabilities cannot be tacked Tolling – the SOL clock has stopped running True owner may be legally disabled from protecting his property rights (prison, minority, mental hospital) Majority of states hold that a disability extends the period ONLY IF it already existed when the adverse possession began
Justifications: Preventing frivolous claims Correcting title dejects Encouraging development Protecting personhood
Gurwit v. Kannatzer (1990) Fulkerson v. Van Buren (1998) Quitclaim deed – conveys all the title the grantor has in the property (if any). Thus, the grantor does not represent or warrant that he has any title at all. A quitclaim deed is often used when the grantor wishes to release a weak or invalid title claim, in order to resolve an ownership dispute. Howard v. Kunto (1970)
THE VERTICAL DIMENSION
Airspace Rights: A landowner owns at least as much of the space above the ground as he can occupy or use in connection with the land. o One view is that the owner holds title only up to a fixed height, usually 500 ft. United States v. Causby (1946) (flights over private land do not constitute a taking unless they cause direct and immediate interference with the enjoyment and use of the land)
Subsurface Rights:
Under the law of bailments, a finder is obligated to (1) keep the chattel safe; and (2) return it to the prior possessor on demand Three basic types: o Those for the mutual benefit of both the bailor and the bailee The bailee has the duty to take reasonable care of the property Ex: the valet is responsible for any damages he causes by driving the car negligently o Those for the primary benefit of the bailee Extraordinary care is required o Those for the primary benefit of the bailor The bailee is liable only if the property is damaged because of gross negligence or bad faith Ex: the neighbor would be liable if your dog died because they left it in a closed car on a hot day
Armory v. Delamirie (1722) Hannah v. Peel (1945) McAvoy v. Medina (1866)
ESTATES AND FUTURE INTERESTS Modern Freehold Estates
An estate or future interest is usually transferred in 1 of 3 ways: Transfer by deed – a living person may transfer real property by a deed. The completed transfer is called a conveyance or a grant. The person who makes the transfer is the grantor, while the recipient is the grantee. Transfer by will – The property of a decedent may be transferred by a will. The completed transfer of real property is called a devise. The person whose will contains the devise is the testator if male or testatrix if female, while the recipient is the devisee. Different terms apply to the transfer of personal property by will. Transfer by intestate succession – if a person dies without a will, her property will be distributed according to state statutes, usually to her closest living relatives, the completed transfer of real property is descend, while the recipient is the heir.
To Ann and her heirs To Ann in fee simple To Ann
Fee Simple
Alienable Devisable Descendible
Ambiguity is resolved in favor of a Fee Simple To Ann as long as To Ann while To Ann until To Ann during
Fee Simple Determinable
Alienable Devisable Descendible
Not subject to waste
To Ann, provided that To Ann, but if To Ann, on condition that
Fee Simple Subject to a Condition Subsequent
Alienable Devisable Descendible
When ambiguity exists, preferred over a FSDet Not subject to waste To Ann as long as, while, until, during, provided that, but if, on condition that... then to Bob
Fee Simple Subject to an Executory Limitation
Alienable Devisable Descendible
Future interest in a third party follows the estate Not subject to waste
To Ann and the heirs of her body Fee Tail
Alienable Not devisable Descendible
May only alienate right to possession until death Descends only to lineal descendants
To Ann for life To Ann until she dies Life Estate
Alienable Not devisable Not descendible
Subject to waste When conveyed to another becomes LE pur autre vie
To Ann for 20 years (^) Term of Years
Alienable Devisable Descendible
Subject to waste
Alienable – it can be sold or given away during the owner’s lifetime Devisable – it can be transferred by will at death Descendible – it can pass by the laws of intestate succession if the owner dies without a will
1. FEE SIMPLE ABSOLUTE Fee = heritable interest Simple = potentially infinite (may endure forever without any limitation or condition) Absolute = no restriction on use or transfer Embodies the largest group of private property rights recognized by our legal system; thus, the holder has all the rights in the metaphorical bundle of sticks Modern law prizes an active market in real property, and grantors typically intend to convey the most marketable interest, the fee simple Almost all states presume that the grantor intends to convey a fee simple unless he uses words of limitation that specifically convey a different estate An ambiguity is resolved in favor of finding the most marketable estate, a fee simple 2. LIFE ESTATE Duration = lifetime of a particular person (when that person dies, the estate terminates) Can also be measured by the life of a person OTHER THAN the grantee Waste
1. FUTURE INTERESTS RETAINED BY THE TRANSFEROR
Reversion o The future interest remaining in the transferor when she grants a vested estate of lesser quantum (potential duration) than she began with. o A transferor retains a reversion when she conveys a smaller vested estate than the one she has Possibility of Reverter o The future interest retained by the transferor who holds a fee simple absolute, but conveys a fee simple determinable o This future interest gives the transferor the right to possession if that estate terminates Right of Entry o The future interest retained by the transferor who holds a fee simple absolute, but conveys a fee simple subject to a condition subsequent o Contingent upon affirmative steps to regain possession
2. FUTURE INTERESTS CREATED IN A TRANSFEREE Indefeasibly vested remainder o A remainder in an identifiable person that is certain to become a possessory estate o A remainder is vested IF: (1) It is created in an ascertainable person; and Ascertainable person – a person who is both alive and identifiable at the time of the transfer (2) It is not subject to a condition precedent other than the natural termination of the prior estate.
Future Interest
Retained by Transferor
right of entry reversion
possibility of reverter
Creating in a Transferee
Remainder
Vested
subject to open indefeasible
subject to divestment
Contingent
Executory Interest
shifting springing
Condition precedent – a condition that must be met before the remainder can become possessory, other than the natural termination of the prior estate Vested Remainder Subject to Divestment o A remainder that is vested BUT is subject to a condition subsequent. Vested Remainder Subject to Open o A vested remainder held by one or more living members of a group or class that may be enlarged in the future o Sometimes called a vested remainder subject to partial divestment Contingent Remainder o If a remainder is not vested, it is contingent o A remainder that is either: (1) given to an unascertainable person or (2) subject to a condition precedent Executory Interest o Future interest in a transferee that must divest another estate or interest to become possessory. o Exact OPPOSITE of the remainder o Springing – an executory interest follows an interest in the transferor o Shifting – an executory interest follows an interest in a transferee
Rules Furthering Marketability Not listed: (1) Doctrine of Worthier Title (2) Doctrine of Destructibility of Contingent Remainders
1. RULE IN SHELLEY’S CASE Rule: If a freehold estate is given to a person and, in the same instrument, a remainder is given to the heirs (or the heirs of the body) of that person, he takes both the freehold estates and the remainder. In general, the rule applies if 4 requirements are satisfied: o One instrument o Creates a freehold estate in a transferee, and o A remainder in that transferee’s heirs, and o Both interests are legal or both equitable Applies only to remainders in the heirs of transferees Applied EVEN IF it is contrary to the transferor’s unambiguous intent, even though the grantor expressly states the contrary
O conveys “to B for life, then to B’s heirs.” Initially, the conveyance seems to grant B a life estate and B’s heirs a contingent remainder in fee simple, leaving a reversion in O. However, under this rule, B holds both the life estate and the remainder. The remainder intended for B’s heirs becomes a remainder in free simple in B. since B holds both the present possessory interest and the complete future interest, B’s two interests merge and B now holds a fee simple absolute. B is ascertainable, so any future purchasers can deal directly with B.
2. RULE AGAINST PERPETUITIES
When A dies, A’s interest in the estate is removed, and B automatically becomes the sole owner of Greenacre o At CL and in some jurisdictions, a joint tenancy is created ONLY when the four unities are present: Time – all joint tenants must acquire their interests at the same time Title – they must acquire title by the same instrument Interest – they must have the same shares in the estate, equal in size and duration Possession – they must have an equal right to possess, use, and enjoy the whole property o If one joint tenant transfers her interest, the joint tenancy is severed o Can be severed unilaterally by any joint tenant o Often used as an inexpensive substitute for a will Tenancy by the Entirety o “To A and B as husband and wife as tenants by the entirety” o Only married couples o Each tenant by the entirety has an undivided right to use and possess the whole property and a right of survivorship o Ended ONLY by (1) death, (2) divorce, or (3) the agreement of both spouses o In most states that recognize this cotenancy, neither spouse may transfer or encumber his or her interest
James v. Taylor (1998) (The deed in this case did not create a joint tenancy in the grantees because the language of the deed is insufficient to overcome the statutory presumption of a tenancy in common. When creating a JT, the conveyor must expressly declare that she wants it to be a JT. This case reflects, “if the wording is unclear, a court may ignore the grantor’s actual intent.”)
MODERN TREND: focus more on the grantor’s intent and less on formulaic language
2. SEVERANCE Severance – destruction of any one of the unities converts a Joint Tenancy to a Tenancy in Common Unilateral Severance o Common law: Required a “straw man” (a third-party to serve as grantee of the severing joint tenant’s interest who would then convey that interest back to the severing tenant) o Modern law: A joint tenant may sever by unilaterally conveying her interest to herself (destroying the unities of time and title) Courts increasingly focus on intent when determining whether a JT has been created or severed, rather than the traditional four unities Tenhet v. Boswell (1976) o Facts: Tenhet (T) & Johnson (J) own the property together as joint tenants, then T leases to Boswell (B). T can do that because she has an undivided interest in the whole. Three months later, J died. T thinks that since J died, she has the whole, and thus wants to recover possession from B.
o Issue: Whether the partial alienation of J’s interest in the property effected a severance of joint tenancy. o Holding: A joint tenancy may, during his life, grant certain rights in the joint property without severing tenancy, BUT when such a joint tenant dies, his interest dies with him and any encumbrances placed by him on the property become unenforceable against the surviving joint tenant. o Reasoning: The lease is dependent on J’s possessory rights. Once J died the rights died with him and the rights went back to T. So, the rights on which B leased are gone. T now has everything, including present possession. B has nothing.
3. PARTITION Partition – the physical division of property owned by cotenants, based on each cotenant’s shares. If the land cannot be fairly divided, then the entire estate must be sold, and the assets appropriately distributed o Partition by sale – cotenants are forced to sell the land and divide the proceeds o Partition in kind – the land is just divided proportionally among the cotenants Any tenant in common or joint tenant has the right to sue for partition of the property Ark Land Co. v. Harper (2004) o Facts: The Caudill family exclusively owned the land for nearly 100 years until Ark Land acquired a 67.5% undivided interest by purchasing the property interests from several Caudill family members. o Holding: The fact that the corporation's proposed use of the property caused it to be worth more money, as opposed to maintaining it as a family homestead, did not control when deciding whether to order that the property be partitioned in kind or partitioned by a sale. Partition in kind was the preferred partition method, and the partitioning sale statute was to be construed narrowly. Evidence of the heirs' long-standing ownership of the property, and their sentimental or emotional interests in it, could be considered and controlled because the property could be partitioned in kind, even though it caused some economic inconvenience to the corporation. The corporation's self-created enhancement of the property's value, based on the corporation's expectation that it could mine coal on it, was not a determinative factor in forcing the heirs to give up their rights through a forced partition by sale. 4. COTENANT RIGHTS AND DUTIES The terms of the agreement govern the contents’ rights and duties All jurisdictions have developed default rules that establish the rights and duties of cotenants in this situation Each cotenant is entitled to his proportionate share of all rents and profits derived from the land Esteves v. Esteves (2001) (a cotenant in possession does not owe any rent to a cotenant out of possession, absent an ouster) o Ouster – occurs when a cotenant in possession refuses to allow another cotenant to occupy the property
(1) a physical or mental impairment which substantially limits one or more of the person’s major life activities, (2) a record of having such an impairment, or (3) being regarded as having such an impairment but does not include current, illegal use of or addiction to a controlled substance. o §3602(b) defines a “dwelling” as: Any building, structure, or portion thereof which is occupied as, or designed or intended for occupancy as, a residence by one or more families. “Family” includes a single person (§3602(c)) Civil Rights Act of 1866 (42 U.S.C. §1982) provides: o All citizens of the U.S. 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. o ONLY covers racial discrimination Neithamer v. Brenneman Property Services, Inc. (1999) o FHA three-step approach: (1) P establishes a prima facie case of discrimination (2) the burden then shifts to D to prove a legitimate, nondiscriminatory reason for his conduct (3) if D meets that burden, then P must show that the reason is a mere pretext
SELECTING THE ESTATE Term of Years Tenancy o Has a fixed duration that is agreed upon in advance o Once the term ends, the tenant’s possessory right automatically expires, and the landlord may retake possession of the premises o Commonly used in commercial leases and often seen in residential leases Suppose L leases Greenacre to T “from July 1, 2012 until June 30, 2022,” a fixed term of ten years. T’s estate terminates at midnight on June 30, 2022. Periodic Tenancy o Automatically renewed for successive periods unless the landlord or tenant terminates the tenancy by giving advance notice o Month-to-month periodic tenancies are frequently used in residential leases Suppose that L leases Greenacre “to T from month to month, beginning July 1, 2018.” In order to end the tenancy, either L or T must give one month’s advance notice to the other. Thus, if T gives his notice of termination to L on May 31, 2021, the tenancy will end at midnight on June 30. Tenancy at Will o No fixed ending point o It continues “only so long as both the landlord and the tenant desire.” o Often arises by implication, without an express agreement
o At common law, either the landlord or the tenant could end the tenancy without any advance notice to the other o Today, most state require advance notice to end this tenancy, usually equal to the period of time between rent payments o The tenancy terminated automatically IF either party dies, the tenant abandons possession, or the landlord sells the property. If L leases Greenacre to T “for as long as both of us wish.” Tenancy at Sufferance o Created when a person who rightfully took possession of land continues in possession after that right ends o Arises from the occupant’s improper conduct, not from an agreement o More of a convenient label for a type of wrongful occupancy than a true estate o Common law gave the landlord two options in this situation:
- Treat T as a trespass and evict him; OR
- Renew T’s tenancy for another term o Today most states have abolished or limited the second option, in order to avoid unfairness to the tenant Suppose that L and T enter into a 12-year term of years tenancy for Greenacre on January 1, 2009. The tenancy ends at midnight on December 31, 2020, but T wrongfully continues in possession, becoming a holdover tenant.
Effel v. Rosberg (TX 2012) (the rule continues to be that a lease for an indefinite and uncertain length of time is an estate at will)
NEGOTIATING THE LEASE Three aspects of lease negotiations merit special attention: Statute of Frauds o Mandates that a lease of real property for a term of more than one year cannot be enforced unless it is in writing o In order to meet this standard, the lease or another document must contain the key lease terms (parties, property, duration, and rent) and be signed by the party against whom enforcement is sought Standard forms o The landlord and tenant usually negotiate the key terms of a residential lease (the amount of rent and the duration of the tenancy) o BUT the typical tenant is then asked to sign a preprinted standard lease form, without any meaningful opportunity to negotiate the other terms The form will favor the landlord’s position Rent control o In a few states, local ordinances may limit the amount of rent that a residential landlord can charge, especially in large cities
The “wrongful conduct” requirement may be satisfied by an act OR omission o Cases have found that this standard is met where the landlord: Fails to perform an obligation in the lease Fails to adequately maintain and control the common area Breaches a statutory duty owed to the tenant Fails to perform promised repairs, or Allows nuisance-like behavior Fidelity Mutual Life Insurance Co. v. Kaminsky (1989)
THE IMPLIED WARRANTY OF HABITABILITY In order to use the implied warranty of habitability, the tenant must notify the landlord about the defects and allow a reasonable time for the landlord to make repairs. BUT the tenant is not required to vacate the premises Remedies for breach: o Withhold rent Usually, the most effective remedy because it gives the landlord an incentive to repair the premises In most jurisdictions, the tenant may withhold all rent, even for a partial breach of the warranty o Repair and deduct In many states, the tenant may withhold rent and use these funds to repair the defects o Sue for damages The tenant may sue for damages while remaining in possession or after vacating the premises o Terminate the lease In most states, the tenant may terminate the lease and vacate the premises, thus avoiding liability for future rent
Transferring the Tenant’s Interest As a general rule, the tenant and the landlord are both entitled to transfer their rights to third parties A tenant may transfer her rights by either assignment or a sublease. The method which is chosen will affect the rights and duties of all three parties [landlord, tenant, and transferee] after the transfer occurs o Sublease – if the instrument transfers the lessee’s estate for less than its entire term it is a sublease regardless of the parties’ intention Usually pays rent to the original lessee, who in turn pays rent to the landlord under the main lease Considered the tenant of the original lessee Not liable to the landlord Landlord and third party are in privity of estate; landlord and original tenant are in privity of contract
o Assignment – if the assignee reassigns the leasehold interest, his privity or estate with the landlord ends and he is not liable for the subsequent assignee’s failure to pay rent Test for distinguishing between an assignment and a sublease: o Objective test: Did the tenant transfer his right of possession for all of the remaining lease term (assignment) or not (sublease)? Suppose that X transfers the entire remaining 25-year term for her agricultural lease to Z – except that X holds the right to possession on the final two days of the term. This is a sublease under the majority approach. o Subjective test: In some jurisdictions, the distinction turns on the intent of the parties. Under this approach, it would be possible to have a sublease for the entire remaining term of the original lease. Possible standards that govern the tenant’s rights to transfer: o Sole discretion clause – the lease might provide that X may refuse consent for any reason whatsoever in his “sole discretion” o Reasonableness clause – the lease might provide that X may refuse consent only on a commercially reasonable basis. For example, X might deny consent if Z has a bad credit record o No standard in lease – the lease might require X’s consent, but contain no standard to guide X’s decision; such a provision is called a silent consent clause Ernst v. Conditt
Ending the Tenancy ABANDONMENT An abandonment of the leased property by the tenant occurs when he vacates the leased property without justification and without any present intention of returning and he defaults in the payments of the rent. o EXCEPTION: constructive eviction Traditionally, a landlord could choose among three options in this situation: o Sue for all rent o Terminate the lease o Mitigate damages and then sue for rent Sommer v. Kridel o The majority rule is based on principles of property law which equate a lease with a transfer of a property interest in the owner’s estate. o Under this rationale, the lease conveys to a tenant an interest in the property which forecloses any control by the landlord; thus, it would be anomalous to require the landlord to concern himself with the tenant’s abandonment of his own property. o Today almost all states follow the Sommer approach: After abandonment, the landlord must either terminate the lease or mitigate damages
SECURITY DEPOSITS
