REAL PROPERTY OVERVIEW 1.

REAL PROPERTY
OVERVIEW
I. IN BRIEF
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 opera-
tion 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.

II. 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

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 2. REAL PROPERTY OVERVIEW

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 condi-

tions 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

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

remainders), 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

 REAL PROPERTY OVERVIEW 3.

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, termi-

nated 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

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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

b. Negative easement—right to prevent something on another’s land

c. 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

d. Easement in gross—involves one tract of land

e. 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 contin-

uous use for the statutory period

f. Termination of easements—can end by stated condition, unity of ownership

between easement and servient estate, abandonment, estoppel, prescription,
necessity, release, or condemnation
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2. Profits

a. Right to enter another’s land to remove products of the soil

3. 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

4. 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

neighborhood conditions)

III. 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)
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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

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

IV. WHO WILL HOLD THE INTEREST?

A. Concurrent Interests
1. All co-tenants share the right to possession and enjoyment of the property
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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

V. IS THE LAND SUBJECT TO A SECURITY

INTEREST?

A. Mortgages (Land Is Collateral for a Debt)

1. Theories of title
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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

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VI. 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

3. Divided ownership cases—landowner does not bring chattel onto land

a. Item’s owner can remove it only if this would not leave unrepaired damage to
the premises

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