REAL PROPERTY

Multistate 08 real property Q.indd 1 9/13/2016 4:33:19 PM

Multistate 08 real property Q.indd 2 9/13/2016 4:33:19 PM
 REAL PROPERTY i.

REAL PROPERTY

TABLE OF CONTENTS

I. ESTATES IN LAND  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  1
A. IN GENERAL  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  1
B. PRESENT POSSESSORY ESTATES  . . . . . . . . . . . . . . . . . . . . . . . . .  1
1. Fee Simple Absolute  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  1
2. Defeasible Fees  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  1
a. Fee Simple Determinable (and Possibility of Reverter)  . . . . . . . . . . .  1
1) Correlative Future Interest in Grantor—Possibility of Reverter  . . .  2
a) Possibility of Reverter Need Not Be Expressly Retained  . . . . .  2
b) Transferability of Possibility of Reverter  . . . . . . . . . . . . .  2
2) Correlative Future Interest in Third Party—Executory Interest  . . .  2
b. Fee Simple Subject to Condition Subsequent (and Right of Entry)  . . . . .  2
1) Correlative Future Interest in Grantor—Right of Entry  . . . . . . .  3
a) Failure to Reserve Right of Entry  . . . . . . . . . . . . . . . . .  3
b) Waiver of Right of Entry  . . . . . . . . . . . . . . . . . . . . . .  3
(1) Inaction by Itself Not a Waiver   . . . . . . . . . . . . . . . .  3
c) Transferability of Right of Entry  . . . . . . . . . . . . . . . . .  3
2) Correlative Future Interest in Third Party—Executory Interest  . . .  3
3) Compare—Fee Simple Determinable  . . . . . . . . . . . . . . . . . .  4
a) Construction of Ambiguous Language  . . . . . . . . . . . . . .  4
c. Fee Simple Subject to an Executory Interest  . . . . . . . . . . . . . . . . .  4
d. Limitations on Possibilities of Reverter and Rights of Entry  . . . . . . . .  5
e. Conditions and Limitations Violating Public Policy  . . . . . . . . . . . . .  5
1) Restraints on Marriage  . . . . . . . . . . . . . . . . . . . . . . . . .  5
2) Provisions Involving Separation or Divorce  . . . . . . . . . . . . . .  5
3. Fee Tail  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  5
4. Life Estate  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  5
a. Life Estates by Marital Right (Legal Life Estates)  . . . . . . . . . . . . .  6
b. Conventional Life Estate  . . . . . . . . . . . . . . . . . . . . . . . . . . .  6
1) For Life of Grantee  . . . . . . . . . . . . . . . . . . . . . . . . . . . .  6
2) Life Estate Pur Autre Vie (Life of Another)  . . . . . . . . . . . . . .  6
a) Inheritability  . . . . . . . . . . . . . . . . . . . . . . . . . . . .  7
c. Rights and Duties of Life Tenant—Doctrine of Waste  . . . . . . . . . . .  7
1) Affirmative (Voluntary) Waste—Natural Resources   . . . . . . . . .  7
a) Open Mines Doctrine   . . . . . . . . . . . . . . . . . . . . . . .  7
2) Permissive Waste  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  7
a) Obligation to Repair  . . . . . . . . . . . . . . . . . . . . . . . .  8
b) Obligation to Pay Interest on Encumbrances  . . . . . . . . . . .  8
c) Obligation to Pay Taxes  . . . . . . . . . . . . . . . . . . . . . . .  8
d) Special Assessments for Public Improvements  . . . . . . . . . .  8
(1) Apportionment of Costs  . . . . . . . . . . . . . . . . . . . .  8
e) No Obligation to Insure Premises  . . . . . . . . . . . . . . . . .  8
f) No Liability for Third Party’s Torts  . . . . . . . . . . . . . . . .  9
3) Ameliorative Waste  . . . . . . . . . . . . . . . . . . . . . . . . . . . .  9

Multistate 08 real property Q.indd 1 9/13/2016 4:33:19 PM

 ii. REAL PROPERTY

a) Compare—Leasehold Tenant  . . . . . . . . . . . . . . . . . . .  9
b) Compare—Worthless Property  . . . . . . . . . . . . . . . . . .  9
d. Renunciation of Life Estates  . . . . . . . . . . . . . . . . . . . . . . . . .  9
5. Estates for Years, Periodic Estates, Estates at Will, Tenancies at
Sufferance  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  10
C. FUTURE INTERESTS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  10
1. Reversionary Interests—Future Interests in Transferor  . . . . . . . . . . . .  10
a. Possibilities of Reverter and Rights of Entry  . . . . . . . . . . . . . . . .  10
b. Reversions  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  10
c. All Reversionary Interests Are “Vested”  . . . . . . . . . . . . . . . . . .  11
2. Remainders  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  11
a. Indefeasibly Vested Remainder  . . . . . . . . . . . . . . . . . . . . . . .  12
b. Vested Remainder Subject to Open  . . . . . . . . . . . . . . . . . . . . .  12
1) Divesting Interests Are Executory Interests  . . . . . . . . . . . . . .  13
2) Effect on Marketability of Title  . . . . . . . . . . . . . . . . . . . .  13
c. Vested Remainder Subject to Total Divestment  . . . . . . . . . . . . . .  13
d. Contingent Remainder  . . . . . . . . . . . . . . . . . . . . . . . . . . . .  14
1) Subject to Condition Precedent  . . . . . . . . . . . . . . . . . . . .  14
2) Unborn or Unascertained Persons  . . . . . . . . . . . . . . . . . . .  15
3) Destructibility of Contingent Remainders  . . . . . . . . . . . . . . .  15
a) Rule Abolished  . . . . . . . . . . . . . . . . . . . . . . . . . . .  16
b) Related Doctrine of Merger  . . . . . . . . . . . . . . . . . . . .  16
(1) Compare—Interests Created Simultaneously  . . . . . . .  17
e. Rule in Shelley’s Case (Rule Against Remainders in Grantee’s Heirs)   . .  17
f. Doctrine of Worthier Title (Rule Against Remainders in Grantor’s
Heirs)  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  18
3. Executory Interests  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  18
a. Shifting Executory Interest—Divests a Transferee  . . . . . . . . . . . .  18
b. Springing Executory Interest—“Follows a Gap” or Divests a
Transferor  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  19
c. Executory Interest Follows a Fee  . . . . . . . . . . . . . . . . . . . . . .  19
d. Differences Between Executory Interests and Remainders  . . . . . . . .  19
4. Importance of Classifying Interests “In Order”  . . . . . . . . . . . . . . . .  20
5. Transferability of Remainders and Executory Interests  . . . . . . . . . . . .  21
a. Vested Remainders Are Transferable, Devisable, and Descendible  . . . .  21
b. Contingent Remainders and Executory Interests Are Transferable
Inter Vivos  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  21
c. Contingent Remainders and Executory Interests Are Usually Devisable
and Descendible  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  21
d. Any Transferable Future Interest Is Reachable by Creditors  . . . . . . .  21
e. Practical Ability to Transfer Marketable Title  . . . . . . . . . . . . . . .  21
6. Class Gifts  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  22
a. Definitional Problems  . . . . . . . . . . . . . . . . . . . . . . . . . . . .  22
1) Dispositions to “Children”  . . . . . . . . . . . . . . . . . . . . . . .  22
2) Dispositions to “Heirs”  . . . . . . . . . . . . . . . . . . . . . . . . .  22
3) Dispositions to “Issue” or “Descendants”  . . . . . . . . . . . . . . .  22
4) Class Members in Gestation  . . . . . . . . . . . . . . . . . . . . . .  22
b. When the Class Closes—The Rule of Convenience  . . . . . . . . . . . . .  22

Multistate 08 real property Q.indd 2 9/13/2016 4:33:19 PM

 REAL PROPERTY iii.

1) Outright Gift—Class Closes at Time Gift Is Made  . . . . . . . . . .  22

a) No Class Members Alive at Testator’s Death—Class Stays
Open  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  23
2) Postponed Gift—Class Closes at Time Fixed for Distribution  . . . .  23
3) Dispositions Subject to Condition of Reaching Given Age  . . . . . .  23
4) Rule of Convenience Is a Rule of Construction Only  . . . . . . . . .  24
7. Survival  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  24
a. Express Words of Survival  . . . . . . . . . . . . . . . . . . . . . . . . . .  25
b. Implied Contingency of Survival—Gifts to “Issue,” “Descendants,” or
“Heirs”  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  25
D. TRUSTS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  25
1. Private Trust Concepts and Parties  . . . . . . . . . . . . . . . . . . . . . . .  25
a. Settlor  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  25
b. Trustee  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  25
c. Beneficiaries  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  25
d. Res  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  26
e. Application of Rule Against Perpetuities  . . . . . . . . . . . . . . . . . .  26
2. Creation of Trusts  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  26
a. Inter Vivos Conveyance  . . . . . . . . . . . . . . . . . . . . . . . . . . .  26
b. Inter Vivos Declaration  . . . . . . . . . . . . . . . . . . . . . . . . . . .  26
c. Testamentary Conveyance  . . . . . . . . . . . . . . . . . . . . . . . . . .  26
d. Pour-Over into Existing Trust  . . . . . . . . . . . . . . . . . . . . . . . .  26
3. Charitable Trusts  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  26
a. Beneficiaries  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  26
b. Application of Rule Against Perpetuities  . . . . . . . . . . . . . . . . . .  27
c. Cy Pres Doctrine  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  27
d. Enforcement of Charitable Trusts   . . . . . . . . . . . . . . . . . . . . .  27
E. THE RULE AGAINST PERPETUITIES  . . . . . . . . . . . . . . . . . . . . . . .  27
1. Analysis of the Rule  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  28
a. When the Perpetuities Period Begins to Run  . . . . . . . . . . . . . . . .  28
1) Wills—Date of Testator’s Death  . . . . . . . . . . . . . . . . . . . .  28
2) Revocable Trusts—Date Trust Becomes Irrevocable  . . . . . . . . .  28
3) Irrevocable Trusts—Date Trust Is Created  . . . . . . . . . . . . . .  28
4) Deeds—Date Deed Is Delivered with Intent to Pass Title  . . . . . .  28
b. “Must Vest”   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  28
1) “Wait and See” Rule   . . . . . . . . . . . . . . . . . . . . . . . . . .  29
c. “If at All”  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  30
d. “Lives in Being”  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  30
1) Who Can Be Used as Measuring Lives   . . . . . . . . . . . . . . . .  31
2) Reasonable Number of Human Lives Can Be Used  . . . . . . . . . .  31
e. Interests Exempt from Rule  . . . . . . . . . . . . . . . . . . . . . . . . .  31
1) Gift Over to Second Charity  . . . . . . . . . . . . . . . . . . . . . .  31
2) Vested Interests  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  32
a) Compare—Class Gifts Are Subject to Rule  . . . . . . . . . . .  32
3) Reversionary Interests  . . . . . . . . . . . . . . . . . . . . . . . . .  32
a) Compare—Executory Interests Are Subject to Rule  . . . . . .  33
f. Consequence of Violating the Rule—Interest Is Stricken  . . . . . . . . .  33
1) Exception—“Infectious Invalidity”  . . . . . . . . . . . . . . . . . .  33

Multistate 08 real property Q.indd 3 9/13/2016 4:33:19 PM

 iv. REAL PROPERTY

2.
The Rule in Operation—Common Pitfall Cases  . . . . . . . . . . . . . . . .  34
a. Executory Interest Following Defeasible Fee Violates the Rule  . . . . . .  34
b. Age Contingency Beyond Age Twenty-One in Open Class  . . . . . . . . .  34
c. The Fertile Octogenarian  . . . . . . . . . . . . . . . . . . . . . . . . . .  35
d. The Unborn Widow or Widower   . . . . . . . . . . . . . . . . . . . . . .  35
e. The Administrative Contingency   . . . . . . . . . . . . . . . . . . . . . .  36
f. Options and Rights of First Refusal  . . . . . . . . . . . . . . . . . . . . .  36
1) Options  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  36
a) Reasonable Time Limit May Be Inferred   . . . . . . . . . . . .  36
b) Options Connected to Leaseholds  . . . . . . . . . . . . . . . .  37
2) Rights of First Refusal  . . . . . . . . . . . . . . . . . . . . . . . . .  37
3. Application of the Rule to Class Gifts  . . . . . . . . . . . . . . . . . . . . . .  37
a. “Bad-as-to-One, Bad-as-to-All” Rule  . . . . . . . . . . . . . . . . . . . .  37
b. Class Closing Rules May Save Disposition  . . . . . . . . . . . . . . . . .  38
c. “Gift to Subclass” Exception  . . . . . . . . . . . . . . . . . . . . . . . . .  38
d. Per Capita Gift Exception  . . . . . . . . . . . . . . . . . . . . . . . . . .  39
4. Perpetuities Reform Legislation  . . . . . . . . . . . . . . . . . . . . . . . . .  39
5. Technique for Analysis of Perpetuities Problems  . . . . . . . . . . . . . . . .  40
a. Determine What Interests Are Created  . . . . . . . . . . . . . . . . . . .  40
b. Apply the Rule  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  40
c. Apply Reform Statute  . . . . . . . . . . . . . . . . . . . . . . . . . . . .  40
F. THE RULE AGAINST RESTRAINTS ON ALIENATION  . . . . . . . . . . . . .  40
1. Types of Restraints on Alienation  . . . . . . . . . . . . . . . . . . . . . . . .  40
2. Restraints on a Fee Simple  . . . . . . . . . . . . . . . . . . . . . . . . . . . .  40
a. Total Restraints  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  40
b. Partial Restraints  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  41
1) Reasonable Restraints Doctrine   . . . . . . . . . . . . . . . . . . . .  41
2) Discriminatory Restraints  . . . . . . . . . . . . . . . . . . . . . . .  41
a) Fourteenth Amendment  . . . . . . . . . . . . . . . . . . . . . .  41
b) Fair Housing Act  . . . . . . . . . . . . . . . . . . . . . . . . . .  41
3. Restraints on a Life Estate  . . . . . . . . . . . . . . . . . . . . . . . . . . . .  41
a. Legal Life Estate  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  41
b. Equitable Life Estate  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  42
4. Restraints on Future Interests  . . . . . . . . . . . . . . . . . . . . . . . . . .  42
a. Vested Remainders in Fee Simple  . . . . . . . . . . . . . . . . . . . . . .  42
b. Vested Remainders for Life  . . . . . . . . . . . . . . . . . . . . . . . . .  42
c. Contingent Remainders  . . . . . . . . . . . . . . . . . . . . . . . . . . .  42
5. Other Valid Restraints on Alienation  . . . . . . . . . . . . . . . . . . . . . .  42
a. Reasonable Restrictions in Commercial Transactions  . . . . . . . . . . .  42
b. Options and Rights of First Refusal  . . . . . . . . . . . . . . . . . . . . .  43
c. Restrictions on Transferability of Leaseholds  . . . . . . . . . . . . . . .  43
G. CONCURRENT ESTATES  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  43
1. Joint Tenancy  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  43
a. Creation  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  43
1) Four Unities Required   . . . . . . . . . . . . . . . . . . . . . . . . .  43
2) Modern Law  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  43
3) Express Language Required  . . . . . . . . . . . . . . . . . . . . . .  43
b. Severance  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  44

Multistate 08 real property Q.indd 4 9/13/2016 4:33:19 PM

 REAL PROPERTY v.

1) Inter Vivos Conveyance by One Joint Tenant  . . . . . . . . . . . . .  44

a) When More than Two Joint Tenants  . . . . . . . . . . . . . . .  44
b) Transactions that May Not Result in Severance  . . . . . . . . .  44
(1) Judgment Liens   . . . . . . . . . . . . . . . . . . . . . . .  44
(2) Mortgages  . . . . . . . . . . . . . . . . . . . . . . . . . . .  44
(3) Leases   . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  45
(a) Death of Lessor   . . . . . . . . . . . . . . . . . . . . .  45
2) Contract to Convey by One Joint Tenant  . . . . . . . . . . . . . . .  45
a) Compare—Executory Contract by All Joint Tenants  . . . . . .  45
(1) Common Law View—Joint Tenancy Continues  . . . . . .  46
(2) Other Courts—Tenancy in Common  . . . . . . . . . . . .  46
3) Testamentary Disposition by One Joint Tenant Has No Effect  . . .  46
a) Compare—“Secret” Deeds  . . . . . . . . . . . . . . . . . . . .  46
4) Effect of One Joint Tenant’s Murdering Another  . . . . . . . . . . .  46
2. Tenancy by the Entirety   . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  46
a. Right of Survivorship   . . . . . . . . . . . . . . . . . . . . . . . . . . . .  46
b. Severance Limited   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  47
c. Individual Spouse Cannot Convey or Encumber   . . . . . . . . . . . . .  47
3. Tenancy in Common  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  47
4. Incidents of Co-Ownership  . . . . . . . . . . . . . . . . . . . . . . . . . . . .  47
a. Possession  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  47
b. Rents and Profits  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  47
c. Effect of One Concurrent Owner’s Encumbering the Property  . . . . . .  47
d. Ouster  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  48
e. Remedy of Partition  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  48
1) Restraint on Partition by Co-Tenants  . . . . . . . . . . . . . . . . .  48
f. Expenses for Preservation of Property—Contribution  . . . . . . . . . .  48
1) Repairs—Contribution May Be Compelled for Necessary
Repairs  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  49
2) Improvements—No Contribution or Setoff  . . . . . . . . . . . . . .  49
3) Taxes and Mortgages—Contribution Can Be Compelled  . . . . . .  49
g. Duty of Fair Dealing Among Co-Tenants  . . . . . . . . . . . . . . . . . .  49

II. LANDLORD AND TENANT  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  49

A. NATURE OF LEASEHOLD  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  49
1. Tenancies for Years  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  50
a. Fixed Period of Time  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  50
b. Creation  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  50
c. Termination  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  50
1) Breach of Covenants  . . . . . . . . . . . . . . . . . . . . . . . . . .  50
a) Failure to Pay Rent  . . . . . . . . . . . . . . . . . . . . . . . .  50
2) Surrender  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  50
2. Periodic Tenancies  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  50
a. Creation  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  51
1) By Express Agreement  . . . . . . . . . . . . . . . . . . . . . . . . .  51
2) By Implication   . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  51
3) By Operation of Law  . . . . . . . . . . . . . . . . . . . . . . . . . .  51
a) Tenant Holds Over  . . . . . . . . . . . . . . . . . . . . . . . . .  51

Multistate 08 real property Q.indd 5 9/13/2016 4:33:19 PM

 vi. REAL PROPERTY

b) Lease Invalid  . . . . . . . . . . . . . . . . . . . . . . . . . . . .  51

b. Termination—Notice Required  . . . . . . . . . . . . . . . . . . . . . . .  51
3. Tenancies at Will  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  52
a. Creation  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  52
b. Termination   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  52
4. Tenancies at Sufferance  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  53
5. The Hold-Over Doctrine  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  53
a. Eviction  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  53
b. Creation of Periodic Tenancy  . . . . . . . . . . . . . . . . . . . . . . . .  53
1) Terms  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  53
2) Altered Terms  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  53
c. What Does Not Constitute Holding Over  . . . . . . . . . . . . . . . . . .  53
d. Double Rent Jeopardy  . . . . . . . . . . . . . . . . . . . . . . . . . . . .  54
e. Forcible Entry Statutes  . . . . . . . . . . . . . . . . . . . . . . . . . . . .  54
B. LEASES  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  54
1. Common Law—Lease Covenants Independent  . . . . . . . . . . . . . . . . .  54
2. Modern Trend—Lease Covenants Dependent  . . . . . . . . . . . . . . . . .  54
C. TENANT DUTIES AND LANDLORD REMEDIES  . . . . . . . . . . . . . . . . .  55
1. Tenant’s Duty to Repair (Doctrine of Waste)  . . . . . . . . . . . . . . . . . .  55
a. Types of Waste  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  55
1) Voluntary (Affirmative) Waste  . . . . . . . . . . . . . . . . . . . . .  55
2) Permissive Waste  . . . . . . . . . . . . . . . . . . . . . . . . . . . .  55
3) Ameliorative Waste  . . . . . . . . . . . . . . . . . . . . . . . . . . .  55
a) Liability—Cost of Restoration  . . . . . . . . . . . . . . . . . .  55
b) Modern Exception—Value of Premises Decreasing   . . . . . . .  56
b. Destruction of the Premises Without Fault  . . . . . . . . . . . . . . . . .  56
1) Majority View—Tenant Can Terminate Lease  . . . . . . . . . . . .  56
c. Tenant’s Liability for Covenants to Repair  . . . . . . . . . . . . . . . . .  56
1) Rebuilding After Structural Damage or Casualty Destruction  . . .  56
2) Repairing Ordinary Wear and Tear  . . . . . . . . . . . . . . . . . .  56
2. Duty to Not Use Premises for Illegal Purpose  . . . . . . . . . . . . . . . . . .  57
a. Occasional Unlawful Conduct Does Not Breach Duty  . . . . . . . . . . .  57
b. Landlord Remedies—Terminate Lease, Recover Damages  . . . . . . . .  57
3. Duty to Pay Rent  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  57
a. When Rent Accrues  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  57
b. Rent Deposits   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  57
1) Restrictions on Security Deposits  . . . . . . . . . . . . . . . . . . .  57
2) Choice of Law  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  58
c. Termination of Rent Liability—Surrender  . . . . . . . . . . . . . . . . .  58
4. Landlord Remedies  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  58
a. Tenant on Premises But Fails to Pay Rent—Evict or Sue for Rent  . . . .  58
1) Distress—Landlord’s Lien  . . . . . . . . . . . . . . . . . . . . . . .  58
b. Tenant Abandons—Do Nothing or Repossess  . . . . . . . . . . . . . . .  58
1) Landlord Does Nothing—Tenant Remains Liable  . . . . . . . . . .  58
2) Landlord Repossesses—Tenant’s Liability Depends on Surrender  .  58
a) Acts that Constitute Acceptance of Surrender   . . . . . . . . .  59
b) Acts that Do Not Constitute Acceptance of Surrender   . . . . .  59
D. LANDLORD DUTIES AND TENANT REMEDIES  . . . . . . . . . . . . . . . . .  59

Multistate 08 real property Q.indd 6 9/13/2016 4:33:19 PM

 REAL PROPERTY vii.

1.
Duty to Deliver Possession of Premises  . . . . . . . . . . . . . . . . . . . . .  59
a. Landlord Duty—Must Deliver Actual Possession  . . . . . . . . . . . . .  59
b. Tenant Remedy—Damages  . . . . . . . . . . . . . . . . . . . . . . . . .  59
2. Quiet Enjoyment  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  60
a. Actual Eviction  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  60
b. Partial Actual Eviction  . . . . . . . . . . . . . . . . . . . . . . . . . . . .  60
1) Partial Eviction by Landlord—Entire Rent Obligation Relieved  . .  60
2) Partial Eviction by Third Person—Rent Apportioned  . . . . . . . .  60
c. Constructive Eviction  . . . . . . . . . . . . . . . . . . . . . . . . . . . .  60
3. Implied Warranty of Habitability  . . . . . . . . . . . . . . . . . . . . . . . .  61
a. Standard—Reasonably Suitable for Human Residence  . . . . . . . . . .  61
b. Remedies   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  61
4. Retaliatory Eviction  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  61
5. Discrimination   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  61
a. Reasonable Accommodations  . . . . . . . . . . . . . . . . . . . . . . . .  62
E. ASSIGNMENTS AND SUBLEASES  . . . . . . . . . . . . . . . . . . . . . . . . .  62
1. Consequences of Assignment  . . . . . . . . . . . . . . . . . . . . . . . . . . .  62
a. Covenants that Run with the Land  . . . . . . . . . . . . . . . . . . . . .  62
b. Rent Covenant Runs with the Land  . . . . . . . . . . . . . . . . . . . . .  63
1) Reassignment by Assignee—Privity of Estate with Landlord
Ends  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  63
a) Effect of Assignee Assuming Rent Obligation  . . . . . . . . . .  63
2) Original Tenant Remains Liable  . . . . . . . . . . . . . . . . . . . .  63
2. Consequences of Sublease  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  63
a. Liability of Sublessee for Rent and Other Covenants  . . . . . . . . . . .  63
1) Termination for Breach of Covenants  . . . . . . . . . . . . . . . . .  64
b. Assumption by Sublessee  . . . . . . . . . . . . . . . . . . . . . . . . . . .  64
c. Rights of Sublessee  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  64
3. Covenants Against Assignment or Sublease  . . . . . . . . . . . . . . . . . . .  64
a. Strictly Construed Against Landlord  . . . . . . . . . . . . . . . . . . . .  64
b. Waiver of Covenant  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  64
c. Continuing Waiver  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  64
d. Transfer in Violation of Lease Not Void  . . . . . . . . . . . . . . . . . .  64
e. Reasonableness  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  64
4. Assignments by Landlords  . . . . . . . . . . . . . . . . . . . . . . . . . . . .  64
a. Right to Assign  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  65
b. Rights of Assignee Against Tenants  . . . . . . . . . . . . . . . . . . . . .  65
c. Liabilities of Assignee to Tenants  . . . . . . . . . . . . . . . . . . . . . .  65
F. CONDEMNATION OF LEASEHOLDS  . . . . . . . . . . . . . . . . . . . . . . .  65
1. Entire Leasehold Taken by Eminent Domain—Rent Liability
Extinguished  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  65
2. Temporary or Partial Taking—Tenant Entitled to Compensation Only  . . .  65
G. TORT LIABILITY OF LANDLORD AND TENANT  . . . . . . . . . . . . . . . .  65
1. Landlord’s Liability  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  65
a. Concealed Dangerous Condition (Latent Defect)  . . . . . . . . . . . . . .  65
b. Common Areas  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  66
c. Public Use  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  66
d. Furnished Short-Term Residence  . . . . . . . . . . . . . . . . . . . . . .  66

Multistate 08 real property Q.indd 7 9/13/2016 4:33:19 PM

 viii. REAL PROPERTY

e. Negligent Repairs by Landlord  . . . . . . . . . . . . . . . . . . . . . . .  66

f. Landlord Contracts to Repair  . . . . . . . . . . . . . . . . . . . . . . . .  66
2. Modern Trend—General Duty of Reasonable Care  . . . . . . . . . . . . . .  66
a. Defects Arising After Tenant Takes Possession  . . . . . . . . . . . . . .  66
b. Legal Duty to Repair  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  67
c. Security   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  67
3. Tenant’s Liability  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  67

III. FIXTURES  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  67

A. IN GENERAL  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  67
B. CHATTELS INCORPORATED INTO STRUCTURE ALWAYS BECOME
FIXTURES  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  67
C. COMMON OWNERSHIP CASES  . . . . . . . . . . . . . . . . . . . . . . . . . .  68
1. Annexor’s Intent Controls in Common Ownership Cases  . . . . . . . . . . .  68
a. Constructive Annexation  . . . . . . . . . . . . . . . . . . . . . . . . . . .  68
b. Vendor-Purchaser Cases  . . . . . . . . . . . . . . . . . . . . . . . . . . .  68
c. Mortgagor-Mortgagee Cases  . . . . . . . . . . . . . . . . . . . . . . . .  68
2. Effect of Fixture Classification  . . . . . . . . . . . . . . . . . . . . . . . . . .  68
a. Conveyance  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  68
b. Mortgage  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  69
c. Agreement to Contrary  . . . . . . . . . . . . . . . . . . . . . . . . . . .  69
D. DIVIDED OWNERSHIP CASES  . . . . . . . . . . . . . . . . . . . . . . . . . . .  69
1. Landlord-Tenant   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  69
a. Agreement   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  69
b. No Intent If Removal Does Not Cause Damage   . . . . . . . . . . . . . .  69
c. Removal Must Occur Before End of Lease Term   . . . . . . . . . . . . .  70
d. Tenant Has Duty to Repair Damages Resulting from Removal   . . . . .  70
2. Life Tenant and Remainderman  . . . . . . . . . . . . . . . . . . . . . . . . .  70
3. Licensee and Landowner  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  70
4. Trespasser and Landowner  . . . . . . . . . . . . . . . . . . . . . . . . . . . .  70
a. Trespasser’s Recovery Limited to Value Added to Land  . . . . . . . . .  70

IV. RIGHTS IN THE LAND OF ANOTHER—EASEMENTS, PROFITS, COVENANTS,

AND SERVITUDES  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  70
A. IN GENERAL  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  70
B. EASEMENTS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  70
1. Introduction  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  70
a. Types of Easements  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  71
1) Affirmative Easements  . . . . . . . . . . . . . . . . . . . . . . . . .  71
2) Negative Easements  . . . . . . . . . . . . . . . . . . . . . . . . . . .  71
b. Easement Appurtenant  . . . . . . . . . . . . . . . . . . . . . . . . . . . .  71
1) Use and Enjoyment  . . . . . . . . . . . . . . . . . . . . . . . . . . .  71
2) Benefit Attached to Possession  . . . . . . . . . . . . . . . . . . . . .  72
3) Transfer of Dominant and Servient Estates  . . . . . . . . . . . . . .  72
c. Easement in Gross  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  72
d. Judicial Preference for Easements Appurtenant  . . . . . . . . . . . . . .  73
2. Creation of Easements  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  73
a. Express Grant  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  73

Multistate 08 real property Q.indd 8 9/13/2016 4:33:19 PM

 REAL PROPERTY ix.

b. Express Reservation  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  73

c. Implication  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  73
1) Easement Implied from Existing Use (“Quasi-Easement”)  . . . . .  74
a) Existing Use at Time Tract Divided  . . . . . . . . . . . . . . .  74
b) Reasonable Necessity  . . . . . . . . . . . . . . . . . . . . . . .  74
c) Grant or Reservation  . . . . . . . . . . . . . . . . . . . . . . .  74
2) Easements Implied Without Any Existing Use  . . . . . . . . . . . .  74
a) Subdivision Plat  . . . . . . . . . . . . . . . . . . . . . . . . . .  74
b) Profit a Prendre  . . . . . . . . . . . . . . . . . . . . . . . . . .  74
3) Easement by Necessity  . . . . . . . . . . . . . . . . . . . . . . . . .  74
d. Prescription  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  75
1) Open and Notorious  . . . . . . . . . . . . . . . . . . . . . . . . . . .  75
2) Adverse  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  75
3) Continuous Use  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  75
4) When Prescriptive Easements Cannot Be Acquired  . . . . . . . . .  75
3. Scope  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  75
a. General Rules of Construction  . . . . . . . . . . . . . . . . . . . . . . .  75
b. Absence of Location  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  76
c. Changes in Use  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  76
d. Easements by Necessity or Implication  . . . . . . . . . . . . . . . . . . .  76
e. Use of Servient Estate  . . . . . . . . . . . . . . . . . . . . . . . . . . . .  77
1) Duty to Repair  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  77
f. Intended Beneficiaries—Subdivision of Dominant Parcel  . . . . . . . . .  77
g. Effect of Use Outside Scope of Easement  . . . . . . . . . . . . . . . . . .  77
4. Termination of Easements  . . . . . . . . . . . . . . . . . . . . . . . . . . . .  77
a. Stated Conditions  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  78
b. Unity of Ownership  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  78
1) Complete Unity Required   . . . . . . . . . . . . . . . . . . . . . . .  78
2) No Revival  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  78
c. Release  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  79
1) Easement Appurtenant  . . . . . . . . . . . . . . . . . . . . . . . . .  79
2) Easement in Gross  . . . . . . . . . . . . . . . . . . . . . . . . . . .  79
3) Statute of Frauds  . . . . . . . . . . . . . . . . . . . . . . . . . . . .  79
d. Abandonment  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  79
1) Physical Act Required  . . . . . . . . . . . . . . . . . . . . . . . . .  79
2) Mere Words Insufficient  . . . . . . . . . . . . . . . . . . . . . . . .  80
3) Mere Nonuse Insufficient  . . . . . . . . . . . . . . . . . . . . . . . .  80
e. Estoppel  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  80
f. Prescription  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  80
g. Necessity  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  80
h. Condemnation  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  81
i. Destruction of Servient Estate  . . . . . . . . . . . . . . . . . . . . . . . .  81
5. Compare—Licenses  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  81
a. Assignability  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  81
b. Revocation and Termination  . . . . . . . . . . . . . . . . . . . . . . . . .  81
1) Public Amusement Cases  . . . . . . . . . . . . . . . . . . . . . . . .  81
2) Breach of Contract  . . . . . . . . . . . . . . . . . . . . . . . . . . .  81
c. Failure to Create an Easement  . . . . . . . . . . . . . . . . . . . . . . .  82

Multistate 08 real property Q.indd 9 9/13/2016 4:33:19 PM

 x. REAL PROPERTY

d. Irrevocable Licenses  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  82

1) Estoppel Theory  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  82
2) License Coupled with an Interest  . . . . . . . . . . . . . . . . . . .  82
a) Vendee of a Chattel  . . . . . . . . . . . . . . . . . . . . . . . .  82
b) Termination of Tenancy  . . . . . . . . . . . . . . . . . . . . . .  83
c) Inspection for Waste  . . . . . . . . . . . . . . . . . . . . . . . .  83
C. PROFITS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  83
1. Creation  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  83
2. Alienability  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  83
3. Exclusive and Nonexclusive Profits Distinguished  . . . . . . . . . . . . . . .  83
4. Scope  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  83
a. Apportionment of Profits Appurtenant  . . . . . . . . . . . . . . . . . . .  83
b. Apportionment of Profits in Gross  . . . . . . . . . . . . . . . . . . . . .  84
5. Termination  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  84
D. COVENANTS RUNNING WITH THE LAND AT LAW (REAL
COVENANTS)  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  84
1. Requirements for Burden to Run  . . . . . . . . . . . . . . . . . . . . . . . .  84
a. Intent  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  84
b. Notice  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  85
c. Horizontal Privity   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  85
d. Vertical Privity  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  85
e. Touch and Concern  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  86
1) Negative Covenants   . . . . . . . . . . . . . . . . . . . . . . . . . . .  86
2) Affirmative Covenants  . . . . . . . . . . . . . . . . . . . . . . . . .  86
2. Requirements for Benefit to Run  . . . . . . . . . . . . . . . . . . . . . . . . .  87
a. Intent  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  87
b. Vertical Privity  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  87
c. Touch and Concern  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  87
3. Modern Status of Running of Burden and Benefit  . . . . . . . . . . . . . . .  87
a. Horizontal and Vertical Privity  . . . . . . . . . . . . . . . . . . . . . . .  88
b. Touch and Concern  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  88
4. Specific Situations Involving Real Covenants  . . . . . . . . . . . . . . . . . .  88
a. Promises to Pay Money  . . . . . . . . . . . . . . . . . . . . . . . . . . .  88
b. Covenants Not to Compete  . . . . . . . . . . . . . . . . . . . . . . . . . .  88
c. Racially Restrictive Covenants  . . . . . . . . . . . . . . . . . . . . . . .  88
5. Remedies—Damages  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  88
6. Termination  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  88
E. EQUITABLE SERVITUDES  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  89
1. Creation  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  89
a. Servitudes Implied from Common Scheme  . . . . . . . . . . . . . . . . .  89
1) Common Scheme  . . . . . . . . . . . . . . . . . . . . . . . . . . . .  89
2) Notice  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  90
2. Enforcement  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  90
a. Requirements for Burden to Run  . . . . . . . . . . . . . . . . . . . . . .  90
1) Intent  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  90
2) Notice  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  90
3) Touch and Concern  . . . . . . . . . . . . . . . . . . . . . . . . . . .  90
b. Requirements for Benefit to Run  . . . . . . . . . . . . . . . . . . . . . .  90

Multistate 08 real property Q.indd 10 9/13/2016 4:33:19 PM

 REAL PROPERTY xi.

c. Privity Not Required  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  90

d. Implied Beneficiaries of Covenants—General Scheme  . . . . . . . . . .  91
3. Equitable Defenses to Enforcement  . . . . . . . . . . . . . . . . . . . . . . .  91
a. Unclean Hands  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  91
b. Acquiescence  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  92
c. Estoppel  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  92
d. Changed Neighborhood Conditions  . . . . . . . . . . . . . . . . . . . . .  92
1) Zoning  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  92
2) Concept of the “Entering Wedge”  . . . . . . . . . . . . . . . . . . .  92
4. Termination  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  93
F. RELATIONSHIP OF COVENANTS TO ZONING ORDINANCES  . . . . . . . .  93
G. PARTY WALLS AND COMMON DRIVEWAYS  . . . . . . . . . . . . . . . . . .  93
1. Creation  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  93
2. Running of Covenants  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  93

V. ADVERSE POSSESSION  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  93

A. IN GENERAL  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  93
B. REQUIREMENTS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  94
1. Running of Statute  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  94
2. Actual and Exclusive Possession  . . . . . . . . . . . . . . . . . . . . . . . . .  94
a. Actual Possession Gives Notice  . . . . . . . . . . . . . . . . . . . . . . .  94
1) Constructive Possession of Part  . . . . . . . . . . . . . . . . . . . .  94
b. Exclusive Possession—No Sharing with Owner  . . . . . . . . . . . . . .  94
3. Open and Notorious Possession  . . . . . . . . . . . . . . . . . . . . . . . . . .  94
4. Hostile  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  95
a. If Possession Starts Permissively—Must Communicate Hostility  . . . . .  95
b. Co-Tenants—Ouster Required  . . . . . . . . . . . . . . . . . . . . . . .  95
c. If Grantor Stays in Possession—Permission Presumed  . . . . . . . . . .  95
d. Compare—Boundary Line Agreements  . . . . . . . . . . . . . . . . . .  95
1) Establishment Requirement  . . . . . . . . . . . . . . . . . . . . . .  96
5. Continuous Possession  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  96
a. Intermittent Periods of Occupancy Not Sufficient  . . . . . . . . . . . . .  96
b. Tacking Permitted  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  96
1) “Privity”  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  96
2) Formalities on Transfer  . . . . . . . . . . . . . . . . . . . . . . . . .  96
6. Payment of Property Taxes Generally Not Required  . . . . . . . . . . . . . .  96
C. DISABILITY  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  96
1. Effect of Disabilities—Statute Does Not Begin to Run  . . . . . . . . . . . . .  97
2. No Tacking of Disabilities  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  97
3. Maximum Tolling Periods  . . . . . . . . . . . . . . . . . . . . . . . . . . . .  97
D. ADVERSE POSSESSION AND FUTURE INTERESTS  . . . . . . . . . . . . . .  97
1. Possibility of Reverter—Statute of Limitations Runs on Happening
of Event  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  98
2. Right of Entry—Happening of Event Does Not Trigger Statute of
Limitations  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  98
a. Grantor Must Act Within Reasonable Time to Avoid Laches   . . . . . .  98
E. EFFECT OF COVENANTS IN TRUE OWNER’S DEED  . . . . . . . . . . . . .  98
F. LAND THAT CANNOT BE ADVERSELY POSSESSED  . . . . . . . . . . . . .  98

Multistate 08 real property Q.indd 11 9/13/2016 4:33:20 PM

 xii. REAL PROPERTY

VI. CONVEYANCING  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  98

A. LAND SALE CONTRACTS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  98
1. Statute of Frauds Applicable   . . . . . . . . . . . . . . . . . . . . . . . . . . .  98
a. Doctrine of Part Performance   . . . . . . . . . . . . . . . . . . . . . . .  99
1) Theories to Support the Doctrine   . . . . . . . . . . . . . . . . . . .  99
a) Evidentiary Theory   . . . . . . . . . . . . . . . . . . . . . . . .  99
b) Hardship or Estoppel Theory   . . . . . . . . . . . . . . . . . .  99
2) Acts of Part Performance   . . . . . . . . . . . . . . . . . . . . . . .  99
3) Can Seller Obtain Specific Performance Based on Buyer’s Acts?   . .  99
a) Evidentiary Theory   . . . . . . . . . . . . . . . . . . . . . . . .  99
b) Hardship or Estoppel Theory   . . . . . . . . . . . . . . . . . .  99
2. Doctrine of Equitable Conversion  . . . . . . . . . . . . . . . . . . . . . . . .  100
a. Risk of Loss  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  100
1) Casualty Insurance  . . . . . . . . . . . . . . . . . . . . . . . . . . .  100
b. Passage of Title on Death  . . . . . . . . . . . . . . . . . . . . . . . . . .  100
1) Death of Seller  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  100
2) Death of Buyer  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  100
3. Marketable Title  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  101
a. “Marketability” Defined—Title Reasonably Free from Doubt  . . . . . .  101
1) Defects in Record Chain of Title  . . . . . . . . . . . . . . . . . . .  101
a) Adverse Possession  . . . . . . . . . . . . . . . . . . . . . . . .  101
b) Future Interest Held by Unborn or Unascertained Parties  . . .  101
2) Encumbrances  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  102
a) Mortgages and Liens  . . . . . . . . . . . . . . . . . . . . . . .  102
b) Easements  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  102
c) Covenants  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  102
d) Encroachments  . . . . . . . . . . . . . . . . . . . . . . . . . .  102
3) Zoning Restrictions  . . . . . . . . . . . . . . . . . . . . . . . . . . .  102
4) Waiver  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  102
b. Quitclaim Deed—No Effect  . . . . . . . . . . . . . . . . . . . . . . . . .  103
c. Time of Marketability  . . . . . . . . . . . . . . . . . . . . . . . . . . . .  103
1) Installment Land Contract  . . . . . . . . . . . . . . . . . . . . . .  103
d. Remedy If Title Not Marketable  . . . . . . . . . . . . . . . . . . . . . .  103
1) Rescission, Damages, Specific Performance  . . . . . . . . . . . . .  103
2) Merger  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  103
4. Time of Performance  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  103
a. Presumption—Time Not of the Essence  . . . . . . . . . . . . . . . . . .  103
b. When Presumption Overcome   . . . . . . . . . . . . . . . . . . . . . . .  104
c. Effect of Time of the Essence Construction  . . . . . . . . . . . . . . . .  104
d. Liability When Time Not of the Essence  . . . . . . . . . . . . . . . . . .  104
5. Tender of Performance   . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  104
a. When Party’s Tender Excused   . . . . . . . . . . . . . . . . . . . . . . .  104
b. Neither Party Tenders Performance   . . . . . . . . . . . . . . . . . . . .  104
c. Buyer Finds Seller’s Title Unmarketable   . . . . . . . . . . . . . . . . .  104
d. Condition Precedent Unsatisfied  . . . . . . . . . . . . . . . . . . . . . .  104
6. Remedies for Breach of the Sales Contract  . . . . . . . . . . . . . . . . . . .  105
a. Damages  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  105
1) Liquidated Damages  . . . . . . . . . . . . . . . . . . . . . . . . . .  105

Multistate 08 real property Q.indd 12 9/13/2016 4:33:20 PM

 REAL PROPERTY xiii.

b. Specific Performance  . . . . . . . . . . . . . . . . . . . . . . . . . . . .  105

1) Buyer’s Remedy  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  105
2) Seller’s Remedy  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  105
c. Special Rules for Unmarketable Title  . . . . . . . . . . . . . . . . . . .  105
7. Seller’s Liability for Defects on Property  . . . . . . . . . . . . . . . . . . . .  105
a. Warranty of Fitness or Quality—New Construction Only   . . . . . . . .  105
b. Negligence of Builder  . . . . . . . . . . . . . . . . . . . . . . . . . . . .  106
c. Liability for Sale of Existing Land and Buildings  . . . . . . . . . . . . .  106
1) Misrepresentation (Fraud)  . . . . . . . . . . . . . . . . . . . . . . .  106
2) Active Concealment  . . . . . . . . . . . . . . . . . . . . . . . . . .  106
3) Failure to Disclose  . . . . . . . . . . . . . . . . . . . . . . . . . . .  106
d. Disclaimers of Liability  . . . . . . . . . . . . . . . . . . . . . . . . . . .  107
1) “As Is” Clauses  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  107
2) Specific Disclaimers  . . . . . . . . . . . . . . . . . . . . . . . . . .  107
8. Real Estate Brokers  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  107
9. Title Insurance  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  107
B. DEEDS—FORM AND CONTENT  . . . . . . . . . . . . . . . . . . . . . . . . . .  107
1. Formalities   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  107
a. Statute of Frauds   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  107
b. Description of Land and Parties   . . . . . . . . . . . . . . . . . . . . . .  107
c. Words of Intent   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  108
d. Consideration Not Required   . . . . . . . . . . . . . . . . . . . . . . . .  108
e. Seal Is Unnecessary   . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  108
f. Attestation and Acknowledgment Generally Unnecessary   . . . . . . . .  108
g. Signature   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  108
1) Spouse’s Signature  . . . . . . . . . . . . . . . . . . . . . . . . . . .  108
2) Trustee’s Signature  . . . . . . . . . . . . . . . . . . . . . . . . . . .  108
2. Defective Deeds and Fraudulent Conveyances   . . . . . . . . . . . . . . . . .  108
a. Void and Voidable Deeds   . . . . . . . . . . . . . . . . . . . . . . . . . .  108
1) Void Deeds   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  109
2) Voidable Deeds   . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  109
b. Fraudulent Conveyances   . . . . . . . . . . . . . . . . . . . . . . . . . .  109
3. Description of Land Conveyed   . . . . . . . . . . . . . . . . . . . . . . . . .  109
a. Sufficient Description Provides a Good Lead   . . . . . . . . . . . . . . .  109
b. Insufficient Description—Title Remains in Grantor   . . . . . . . . . . .  109
c. Parol Evidence Admissible to Clear Up Ambiguity   . . . . . . . . . . . .  110
1) Compare—Inadequate Description   . . . . . . . . . . . . . . . . .  110
d. Rules of Construction   . . . . . . . . . . . . . . . . . . . . . . . . . . . .  110
e. Land Bounded by Right-of-Way   . . . . . . . . . . . . . . . . . . . . . .  110
1) Title Presumed to Extend to Center of Right-of-Way   . . . . . . . .  110
a) Evidence to Rebut Presumption   . . . . . . . . . . . . . . . . .  111
b) Measuring from Monument   . . . . . . . . . . . . . . . . . . .  111
2) Variable Boundary Line Cases   . . . . . . . . . . . . . . . . . . . .  111
a) Slow Change in Course Changes Property Rights   . . . . . . .  111
b) Avulsion Does Not Change Property Rights   . . . . . . . . . .  111
c) Encroachment of Water Does Not Change Fixed Boundary
Lines   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  111
f. Reformation of Deeds   . . . . . . . . . . . . . . . . . . . . . . . . . . . .  111

Multistate 08 real property Q.indd 13 9/13/2016 4:33:20 PM

 xiv. REAL PROPERTY

4.
Closing Documents  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  112
a. Closing Disclosure  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  112
b. Notification of Defects  . . . . . . . . . . . . . . . . . . . . . . . . . . . .  112
c. Environmental Report  . . . . . . . . . . . . . . . . . . . . . . . . . . . .  113
C. DELIVERY AND ACCEPTANCE  . . . . . . . . . . . . . . . . . . . . . . . . . .  113
1. Delivery—In General  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  113
a. Manual Delivery  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  113
b. Presumptions Relating to Delivery  . . . . . . . . . . . . . . . . . . . . .  113
c. Delivery Cannot Be Canceled  . . . . . . . . . . . . . . . . . . . . . . . .  114
d. Parol Evidence  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  114
1) Admissible to Prove Grantor’s Intent  . . . . . . . . . . . . . . . . .  114
2) Not Admissible to Show Delivery to Grantee Was Conditional  . . .  114
3) Admissible to Show No Delivery Intended  . . . . . . . . . . . . . .  114
a) Deed Intended as Mortgage  . . . . . . . . . . . . . . . . . . .  114
b) Transfer of Deed to Bona Fide Purchaser  . . . . . . . . . . . .  114
(1) Estoppel in Favor of Innocent Purchaser  . . . . . . . . .  115
4) Comment  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  115
2. Retention of Interest by Grantor or Conditional Delivery  . . . . . . . . . . .  115
a. No Delivery—Title Does Not Pass  . . . . . . . . . . . . . . . . . . . . .  115
b. No Recording—Title Passes  . . . . . . . . . . . . . . . . . . . . . . . . .  115
c. Express Condition of Death of Grantor Creates Future Interest  . . . . .  115
d. Conditions Not Contained in Deed  . . . . . . . . . . . . . . . . . . . . .  115
e. Test—Relinquishment of Control  . . . . . . . . . . . . . . . . . . . . . .  116
3. Where Grantor Gives Deed to Third Party  . . . . . . . . . . . . . . . . . . .  116
a. Transfer to Third Party with No Conditions  . . . . . . . . . . . . . . .  116
b. Transfer to Third Party with Conditions (Commercial Transaction)  . .  116
1) Parol Evidence Admissible to Show Conditions  . . . . . . . . . . .  116
2) Grantor’s Right to Recover Deed  . . . . . . . . . . . . . . . . . . .  117
a) Majority View—Can Recover Only If No Written Contract  . .  117
b) Minority View—No Right to Recover  . . . . . . . . . . . . . .  117
3) Breach of Escrow Conditions—Title Does Not Pass  . . . . . . . . .  117
a) Estoppel Cases  . . . . . . . . . . . . . . . . . . . . . . . . . .  117
4) Relation-Back Doctrine  . . . . . . . . . . . . . . . . . . . . . . . .  117
a) Not Applied If Intervening Party Is BFP or Mortgagee  . . . .  118
b) Not Applied in Favor of Escrow Grantee with Knowledge  . . .  118
c. Transfer to Third Party with Conditions (Donative Transactions)  . . .  118
1) Condition Unrelated to Grantor’s Death  . . . . . . . . . . . . . . .  118
2) Where Condition Is Grantor’s Death  . . . . . . . . . . . . . . . . .  118
a) Limitation—No Delivery If Conditioned on Survival  . . . . .  118
4. Acceptance  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  118
a. Usually Presumed  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  119
b. Usually “Relates Back”  . . . . . . . . . . . . . . . . . . . . . . . . . . .  119
5. Dedication  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  119
D. COVENANTS FOR TITLE AND ESTOPPEL BY DEED  . . . . . . . . . . . . .  119
1. Covenants for Title in a General Warranty Deed  . . . . . . . . . . . . . . .  119
a. Usual Covenants  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  119
1) Covenant of Seisin  . . . . . . . . . . . . . . . . . . . . . . . . . . .  119
2) Covenant of Right to Convey  . . . . . . . . . . . . . . . . . . . . .  120

Multistate 08 real property Q.indd 14 9/13/2016 4:33:20 PM

 REAL PROPERTY xv.

3) Covenant Against Encumbrances  . . . . . . . . . . . . . . . . . . .  120

4) Covenant for Quiet Enjoyment  . . . . . . . . . . . . . . . . . . . .  120
5) Covenant of Warranty  . . . . . . . . . . . . . . . . . . . . . . . . .  120
6) Covenant for Further Assurances  . . . . . . . . . . . . . . . . . . .  120
7) No Implied Warranties or Covenants  . . . . . . . . . . . . . . . . .  120
b. Breach of Covenants   . . . . . . . . . . . . . . . . . . . . . . . . . . . .  120
1) Covenants of Seisin and Right to Convey   . . . . . . . . . . . . . .  120
2) Covenant Against Encumbrances   . . . . . . . . . . . . . . . . . . .  121
3) Covenants for Quiet Enjoyment, Warranty, and Further
Assurances   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  121
a) Covenant Runs to Successive Grantees   . . . . . . . . . . . . .  121
b) Requirement of Notice   . . . . . . . . . . . . . . . . . . . . . .  121
c) Any Disturbance of Possession   . . . . . . . . . . . . . . . . .  121
c. Damages and Remote Grantees  . . . . . . . . . . . . . . . . . . . . . . .  122
2. Statutory Special Warranty Deed  . . . . . . . . . . . . . . . . . . . . . . . .  122
3. Quitclaim Deeds  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  122
4. Estoppel by Deed  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  122
a. Applies to Warranty Deeds  . . . . . . . . . . . . . . . . . . . . . . . . .  122
b. Rights of Subsequent Purchasers  . . . . . . . . . . . . . . . . . . . . . .  123
1) Effect of Recordation by Original Grantee  . . . . . . . . . . . . . .  123
c. Remedies of Grantee  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  123
E. RECORDING  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  123
1. Recording Acts—In General  . . . . . . . . . . . . . . . . . . . . . . . . . . .  123
a. Purpose of Recordation—Notice  . . . . . . . . . . . . . . . . . . . . . .  123
b. Requirements for Recordation  . . . . . . . . . . . . . . . . . . . . . . .  123
1) What Can Be Recorded—Instrument Affecting an Interest
in Land  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  123
2) Grantor Must Acknowledge Deed  . . . . . . . . . . . . . . . . . . .  124
c. Mechanics of Recording  . . . . . . . . . . . . . . . . . . . . . . . . . . .  124
1) Filing Copy  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  124
2) Indexing  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  124
2. Types of Recording Acts  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  124
a. Notice Statutes  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  124
b. Race-Notice Statutes  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  125
c. Race Statutes  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  125
3. Who Is Protected by Recording Acts   . . . . . . . . . . . . . . . . . . . . . .  125
a. Purchasers   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  126
1) Donees, Heirs, and Devisees Not Protected   . . . . . . . . . . . . .  126
2) Purchaser from Donee, Heir, or Devisee   . . . . . . . . . . . . . . .  126
3) Mortgagees   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  126
4) Judgment Creditors   . . . . . . . . . . . . . . . . . . . . . . . . . .  126
5) Transferees from Bona Fide Purchaser—Shelter Rule   . . . . . . .  127
a) Rationale   . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  127
b) Exception—No “Shipping Through”   . . . . . . . . . . . . . .  127
6) Purchaser Under Installment Land Contract   . . . . . . . . . . . .  127
a) Exception—Shelter Rule   . . . . . . . . . . . . . . . . . . . . .  128
b. Without Notice   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  128
1) Actual Notice   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  128

Multistate 08 real property Q.indd 15 9/13/2016 4:33:20 PM

 xvi. REAL PROPERTY

2) Record Notice—Chain of Title   . . . . . . . . . . . . . . . . . . . .  128

a) “Wild Deeds”   . . . . . . . . . . . . . . . . . . . . . . . . . . .  128
b) Deeds Recorded Late   . . . . . . . . . . . . . . . . . . . . . . .  129
(1) Exception—Shelter Rule   . . . . . . . . . . . . . . . . . .  129
(2) Lis Pendens Protection   . . . . . . . . . . . . . . . . . . .  129
c) Deeds Recorded Before Grantor Obtained Title   . . . . . . . .  130
d) Deed in Chain Referring to Instrument Outside Chain   . . . .  130
e) Restrictive Covenants—Deeds from Common Grantor   . . . .  130
(1) Subdivision Restrictions   . . . . . . . . . . . . . . . . . .  130
(2) Adjacent Lots   . . . . . . . . . . . . . . . . . . . . . . . .  131
f) Marketable Title Acts   . . . . . . . . . . . . . . . . . . . . . .  131
3) Inquiry Notice   . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  131
a) Generally No Inquiry from Quitclaim Deed   . . . . . . . . . .  131
b) Inquiry from References in Recorded Instruments   . . . . . .  131
c) Inquiry from Unrecorded Instruments in Chain of Title   . . .  131
d) Inquiry from Possession   . . . . . . . . . . . . . . . . . . . . .  132
c. Valuable Consideration   . . . . . . . . . . . . . . . . . . . . . . . . . . .  132
1) Test—Substantial Pecuniary Value   . . . . . . . . . . . . . . . . . .  132
2) Property Received as Security for Antecedent Debts Is
Insufficient  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  132
4. Title Search  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  133
a. Tract Index Search  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  133
b. Grantor and Grantee Index Search  . . . . . . . . . . . . . . . . . . . .  133
c. Other Instruments and Events Affecting Title  . . . . . . . . . . . . . . .  134
5. Effect of Recordation  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  134
a. Does Not Validate Invalid Deed  . . . . . . . . . . . . . . . . . . . . . . .  134
b. Does Not Protect Against Interests Arising by Operation of Law  . . . .  134
1) Exception  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  135
c. Recorder’s Mistakes  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  135
d. Effect of Recording Unacknowledged Instrument  . . . . . . . . . . . . .  135
1) No Acknowledgment—No Constructive Notice  . . . . . . . . . . . .  135
2) Compare—Defective Acknowledgment  . . . . . . . . . . . . . . . .  135
F. CONVEYANCE BY WILL  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  135
1. Ademption   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  136
a. Not Applicable to General Devises   . . . . . . . . . . . . . . . . . . . . .  136
b. Not Applicable to Land Under Executory Contract   . . . . . . . . . . .  136
1) No Ademption If Decedent Incompetent When Contract
Formed  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  136
c. Other Proceeds Not Subject to Ademption   . . . . . . . . . . . . . . . .  136
d. Partial Ademption   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  136
2. Exoneration   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  137
3. Lapse and Anti-Lapse Statutes   . . . . . . . . . . . . . . . . . . . . . . . . .  137
a. Degree of Relationship to Testator   . . . . . . . . . . . . . . . . . . . . .  137
1) Descendants Are Substituted   . . . . . . . . . . . . . . . . . . . . .  137
b. Application to Class Gifts   . . . . . . . . . . . . . . . . . . . . . . . . .  137
c. Anti-Lapse Statute Does Not Apply If Contrary Will Provision   . . . . .  137

Multistate 08 real property Q.indd 16 9/13/2016 4:33:20 PM

 REAL PROPERTY xvii.

VII. SECURITY INTERESTS IN REAL ESTATE  . . . . . . . . . . . . . . . . . . . . . .  137

A. TYPES OF SECURITY INTERESTS  . . . . . . . . . . . . . . . . . . . . . . . .  137
1. Mortgage   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  138
2. Deed of Trust   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  138
3. Installment Land Contract   . . . . . . . . . . . . . . . . . . . . . . . . . . .  138
4. Absolute Deed—Equitable Mortgage   . . . . . . . . . . . . . . . . . . . . . .  138
5. Sale-Leaseback   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  138
6. Equitable Vendor’s Lien  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  139
B. TRANSFERS BY MORTGAGEE AND MORTGAGOR  . . . . . . . . . . . . . .  139
1. Transfer by Mortgagee  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  139
a. Transfer of Mortgage Without Note  . . . . . . . . . . . . . . . . . . . .  139
b. Transfer of Note Without Mortgage   . . . . . . . . . . . . . . . . . . . .  139
1) Methods of Transferring the Note   . . . . . . . . . . . . . . . . . .  139
a) Holder in Due Course Status   . . . . . . . . . . . . . . . . . .  139
b) Benefits of Holder in Due Course Status   . . . . . . . . . . . .  140
2) Effect of Payment to Original Mortgagee After Transfer
of Note   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  140
2. Transfer by Mortgagor—Grantee Takes Subject to Mortgage  . . . . . . . .  140
a. Assumption  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  140
b. Nonassuming Grantee  . . . . . . . . . . . . . . . . . . . . . . . . . . . .  141
c. Due-on-Sale Clauses  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  141
C. DEFENSES AND DISCHARGE OF THE MORTGAGE  . . . . . . . . . . . . .  141
1. Defenses to Underlying Obligation  . . . . . . . . . . . . . . . . . . . . . . .  141
2. Consumer Protection Defenses to Foreclosure   . . . . . . . . . . . . . . . . .  141
a. Consumer Rights When Mortgage Is Signed  . . . . . . . . . . . . . . .  141
b. Consumer Rights During Foreclosure Process  . . . . . . . . . . . . . .  141
c. Choice of Law  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  141
3. Discharge of the Mortgage  . . . . . . . . . . . . . . . . . . . . . . . . . . . .  142
a. Payment  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  142
b. Merger  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  142
c. Deed in Lieu of Foreclosure  . . . . . . . . . . . . . . . . . . . . . . . . .  142
D. POSSESSION BEFORE FORECLOSURE  . . . . . . . . . . . . . . . . . . . . .  142
1. Theories of Title  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  142
a. The Lien Theory  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  142
b. The Title Theory  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  143
c. The Intermediate Theory  . . . . . . . . . . . . . . . . . . . . . . . . . .  143
2. Mortgagor Consent and Abandonment  . . . . . . . . . . . . . . . . . . . . .  143
3. Risks of Mortgagee in Possession  . . . . . . . . . . . . . . . . . . . . . . . .  143
4. Receiverships  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  143
E. FORECLOSURE  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  143
1. Redemption  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  143
a. Redemption in Equity  . . . . . . . . . . . . . . . . . . . . . . . . . . . .  143
b. Statutory Redemption  . . . . . . . . . . . . . . . . . . . . . . . . . . . .  144
2. Priorities 
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  144
a. Effect of Foreclosure on Various Interests  . . . . . . . . . . . . . . . . .  144
1) Junior Interests Destroyed by Foreclosure  . . . . . . . . . . . . . .  144
2) Senior Interests Not Affected  . . . . . . . . . . . . . . . . . . . . .  144
b. Modification of Priority   . . . . . . . . . . . . . . . . . . . . . . . . . .  144

Multistate 08 real property Q.indd 17 9/13/2016 4:33:20 PM

 xviii. REAL PROPERTY

1) Failure to Record   . . . . . . . . . . . . . . . . . . . . . . . . . . .  144

2) Subordination Agreement   . . . . . . . . . . . . . . . . . . . . . . .  145
3) Purchase Money Mortgages   . . . . . . . . . . . . . . . . . . . . . .  145
a) Vendor PMM vs. Third-Party PMM   . . . . . . . . . . . . . .  145
b) Third-Party PMM vs. Third-Party PMM   . . . . . . . . . . .  145
4) Modification of Senior Mortgage   . . . . . . . . . . . . . . . . . . .  146
5) Optional Future Advances   . . . . . . . . . . . . . . . . . . . . . .  146
6) Subrogation  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  146
3. Proceeds of Sale  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  146
4. Deficiency Judgments  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  146
F. INSTALLMENT LAND CONTRACTS  . . . . . . . . . . . . . . . . . . . . . . .  148
1. Equity of Redemption  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  148
2. Restitution  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  148
3. Treat as a Mortgage  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  148
4. Waiver  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  148
5. Election of Remedies  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  148

VIII. RIGHTS INCIDENTAL TO OWNERSHIP OF LAND (NATURAL RIGHTS)  . . . .  149

A. IN GENERAL  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  149
B. RIGHT TO LATERAL AND SUBJACENT SUPPORT OF LAND  . . . . . . . .  149
1. Right to Lateral Support  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  149
a. Support of Land in Natural State  . . . . . . . . . . . . . . . . . . . . . .  149
b. Support of Buildings on Land  . . . . . . . . . . . . . . . . . . . . . . .  149
2. Right to Subjacent Support  . . . . . . . . . . . . . . . . . . . . . . . . . . .  149
a. Support of Land and Buildings  . . . . . . . . . . . . . . . . . . . . . . .  149
b. Interference with Underground Waters  . . . . . . . . . . . . . . . . . .  149
C. WATER RIGHTS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  149
1. Watercourses  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  150
a. Riparian Doctrine  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  150
1) What Land Is Riparian  . . . . . . . . . . . . . . . . . . . . . . . .  150
a) Riparian Owner  . . . . . . . . . . . . . . . . . . . . . . . . . .  150
b) Doctrine Applies Only to Riparian Parcel  . . . . . . . . . . . .  150
2) Nature of Riparian Right  . . . . . . . . . . . . . . . . . . . . . . .  150
a) Natural Flow Theory  . . . . . . . . . . . . . . . . . . . . . . .  150
b) Reasonable Use Theory  . . . . . . . . . . . . . . . . . . . . . .  150
(1) Factors to Consider  . . . . . . . . . . . . . . . . . . . . .  151
c) Natural vs. Artificial Use  . . . . . . . . . . . . . . . . . . . . .  151
b. Prior Appropriation Doctrine  . . . . . . . . . . . . . . . . . . . . . . . .  151
1) Factors to Note for Bar Exam  . . . . . . . . . . . . . . . . . . . . .  151
c. Accretion and Avulsion  . . . . . . . . . . . . . . . . . . . . . . . . . . .  152
2. Groundwater  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  152
a. Absolute Ownership Doctrine  . . . . . . . . . . . . . . . . . . . . . . . .  152
b. Reasonable Use Doctrine  . . . . . . . . . . . . . . . . . . . . . . . . . .  152
c. Correlative Rights Doctrine  . . . . . . . . . . . . . . . . . . . . . . . . .  152
d. Appropriative Rights Doctrine  . . . . . . . . . . . . . . . . . . . . . . .  152
e. Restatement Approach  . . . . . . . . . . . . . . . . . . . . . . . . . . .  152
3. Surface Waters  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  152
a. Natural Flow Theory  . . . . . . . . . . . . . . . . . . . . . . . . . . . .  153

Multistate 08 real property Q.indd 18 9/13/2016 4:33:20 PM

 REAL PROPERTY xix.

b. Common Enemy Theory  . . . . . . . . . . . . . . . . . . . . . . . . . .  153

c. Reasonable Use Theory  . . . . . . . . . . . . . . . . . . . . . . . . . . .  153
d. Compare—Capture of Surface Water  . . . . . . . . . . . . . . . . . . .  153
D. RIGHTS IN AIRSPACE  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  153
E. RIGHT TO EXCLUDE—REMEDIES OF POSSESSOR  . . . . . . . . . . . . .  153
1. Trespass  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  153
2. Private Nuisance  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  153
a. Compare—Public Nuisance  . . . . . . . . . . . . . . . . . . . . . . . . .  153
3. Continuing Trespass  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  154
4. Law or Equity  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  154
a. Ejectment  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  154
b. Unlawful Detainer  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  154

IX. COOPERATIVES, CONDOMINIUMS, AND ZONING  . . . . . . . . . . . . . . . .  154

A. COOPERATIVES  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  154
1. Restriction on Transfer of Interests  . . . . . . . . . . . . . . . . . . . . . . .  154
2. Mortgages  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  154
3. Maintenance Expenses  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  154
B. CONDOMINIUMS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  155
1. Restriction on Transfer of Interests   . . . . . . . . . . . . . . . . . . . . . . .  155
2. Mortgages   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  155
3. Maintenance Expenses   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  155
4. Homeowners’ Associations  . . . . . . . . . . . . . . . . . . . . . . . . . . . .  155
a. Membership  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  155
b. Fees  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  155
c. Association Rules  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  155
C. ZONING  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  155
1. Cumulative Zoning  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  156
2. Nonconforming Use   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  156
3. Special Use Permits   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  156
4. Variance   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  156

Multistate 08 real property Q.indd 19 9/13/2016 4:33:20 PM

Multistate 08 real property Q.indd 20 9/13/2016 4:33:20 PM
 REAL PROPERTY 1.

REAL PROPERTY

I. ESTATES IN LAND

A. IN GENERAL
“Estates in land” are possessory interests in land. These interests may be presently possessory
(present estates), or they may become possessory in the future (future interests). They may be
“freeholds,” which give possession under some legal title or right to hold (e.g., fees or life estates),
or they may be “nonfreeholds,” which give mere possession (i.e., leases). Estates in land may be
of potentially infinite duration, as in the case of a fee simple, or they may be of limited duration,
as in the case of an estate for years. But whatever their characteristics, “estates in land” must be
distinguished from nonpossessory interests such as easements, profits, covenants, and servitudes.

This section of the outline will examine various estates in land. It divides the interests into two
classes: present interests and future interests. However, some future interests (those following
defeasible fees) will be considered with the present interests to which they are attached.

B. PRESENT POSSESSORY ESTATES

1. Fee Simple Absolute

An estate in fee simple absolute is the largest estate permitted by law. It invests the holder of
the fee with full possessory rights, now and in the future. The holder can sell it, divide it, or
devise it; and if she dies intestate, her heirs will inherit it. The fee simple has an indefinite
and potentially infinite duration. The common law rule requiring technical words of inheri-
tance (“and his heirs”) has been abolished by statute in nearly all jurisdictions. Typically,
such statutes provide: “A fee simple title is presumed to be intended to pass by a grant of real
property unless it appears from the grant that a lesser estate was intended.”
Example: A conveyance from “O to A” is presumed to pass a fee simple interest if O
owned one. At common law, absent the words of inheritance, even a convey-
ance “to A in fee simple” would convey only a life estate to A.

2. Defeasible Fees
Defeasible fees are fee simple estates of potentially infinite duration that can be terminated
by the happening of a specified event. Because defeasible fees can result in forfeitures, courts
will construe, where possible, a purported limitation as a mere declaration of the grantor’s
purpose or motive for making the grant (i.e., as precatory language). (See b.1)a), infra.)

a. Fee Simple Determinable (and Possibility of Reverter)

A fee simple determinable, also called a determinable fee, is an estate that automati-
cally terminates on the happening of a stated event and goes back to the grantor. (It
must be distinguished from the fee simple subject to a condition subsequent, where the
grantor must take affirmative steps to terminate the estate of the grantee if the stated
event occurs.) It is created by the use of durational, adverbial language, such as “for so
long as,” “while,” “during,” or “until.” A fee simple determinable can be conveyed by
the owner thereof, but his grantee takes the land subject to the termination of the estate
by the happening of the event.
Example: O conveys land “to A for so long as no alcoholic beverages are
consumed on the premises.” This gives A a fee simple because the estate

Multistate 08 real property Q.indd 1 9/13/2016 4:33:20 PM

 2. REAL PROPERTY

may last forever if no one ever quaffs a brew. If A conveys his fee simple
determinable estate to B, B will own the “for so long as” estate. If A
does not convey his estate, on A’s death it will pass by will or intestacy
to his successors, and so on. If, however, someone ever consumes an
alcoholic beverage on the premises, the estate will automatically come to
an end according to its own terms; and O will immediately and automat-
ically become the owner of the fee simple, without taking any steps to
terminate A’s interest.

1) Correlative Future Interest in Grantor—Possibility of Reverter

Because the grantee’s estate may end upon the happening of the stated event, there
is a possibility that the land may revert back to the grantor. The interest that is left
in a grantor who conveys an estate in fee simple determinable is called a “possi-
bility of reverter.” It is a future interest because it becomes possessory only upon
the occurrence of the stated event.

a) Possibility of Reverter Need Not Be Expressly Retained

At common law and in nearly all states today, the grantor does not have to
expressly retain a possibility of reverter. It arises automatically in the grantor
as a consequence of his conveying a fee simple determinable estate, with its
built-in time limitation.

b) Transferability of Possibility of Reverter

At early common law, the possibility of reverter could not be transferred inter
vivos or devised by will. An attempted transfer of the interest was invalid; but
the possibility of reverter was not extinguished by the attempted transfer and
would still descend to the heirs of the owner. Today, in most jurisdictions, the
possibility of reverter can be transferred inter vivos or devised by will, and
descends to the owner’s heirs if she dies intestate.

2) Correlative Future Interest in Third Party—Executory Interest

A possibility of reverter arises only in the grantor, not in a third party. If a compa-
rable interest is created in a third party, it is an executory interest. (See C.3., infra.)

b. Fee Simple Subject to Condition Subsequent (and Right of Entry)

A fee simple subject to a condition subsequent is created when the grantor retains the
power to terminate the estate of the grantee upon the happening of a specified event.
Upon the happening of the event stated in the conveyance, the estate of the grantee
continues until the grantor exercises her power of termination (right of entry) by
bringing suit or making reentry. The following words are usually held to create condi-
tions subsequent: “upon condition that,” “provided that,” “but if,” and “if it happens that.”
Example: O, owning Blackacre in fee simple, conveys it “to A and his heirs, on
the express condition that the premises are never to be used by A for the
sale of liquor, and in the event that they are so used, then O or her heirs
may enter and terminate the estate hereby conveyed.” A has a fee simple
subject to a condition subsequent. O has a right of entry. If the condition
is broken, O has a power to terminate the estate of A by asserting her
right of entry.

Multistate 08 real property Q.indd 2 9/13/2016 4:33:20 PM

 REAL PROPERTY 3.

1) Correlative Future Interest in Grantor—Right of Entry

A right of entry (also known as “right of reentry” or “power of termination”) is
the future interest retained by the transferor who conveys an estate on condition
subsequent. It is necessary to expressly reserve the right of entry in the grantor;
this retained interest does not automatically arise as in the case of a fee simple
determinable and possibility of reverter.

a) Failure to Reserve Right of Entry

Courts often hold that words of condition, standing alone, create only
covenants, easements, or trusts, or are mere precatory terms.
Example: O conveys land “to A and his heirs, provided that liquor is
not sold on the premises.” O has not used words indicating
the estate will terminate if liquor is sold on the premises. Nor
has O retained a right to reenter. Because a statement of the
grantor’s wishes as to how the property should be used does
not ordinarily imply a right retained by the grantor to enforce
the purpose, a court may construe the deed as giving A a fee
simple absolute. [Wood v. Board of County Commissioners,
759 P.2d 1250 (Wyo. 1988)]

b) Waiver of Right of Entry

Because the grantor can elect whether or not to terminate the grantee’s estate,
she may waive her right or power to enforce a forfeiture by express agreement
or by her conduct. (Such is not the case with a fee simple determinable, where
the forfeiture is automatic.)

(1) Inaction by Itself Not a Waiver

The general rule is that when there is a breach of the condition and the
grantor simply does nothing about it, the power of termination is not
waived. (See also V.D.2., infra.) However, where there is any element of
detrimental reliance by the fee holder, many courts treat inaction as a
waiver on an estoppel or laches theory.

c) Transferability of Right of Entry

At common law, a right of entry was not devisable or transferable inter vivos
to a third person. The right of entry did, however, descend to the heirs of the
grantor on her death. Today, in most jurisdictions, a right of entry is still not
alienable inter vivos. (Indeed, in a handful of states, an attempted transfer
destroys it.) But in most states, rights of entry are devisable; and in all states,
they descend to the owner’s heirs.

2) Correlative Future Interest in Third Party—Executory Interest

A right of entry can be created only in favor of the grantor and her heirs. If a
similar interest is created in favor of a third party, the interest is called an execu-
tory interest (e.g., “if the property is ever used for other than church purposes, then
to B and his heirs”). Unlike a right of entry, an executory interest is subject to the
Rule Against Perpetuities. (See E., infra.)

Multistate 08 real property Q.indd 3 9/13/2016 4:33:20 PM

 4. REAL PROPERTY

3) Compare—Fee Simple Determinable

This estate is distinguished from a determinable fee in that the breach of the
condition does not itself terminate the estate and immediately revest the fee in the
grantor or her successor. The estate continues in the grantee or his successor unless
or until the grantor or her successor affirmatively elects to terminate it.
a) Construction of Ambiguous Language
The general policy of courts is to avoid forfeiture of estates. Thus, a convey-
ance that contains both durational language and a power of termination may be
construed as creating a fee simple subject to a condition subsequent, because
the forfeiture is optional at the grantor’s election rather than automatic.
Example: O conveys land “to A so long as liquor is not sold on the
premises, and if liquor is sold, O has a right to reenter.” The
words “so long as” point to a fee simple determinable. The
retained right of entry points to a fee simple subject to a condi-
tion subsequent. The court can classify the language to create
either estate, but the fee simple subject to a condition subse-
quent is preferred.
c. Fee Simple Subject to an Executory Interest
A fee simple subject to an executory interest is an estate that, upon the happening of a
stated event, is automatically divested in favor of a third person rather than the grantor.
Examples: 1) O conveys land “to Church; provided, however, that if the premises
shall ever cease to be used for church purposes, title shall pass to the
American Heart Association.” Church has a fee simple subject to an
executory interest in favor of the Heart Association. O does not have
a right of entry because no such interest was reserved in the convey-
ance. The Heart Association’s interest is not a right of entry because
that future interest can be reserved only in favor of a grantor. The Heart
Association’s future interest is not a remainder because it divests a fee
simple. Therefore, it is an executory interest.
Note: Executory interests are subject to the Rule Against Perpetuities,
but the Heart Association’s interest is valid because of the “charity-to-
charity” exception to the Rule. (See E.1.e.1), infra.)
2) O conveys land “to Church for so long as the premises are used for
church purposes, and if they shall ever cease to be so used, then and in
that event to the American Red Cross.” Church has a fee simple deter-
minable subject to an executory interest in favor of the Red Cross. O has
no possibility of reverter because he has not retained any interest; he
has conveyed away his entire estate in the property. The future interest
in the Red Cross cannot be a possibility of reverter because that interest
arises only in a grantor, and the Red Cross is a grantee. It is an execu-
tory interest and not a remainder because it divests a fee simple. (Further
discussion of these points will come later.)
Note: Were it not for the “charity-to-charity” exception to the Rule
Against Perpetuities, the executory interest in favor of the Red Cross
would violate the Rule.

Multistate 08 real property Q.indd 4 9/13/2016 4:33:20 PM

 REAL PROPERTY 5.

d. Limitations on Possibilities of Reverter and Rights of Entry

In a few states, statutes limit the permissible duration of possibilities of reverter and
rights of entry to a certain number of years (usually 30) in order to foster marketability
of title. Other statutes (usually called “marketable title acts”) require the rerecording of
various future interests (including possibilities of reverter and rights of entry) every 20
to 40 years or they become unenforceable.

e. Conditions and Limitations Violating Public Policy

Conditions and limitations that are designed to prevent the acquisition or retention of an
interest in land generally are struck down if they are contrary to public policy. Striking
such a condition will result in an interest different from that intended by the grantor.
(See also F., infra.)

1) Restraints on Marriage
If the purpose of the condition or limitation is to penalize marriage, it likely
will be struck down. On the other hand, if the purpose is to give support until
marriage, when the new spouse’s obligation of support arises, the condition or
limitation generally is upheld.
Example: O conveys land “to A, but if she marries, to B.” Absent any
evidence as to O’s motive, the condition subsequent will be struck
down, leaving A with a fee simple absolute.

Compare: O conveys land “to A for her support until she marries.” Because O
intends to give A support only until the burden of support shifts to
A’s spouse, A’s fee simple determinable is valid.

2) Provisions Involving Separation or Divorce

Conditions and limitations meant to encourage separation or divorce are invalid.
On the other hand, conditions and limitations meant to give support in the event of
separation or divorce generally are valid.
Example: O conveys land “to A, provided that he divorces his current spouse
within one year; if he does not, to B.” Absent any evidence as to O’s
motive, the condition subsequent will be struck down, leaving A
with a fee simple absolute.

3. Fee Tail
The fee tail, typically created by the words “to A and the heirs of his body,” limited inheri-
tance to lineal descendants of the grantee. If no lineal descendants survived at the grantee’s
death, the property either reverted to the grantor or her successors or passed to a designated
remainderman. Today, most United States jurisdictions have abolished the fee tail and have
enacted statutes under which any attempt to create a fee tail results in the creation of a fee
simple.

4. Life Estate
An estate for life is an estate that is not terminable at any fixed or computable period of time,
but cannot last longer than the life or lives of one or more persons. It may arise by operation
of law or may be created by an act or agreement of the parties.

Multistate 08 real property Q.indd 5 9/13/2016 4:33:20 PM

 6. REAL PROPERTY

a. Life Estates by Marital Right (Legal Life Estates)

Such estates arise under dower and curtesy, the common law interests of wife and
husband, respectively, in real property of which the other spouse was seized during
marriage (including property acquired before marriage). At common law, a surviving
wife’s dower right entitled her to a life estate in an undivided one‑third of her husband’s
lands. A surviving husband’s right of curtesy gave him a life estate in all of his wife’s
lands if issue were born. For exam purposes, it is important to remember that a convey-
ance by a husband to a bona fide purchaser does not defeat dower unless the wife joins
in the conveyance. Likewise, a husband’s creditors cannot defeat a wife’s dower rights.
Most states have abolished both dower and curtesy and have instead given the surviving
spouse a statutory right to take a portion of the deceased spouse’s estate. Community
property states do not recognize either dower or curtesy.

b. Conventional Life Estate

1) For Life of Grantee

The usual life estate is measured by the life of the grantee and is called simply
a life estate. It may be indefeasible (so that it will end only when the life tenant
dies), or it may be made defeasible in the same ways that fee estates can be defea-
sible (e.g., determinable, subject to a condition subsequent, subject to an execu-
tory interest). In such a case, the estate may end before the life tenant dies if the
limiting condition occurs. (See Example 5), below.)
Examples: 1) O conveys “to A for life.” In this case, A has an estate in the
land for as long as he lives. On his death, the land reverts to O, the
grantor.

2) “To A for life, then to B.” This is a life estate because it is

measured by the life of A and is not terminable at a fixed period of
time.

3) “To A for life, but in no event for more than 10 years.” This is an
estate for years and not a life estate because the estate in A will end
in 10 years (i.e., a fixed time period).

4) “To A for 10 years if he lives so long.” This is also an estate for

years and not a life estate because the estate in A will end in 10
years.

5) “To A for life or until she remarries.” This is a life estate subject
to a limitation, but nevertheless a life estate. The estate in A will
not end at any fixed or computable time period. It can be termed a
“life estate determinable,” and is analogous to the fee simple deter-
minable discussed above.

6) “To B and C after the life of A.” A has an implied life estate.

2) Life Estate Pur Autre Vie (Life of Another)

A life estate pur autre vie is a life estate measured by the life of someone other

Multistate 08 real property Q.indd 6 9/13/2016 4:33:20 PM

 REAL PROPERTY 7.

than the life tenant. Such an estate can be created directly by the grantor, e.g., “to
A for the life of B.” A’s estate ends when B dies. It can also be created indirectly,
as where the grantor conveys “to B for life,” and B later conveys his interest to A.
A owns an estate measured by B’s life; it ends when B dies.

a) Inheritability
At common law, if A died before B, the property was regarded as without an
owner until B died. Today, statutes provide that such estates are devisable and
inheritable if no special occupant is named in the original grant. (A “special
occupant” is a person named by the grantor to take the balance of the term, if
any.)

c. Rights and Duties of Life Tenant—Doctrine of Waste

A tenant for life is entitled to all the ordinary uses and profits of the land; but he
cannot lawfully do any act that would injure the interests of the person who owns the
remainder or the reversion. If he does, the future interest holder may sue for damages
and/or to enjoin such acts.

1) Affirmative (Voluntary) Waste—Natural Resources

As a general rule, a life tenant may not consume or exploit natural resources on the
property (e.g., timber, minerals, oil). Exceptions to this rule allow exploitation in
the following circumstances:

(i) In reasonable amounts where necessary for repair and maintenance of the
land;

(ii) When the life tenant is expressly given the right to exploit such resources in
the grant;

(iii) When prior to the grant, the land was used in exploitation of such natural
resources, so that in granting the life estate the grantor most likely intended
the life tenant to have the right to exploit (but see “open mines doctrine,”
below); and

(iv) In many states, where the land is suitable only for such exploitation (e.g., a
mine).

Note: There is a vague “reasonableness” limit on the amount of oil or coal a life
tenant can remove from the property.

a) Open Mines Doctrine

If mining (extraction of minerals) was done on the land before the life estate
began, the life tenant may continue to mine the property—but is limited to
the mines already open. The life tenant may not open any new mines. There
is a trend away from this limitation, applying instead the rule in (iii), above,
to all natural resources, including minerals.

2) Permissive Waste
Absent a contrary provision in the instrument creating the life estate, a life tenant

Multistate 08 real property Q.indd 7 9/13/2016 4:33:20 PM

 8. REAL PROPERTY

has a duty to make repairs to the property to keep it from being damaged by the
weather, and to pay certain carrying charges (e.g., mortgage interest, property
taxes, and special assessments for public improvements). However, this duty is
limited to the extent of the income or profits derived from the land (or if there is
no actual income or profit, to the extent of the reasonable rental value of the land).
Failure to make required repairs or pay required carrying charges constitutes
permissive waste. A future interest holder who expends funds in satisfaction of
the life tenant’s obligations (e.g., pays the property taxes to avoid a tax foreclosure
sale) is entitled to reimbursement.

a) Obligation to Repair
A life tenant is obligated to preserve the land and structures in a reasonable
state of repair (to the limited extent stated above). But the tenant is under no
obligation to make permanent improvements on the land, no matter how wise
it might seem to do so.

b) Obligation to Pay Interest on Encumbrances

A life tenant is obligated to pay interest on any encumbrances on the land (to
the limited extent stated above). However, he does not have to pay anything
on the principal of the debt; reversioners or remaindermen must pay the
principal in order to protect their interests.

The foregoing applies to encumbrances on the entire fee simple estate. Of

course, a life tenant could place a mortgage on the life estate alone, and would
then be liable for both principal and interest payments.

c) Obligation to Pay Taxes

The life tenant is obligated to pay all ordinary taxes on the land (to the
limited extent stated above).

d) Special Assessments for Public Improvements

If the life of a public improvement on the land is shorter than the expected
duration of the life estate, the life tenant is obligated to pay all of the assess-
ment (to the limited extent stated above). However, if the improvement is
likely to outlast the life estate (e.g., curbing, sewers, water mains, a change in
grade of a street), taxes and assessments are apportioned equitably between
the life tenant and the holders of all future interests.

(1) Apportionment of Costs

Costs are usually apportioned by using the ratio produced by the market
value of the life estate over the market value of the property.

e) No Obligation to Insure Premises

The life tenant is under no obligation to insure the premises for the benefit of
a remainderman. However, both the life tenant and the remainderman have an
insurable interest.

Multistate 08 real property Q.indd 8 9/13/2016 4:33:20 PM

 REAL PROPERTY 9.

f) No Liability for Third Party’s Torts

Under the modern view, life tenants are not responsible to remaindermen (as
they were at common law) for damages caused by third-party tortfeasors. The
life tenant’s action against such third parties is limited to the damages to the
life estate.

3) Ameliorative Waste
Ameliorative waste consists of acts that economically benefit the property.
Ameliorative waste occurs when the use of the property is substantially changed,
but the change increases the value of the property. At common law, any change
to existing buildings or other improvements was always actionable waste, even if
it improved the value of the property. Under modern authorities, however, a life
tenant can substantially alter or even demolish existing buildings if:

(i) The market value of the future (or other nonpossessory) interests is not
diminished; and either

(ii) The remaindermen do not object; or

(iii) A substantial and permanent change in the neighborhood conditions has

deprived the property in its current form of reasonable productivity or useful-
ness.

Example: A holds a life estate in Blackacre, and B holds the remainder. The
premises consist of an old and somewhat shabby apartment building
that is nearly fully rented and produces a consistent income. The
surrounding neighborhood includes many similar buildings. A
proposes to demolish the building and construct a new shopping
center on the land, which will produce much higher income. B
objects to the change and brings an action to enjoin the demolition.
B will prevail even though A’s proposed changes would increase the
value of the property. Because the existing building is economically
productive and consistent with the neighborhood, A’s commission
of waste would not be justified.

a) Compare—Leasehold Tenant
Leasehold tenants are treated differently from life tenants. Most leasehold
tenants remain liable for ameliorative waste even if the neighborhood has
changed and the market value of the premises is increased. (See II.C.1.a.3),
infra.)

b) Compare—Worthless Property
Under modern authority, a life tenant may ask for a judicial sale in a partition
proceeding if it appears that the land is practically worthless in its present
state. The proceeds are put in trust with income to the life tenant.

d. Renunciation of Life Estates

A life tenant who receives the estate by will or intestacy may renounce it, perhaps

Multistate 08 real property Q.indd 9 9/13/2016 4:33:21 PM

 10. REAL PROPERTY

because owning it would be burdensome. If this occurs, the courts generally accelerate
the future interest that follows the life estate, allowing it to become possessory immedi-
ately.

5. Estates for Years, Periodic Estates, Estates at Will, Tenancies at Sufferance

These nonfreehold present estates in land are considered in the Landlord and Tenant section
of this outline (see II.A., infra).

C. FUTURE INTERESTS
A future interest is an estate that does not entitle the owner thereof to possession immediately,
but will or may give the owner possession in the future. A future interest is a present, legally
protected right in property; it is not an expectancy.
Examples: 1) O conveys land “to A for life, and on A’s death to B in fee simple.” A has a
present possessory life estate. B has a future interest. (B’s future interest is an
indefeasibly vested remainder.) Upon the termination of A’s possessory life estate,
B’s remainder in fee simple will become a present possessory estate in fee simple.

2) O conveys land “to A for life, and on A’s death to B in fee simple if B survives
A.” A has a present possessory life estate. B has a future interest. (It is a contingent
remainder.) Upon the termination of A’s life estate, B’s remainder in fee simple
may become a present possessory estate in fee simple. B must survive A in order
to take. (In this example, O also has a future interest. He has not conveyed away
the interest represented by the contingency that B may predecease A. If B does
predecease A, on the termination of A’s life estate title to the land will revert to O.
O’s retained future interest is called a reversion.)

3) After the conveyance “to A for life, and on A’s death to B,” B can transfer his
remainder interest to another person. Alternatively, if B dies during A’s lifetime,
his vested remainder will pass to the devisees under his will or (if B left no will) to
his intestate heirs.

1. Reversionary Interests—Future Interests in Transferor

a. Possibilities of Reverter and Rights of Entry

These future interests are discussed above in connection with the present estates to
which they are attached.

b. Reversions
A person owning an estate in real property can create and transfer a lesser estate (in the
durational sense). The residue left in the grantor, which arises by operation of law, is a
reversion.
Examples: 1) O, owning land in fee simple, conveys it (i) “to A for life,” or (ii) “to
A for 99 years.” In each case, O has a reversion in fee simple. She (or her
successors) will be entitled to present possession of the land when the
granted estate terminates.

2) O, owning a life estate in land, leases it “to A for 20 years.” O has a

reversion in a life estate. If O is still alive when A’s lease expires, title

Multistate 08 real property Q.indd 10 9/13/2016 4:33:21 PM

 REAL PROPERTY 11.

will revert to O for life. What happens if, 10 years after this transfer,
O dies? A’s lease will come to an end, for he was given a lease by one
holding only a life estate. O cannot convey a greater interest than she
has.

3) O, owning land in fee simple, conveys it “to A for life, and on A’s
death to B if B survives A.” A has a life estate, B has a contingent
remainder, and O has a reversion that will take in present possession at
A’s death if B predeceases A.

Reversions are transferable, devisable by will, and descendible by inheritance. The

holder of a reversion may sue a possessory owner for waste and may recover against
third-party wrongdoers for damages to the property (to the extent of the injury to the
reversion).

c. All Reversionary Interests Are “Vested”

Although a reversionary interest becomes possessory in the future, it is a vested interest,
not a contingent interest, because both the owner and the event upon which it will
become possessory are certain. This is true even if the reversionary interest is determin-
able or defeasible. Because it is a vested interest, a reversionary interest is not subject to
the Rule Against Perpetuities.

2. Remainders
A remainder is a future interest created in a transferee that is capable of taking in present
possession and enjoyment (i.e., capable of becoming a present interest) upon the natural
termination of the preceding estates created in the same disposition. Unlike a reversion,
which arises by operation of law from the fact that the transferor has not made a complete
disposition of his interest, a remainder must be expressly created in the instrument creating
the intermediate possessory estate. At common law, the only preceding estates that could
support a remainder were life estates and fee tails. Because nearly all American jurisdictions
have abolished the fee tail estate, a safe rule of thumb is that remainders always follow life
estates. (Note: According to the Restatement of Property, under modern law, a remainder
can also follow a term of years. However, there is very little case law on the point, and it is so
rare that it is extremely unlikely to be tested.)
Examples: 1) “To A for life, and on A’s death to B and his heirs.” A has a present posses-
sory life estate. B has a remainder in fee simple. It is a remainder because
upon the expiration of A’s life estate (natural termination of the preceding
estate), B will be entitled to present possession and enjoyment of the property.
The term “remainder” derives from the consequence that when A’s life estate
comes to an end, title “remains away” from the transferor instead of reverting
back to him.

2) On Monday, O conveys Blackacre “to A for life.” On Wednesday, O

conveys “all of my right, title, and interest in Blackacre” to B. B holds a rever-
sion, not a remainder. B’s future interest was not created in the same disposi-
tion that gave A a life estate. The Monday conveyance gave A a life estate and
raised a reversion in O. The Wednesday conveyance transferred O’s reversion
to B. “Once a reversion, always a reversion.”

Multistate 08 real property Q.indd 11 9/13/2016 4:33:21 PM

 12. REAL PROPERTY

A remainder cannot “cut short” or divest a preceding estate prior to its normal expira-
tion. Therefore, a remainder can never follow a fee simple, which has a potentially infinite
duration. Future interests that cut short a preceding estate or follow a gap after it are called
executory interests. (See 3., infra.)

a. Indefeasibly Vested Remainder

An indefeasibly vested remainder is a remainder that:
(i) Can be created in and held only by an ascertained person or persons in being;
(ii) Must be certain to become possessory on termination of the prior estates (i.e.,
there is no condition that may operate to prevent the remainder from someday
becoming a present interest);
(iii) Must not be subject to being defeated or divested (compare the vested remainder
subject to total divestment, c., infra); and
(iv) Must not be subject to being diminished in size (compare the vested remainder
subject to open, b., infra).
Examples: 1) “To A for life, and on A’s death to B.” A has a life estate; B has an
indefeasibly vested remainder which is certain to take in possession on
the termination of A’s life estate.
What if B dies in A’s lifetime? There is no stated condition that B
survive A in order to take, and the courts do not imply such a condi-
tion. B’s indefeasibly vested remainder passes by will or intestacy to his
successors, who own an indefeasibly vested remainder.
2) “To A for life, then to A’s first-born son in fee.” At the time of this
disposition, A has no children. The state of title: life estate in A, contin-
gent remainder in the first son to be born to A, reversion in fee simple in
the transferor. (The reversion will take in present possession if A never
has a son.) The remainder is not vested because it is not created in an
ascertained person in being. Also, it is subject to the condition that A
have a child.
Two years later A has a son, John. The state of title: life estate in A,
indefeasibly vested remainder in fee simple in John.
b. Vested Remainder Subject to Open
This is a vested remainder created in a class of persons (e.g., “children,” “brothers and
sisters”) that is certain to take on the termination of the preceding estates, but is subject
to diminution by reason of other persons becoming entitled to share in the remainder. It
is also called a “vested remainder subject to partial divestment.”
Examples: 1) “To A for life, and on A’s death to her children in equal shares.” If at
the time of this disposition A has no children, the state of title is: life
estate in A; contingent remainder in the unborn children of A; reversion
in fee in the transferor, which will take in possession if A never has any
children.

Multistate 08 real property Q.indd 12 9/13/2016 4:33:21 PM

 REAL PROPERTY 13.

Suppose two years later a child, Bob, is born to A. The state of title
is: life estate in A, vested remainder subject to open in Bob. Bob’s
remainder is vested because he is in existence and ascertained and his
taking is not subject to any contingency. But it is vested subject to open
because A may have more children.

Two years later another child, Ray, is born to A. Bob’s remainder has
been partially divested in favor of Ray, who also meets the descrip-
tion “children of A.” Bob and Ray now hold the vested remainder as
tenants in common (each with an undivided one-half share) subject to
open—i.e., their vested remainders will be partially divested if more
children are born to A.

Two years later Bob dies; shortly thereafter, A dies. Bob’s successors (by
will or intestacy) and Ray are entitled to present possession and enjoy-
ment of the property. Bob’s share of the remainder was subject to partial
divestment, but it was not subject to being totally defeated. No condition
of survival was attached to Bob’s interest. Bob (or his successors) was
certain to take; the only question was the size of his share.

2) Gift by will “to my wife, Rowena, for life, and on her death to
my children in equal shares.” T is survived by Rowena and by three
children. At first blush this looks like a vested remainder subject to open
because it is a remainder to someone’s children. In reality, though, it is
indefeasibly vested. T, being dead, can have no more children. (Slight
qualification of answer: If Rowena is pregnant with T’s child at T’s
death, the posthumous child, if born alive, will share in the gift.)

1) Divesting Interests Are Executory Interests

Once the remainder vests in one existing member of the class, the divesting interest
in the unborn members of the class is called an executory interest.

2) Effect on Marketability of Title

Note that where there are outstanding interests in the unborn children, the vested
remainderman and the life tenant cannot jointly convey good title.
Example: O “to A for life, remainder to B’s children.” C wants to buy the
land, and desires to know if he can get good title if he purchases
from A and all of B’s living children. The answer is no, as long as
B is alive, because it is possible for B to have more children (no
matter what B’s age). Thus, there would be outstanding interests in
the unborn children of B, and C would not get good title.

c. Vested Remainder Subject to Total Divestment

A vested remainder subject to total divestment arises when the remainderman is in
existence and ascertained and his interest is not subject to any condition precedent, but
his right to possession and enjoyment is subject to being defeated by the happening of
some condition subsequent.
Examples: 1) “To A for life, remainder to B and his heirs, but if at B’s death he

Multistate 08 real property Q.indd 13 9/13/2016 4:33:21 PM

 14. REAL PROPERTY

is not survived by issue, to C and his heirs.” Here, B has a vested

remainder in fee simple, but his fee simple interest is subject to being
divested if at his death he is not survived by issue. (C has a shifting
executory interest.)
2) “To A for life, then to B for life.” A has a life estate. B has a vested
remainder in a life estate subject to total divestment. The transferor has
a reversion in fee. B’s remainder is vested even though (as a practical
matter) he must survive A in order to take. But this practical require-
ment does not make B’s remainder contingent. The only condition to
B’s taking is the natural termination of A’s life estate, and this “condi-
tion” is inherent in any remainder life estate. There is no other condition
precedent. However, B’s remainder life estate is not indefeasibly vested,
for it will be defeated if he dies in A’s lifetime. Therefore, it is a vested
remainder subject to total divestment.
3) “To A for life, and on A’s death to B; but if B predeceases A, on A’s
death to C.” A has a life estate. B has a vested remainder subject to total
divestment. Although B’s taking is contingent on his surviving A, that
contingency is expressed as a condition subsequent—meaning that B’s
remainder is vested subject to total divestment. (C has a shifting execu-
tory interest.)
d. Contingent Remainder
There are two ways to create a contingent remainder.

1) Subject to Condition Precedent

A remainder will be classified as contingent if its taking in possession is subject to
a condition precedent (“contingent as to event”).
Examples: 1) “To A for life, and on A’s death to B if B survives A.” A has a
life estate; B has a contingent remainder in fee simple. The trans-
feror has a reversion, which will become a possessory estate on the
termination of A’s life estate if B predeceases A. Here, B’s taking
is subject to a contingency, stated as a condition precedent, that he
must survive A in order to take.

Compare this with Example 3) in the preceding section. In that

example, B’s taking is also subject to a contingency: he must
survive A in order to take. Thus in substance, this example and
Example 3) are quite similar. But in classifying future interests,
the general rule is that it is form and not substance that counts.
In Example 3), the contingency of survival is expressed as a condi-
tion subsequent; therefore, B’s remainder is vested subject to total
divestment. But in this example, the contingency of survival is
expressed as a condition precedent; therefore, B’s remainder is a
contingent remainder.

2) “To A for life, and on A’s death to B if B marries C.” Here,

B is an ascertained person, but there is a condition precedent to

Multistate 08 real property Q.indd 14 9/13/2016 4:33:21 PM

 REAL PROPERTY 15.

B’s taking: he must marry C. If B marries C in A’s lifetime, his

remainder will become indefeasibly vested.

3) O conveys “to A for life, then to B and his heirs if B survives A;

if B does not survive A, then to C and his heirs.” Each remainder is
contingent because each is subject to a condition precedent. They
are mutually exclusive and exhaustive; i.e., only one can come into
possession, and when it does the other can never do so. These are
called alternative contingent remainders.

Compare: O conveys “to A for life, then to B and his heirs, but if B marries
C, then to D and his heirs.” Here B, an ascertained person, takes a
vested remainder because it is not limited on a condition precedent.
B’s remainder is ready to come into possession whenever A dies.
But the marriage condition is subsequent—B’s marriage to C will
forfeit his estate. D’s interest is called an executory interest.

2) Unborn or Unascertained Persons

A remainder is contingent if it is created in favor of unborn or unascertained
persons (“contingent as to person”), because until the remainderman is ascer-
tained, there is no one ready to take possession should the preceding estate come
to an end.
Examples: 1) “To A for life, and on A’s death, per stirpes to such of A’s
descendants as survive her.” At the time of this disposition, A is
in poor health and she has two adult children (B and C) who are
very healthy. State of title: A has a life estate; there is a contingent
remainder in such of A’s descendants as survive A; the transferor
has a reversion (for A may not be survived by any descendants).

While the odds are in B and C’s favor that they will take the
remainder upon A’s death, they are not named as the remain-
dermen. The remainder is in such of A’s descendants as survive A,
and we will not be able to identify the remaindermen until A dies
and we can see which of A’s descendants survived her.

2) O transfers securities in trust “to pay the income to A for life,

and on A’s death to distribute the trust corpus to A’s heirs.” There is
a contingent remainder in A’s heirs. It is true that A’s heirs will be
determined the moment A dies and A’s life estate terminates. But
at the time O makes the transfer, the remaindermen are not ascer-
tained, for “nemo est haeres viventis” (no one is heir of the living).
The persons who turn out to be A’s heirs will not be ascertained
until A dies.

3) Destructibility of Contingent Remainders

At common law, a contingent remainder had to vest prior to or upon termination of
the preceding freehold estate or it was destroyed.
Examples: 1) O conveyed “to A for life, then to the heirs of B.” If A

Multistate 08 real property Q.indd 15 9/13/2016 4:33:21 PM

 16. REAL PROPERTY

predeceased B, there were no heirs of B to take possession so the

remainder was destroyed and O or his estate retook possession.

2) O conveyed “to A for life, then to B if she reaches age 21.” If A

died before B reached 21, the remainder was destroyed. (Note that
whenever a grantor created a contingent remainder, he retained a
reversion, which was normally defeasible.)

Analysis: Why are the interests in the above examples remainders and not execu-
tory interests? In each instance it is possible that the future interest will take effect
at the natural expiration of A’s life estate (as remainders do), or that it will take
effect following a gap after A’s estate (as executory interests do). The rule is that if
an interest may operate as either a remainder or an executory interest (depending
on the circumstances at A’s death), it is a remainder. Thus, at common law, if such
a remainder was then called upon to act as an executory interest, it could not do so
and was destroyed.

a) Rule Abolished
Today, the rule of destructibility has been abolished in all but a few states.
Thus, in the two examples given above, on A’s death, O’s reversion would
take over, and would then give way to a springing executory interest on B’s
death in the first example, and on B’s attaining age 21 in the second. (Note
that the contingent remainders are not destroyed when the preceding estate
ends, but instead become executory interests because they will divest the
transferor’s estate.)

b) Related Doctrine of Merger

Whenever the same person acquires all of the existing interests in land,
present and future, a merger occurs. That person then holds a fee simple
absolute. For example, suppose O conveys by deed “to A for life.” O now has
a reversion. Subsequently, by a later deed, O conveys his reversion interest to
A. A will have a fee simple absolute by merger. (A similar result would follow
if A conveyed her life estate to O.) Moreover, the common law held (as an
aspect of the destructibility doctrine) that if a person acquired all of the inter-
ests in land except a contingent remainder, the merger would occur anyway,
and the contingent remainder would be destroyed! Contingent remainders
were considered to be such flimsy, ephemeral interests that they would not
keep the merger from occurring. Note that this is still the rule in those few
states retaining the common law rule of destructibility.
Example: In Example 1), above (O “to A for life, then to the heirs of
B”), title stands as a life estate in A, a contingent remainder in
the as yet unascertained heirs of B, and a reversion (if B is still
alive at the death of A) in O. If O then purchased A’s interest,
O would hold a life estate pur autre vie (for the life of A) and
a reversion. At common law, O’s two interests on either side of
the contingent remainder merged, wiping out the contingent
remainder and giving O a fee simple.

Multistate 08 real property Q.indd 16 9/13/2016 4:33:21 PM

 REAL PROPERTY 17.

(1) Compare—Interests Created Simultaneously

If a life estate and the next vested interest were created simultaneously
(by the same instrument), there would be no merger at that time because
that would defeat the grantor’s obvious intent to create a contingent
remainder. However, if the life tenant subsequently conveyed his interest
to the holder of the next vested estate, the contingent remainder would
then be destroyed.

e. Rule in Shelley’s Case (Rule Against Remainders in Grantee’s Heirs)

At common law, where a freehold estate (usually a life estate) was given to A (by will
or inter vivos transfer), and in the same instrument a remainder was limited to the
“heirs” or to the “heirs of the body” of A, and the freehold estate and the remainder
were both legal or both equitable, the purported remainder in the heirs was not recog-
nized, and A took both the freehold estate and the remainder. The Rule operated
(regardless of the grantor’s intent) to convert what would otherwise have been a contin-
gent remainder in the heirs into a remainder in the ancestor.
Examples: 1) O grants or devises land “to A for life, and then to the heirs of A.”
Apart from the Rule in Shelley’s Case, the title would be: life estate
in A, contingent remainder in fee simple in A’s heirs. But by virtue
of the Rule, the title is: life estate in A, vested remainder in A in fee
simple. (Here, the law of merger causes A’s life estate to merge with his
remainder so that A gets a present estate in fee simple.)
2) O “to A for life, then to B for life, then to the heirs of A.” A has a
life estate, and the Rule in Shelley’s Case transforms the contingent
remainder in the heirs of A into a vested remainder in fee simple in A.
But merger does not occur because of the intervening vested remainder
limited to B.
3) O “to A for life, then to B for life, then to the heirs of B.” The Rule in
Shelley’s Case operates, as does merger, and B has a vested remainder in
fee simple.
4) O “to A for life, then one day after A’s death to the heirs of A.” The
Rule in Shelley’s Case does not operate because the interest limited to
the heirs of A is not a remainder (it can never take over immediately at
the termination of the prior freehold estate), but rather is an executory
interest.
Compare: O conveys land “to A and his heirs.” A takes a fee simple—not by
operation of the Rule in Shelley’s Case, but because the words “and
his heirs” are words of limitation denoting that a fee simple estate has
been conveyed. (See I.B.1., supra.) (It is a common student error to
conclude, in this case, that “A takes a fee simple because of the Rule in
Shelley’s Case.” This rule is triggered only by the attempted creation of a
remainder in the grantee’s heirs.)
Note: This Rule has been abolished in most states today, but arises occasionally where
a conveyance was executed prior to abolition of the Rule.

Multistate 08 real property Q.indd 17 9/13/2016 4:33:21 PM

 18. REAL PROPERTY

f. Doctrine of Worthier Title (Rule Against Remainders in Grantor’s Heirs)

Under the Doctrine of Worthier Title (“DOWT”), a remainder limited to the grantor’s
heirs is invalid, and the grantor retains a reversion in the property. This doctrine is still
applied to inter vivos transfers in a majority of states, but most states treat it only as
a rule of construction (i.e., it does not apply if the grantor has clearly manifested an
intent to create a future interest in his heirs).
Example: O deeds property “to A for life, and on A’s death to my heirs at law,”
or “. . . and on A’s death to my next of kin.” In most states, the disposi-
tion gives A a life estate and presumptively leaves a reversion in fee
simple in O. The burden of establishing that O really intended to create
a remainder in his heirs (or next of kin) would be on the parties so
contending. The litigation would arise after O’s death, and would be
between (i) the persons designated as O’s heirs under the state’s intes-
tacy laws, claiming that they take on A’s death by remainder; and (ii) the
devisees under O’s will, contending that O died owning a reversion.

In a state that has abolished the doctrine, the state of title is: life estate in
A; contingent remainder in O’s heirs; reversion in O.

Compare: 1) O deeds property “to A for life, and on A’s death to my children in
equal shares.” On O’s death, his children, X and Y, are O’s sole heirs.
DOWT does not apply. The doctrine applies only when there is a dispo-
sition, following a life estate, to the transferor’s “heirs” or “next of kin,”
or words of like effect.

2) O deeds property “to A for life, and on A’s death to the heirs born to
my wife Martha and me.” DOWT does not apply; the disposition creates
a life estate in A and a vested remainder subject to open in the children
of O and Martha. Although O used the term “heirs,” it is clear from the
context that he was not using the term in its technical sense, but was
referring to his children by his wife Martha.

3. Executory Interests
Here is a good shorthand rule for classifying executory interests. Remember that there are
two and only two future interests that can be created in a transferee: remainders and execu-
tory interests. If it is not a remainder because the preceding estate is not a life estate, then
it must be an executory interest. Thus, an executory interest is any future interest in a trans-
feree that does not have the characteristics of a remainder, i.e., it is not capable of taking on
the natural termination of the preceding life estate. More specifically, an executory interest is
an interest that divests the interest of another.

a. Shifting Executory Interest—Divests a Transferee

A shifting executory interest is one that divests the interest of another transferee; i.e., it
cuts short a prior estate created by the same conveyance.
Examples: 1) “To A and her heirs; but if B returns from Canada, then and in that
event to B and his heirs.” A has a fee simple subject to an executory
interest. Because the future interest is created in a transferee, it has to
be either a remainder or an executory interest. B’s future interest is not

Multistate 08 real property Q.indd 18 9/13/2016 4:33:21 PM

 REAL PROPERTY 19.

a remainder because it does not follow the natural termination of the

preceding estate (here, A’s fee simple estate). If B’s interest does take in
present possession, it will divest A’s fee simple, and title will shift to B.

2) O conveys “to A for life, remainder to B and his heirs, but if B prede-
ceases A, to C and his heirs.” C’s interest does not await the expiration of
B’s vested remainder, but instead may cut it short.

b. Springing Executory Interest—“Follows a Gap” or Divests a Transferor

A springing executory interest is an interest that follows a gap in possession or divests
the estate of the transferor.
Examples: 1) O conveys property “to A when and if A marries B.” State of title: fee
simple subject to an executory interest in O; springing executory interest
in fee simple in A. A’s interest is not a remainder because if A’s future
interest becomes a present interest (if A marries B), it will divest O’s
fee simple. Because it divests the estate of a transferor, it is a springing
executory interest.
2) O conveys property “to A for life, and one year after A’s death to
B.” A has a life estate. O has a reversion. B has a springing executory
interest in fee simple. B’s interest cannot be a remainder because of the
one-year gap; it is not capable of taking on the natural termination of the
preceding estate (A’s life estate). It is therefore an executory interest. It is
a springing executory interest because it springs out of the transferor’s
reversion.
c. Executory Interest Follows a Fee
A remainder cannot follow a fee simple interest of any kind. Therefore, any interest
that follows a fee and is held by a third person is an executory interest.
Examples: 1) O conveys land “to Church for so long as the premises are used for
church purposes, and if they shall ever cease to be so used, then and in
that event to the American Red Cross.” Church has a fee simple deter-
minable subject to an executory interest; the Red Cross has an executory
interest that is valid under the charity-to-charity exception to the Rule
Against Perpetuities.

2) O conveys “to Church; provided, however, that if the premises shall

ever cease to be used for church purposes, then and in that event to the
American Red Cross.” Church has a fee simple subject to an executory
interest; the Red Cross has an executory interest that is valid under the
charity-to-charity exception to the Rule Against Perpetuities.

d. Differences Between Executory Interests and Remainders

It is important to be able to distinguish between executory interests and remainders
for the following reasons: (i) executory interests are not destructible, while contingent
remainders are still destructible in a few jurisdictions; (ii) executory interests are not
considered vested, whereas contingent remainders can become vested; and (iii) the Rule
in Shelley’s Case does not apply to executory interests, but it does apply to remainders
limited to the heirs of the grantee.

Multistate 08 real property Q.indd 19 9/13/2016 4:33:21 PM

 20. REAL PROPERTY

4. Importance of Classifying Interests “In Order”

Future interests are classified clause by clause—which will often mean that the label
appended to the first future interest created in a disposition will determine the label to be
appended to a second future interest created in the same disposition. For instance, if the first
future interest is a contingent remainder, subsequent future interests must also be contingent
remainders. Similarly, if the first future interest is a vested remainder subject to divestment,
the following future interests will be executory interests.
Examples: 1) O conveys land “to A for life, and on A’s death to B if B survives A; but if
B does not survive A, on A’s death to C.” A has a life estate. B has a contin-
gent remainder because B’s taking is subject to a contingency (expressed in
condition precedent form) that B must survive A in order to take. C has an
alternative contingent remainder.

Because the contingency of B’s survival is expressed both as a condition

precedent and (in the next clause) as a condition subsequent, why is B’s
remainder classified as contingent rather than as vested subject to total divest-
ment? The explanation is that interests are classified “in order.” Looking first
at the clause giving an interest to B, here the contingency is expressed as a
condition precedent; therefore, B’s remainder is contingent. Then, having
classified B’s interest, we turn to C’s interest. But because B’s interest has
already been determined to be a contingent remainder, C’s interest is neces-
sarily an alternative contingent remainder.

2) O conveys land “to A for life, and on A’s death to B. But if B predeceases
A, on A’s death to C.” Watch this one carefully, for the answer turns on the
principle that we classify interests “in order.” First of all, A has a life estate.
Next we classify B’s interest. It is a remainder, for it is capable of taking on
the natural termination of the preceding estate (A’s life estate). It is a vested
remainder in fee simple because B is an ascertained person and there is no
condition precedent to B’s taking other than the termination of A’s life estate.
Having classified it as a vested remainder, we read on (“but if”) and see
that B’s estate will be defeated if he predeceases A. Therefore, it is a vested
remainder subject to total divestment upon the happening of this condition,
which is expressed in condition subsequent form.

Having classified B’s remainder as vested subject to total divestment, we turn

to C’s interest. It cannot be a remainder, for a remainder follows the natural
termination of the preceding estate—B’s estate, which is a vested remainder
in fee simple. But no remainder can follow a fee simple, for a fee simple is
an estate of potentially infinite duration. If C does take, it will cut short B’s
vested remainder in fee simple some time short of infinity. Therefore, C’s
interest is an executory interest—a shifting executory interest, because it
divests a transferee.

Multistate 08 real property Q.indd 20 9/13/2016 4:33:21 PM

 REAL PROPERTY 21.

But isn’t C’s interest capable of taking on the natural termination of A’s life
estate (if B predeceases A)? Yes, but that does not affect our classification.
A remainder is a future interest capable of taking on the termination of the
preceding estate, and here the preceding estate is B’s.

Suppose, some years after this disposition, B dies during A’s lifetime. What is
the state of title? The answer: life estate in A, indefeasibly vested remainder
in C. Now that B’s estate is out of the way, the preceding estate is A’s life
estate, and so now we can change the label and call C’s interest a remainder.

5. Transferability of Remainders and Executory Interests

a. Vested Remainders Are Transferable, Devisable, and Descendible

At common law and in all jurisdictions today, vested remainders are fully transferable
during life, devisable by will, and descendible by inheritance. This is true of all types
of vested remainders: indefeasibly vested, vested subject to open, and vested subject to
total divestment.

b. Contingent Remainders and Executory Interests Are Transferable Inter Vivos

At common law, contingent remainders and executory interests were not assignable.
While this is still the rule in a few states, most American courts hold that these interests
are freely transferable.

c. Contingent Remainders and Executory Interests Are Usually Devisable and

Descendible
Whereas the rule at common law was that contingent remainders and executory inter-
ests were not transferable inter vivos, it has always been held that these interests are
devisable and descendible—unless, of course, the holder’s survival is a condition to the
interest’s taking.
Example: “To A for life, and on A’s death to B; but if B does not survive A, on A’s
death to C.” State of title: life estate in A, vested remainder subject to
total divestment in B, and shifting executory interest in C. Suppose B
dies in A’s lifetime, leaving a will that devises “all my property” to Mrs.
B. B’s remainder interest does not pass under his will because, by the
terms of the disposition, that interest failed when B died in A’s lifetime.

d. Any Transferable Future Interest Is Reachable by Creditors

The rule followed in nearly all states is this: If a future interest can, under the laws
of the state, be transferred voluntarily by its owner, it is also subject to involuntary
transfer; i.e., it can be reached by the owner’s creditors by appropriate process.

e. Practical Ability to Transfer Marketable Title

Technically, most states consider all types of future interests transferable, but in practice
those interests held by unborn or unascertained persons are not transferable because
courts will not appoint a guardian for purposes of conveying land. (See VI.A.3.a.1)b),
infra.)

Multistate 08 real property Q.indd 21 9/13/2016 4:33:21 PM

 22. REAL PROPERTY

6. Class Gifts
A “class” is a group of persons having a common characteristic. Typically, they stand in the
same relation to each other or to some other person (e.g., children, grandchildren, descen-
dants, nephews and nieces). In a gift to a class, the share of each member of the class is
determined by the number of persons in the class.
a. Definitional Problems
1) Dispositions to “Children”
A gift to a person’s “children” generally includes that person’s children from all
marriages as well as adopted and nonmarital children. That person’s stepchildren
and grandchildren are generally not included in the class.

2) Dispositions to “Heirs”
A disposition to the “heirs” of someone presumptively includes those persons who
would take the named person’s estate according to the laws of descent and distribu-
tion if she were to die without a will.

3) Dispositions to “Issue” or “Descendants”

The terms “issue” and “descendants” refer to the lineal offspring of the designated
person, whatever the degree of relationship (children, grandchildren, great-grand-
children, etc.). As a general principle, the issue or descendants take per stirpes.

4) Class Members in Gestation

Persons in gestation at the time set for distribution are included in a class. The
common law presumption is that a child born within 10 lunar months or 280
calendar days after the necessary point in time was in gestation at that time.

b. When the Class Closes—The Rule of Convenience

When a gift is made to a group of persons generically described as a class, such as to
someone’s “children,” there is the possibility that other persons may be born who meet
the class description. This raises the question, when does the class “close”; i.e., when is
the maximum membership of the class determined, such that persons born thereafter
are excluded from sharing in the gift? In resolving this problem, the common law courts
developed the rule of convenience. This is a rule of construction, not a rule of law. It is
applicable in the absence of an expression of intent to include all persons who meet the
class description regardless of when they are born. Under the rule, a class closes when
some member of the class can call for a distribution of her share of the class gift.
It is presumed that the ordinary transferor intends to include all members of the class,
whenever born, provided that this would not cause any undue inconvenience. Thus,
the rule of convenience is based on a policy of including as many persons in the class as
possible, consistent with permitting a distribution of the property at the first opportunity
without the necessity of a future rebate.

1) Outright Gift—Class Closes at Time Gift Is Made

When a will makes an outright gift to a class, if any class members are alive at the
testator’s death, the class closes as of the date of the testator’s death.
Example: T’s will devises property “to the children of my good friend, John
Brown.” John has three children (A, B, and C) at the time of T’s

Multistate 08 real property Q.indd 22 9/13/2016 4:33:21 PM

 REAL PROPERTY 23.

death; another child (D) is born two years later. The class closes at
T’s death; A, B, and C share the gift. D is excluded by the rule of
convenience.

Here, additional members of the class are included up to the time

of T’s death because there is no inconvenience in doing so. But we
close the class at T’s death because it is assumed that T would want
an immediate distribution, rather than postponing distribution until
John Brown’s death, which is the only time we will be sure that
John Brown will have no more children. If we were to include D,
we would also have to include E, F, and G, who might be born later.
Moreover, if we distributed one-third shares to A, B, and C at T’s
death, but required them to make rebates if more children should be
born later to their father, John, all sorts of practical problems would
arise. To avoid these problems, there is a strong constructional
preference to close the class at T’s death.

a) No Class Members Alive at Testator’s Death—Class Stays Open

If there are no members of the class living at the testator’s death, all afterborn
persons who come within the class designation are included. Thus, if T had
bequeathed $100,000 “to the children of John,” and John had no children
living at T’s death or born within the period of gestation thereafter, then all
of John’s children, whenever born, are included, regardless of any possible
inconvenience in keeping the class open this long.

2) Postponed Gift—Class Closes at Time Fixed for Distribution

When possession and enjoyment of a gift are postponed, as where the gift follows
a life estate, the class remains open until the time fixed for distribution (e.g., death
of the life tenant).
Example: T’s will creates a trust to pay the income to W for life, and on W’s
death to pay the principal to the children of John. At the time T
executes his will, John has two children (A and B). After the will is
executed but before T dies, another child (C) is born to John. After
T’s death but during W’s lifetime, another child (D) is born to John.
W dies; two years later John has another child (E).

The class closes at W’s death; A, B, C, and D each take a

one-fourth share. E is excluded by the rule of convenience. There
was no inconvenience in leaving the class open until W’s death,
for the time had not yet come to distribute the corpus. But when W
dies, it is time to make a distribution; the class is closed in order to
determine the minimum shares going to each class member.

3) Dispositions Subject to Condition of Reaching Given Age

When there is a gift to a class conditioned upon the members attaining a certain
age, the class closes when (i) the preceding estate, if any, terminates, and (ii) the
first class member reaches the specified age. That class member’s minimum share
should be determined and distributed to her when she reaches the specified age.

Multistate 08 real property Q.indd 23 9/13/2016 4:33:21 PM

 24. REAL PROPERTY

Examples: 1) T’s will devises his residuary estate “to the children of John who
live to attain the age of 21.” At T’s death, John has three children:
A (age 22), B (age 16), and C (age 10). The class closes at T’s
death. A is entitled to immediate distribution of her share, and
the minimum size of that share must be fixed as of T’s death, at
one-third. If B lives to attain age 21, but C dies before attaining that
age, on C’s death, A and B’s shares will be increased to one-half.

Two years after T’s death, another child (D) is born to John. D is
excluded by the rule of convenience. The class was closed at T’s
death in order to determine the minimum size of A’s share so that
this share could be distributed to her.

Suppose none of John’s children is 21 at T’s death. The class

remains open until a child of John reaches the designated age, at
which time the class closes.

2) T’s will devises his residuary estate “to Wanda for life, and on
Wanda’s death to such of John’s children as live to attain the age
of 21.” Here, the class will close, and the remaindermen who share
in the disposition will be determined, when two things occur: (i)
Wanda dies; and (ii) a child of John reaches age 21. If at T’s death
one of John’s children is over age 21, it does not matter; the class
remains open until Wanda’s life estate terminates. Likewise, if
at Wanda’s death no child of John has attained age 21, the class
remains open until one of John’s children reaches that age. If at
Wanda’s death a child has attained age 21, the class will close at
that time.

4) Rule of Convenience Is a Rule of Construction Only

The rule of convenience is a rule of construction only. If the transferor explicitly
sets forth the time when membership of the class is to be determined, or if he
provides that all members of the class, whenever born, are to share in the gift, then
his directions will govern. However, courts have a strong preference for application
of the rule of convenience unless there is a fairly clear indication that it is not to
govern.

7. Survival
As a general rule, all future interests can pass at death by will or inheritance; i.e., they are
descendible and devisable. This is true unless the interest’s taking is subject to an expressed
or implied contingency of survival.
Examples: 1) T’s will devises his residuary estate “to my sister Sue for life, and on Sue’s
death to her children in equal shares.” At the time of T’s death, Sue has
three children: A, B, and C. C dies, then Sue dies survived by A and B. The
remainder is shared by A, B, and the estate of C (i.e., the estate takes under
C’s will or by intestacy), each with one-third shares. Analysis: A, B, and C
had vested remainders subject to open, but their interests were not in terms
conditioned on surviving the life beneficiary—and the law does not imply

Multistate 08 real property Q.indd 24 9/13/2016 4:33:21 PM

 REAL PROPERTY 25.

such a condition of survival. On C’s death, his vested remainder subject to

open passes via his will or by intestacy. (Note: This example does not invoke
the lapsed gift doctrine of Wills law, for C was alive at the testator’s death.)

2) “To A for life, and on A’s death to B if B is then living; but if B is not
then living, to C.” C dies, then B dies, then A dies. Who takes? Answer: The
takers under C’s will or by intestacy. B and C were given alternative contin-
gent remainders. B’s remainder was contingent on his surviving A, and B did
not meet the condition; his estate was defeated. C’s remainder was contingent
on B’s not surviving A; it was not in terms contingent on C’s surviving A, and
the law does not imply such a condition.

a. Express Words of Survival

In each of the following examples, the italicized language imposes a condition prece-
dent that the remaindermen must survive the life tenant in order to take.
Examples: 1) “To A for life, remainder to his surviving children.”

2) “To A for life, and should he die leaving children, to such children.”

3) “To A for life, and after the death of A, remainder to the children of A
then living.”

b. Implied Contingency of Survival—Gifts to “Issue,” “Descendants,” or “Heirs”

Gifts to a person’s “issue,” “descendants,” or “heirs” imply a condition of surviving the
named ancestor.

D. TRUSTS
An express trust involves the holding of title to property by a trustee, who has an equitable
fiduciary duty to deal with it for the benefit of other persons (the beneficiaries).

1. Private Trust Concepts and Parties

a. Settlor
The settlor is the person who creates the trust by manifesting an intent to do so. While
a trust of personal property may be expressed orally, the Statute of Frauds requires a
writing to create a trust of real property. The settlor must own the property at the time
the trust is created and must intend to make the trust effective immediately.

b. Trustee
The trustee holds legal title to the property, but must act under the instructions of the
settlor who created the trust. The trustee has a fiduciary duty to use the highest care and
skill for the beneficiaries. If the trustee has no duties at all, the trust will fail, and legal
title will vest immediately in the beneficiaries. However, if the trustee dies, resigns, or
refuses to serve, the trust will not fail; a court of equity will appoint a substitute trustee.

c. Beneficiaries
The beneficiaries are the persons for whose benefit the trust is created and held;
they hold equitable title to the property. Every private trust must have at least one
beneficiary, and the beneficiaries must be definitely identifiable by the time their

Multistate 08 real property Q.indd 25 9/13/2016 4:33:21 PM

 26. REAL PROPERTY

interest comes into enjoyment and, in all events, within the period of the Rule Against
Perpetuities. Acceptance of the benefits of the trust is normally presumed, but a benefi-
ciary may renounce his rights under the trust within a reasonable time after learning of
its creation. A trust may be for a class of beneficiaries (e.g., “all the living descendants
of Mary Jones”), provided that the class is small enough to be “reasonably definite.”

d. Res
The res is the property that is the subject of the trust. If there is no res, the trust fails.
The res may be real property or personal property (tangible or intangible), and it may
be either a present interest or a future interest (vested or contingent). The trust res must
be segregated from other property of the settlor, but this does not preclude a trust of a
fractional share interest, such as a trust of “an undivided one-half interest in Blackacre,”
where the settlor owns all of Blackacre.

e. Application of Rule Against Perpetuities

The Rule Against Perpetuities (see E., infra) applies to the equitable future interests of
the beneficiaries in a private trust just as it does to “legal” future interests.
Example: O conveys land to T “in trust for the benefit of A so long as the existing
house on the land remains standing, and then for the benefit of the then
living descendants of A.” The equitable interest of the descendants of A
is void because it is not certain to vest or fail within 21 years after the
life of any person living at the time the trust is created.

2. Creation of Trusts

a. Inter Vivos Conveyance

An inter vivos trust can be created by the settlor’s conveyance of the trust res to the
trustee while the settlor is alive. For real property, this must be done by a writing to
satisfy the Statute of Frauds; this is usually accomplished by delivery of a deed.

b. Inter Vivos Declaration

The settlor may declare that he is now holding certain property (previously held outright
by the settlor) in trust for certain beneficiaries. No deed or delivery is necessary, but if
the res is real property, the declaration must be in writing and signed by the settlor.

c. Testamentary Conveyance
The settlor may create the trust by language in his will, and may also transfer the res
to the trustee by a devise in the will. The trust will come into existence only upon the
death of the settlor.

d. Pour-Over into Existing Trust

The settlor may create an inter vivos trust before death. The settlor’s will may then
bequeath property to the trust—“pouring it over” into the trust.

3. Charitable Trusts

a. Beneficiaries
A charitable trust, unlike the private trusts described above, must have an indefinite

Multistate 08 real property Q.indd 26 9/13/2016 4:33:21 PM

 REAL PROPERTY 27.

group of beneficiaries. The beneficiaries must be reasonably numerous and not individu-
ally identified. The trust may be for the benefit of an established charity (e.g., the
American Red Cross) or for a group of persons (e.g., the victims of Hurricane Sandy).

b. Application of Rule Against Perpetuities

The Rule Against Perpetuities does not apply to trusts that are entirely charitable. Such
trusts may have infinite life. This is true even if the trust benefits two charities, one
with a present interest and the other with a future interest that would normally violate
the Rule Against Perpetuities. Note, however, that if either the first or second interest is
noncharitable, the exemption from the Rule Against Perpetuities does not apply and the
second gift is void.
Examples: 1) O conveys land to T in trust “for the benefit of the victims of
Hurricane Sandy, and when all houses destroyed by the hurricane have
been rebuilt, then for the benefit of the American Red Cross.” The
interest of the Red Cross may not vest until more than 21 years after the
death of any person living when the trust is created, but it is still a valid
interest.

2) O conveys land to T in trust “for the benefit of my son John, whose

house was destroyed by Hurricane Sandy, and when his house has been
rebuilt, then for the benefit of the American Red Cross.” The interest of
the Red Cross may not vest until more than 21 years after the death of
any person living when the trust is created, and it is void.

c. Cy Pres Doctrine
If the purposes of a charitable trust are impossible to fulfill, are illegal, or have been
completely fulfilled, a court may redirect the trust to a different purpose that is “as near
as may be” (a translation of the Latin “cy pres”) to the settlor’s original intent.

d. Enforcement of Charitable Trusts

Charitable trusts may be enforced by an action of the attorney general of the state.
Under the Uniform Trust Code ("UTC"), enacted by the majority of states, the settlor
and qualified beneficiaries also have standing to enforce a charitable trust. [UTC §§110,
405(c)]

E. THE RULE AGAINST PERPETUITIES

The Rule Against Perpetuities may be stated as follows: “No interest in property is valid unless
it must vest, if at all, not later than 21 years after one or more lives in being at the creation of the
interest.” The Rule might be more easily understood if it had been expressed as an affirmative
proposition: “An interest is void if there is any possibility, however remote, that the interest may
vest more than 21 years after some life in being at the creation of the interest.” This paraphrase of
the Rule properly places the emphasis on the possibility of remote vesting, the test by which the
invalidity of an interest is shown. If a situation can be imagined in which the interest might not
vest within the perpetuities period, the interest is void. This is the result even though the circum-
stances that might bring about the remote vesting are unlikely to occur or are unrealistic. (All
kinds of unlikely things are considered capable of happening under the Rule.) The Rule applies to
the following legal and equitable future interests in personal or real property:

Multistate 08 real property Q.indd 27 9/13/2016 4:33:21 PM

 28. REAL PROPERTY

(i) Contingent remainders;

(ii) Executory interests;

(iii) Class gifts (even if vested remainders);

(iv) Options and rights of first refusal; and

(v) Powers of appointment.

1. Analysis of the Rule

a. When the Perpetuities Period Begins to Run

The validity of interests under the Rule is determined at the time the interests are
created, taking into account the facts then existing. The “lives in being plus 21 years”
period begins to run, and the measuring lives used to show the validity of an interest
must be in existence, at that time.

1) Wills—Date of Testator’s Death

The perpetuities period in the case of a will begins to run on the date of the testa-
tor’s death.

2) Revocable Trusts—Date Trust Becomes Irrevocable

In the case of revocable trusts, the perpetuities period begins to run on the date
the trust becomes irrevocable. This will be at the settlor’s death unless the settlor
amends the trust, making it irrevocable, during his lifetime.

3) Irrevocable Trusts—Date Trust Is Created

The perpetuities period for irrevocable trusts begins to run on the date the trust is
created.

4) Deeds—Date Deed Is Delivered with Intent to Pass Title

In the case of a deed, the perpetuities period begins to run on the date the deed is
delivered with the intent to pass title.

b. “Must Vest”
To be valid under the Rule, it must be shown that the interest created in the trans-
feree must vest, regardless of what might happen, within lives in being plus 21 years.
An interest becomes “vested” for purposes of the Rule when: (i) it becomes a present
possessory estate, or (ii) it becomes an indefeasibly vested remainder or a vested
remainder subject to total divestment. Remember that the Rule is applicable only to
future interests created in third persons; consequently, the Rule generally applies only to
contingent remainders, executory interests, and vested remainders subject to open.
Examples: 1) “To A for life, then to A’s children for their lives, and on the death
of the last survivor of A’s children, to B in fee simple.” At the time of
this disposition, A has two very young children and is quite capable of
having more children in the future. (i) A has a present possessory life
estate. A’s present children have vested remainders in life estates that
are subject to open in favor of any future children born to A. There is

Multistate 08 real property Q.indd 28 9/13/2016 4:33:21 PM

 REAL PROPERTY 29.

a contingent remainder in a life estate in A’s unborn children—but this

interest is valid under the Rule because the children’s life estates will
vest at their birth, which will be in A’s lifetime. B has an indefeasibly
vested remainder in fee simple. (ii) B’s interest is valid under the Rule
even though it may be years before B (or her successors) is entitled to
present possession and enjoyment of the property, and even though B
(or her successors) may not succeed to present possession and enjoy-
ment until the death of some person not now in being (i.e., a future-born
child of A may be the last survivor of A’s children). Despite all this,
B’s interest is valid under the Rule because it is an indefeasibly vested
remainder from the time of its creation.

2) “To A for life, then to B; but if at B’s death she is not survived by
children, then in that event to C.” (i) A has a present possessory life
estate. B has a vested remainder subject to total divestment in fee simple.
C has a shifting executory interest in fee simple. (ii) C’s interest is valid
under the Rule. B’s is the relevant life that can be used to show that C’s
interest will vest within the perpetuities period. If B dies in A’s lifetime
not survived by children, C’s interest will become an indefeasibly vested
remainder. If B survives A and thereafter dies not survived by children,
C’s executory interest will become a present possessory estate. Of
course, B may die in A’s lifetime (or after A’s death) leaving children
surviving her, in which case C’s interest is extinguished. But that does
not matter; the Rule requires that an interest must vest, if it does vest (“if
at all”), within lives in being plus 21 years.

3) “To A for life, and on her death to such of her children as attain the
age of 35.” At the time this disposition takes effect, A is a 60-year-old
woman who has had a hysterectomy. She has two children, ages 30 and
25. Under the common law Rule, here is what might happen: A might
give birth to a child (defying medical science in the process). (See also
V.D.2., infra.) Then A’s other two children might die before attaining
age 35; then A might die before the afterborn attained his 14th birthday.
(Key: 35 minus 21 is 14.) The afterborn child lives on to attain age 35.
If these events were to occur, the remainder to such of A’s children as
attain age 35 would vest remotely. Because these events might occur, the
remainder violates the Rule; it is stricken.

1) “Wait and See” Rule

A majority of states have modified the “must vest, if at all” rule above. Under the
modified approach, these states suspend judgment as to whether the interest in
question is good or void. Potentially, they wait until the end of the perpetuities
period. If the interest in question actually vests during the period, it is good; if it
does not vest or fail during that period, it is void. Until the end of the perpetuities
period, it is impossible to know for sure whether the interest is good or not.
Example: Consider Example 3), above: “To A for life, and on her death to
such of her children as attain the age of 35.” Under the “wait and
see” approach, the courts would inquire as to whether in fact any

Multistate 08 real property Q.indd 29 9/13/2016 4:33:21 PM

 30. REAL PROPERTY

child of A reaches the age of 35 within 21 years after A’s death. If

one or more of A’s children does so, the remainder is valid; if none
does so, the remainder is void.

c. “If at All”
This simply means that the interest does not have to vest within the perpetuities period
in order to be valid; after all, many contingent remainders never vest because the condi-
tion precedent to their taking is not satisfied.
Examples: 1) “To A for life, and on A’s death to B if B is then living.” A has a life
estate, B has a contingent remainder, and the transferor has a reversion.
B may never take, for she may predecease A. But if B does take (“if at
all”), her interest will vest—here, will become a possessory estate—on
A’s death, when we will know whether B has survived A. In this case, B
is “her own life in being,” for the condition precedent to B’s taking must
occur, if it does occur, within B’s lifetime. B’s interest is valid under the
Rule.

2) “To A in fee, but on the express condition that if marijuana is ever

smoked on the premises during B’s lifetime or within 21 years after B’s
death, then and in that event to B in fee.” A has a fee simple subject to an
executory interest; B has an executory interest in fee simple. B’s interest
might not take, for marijuana might not be smoked on the premises
during B’s lifetime or within 21 years thereafter. But if B’s interest does
take, by the terms of the disposition it must take during B’s lifetime or
within 21 years thereafter. B’s interest is valid under the Rule.

d. “Lives in Being”
The law allows any lives to be used to show the validity or invalidity of an interest,
but no lives are of any help unless they are somehow connected with the vesting of an
interest. The measuring lives need not be given a beneficial interest in the property, and
they need not even be expressly referred to in the instrument, but there must be some
connection that insures vesting or failure of the interest within the perpetuities period.
Examples: 1) “To A for life, then to such of A’s children as attain the age of 21.”
Here, the relevant measuring life is A. All of A’s children are going to
attain age 21, if at all, within 21 years after A’s death. (This includes
a child in the mother’s womb at A’s death, for the perpetuities period
includes any period of gestation actually involved.)

2) T’s will devises her residuary estate “to such of my nephews and
nieces as attain the age of 21.” At the time of T’s death, she has two
brothers and six nephews and nieces, all of whom are under age 21. Is
the gift valid under the Rule? The answer: It depends. Specifically, it
depends on whether T’s parents are living. The relevant measuring
lives are T’s brothers and sisters, because all of T’s nephews and nieces
will attain age 21, if at all, within 21 years after their parents’ deaths.
If T’s parents are dead, her two brothers are all the brothers she is ever
going to have; and T’s nephews and nieces will be the children of these
brothers. The disposition is valid.

Multistate 08 real property Q.indd 30 9/13/2016 4:33:21 PM

 REAL PROPERTY 31.

But if T’s parents are alive, they might have another child (call him
Excelsior), a brother or sister of T not alive at T’s death. Then T’s two
brothers and six nephews and nieces who were alive at T’s death might
die. Then Excelsior might have a child who lives to attain age 21—more
than 21 years after any life in being. Because this might happen, the
disposition is invalid under the Rule.

1) Who Can Be Used as Measuring Lives

In all the examples in this chapter, the measuring lives used to show the validity
or invalidity of interests are referred to or are indirectly involved in the disposi-
tion itself. It is a common drafting practice to use a “perpetuities saving clause”
(i) to make sure that the Rule has not been accidentally violated, for the Rule
is difficult to master; and (ii) sometimes to extend the duration of trusts to the
maximum extent permitted under the Rule. The clause reads something like this:
“Notwithstanding anything herein to the contrary, any trust created hereunder
shall terminate, if it has not previously terminated, 21 years after the death of the
survivor of the following named persons: ; and the remaining principal
and undistributed income of such trusts shall be distributed to . . . .”

In the blanks are inserted the names of the persons to be used as “artificial”
measuring lives. Most commonly, the descendants then living of the transferor
are specifically named. Alternatively, the clause might provide: “after the death of
the survivor of all my descendants who shall be living at the time of my death”—
this clause works in a will but does not work in an irrevocable trust. A few more
aggressive draftsmen will name 10 healthy babies born in some local hospital on
the day the instrument is executed—the probability is that this will permit the trust
to run for 100 years.

2) Reasonable Number of Human Lives Can Be Used

Animals and organizations cannot be used as measuring lives; only humans can be
used as measuring lives. Also, the number of measuring lives must be reasonable.
Examples: 1) “The trust will terminate 21 years after the death of the survivor
of all persons listed in the Manhattan telephone directory.” Clearly
impermissible.

2) “The trust will terminate 21 years after the death of the survivor
of all the descendants of Queen Victoria who are alive at the
time of my death.” This “royal lives” clause was widely used in
England shortly after the turn of the century, and the English courts
grudgingly sustained it. If the name of some currently famous
person were used in this fashion, it is highly questionable whether
American courts would sustain the disposition.

e. Interests Exempt from Rule

1) Gift Over to Second Charity

A charitable trust may last forever (i.e., neither the Rule Against Perpetuities nor
any analogous rule applies). However, like any other gift, a gift for charitable

Multistate 08 real property Q.indd 31 9/13/2016 4:33:21 PM

 32. REAL PROPERTY

purposes is void for remoteness if it is contingent upon the happening of an event

that may not occur within the perpetuity period. The only exception to this rule
is that if there is a gift to Charity A, followed by a gift over to Charity B upon
a possibly remote event, the gift over is valid. Remember, this is the charity-to-
charity exception. The Rule Against Perpetuities applies to dispositions over from
a charity to an individual on a remote condition, and to dispositions over from an
individual to a charity on a remote condition.
Examples: 1) “To the Georgetown YMCA for so long as the premises are used
for YMCA purposes; and when they shall cease to be so used, then
and in that event to the American Cancer Society.” The YMCA has
a fee simple subject to an executory interest; the Cancer Society has
a shifting executory interest. The gift over to the Cancer Society is
valid under the charity-to-charity exception to the Rule.

2) “To the Georgetown YMCA for so long as the premises are

used for YMCA purposes; and when they shall cease to be so
used, then and in that event to John Hancock, his heirs, succes-
sors, and assigns.” Classifying the interests without regard to the
Rule, the YMCA would have a fee simple subject to an executory
interest; Hancock would have a shifting executory interest—which
is stricken because it violates the Rule. The YMCA has a fee simple
determinable, and the transferor has a possibility of reverter.

3) “To John Hancock, his heirs, successors, and assigns, provided

that no marijuana is ever smoked on the premises; and if marijuana
is ever smoked on the premises, to the Georgetown YMCA.”
Classifying interests without regard to the Rule, Hancock would
have a fee simple subject to an executory interest; the YMCA would
have a shifting executory interest—which is stricken because it
violates the Rule. Thus, Hancock has a fee simple absolute.

2) Vested Interests
A vested remainder in an individual is not subject to the Rule. Thus, a devise “to A
for life, then to A’s children for life, then to B in fee simple” is wholly valid. B has
a presently vested remainder. It may vest in possession long after lives in being if
A leaves some surviving children born after the testator’s death, but the remainder
to B is presently vested in interest, and that is what counts.

a) Compare—Class Gifts Are Subject to Rule

Vested remainders in a class, however, are subject to the Rule so long as the
class remains open.

3) Reversionary Interests
Reversions, possibilities of reverter, and rights of entry are all vested in interest and
hence are not subject to the Rule Against Perpetuities. (Even so, in many states,
there are statutes expressly limiting the duration of possibilities of reverter or rights
of entry.)

Multistate 08 real property Q.indd 32 9/13/2016 4:33:21 PM

 REAL PROPERTY 33.

a) Compare—Executory Interests Are Subject to Rule

Possibilities of reverter and rights of entry, which are exempt from the Rule,
must be carefully distinguished from executory interests, which are subject
to the Rule. Remember that executory interests are created in transferees;
possibilities of reverter and rights of entry are created only in the grantor (or
the testator’s heirs if a will is involved). An understanding of this distinction
has frequently been tested by the bar examiners.
Example: O conveys Blackacre “to School so long as it is used for
educational purposes, and when it is no longer so used, to A.”
A has an executory interest that violates the Rule because it
may vest in possession many years after all lives in being are
dead. Because any interest that violates the Rule is void and
is stricken from the instrument, this leaves a determinable fee
in the school and a possibility of reverter in O. O can now,
by a second deed, transfer her possibility of reverter to A (if
possibilities of reverter have been made transferable by statute
in the jurisdiction). To get a possibility of reverter in A, two
pieces of paper are required: one creating the possibility of
reverter in O; the second transferring it to A.
f. Consequence of Violating the Rule—Interest Is Stricken
An interest that violates the Rule is void and is stricken (subject to the possible applica-
tion of a perpetuities reform statute). However, all other interests created in the instru-
ment of transfer that are valid under the Rule are given effect.
1) Exception—“Infectious Invalidity”
There is an important exception to the preceding statement. Under the principle
of “infectious invalidity,” if the invalid gift is an essential part of the transferor’s
dispositive scheme, such that to strike this interest and give effect to the remaining
interests would be to subvert the transferor’s intent—if it is determined that the
transferor would prefer that the entire disposition fail—then the entire disposition
is void.
Example: Irrevocable Trust A directs the trustee “to pay the income to my
brother’s children for life, and on the death of my brother’s last
surviving child, to pay the principal to the issue of my brother’s
children.” The gift to “the issue of my brother’s children” is void
because the brother might have a child born after the creation of
the trust (who would thus not be a life in being). That child might
not die within 21 years after the death of the last child living at the
time the trust was created. After the invalid interest is stricken, the
brother’s children have a life estate in the income, and the settlor
has a reversion in the principal. However, Trust B provides that
if any provision of Trust A is invalid, any income and principal
from Trust A should be held in trust for the benefit of the brother’s
children and their issue. By striking out all the gifts in Trust A,
valid and invalid, and by giving effect to Trust B, the settlor’s
presumed intent to benefit his brother’s children and their issue may
be substantially carried out. [New England Trust Co. v. Sanger, 149
N.E.2d 598 (Mass. 1958)]

Multistate 08 real property Q.indd 33 9/13/2016 4:33:22 PM

 34. REAL PROPERTY

2. The Rule in Operation—Common Pitfall Cases

a. Executory Interest Following Defeasible Fee Violates the Rule

An executory interest that follows a defeasible fee, with no limit on the time within
which it must vest, violates the Rule Against Perpetuities and is stricken. The effect on
the remaining fee estate depends on whether the estate is determinable or subject to a
condition subsequent. If the defeasible fee is phrased in durational terms (e.g., “for so
long as,” “until”), the estate will still terminate upon the happening of the stated event
and the grantor will have a possibility of reverter. In contrast, if the fee is subject to a
condition subsequent, the condition is also stricken and the estate becomes a fee simple
absolute.
Examples: 1) “To John Brown for so long as no marijuana is smoked on the
premises; and if marijuana is ever smoked on the premises, then to
Candy Barr.” (i) John Brown has a fee simple subject to an executory
interest; Candy Barr has an executory interest in fee simple. (ii) Candy’s
interest violates the Rule. Things may stay quiet for generations, long
beyond 21 years after the deaths of John and Candy (the only relevant
lives in this case). Then someone might light up, triggering the execu-
tory interest. Because this might happen, the executory interest might
vest (i.e., might become a possessory estate) long after lives in being plus
21 years. Candy’s interest violates the Rule, and it is stricken. This leaves
a fee simple determinable in John Brown, and a possibility of reverter in
the transferor. The possibility of reverter is valid; retained interests in the
transferor are not subject to the Rule.

What if marijuana is smoked on the premises within five years after

the transfer, well within lives in being plus 21 years, meaning that in
actuality there was no remote vesting? It does not matter. Under the
Rule we do not “wait and see.” (But see 1.b.1), supra.) It is what might
happen that counts, viewing the facts as they exist at the time the
interest is created. What actually happens is irrelevant.

2) “To John Brown; provided, however, that if marijuana is ever smoked

on the premises, then to Candy Barr.” (i) John Brown has a fee simple
subject to an executory interest; Candy Barr has an executory interest
in fee simple. (ii) Candy’s interest violates the Rule, under the analysis
given in Example 1). Again we strike Candy’s interest—leaving John
Brown with a fee simple absolute. (Contrast this with the result in
Example 1), where the transferor had a possibility of reverter. This is
the result of two different forms of expressing the gift to John Brown.
Whenever a fee simple determinable is created (“so long as”), the trans-
feror automatically has a possibility of reverter. But when a fee on a
condition subsequent is created, the transferor does not have a right of
entry unless the right of entry is expressly raised.)

b. Age Contingency Beyond Age Twenty-One in Open Class

A gift to an open class conditioned upon the members surviving to an age beyond 21
violates the Rule Against Perpetuities.

Multistate 08 real property Q.indd 34 9/13/2016 4:33:22 PM

 REAL PROPERTY 35.

Example: “To A for life, then to such of A’s children as live to attain the age of
25.” At the time of this disposition, A has two children: X (age 12) and
Y (age nine). (i) A has a life estate; there is a contingent remainder in
A’s children who live to attain age 25, and a reversion in the transferor
(for none of A’s children may ever reach age 25). (ii) The remainder to
A’s children violates the Rule. After this transfer, A might have another
child (Z); before this afterborn child (who cannot be used as a life in
being) attains age four, A, X, and Y might die; then Z might live on to
age 25, at which time the remainder to A’s children would vest in Z. But
if this were to happen (and it might), the remainder would vest beyond
lives in being plus 21 years. Because the interest might vest remotely, it
is stricken.

c. The Fertile Octogenarian

A woman is conclusively presumed to be capable of bearing children regardless of her
age or medical condition.
Example: Suppose, in the preceding example, X and Y were age 24 and 22, respec-
tively, and A was a 60-year-old woman who has undergone a hysterec-
tomy. Under the “remote possibilities” test, it is possible for a woman,
of whatever age and medical condition, to bear children. Thus, A might
have another child, Z. The remainder to A’s children violates the Rule.

d. The Unborn Widow or Widower

The problem is that the term “widow” (and “widower”), like “heir,” is a technical word
with a technical meaning: You do not know who a person’s widow (or widower) is until
he dies and you can determine to whom he was married at his death.
Example: “To A for life, then to his widow for life; and on the death of A’s widow,
to such of A’s descendants as are then living.” (i) A has a life estate;
there is a contingent remainder in a life estate in his widow; there is a
contingent remainder in fee simple in A’s descendants; and the trans-
feror has a reversion. (ii) The remainder in the descendants violates the
Rule. Although A is now happily married, he might divorce his wife (or
she might die), and A might marry someone who was not alive at the
time the interest was created. A might have a child by this widow; then
everyone now on the scene might die; the widow might live for more
than 21 years after the death of all lives in being, then die—leaving the
afterborn child or children as “A’s descendants then living.”

Compare: "To A for life, then to his widow for life; and on the death of A’s widow,
to A's children." (i) A has a life estate; there is a contingent remainder in
a life estate in his widow; A’s present children have vested remainders
in fee simple that are subject to open in favor of any future children
born to A, and A’s unborn children have a contingent remainder in fee
simple. (ii) The remainder in A's children is valid under the Rule because
their interests will vest (and the class will close) within A’s lifetime. The
difference here is that the children’s interest was not contingent on their
surviving A’s widow, and the law does not imply such a condition.

Multistate 08 real property Q.indd 35 9/13/2016 4:33:22 PM

 36. REAL PROPERTY

e. The Administrative Contingency

A gift that is conditioned on an administrative contingency (e.g., admission of will to
probate) violates the Rule. The key question is “under the facts as they existed at the
time of the gift, what might happen?”
Example: Disposition of residuary estate “per stirpes to such of my descendants
as are living at the time my will is admitted to probate.” Alternatively, a
will of a German national written during World War II: “to such of my
relations in Germany as are living at the time World War II is officially
declared at an end.” Under the “what might happen” approach of the
common law Rule, wills are not probated, wars do not come to an end,
decrees of distribution are never entered, etc. Moreover, because no
person’s lifetime is connected to the condition attached to this type of
gift, we cannot use a life in being; we must use the “period in gross” of
21 years. And because the will “might not” be probated within 21 years,
the gift is void.

The fact that the testator’s will is in fact probated three weeks after her
death does not matter. We do not wait and see. (But see 1.b.1), supra.)
Rather, looking from the time of the testator’s death, and taking into
account facts as they existed at that time, the question is what might
happen.

f. Options and Rights of First Refusal

1) Options
An option creates in the optionee a right to purchase the property on terms
provided in the option. Options are typically considered to be assignable unless
the parties provide otherwise and thus are subject to the Rule Against Perpetuities
(but see b), infra). If an option is structured so that it might be exercised later than
the end of the Rule’s period, it is usually held void.
Examples: 1) A is a subdivision developer and gives B an option to purchase a
lot in the subdivision “to be exercised within 60 days after the City
Council grants approval for the filing of a subdivision plat.” While
the parties may expect this to occur soon, it is possible that it will
not occur within 21 years after any life in being at the creation of
the option. Hence, the option may be held void.

2) O conveys “to A and her heirs an option to purchase Blackacre

for $25,000.” This option is not limited to A’s life, but can be
exercised by A’s heirs and their heirs long after A’s death. Thus, the
option is void.

a) Reasonable Time Limit May Be Inferred

A significant minority of courts, in applying the Rule to these interests, will
construe the option as lasting only for a reasonable time, which is invari-
ably less than 21 years, and thus will uphold it. Under this view, the option
in Example 1), above, would be sustained on the ground that the parties
intended it to expire if the City Council failed to act within a reasonable time,

Multistate 08 real property Q.indd 36 9/13/2016 4:33:22 PM

 REAL PROPERTY 37.

less than 21 years. Similarly, if the parties to the option are natural persons,
some courts construe the option as lasting only for their lifetimes; hence, it
is valid under the Rule. Furthermore, the Uniform Statutory Rule Against
Perpetuities (4.d., infra) excludes options in commercial transactions from the
Rule’s application.

b) Options Connected to Leaseholds

If a tenant under a lease has an option to purchase the leased premises during
the lease term, the Rule is not applied, no matter how long the term. If a
tenant assigns the leasehold, the option generally is considered a running
covenant, exercisable by the assignee in the absence of contrary intent.
However, a tenant may attempt to transfer the option to some other party,
thereby separating it from the leasehold estate. While some courts do not
permit the option to be transferred separately, most courts hold that the
transferability of the option depends on the original parties’ intent when they
entered into the lease and option agreement. If the court finds that the option
has been separated from the leasehold estate, so that it is no longer exercisable
by the tenant, the option becomes subject to the Rule Against Perpetuities.

2) Rights of First Refusal

A right of first refusal (or “preemptive right”) gives the holder the right to purchase
the property if the seller receives a third party’s offer to purchase, usually on the
same terms as that offer. In contrast to options, rights of first refusal in many states
are presumed to be personal to the holder and thus not assignable unless the
instrument indicates otherwise. [Malone v. Flattery, 797 N.W.2d 624 (Iowa 2011)]
Nonassignable rights of first refusal are usually not subject to the Rule Against
Perpetuities, but rather are governed by the Rule Against Restraints on Alienation
(see F.5.b., infra). In some states, however, rights of first refusal are subject to the
Rule Against Perpetuities in the same manner as options.

3. Application of the Rule to Class Gifts

a. “Bad-as-to-One, Bad-as-to-All” Rule

The general principle that the Rule does not invalidate interests that “vest” within the
perpetuities period does not apply to vested remainders subject to open. The class gift
rule, sometimes called the “all-or-nothing” rule, requires that:

(i) The class must close within the perpetuities period; and

(ii) All conditions precedent for every member of the class must be satisfied, if at all,
within the perpetuities period.

If it is possible that a disposition might vest remotely with respect to any member of the
class, the entire class gift is invalid.
Examples: 1) “To A for life, then to such of A’s children as live to attain the age of
35.” At the time of this disposition, A has two children: X (age 38) and
Y (age 33). (i) A has a life estate. X has a vested remainder subject to
open. There is a contingent remainder in such of A’s other children as

Multistate 08 real property Q.indd 37 9/13/2016 4:33:22 PM

 38. REAL PROPERTY

live to attain the age of 35. (ii) The remainder to A’s children violates the
Rule; the transferor has a reversion in fee. While X’s remainder is vested
subject to open, it is not vested for purposes of the Rule. Here is what
might happen: A might have another child (Z); before Z attains age 14,
A, X, and Y might die, etc. The gift with respect to any afterborn child
of A clearly violates the Rule; under the “bad-as-to-one, bad-as-to-all”
class gift rule, the entire class gift is void.

Why does the “class closing” rule not save the gift? Because X is already
age 35, doesn’t this mean that the class will close on the life tenant’s
death? The answer is: yes it does, but this does not help. Although we
will close the class at that point, the class as closed might include the
afterborn Z, who might be under age 14 at that time; and it still might be
more than lives in being plus 21 years before Z’s interest might vest.

2) “To A for life, then to A’s children for their lives, and on the death of
the last survivor of A’s children, to A’s grandchildren in fee.” At the time
this disposition takes effect, A is alive and has two children and three
grandchildren. A has a life estate, the two children have vested remain-
ders subject to open in a life estate, and the three grandchildren have
vested remainders subject to open in fee. The remainder to A’s grand-
children is void because every member of the class will not be ascer-
tained until the death of the survivor of A’s children; and that surviving
child might be born to A after the date of this disposition. Then all of A’s
children and grandchildren who are lives in being might die and 21 years
after their deaths, this afterborn child might give birth to a child (GC-4);
although GC-4’s interest would vest at birth, under the hypothesized
facts it would vest remotely.

b. Class Closing Rules May Save Disposition

In some cases, the “rule of convenience” applicable to class gifts can be relied on to
save a gift from the Rule.
Example: “To A for life, and on her death to A’s grandchildren in fee.” At the time
of this disposition, A has two children and three grandchildren. A has
a life estate and the grandchildren have vested remainders subject to
open. As in the preceding example, A might have an afterborn child who
might produce afterborn grandchildren—but there is one difference.
Under the “rule of convenience” the class will be closed at the time any
member of the class can demand a distribution—here the death of
A, a life in being. Consequently, all members of the class who will be
permitted to share in the remainder will be determined on A’s death.

c. “Gift to Subclass” Exception

Separate gifts vest at different times. Each gift to a subclass may be treated as a
separate gift under the Rule.
Example: “To pay the income to A for life, then to A’s children for their lives,
and as each child of A dies, to distribute the corpus to such child’s
issue then living, per stirpes.” A has two children at the time of this

Multistate 08 real property Q.indd 38 9/13/2016 4:33:22 PM

 REAL PROPERTY 39.

disposition. In this case, the remainder to issue has been made by a gift
to subclasses; as each child dies his issue are to take the share on which
he was receiving income. With respect to A’s two children now alive, the
class of “issue then living” will be determined on their deaths; the gift
is good. If A should have another child after the date of this disposition,
the remainder to such afterborn child’s issue is void because it might
vest beyond the lives in being plus 21 years.

d. Per Capita Gift Exception

When there is a separate gift of a fixed sum to each class member, each gift is tested
separately under the Rule.
Example: T’s will bequeaths “$1,000 each to such of A’s grandchildren as live to
attain the age of 21, whether alive at my death or born thereafter.” At T’s
death, A has two children and five grandchildren. Here, we have a per
capita gift to each member of the class; there is no problem of knowing
within the perpetuities period the number of class members who share
in an aggregate gift, and thus the size of each share. Here, the amount
to be received by each member is ascertainable without reference to the
number of persons in the class. The bequest is valid for all grandchil-
dren by A’s two children who were alive at T’s death. (This includes all
future-born grandchildren as well as the five now on the scene, for all
such grandchildren will reach 21, if at all, within 21 years after their
parent’s death.)

However, the bequest is void for any grandchildren by a child born to

A after T’s death. Such an afterborn child cannot be used as a life in
being.

4. Perpetuities Reform Legislation

Most states have enacted one of the following types of statutes designed to eliminate some of
the harsh results of the common law Rule Against Perpetuities:

a. A “wait and see” statute, under which the validity of an interest following one or more
life estates is determined on the basis of facts existing at the end of the life estate rather
than at the creation of the interest (see 1.b.1), supra);

b. A cy pres approach, borrowed from Trusts law, under which an invalid interest is
reformed to comply with the Rule and carry out the grantor’s intent as nearly as
possible;

c. A statute dealing with specific perpetuities problems (e.g., age contingencies reduced to
age 21, women over age 55 presumed incapable of childbearing, gift to widow presumed
to mean the person who was the spouse on the date the gift was created); or

d. The Uniform Statutory Rule Against Perpetuities, which provides an alternative

90-year vesting period. The Uniform Rule takes a “wait and see” approach in deter-
mining whether an interest actually vests within 90 years.

Multistate 08 real property Q.indd 39 9/13/2016 4:33:22 PM

 40. REAL PROPERTY

5. Technique for Analysis of Perpetuities Problems

In applying the Rule Against Perpetuities, these three steps should be followed:

a. Determine What Interests Are Created

First, determine what interests are created, applying the proper future interests labels, as
though there were no Rule Against Perpetuities.

b. Apply the Rule

Determine the measuring life or lives that can be used to show either that the interest
must vest within lives in being plus 21 years or that the interest might not vest within
that period. At this step, assume that there is no such thing as a perpetuities reform
statute, for the statute is not brought into play unless there is a perpetuities problem.
c. Apply Reform Statute
If the particular jurisdiction has a perpetuities reform statute that is triggered by the
perpetuities violation, apply the statute to reform or save the gift.
F. THE RULE AGAINST RESTRAINTS ON ALIENATION
As a general rule, any restriction on the transferability of a legal (as distinguished from an
equitable) interest in property is void: The restriction violates the common law Rule Against
Restraints on Alienation. “Restraint on alienation” means an express restriction on the trans-
ferability of property. Like the Rule Against Perpetuities, this is a rule of public policy that is
designed to prevent property from being tied up and taken out of commerce.
1. Types of Restraints on Alienation
There are three types of restraints on alienation: (i) disabling restraints, under which
any attempted transfer is ineffective; (ii) forfeiture restraints, under which an attempted
transfer results in a forfeiture of the interest; and (iii) promissory restraints, under which an
attempted transfer breaches a covenant. A disabling restraint on any legal interest is void.
Examples: 1) Property is transferred to A in fee simple, with the added proviso that
“neither A nor any of her children shall have the right to transfer the land
or any interest therein.” Under this restriction, if given effect (it is not), any
attempted transfer would simply be ineffective. This is a disabling restraint.
2) Property is transferred to A in fee simple, with the added proviso that “if
A shall attempt to transfer the land or any interest therein during her lifetime,
her estate shall cease, and title therein shall vest in B.” This is a forfeiture
restraint.
3) Property is transferred to A in fee simple, with the added proviso that “A
hereby covenants that she will not transfer the land or any interest therein
without [the transferor’s] prior written consent.” Under this promissory
restraint, if given effect, the remedy is injunction or damages for breach of
contract.
2. Restraints on a Fee Simple
a. Total Restraints
Any total restraint on a fee simple—either forfeiture, disabling, or promissory—is void.
The grantee may ignore the restraint and freely transfer the property.

Multistate 08 real property Q.indd 40 9/13/2016 4:33:22 PM

 REAL PROPERTY 41.

b. Partial Restraints
A partial restraint is one that purports to restrict the power to transfer to specific
persons, or by a specific method, or until a specific time.
1) Reasonable Restraints Doctrine
Although absolute restraints on fee simple estates are void, a forfeiture or promis-
sory restraint for a limited time and for a reasonable purpose may be upheld.
Example: A owns and resides in a house. He conveys a one-half interest in
the house to his brother, B, including in the deed a covenant that
“during their joint lifetimes, each party promises not to convey his
interest to any other person without the consent of the other party.”
This promissory restraint is limited to the joint lifetimes of the
parties and is a reasonable way to ensure that neither party will be
faced with the prospect of residing with a stranger. The restraint
would probably be upheld.
2) Discriminatory Restraints
Restraints prohibiting the transfer or use of property to or by a person of a speci-
fied racial, religious, or ethnic group are not enforceable.
a) Fourteenth Amendment
Judicial enforcement of a covenant forbidding use of property by persons of
a particular race is discriminatory state action forbidden by the Fourteenth
Amendment to the United States Constitution. [Shelley v. Kraemer, 334 U.S.
1 (1948)]
Example: O conveys Blackacre “to A and his heirs, and A promises
that Blackacre will never be used or occupied by nonwhite
persons.” Thereafter A sells to B, a black man, who moves
onto Blackacre. O sues for an injunction prohibiting B from
using Blackacre, and sues A for damages for having sold to B.
Injunction and damages are judicial remedies ordinarily avail-
able for breach of a covenant. The court cannot grant O either
an injunction or damages, because such judicial action would
be state action interfering with B’s right to enjoy property free
of racial discrimination. [Barrows v. Jackson, 346 U.S. 249
(1953)]
b) Fair Housing Act
Discriminatory restrictions may also violate the Fair Housing Act of 1968.
Recording a deed with a racial restriction is prohibited by the Act. [42 U.S.C.
§3604(c)]
3. Restraints on a Life Estate
a. Legal Life Estate
Forfeiture and promissory restraints on life estates are valid. A life estate is inalien-
able as a practical matter because few would be willing to pay full value for an estate
of uncertain duration; thus, little is lost by giving effect to the transferor’s intention to
restrict the estate’s transferability. (However, disabling restraints on legal life estates are
void.)

Multistate 08 real property Q.indd 41 9/13/2016 4:33:22 PM

 42. REAL PROPERTY

b. Equitable Life Estate

The rule applicable to restrictions on equitable interests (i.e., those held in trust) is the
exact opposite of the rule applicable to legal interests. Spendthrift clauses, which are
true disabling restraints, are given effect in the great majority of American jurisdictions.
(See Trusts outline.)

4. Restraints on Future Interests

Restraints on vested future interests generally are valid only to the extent that restraints on
present interests of the same type are valid. Disabling restraints on all future interests are
void.

a. Vested Remainders in Fee Simple

Any total restraint on a vested remainder in fee simple—either forfeiture, disabling, or
promissory—is void (see 2.a., supra). Partial forfeiture and promissory restraints on
vested remainders in fee simple may be upheld if reasonable (see 2.b.1), supra).

b. Vested Remainders for Life

Forfeiture and promissory restraints on vested remainders for life are valid (see 3.a.,
supra).

c. Contingent Remainders
The law is unsettled as to the validity of forfeiture and promissory restraints on contin-
gent remainders. Thus, this issue is not likely to be tested.

5. Other Valid Restraints on Alienation

a. Reasonable Restrictions in Commercial Transactions

The courts tend to uphold restrictions on transferability that arise in the context of
a commercial transaction on the theory that the restriction appears in an agreement
entered into by the parties, it is a product of their bargaining, and presumably serves a
useful purpose in facilitating the parties’ objectives. Thus, restrictions on transferability
that are part of a bargained-for agreement, as distinguished from a donative transaction,
are valid.
Examples: 1) O borrows money from M Bank and gives the bank a mortgage on
land. The mortgage provides that the land shall not be transferable by O
without M’s consent, and that if the land is transferred without consent,
the entire indebtedness shall be accelerated and shall become immedi-
ately due and payable. This “due on sale” restriction on transferability
is reasonable because M has an interest in approving who shall be the
transferee of the land in which it has a security interest.

2) A, B, C, and D each own 25% of the stock in a closely held corpo-

ration. The articles of incorporation provide that no shareholder shall
transfer her stock without the consent of a majority of the other share-
holders. This restriction on transferability is valid because, due to the
closely held nature of the business, the shareholders have a legitimate
concern over the identity of their associates.

Multistate 08 real property Q.indd 42 9/13/2016 4:33:22 PM

 REAL PROPERTY 43.

b. Options and Rights of First Refusal

The right to have the first opportunity to purchase real estate when it becomes avail-
able, or the right to meet any offer, is valid if reasonable (e.g., by specifying fair market
value or other reasonable price). [Restatement (Third) of Property: Servitudes §3.4]

c. Restrictions on Transferability of Leaseholds

A provision in a lease prohibiting the lessee’s assignment or subletting of her lease-
hold interest without the consent of the landlord is given effect in all jurisdictions. (See
II.E.3., infra.)

G. CONCURRENT ESTATES
Any of the estates in land previously discussed can be held concurrently by several persons. These
persons all have the right to the enjoyment and possession of the land at the same time. Three of
the chief forms of concurrent ownership in land are discussed here: joint tenancy, tenancy by the
entirety, and tenancy in common.

1. Joint Tenancy
A joint tenancy can be created between two or more co-tenants. Its distinguishing feature
is the right of survivorship. Conceptually, when one joint tenant dies, the property is freed
from his concurrent interest; the survivor or survivors retain an undivided right in the
property, which is no longer subject to the interest of the deceased co-tenant. The survivors
do not succeed to the decedent’s interest; they hold free of it.

a. Creation

1) Four Unities Required

At common law, four unities are required to create a joint tenancy:

a) Unity of time (interests vested at the same time);

b) Unity of title (interests acquired by the same instrument);

c) Unity of interest (interests of the same type and duration); and

d) Unity of possession (interests give identical rights to enjoyment).

2) Modern Law
The above requirements have been eroded in some jurisdictions; e.g., by statute
in some states, an owner can create a joint tenancy in herself and another by a
single deed (she need not use a “strawman” conveyance), even though the unities
of “time” and “title” are not satisfied. Similarly, as indicated below, a number
of transactions are no longer found to sever a joint tenancy despite the seeming
absence of continued unities.

3) Express Language Required

Under modern law, joint tenancies are disfavored. Hence, there must be a clear
expression of intent to create this estate, or it will not be recognized. The usual
language required is “to A and B as joint tenants with right of survivorship.”
Today, when two or more persons take property by a single conveyance, a tenancy

Multistate 08 real property Q.indd 43 9/13/2016 4:33:22 PM

 44. REAL PROPERTY

in common, not a joint tenancy, is presumed. A joint tenancy results only when an
intention to create a right of survivorship is clearly expressed.

b. Severance
A joint tenancy can be terminated by a suit for partition, which can be brought by any
joint tenant. It may also be terminated by various acts by any joint tenant.

1) Inter Vivos Conveyance by One Joint Tenant

An inter vivos conveyance by one joint tenant of her undivided interest destroys the
joint tenancy so that the transferee takes the interest as a tenant in common and not
as a joint tenant. This rule applies to both voluntary and involuntary conveyances
(even secret conveyances).

a) When More than Two Joint Tenants

When property is held in joint tenancy by three or more joint tenants,
a conveyance by one of them destroys the joint tenancy only as to the
conveyor’s interest. The other joint tenants continue to hold in joint tenancy
as between themselves, while the grantee holds her interest as a tenant in
common with them.
b) Transactions that May Not Result in Severance
(1) Judgment Liens
In most jurisdictions, when a plaintiff obtains a money judgment against
a defendant, that judgment becomes a lien on the defendant’s real
estate in the county where the judgment is docketed. (This is automatic
in some states; in others, the lien must be recorded in the real estate
records.) The lien then “runs with the land,” burdening it until the
judgment is paid or until the lien expires under a statute of limitations
(e.g., 10 years). Suppose such a lien is obtained against one of several
joint tenants but not against the others. Does it sever the joint tenancy,
converting it into a tenancy in common? The majority view is that it
does not; a lien is not considered a sufficiently substantial “conveyance”
to destroy the unities of time and title. However, if the plaintiff who
obtained the judgment then proceeds to enforce it by foreclosure (often
termed a “judgment sale”), the sheriff’s deed issued to the buyer at
that sale will sever the joint tenancy. That follows from the fact that the
sheriff’s deed conveys the defendant’s full title.
Example: A and B own land as joint tenants with right of survivor-
ship. P sues A on a tort claim, and obtains and records a
judgment. If A dies at that point, B owns the entire land
(by virtue of the right of survivorship), and P has a lien
on nothing. However, assume that P has a judgment sale,
and a sheriff’s deed is issued to X, who buys at the sale.
Then A dies. B and X each own a one-half interest in the
land as tenants in common.

(2) Mortgages
In the majority of states, a mortgage is regarded as a lien on title, and

Multistate 08 real property Q.indd 44 9/13/2016 4:33:22 PM

 REAL PROPERTY 45.

one joint tenant’s execution of a mortgage on her interest does not

by itself cause a severance. (Rather, the severance occurs only if the
mortgage is foreclosed and the property sold.) But in the minority of
states, which regard a mortgage as a transfer of title, the transfer destroys
the unity of title and severs the joint tenancy.
Example: A, B, and C are joint tenants. A mortgages her interest
to Lender, who records. Thereafter, A dies and Lender
seeks to enforce her mortgage on an undivided one-third
interest in the property. In a state following the “lien
theory” of mortgages, Lender loses. A’s mortgage did not
sever the joint tenancy. Lender’s rights were lost when A
died prior to foreclosure. A’s interest evaporated, and with
it Lender’s security interest.

(3) Leases
Theoretically, when one joint tenant leases her interest in jointly held
property, the lease destroys the unities of interest and possession and
thereby should effect a severance (which is the view taken by some
states). But other states hold that the joint tenancy is not destroyed, and
is merely temporarily suspended (for the length of the lease).

(a) Death of Lessor

There is a split among the states following the latter view, on what
happens if the lessor/joint tenant dies before the end of the lease.
Some courts hold that because the lessor’s own right to possession
would cease on her death, so must the right of any lessee (i.e., the
lessor could not convey more than she had). Others hold that the
lease operates as a “temporary severance,” and the remaining joint
tenant’s survivorship rights are therefore postponed until the end of
the lease.

2) Contract to Convey by One Joint Tenant

In most states, a severance also results where one joint tenant executes a valid
contract to convey her interest to another, even though no actual transfer of title
has yet been made. The contract to convey is enforceable in equity, and hence is
treated as an effective transfer of an equitable interest. Thus, if the vendor dies
before the title is transferred, the purchaser is entitled to a deed from the vendor’s
estate and becomes a tenant in common with the original joint tenant or tenants.

a) Compare—Executory Contract by All Joint Tenants

There is a split as to whether an executory contract to sell, entered into by all
the joint tenants, will terminate the joint tenancy. Suppose that on January 1,
A and B, joint tenants, contract with X to sell and deliver title to Blackacre to
X on February 1. A dies on January 15. Two questions arise: (i) On February
1, is B entitled to the full sales proceeds as surviving joint tenant, or is A’s
estate entitled to one-half (on the theory that the January 1 contract worked an
equitable conversion, which created in the vendors a contract right to receive
money that was held in tenancy in common)? And, (ii) will X have to obtain

Multistate 08 real property Q.indd 45 9/13/2016 4:33:22 PM

 46. REAL PROPERTY

a deed not only from B but also from A’s administrator on the theory that the
retained legal title (for security purposes) was held in tenancy in common?

(1) Common Law View—Joint Tenancy Continues

The common law view, still followed by many courts, is that a joint
tenancy continues in both the right to the proceeds and the retained legal
title, meaning that B gets the full sales proceeds and can give good title.

(2) Other Courts—Tenancy in Common

Other jurisdictions, however, proceed on the doctrine of equitable
conversion and hold that the executory contract converts A and B’s
land ownership rights to a mere contract right to receive the purchase
price (which they hold as tenants in common because of the statutory
presumption favoring such tenancies). Further, the legal title to the land,
retained for security purposes, is also held to be in tenancy in common.

3) Testamentary Disposition by One Joint Tenant Has No Effect

A joint tenancy is not terminated where a joint tenant executes a will devising her
interest to another or dies with such a will in effect. The reason is that a will is
ambulatory (effective only at death) and hence is inoperative as to joint tenancy
property, because at the instant of death the decedent’s rights in the property
evaporate. (The result would be contra if all joint tenants had agreed that the
decedent could devise her interest; but in such a case, the agreement itself would
cause the severance.)

a) Compare—“Secret” Deeds
As indicated above, an inter vivos conveyance severs a joint tenancy. This is
true even though the deed is kept “secret” and the interest transferred is to
take effect only upon the death of the grantor. However, if the grantee does
not know about the deed, the grantee’s acceptance after the death of the
grantor does not relate back to defeat the right of survivorship. (See VI.C.4.b.,
infra.)

4) Effect of One Joint Tenant’s Murdering Another

Some states have passed statutes under which the felonious and intentional killing
of one joint tenant by another joint tenant operates as a severance. In other states,
the surviving joint tenant holds the ill-gained portion on a constructive trust for the
decedent’s estate. Thus, the homicidal survivor keeps her original share but does
not profit from her felony.

2. Tenancy by the Entirety

A tenancy by the entirety is a marital estate akin to a joint tenancy between spouses. It is not
recognized in community property states, but in some common law jurisdictions, it arises
presumptively in any conveyance made to a married couple.

a. Right of Survivorship
The estate carries a right of survivorship, which operates in the same manner as the
right of survivorship incident to a joint tenancy.

Multistate 08 real property Q.indd 46 9/13/2016 4:33:22 PM

 REAL PROPERTY 47.

b. Severance Limited
The major distinction between a joint tenancy and a tenancy by the entirety concerns
severance. A tenancy by the entirety cannot be terminated by involuntary partition.
It can be terminated only by: (i) the death of either spouse (leaving the survivor sole
owner of the fee); (ii) divorce (in most states leaving the parties as tenants in common
with no right of survivorship); (iii) mutual agreement; or (iv) execution by a joint
creditor of both spouses (a creditor of one or the other cannot execute).

c. Individual Spouse Cannot Convey or Encumber

In most states, an individual spouse may not convey or encumber tenancy by the
entirety property. A deed or mortgage executed by only one spouse is ineffective.

3. Tenancy in Common
A tenancy in common is a concurrent estate with no right of survivorship. Each owner has a
distinct, undivided interest in the property. This interest is freely alienable by inter vivos and
testamentary transfer, is inheritable, and is subject to claims of the tenant’s creditors. The
only “unity” involved is possession: Each tenant is entitled to possession of the whole estate.
Today, by statute, multiple grantees are presumed to take as tenants in common. The same is
true where multiple transferees take by descent.

4. Incidents of Co-Ownership

a. Possession
Each co-tenant has the right to possess all portions of the property; no co-tenant has the
right to exclusive possession of any part. A co-tenant out of possession cannot bring a
possessory action unless there has been an “ouster” by the tenant in possession. A claim
of right to exclusive possession can constitute an ouster.

b. Rents and Profits

In most jurisdictions (but not all), a co-tenant in possession has the right to retain profits
gained by her use of the property. A co-tenant in possession need not share such profits
with co-tenants out of possession, nor reimburse them for the rental value of her use of
the land, unless there has been an ouster or an agreement to the contrary. However, a
co-tenant out of possession has a right to share in rents from third parties and in profits
derived from a use of the land that reduces its value (e.g., removal of minerals, etc.).

c. Effect of One Concurrent Owner’s Encumbering the Property

A joint tenant or tenant in common may place a mortgage on her interest, but may not,
of course, encumber the other co-tenant’s interest. If a tenancy in common is involved,
the mortgagee can foreclose only on the mortgaging co-tenant’s interest. Likewise, if
a joint tenancy is involved and the mortgage itself does not sever the joint tenancy (see
1.b.1)b)(2), supra), the mortgagee can foreclose on the mortgagor/co-tenant’s interest
and the foreclosure sale itself will cause a severance. But in the case of a joint tenancy,
the mortgagee runs the risk that the mortgaging co-tenant will die before foreclosure,
extinguishing the mortgagee’s interest. The same principles apply to judgment liens
obtained against an individual co-tenant.
Example: A and B are joint tenants with right of survivorship. A injures P in an
accident, and P sues A, obtaining a personal injury judgment against A

Multistate 08 real property Q.indd 47 9/13/2016 4:33:22 PM

 48. REAL PROPERTY

for $1,000. This judgment is, by statute, a lien on A’s one-half interest
in the land, but it does not cause a severance. If A dies before the lien is
foreclosed and is survived by B, B owns the land free and clear of the
lien. But if P forecloses the lien before A’s death, the foreclosure sale will
cause a severance, and the buyer at the sale will own a one-half interest
in the land as a tenant in common with B.

d. Ouster
Under the unity of possession, each co-tenant is entitled to possess and enjoy the whole
of the property subject to the equal right of her co-tenant. If one tenant wrongfully
excludes another co-tenant from possession of the whole or any part of the whole of the
premises, there is an ouster. The ousted co-tenant is entitled to receive his share of the
fair rental value of the property for the time he was wrongfully deprived of possession.

e. Remedy of Partition
A joint tenant or tenant in common has a right to judicial partition, either in kind
(division of the tract into parcels) or by sale and division of the proceeds (in accor-
dance with the ownership interests as modified by permitted recoupments for improve-
ments, repairs, taxes, and the like). Although partition in kind is generally preferred,
partition by sale and division of the proceeds is permitted when a fair and equitable
physical division of the property cannot be made. [Nordhausen v. Christner, 338 N.W.2d
754 (Neb. 1983)]
Examples: 1) A and B own a single-family home as joint tenants. A brings an
appropriate action to partition the land. Because physical division of the
home is not feasible, the court will order a sale of the home and division
of the proceeds equally between A and B.

2) A owns a three-fourths interest and B owns a one-fourth interest

in a four-acre undeveloped parcel of land as tenants in common. The
applicable zoning ordinance requires that a buildable lot contain at least
two acres. A seeks to partition the land into a three-acre lot for himself
and a one-acre lot for B. B argues that the land should be sold and the
proceeds divided between A and B according to their respective shares.
B will prevail, because the zoning ordinance makes it impossible to
divide the land fairly.

1) Restraint on Partition by Co-Tenants

Although in general, a co-tenant has the right to demand a partition by judicial
sale at any time, courts give effect to a provision prohibiting partition by any
one co-tenant, provided that the restriction is to last for only a reasonable time.
The restriction is not considered to be an invalid restraint on alienation because
(i) any co-tenant can transfer her interest to a third person at any time, and (ii)
the restraint can be eliminated if the co-tenants join in a deed to a third person,
thereby terminating the co-tenancy relationship.

f. Expenses for Preservation of Property—Contribution

Under certain circumstances, equity courts will compel contribution between concur-
rent owners.

Multistate 08 real property Q.indd 48 9/13/2016 4:33:22 PM

 REAL PROPERTY 49.

1) Repairs—Contribution May Be Compelled for Necessary Repairs

A co-tenant who pays more than her pro rata share of the cost of necessary repairs
is entitled to contribution from the other co-tenants in actions for accounting or
partition. Although the courts are split on whether a co-tenant who makes neces-
sary repairs can maintain an independent action for contribution against the other
co-tenants, the majority view is that she can compel contribution, provided she has
notified the other co-tenants of the need for repairs. Moreover, several decisions
authorize contribution even without such notice.

The common law view was that because no co-tenant has a duty to make neces-
sary repairs, a co-tenant who makes such repairs cannot bring an action to compel
contribution from the other co-tenants. This is now the minority view.

2) Improvements—No Contribution or Setoff

Generally, there is no right of contribution for the cost of improvements, nor can
they be set off in an action for accounting. Only in an action for partition can the
value of improvements be recouped.

3) Taxes and Mortgages—Contribution Can Be Compelled

Each co-tenant has a duty to pay her share of taxes and payments due on
mortgages on the entire property. A tenant who is not in sole possession can pay
the taxes and mortgage payments and then compel contribution from the other
co-tenants. However, a co-tenant in sole possession will receive reimbursement
only for the amount that exceeds the rental value of the property.

g. Duty of Fair Dealing Among Co-Tenants

A confidential relationship exists among co-tenants. Accordingly, the acquisition by
one co-tenant of any outstanding title or lien that might affect the estate held by all the
co-tenants is deemed to be an acquisition on behalf of all the other co-tenants as well.
Thus, when one co-tenant purchases or otherwise acquires a lienholder’s (mortgagee’s)
claim against the co-tenancy property, she must give the other co-tenants a reasonable
time to pay their share and acquire a proportionate interest. Courts carefully scrutinize
the fairness of transactions between co-tenants. Lastly, it is difficult for one co-tenant to
adversely possess against other co-tenants. (See V.B.4.b., infra.)
Example: A and B own land as co-tenants. Neither pays the annual property taxes.
The county conducts a tax sale and A buys the property for $10,000.
If B is willing to pay A $5,000, many courts will compel A to put the
property in co-tenancy again.

II. LANDLORD AND TENANT

A. NATURE OF LEASEHOLD
A leasehold is an estate in land. The tenant has a present possessory interest in the leased
premises, and the landlord has a future interest (reversion). Certain rights and liabilities flow from
this property relationship between landlord and tenant. The three major types of leasehold estates

Multistate 08 real property Q.indd 49 9/13/2016 4:33:22 PM

 50. REAL PROPERTY

are tenancies for years, periodic tenancies, and tenancies at will. There is a fourth category
called tenancies at sufferance.

1. Tenancies for Years

a. Fixed Period of Time

A tenancy for years is one that is to continue for a fixed period of time. It may be for
more or less than a year (e.g., 10 days or 10 years); it may be determinable (similar to a
fee simple determinable) or on condition subsequent. The termination date of a tenancy
for years is usually certain. As a result, the tenancy expires at the end of the stated
period without either party giving notice to the other. Even if the date of termination is
uncertain (e.g., L leases the premises to T “until the end of the war”), most courts hold
that if the parties have attempted to state some period of duration, the lease creates a
tenancy for years.

b. Creation
Tenancies for years are normally created by written leases. In most states, the Statute
of Frauds requires that a lease creating a tenancy for more than one year be memorial-
ized in writing. In addition, most states have statutes that restrict the number of years
for which a leasehold estate may be created (e.g., 51 years for farm property and 99
years for urban property). When the lease term exceeds the statutory maximum, most
courts hold that the lease is entirely void. Likewise, where the lease contains an option
to renew for a period beyond the permitted maximum, most courts hold the entire lease
void.

c. Termination
A tenancy for years ends automatically on its termination date.

1) Breach of Covenants
In most tenancy for years leases, the landlord reserves the right to terminate if the
tenant breaches any of the leasehold covenants. This reserved power is called the
landlord’s right of entry.

a) Failure to Pay Rent

In many jurisdictions, if the tenant fails to pay the promised rent, the landlord
has the right to terminate the lease even in the absence of a reserved right of
entry.

2) Surrender
A tenancy for years also terminates upon surrender. Surrender consists of the
tenant giving up his leasehold interest to the landlord and the landlord accepting.
Usually the same formalities are required for the surrender of a leasehold as are
necessary for its creation. Thus, a writing is necessary for the surrender of a lease-
hold if the unexpired term is more than one year.

2. Periodic Tenancies
A periodic tenancy is a tenancy that continues from year to year or for successive fractions
of a year (e.g., weekly or monthly) until terminated by proper notice by either party. The

Multistate 08 real property Q.indd 50 9/13/2016 4:33:22 PM

 REAL PROPERTY 51.

beginning date must be certain, but the termination date is always uncertain until notice is
given.

All conditions and terms of the tenancy are carried over from one period to the next unless
there is a lease provision to the contrary. Periodic tenancies do not violate the rules limiting
the length of leaseholds because each party retains the power to terminate upon giving
notice.

a. Creation
Periodic tenancies can be created in three ways:

1) By Express Agreement
Periodic tenancies can be created by express agreement (e.g., “Landlord leases to
Tenant from month to month”).

2) By Implication
A periodic tenancy will be implied if the lease has no set termination but does
provide for the payment of rent at specific periods.
Example: “Landlord leases to Tenant at a rent of $1,000 payable monthly
in advance.” The reservation of monthly rent will give rise to a
periodic tenancy from month to month.

Note: If the lease reserves an annual rent, payable monthly (e.g.,

“$12,000 per annum, payable $1,000 on the first day of every
month commencing January 1”), the majority view is that the
periodic tenancy is from year to year.

3) By Operation of Law
A periodic tenancy may arise even without an express or implied agreement
between the parties.

a) Tenant Holds Over

If a tenant for years remains in possession after the termination of his tenancy
period, the landlord may elect to treat the tenant as a periodic tenant on the
same terms as the original lease. (See 5.b., infra.)

b) Lease Invalid
If a lease is invalid (e.g., because of failure to satisfy the Statute of Frauds)
and the tenant nonetheless goes into possession, the tenant’s periodic payment
of rent will convert what would otherwise be a tenancy at will into a periodic
tenancy. The period of the tenancy coincides with the period for which the
rent is paid.

b. Termination—Notice Required
A periodic tenancy is automatically renewed, from period to period, until proper notice
of termination is given by either party. Many jurisdictions have statutorily prescribed
the notice required to terminate a periodic tenancy. In general, the guidelines are as
follows:

Multistate 08 real property Q.indd 51 9/13/2016 4:33:22 PM

 52. REAL PROPERTY

(i) The tenancy must end at the end of a “natural” lease period.

(ii) For a tenancy from year to year, six months’ notice is required.

(iii) For tenancies less than one year in duration, a full period in advance of the period
in question is required by way of notice (e.g., for a month-to-month periodic
tenancy, one full month’s notice is required).

In general, the notice required to terminate a periodic tenancy must be in writing and
must actually be delivered to the party in question or deposited at his residence in a
manner similar to that required for service of process.

3. Tenancies at Will
A tenancy at will is an estate in land that is terminable at the will of either the landlord or the
tenant. To be a tenancy at will, both the landlord and the tenant must have the right to termi-
nate the lease at will.

(i) If the lease gives only the landlord the right to terminate at will, a similar right will
generally be implied in favor of the tenant so that the lease creates a tenancy at will.

(ii) If the lease is only at the will of the tenant (e.g., “for so long as the tenant wishes”),
courts usually do not imply a right to terminate in favor of the landlord. Rather, most
courts interpret the conveyance as creating a life estate or fee simple, either of which is
terminable by the tenant. (If the Statute of Frauds is not satisfied, the conveyance is a
tenancy at will.)

a. Creation
A tenancy at will generally arises from a specific understanding between the parties
that either party may terminate the tenancy at any time. Note that unless the parties
expressly agree to a tenancy at will, the payment of regular rent (e.g., monthly,
quarterly, etc.) will cause a court to treat the tenancy as a periodic tenancy. Thus, tenan-
cies at will are quite rare. Although a tenancy at will can also arise when the lease is for
an indefinite period (one that does not satisfy the requirements for creating a tenancy
for years), or when a tenant goes into possession under a lease that does not satisfy the
requisite formalities (usually the Statute of Frauds), rent payments will usually convert
it to a periodic tenancy.

b. Termination
A tenancy at will may be terminated by either party. At common law, no notice was
required to terminate a tenancy at will. But the majority of states now require that a
party give the other notice of termination and a reasonable time to quit the premises. A
tenancy at will also terminates by operation of law if:

1) Either party dies;

2) The tenant commits waste;

3) The tenant attempts to assign his tenancy;

Multistate 08 real property Q.indd 52 9/13/2016 4:33:22 PM

 REAL PROPERTY 53.

4) The landlord transfers his interest in the property; or

5) The landlord executes a term lease to a third person.

4. Tenancies at Sufferance
A tenancy at sufferance (sometimes called “occupancy at sufferance”) arises when a tenant
wrongfully remains in possession after the expiration of a lawful tenancy (e.g., after the
stipulated date for the termination of a tenancy for years; or after the landlord has exercised
a power of termination). Such a tenant is a wrongdoer and is liable for rent. The tenancy at
sufferance lasts only until the landlord takes steps to evict the tenant. No notice is required to
end the tenancy, and authorities are divided as to whether this is even an estate in land.

5. The Hold-Over Doctrine

When a tenant continues in possession after the termination of his right to possession, the
landlord has two choices of action:

a. Eviction
The landlord may treat the hold-over tenant as a trespasser and evict him under an
unlawful detainer statute.

b. Creation of Periodic Tenancy

The landlord may, in his sole discretion, bind the tenant to a new periodic tenancy.

1) Terms
The terms and conditions of the expired tenancy (e.g., rent, covenants, etc.) apply
to the new tenancy. In commercial leases, if the original lease term was for one
year or more, a year-to-year tenancy results from holding over. If the original
term was for less than one year, the periodic term is determined by the manner in
which the rent was due and payable under the prior tenancy. In residential leases,
however, most courts would rule the tenant a month-to-month tenant (or a week-
to-week tenant if the tenant was a roomer paying weekly rent), irrespective of the
term of the original lease.
Example: A nonresidential tenant was holding under a six-month term
tenancy with rent payable monthly. The tenant holds over and the
landlord binds him to a new tenancy. The new periodic tenancy is a
month-to-month tenancy.

2) Altered Terms
If the landlord notifies the tenant before termination of the tenancy that occupancy
after termination will be at an increased rent, the tenant will be held to have acqui-
esced to the new terms if he does not surrender. The tenant will be held to the new
terms even if he objects to the increased rent, provided that the rent increase is
reasonable.

c. What Does Not Constitute Holding Over

The landlord cannot bind the tenant to a new tenancy under the hold-over doctrine
if: (i) the tenant remains in possession for only a few hours after termination of the
lease, or leaves a few articles of personal property on the premises; (ii) the delay is not

Multistate 08 real property Q.indd 53 9/13/2016 4:33:22 PM

 54. REAL PROPERTY

the tenant’s fault (e.g., because of severe illness); or (iii) it is a seasonal lease (e.g.,
summer cottage).

d. Double Rent Jeopardy

Many state statutes provide that if a tenant willfully remains in possession after his term
expires and after the landlord makes a written demand for possession, the landlord
may collect double rent for the time the tenant in fact remains in possession.

e. Forcible Entry Statutes

Most states by statute prohibit forcible entry, i.e., entry against the will of the possessor.
Under such statutes, a landlord must not use force or self-help to remove a hold-over
tenant. Some states also bar the landlord from more subtle methods of regaining posses-
sion, e.g., changing the locks and locking out the tenant.

The statutes allow the landlord to evict a tenant who has remained in possession after
his right to possession has terminated. The sole issue is “who has the right to posses-
sion”; questions of title must be litigated in ejectment actions rather than in eviction
actions.

B. LEASES
A lease is a contract containing the promises of the parties. It governs the relationship between the
landlord and tenant over the term of the lease.

1. Common Law—Lease Covenants Independent

At common law, covenants in a lease were independent of each other; i.e., one party’s perfor-
mance of his promise did not depend on the other party’s performance of his promise. Thus,
if one party breached a covenant, the other party could recover damages, but still had to
perform his promises and could not terminate the landlord-tenant relationship.
Example: L leases an office space to T for five years. T covenants to pay $1,250 per
month, and L covenants to paint the office once each year. At the beginning
of the second year, L refuses to paint the office. At common law, T could
recover damages from L (the decrease in fair rental value or the cost of
painting), but T could not terminate the lease or refuse to pay his rent because
of L’s breach.

2. Modern Trend—Lease Covenants Dependent

Exceptions to the common law rule developed over time. For example, a tenant may be
excused from his covenant to pay rent if the landlord actually or constructively evicts the
tenant (see D.2., infra) or breaches the implied warranty of habitability (see D.3., infra).
Similarly, in nearly all states a landlord may terminate the lease if the tenant breaches his
covenant to pay rent (see C.4.a., infra). Modern courts are also likely to construe other
covenants as dependent and excuse one party’s performance (after proper notice and time to
cure) when the other party’s breach relates to a material part of the lease (e.g., the Uniform
Residential Landlord and Tenant Act, which has been adopted in nearly half the states,
codifies this rule for residential tenancies [URLTA §§4.101, 4.201]).
Example: L leases a retail space to T for four years to be used as a furniture store. T
covenants to pay $350 per month, and L covenants not to lease any other
space in the building “for use as a furniture store.” During the third year, L

Multistate 08 real property Q.indd 54 9/13/2016 4:33:22 PM

 REAL PROPERTY 55.

leases the adjoining retail space to a rug store. If T sells rugs and would suffer
financial loss as a result of the competition, L’s breach would be considered
material, allowing T to terminate the lease. [Kulawitz v. Pacific Woodenware
& Paper Co., 155 P.2d 24 (Cal. 1944)]

Compare: In the example in 1., above, L’s breach of a covenant to paint likely would not
be considered material.

C. TENANT DUTIES AND LANDLORD REMEDIES

1. Tenant’s Duty to Repair (Doctrine of Waste)

A tenant cannot damage—commit waste on—the leased premises. The rules governing
waste in the leasehold context are very much like those governing waste in the context of the
life estate.

a. Types of Waste

1) Voluntary (Affirmative) Waste

A tenant is liable to the landlord for voluntary waste. Voluntary waste results
when the tenant intentionally or negligently damages the premises. It also includes
exploiting minerals on the property unless the property was previously so used, or
unless the lease provides that the tenant may do so.

2) Permissive Waste
Unless the lease provides otherwise, the tenant has no duty to the landlord to make
any substantial repairs (i.e., to keep the premises in good repair). However, the
tenant has a duty to make ordinary repairs to keep the property in the same condi-
tion as at the commencement of the lease term, excluding ordinary wear and tear
(unless the tenant covenanted to repair ordinary wear and tear; see c.2), infra).
For example, it is the tenant’s duty to repair broken windows or a leaking roof
and to take such other steps as are needed to prevent damage from the elements
(i.e., keep the premises “wind and water tight”). If the tenant fails to do so, he is
liable to the landlord for any resulting damage, but not for the cost of repair. Under
the URLTA, residential tenants have additional duties: (i) not to cause housing
code violations; (ii) to keep the premises clean and free of vermin; and (iii) to use
plumbing, appliances, etc., in a reasonable manner. Note that even when the burden
of repair is on the landlord, the tenant does have a duty to report deficiencies
promptly to the landlord.

3) Ameliorative Waste
A tenant is under an obligation to return the premises in the same nature and
character as received. Therefore, a tenant is not permitted to make substantial
alterations to leased structures even if the alteration increases the value of the
property.

a) Liability—Cost of Restoration
The tenant is liable for the cost of restoration should he commit ameliorative
waste.

Multistate 08 real property Q.indd 55 9/13/2016 4:33:22 PM

 56. REAL PROPERTY

b) Modern Exception—Value of Premises Decreasing

When, through the passage of time, the demised premises have been signifi-
cantly reduced in value, courts will permit a change in the character of the
premises as long as:

(1) The change increases the value of the premises;

(2) The change is performed by a long-term tenant (e.g., 25 years); and

(3) The change reflects a change in the nature and character of the neigh-
borhood.

b. Destruction of the Premises Without Fault

If the leased premises are destroyed (e.g., by fire) without the fault of either the landlord
or the tenant, no waste is involved. In this situation, the common law held that the lease
continues in effect. In the absence of lease language, neither party has a duty to restore
the premises, but the tenant has a duty to continue paying the rent.

1) Majority View—Tenant Can Terminate Lease

In most states, statutes or case law now give the tenant an option to terminate the
lease if the premises are destroyed without the tenant’s fault, even in the presence
of an explicit covenant to repair (see below).

c. Tenant’s Liability for Covenants to Repair

In residential leases, even if the tenant covenants to repair, the landlord will usually
be obligated to repair (except for damages caused by the tenant) under the “implied
warranty of habitability” (see D.3., infra), because the landlord’s obligations under
that warranty are usually held not to be waivable. However, in nonresidential leases,
the tenant’s covenant to repair is enforceable, and a landlord’s claim that the tenant
breached the covenant will be assessed by comparing the property’s condition when the
lease terminates with its condition when the lease commenced.

1) Rebuilding After Structural Damage or Casualty Destruction

A covenant requiring the tenant to repair is not usually construed by the modern
cases to include rebuilding of structural damage or destruction due to a casualty,
structural defects, or a third party’s acts, unless the covenant expressly includes
these types of repairs.
Example: L leases greenhouses to T, and the lease contains a covenant by T
to “maintain said (greenhouses); and, upon expiration of the term
hereof surrender in as good a condition as it shall be when lessee
takes possession thereof.” The greenhouses are destroyed by fire,
and L sues T for the cost of rebuilding them. Held: “Maintain” or
“repair” does not include an obligation to rebuild after destruc-
tion by fire. [Washington Hydroculture, Inc. v. Payne, 635 P.2d 138
(Wash. 1981)]

2) Repairing Ordinary Wear and Tear

A covenant requiring the tenant to repair is usually construed to include even

Multistate 08 real property Q.indd 56 9/13/2016 4:33:22 PM

 REAL PROPERTY 57.

repair of ordinary wear and tear if the covenant in the lease makes no specific
mention of ordinary wear and tear. However, repair covenants frequently exclude
repair of ordinary wear and tear, and such an exclusion is enforceable.
Example: L leases a restaurant to T. T covenants to “maintain, repair and
keep in good order the interior of the building.” The covenant does
not contain the usual exclusion for ordinary wear and tear. Thus,
T is held liable for all needed repairs, including tears in booths
and chairs, worn flooring, and a damaged ceiling. [Santillanes v.
Property Management Services, Inc., 716 P.2d 1360 (Idaho 1986)]

2. Duty to Not Use Premises for Illegal Purpose

If the tenant uses the premises for an illegal purpose, and the landlord is not a party to the
illegal use, the landlord may terminate the lease or obtain damages and injunctive relief.

a. Occasional Unlawful Conduct Does Not Breach Duty

Occasional unlawful conduct of the tenant does not breach this duty. The duty is
breached only when the illegal conduct is continuous (e.g., if the tenant operates a
gambling ring out of the leased premises).

b. Landlord Remedies—Terminate Lease, Recover Damages

If the conduct is continuous, the landlord may terminate the lease and recover the
damages. If the conduct has first been stopped by a public authority, the landlord may
terminate and recover damages, but only if she acts within a reasonable time after the
use has been stopped. Alternatively, the landlord faced with unlawful tenant conduct
may keep the lease in force and seek injunctive or monetary relief.

3. Duty to Pay Rent

At common law, rent is due at the end of the leasehold term. However, leases usually contain
a provision making the rent payable at some other time (e.g., “monthly in advance”).

a. When Rent Accrues

At common law, rent is not apportionable; i.e., it does not accrue from day to day,
but rather accrues all at once at the end of the term. However, most states today have
statutes that provide that if a leasehold terminates before the term originally agreed on,
the tenant must pay a proportionate amount of the agreed rent.

b. Rent Deposits
Landlords often require a deposit by the tenant at the outset of the lease. If the money
is considered a security deposit, the landlord will not be permitted to retain it beyond
the extent of his recoverable damages. But if the deposit is denominated a “bonus” or a
future rent payment (e.g., the last month’s rent), then most courts permit the landlord to
retain it after the tenant has been evicted.

1) Restrictions on Security Deposits

Most states restrict the amount of security deposits to one month’s rent, require
landlords to pay interest on security deposits, and allow statutory or punitive
damages for a landlord’s improper refusal to return a security deposit.

Multistate 08 real property Q.indd 57 9/13/2016 4:33:22 PM

 58. REAL PROPERTY

2) Choice of Law
Landlords cannot avoid strict state laws regarding security deposits or other rules
related to leases by using a choice of law provision in a lease to select the law
of another state. The law of the state in which the property is located generally
applies to leases, even when a provision to the contrary appears in the lease.

c. Termination of Rent Liability—Surrender

If a tenant effectively conveys back (surrenders) his leasehold to the landlord, the
tenant’s liability for future rent ends. Normally, this occurs when there is an agreement
between the landlord and tenant that the tenant’s interest in the demised premises will
end. If the unexpired term of the lease is more than one year, the surrender must be
memorialized in writing to satisfy the Statute of Frauds.

4. Landlord Remedies

a. Tenant on Premises But Fails to Pay Rent—Evict or Sue for Rent

At common law, a breach, such as failure to pay rent, resulted only in a cause of action
for money damages; a breach by either party did not give rise to a right to terminate
the lease. Most leases, however, grant the nonbreaching party the right to terminate.
Furthermore, nearly all states have enacted an unlawful detainer statute, which permits
the landlord to evict a defaulting tenant. These statutes provide for a quick hearing, but
severely limit the issues that may be raised. Under most statutes, the only issue properly
before the court is the landlord’s right to rent and possession. The tenant cannot raise
counterclaims.

1) Distress—Landlord’s Lien
In some states (especially in nonresidential leases), a landlord who does not receive
rent when due can assert a lien on the personal property found on the leased
premises. This applies to property owned by sublessees as well as by the original
tenant.

b. Tenant Abandons—Do Nothing or Repossess

If the tenant unjustifiably abandons the property, the landlord has two options: she may
do nothing, or she may repossess.

1) Landlord Does Nothing—Tenant Remains Liable

Traditionally, a landlord had no duty to mitigate and could let the premises lie idle
if the abandoning tenant did not tender an acceptable substituting tenant. However,
the landlord could not sue for rent due in the future because the tenant still might
pay rent when it became due. Now, the majority view requires the landlord to make
reasonable efforts to mitigate her damages by reletting to a new tenant. Under this
view, the landlord may sue a tenant who has wrongfully terminated the lease for
damages equal to the difference between the unpaid rent under the lease and the
property’s fair market rental value. If the landlord could have done so but does not
attempt to relet, her recovery against the tenant will be reduced accordingly.

2) Landlord Repossesses—Tenant’s Liability Depends on Surrender

If the landlord repossesses and/or relets the premises, the tenant’s liability will

Multistate 08 real property Q.indd 58 9/13/2016 4:33:23 PM

 REAL PROPERTY 59.

depend on whether the landlord has accepted a surrender of the premises. If

surrender is not found, the tenant remains liable for the difference between the
promised rent and the fair rental value of the property (or, in the case of reletting,
between the promised rent and the rent received from the reletting). However, if
the landlord’s reletting or use of the premises for her own profit constitutes accep-
tance of surrender, the abandoning tenant is free from any rent liability accruing
after abandonment.

a) Acts that Constitute Acceptance of Surrender

If the landlord resumes possession of the demised premises for herself, this
conduct usually constitutes acceptance of the surrender, and the tenant will be
relieved of any further liability.

b) Acts that Do Not Constitute Acceptance of Surrender

The fact that the landlord enters the premises after abandonment to make
repairs, receives back the keys, or offers to attempt to relet the premises on
behalf of the tenant, does not by itself constitute an acceptance of the offered
surrender. Note that if the landlord has a duty to mitigate damages, she must
repossess the premises; thus, doing so does not constitute acceptance of the
tenant’s surrender so as to relieve the tenant of liability for future rent. In
that case, the tenant would be liable for past due rent as well as the differ-
ence between the future rent under the lease and the fair market or relet rental
value.

D. LANDLORD DUTIES AND TENANT REMEDIES

At common law, a landlord had no duty to repair or maintain the premises. This rule has been
modified for residential tenancies in most states by statute (e.g., the URLTA) and the implied
warranty of habitability. Moreover, the lease itself commonly prescribes landlord liability to the
tenant in several areas. If a lease does not expressly prescribe landlord duties, some duties will be
implied.

1. Duty to Deliver Possession of Premises

a. Landlord Duty—Must Deliver Actual Possession

Statutes in most states require the landlord to put the tenant in actual possession of the
premises at the beginning of the leasehold term. In a minority of states, the landlord’s
obligation is merely to give the tenant the legal right to possession. The difference can
be important if the leased premises are occupied by a prior, hold-over tenant who has
not moved out. Under the majority view, the landlord is in breach if she has not evicted
the hold-over tenant by the beginning of the new tenant’s term. Under the minority
view, it is up to the new tenant to bring eviction proceedings against the hold-over
tenant.

b. Tenant Remedy—Damages
In states following the majority rule, a tenant is entitled to damages against a landlord
in breach of the duty to deliver possession. If, e.g., the tenant had to find more expen-
sive housing during the interim or suffered business losses as a consequence of the
landlord’s breach, he may recover for these items.

Multistate 08 real property Q.indd 59 9/13/2016 4:33:23 PM

 60. REAL PROPERTY

2. Quiet Enjoyment
There is implied in every lease a covenant that neither the landlord nor someone with
paramount title (e.g., a prior mortgagee of the landlord who forecloses) will interfere with
the tenant’s quiet enjoyment and possession of the premises. The covenant of quiet enjoy-
ment may be breached in any one of three ways: actual eviction, partial actual eviction, or
constructive eviction.

a. Actual Eviction
Actual eviction occurs when the landlord, a paramount title holder, or a hold-over tenant
excludes the tenant from the entire leased premises. Actual eviction terminates the
tenant’s obligation to pay rent.

b. Partial Actual Eviction

Partial actual eviction occurs when the tenant is physically excluded from only part of
the leased premises. (The part from which the tenant is excluded need not be a substan-
tial part of the premises for breach to occur.) The tenant’s remedies for breach will
differ depending on whether the partial eviction was caused by the landlord or by one
with paramount title.

1) Partial Eviction by Landlord—Entire Rent Obligation Relieved

Partial eviction by the landlord relieves the tenant of the obligation to pay rent
for the entire premises, even though the tenant continues in possession of the
remainder of the premises.

2) Partial Eviction by Third Person—Rent Apportioned

Partial eviction by a third person with paramount title results in an apportionment
of rent; i.e., the tenant is liable for the reasonable rental value of the portion that he
continues to possess.

c. Constructive Eviction
Constructive eviction occurs when a landlord’s breach of duty renders the premises
untenantable (i.e., unsuitable for occupancy). To establish a claim for constructive
eviction, the tenant must prove:

(i) The landlord, or persons acting for him, breached a duty to the tenant (acts of
neighbors or strangers will not suffice);

(ii) The breach substantially and materially deprived the tenant of her use and enjoy-
ment of the premises (e.g., flooding, absence of heat in winter, loss of elevator
service in a warehouse);

(iii) The tenant gave the landlord notice and a reasonable time to repair; and

(iv) After such reasonable time, the tenant vacated the premises.

A tenant who has been constructively evicted may terminate the lease (i.e., is relieved
of her duty to pay rent from the date of abandonment) and may also seek damages.
Constructive eviction is often raised as a defense in a landlord’s suit for damages or rent.

Multistate 08 real property Q.indd 60 9/13/2016 4:33:23 PM

 REAL PROPERTY 61.

3. Implied Warranty of Habitability

More than half the states have now adopted by court decision or statute the implied warranty
of habitability for residential tenancies; it is clearly a growing trend. (It is rarely applied
to nonresidential cases, unlike constructive eviction.) The standards are more favorable to
tenants than in constructive eviction, and the range of remedies is much broader.

a. Standard—Reasonably Suitable for Human Residence

The standard usually applied is the local housing code if one exists; if there is none, the
court asks whether the conditions are reasonably suitable for human residence.

b. Remedies
The following remedies have been adopted by various courts for violation of the implied
warranty (although few courts have adopted all):

1) Tenant may move out and terminate lease (as in a constructive eviction).

2) Tenant may make repairs directly, and offset the cost against future rent obliga-
tions. (Some states limit this remedy by statute to a fixed amount, such as one
month’s rent, or to only one occasion each year.)

3) Tenant may reduce or abate rent to an amount equal to the fair rental value in
view of the defects in the property. (In many jurisdictions, the tenant may withhold
all rent until the court determines the amount of this fair rental value, and may
then pay it without risk of the landlord’s terminating the lease for rent delin-
quency.)

4) Tenant may remain in possession, pay full rent, and seek damages against the
landlord.

4. Retaliatory Eviction
If a tenant exercises the legal right to report housing or building code violations or other
rights provided by statute (e.g., a residential landlord-tenant act), the landlord is not permitted
to terminate the tenant’s lease in retaliation. The landlord is also barred from penalizing the
tenant in other ways, such as raising the rent or reducing tenant services. This protection is
recognized by residential landlord-tenant acts in nearly half the states. These statutes usually
presume a retaliatory motive if the landlord acts within, say, 90 to 180 days after the tenant
exercises his rights. In other states, the same conclusion is reached by judicial construction
of the eviction and code statutes. The protection generally applies to tenants under both
periodic leases when the landlord gives notice to terminate and fixed-term leases when the
landlord refuses to renew. To overcome the presumption, the landlord must show a valid,
nonretaliatory reason for his actions.

5. Discrimination
The Civil Rights Act of 1866 bars racial or ethnic discrimination in the sale or rental of
all property. The Fair Housing Act bars discrimination based on race, ethnicity, religion,
national origin, gender, and disability in the sale or rental of a dwelling. Discrimination
against families with children is also barred except in senior citizen housing. The Act does
not apply to religious organizations, private clubs, and owners who have no more than three

Multistate 08 real property Q.indd 61 9/13/2016 4:33:23 PM

 62. REAL PROPERTY

single-family dwellings or who have an owner-occupied apartment with no more than four
units. [42 U.S.C. §§3603(b), 3607]

a. Reasonable Accommodations
When the Fair Housing Act applies, landlords must permit disabled tenants to make
reasonable modifications to existing premises to accommodate their disabilities at the
tenants’ own expense. Landlords must also make reasonable accommodations in rules,
policies, and services when necessary to afford a disabled person an equal opportunity
to use a dwelling.
Example: A landlord of an apartment building with 100 “first-come, first-served”
parking spaces must provide a designated space by the door to the
building for a disabled tenant who cannot walk long distances and
cannot usually find an open space near the door. [Jankowski Lee &
Associates v. Cisneros, 91 F.3d 891 (7th Cir. 1996)]

E. ASSIGNMENTS AND SUBLEASES

Absent an express restriction in the lease, a tenant may freely transfer his leasehold interest, in
whole or in part. If he makes a complete transfer of the entire remaining term, he has made an
assignment. If he retains any part of the remaining term, the transfer is a sublease.
Example: L leases property to T for a 10-year term. One month later, T transfers his interest
to T1 for nine years, retaining the right to retake the premises (reversion) after nine
years. The effect of his transfer is to create a sublease between T (sublessor) and
T1 (sublessee).

If, on the other hand, T had transferred to T1 for the remaining period of the lease,
reserving no rights, the transfer would constitute an assignment of the lease from T
(assignor) to T1 (assignee). (Note: It is not controlling that the parties denominate
the transfer an “assignment” or “sublease.” The court still examines what interest,
if any, is retained by T to determine the nature of the transaction.)

1. Consequences of Assignment
The label given to a transfer—an assignment or sublease—determines whether the landlord
can proceed directly against the transferee or only against the transferor. To be an assign-
ment, the transfer must be on the same terms as the original lease except that the tenant
may reserve a right of termination (reentry) for breach of the terms of the original lease
that has been assigned; e.g., “to A for the balance of the leasehold term. However, should A
fail to make the rental payments to the landlord, the right to reenter and reclaim the premises
is reserved.” If the transfer is an assignment, the assignee stands in the shoes of the original
tenant in a direct relationship with the landlord. The assignee and the landlord are in “privity
of estate,” and each is liable to the other on all covenants in the lease that “run with the
land.”

a. Covenants that Run with the Land

A covenant “runs” if the original parties to the lease so intend, and if the covenant
“touches and concerns” the leased land; i.e., it benefits the landlord and burdens the
tenant (or vice versa) with respect to their interests in the property. (These require-
ments are discussed in detail at IV.D., infra.) Covenants held to run with the land
(unless the parties specify otherwise) include: covenants to do or not do a physical act

Multistate 08 real property Q.indd 62 9/13/2016 4:33:23 PM

 REAL PROPERTY 63.

(e.g., to repair, to conduct a business on the land in a specified manner, to supply heat);
covenants to pay money (e.g., rent, taxes, etc.); and covenants regarding the duration of
the lease (e.g., termination clauses).

b. Rent Covenant Runs with the Land

Because the covenant to pay rent runs with the land, an assignee owes the rent directly
to the landlord. He does not owe rent for the period before the assignment, but only for
the time that he is in “privity of estate,” i.e., from the time of assignment until the end of
the lease or until the assignee himself reassigns.

1) Reassignment by Assignee—Privity of Estate with Landlord Ends

If the assignee reassigns the leasehold interest, his privity of estate with the
landlord ends, and he is not liable for the subsequent assignee’s failure to pay rent.
However, if the first assignee specifically promised the landlord that he would be
liable for the rent for the remainder of the lease term, he may be obligated to pay
based on privity of contract, even though his reassignment ended the privity of
estate.

a) Effect of Assignee Assuming Rent Obligation

If the assignee made no promise to the landlord but did promise the original
tenant that he would pay all future rent, the landlord may be able to sue the
assignee as a third-party beneficiary of the contract between the original
tenant and the assignee.

2) Original Tenant Remains Liable

After assignment, the original tenant is no longer in privity of estate with the
landlord. However, if (as is likely) the tenant promised to pay rent in his lease with
the landlord, he can still be held liable on his original contractual obligation to pay,
i.e., on privity of contract. This allows the landlord to sue the original tenant where
the assignee has disappeared, is judgment-proof, etc.
Example: L rents to T for three years at $9,400 per year. After one year, T
assigns to T1. T1 pays the rent for one year, and then assigns to
T2. T2 fails to pay rent. L can collect from T or T2 but not from
T1 (unless T1 made some promise on the basis of which L can sue
him).

2. Consequences of Sublease
In a sublease, the sublessee is considered the tenant of the original lessee, and usually pays
rent directly to the original lessee, who in turn pays rent to the landlord under the main lease.

a. Liability of Sublessee for Rent and Other Covenants

The sublessee is liable to the original lessee for whatever rent the two of them agreed to
in the sublease. However, the sublessee is not personally liable to the landlord for rent
or for the performance of any other covenants made by the original lessee in the main
lease. The reason is that the sublessee has no contractual relationship with the landlord
(no privity of contract), and does not hold the tenant’s full estate in the land (no privity
of estate); therefore, the covenants in the main lease do not “run with the land” to bind
the sublessee.

Multistate 08 real property Q.indd 63 9/13/2016 4:33:23 PM

 64. REAL PROPERTY

1) Termination for Breach of Covenants

Even though the sublessee is not personally liable to the landlord, the landlord can
still terminate the main lease for nonpayment of rent or, if so stated in the lease,
breach of other tenant covenants. If this occurs, the sublease will automatically
terminate at the same time.

b. Assumption by Sublessee
It is possible for the sublessee to assume the rent covenant and other covenants in the
main lease. An assumption is not implied, but must be expressed. If this occurs, the
sublessee is bound by the assumption agreement and becomes personally liable to the
landlord on the covenants assumed. The landlord is considered a third-party beneficiary
of the assumption agreement.

c. Rights of Sublessee
The sublessee can enforce all covenants made by the original lessee in the sublease, but
has no direct right to enforce any covenants made by the landlord in the main lease.
However, it is likely (although there is very little case law on point) that a sublessee in
a residential lease would be permitted to enforce the implied warranty of habitability
against the landlord.

3. Covenants Against Assignment or Sublease

a. Strictly Construed Against Landlord

Many leases contain covenants on the part of the tenant not to assign or sublease
without the consent of the landlord. These are strictly construed against the landlord.
Thus, a covenant prohibiting assignment does not prohibit subleasing and vice versa.

b. Waiver of Covenant
Even if the lease has a valid covenant against assignment, the covenant may be held
waived if the landlord knows of the assignment and does not object. This often occurs
when the landlord knowingly accepts rent from the assignee.

c. Continuing Waiver
If the landlord grants consent to one transfer, the Rule in Dumpor’s Case provides that
he waives his right to avoid future transfers unless he expressly reserves the right to do
so. Reservation of right must take place at the time of granting consent.

d. Transfer in Violation of Lease Not Void

If a tenant transfers (assigns or sublets) in violation of a prohibition in the lease against
transfers, the transfer is not void. However, the landlord usually may terminate the lease
under either the lease terms or a statute. Alternatively, he may sue for damages if he can
prove any.

e. Reasonableness
In a minority of states, the landlord may not unreasonably withhold consent to transfers
by the tenant. The majority imposes no such limitation.

4. Assignments by Landlords

Multistate 08 real property Q.indd 64 9/13/2016 4:33:23 PM

 REAL PROPERTY 65.

a. Right to Assign
A landlord may assign the rents and reversion interest that he owns. This is usually
done by an ordinary deed from the landlord to the new owner of the building. Unless
required by the lease (which is very unlikely), the consent of the tenants is not required.

b. Rights of Assignee Against Tenants

Once the tenants are given reasonable evidence that the assignment has occurred, they
are legally obligated to recognize and pay rent to the new owner as their landlord. This
is called attornment. The benefits of all other tenant covenants (e.g., to repair, to pay
taxes) also run with the landlord’s estate and benefit the new landlord, provided that
they touch and concern the land.

c. Liabilities of Assignee to Tenants

The assignee is liable to the tenants for performance of all covenants made by the
original landlord in the lease, provided that those covenants touch and concern the land.
The burdens of those covenants run with the landlord’s estate and become the burdens
of the new landlord. The original landlord also remains liable on all of the covenants
he made in the lease.
Example: L leases to T, and in the lease covenants to repair and maintain the
premises. L then sells the building to L2, subject to the lease. Because
a covenant to repair and maintain touches and concerns the land, L2 is
personally liable to T if L2 fails to perform the covenant. L also remains
liable.

F. CONDEMNATION OF LEASEHOLDS

1. Entire Leasehold Taken by Eminent Domain—Rent Liability Extinguished

If all of the leased land is condemned for the full balance of the lease term, the tenant’s
liability for rent is extinguished because both the leasehold and the reversion have merged
in the condemnor and there is no longer a leasehold estate. Absent a lease provision to the
contrary, the lessee is entitled to compensation for the taking of the leasehold estate.

2. Temporary or Partial Taking—Tenant Entitled to Compensation Only

If the taking is temporary (i.e., for a period less than the remaining term), or if only a portion
of the leased property is condemned, the tenant is not discharged from the rent obligation but
is entitled to compensation (i.e., a share of the condemnation award) for the taking.

G. TORT LIABILITY OF LANDLORD AND TENANT

1. Landlord’s Liability
At common law, subject to a few exceptions, a landlord had no duty to make the premises
safe. Today there are six exceptions to this rule:

a. Concealed Dangerous Condition (Latent Defect)

If, at the time the lease is entered into, the landlord knows (or should know) of a
dangerous condition that the tenant could not discover upon reasonable inspection, the
landlord has a duty to disclose the dangerous condition. Failure to disclose results in
liability for any injury resulting from the condition.

Multistate 08 real property Q.indd 65 9/13/2016 4:33:23 PM

 66. REAL PROPERTY

Once disclosure is made, if the tenant accepts the premises, she is considered to have
assumed the risk of injuries to herself or her guests (e.g., family members, invitees,
licensees); the landlord is no longer liable.

b. Common Areas
The landlord has a duty to exercise reasonable care over common areas, such as halls,
walks, elevators, etc., that remain under his control. The landlord is liable for any injury
resulting from a dangerous condition that could reasonably have been discovered and
made safe. This duty is the same as the duty an owner-occupier owes his guests (see
Multistate Torts outline).

c. Public Use
A landlord is liable for injuries to members of the public if, at the time of the lease, he:
(i) knows or should know of a dangerous condition, (ii) has reason to believe that the
tenant may admit the public before repairing the condition (e.g., because of short lease
term), and (iii) fails to repair the condition. The landlord’s liability extends only to
people who enter the premises for the purpose for which the public is invited. Note that
the tenant’s promise to repair does not relieve the landlord of liability if the landlord has
reason to suspect that the tenant will admit the public before making the repair.

d. Furnished Short-Term Residence

When a furnished house or apartment is leased for a short term (i.e., three months or
less) for immediate occupancy, many jurisdictions hold that the landlord is liable if the
premises are defective and cause injury to a tenant.

e. Negligent Repairs by Landlord

Even if a landlord has no duty to make repairs, a landlord who actually attempts to
repair is liable if an injury results because the repairs are done negligently, or because
they give a deceptive appearance of safety. [Restatement (Second) of Property:
Landlord & Tenant §17.7]
Example: L leases an apartment to T. Without obligation, L agrees to repair
sagging, rotted boards in the kitchen floor. The work appears to be done
correctly, but in fact is structurally unsound. T relies on the deceptive
appearance of safety thereby created and walks on the floor. L is subject
to liability for injuries to T when the floor collapses.

f. Landlord Contracts to Repair

If a landlord covenants to repair, most courts hold that he is liable in tort for an injury to
the tenant or the tenant’s guests resulting from his failure to repair or negligent repair.
2. Modern Trend—General Duty of Reasonable Care
Increasingly, the courts are simply holding that landlords have a general duty of reasonable
care with respect to residential tenants, and that they will be held liable for personal injuries
of tenants and their guests resulting from the landlord’s ordinary negligence, without regard
to the exceptions discussed above. This duty is ordinarily not imposed until the landlord has
notice of a particular defect and a reasonable opportunity to repair it.
a. Defects Arising After Tenant Takes Possession
A landlord will generally be held to have notice of defects that existed before the tenant

Multistate 08 real property Q.indd 66 9/13/2016 4:33:23 PM

 REAL PROPERTY 67.

took possession. However, the landlord will not be liable for defects arising after the
tenant takes possession unless there is evidence that the landlord actually knew or
should have known of them.

b. Legal Duty to Repair

If the landlord has a statutory duty to repair (e.g., under the housing code), he may be
liable to the tenant or the tenant’s guests for injuries resulting from his failure to repair.
Some courts hold that violation of the housing code (or similar statute) is negligence
per se, but most courts hold that it is merely evidence of negligence, which the jury
may or may not find conclusive. The same analysis probably applies to a violation of the
implied warranty of habitability, but there are very few cases on point.

c. Security
Some cases have held landlords liable for injuries inflicted on tenants by third-party
criminals, where the landlord failed to comply with housing code provisions dealing
with security, or failed to maintain ordinary security measures (e.g., working locks on
apartment doors), or where he advertised extraordinary security measures (e.g., televi-
sion surveillance, doormen, security patrols) and then failed to provide them.

3. Tenant’s Liability
The tenant, as occupier of the premises, may be liable in tort to third persons for dangerous
conditions or activities on the leased property. The duty of care owed by the tenant as an
occupier of land is discussed in the Multistate Torts outline.

III. FIXTURES

A. IN GENERAL
A “fixture” is a chattel that has been so affixed to land that it has ceased being personal property
and has become part of the realty. For example, S and B contract to sell and buy a house. Before
vacating, S removes a “built-in” refrigerator. B claims that the item was “part of the house.” Is the
refrigerator a “fixture”? If so, B is entitled to its return or appropriate compensation.

It is important in dealing with “fixture” problems to distinguish between common ownership cases
and divided ownership cases. Courts treat them differently even though they often purport to apply
the same tests. “Common ownership” cases are those in which the person who brings the chattel
onto the land owns both the chattel and the realty (e.g., X installs a furnace in her own home).
“Divided ownership” cases are either ones where the person who owns and installs the chattel does
not own the land (e.g., T installs a furnace in her rented home, which belongs to L); or the person
owns the land but does not own the chattel (e.g., it is subject to a security interest held by the seller).

B. CHATTELS INCORPORATED INTO STRUCTURE ALWAYS BECOME FIXTURES

In both common ownership and divided ownership cases, where the items become incorporated
into the realty so that they lose their identity, they become part of the realty. Examples include
bricks built into a building or concrete poured into a foundation. Similarly, where identification
is possible, but removal would occasion considerable loss or destruction, the items are considered
fixtures, e.g., heating pipes embedded in the wall or floor of a house.

Multistate 08 real property Q.indd 67 9/13/2016 4:33:23 PM

 68. REAL PROPERTY

C. COMMON OWNERSHIP CASES

1. Annexor’s Intent Controls in Common Ownership Cases

In all common ownership cases where a chattel is not incorporated into a structure, whether
an item is a “fixture” (i.e., part of the realty) depends upon the objective intention of the
party who made the “annexation.” This intention is determined by considering:
(i) The nature of the article (i.e., how essential the item is to normal use of the premises);
(ii) The manner in which it is attached to the realty (the more substantially attached, the
more likely it was intended to be permanent);
(iii) The amount of damage that would be caused by its removal; and
(iv) The adaptation of the item to the use of the realty (e.g., custom window treatments,
wall-to-wall carpet).
a. Constructive Annexation
In some cases, an article of personal property is considered a fixture even though it is
not physically annexed to the real estate at all. This is because it is so uniquely adapted
to the real estate that it makes no sense to separate it. Examples include the keys to the
doors of a house; curtain rods that have been cut and sized to the brackets on the walls
of a house, even if the rods themselves are not presently installed; and a carpet that has
been cut to fit an unusually shaped room, even if the carpet is not nailed or glued in
place.

b. Vendor-Purchaser Cases
The typical situation is where the owner of land affixes chattels to the land and subse-
quently conveys the land without expressly providing whether the chattels are to pass
with the realty. The intention test works fairly well. The question boils down to whether
an owner bringing the disputed chattel to the realty would intend that it become part of
the realty. Or to put it another way, whether a reasonable purchaser would expect that
the disputed item was part of the realty.

c. Mortgagor-Mortgagee Cases
The intention test is universally applied to determine whether the owner (mortgagor)
intended the chattels to become “part of the realty.” Where the mortgagor has made the
annexation prior to the giving of the mortgage, the question is what the “reasonably
objective” lender expects to come within the security of her lien. However, where the
annexation is made after the giving of the mortgage, the same considerations arguably
should not apply because each item that is “added” to the lien of the mortgage repre-
sents a windfall to the mortgagee should foreclosure occur. Nevertheless, courts univer-
sally apply the same intention test regardless of when the annexation was made. (Courts
also usually apply the intention test where items are annexed by one in possession of
land under an executory contract to purchase.)
2. Effect of Fixture Classification
a. Conveyance
If a chattel has been categorized as a fixture, it is part of the real estate. A conveyance

Multistate 08 real property Q.indd 68 9/13/2016 4:33:23 PM

 REAL PROPERTY 69.

of the real estate, in the absence of any specific agreement to the contrary, passes the
fixture with it. The fixture, as part of the realty, passes to the new owner of the real
estate.

b. Mortgage
To the extent that the owner of the real estate mortgages the realty, in the absence of an
agreement to the contrary, the mortgage attaches to all fixtures on the real estate.

c. Agreement to Contrary
Even though the concept of fixtures may apply and a chattel becomes a fixture, an
agreement between a buyer and seller (similarly, between a mortgagor and mortgagee)
can cause a severance of title. For example, a buyer and seller may agree that the seller
will retain the right to remove fixtures. Similarly, a mortgagor and mortgagee can agree
that the mortgage lien shall not attach to specified fixtures. The effect of such an agree-
ment is to de-annex, so far as relevant, the chattel from the realty and reconvert the
fixture into a chattel.

D. DIVIDED OWNERSHIP CASES

In divided ownership cases, unlike the ones just discussed, the chattel is owned and brought to
the realty by someone who is not the landowner (e.g., by a tenant, a licensee, or a trespasser). The
question is whether the ownership of the chattel has passed to the landowner. Accession is the
term used to describe the intent of the annexor to make the chattels a permanent part of the real
estate, and courts often say that the intention test (C.1., supra) is to be applied in these cases too.
But the exceptions disprove the rule.

1. Landlord-Tenant
Early English law favored the landlord. However, American law created a trade fixtures
exception under which tradesmen-tenants could remove an item used in their trade or
business, that otherwise would have been a “fixture,” unless its removal would cause substan-
tial damage to the premises. Later, this exception was expanded to include all tenants
generally. Some courts have treated the trade fixtures exception as consistent with the annex-
or’s‑intention test; i.e., a tenant’s annexations are removable because “it was not the intention
of the tenant to make them permanent annexations to the freehold and thereby donations to
the owner of it.”

a. Agreement
An agreement between the landlord and tenant is controlling on whether the chattel
annexed to the premises was intended to become a fixture. To the extent that the
landlord and tenant specifically agree that such annexation is not to be deemed a fixture,
the agreement controls.

b. No Intent If Removal Does Not Cause Damage

In the absence of an express agreement to the contrary, a tenant may remove a chattel
that he has attached to the demised premises as long as the removal does not leave
unrepaired damage to the premises or cause the virtual destruction of the chattel. In
other words, the tenant will not have manifested an intention to permanently improve
the freehold (and the concept of fixtures will be inapplicable) as long as the removal of
the chattel does not substantially damage the premises or destroy the chattel.

Multistate 08 real property Q.indd 69 9/13/2016 4:33:23 PM

 70. REAL PROPERTY

c. Removal Must Occur Before End of Lease Term

Generally, a tenant must remove his annexed chattels before the termination of his
tenancy or they become the property of the landlord. If the duration of the tenancy is
indefinite (e.g., tenancy at will), the removal must occur within a reasonable time after
the tenancy terminates. Similarly, a tenant has a reasonable time for removal if he holds
over during unsuccessful negotiations for a new lease.

d. Tenant Has Duty to Repair Damages Resulting from Removal

Tenants are responsible for repairing damages caused by removal of “fixtures.”

2. Life Tenant and Remainderman

Generally, the same rules apply here as in the landlord-tenant cases—with one key distinc-
tion. The personal representative of a life tenant may remove the annexed chattel within a
reasonable time after the life tenant’s death.

3. Licensee and Landowner

Licenses to bring items onto land usually contain agreements respecting removal. In the
absence of an agreement, licensees are permitted to remove the items subject to a duty to
repair damages caused thereby.

4. Trespasser and Landowner

Trespassers (e.g., adverse possessors before the running of the statute of limitations)
normally lose their annexations whether installed in good faith or not. Moreover, the
trespasser can be held liable for the reasonable rental value of the property on which she
annexed the item for the period that she illegally occupied the land.

a. Trespasser’s Recovery Limited to Value Added to Land

Some courts allow a good faith trespasser to recover for the improvement, but the
recovery is measured by the value added to the land, not the cost to construct the
improvement.

IV. RIGHTS IN THE LAND OF ANOTHER—EASEMENTS, PROFITS,

COVENANTS, AND SERVITUDES

A. IN GENERAL
Easements, profits, covenants, and servitudes are nonpossessory interests in land. They create a
right to use land possessed by someone else. For example, A, the owner of Blackacre, grants to
B, the owner of an adjacent parcel, Whiteacre, the right to use a path over Blackacre connecting
Whiteacre to a public road. An easement has been created, giving B the right to use—but not to
possess—the pathway over Blackacre. Easements, profits, covenants, and servitudes have many
similarities in operation, coverage, creation, and termination. They also have important differ-
ences, mainly in the requirements that must be met for their enforcement.

B. EASEMENTS

1. Introduction
The holder of an easement has the right to use a tract of land (called the servient tenement)

Multistate 08 real property Q.indd 70 9/13/2016 4:33:23 PM

 REAL PROPERTY 71.

for a special purpose, but has no right to possess and enjoy the tract of land. The owner of
the servient tenement continues to have the right of full possession and enjoyment subject
only to the limitation that he cannot interfere with the right of special use created in the
easement holder. Typically, easements are created in order to give their holder the right of
access across a tract of land, e.g., the privilege of laying utility lines, or installing sewer pipes
and the like. Easements are either affirmative or negative, appurtenant or in gross.
a. Types of Easements
1) Affirmative Easements
Affirmative easements entitle the holder to enter upon the servient tenement and
make an affirmative use of it for such purposes as laying and maintaining utility
lines, draining waters, and polluting the air over the servient estate. The right-of-
way easement is another instance of an affirmative easement. Thus, an affirmative
easement privileges the holder of the benefit to make a use of the servient estate
that, absent the easement, would be an unlawful trespass or nuisance.

2) Negative Easements
A negative easement does not grant to its owner the right to enter upon the servient
tenement. It does, however, entitle the privilege holder to compel the possessor
of the servient tenement to refrain from engaging in activity upon the servient
tenement that, were it not for the existence of the easement, he would be privileged
to do. Courts historically recognized negative easements only for light, air, subja-
cent or lateral support, and for the flow of an artificial stream. Today, a negative
easement is simply a restrictive covenant. (See D.1.e.1), infra.)
Example: A owns Lot 6. By written instrument, he stipulates to B that he will
not build any structure upon Lot 6 within 35 feet of the lot line. B
has acquired a negative easement in Lot 6.

b. Easement Appurtenant
An easement is deemed appurtenant when the right of special use benefits the holder of
the easement in his physical use or enjoyment of another tract of land. For an easement
appurtenant to exist, there must be two tracts of land. One is called the dominant
tenement, which has the benefit of the easement. The second tract is the servient
tenement, which is subject to the easement right. One consequence of appurtenance
is that the benefit passes with transfers of the benefited land, regardless of whether the
easement is mentioned in the conveyance.
Example: A owns Lot 6 and B owns Lot 7, which are adjoining tracts of land. By a
written instrument, B grants to A the right to cross B’s tract (Lot 7). A’s
use and enjoyment of Lot 6 is benefited by virtue of the acquisition of
the right to use Lot 7 for this special purpose. The right is an easement
appurtenant. B remains the owner of Lot 7. A has only a right to use Lot
7 for a special purpose, i.e., the right to cross the tract.
1) Use and Enjoyment
In an easement appurtenant, the benefits to be realized by the easement must be
directly beneficial to the possessor of the dominant tenement in his physical use
and enjoyment of that tract of land. It is not sufficient that the easement makes use
of the land more profitable.

Multistate 08 real property Q.indd 71 9/13/2016 4:33:23 PM

 72. REAL PROPERTY

Example: A owns Lot 6 and B owns adjacent Lot 7. A grants to B the right to
use part of Lot 6 to mine coal. The right is not an easement appur-
tenant because the benefit granted is not related to B’s physical use
and enjoyment of Lot 7.

2) Benefit Attached to Possession

The benefit of an easement appurtenant becomes an incident of the possession of
the dominant tenement. All who possess or subsequently succeed to title to the
dominant tenement become, by virtue of the fact of possession, entitled to the
benefit of the easement. There can be no conveyance of the easement right apart
from possession of the dominant tenement, except that the easement holder may
convey the easement to the owner of the servient tenement in order to extinguish
the easement (see 4.b., infra).

3) Transfer of Dominant and Servient Estates

Both the dominant and servient parcels can be transferred. As discussed above,
if the dominant parcel is transferred, the benefit of the easement goes with it
automatically—even if it is not mentioned in the deed—and becomes the property
of the new owner. If the servient parcel is transferred, its new owner takes it
subject to the burden of the easement, unless she is a bona fide purchaser (see
VI.E.3., infra) with no notice of the easement. There are three ways the person
who acquires the servient land might have notice of the easement: (i) actual knowl-
edge, (ii) notice from the visible appearance of the easement on the land, and (iii)
notice from the fact that the document creating the easement is recorded in the
public records. Everyone who buys land is expected to inspect the land physically
and to examine the public records.
Example: A owns Lot 6 and grants B (the owner of Lot 7) an easement for a
driveway across Lot 6 to benefit adjacent Lot 7. The easement is not
recorded. Then A sells Lot 6 to X. The tire tracks of the driveway
are plainly visible at the time of the sale. X is therefore not a bona
fide purchaser, and takes Lot 6 subject to the easement.

c. Easement in Gross
An easement in gross is created where the holder of the easement interest acquires a
right of special use in the servient tenement independent of his ownership or possession
of another tract of land. In an easement in gross, the easement holder is not benefited in
his use and enjoyment of a possessory estate by virtue of the acquisition of that privi-
lege. There is no dominant tenement. An easement in gross passes entirely apart from
any transfer of land.
Example: A owns Lot 6. By a written instrument, she grants to B the right to
build a pipeline across Lot 6. B receives the privilege independent of his
ownership or possession of a separate tract of land. B has acquired an
easement in gross.

Easements in gross can be either personal (e.g., O gives friend right to swim and
boat on lake) or commercial (e.g., utility or railroad track easements). Generally, an
easement in gross is transferable only if the easement is for a commercial or economic
purpose.

Multistate 08 real property Q.indd 72 9/13/2016 4:33:23 PM

 REAL PROPERTY 73.

d. Judicial Preference for Easements Appurtenant

If an easement interest is created and its owner holds a corporeal (possessory) estate
that is or could be benefited in physical use or enjoyment by the acquisition of the
privilege, the easement will be deemed appurtenant. This is true even though the deed
creating the easement makes no reference to a dominant tenement.
Example: A conveys to “B, her heirs, successors, and assigns, the right to use a
strip 20 feet wide on the north edge of Blackacre for ingress and egress
to Whiteacre.” Because there is ambiguity as to whether the benefit was
intended to attach to B’s land, Whiteacre, or to B personally, a court
will apply the constructional preference and hold that the benefit was
intended to be appurtenant, with the consequence that any conveyance
of Whiteacre by B will carry with it the right to use the strip across
Blackacre.

2. Creation of Easements
The basic methods of creating an easement are: express grant or reservation, implication, and
prescription.

a. Express Grant
Because an easement is an interest in land, the Statute of Frauds applies. Therefore, any
easement must be memorialized in a writing that is signed by the grantor (the holder of
the servient tenement) unless its duration is brief enough (commonly one year or less)
to be outside the coverage of a particular state’s Statute of Frauds. An easement can be
created by conveyance. A grant of an easement must comply with all the formal requi-
sites of a deed. An easement is presumed to be of perpetual duration unless the grant
specifically limits the interest (e.g., for life, for 10 years).

b. Express Reservation
An easement by reservation arises when the owner (of a present possessory interest) of a
tract of land conveys title but reserves the right to continue to use the tract for a special
purpose after the conveyance. In effect, the grantor passes title to the land but reserves
unto himself an easement interest. Note that, under the majority view, the easement can
be reserved only for the grantor; an attempt by the grantor to reserve an easement for
anyone else is void. (There is a growing trend to permit reservations in third parties, but
it remains a minority view.)
Example: G owns Lot 6 and Lot 7, which are adjacent. G sells Lot 7 to B. Later,
when G is about to sell Lot 6 to A, B asks G to reserve an easement over
Lot 6 in favor of B. G agrees to do so, and executes a deed of Lot 6 to
A that contains the following language: “Reserving an easement for a
driveway in favor of Lot 7, which is owned by B.” The reservation clause
is void and no easement is created.

c. Implication
An easement by implication is created by operation of law rather than by written
instrument. It is an exception to the Statute of Frauds. There are only three types of
implied easements: (i) an intended easement based on a use that existed when the
dominant and servient estates were severed, (ii) an easement implied from a recorded
subdivision plat or profit a prendre, and (iii) an easement by necessity.

Multistate 08 real property Q.indd 73 9/13/2016 4:33:23 PM

 74. REAL PROPERTY

1) Easement Implied from Existing Use (“Quasi-Easement”)

An easement may be implied if, prior to the time the tract is divided, a use
exists on the “servient part” that is reasonably necessary for the enjoyment of
the “dominant part” and a court determines that the parties intended the use to
continue after division of the property. It is sometimes called a “quasi-easement”
before the tract is divided because an owner cannot hold an easement on his own
land.

a) Existing Use at Time Tract Divided

For a use to give rise to an easement, it must be apparent and continuous at
the time the tract is divided. “Apparent” means that a grantee could discover
the existence of the use upon reasonable inspection. A nonvisible use may still
be “apparent” if surface connections or the like would put a reasonable person
on notice of its existence.

b) Reasonable Necessity
Whether a use is reasonably necessary to the enjoyment of the dominant
parcel depends on many factors, including the cost and difficulty of the alter-
natives and whether the price paid reflects the expected continued use of the
servient portion of the tract.

c) Grant or Reservation
An easement implied in favor of the grantee is said to be created by implied
grant, while an easement implied in favor of the grantor is said to be created
by implied reservation.

2) Easements Implied Without Any Existing Use

In two limited situations, easements are implied in a conveyance even though there
is no preexisting use.

a) Subdivision Plat
When lots are sold in a subdivision with reference to a recorded plat or map
that also shows streets leading to the lots, buyers of the lots have implied
easements to use the streets in order to gain access to their lots. These
easements continue to exist even if the public easements held by the city or
county in the streets are later vacated.

b) Profit a Prendre
When a landowner grants a profit a prendre to a person to remove a valuable
product of the soil (e.g., grass, asphalt, ore, etc.), the holder of the profit also
has an implied easement to pass over the surface of the land and to use it as
reasonably necessary to extract the product.

3) Easement by Necessity
When the owner of a tract of land sells a part of the tract and by this division
deprives one lot of access to a public road or utility line, a right-of-way by absolute
necessity is created by implied grant or reservation over the lot with access to the
public road or utility line. The owner of the servient parcel has the right to locate

Multistate 08 real property Q.indd 74 9/13/2016 4:33:23 PM

 REAL PROPERTY 75.

the easement, provided the location is reasonably convenient. An easement by

necessity terminates when the necessity ceases.

d. Prescription
Acquiring an easement by prescription is analogous to acquiring property by adverse
possession. (See V., infra.) Many of the requirements are the same: To acquire a
prescriptive easement, the use must be open and notorious, adverse, and continuous
and uninterrupted for the statutory period. Note that the public at large can acquire an
easement in private land if members of the public use the land in a way that meets the
requirements for prescription.

1) Open and Notorious

The user must not attempt to conceal his use. Underground or other nonvisible
uses, such as pipes and electric lines, are considered open and notorious if the use
could be discovered (e.g., through surface connections) upon inspection.

2) Adverse
The use must not be with the owner’s permission. Unlike adverse possession, the
use need not be exclusive. The user of a common driveway, e.g., may acquire a
prescriptive easement even though the owner uses it too.

3) Continuous Use
Continuous adverse use does not mean constant use. A continuous claim of right
with periodic acts that put the owner on notice of the claimed easement fulfills the
requirement. Note that tacking is permitted for prescriptive easements, just as for
adverse possession (see V.B.5.b., infra).

4) When Prescriptive Easements Cannot Be Acquired

Negative easements cannot arise by prescription, nor generally may easements
in public lands. An easement by necessity cannot give rise to an easement by
prescription. However, if the necessity ends, so does the easement, and the use is
adverse from that point forward.

3. Scope
Courts enforcing easements are often called upon to interpret the arrangement in order to
determine the scope and intended beneficiaries of the interest. The key to interpretation
employed in all these cases is the reasonable intent of the original parties. What would the
parties reasonably have provided had they contemplated the situation now before the court?
What result would reasonably serve the purposes of the arrangement?

a. General Rules of Construction

If, as typically happens, the language used is general (e.g., “a right-of-way over
Blackacre”), the following rules of construction usually apply: (i) ambiguities are
resolved in favor of the grantee (unless the conveyance is gratuitous); (ii) subsequent
conduct of the parties respecting the arrangement is relevant; (iii) the parties are
assumed to have intended a scope that would reasonably serve the purposes of the grant
and to have foreseen reasonable changes in the use of the dominant estate. The rule of
reasonableness will be applied only to the extent that the governing language is general.

Multistate 08 real property Q.indd 75 9/13/2016 4:33:23 PM

 76. REAL PROPERTY

If the location or scope of the permitted use is spelled out in detail, the specifics will
govern, and reasonable interpretation will be excluded.
Examples: 1) In 1890, A, the owner of Blackacre, granted to B, the owner of
Whiteacre, a “right-of-way” over Blackacre for purposes of ingress and
egress to Whiteacre from the public highway running along the western
boundary of Blackacre. At the time of the grant, there were only horses
and buggies, no automobiles. Applying a “rule of reasonableness” to the
general language creating the right-of-way, a court would probably find
that the right-of-way could today be used for cars. If, however, the use
of cars would impose a substantially greater burden on Blackacre, the
court would probably find against this use on grounds that it was outside
the scope reasonably contemplated by A and B.

2) If, in the example just given, the right-of-way was specifically

dedicated (“only to the use of horses and carriages”), automobile use
would be excluded. Similarly, if the right-of-way was specifically located
(e.g., “over the southern 10 feet of Blackacre”), the rule of reasonable-
ness could not be invoked to change or enlarge the location.

b. Absence of Location
If an easement is created but not specifically located on the servient tenement, an
easement of sufficient width, height, and direction to make the intended use reasonably
convenient will be implied. The owner of the servient tenement may select the location
of the easement so long as her selection is reasonable.

c. Changes in Use
In the absence of specific limitations in the deed creating an easement, the courts will
assume that the easement is intended by the parties to meet both present and future
reasonable needs of the dominant tenement.
Examples: 1) A roadway easement of unspecified width was created in 1920,
when cars were only six feet wide. Today, however, cars are consider-
ably wider. Because the original roadway easement was not specifically
limited in width, the easement will expand in size to accommodate the
changing and expanding needs of the owner of the dominant tenement.

2) But a basic change in the nature of the use is not allowed. Thus, a
telephone or power line may not be added on the roadway. (Many courts
are more liberal in allowing such additions if the roadway easement is
public rather than private.)

d. Easements by Necessity or Implication

In the case of easements by necessity, the extent of the necessity determines the scope
of the easement. Because there is no underlying written instrument to interpret, courts
will look instead to the circumstances giving rise to the easement. Similarly, with
other implied easements, the quasi-easement will provide the starting point for the
court’s construction of the scope of the easement. Modifications in the easement will be
enforced to the extent that they are necessary for reasonably foreseeable changes in the
use of the dominant parcel.

Multistate 08 real property Q.indd 76 9/13/2016 4:33:23 PM

 REAL PROPERTY 77.

e. Use of Servient Estate

Absent an express restriction in the original agreement, the owner of the servient estate
may use her land in any way she wishes so long as her conduct does not interfere with
performance of the easement, profit, covenant, or servitude.
Example: A grants to B Water Company the right to lay water pipes in a specified
five-foot right-of-way. A is not by this grant necessarily precluded from
granting similar rights in the same right-of-way to a competing company,
so long as the second grant does not interfere with the use made by B,
the original grantee. A may also build over the right-of-way so long as
the structure does not unreasonably interfere with B’s use.

1) Duty to Repair
If the holder of the benefit is the only party making use of the easement, that party
has the duty to make repairs (e.g., fill in potholes on a right-of-way) and, absent
a special agreement, the servient owner has no duty to do so. If the easement is
nonexclusive and both the holder of the benefit and the servient owner are making
use of the easement, the court will apportion the repair costs between them on the
basis of their relative use.

f. Intended Beneficiaries—Subdivision of Dominant Parcel

When an easement is created for the benefit of a landowner, and the landowner later
subdivides the parcel, there is a question whether each subdivision grantee will succeed
to the original benefit. The answer will turn on whether the extension of the benefit to
each of the subdivided parcels will burden the servient estate to a greater extent than
was contemplated by the original parties. Absent any other evidence on intent, a court
will not find an intent to allow an extension if extending the benefit to each parcel in the
subdivision will unreasonably overburden the servient estate. Weighing all the circum-
stances, a court could find subdivision into four lots reasonable, but subdivision into 50
lots unreasonable; it is determined on a case-by-case basis.
Example: A, the owner of Blackacre, grants to B, the owner of Whiteacre, a right-
of-way easement of ingress and egress over Blackacre. B then subdivides
Whiteacre into 150 lots. If A and B had not contemplated the subdivi-
sion of Whiteacre, and if use of the right-of-way by all 150 lot owners
would substantially interfere with A’s use of Blackacre (in a way that B’s
use alone would not), a court would probably not find an intent that the
benefit of the right-of-way easement attach to each of the 150 parcels.

g. Effect of Use Outside Scope of Easement

When the owner of an easement uses it in a way that exceeds its legal scope, the
easement is said to be surcharged. The remedy of the servient landowner is an
injunction of the excess use, and possibly damages if the servient land has been
harmed. However, the excess use does not terminate the easement or give the servient
landowner a power of termination.

4. Termination of Easements
An easement, like any other property interest, may be created to last in perpetuity or for a
limited period of time. To the extent the parties to its original creation provide for the natural
termination of the interest, such limitations will control.

Multistate 08 real property Q.indd 77 9/13/2016 4:33:23 PM

 78. REAL PROPERTY

a. Stated Conditions
If the parties to the original creation of an easement set forth specific conditions upon
the happening of which the easement right will terminate, the conditions will be recog-
nized. On this basis, the following conditions are valid: an easement granted “so long
as repairs are maintained,” an easement granted “so long as X is the holder of the
dominant tenement,” an easement granted “until the dominant tenement is used for
commercial purposes,” etc.

b. Unity of Ownership
By definition, an easement is the right to use the lands of another for a special purpose.
On this basis, the ownership of the easement and of the servient tenement must be in
different persons. If ownership of the two comes together in one person, the easement is
extinguished.

1) Complete Unity Required

For an easement to be extinguished by merger of dominant and servient tenements,
the duration of the servient tenement must be equal to or longer than the duration
of the dominant tenement (and therefore the easement) with which it is combined.
Examples: 1) A owns the servient tenement in fee simple. B owns the
dominant tenement in fee simple, and B’s dominant tenement has,
appurtenant to it, an access easement across the servient tenement.
A conveys a 10-year term tenancy in the servient tenement to
B. The duration of the conveyed interest in the servient estate is
shorter than the duration of the dominant estate (and therefore the
easement) with which it is combined. Thus, the easement is not
extinguished by merger.

2) A owns the servient tenement in fee simple. B holds a 10-year

term tenancy in the dominant tenement, and B’s fixed-term tenancy
estate has, appurtenant to it, an access easement across the servient
tenement. A conveys the fee simple servient tenement to B (or B
conveys the 10-year term tenancy in the dominant tenement to A;
it doesn’t matter). The duration of the servient estate is longer than
the duration of the dominant estate (and therefore the easement)
with which it is combined. Thus, the easement is extinguished by
merger.

2) No Revival
If complete unity of title is acquired, the easement is extinguished. Even though
there may be later separation, the easement will not be automatically revived.
Example: A owns Lot 6, the servient tenement. B owns adjacent Lot 7. A
grants to B the privilege of crossing Lot 6, i.e., grants an easement
appurtenant to B. Assume A conveys Lot 6 to B in fee simple. The
easement would be extinguished because B then holds both the
easement and title to the servient tenement. If, thereafter, B conveys
Lot 6 to C, the easement is not revived. Of course, it could be
created anew.

Multistate 08 real property Q.indd 78 9/13/2016 4:33:23 PM

 REAL PROPERTY 79.

c. Release
An easement may be terminated by a release given by the owner of the easement
interest to the owner of the servient tenement. A release requires the concurrence of
both owners and is, in effect, a conveyance. The release must be executed with all the
formalities that are required for the valid creation of an easement.
1) Easement Appurtenant
The basic characteristic of an easement appurtenant is that it becomes, for the
purpose of succession, an incident of possession of the dominant tenement. This
basic characteristic requires that the easement interest not be conveyed indepen-
dently of a conveyance of the dominant tenement. However, an easement appurte-
nant may be conveyed to the owner of the servient tenement without a conveyance
(to the same grantee) of the dominant tenement. This is an exception to the general
alienability characteristics of an easement appurtenant (see 1.b., supra).
2) Easement in Gross
The basic characteristic of an easement in gross is that unless it is for a commer-
cial purpose, it is inalienable. However, an easement in gross can be released; i.e.,
can be conveyed to the owner of the servient tenement. This is an exception to the
general characteristics of an easement in gross.
3) Statute of Frauds
The Statute of Frauds requires that every conveyance of an interest in land that
has a duration long enough to bring into play a particular state’s Statute of Frauds
(typically one year) must be evidenced by a writing. This writing requirement is
also applicable to a release of an easement interest. If the easement interest that
is being conveyed has a duration of greater than one year, a writing is required in
order to satisfy the Statute of Frauds. An oral release is ineffective, although it may
become effective by estoppel.

d. Abandonment
It has become an established rule that an easement can be extinguished without convey-
ance where the owner of the privilege demonstrates by physical action an intention to
permanently abandon the easement. To work as an abandonment, the owner must have
manifested an intention never to make use of the easement again.
Example: A owns Lot 6 and B owns Lot 7, which are immediately adjacent. A
grants to B an easement across Lot 6. This easement is specifically
located on the servient tenement and is a walkway. Subsequently, B
constructs a house on Lot 7 that completely blocks his access to the
walkway. By the physical action of constructing the house in such a way
that access to the walkway (i.e., the easement) is denied, B has physi-
cally indicated an intent not to use the easement again. The easement is
extinguished by abandonment.

1) Physical Act Required

An abandonment of an easement occurs when the easement holder physically
manifests an intention to permanently abandon the easement. Such physical action
brings about a termination of the easement by operation of law and therefore no
writing is required; i.e., the Statute of Frauds need not be complied with.

Multistate 08 real property Q.indd 79 9/13/2016 4:33:23 PM

 80. REAL PROPERTY

2) Mere Words Insufficient

The oral expressions of the owner of the easement that he does not intend to use
the easement again (i.e., he wishes to abandon it), by themselves, are insufficient to
constitute an abandonment of the easement. For words alone to operate as a termi-
nation, such expression will only be effective if it qualifies as a release; i.e., the
Statute of Frauds must be complied with. Note, however, that oral expressions may
be sufficient if accompanied by a long period of nonuse (see 3), infra).

3) Mere Nonuse Insufficient

An easement is not terminated merely because it is not used for a long period by
its owner. To terminate the easement, the nonuse must be combined with other
evidence of intent to abandon it. Nonuse itself is not considered sufficient evidence
of that intent.

e. Estoppel
While the assertions of the holder of the easement are insufficient to work a termination
unless there is valid compliance with the requirements of a release, an easement may be
extinguished by virtue of the reasonable reliance and change of position of the owner of
the servient tenement, based on assertions or conduct of the easement holder.
Example: The owner of a right‑of‑way tells the owner of the servient tenement that
the owner of the servient tenement may build a building on the servient
tenement in such a way as to make the right-of-way no longer usable, and
the servient owner does in fact build the building. There will be an extin-
guishment of the easement by estoppel.
For an easement to be extinguished by estoppel, three requirements must be satisfied.
Namely, there must be (i) some conduct or assertion by the owner of the easement,
(ii) a reasonable reliance by the owner of the servient tenement, (iii) coupled with a
change of position. Even though there is an assertion by the easement holder, if the
owner of the servient tenement does not change her position based upon the assertion,
the easement will not be terminated.
f. Prescription
An easement may be extinguished, as well as created, by prescription. Long continued
possession and enjoyment of the servient tenement in a way that would indicate to the
public that no easement right existed will end the easement right. Such long continued
use works as a statute of limitations precluding the whole world, including the easement
holder, from asserting that his privilege exists.

The termination of an easement by prescription is fixed by analogy to the creation of

an easement by prescription. The owner of the servient tenement must so interfere with
the easement as to create a cause of action in favor of the easement holder. The interfer-
ence must be open, notorious, continuous, and nonpermissive for the statutory period
(e.g., 20 years).

g. Necessity
Easements created by necessity expire as soon as the necessity ends.
Example: A, the owner of a tract of land, sells a portion of it that has no access to a
highway except over the remaining lands of A. B, the purchaser, acquires

Multistate 08 real property Q.indd 80 9/13/2016 4:33:23 PM

 REAL PROPERTY 81.

by necessity a right-of-way over the remaining lands of A. Some years

later, a highway is built so that B no longer needs the right-of-way across
A’s property. The easement ends because the necessity has disappeared.

h. Condemnation
Condemnation of the servient estate will extinguish the nonpossessory interest. Courts
are split, however, on whether the holder of the benefit is entitled to compensation for
the value lost.

i. Destruction of Servient Estate

If the easement is in a structure (e.g., a staircase), involuntary destruction of the struc-
ture (e.g., by fire or flood) will extinguish the easement. Voluntary destruction (e.g.,
tearing down a building to erect a new one) will not, however, terminate the easement.

5. Compare—Licenses
Licenses, like affirmative easements, privilege their holder to go upon the land of another
(the licensor). Unlike an affirmative easement, the license is not an interest in land. It is
merely a privilege, revocable at the will of the licensor. (Although licenses may acquire some
of the characteristics of easements through estoppel or by being coupled with an interest.)
The Statute of Frauds does not apply to licenses, and licensees are not entitled to compen-
sation if the land is taken by eminent domain. Licenses are quite common; examples of
licensees include delivery persons, plumbers, party guests, etc.

a. Assignability
An essential characteristic of a license is that it is personal to the licensee and therefore
not alienable. The holder of a license privilege cannot convey such right. In fact, most
courts have held that the license privilege is so closely tied to the individual parties that
it is revoked, by operation of law, upon an attempted transfer by the licensee.

b. Revocation and Termination

Another essential characteristic of a license is that it is revocable by nature. It may be
revoked at any time by a manifestation of the licensor’s intent to end it. This manifesta-
tion may be by a formal notice of revocation or it may consist of conduct that obstructs
the licensee’s continued use. Similarly, the licensee can surrender the privilege
whenever he desires to do so. A license ends by operation of law upon the death of the
licensor. In addition, a conveyance of the servient tenement by the licensor terminates
the licensee’s privilege.

1) Public Amusement Cases

Tickets issued by theaters, race courses, and other places of amusement have given
rise to some controversy. The traditional rule is that such tickets create a license.
Once describing the tickets as granting a license, the essential characteristic of a
license applies; i.e., it is revocable by nature. On this basis, the licensor may termi-
nate the licensee’s privilege at will.

2) Breach of Contract
A license may be granted pursuant to an express or implied contract between the
licensor and licensee. On this basis, the termination of the licensee’s privilege may

Multistate 08 real property Q.indd 81 9/13/2016 4:33:23 PM

 82. REAL PROPERTY

constitute a breach of contract. While many courts may grant a cause of action for
money damages for a revocation of a license in breach of contract, they continue
to sustain the licensor’s right to terminate the licensee’s privilege to continue to
remain on the servient tenement.
Example: A pays a $70 greens fee to play 18 holes of golf on B’s property.
After A has played only nine holes, B terminates A’s right to be
on B’s property. Because A acquired a license and it is revocable
by its very nature, B’s action is not, in property terms, wrongful.
However, A may have a cause of action against B to recoup part or
all of A’s $70.

c. Failure to Create an Easement

The Statute of Frauds requires that any conveyance of an interest in land (including an
easement interest) of duration greater than one year must be memorialized in writing to
be enforceable. If a party attempts to create an easement orally, the result is the creation
of a license, i.e., a revocable privilege. Note, however, that if an oral attempt to create
an easement is subsequently “executed,” to the extent that it would be inequitable to
permit its revocation (e.g., the licensee has expended substantial funds in reliance on the
license), the licensor may be estopped to revoke the license.

d. Irrevocable Licenses

1) Estoppel Theory
If a licensee invests substantial amounts of money or labor in reliance on a license,
the licensor may be estopped to revoke the license, and the license will thus
become the equivalent of an affirmative easement.
Example: A orally licenses B to come onto Blackacre to excavate a drainage
ditch connected to B’s parcel, Whiteacre. B does so at substantial
expense. A will probably be estopped to revoke the license and
prevent B from using the ditch.

Under the majority view, such irrevocable licenses or easements by estoppel last
until the owner receives sufficient benefit to reimburse himself for the expenditures
made in reliance on the license. A minority of courts treat easements by estoppel
like any other affirmative easements and give them a potentially infinite duration.

2) License Coupled with an Interest

If a license is coupled with an interest, it will be irrevocable as long as the interest
lasts.

a) Vendee of a Chattel
The purchaser of a chattel located upon the seller’s land is, in the absence of
an express stipulation to the contrary, given the privilege to enter upon the
seller’s land for the purpose of removing the chattel. The purchaser’s right is
irrevocable. He must, however, enter at reasonable times and in a reasonable
manner.
Example: A, the owner of Blackacre, sells 100 crates of oranges stored
in a shed on Blackacre and at the same time licenses B to

Multistate 08 real property Q.indd 82 9/13/2016 4:33:23 PM

 REAL PROPERTY 83.

come onto Blackacre to remove the crates of oranges. B has an

irrevocable license to enter Blackacre and remove the crates
within a reasonable time.
b) Termination of Tenancy
If a tenant’s right to possess land has been lawfully terminated, the tenant
may still reenter the land at reasonable times and in a reasonable manner for
the purpose of removing his chattels. This is an irrevocable privilege.

c) Inspection for Waste

The owner of a future interest in land (e.g., a landlord, holder of a rever-
sionary interest, or remainderman) is privileged to enter upon the land, at
reasonable times and in a reasonable manner, for the purpose of determining
whether waste is being committed by the holder of the present possessory
estate.

C. PROFITS
Like an easement, a profit (profit a prendre) is a nonpossessory interest in land. The holder of the
profit is entitled to enter upon the servient tenement and take the soil or a substance of the soil
(e.g., minerals, timber, oil, or game). Also, like an easement, a profit may be appurtenant or in
gross. In contrast to easements, however, there is a constructional preference for profits in gross
rather than appurtenant.

1. Creation
Profits are created in the same way as easements.

2. Alienability
A profit appurtenant follows the ownership of the dominant tenement. A profit in gross may
be assigned or transferred by the holder.

3. Exclusive and Nonexclusive Profits Distinguished

When an owner grants the sole right to take a resource from her land, the grantee takes an
exclusive profit and is solely entitled to the resources, even to the exclusion of the owner of
the servient estate. By contrast, when a profit is nonexclusive, the owner of the servient estate
may grant similar rights to others or may take the resources herself. Ordinarily, profits (like
easements) are construed as nonexclusive.

4. Scope
The extent and nature of the profit is determined by the words of the express grant (if there
was a grant), or by the nature of the use (if the profit was acquired by prescription). Note
that implied in every profit is an easement entitling the profit holder to enter the servient
estate to remove the resource.
Example: A, the owner of Blackacre, grants B the right to come onto Blackacre to carry
off gravel from a pit on Blackacre. B has a profit with respect to the gravel
and also the benefit of an implied affirmative easement to go onto Blackacre
by reasonable means to remove the gravel.

a. Apportionment of Profits Appurtenant

Courts treat the subdivision of land with a profit appurtenant just as they treat the

Multistate 08 real property Q.indd 83 9/13/2016 4:33:24 PM

 84. REAL PROPERTY

subdivision of land with an easement appurtenant. The benefit of the profit will attach
to each parcel in a subdivision only if the burden on the servient estate is not as a result
overly increased.
Example: A, the owner of Blackacre, grants B, the owner of adjacent Whiteacre,
the right to remove rock from Blackacre. If the profit was to take the
rock for purposes of maintaining a boat launch on Whiteacre, then an
increase in use from one to 50 boat launches when Whiteacre is subdi-
vided will probably be viewed as overburdensome to Blackacre.
If, however, the profit was to take rock for purposes of reinforcing
Whiteacre’s coastline to prevent erosion, apportionment would likely be
allowed because subdivision would not increase the number of acres to
be reinforced and consequently would not impose a greater burden on
Blackacre.
b. Apportionment of Profits in Gross
Because profits are freely alienable, a question frequently arises as to whether the holder
of a profit can convey it to several people. If a profit is exclusive, the holder may transfer
the profit to as many transferees as he likes. Likewise, if the grant of the profit specifies
a limit on the profit (less than all), the right can be transferred to multiple transferees.
If, however, the profit is nonexclusive and not limited as to amount, it is generally not
divisible. Undue burden to the servient estate is again the benchmark, however, and a
nonexclusive profit may be assigned to a single person or to several persons jointly if
the multiple assignees work together and take no more resources than would have been
taken by the original benefit holder.

5. Termination
Profits are terminated in the same way as easements. In addition, misuse of a profit, unduly
increasing the burden (typically through an improper apportionment), will be held to
surcharge the servient estate. The result of surcharge in this case is to extinguish the profit.
(Contrast this with the result when the benefit of an affirmative easement is misused:
Improper or excessive use increasing the burden on the servient estate is enjoinable but, in
most jurisdictions, does not extinguish the easement; see B.3.g., supra.)

D. COVENANTS RUNNING WITH THE LAND AT LAW (REAL COVENANTS)

A real covenant, normally found in deeds, is a written promise to do something on the land
(e.g., maintain a fence) or a promise not to do something on the land (e.g., conduct commercial
business). Real covenants run with the land at law, which means that subsequent owners of the
land may enforce or be burdened by the covenant. To run with the land, however, the benefit and
burden of the covenant must be analyzed separately to determine whether they meet the require-
ments for running.

1. Requirements for Burden to Run

If all requirements are met for the burden to run, the successor in interest to the burdened
estate will be bound by the arrangement entered into by her predecessor as effectively as if
she had herself expressly agreed to be bound.

a. Intent
The covenanting parties must have intended that successors in interest to the covenantor

Multistate 08 real property Q.indd 84 9/13/2016 4:33:24 PM

 REAL PROPERTY 85.

be bound by the terms of the covenant. The requisite intent may be inferred from
circumstances surrounding creation of the covenant, or it may be evidenced by language
in the conveyance creating the covenant (e.g., “this covenant runs with the land,” or
“grantee covenants for herself, her heirs, successors, and assigns”).

b. Notice
Under the common law, a subsequent purchaser of land that was subject to a covenant
took the land burdened by the covenant, whether or not she had notice. However, under
American recording statutes (see VI.E., infra), if the covenant is not recorded, a bona
fide purchaser who has no notice of the covenant and who records her own deed will
take free of the covenant. Hence, as a practical matter, if the subsequent purchaser
pays value and records (as will nearly always be true), she is not bound by covenants of
which she has no actual or constructive notice.

c. Horizontal Privity
This requirement rests on the relationship between the original covenanting parties.
Specifically, horizontal privity requires that, at the time the promisor entered into the
covenant with the promisee, the two shared some interest in the land independent of
the covenant (e.g., grantor-grantee, landlord-tenant, mortgagor-mortgagee).
Examples: 1) A and B are neighboring landowners, neither having any rights in
the other’s land. For good consideration, A promises B, “for herself,
her heirs, successors, and assigns,” that A’s parcel “will never be used
for other than residential purposes.” The horizontal privity requirement
is not met, and successors in interest to A will not be bound because
at the time A made this covenant, she and B shared no interest in land
independent of the covenant.
2) A, the owner of Blackacre in fee, promised B, the holder of a right-
of-way easement over Blackacre, “always to keep the right-of-way free
of snow or other impediment to B’s use of the right-of-way.” Horizontal
privity is met because, at the time the covenant was made, A owned the
parcel in fee and B held the benefit of an easement in it.
3) A, the owner of Blackacre and Whiteacre, deeds Whiteacre to B,
promising “not to use Blackacre for other than residential purposes.”
Horizontal privity exists here by virtue of the grantor-grantee relation-
ship between A and B.
d. Vertical Privity
To be bound, the successor in interest to the covenanting party must hold the entire
durational interest held by the covenantor at the time she made the covenant.
Example: A, who owns Blackacre and Whiteacre in fee simple absolute, sells
Whiteacre to B and, in the deed, covenants for herself, her heirs, succes-
sors, and assigns to contribute one-half the expense of maintaining a
common driveway between Blackacre and Whiteacre. A then transfers
Blackacre to C “for life,” retaining a reversionary interest for herself. B
cannot enforce the covenant against C because C does not possess the
entire interest (fee simple absolute) held by her predecessor in interest,
A, at the time A made the promise.

Multistate 08 real property Q.indd 85 9/13/2016 4:33:24 PM

 86. REAL PROPERTY

e. Touch and Concern

The covenant must be of the type that “touches and concerns” the land. The phrase
“touch and concern the land” is not susceptible to easy definition. It generally means
that the effect of the covenant is to make the land itself more useful or valuable to
the benefited party. The covenant must affect the legal relationship of the parties as
landowners and not merely as members of the community at large. Therefore, as a
general matter, for the burden of a covenant to run, performance of the burden must
diminish the landowner’s rights, privileges, and powers in connection with her enjoy-
ment of the land.

1) Negative Covenants
For the burden of a negative covenant to touch and concern the land, the covenant
must restrict the holder of the servient estate in his use of that parcel of land.
Examples: 1) A, who owned Blackacre and Whiteacre, covenanted with B, the
grantee of Whiteacre, that she would not erect a building of over
two stories on Blackacre. The burden of the covenant touches and
concerns Blackacre because it diminishes A’s rights in connection
with her enjoyment of Blackacre.
2) A, who owned Blackacre and Whiteacre, covenanted with B,
the grantee of Whiteacre, that she would never operate a shoe store
within a radius of one mile of Whiteacre. The covenant does not
touch and concern Blackacre because its performance is uncon-
nected to the enjoyment of Blackacre.
2) Affirmative Covenants
For the burden of an affirmative covenant to touch and concern the land, the
covenant must require the holder of the servient estate to do something, increasing
her obligations in connection with enjoyment of the land.
Examples: 1) A, who owned Blackacre and Whiteacre, covenanted with B,
the grantee of Whiteacre, to keep the building on Blackacre in
good repair. The covenant touches and concerns Blackacre because
it increases A’s obligations in connection with her enjoyment of
Blackacre.
2) A owned Blackacre and Whiteacre, which were several miles
apart. A covenanted with B, the grantee of Whiteacre, to keep the
building on Whiteacre in good repair. The covenant does not touch
and concern Blackacre because its performance is unconnected to
the use and enjoyment of Blackacre.
3) A, the grantee of a parcel in a residential subdivision, covenants
to pay an annual fee to a homeowners’ association for the mainte-
nance of common ways, parks, and other facilities in the subdivi-
sion. At one time, it was thought that such covenants, because
physically unconnected to the land, did not touch and concern. The
prevailing view today is that the burden will run because the fees
are a charge on the land, increasing A’s obligations in connection
with the use and enjoyment of it. (See 4.a., infra.)

Multistate 08 real property Q.indd 86 9/13/2016 4:33:24 PM

 REAL PROPERTY 87.

2. Requirements for Benefit to Run

If all requirements for the benefit to run are met, the successor in interest to the promisee
will be allowed to enjoy the benefit (i.e., enforce the covenant).

a. Intent
The covenanting parties must have intended that the successors in interest to the
covenantee be able to enforce the covenant. Surrounding evidence of intent, as well as
language in the instrument of conveyance, is admissible.

b. Vertical Privity
The benefit of a covenant runs to the assignees of the original estate or of any lesser
estate (e.g., a life estate). The owner of any succeeding possessory estate can enforce
the benefit at law. In the majority of states today, horizontal privity is not required for
the benefit to run. As a consequence, if horizontal privity is missing, the benefit may
run to the successor in interest to the covenantee even though the burden is not enforce-
able against the successor in interest of the covenantor.
Example: A, who owns Blackacre, covenants with her neighbor, B, who owns
Whiteacre, that “A, her successors, and assigns will keep the building on
Blackacre in good repair.” Horizontal privity is missing. B then conveys
Whiteacre, the dominant estate, to C. C can enforce the benefit of the
affirmative covenant against A because horizontal privity is not needed
for the benefit to run. If, however, A conveys Blackacre to D, neither
B nor C could enforce the covenant against D, for horizontal privity is
required for the burden to run.

c. Touch and Concern

For the benefit of a covenant to touch and concern the land, the promised performance
must benefit the covenantee and her successors in their use and enjoyment of the
benefited land.
Examples: 1) A, who owns Blackacre and Whiteacre, covenants with B, the grantee
of Whiteacre, not to erect a building over two stories on Blackacre. The
benefit of the covenant touches and concerns Whiteacre because, by
securing B’s view, it increases his enjoyment of Whiteacre.

2) A, who owns Blackacre and Whiteacre, covenants with B, the grantee

of Whiteacre, to keep the building on Blackacre freshly painted and in
good repair. The benefit of the covenant touches and concerns Whiteacre
because, by assuring the view of an attractive house, it increases the
value of Whiteacre.

Compare: A, who owns Blackacre, covenants with B, a supermarket operator

owning no adjacent land, to erect and maintain on Blackacre a billboard
advertising B’s supermarkets. The benefit of the covenant does not
touch and concern because it is not connected to and does not operate to
increase B’s enjoyment of any piece of land.

3. Modern Status of Running of Burden and Benefit

Multistate 08 real property Q.indd 87 9/13/2016 4:33:24 PM

 88. REAL PROPERTY

a. Horizontal and Vertical Privity

The Restatement of Property provides that horizontal privity is not required for running
of the burden, and further discards the requirement of vertical privity for running of
both the burden and the benefit. Instead, the Restatement draws a distinction between
affirmative and negative covenants. Negative covenants are treated like easements,
which run to successors because they are interests in land. The burdens and benefits of
affirmative covenants run to persons who succeed to an estate of the same duration as
owned by the original parties, including in most cases an adverse possessor. But affir-
mative covenants do not run to persons who hold lesser estates than those held by the
original parties to the covenant. Special rules are set forth for when affirmative burdens
run to lessees and life tenants, and when they can enforce the benefits. [Restatement
(Third) of Property: Servitudes §§5.2 - 5.5]

b. Touch and Concern

The Restatement of Property also supersedes the touch and concern requirement by
providing that real covenants are presumed valid unless they are illegal, unconstitu-
tional, or violate public policy. [Restatement (Third) of Property: Servitudes §§3.1, 3.2]

4. Specific Situations Involving Real Covenants

a. Promises to Pay Money

The majority rule is that if the money is to be used in a way connected with the land,
the burden will run with the land. The most common example is a covenant to pay a
homeowners’ association an annual fee for maintenance of common ways, parks, etc., in
a subdivision.

b. Covenants Not to Compete

Covenants not to compete have created several problems. Clearly, the burden of the
covenant—restricting the use to which the land may be put—“touches and concerns”
the land. However, the benefited land, while “commercially enhanced,” is not affected
in its physical use. Thus, some courts have refused to permit the benefit of such
covenants to run with the land.

c. Racially Restrictive Covenants

If a covenant purports to prohibit an owner from transferring land to persons of a
given race, no court (state or federal) is permitted to enforce the covenant. To do so
would involve the court in a violation of the Equal Protection Clause of the Fourteenth
Amendment (see I.F.2.b.2), supra).

5. Remedies—Damages
A breach of a real covenant generally is remedied by an award of money damages. If
equitable relief, such as an injunction, is sought, the promise may be enforced as an equitable
servitude (see E., infra). Note that a real covenant gives rise to personal liability only. The
damages are collectible out of the defendant’s general assets.

6. Termination
As with all other nonpossessory interests in land, a real covenant may be terminated by: (i)
the holder of the benefit executing a release in writing; (ii) merger (fee simple title to both

Multistate 08 real property Q.indd 88 9/13/2016 4:33:24 PM

 REAL PROPERTY 89.

the benefited and burdened land comes into the hands of a single owner); and (iii) condem-
nation of the burdened property. (See B.4.b., c., h., supra.)

E. EQUITABLE SERVITUDES
If a plaintiff wants an injunction or specific performance, he may show that the covenant quali-
fies as an equitable servitude. An equitable servitude is a covenant that, regardless of whether it
runs with the land at law, equity will enforce against the assignees of the burdened land who have
notice of the covenant. The usual remedy is an injunction against violation of the covenant.

1. Creation
Generally, equitable servitudes are created by covenants contained in a writing that satis-
fies the Statute of Frauds. As with real covenants, acceptance of a deed signed only by the
grantor is sufficient to bind the grantee as promisor. There is one exception to the writing
requirement: Negative equitable servitudes may be implied from a common scheme for
development of a residential subdivision.

a. Servitudes Implied from Common Scheme

When a developer subdivides land into several parcels and some of the deeds contain
negative covenants but some do not, negative covenants or equitable servitudes binding
all the parcels in the subdivision may be implied under the doctrine of “reciprocal
negative servitudes.” The doctrine applies only to negative covenants and equitable
servitudes and not to affirmative covenants. Two requirements must be met before
reciprocal negative covenants and servitudes will be implied: (i) a common scheme for
development, and (ii) notice of the covenants.
Example: A subdivides her parcel into lots 1 through 50. She conveys lots 1
through 45 by deeds containing express covenants by the respective
grantees that they will use their lots only for residential purposes. A
orally assures the 45 grantees that all 50 lots will be used for residen-
tial purposes. Some time later, after the 45 lots have been developed as
residences, A conveys lot 46 to an oil company, which plans to operate
a service station on it. The deed to lot 46 contains no express residential
restriction. A court will nonetheless imply a negative covenant, prohib-
iting use for other than residential purposes on lot 46 because both
requirements have been met for an implied reciprocal negative servitude.
First, there was a common scheme, here evidenced by A’s statements to
the first 45 buyers. Second, the oil company was on inquiry notice of
the negative covenant because of the uniform residential character of the
other lots in the subdivision development.

1) Common Scheme
Reciprocal negative covenants will be implied only if at the time that sales of
parcels in the subdivision began, the developer had a plan that all parcels in the
subdivision be developed within the terms of the negative covenant. If the scheme
arises after some lots are sold, it cannot impose burdens on the lots previously sold
without the express covenants. The developer’s common scheme may be evidenced
by a recorded plat, by a general pattern of prior restrictions, or by oral represen-
tations, typically in the form of statements to early buyers that all parcels in the
development will be restricted by the same covenants that appear in their deeds.

Multistate 08 real property Q.indd 89 9/13/2016 4:33:24 PM

 90. REAL PROPERTY

On the basis of this scheme, it is inferred that purchasers bought their lots relying
on the fact that they would be able to enforce subsequently created equitable servi-
tudes similar to the restrictions imposed in their deeds.

2) Notice
To be bound by the terms of a covenant that does not appear in his deed, a
grantee must, at the time he acquired his parcel, have had notice of the covenants
contained in the deeds of other buyers in the subdivision. The requisite notice may
be acquired through actual notice (direct knowledge of the covenants in the prior
deeds); inquiry notice (the neighborhood appears to conform to common restric-
tions); or record notice (if the prior deeds are in the grantee’s chain of title he will,
under the recording acts, have constructive notice of their contents).

2. Enforcement
For successors of the original promisee and promisor to enforce an equitable servitude,
certain requirements must be met.

a. Requirements for Burden to Run

1) Intent
The covenanting parties must have intended that the servitude be enforceable
by and against assignees. No technical words are required to express this intent.
In fact, the intent may be ascertained from the purpose of the covenant and the
surrounding circumstances.

2) Notice
A subsequent purchaser of land burdened by a covenant is not bound by it in equity
unless she had actual or constructive notice of it when she acquired the land. This
rule is part of the law of equitable servitudes, and exists apart from the recording
acts.

3) Touch and Concern

This is the same requirement as applies to real covenants (see D.1.e., supra).

b. Requirements for Benefit to Run

The benefit of the equitable servitude will run with the land (and thus to successors
in interest of the original parties) if the original parties so intended and the servitude
touches and concerns the benefited property.
c. Privity Not Required
The majority of courts enforce the servitude not as an in personam right against the
owner of the servient tenement, but as an equitable property interest in the land itself.
There is, therefore, no need for privity of estate.
Examples: 1) A acquires title to Blackacre by adverse possession. Even though he
is not in privity of estate with the original owner, he is subject to the
equitable servitude because the servitude is an interest in the land.

2) A and B are neighboring landowners, neither having any rights in

the other’s land. A promises B, “for herself, her heirs, successors, and

Multistate 08 real property Q.indd 90 9/13/2016 4:33:24 PM

 REAL PROPERTY 91.

assigns,” that A’s parcel “will never be used for other than residential
purposes.” B records the agreement. A sells Blackacre to C. The burden
created by this promise would not run at law as a negative covenant
because horizontal privity is missing. However, under an equitable servi-
tude theory, the burden will run, and an injunction will issue against
other than residential uses.
3) Same as above, but A transfers only a life estate to C. Again, the
burden would not run at law because of the absence of vertical privity.
The burden would, however, be enforceable as an equitable servitude.
d. Implied Beneficiaries of Covenants—General Scheme
If a covenant in a subdivision deed is silent as to who holds its benefit, any neighbor in
the subdivision will be entitled to enforce the covenant if a general scheme or plan is
found to have existed at the time he purchased his lot.
Example: A subdivides her parcel into Lots 1 through 10. She conveys Lot 1 to
B, who covenants to use the lot for residential purposes only. A then
conveys Lot 2 to C, who makes a similar covenant. Thereafter, A
conveys the balance of the lots to other grantees by deeds containing the
residential restriction. Can C enforce the restrictions against B? Can B
enforce against C?
Subsequent purchaser versus prior purchaser (C v. B): In most juris-
dictions, C (the later grantee) can enforce the restriction against B if the
court finds a common plan of residential restrictions at the very outset of
A’s sales. (Evidence would be the similar covenant restrictions in all the
deeds.) The rationale is that B’s promise was made for the benefit of the
land at that time retained by A, the grantor. Such land, Lots 2 through
10, became the dominant estate. When A thereafter conveyed Lot 2 to C,
the benefit of B’s promise passed to C with the land.
Prior purchaser versus subsequent purchaser (B v. C): In most juris-
dictions, B could likewise enforce the restriction against C, even though
A made no covenant in her deed to B that A’s retained land would be
subject to the residential restrictions.
There are two theories on which a prior purchaser can enforce a restric-
tion in a subsequent deed from a common grantor. One theory is that B is
a third-party beneficiary of C’s promise to A. The other theory is that an
implied reciprocal servitude attached to A’s retained land at the moment
she deeded Lot 1 to B. Under this theory, B is enforcing an implied servi-
tude on Lot 2 and not the express covenant later made by C.
3. Equitable Defenses to Enforcement
A court in equity is not bound to enforce a servitude if it cannot in good conscience do so.
a. Unclean Hands
A court will not enforce a servitude if the person seeking enforcement is violating a
similar restriction on his own land. This defense will apply as long as the plaintiff’s
violation is of the same general nature.

Multistate 08 real property Q.indd 91 9/13/2016 4:33:24 PM

 92. REAL PROPERTY

b. Acquiescence
If a benefited party acquiesces in a violation of the servitude by one burdened party,
he may be deemed to have abandoned the servitude as to other burdened parties.
(Equitable servitudes, like easements, may be abandoned.) Note that this defense will
not apply if the prior violation occurred in a location so distant from the complainant
that it did not really affect his property.

c. Estoppel
If the benefited party has acted in such a way that a reasonable person would believe
that the covenant was abandoned or waived, and the burdened party acts in reliance
thereon, the benefited party will be estopped to enforce the covenant. Similarly, if the
benefited party fails to bring suit against a violator within a reasonable time, the action
may be barred by laches.

d. Changed Neighborhood Conditions

Changed neighborhood conditions may also operate to end an equitable servitude. If the
neighborhood has changed significantly since the time the servitude was created, with
the result that it would be inequitable to enforce the restriction, injunctive relief will be
withheld. (Many courts, however, will allow the holder of the benefit to bring an action
at law for damages.)
Example: A, the owner of Blackacre and Whiteacre, adjacent parcels in an
undeveloped area, sells Blackacre to B, extracting a promise that
Blackacre “will always be used only for residential purposes.” Fifteen
years later, the neighborhood has developed as a commercial and indus-
trial center. If B or her successors in interest to Blackacre now wish to
use the parcel for a store, an injunction will probably not issue. A may,
however, recover from B or her successors any damages that she may
suffer from termination of the residential restriction.

1) Zoning
Zoning plays an important role in determining whether changed conditions will
be allowed as a defense to enforcement of an equitable servitude. Zoning that is
inconsistent with the private restriction imposed by the equitable servitude will
not of itself bar the injunction, but it will provide good evidence that neighborhood
conditions have changed sufficiently to make the injunction unjust. Thus, in the
example above, the position of B or her successors would be fortified by a showing
that the area in which Blackacre is situated is presently zoned for commercial uses.

2) Concept of the “Entering Wedge”

The concept of the “entering wedge” also plays an important role in changed
condition cases. If the equitable servitude is part of a general plan of restric-
tions in a subdivision, and if the parcel in question is located somewhere at the
outer edge of the subdivision, changed conditions outside of the subdivision will
not bar the injunction if it is shown that lifting the restriction on one parcel will
produce changed conditions for surrounding parcels, requiring that their restric-
tions also be lifted, and so on (the “domino effect”). Thus, in the example above,
if removing the restriction and allowing commercial development of Blackacre
would produce changed conditions for the neighboring, similarly restricted

Multistate 08 real property Q.indd 92 9/13/2016 4:33:24 PM

 REAL PROPERTY 93.

parcel—Whiteacre—with the consequence that its servitude could not be equitably

enforced, the injunction against commercial use on Blackacre will probably be
allowed, notwithstanding the changed conditions.

4. Termination
Like other nonpossessory interests in land, an equitable servitude may be terminated by a
written release from the benefit holder(s), merger of the benefited and burdened estates, or
condemnation of the burdened property. (See B.4.b., c., h., supra.)

F. RELATIONSHIP OF COVENANTS TO ZONING ORDINANCES

Both restrictive covenants and zoning ordinances (see IX.C., infra) may affect legally permis-
sible uses of land. Both must be complied with, and neither provides any excuse for violating the
other. For example, if the zoning permits both residential and commercial use but an applicable
covenant allows only residential use, the covenant will control.

These two forms of land use restrictions are enforced differently. As discussed above, covenants
(if they meet the relevant requirements) can be enforced by nearby property owners at law or
in equity. Zoning, on the other hand, is not subject to enforcement by private suit, but can be
enforced only by local governmental officials.

G. PARTY WALLS AND COMMON DRIVEWAYS

Often, a single wall or driveway will be built partly on the property of each of two adjoining
landowners. Absent an agreement between the owners to the contrary, courts will treat the
wall as belonging to each owner to the extent that it rests upon her land. Courts will also imply
mutual cross-easements of support, with the result that each party has the right to use the wall or
driveway, and neither party can unilaterally destroy it.

1. Creation
While a written agreement is required by the Statute of Frauds for the express creation of
a party wall or common driveway agreement, an “irrevocable license” can arise if there has
been detrimental reliance on a parol agreement. Party walls and common driveways can also
result from implication or prescription.

2. Running of Covenants
If party wall or common driveway owners agree to be mutually responsible for maintaining
the wall or driveway, the burdens and benefits of these covenants will run to succes-
sive owners of each parcel. The cross-easements for support satisfy the requirement of
horizontal privity because they are mutual interests in the same property. Each promise
touches and concerns the adjoining parcels, and the grantee will be charged with notice of
the covenant because of the visibility of the common wall or driveway.

V. ADVERSE POSSESSION

A. IN GENERAL
Title to real property may be acquired by adverse possession. (Easements may also be acquired
by prescription.) Gaining title by adverse possession results from the operation of the statute of
limitations for ejectment, or recovery of real property. If an owner does not, within the statutory

Multistate 08 real property Q.indd 93 9/13/2016 4:33:24 PM

 94. REAL PROPERTY

period, take legal action to eject a possessor who claims adversely to the owner, the owner is
thereafter barred from bringing suit for ejectment. Moreover, title to the property vests in the
possessor.

B. REQUIREMENTS
To establish title by adverse possession, the possessor must show (i) an actual entry giving
exclusive possession that is (ii) open and notorious, (iii) adverse (hostile), and (iv) continuous
throughout the statutory period.

1. Running of Statute
The statute of limitations begins to run when the claimant goes adversely into possession of
the true owner’s land (i.e., the point at which the true owner could first bring suit). The filing
of suit by the true owner is not sufficient to stop the period from running; the suit must be
pursued to judgment. However, if the true owner files suit before the statutory period (e.g.,
20 years) runs out and the judgment is rendered after the statutory period, the judgment will
relate back to the time that the complaint was filed.

2. Actual and Exclusive Possession

a. Actual Possession Gives Notice

The requirement of actual possession is designed to give the true owner notice that a
trespass is occurring. It is also designed to give her notice of the extent of the adverse
possessor’s claim. As a general rule, the adverse possessor will gain title only to the
land that she actually occupies.

1) Constructive Possession of Part

Actual possession of a portion of a unitary tract of land is sufficient adverse
possession as to give title to the whole of the tract of land after the statutory
period, as long as there is a reasonable proportion between the portion actually
possessed and the whole of the unitary tract, and the possessor has color of title
to the whole tract. Color of title is a document that purports to give title, but for
reasons not apparent from its face does not. Usually, the proportion will be held
reasonable if possession of the portion was sufficient to put the owner or commu-
nity on notice of the fact of possession.

b. Exclusive Possession—No Sharing with Owner

“Exclusive” merely means that the possessor is not sharing with the true owner or
the public at large. This requirement does not prevent two or more individuals from
working together to obtain title by adverse possession. If they do so, they will obtain
the title as tenants in common.
Example: A and B are next door neighbors. They decide to plant a vegetable
garden on the vacant lot behind both of their homes. A and B share
expenses and profits from the garden. If all other elements for adverse
possession are present, at the end of the statutory period, A and B will
own the lot as tenants in common.

3. Open and Notorious Possession

Possession is open and notorious when it is the kind of use the usual owner would make of

Multistate 08 real property Q.indd 94 9/13/2016 4:33:24 PM

 REAL PROPERTY 95.

the land. The adverse possessor’s occupation must be sufficiently apparent to put the true
owner on notice that a trespass is occurring.
Examples: 1) Water Company runs a pipe under Owner’s land, and there is no indication
of the pipe’s existence from the surface of the land. Water Company cannot
gain title by adverse possession because there is nothing to put Owner on
notice of the trespass.

2) A’s use of B’s farmland for an occasional family picnic will not satisfy the
open and notorious requirement because picnicking is not necessarily an act
consistent with the ownership of farmland.

4. Hostile
The possessor’s occupation of the property must be hostile (adverse). This means merely
that the possessor does not have the true owner’s permission to be on the land. It does not
mean anger or animosity. The state of mind of the adverse possessor is irrelevant. By the
large majority view, it does not matter whether the possessor believes she is on her own land,
knows she is trespassing on someone else’s land, or has no idea who owns the land.

a. If Possession Starts Permissively—Must Communicate Hostility

If the possessor enters with permission of the true owner (e.g., under a lease or license),
the possession does not become adverse until the possessor makes clear to the true
owner the fact that she is claiming “hostilely.” This can be done by explicit notification,
by refusing to permit the true owner to come onto the land, or by other acts inconsistent
with the original permission.

b. Co-Tenants—Ouster Required
Possession by one co-tenant is not ordinarily adverse to her co-tenants because each
co-tenant has a right to the possession of all the property. Thus, sole possession or use
by one co-tenant is not adverse, unless there is a clear repudiation of the co-tenancy;
e.g., one co-tenant ousts the others or makes an explicit declaration that he is claiming
exclusive dominion over the property.

c. If Grantor Stays in Possession—Permission Presumed

If a grantor remains in possession of land after her conveyance, she is presumed to be
there with the permission of her grantee. Only the grantor’s open repudiation of the
conveyance will start the limitation period running against the grantee. Likewise, if the
tenant remains in possession after the expiration of her lease, she is presumed to have
the permission of the landlord.

d. Compare—Boundary Line Agreements

There is a separate but related doctrine that may be helpful here. It operates where a
boundary line (usually a fence) is fixed by agreement of the adjoining landowners,
but later turns out not to be the “true” line. Most courts will fix ownership as per the
agreed line, provided it is shown that: (i) there was original uncertainty as to the true
line; (ii) the agreed line was established (i.e., agreed upon); and (iii) there has been
lengthy acquiescence in the agreed line by the adjoining owners and/or their succes-
sors.

Multistate 08 real property Q.indd 95 9/13/2016 4:33:24 PM

 96. REAL PROPERTY

1) Establishment Requirement
The establishment requirement can be implied by acquiescence. A past dispute is
not necessary to show uncertainty, although it can be good evidence of it. But a
showing of original uncertainty is required; otherwise, in a court’s view, a parol
transfer of land would result.

5. Continuous Possession
The adverse claimant’s possession must be continuous throughout the statutory period.
Continuous possession requires only the degree of occupancy and use that the average owner
would make of the property.

a. Intermittent Periods of Occupancy Not Sufficient

Intermittent periods of occupancy generally are not sufficient. However, constant use by
the claimant is not required so long as the possession is of the type that the usual owner
would make of the property. For example, the fact that the adverse possessor is using
the land for the intermittent grazing of cattle will probably not defeat continuity if the
land is normally used in this manner.

b. Tacking Permitted
There need not be continuous possession by the same person. Ordinarily, an adverse
possessor can take advantage of the periods of adverse possession by her predecessor.
Separate periods of adverse possession may be “tacked” together to make up the full
statutory period with the result that the final adverse possessor gets title, provided there
is privity between the successive adverse holders.

1) “Privity”
Privity is satisfied if the subsequent possessor takes by descent, by devise, or
by deed purporting to convey title. Tacking is not permitted where one adverse
claimant ousts a preceding adverse claimant or where one adverse claimant
abandons and a new adverse claimant then goes into possession.

2) Formalities on Transfer
Even an oral transfer of possession is sufficient to satisfy the privity requirement.
Example: A received a deed describing Blackacre, but by mistake built a
house on an adjacent parcel, Whiteacre. A, after pointing the house
out to B and orally agreeing to sell the house and land to her,
conveyed to B, by a deed copied from her own deed, describing the
property as Blackacre. The true owner of Whiteacre argues that
there was no privity between A and B because the deed made no
reference to Whiteacre, the land actually possessed. Nonetheless,
the agreed oral transfer of actual possession is sufficient to permit
tacking.

6. Payment of Property Taxes Generally Not Required

Only a minority of states require the adverse possessor to pay taxes on the property.
However, in all states, payment of property taxes is good evidence of a claim of right.

C. DISABILITY

Multistate 08 real property Q.indd 96 9/13/2016 4:33:24 PM

 REAL PROPERTY 97.

1. Effect of Disabilities—Statute Does Not Begin to Run

The statute of limitations does not begin to run for adverse possession (or easements by
prescription) if the true owner was under some disability to sue when the cause of action
first accrued (i.e., the inception of the adverse possession). Typical disabilities are: minority,
imprisonment, and insanity.
Example: O, the true owner, is five years old when A goes into adverse possession. The
statute will not begin to run until O reaches the age of majority.

Compare: O, the true owner, is declared insane six months after A begins using a
pathway adversely. The statute has begun to run because O’s disability arose
after A’s adverse use began.

2. No Tacking of Disabilities
Only a disability of the owner existing at the time the cause of action arose is considered.
Thus, disabilities of successors in interest or subsequent additional disabilities of the owner
have no effect on the statute.
Examples: 1) O is a minor at the time A goes into adverse possession of O’s land. One
year before O reaches the age of majority, O is declared insane (a subsequent
disability). The statute begins to run from the date O reaches the age of
majority, whether she is then sane or insane.

2) O, the true owner, is insane when A begins an adverse use. Ten years later,
O dies intestate and the land goes to her heir, H, who is then 10 years old. The
statute of limitations begins to run upon O’s death despite H’s minority. H’s
minority is a “supervening” disability and cannot be tacked to O’s.

3. Maximum Tolling Periods

In some states, the maximum tolling period is 20 years; thus, the maximum period of the
statute of limitations would be the regular statute of limitations period plus the maximum
20-year tolling period.

D. ADVERSE POSSESSION AND FUTURE INTERESTS

The statute of limitations does not run against the holder of a future interest (e.g., a remainder)
until that interest becomes possessory. Until the prior present estate terminates, the holder of
the future interest has no right to possession, and thus no cause of action against a wrongful
possessor.
Examples: 1) O devises Blackacre to A for life and then to B. Thereafter, X goes into posses-
sion and possesses adversely for the statutory period. X has acquired A’s life estate
by adverse possession, but has not acquired any interests against B. Of course, if
following A’s death, X or her successor stays in possession for the statutory period,
X will have acquired B’s rights also.

2) X enters into adverse possession of Blackacre. Four years later, O devises

Blackacre to A for life and then to B. X continues her adverse possession for seven
more years. The statute of limitations is 10 years. In this case, X has acquired the
whole title by adverse possession. An adverse possession begun against the owner
of the fee simple absolute cannot be interrupted by a subsequent division of the
estate.

Multistate 08 real property Q.indd 97 9/13/2016 4:33:24 PM

 98. REAL PROPERTY

1. Possibility of Reverter—Statute of Limitations Runs on Happening of Event

In a conveyance “to A for so long as” some event occurs or fails to occur, on the happening
of the event the fee simple determinable automatically comes to an end and the grantor (or
his successors) is entitled to present possession. At that point, the grantor has a cause of
action to recover possession of the property. If he does not bring the action within the period
specified by the applicable statute of limitations (and if A or her successors have the requisite
open, notorious, continuous, and adverse possession), his action will be barred.

2. Right of Entry—Happening of Event Does Not Trigger Statute of Limitations

In the case of a right of entry, on the happening of the stated event the grantor (or his succes-
sors) has only a right to reenter the property, a power to terminate the grantee’s estate.
Until the grantor asserts his right of entry, no cause of action arises because the grantee’s
continued possession of the land is proper: her fee simple estate has not been terminated.
Thus (in most states), the statute of limitations does not operate to bar assertion of a right of
entry even though the condition triggering the right of entry has been breached.

a. Grantor Must Act Within Reasonable Time to Avoid Laches

However, to avoid the title problems that might otherwise be presented, most courts
hold that the holder of the right of entry must bring his action within a reasonable time
after the event occurs. If he fails to do so, his action is barred by laches. As for what
constitutes a reasonable time, many courts look to the statute of limitations governing
actions for possession of real property.

E. EFFECT OF COVENANTS IN TRUE OWNER’S DEED

The exact nature of the title obtained depends on the possessor’s activities on the land. For
example, assume there is a recorded restrictive covenant limiting use of the land to a single-family
residence. If the possessor uses the land in violation of that covenant for the limitations period,
she takes title free of the covenant. But if she complies with the covenant, she takes title subject to
it, and it remains enforceable against her (at least in an equitable action).

F. LAND THAT CANNOT BE ADVERSELY POSSESSED

The statute of limitations does not run against government-owned land (federal, state, or local) or
land registered under a Torrens system.

VI. CONVEYANCING

A. LAND SALE CONTRACTS

Most transfers of land are preceded by contracts of sale. These normally contemplate escrows
(delivery of deed to a third person to be held until purchase price paid) before closing (exchange
of purchase price and deed).

1. Statute of Frauds Applicable

To be enforceable, a land contract must be memorialized in a writing that is signed by the
party to be charged. The writing need not be a formal contract; a memorandum suffices—
e.g., escrow instructions or e-mails can be contracts of sale. The Statute of Frauds requires
that the writing contain all “essential terms” of the contract. These are: (i) a description of

Multistate 08 real property Q.indd 98 9/13/2016 4:33:24 PM

 REAL PROPERTY 99.

the property (see B.3., infra), (ii) identification of the parties to the contract, and (iii) the
price and manner of payment (if agreed upon). Incidental matters (e.g., prorating of taxes,
furnishing of deeds, title insurance, etc.) can be determined by custom; they need not appear
in the writing nor even have been agreed upon.

a. Doctrine of Part Performance

A court may give specific performance of a contract (though not damages) despite the
absence of a writing if additional facts are present.

1) Theories to Support the Doctrine

a) Evidentiary Theory
Courts state that if acts done by a party can be explained only by reference
to an agreement, these acts unequivocally establish the existence of an oral
contract.

b) Hardship or Estoppel Theory

If acts done by a party in reliance on the contract would result in hardship
to such an extent that it would be a fraud on that party were the contract not
specifically enforced, the other party will be estopped from asserting the
Statute of Frauds as a defense.

2) Acts of Part Performance

In most states, two of the following are required:

(i) Possession of the land by the purchaser;

(ii) Making of substantial improvements; and/or

(iii) Payment of all or part of the purchase price by the purchaser.

Some state courts will go beyond this list and will accept as “part performance”
other types of detrimental reliance by the purchaser, such as performance of
services or sale of other land.

3) Can Seller Obtain Specific Performance Based on Buyer’s Acts?

a) Evidentiary Theory
Under the evidentiary theory, it is immaterial who performed the acts consti-
tuting the part performance. Because they refer unequivocally to a contract,
the seller may obtain specific performance based on the buyer’s acts.

b) Hardship or Estoppel Theory

Under the hardship or estoppel theory, however, the plaintiff must be the one
whose action would result in hardship if the Statute of Frauds were invoked.
Consequently, the seller normally cannot rely on the buyer’s acts. Even so,
make sure that you ascertain whether the seller has done anything that would
cause him a hardship if the Statute of Frauds were successfully asserted by
the buyer.

Multistate 08 real property Q.indd 99 9/13/2016 4:33:24 PM

 100. REAL PROPERTY

2. Doctrine of Equitable Conversion

Under the doctrine of equitable conversion, once a contract is signed and each party is
entitled to specific performance, equity regards the purchaser as the owner of the real
property. The seller’s interest, which consists of the right to the proceeds of sale, is consid-
ered to be personal property. The bare legal title that remains in the seller is considered to be
held in trust for the purchaser as security for the debt owed the seller. But note that posses-
sion follows the legal title; so even though the buyer is regarded as owning the property, the
seller is entitled to possession until the closing.

a. Risk of Loss
If the property is destroyed (without fault of either party) before the date set for closing,
the majority rule is that, because the buyer is deemed the owner of the property, the risk
of loss is on the buyer. Thus, the buyer must pay the contract price despite a loss due to
fire or other casualty, unless the contract provides otherwise. Some states, however, have
adopted the Uniform Vendor and Purchaser Risk Act, which places the risk on the seller
unless the buyer has either legal title or possession of the property at the time of the loss.

1) Casualty Insurance
Suppose the buyer has the risk of loss, as is true under the majority view, but
the seller has fire or casualty insurance that covers the loss. In the event of loss,
allowing the seller to recover the full purchase price on the contract and to collect
the insurance proceeds would be unjust enrichment. Hence, the courts require
the seller to give the buyer credit, against the purchase price, in the amount of the
insurance proceeds.

b. Passage of Title on Death

The doctrine of equitable conversion also affects the passage of title when a party to a
contract of sale dies before the contract has been completed. In general, it holds that a
deceased seller’s interest passes as personal property and a deceased buyer’s interest as
real property.

1) Death of Seller
If the seller dies, the “bare” legal title passes to the takers of his real property,
but they must give up the title to the buyer when the contract closes. When the
purchase price is paid, the money passes as personal property to those who take
the seller’s personal property. Note that if the property is specifically devised, the
specific devisee may take the proceeds of the sale. (See F.1.b., infra.)

2) Death of Buyer
If the buyer dies, the takers of his real property can demand a conveyance of the
land at the closing of the contract. Moreover, under the traditional common law
rule, they are entitled to exoneration out of the personal property estate (see F.2.,
infra). Thus, the takers of his personal property will have to pay the purchase price
out of their share of the buyer’s estate. However, a majority of states have enacted
statutes abolishing the doctrine of exoneration, and in those states the takers of the
real property will take it subject to the vendor’s lien for the purchase price. In these
states, as a practical matter, the takers of the real property will have to pay the
price unless the testator specifically provided to the contrary.

Multistate 08 real property Q.indd 100 9/13/2016 4:33:24 PM

 REAL PROPERTY 101.

3. Marketable Title
There is an implied covenant in every land sale contract that at closing the seller will provide
the buyer with a title that is “marketable.”

a. “Marketability” Defined—Title Reasonably Free from Doubt

Marketable title is title reasonably free from doubt, i.e., title that a reasonably prudent
buyer would be willing to accept. It need not be a “perfect” title, but the title must be
free from questions that might present an unreasonable risk of litigation. Generally, this
means an unencumbered fee simple with good record title.

1) Defects in Record Chain of Title

Title may be unmarketable because of a defect in the chain of title. Examples
include: a significant variation in the description of the land from one deed to the
next, a deed in the chain that was defectively executed and thus fails to meet the
requirements for recordation, and evidence that a prior grantor lacked capacity
to convey the property. Many courts hold that an ancient lien or mortgage on the
record will not render title unmarketable if the seller has proof of its satisfaction or
the statute of limitations on the claim would have run under any possible circum-
stance, including tolling for disabilities.

a) Adverse Possession
Historically, a title acquired by adverse possession was not considered
marketable because the purchaser might be later forced to defend in court the
facts that gave rise to the adverse possession against the record owner. On
the bar exam, title acquired by adverse possession is unmarketable, despite
the fact that most modern cases are contra. Most of the modern cases hold
adverse possession titles to be marketable if: (i) the possession has been for a
very lengthy period; (ii) the risk that the record owner will sue appears to be
very remote; and (iii) the probability of the record owner’s success in such a
suit appears to be minimal. Because the bar examiners have yet to recognize
this line of cases, the modern view should be considered only as a fallback
position on the bar exam.

b) Future Interest Held by Unborn or Unascertained Parties

Even though most states consider all types of future interests to be transfer-
able, it is often impossible for the owners of the present and future interests,
acting together, to transfer a marketable fee simple absolute title. This is
because the future interests are often held by persons who are unborn or
unascertainable.
Example: “To A for life, and upon A’s death to A’s eldest surviving
daughter.” Assume that at the time of this conveyance A has
one daughter, B. State of title: A has a life estate, and B has a
contingent remainder. A and B together can transfer the land
to a purchaser, such as C, but the title is not marketable. It may
turn out that, upon A’s death, B will have predeceased A, and
some other daughter (perhaps not even yet born when A and
B transferred to C) will be “A’s eldest surviving daughter.”
Because that daughter did not join in the conveyance to C, she

Multistate 08 real property Q.indd 101 9/13/2016 4:33:24 PM

 102. REAL PROPERTY

is not bound by it, and she owns the land. On the other hand,
if B does turn out to be A’s eldest surviving daughter (which
cannot be determined until A’s death), then C’s title will
become a marketable fee simple at that time.
While most courts will appoint a guardian ad litem to represent unborn or
unascertained persons in litigation, the majority will not appoint such a
guardian for purposes of conveying the land.
2) Encumbrances
Generally, mortgages, liens, easements, and covenants render title unmarketable
unless the buyer waives them.

a) Mortgages and Liens

A seller has the right to satisfy a mortgage or lien at the closing with the
proceeds from the sale. Therefore, as long as the purchase price is sufficient
and this is accomplished simultaneously with the transfer of title (usually
through the use of escrows), the buyer cannot claim that the title is unmarket-
able; the closing will result in a marketable title.

b) Easements
An easement that reduces the value of the property (e.g., an easement of way
for the benefit of a neighbor) renders title unmarketable. The majority of
courts, however, have held that a beneficial easement (e.g., utility easement
to service property) or one that was visible or known to the buyer does not
constitute an encumbrance. Some courts go so far as to hold that the buyer is
deemed to have agreed to take subject to any easement that was notorious or
known to the buyer when she entered into the contract.

c) Covenants
Restrictive covenants render title unmarketable.

d) Encroachments
A significant encroachment constitutes a title defect, regardless of whether an
adjacent landowner is encroaching on the seller’s land or vice versa. However,
the encroachment will not render title unmarketable if: (i) it is very slight
(only a few inches) and does not inconvenience the owner on whose land it
encroaches; (ii) the owner encroached upon has indicated that he will not sue
on it; or (iii) it has existed for so long (many decades) that it has become legal
by adverse possession, provided that the state recognizes adverse possession
titles as being marketable (see 1)a), supra).

3) Zoning Restrictions
Generally, zoning restrictions do not affect the marketability of title; they are not
considered encumbrances. An existing violation of a zoning ordinance, however,
does render title unmarketable.

4) Waiver
Any of the above-mentioned title defects can be waived in the contract of sale.

Multistate 08 real property Q.indd 102 9/13/2016 4:33:24 PM

 REAL PROPERTY 103.

b. Quitclaim Deed—No Effect

The fact that a contract calls for a quitclaim deed, which does not contain any covenants
for title, does not affect the implied covenant to provide marketable title (unless so
provided in the contract).

c. Time of Marketability
If, as is usual, the seller has agreed to furnish title “at date of closing,” the buyer cannot
rescind prior to that date on grounds that the seller’s title is not marketable.

1) Installment Land Contract

Similarly, where an installment land contract is used, the seller’s obligation is to
furnish marketable title when delivery is to occur, e.g., when the buyer has made
his final payment. Therefore, a buyer cannot withhold payments or seek other
remedies (e.g., rescission) on grounds that the seller’s title is unmarketable prior to
the date of promised delivery. The buyer might get rescissionary relief before the
date of delivery by showing that the seller cannot possibly cure the defects in time.
Or, under compelling circumstances, a court might require the seller to quiet title
during the contract period.

d. Remedy If Title Not Marketable

If the buyer determines that the seller’s title is unmarketable, he must notify the seller
and give a reasonable time to cure the defects, even if this requires extension of the
closing date. The notice must specify the nature of the defects. If the seller fails to cure
the defects, the buyer may pursue several remedies.

1) Rescission, Damages, Specific Performance

In the absence of a contractual stipulation to the contrary, if title is not marketable,
the buyer can rescind, sue for damages for breach, get specific performance with
an abatement of the purchase price, or, in some jurisdictions, require the seller to
quiet title. The seller cannot sue successfully for damages or specific performance.

2) Merger
If the buyer permits the closing to occur, the contract is said to merge with the
deed (i.e., it disappears) and, in the absence of fraud, the seller is no longer liable
on the implied covenant of marketable title. However, the buyer may have an
action for violation of promises made in the deed, if any (see D., infra). Note: The
merger rule does not apply to most nontitle matters, such as covenants regarding
the physical condition of the property. [Campbell v. Rawls, 381 So. 2d 744 (Fla.
1980)]

4. Time of Performance

a. Presumption—Time Not of the Essence

In general, the courts assume that time is not “of the essence” in real estate contracts.
This means that the closing date stated in the contract is not absolutely binding in
equity, and that a party, even though late in tendering her own performance, can still
enforce the contract if she tenders within a reasonable time after the date. (A month or
two is typically considered a reasonable time.)

Multistate 08 real property Q.indd 103 9/13/2016 4:33:24 PM

 104. REAL PROPERTY

b. When Presumption Overcome

Time will be considered “of the essence” if:

1) The contract so states; or

2) The circumstances indicate it was the parties’ intention; e.g., the land is rapidly
fluctuating in value or a party must move from out of town and has no other place
to go; or

3) One party gives the other notice that she desires to make time of the essence, and
does so within a reasonable time prior to the date designated for closing.

c. Effect of Time of the Essence Construction

If time is of the essence, a party who fails to tender performance on the date set for
closing is in total breach and loses her right to enforce the contract.

d. Liability When Time Not of the Essence

Even if time is not of the essence, a party who is late in tendering performance is
liable in damages for the incidental losses she has caused, such as additional mortgage
interest, taxes, etc.

5. Tender of Performance
In general, the buyer’s obligation to pay the purchase price and the seller’s obligation to
convey the title are deemed to be concurrent conditions. This means that neither party is in
breach of the contract until the other party tenders her performance, even if the date desig-
nated for the closing has passed.

a. When Party’s Tender Excused

A party’s tender is unnecessary and is excused if the party has repudiated the contract,
or if it is impossible for the other party to perform (e.g., if the seller does not have
marketable title and cannot get it).

b. Neither Party Tenders Performance

If neither party tenders performance, the closing date is automatically extended indefi-
nitely until one of them does so.

c. Buyer Finds Seller’s Title Unmarketable

If the buyer determines that the seller’s title is unmarketable, the buyer must give the
seller a reasonable time to cure title defects.

d. Condition Precedent Unsatisfied

Most contacts for the sale of residential property contain mortgage contingency clauses,
which provide that if the buyer is unable to obtain a mortgage, the contract is voidable.
These, and similar clauses, creation conditions precedent to the parties’ performance of
the contract at closing. A buyer must make a good faith effort to satisfy the condition
precedent (e.g., file a timely mortgage application, respond to all of a lending company’s
requests for documents). A buyer’s refusal to complete the transaction for any reason
other than a good faith failure to satisfy the condition precedent will be a breach of
contract.

Multistate 08 real property Q.indd 104 9/13/2016 4:33:24 PM

 REAL PROPERTY 105.

6. Remedies for Breach of the Sales Contract

a. Damages
The usual measure of damages is the difference between the contract price and the
market value of the land on the date of the breach. Incidental damages, such as title
examination and moving or storage costs, can also be recovered.

1) Liquidated Damages
Sales contracts usually require the buyer to deposit “earnest money” with the
seller, and provide that if the buyer defaults in performance, the seller may retain
this money as liquidated damages. The courts routinely uphold the seller’s reten-
tion of the deposit if the amount appears to be reasonable in light of the seller’s
anticipated and actual damages. Many courts will uphold a retention of a deposit of
up to 10% of the sales price without further inquiry into its reasonableness. Even
without a liquidated damages clause, courts may uphold retention of the deposit, on
the ground that giving restitution of the funds to the buyer would unjustly reward a
party in breach.

b. Specific Performance

1) Buyer’s Remedy
A court of equity will order a seller to convey the title if the buyer tenders the
purchase price. The remedy at law (damages) is deemed inadequate because the
buyer is getting land and land is unique.

If the seller cannot give marketable title, but the buyer wishes to proceed with the
transaction, she can usually get specific performance with an abatement of the
purchase price in an amount reflecting the title defect.

2) Seller’s Remedy
Somewhat illogically, the courts also generally will give a specific performance
decree for the seller if the buyer is in breach. This is sometimes explained as
necessary to have “mutuality of remedy.” A few courts in recent years have refused
to award specific performance to sellers if the property is not unique (e.g., if a
developer is selling a house in a large subdivision of similar houses).

c. Special Rules for Unmarketable Title

If the seller’s title is unmarketable for reasons that do not indicate the seller’s bad faith
(i.e., he did not realize that his title was defective when he signed the contract), about
half of the courts limit the buyer’s recovery of damages to incidental out-of-pocket costs
(title examination, etc.) and return of the buyer’s earnest money deposit. The other half
of the courts give the buyer the standard measure of contract damages mentioned above.

7. Seller’s Liability for Defects on Property

a. Warranty of Fitness or Quality—New Construction Only

The common law rule is that contracts of sale and deeds of real property, unlike
conveyances of personal property, carry no implied warranties of quality or fitness for

Multistate 08 real property Q.indd 105 9/13/2016 4:33:24 PM

 106. REAL PROPERTY

the purpose intended. One exception is a contract for the sale of a residential building
under construction or to be constructed, on the ground that the buyer has no opportunity
to inspect. Most courts extend the implied warranty of fitness or quality to the sale of
any new house by the builder. The warranty implied is that the new house is designed
and constructed in a reasonably workmanlike manner and suitable for human habita-
tion. Courts are split, however, on whether a subsequent purchaser can recover from the
original builder because of the lack of privity. [See Speight v. Walters, 744 N.W.2d 108
(Iowa 2008); Conway v. Cutler Group, Inc., 2014 WL 4064261 (Pa. 2014)]

b. Negligence of Builder
A person who contracts for construction may always sue a builder for negligence in
performing a building contract. Moreover, many courts now permit the ultimate vendee
(e.g., a subdivision buyer) to sue the builder despite the fact that the seller hired the
builder and the buyer thus lacks “privity.”

c. Liability for Sale of Existing Land and Buildings

A seller of existing land and buildings (not new construction) may be liable to the
purchaser for defects in the improvements (e.g., a leaky roof or basement, termite infes-
tation, a nonfunctioning septic system) on any of several different theories.

1) Misrepresentation (Fraud)
This theory requires proof that the seller made a false statement of fact (oral or
written) to the buyer, that the buyer relied on the statement, and that it materi-
ally affected the value of the property. The seller must either have known that the
statement was false, or have made it negligently (without taking reasonable care to
determine its truth).

2) Active Concealment
The seller is liable as above, even without making any statement, if the seller took
steps to conceal a defect in the property (e.g., paneling over a wall to conceal
cracks).

3) Failure to Disclose
A majority of states now hold sellers liable for failure to disclose defects if the
following factors are present:

(i) The seller knows or has reason to know of the defect;

(ii) The defect is not obvious or apparent, and the seller realizes that the buyer is
unlikely to discover it by ordinary inspection; and

(iii) The defect is serious and would probably cause the buyer to reconsider the
purchase if it were known.

These decisions are more likely to impose liability on the seller if the property is
a personal residence, if the defect is dangerous, and if the seller personally created
the defect or previously attempted to repair it and failed to do so.

Multistate 08 real property Q.indd 106 9/13/2016 4:33:24 PM

 REAL PROPERTY 107.

d. Disclaimers of Liability
Sellers sometimes attempt to avoid liability for property defects by inserting clauses in
sales contracts exculpating the seller.

1) “As Is” Clauses

A general clause, such as “property sold as is” or “with all defects,” is not suffi-
cient to overcome a seller’s liability for fraud, concealment, or (in the states that
recognize it) failure to disclose.

2) Specific Disclaimers
If the exculpatory clause identifies and disclaims liability for specific types of
defects (e.g., “seller is not liable for leaks in the roof”), it is likely to be upheld.

8. Real Estate Brokers

Most real estate sales contracts are negotiated by real estate brokers. The broker who obtains
the “listing” from the seller is the seller’s agent. Other agents who participate in the sale
(e.g., through a multiple listing service) are also the seller’s agents, unless they specifically
agree to serve as the buyer’s agent. While these agents owe a fiduciary duty to the seller, they
also have a duty to the buyer to disclose material information about the property if they have
actual knowledge of it. Traditionally, the agent’s commission was earned when she found a
buyer who was “ready, willing, and able” to purchase the property, even if the buyer later
backed out of the contract. But the growing trend of the cases is to award the commission
only if the sale actually closes, or if it fails to close because of the seller’s fault.

9. Title Insurance
A title insurance policy insures that a good record title of the property exists as of the
policy’s date and agrees to defend the record title if litigated. The insurance can be taken out
by either the owner of the property or the mortgage lender. An owner’s policy protects only
the person who owns the policy (i.e., the property owner or the mortgage lender) and does
not run with the land to subsequent purchasers. In contrast, a lender’s policy follows any
assignment of the mortgage loan.

B. DEEDS—FORM AND CONTENT

Transfer of title to an interest in real property occasionally occurs through operation of law; but in
most circumstances, transfer can be accomplished only by a deed that satisfies various formalities
required by statute.

1. Formalities

a. Statute of Frauds
The Statute of Frauds requires that a deed be in writing and signed by the grantor.

b. Description of Land and Parties

A deed must identify the land. The description need not be formal, and it may incor-
porate extrinsic information, but it must be unambiguous. The parties (grantor and
grantee) must also be identified. This may be done by name, or by describing them in
some other way (e.g., “I grant this land to my eldest daughter,” or “I convey this land
to the present members of the law review at State University”). If the deed is delivered

Multistate 08 real property Q.indd 107 9/13/2016 4:33:24 PM

 108. REAL PROPERTY

with the identity of the grantee left blank, the courts will presume that the person taking
delivery has authority to fill in the name of the grantee, and if she does so, the deed is
valid. But if the land description is left blank, no such authority is presumed, and the
deed is void unless the grantee was explicitly given authority to fill in the description,
and did so.

c. Words of Intent
The deed must evidence an intention to transfer realty, but technical words are unneces-
sary. The word “grant” by itself is sufficient in many states.

d. Consideration Not Required

The deed need not recite any consideration, nor must any consideration pass in order to
make a deed valid. A deed may validly convey real property by inter vivos gift so long
as the following requirements are met: (i) donative intent, (ii) delivery, and (iii) accep-
tance (see C., infra).

e. Seal Is Unnecessary
A seal is unnecessary.

f. Attestation and Acknowledgment Generally Unnecessary

Attestation by witnesses is generally unnecessary, as is an acknowledgment. But note:
Either or both might be required for the deed to be recorded.

g. Signature
A deed must be signed by the grantor. The grantor may designate an agent to sign on
the grantor’s behalf, but if the signing is not done in the grantor’s presence, the Statute
of Frauds generally requires that the agent’s authority be written. In the case of deeds
by corporations, statutes usually provide for execution by two officers of the corpora-
tion and the affixing of the corporation’s seal. If the deed represents a conveyance of
all or a substantial part of the corporation’s assets, a resolution of the board of directors
approving the transfer may be necessary. The grantee’s signature is not necessary even
if the deed contains covenants on her part. Her acceptance of the deed (called a “deed
poll” when signed only by the grantor) is sufficient to make the covenants enforceable.

1) Spouse’s Signature
In a minority of states, when a grantor wishes to sell her primary residence, her
spouse must sign the deed, even if the spouse is not an owner, because the spouse
has “homestead” rights as the spouse of the owner. Homestead rights must be
waived by the holder of the rights for good title to be conveyed.

2) Trustee’s Signature
When real property is held in trust, the trustee must sign a deed conveying the
property. The beneficiary’s signature is not generally required.

2. Defective Deeds and Fraudulent Conveyances

a. Void and Voidable Deeds

A deed that is defective may be either void or voidable. “Void” implies that the deed

Multistate 08 real property Q.indd 108 9/13/2016 4:33:25 PM

 REAL PROPERTY 109.

will be set aside by the court even if the property has passed to a bona fide purchaser.
“Voidable” implies that the deed will be set aside only if the property has not passed to
a bona fide purchaser.
1) Void Deeds
Deeds considered void include those that are forged, were never delivered, were
issued to a nonexistent grantee (e.g., a grantee who is in fact dead at the time of
delivery, or a corporation that has not yet been legally formed), or were obtained
by fraud in the factum (i.e., the grantor was deceived and did not realize that he
was executing a deed).

2) Voidable Deeds
Deeds considered voidable include those executed by persons younger than the age
of majority or who otherwise lack capacity (e.g., because of insanity), and deeds
obtained through fraud in the inducement, duress, undue influence, mistake, and
breach of fiduciary duty.

b. Fraudulent Conveyances
Even when a deed complies with the required formalities mentioned above, it may be
set aside by the grantor’s creditors if it is a fraudulent conveyance. Under the Uniform
Fraudulent Transfer Act, which nearly all states have adopted, a conveyance is fraudu-
lent if it was made: (i) with actual intent to hinder, delay, or defraud any creditor of
the grantor; or (ii) without receiving a reasonably equivalent value in exchange for the
transfer, and the debtor was insolvent or became insolvent as a result of the transfer.
However, the deed will not be set aside as against any grantee who took in good faith
and paid reasonably equivalent value.

3. Description of Land Conveyed

In land contracts and deeds, property may be described in various ways; i.e., by reference
to a government survey, by metes and bounds, by courses and angles, by references to a
recorded plat, by reference to adjacent properties, by the name of the property, or by a street
and number system.

a. Sufficient Description Provides a Good Lead

A description is sufficient if it provides a good lead as to the identity of the property
sought to be conveyed.
Example: A conveyance of “all my land,” or “all my land in Alameda County,”
provides a sufficient lead. The intention of the grantor is clear and the
meaning of this intention can be proved without difficulty (by checking
the land records of Alameda County).
b. Insufficient Description—Title Remains in Grantor
If the description is too indefinite, title remains in the grantor, subject to the possibility
of a suit for reformation of the deed.
Example: A conveyance of “one acre off the western end of my 30-acre tract” (the
30-acre tract being adequately described) would probably fail for uncer-
tainty. “Off the western end” is too vague to ascertain which acre, and
the admission of parol evidence here would be considered a violation of
the Statute of Frauds.

Multistate 08 real property Q.indd 109 9/13/2016 4:33:25 PM

 110. REAL PROPERTY

c. Parol Evidence Admissible to Clear Up Ambiguity

The general rule is that parol evidence is admissible to explain or supplement a written
description or to clear up an ambiguity. If there is a patent ambiguity—one appearing
on the face of the deed—parol evidence is normally admissible to ascertain the parties’
intent. For example, one part of the deed states that it is conveying “Blackacre” but later
it purports to convey an interest in “Whiteacre.” Parol evidence is admissible to show
which property the grantor intended to convey. Where the ambiguity is latent—not
apparent on the face of the deed—parol evidence is generally admissible. For example,
if A grants to B “my house in San Francisco,” parol evidence is admissible to show
which house A owns.

1) Compare—Inadequate Description
If, however, A grants to B “my house in San Francisco,” and it turns out that A
owns three houses in that city, the conveyance would probably fail for lack of
adequate description. (But note: If there is an underlying original agreement in
which there was no mistake or ambiguity, and the only mistake was in the writing
of the instrument, relief might be available by way of reformation of the deed.)

d. Rules of Construction
Where there is a mistake or inconsistency in the description (as where the deed leaves
in doubt the exact location of a property line, or measurements give two different
locations for the line), the following rules of construction are applied to carry out the
parties’ probable intent. (These are not “rules of law” and will not be applied where
there is clear evidence showing a contrary intent.)

1) Natural monuments prevail over other methods of description; i.e., artificial

monuments, courses and distances, surfaces, acreage, or general descriptions (e.g.,
a call from “Point X to the old oak tree,” prevails over a call from “Point X south
100 feet”).

2) Artificial monuments (e.g., stakes, buildings, etc.) prevail over all but natural
monuments.

3) Courses (e.g., angles) prevail over distances (e.g., “west 90 degrees to Main St.”
prevails over “west 100 feet to Main St.”).

4) All of the foregoing prevail over general descriptions such as name (e.g., “Walker’s
Island”) or quantity (e.g., “being 300 acres”).

e. Land Bounded by Right-of-Way

1) Title Presumed to Extend to Center of Right-of-Way

If land is described as being bounded by a street, highway, or other right-of-way, or
if the land conveyed is otherwise described but actually is bounded by such, there
is a rebuttable presumption that the title of the grantee extends to the center of the
right-of-way (assuming that the grantor owns to the center), or to the full width of
it if the grantor retains no adjoining land. This presumption accords with (i) the
presumed intention of the parties, and (ii) the public policy that disfavors a grant-
or’s retention of thin strips of land.

Multistate 08 real property Q.indd 110 9/13/2016 4:33:25 PM

 REAL PROPERTY 111.

a) Evidence to Rebut Presumption

In many jurisdictions, a description such as “running along the street” has
been held sufficient to rebut the presumption that the grantee took title to the
center. (This is to be distinguished from the language “bounded on the west
by the highway” to which the presumption applies.)

But when the monument involved is a body of water, more definite language
is necessary to rebut the presumption that the grantee takes title to the center.
This is because, unlike streets, there are no public rights in most bodies of
water abutting on land (except possible navigation easements), and because
a grantee of land adjoining water normally expects a right of access to the
water.

b) Measuring from Monument

Notwithstanding the general rule, and unless a contrary intention is expressed,
measurements “from” a right-of-way are presumed to start from the side and
not the center. Again, this is based on the parties’ presumed intent.

2) Variable Boundary Line Cases

a) Slow Change in Course Changes Property Rights

The slow and imperceptible change in course of a river or stream serving as
a boundary operates to change the legal boundary. Where land is described
as abutting upon a body of water, any slow and imperceptible deposit of
soil (“accretion”) belongs to the owner of the abutting land (the riparian
owner). Where accretion builds up in an irregular pattern over the lands of
several adjacent property owners, courts determine title to it in a “just and
equitable manner,” either by (i) merely extending the property lines out into
the water with each landowner getting the property that falls within the lines
as extended; or (ii) dividing up the newly formed land in proportion to the
owners’ interests in the adjoining lands. Similarly, slow erosion of a stream’s
bank results in the owner losing title to the affected area.

b) Avulsion Does Not Change Property Rights

A sudden, perceptible change of a watercourse (“avulsion”) does not change
property rights. Thus, if a river changes course suddenly, boundaries remain
where they were, even if someone who formerly had river access now finds
himself landlocked.

c) Encroachment of Water Does Not Change Fixed Boundary Lines

According to the majority view, where property is encroached upon by a body
of water (e.g., lake enlarges), previously fixed boundary lines do not change
and ownership rights are not affected. Indeed, the boundary lines can still be
proven even though the land is completely under water.

f. Reformation of Deeds
Reformation is an equitable action in which the court rewrites the deed to make it
conform to the intention of the parties. It will be granted if the deed does not express

Multistate 08 real property Q.indd 111 9/13/2016 4:33:25 PM

 112. REAL PROPERTY

what the parties agreed to, either because of their mutual mistake or a scrivener’s
(drafter’s) error. It will also be granted for unilateral mistake, but only if the party who
is not mistaken induced the mistake by misrepresentation or some other inequitable
conduct. If the property has passed to a bona fide purchaser who relied on the original
language of the deed, the court will not reform it.

4. Closing Documents
Most real estate closings require more than the exchange of a deed. They are complex
events involving the signing of numerous documents and sometimes last minute negotiations
(usually over whether a particular fixture will remain part of the property or whether the
seller will pay to repair a portion of the property that was damaged between the contract date
and the closing date). Below are a few of the most critical closing documents.

a. Closing Disclosure
Various federal laws and regulations require residential mortgage lenders to provide
specific information to mortgagors at least three business days prior to closing. The
required information has been consolidated into a single form called the “Closing
Disclosure.” The mortgagee must clearly provide the following information in the
Closing Disclosure:

(i) Mortgage amount;

(ii) Interest rate;

(iii) Monthly payment;

(iv) Whether any of those amounts can change during the life of the loan;

(v) Whether the mortgage has a prepayment penalty or balloon payment;

(vi) Estimated monthly taxes, insurance, and assessments;

(vii) Total closing costs to the buyer; and

(viii) Cash required for the buyer to complete the closing.

Failure by the mortgagee to properly provide the Closing Disclosure can result in an
opportunity for the mortgagor to cancel the mortgage or to recover damages.

b. Notification of Defects
The majority of states now require a seller of residential property to provide a form to
the buyer at closing, notifying the buyer of any physical defects of which the seller is
aware. In most states, the seller must provide this form even when selling the property
“as is.” This form generally includes a list of possible defects (e.g., roof leaks, founda-
tion cracks, termites), each of which the seller must certify do not exist, or disclose
information about. A seller who fails to disclose a known defect that must be disclosed
in this form will be liable for the defect after closing.

Multistate 08 real property Q.indd 112 9/13/2016 4:33:25 PM

 REAL PROPERTY 113.

c. Environmental Report
An owner of real property must generally pay to cure any environmental damage (e.g.,
soil contaminated by leaked gasoline) to the property, even if the damage occurred
before the owner owned the property. As a result, buyers of commercial real estate often
ask sellers to guarantee that the property complies with environmental laws. Sellers
want to avoid making these guarantees, and the parties must ultimately negotiate an
environmental report, to be signed by both parties at closing, that identifies which
environmental guarantees the seller makes.
C. DELIVERY AND ACCEPTANCE
1. Delivery—In General
A deed is not effective to transfer an interest in realty unless it has been delivered. Physical
transfer of a deed is not necessary for a valid delivery. Nor does physical transfer alone estab-
lish delivery (although it might raise a presumption thereof). Rather, “delivery” refers to the
grantor’s intent; it is satisfied by words or conduct evidencing the grantor’s intention that
the deed have some present operative effect; i.e., that title pass immediately and irrevocably,
even though the right of possession may be postponed until some future time.
Examples: 1) O drafts an instrument conveying Blackacre to A and hands the instrument
to A “for safekeeping.” Although handed to the named grantee, this is not a
valid delivery. There is no evidence that O intended the instrument to have
any present operative effect.

2) O drafts an instrument conveying Blackacre to A. O attempts to give the

instrument to A personally but is unable to find A; nevertheless, O quits
possession of Blackacre and thereafter treats A as the owner thereof. Nearly
all courts would hold that there has been a sufficient delivery.

Under some circumstances (i.e., when a third party is involved), conditional delivery is
permissible. This type of delivery becomes effective only upon the occurrence of a condition,
but the transfer then relates back to the time of the conditional delivery. The grantor has
only limited rights to revoke prior to the occurrence of the condition. (See further discussion
of conditional deliveries, 3., infra.)

a. Manual Delivery
The delivery requirement will be satisfied where the grantor physically or manually
delivers the deed to the grantee. Manual delivery may be accomplished by means of
the mails, by the grantor’s agent or messenger, or by physical transfer by the grantor’s
attorney in the grantor’s presence.

b. Presumptions Relating to Delivery

As a matter of theory, a deed may be delivered by words without an act of physical
transfer. Delivery is presumed if the deed is: (i) handed to the grantee, or (ii) acknowl-
edged by the grantor before a notary and recorded. Unless there is some clear expres-
sion of intent that the grantor envisioned the passage of title to the grantee without
physical delivery, the continued possession of the deed by the grantor raises a presump-
tion of nondelivery and therefore no passage of title. Conversely, possession by a grantee
of a properly executed deed raises a presumption that the delivery requirement has been
satisfied. Note, however, that the presumptions involved are rebuttable.

Multistate 08 real property Q.indd 113 9/13/2016 4:33:25 PM

 114. REAL PROPERTY

c. Delivery Cannot Be Canceled

Title passes to the grantee upon effective delivery. Therefore, returning the deed to the
grantor has no effect; it constitutes neither a cancellation nor a reconveyance.

d. Parol Evidence

1) Admissible to Prove Grantor’s Intent

The majority rule is that any type of parol evidence, including conduct or state-
ments made by the grantor before or after the alleged delivery, is admissible to
prove her intent.

2) Not Admissible to Show Delivery to Grantee Was Conditional

If a deed is unconditional on its face and is given directly to the grantee, in most
jurisdictions parol evidence is not admissible to show that the delivery was subject
to a condition.
Example: O delivers an absolute deed of Blackacre to A, but tells A that
the deed is effective only if A pays off the encumbrance on the
property, or only if O does not return from the hospital. Under
the above rule, even if A never pays off the encumbrance or if
O returns from the hospital, A is the owner of Blackacre and O
cannot claim that there was no valid delivery. Rationale: The rule
is designed to avoid unsettling of land titles which appear to be in
the grantee’s name, and to protect both innocent third parties and
grantees from testimony fabricated by grantors.

3) Admissible to Show No Delivery Intended

But while parol evidence is not admitted to prove that a delivery was subject to an
oral condition, parol evidence is admissible to prove that the grantor did not intend
the deed to have any present effect at all.
Example: O tells A, “I want you to have Blackacre when I die, and I’m giving
you this deed to Blackacre so that you can have it at that time.”
Most courts would hold that O’s statements are admissible, and that
despite the unconditional nature of the deed itself, they show that O
did not intend the deed to have any present effect.

a) Deed Intended as Mortgage

Parol evidence is always admissible to show that a deed absolute on its face
was intended by the parties to be a mortgage; i.e., there was no intent to
convey title outright. (See VII.A.4., infra.)

b) Transfer of Deed to Bona Fide Purchaser

Suppose O gives A a deed for examination by A’s attorney (deed not intended
to be effective at this point). A wrongfully records it and sells to B, a bona
fide purchaser (“BFP”). On these facts, O would prevail against B unless
estopped to assert lack of delivery (see below). In other words, absent
estoppel, a subsequent BFP is not protected; if there was no delivery, the
BFP’s grantor had no power to convey.

Multistate 08 real property Q.indd 114 9/13/2016 4:33:25 PM

 REAL PROPERTY 115.

(1) Estoppel in Favor of Innocent Purchaser

Even though the grantor is allowed to show that no delivery at all was
intended as against the grantee, he often is estopped to assert lack of
delivery against an innocent purchaser.
Example: O gives A a deed but does not intend the deed to be
presently effective. A shows the deed to an innocent
purchaser, B, who buys the land in reliance thereon. B
will prevail in litigation with O, the original grantor, if it
appears that O negligently permitted A to have posses-
sion of the deed. Rationale: As between two innocent
parties, the one who contributed most directly to the loss
must bear the burden of it, and in many cases O must be
deemed responsible for entrusting A with a deed absolute
on its face. The same result occurs where the grantee
records the deed and an innocent purchaser relies on the
recordation.

4) Comment
Obviously, the above rules give the courts flexibility to find either delivery or
nondelivery in many situations. It is also evident that there exists a theoretical
inconsistency in admitting parol evidence to show that no delivery was intended,
but not to show that delivery was “conditional.” This inconsistency has been criti-
cized by numerous commentators.

2. Retention of Interest by Grantor or Conditional Delivery

Problems arise when the grantor attempts to retain an interest in the property (e.g., a life
estate) or when he attempts to make the passage of title dependent upon the happening of a
condition or event other than delivery.

a. No Delivery—Title Does Not Pass

If the grantor executes a deed but fails to deliver it during his lifetime, no conveyance
of title takes place. Without adequate delivery, the title does not pass to the intended
grantee.

b. No Recording—Title Passes
If the grantor executes and delivers a deed but fails to have it recorded, title passes.
Therefore, an agreement between the grantor and grantee to the effect that the deed will
not be recorded until some event takes place in the future does not affect the passage of
title.

c. Express Condition of Death of Grantor Creates Future Interest

When a deed, otherwise properly executed and delivered, contains an express provi-
sion that the title will not pass until the grantor’s death, the effect is to create a present
possessory life estate in the grantor and a future estate in the grantee. Note, however,
that this result follows only when the deed expressly contains such a provision.

d. Conditions Not Contained in Deed

If a deed is absolute on its face, but is delivered to the grantee with an oral condition

Multistate 08 real property Q.indd 115 9/13/2016 4:33:25 PM

 116. REAL PROPERTY

(e.g., “title is not to pass until I return from the Orient”), the traditional view was that
the condition dropped out and the delivery became absolute. A growing minority of
cases enforces the condition. Where the condition is the grantor’s death, the deed is
usually held “testamentary” and therefore void (unless executed with testamentary
formalities).

e. Test—Relinquishment of Control
To make an effective delivery, the grantor must relinquish absolute and unconditional
control.

3. Where Grantor Gives Deed to Third Party

In this situation, the rules are quite different; conditional delivery is permissible. Three
situations should be distinguished: (i) where the grantor gives the deed to a third party, there
being no conditions appended; (ii) where the grantor in a commercial context gives such
a deed to a third party, there being conditions appended; and (iii) where the situation is the
same as in (ii), but the transaction is donative.

a. Transfer to Third Party with No Conditions

If O (the grantor) gives B a deed naming A as grantee and instructs B to give the deed
to A, has a delivery occurred? Most courts say yes. Because O indicated an intent to
make the deed presently operative, A has a right to the deed and O should not be able
to get it back. However, if O told B to retain the deed and give it to A upon O’s later
instructions, no delivery would have occurred.

When there are no specific instructions regarding delivery, the question is one of O’s
intent. If B is A’s attorney, delivery seems clear. But if B is O’s attorney, a court might
infer that B was merely O’s agent and that O thus retained the power to recall the deed.
(A few courts hold that B is to be treated as O’s agent in all circumstances, even if
O manifests a clear intention of present effectiveness, and consequently no delivery
occurs.)

b. Transfer to Third Party with Conditions (Commercial Transaction)

Suppose that O gives B a deed naming A as grantee and tells B to transfer the deed to
A when A has paid $5,000 on O’s account on or before September 1. This is the true
escrow situation—the true conditional delivery. Under the circumstances outlined
below, a valid conditional delivery has occurred. The deed has a present operative effect
in that title will transfer automatically upon the occurrence of the condition. O will
retain title only if the condition does not occur.

1) Parol Evidence Admissible to Show Conditions

Even though a deed is unconditional, the general rule is that parol evidence is
admissible to show the conditions and terms upon which a deed was deposited
with the escrow. (This is contrary to the rule excluding parol evidence where
transfer is directly to the grantee.) If the escrow custodian has violated parol condi-
tions, there will be no valid delivery. Once the condition occurs, whether parol or
not, title automatically vests in the grantee and the escrow holds the deed as the
grantee’s agent.

Multistate 08 real property Q.indd 116 9/13/2016 4:33:25 PM

 REAL PROPERTY 117.

2) Grantor’s Right to Recover Deed

a) Majority View—Can Recover Only If No Written Contract

Under the majority view, if the grantor seeks to recover the deed prior to the
occurrence of the condition, the grantee can object only if there is an enforce-
able written contract to convey. (On the other hand, once the condition occurs,
title passes even in the absence of an enforceable contract.)

(1) The requirement of a written contract is based on the Statute of Frauds

consideration that oral contracts to convey realty should not become
enforceable simply because the deed has been deposited with a third
party.

(2) Ordinarily, the contract to convey will be a buy-sell land contract.

However, written escrow instructions are often a sufficient memorandum
of the contract to satisfy the Statute of Frauds.

b) Minority View—No Right to Recover

A strong minority prohibits revocation even in the absence of an enforceable
underlying contract. Deposit of the deed with a third party on stated condi-
tions is seen to obviate most possibilities of fraud.

3) Breach of Escrow Conditions—Title Does Not Pass

When the grantee wrongfully acquires the deed from the escrow holder prior to
performance of the conditions of the escrow, title does not pass. Therefore, even
though the grantee is in possession of the deed, she cannot convey any interest in
the land to a subsequent transferee, even a BFP.

a) Estoppel Cases
A few cases have held that where the escrow holder was chosen by the
grantor, the grantor is bound by the escrow holder’s acts and is estopped to
deny a valid delivery and passage of title to the grantee. Thus, an innocent
purchaser (BFP) from the grantee may acquire good title. An important
factor is whether the grantor has allowed the grantee to take possession of the
property prior to completion of the conditions of the escrow. If the grantor
has remained in possession, the purchaser may be held to have notice of the
grantor’s interest and cannot be a BFP.

4) Relation-Back Doctrine
In an escrow transaction, title does not pass to the grantee until performance of
the named conditions. However, where justice requires, the title of the grantee
will “relate back” to the time of the deposit of the deed in escrow. Generally, the
relation-back doctrine will be applied if:

(i) The grantor dies (doctrine applied to avoid the rule that title must pass before
death if instrument is not a will);

Multistate 08 real property Q.indd 117 9/13/2016 4:33:25 PM

 118. REAL PROPERTY

(ii) The grantor becomes incompetent (doctrine applied to avoid the rule that an
incompetent cannot convey title); or

(iii) A creditor of the grantor (who is not a BFP or mortgagee) attaches the
grantor’s title (doctrine applied to cut off the creditor’s claim).

a) Not Applied If Intervening Party Is BFP or Mortgagee

The relation-back doctrine is not applied where the intervening third party is
a BFP or mortgagee. However, if the sales contract is recorded, there can be
no intervening BFPs because its recordation gives constructive notice.

b) Not Applied in Favor of Escrow Grantee with Knowledge

The relation-back doctrine will not be applied in favor of an escrow grantee
who, at the time she performs the terms and conditions of the escrow, has
actual or constructive knowledge of prior equities of other persons (e.g., that
the grantor conveyed to another). But if the escrow grantee has performed
part of the conditions when she acquires such knowledge, she will be
protected against all but BFPs or mortgagees.

c. Transfer to Third Party with Conditions (Donative Transactions)

If the grantor gives a deed to a third party with instructions to turn it over to the named
donee only when certain conditions occur, is there a valid delivery or can the grantor
change her mind and demand the deed back before the conditions occur?

1) Condition Unrelated to Grantor’s Death

When O gives to B a deed naming A as grantee, and instructs B to give it to A
“when A marries,” etc., no “true” escrow will exist unless there is an underlying
contract of sale (which is extremely unlikely in a donative transaction such as this).
Hence, O can retrieve the deed from B upon request. Nevertheless, if O does not
do so, and B actually delivers the deed to A after the condition is satisfied, the
delivery will be effective to convey title to A as of that date.

2) Where Condition Is Grantor’s Death

When O executes a deed to A and hands the deed to B with instructions to give it
to A upon the death of O, most courts hold that the grantor cannot get her deed
back because her intent was to presently convey a future interest to the grantee
(either a remainder, with a life estate reserved in the grantor, or an executory
interest). Note that this analysis also makes the gift inter vivos, not testamentary,
and thus not in conflict with the Statute of Wills. Caution: In dealing with death
cases, make sure that it was the grantor’s intent that the deed be operative immedi-
ately to convey a future interest.

a) Limitation—No Delivery If Conditioned on Survival

When O’s instructions to B are to deliver the deed to A only if A survives O,
it is generally held that there is no valid delivery because it was O’s intent to
retain title and possession until her death.

4. Acceptance

Multistate 08 real property Q.indd 118 9/13/2016 4:33:25 PM

 REAL PROPERTY 119.

a. Usually Presumed
There must be an acceptance by the grantee in order to complete a conveyance. In most
states, acceptance is presumed if the conveyance is beneficial to the grantee (whether
or not the grantee knows of it). In other states, acceptance is presumed only where the
grantee is shown to have knowledge of the grant and fails to indicate rejection of it.
Acceptance is presumed in all states if the grantee is an infant or an incompetent.

b. Usually “Relates Back”

Acceptance (presumed or otherwise) usually “relates back” to the date of “delivery” of
the deed in escrow. However, many courts refuse to “relate back” an acceptance where
it would defeat the rights of intervening third parties such as BFPs, attaching creditors
of the grantor, or surviving joint tenants. A few states will not even “relate back” an
acceptance if doing so defeats the devisees of the grantor.

5. Dedication
Land may be transferred to a public body (e.g., a city or county) by dedication. An offer of
dedication may be made by written or oral statement, submission of a map or plat showing
the dedication, or opening the land to public use. An acceptance by the public agency is
necessary. This may be accomplished by a formal resolution, approval of the map or plat, or
actual assumption of maintenance or construction of improvements by the agency.

D. COVENANTS FOR TITLE AND ESTOPPEL BY DEED

There are three types of deeds characteristically used to convey property interests other than
leaseholds: the general warranty deed (also known as “covenant and warranty deed”), the special
warranty deed (usually statutory), and the quitclaim deed. The major difference between these
deeds is the scope of assurances (covenants for title) they give to the grantee and the grantee’s
successors regarding the title being conveyed. The general warranty deed normally contains six
covenants for title (see 1.a.1) - 6), infra). The special warranty deed contains fewer and more
limited assurances. The quitclaim deed contains no assurances; it releases to the grantee whatever
interest the grantor happens to own. Covenants for title must be distinguished from covenants for
other than title (i.e., covenants running with the land used for private land regulation).

1. Covenants for Title in a General Warranty Deed

In this day of recording acts and title insurance, covenants for title are not much relied upon
for title assurance. A general warranty deed is one in which the grantor covenants against
title defects created both by himself and by all prior titleholders. In a special warranty deed,
however, the grantor covenants only that he himself did not create title defects; he represents
nothing about what prior owners might have done. General warranty deeds are a rarity in a
number of states where many conveyances are made with statutory form special warranty
deeds.

a. Usual Covenants
A grantor may give any or all of the following covenants, which are classified as the
“usual covenants for title.” A deed containing such covenants is called a “general
warranty deed.”

1) Covenant of Seisin
The covenant of seisin is a covenant that the grantor has the estate or interest that

Multistate 08 real property Q.indd 119 9/13/2016 4:33:25 PM

 120. REAL PROPERTY

she purports to convey. Both title and possession at the time of the grant are neces-
sary to satisfy the covenant.

2) Covenant of Right to Convey

The covenant of the right to convey is a covenant that the grantor has the power
and authority to make the grant. Title alone will ordinarily satisfy this covenant, as
will proof that the grantor was acting as the authorized agent of the titleholder.

3) Covenant Against Encumbrances

The covenant against encumbrances is a covenant assuring that there are neither
visible encumbrances (easements, profits, etc.) nor invisible encumbrances
(mortgages, etc.) against the title or interest conveyed.

4) Covenant for Quiet Enjoyment

The covenant for quiet enjoyment is a covenant that the grantee will not be
disturbed in her possession or enjoyment of the property by a third party’s lawful
claim of title.

5) Covenant of Warranty
The covenant of warranty is a covenant wherein the grantor agrees to defend on
behalf of the grantee any lawful or reasonable claims of title by a third party, and
to compensate the grantee for any loss sustained by the claim of superior title. This
covenant is generally considered to be similar to the covenant for quiet enjoyment.

6) Covenant for Further Assurances

The covenant for further assurances is a covenant to perform whatever acts are
reasonably necessary to perfect the title conveyed if it turns out to be imperfect.

7) No Implied Warranties or Covenants

In the absence of a statute, no covenants of title are implied in deeds. Moreover,
the implied (or express) covenant of marketable title found in contracts of sale of
real estate is no longer assertable once a deed has been delivered, unless fraud or
mistake is shown.

b. Breach of Covenants
Three of the covenants (seisin, right to convey, against encumbrances) are present
covenants and are breached, if at all, at the time of conveyance. Quiet enjoyment,
warranty, and further assurances are future covenants and are breached only upon
interference with the possession of the grantee or her successors. This distinction
is important in that it determines when the statute of limitations begins running and
whether a remote grantee of the covenantor can sue.

1) Covenants of Seisin and Right to Convey

The covenants of seisin and right to convey are breached at the time of convey-
ance if the grantor is not the owner of the interest she purports to convey (or has
not been authorized to so convey). If there is a breach, the grantee has a cause of
action against which the statute of limitations begins to run at the time of convey-
ance. If the grantee reconveys, the general rule is that the subsequent grantee has

Multistate 08 real property Q.indd 120 9/13/2016 4:33:25 PM

 REAL PROPERTY 121.

no right of action against the covenantor. In a few jurisdictions, it is implied that

the original grantee assigned the cause of action to the subsequent grantee, thus
permitting suit against the original grantor-covenantor. (The latter is probably the
better rule because the subsequent grantee most likely paid the original grantee the
market value.)
Example: O conveys Blackacre to A by a deed containing a covenant of
seisin. O purports to convey a fee simple, but in fact X was the
owner of Blackacre. Soon thereafter, A conveys to B. Under the
usual view, A, but not B, may recover from O. In a few jurisdic-
tions, it is implied that A assigned her cause of action to B.

2) Covenant Against Encumbrances

The covenant against encumbrances is breached and a cause of action arises at
the time of conveyance if the property is encumbered. Most jurisdictions hold that
the covenant is breached even if the grantee knew of the encumbrance, whether it
be an encumbrance on title (e.g., a mortgage) or a physical encumbrance (e.g., an
easement or servitude), but others hold there is no breach if the grantee knew of a
physical encumbrance.

These jurisdictions charge grantees with constructive notice of visible physical

encumbrances (e.g., right-of-way). Several cases go so far as to hold that a covenant
against encumbrances is not breached where the encumbrance (“visible” or not)
is a benefit to the land involved (e.g., an easement for a sewer or for an adjacent
street). As with the covenants of seisin and right to convey, this covenant cannot
be enforced by a remote grantee in the majority of states.

3) Covenants for Quiet Enjoyment, Warranty, and Further Assurances

Covenants for quiet enjoyment, warranty, and further assurances are not breached
until a third party interferes with the possession of the grantee or her successors.
(But note: A covenant for quiet enjoyment or of warranty is not breached by the
covenantor’s refusal to defend title against a wrongful claim or eviction by a third
party.)
a) Covenant Runs to Successive Grantees
These covenants are viewed as “continuous”; i.e., they can be breached a
number of times. Their benefit “runs” with the grantee’s estate (unlike the
present covenants discussed above).
Example: O conveys to A by a deed containing a covenant of warranty.
A thereafter conveys to B and B to C, and then C is evicted by
a third party with title that was paramount when O conveyed
to A. C can successfully sue O.

b) Requirement of Notice
The covenantor is not liable on her covenant of warranty or of further assur-
ances unless the party seeking to hold her liable gives her notice of the claim
against the title she conveyed.
c) Any Disturbance of Possession
Most courts hold that any disturbance of possession suffices to constitute a

Multistate 08 real property Q.indd 121 9/13/2016 4:33:25 PM

 122. REAL PROPERTY

breach. Thus, if the covenantee cannot obtain complete possession or pays

off an adverse, paramount claim in order to retain possession, this is a suffi-
cient disturbance of possession. Compare: A disturbance of the covenan-
tee’s possession is not required as a prerequisite to recovery for breach of
covenants of seisin, right to convey, or against encumbrances.

c. Damages and Remote Grantees

Suppose successive conveyances from O to A to B to C, each conveyance containing
full covenants. C is evicted by X, who was the true owner when O conveyed to A. C
may sue O, A, or B because each gave a covenant of warranty the benefit of which “ran”
with the land. But what is the measure of C’s recovery? Is it the consideration the defen-
dant (i.e., O, A, or B) received? Is it the consideration C paid (an indemnity theory) so
that if C was a donee, she gets nothing?

Many states permit C to recover to the extent of the consideration received by the
defendant-covenantor (even though it exceeds the consideration paid by C). Under this
view, defendant-shopping is advisable (to sue whomever received most). The defen-
dant who is held liable then has a cause of action against any prior covenantor, until
ultimately O is held liable. In other states, C can recover only the actual consideration
she paid (but not to exceed the amount received by the defendant-covenantor).

2. Statutory Special Warranty Deed

Statutes in many states provide that (unless expressly negated) the use of the word “grant” in
a conveyance creates by implication the following two limited assurances against acts of the
grantor (not her predecessors): (i) that prior to the time of the execution of such conveyance,
the grantor has not conveyed the same estate or any interest therein to any person other
than the grantee; and (ii) that the estate conveyed is free from encumbrances made by the
grantor.

3. Quitclaim Deeds
A quitclaim deed is basically a release of whatever interest, if any, the grantor has in the
property. Hence, the use of covenants warranting the grantor’s title is basically inconsistent
with this type of deed; i.e., if the deed contains warranties, it is not a quitclaim deed.

4. Estoppel by Deed
If a grantor purports to convey an estate in property that she does not then own, her subse-
quent acquisition of title to the property will automatically inure to the benefit of the
grantee. In other words, the grantor impliedly covenants that she will convey title immedi-
ately upon its acquisition.
Example: On Day 1, A, who does not own Blackacre, purports to convey Blackacre to B
by general warranty deed. On Day 1, B has no interest in Blackacre. On Day
3, A acquires Blackacre from O. That interest automatically passes to B, so
that on Day 3 B owns Blackacre. A’s warranties will prevent her from denying
ownership when she executed the deed on Day 1.

a. Applies to Warranty Deeds

The doctrine is most frequently applied where the conveyance is by warranty deed.
Regardless of covenants for title, many courts hold that if the deed expressly purports

Multistate 08 real property Q.indd 122 9/13/2016 4:33:25 PM

 REAL PROPERTY 123.

to convey a fee simple or other particular estate, the grantee is entitled to that estate if
later acquired by the grantor. In most states, however, the doctrine will not be applied
when the conveyance is by a quitclaim deed.

b. Rights of Subsequent Purchasers

The majority of courts hold that title inures to the benefit of the grantee only as against
the grantor (who is estopped to deny that she acquired title on behalf of the grantee).
This is a personal estoppel only. Consequently, if the grantor transfers her after-acquired
title to an innocent purchaser for value, the BFP gets good title. (There is no basis for
invoking an estoppel against an innocent purchaser without notice.)

1) Effect of Recordation by Original Grantee

If the original grantee records the deed she receives from the grantor, the question
arises as to whether this recordation imparts sufficient notice of the grantee’s
interest, so as to prevent a subsequent purchaser from being a BFP. This depends
on the subsequent grantee’s burden of searching the title. (See E.4., infra.)

c. Remedies of Grantee
In jurisdictions following the estoppel rationale, the original grantee, at her election,
may accept title to the land or sue for damages for breach of covenants for title.
However, if an innocent purchaser of the after-acquired title is involved, the grantee has
no rights against the BFP.

E. RECORDING
At common law, in nearly all cases priority was given to the grantee first in time. Thus, if O
conveyed Blackacre to A and then made an identical conveyance to B, A prevailed over B on the
theory that after the first conveyance O had no interest left to convey.

1. Recording Acts—In General

Statutes known as “recording acts” require a grantee to make some sort of recordation so
as to give “notice to the world” that title to certain property has already been conveyed, and
thus to put subsequent purchasers on guard. These statutes are in effect in some form in
every state. Basically, recording acts set up a system by which any instrument affecting title
to property located in a certain county can be recorded in that county. These acts seek to
protect all subsequent BFPs from secret, unrecorded interests of others.

a. Purpose of Recordation—Notice
Recordation is not essential to the validity of a deed, as between the grantor and
grantee. However, if a grantee does not record her instrument, she may lose out against
a subsequent BFP. By recording, the grantee gives constructive (or “record”) notice to
everyone. Hence, as stated earlier, proper recording prevents anyone from becoming a
subsequent BFP.

b. Requirements for Recordation

1) What Can Be Recorded—Instrument Affecting an Interest in Land

Practically every kind of deed, mortgage, contract to convey, or other instrument
creating or affecting an interest in land can be recorded. Note: A judgment or

Multistate 08 real property Q.indd 123 9/13/2016 4:33:25 PM

 124. REAL PROPERTY

decree affecting title to property can also be recorded. And, even before judgment,
where a lawsuit is pending that may affect title to property, any party to the
action can record a lis pendens (notice of pending action), which will effectively
put third parties on notice of all claims pending in the lawsuit.

2) Grantor Must Acknowledge Deed

Most recording statutes provide that, in order to be recorded, a deed must be
acknowledged by the grantor before a notary public. This requirement offers some
protection against forgery. Problems may arise if the recorder records a deed that
has not been acknowledged or has been improperly acknowledged.

c. Mechanics of Recording

1) Filing Copy
The grantee or her agent normally presents the deed to the county recorder, who
photographs it and files the copy in the official records. These records are kept
chronologically.

2) Indexing
The recorder also indexes the deed to permit title searches. The usual indexes
are the grantor-grantee and grantee-grantor indexes, which are arranged by refer-
ence to the parties to the conveyance. Tract indexes, which index the property by
location, exist in some urban localities.

2. Types of Recording Acts

There are three major types of recording acts, classified as “notice,” “race-notice,” and “race”
statutes. Note that the burden is on the subsequent taker to prove that he qualifies for protec-
tion under the statute.

a. Notice Statutes
Under a notice statute, a subsequent BFP (i.e., a person who gives valuable consider-
ation and has no notice of the prior instrument) prevails over a prior grantee who failed
to record. The important fact under a notice statute is that the subsequent purchaser had
no actual or constructive notice at the time of the conveyance. Constructive notice
includes both record notice and inquiry notice (see 3.b.3), infra). A typical notice statute
provides:

A conveyance of an interest in land, other than a lease for less than one year, shall not
be valid against any subsequent purchaser for value, without notice thereof, unless the
conveyance is recorded.

Note also that the subsequent BFP is protected, regardless of whether she records at all.
Example: On January 1, O conveys Blackacre to A. A does not record. On January
15, O conveys Blackacre to B, who gives valuable consideration and has
no notice of the deed from O to A. B prevails over A.

What if A records before B? Suppose in the example above that A

recorded on January 18, and B never recorded. This is irrelevant under a

Multistate 08 real property Q.indd 124 9/13/2016 4:33:25 PM

 REAL PROPERTY 125.

“notice” statute, because B had no notice at the time of her conveyance

from O. B is protected against a prior purchaser even though B does
not record her deed (this is the difference between “notice” and “race-
notice” statutes). Of course, if B does not record, she runs the risk that a
subsequent purchaser will prevail over her, just as she prevailed over A.

b. Race-Notice Statutes
Under a race-notice statute, a subsequent BFP is protected only if she records before
the prior grantee. Rationale: The best evidence of which deed was delivered first is to
determine who recorded first. To obviate questions about the time of delivery and to add
an inducement to record promptly, race-notice statutes impose on the BFP the additional
requirement that she record first. A typical race-notice statute provides:

Any conveyance of an interest in land, other than a lease for less than one year, shall
not be valid against any subsequent purchaser for value, without notice thereof, whose
conveyance is first recorded.
Example: On January 1, O conveys Blackacre to A. A does not record. On January
15, O conveys Blackacre to B. On January 18, A records. On January 20,
B records. A prevails over B because B did not record first.

c. Race Statutes
Under a pure race statute, whoever records first wins. Actual notice is irrelevant. The
rationale is that actual notice depends upon extrinsic evidence, which may be unreliable.
Very few states have race statutes.
Example: On January 1, O conveys Blackacre to A. A does not record. On January
15, O conveys Blackacre to B. B knows of the deed to A. B records.
Then A records. B prevails over A because she recorded first. It is
immaterial that she had actual notice of A’s interest.

3. Who Is Protected by Recording Acts

Only bona fide purchasers (“BFPs”) are entitled to prevail against a prior transferee under
“notice” and “race-notice” statutes. To attain this status, a person must satisfy three require-
ments (each of which is discussed in detail below). The person must:

(i) Be a purchaser (or mortgagee or creditor if the statute so allows; see below);

(ii) Take without notice (actual, constructive, or inquiry) of the prior instrument; and

(iii) Pay valuable consideration.

Note: If these requirements are not met, the person is not protected by the recording acts, so
that the common law rule of first in time prevails.
Example: O, the owner of Blackacre, executes a contract of sale of the land to A on
Monday. A immediately records the contract. On Tuesday, O deeds the land
to B. B pays valuable consideration for the land, but is not a BFP because B is
held to have constructive notice of A’s rights. Result: A is entitled to enforce
the contract against B, paying B the rest of the price and compelling B to
deliver a deed to A. (If A had failed to record the contract, and B had no other

Multistate 08 real property Q.indd 125 9/13/2016 4:33:25 PM

 126. REAL PROPERTY

notice of it, B would have taken free of A’s contract rights. A would have
an action in damages against O for breach of contract, but would not have a
claim for specific performance against B.)

a. Purchasers
All recording acts protect purchasers (of the fee or any lesser estate).

1) Donees, Heirs, and Devisees Not Protected

Donees, heirs, and devisees are not protected because they do not give value for
their interests.
Example: O, the owner of Blackacre, conveys it to A on Monday. A fails to
record. O dies on Tuesday and his heirs/devisees succeed to his
property interests. Even though O’s heirs/devisees may be unaware
of the prior conveyance of Blackacre to A, A prevails.

2) Purchaser from Donee, Heir, or Devisee

A person who buys land from the donee, heir, or devisee of the record owner is
protected against a prior unrecorded conveyance from the record owner.
Example: O conveys Blackacre to A, who does not record. O dies, leaving
H as her heir. (H does not prevail over A because he is not a
purchaser.) H conveys to B, a BFP, who records. B prevails over A
in nearly all jurisdictions.

An heir who purchases the interests of her co-heirs, without notice of the prior
unrecorded conveyance, is entitled to the same protection as any other purchaser to
the extent of her purchase.

3) Mortgagees
Mortgagees for value are treated as “purchasers,” either expressly by the recording
act or by judicial classification.
Example: O, the owner of a parcel in State X known as Blackacre, deeds the
parcel to A on Monday, but A fails to record the deed. On Tuesday,
O executes a mortgage to Bank. State X has a race-notice recording
statute. Bank is a good faith purchaser for value, and immediately
records its mortgage. Result: Bank has a valid mortgage on the
land, while the title to the land is held by A. (If Bank had not been
a BFP, or had failed to record, A would hold the title free of Bank’s
mortgage.)

4) Judgment Creditors
In nearly all states, a plaintiff who obtains a money judgment can obtain, by
statute, a judgment lien on the defendant’s real estate. A typical statute reads as
follows:

Any judgment properly filed shall, for 10 years from filing, be a lien on the real
property then owned or subsequently acquired by any person against whom the
judgment is rendered.

Multistate 08 real property Q.indd 126 9/13/2016 4:33:25 PM

 REAL PROPERTY 127.

Is a plaintiff who obtains a judgment lien under such a statute protected by the
recording acts from a prior unrecorded conveyance made by the defendant? The
cases are split, but the majority holds that the judgment lienor is not protected.
These courts usually reason either (i) the plaintiff is not a BFP because he did not
pay value for the judgment, or (ii) the judgment attaches only to property “owned”
by the defendant, and not to property the defendant has previously conveyed away,
even if that conveyance was not recorded.
Example: On January 1, O grants a mortgage on Blackacre to A. A does not
record the mortgage. On January 15, B, who had previously sued
O on a tort claim, obtains and properly files a judgment against O.
B has no knowledge of the mortgage from O to A. Which lien has
priority, A’s mortgage or B’s judgment lien? By the majority view,
A has priority despite A’s failure to record the mortgage. B is not
protected by the recording act.

5) Transferees from Bona Fide Purchaser—Shelter Rule

A person who takes from a BFP will prevail against any interest that the trans-
feror-BFP would have prevailed against. This is true even where the transferee had
actual knowledge of the prior unrecorded interest.
Example: O conveys to A, who fails to record. O then conveys to B, a BFP,
who records. B then conveys to C, who has actual knowledge of
the O to A deed. C prevails over A. (And this is true whether C is a
donee or purchaser.)

a) Rationale
If the rule were otherwise, a BFP might not be able to convey an interest in
the land. The transferee is not protected for her own sake, but rather for the
sake of the BFP from whom she received title.

b) Exception—No “Shipping Through”

This rule will not help someone who previously held title and had notice
of the unrecorded interest. In the example above, if O repurchased from B,
O would have notice of A’s interest and could not claim the benefit of the
“shelter rule.”

6) Purchaser Under Installment Land Contract

In most states, a purchaser who has paid only part of the purchase price under an
installment land contract (see VII.A.3., infra) is protected by the recording acts
only to the extent of payment made. In a dispute between the contract purchaser
and a prior claimant, the court may:

(i) Award the contract purchaser a share of the property as a tenant in common
equal to the proportion of payments made;

(ii) Award the land to the prior claimant, but give the contract purchaser a lien on
the property to the extent of the amount paid [Westpark, Inc. v. Seaton Land
Co., 171 A.2d 736 (Md. 1961)]; or

Multistate 08 real property Q.indd 127 9/13/2016 4:33:25 PM

 128. REAL PROPERTY

(iii) Award the land to the contract purchaser, but give the prior claimant a lien on
the property to the extent of the balance still owed [Sparks v. Taylor, 90 S.W.
485 (Tex. 1906)].

Example: O conveys Blackacre to A, who does not record. O then conveys

Blackacre to B as a gift. B, knowing nothing of the O-A convey-
ance, records her deed. B then sells Blackacre to C for $100,000
via an installment land contract. C is to make four payments of
$25,000. C makes the first payment and records his deed. A learns
of the B-C conveyance and files suit against C to quiet title. Result:
The court may (i) award C a one-fourth interest in Blackacre as a
tenant in common; (ii) award Blackacre to A, but order A to pay
C $25,000; or (iii) award Blackacre to C, but order C to pay the
remaining $75,000 to A.

a) Exception—Shelter Rule
If B in the example above were a BFP, the shelter rule would apply and C
would be fully protected even though C had notice of the O-A conveyance
partway through C’s payments.

b. Without Notice
“Without notice” means that the purchaser had no actual, record, or inquiry notice of
the prior conveyance at the time she paid the consideration and received her interest
in the land. While no one has a legal duty to perform a title search, a subsequent
purchaser will be charged with the notice that such a search would provide, whether or
not she actually searches. However, the fact that the purchaser obtains knowledge of the
adverse claim after the conveyance but before she records it is immaterial; she only has
to be “without notice” at the time of the conveyance.

1) Actual Notice
The subsequent purchaser must show that she did not actually know of any prior
unrecorded conveyance. Actual notice includes knowledge obtained from any
source (e.g., newspaper, word-of-mouth, etc.).

2) Record Notice—Chain of Title

The fact that a deed has been recorded does not always mean that a purchaser will
be charged with notice of it. A subsequent purchaser will be held to have record
notice only if the deed in question is recorded “in the chain of title,” which means
that it is recorded in a fashion that a searcher could reasonably find it. There are
several situations in which a deed might be recorded, but very difficult or impos-
sible for a search to locate.

a) “Wild Deeds”
A “wild deed” is a recorded deed that is not connected to the chain of title. It
does not give constructive notice because the subsequent BFP cannot feasibly
find it.
Example: O owns Blackacre, which she contracts to sell to A. The
contract is not recorded, and O remains in possession. A

Multistate 08 real property Q.indd 128 9/13/2016 4:33:25 PM

 REAL PROPERTY 129.

thereupon conveys Blackacre by deed to B, and B records.

O then conveys Blackacre by deed to C. Did B’s recordation
charge C with constructive notice of B’s claim to equitable title
to Blackacre derived through A? No. C is not charged with
notice because there was no way for him to find the A‑B deed.
Nothing related it to O. It was not in O’s chain of title; it was a
“wild deed.”

Compare: If the jurisdiction maintained a tract index, it would not

be hard to find that A-B deed. It would be indexed under
Blackacre’s block and lot number. But it is impossible to find
in a grantor-grantee index without looking at the descriptions
of all the recorded properties.

b) Deeds Recorded Late

A deed recorded after the grantor therein is shown by the record to have
parted with title through another (subsequent) instrument is not constructive
notice in most states.
Example: O conveys to A on May 1. O conveys to B, a donee, on May
15. B records on June 1. A records on June 15. B conveys to C
on July 1. C has no actual notice of the O-A deed.
B v. A: As between A and B, A would win because B (a
donee) was not a BFP.
C v. A: In notice statute jurisdictions, most courts hold that C
will prevail over A because the O-A deed was recorded “late”
and is not in C’s chain of title; i.e., the search burden is too
great if C is required to search “down” the grantor index to the
present time for each grantor in the chain.
In several race-notice jurisdictions, however, A’s recordation is
treated as giving constructive notice to any purchaser subse-
quent to such recordation. In these states, the title searcher
must search to the present date under the name of each
person who ever owned the property in order to pick up deeds
recorded late.
(1) Exception—Shelter Rule
If B in the example above were a BFP, C would win in any event, for
she would “shelter” under B. This result would be the same even if C
had actual knowledge of the O-A deed; otherwise B’s power to transfer
would be restricted.

(2) Lis Pendens Protection

What can A do to protect herself when she records her deed and finds
the O-B deed on record? She can bring suit against B to expunge B’s
deed and file a lis pendens (litigation pending) notice under B’s name, so
any purchaser from B will have notice of A’s claim.

Multistate 08 real property Q.indd 129 9/13/2016 4:33:25 PM

 130. REAL PROPERTY

c) Deeds Recorded Before Grantor Obtained Title

There is a split of authority on whether a recorded deed, obtained from a
grantor who had no title at that time but who afterwards obtains title, is
constructive notice to a subsequent purchaser from the same grantor.
Example: Suppose that on June 1, O owns Blackacre, but on that
same day, A conveys Blackacre by warranty deed to B who
promptly records. On July 2, O conveys Blackacre to A, and
this deed is also promptly recorded. On August 3, A conveys
Blackacre to C, a BFP who has no actual notice of the prior
A‑B deed.
Majority view: Most courts protect C over B on the theory
that a deed from A that was recorded prior to the time title
came to A is not in the chain of title and so does not give C
constructive notice of B’s claim to Blackacre. Rationale: It
would put an excessive burden on the title searcher to have to
search the index under each grantor’s name prior to the date
the grantor acquired title.
Minority view: However, a minority of courts protect B over
C on the basis that as soon as A acquired title from O, it
transferred automatically to B by virtue of A’s earlier deed to
B. Therefore, A had nothing to transfer to C. (Criticism: The
minority view sharply increases the costs of title search.)
d) Deed in Chain Referring to Instrument Outside Chain
If a recorded document in the chain of title refers to another instrument, such
reference may be sufficient to impart constructive notice of the other instru-
ment, even if it is unrecorded or is not itself in the chain of title.
Example: O mortgages Blackacre to A, who does not record. Later, O
sells Blackacre to B by deed which recites that title is subject
to A’s mortgage. This deed is recorded. B then sells to C.
C takes subject to A’s mortgage, even though it was never
recorded, because of the reference to it in the OB deed.
e) Restrictive Covenants—Deeds from Common Grantor
(1) Subdivision Restrictions
Suppose that O, a subdivider, is developing a residential subdivision.
She sells lot #1 to A, and the deed provides that lot #1 is restricted to
residential use. The deed also provides that “O on behalf of herself, her
heirs, and assigns promises to use her remaining lots (#2, #3, etc.) for
residential purposes only.” A records the deed. O then sells lot #2 to B.
The deed to B contains no restrictions. B wishes to erect a gas station.
Is B bound by the restrictions in the OA deed of which he had no actual
notice? The courts are split.
(a) Some charge B with reading all deeds given by a common grantor,
not just the deeds to his particular tract. Hence, B has constructive
notice and is bound by the restriction.

Multistate 08 real property Q.indd 130 9/13/2016 4:33:25 PM

 REAL PROPERTY 131.

(b) However, the better view is contra; i.e., because the burden of title
search would be excessive, deeds to other lots given by a common
grantor are not in B’s chain of title. (But if B has actual or inquiry
notice of the restriction, it may be enforced as an equitable servi-
tude; see IV.E., supra.)
(2) Adjacent Lots
Suppose that O owns lot #1 and lot #2. She grants lot #2 to A with an
easement of way over lot #1. The deed to A is indexed as a deed to lot
#2; no mention is made of lot #1. Subsequently, O conveys lot #1 to B
without mentioning the easement. As with subdivision restrictions, the
courts are split as to whether B is required to read O’s deeds of adjoining
lots.

f) Marketable Title Acts

In some states, a search cut-off date is established by statute; e.g., defects of
title reaching back farther than 40 years are barred (a title searcher need only
check the chain of title back 40 years). The exact cut-off point varies from
state to state.

3) Inquiry Notice
Inquiry notice means that if the subsequent grantee is bound to make reasonable
inquiry, she will be held to have knowledge of any facts that such inquiry would
have revealed (even though she made none).

a) Generally No Inquiry from Quitclaim Deed

In a majority of states, quitclaim grantees are treated the same as warranty
deed grantees under the recording system; i.e., they are not charged with
inquiry notice from the mere fact that a quitclaim deed was used.

b) Inquiry from References in Recorded Instruments

If a recorded instrument makes reference to an unrecorded transaction, the
grantee is bound to make inquiry to discover the nature and character of the
unrecorded transaction.
Example: O grants an easement in Blackacre to A, who does not record.
O thereafter conveys the fee to B and in the deed states
that the property is “subject to an easement.” B records. C
purchases Blackacre from B without any knowledge of the
easement. The reference to the easement in the OB deed
creates a duty to inquire concerning the easement. If a reason-
able inquiry would have informed C of the easement, she has
notice of it even though the deed of the easement was never
recorded. (Remember the grantee is charged with construc-
tive knowledge of the fruits of a reasonable inquiry even
though she made no inquiry.) Thus, C will take subject to A’s
unrecorded interest in Blackacre.
c) Inquiry from Unrecorded Instruments in Chain of Title
Suppose O, the record owner, conveys a life estate to A by a deed that is not

Multistate 08 real property Q.indd 131 9/13/2016 4:33:25 PM

 132. REAL PROPERTY

recorded. Thereafter, A purports to convey a fee simple to B, a purchaser for

valuable consideration, without actual notice that A merely has a life estate.
O would prevail over B with respect to the remainder interest because when
a grantor’s deed is unrecorded, the grantee is expected—at her peril—to
demand a viewing of her grantor’s title documents at the time of the purchase
and insist that they be recorded.

d) Inquiry from Possession

A title search is not complete without an examination of possession. If the
possession is unexplained by the record, the subsequent purchaser is obligated
to make inquiry. The subsequent purchaser is charged with knowledge of
whatever an inspection of the property would have disclosed and anything
that would have been disclosed by inquiring of the possessor.
Example: O, the owner of Blackacre, conveys it to A, who fails to record.
However, A goes into possession of Blackacre. Thereafter,
O executes an identical conveyance of Blackacre to B, who
purchases for valuable consideration and without actual notice
of the prior unrecorded conveyance to A. A majority of states
hold that B is placed on constructive notice of A’s interest. An
examination of possession would have revealed A’s presence,
and A’s possession is inconsistent with O’s ownership.

Similarly, the physical appearance of the land may give notice of an adverse
interest. For example, tire tracks passing over the land to an adjacent parcel
may give notice of an easement.

c. Valuable Consideration
A person is protected by the recording statute only from the time that valuable consid-
eration was given. Thus, if a deed was delivered before the consideration was paid,
the purchaser will not prevail over deeds recorded before the consideration was given.
Valuable consideration must be more than merely nominal. A person who claims to be a
BFP must prove that real consideration was paid.

1) Test—Substantial Pecuniary Value

The test is different from that of contract law, where any consideration suffices
to support a contract. Here, the claimant must show that he is not a donee but a
purchaser. The consideration need not be adequate, nor the market value of the
property, but it must be of substantial pecuniary value. (“Love and affection” is not
valuable consideration.)

2) Property Received as Security for Antecedent Debts Is Insufficient

One who receives a deed or mortgage only as security for a preexisting debt has
not given valuable consideration.
Example: O becomes indebted to A. O conveys Blackacre to B, who does
not record. O then gives A a mortgage on Blackacre to secure the
indebtedness, and A records. A did not give valuable consideration,
and B prevails over A.

Multistate 08 real property Q.indd 132 9/13/2016 4:33:25 PM

 REAL PROPERTY 133.

4. Title Search
Suppose O has contracted to sell Blackacre to A. Prior to closing, A, the buyer, will have
a title search performed to assure herself that O really owns Blackacre and to determine if
there are any encumbrances on O’s title. How will A’s title searcher(s) proceed?

a. Tract Index Search

In a tract index jurisdiction, the job is comparatively easy. The searcher looks at the
page indexed by block and/or lot describing Blackacre and at a glance can see prior
recorded instruments conveying, mortgaging, or otherwise dealing with Blackacre.

b. Grantor and Grantee Index Search

The search is much more complicated in a grantor and grantee index jurisdiction.
Examples: 1) V owned Blackacre in 1935. In 1965, V conveyed Blackacre to W. In
1990, W conveyed Blackacre to X. In 1995, X gave B Bank a mortgage
on the property. In 2005, X conveyed Blackacre to O. O contracts to sell
the land to A. A’s title searcher will look in the grantee index under O’s
name from the present back to 2005, when she finds the deed from X,
then under X’s name from 2005 to 1990, when she finds the deed from
W to X, then under W’s name from 1990 to 1965, then under V’s name
from 1965 backward. The searcher will then look in the grantor index
under V’s name from 1935 to 1965, under W’s name from 1965 to 1990,
under X’s name from 1990 to 2005, and under O’s name from 2005 to
the present. In this manner, she will pick up the mortgage to B Bank,
which was recorded in 1995 in the grantor index under X’s name.

2) O

1980 A(N/R)
1990 B(R but Notice)

2000 A(R)
2014 C(R)

1980 O conveys to A.

1990 O executes an identical conveyance of Blackacre to B. B pays

valuable consideration, but B has actual knowledge of the prior
unrecorded conveyance to A. B records.

2000 A records.

2014 B conveys his interest in Blackacre to C, who purchases without

notice of the conveyance to A and who pays valuable consideration.

Multistate 08 real property Q.indd 133 9/13/2016 4:33:26 PM

 134. REAL PROPERTY

In searching the title, C will first look in the grantee index under B’s name
to discover if his seller, B, ever acquired title. He will find that B acquired
title in 1990 from O. Next, he will look in the grantor index under B’s
name to discover if B made any prior conveyances, and then will look in
the grantee index once again, this time under O’s name, to discover if O
ever acquired title. C will find that O acquired title in 1970. Then he will
look in the grantor index under O’s name to discover if O made a convey-
ance prior to his conveyance to B. Under the majority rule, C is required
to look under O’s name in the grantor index only through 1990. C will
find no conveyances. In 1990, C will find the recorded conveyance to B
and he need look no further. On this basis, C will not find the recorded
conveyance to A because A recorded after 1990. A’s recording is “out of
the chain of title,” and therefore C is not charged with notice.
Under a pure notice or race-notice statute, as between A and B, A will
prevail because B, having knowledge of A’s unrecorded conveyance, is
not a protected party. However, as between A and C, many courts hold
that C should prevail because A’s recording is out of the chain of title.
The cases are split. Because notice is irrelevant under pure race statutes,
B would prevail over A because B recorded first. Once it is established
that B prevails over A, C obviously takes good title.
c. Other Instruments and Events Affecting Title
The title searcher’s job may be complicated by marriages and divorces (e.g., a woman’s
name may have changed between her appearance as grantee and her reappearance as
grantor) and by the fact that a number of interests in the land may be filed and indexed
elsewhere than in the recording office (e.g., judgment liens may appear in the trial
court’s judgment docket, and tax liens may be filed only in the tax assessor’s office).
Similarly, discovering whether land has passed by will or intestacy rather than by
conveyance may require a search of probate records.
5. Effect of Recordation
Proper recordation gives all prospective subsequent grantees constructive notice of the
existence and contents of the recorded instruments; i.e., there can be no subsequent BFPs.
Recordation also raises presumptions that the instrument has been validly delivered and that
it is authentic. These presumptions are rebuttable, not conclusive.
a. Does Not Validate Invalid Deed
As stated earlier, recordation is not necessary for a valid conveyance. Nor does recorda-
tion validate an invalid conveyance, such as a forged or undelivered deed.
b. Does Not Protect Against Interests Arising by Operation of Law
Furthermore, recordation does not protect a subsequent purchaser against interests that
arise by operation of law, rather than from a recordable document (e.g., dower rights;
prescriptive and implied easements; title by adverse possession). Because there is no
instrument to record in order to perfect such interests, the recording acts do not apply,
and subsequent purchasers take subject to the interests. (Remember: If the recording act
is inapplicable, the common law priority rules apply.)
Example: O is the record owner of Blackacre. X adversely possesses Blackacre
for the period of the statute of limitations. O then conveys Blackacre to

Multistate 08 real property Q.indd 134 9/13/2016 4:33:26 PM

 REAL PROPERTY 135.

A, a BFP. Even though X’s interest has never been recorded, X prevails
against A.

1) Exception
A court may protect a subsequent BFP from an unrecorded implied easement that
is not visible upon inspection of the premises (e.g., an underground sewer).

c. Recorder’s Mistakes
An instrument is considered recorded from and after the time it is filed at the recorder’s
office, irrespective of whether it is actually listed on the indexes. If the recorder’s office
has made an error in recording, the subsequent purchaser has an action against the
recorder’s office. There is a strong minority view that protects the searcher.

d. Effect of Recording Unacknowledged Instrument

As discussed above, the recording acts require that before an instrument can be
recorded, it must be acknowledged by the grantor before a notary. What happens if
the recorder, by oversight, records a deed that has not been acknowledged or has been
defectively acknowledged?

1) No Acknowledgment—No Constructive Notice

Because an unacknowledged deed does not qualify for recordation, it does not
give constructive notice to subsequent purchasers. Hence, unless the subsequent
purchaser has other notice of the earlier deed, the subsequent purchaser will
prevail.
Example: O conveys Blackacre to A by a deed that is not acknowledged, but
the recorder nevertheless records it. Later, O conveys to B by an
acknowledged deed, which B records. B prevails over A unless B
had actual notice of the deed from O to A (which she might have if
she searched the title records) or inquiry notice (as she would have
if A was in possession of Blackacre).
2) Compare—Defective Acknowledgment
When a recorded instrument has been acknowledged, but the acknowledgment is
defective for some reason not apparent on the face of the instrument, the better
view is that the recordation does impart constructive notice. Rationale: A hidden
defect in the acknowledgment should not be allowed to destroy the constructive
notice that the document otherwise clearly imparts. Purchasers should be entitled
to rely on what appears to be a perfectly recorded document.
Example: A deed bears what appears to be a valid acknowledgment but is in
fact invalid because the notary was disqualified to act or because
the grantor did not appear personally in front of the notary to
acknowledge her signature, as required by law.
F. CONVEYANCE BY WILL
A will is a conveyance that is prepared and executed by the property owner during life, but which
does not “speak” or operate until the date of the owner’s death. Thus, a will is “ambulatory,”
meaning that it can be revoked or modified so long as the testator is alive. Some special situations
arise when there is a change in the status of the property or beneficiaries between the time the
will is executed and the testator’s death.

Multistate 08 real property Q.indd 135 9/13/2016 4:33:26 PM

 136. REAL PROPERTY

1. Ademption
If property is specifically devised or bequeathed in the testator’s will, but the testator no
longer owns that property at the time of death, the gift is adeemed. This means that the gift
fails and is not replaced by other property. The reason that the property is no longer owned
by the testator generally does not matter; i.e., it does not matter whether the testator sold the
property or it was accidentally destroyed.
Example: T owns Blackacre and executes a will devising “Blackacre to my daughter
Mary.” Prior to his death, T sells Blackacre to A and deposits the proceeds of
the sale in a bank account. Upon T’s death, Mary is not entitled to Blackacre
or to its proceeds. Note that if the will had provided for T’s executor to sell
Blackacre and distribute the proceeds to Mary, she would be entitled to the
proceeds even though the sale occurred before T’s death.
a. Not Applicable to General Devises
Ademption does not apply unless the gift mentioned specific property. A specific devise
or legacy is one that can be satisfied only by the delivery of a particular item; it cannot
be satisfied by money. Thus, a bequest of “$10,000,” or even of “$10,000 to be paid out
of the sale of my IBM stock” cannot be adeemed.
b. Not Applicable to Land Under Executory Contract
If the testator enters into an enforceable contract of sale of property after making a
specific devise of it by will, the doctrine of equitable conversion holds that the testa-
tor’s interest is converted into personal property. Logically, an ademption has occurred,
and the proceeds of sale when the closing occurs should not pass to the specific devisee
of the property. The traditional case law agrees, but the Uniform Probate Code and
statutes in many states have reversed this result. Then, when property subject to a
specific devise is placed under contract of sale before the decedent’s death, the proceeds
of the sale will pass to the specific devisee. [See UPC §2-606]
Example: T owns Blackacre and executes a will devising “Blackacre to my
daughter Mary.” Prior to his death, T enters into a contract to sell
Blackacre to A. After T’s death the contract is completed, and A pays
the purchase price for the land. Mary is entitled to the purchase price in
substitution of the land itself.
1) No Ademption If Decedent Incompetent When Contract Formed
If the decedent is unable to enter into the contract, and instead it is entered into by
a guardian, attorney in fact, or other representative, courts usually do not apply the
equitable doctrine, and they allow the proceeds of the sale to pass to the specific
devisee.
c. Other Proceeds Not Subject to Ademption
When property is damaged or destroyed before the testator’s death but the casualty
insurance proceeds are not paid until after the testator’s death, ademption does not
usually apply. The beneficiary of the specific bequest takes the insurance proceeds.
Similarly, ademption usually does not apply to property condemned by the government
when the taking was before death but the condemnation award was paid after death.
d. Partial Ademption
If the testator specifically devises property and then sells or gives away a part of that
property, only that portion is adeemed; the remainder passes to the devisee.

Multistate 08 real property Q.indd 136 9/13/2016 4:33:26 PM

 REAL PROPERTY 137.

2. Exoneration
At common law and in some states today, if a testator makes a specific devise of real estate
that is subject to a mortgage or other lien, the devisee is entitled to have the land “exoner-
ated” by the payment of the lien from the testator’s residuary estate. Thus, the property will
pass to the devisee free of encumbrances. However, a majority of states have, by statute,
abolished the exoneration doctrine. In these states, the property will pass to the devisee
subject to a preexisting mortgage or other lien unless the will expressly provides for a payoff
of the lien. [See UPC §2-607]

3. Lapse and Anti-Lapse Statutes

A lapse occurs when the beneficiary of a gift in a will dies before the testator. Under the
common law, if a lapse occurred, the gift was void. However, nearly all states now have
statutes that prevent lapse by permitting the gift to pass to the predeceasing beneficiary’s
living descendants under certain circumstances. These statutes vary as to the scope of
beneficiaries covered.

a. Degree of Relationship to Testator

Many of the anti-lapse statutes apply only when the named beneficiary is a descen-
dant of the testator. Others apply if the beneficiary is more remotely related, such as a
descendant of the testator’s grandparent. Others apply to any relative, and still others
apply to any beneficiary at all.

1) Descendants Are Substituted

The anti-lapse statute does not save the gift for the predeceasing beneficiary’s
estate; rather it substitutes the beneficiary’s descendants for the beneficiary. Thus,
property will never pass under the anti-lapse statute to a predeceasing beneficiary’s
spouse. The property passes to the beneficiary’s descendants under the method of
distribution (e.g., per stirpes, per capita) used by the state’s intestate succession
(inheritance) statute.

b. Application to Class Gifts

Ordinarily, if a gift is made by will to a class (e.g., “to my children,” or “to the descen-
dants of my brother Bob”), and some members of the class die before the testator, the
gift is simply given to the surviving members of the class. However, if class members
within the coverage of an anti-lapse statute predecease the testator leaving surviving
issue, the statute will apply, and the issue will take the deceased class member’s share
of the gift.

c. Anti-Lapse Statute Does Not Apply If Contrary Will Provision

The anti-lapse statute does not apply if there is a contrary will provision—e.g., if the
gift is contingent on the beneficiary’s surviving the testator.

VII. SECURITY INTERESTS IN REAL ESTATE

A. TYPES OF SECURITY INTERESTS

A security interest in real estate operates to secure some other obligation, usually a promise to

Multistate 08 real property Q.indd 137 9/13/2016 4:33:26 PM

 138. REAL PROPERTY

repay a loan, which is represented by a promissory note. If the loan is not paid when due, the
holder of the security interest can either take title to the real estate or have it sold and use the
proceeds to pay the debt with accrued interest and any legal and court costs. Of the six types of
security interests, the first three are most important.

1. Mortgage
The debtor/notemaker is usually the mortgagor; he gives the mortgage (along with the note)
to the lender, who is the mortgagee. But note that the debtor and mortgagor can be different
people (e.g., a mother agrees to place a mortgage on her house to secure a loan to her
daughter). Most states require that a lender realize on the real estate to satisfy the debt only
by having a judicial (court-ordered) foreclosure sale conducted by the sheriff.

2. Deed of Trust
The debtor/notemaker is the trustor. The trustor gives the deed of trust to a third-party
trustee, who is usually closely connected with the lender (e.g., the lender’s lawyer, affiliated
corporation, or officer). In the event of default, the lender (termed the beneficiary) instructs
the trustee to proceed with foreclosing the deed of trust by sale. Many states allow the sale
to be either judicial (as with a mortgage) or nonjudicial, under a “power of sale” clause that
authorizes the trustee to advertise, give appropriate notices, and conduct the sale personally.

3. Installment Land Contract

In an installment land contract, the debtor is the purchaser of the land who signs a contract
with the vendor, agreeing to make regular installment payments until the full contract price
(including accruing interest) has been paid. Only at that time will the vendor give a deed
transferring legal title to the purchaser. In case of default, the contract may contain a forfei-
ture clause providing that the vendor may cancel the contract, retain all money paid to date,
and retake possession of the land. However, the defaulting purchaser may be entitled to resti-
tution to the extent his payments exceed the vendor's damages. (See F., infra.)

4. Absolute Deed—Equitable Mortgage

A landowner needing to raise money may “sell” the land to a person who will pay cash
and may give the “buyer” an absolute deed rather than a mortgage. This may seem to be
safer than a mortgage loan to the creditor and may seem to have tax advantages. However,
if the court concludes, by clear and convincing evidence, that the deed was really given for
security purposes, they will treat it as an “equitable” mortgage and require that the creditor
foreclose it by judicial action, like any other mortgage. This result will be indicated by the
following factors: (i) the existence of a debt or promise of payment by the deed’s grantor;
(ii) the grantee’s promise to return the land if the debt is paid; (iii) the fact that the amount
advanced to the grantor/debtor was much lower than the value of the property; (iv) the
degree of the grantor’s financial distress; and (v) the parties’ prior negotiations.

5. Sale-Leaseback
A landowner needing to raise money may sell her land to another for cash and may then
lease the land back for a long period of time. As in the case of the absolute deed, the grantor/
lessee may attack such a transaction later as a disguised mortgage. Factors that will lead the
court to such a result are: (i) the fact that the regular rent payments on the lease are virtually
identical to payments that would be due on a mortgage loan; (ii) the existence of an option
to repurchase by the grantor/lessee; and (iii) the fact that the repurchase option could be

Multistate 08 real property Q.indd 138 9/13/2016 4:33:26 PM

 REAL PROPERTY 139.

exercised for much less than the probable value of the property at that time, so that the repur-
chase would be very likely to occur.

6. Equitable Vendor’s Lien

In addition to an installment land contract (3., supra) and a purchase money mortgage
(E.2.b.3), infra), a seller may finance the buyer’s purchase of the land by an equitable
vendor’s lien. The lien does not result from an agreement, but rather arises by implication
of law when the seller transfers title to the buyer and the purchase price or a portion of the
purchase price remains unpaid.

B. TRANSFERS BY MORTGAGEE AND MORTGAGOR

All parties to a mortgage or deed of trust can transfer their interests. Ordinarily, the mortgagor
transfers by deeding the property, while the mortgagee usually transfers by indorsing the note and
executing a separate assignment of the mortgage. The note and mortgage must pass to the same
person for the transfer to be complete.

1. Transfer by Mortgagee

a. Transfer of Mortgage Without Note

The case law is divided, with some states holding that the transfer of the mortgage
automatically transfers the note as well, unless the mortgagee-transferor expressly
reserves the rights to the note (which there would rarely be any reason for the
mortgagee to do). In these states, the transferee of the mortgage can then file an
equitable action and compel a transfer of the note as well. Other states hold that,
because the note is the principal evidence of the debt, a transfer of the mortgage without
the note is a nullity and is void.

b. Transfer of Note Without Mortgage

The note can be transferred without the mortgage, but the mortgage will automatically
follow the properly transferred note, unless the mortgagee-transferor expressly reserves
the rights to the mortgage (which there would rarely be any reason for the mortgagee
to do). No separate written assignment of the mortgage is necessary, although it is
customary for the transferee to obtain and record an assignment of the mortgage.

1) Methods of Transferring the Note

The note may be transferred either by indorsing it and delivering it to the trans-
feree, or by a separate document of assignment. Only if the former method is used
can the transferee become a holder in due course under UCC Article 3.

a) Holder in Due Course Status

To be a holder in due course of the note, the following requirements must be
met:

(1) The note must be negotiable in form, which means that it must be
payable “to bearer” or “to the order of” the named payee. It must
contain a promise to pay a fixed amount of money (although an adjust-
able interest rate is permitted), and no other promises, except that it may
contain an acceleration clause and an attorneys’ fee clause.

Multistate 08 real property Q.indd 139 9/13/2016 4:33:26 PM

 140. REAL PROPERTY

(2) The original note must be indorsed (i.e., signed) by the named payee.
Indorsement on a photocopy or some other document is not acceptable.
(3) The original note must be delivered to the transferee. Delivery of a
photocopy is not acceptable.
(4) The transferee must take the note in good faith and must pay value for
it. (“Value” implies an amount that is more than nominal, although it
need not be as great as the note’s fair market value.) The transferee must
not have any notice that the note is overdue or has been dishonored, or
that the maker has any defense to the duty to pay it.
b) Benefits of Holder in Due Course Status
A holder in due course will take the note free of any personal defenses that
the maker might raise. “Personal defenses” include failure of consideration,
fraud in the inducement, waiver, estoppel, and payment. The holder in due
course is, however, still subject to “real” defenses that the maker might raise.
These include infancy, other incapacity, duress, illegality, fraud in the execu-
tion, forgery, discharge in insolvency, and any other insolvency.

2) Effect of Payment to Original Mortgagee After Transfer of Note

Under the version of the UCC enacted in a large majority of states, if the original
payee transfers possession of a negotiable instrument, a payment to the original
payee will not count, and the holder of the instrument can still demand payment.
[See UCC §3-602 (1995)] However, many notes secured by mortgages on real
property are not negotiable in form (e.g., because their promise to pay is condi-
tional or they are not payable to “bearer” or “order”). If the original mortgagee
transfers possession of a nonnegotiable note, the mortgagor’s payment to the
original mortgagee is effective against the transferee until the mortgagor receives
notice of the transfer. [Restatement (Third) of Property: Mortgages §5.5]
Example: A borrows $50,000 from B and gives B a nonnegotiable note for
that amount, secured by a mortgage on Blackacre. One year later, B
assigns the note and mortgage to C, transferring actual possession
of the note to C. Two years thereafter, A, who does not realize that
B no longer holds the note, pays $50,000 plus interest to B. This
payment is effective against C. C’s recourse is against B.

2. Transfer by Mortgagor—Grantee Takes Subject to Mortgage

If the mortgagor sells the property and conveys a deed, the grantee takes subject to the
mortgage, which remains on the land. Unless there is a specific clause in the mortgage, the
mortgagee has no power to object to the transfer.

a. Assumption
Often the grantee signs an assumption agreement, promising to pay the mortgage loan.
If she does so, she becomes primarily liable to the lender (usually considered a third-
party beneficiary), while the original mortgagor becomes secondarily liable as a surety.
Note, however, that the mortgagee may opt to sue either the grantee or the original
mortgagor on the debt. If the mortgagee and grantee modify the obligation, the original
mortgagor is completely discharged of liability.

Multistate 08 real property Q.indd 140 9/13/2016 4:33:26 PM

 REAL PROPERTY 141.

b. Nonassuming Grantee
A grantee who does not sign an assumption agreement does not become personally
liable on the loan. Instead, the original mortgagor remains primarily and personally
liable. However, if the grantee does not pay, the mortgage may be foreclosed, thus
wiping out the grantee’s investment in the land.

c. Due-on-Sale Clauses
Most modern mortgages contain “due-on-sale” clauses, which purport to allow the
lender to demand full payment of the loan if the mortgagor transfers any interest in the
property without the lender’s consent. Such clauses are designed to both: (i) protect
the lender from sale by the mortgagor to a poor credit risk or to a person likely to
commit waste; and (ii) allow the lender to raise the interest rate or charge an “assump-
tion fee” when the property is sold. Federal law preempts state law and makes due-on-
sale clauses enforceable for all types of institutional mortgage lenders on all types of
real estate. The preemption does not apply to isolated mortgage loans made by private
parties.
C. DEFENSES AND DISCHARGE OF THE MORTGAGE
1. Defenses to Underlying Obligation
Because a mortgage is granted to secure an obligation, if the obligation is unenforceable so
is the mortgage. Therefore, defenses in an action on the underlying obligation are defenses
against an action on the mortgage, including: (i) failure of consideration, (ii) duress, (iii)
mistake, or (iv) fraud.

2. Consumer Protection Defenses to Foreclosure

Rules and regulations designed to protect consumers from unfair lending practices became
extremely common after the 2008 foreclosure crisis. These rules provide mortgagors
defenses in foreclosure proceedings.

a. Consumer Rights When Mortgage Is Signed

The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank
Act”) requires residential mortgage lenders to determine a mortgagor’s ability to repay
before extending a loan. The terms of the loan must be understandable and not unfair,
deceptive, or abusive. The Act also prohibits a lender from steering mortgagors to
transactions not in their interest in an effort to increase the lender’s compensation. [15
U.S.C. §§1639b, 1639c] The mortgagor can assert violations of the ability to repay or
anti-steering provisions as a defense in a foreclosure proceeding. [15 U.S.C. §1640(k)]

b. Consumer Rights During Foreclosure Process

After a mortgagor has defaulted on a mortgage, the mortgagee must, in good faith,
consider a request made by the mortgagor for a modification of the mortgage or other
alternative to foreclosure. The mortgagee cannot file an action to foreclose in court
while such a request is pending, and if the request is made after the action is filed, the
mortgagee cannot proceed to foreclosure sale until the request is resolved. [24 C.F.R.
§203.606]

c. Choice of Law
The law of the state in which the property is located governs mortgages. So, while a

Multistate 08 real property Q.indd 141 9/13/2016 4:33:26 PM

 142. REAL PROPERTY

mortgagee might be tempted to include a choice of law clause in a mortgage that selects
the law of a state that has less stringent foreclosure consumer protection laws, such
clauses are generally void.

3. Discharge of the Mortgage

A mortgagee’s right to foreclose is precluded by anything amounting to a discharge of the
mortgage, such as payment of the debt secured, merger of the legal and equitable interests, or
the acceptance by the mortgagee of a deed in lieu of foreclosure tendered by the mortgagor.

a. Payment
Generally, full payment of the note discharges the mortgage lien. The agreement in the
note, however, will normally govern whether the mortgagor may prepay the obligation.
If the note or mortgage does not provide for prepayment, the mortgagor has no right to
prepayment. The mortgage may also provide for a prepayment fee or a total prohibition
of prepayment for part or all of the mortgage term. Note: The Dodd-Frank Act prohibits
prepayment penalties on certain loans (e.g., adjustable rate, interest-only). [15 U.S.C.
§1639c(c)]

b. Merger
A mortgage lien vests the mortgagee with either an equitable interest (lien theory) or
a legal interest (title theory), while the mortgagor retains the other interest (see D.1.,
infra). If the mortgagee subsequently acquires the mortgagor’s interest, the mortgage
is said to merge with the title, and the mortgagor’s personal liability on the underlying
debt is discharged up to the value of the land.

c. Deed in Lieu of Foreclosure

The mortgagor may also tender to the mortgagee a deed in lieu of foreclosure. In
effect, the mortgagor simply turns over her equity of redemption (see E.1.a., infra) to
the mortgagee. Acceptance of a deed in lieu of foreclosure permits the mortgagee to
take immediate possession without the formalities of a foreclosure sale. Although it is
common to negotiate a complete release from the debt, the parties also have the option
to negotiate a mortgagor’s agreement to remain liable on some portion of the debt.
Mortgagors cannot be compelled to tender such a deed, and mortgagees have the right
to refuse the deed and proceed to foreclosure.

D. POSSESSION BEFORE FORECLOSURE

When a mortgagor defaults on his debt, the mortgagee can sue on the debt or foreclose on the
mortgage. A mortgagee may wish to take possession of the property, or begin receiving the rents
from the property, before foreclosure. This is especially important in states where foreclosure is a
lengthy process.

1. Theories of Title
The mortgagee may have a right to take possession before foreclosure, depending on the
theory the state follows.

a. The Lien Theory

According to the lien theory, the mortgagee is considered the holder of a security
interest only and the mortgagor is deemed the owner of the land until foreclosure. A

Multistate 08 real property Q.indd 142 9/13/2016 4:33:26 PM

 REAL PROPERTY 143.

majority of the states follow this theory, which provides that the mortgagee may not
have possession before foreclosure.

b. The Title Theory

Under the title theory, legal title is in the mortgagee until the mortgage has been
satisfied or foreclosed. A minority of states follow this theory, which provides that the
mortgagee is entitled to possession upon demand at any time. In practice, this means
that as soon as a default occurs, the mortgagee can take possession.

c. The Intermediate Theory

The intermediate theory is a compromise position in which legal title is in the
mortgagor until default, and upon default, legal title is in the mortgagee. Only a
handful of states follow this theory, which provides that the mortgagee may demand
possession when a default occurs. There is little practical difference between this theory
and the title theory.

2. Mortgagor Consent and Abandonment

All states agree that the mortgagee may take possession if the mortgagor gives consent to do
so, or if the mortgagor abandons the property.

3. Risks of Mortgagee in Possession

The mortgagee who takes possession prior to foreclosure can intercept the rents, prevent
waste, make repairs, and lease out vacant space. However, despite these advantages, most
mortgagees do not wish to take possession because of the liability risks it presents. These
risks include a very strict duty to account for all rents received, a duty to manage the
property in a careful and prudent manner, and potential liability in tort to anyone injured on
the property.

4. Receiverships
Instead of becoming a “mortgagee in possession,” most mortgagees attempt to intercept the
rents before foreclosure by getting a receiver appointed by the court to manage the property.
Courts will generally appoint receivers for rental property upon a showing of some combina-
tion of three factors: (i) that waste is occurring, (ii) that the value of the property is inade-
quate to secure the debt, and (iii) that the mortgagor is insolvent.

E. FORECLOSURE
Foreclosure is a process by which the mortgagor’s interest in the property is terminated. The
property is generally sold to satisfy the debt in whole or in part (foreclosure by sale). Almost all
states require foreclosure by sale. All states allow judicial sale, while about one-half also allow
nonjudicial sale under a power of sale. The nonjudicial sale is often permitted with deeds of trust
but not with mortgages. Foreclosure sales are conducted by auction, with the highest bidder taking
the property. The lender may bid at the sale, and in many cases the lender is the sole bidder.
(Note: For convenience, the discussion below speaks of mortgagors and mortgagees, but the same
principles apply to deed-of-trust trustors and beneficiaries.)
1. Redemption
a. Redemption in Equity
At any time prior to the foreclosure sale, the mortgagor has the right to redeem the

Multistate 08 real property Q.indd 143 9/13/2016 4:33:26 PM

 144. REAL PROPERTY

land or free it of the mortgage by paying off the amount due, together with any accrued
interest. If the mortgagor has defaulted on a mortgage or note that contains an “accel-
eration clause” permitting the mortgagee to declare the full balance due in the event of
default, the full balance must be paid in order to redeem. A mortgagor’s right to redeem
her own mortgage cannot be waived in the mortgage itself; this is known as “clogging
the equity of redemption” and is prohibited. However, the right can be waived later for
consideration.

b. Statutory Redemption
About half the states give the mortgagor (and sometimes junior lienors) a statutory right
to redeem for some fixed period after the foreclosure sale has occurred; this period is
usually six months or one year. The amount to be paid is usually the foreclosure sale
price, rather than the amount of the original debt. Be careful to distinguish equitable
redemption, which is universally recognized (but only up to the date of the sale), from
statutory redemption, which is only recognized by about half the states and applies only
after foreclosure has occurred.

2. Priorities
Generally, the priority of a mortgage is determined by the time it was placed on the property.
When a mortgage is foreclosed, the buyer at the sale will take title as it existed when the
mortgage was placed on the property. Thus, foreclosure will terminate interests junior to the
mortgage being foreclosed but will not affect senior interests.
a. Effect of Foreclosure on Various Interests
1) Junior Interests Destroyed by Foreclosure
Foreclosure destroys all interests junior to the mortgage being foreclosed. In other
words, junior mortgages, liens, leases, easements, and all other types of inter-
ests will be wiped out. If a lien senior to that of the mortgagee is in default, the
junior mortgagee has the right to pay it off (i.e., redeem it) in order to avoid being
wiped out by its foreclosure. Thus, those with interests subordinate to those of the
foreclosing party are necessary parties to the foreclosure action. Failure to include
a necessary party results in the preservation of that party’s interest despite foreclo-
sure and sale.

2) Senior Interests Not Affected

Foreclosure does not affect any interest senior to the mortgage being foreclosed.
The buyer at the sale takes subject to such interest. She does not become person-
ally liable on such senior interests, but she will be forced to pay them in order to
prevent their foreclosure in the future.

b. Modification of Priority
As noted above, priorities among mortgages on the same real estate are normally
determined simply by chronology: the earliest mortgage placed on the property is first
in priority, the next mortgage is second, and so on. However, the chronological priority
may be changed in the following ways:

1) Failure to Record
If the first mortgagee fails to record, and the second mortgagee records, gives

Multistate 08 real property Q.indd 144 9/13/2016 4:33:26 PM

 REAL PROPERTY 145.

value, and takes without notice of the first, the second mortgagee will have priority
over the first by virtue of the normal operation of the recording acts.

2) Subordination Agreement
A first mortgagee may enter into an agreement with a junior mortgagee, subordi-
nating its priority to the junior mortgagee. Such agreements are generally enforced.
However, a broad promise to subordinate to any mortgage (or a vaguely described
mortgage) to be placed on the property in the future may be considered too inequi-
table to enforce.

3) Purchase Money Mortgages

A purchase money mortgage (“PMM”) is a mortgage given to:

(i) The vendor of the property as a part of the purchase price; or

(ii) A third-party lender who is lending the funds to allow the buyer to purchase
the property.

A PMM, whether recorded or not, has priority over mortgages, liens, and other
claims against the mortgagor that arise prior to the mortgagor’s acquisition of title.
However, PMM priority is subject to being defeated by subsequent mortgages or
liens by operation of the recording acts or may be altered through a subordination
agreement. [Restatement (Third) of Property: Mortgages §7.2; Slodov v. United
States, 436 U.S. 238 (1978)]
Example: A properly records a judgment lien against O (which will attach
to any after-acquired property of O). O finances the purchase
of Blackacre with a $250,000 loan from B. B does not record
its mortgage. A few months later, O borrows $10,000 from C in
exchange for a mortgage on Blackacre. C records her mortgage.
B’s PMM has priority over A’s lien because the lien arose before O
acquired title to Blackacre (i.e., the general priority rule governing
PMMs), but it is junior to C’s mortgage under any recording act
because C had no notice of B’s interest and recorded first.

a) Vendor PMM vs. Third-Party PMM

As between two PMMs, one to the vendor and one to a third-party lender,
the vendor’s mortgage is usually given priority over the third-party lender’s.
Because both PMMs arise from the same transaction, neither is treated as
“subsequent” under the Restatement. Thus, the recording acts do not apply
unless only one party has notice of the other. However, some jurisdictions
that do not follow the Restatement allow the recording acts to determine
priority between all PMMs.

b) Third-Party PMM vs. Third-Party PMM

If two PMMs are given to two third-party lenders, their priority is deter-
mined by the chronological order in which the mortgages were placed on the
property, the recording act, and a subordination agreement (if any). Note that
in these cases, the recording acts are often of no use because two purchase

Multistate 08 real property Q.indd 145 9/13/2016 4:33:26 PM

 146. REAL PROPERTY

money mortgagees will almost always know of each other’s existence and,
thus, have notice.

4) Modification of Senior Mortgage

Suppose there are two mortgages on the land. The landowner enters into a modifi-
cation agreement with the senior mortgagee, raising its interest rate or otherwise
making it more burdensome. The junior mortgage will be given priority over
the modification. For example, if the first mortgage debt is larger because of the
modification, the second mortgage gains priority over the increase in the debt.

5) Optional Future Advances

In general, a mortgage may obligate the lender to make further advances of funds
after the mortgage is executed, and such advances will have the same priority as
the original mortgage. However, if a junior mortgage is placed on the property
and the senior lender later makes an “optional” advance while having notice of the
junior lien, the advance will lose priority to the junior lien. An optional advance
is one that the senior lender is not contractually bound to make. Numerous states
have reversed this rule by statute, but it remains the majority view.

6) Subrogation
A mortgage taken out for the purpose of refinancing a preexisting senior mortgage
takes the priority position of the senior mortgage.
Example: Bank A holds a $100,000 senior mortgage on a tract of land owned
by O. Bank B holds a $50,000 second mortgage on the same land.
Bank C loans O $100,000, secured by a new mortgage, which O
immediately uses to pay off Bank A’s mortgage. Bank C now has
the senior mortgage, and Bank B still has the junior mortgage.
Note that Bank B has not been harmed: Bank C's mortgage simply
replaced Bank A’s.

3. Proceeds of Sale
The proceeds of the foreclosure sale are used first to pay expenses of the sale, attorneys’
fees, and court costs; then to pay the principal and accrued interest on the loan that was
foreclosed; next to pay off any junior liens or other junior interests in the order of their
priority; and finally, any remaining proceeds are distributed to the mortgagor. In many
cases, there is no surplus remaining after the principal debt is paid off.

4. Deficiency Judgments
If the proceeds of the sale are insufficient to satisfy the mortgage debt, the mortgagee can
bring a personal action against the mortgagor/debtor for the deficiency. However, a number
of states limit the deficiency that can be recovered to the difference between the debt and the
property’s fair market value when the fair market value is higher than the foreclosure price.
Other states prohibit deficiency judgments entirely on PMMs and on deeds of trust that are
foreclosed by power of sale.
Examples: 1) Assume that land has a fair market value of $50,000 and is subject to three
mortgages executed by its owner, whose name is MR. The mortgages have
priorities and secure outstanding debts in the amounts shown below, which
are owed to three different creditors, ME1, ME2, and ME3:

Multistate 08 real property Q.indd 146 9/13/2016 4:33:26 PM

 REAL PROPERTY 147.

Mortgage 1
MR ME1
$30,000

Mortgage 2
MR ME2
$15,000

Mortgage 3
MR ME3
$10,000

Assume that Mortgage 1 is foreclosed, and the bid at the sale is $50,000 (the
fair value of the land). How will the funds be distributed?

In an actual case, the funds would first be used to pay any attorneys’ fees and
expenses of the foreclosure, and then to any accrued interest on Mortgage 1.
However, we will assume that these items are zero.

The $50,000 in funds from the sale will then be used to pay off the mortgages
in the order of their priority. Thus, $30,000 is applied to fully pay off
Mortgage 1. Then, $15,000 is applied to fully pay off Mortgage 2. There is
a remaining balance from the foreclosure sale of $5,000, which is applied
toward payment of Mortgage 3. Because this is not enough to discharge
Mortgage 3 fully, ME3 is left with a deficiency of $5,000, and may sue MR
for a personal judgment in this amount unless state anti‑deficiency statutes
prohibit it.

2) Assume the same facts as above, except that the bid at the sale is $60,000
rather than $50,000. This will allow full payment of Mortgage 1 ($30,000),
Mortgage 2 ($15,000), and Mortgage 3 ($10,000), and will leave a surplus of
$5,000. Assuming there are no further liens or encumbrances on the property,
this $5,000 will be paid over to MR, the mortgagor.

3) Now assume the same facts as in the original problem, except that it is
Mortgage 2 that is being foreclosed. Mortgage 1 exists, but it is either not in
default or its holder has not yet taken action to foreclose it.

Recall from the outline above that foreclosure does not affect any interest
senior to the mortgage being foreclosed. Thus, foreclosure of Mortgage 2
will not affect Mortgage 1, which will continue to exist on the property in
the hands of the foreclosure sale purchaser. Such a purchaser will not be
personally liable to pay Mortgage 1 off, but as a practical matter, if Mortgage
1 is not paid, sooner or later ME1 will foreclose it. Hence, the buyer at the
foreclosure sale of Mortgage 2 will have a strong economic incentive to pay
Mortgage 1; otherwise, she will be subjected to the foreclosure action of ME1,
and may well lose much or all of her investment in the property.

Multistate 08 real property Q.indd 147 9/13/2016 4:33:26 PM

 148. REAL PROPERTY

What will a wise bidder at the foreclosure sale on Mortgage 2 bid? The
maximum is $20,000, which is the fair value of the land ($50,000) minus
the amount the successful bidder will subsequently have to pay to discharge
Mortgage 1 ($30,000).

If the bid at the foreclosure sale of Mortgage 2 is $20,000, how will the
money be distributed? None of it will go to ME1, because he still has his
mortgage on the property. $15,000 of the funds will be applied to fully pay
off Mortgage 2, and $5,000 will remain to be applied against the $10,000
balance owed on Mortgage 3 (which is, of course, wiped out by the foreclo-
sure of Mortgage 2). ME3 will still have a $5,000 deficiency, as in the first
example above.

F. INSTALLMENT LAND CONTRACTS

Installment contracts may provide for forfeiture rather than foreclosure as the vendor’s remedy in
the event of default. However, because forfeiture is often a harsh remedy, the courts have tended to
resist enforcing forfeiture clauses and in doing so have developed the following theories:

1. Equity of Redemption
Several states allow the contract purchaser who is in default to pay off the accelerated full
balance of the contract and to keep the land. In other words, they grant the purchaser a grace
period. This is roughly analogous to the equity of redemption in mortgage law. A few states
have statutory schedules of grace periods, which often provide for a longer time if a greater
percentage of the total price has been paid.

2. Restitution
A number of decisions allow actions by the vendor for forfeiture of the land but require her
to refund to the purchaser any amount by which his payments exceed the vendor’s damages.
The court may measure these damages by the property’s fair rental value while the purchaser
was in possession or by any drop in market value since the contract was executed.

3. Treat as a Mortgage
A few states, by statute or case law, now treat installment contracts like mortgages, at least
for purposes of the vendor’s remedies. In effect, the vendor must foreclose the contract by
judicial sale in order to realize on the real estate, and she cannot simply reclaim the land.

4. Waiver
Many cases hold that where a vendor has established a pattern of accepting late payments
from the purchaser, she cannot suddenly insist on strict on-time payment and declare a forfei-
ture if such payment is not forthcoming. Such a pattern is said to constitute a waiver of strict
performance. To reinstate strict performance, the vendor must send the purchaser a notice of
her intention to do so and must allow a reasonable time for the purchaser to make up any late
payments and to get back “on stream.”

5. Election of Remedies
It is commonly held that the vendor who elects to pursue a forfeiture cannot also bring an
action for damages or for specific performance. The vendor must choose only one remedy
and forgo all others.

Multistate 08 real property Q.indd 148 9/13/2016 4:33:26 PM

 REAL PROPERTY 149.

VIII. RIGHTS INCIDENTAL TO OWNERSHIP OF LAND (NATURAL RIGHTS)

A. IN GENERAL
The owner of real property has the exclusive right to use and possess the surface, the airspace, and
the soil of the property. This right is subject to restrictions in the chain of title (e.g., easements and
covenants), to the law of nuisance, and to any valid laws or regulations that restrict the use of the
land (e.g., zoning ordinances).

B. RIGHT TO LATERAL AND SUBJACENT SUPPORT OF LAND

1. Right to Lateral Support

Ownership of land carries with it the right to have the land supported in its natural state by
adjoining land. This normally means a right to have one’s land undisturbed by withdrawal of
support (e.g., by excavations on adjoining land).

a. Support of Land in Natural State

A landowner is strictly liable if his excavation causes adjacent land to subside (i.e., slip
or cave in). Thus, he will be liable even if he used the utmost care.

b. Support of Buildings on Land

If land is improved by buildings and an adjacent landowner’s excavation causes subsid-
ence, the adjacent landowner will be strictly liable for damages to the land and build-
ings caused by the excavation only if it is shown that the land would have collapsed in
its natural state (i.e., that it would have collapsed in the absence of the buildings and
improvements). Even if the land would not have collapsed in its natural state (i.e., the
collapse would not have occurred except for the weight of the buildings), the excavating
landowner is liable for loss or damage to the land and buildings if his excavation is
found to have been done negligently. (Tort rules apply here.)

2. Right to Subjacent Support

When a landowner conveys to a grantee the right to take minerals from beneath the land,
the grantor retains the right to have the surface supported unless the conveyance expressly
includes authority to destroy the surface if “reasonably necessary” to extract the mineral.

a. Support of Land and Buildings

This right of support extends not only to the land in its natural state but also to all
buildings existing on the date when the subjacent estate is severed from the surface.
However, the underground occupant is liable for damages to subsequently erected build-
ings only if he was negligent.

b. Interference with Underground Waters

Note that an underground occupant is liable for negligently damaging springs and wells,
whereas an adjoining landowner is not liable for interfering with underground perco-
lating waters.

C. WATER RIGHTS
Different rules apply depending on whether the water rights claimed involve (i) water in water-
courses (e.g., streams, rivers, and lakes, including underground watercourses); (ii) ground or

Multistate 08 real property Q.indd 149 9/13/2016 4:33:26 PM

 150. REAL PROPERTY

percolating water (e.g., water normally pumped or drawn from wells); or (iii) surface water (e.g.,
rainfall, seepage). Exam questions normally concern who has priority to use the water from
watercourses and from the ground, and to what extent a landowner may obstruct or divert the flow
of surface water.

1. Watercourses
There are two major systems for allocation of water in watercourses: (i) the riparian
doctrine (generally applied in the eastern states where water is or was relatively abundant),
and (ii) the prior appropriation doctrine (generally used in the 17 western states where
water is relatively scarce).

a. Riparian Doctrine
Under the riparian doctrine, water does not belong to the public generally or to the
state (with certain exceptions) but rather to the “riparian” proprietors who own land
bordering on the watercourse. All of these landowners have “riparian rights” and none
can use the water so as to deprive the others of these rights.

1) What Land Is Riparian

Under the majority rule, all tracts held under unity of ownership are riparian if
the tracts are contiguous and any of them front on the water. Thus, if a riparian
owner purchases a parcel which is contiguous to the riparian parcel, riparian rights
attach to the newly acquired parcel. The minority rule limits riparian rights to
the smallest tract of land ever owned abutting the water. Under this view, if a back
portion of a riparian tract is sold, it becomes nonriparian and can never regain
riparian rights.

a) Riparian Owner
Riparian owners include the fee owner of the abutting land and, to the extent
of their title, lessees and easement owners of such land.

b) Doctrine Applies Only to Riparian Parcel

The riparian doctrine permits use of water only in connection with activities
carried out on the riparian parcel. Riparian rights cannot be conveyed for the
use of nonriparian land nor can they be lost by nonuse.

2) Nature of Riparian Right

a) Natural Flow Theory

Under the “natural flow” theory, a riparian owner is entitled to the water
in the bordering stream or lake subject to the limitation that he may not
substantially or materially diminish its quantity, quality, or velocity. Thus,
a downstream owner can enjoin an upstream owner’s use even though the
downstream owner has plenty of water for his own use. No state appears to
adhere strictly to this theory because it operates to limit beneficial upstream
use and leads to “waste” of the resource.

b) Reasonable Use Theory

Under the more common theory, all riparian owners share the right of

Multistate 08 real property Q.indd 150 9/13/2016 4:33:27 PM

 REAL PROPERTY 151.

“reasonable use.” The general idea is that the right of each riparian owner to
use the stream (e.g., to divert for irrigation, to pollute, etc.) is subject to a like
reasonable right in other riparian owners. Each riparian owner must submit
to reasonable use by other riparian owners, and a downstream owner cannot
enjoin such use by an upstream owner unless it substantially interferes
with the needs of those who have a like right (i.e., unless actual damage is
shown).

(1) Factors to Consider

In determining whether an owner’s use of water is “reasonable,” courts
generally balance the utility of the use against the gravity of the harm.
(Note the analogy to nuisance law.) Six factors are helpful in this
balancing process: (i) the purpose of the questioned use; (ii) the destina-
tion to which the water is taken for use; (iii) the extent of the use; (iv)
the pollution of water by use; (v) whether the use involves an alteration
in the manner of flow; and (vi) miscellaneous types of conduct that may
give rise to litigation. (These factors may be remembered more easily by
using the acronym MAPPED.)

c) Natural vs. Artificial Use

Under either of the above theories, water use is categorized as “natural” or
“artificial.” Natural uses include those necessary for the daily sustenance of
human beings (e.g., household consumption, gardening, minimal number of
livestock). All other uses, including irrigation and manufacturing, are artifi-
cial. Natural uses prevail over artificial. Upper riparians can take all that
they need for natural uses. However, they cannot take for artificial purposes
unless there is enough water for the domestic wants of all.

b. Prior Appropriation Doctrine

Under the prior appropriation doctrine, the water belongs initially to the state, but the
right to divert and use it can be acquired by an individual whether or not he is a riparian
owner. Initially, individual rights were established by actual use; thus, each appropriator
acquired a vested property right “to divert a given quantity of water, at given times from
a given place, to use at a given place for a given purpose.”

1) Factors to Note for Bar Exam

Present day acquisition and governance of rights under this doctrine are largely
dealt with under complex state-administered permit systems that are too detailed
for coverage here. However, it is sufficient for bar examination purposes to note
that: (i) appropriative rights were originally determined simply by priority of
beneficial use; (ii) if there is a decrease in stream flow, priority is accorded in
terms of time of appropriation (i.e., the junior appropriators in descending order
of priority must suffer); (iii) in many states, an appropriative right can be severed
from the land it serviced when acquired and transferred (i.e., can be sold to another
for use on other land), provided no injury is caused to existing uses; and (iv) an
appropriative right (unlike a riparian one) can be lost by abandonment (intent and
nonuse).

Multistate 08 real property Q.indd 151 9/13/2016 4:33:27 PM

 152. REAL PROPERTY

c. Accretion and Avulsion

A watercourse may affect a property’s boundary line through accretion or avulsion. (See
VI.B.3.e.2), supra.)

2. Groundwater
If water comes from an underground watercourse (e.g., a defined stream or river), the
riparian or prior appropriation doctrines apply. However, the presumption is that under-
ground water is percolating (i.e., the water moves through the ground diffusely and is usually
withdrawn by wells from the underground water table). There are four different rules for
determining rights in underground water.

a. Absolute Ownership Doctrine

The absolute ownership doctrine is followed by only a few states. The owner of the
land overlying the source basin may extract as much water as she wishes and use it for
whatever purpose she desires (including export). There is no firmly established system
for allocation among overlying owners.

b. Reasonable Use Doctrine

The reasonable use doctrine, followed by many eastern states, allows the surface owner
to make “reasonable use” of the groundwater. This rule differs from the absolute owner-
ship rule mainly with respect to exporting water off site: Exporting is allowed only to
the extent that it does not harm other owners who have rights in the same aquifer. On
the other hand, virtually all beneficial uses of water on the land are considered reason-
able and are allowed.

c. Correlative Rights Doctrine

In some states, the owners of overlying land own the underground water basin as joint
tenants, and each is allowed a reasonable amount for her own use.

d. Appropriative Rights Doctrine

In many western states, the prior appropriation doctrine applies to groundwater as well
as watercourses. Priority of use determines appropriative rights. In most western states,
rights to percolating water are now determined by a state water board which controls
annual yield, prohibits water waste, etc.

e. Restatement Approach
A few states follow the Restatement approach, which is based on principles of nuisance
law. This approach allows the surface owner to pump groundwater for a beneficial
purpose unless the withdrawal: (i) unreasonably causes harm to neighboring landowners
through lowering of the water table; (ii) exceeds the pumper’s reasonable share of the
annual supply or total store of groundwater; or (iii) directly and substantially affects
surface waters and unreasonably causes harm to a surface water user. [Restatement
(Second) of Torts §858]

3. Surface Waters
Diffused surface waters are those that have no channel but pass over the surface of the land.
The source may be rainfall, melting snow, seepage, etc. A landowner can use surface waters
within her boundaries for any purpose she desires. Problems concern the right of a lower

Multistate 08 real property Q.indd 152 9/13/2016 4:33:27 PM

 REAL PROPERTY 153.

owner to restrict a flow that would naturally cross his land (e.g., by dikes) and the right of
an upper owner to alter or divert a natural flow onto other lands (e.g., by drains, channels, or
sloughs). The acting landowner’s liability to other landowners depends upon which doctrine
the state follows.

a. Natural Flow Theory

Under the natural flow theory, followed by many states, a landowner cannot refuse to
take natural drainage, cannot divert surface water onto the land of another, and cannot
alter the rate or manner of natural flow where such actions would injure others above or
below him. Because this theory imposes substantial impediments on development (e.g.,
no paving, large roofs, culverts, etc.), most states have “softened” the rule to permit
reasonable changes in natural flow. And a few states have held the doctrine inapplicable
to urban property (because development would otherwise be hindered).

b. Common Enemy Theory

Under the common enemy theory, followed by many states, surface water is a common
enemy and any owner can build dikes or change drainage to get rid of it. However,
many courts have modified the doctrine and have held landowners to a standard of
ordinary care to avoid unnecessary and negligent injury to the land of others.

c. Reasonable Use Theory

The growing trend is to apply the reasonable use doctrine which, as in nuisance and
watercourse cases, requires balancing the utility of the use against the gravity of the
harm. Judicial mitigation of both the natural flow and common enemy doctrines often
results in an approximation of the reasonable use theory.

d. Compare—Capture of Surface Water

A landowner can capture (e.g., by dam, rain barrels) as much surface water as he
wishes. It can be diverted to any purpose on or off the land. Owners below have no
cause of action unless the diversion is malicious.

D. RIGHTS IN AIRSPACE
The right to the airspace above a parcel is not exclusive, but the owner is entitled to freedom from
excessive noise and transit by aircraft. If flights are so low as to be unreasonably disturbing, they
constitute a trespass or (if the airport is government-owned) a taking by inverse condemnation.
E. RIGHT TO EXCLUDE—REMEDIES OF POSSESSOR
1. Trespass
If the land is invaded by a tangible physical object that interferes with the right of exclusive
possession, there is a trespass.

2. Private Nuisance
If the land is invaded by intangibles (e.g., odors or noises) that substantially and unreason-
ably interfere with a private individual’s use or enjoyment of her property, the possessor may
bring an action for private nuisance.

a. Compare—Public Nuisance
Public nuisance is an invasion by intangibles that unreasonably interfere with the health,

Multistate 08 real property Q.indd 153 9/13/2016 4:33:27 PM

 154. REAL PROPERTY

safety, or property rights of the public—i.e., a broad segment of the community, rather
than one or a few individuals.

3. Continuing Trespass
If the land is repeatedly invaded by a trespasser (e.g., the invader repeatedly swings a crane
over the property), the possessor may sue for either trespass or nuisance.

4. Law or Equity
If the possessor wants to force the invader to stop the invasion of the property, the remedy is
an injunction in equity. If the possessor wants damages, the remedy is an action at law.

a. Ejectment
The remedy at common law to remove a trespasser from the property is ejectment.

b. Unlawful Detainer
In the landlord-tenant situation, the landlord may force the tenant to vacate the premises
by the statutory remedy of unlawful detainer. (In some states, the term used to describe
this action is forcible detainer or summary ejectment.) The action may be joined with a
demand for money damages in rent due.

IX. COOPERATIVES, CONDOMINIUMS, AND ZONING

A. COOPERATIVES
In the most common form of housing cooperative, title to the land and buildings is held by a
corporation that leases the individual apartments to its shareholders. Thus, the residents in a
cooperative are both tenants of the cooperative (by virtue of their occupancy leases) and owners
of the cooperative (by virtue of their stock interests). Stock interests in the cooperative are not
transferable apart from the occupancy lease to which they are attached.

1. Restriction on Transfer of Interests

Because the members of a cooperative are tenants, the cooperative may retain the same
controls over assignment and sublease of the apartments as may be exercised by any other
landlord.

2. Mortgages
Permanent financing is provided through a blanket mortgage on the entire property owned
by the cooperative corporation (land and buildings). This mortgage has priority over the
occupancy leases. Failure to meet the payments on the blanket mortgage may result in the
termination of the leases through foreclosure of the mortgage. Thus, each cooperative tenant
is vitally concerned that the other tenants pay their shares of the blanket mortgage.

3. Maintenance Expenses
Ordinarily, cooperative tenants are not personally liable on the note or bond of the blanket
mortgage. However, under their occupancy leases, each tenant is liable for her proportionate
share of all of the expenses of the cooperative (including payments on the mortgage as well
as other operating expenses).

Multistate 08 real property Q.indd 154 9/13/2016 4:33:27 PM

 REAL PROPERTY 155.

B. CONDOMINIUMS
In a condominium, each owner owns the interior of her individual unit plus an undivided interest
in the exterior and common elements.

1. Restriction on Transfer of Interests

Because condominium unit ownership is treated as fee ownership, the ordinary rules against
restraints on alienation apply. A few jurisdictions (e.g., New York) by statute allow reason-
able restraints on transfer of condominium units.

2. Mortgages
Each unit owner finances the purchase of her unit by a separate mortgage on her unit.
Consequently, unit owners need not be as concerned about defaults by others as they must be
in a cooperative.

3. Maintenance Expenses
Each unit owner is personally liable on her own mortgage and each pays her own taxes
(unlike the cooperative situation, but like any other homeowner). In addition, each unit
owner is liable to contribute her proportionate share to the common expenses of maintaining
the common elements, including insurance thereon.

4. Homeowners’ Associations
A homeowners’ association (sometimes called a condominium association) oversees the
common elements of a condominium property. The common elements include the exterior of
the building, common staircases, landscaping, the front gate, etc. The association is usually a
legal entity, such as a corporation or LLC.

a. Membership
The owner of each condominium is a member of the homeowners’ association. The
members vote to elect a board. The board either oversees the common elements directly
or hires a management company to oversee them.

b. Fees
Each condominium unit owner must pay regular (e.g. monthly) fees to the homeowners’
association which are used by the association to maintain the common elements. If
the monthly fees are insufficient to pay necessary expenses (e.g., a major repair to the
roof of the building is needed), the association may impose an additional one-time fee
(sometimes called a special assessment) that each member must pay.

c. Association Rules
Most homeowners’ associations pass charters and bylaws that place requirements or
restrictions on each owner’s use of her property. For example, bylaws might prevent the
ownership of a pet larger than 20 pounds or require balconies to be kept free of trash.
These rules are binding on the members and may be enforced either by individual
members or by the association itself.

C. ZONING
The state may enact statutes to reasonably control the use of land for the protection of the health,
safety, morals, and welfare of its citizens. Zoning is the division of a jurisdiction into districts in

Multistate 08 real property Q.indd 155 9/13/2016 4:33:27 PM

 156. REAL PROPERTY

which certain uses and developments are permitted or prohibited. The zoning power is based on
the state’s police power and is limited by the Due Process Clause of the Fourteenth Amendment.
Other limitations are imposed by the Equal Protection Clause of the Fourteenth Amendment
and the “no taking without just compensation” clause of the Fifth Amendment. (See Multistate
Constitutional Law outline.) Cities and counties can exercise zoning power only if authorized
to do so by state enabling acts. Ordinances that do not conform to such acts are “ultra vires”
(beyond the authority of the local body) and void.

1. Cumulative Zoning
There are two types of zoning ordinances: cumulative and noncumulative. A cumulative
zoning ordinance creates a hierarchy of uses of land (e.g., a single-family home is a higher
use than an apartment building, which is a higher use than a strip mall, which is a higher use
than a factory). Under a cumulative zoning ordinance, land that is zoned for a particular use
may be used for the stated purpose or for any higher use. Under a noncumulative zoning
ordinance, land may be used only for the purpose for which it is zoned.
Example: Town zones a strip of vacant land as commercial land. A, who owns land in
the strip, wants to build a single-family home there. B, who also owns land in
the strip, wants to build a factory. If the ordinance is cumulative, A can build
the home, but if it is noncumulative, he cannot build the home. B cannot build
the factory, regardless of whether the ordinance is cumulative or noncumula-
tive.

2. Nonconforming Use
A use that exists at the time of passage of a zoning ordinance and that does not conform
cannot be eliminated at once. Generally, the nonconforming use may continue indefinitely,
but any change in the use (e.g., tearing down an old building and replacing it with a new one)
must comply with the zoning ordinance. Some statutes provide for amortization—i.e., the
gradual elimination of nonconforming uses (e.g., the use must end in 10 years).

3. Special Use Permits

Some unusual uses (e.g., hospitals, funeral homes, etc.) require issuance of a special permit
even though the zoning of the particular district (e.g., commercial) allows that type of use.

4. Variance
A variance from the literal restrictions of a zoning ordinance may be granted by administra-
tive action. The property owner must show that the ordinance imposes a unique hardship on
him and that the variance will not be contrary to the public welfare.

Multistate 08 real property Q.indd 156 9/13/2016 4:33:27 PM

 APPROACH TO REAL PROPERTY 1.

APPROACH TO EXAMS

REAL PROPERTY

IN A NUTSHELL: The law of real property centers on a person’s interest in land, which may be as
great as full ownership or as small as a right to enter. It governs how the land and those interests are
acquired and granted; bought and sold; rented and leased; and used as security for debts. Interests
in land arise through express creation (e.g., by a deed, will, or mortgage) and operation of law (e.g.,
through adverse possession). Realty may be owned by one individual or several, and an interest may
become possessory at once or in the future. However, when multiple parties claim conflicting interests
in land, recording statutes dictate who will prevail. Real property law also governs items so affixed to
land that they are considered realty (i.e., fixtures) and sets forth rights and responsibilities regarding the
use of water.

I. WHAT INTEREST IS INVOLVED?

A. Freeholds—Present Possessory Interests

1. Indefeasible interests—not subject to early termination
a. Fee simple absolute (“to A and his heirs” or “to A”)
b. Life estate (“to A for life” or “to A for the life B”)
2. Defeasible interests—allows a fee simple or life estate to be terminated if a stated event
occurs
a. Determinable (“for so long as,” “until,” “while,” “during”)—automatically reverts to the
grantor
b. Subject to condition subsequent (“but if,” “upon condition that,” “provided that”)—
subject to the grantor’s right of entry, which must be exercised
c. Subject to an executory interest (“to A for so long as . . . , and if not . . . , to B,” “to A,
but if . . . , to B”)—divests in favor of a third party

B. Freeholds—Future Possessory Interests

1. Interests retained by the grantor
a. Reversion—grantor transfers a shorter estate than she owns (grantor with a fee simple
transfers a life estate)
b. Possibility of reverter—grantor transfers a determinable estate
c. Right of entry (power of termination)—reserved on the grant of an estate subject to a
condition subsequent
2. Interests created in a transferee ( Note: Rule Against Perpetuities may apply)
a. Executory interests—cut short the prior estate
b. Remainders—possessory only on the natural termination of the prior estate (e.g., death
of the life tenant)
1) Remainders are vested if made in an ascertained person and with no conditions
precedent; otherwise are contingent
c. Class gifts—remainders in a class are contingent if no member of the class yet exists,
vested if all possible members exist, and vested subject to open if more members might
come to exist
1) Under the rule of convenience, an open class closes when any member can demand
possession
3. Rule Against Perpetuities

FYR-30-rl-prop-exam-APPROACH--Q.indd 1 5/24/2017 3:13:06 PM

 2. APPROACH TO REAL PROPERTY

a. Any future interest that is not certain to vest or fail within a life in being plus 21 years
is void
b. Applies to contingent remainders, executory interests, class gifts (even if vested remain-
ders), options and rights of first refusal, and powers of appointment
c. Does not apply to vested interests, grantors’ reversionary interests, or gifts between
charities
d. Only the interest that violates the Rule is stricken (severed from the disposition)
e. Cases that always violate the common law Rule:
1) Executory interest following a defeasible fee—executory interest is stricken
2) Gift to an open class conditioned on members surviving to an age beyond 21—
entire class gift is stricken (“bad as to one, bad as to all”)
3) Remainder to A’s children living at his widow’s death (“unborn widow”
problem)—contingent remainder is stricken
4) Gift conditioned on an administrative contingency is stricken
5) Options that might be exercised (not created) later than the Rule’s period are
stricken
f. At common law, a woman is conclusively presumed capable of bearing children (the
“fertile octogenarian”)
g. Departures from common law Rule:
1) “Wait and see” statutes—validity of interest determined by actual future events
2) Uniform Statutory Rule Against Perpetuities—90-year vesting period, “wait and
see” approach
3) Cy pres approach—invalid interests reformed to match grantor’s intent

C. Leasehold Interests (Landlord and Tenant)

1. Types of tenancies
a. Tenancy for years—for a fixed period of time (e.g., 10 days, 10 years)
1) Created expressly, ends automatically on its termination date (no notice)
b. Periodic tenancy—for a fixed period that continues for succeeding periods (e.g., month
to month)
1) Created expressly or when a lease draws periodic rent payments, terminated on
proper notice (appropriate time period)
c. Tenancy at will—no stated duration, as long as parties desire
1) Created expressly, terminated on proper notice
d. Tenancy at sufferance (hold-over doctrine)—tenant remains in possession after tenancy
expires
1) Landlord may evict tenant or create a periodic tenancy by accepting rent
2. Rights and duties of landlord and tenant
a. Governed largely by the lease and tort law
b. Tenant must pay rent and may not commit waste
c. Landlord generally must repair, must deliver habitable premises, and may not interfere
with tenant’s possession
3. Both parties generally may assign their interests (transferring the entire term), and tenants
may also sublease (retaining part of the term)

D. Nonpossessory Interests
1. Easements
a. Affirmative easement—right to use someone else’s land

FYR-30-rl-prop-exam-APPROACH--Q.indd 2 5/24/2017 3:13:06 PM

 APPROACH TO REAL PROPERTY 3.

b. Negative easement—right to prevent something on another’s land

2. Easement appurtenant—involves two tracts of land
1) Dominant parcel has the benefit, which runs to grantees
2) Servient parcel has the burden, which runs to grantees with notice
a. Easement in gross—involves one tract of land
b. Creation of easements
1) Express grant or reservation (Statute of Frauds applies)
a) An oral grant creates a license, which is not an interest in land
2) Implication—by operation of law
a) By use existing before a tract was divided
b) By necessity for a landlocked parcel
3) Prescription—acquired through adverse, open and notorious, and continuous use
for the statutory period
c. Termination of easements—can end by stated condition, unity of ownership between
easement and servient estate, abandonment, estoppel, prescription, necessity, release, or
condemnation
3. Profits
a. Right to enter another’s land to remove products of the soil
4. Real covenants (run with the land at law)
a. Written promises to do or refrain from doing something on land, with a usual remedy of
money damages
b. Requirements for burden to run to later grantees: intent, notice, horizontal privity,
vertical privity, touch and concern
c. Requirements for benefit to run: intent, vertical privity, touch and concern
5. Equitable servitudes
a. Covenants with equitable remedies (i.e., injunction, specific performance)
b. Implied from a common scheme for development if notice exists
c. Requirements for burden to run: intent, notice, touch and concern
d. Requirements for benefit to run: intent, touch and concern
e. Equitable defenses apply (i.e., unclean hands, estoppel, acquiescence, changed neighbor-
hood conditions)

II. HOW IS THE INTEREST BEING ACQUIRED?

A. Conveyancing (Statute of Frauds Applies—Requires Writing Signed by Grantor)

1. Land sale contracts
a. Statute of Frauds exception—no writing is required if buyer has partially performed
through possession, improvement, or payment
b. Time for performance presumed not of the essence
c. Marketable title—contracts contain an implied covenant that seller will deliver title free
from an unreasonable risk of litigation at closing (i.e., when purchase price and deed
exchanged)
2. Deeds
a. Must evidence an intent to transfer land and adequately describe the land and parties
b. Effective on delivery (i.e., words or conduct showing the grantor’s intent to immediately
pass title) and acceptance (often presumed)
c. Types of deeds

FYR-30-rl-prop-exam-APPROACH--Q.indd 3 5/24/2017 3:13:06 PM

 4. APPROACH TO REAL PROPERTY

1) General warranty deed—covenants against any title defects created by the grantor
or prior titleholders
2) Special warranty deed—covenants against title defects created by the grantor
3) Quitclaim deed—no covenants; transfers whatever interest grantor has
3. Wills
a. Effective on the testator’s death
b. If, at the testator’s death, she no longer owns property that was specifically devised, that
gift fails (i.e., is adeemed)
c. If, at the testator’s death, the beneficiary has already died, his gift fails (i.e., lapses) or
might pass to the beneficiary’s descendants under an anti-lapse statute if he and the
testator were related

B. Adverse Possession
1. Possessor must show: (i) actual entry giving rise to exclusive possession that is (ii) open and
notorious, (iii) adverse/hostile (i.e., lacking the owner’s permission), and (iv) continuous
throughout the statutory period for an ejectment action (e.g., 20 years)
2. The statute does not begin to run if the owner is under a disability to sue (e.g., incapacity)
when the possession begins

III. WHO WILL HOLD THE INTEREST?

A. Concurrent Interests
1. All co-tenants share the right to possession and enjoyment of the property
2. Joint tenants—two or more co-tenants with rights of survivorship (i.e., the dead co-tenant’s
share passes to the remaining co-tenants)
a. Created expressly, severed by a tenant’s sale or suit for partition
3. Tenants by the entirety—two spouses with rights of survivorship
a. Created expressly or presumed in some states by a grant to spouses, severed by divorce
4. Tenants in common—two or more co-tenants, no right of survivorship
a. Created by the severance of the above tenancies
b. Default co-tenancy created if nothing else was specified

B. Competing Interests—Grantor Transfers Same Land More than Once

1. Recording acts protect a bona fide purchaser for value without actual, inquiry, or record
notice of the prior conveyance (“BFP”)
a. Actual notice—what the grantee actually knows
b. Inquiry notice—what a reasonable inquiry would have revealed
c. Record notice—what a search of the real property records would have revealed
2. Types of recording acts
a. Notice statutes—later BFP wins if earlier grant was not recorded
b. Race-notice statutes—later BFP wins only if she records before the earlier grantee
records
c. Race statutes—first to record wins; actual notice is irrelevant

FYR-30-rl-prop-exam-APPROACH--Q.indd 4 5/24/2017 3:13:06 PM

 APPROACH TO REAL PROPERTY 5.

IV. IS THE LAND SUBJECT TO A SECURITY INTEREST?

A. Mortgages (Land Is Collateral for a Debt)

1. Theories of title
a. Lien theory—mortgagee holds a security interest only
b. Title theory—mortgagee holds title until mortgage is satisfied
c. Intermediate theory—mortgagee holds title only after default
2. If mortgagor transfers mortgaged land
a. Grantee may agree to assume the mortgage and become primarily liable to pay the
mortgage loan
b. Grantee who does not assume the mortgage is not personally liable for the loan but may
lose the land if the transferor defaults
3. Foreclosure—after default, property may be sold to satisfy the debt
a. Does not affect senior interests
b. Terminates junior interests
1) Junior interests are entitled to any surplus remaining after the foreclosing mortgage
is satisfied
c. The mortgagor may redeem the land by paying the amount due
4. If there is a deficiency—mortgagee can sue mortgagor if foreclosure sale proceeds do not
satisfy mortgage debt

B. Other Security Interests

1. Deed of trust—similar to a mortgage, but a third-party trustee forecloses
2. Installment land contract—seller retains the deed until buyer pays in full
3. Absolute deed—treated as an equitable mortgage when given for a debt
4. Sale-leaseback—court may determine this was a disguised mortgage

V. DOES THE LAND HAVE SPECIAL CHARACTERISTICS?

A. Fixtures
1. Fixtures are items so affixed to land that they become part of the realty
a. Constructive annexation—items not physically attached to land are fixtures if they are
so uniquely adapted to the real estate that it makes no sense to separate them (e.g. keys
to doors)
2. Common ownership cases—landowner brings chattel onto land
a. Annexor’s objective intent determines whether items are fixtures
B. Water
1. Rules vary by state and by source of water
a. Watercourses—rivers, streams, lakes
b. Groundwater—percolating water from wells
c. Surface waters—rainfall, melting snow, seepage

C. Zoning
1. Governmental regulations that restrict the use of land
a. Existing zoning violations render title to land unmarketable
2. Variance—permission to depart from zoning restriction

FYR-30-rl-prop-exam-APPROACH--Q.indd 5 5/24/2017 3:13:06 PM

FYR-30-rl-prop-exam-APPROACH--Q.indd 6 5/24/2017 3:13:06 PM