Real Property Ownership PDF

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MyThemis Learners https://www.themisbar.com/learners/index.php?service=subjectoutline&... Quick jump menu Search  TASK IS COMPLETED  BACK TO TOP I. OWNERSHIP Ownership of real property may be transferred by sale, by gift, or, upon death, by devise or intestate succession. The seller or donor is called the “grantor,” and the buyer or recipient is called the “grantee.” This section will discuss both present and future possessory interests in land (which are subject only to the rights of others), and other sections will discuss nonpossessory interests in land (which are subject to speci c restrictions as to the use of the land). A. Present Estates A. PRESENT ESTATES To be categorized as a freehold, an estate must be (i) immobile (either land or some interest derived from or a xed to land) and (ii) for an indeterminate duration (as opposed to a leasehold, which is for a limited duration). The owner of a present estate has the right to currently possess the property. 1. Fee Simple Absolute Fee simple absolute (or “fee simple”) is the most common form of property ownership and the broadest ownership interest recognized by law. It is absolute ownership of potentially in nite duration. It is “freely alienable” because it is able to be transferred inter vivos, by will, or intestacy without restriction. A fee simple absolute has no accompanying future interest. Although common law required words of limitation (e.g., “and heirs”), conveyances that are ambiguous (e.g., "to B") are now considered fee simple by default. Example: A conveys Blackacre “to B and his heirs.” C conveys Whiteacre to “B.” Both conveyances give B a fee simple absolute estate in the property. Note that using the limitation “and heirs” does not restrict the ability of the transferee of a fee simple absolute interest or other real property interest to transfer that interest during the transferee’s life or to devise that interest by will death, nor limit the people to whom the interest may be transferred to the transferee’s heirs. 2. Defeasible Fees As with a fee simple absolute estate, a defeasible fee is ownership of potentially in nite duration. But, unlike a fee simple absolute estate, a defeasible fee may be terminated by the occurrence of an event. Three defeasible fee simples are (i) fee simple determinable, (ii) fee simple subject to a condition subsequent, and (iii) fee simple subject to an executory interest. A defeasible fee is freely alienable by the owner during his life, and upon his death, it is devisable (i.e., transferable by decedent's will) and, if not devised, descendible (i.e., transferable by intestacy law). EXAM NOTE: If a statement in a conveyance of real property merely indicates a grantor’s desire, intent, or purpose for which the property is to be used rather than imposing a condition on the ownership of the property itself, the property interest is treated as a fee simple absolute, rather than a defeasible fee. a. Fee simple determinable A fee simple determinable is a present fee simple estate that is limited by speci c durational language (e.g., “so long as,” “while,” “during,” “until”). A fee simple determinable terminates automatically upon the happening of the stated event. 1 of 85 6/25/2024, 11:32 MyThemis Learners https://www.themisbar.com/learners/index.php?service=subjectoutline&... 1) Future interest in grantor—possibility of reverter The grantor retains a future interest in the estate, which is known as a possibility of reverter, even though the conveyance does not mention this future interest or the grantor as its owner, unless the conveyance provides otherwise. Upon the occurrence of the stated event, the estate automatically reverts to the grantor or her successors. Example: A conveys Blackacre “to B and his heirs until B gets married.” The estate reverts back to A if B gets married. B has a fee simple determinable in Blackacre, and A has a possibility of reverter. A possibility of reverter is freely alienable during the grantor's life, and upon her death devisable and, if not devised, descendible. 2) Future interest in grantee—executory interest When the conveyance speci es that the estate, upon the occurrence of the stated event, is to pass to a third party, the future interest held by the third party is an executory interest. As with the possibility of reverter, upon the occurrence of the stated event, the passage of the estate is automatic; the third party is not required to take any action in order to become the owner of the estate. Example: A conveys Blackacre “to B and his heirs until B gets married, then to C.” B has a fee simple determinable in Blackacre, while C has an executory interest. A does not have an interest in Blackacre. An executory interest is freely alienable during life, and upon death devisable and, if not devised, descendible. For a more detailed discussion, see § I.B.5. Executory Interests, infra. Note that when the future interest is in a third-party grantee, some jurisdictions label the present defeasible fee interest as a "fee simple subject to an executory interest" (or "fee simple subject to an executory limitation") rather than a "fee simple determinable." This is the same term used to label a present defeasible fee interest that is subject to a condition and is followed by an executory interest in a grantee (see c. Fee simple subject to an executory interest, below). b. Fee simple subject to a condition subsequent A fee simple subject to a condition subsequent is a present fee simple that is limited in duration by speci c conditional language (e.g., “provided that,” “on condition that,” “but if”). Upon the occurrence of the condition, the grantor (or his successor interest) has the right to terminate this estate. EXAM NOTE: Unlike a fee simple determinable, termination of a fee simple subject to a condition subsequent is not automatic. Upon occurrence of the stated condition, the present fee simple will terminate only if the grantor a rmatively demonstrates intent to terminate (e.g., by bringing an eviction action). If the language in the conveyance is ambiguous, courts typically adopt a preference for the fee simple subject to a condition subsequent over a fee simple determinable. 1) Future interest in grantor—right to terminate In the conveyance, the grantor must explicitly retain the right to terminate the fee simple subject to a condition subsequent (known as the “right of entry,” “right of reentry,” or “power of termination”). In most jurisdictions, this right is freely alienable during life, and upon death devisable and, if not devised, descendible. Example: A conveys Blackacre “to B and his heirs, but if B gets married, then A can reenter Blackacre.” B has a fee simple subject to a condition subsequent in Blackacre, and A has a right of reentry. If B gets married, B will retain his current possessory estate in Blackacre until A exercises his right to terminate B’s estate. EXAM NOTE: In the above example, remember that until A retakes Blackacre, B continues to own the land. The owner may waive this right, but the mere failure to assert it does not constitute a waiver. When the grantor fails to retain this right, a court may nd that the condition constitutes only a covenant for which the owner may be entitled to damages or an injunction, but that the owner does not have the right to regain possession of the property. 2 of 85 6/25/2024, 11:32 MyThemis Learners https://www.themisbar.com/learners/index.php?service=subjectoutline&... c. Fee simple subject to an executory interest A fee simple subject to an executory interest (also known as a fee simple subject to an executory limitation) is a present fee simple estate that is limited by speci c conditional language (e.g., “provided that,” “on condition that,” “but if”), such that, upon the occurrence of the speci ed event or condition, title will automatically pass to a third party (i.e., someone other than the grantor or the holder of the present fee). EXAM NOTE: Unlike the occurrence of the condition regarding a fee simple subject to a condition subsequent, the occurrence of the condition stated in a fee simple subject to in an executory interest automatically triggers the passage of title to the third party. 1) Future interest in third party—executory interest The future interest held by the third party is an executory interest. Example : A conveys Blackacre “to B and his heirs; but if B gets married, then to C.” In Blackacre, B has a fee simple subject to an executory interest, and C has an executory interest. A does not have an interest in Blackacre. An executory interest is freely alienable during life, and upon death devisable and, if not devised, descendible. For a more detailed discussion, see § I.B.5. Executory Interests, infra. 3. Fee Tail A fee tail is a freehold estate that limits the estate to the grantee’s lineal blood descendants by speci c words of limitation (e.g., “heirs of the body”). The fee tail estate has been eliminated in most states; it is treated as a fee simple absolute estate. 4. Life Estate A life estate is a present possessory estate that is limited in duration by a life. The language in the document creating the life estate must be clear (e.g., “to A for life”), and the duration must be measured in terms of a life, not a unit of time (e.g., years). a. Subsequent estate Usually, the future interest that follows a life estate is spelled out in the conveyance, and typically is a remainder or executory interest. Example 1: A conveys Blackacre “to B for B’s life, and then to C.” B has a life estate in Blackacre, which terminates upon B’s death. C has a remainder. On B’s death, ownership of Blackacre vests in C. If there is no subsequent interest conveyed, ownership of the property reverts to the grantor on the death of the measuring life. This future interest is known as a “reversion” Example 2: A conveys Blackacre “to B for life.” B has a life estate in Blackacre, which terminates upon B’s death. A has a reversion; upon B’s death, ownership of Blackacre reverts to A. The life estate, as a present possessory estate, is not subject to the Rule Against Perpetuities, but a future estate, the duration of which is measured by a life, may be (see B.8. Rule Against Perpetuities, below). b. Measuring life 1) Grantee's life Unless the conveyance speci es otherwise, the life of the grantee (i.e., the life tenant) is the measuring life. Example: A conveys Blackacre to “B for life.” B has a life estate that is measured by his own life. A life estate is transferable while the person by whom the life estate is measured is alive. Because the interest terminates at the death of the person by whom the life estate is measured, a life estate measured by the grantee’s life is neither devisable nor descendible by the grantee. 2) Another's life 3 of 85 6/25/2024, 11:32 MyThemis Learners https://www.themisbar.com/learners/index.php?service=subjectoutline&... The duration of a life estate may be measured by the life of an individual other than the grantee; the life estate is known as a “life estate pur autre vie.” Example 1: O conveys Blackacre to “A for the life of B.” A has a life estate pur autre vie in Blackacre for the life of B. When the measuring life survives the life tenant, the life estate may be devised by the life tenant or inherited by the life tenant’s heirs. Example 2: O conveys Blackacre to “A for the life of B, with a remainder to C.” A has life estate for the life of B. A dies before B and devises the life estate to D. D has a life estate until B dies, at which time C’s remainder becomes possessory. c. Cutting short a life estate A life estate can be subject to a condition that cuts it short. A life estate can be quali ed by language that speci es one or more events that might cause the life estate to terminate before the death of the individual who serves as the measuring life. Such a life estate is called a defeasible life estate (or a determinable life estate). Historically, depending on whether the stated event was described by language of limitation or condition, the estate was variously called a life estate subject to a "special limitation," "an executory limitation," or "a condition subsequent." Example: A conveys Blackacre “to B for life, but if B remarries, then to C.” B has a defeasible life estate. C has an executory interest. d. Rights A life tenant has the right to possess the property, as well as the right to lease, sell, or mortgage his interest in the property (i.e., right of alienation). 1) Rents Generally, rents generated from the lease of the property belong to the life tenant. 2) Pro ts A pro t is a right to take natural resources from land (e.g., oil, gas, minerals). The life tenant may take such resources when the grantor expressly or impliedly gives the life tenant this right. When such resources are being taken when a life estate becomes possessory, there is a presumption that the grantor intended the life tenant to have this right. (Regarding resources obtained through mining, this principle is known as the "open mines" doctrine.) When this right is not expressly or impliedly given to the life tenant, exploitation of natural resources can constitute waste. 3) Sale of property Generally, a life tenant can only sell her life estate when the future interest holders agree to the sale of the property in fee simple. However, in a majority of jurisdictions, a life tenant may seek a court order compelling the sale of the property in fee simple when future interest holders cannot be ascertained or are unwilling to sell the property. The grounds for obtaining a court order vary. When the court is acting in equity, equitable factors, such as whether the income generated by property is insu cient to meet the life tenant's obligations with respect to the property, may be considered. The proceeds from the sale are distributed based on the present value of each interest. e. Doctrine of Waste The rights of a life tenant are limited by the doctrine of waste. Under this doctrine, a life tenant generally must deliver the property to the future interest holder in substantially the same condition that it was in when she took possession, with allowance for normal wear and tear. The owner of property in fee simple absolute who divides ownership of the property into a life estate and one or more future interest may alter or eliminate the applicability of this doctrine to the life tenant. In addition, the future interest holders may consent to the life tenant's conduct. 1) Permissive waste Permissive waste occurs when the life tenant “permits” the premises to deteriorate through neglect or a failure to preserve or protect the property. a) Repairs A life tenant has a duty to prevent permissive waste by making reasonable repairs. This constitutes a personal obligation of the life tenant only to the extent that the life tenant receives a nancial bene t from the property (i.e., the amount of income generated by the property, or, if the life tenant uses the property (e.g., farms the land, occupies the residence), its fair rental value). 4 of 85 6/25/2024, 11:32 MyThemis Learners https://www.themisbar.com/learners/index.php?service=subjectoutline&... b) Damage caused by natural forces or third parties In most jurisdictions, the life tenant is not responsible for damage caused by natural forces or third parties that the life tenant could not prevent. For damage to the property caused by a third party, the life tenant and the future interest holder each have the right to sue the third party for damages. c) Insurance In most jurisdictions, the life tenant is not under an obligation to insure the land for the bene t of the future interest holder. 2) Voluntary waste Voluntary (or a rmative) waste occurs when the condition of the property is substantially changed due to the life tenant's a rmative action. a) Diminution in value Generally, a life tenant's a rmative action that results in the diminution in value of the property is prohibited by the doctrine of waste. b) No diminution in value When the life tenant's a rmative action substantially changes the condition of the property and thereby does not diminish the value of the property, this is known as ameliorative waste. At common law, this was prohibited because the condition of the property was changed. In most jurisdictions today, ameliorative waste is permitted when the change results in reasonable use of the property. A life tenant has a duty not to change the premises if the future interest holders have a reasonable ground for objection. However, a reasonable ground for objection does not exist if a substantial and permanent change in neighborhood surroundings makes the change necessary to continue reasonable use of the property, and the proposed change is one that an owner of a fee simple estate would typically make. In addition, in determining the reasonableness of a change, the life tenant's life expectancy and good faith in making the change are factors to be considered. 3) Actions by future interest holder Although the doctrine of waste typically arises in the context of a life estate, it comes into play with abuse, neglect, or improvement of real property by any person who holds a present property interest that is not a fee simple interest (e.g., a defeasible fee). The holder of a vested future interest may bring suit for damages, and the holder of any future interest may bring suit for an injunction. Some jurisdictions recognize an action for treble damages or forfeiture against a life tenant for voluntary waste. The holder of a future interest in the property (e.g., remainder, executory interest) may enter the land to inspect for waste. f. Allocation of burdens The following property expenses are sometimes referred to as carrying charges. 1) Property taxes Because property taxes are imposed on an annual basis, they are an assessment only against the life estate, not against future interests in the property. Generally, as with repairs, these taxes are a personal obligation of the life tenant only to the extent that he receives a nancial bene t from the property. If the life tenant occupies the property, he is responsible for property taxes only to the extent of the fair rental value of the property. Any excess can be assessed against the life estate interest as a lien which can be enforced through a judicial sale. 2) Pre-existing mortgage obligation Payments due on an obligation secured by mortgage of the property that was incurred prior to the creation of a life estate and future interest are subject to allocation between the life tenant and the future interest holder. The allocation can vary depending on the type of obligation. If the obligation requires only the periodic payment of interest until the principal amount is due, the life tenant is responsible for such interest payments. If the obligation requires the periodic payment of both interest and principal, the payment obligation is allocated between the life tenant and future estate holder based on the present value of each interest. 5 of 85 6/25/2024, 11:32 MyThemis Learners https://www.themisbar.com/learners/index.php?service=subjectoutline&... Consequently, when the holder of a future interest pays the outstanding mortgage obligation because the life tenant fails to do so, the holder can bring an action against the life tenant personally to recoup his payment of the life tenant's portion of the obligation, but only to the extent of the life tenant’s nancial bene t from the property. Any excess can be assessed against the life estate interest as a lien which can be enforced through a judicial sale. A life tenant who pays a future interest holder's mortgage obligation is entitled to a similar remedy. 3) Assessment for public improvement An assessment for a public improvement (e.g., paving road, installing water or sewer lines) typically is subject to allocation between the life tenant and future estate holder g. Dower and curtesy At common law, a surviving spouse had a life estate in property owned by deceased spouse. For a widow, this life estate interest was known as a dower right; for a widower, a curtesy right. Because every jurisdiction now provides other protections for a surviving spouse, such as a surviving spouse's right to at least a portion of the deceased spouse's property in fee simple, less than a handful of jurisdictions have retained a surviving spouse's right to a life estate in the deceased spouse's property. B. Future Interests A future interest is an ownership interest in presently existing property, which may commence in possession or enjoyment sometime in the future. 1. Reversion A reversion (or “reverter”) is the future interest held by the grantor who grants a life estate or estate for years but does not convey the remaining future interest to a third party. Reversions are not subject to the Rule Against Perpetuities. A reversion is fully alienable during life, and upon death devisable and, if not devised, descendible. 2. Possibility of Reverter A possibility of reverter is a future interest retained by a grantor when a fee simple determinable is conveyed. 3. Right of Reentry A right of reentry (also called “right of entry” or “power of termination”) is a future interest retained by the grantor after a fee simple subject to a condition subsequent is granted. 4. Remainder Generally, a remainder is a future interest created in a grantee that is capable of becoming an estate that is presently possessory upon the natural expiration of a prior estate (e.g., a life estate, estate for years) that is created in the same conveyance in which the remainder is created. However, by de nition, a remainder interest cannot follow a defeasible fee interest; a future interest that follows a defeasible fee is an executory interest. A remainder can be either vested or contingent. a. Vested remainder A vested remainder is an interest that is not subject to any conditions precedent and is created in an ascertainable grantee. Example: A conveys Blackacre “to B for life, then to C and his heirs.” Here, the grantee, C, has a vested remainder. There are no preconditions on C's entitlement to his remainder interest and C, as the designated individual, is an ascertainable grantee. 1) Vested remainder subject to open 6 of 85 6/25/2024, 11:32 MyThemis Learners https://www.themisbar.com/learners/index.php?service=subjectoutline&... When a remainder interest is transferred to persons designated as a group rather than individually (e.g., children, grandchildren) and at least one member of the group is individually ascertainable and entitled to the remainder interest, but that person's interest may be subject to being shared with other members of the group, the vested remainder held by such persons is characterized as a "vested remainder subject to open" or alternatively as a "vested remainder subject to partial divestment." Example 1: A conveys Blackacre “to my son for life, and on his death to his children.” When A conveys Blackacre, his son is alive and has one child. That child has a vested remainder subject to open because his interest in Blackacre may be subject to being shared if A's son has other children. Example 2: A conveys Blackacre “to my son for life, and on his death to his children who attain 21 years of age.” When A conveys Blackacre, his son is alive and has one child who is 30 years of age. That child has a vested remainder subject to open because his interest in Blackacre may be subject to being shared if A's son has other children who attain 21 years of age. 2) Vested remainder subject to complete divestment A vested remainder subject to divestment indicates that the occurrence of a condition subsequent will completely divest the remainder interest. Example: A conveys Blackacre “to B for life, and then to C; but if C has no children, then to D’s children.” C has a vested remainder interest, but if he is not survived by his children at the time of B’s death, then C’s interest will be divested. Consequently, C has a vested remainder subject to complete divestment. b. Contingent remainder A remainder is contingent if it is created in a grantee that is unascertainable, or if it is subject to an express condition precedent to a grantee’s taking. This situation normally occurs in one of two circumstances: (i) when the property cannot vest because the bene ciary is unknown, or (ii) when the property cannot vest because the known bene ciary is subject to a condition precedent that has not yet occurred. Example 1: A conveys Blackacre “to B for life, and on his death to his children." When A conveys Blackacre, B does not have any children. B's unborn children have a contingent remainder. Example 2: A conveys Blackacre "to B for life, then to B's children who attain 21 years of age." When A conveys Blackacre, B has one child who is 10 years old. B's child has a contingent remainder. 1) Destruction of contingent remainders A contingent remainder was destroyed at common law if it had not vested by the time the preceding estate terminated. In most jurisdictions today, the grantor’s reversion becomes possessory, and the person holding the contingent remainder takes a springing executory interest (see 5.b. Springing executory interest below), which becomes possessory if the condition precedent is met. Example: A conveys Blackacre “to B for life, remainder to C’s heirs.” B and C are alive. Subsequently, B dies and is survived by C. At common law, the contingent remainder in C's heirs was destroyed, and A had in fee simple absolute in Blackacre by virtue of A's reversion. Today, in most jurisdictions, A has a fee simple subject to an executory interest, and C's heirs have a springing executory interest that will become a fee simple absolute interest on C's death. 2) Rule in Shelley’s Case At common law, the Rule in Shelley’s Case prevented a contingent remainder in the grantee’s heirs. Defeating the grantor’s intent, the rule changed the interest that the grantor purported to give to the grantee and his heirs to a vested remainder in the grantee. Under the doctrine of merger, when the life estate in the grantee was immediately followed by a remainder in the grantee's heirs, both the present and future interests were merged, and the grantee took the property in fee simple absolute. Most jurisdictions have abolished the Rule in Shelley’s Case, and the grantee's heirs take the future interest as conveyed in the deed. Example: A conveys Blackacre “to B for life, remainder to B’s heirs.” If the Rule in Shelley’s Case applies, then after merger of the present and future estate, B owns Blackacre in fee simple absolute. If the Rule in Shelley’s Case has been abolished, then B has a life estate and B’s heirs have a contingent remainder in Blackacre. c. Doctrine of Worthier Title 7 of 85 6/25/2024, 11:32 MyThemis Learners https://www.themisbar.com/learners/index.php?service=subjectoutline&... The Doctrine of Worthier Title, which was a rule of law at common law, is a rule of construction similar to the Rule in Shelley’s Case, except that it prevents a grantor from creating a remainder in the grantor’s heirs; it applies in a minority of jurisdictions to an inter vivos conveyance. The rule creates a presumption of a reversion to the grantor, which is rebuttable by a showing of contrary intent. Example: A conveys Blackacre “to B for life, remainder to A’s heirs.” If the Doctrine of Worthier Title applies, then B has a life estate, and A has a reversion, unless a contrary intent is established. If this doctrine has been abolished, then B has a life estate, and A’s heirs have a contingent remainder. 5. Executory Interests An executory interest is a future interest in a third party that is not a remainder and that generally cuts the prior estate short upon the occurrence of a speci ed condition. In addition, a future interest that follows a fee simple determinable and is held by a third party (rather than the grantor) is an executory interest, even though it arises naturally out of the termination of the fee simple determinable, because a remainder never follows a defeasible fee and an executory interest is the only other future interest held by a third party. There are two types of executory interests: shifting executory interests and springing executory interests. a. Shifting executory interest A shifting executory interest divests the interest of the grantee by cutting short a prior estate created in the same conveyance. The estate “shifts” from one grantee to another on the happening of the condition. Example: A conveys Blackacre “to B and his heirs, but if C returns from Paris, then to C.” This conveyance creates a fee simple subject to an executory limitation in B and a shifting executory interest in C. 1) Executory interest that follows a fee simple determinable While a future interest that follows a fee simple determinable and is held by a third party (rather than the grantor) is an executory interest, it is not characterized as a shifting executory interest, even though the event results in the estate passing to a grantee, because the executory interest arises naturally out of the termination of the fee simple determinable rather than cutting the fee simple determinable short. Example: A conveys Blackacre “to B and his heirs until C returns from Paris, then to C.” This conveyance creates a fee simple determinable subject to an executory limitation in B and an executory interest in C. b. Springing executory interest A springing executory interest divests the interest of the grantor or lls a gap in possession in which the estate reverts to the grantor. Example: A conveys Blackacre “to B for life, and one year after B’s death to C and his heirs.” This conveyance creates a life estate in B, a one-year reversion in A (in fee simple subject to an executory limitation), and a springing executory interest in C. 6. Transferability of Remainders and Executory Interests Remainders, both vested and contingent, and executory interests are alienable during life, and upon death devisable and, if not devised, descendible. (At common law, which a few jurisdictions continue to follow, a contingent remainder could not be transferred during life.) Most states permit a future interest to be reached by creditors of the interest holder, except for those interests held by unascertainable or unborn persons or those held in certain trusts (e.g., a spendthrift trust). a. Transfer back to grantor Although a remainder or an executory interest is initially created in a grantee, not a grantor, these two future interests retain their designations if transferred back to the grantor. Example: A conveys Blackacre "to B for life, and then to C." C has remainder interest. C conveys her interest in Blackacre to A. A has a remainder interest. 8 of 85 6/25/2024, 11:32 MyThemis Learners https://www.themisbar.com/learners/index.php?service=subjectoutline&... 7. Classi cation of Interests It is important to classify the various interests in a disposition clause in order (i.e., from left to right) because the characterization of the rst interest usually determines the characterizations of the following interests. For example, a contingent remainder can follow a contingent remainder, but it cannot follow a fee simple. Example 1: A conveys Blackacre “to B for life, then to C if C survives B; but if C does not survive B, on B’s death to D.” B has a present life estate. C has a future interest, which is a remainder because it can become possessory upon the termination of the preceding possessory interest (i.e., B’s life estate), and it is a contingent remainder because C’s taking is conditioned on C surviving B. D also has a future interest, which is a remainder because it can become possessory upon the termination of B’s life estate; it is a contingent remainder because D’s taking is contingent on C not surviving B. Consider the following language that results in the same outcome (i.e., C owns Blackacre if C survives B, and D owns Blackacre if C does not) but di erent property interests for C and D immediately after the conveyance. Example 2: A conveys Blackacre “to B for life, and on B’s death to C. But if C predeceases B, on B’s death to D.” B has a present life estate. C has a future interest, which is a remainder because it can become possessory upon the termination of B’s life estate. C’s remainder is vested because C is ascertainable and there is no condition precedent that C must satisfy to take Blackacre. However, C’s vested remainder is subject to complete divestment if a condition subsequent (C predeceasing B) occurs. D has a future interest, but it is not a remainder because C’s interest is not an estate that will naturally terminated (e.g., a life estate, an estate for years) but instead may exist forever if the condition does not occur. If the condition subsequent occurs, then D would be entitled to take possession of Blackacre, thereby cutting short C’s interest. Consequently, D has a shifting executory interest. The above two examples demonstrate the importance of examining each clause independently and classifying each interest in the proper order. 8. Class Gifts A class gift is a donative transfer during life or at death by will to persons as members of a group (e.g., children, heirs). Consequently, the bene ciaries of the gift are subject to change as is each bene ciary's share of the gift. The following rules are rules of interpretation that place the burden of persuasion on the person seeking to overcome them. They are subject to laws to the contrary, such an anti-lapse statute (see the Themis Wills outline). a. Members of the group 1) Single-generation class gifts A gift to a single generation (e.g., children, grandchildren, siblings, nieces and nephews) include only members of that generation. a) Gifts to children A gift to children (e.g., "my children," "my daughter's children") include natural children as well as adopted children but exclude stepchildren who have not been adopted. Natural children can include nonmarital children. In most jurisdictions, a rebuttable presumption exists that a posthumously born child is the natural child of the deceased spouse if the child is born within 280 days of the spouse’s death. A posthumously born child born more than 280 days after the spouse’s death has the burden of proving that he is the deceased spouse’s natural child. 2) Multiple-generation class gifts A multiple-generation class gift other than heirs or next of kin (e.g., descendants, issue) include children of the designated individual as well children of those children, and likewise with regard to more remote generations. 3) Class gifts to heirs A class gift to heirs includes individuals who would succeed to the designated individual's intestate estate if the designated individual died intestate on the distribution date owning only the subject matter of the gift. 9 of 85 6/25/2024, 11:32 MyThemis Learners https://www.themisbar.com/learners/index.php?service=subjectoutline&... 9. Survival Contingency a. Express When a gift is expressly conditioned on survival, the donee must satisfy the condition to take the gift. Gifts that are expressly conditioned on survival include: "To A for life, remainder to his surviving children." "To A for life, and should he die leaving surviving children, to such children." "To A for life, and after the death of A, remainder to the children of A then living." b. Implied When a gift is to an individual's heirs, descendants, or issue, it is implied that the donee must survive the individual to take the gift. Example: A devises Blackacre “To my spouse for life, and then to her heirs.” When Blackacre is devised to A's spouse, A's spouse has two children, each of whom are eligible to be her heirs. At the time of the death of A's spouse, one of her children has predeceased her without ever having children. Blackacre passes to the surviving child of A's spouse. c. Ambiguous If a survivorship contingency is ambiguously stated in a conveyance, the majority view is that the contingency applies at the termination of the interest that immediately precedes distribution of the remainder. A minority approach interprets a survivorship contingency to require the future interest holder to survive only the grantor (e.g., testator) and not the holder of the interest that immediately precedes the remainder interest (e.g., life tenant). Example: A conveys Blackacre "to my spouse for life, and then to my children who survive." When A dies, A has two surviving children, C and D. When A's spouse dies, A has only one surviving child, C. Under the majority view, only C takes Blackacre, as only C has survived to the distribution of the remainder. Under the minority view, both C and D are entitled to Blackacre, as both survived A, the grantor. D’s interest passes to D’s estate. 10. Rule Against Perpetuities Under the Rule Against Perpetuities (“Rule”), speci c future interests are valid only if they must vest or fail by the end of a life in being plus 21 years, with a fraction of a year added for the term of gestation in cases of posthumous birth. Example 1: A conveys Blackacre “to B for life, and then to the rst male descendant of B, then to C.” This provision violates the Rule because it may be many generations before there is a male descendant of B, if at all. Example 2: A conveys Blackacre “to B for life, and then to B’s rst son who reaches the age of 18, then to C.” This provision is valid because any son of B will attain age 18 within 21 years after B’s death. Note the di erence in the examples above. In Example 1, the opportunity for B to have a male descendant does not end after he dies. Because there is a possibility that the devise will neither vest nor fail within a life in being plus 21 years, the Rule is violated. On the other hand, in Example 2, once B dies, his opportunity to have children ends, and so the clock starts. If, when he dies, B has at least one son under the age of 18, then it is certain to be less than a life in being plus 21 years before the condition either vests (son reaches 18) or fails (son dies). a. A ected future interests The Rule applies only to the following interests: contingent remainders, vested remainders subject to open, executory interests, and powers of appointment. Rights of rst refusal and options may also be subject to the Rule unless they arise in commercial transactions (see III.E.3. Rule Against Perpetuities, infra). It does not apply to future interests that are held by the grantor (i.e., reversion, possibility of reverter, right of reentry). 1) Trust interests Even though a bene ciary of a trust holds only an equitable interest in the trust property, such an interest may be subject to the Rule. b. Measuring lives The application of the Rule is determined by one or more measuring lives. A measuring life must be human, but there can be more than one measuring 10 of 85 6/25/2024, 11:32 MyThemis Learners https://www.themisbar.com/learners/index.php?service=subjectoutline&... life, provided the number of such lives is reasonable. If a measuring life is not speci ed, then the measuring life is the life directly related to the future interest that is subject to the Rule. Example 1: A devises Blackacre “to B for life, and then to B’s children who reach the age of 25.” B’s life is the measuring life. If there is no measuring life, then the applicable vesting period is 21 years from the time that the future interest is created. Example 2: A devises Blackacre “to a charity for so long as the property is used as an animal shelter, and then to C.” Because there is no measuring life, C’s interest must vest or fail within 21 years of the creation of C’s interest in order to satisfy the Rule. Since there is no guarantee regarding the future use to which Blackacre is put, C’s interest violates the Rule. c. Creation events The Rule tests the future interest as of the time that it is created. For example, a future interest created by a will is tested as of the testator’s death. d. “Vest or fail” requirement The Rule requires that the future interest either vest or fail to vest within the applicable time period. If there is any possibility that it will not be known whether the interest will vest or fail within that period, then the Rule has not been satis ed. e. E ect of violation If a future interest fails to satisfy the Rule, then only the o ending interest fails. In the rare case when the voiding of the future interest undermines the grantor’s intent, the entire transfer is voided. f. Special rule for transfer to a class (class gifts) If the transfer of a future interest is made to a class, and the Rule voids a transfer to any member of a class, then the transfer is void as to all class members, even those whose interests are already vested (i.e., “bad as to one, bad as to all”). Example: A devises Blackacre “to B for life, and then to B’s children who graduate from college.” At the time of A’s death, B had two children: X, who had graduated from college, and Y, who had not. X has a vested remainder subject to open; Y, as well as any afterborn children of B, has a contingent remainder. At the time of B’s death, Y has also graduated from college, and B has had a third child, Z, who is in elementary school. Because it may take Z more than 21 years to graduate college and thereby vest his interest, not only is Z’s interest void under the Rule, but X and Y’s interests are also void. 1) Rule of convenience as a savior The rule of convenience, which is a rule of interpretation, can operate to prevent the application of the Rule to a class transfer. Under this rule, membership in a class closes whenever any member of the class is entitled to immediate possession of a share of the class gift. Example 1: A conveys Blackacre “to B for life, and then to B’s grandchildren.” At the time of the conveyance, B has one grandchild, X. X has a vested remainder subject to open. Although B may have grandchildren born more than 21 years after B’s or X’s death, the class will close upon B’s death because B has a grandchild, X. Consequently, X and any other grandchildren born prior to B’s death will take Blackacre. The Rule will not apply to void their interests in Blackacre. Because the rule of convenience is a rule of interpretation, it does not apply when the grantor speci es that the class should remain open even though a member of the class is entitled to immediate possession of a share of the class gift. In addition, the application of the rule of convenience to a class transfer does not automatically forestall the application of the Rule. Example 2: Assume the same facts as those in Example (1), except that B has no grandchildren at the time of the conveyance. After the conveyance, B has a child, C. Then, A, B, and all of B’s children die themselves childless, except C. Twenty-two years later C has a child, G. Since G’s interest will not vest within a life in being plus 21 years, and there is no member of the class who was entitled to immediate possession of a share of the class gift on B’s death, the contingent remainder in B’s grandchildren is void under the Rule and is not saved by the rule of convenience. EXAM NOTE: Beware of fact patterns with class gifts to grandchildren of an inter vivos grantor instead of a testator. An inter vivos transfer is more likely to violate the Rule because the grantor could have another child after the gift, while a deceased testator cannot. 11 of 85 6/25/2024, 11:32 MyThemis Learners https://www.themisbar.com/learners/index.php?service=subjectoutline&... 2) Exceptions There are two main exceptions to the “bad as to one, bad as to all” rule for class transfers. Both transfers of a speci c dollar amount to each class member (e.g., “$50,000 to each grandchild who survives his parent”) and transfers to a subclass that vests at a speci c time (e.g., “to the children of B, and upon the death of each, to that child’s issue”) are tested separately. Any person who is entitled to the transferred interest is not prohibited from taking that interest simply because there are other members of the class who are prohibited from taking the interest. g. Charity-to-charity exception to the Rule Against Perpetuities If property passes from one charity to another charity, then the interest of the receiving charity is not subject to the Rule. Example: Blackacre is conveyed “to charity B, as long as the premises are used for a school, and then to charity C.” The executory interest of charity C may not vest within the time allotted by the Rule, but, because the Rule does not apply to charity-to-charity transfers, C’s executory interest is valid. EXAM NOTE: The Rule applies to property that passes between a charity and a non-charity. h. Common violations 1) Class transfers—”survival beyond age 21” condition If a transfer to a class is conditioned on the class members surviving to an age beyond 21 and the class is open, then the transfer to the class violates the Rule. Example: A conveys Blackacre “to B for life, and then to B’s children who reach the age of 30.” At the time of the conveyance, B has one child, X, who is 35 years old. X has a vested remainder subject to open; B’s potential children have a contingent remainder. The contingent remainder violates the Rule because it is possible that B could have another child who would not attain the age of 30 until more than 21 years after B’s death. Because the contingent remainder is invalid, X’s vested remainder subject to open is also invalid as a consequence of the “bad as to one, bad as to all” rule for class transfers. 2) Fertile octogenarian Anyone, regardless of age or physical condition, including an 80-year-old woman (i.e., the fertile octogenarian) is deemed capable of having children for the purposes of the Rule. Some states have set an age limit (e.g., 55 years old) beyond which it is rebuttably presumed that a woman cannot have a child. Example: A conveys Blackacre “to B for life, then to B’s children who reach the age of 30 years old.” At the time of the conveyance, B is 90 years old, with one child, X, who is 35 years old. X has a vested remainder subject to open, since B, despite her age, is assumed to be capable of having another child. Because the contingent remainder in that child would violate the Rule, X’s interest is also void under the “bad as to one, bad as to all” rule. 3) Unborn spouse If an interest following a widow’s life estate cannot vest until the widow dies, then it violates the Rule. Example: A conveys Blackacre “to B for life, then to B’s widow for life, then to B’s children who are then living.” The contingent remainder in B’s children violates the Rule because B’s widow may be someone who is not yet alive at the time of the conveyance. The contingent remainder would not violate the Rule if the life estate was conveyed to a particular person (e.g., B’s current spouse) instead of “B’s widow.” 4) Defeasible fee followed by an executory interest An executory interest that follows a defeasible fee violates the Rule, unless there is a time limit on the vesting of the executory interest that satis es the Rule. If the limit on the defeasible fee is durational (e.g., “so long as,” “while”), then the striking of the executory interest leaves the grantor with the possibility of reverter. If the limit on the defeasible fee is a condition subsequent (e.g., “but if,” “upon the condition that”), then the striking of the executory interest leaves the holder of the defeasible fee with a fee simple absolute interest in the property. Example 1: A conveys Blackacre “to B so long as the property is used for residential purposes; if it is not, then to C.” B has a fee simple subject to an executory interest; C has an executory interest. Because C’s executory interest could become possessory after the expiration of the testing period for the Rule, C’s interest is stricken, and A has a possibility of reverter in Blackacre. Example 2: A conveys Blackacre “to B; but if the property is used for residential purposes, then to C.” B has a fee simple subject to an executory 12 of 85 6/25/2024, 11:32 MyThemis Learners https://www.themisbar.com/learners/index.php?service=subjectoutline&... interest; C has an executory interest. Because C’s executory interest could become possessory after the expiration of the testing period for the Rule, C’s interest is stricken, and B owns Blackacre in fee simple absolute. 5) Conditional passage of interest If there is a condition imposed on the passing of a future interest subject to the Rule that is not con ned to a speci ed time limit that meets the Rule’s testing period, such as probating the will or termination of a current military con ict, then the future interest runs afoul of the Rule. i. Modi cations of the Rule No jurisdiction continues to apply the common law Rule Against Perpetuities without modi cation. 1) “Wait and see” stance A majority of jurisdictions have adopted the Uniform Statutory Rule Against Perpetuities (USRAP), which adopts a “wait and see” stance with respect to the applicability of the Rule. Under this stance, an otherwise invalid interest is valid if it does in fact vest within 90 years after its creation. In addition, under the USRAP, the Rule generally does not apply to future interests arising from commercial transactions, including options to purchase, preemptive rights (e.g., right of rst refusal), and future leases. 2) Perpetual (Dynastic) trusts Some jurisdictions except equitable interests in property held in trust from the common law Rule either automatically or by election. Most of these jurisdictions have required that the trustee have the power to sell the property. Because almost all conveyances today that run afoul of the common law Rule take the form of such trust interests, this exception has the e ect of abolishing the common law Rule. 3) Cy pres doctrine A few jurisdictions permit a court to reform a conveyance to prevent it from violating the Rule by applying the cy pres doctrine (also known as "equitable approximation"). Under this doctrine, the court makes changes to the conveyance, such as reducing a time limit for a future interest to take e ect to 21 years after the expiration of the last measuring life, in order to come “as near as possible” to the intent of the transferor while staying within the bounds of the Rule. 4) Complete repeal A few jurisdictions have completely repealed the common law Rule. C. Concurrent Estates A concurrent estate (i.e., co-tenancy) arises when two or more persons own real property simultaneously. The most common concurrent estates are tenancy in common, joint tenancy, and tenancy by the entirety. 1. Tenancy in Common A tenancy in common exists when two or more co-owners have an equal right to possess property (unity of possession) but do not have a right of survivorship with respect to the property interest held by another co-owner. In most jurisdictions, there is a rebuttable presumption that a conveyance of property to two or more persons as joint owners creates a tenancy in common rather than a joint tenancy. Each co-tenant holds an undivided interest with unrestricted rights to possess the whole property, regardless of the size of the co-tenant’s interest. Each tenant can unilaterally transfer, devise, mortgage, or lease his interest to a third party, without a ecting the interest of the other tenants in common. 2. Joint Tenancy A joint tenancy exists when two or more persons own property with the right of survivorship. On the death of a joint tenant, that person's interest terminates and the surviving joint tenants' interests are accordingly increased. Where there is only one surviving joint tenant, that person owns the 13 of 85 6/25/2024, 11:32 MyThemis Learners https://www.themisbar.com/learners/index.php?service=subjectoutline&... property outright upon the death of the other joint tenants. Some jurisdictions have abolished this concurrent estate or eliminated its right of survivorship, thereby e ectively transforming it into a tenancy in common. EXAM NOTE: To determine if a joint tenancy was created, look for survivorship language (e.g., "to A and B, as joint tenants with right of survivorship"). a. Four unities In addition to the right of survivorship, traditionally each joint tenant must not only have an equal right to possess or use the property (unity of possession), but each interest must be equal to the other interests (unity of interest) and have been created at the same time (unity of time) and in the same instrument (unity of title). [Mnemonic−”PITT”]. The modern trend focuses on the intent of the parties if the language creating the tenancy is unclear. Unlike a joint tenancy, a tenancy in common requires only the unity of possession. 1) Conveyance by current fee simple owner Traditionally, the fee simple owner of real property cannot directly create a joint tenancy with one or more other persons. To do so violates the unities of time and title because the owner's interest in the property arose prior to the other persons' interest and by virtue of a prior instrument. To overcome this problem, the fee simple owner can transfer the property to "strawman," who then transfers the property to the owner and the other persons as joint tenants. Many jurisdictions now permit the fee simple owner to forego this formality and directly create a joint tenancy with one or more other persons. 2) Unequal interests Some jurisdictions permit joint tenants to own unequal interests. b. Severance The severance of joint tenancy may occur in several ways. The severance of a joint tenancy converts it into a tenancy in common. However, if there are more than two joint tenants, a severance does not automatically a ect the joint tenancy of all joint tenants. Example 1: X and Y hold Greenacre as joint tenants. X gives his interest in Greenacre to Z. X’s action results in a severance of the joint tenancy. After the severance, Y and Z hold Greenacre as tenants in common. Example 2: X, Y, and Z hold Greenacre as joint tenants. X gives his interest in Greenacre to A. X’s action results in a severance of the joint tenancy with respect to X’s interest. After the severance, A holds a one-third interest in Greenacre as a tenant in common with Y and Z, who each still hold a one-third interest in Greenacre as joint tenants between themselves. 1) Conveyance a) At death A devise (i.e., a conveyance by will) by a joint tenant of his property interest is not given e ect. Instead, the property passes automatically to the remaining joint tenants due to the right of survivorship. Example 3: Assume the same facts as those in Example 2. Y dies and leaves his property to B. B is not entitled to Y’s one-third interest in Greenacre. Instead, Z, by virtue of his right of survivorship, owns a two-thirds interest in Greenacre as a tenant in common with A, who continues to hold her one- third interest in Greenacre. Similarly, when a joint tenant dies without devising the property, the property passes automatically to the remaining joint tenants due to the right of survivorship and not to the joint tenant's heirs as such. b) Lifetime transfer A lifetime (inter vivos) transfer by a joint tenant of his property interest e ects a severance of the joint tenancy. Example 4: Assume the same facts as those in Example 2. Y, while alive, sells his interest in Greenacre to C. This e ects a severance of the remaining joint tenancy that existed between Y and Z. A, C, and Z each hold a one-third interest in Greenacre as tenants in common. 14 of 85 6/25/2024, 11:32 MyThemis Learners https://www.themisbar.com/learners/index.php?service=subjectoutline&... i) Contract to transfer: one joint tenant In most states, a joint tenant may e ect a severance by executing a contract to convey his property interest. ii) Contract to transfer: all joint tenants In some states, a contract to convey property held in a joint tenancy that is executed by all of the joint tenants does not e ect a severance. Severance occurs only upon the transfer of the property. In other states, severance occurs upon the execution of a contract to convey by all joint tenants. 2) Mortgages A joint tenant may grant a mortgage in her joint tenancy interest. In lien theory states (the majority), the mortgage is only a lien on the property; the granting of a mortgage does not sever the joint tenancy, and severance occurs only upon a foreclosure sale following a default. In title theory states (the minority), the granting of a mortgage by a joint tenant constitutes a transfer of title; the joint tenancy is between the mortgagee and the other joint tenants, and it is severed and converted into a tenancy in common; if there is more than one remaining joint tenant, however, they continue to hold their property interests with each other as joint tenants. 3) Judicial lien A judicial lien is typically imposed as a consequence of an adverse judgment against a joint tenant stemming from a contractual or tort liability. In most states, a judicial lien imposed on the property interest of a joint tenant does not sever the joint tenancy. There must be a levy and sale of the property interest to e ect a severance. If the joint tenant against whose property interest the lien is imposed dies prior to the sale, the remaining joint tenants are entitled to that property interest by right of survivorship. 4) Leases There is a split among jurisdictions with respect to how to handle joint tenancies when one joint tenant leases his interest. Some jurisdictions hold that the lease destroys the unity of interest and thus severs the joint tenancy, while other jurisdictions believe that the lease merely temporarily suspends the joint tenancy, which resumes upon expiration of the lease. 5) Intentional killings When one co-tenant intentionally kills the other co-tenant, some states allow the felonious joint tenant to hold the property in constructive trust for the deceased joint tenant’s estate. This means that the surviving joint tenant does not pro t from the felony but can keep his interest in the property. Other jurisdictions have statutes that sever the joint tenancy upon a felonious killing of one joint tenant by another joint tenant. 3. Tenancy by the Entirety Tenancy by the entirety is a joint tenancy between married persons with a right of survivorship. The same rules for joint tenancy apply to tenancy by the entirety, plus the joint tenants must be married when a deed is executed or the conveyance occurs (the fth unity—unity of person). Neither spouse can alienate or encumber the property without the consent of the other. Tenancy by the entirety is recognized in about half of the states. In states in which it is recognized, a majority rebuttably presume that a conveyance to a married couple creates a tenancy by the entirety, and, upon divorce, that the property is held in a tenancy in common. In addition, a majority also treat the involuntary alienation (e.g., judgment lien) of property held in a tenancy by the entirety as void; similarly, the voluntary alienation (e.g., mortgage) by only one spouse is void. 4. Rights and Obligations a. Possession Unless there is an agreement to the contrary, each co-tenant has the right to possess all of the property; one co-tenant may not bind another co-tenant to a boundary line agreement with a neighbor. A co-tenant is generally not required to pay rent to the other co-tenants for the value of her own use of the property, even when the other co-tenants do not make use of the property. Similarly, a co-tenant is generally not required to share pro ts earned from the use of the property, such as from a business conducted on the property. Because of each tenant’s right to possess the entire property, a co?tenant’s exclusive use of the property does not, by itself, give rise to adverse 15 of 85 6/25/2024, 11:32 MyThemis Learners https://www.themisbar.com/learners/index.php?service=subjectoutline&... possession of the interest of another co-tenant. 1) Ouster When a co-tenant refuses to allow another co-tenant access to the property, the ousted co-tenant may bring a court action (e.g., an injunction) to gain access to the property and to recover the value of the use of the property for the time during which the co-tenant was denied access to the property. Under the majority rule, a co-tenant in exclusive possession of the property who merely rejects a demand by another co-tenant that the co-tenant in possession either pay rent or vacate a portion of the premises has not committed ouster. For an ouster to occur under the majority rule, the co-tenant in possession must refuse a demand by another co-tenant to use the property. 2) Natural resources A co-tenant is entitled to the land’s natural resources (e.g., timber, minerals, oil, gas) in proportion to her ownership share. b. Property-related expenditures and income A co-tenant who makes property-related expenditures is, in some cases, entitled to contribution from the other co-tenants based on the ownership interest of each co-tenant. Conversely, a co-tenant who receives income from a third party for use of the property may be subject to an action for an accounting of that income and its distribution among the co-tenants based on the ownership interest of each co-tenant. 1) Necessary property related obligations A co-tenant who pays more than his share of necessary property related expenses (e.g., property taxes, mortgage payments), generally can compel the other co-tenants to contribute based on the ownership interest of each co-tenant. A co-tenant in sole possession of the property can collect only to the extent that those expenses exceed the rental value of the property. 2) Repairs A co-tenant cannot compel other co-tenants to share in the expenses for repairs made to the property through an action for contribution. A co-tenant may, in some jurisdictions, maintain a separate action for contribution if the other co-tenants were noti ed of the need for the repair. If there is an action for accounting or partition, necessary repair expenses can be recouped indirectly (e.g., repair expenses can o set rental income received from a third party). 3) Improvements Similarly, a co-tenant does not have a right to contribution from other co-tenants for improvements made to the property. In a partition action, the co- tenant may be entitled to the additional value attributable to the improvement if the property is sold or if the property is divided among the co-tenants. 4) Third-party rents A co-tenant must account to other co-tenants for rent received from third parties, but can deduct expenses, including necessary repairs, when calculating net proceeds. Net proceeds from a third?party rental of the property are divided among the co-tenants based on the ownership interest of each co-tenant. c. Fiduciary obligation Although co-tenants owe a duty of fair dealing to each other, co-tenants generally do not owe duciary duties to each other. However, a duciary obligation can be imposed on co-tenants who jointly purchase the property in reliance on each other or acquire their interests at the same time from a common source, such as by gift, will, or inheritance. Typically, these co-tenants will be related or in a con dential relationship. The primary situation in which such a co-tenant is found to have a duciary obligation arises when the property is sold at a tax or mortgage foreclosure sale and a co-tenant acquires the property. In such a situation, the other co-tenants have the right to reacquire their original interests by paying their due contributions within a reasonable time. Example: A brother and sister inherit land from their mother as tenants-in-common, each holding a one-half interest in the land. Neither pays the taxes on the property. The local government secures a lien on the property for the unpaid taxes and the property is sold at a tax sale. The brother purchases the property at the sale for $100,000. The brother has a duciary obligation to his sister to permit her to reacquire her one-half interest in the property 16 of 85 6/25/2024, 11:32 MyThemis Learners https://www.themisbar.com/learners/index.php?service=subjectoutline&... by paying him $50,000, her share of the purchase price, within a reasonable time. A duciary obligation is not imposed with respect to a property right acquired by a co-tenant prior to the creation of the co-tenancy (e.g., a mortgage). d. Partition 1) Who may partition A tenant in common or a joint tenant generally has the right to unilaterally partition the property, but a tenant by the entirety does not have this right. Property can be partitioned either voluntarily (if the co-tenants agree in writing on the division of land) or involuntarily (by court action). The holder of a future interest who shares that interest with another (e.g., jointly held remainder interest) does not have the right to immediate possession and therefore cannot maintain an action for involuntary partition. 2) E ect of partition In a “partition in kind” action, the court divides the jointly owned property into distinct physical portions. If physical division of the property is not practicable or fair, the court may order a partition by sale and distribute the proceeds among the co-tenants in accordance with their ownership interests. Courts prefer a partition in kind. 3) Agreement not to partition An agreement by co-tenants not to seek partition is enforceable. However, the agreement must be clear, and the time limitation must be reasonable. e. Easements The co-tenants may agree to create an easement jointly. This grant operates like any other easement and may be enforceable against later purchasers of the servient estate. If a co-tenant attempts to create an easement unilaterally, the easement is only enforceable against that co-tenant’s interest. The easement cannot be enforced against later owners of the servient estate unless the other co-tenants consent to the easement. Example: A and B own a piece of land as tenants in common. Without B’s knowledge or permission, A grants an easement to a neighbor to cross the land. Even though B did not consent, the neighbor can enforce the easement pursuant to A’s right to possess the entire property. Later, A and B decide to sell the land to Buyer. Even if Buyer has notice of the easement, the neighbor cannot enforce the easement against Buyer unless the neighbor can show that all co-tenants consented to the easement. f. Alteration of rights and obligations by agreement As is the case with the right to partition, co-tenants may agree to alter their rights and obligations discussed above. For example, one co-tenant may be given the exclusive right to occupy the property or to receive all rental income from the property. D. Special Real Property Issues 1. Fair Housing and Discrimination The federal Fair Housing Act (FHA) (Title VIII of the Civil Rights Act of 1968), 42 U.S.C. § 3601 et seq., prohibits discrimination in the sale, rental, and nancing of homes and in other housing-related transactions (such as advertising, homeowner’s insurance, and zoning). Owner-occupied buildings with no more than four living units (including the owner’s living unit), single-family housing sold or rented without the use of a broker, and housing operated by religious organizations and private clubs that limit occupancy to members are generally exempted from the FHA. a. Protected classes 17 of 85 6/25/2024, 11:32 MyThemis Learners https://www.themisbar.com/learners/index.php?service=subjectoutline&... The FHA prohibits discrimination based on race, color, religion, national origin, sex, disability, and familial status. “Sex” has been interpreted to include sexual orientation and gender identity. Protected familial status includes having or securing custody of children under the age of 18 and being pregnant. Exemption from familial status protection exists for housing for older individuals (e.g., housing for individuals who are 62 years of age or older). b. Prohibited practices The FHA prohibits taking any of the following actions based on a protected characteristic: i) Refusing to rent or sell housing; ii) Making housing unavailable; iii) Providing di erent housing services or facilities; iv) Setting di erent terms for sale or rental of a dwelling; v) Falsely denying that housing is available; vi) Refusing to make a mortgage loan or imposing di erent terms or conditions on a loan; vii) Refusing to allow a tenant with a disability to make reasonable modi cations to the dwelling or common-use areas at his own expense; viii) Refusing to make reasonable accommodations in rules, policies, practices, or services if necessary for the person with a disability to use the housing (e.g., refusing to allow a visually impaired tenant to keep a guide dog in an apartment with a “no pets” policy); ix) Threatening, coercing, intimidating, or interfering with anyone exercising a fair housing right; and x) Advertising or making any statement that indicates a limitation or preference based on protected characteristics. The exemptions for owner-occupied buildings with no more than four living units (including the owner’s living unit) and single-family housing sold or rented without the use of a broker, do not apply to the advertising restriction (item x), above, unless there are shared living areas, and the restriction is sex based). Additionally, the advertising restriction applies not only to a landlord or seller who places the advertisement, but the publisher of the newspaper where the advertisement is featured. See generally Ragin v. New York Times Co., 923 F.2d 995 (2d Cir. 1991). A religious community whose membership is not restricted based upon race, color, or national origin may restrict the sale, rental, or occupancy of dwellings that it owns or operates for noncommercial purpose to persons of the same religion or may give preference to those persons. Similarly, a private club may restrict the rental or occupancy of dwellings that it owns or operates for a noncommercial purpose to club members or may give preference to those persons. c. Enforcement and compliance The U.S. Department of Housing and Urban Development (HUD) plays the lead role in administering the FHA. A person who believes that a violation of the FHA has occurred may le a complaint with HUD and/or le suit in federal court (a court-appointed attorney may be available). Available relief includes actual damages (including humiliation, and pain and su ering), injunctive or other equitable relief (such as making the housing available), and reasonable attorney’s fees and costs. If the case is resolved by an administrative hearing, then a civil penalty to vindicate the public interest may be assessed. A federal court may award punitive damages. d. Complaint process Complaints led with HUD are rst investigated by the O ce of Fair Housing and Equal Opportunity (FHEO). There must be a causal connection between the prohibited behavior and the alleged violation. If FHEO nds reasonable cause to believe that discrimination occurred, then the case goes to an administrative hearing within 120 days, unless either party elects for the case to be heard in federal court. Before an administrative hearing is ordered, HUD attempts to reach an agreement among the parties, and any conciliation agreement will cease action on the complaint. For a conciliation agreement to cease action on the complaint, however, it must protect both the complainant and the public interest. The breach of a conciliation agreement may result in suit by the attorney general. e. Proof of discrimination 18 of 85 6/25/2024, 11:32 MyThemis Learners https://www.themisbar.com/learners/index.php?service=subjectoutline&... 1) Racial discrimination To establish racial discrimination under the FHA, the plainti need only show a disparate racial impact, not a racial intent or purpose. In showing a disparate racial impact, the plainti must establish that the defendant’s policy caused the disparate impact; statistical evidence of disparate impact is not in itself su cient. Tex. Dep't of Hous. & Cmty. A airs v. Inclusive Cmtys. Project, Inc., 576 U.S. 519 (2015). Compare constitutional discrimination: To establish a violation of the Fourteenth Amendment’s Equal Protection Clause, the plainti must show a racial intent or purpose; a racial impact is not su cient. Arlington Heights v. Metropolitan Hous. Dev. Corp., 429 U.S. 252 (1977). 2) Occupancy restrictions Although the FHA prohibits discrimination based on familial status, it does exempt reasonable zoning restrictions based on maximum occupancy. However, this statutory exemption is limited to a strict numerical maximum occupancy restriction (e.g., “no more than eight persons may occupy a dwelling”); a zoning restriction that de ned “family” for purposes of an area zoned for single families to permit an unrestricted number of family members to live together while restricting the number of unrelated persons who could live together did not qualify for this exemption. City of Edmonds v. Oxford House, Inc., 514 U.S. 725 (1995). (Note that this case involved an attempt by a locality to prevent the location of a group home for those with disabilities in an area zoned for one-family residences. The holding was con ned to a decision about the statutory exemption for a maximum occupancy restriction, and did not address the larger issue of the degree to which or the means by which a locality may accomplish that goal.) Compare constitutional discrimination: Under the Fourteenth Amendment, a local occupancy restriction on unrelated individuals is only subject to the rational-basis test. Village of Belle Terre v. Boraas, 416 U.S. 1 (1974); but see Moore v. City of East Cleveland, 431 U.S. 494 (1977) (related persons, including extended family members, have a fundamental right to live together in a single household). 2. Con ict of Laws When signi cant aspects of a legal action are divided between two or more states (e.g., parties who are residents of di erent states), the forum court must determine the law to be applied in deciding a particular issue. The decision as to which state’s law should govern is determined under con ict-of- laws principles. a. General rule 1) Law of the situs In a case involving real property, if there is a con ict as to which state’s law should be applied to resolve the issue, the general con ict-of-laws rule is that the law applied by the forum court should be determined by the con ict-of-laws rule that would be applied by the courts of the state where the property is located (i.e., the situs). Usually, the con ict-of-laws rule of the situs state directs the application of its own local law on that issue (i.e., the law of the situs) in resolving the matter. Compare jurisdiction: To hear a case, the forum court must have both subject-matter jurisdiction and personal jurisdiction over the parties. If an action involves interests in land located in the state, such as an action for partition or to quiet title, then a state court has in rem jurisdiction to decide those interests, even if the court lacks personal jurisdiction over the parties claiming an interest in the property. Restatement (Second) of Con ict of Laws § 59. 2) Issues governed by general rule (i.e., law of the situs) The following real property issues are usually governed by the general rule: i) The validity of and rights created by a contract for the transfer of an interest in land by sale or lease; ii) Whether a conveyance (e.g., a deed) transfers an interest in land, and the nature of the interest transferred (e.g., fee simple absolute, easement, real covenant); iii) Whether there has been a transfer of an interest in land by operation of law (e.g., adverse possession, prescription), and the nature of the interest transferred; iv) Whether a lien (e.g., a mortgage) creates an interest in land, and the nature of the interest created; 19 of 85 6/25/2024, 11:32 MyThemis Learners https://www.themisbar.com/learners/index.php?service=subjectoutline&... v) The method for foreclosure of a mortgage on land and the resulting interests; vi) Whether an interest in land has been transferred by the exercise of a power created by the operation of law (e.g., transfer of land by the executor of a will) or a power of attorney, and the nature of the interest transferred; vii) The existence and extent of an equitable interest in land; viii) The passage of an interest in land upon the death of the owner by intestate succession; and ix) Whether an interest in land escheats to the state. Restatement (Second) of Con ict of Laws §§ 189, 223, 225–236, 241–243. b. Exceptions to the general rule 1) Documents that specify applicable law If an instrument that conveys an interest in land or a will that devises an interest in land designates the application of a speci c jurisdiction’s laws, then those laws generally apply. Restatement (Second) of Con ict of Laws §§ 224, 240. If parties to a contract for the transfer of an interest in land designate applicable law, that law will apply with regard to the validity of the contract as well as the rights and duties created by the contract. Otherwise, if a state has a more signi cant relationship to the transaction and the parties than the situs state, that other state’s laws should be applied. This modi ed rule also applies to covenants of title, real covenants that directly a ect the transferred land, or an agreement to assume a mortgage. Restatement (Second) of Con ict of Laws §§ 189, 190. 2) E ect of marriage The e ect of marriage on an interest in land owned by a spouse at the time of the marriage or acquired by a spouse during the marriage is generally governed by the con ict-of-laws rules of the situs state. The law of the situs generally governs interests in land owned by a spouse at the time of the marriage. When dealing with property acquired during marriage, the law of the spouses’ domicile when the property was acquired determines whether the property is marital or separate property, and the law of the situs determines the rights of a third party (e.g., a creditor) to the property. Restatement (Second) of Con ict of Laws §§ 233, 234; Powell on Real Property § 53.06. With regard to the existence and extent of a common-law or statutory interest, including a forced share interest, of a surviving spouse in the land of the deceased spouse, the general rule applies. Restatement (Second) of Con ict of Laws §§ 241, 242. 3) Collateral issues If an action regarding real property rights involves a collateral issue, then the con ict-of-laws rule of the situs state may apply the law of the state with the most signi cant interest when determining the collateral issue. Restatement (Second) of Con ict of Laws § 223, cmt. i. Example: The owner of land located in State A transfers title to the land. The buyer, who lives in State B, subsequently les suit in State A to cancel the deed, alleging that the transfer was due to a fraud perpetrated by the transferor in State B. The con ict-of-laws rule of State A may direct that the law of State B be applied to determine whether the transferor’s conduct constituted fraud. c. Other issues When the action does not directly relate to an interest in land, the general rule does not apply. 1) Mortgage note Typically, a mortgage is given as security for a debt obligation, evidenced by a promissory note. Issues regarding the note (e.g., the validity of the note, interpretation of its terms, whether the note is in default) are determined by the local law of the state where the contract requires that repayment be made, unless some other state has a more signi cant relationship to the transaction and the parties. Restatement (Second) of Con ict of Laws § 195, cmt. a. 20 of 85 6/25/2024, 11:32 MyThemis Learners https://www.themisbar.com/learners/index.php?service=subjectoutline&... 2) Foreclosure-related rights Similarly, issues that relate to a foreclosure but do not a ect an interest in land (e.g., the mortgagee’s right to hold the mortgagor liable for any de ciency remaining after foreclosure, or to bring suit upon the underlying debt without having rst proceeded against the mortgaged land) are determined by the law that governs the debt for which the mortgage was given, which is the law of the state that has the most signi cant relationship to the transaction and the parties. Restatement (Second) of Con ict of Laws §§ 188; 229, cmt. e. II. LANDLORD AND TENANT The relationship between a landlord and a tenant can create four kinds of estates. This relationship is generally governed by a contract, called the lease, that contains the covenants (i.e., promises) of the parties. The promises are generally independent of each other. In other words, each party must perform his promises regardless of whether or not the other party performs his promise. A. Types of Tenancies There are four types of landlord-tenant estates: i) Tenancy for years; ii) Periodic tenancy; iii) Tenancy at will; and iv) Tenancy at su erance. 1. Tenancy for Years A tenancy for years is an estate measured by a xed and ascertainable amount of time. a. Term A tenancy for years may be any length of time (e.g., one week, six months, ve years). b. Creation A tenancy for years is created by an agreement between the landlord and the tenant. 1) Statute of Frauds The Statute of Frauds applies to a tenancy for years that is longer than one year. Restatement (Second) of Property: Landlord and Tenant § 2.1, Statutory Note 1. a) Requirements The lease agreement must be in a writing that: i) Identi es the parties; ii) Identi es the premises; iii) Speci es the duration of the lease; iv) States the rent to be paid; and v) Is signed by the party to be charged. Restatement (Second) of Property: Landlord and Tenant § 2.2. 21 of 85 6/25/2024, 11:32 MyThemis Learners https://www.themisbar.com/learners/index.php?service=subjectoutline&... b) Determination of time period In most jurisdictions, when a lease is to commence in the future, it is the period of the lease itself that must exceed one year for the Statute of Frauds to apply to the lease. Restatement (Second) of Property: Landlord and Tenant § 2.1, cmts. c, f. In most jurisdictions, when a lease is subject to an option to renew, the option is disregarded when considering whether the lease must comply with the Statute of Frauds. Restatement (Second) of Property: Landlord and Tenant § 2.1, Reporter’s Notes on cmt. c. c) E ect of noncompliance A lease subject to the Statute of Frauds that does not comply with it (e.g., an oral lease) is invalid unless the tenant takes possession of the premises with the acquiescence of the landlord, in which case a tenancy at will is created. If the rent is then paid by the tenant and accepted by the landlord, a periodic tenancy is created. If the tenant further makes substantial improvements to the premises and thereby indicates that the parties contemplated a lease for more than a year, the oral lease is given full e ect. Restatement (Second) of Property: Landlord and Tenant § 2.3. c. Termination 1) At end of term Termination occurs automatically upon the expiration of the term; no notice is required. Any right to renew the agreement must be explicitly set out in the lease. 2) Prior to end of term Termination may also occur before the expiration of the term, such as when the tenant surrenders the leasehold (i.e., the tenant o ers and the landlord accepts return of the leasehold). In addition, although at common law the doctrine of independent covenants usually prevented the breach of a covenant in the lease by a tenant or landlord from giving the other party the right to terminate the lease, most states recognize that the breach of certain leasehold covenants (i.e., the tenant’s payment of the rent and the landlord’s covenants of quiet enjoyment and implied warranty of habitability) can give rise to a right to terminate the lease. 2. Periodic Tenancy A periodic tenancy is a repetitive, ongoing estate measured by a set period (e.g., a month, a year) but with no predetermined termination date. It automatically renews at the end of each period until one party gives