Michael's Property Outline

Definition of Property: A combination of real property (realty) and personalty (tangible and intangible assets). Best seen as a “bundle of rights” that includes right to possess, use, transfer, and exclude.

Theories of Property:I. Lockean Theory : Property is acquired by mixing personal labor with a common resource. Very influential on

judges and a precursor to utilitarianism. Exemplifies instrumental reasoning.i. Criticism is that it can lead to absurd results, such as claiming ownership of the Pacific Ocean if I

dump tomato juice in it. Important in Pierson.II. Economic Theory of Property Rights (Harold Demsetz’s Toward a Theory of Property Rights): Private property

rights are superior to collective property rights because more efficient in maximizing wealth since collective ownership imposes undesirable externalities, costs not internalized by property users, who are rational economic actors (wealth maximizers), while private property forces actors to internalize their actions’ costs.a. Demsetz’s Presumptive Efficiency Thesis: Laborador Indians, when Europeans created a market for fur,

moved to private property rights because communal ownership became costly since Indians had incentive to cease maximizing long-term value communally (Garrett Harden’s Tragedy of the Commons – each individual’s wealth maximization depletes the communal wealth beyond replenishment rate). Transitioning to private property brought two efficiencies: (1) cost internalization and (2) lower transaction costs (reduces free ride problem of holdouts) by reducing the people with whom landowners must cooperate.

i. Criticisms: (1) ignores power differences, (2) mechanism problem (how societies transition from communal to private ownership), (3) wealth is imperfect proxy for social welfare, (4) custom can be efficient (like not stealing at Cornell library), (5) anti-commons (all rights divided) are very inefficient (one of the things the Rule Against Perpetuities tries to prevent).

Rationales for Judicial Decisions:III. Instrumental : Legal rules are instruments for achieving social desirable ends by giving incentives and

disincentives for behaviors. Protecting labor is one common end for instrumental reasoning. One common argument is that a rule promotes competition and thus better allocation of resources. Cases where important: Pierson (majority and minority), Keeble (especially).a. Example: Livingston’s dissent in Pierson. Social good of killing foxes better accomplished by giving

ownership by reasonable pursuit, thereby better protecting labor.i. But Livingston probably wrong since more competition through rule of capture.

IV. Formalist : Blindly following authorities just because they’re authorities. Pierson (majority).V. Custom-Based Reasoning : Established customs should have a role in law. Prof says should be rejected unless

customs agree with societal norms. Pierson (minority).VI. Fairness : Tends to merge into instrumental reasoning.

First Possession

Acquisition by Capture

Pierson v. Post: Pursuit of an animal does not create a property right in the animal.i. Property right is created once animal is mortally wounded and hunter acquires it. (Capture)Policies supporting the Rule of Capture: Certainty – definition of pursuit nebulous, capture is not (however, mortal wounding is not clear) Preserving peace & order - litigation would be curtailed by capture rule (rule is predicable); physical Ridding society of foxes - good public policy at the time

Rule of Capture rewards the better hunter – hunters more likely to invest resources to capturing foxes (better horses, technology, etc)

Judge Tompkins (majority) view of wild animals: Property rights in wild animals is acquired through capture or mortal wounding. (Ruling in Pierson) Judge Livingston (dissent) view: Property in wild animals may be acquired without bodily touch or capture, as long as the pursuer is within reach, or has a reasonable prospect of taking with intent to convert to his own use. Two different styles of judicial reasoning that the majority uses:1. Formalist

Represented by the reliance upon legal authorities (whether cases, statutes or treatises)2. Instrumental

Policy, gives instrumental/social goals that are thought to be desirable and develops preferable legal norm

Ratione soli (Constructive Possession): if you own the land, you are deemed to be in physical possession of all wild animals on the land

Policy rationale: to discourage trespass; Land owner has the legal right to make a first attempt to gain physical possession

Animus revertendi (If animal runs away with intention or habit of return, hunter cannot keep carcass even if hunter thinks animal is wild)

ii. This encourages domestication of animals.iii. Owner does not lose title even though animal runs away.

Natural Resources

i. Oil, Gas, Coal at Common Law1. Under common law, first in time principle applied – fugitive resources seen wild animals.

a. Example: Oil and Gas - Capture as much as you like if you own land above resource since oil and gas migrates on its own beneath the ground.

i. You only have ownership for oil and gas extracted. In theory, as long as the oil and gas remain underground, they’re un-owned.

b. Example: Coal – Ownership of all coal beneath your ground.i. If neighbor runs a pipe under your land, she trespasses.

c. Problem: Led to overexploitation of the resource. Each individual pursuing self interest would quickly deplete the resource.

ii. Water Law1. Underground Pools

a. English Rule: Absolute ownership of water beneath land. Problem is that leads to overexploitation rather than long-term social good.

b. American Rule: Owner of land above pool can only extract water at a reasonable rate for reasonable uses.

iii. Surface Water (rivers, etc.)c. Riparianism: Right to water derives from whether you own riparian land (land located next to

surface water). If you’re not an owner, get nothing. Only makes sense where there’s lots of water, like East.

i. Natural flow theory : Riparian landowner can extract water, but not change the water’s natural flow to downstream owner.

1. Gives downstream owner “correlative rights”2. Problem: Prevents commercial use of water since extracting large quantities

changes natural flow.ii. Reasonable use theory : Upstream owners can diminish water’s natural flow as long as

use is reasonable (industrial use).1. Benefit: Allowed industrial use of water.

d. Prior Appropriation: Rule of capture for water – prior possessor wins. Common in arid West. Subject to many regulations today over whether structures make a person first possessor.

Intellectual Property - Acquisition by Creation

Exclusive rights granted for a limited time to encourage competition.iv. Monopolies encourage invention.v. Limited monopoly encourages competition.

vi.Tension b/w polices: 1) Incentives to create; 2) Competition to improve quality and lower prices.

Patentsvii. Requirements: Useful, novel, non-obvious

viii. Monopoly lasts 20 years from date of application.ix. Federal law

Copyrightsx. Life of author + 70 years.

xi. No registration required, copyright comes directly into existence.xii. Federal law

Trademarksxiii. State AND federal law (Lanham Act)xiv. Grew out of common law of unfair competition.

International News Service v. AP (51)xv. Court creates quasi-property interest in the news b/w the 2 parties.

xvi. With respect to public there is NO property right in the news, but there is a quasi-right b/w the 2.

xvii. Court really talks of UNFAIR COMPETITION law, not IP. INS’s practices are unfair competition, but do not violate copyright laws.

xviii. Court extends unfair competition to misappropriation1. Misappropriation: Selling another’s good as your own.2. Palming off: Representing someone else made goods you actually made.

xix. Courts rarely follow this decision anymore b/c they want to encourage competition. Usually limited to its own facts.

xx. AP could do other things to protect itself (which is why INS is disfavored)1. Change release time2. Enhanced its own reputation3. Undercut INS prices4. Make exclusive deals to only use AP news

Cheney Bros. v. Doris Silk (55)xxi. Silks aren’t patented can’t be copyrighted.

xxii. D is knocking off P’s best-selling silks. (Copying P’s design and selling it as D’s own).xxiii. Court interprets INS very narrowly to the specific facts of INS.xxiv. Court wants to encourage competition and, absent statute, copying is protected.xxv. P has property right ONLY in chattel, NOT in idea/design of chattel.

xxvi. Protect competition! No common-law patents/copyrights.xxvii. P should put its trademark on the silk! Then D could not use trademark b/c it would be

infringement.xxviii. There is a difference b/w tangibles and info. Two people can simultaneously own info. Info is

public good and there is non-rivaled consumption.xxix. Exclusive rights to info/public good does not promote goals of market economy while granting

exclusive rights to property/non-public good does.a. Smith v. Chanel: You can compare copy to the original. We want people to know they have better options.b. Nichols v. Universal (59): You can’t copyright themes and general ideas.c. Diamond v. Chakrabarty (60): You can get a patent for a living thing not found naturally (here it was an

engineered bacterium). Tension b/w protecting human ingenuity and protecting products of nature.d. The other cases all show tension b/w protecting creativity and idea and stifling creativity and competition.

B. Property over One’s persona. Conversion: any wrongful act of dominion over another’s property inconsistent with their rights.b. In Moore (69) the court does NOT extend conversion claim to excised body parts. No property right over

excised body parts. D owns body parts once excised.i. Cell line generic to all humans

ii. P’s likeness not being invoked.c. Law of Accession

i. Owner of product is owner of raw material unless the value of the final product is substantially greater than the value of the raw product.

ii. If there are multiple raw materials from different sources, owner is owner of principle raw material.

d. Competing Policiesi. Right over one’s person

ii. Furthering medical research (Court more concerned w/ this policy)e. Court says informed consent protects P so conversion unnecessary, and P is allowed to sue for not

getting informed consent.f. Court also says legislature is better suited to deal with this area (Dissent says UAGA already did this and

allows sale of body parts: one stick from bundle taken does not destroy property rights)g. We may also NOT want a market for body parts.

Right to Exclude

Core of ownership: Essential rightCan get punitive damages for trespass b/c property owners have right to exclude others from their property.Justifications for trespass (state v. shack)

i. Necessityii. Public Policy (as in shack to provide medical/legal advice)

iii. Right to exclude limited to allow gov’t services and charities seeking to assist employees’ welfare.

Broad reading of Shack requires employees to be able to have visitors and press to be allowed on land.In Uston (91) casinos can’t exclude card counters b/c they are not technically cheating and casino is open to public, inviting them in.

iv. Singer’s reliance interest would allow card counter to stay (91)v. Singer’s 1st theory: Once non-owner allowed on property he develops a reliance interest and

should be allowed to remain in the future.vi. Singer’s 2nd principal: when there is mutual dependence and relationship ends, property rights

should be shifted to protect more vulnerable party.vii. Singer’s 3rd: Shift rights to protect vulnerable.

The more private your property is, the more you have right to exclude.

VII. ACQUISITION BY FIND a. Rule : A possessor often prevails against all but the true owner and a prior possessor prevails against a

subsequent possessor, but there are some exceptions such as when the owner of locus in quo has an interest.

b. Common law forms of action:i. Trover : Seeking money damages for conversion of chattels.

1. For a found object, money damages for conversion should always be less than the full market value of the good because of possibility that true owner will come forward.

2. Example: Armory v. Delamirie – P received the full value of the found stone, probably because court decided every doubt against D.

ii. Replevin : Seeking return of the object for conversion of chattels.iii. Conversion : Interference with dominion and control, like stealing someone’s pen.iv. Trespass to Chattels : Damaging a resource or interfering with use and enjoyment.

c. Relativity of Title: Ownership is relative to the context so look at the respective rights of the parties involved in the litigation before us and ask who has superior title (i.e. who is the prior possessor, as articulated in Armory v. Delamirie).

i. Rule: Against the true owner, the finder has relatively inferior title, but against future finders, the first finder has superior title to the good. How the good was acquired should be irrelevant under the law.

1. Courts often rejects jus tertii defense: the right of possession outstanding in some third party not a party to the litigation.

2. True owner can acquire the good back from the finder, but if the finder sold the good and received less than the owner claims it was worth, the true owner is out of luck.

a. Policy: Otherwise, there are disincentives to finding goods.ii. Policy:

1. Possession is often a good proxy for ownership (e.g., we don’t carry laptop receipts around).

2. Create incentives for prior possessor to make productive use of the good, increasing the change the true owner will learn of the good and get it back.

iii. Exceptions: 1. Winkfield Doctrine : If the true owner is (1) a voluntary bailor and (2) the wrongdoer

paid full damages, the true owner cannot recover against the wrongdoer since he assumed the risk by making a voluntary bailment

a. Doesn’t apply to Armory since that was involuntary bailment. Thus, the true owner of the jewel could recover damages from Delamirie, in which case the true owner’s rights would be subrogated to Delamirie.

b. Double liability is possible against subsequent possessor if prior possessor receives damages and skips town, and original owner goes after subsequent possor in an involuntary bailment case.

2. As Helmholz argues, courts often penalize thieves by giving them no rights as prior possessors of goods against future innocent finders.

d. Voluntary versus Involuntary Bailmenti. Voluntary Bailment : True owner (bailor) voluntarily delivers a good to another person (bailee)

for a certain purpose under an express or implied-in-fact K.1. Remedies: Bailor is less likely to receive damages from bailee for return of good since

the bailorhad the opportunity to determine whether the bailee was trustworthy or likely to lose the good. Since the bailor created the risk of loss, property law is less willing to award possession to the true owner since he created the risk of loss.

2. A voluntary bailor gives voidable title to the bailee.3. A bailee acquires no presently existing property interest – it is revocable and thus

different from an estate.

4. Duties: A bailee has more duties to bailor than a possessory interest holder has to future interest holder. The reason is that an estate is a presently existing property interest but bailment is not.

ii. Involuntary Bailment : A bailment that arises when bailor accidentally confers possession to another person.

1. Remedies: Bailor is more likely to receive possession back since the bailor did nothing to create the risk of loss.

2. Example: Hannah v. Peel – This was involuntary bailment because true owner didn’t mean to confer possession of the brooch to Peel, the soldier. Terribly reasoned.

e. Finder versus Owner of Locus in Quo: i. Central Question: Whether the owner of the locus in quo should be considered the prior

possessor instead of the finder.1. Policy Considerations: (1) promoting return of objects to true owners, (2) meeting

reasonable expectations of parties, and (3) rewarding honesty by creating incentives for finders to pick up found goods.

a. Theme: Possession is both a fact and legal conclusion. Sometimes, as in Hannah, policy considerations can prevail over possession.

b. Hannah v. Peel – Criticisms: Gives the finder the found broach on the erroneous reasoning that (1) the brooch was lost, (2) the finder was honest, (3) owner never had possession of the house since never moved into it.

2. Criticism : The American all or nothing approach to found property is inferior to other countries’ approaches like Japan with nationwide estray statutes that require finders to turn goods in to owner of locus in quo and gives generous rewards if the property is not claimed. American courts generally reject this approach because of obsession on possession.

ii. Rules of Thumb1. Lost v. Mislaid (Intentionally Placed) Goods :

a. Lost Object – Finder winsi. Lost : Owner placed the property where it was and unintentionally lost

it. Thus, an involuntary bailment.1. Example: O doesn’t notice his watch slipped off his watch onto

the street.ii. Like the banknotes in Bridges v. Hawkesworth discussed in Hannah,

though Hannah reasoning was terrible because confused the shopkeeper’s relatively inferior title to the owner with relatively inferior title to the finder.

b. Mislaid Object – Owner of locus in quo wins.i. Mislaid : Owner deliberately places object somewhere and fails to

return. Thus, an involuntary bailment where the owner acquires constructive possession because of the owner’s duty to care for the good.

1. Policy: Owner of mislaid good is more likely to return for it than if the good is lost, so owner should keep the good until then to maximize the opportunity of true owner to receive the good back.

a. Example: O lays his watch on the sink and forgets to pick it up.

2. Example: The court in Hannah got this point wrong. The brooch should have been considered mislaid since it was so well-hidden in the windowpane. Hiding a good displays an intention to return for it.

ii. Example: McAvoy v. Medina - A wallet on a table was considered mislaid since it was intentionally placed there. The owner of the locus in quo won.

c. Problems with the Lost-Mislaid Distinction:i. Goods on floor could be placed there deliberately, like a purse.

1. Example: Purse found on floor is technically lost because found on floor since in theory goods aren’t placed on floors. But the purse might have been put there deliberately.

ii. Category determined by the subjective state of mind of the true owner at the time the item left the possession of the true owner.

1. Example: When wallet mislaid on table knocked onto shop floor goes from mislaid to lost, it becomes nearly impossible to determine owner’s state of mind

iii. Creates incentives for finder to pretend the good is lost so he can dispose of it.

d. Abandoned Propertyi. Rule : Finder gets possession and title if he exercises (1) control over the

property with (2) intent to assert ownership, with some exceptions when the parties have reasonable expectations otherwise.

ii. Abandoned : Property is abandoned when the owner (1) voluntarily and (2) intentionally relinquishes ownership with intent to give up title and possession.

1. Example: O throws his old watch into garbage can beause a battery would be too expensive.

2. Public Place v. Private Place :a. Rule : The more private the place where object found, the more likely that

owner of locus in quo will win. The more public the place, the more likely object will go to the finder.

3. Objects Found Under Soil :a. Rule : If an object is found under or embedded in the soil, the owner of the

locus in quo wins (South Straffordshire v. Sharman).i. Policy: The owner of the locus in quo expects to have ownership of

buried goods.b. The older the good is and the less likely that the true owner can be found, the

more the owner of the locus in quo wins, such as an underground ancient boat in Elwes v. Brigg Gas Co. because the boat was treated as if attached to soil.

4. Finder is Employee of Owner of Locus in Quo :a. Rule : If finder is employee of owner of locus in quo, some cases hold that

employee cannot keep object because employee is acting for the employer and has contractual duty to report object to employer, as in South Straffordshire.

i. The understanding between the employer and agent is relevant.

Adverse Possession

Elements of adverse possession:

1. For the statutorily-stated period of time, the adverse possessor must have made an actual entry. The adverse possessor's possession must not only be actual but exclusive. It must not be shared w/ the true owner.

2. Possession must be open and notorious.You don't have to put the true owner on actual notice, but if the true owner investigates the state of her land, she should discover your occupancy.a. Fencing, cultivating and erecting a building are deemed open and notorious acts

i. Actual Notice:ii. Inquiry Notice: A form of constructive notice in that a reasonable person would have

sufficient notice to make inquiries to discovery the AP. iii. Record Notice: something recorded, like will or deed. Not matter if not read it, but if

recorded somewhere have notice.

3. Hostile and under a claim of rightAdverse possessor must be there w/o the true owner's permission, and not conceding that her possession is permitted. You must be there in possession as though you are the true owner.

1. Objective View (Horn book/Majority approach to hostility; J.Fuld dissent in Lutz)

not proved by the adverse possessors state of mind, proved by adv possessor behavior eg fencing the land in, cultivating, building upon it, etc

This is the Connecticut Doctrine of adverse possession; adopted by most states Considers AP’s conduct rather than subjective state of mind.

2. Subjective View: willful trespasser view (‘squatters rights/’bad faith’ view):

Adv possessor must be in possession of land that isn’t theirs and they know it isn’t theirs This is the Maine Doctrine of adverse possessiono Alexander: odd result – party wins with bad faith intentions; loses with good faith

Encourages honestly mistaken neighbor to lie

3. Subjective View: innocent trespasser view (‘good faith’ view)

Requires that the adverse possessor act in good faith in thinking that the land was theirs. Used in Lutz majority, said knew Charlie’s shack wasn’t on his property, said that meant no

claim of title. Shouldn’t matter, but often does in practice.

b. “claim of right/title” should be distinguished from “color of title” which is not a requirement of adverse law. Claim of title is a requirement.

i. Claim of Right/Title: expresses the necessary adversity of titleii. Color of Title: claim is based on a written instrument/judgment that is defective.

Required for adverse possession in some states, but not most.iii. Advantages: An adverse possessor who occupies land under color of title has big

advantages:1. Constructive Possession of Entire Parcel: Under color of title, adverse possessor

is said to be in constructive possession of the entire parcel at issue, not just the part occupied.

a. No color of title: Adverse possession only gives ownership of the actual part of property occupied, not the entire parcel.

2. Shorter statute of limitations when taken under color of title.iv. Policy why favored: Exemplifies good faith adverse possession.v. Example: O owns and has been in possession of 100 acre farm since 1975. In 1990, A

entered the back 40 under color of an invalid deed from Z, who had no title to the land. Since 1990, A has improved the back 40 acres in a manner consistent with that of a true

owner. A then moves to evict O. The section in between O and A isn’t possessed by anybody.

1. A cannot evict O from section O is possessing since O’s actual possession trumps A’s constructive possession under color of title.

2. O wins the section in between because O constructively possessed the land first.3. A only gets possession of the portion A occupies.4. Principle : When there are competing claims of constructive possession, the

prior possessor wins title to everything except what’s actually possessed by the adverse possessor.

4. Continuous and uninterruptedThis goes back directly to the statutory foundation. If the true owner discovers the existence of adverse possession and takes action against the adverse possessor sufficient to interrupt the running of the statute, by bringing for example an action to eject the adverse possessor, or by exercising self-help (adverse possessor goes to work one day, and the adverse possession is simply in the form of some kind of a crude wooden shack, and the true owner comes during the day and tears down the shack and moves the contents off his land,) that interrupts the running of the statute.If the adverse possessor comes back and starts actual possession again, open and notorious, hostile and under a claim of right, that may trigger the running of the statutory period to start anew.

Policies behind Adverse Possession Doctrine:

a) Avoid Stale Claims: A desire to avoid stale claims when evidence if faulty and hard to acquire.

b) Promotes Quiet Titles: A desire to quiet title so land can be alienable. A rational buyer will not buy land that lacks a quiet title. (Ballantine’s argument.) Also protects people who have relied on deed, not know it was defective. Quiets title to land by correcting technical error in original conveyance.

c) Cost of correcting errors: Over time, the cost of correcting errors in boundaries becomes very high (errors are everywhere since many deed descriptions get the boundaries wrong), exceeding the benefit of correction.

d) Reward Theory: Reward the adverse possessor for putting land to productive use.

e) Sleeping Theory: Punish the idle owner. Penalize true owner for not asserting rights.

f)Prospect Theory: Land over time becomes part of peoples’ identity according to Oliver Wendell Holmes. Thus, the long-term adverse possessor suffers grave loss from losing the property. Similar to Hegel’s Personality Theory of Property, which says the self develops an identity by attaching itself to the outside world.

"Color of title" adverse possession refers to a claim founded on some kind of written instrument or judgment that was defective or invalid for some reason. If you enter on someone else's land that you do not own but you think you own, because you're relying upon some legal document that purports to give you title, that is color of title adverse possession.

CoT adverse possession - 1. Shorter limitation period2. "Constructive" adverse possession given to adverse possessor

Policy why favored: Exemplifies good faith adverse possession.1. Example: O owns and has been in possession of 100 acre farm since 1975. In 1990, A entered

the back 40 under color of an invalid deed from Z, who had no title to the land. Since 1990, A

has improved the back 40 acres in a manner consistent with that of a true owner. A then moves to evict O. The section in between O and A isn’t possessed by anybody.

1. A cannot evict O from section O is possessing since O’s actual possession trumps A’s constructive possession under color of title.

2. O wins the section in between because O constructively possessed the land first.3. A only gets possession of the portion A occupies.4. Principle : When there are competing claims of constructive possession, the prior

possessor wins title to everything except what’s actually possessed by the adverse possessor.

DisabilitiesAll states provide by statute that they will extend the statute of limitations if certain disabilities exist

If a person with a cause of action is within the age of minority, insane, imprisoned, whatever, then after the original statute of limitations runs, they might get an additional 10 years after the disability is removed.

Also, successors get the extension if the original owner was disabled and then died.

When in the following examples would the adverse possessor acquire title under a statute with a 21 year statute of limitations and a 10 year extension for disability?

1. O is insane in 1984. O dies insane and intestate in 2007.a. O's heir, H, is under no disability in 2007.

ANSWER: 2017. disability removed in 2007, thus H gets 10 years.b. O's heir, H, is six years old in 2007.

ANSWER: 2017. Disabilities are not tacked together.2. O has no disability in 1984. O dies intestate in 2002. O's heir H is two years old in 2002.

ANSWER: Statute runs out in 2005 (21 years.) O was under no disability when the statute began to run. Any subsequent disability is ignored.

3. O is five years old in 1984. In 1994 O becomes mentally ill, and O dies intestate in 2009. O's heir, H, is under no disability. Does the adverse possessor here acquire title in 2005, 2007, or at some later date? If the answer is 2005 or 2007, how are O's interests to be protected?

Could be 205: statute of limitations starts in 1984, and 21 years later runs out But you can't use 2005 cause it ignores O's subsequent mental illness It could be 2007, b/c in 1984, when the cause of action accrued, O was only 5, which is a disability which

was removed in 1997 and ten years later was 2007. The conventional wisdom is that if it is either the date produced by the basic statutory period of 21 years or the disability statute (plus 10 years,) you go with whichever is longer.Reason for this is that if O was under a disability when the cause of action accrued, and the basic limitation period was 21 years and it was removed 21 years and 6 months later, does O have six months or 10 years?

We say it's the longer of the two to avoid giving an unreasonably short period of time to the owner or the owner's successorThe sleeping theory doesn't require that we use the earlier date. Since the owner was under a disability (and by definition couldn't assert her rights any earlier) there's no policy justification for using the earlier date.

4. O disappears in 1997 and is not heard from again. You represent B, who wishes to buy from A, our adverse possessor. What advice do you give to B?You're in a bit of a quandary. O may have wandered off suffering from a mental disability that qualifies as a disability under the statute. So O might have a good claim that will go on for some time. What do you do?

See if, in your jurisdiction, there's a statute that establishes a presumption of death following their disappearance for a period of time.In lieu of that, see if you can get insurance against the risk of loss imposed here.

Adverse Possession of Chattels – Void and Voidable Titlea. Rule : Adverse possession of chattels is possible if the true owner brings no claim within the statute of

limitations (which differs greatly from jurisdiction to jurisdiction).b. Problem: Devising a fair solution for true owners and bona fide purchasers since (1) there is no

registration system for valuable chattels like there is for land and (2) chattels are easily moved and hidden

c. Bona Fide Purchaser (BFP): One who has in good faith paid valuable consideration (not inherited or been given) for property without adverse possession claims.

General rule is that a seller cannot convey better title than that which he holds. o Always applied when seller has stolen the property. (X steals car from P and sells to Y, who

ultimately sells to O for FMV and D not know stolen. P may recover car from D because possessor of STOLEN goods never can convey good title even if BFP.

Voidable Title Exception: If goods are acquired from TO not by outright theft but by less blatant forms of dishonesty, BFP may be protected. o BFP who takes from someone with voidable title (as opposed to the void title of thief) will be

protected. (B obtains goods from A by fraud, B gets voidable title and sells to C, a BFP, A cannot get back.

Owner can still recover as long as still in hands of one with voidable title. Once voidable titleholder transfers them to BFP, TO’s right extinguished.

Voidable title is acquired when the bailee entered into a voluntary arrangement with the bailor and, through fraud or misrepresentation in some way, acquired possession, such as by writing a bad check. A bona fide purchaser of a good from a person with voidable title acquires ownership. Has to be one of the narrow cases under UCC 2-403 for possessor to have voidable title – see page 148.

o Example: A car owner who entrusts a good with a car dealer to make repairs, but the dealer sells it. The dealer would have voidable title and whoever bought the car from the dealer would have good title.

o UCC §2-403(3) Exceptiono if an owner entrusts an item to a “merchant who deals in goods of that kind” – the merchant

has the power to transfer all rights of the entrusted to a buyer in the ordinary course of business. GFP beats TO.

The distinction between ‘void’ title and ‘voidable’ title is the voluntariness of the transfer by the TO. Theft is like involuntary bailment. But if voluntary bailment, accepted risk, put in steam of commerce, going to protect BFP.

O’Keeffe v Snyder (adverse possession of chattels O’Keeffe painting case – discovery rule)

P, claims that her painting was stolen from gallery in 1946 – D, present possessor, claims the painting was in father’s house in 1941-43, father had relationship with gallery’s owner. O’Keeffe brings case to recover the painting.

Issue: Has the SofL run on the action for replevin?

Held: No – P still has claim under the Discovery Rule for S of L. But due diligence requirement is ambiguous. Six Years from Time of Theft: Applied by the trial court in O’Keeffe v. Snyder to say P loses since only had six years from the time of theft to claim the good, so P lost at trial court level.

Six Years from Time Adverse Possession Fulfilled: Applied by the Appellate Division in O’Keeffe. Six years from the time the elements of adverse possession are established. The rule in most states. Court says here that instead of imposing burden on present possessor (Like in AP), imposes burden on TO, a burden easily met by

exercising due diligence ot find painting. “open and notorious” different for chattels because easier ot hide, so given more time/leeway to TO.

Differing rules on Adverse Possession of Chattels and SofL:

1. Discovery Rule: SofL begins to run when TO knows/reasonably should have known through exercise of due diligence should have discovered facts which form the basis of a cause of action

emphasis on the conduct of the TO rather than on the conduct of the possessor As in O’Keeffe, it’s unclear whether due diligence is required from the time the painting is stolen or

the time when the P could have reasonably known the possessor of the lost chattel. For instance, what if P gave up for a while because the chattel was hidden, but the painting resurfaced decades later? Has the statute of limitations for claiming the lost chattel run out? It’s ambiguous.

As long as excercising DD, the statute does not run. Encourages adverse possessor to keep chattel hidden because all the efforts taken to find it.

2. New York/Demand Rule: SofL begins to run when the TO demands the return and good faith purchaser refuses

No obligation on the TO to locate the whereabouts of the chattel or identity of the possessor with due diligence

Protects the TO to a greater extent – no requirement on their behalf to use due diligence But allows TO to wait until forever before bringing a claim, decreasing buyers’ certainty in buying

artwork since TO could appear and demand it back at any time.o Laches Defense: Applied in equity courts as alternative to the statute of limitations.

Allows a possessor to keep the good if it’s been kept so long that it would be inequitable to make the possessor return it (though today inequitable period is similar to the statute of limitations).

o Policy: Forces true owners to act, not sit on their rights. Increases certainty in purchasing chattels like artwork that buyers are getting a good title.

There is no uniform treatment – all approaches discussed have been adopted

Adverse Possession of Chattels – Void and Voidable Titled. Rule : Adverse possession of chattels is possible if the true owner brings no claim within the statute of

limitations (which differs greatly from jurisdiction to jurisdiction).e. Problem: Devising a fair solution for true owners and bona fide purchasers since (1) there is no

registration system for valuable chattels like there is for land and (2) chattels are easily moved and hidden

f. Bona Fide Purchaser (BFP): One who has in good faith paid valuable consideration (not inherited or been given) for property without adverse possession claims.

General rule is that a seller cannot convey better title than that which he holds. o Always applied when seller has stolen the property. (X steals car from P and sells to Y, who

ultimately sells to O for FMV and D not know stolen. P may recover car from D because possessor of STOLEN goods never can convey good title even if BFP.

Voidable Title Exception: If goods are acquired from TO not by outright theft but by less blatant forms of dishonesty, BFP may be protected.

o BFP who takes from someone with voidable title (as opposed to the void title of thief) will be protected. (B obtains goods from A by fraud, B gets voidable title and sells to C, a BFP, A cannot get back.

Owner can still recover as long as still in hands of one with voidable title. Once voidable titleholder transfers them to BFP, TO’s right extinguished.

Voidable title is acquired when the bailee entered into a voluntary arrangement with the bailor and, through fraud or misrepresentation in some way, acquired possession, such as by writing a bad check. A bona fide purchaser of a good from a person with voidable title acquires ownership. Has to be one of the narrow cases under UCC 2-403 for possessor to have voidable title – see page 148.

o Example: A car owner who entrusts a good with a car dealer to make repairs, but the dealer sells it. The dealer would have voidable title and whoever bought the car from the dealer would have good title.

o UCC §2-403(3) Exceptiono if an owner entrusts an item to a “merchant who deals in goods of that kind” – the merchant

has the power to transfer all rights of the entrusted to a buyer in the ordinary course of business. GFP beats TO.

The distinction between ‘void’ title and ‘voidable’ title is the voluntariness of the transfer by the TO. Theft is like involuntary bailment. But if voluntary bailment, accepted risk, put in steam of commerce, going to protect BFP.

O’Keeffe v Snyder (adverse possession of chattels O’Keeffe painting case – discovery rule)

P, claims that her painting was stolen from gallery in 1946 – D, present possessor, claims the painting was in father’s house in 1941-43, father had relationship with gallery’s owner. O’Keeffe brings case to recover the painting.

Issue: Has the SofL run on the action for replevin?

Held: No – P still has claim under the Discovery Rule for S of L. But due diligence requirement is ambiguous. Six Years from Time of Theft: Applied by the trial court in O’Keeffe v. Snyder to say P loses since only had six years from the time of theft to claim the good, so P lost at trial court level.

Six Years from Time Adverse Possession Fulfilled: Applied by the Appellate Division in O’Keeffe. Six years from the time the elements of adverse possession are established. The rule in most states. Court says here that instead of imposing burden on present possessor (Like in AP), imposes burden on TO, a burden easily met by exercising due diligence ot find painting. “open and notorious” different for chattels because easier ot hide, so given more time/leeway to TO.

Differing rules on Adverse Possession of Chattels and SofL:

1. Discovery Rule: SofL begins to run when TO knows/reasonably should have known through exercise of due diligence should have discovered facts which form the basis of a cause of action

emphasis on the conduct of the TO rather than on the conduct of the possessor

As in O’Keeffe, it’s unclear whether due diligence is required from the time the painting is stolen or the time when the P could have reasonably known the possessor of the lost chattel. For instance, what if P gave up for a while because the chattel was hidden, but the painting resurfaced decades later? Has the statute of limitations for claiming the lost chattel run out? It’s ambiguous.

As long as excercising DD, the statute does not run. Encourages adverse possessor to keep chattel hidden because all the efforts taken to find it.

3. New York/Demand Rule: SofL begins to run when the TO demands the return and good faith purchaser refuses

No obligation on the TO to locate the whereabouts of the chattel or identity of the possessor with due diligence

Protects the TO to a greater extent – no requirement on their behalf to use due diligence But allows TO to wait until forever before bringing a claim, decreasing buyers’ certainty in buying

artwork since TO could appear and demand it back at any time.o Laches Defense: Applied in equity courts as alternative to the statute of limitations.

Allows a possessor to keep the good if it’s been kept so long that it would be inequitable to make the possessor return it (though today inequitable period is similar to the statute of limitations).

o Policy: Forces true owners to act, not sit on their rights. Increases certainty in purchasing chattels like artwork that buyers are getting a good title.

There is no uniform treatment – all approaches discussed have been adopted

Acquisition by Gift

Here, as in contracts, we have certain requirements that serve basic functionsThree requirements for a gift to be valid:

1. Donative intentYou intend to bind yourself NOW. Not at some point in the future. You intend to part with dominion and control, giving it to the donee.

2. DeliveryAnalogue to consideration in contractsComes in three flavors:

Manual delivery If the object of the gift is capable of being physically, manually delivered, it must be.

No substitute for manual delivery will be accepted where manual delivery is possible.

Handing over the object makes vivid and concrete to the donor the significance of the act performed. This is the cautionary function in the law of gifts.

The act is unequivocal evidence of a gift to the actual witnesses to the transaction. This is the evidentiary function.

Delivery of the object to the donee gives the donee, after the act, prima facie evidence in favor of the alleged gift. Also the evidentiary function.

Constructive delivery Giving the donee the means of access (keys to a car) For when something is to big to pick up and manually hand over

Symbolic delivery When manual and constructive can't be had, you write a piece of paper saying "I

hereby give you my painting of water lilies"

i. Example: O writes a check to B on her checking account and hands it to B. Before B cashes the check, O dies. Result: No gift. The check was only a promise to pay and the money was revocable – O could have ordered the bank not to honor the check. Loss of dominion and control with cashing to check.

ii. Example: Robert leaves a note in safety deposit box that says, “Upon my death, the contents of this safety deposit box shall go to Joan.” Result: No gift. Because note said “upon my death” there was no present transfer of property interest. This is just an invalid will since not witnessed, a mere statement of donative intent which isn’t enforceable. Did not give up dominion and control.

iii. Example: O owns pearl ring, but accidentally leaves it on sink of daughter A’s house. When A calls to report the ring, O tells A to keep it, but later changes her mind. Under traditional rule, O has not made a gift to A because no donative intent at the time of delivery. But most courts wouldn’t reach this result because of a recent trend toward letting donative intent be present if there was intent after delivery. Otherwise, cases like this are terrible because they place form over function.

iv. Once transfer of gift occurs, the donor can’t change his or her mind – the donor has lost all property interest in the good unless donee let’s the donor have it. Example: O owns pearl ring, but leaves it accidentally on A’s sink. A doesn’t call, but surprises O by showing it to O the next time O visited. O says A can have it, borrows it back, and is killed. A sues O’s executor for the ring. Result: A wins because A acquired title from O. O only had possession, not title, when killed. This assumes the court relaxes the delivery requirement.

There is a clear trend AWAY FROM the insistence on manual delivery, reflected in statutes in some states.

California statute: symbolic delivery by writing is always permitted.3. Acceptance

Presumed Acceptance is almost never an issue

Gift causa mortis is a gift made in contemplation of and expectation of immediate death, there must be an intention to make a gift and actual delivery of that gift.

A gift causa mortis is conditional on the donor dying. If the donor recovers, then the gift is revoked. A gift inter vivos is not conditional. A gift inter vivos is irrevocable. A gift causa mortis is revocable.

Gift inter vivos Gift causa mortis

UnconditionalIrrevocable

Conditioned on the donor dyingRevocable

The court worries that people might use a gift causa mortis as a way of evading the very stringent requirements required for wills (most notably the witness requirement.)

If it can be moved, it must be moved.

You can give a gift of a remainder interest like in Gruen v. Gruen (166)Law lets you slice bundle of rights. Dad kept possession until death, then son gets it…valid gift.No manual delivery required b/c it would be impractical for dad to fly, give painting to son, then son gives painting back to dad.

1. Letters were valid symbolic delivery.2. Impractical to have to deliver painting.

Delivery requirements gradually shrinking.

Estates

Estate Vocabulary: Escheat: if a person dies intestate without heirs, the person’s property went to overlord in feudal times.

Now such property escheats to the state. Estate: A unit for measuring ownership, both size and time. An estate last forever, it is an independent

entity, independent of both the owner and the thing that is owned. Issue: Blood descendents. You can talk about someone’s issue while they are still alive (unlike heirs).

Property goes to children, if no children then parents, if no parents then to others. Future Interest: A present existing property interest to possess property in the future Testator: man who leaves a will Testatrix: woman who leaves a will Intestate: lacking a valid will at time of death. Most states say property goes to issues first. If there is no

issue then goes to the parents (ancestors) and if dead then to collaterals (lateral level, brothers, sisters, etc).

Heir: Those that inherit if a person who dies (the decedent) is intestate. Usually limited to lineal relations (those in the immediate bloodline like parents and children – children are issue) and collaterals (non-lineal relatives such as cousins and uncles). While a person is alive, he or she has no heirs, only heirs apparent (Nemo est haeres viventis – no one is heir to the living).

Real Property: interest in land or things attached it (real estate). Ancestors: going up Devisee: person who has real property devised to them, ie take under a will. Legatee: person who has personal property bequeathed to them, ie take under a will. Alienable: to transfer property to another by gift, sale or will. Vested: an interest that either confers a present right to possession, use, or enjoyment of the property or

is sure to confer such a right in the future.

You never own land, just an estate in land. Legal abstraction.

A. Non-freeholda. Leaseholdb. Mere leases

B. Freeholda. Fee simple

i. Inheritableii. Alienable (freely) – can transfer to whomever you want

iii. May last foreveriv. In old times words of inheritance/limitation (“and his heirs”) required. These not required today,

but if you see them, remember “and his heirs” gives nothing to the heirs at that time. 1. “to the heirs of B” were words of purchase and limitation in old days interpreted as to

B’s heirs and their heirs.

2. “to A” – words of purchase “and his heirs” –words of limitations.3. Words of purchase tell you who has the interest.4. Words of limitation define the estate.5. If I say “To A and his heirs” creditor’s cannot attach property for debt accumulated

through A’s heirs to be.b. Fee tail

i. “to A and the heirs of his body” or “to A and his issue”ii. Heirs limited to lineal descendants (no parents, aunts, cousins)

iii. Always followed by remainder (expressly stated) or reversion to O.iv. Stifles alienability.v. Only 4 states still have the fee tail b/c it perpetuated wealth.

1. Now easy to unlock fee tail in these states to make it FS.vi. What happens to fee tail in states abolishing it?

1. Convert fee tail to FS absolute.2. If line runs out w/ person currently having fee tail (A) then the land goes to the

remainder or reversionary interest at A’s death, otherwise A gets FS.c. Life estate

i. Good for life of the life tenant or pur autre vie (life estate valid for the life of another, not necessarily possessor of land).

ii. Courts generally do not order sale of land subject to legal life estate unless all interested parties consent or if the sale is necessary to serve the best interests of all parties (life tenant and remaindermen).

iii. Law of Waste (pg 201)1. A cannot use property in manner that unreasonably interferes w/ expectations of B

(who takes land after A)2. Affirmative Waste: Injurious acts that substantially reduce land value.

a. Minerals may only be extracted if they were being extracted at the time the interest was created.

b. Open mines doctrine3. Permissive Waste: Not taking reasonable care of property.4. The law of waste is a mess and is unpredictable b/c it is too estate and property

dependent.iv. Don’t give legal life estates, put them in trusts! This prevents all law of waste problems, b/c

trustee may sell property!

Inheritance and determination of heirs under Modern Law Typically controlled by state statute Share of spouse: usually ½ share (NY: 1/3) Issue (children, grandchildren, etc – all further descendant)

o Children: typically divide half of estate o Predeceased Children: issue of children take by representation o Grandchildren: take nothing if parent is aliveo Adopted Children: treated as biological children

Parents: o if decedent dies with issue – parents take nothing o if decedent dies with spouse and no issue – parents take ½o if decedent dies w/o spouse or issue: parents take al

Grandparents:o Take when decedent leaves no issue and no parents and no siblingso Treated as units (ie suppose only heirs are widower paternal grandfather and married maternal

grandparents – paternal gf takes 50% and married set takes 50%) Collateral relatives (brothers, cousins, uncles, aunts, etc):

o take under complex statutory laws if decedent leaves no issue, spouse or parentso take by representation of parents, grandparents

Fee Simple

There's fee simple absolute and defeasible fee simple

Three types of defeasible fee simple:

Type 1 of defeasible fee: Fee simple determinable states language in durational terms ("to the school district so long as it is used for classroom teaching purposes.")

"So long as," "until," "while" Type 2 of defeasible fee: A "fee simple subject to conditions subsequent" states the event in terms that tell you that, when that event occurs, then the grantor or someone else has a right to come in and retake possession of the land.

The tip off is language like "but if." "To A, but if A ever smokes tobacco." Or, "To A, however, if A ever smokes tobacco…"These are conditional terms

The difference between the two:

While a fee simple determinable AUTOMATICALLY ends upon fulfillment of the duration, a fee simple subject to conditions subsequent CONTINUES until the owner or whoever comes in and exercises their right of entry. If they never exercise the right of entry, the fee simple subject to conditions subsequent does not end.

Because it's possible that both of these types of defeasible fees might end before infinity, they must be accompanied by some future interest. If no future interest is given to any third party, then the grantor has kept it.

The future interest that accompanies the fee simple determinable is the possibility of reverter The future interest created in the grantor with a fee simple subject to conditions subsequent is the right of

entry.This is assuming no future interest was given to a third party.

You can never have a possibility of reverter combined w/ a fee simple subject, or a right of entry combined with a fee simple determinable Type 3 of defeasible fee: Fee simple subject to executory limitation. The same instrument that transfers the defeasible fee simultaneously transfers some future interest to a third party, such that the grantor has not retained a future interest himself. That future interest given to a third party is called an executory interest. O conveys to "A and her heirs; but if A ever smokes tobacco, then to B and his heirs." The defeasible fee is followed by executory interest (the interest that is given to B.)

If A does smoke, the fee simple automatically ends. In this regard it's like a fee simple determinable. B does not have to show up and exercise a right of entry. The termination does not wait upon action of anybody else.

Reversionary Interest Possessory Estate

Possibility of Reverter

Right of entry

Fee simple determinable

Fee simple subject to conditions subsequent

There are concrete differences b/tw these two types of defeasible fees. Transferability

In modern law, both the possibility of reverter and the right of entry are fully transferable in most states (inter vivos, descendable and devisable) At early common law, they were not alienable inter vivos b/c they were thought to be too ephemeral. In a few states, the old common law rule still applies. They're descendable and devisable but not alienable.In a few other states, there's a distinction b/tw the two: possibility of reverter is alienable, but right of entry is not.In one or two states that draw this distinction, they go further and provide that any attempt to transfer inter vivos the right of entry causes the right of entry to be forfeited.

FUTURE INTERESTS

Reversionary Future Interestsa. Definition: Future interests are presently existing property interests. The word future only refers to when the estate

becomes possessory.b. Proper classification has two parts: (1) the future interest created and (2) what type of estate will be created when

and if the future interest becomes possessory.c. Where there is ambiguity as to what future interest is created, courts will usually be guided by the type of defeasible

fee rather than the type of reversionary interest that is created. If it’s feasible to construe as either FSD or FSCS, the latter is preferred

d. Reversionary Interests – Kept by Grantor and always vestedi. Reversion : The interest remaining in the grantor, or in the successor in interest of a testator, who transfers a

vested estate of lesser quantum than that of the vested estate which he has. 1. Quantum of Estates: (1) fee simple, (2) fee tail, (3) life estate, and (4) leasehold.

a. Example: O conveys “to A for life, then to B and the heirs of her body.” In a state that recognizes the fee tail, O keeps a reversion because an estate of lesser quantum.

ii. Technical Reversion : Whenever future interests are contingent remainders only, there must be a technical reversion even though it will never become possessory.

1. It can arise by operation of law, even when the vesting of one contingent remainder necessarily precludes the vesting of the other and there is seemingly no circumstances in which possession might come back to the original grantor.

a. Example: O “to A for life, then to B and her heirs if B survives A, and if B does not survive A, to C and his heirs.” Here, O has a reversion even though B and C have alternative contingent remainders.

iii. Possibility of Reverter : The interest that arises when an owner carves out of his estate a determinable estate of the same quantum. It is a future interest remaining in transferor or his heirs when FSD is created.

1. Example: O conveys Blackacre to Town Library Board so long as used for library purposes. O has a possibility of reverter.

iv. Right of Entry (power of termination): When an owner transfers an estate subject to condition subsequent and retains the power to cut short or terminate the estate.

1. Example: O conveys Whiteacre to Town Library Board, but if it ceases to use the land for library purposes, O has the right to reenter and retake the premises.

e. Non-Reversionary Interests – Future interests created in a grantee. Never divest preceding estate. Matters because (1) vested remainder accelerates possess, (2) transferability since at common law contingent remainders weren’t transferable although this isn’t true in most states today, (3) destructibility rule which has been abolished, and (4) Rule Against Perpetuities – the best reason.

a. Remainders: Generally: A future interest that is capable of becoming (immediately) possessory at the termination of the prior estate (as opposed to executory interests which can take affect only by divesting another interest; i.e. not immediately possessory)

1. Remainders are either vested or contingent. Decision Tree for dealing with non-reversionary future interests: 1) Remainder or Executory? (capable of becoming possessory immediately?)2) Kind of Remainder? (contingent or vested? Are the takers born and ascertained?) 3) If vested – how? (indefeasibly? Subject to open? Subject to complete defeasance?)

ii. Vested Remainder: In possession – once possessory, an estate is vested. In interest: An interest is vested if it is (1) given to an ascertained person (born and identified) and (2) is not subject to a condition precedent (a condition precedent is set out within the description of a particular estate and must be satisfied before that estate can become possessory) other than the natural termination of the preceding estate.

1. TYPES OF VESTING a. Indefeasibly Vested : Holder of remainder is certain to acquire a possessory estate at some

time in the future and is also certain to be entitled to retain permanently thereafter the possessory estate so acquired.

i. Eg “to A for life, then to B and her heirs” B has indefeasible vested remainder interest as he is certain to take possession on A’s death. Interest is vested: If B predeceases A – B’s heirs/devisees are entitled to possession

b. Vested Subject to Open (a/k/a Vested Subject to Partial Divestment) : Class gifts. Remainder is vested in a class of persons, at least one of whom is qualified to take possession but shares of the class members are not yet fixed because more persons can subsequently become members of the class.

1. Example: To A for life, then to B’s children. B has one child (X) at time of conveyance. A has life estate, B has vested remainder subject to open, and unborn children have an executory interest.

2. Example: To A for life, then to A’s children who shall reach age 21. B is now 15.When child B reaches age 21, he has satisfied the condition precedent and now has a vested remainder in fee simple. If child C is born, C’s interest does not automatically vest; rather, C has an executory interest because if C does satisfy condition precedent and reach age 21, the vesting in C simultaneously partially divests B’s interest.If A dies after child D is born, B and C now have a fee simple subject to an executory limitation, with an executory interest held by D.

3. A conceived but unborn child is treated as alive if it benefits the child 4. Sometimes have rule of convenience where clas closes as soon as 2 person

entitled to take possession. MOST OF THE TIME NOT APPLICABLE. c. Vested Subject to Complete Divestment : Remainder is either vested subject to being

divested by the operation of a condition subsequent or vested subject to a divestment by an inherent limitation of the estate in remainder.

1. When you have a life estate that’s followed by a vested remainder in a fee simple subject to complete divestment, the future interest that follows must be an executory interest.

2. Remainders that have vested but may be divested on the happening of an event

a. “to A for life, then to B, but if B drops out of law school, then to C”B has a vested remainder in FS – but interest is divested if she drops out of law school

b. Future interests can be both vested subject to open and vested subjected to complete divestment

3. Vested Subject to Limited Defeasance : Remainder is subject to durational limitation.

1. Example: To A for life, then to B for life. B has a vested remainder subject to limited defeasance.

ii. Vested in more than One Category

Contingent Remainder: Grantee is (1) an unascertained person (not born or alive) or (2) subject to a condition precedent other than the natural termination of the preceding estate. Things not a condition precedent: 1) Termination of a preceding estate (otherwise, all remainders would be contingent remainders)

2) Surplusage: language that merely refers to the termination of the preceding estate (“to A for life, and on A’s death, to B”). 3) Survivorship: unless expressly stated. E.g. “to A for life, then to A’s issue, and if A dies w/o issue to B”. B’s remainder is contingent to A dying w/o issue – not on B surviving. If B predeceases A – B’s devisees/heirs take the interest

a. Anytime you have a life estate followed by a contingent remainder in a fee simple, then there must be a reversion in a fee simple. But once the contingent remainder vests, the reversion disappears.

b. When there are alternate contingent remainders, there is a technical reversion in grantor even though it cannot become possessory.

ii. Example: O conveys to A for life, then to A’s children and their heirs, but if at A’s death he is not survived by any children, then to B and her heirs.” A is alive and has no children. Result: A has life estate, A’s children have contingent remainder, B has contingent remainder, and O has reversion. But when A has children, the remainder vests and O’s reversion disappears.

1. Suppose A has C and D, but C dies before A. At time A dies, D and B survive. Here, C and D have title in fee simple absolute because the condition was only that one child survive, so by D surviving, C’s successors take.

a. Example: “to A for life, then to B and her heirs if B survives A, and if B does not survive A to C and his heirs.” B has a contingent interest because the condition is part of her estate’s description.

b. Example: T devises $10,000 “to my cousin, Don Little, if and when he survives his wife.” State of Title: T’s successors have fee simple subject to an excecutory limitation, and Don has an executory interest.

Doctrine of Merger: LE in A and a remainder in A will merge unless (i) there is an intervening estate or (ii) the remainder in A is subject to a condition precedent to which his LE is not subject. Under doctrine of merger, if a life estate came into hands of the person who held next vested estate in fee simple, then the life estate would merge into next vested estate in fee simple. Life estate would be destroyed and any contingent remainder that in between would be destroyed.

I. RULE AGAINST PERPETUITIES : a. Rule : No interest is good unless it must vest, if at all, not later than 21 years after some life in being at

the creation of the interest. You must know with absolute certainty whether the interest will vest or not within this period (okay if vests in possession or in interest). Reversionary interests are immune from RAP.

i. Policy: (1) strike down interests that might vest too remotely which would prevent land from being alienable since perpetual trusts often are spendthrift trusts, which prevent beneficiaries of the trust from accessing the principle or transferring it, and (2) a fair compromise between interests of grantor who has dynastic preferences and interest of society having resources be in hands of living people and subject to control of living people, (3) desire to cut off dead hand control at generations decedent knows plus one until a person reaches the age of majority.

ii. Criticisms: A trap for the unwary, like the fertile octogenarian, that includes possibilities that won’t happen and override grantor’s intent unnecessarily. It’s also silly for reversionary interests to be immune from RAP on the basis that they’re vested.

b. Affected Future Interests : (1) contingent remainders, (2) executory interests, and (3) class gifts (subject to all or nothing rule – if all class members might not vest in time, then the whole class gift is deleted).

i. Exception: when the executory interest is certain to vest, the RAP doesn’t apply. c. Perpetuity Clock’s Beginning for Lives in Being plus 21 Years: (1) if given inter vivos and irrevocable, at

the time of the deed’s delivery or point at which gift becomes irrevocable, or (2) if a will, at date of testator’s death.

d. Validating Life: A person whose life validates or invalidates the interest – must be causally connected to the conveyance. If the interest is sure to vest in this person’s life, the interest is okay. A child in gestation is okay, but frozen sperm is not. The law conclusively believes any live person can have children.

i. The same validating life can apply to multiple interests.ii. Can be somebody not mentioned in the transaction, such as in T devises “to my grandchildren

who reach 21.” The validating life is the survivor of T’s two children.e. Procedure:

i. Classify interests. ii. Determine interests subject to RAP. If vested like a reversion, that interest is okay.

iii. What events must occur in order for that interest either to vest or fail (terminate)?iv. Which persons are casually connected with that event? (search for validating life)?v. Are there any persons within whose life (plus 21 years, if need to save the interest) the interest

is absolutely certain either to vest or fail? 1. For each candidate ask: is there any possible invalidating chain of events (the “what

might happen” test)? a. If no: that person is the validating life.b. If yes: the interest is void.

f. Perpetuity Savings Clause: A clause that says what to do in case you mess up and conveyance violates RAP. Contains two parts:

i. Termination Clause: The trust is to terminate and all interests are to vest no later than 21 years than the survival of A and those of A’s issue living at my death.

ii. Distribution Clause: Says what to do after termination, such as in the event of such determination, the then remaining principal and undistributed income of the trust shall be distributed to A’s issue then living per stirpes, or, if no issue of A is then living, to the American Red Cross.

g. Examples:

i. “To A for life, then to A’s first child to reach 25.” – No good because A could have more children after conveyance for which it could take more than 21 years to find out if interest vests.

ii. “To A for life, then to A’s first child to reach 21.” – Okay because even if A has more children, we’ll know the first to reach 21 before end of RAP period

iii. T devises “to my grandchildren who reach age 21,” when T has two living children and three grandchildren under 21. No RAP problems here. But if T deeds the property, then this isn’t valid because T is still alive and could have more children, which runs into RAP problems.

iv. T devises “for A for life, then to A’s children for the life of the survivor of them, then upon the death of the last surviving child of A, to A’s grandchildren.” At time of conveyance, A is 80 years old with two living children B and C.

1. State of Title: A has life estate, A’s children have vested remainder in life estate, and grandchildren get nothing because violates RAP since A could have more children and this is a class gift subject to the all or nothing rule.

v. O conveys “to A for life, then to B if B attains the age of 30.” B is now 2 years old. 1. State of Title: B is her own validating life and her life in being, so no RAP problems. If

state has destructibility rule, then O gets in fee simple if A dies before B reaches age 30. If no destructibility rule in state, then O would have a fee simple subject to an executory limitation, and B would have an executory interest.

vi. O conveys “to A for life, then to A’s children for their lives, then to B if B is then alive, and if B is not then alive, to B’s heirs.” A has no children living at the time of the conveyance.

1. State of Title: A has life estate; A’s children have contingent remainder in life estate; B has contingent remainder; B’s heirs have contingent remainder; and O has technical reversion. A’s children are fine for RAP since A is validating life. B is fine for RAP since B’s her own validating life. B’s heirs’ interest is valid since B is validating life.

vii. O to A so long as the Cornell Tower stands; if it ever falls, then to B. No good under RAP.viii. O to A; but if the Cornell Tower ever falls, then to B. No good under RAP.

ix. O to Cornell so long as Cornell Tower stands. Okay under rap because O’s possibility of reverter treated as if it already vested.

h. Wait and See Version : The validity of future interests is judged by actual events as they happen, and not by possible events that might happen. Adopted by many states. The validity of an interest is not determined at the time the interest is created: it is necessary to wait and see what actually happens. Jurisdictions differ about the permissible vesting period – how long you wait and see for interest to vest.

i. Approaches to Wait and See1. Causal Relationship: Wait and see for the lives of all of the people whose lives were

casually related in some way with the event or the events that make the interest contingent. Problematic because it doesn’t create a permissible vesting period across the board. Also not predictable in advance.

2. Specified List: Wait and see for period of time measured by the last surviving member of a specified group of people. Adopted by Restatment (Second) of Property.

3. USRAP (Uniform Statutory Rule Against Perpetuities) – Adopted in half of states. Adopts 90 year in gross waiting period, which represents length of time typically have under disposition which contains perpetuity-savings clause, which says that if one or more of interests created in trust has not yet vested by the death of last surviving beneficiary of life estate, then the trust terminates.

a. Problem: Courts have to track what happens over 90 years, which is tough.b. Last surviving beneficiary on average will be grantor’s youngest descendant,

whose average age is thought to be 6 at time of trust creation. 6 year old will on average live another 69 years. After 69 years add common law 21 year period to come up with 90 years.

c. Mode of Analysis: (1) apply common law rule, (2) for any interests that are invalid under the common law rule, wait and see.

i. If interest vests or terminates within 90 years then it’s valid.

ii. If interest does not vest or terminate within 90 years, USRAP has court rewrite instrument so as to make valid under RAP.

i. Other Reform Versions : Abolish the rule as to trusts like South Dakota and Delaware, make the rule as to optional trusts, or extend wait and see period like Wyoming to 1,000 years. These changes effectively ban the RAP and allow dynasty trusts that may literally last forever.

CONCURRENT ESTATES

Rule: Concurrent estates are estates in which multiple people share simultaneously the right to ownership and possession.

b. Three Forms: (1) tenancy in common (no survivorship right), (2) joint tenancies (survivorship right), and (3) tenancy by the entirety (survivorship right).

i. Difference between tenancy in common and joint tenancy: joint tenancy has a right of survivorship, but tenancies in common do not.

ii. Survivorship Right: The right of the survivor to get the land completely after the other dies even if the decedent tries to transfer the land and survivor gets to avoid probate, which explains the popularity of joint tenancies.

c. Tenancy in Common :i. Rule : Each tenant in common owns by share (not by the whole) and has a separate but

undivided interest in the property that can be devised by deed or will.1. Modern Rule: Favored by modern courts because they increase the alienability of land.

ii. No Surviorship : Tenants in common have no survivorship rights; when one tenant in common dies, his interest passes to successors in interest.

iii. Equality of Shares : Presumption is that tenants’ shares are equal, but this presumption can be overcome by evidence that unequal shares were intended.

1. Example: if A puts up ¾ of purchase price and B puts up ¼ purchase price, likely that parties will have undivided interests proportionate to the consideration each paid

d. Joint Tenancies :i. Rule : Each tenant owns by (1) by the share and (2) by the whole.

ii. Equality of Shares: All tenants must have an equal share to create a joint tenancy.iii. Creation: Because of the modern presumption against creating joint tenancies, you must be

specific about creating a joint tenancy. To be safe, just say: “To A and B as joint tenants and not as tenants in common.”

a. Example: “To A and B jointly” – this does not create a joint tenancy since not specific enough. Will be read as creating a tenancy in common.

2. Use of Straw : To create a joint tenancy, you can also use a straw, such as by conveying to the straw and having it conveyed back to you as a joint tenant with another person.

iv. Survivorship : When first of tenants dies, his/her share terminates and the surviving joint tenant(s) take their interest entirely free of the claims of the deceased joint tenant and without going through probate. However, any joint tenant can unilaterally sever the joint tenancy during his lifetime, defeating survivorship and creating a tenancy at common.

1. Example: A and B are joint tenants. When A dies, B gets everything, even if A tried to devise the land to another.

2. It is possible to create an indestructible survivorship right by devising to A and B as joint tenants for their joint lives, remainder to the survivor. This is indestructible because the survivor gets the whole estate and therefore has a presently existing future interest.

3. Uniform Simultaneous Death Act has been modified to say that the new default rule is that there is a 120 hour survival requirement. You must survive the other party by 120 hours and unless you do, one-half the property is distributed as if A has survived and the other half as if B has survived.

v. Severance : A joint tenant can unilaterally end a joint tenancy by deed, not by will, converting a joint tenancy into a tenancy in common with no right of survivorship. There’s no requirement to make the severance known to the other joint tenant.

1. You cannot sever a joint tenancy by conveying to yourself as a tenant in common. Leads to problems, as in the wife’s actions in Riddle v. Harmon (though wife was able to create a tenancy in common, but was very lucky to get a favorable court – most courts wouldn’t have done this).

vi. Requirements (Four Unities) 1. Time : interest of each tenant must be acquired/vest at same time.2. Title : all tenants must acquire title by same instrument or by a joint adverse possession.

a. Thus, people who inherit by intestate succession inherit as tenants in common, not as joint tenants. People who take under a will have to take under the same instrument. Heirs take by an act of law – a statute. Devisees take under the same instrument – a will.

3. Interest : all must have equal undivided shares and identical interests measured by duration.

4. Possession : Each must have right to possession of wholevii. Examples

1. A, B, and C as joint tenants. Subsequently, A conveys to D. B then dies intestate, leaving H as an heir.

a. State of Title: When A conveyed to D, D got a 1/3 interest as tenant in common, leaving B and C with a 2/3 interest in joint tenancy. Vis-à-vis to A, they would be tenants in common. H gets nothing because you cannot break a joint tenancy by a will.

2. A and B are planning to get married. Two weeks before the ceremony, they buy the house and take title in A and B as tenants by the entirety. Several years after the marriage, A moves out of the house and conveys his interest in the house to his brother C. C brings an action to partition the property.

a. State of Title: C wins because A and B couldn’t have taken as tenants by the entirety since they weren’t married at the time. Thus, they took as either tenants in common and joint tenants, both of which lets A convey his interest elsewhere.

i. A and B could avoid this problem by buying as joint tenants, conveying it to a trustee, and having the trustee convey it back to them as tenants by the entirety after the marriage.

e. Tenancy by the Entirety : i. Rule : A tenancy by the entirety allows tenants not to own by the share, but own by the whole,

conferring a right of survivorship. ii. Creation: In most states, fulfill the four unities and be married at time of creation (or domestic

partners in some states like CA and Hawaii.iii. Severance : Because tenants own by the whole, there is a survivorship right but no unilateral

severance right. Both husband and wife can agree to sever a tenancy by the entirety, but they cannot do so unilaterally. If the marriage ends in divorce, most states convert the land into a tenancy in common.

f. Partition i. Rule: Unlike severance, partition ends the concurrent ownership, breaking the estate into

smaller, individual estates. Partition can occur either (1) in-kind (physical) or (2) by sale.1. In-Kind (Physical): Physically dividing the property and allocating portions to each party

as close as possible to their respective interests – very hard to do because of terrain differences and access to services like roads and sewage, which makes in-kind partition disfavored by courts in practice even though it is preferred in theory. Disfavored because of: (1) difficulty of physically dividing land precisely according to shares and (2) difficulty of assessing owelty payments compared to dividing the market price.

a. If not possible to divide according to respective shares, the party getting a larger than deserved share must pay owelty to the other party as an equalization payment.

b. Example: Delfino v. Vealencis – The Connecticut Supreme Court ordered an in-kind partition, but D got the short end, having to pay owelty and getting less than her fair share of acreage. D owned 45/144 interest, but only got 1 acre while Ps got 19 acres, and D had to pay owelty anyway.

2. By Sale : Court puts up the land for auction, with proceeds divided according to owners’ shares. Preferred by courts in practice because of problems of in-kind partition, even often when there is a homestead on the parcel that is lost.

a. Example: Delfino v. Vealencis – The trial court ordered partition by sale (though this was eventually overturned) because dividing parcels reduces the value of the whole and D’s garbage company placed P’s plans for residential development in jeopardy. A terrible decision because only considered P’s interests.

g. Sharing the Benefits and Burdens of Co-Ownership:i. Sole possession by one cotenant: Okay because since interests of tenants in common and joint

tenants are undivided, each cotenant is entitled to possess the entire parcel. If sufficiently adverse, could count as adverse possession.

1. A cotenant in sole possession does not have to pay rent to fellow cotenants unless cotenant in possession has ousted fellow cotenants.

a. Ouster : When cotenant in possession rebuffs attempt of cotenant to take possession. There must be an actual demand to enter beyond just a letter. Where actual ouster is inappropriate like husband beating wife, courts will recognize constructive ouster.

i. Example: Spiller v. Mackereth – Because co-tenant didn’t attempt to enter property, there was no ouster and the other co-tenant could live there rent-free.

b. Recovery: If there is ouster, cotenant not in possession is entitled to recover from cotenant in possession ½ of fair rental value (where each party has ½ share).

i. Courts might not force the cotenant to pay rent though depending on the expectations of the parties, such as the cotenant sibling who remains in possession

c. Policy: Lets courts be flexible in considering parties’ unique circumstances and expectations in determining whether cotenant in possession must pay rent.

ii. Leasing Premises to third party: Each cotenant is free to lease the entire premises to a third party without obtaining consent of the non-leasing cotenant.

1. Non-leasing cotenant has 2 options: (1) recover respective share of actual rent from cotenant who has leased premises or (2) recover respective share of fair rental value from lessee, but only if the non-leasing cotenant has attempted to enter the premises and been ousted by the lessee (may be advantageous if landlord cotenant got a bad deal).

Presumptions for Ambiguous Grants/Devisee

If a vague instrument transfers possession to 2 or more individuals – rebuttable presumption is the creation of tenancy in common. If inherit property with another person, as an heir, or as a devisee, inherit as tenants in common.

Key language for joint tenancy = “A & B as joint tenants with right of survivorship” If property is conveyed to husband & wife --> presumption that it is a Tenancy in the Entirety (absent

evidence to the contrary)

Joint Tenancy Bank Accounts

O opens a joint bank account with $5000 with both O and A having access:

Three potential types of Intentions for Joint Bank Accounts:

i. True Joint Tenancy Account equal access/ownership in the amount on deposit – right of survivorship default – this is the presumption when the joint tenancy card at the bank is completed

ii. Substitute Will/Payable at Death Account A possesses no right to withdraw money – only survivorship rights (like a will) Avoids probate Presumption – rebuttable by clear & convincing evidence to the contrary

iii. Convenience/Agency Account depositor intends that the other only has access to pay O’s bills (A is an agent for O)

form will not control – courts allow extrinsic evidence to establish explicit intentions of O. Has all these weird forms because can’ tjust have them say “A payable to death to B” because sounds like a will, need witnesses and formality of execution etc. Banks don’t want to be bothered with this.

Uniform Probate Code: in certain states, the ambiguity is avoided because the code authorizes financial institutions to offer any combination of the above.

Leaseholds

TRADITIONS, TENSIONS & CHANGES IN LANDLORD-TENANT LAW

a. History: Rental agreements used to be determined solely as contracts and nothing more. In the 1960s, this changed – landlords started having responsibility for the care and condition of the rental property, and thus the law transitioned from property to contract law. Today, rental agreements are a hybrid of property law and contract law since technically a leasehold estate subject to Statute of Frauds, a lease for over one year must be in writing to be valid.

b. Types of Tenancies: (1) term of years, (2) periodic tenancy, (3) tenancy at will, (4) tenancy at sufferance (holdover).

iii. Term of Years : A lease for a fixed duration, with an identifiable beginning and end point.1. Notice: No notice is required to end term of years – it ends automatically.

a. Example: L leases Whiteacre to T for one year, beginning October 1. On September 30 of next year, T moves out. That’s okay because no notice is required in term of years.

iv. Periodic Tenancy : A lease for a fixed period, but tenancy automatically renews unless a party gives adequate notice of intent to terminate the tenancy.

1. Notice: At common law, periodic tenancies of more than a year’s duration required: (1) six months’ notice and (2) notice provides that the tenancy end on the last day in question to be effective. Would hold them on hook until effective notice given that stated effective last day of period. Today, notice will be read as giving notice to vacate on the earliest possible date.

i. Example: T has month to month lease and gives notice on Nov. 16, saying T will vacate on Nov. 30. Most courts will hold T liable for December’s rent, but no more, conferring notice to Dec. 31.

b. If the period was for less than a year, than the notice has to be for the length of the period, but not more than six months, and terminate the tenancy on the final day of the period (though some states have relaxed this requirement).

i. Example: A month-to-month tenancy has 30 days notice required, though jurisdictions differ on whether it has to fall on the final day of the rental period.

2. Examples: a. L leases Whiteacre to T from year to year, beginning on October 1. As a periodic

tenancy, six months’ notice is required, so notice must be given by March 30 or else lease is automatically renewed.

b. L leases Whiteacre to T at an annual rental of $24,000 payable $2,000 per month on the first of each month. (periodic tenancy with period of 1 year or 1 month, depending on the jurisdiction).

v. Tenancy at Will : A lease of no fixed period that endures so long as both landlord and tenant both desire.

1. Notice: Modern statutes require notice in order for a party to end tenancy at will, but notice not required at common law. Both sides must be able to end the tenancy at will unilaterally (if a tenancy isn’t terminable by only one party, it is not a tenancy at will).

a. Ends at death of either party.vi. Tenancy at Sufferance (Holdover Doctrine): The tenant remains in possession (holds over) after

the end of the formal lease, preventing landlord from using property (leaving furniture and circumstances beyond tenant’s control aren’t enough to create a holdover).

1. Landlords have two options: (1) evict tenant (plus damages due to holdover) and (2) consent (express/implied) to creation of new tenancy (usually a periodic tenancy, not just the old lease period) for no more than one year Landlords must pick one and cannot change mind, as in Crechale & Polles, Inc.

a. Example: Crechale & Polles, Inc. v. Smith – Mississippi Supreme Court said that landlord treated tenant as trespasser but fails to eject tenant creates a month to month periodic tenancy by cashing rent check. Implied consent: the exception and cashing of rent checks beyond the termination date

b. What type of tenancy is created under ‘new tenancy’ option?i. Depends on state statute

1. Periodic tenancy (modern/majority approach). Period determined by manner in which rent was paid (usually monthly). All other terms other than duration apply from previous tenancy.

2. Term of years (minority approach). Term of years determined by old lease agreement – max is one year

Discrimination in Tenant Selection

h. Rule: Discrimination in tenant selection is controlled by federal, state, and local statutes. State and local statutes may be more protective against discrimination than federal law, but not less protective.

i. Fair Housing Act (1968):. Prohibits discrimination against a variety of groups resulting from state action. §3604(a) prohibits discrimination on the basis of race, color, religion, sex, familial status, national origin, and handicaps (last added by amendment in 1988 (see pp. 376-377). Does not cover marital status or sexual orientation. Applies to private and public discrimination in provision of services.

i. Meaning of Terms:1. Dwelling: Does not include a place that is not a residence for a significant period of time.

a. Example: A hotel would not be covered by the term, but a single room occupancy hotel or a college dorm would be covered by the term.

2. Familial status: Specific exception which allows for the creation of housing intended only for the elderly.

3. Handicap: Includes people with AIDS and people with HIV. But accommodation only has to be reasonable, so if there is a tenant with mental disability that would damage the rental unit, you don’t have to lease to him under 3602(h). Handicap defined as “a physical or mental impairment that substantially limits one or more of major life activities of the individual.”

4. Reasonable accommodation: If the landlord produces evidence that the tenant’s presence constitutes a direct threat to health/safety of other individuals in the building or on the premises, or would result in substantial property damage, then the landlord may refuse to rent or can even evict the tenant. Owner with no pets policy might have to accommodate a blind tenant with a seeing eye dog. But if tenant playing music too loud, not wear hearing aid, can evict.

ii. Advertisements (§ 3604(c)): Prohibits any oral or written statement of landlord indicating a preference, limitation, or restriction on the basis of discrimination. The Mrs. Murphy exception doesn’t apply to advertisements under § 3603(b).

1. Ads that regularly suggest the prominence of one race in an area are forbidden, such as regularly using only non-minorities in ads for home buyers, regardless of intent.

2. Standard used is the ordinary reader or the ordinary listener standard, which is a question of fact to be determined by jury. Although a plaintiff need not prove intent to discriminate, here intent may be relevant to evaluating the ordinary reader/listener standard.

a. Example: Ad says “Furnished basement apartment in private white home.” This seems illegal under (§3603(a)).because an ordinary reader would see this ad as indicating a racial preference, but isn’t because of the Mrs. Murphy Exception (§3603(b)(2)) for home-owners renting out space in house they occupy and because it’s a single family home rented by owner under (§3603(b)(1)). But it is illegal because of §3604(c) since implies a preference based on race.

iii. Exceptions: 1. If 3 or less single family homes sold (s. 3603 b1). Therefore, statute only applies to

those whose main business is such sales or rentals - needed in order to get statute through Congress because seen as radical change in the law.

2. Mrs. Murphy Exception : Rooms or units in dwellings containing living quarters occupied or intended to be occupied by no more than four families living independently of each other, if the owner actually maintains and occupies one of the living quarters as her residence (s. 3603 b2). Policy: political compromise and principle of associative autonomy. Does not apply to advertisements in 3604(c) – cannot discriminate in advertisements because of exception in § 3603(b).

iv. Proving a Prima Facie Case under FHA Section 3604(a) (refuse to rent or sell) and Section 3604(b) (discrimination in privileges and conditions of rental or sale):

1. Discriminatory Treatment : Usually where P claims D discriminated against P on the basis of race or one of the other proscribed bases of discrimination intentionally.

a. Elements of Prima Facie Case: (1) Member of Protected Class, (2) Qualified to rent/purchase (property eventually rented or purchased to person similar except for not being in class), (3) Rejected although housing remained on market.

b. Once prima facie case established, the burden shifts to D to prove that there was a compelling business reason for rejecting the applicant. Plaintiff then opportunity to show that a defendant’s stated reason for denying plaintiff rental/purchase was pretextual.

2. Disparate Impact : Show discrimination on the basis of effect, not intent. a. Elements of Prima Facie Case: (1) Demonstrating that a facially neutral policy

has a disproportionate discriminatory impact on a racial or ethnic group or some other group protected by the statute. No need to prove intent.

b. Once a prima facie case established, the burden shifts to the landlord to prove a LEGITIMATE business purpose, not a compelling business purpose like discriminatory treatment (as stated in Pfaff v. Hud) so long as there isn’t a less restrictive means of obtaining the goal.

i. Example: Suppose that a local zoning policy limiting the location of multi-family apartments for low-income families has a disproportionate impact on blacks. That would establish a prima facie under FHA.

v. Why all the exceptions? Freedom of association in one’s own home Congressional compromise – legislature was going after professionals FHA was very controversial at the time it was enacted – exceptions necessary to get legislation

throughj. Civil Rights Act of 1866 (Codified as 42 U.S.C.A. § 1982): Prohibits private and public racial

discrimination on the basis of race as understood in 1866 (so, for example, nationalities seen as races). Prohibits racial discrimination only in the inheritance, lease, sale, or holding of real property – does NOT cover discrimination in provision of facilities. Given new life by Supreme Court in 1968 in Jones v. Alfred H. Mayer Co.

i. Comparison to Fair Housing Act: Broader because doesn’t contain the Mrs. Murphy exception, but narrower because limited to racial discrimination and covers only refusals to rent or sell.

1. It’s a violation of Civil Rights Act for a landlord of single-family home to refuse to rent to a black couple based on race.

ii. Discrimination: Requires actual discrimination, so ads indicating racial preferences aren’t covered by this. In practice, also covers discrimination on the basis of national origin.

1. When the purpose of racial discrimination in housing is to counter the effects of past discrimination and is temporary, it is probably okay, but not otherwise, as in the minority cap in United States v. Starrett City Associates.

iii. Example: 1. Ad says “Furnished basement apartment in private white home.” German couple

applies and is rejected because German. The Civil Rights Act of 1866 would cover this situation since Germans seen as a race in 1866.

Note: Discriminatory intent is NOT necessary for plaintiff to make a prima facie case under Fair Housing Act, rather disparate impact enough, discriminatory treatment. 1866 CR Act, Section 1982 requires intent.

Hypo: O inserts ad in newspaper offering to rent a room in her house to a white a person.

If no ad – no violation of FHA (can discriminate under Mrs. Murphy exception) With ad – violation of FHA § 3604(c) If O does not rent to blacks – violation of § 1982

State and Local Laws A number of state/local ordinances prohibit discrimination based on marital status, sexual orientation or

age. Suppose L (fund. Christian!) denies dwelling to unmarried couple based on religious beliefs. Violation of right

to exercise religion?o Majority view: may not deny – this is a neutral law of general application which does not substantial

or unreasonably violate L’s right to the free exercise of religionCourt has said racial quota to prevent white flight violated FHA. Also held that numerical occupancy restrictions justified, even though disparate impact on families, it was justified (houses built for certain mount of people.)

Subleases & Assignmentsa. Rule : Tenants have the ability to (1) assign or (2) sublease their estates because estates in land are fully

transferable under the principle of free alienability. To recover directly from the transferee, the lessor only has to have either privity of estate or privity of contract with the transferee.

2. Privity of Estate – An estate grantor-grantee relationship.3. Privity of Contract – A contractual relationship. Terminating privity of K requires a

release (novation) from the landlord, which is not implied merely from the landlord consenting to the assignment or sublease (as in Ernst v. Conditt, where the landlord’s consent to the assignment from Rogers to Conditt did not imply novation).

iv. Traditional Approach: As above, look for whether the original tenant kept a portion of the sublease.

v. Modern Approach (as used in Ernst v. Conditt) – Look at parties intention as determined by the language in the contract and past the formalities of the contract. But this approach ultimately ends up looking at the same thing as traditional approach: whether there was a unit kept a portion of the sublease.

k. Assignment : When the tenant has transferred all of the remaining estate to an assignee. If the lessee has retained the right to reenter (a reversionary interest), this is may sufficient basis for making the transfer a sublease (most jurisdictions say no; some say yes)

b. When this happens, the assignee and landlord are in privity of estate, but not privity of contract – the original tenant and landlord remain in privity of contract.

i. Example: Ernst v. Conditt – If the conveyance from Rogers to Conditt was an assignment, there is privity of estate between Ernst and Conditt, allowing Ernst to recover.

c. Sublease : When the tenant has transferred something less than all of the remaining estate. When this happens, the sublessee and landlord are not in privity of contract and not in privity of estate (the original tenant remains in privity of estate with the landlord; sublessee and original tenant are in privity of estate and privity of contract). Therefore, the landlord can’t go after the sublessee.

ii. Example: Ernst v. Conditt – If the conveyance from Rogers to Conditt was a sublease, then Ernst can’t recover from Conditt – Ernst can only recover from Rogers since there’s no privity of estate or contract between Ernst and Conditt.

d. Third Party Beneficiary Doctrine of Contract: The promisor makes promise to promisee and they both understand that intended beneficiary of promise is a third party, giving the donee beneficiaries contract rights even though they are not a party to the contract. The donee beneficiaries are the people who stand to benefit from the contract even though they don’t pay consideration, such as the beneficiary for a life insurance policy. Under anticipatory repudiation, the donee beneficiaries can sue when the promisor has stated that he won’t honor the promise benefiting the donee beneficiaries.

iii. When there has been a sublease, and the sublessee promises to the lessee that he will perform the promises in the lease which were made by the lessee for the benefit of the landlord, a third party beneficiary contract has been created: landlord is third party beneficiary and has contract rights. In Ernst v. Conditt, this principle would allow the landlord (Ernst) to recover from the sublessee (Conditt).

e. Subrogation : If one party has to pay damages for a breach by another party then the party paying the damages is entitled to recover from the breaching party based on stepping in the shoes of the party who accepted the damages, acquiring that person’s rights.

iv. Example: So if T had to pay L for T1’s damages, T could step into the shoes of L and recover from T1 on the basis of subrogation.

f. Example: T1 in agreement with T assumed all the covenants in the head lease between T and L. Three months later, T1 assigns entire interest to T2. A few months later, T2 assigns interest to T3 who defaults on rent and trashes the apartment.

v. Between L and T – T is liable. Privity of contract, no novation to terminate responsibilities. No privity of estate. Once T loses, T could make T1 pay because of T1’s promises to T. T could also recover from T1 based on subrogation since T acquired L’s rights after paying L, and L could recover from T1. If T has to pay, T can also recover from T3 because of subrogation. But not T2 because L cannot go after T2.

vi. Between L and T1 – T1 is liable. Privity of contract under the third party beneficiary doctrine since T1 agreed to assume all the covenants T owed to L. Therefore, in the assignment between T and T1 where T1 assumed all of the covenants T owed to L, L was a third party beneficiary and has K rights against T1. Since no novation for the assignment between T1 and T2, privity of contract still exists. Thus, T1 is liable for T3’s actions.

vii. Between L and T2 – T2 isn’t liable because no privity of estate or contract. No privity of estate because T2 assigned the whole estate to T3. No privity of contract because T2 never assumed a contractual duty to pay back rent or maintain the apartment.

viii. Between L and T3 – T3 is liable because privity of estate between L and T3 and you only need privity of estate or K to recover.

Adam Shajnfeld’s Excellent Summary:

Note: PRIVITY of contract between A and T ONLY if A explicitly takes on all of T’s covenants. If A does that, then L has a third party beneficiary interest.

At the time a transfer of an interest in the leased property is made – the transferor may exact a promise from the transferee that he will perform the promise.

Landlord’s Duties; Tenant’s Rights and Remedies a. Consent/Approval Clause Types:

i. Absolute Discretion Clause: Explicitly says that tenant must obtain landlord’s consent for any assignment or sublease. The consent may be withheld by the landlord at the landlord’s sole (and absolute/arbitrary) discretion

ii. Reasonableness Clause: The landlord must act objectively reasonably in deciding whether to approve the sublease from a commercial standpoint.

iii. Silent Clause: Tenant must obtain landlord’s consent to any assignment or sublease.1. Majority Rule: When there is no mention of reasonability in an approval clause, the

landlord under common law has no duty to act reasonably in refusing a proposed sublease or assignment to another tenant.

2. Minority Rule: Unless the lease says otherwise, there is an inherent reasonableness requirement for commercial leases, but not residential leases. But even in minority rule states, parties of equal bargaining power can contract around the reasonableness requirement for residential leases even, such as in California.

b. Tenant’s Duties: At common law, tenants duties were to: (1) avoid waste, (2) make repairs, and (3) pay rent. Example: If window broke, tenant had to pay for repair in order to avoid waste by exposing unit to the elements.

c. Landlord’s Duties about Care and Condition of Premises II. Traditional Common Law Rule: Caveat lessee because of policy of self-reliance.

a. The landlord had: 1) no implied duty to repair, 2) no implied covenant or warranty of fitness for USC or habitability, 3) duty to deliver legal possession (not actual possession, so the tenant might have to evict holdovers), 4) covenant of title, and 5) covenant of quiet enjoyment (dependent on T paying rent), with some exceptions.

i. The landlord’s duties were mutually independent, so if the landlord broke a duty, the tenant still had to pay rent, with the exception of the relationship between tenant paying rent and the covenant of quiet enjoyment.

Duty not to interfere with T’s quiet enjoyment. traditionally only breached by actual eviction/ouster or constructive eviction & any of the 4 below exceptions (traditional rule)

III. Covenant of quite enjoyment, if substantially breached, allows the T to vacate in a timely manner and cease paying rent – constructive eviction is an affirmative defensea. Exceptions to Caveat Lessee (Landlord had duty of care for the conditions of the premises, which

breaching was breaking covenant of quiet enjoyment):i. Furnished dwelling doctrine – A short term lease of a furnished place.

ii. Latent defect : Defects the tenant couldn’t discover by a reasonable inspection of the property.1. Example: Water leaking from pipes in upstairs apartment and raw sewage entering

sewage from broken basement pipe in Hilder v. St. Peter.iii. Common areas : Landlord possessed common areas, so landlord responsible for defects in

common areas.iv. Nuisance : Landlord responsible because the nuisance affects multiple tenants and the landlord

is better positioned to deal with the problem.v. Fraudulent misrepresentation : Standard principle of K law.

vi. Landlord promised to repair : Landlord was liable for promises to repair premises that didn’t happen or repairs were negligent.

vii. Express promises b. Third Party Conduct:

i. Common law: landlord not responsible for acts of third parties, including other tenants.ii. Modern trend: landlord remains obligated to control actions by tenants that interfere with

ability of other tenants to enjoy premises, such as nuisance or noise abatement. Many states still apply common law.

c. Covenant of Quiet Enjoyment (CQE ) : A commercial or residential tenant has a right of quiet enjoyment of the premises, without interference by the landlord. If the condition of the premises interferes with the tenant’s enjoyment of the premises, you don’t have to show there is a duty on the landlord to breach CQE. The landlord’s duty in one of the above exceptions or a provision in the lease. Breach of covenant gave grounds for the tenant to vacate and stop paying rent if (1) the breach substantially interfered with the tenant’s enjoyment of the property and (2) the landlord didn’t take reasonable steps to eliminate the problem.

1. Example: No breach of covenant of quiet enjoyment if landlord hires private security guards but crime continues, because he took reasonable steps.

ii. Reasons Still Necessary Since Differs from IWH: (1) implied warranty of habitability doesn’t cover commercial leases or all residential leases like single-family homes in some jurisdictions (but not Vermont as we saw in Hilder), (2) implied warranty of habitability isn’t recognized in all states, and (3) jurisdictions recognizing IWH may not apply it to all residential leases (such as the single-family home exception in Hilder v. St. Peter).

iii. Historical Evolution: 1. Actual Eviction : Only requirement to breach covenant, like changing the locks.2. Constructive Eviction as a Remedy : Constructive eviction became added as an

affirmative defense. Until the tenant vacated, the tenant had to continue paying rent. If there has been a breach of CQE and the tenant has given landlord notice of the problem and an opportunity for landlord to correct problem and landlord fails to correct in timely fashion, tenant may vacate premises in timely fashion and stop paying rent. Substantial breach of independent duty by landlord or substantial interference with tenant’s enjoyment (possession) that amounts to constructive eviction.

a. Remember that constructive eviction and the covenant of quiet enjoyment are different. The tenant can stay in possession and sue for breach of covenant of quiet enjoyment. But CE an affirmative defenswe. Need to give notice of defect and reasonable time to fix it.

3. Reste Realty : CQE itself can be the basis of constructive eviction, unlike before. The tenant can deduct rent, but not withhold rent while the tenant remains in possession. The CQE can work independently of the traditional exceptions to caveat lessee or anything in the terms of the lease. It is separate from constructive eviction, which is just a remedy. The innovation is what it takes to show a breach of CQE – you now don’t have to show there was a duty independent of the covenant. You no longer have to go into one of the exceptions to caveat lessee – you just go directly to the covenant. Under traditional analysis, the covenant was dependent upon caveat lessee. Under Reste Realty, the covenant is an independent duty. You just ask whether the landlord’s conduct made the land substantially unfit for the purpose for which the property was rented. But without Reste Realty, you must ask whether the landlord has a duty with respect to the complained of defect, which means (1) is there anything in the lease that imposes such as duty. If no, did the landlord make an oral promise. If no, do one of the exceptions to caveat lessee apply, such as latent defect or nuisance or common areas. If the answer to all these question is no, then the landlord has no duty regardless of how much the defect interferes with the tenant’s enjoyment of the premises, there’s no breach of CQE. Reste Realty made the landlord’s duty have independent significance – it itself imposes a duty on the landlord.

In Reste Realty, the court really wanted to broaden the scope of CQE even though it could have established breach of CQE under landlord’s promise to repair basement flooding and duty to maintain common areas (the driveway). NJ Court departs from traditional rules (broadened approach to COQE): Alex: court did not need to depart: many exceptions are present in the instant case to the traditional Caveat lesse:

i. common areas: the drive way was a common area which needed repairii. express promise: there was an express promise to repair the leaking

Why did the court change the rule?

The new rule of law is more tenant friendly (convenant of quite enjoyment now has a broader reach)

If L renders the premises substantially unsuitable for the purpose for which they are leased, or which seriously interferes with the beneficial enjoyment of the premises, this is a breach of the covenant of quite enjoyment (less clear legal standard) departure from tradition approach: treating this as a independent grounds for constructive eviction –

did not need another violation by the L to show breach of the covenant of QEa.

iv. Tenant’s options when breach of CQE: (1) stay in possession, continue paying rent, and sue for damages (the difference between the fair rental value without defect and fair rental value with defect) or (2) vacate in a timely fashion, stop paying rent, and assert constructive eviction as an affirmative defense.

1. Problems: Tenant has to guess whether the breach of CQE is sufficient to be constructive eviction, so could be stuck with bad place.

d. Implied Warranty of Habitability (Modern view, but not law everywhere): There is a breach of the unwaivable implied warranty of habitability for residential leases of multi-unit homes (not single family homes – mostly apartments rented by a landlord in the business of renting apartments rather than a non-professional) when the defect has an impact on tenants’ health or safety (violation of a housing code is a helpful benchmark, but not necessary). The defect has to be such that it would in the eyes of reasonable person deprive tenants of essential functions that a residence is supposed to serve, but this is read objectively, not subjectively – it means conditions that violate statutory warranties of habitability regardless of the lease’s terms.

i. The implied warranty of obligation is an unqualified obligation to keep premises inhabitable, such as for trash collection when workers strike. A substantial breach can justify rent withholding.

1. Example: Failing to repair gym equipment is no violation of IWH because nothing to do with safe or healthy conditions.

2. Example: Failure to maintain luxury amenities like a pool isn’t a violation of IWH because there is an objective standard about the uses of the premises reasonably intended by the parties.

ii. Not waivable because (1) presumed unequal bargaining power between landlords and tenants, and (2) undesirable third party effects of letting it be waived, such as rats bothering neighbors.

1. Example: Even if landlord takes $50 per month for a rundown house because its in terrible condition, the tenant can still allege breach of warranty of habitability and not pay rent.

iii. Authority: Hilder v. St. Peter – Created the implied warranty of habitability even though it could have reached the same practical result based on the broken basement sewage pipe allowing for breach of CQE, although the problem was that the plaintiffs remained in possession without paying rent, which they cannot do under CQE.

iv. Policies: 1. CQE not always a helpful remedy since housing markets can be tight and the difficulty of

tenants predicting whether there really is constructive eviction in deciding whether to move out.

2. Unequal Bargaining Power between landlords and tenants is the basis for not letting the implied warranty of habitability be waived.

3. Better fulfills expectations of tenants, who don’t think of leases as estates in lands but as places of safety and security.

v. Advantages over CQE: (1) lets a tenant stay in the premises and withhold rent, (2) repair and deduct (tenant can make repairs and deduct their fair market value from the rent, (3) possibility of punitive damages, and (4) possible advantages of damages in tort for personal injury. Therefore, damages are much higher under implied warranty of habitability than CQE.

vi. Tenant’s Options When Breach of IWH : First step is always to notify landlord to give him opportunity to cure defect. After this, the tenant can (1) remain in possession and stop paying rent (more common) or (2) vacate.

1. Methods of Calculating Damages:

a. Difference of fair market value as warranted and as is condition (unrepaired).i. This is used rather than the contract formula because the K formula

would allow waiver of warranty of habitability by landlords claiming the K value and as is condition are the same, so no damages.

ii. The court in Hilder v. St. Peter explicitly adopted this approach to avoid implicit waiver of the warranty of habitability by a low K rent. In fact, this court assumed that the rental value as is was worth less than nothing.

b. Difference between agreed rent in contract and as is condition.i. This helps tenants’ attorneys because they don’t have to prove the fair

market value as warranted.vii. Retaliatory Eviction Doctrine: In almost all jurisdictions, the landlord attempting to change

services, increase rent, or end the tenancy within 80 to 90 days after a warranty problem is raised will carry a rebuttable presumption of retaliatory eviction, in which case the landlord cannot evict unless rebuts the presumption.

Summary: Tenant’s right to claim a constructive eviction is lost is not exercised within a reasonable time after the right comes into existence T can assert breach of the CQE even if she remains in possession and does not raise CE as an affirmative defense. She then pays the rent, but brings an action for breach of CQE for damages.

BUT, you're correct that she could not remain in possession, stop paying rent, and then bring an action for breach of CQE. She must continue to pay rent.

Warranty of Habitability Covenant of Quiet Enjoyment

Types of Leases covered Residential Commercial & residential

Defects Covered Latent & patent

Latent

(Reste Realty Corp.: covers patent defects after the signing of the lease)

Waivable? Not waivable Waivable

Punitive Damages? Yes No

With-holding rent T may remain in possession T must vacate

Damages FMV (as warranted/rent) – FMV (as is)

+ punitive damagesRent – FMV (as is)

TRANSFERS OF LAND

THE RECORDING SYSTEM

l. Principle: Because of the importance of notice in law of servitudes, assuring the title to a property is good is vital. There are three methods to assure good marketable title: (1) recording system, (2) title registration (aka Torrens system), and (3) title insurance.

i. Recording System : A private system where the recording is done by private individuals. 1. The point of recording is not that it’s required for validity – it’s to protect yourself against prior

unrecorded instruments that may conflict with later instruments.ii. Title Registration : Least important – A public system that involves the government giving a certificate stating

that title to the land is good. A very rare system because of potential for fraud.iii. Title Insurance : Used by all who buy land, even if they use a recording system to buy land. Title insurance

companies have their own private index, which is good because reduces risk of flawed titles. There are gaps in recordation system. Adverse possession, unless owner who seeks legal judgment and records that judgment. Easements, right of way easements, acquired by proscription, all not included. Recorded deeds might also be defective. Neither deeds nor wills are REQUIRED legally to be recorded in order to be valid. Want to record to protect self from subsequent BFP.

m. Indexes: There are two main categories of indexes:i. Tract Index – The best system because of simplicity. Parcels are filed by a number. The tract is given a

number and you do a search under the number of the tract. But this index is rare, and you usually have to use the grantor-grantee index, which is far worse.

ii. Grantor-Grantee Index – You do this in the county court of the place where the land is located. It’s a far worse system than tract index and requires you to trace the grantees back a long time and then going forward in the grantor index to find out if grantor transferred title to anybody else.

n. Requirements of Valid Deed:i. Recordation of documents affecting title such as wills do not have to be recorded to be valid.

1. To be valid, a deed must be (1) in writing (signed by party to be charged) and (2) delivered (not need to be manual, can use 3rd party escrow, can stick in safety deposit box and say deed upon time of death). Deed needs to identify grantor and grantee. Describe conveyed property. 3 Methods for legal description.

a. Metes and boundsb. Government survey (rare)c. Plat (subdivision map, usually on file from residential developer). Most efficient.

ii. Conditional delivery must be to a third party (escrow), cannot be to grantee because safety of real estate titles and prevent fraud and fabrication. (Sweeney).

o. Purpose of Recording Statutes: (1) protect subsequent purchaser of land from prior unrecorded instruments and (2) protect existing owners from losing their title to later purchasers. You do a title search to see if there are prior unrecorded instruments that could affect your interest in land.

p. Recording Statutes :i. Rule: Different states have different rules about what recordings are valid. The main categories are: (1) race,

(2) notice, and (3) race-notice.1. Race (2 states): Under pure race, all you have to do is be the first person to record. Notice is

irrelevant.2. Notice (1/2 states): The subsequent purchaser is protected if he or she (1) is a bona fide purchaser

that gave valuable consideration and (2) took without notice (actual or constructive). a. Actual Noticeb. Constructive Notice:

i. Record Notice: Recording a deed is considered to give notice to all subsequent purchasers.

ii. Inquiry Notice: A person with notice of facts that would lead the “reasonable person” to make inquiries that would have yielded actual notice that would have led

you to learn of the actual facts, you are deemed to have been given actual notice. You have a duty to inquire.

3. Race-Notice (1/2 states): Protects the subsequent purchaser against prior unrecorded instruments if he takes: (1) without notice of prior instruments and (2) records first.

ii. Shelter Rule: A person who takes from a bona fide purchaser protected by the recording act has the same rights as his grantor, and thus is protected from earlier conveyances.

iii. Example: O conveys to A, not recorded. O conveys to B, not recorded (bona fide purchaser). A records. A conveys to C (bona fide purchaser). B records. C records.

1. Who wins between B and C?a. Under Notice Statute: B wins over A since B is a subsequent bona fide purchaser without

notice. But C wins over B because C is a subsequent bona fide purchaser without notice of conveyance to B since it wasn’t recorded, so C wins.

b. Under Race-Notice Statute: A wins over B because B didn’t record first. And because A wins over B, A can transfer A’s superior rights to C through the shelter rule. Therefore, C wins over B.

Title Search Start at the recorder’s office in the county office 2 Types of Indexes in US:

Grantor-grantee indexes: separate indexes for grantors & grantees; indexed alphabetically & chronologically by surname

Run names in the Grantee index first – run it back as far as required (differing standards – US gov, custom in county, etc); usually 50-100 yrs

Then, run names in the Grantor index – run it forward to the present Through this process: gain all the instruments affecting the land (not complete picture

however: Adverse possession may insert gaps; easements can be created w/o instruments) Tract Index: utilizes an identification number assigned to a particular tract – not common in the US

Most parcels of lands are described by metes and bounds, not ID numbers

II. PRIVATE LAND USE CONTROLS: THE LAW OF SERVITUDESDefinition: Servitudes are private land use controls which parties agree to regulate how land used so as to maximize aggregate value of all land in question. A servitude gives a use interest, NOT an ownership interest like an estate does – the right to do something on another’s land or have another not do something on his or her own land – both of which involve the uses of another’s land.

They are not revocable at will, unlike a license, and is a use valid for a specified period. The duration depends on whether the easement agreement is a contract enforceable against the person (in personam) or a covenant that runs with the land as a property right enforceable against whoever buys neighbor’s land (in rem).

a. Major Servitude Types: (1) easements, (2) real covenants, and (3) equitable servitudes. 2. Minor Servitude Types: (1) profits a prendre: right to remove things thought of as part of land, such

as mining rights, and (2) licenses – an oral or written permission given by the occupant of land allowing the licensee to do some act that otherwise would be a trespass, which is recovable at will of landowner.

ii. Easements1. Rule: An easement is the right to use someone else’s land in some way. It can be either an (1)

affirmative easement or (2) negative easement. Since they relate to land, the Statute of Frauds controls.

a. Affirmative Easement : The right to use another’s land for a particular use through either (1) appurtenant easement or (2) easement in gross.

i. Appurtenant Easement : An easement that benefits a piece of land. Can identify by saying that the easement “runs with the land.” Produces a dominant tenement (land benefited by the easement) and a servient tenement (land burdened by the easement). The easement appurtenant attaches to the dominant tenement and goes to successive owners. Cannot be detached without the consent of both dominant and servient owners.

1. Example: Willard v. First Church of Christ, Scientist – McGugan let Peterson have lot 20 on the condition that the churchgoers of the church across the street be able to use the parking lot on Sundays. McGugan thus created an affirmative easement and put it in the deed to Peterson. Peterson then conveyed to Willard without telling him of the easement. The problem was the California had a stranger to the deed rule that forbade reserving an easement to benefit a third party. The California Supreme Court dislikes this rule since it was easily evaded by two papers trick. It ultimately abolished the stranger to the deed rule for reservations, but not for exceptions. A bad ruling because it should have abolished the silly distinction between reservations and exceptions.

2. Example: Whiteacre is located between Blackacre and a public road. O, owner of Whiteacre, conveys to A, owner of Blackacre, a right to cross Whiteacre to reach the public road.

ii. Easement in Gross : An easement that benefits somebody personally, not the land. Produces only a servient tenement. The personal beneficiary can take advantage of the easement in gross no matter where it moves since an easement in gross isn’t attached to the land. Fully transferable but cannot change nature of the burden on the servient estate.

1. Example: O, owner of Greenacre, grants to Heylook Billboard Co. the right to erect a sign on Greenacre. Heylook owns no land.

iii. Traditional Common Law: Cannot reserve or accept an easement in favor of a third party.

iv. Modern Law: You can reserve an easement in favor of a third party (new easement created), but not except an easement (allow a pre-existing easement to continue). NY still follows common law rule.

v. Stranger to the Deed Rule: A rule still valid in some states including New York that you cannot reserve an easement in a third party. Has been abolished in many states because it is easily evaded by two papers trick and doesn’t honor parties’ intentions. It can be evaded by the (1) regrant theory, (2) quasi-easement theory, or (3) two pieces of paper.

a. Reservation : Creates a new servitude via the regrant theory in favor a third party. In many states you cannot reserve an easement in favor a 3rd party. Changed by Willard so you could reserve an easement to a 3d party, but not except an easement.

i. Example: O conveys to A reserving a 20 food wide easement of way along the southern end of blackacre.

b. Exception : Holds out a preexisting servitude. You cannot except an easement of a third party. Not changed by Willard.

i. Example: A conveying blackacre to B, except for the easement previously reserved by O.

2. Regrant Theory : A legal fiction to escape the stranger to the deed rule that you cannot reserve an interest to a third party. Assumes the grantor gave the grantee the estate without an easement and the grantee conveyed an easement in favor of a third party.

3. Quasi-Easement : Another legal fiction to escape the stranger to the deed rule. It is to pretend you have an easement over your own property to benefit a third party. You just say the exception was a quasi-easement. Quasi-easement over own land. A has parcel of own land, uses road to highway at end of parcel, 20 years later subdivides large land, without saying anything in deed about easement to highway. Doctrine of implied easement from quasi-easement. Basis for once grantor severs land (why should eliminate exception/reservation principle).

4. Two Pieces of Paper : Owner can escape stranger to the deed rule by using two pieces of paper. First, grant easement to third party first. Second, transfer servient estate and a note in deed that it subject to an easement transferred back to the third party. O deeds BA to Church. Church then deeds BA to A reserving an easement in gross for itself (for parking).

b. Duration of Easement: The duration of an easement is measured the same way as the duration of an estate – in fee simple, term of years, of life estate.

2. CREATION OF PRIVATE AFFIRMATIVE EASEMENTS : Easements can be created by (1) deed, (2) necessity, (3) prescription, (4) estoppel, or (5) public trust doctrine.

a. Deed : As seen above, subject to stranger to the deed rule. b. Necessity : An easement by necessity arises by implication if it is shown that: (1) there was

unity of ownership of alleged dominant and servient estates, (2) the easement is strict necessity, not mere convenience (though modern trend is to lessen strictness of necessity), and (3) necessity existed at the time the dominant and servient estates were severed resulting in implied easement to the dominant (the common element easements by necessity fail on).

Policy: The policy for the harshness of these elements is that the law is imposing an easement that is not present in the deed by implication on the theory that there’s no other reason the dominant estate holder would have sold a landlocked portion of the property. An easement by implication is created by operation of law, not by written instrument. It is an exception to the statute of frauds.

i. Example: Othen v. Rosier – Othen’s attempt to get an easement by necessity failed even though his property was landlocked because it was unclear that necessity existed at the time dominant and servient estates were severed. A bad decision since Othen should have been able to win an easement by necessity or prescription.

c. Prescription : An easement by prescription giving a use interest (not title) can be acquired by using another’s land: (1) hostile and under claim of right (cannot be hostile if it is with permission of servient tenement owner), (2) open and notoriously, (3) continuously uninterrupted for entire statutory period of time, and (4) exclusively (cannot be open to the public, but can be used by dominant and servient estate holder, a laxer requirement than adverse possession). Difference b/w easement by prescription & adverse possession? No ownership rights in easements (only possessory/utilization rights)

1. Example: Other v. Rosier – Othen failed to get an easement by prescription because of failure to use Rosier’s land with hostility and under claim of right since Rosier used to permit Othen to use Rosier’s land to access the road since Rosier maintained the road and controlled the gate across the road and the location of the way Othen’s prior estate owners accessed the public road was ambiguous (a bad reason not to grant easement by prescription). Saying it was permissive, like a license, and could be revoked at will. Could not ripen into prescriptive right.

ii. Owner Prevention: To prevent acquisition of easement by prescription, the servient tenement must effectively stop use or bring suit. Compared to adverse possession, stopping an easement by prescription is easier in many states because of the lost grant theory.

iii. Lost Grant Theory : Many states hold that an easement by prescription is based on the owner’s acquiescence to the easement conveyed in a grant that was lost. Therefore, in these states, showing that the owner does not acquiesce such as by sending a letter is sufficient to end an easement by prescription.

1. Policy: Shouldn’t have made it over to America from England, but it did.2. Example: A makes a road across O’s land in 1982. O sends A a letter in 1992

forbidding A from passing over O’s land. In a state that recognizes the lost grant theory, this letter will stop easement by prescription. But in a state that analogizes easement by prescription to adverse possession, the letter will not stop easement by prescription (in fact, it would help because shows hostility of use).

d. Easement by Estoppel : In some states, a landowner failing to object when somebody crosses his land who later changes his mind and objects after that person has detrimentally relied on the implicit representation of license can acquire an easement by estoppel. This isn’t recognized in jurisdictions like New York because of the Statute of Frauds requirement. A license, revocable, may become inrrecovable if detrimentally relied upon some representation, express or implied by licensor that they will not revoke license. (construction of barn example).

e. Implication from a “quasi-easement” (Prior Use) f. Open and apparent use of an “easement” before severance creates a pattern which gives

rise to an easement by prescription. “Quasi” b/c cannot have easement on one’s own land (misleading to use term easement.

g. more attractive theory then rule of necessity – no requirement of strict necessity (reasonable necessity is sufficient)

h. not mentioned in Othen b/c TX courts do not recognize reserved easements in favor of the grantor. TX courts do allow grantees to utilizes theory – grantee gets more than what the deed said, not less as it would be if grantor allowed to utilized

3. CREATION OF PUBLIC AFFIRMATIVE EASEMENTS : Public easements can arise in certain contexts that give the public a right to cross or use land in some way. The most common one is the public trust doctrine, which has been used to let the public acquire easements over beaches and for environmental conservation.

a. Easement by Prescription : An easement by prescription generally doesn’t work for acquiring a public easement because it leads to individual easements or lacks the required adverseness.

b. Implied Dedication : Some states have held that a history of public use implies that the private owner has dedicated the beach to public use.

c. Custom : Some states (especially Oregon) allow custom to be the basis for extending a public easement over beaches. Idea is that Native Americans used the beach for a variety of purposes and Europeans did the same thing, so the bundle of property rights has never included the right to exclude the public completely from privately-owned beachfront property.

d. PUBLIC TRUST DOCTRINE : The state owns the land flowed by oceans, tidal waters, and navigable waterways in trust for the public uses of commerce, fishing, and navigation up to the high water mark (up to wet sand area). But the dry sand portion of beaches was traditionally not covered, except for publicly owned beaches. Massachusetts and Maine have refused to use the public trust doctrine to require private landowners to allow the public to access the dry sand portions of beaches. Michigan recently applied it to inland lakes.

i. History: Public right to use wet sand area for commerce, fishing, and navigation goes back to Roman Law. American courts first recognized public ownership of navigable inland waterways in Illinois Central.

ii. Minority Rule : New Jersey is strange in letting the public trust doctrine extend to dry sand area of beaches owned by quasi-public entities for public to access wet sand areas of beaches. In Raleigh Avenue Beach Association v. Atlantis Beach Club, New Jersey now requires private landowners to open property for dry sand use where the four-prong test of Matthews is satisfied.

1. Example: Matthews v. Bay Head Improvement Association – Question of case is whether there is public easement for rec purposes to dry sand portion of beach PRIVATELY owned both for purposes of access to wet sand (long time held as pub easement) and for recreational use. The New Jersey Supreme Court deemed D to be a quasi-public entity because it had a monopoly on beach access in the borough, let public on beach during non-prime times, and acted like a government agency in maintaining the beach. Because it acted like a quasi-municipal entity, it had to let the public use the dry sand portion of the beach for recreation. This decision does not hold that all private owners of beaches have to open their properties – it just says quasi-public entities have to give reasonable access to the public of the dry sand portion of beaches. Avon, a New Jersey case before this, was critical in establishing recreation as a recognized public use.

2. Test: The Court established a four-prong test to determine if quasi-public landowners have to open dry sand portion of beach (what reasonable public access is): (1) location of dry sand area in relation to the foreshore (closer to wet sand, more likely reasonable, farther and closer to private house, less likely to be able to use it), (2) extent and availability of publicly owned dry sand area (somewhere eels can go? Reasonable access to that tough?) (3) nature and extent of public demand (don’t want to impose massive crowds

on private owners) and (4) usage of upland area by owners (if have cabanas and using for commercial purposes)

a. Example: In Matthews, P satisfied all four tests: (1) easiness of reaching foreshore from the dry sand portion because there was a boardwalk that led directly from the dry sand portion to the foreshore, (2) lack of publicly owned foreshore in area, (3) strong public demand, and (4) private members regularly used the upland area.

iii. Negative Easements1. Rule : Gives easement holder right to prevent another land owner from using their land in a

particular way. Very limited in number. Essentially function the same as a restrictive covenant. Because of their limitations, negative easements usually arise in effect by covenants or equitable servitudes.

a. History: i. Britain: Only four negative easements were recognized in England because (1)

England had no recording system for negative easements, which were hard to discover when buying land, and (2) negative easements could arise by prescription:

1. Right to prevent neighbor from blocking your window.2. Right to prevent neighbor from blocking flow of air into a defined channel

such as a window. 3. Right to prevent neighbor from blocking flow of water in an artificial stream

(plumbing and sewage).4. Right to prevent neighbor from undermining support of your house.

ii. America: Should have prevented limits on negative easements since no easements by prescription and a strong recording system from the very beginning. But America didn’t do this, and only expanded the list slightly to include also: (1) scenic easements, (2) conservation easements by statute under a Uniform Conservation Easement Act, (3) primary residence easement, (4) solar easements, by statute, and (5) fascade preservation easements.

Covenants Running with the Landa. REAL COVENANTS (unlike easements can be created to benefit 3 rd parties).

a. Rule : Real covenants are promises made by one person about land use that are enforceable against someone other than the original contracting parties (run with the land, in rem rights, not just contract in personam rights) and the requested remedy is a legal remedy (MONEY DAMAGES). Less common than equitable servitudes. They create property rights, not K rights, that run with the land and usually include (1) negative covenants and (2) affirmative covenants. Both types of covenants are usually required when you move into a gated community and are forced to sign a Uniform Declaration of Covenants, Controls and Restrictions (CC&Rs). Contract rights aren’t sufficient because of the high transaction costs of renegotiating the K every time you and your neighbors’ properties exchange ownership. A promise to do (affirmative)/not do (negative) a certain thing regarding the use of land (eg

maintain a fence; not build a commercial building2. Negative (Restrictive) Covenants : Promises not to do something with your property, such as not

putting pink flamingoes on the lawn.a. Restatement (Third) treats negative covenants the same as negative easements. But it

leaves intact the distinction between affirmative and negative covenants because affirmative covenants are more onerous.

i. Lessees – Allowed to claim benefits of affirmative covenants and only have to perform reasonable burdens about negative covenants.

ii. Adverse Possessors – Subject to burdens of affirmative covenants, and the benefits under certain circumstances.

3. Affirmative Covenants : Promises to do something with property, such as paying dues to a homeowner’s association and trim trees.

iv. Requirements : To create a real covenant in America, you traditionally must have: (1) horizontal privity of estate (for burden), (2) vertical privity of estate (same estate for burden, some same interest for benefit), and (3) touch and concern (for both benefit and burden)

1. Horizontal Privity : A relationship between the original promisor and original promisee. English courts required there to be a landlord-tenant relationship to have horizontal privity. American courts recognize horizontal privity in both landlord-tenant and grantor-grantee relationships – therefore, there still must be a conveyance between the two original parties, not just promises. Horizontal privity is required for the burden to run, but not the benefit to run.

2. Vertical Privity : A relationship between an original party to the covenant and an assignee. Restatement (first) required an estate relationship where the burdened party succeeded to the same estate that the promisor had (this is why there’s no vertical privity when an adverse possessor gains a new estate, no life tenant, 3rd party beneficiary). The Restatement (first) only required the benefited party to assume some interest that the original promisee had, not necessarily the same estate.

3. Touch and Concern : A connection exists between the substance of the promise and the affected land that makes it reasonable to say the promise should be enforceable against future owners of the land. The touch and concern requirement is to distinguish between promises that should be enforceable and personal only between contracting parties from those that should be enforceable by and against non-original contracting parties because the burden has some connection to the land. Restatement 3rd gets rid of it and replaces it with public policy.

REAL COVENANTS Horizontal privity Vertical privity Touch and concern

Running of Burden Yes (L/T or G/G) Yes: same estate Yes

Running of Benefit No Yes: some interest Yes

4. Distinguishing between Running of Benefit and Burden: To determine whether we’re dealing with the running of the benefit and burden, look at who is trying to get the benefit of promise.

a. Example: A and B are neighboring landowners and they decide to mutually restrict their lots to single-family residential use. They sign an agreement wherein each promisor they promise on behalf of themselves and assigns (this is critical because it binds yourself and everybody who succeeds to your land – this is the difference between creating a contract and property right). The agreement is recorded properly and B sells her lot to C. C then builds an apartment house on her lot and A sues C for damages. What result?

i. Answer: We’re dealing with the running of the burden because C is not an original promisor. Therefore, we ask whether there is horizontal privity, and there is not since A and C didn’t contract with each other (there was no grantor-grantee relationship). Therefore, the K is enforceable between A and B, but not between A and C.

1. Suppose that after B conveyed to C, A breached the covenant. Since C was not an original contracting party, we look at running of the benefit. In this case, A is liable because horizontal privity is not required for the running of

the benefit, and vertical privity exists between B and C since C took B’s estate.

b. Example: O owns Whiteacre and Blackacre. A buys Blackacre from O. A promises O, his heirs, and assigns that A, his heirs, and assigns will not erect a pizza parlor on Blackacre, which would be objectionable to Whiteacre. Subsequently A devises Blackacre to his wife, W, for life. W erects a pizza parlor. O sues. What result?

i. Answer: Since O is the original contracting party, we’re talking about the running of the burden. And there is no vertical privity because a life estate is not a fee simple. Therefore, O loses.

c. Example: O, a developer, conveys Lot 1 to A, who promises not to use Lot 1 for commercial purposes. A subsequently sells Lot 1 to B, who uses it for commercial purposes. What result?

i. Answer: Burden of the covenant runs to B because A and O are in horizontal privity (grantor-grantee relationship) and there is vertical privity of the same estate between A and B (both of which are required for the burden to run).

Note: Difference betweeh covenant and defeasible fee. Same function but not substitutes. FS determinable, forfeiture of estate if limit breached, CS auto right of entry. Servitude, no forfeiture, money or injunction.

a. EQUITABLE SERVITUDESv. Rule : A promise about land use enforceable that runs with the land when the requested remedy is an

EQUITABLE REMEDY, such as an injunction. Applies only to negative (restrictive) interests, not affirmative promises. Governs the majority of covenants since landowners prefer injunctions rather than money damages. The requirements of an equitable servitude are: (1) intent, (2) touch and concern, (3) notice, and (4) vertical privity (sometimes). HORIZONTAL PRIVITY ISN’T REQUIRED.

a. History: Originated in Tulk v. Moxhay. Tulk conveyed land to Elms after extracting a promise not to develop garden. Elms conveyed to Moxhay, who had notice of Elms’s promise. No real covenant enforceable because no horizontal privity (England requires landlord-tenant relationship for horizontal privity). But equity court let P win by creating equitable servitude doctrine.

2. Intent : Original parties intended for burden to run with the land, such as by assigning the burden and benefit to themselves and assigns.

3. Touch and Concern : Still a requirement although Restatement (Third) tried to abolish it. Really just a way to measure reasonableness of enforcing covenant. Burden of promise touches and concerns the burdened land. There is a connection between the promise’s substance and the affected land that makes it reasonable to say promise should be enforceable against future landowners. Purpose is to distinguish personal promises from those somehow connected to the land. In Neponsit, New York’s court tried to define touch and concern as a requirement that affects land’s value. Negative covenants usually touch and concern land. Affirmative covenants are more problematic. Restrictive Covenants in planned communities a problem. Affirmative, do something (tree cutting) ok, paying (maineteance fee ok, contiguous facility or water no).

a. Restatement (Third) abolishes touch and concern requirement and creates a policy test that presumes a covenant is enforceable unless unconstitutional (like racially restricted covenant), illegal (such as under Fair Housing Act), unconscionable, or contrary to public policy.

b. Example: If Prof. sells you land in return for promise not to develop it and you sell land to Lara who tries to build a Wal-Mart, Alexander can get an injunction because the burden touches and concerns the burdened land.

4. Notice : The covenants are enforceable against you only if you’re a purchaser with notice of equitable servitude. For non-purchasers such as adverse possessors, the covenant is enforceable

regardless of notice. Can be satisfied by actual notice, record notice, and inquiry notice. Equity comes down to notice because eliminated privity.

EQUITABLE SERVITUDES

Horizontal privity Vertical privity Touch and concern Notice

Running of Burden

No No Yes Yes (purchasers) no protection if inheritance, gift, AP

Running of Benefit

No No (mostly, NY murky) Yes

Vertical Privity: Some courts require there to be vertical privity for the running of the benefit (such as New York, though some recognize substantive vertical privity). Other jurisdictions do not require vertical privity for third parties. In Neponsit, New York recognized for the first time that homeowners’ associations have standing to enforce covenants despite vertical privity requirement on theory that the association acted as an agent of the developer.

Example: Suppose A agrees to transfer blackacre to B (blackacre is undeveloped wetland) and B promises A not to develop blackacre, with the nature conservancy having the right to enforce the agreement. The nature conservancy is a third party beneficiary of the contract and can enforce it in most jurisdictions even though there is no vertical privity and conservancy isn’t a party to the estate.

Burden to Run Benefit to Run

Real Covenants: Traditional

(damages sought)

Intent

Horizontal Privity

- grantor/grantee- L/T

Vertical Privity (of estate)

- entire estate conveyedNotice (successive owners must have notice)

Touch and Concern (effect the use of land)

Intent

Vertical Privity (less

stringent than for burden

to run – need only some interest in same piece of property)

Touch and Concern

Equitable Servitudes

(equitable relief sought)

Intent

Notice (purchasers)

Touch and Concern

Intent

Touch and Concern

*Vertical Privity (some states yes, most states no)

Restatement: Does away with covenants/servitudes vs. easements. Instead, Restatement covers servitudes, which include negative easements (now called negative servitude), real covenants, and equitable servitudes. Still need intent and notice for burden, and writing.

(1) Restatement: (a) General Rule: there is a presumption that a servitude is enforceable where

there is intent, and notice is required for burden to run. (b) Exceptions: Servitude is unenforceable and does not run to successive

owners if it is illegal, unconstitutional (e.g. racially discriminatory servitude – state action), or violates public policy. Violates public policy if it: 1) is arbitrary or capricious, i.e. has no rational relationship with any legitimate and stated objective for the servitude; 2) Unreasonably burdens a fundamental constitutional right; 3) Imposes unreasonable restraint on alienation; 4) Unconscionable; or 5) Lacks rational justification.

(2) Negative vs. Affirmative (not as important, but here):(a) Negative Promise: a negative promise runs to all subsequent owners and

possessors of the burdened and benefited properties. Like easement, runs to all subsequent owners.

(b) Affirmative promise: may not be enforced if unreasonably burdensome. Example, if affirmative burden that keep trees on your property cut, inappropriate for tenant on three months to do that. The burdens and benefits of such covenants run to persons who succeed to estates of the same duration as were held by the original parties to the covenant. The burdens also run to adverse possessors. The burden will also run to a lessee

only if reasonable parties would expect that the act is the kind of act more easily carried out by the tenant than by the landlord

(3) SUMMARY:

Hypo: A, owner of BA, deeds BA to B, and B promises to not use the land for use commercial purposes.

A = promise; B = promisor. This does not form a K (in personum rights only) – but rather binds all assignees and successors and is in

favor of A and A’s successors Now C buys BA from B – C builds a 7-11 on BA; can A enforce promise (recover $ damages) against C given

that C never made the promise?a. Money damages = law of real covenantsb. Issue: running of the burden (party against whom damages are sough is someone other than the

original promisor); no running of benefit (A is the original promisee)

* - 3rd Restatement (minority US) has dropped the privity requirement; Rstmt distinguishes b/w negative and affirmative promises:

negative promises treated like easements for succession purposes (runs to all subsequently owners); affirmative promises: run to persons who succeed to the same estate only (but to leesees or life tenants –

burden runs only under certain conditions)

Hypo: 2 neigbours: A & B – promise to restrict use to residential use (recorded promise). B sells to C who proposes to put up commercial building. May A enforce original promise against C in equity?

Yes – no requirement of horiz or vertical privity; the promise was recorded in the chain of title; the touch & concern requirement is satisfied

Hypo: Running of Benefits under Equitable Servitude

WA BA

‘A’ ‘B’

A has never build within 10 yards of BA – B appreciates it. A puts in deed of WA that there is a promise to A that buyer is not to build within 10 yards of BA when he sells to C who sells to D. D is about to breach promise by developing within 10 yards of border.

Issue: May B (w/o vert privity) enjoin D from building w/in 10 yards?

There is no horiz privity b/w B and A There is horiz privity b/w A and C B is simply a 3rd party beneficiary – this is enforceable under 3rd party beneficiary doctrine under

Contract law (in some states & under the Rstmt) Issue is up in the air under NY law as to the requirement of privity

Hypo (affirmative covenant): Condo developer extracts promise from buyers in deed that purchaser and assignees and successor will pay certain sum to maintain tennis/sports complex beside the condo itself (not part of the condo).

‘A’ – original purchaser – sells to X – and D (developer) sells to Trump. X refuses to pay fee to Trump.

Issue: Is the promise to pay money for facilities off the complex but for the enjoyment of the condo residents satisfy the Touch and Concern requirement?

vertical privity present on both sides Court will likely find there is Touch and Concern:

Each condo owner has the right to use the facilities of the club (matter not that any one owner may not use the club) – this is an easement (a sufficient connection b/w the promise and the affect land)

Hypo: Suppose in common interest community – purchasers must pay 10% of capital gain on resale to the developer. Does this promise ‘Touch & Concern’ the land?

Under the 3rd Rstmt: no touch & concern requirement; the servitude is unenforceable only if it is:(1) illegal

(2) unConst [racially discriminator servitudes] or

(3) violates public policy:

- arbitrary & capricious: no rational relationship to the asserted objective

- unreasonably burden a fundamental Const right

- imposes unreasonable restrictions on alienation

- unconscionable

- lacks rational basis

Hypo: In a common interest community – restrictive covenant: no owner may put up a flag of any kind outside the house (for aesthetic reasons).

Issue: Does this Touch & Concern the land? Yes

Issue: Enforceable under the Rstmt?

Illegal? No unConst? No state action Violation of Public Policy?

Unreasonable burden to fundamental right: Freedom of Expression no direct violation of 1A (absence of state action)

a. COMMON INTEREST COMMUNITIES b. Rule : Common interest communities are communities that require CC&Rs (covenants, conditions and restrictins) as

a condition to join the community, which come in the form of (1) original CC&Rs (in declaration) or (2) subsequent CC&Rs (voted by board)

i. Original CC&Rs : Use restrictions in the declaration or master deed of common interest community. Carry a strong presumption of validity unless it is arbitrary (bearing no RR to the protection, preservation, operation or purpose of affected land (deferential), violates public policy, and burdens greatly outweigh the benefits. Test applies to the entire development, not as applied to a particular person. Restatement (Third) says subsequent restraints are valid if reasonable and original restraints as valid unless they lack rational justification, a deferential approach. Some states apply the business judgment rule, which is even more deferential to co-ops.

a. Example: Nahrstedt v. Lakeside Village Condominium Association – D’s restrictive covenant that banned pets was upheld. The court rejected the as applied standard and applied the restrictions across the board. Overturned Bernardo Villas, which said you couldn’t have a rule that banned trucks parked in a carport. Overturned Portola Hills, which said you couldn’t have a rule that banned outdoor satellite dishes.

i. Alexander doesn’t like no trucks rule because people might need truck to earn a living.

b. Example: A CC&R rule that bans political flags or signs is invalid because violates public policy, but one that strictly regulates the number of signs and manner of display is okay, such as the number of feet set back from the street.

2. Criticisms of Easy Enforceability: (Alexander’s argument) Laypersons especially don’t usually read CC&Rs closely or understand, so there’s often no effective notice of them. Also, in some areas like LA, there is little choice but to live in common interest community, so restrictions really aren’t freely chosen.

a. A response by Prof. Epstein is that parties had notice of CC&Rs and chose to live there, with the restrictions included in the market price.

ii. Subsequent CC&Rs : Rules promulgated by the governing board of the common interest community or the board’s interpretation of a rule. Governed by reasonableness standard, which balances harms and benefits. Applies to the entire development, not what’s reasonable for a particular person. The Rest. 3d. suggests the reasonableness test to balance the utility of the purpose served by the restraint from the harm that will flow from the restriction (balance benefits and harm). No presumption of validity, greater scrutiny.