Property II: Leaseholds and Tenant Duties

• Study notes for Property II, Section B with Professor Malagrino, Week 4, dated February 4, 2025

Leaseholds and Tenant Duties

• Pertains to tenant duties
  • Defines waste as affirmative, permissive, and ameliorative

Waste Types

• Affirmative waste is voluntary damage or depletion of property by a tenant. This decreases the property value.
• Permissive waste involves harm to property due to neglect, like land falling into disrepair. This also decreases property value.
• Ameliorative waste: modifications increasing property value made without the required permission, which does not decrease property value.
• Destruction of premises without fault encompasses situations such as Hurricane Katrinas, Force Majeure Clauses which expressly state destruction without fault, and events like 9/11.

Law of Fixtures

• Accession: personal property becoming part of real property.
• Bar test: considers intent for permanency, exemplified by items like fridges, stoves, sconces, lights, and lightbulbs.
  • Common Law (CL) and Uniform Commercial Code (UCC) statutes cover fixtures.

Conveying Property Rights and Land Transactions

• Intro to land Transactions
  • The executory period starts with the execution of a purchase and sale agreement and ends at closing when the deed is transferred.

Brokers

• Deals with the practice of law.
  • Listing broker represents the seller, while the selling broker also represents the seller & Buyer.

Listing Agreements

• Leaves room for a buyer's broker to operate.
  • Open listing: broker is engaged but there's no promise to sell.
  • Exclusive agency: seller promises not to engage another agent. _ Exclusive right to sell: provides more protection for the broker because they get commission regardless of their involvement in the sale.

Commissions

• Majority/Traditional View
  • A commission is earned when the broker brings a ready, willing, and able buyer with a signed contract.
• Minority/Modern Trend
  • Commision is earned when the transaction is complete and the sale closes.

Fiduciary & Duties

• Fiduciary to the seller
  • Both listing and seller brokers
• Duties to the buyer
  • The buyer does not have a lot of duties allocated to them, most favor the seller

Real Estate Contracts

Purchase and Sale Agreement

• The following must be included: purchase price and how it's paid and legal description of the property.
  • Other components include: Evidence/Assurance of "good title", Warranties of title, Date of transfer of title, Prorations, Bearer of risk, Itemization, Executory/Escrow terms, Provisions for return of "earnest-money", and Signatures.
• Includes items like: Fixtures, Mortgage contingency, Time is of the essence, Damages to real estate prior to closing, and "As is" condition.

Statute of Frauds (SoF)

• Requires a written instrument (contract leading to deed) for transfers.
  • Typically, real estate transfers for more than one year must be written.
• Requires variations in terms. Prevents this issue but enables something else

Exceptions to Statue of Frauds

• Partial performance (law): Requires 2/3 to show partial performance
• Note*: Payment of the purchase price, Taking possession, and Making substantial improvements
• Estoppel (equity/equitable exception): Requires all 3 to show estoppel
• Note*: Reasonable, Detrimental, and Reliance

Hickey v. Greene (1983)

• Pertains to equitable estoppel.
  • Pertains to an exception to the SoF.
• Specific performance and land
  • Cause of Action (COA): breach of contract.
• Burden is Specific performance
  • Hickey agreed to purchase a house for $15,000.
• Gladys Greene decided to sell to another couple
  • Greene never deposited the money
  • There was no partial performance or written instrument
• Hickey's offered to pay $16,000 instead
  • Hickey's had sold/were under contract for the sale of their house

Court notes

• The court found that there was no agreement
• The selling/under contract of their house showed Hickey's reliance
• The court had question of detriment: found only if Hickey's cannot get out of the contract for their house
• If there was then Greene would have to accept the original $15,000 and sell to the Hickeys.
• Was remanded to find out

Real Estate Contracts continued (February 6, 2025)

• Statue of Fauds = writing if performance longer than 1 year
  • Hickey V. Greene
• Doctrine of Partial Performance
  • Acting in a a certain way = there must be agreement (need 2/3 shown to demonstrate)
• The following must be shown: Payment, Possession and Improvements
• Equitable remedy
  • Estoppel(need 3/3 shown)
• The following must be shown (Reasonable, Detrimental, and Reliance)

Marketable Title

• Provision of marketable title is an implied condition of the purchase and sale agreement
• Parties can contract around this
• Distinguish between title and deed
• Title must be reasonably free from doubt as to validity
• Title = abstract idea of ownership
• Deed= written instrument to convey ownership
• Compromised marketability (breach duty of delivering marketable title)

Defects in Title

• Missing deeds in chain of title
• Prior conveyance without required consent of spouse
• Loss of some or all of property through adverse possession, foreclosure, or eminent domain

Encumbrances

• Leases, mortgages, deeds of trust, liens, covenants, easements
• Encroachments
• MAJOR ordinance violations
• Breach during executory period = rescission remedy
• Breach after executory period = damages remedy

Lohmeyer (buyer) v. Bower (seller)

• Cause of Action: Breach of Contract
• Claim: Breach of duty to delivery marketable title
• PFR: Rescission
• Private covenant
• 2 stories private ordinance and Bower selling 1 story house

Zoning Ordinance

• Too close to boundary line
• Lohmeyer complained and Bower can't fix in a reasonable time
• Default property rules and contracts
  • Private vs. zoning restrictions
  • Public restrictions: existence v. violation
• Determine the effect of waiver
• Note*: Zoning: Public restriction = marketability= Unmarketable
• Note*: Covenant: Private Restriction= Unmarketable

Equitable Conversion

• Buyer of house is the equitable owner of the real property from the moment the contract becomes effective
  • Seller still legal owner
  • Note the traditional application (Risk of loss during executory period on the buyer)
  • Minority applications
• In most situations, buyer and seller express in contract the party who bears the risk during the executory period

Duty to Disclose Defects

Stambovsky (Buyer) v. Ackley (seller) (NY 1991)

• Reputation that Seller created by posting blogs and advertising it as such prior