Landlord Tenant Issues

Charts in Gilberts:
 Summary of Leasehold Estates (228)
 Comparison of Civil Rights Act and Fair Housing Act (233)
 Actual v. Constructive Eviction (243)
 Tenant’s Remedies for Breach of Implied Warranty of Habitability (253)
 Comparison of Assignments and Subleases (283)
 Approach to Covenants in Lease Running to Assignees (290)

- In the last 50 years, landlord-tenant law has evolved to give tenants more rights and landlords less. LLT law is a
blend of property law and contract law.
- What makes it a lease?
o Lessee has all the legal rights of a possessor and may sue others for invasion of his possessory interest,
via ejectment (out the wrongful possessor), trespass (to recover damages for physical invasion of the
property), or nuisance (to recover damages or to abate nonphysical interference w/ a possessor’s use and
enjoyment of property).  Contrast w/ Easement holder, licensee, or profit holder who lacks these
powers b/c they don’t have a possessory interest in property.

TYPES OF LEASEHOLDS (4)

I) Term of Years
a. Fixed, Single Term of any length.
b. Set out clearly in the lease (for 5 years ending July 1, 2002) or by reference to a formula that will
produce a fixed calendar date for the beginning and ending of it.
c. May be Defeasible, either determinable or subject to condition subsequent.
i. “so long as Done uses SH as a SH.” = Determinable term of years
ii. “but if Don’t shall stop using SH as a SH, R may terminate the lease and retake possession”=
term of years subject to condition subsequent.
d. Indeterminate Term: “for the duration of the war” CL courts say it is a tenancy at will terminable by
either party b/c ending date is ambiguous/ Others say that parties intended to create term of years.
e. CL permitted any length of time; some states have enacted statutes restricting length of leasehold.
II) Periodic Tenancy
a. Recurring period/ does not have an end date and it continues until one party gives the other proper notice.
b. Created Parties’ intentions or Operation of Law (tenant holds over—remains in possession—after the
end of the term, LL may consent to the tenant staying over and renew; Tenant takes possession under an
invalid lease (L leases BA to T for 10 years for $500 but for some reason it is unenforceable but T goes
into possession under the invalid lease mere entry into possession by T creates a tenancy at will but the
payment of rent periodically converts the tenancy at will into a tenancy from period to period arising by
operation of law).
i. Note: In most jxd, when a tenant for years holds over after the tenancy has expired, the lease is
not renewed for another term. Rather a periodic tenancy for another term is created. This means
that the LL and T are obliged to follow the old lease’s provisions for rent, etc but now either
party can get out of the deal by giving the other proper notice.
c. Notice Necessary to Terminate:
i. CL: 6 months advance noticed to terminate Year tenancy and notice equal to the length of the
period (but not more than 6 months) is necessary for periods of less than a year. Takes effect at
the end of the period.
ii. Some states : statutory changes made (CA says one month notice is enough regardless of
whether that date happens to coincide w/ the end of a period).
iii. Parties can shorten or eliminate notice times, but they can’t agree to make it longer than allowed
by law.
d. Fixing the period of periodic tenancies created by operation of law:
i. What is the period when a tenant has taken possession under a void lease, usually an oral long
term lease that is void under SoF, but has paid rent which has been accepted? All courts agree
that periodic tenancy results but three views on the period:
1. Year to Year: Most courts; reasoning it is closest to what was intended.
2. Period Measured by the Rent calculation in the void lease (ex: $500/month= month to
month tenancy)
3. Period Measured by the way rent is actually paid: (ex: paid at end of month, then
month to month tenancy results).
III) Tenancy At Will:
 a. No fixed time or period. Lasts as long as both parties want.
b. Either party can terminate at any time or by operation of law.
i. Tenant terminates either by giving notice or abandoning the property (many states today require
some notice).
ii. LL terminates by giving notice.
iii. Death, transfer of interest.
c. *If it can be terminable only by one party then it is not a tenancy at will:
i. If provision for termination by one party is grafted onto a term of years or a periodic tenancy,
the lease creates a determinable tenancy, not a tenancy at will
1. L leases a house “to T for one year, w/ a proviso that L can terminate at any time”
determinable term of years, terminable at the will of L.
d. Lease for no certain Duration:
i. Tenancy at will: some courts (O’Reilly v. Frye) imply a power of termination in the other party
b/c there is no certain duration.
ii. Determinable Life Estate: Other courts hold that if the agreement does not create a term of years
or periodic tenancy, but the tenancy is to continue so long as the tenant wills, the tenant has a
life estate determinable.
1. Garner v. Gerrish: L leases land to T “so long as T should wish.” This creates a life
estate in T, determinable on his death or prior relinquishment of possession.
IV) Holdovers: Tenancy at Sufferance:
a. Tenant wrongfully remains in possession after the termination of tenancy.
b. What constitutes holding over?
i. CL: any second over
ii. Modern: must be voluntary, no holdover so long as the tenant’s continued possession is the
product of circumstances beyond the tenant’s control
c. Tenancy lasts until the LL exercises:
i. Eviction and recovery of Damages for lost possession:
1. CL measure of damages: fair market value of the occupied premises, plus any special
damages (physical injury to premises).
ii. Election of a new term/ Binding the holdover tenant to a new term):
1. Rationale: deters holdovers, benefits new tenants b/c they rely on the timely departure
of old tenant.
a. Nature of the new leasehold: Most state treat it as periodic tenancy, some as
term of years for a maximum of 1 year.
b. Length of the new term: some states determine the new term’s length by the
way the rent is stated in the old lease.
c. Provisions of the new leasehold: the provisions of the old lease apply to the
new leasehold. If the LL notifies the T of his election to renew at a higher rent
and the tenant makes no objection, the tenant is liable for the higher rent.
d. What constitutes election? LL can’t change mind once he elects a remedy.
(Crechale & Polles, p. 119 E).
e. When must the LL elect the remedy? w/in reasonable time.
d. Statutory Alterations: CL of holdovers has been altered by statutes, mostly designed to limit the LL’s
common law remedies.
i. Uniform Residential LL and T Act Section 4.301(c) provides that a willful holdover may be
liable for treble damages or 3 months rend, whichever is greater, plus the LL’s reasonable
attorney’s fees.
DELIVERY OF POSSESSION—LL has an implied in law obligation to deliver to the tenant the legal right to possession,
State divide on if it has to be actual physical possession.
I) Implied obligation to deliver legal right of possession:
a. LL has duty to transfer to the tenant at the beginning of the tenancy the legal right to possession.
b. If 3rd party has better claim over LL , the LL will not be able to deliver to the tenant the legal right to
possess.
c. Two promises implied in law by LL
i. LL has the power to demise—power to grant to the lessee the interest he purportedly grants
under the lease.
ii. Promises that tenant will have quiet enjoyment of possession—tenant will not be evicted by
somebody with a better (paramount) legal title than LL.
d. Tenant Waives LL’s obligation expressly or by virtue of the tenant’s knowledge at the time he enters into
the lease that there is a paramount title. If he is ignorant and takes possession he has no remedy until and
unless the holder of paramount title interferes w/ his actual possession. If tenant does not know of the
 better title when he signs the lease but learns of it before taking possession he can repudiate the lease w/o
penalty.
II) Actual Possession:
a. If Yes, then LL has the burden of removing the holdover tenant.
b. If No, burden of ousting the holdover falls on the new tenant.
c. American Rule (Hannan v. Dusch) AKA (MINORITY RULE)
i. LL has no implied obligation to deliver actual possession.
ii. Tenant’s remedies: can evict and recover damages from the holdover treating him as a
trespasser, or renew the holdover for a new term, receiving the rent from the holdover.
iii. LL’s remedies: LL should have no remedies
iv. Rationale: Gilbert p. 236, E 122.
d. English Rule (MAJORITY)
i. LL has an implied in law obligation to deliver actual possession to the tenant on the 1 st day of
the lease term.  LL more efficient in ousting and eviction procedures.
ii. Tenant Remedies: terminate the lease, find other premises, and recover damages pertinent to this
exercise in musical chairs, or adhere to the lease , withhold rent for the period he is out of
possession and recover damages related to the lost possession.
SUBLEASES AND ASSIGNMENT
I. Assignment—Unless prohibited by the lease; T and LL may freely transfer his interest in the premises.
a. Transfer of the party’s entire interest under the lease. If the tenant remains an interest / reversion, it is a
sublease.
b. Most leases either prohibit assignment by the tenant, or require him to obtain the LL’s Consent.
c. Privity of Estate:
i. Tenant transfers the entire remaining term of his leasehold to the assignee who comes into
Privity of estate w/ the landlord.  LL and assignee are liable to each other on the covenants in
the original lease that run w/ the land (ie, paying rent).
ii. If LL assigns the reversion (another LL to be) the assignee and the tenant are in Privity of estate.
iii. To have a promise run w/ the leasehold estate and be enforceable against assignees you need:
1. Intent: Original parties to the lease must intend that promise bind assignees.
2. Privity: Assignee must be in either Privity of estate or contract w/ party enforcing the
promise or against whom the promise is sought to be enforced.
3. Touch and Concern:
a. Covenant directly affects the party in the use or enjoyment of the property.
b. Two ends to a covenant—Burden and Benefit: Whoever makes the promise
has the burden end, and whoever has the benefit of the promise has the benefit
end. For the burden or benefit end to run to assignees, the promise must touch
and concern the interest of the assignee.
i. Ex: L leases to T. T promises to repair. T assigns his leasehold to T2.
If L sues T2 on the covenant to repair, L must show that the burden
touches and concerns the leasehold. If L assigned the reversion to L2,
who sued T2, L2 would have to show also that the benefit touches
and concerns the reversion.
c. Personal Promises don’t Run
d. Privity of Contracts: assignment does not destroy contractual promises
i. L leases BA to T, who assigns the leasehold to N, who fails to pay the rent. L may sue N b/c N
is in Privity of estate with L, but L may also sue T b/c T and L remain in Privity of contract w/
each other. BUT L can only recover once, but L has two pockets to choose from.
ii. Destroying Privity of K: Through release and novation
1. Must be clear evidence of LL’s intent to release found in some agreement: Novation
express release, when couple w/ a promise by the assignee to assume performance of
the lease obligations.
iii. Assumption of performance of lease obligations can occur w/o release and it places both the
original tenant and the assignee in Privity of K. P. 125 E !! EXAMPLES.
e. Assignor tenant liability: If LL recovers from assignor tenant the assignor tenant is subrogated (succeeds
to ) the LL’s claim as against the defaulting assignee tenant and the assignor tenant will be entitled to
recover from assignee tenant any amount he pays to LL on behalf of the assignee’s default.
f. Multiple Assignments p. 126 E.
II. Subleases—lessee transfers anything less than his entire interest in the leasehold, thereby retaining a
reversion.
a. Sublessee has no Privity of contract or estate w/ the LL.
b. Sublessor remains in both Privity of K and Estate w/ his LL.
 c.
Sublessee and Sublessor are in Privity of K and Estate w/ respect to their new K—the sublease.
d.
Principal tenant/sublessor default on lease LL is entitled to terminate principal lease and subtenant has no
further right of possession.
III. Distinguishing an assignment from a sublease: Courts use 2 methods:
a. Examining the substance of the transaction to determine if the tenant has transferred her entire interest in
the leasehold likely to examine whether the transferring tenant has reserved a sufficient interest like a
reversion, or right or reentry.
b. Intention of the parties.
i. Ernst v. Conditt.--> parties intended an assignment not a sublease.
c. What happens if you mistakenly think an assignment is a sublease?
IV. Lease Provisions restricting assignment or sublease unless a lease expressly limits or prohibits assignment
or sublease, tenant is free to transfer the leasehold by either method (p. 129 for examples of strict construction
of restrictions)
a. Limits on landlord power to deny consent:
i. Anti discrimination laws:
ii. Implied obligation of reasonableness (Kendall v. Ernest Pestana)
1. It is reasonable to reject transferees of doubtful financial strength.
TENANT OBLIGATIONS (E. 131-134)
- Expressed in the lease but if not then there are existence of certain duties.
I) Pay the Rent
II) Waste Avoidance
a. CL Duty to Repair (normal wear and tear ok)
i. Altered by agreement, general repair clause.
ii. Duty to avoid damage, acts that substantially damage the premises.
III) Refrain from illegal Uses
IV) Honesty as to intended purpose
V) Duty not to commit nuisance
VI) Duties from express lease provisions as long as it is not illegal or unconscionable
VII) Circumstances excusing tenant of obligations
a. Sole Use becomes illegal : used for brewery but then it is disallowed by law.
b. Primary use illegal but other uses permitted
c. Conditional legality of use
d. Destruction of the leasehold property
e. Loss by Eminent domain: gov’t takes leased property
f. Frustration of intended purpose v. Impossibility (see gilberts too)

LANDLORD’S REMEDIES for tenants that default under the lease.

I) LL can augment his remedies by a well – drafted lease
a. Rent Acceleration
b. Security deposits
c. Liquidated damages
d. Confession of judgment
II) Remedies from statute and CL
a. Eviction must give tenant notice to cure defect//Summary proceedings (most expeditious judicial
eviction remedy) usually for non payment of rent.
i. Ejectment
ii. Landlord Self-help: CL can use reasonable force to oust tenant himself but jxd are splintered on
this remedy:
1. No self Help: Berg v. Wiley
2. Reasonable Forceful self help Gower v. Waters
3. Peaceable Self Help (Rucker v. Wynn)
b. Tenant Abandonment tenant is thought to have surrendered the lease
i. Terminate the lease—Tenant liable for unpaid rent to the moment of termination plus damages
created by the abandonment:
1. Jxd 1: CL LL not entitled to damages
2. Jxd 2: Anticipatory Repudiation to leases and recover damages.
ii. Leave the premises untouched thus preserving the LL entitlement to rent as it comes due for the
remainder of the term.
iii. Retake and relet for the tenant
1. Voluntary: must be careful not to imply acceptance of the offered surrender.
 2.Duty to mitigate damage: most states now hold that a LL is not free to do nothing after
tenant abandons, but should be held to a duty to mitigate.
a. Sommer v. Kridel.
c. Seizure of Tenant’s personal property
i. Can be lien on personal property but must file suit to enforce the lien.
LANDLORD’S OBLIGATIONS AND TENANTS REMEDIES
I) Every Tenant has right to Quiet Enjoyment of the leased premises
a. Actual Total Eviction: no longer obligated to pay rent and may elect to terminate lease
b. Actual Partial Eviction: tenant rent obligation stalled until possession is restored.
i. By a 3rd Party under Paramount Title: rent obligation is only partially abated. This comes into
play with recording acts.
c. Constructive Eviction: Tenant not physically ousted instead the utility of physical possession has been
virtually destroyed. Tenant can terminate lease, move out, and be excused from lease obligations. 3
elements:
i. Wrongful act or failure of the landlord
ii. Substantial and Material deprivation of the tenant’s beneficial use and enjoyment of the
premises, and
1. Reste Realty Corp v. Cooper
iii. Complete vacation of the premises by tenant.
II) Warranty of Habitability
a. It is becoming increasingly popular but it is still under minority of state adoption. Implied in law
obligation of LL to provide premises that are fit for human inhabitation both at the inception of the lease
and continuing throughout the lease term. Two separate obligations: 1) an implied warranty of
habitability that properly refers to the warranty implied at inception of the lease 2) Implied continuing
duty of repair.
b. Defended on several grounds: p. 142 (Hildre v. St. Peter) Also criticized on economic grounds.
c. LL will not be in breach until he is notified and has reasonable opportunity to correct problem.
d. Tenant’s Remedies for breach: (Refer to Chart 253)
i. Terminate and leave
ii. Stay and withhold Rent
iii. Stay and Repair
iv. Stay and recover damages: damages in the form of a rent abatement or deduction plus in some
jxd damages for discomfort and annoyance. There are 3 different measures of the amount of
damages in the form of rent deductions:
1. Value as warranted
2. Value as is
3. Proportionate reduction
v. Stay and defend
vi. Punitive damages when LL says he will repair if tenant cleans. (Hilder v. St. Peter)
e. Waiver by Tenant of obligation is usually not permitted.
f. Statutory Codifications like URLTA impose specific landlord duties
g. Retaliatory Eviction Doctrine: Today most JXD hold that a LL may not evict a tenant, even if he is
otherwise entitled to do so, if the LL seeks to evict the tenant in retaliation for the tenant’s reporting of
housing code violations to gov’t authorities. LL can’t evict if she has retaliatory motive.
i. LL can evict when court deems that she does not have a retaliatory motive.
III) Tort Liability of LL:
a. CL Recognized the following Exceptions to the general rule that LL had no tort liability to the tenant or
his guests for dangerous conditions existing on the leased premises at the inception of the lease:
i. Latent defects: Only LL would know so he must disclose. If tenant occupies anyway the LL had
no liability.
ii. Public Use: LL liable to public for injuries occasioned by a defect existing at inception of the
lease which is known to him if the premises are intended for use by members of the public, the
LL knows or should know that the tenant will probably not correct the defect…etc.
b. No liability for dangerous conditions that occur after the tenant has taken possession. LL can assume it
by repairs but if the repairs do not comport w/ duty of ordinary care and skill, LL will be liable for
resulting injuries.
c. Duty to exercise reasonable care over common areas that are in his control
d. Covenant to repair
e. Statutory or judicially created duty of LL to repair
f. Strict Liability: CA adopted and then rejected a rule of strict liability for personal injuries resulting from
latent defects in leased property.
 g. No special rule for LL Modern Trend: IT seems clear that the LL’s tort liability is undergoing a change.
Tort liability has already been imposed where the LL has a statutory duty to repair or breaches the
implied covenant of habitability. But the LL’s liability is likely to be extended to situations beyond these.
LL will probably be treated like all persons who must exercise reasonable care not to subject others to an
unreasonable risk of harm. The basic tort issues, such as foreseeability and unreasonableness of the
particular risk or harm, will control.
h. Exculpatory Clauses:
i. Clause in a lease an attempt to relieve the LL of any liability he might otherwise have to the
tenant for personal injuries or property damage caused by defective conditions in the leased
premises or common areas. - mostly valid but some courts refuse to enforce them in
residential leases b/c of supposed unequal bargaining power or b/c they are thought to increase
the risk of personal injury.
FIXTURES
- Fixtures :
o When a tenant attaches a chattel to the premises, he may want to remove it on termination of the lease.
CL made that hard b/c 2 rules applied :1) fixtures belong to LL; 2) attached chattels that are not fixtures
are forfeited to the LL if they are not removed.
o CL view: Fixture is something permanently attached to land.
o Modern: depends on intention of tenant. Determined by nature of article, manner in which it is attached
and amount of damage it would cause if removed.
o Exceptions are trade fixtures those installed for the purpose of carrying on a trade or business, you can
remove this rationale: encourages economic investment for trade.
SOCIAL REGULATION OF LEASEHOLDS
I) Rent Control
a. Criticisms: Some argue that it is a gov’t seizure of the LL’s reversion followed by its transfer to the
tenant in place…
i. Inefficient allocation of resources: Chicago Board of Realtors Case
II) Anti Discrimination Statutes:
a. 1866 Civil Rights Act
b. Fair Housing Act (Note the exemptions)

TRANSFERS OF REAL PROPERTY

CONTRACTS OF SALE (155-168)

A) Introduction
a. Brokers:
i. Traditional Rule: gets commission if produce a customer ready, able and willing to buy on terms
and for price set by the seller. Once buyer is accepted by the seller, seller owes commission.
Even if sale falls through b/c of buyer’s default, broker gets commission.
ii. Modern Rule: Broker earns only when the buyer completes the transaction by paying the
purchase price. If the sale falls through b/c of buyers default, the seller is not liable to broker.
BUT if sale falls through b/c of sellers fault the seller is liable to the broker.
B) Statute of Frauds
a. Contracts for sale of land must be in writing and must be signed by the party against whom it is sought to
be enforced means that both parties must sign.
i. Include at least: name of buyer, seller, description of the property, agreed upon terms such as
price and conditions.
b. Formal contract not necessary (can be on napkin), Single instrument not necessary
c. Conditions: Real estate K often make the buyer’s obligation subject to financing conditions.
d. Electronic transactions.
e. EXCEPTIONS TO SOF (both equitable doctrines and only available when buyer seeks specific
performance):
i. Part Performance:
1. Every state requires proof of an oral K.
2. Unequivocal Evidence of K: payment of all or a part of the purchase price, taking
possession, making improvements
3. Reasonable Reliance: Modern trend requires 1) proof of oral contract and 2) reasonable
reliance (Hickey v. Green)
ii. Equitable Estoppel:
 1. Oral K may be valid if seller has caused buyer reasonably to rely sig to his detriment
upon seller’s oral agreement to sell.
iii. Revocation of K orally is recognized.
C) Implied Obligations in K
a. Good Faith
b. Time of Closing—completion of the transaction
i. Even though the K sets a specific date for performance the K is enforceable in equity AFTER
that date if performance is offered w/in a reasonable period thereafter.
c. Marketable Title
i. Implied duty of seller to deliver marketable title to buyer.
ii. NOTE! Implication will be made even though the K calls for a conveyance by quitclaim deed
(which makes no warranties of title). The reason is that the K calls for a conveyance of land, and
the seller cannot convey land unless he has title to it.:
1. ***What out for questions where the seller agrees only to give a quitclaim deed. Most
deeds include a warranty that valid title has passed at the time of closing; a quitclaim
deed makes no such warranty. Nevertheless, the seller is not relieved from the duty to
provide marketable title at closing. Thus, if the buyer discovers a defect in the title
before closing, she can seek to rescind the K. However, if she discovers defects after
closing, she will not be able to rescind or get damages from the seller b/c the implied
duty to provide marketable title ends at closing; after that the seller is liable only for
warranties made in the deed, and a quitclaim deed does not warrant title. **
iii. How can one show proof of marketable title?
1. Produce good record title
2. Title by adverse possession either through successful quiet title action or evidence
sufficient to est that the rival claim to title would not succeed if asserted.
a. Root of Title: Not necessary usually to trace chain of title, some 20 states have
marketable title acts which provide that a deed at some distance in the past is a
root of title and cuts off any claims to title founded on earlier instruments
(REFER TO TITLE RECORDING SECTION)
iv. Defective Title: the defect must be substantial and likely to injure buyer to be unmarketable.
1. Defective Chain of title
2. Encumbrances—generally make title unmarketable: burden on title such as mortgages,
judgment liens, easements, or covenants.
a. Lohmeyer v. Bower: B and L entered into a written agreement by which B
agreed to sell and L agreed to buy a one story home Lot was burdened by a
covenant requiring all residences constructed on the land to be two stories
tall Ct Said: Mere existence of a covenant restricting use is an encumbrance
making title unmarketable only b/c L had agreed to take title “subject to all
encumbrances of record” did the mere existence of the covenant NOT make
title unmarketable but L did not agree to accept existing violations of the
covenant existing violations made title unmarketable.
b. Exceptions: 1) An easement that benefits the property (utility easement) is
regarded by SOME courts as not an encumbrance so long as the easement is
known to the buyer before entry into the K; 2) Covenants restricting use are
encumbrances, but some court treat them as not making title unmarketable if
the sale K specifies a particular use that is permitted by the restrictive
covenants.
3. Zoning Restrictions not encumbrances but if existing use of the property violates a
zoning ordinance the title will be held unmarketable on the theory that the buyer could
not possibly have intended to purchase a violation of law and consequent liability.
d. Default and Remedies
i. Remedies of the Buyer on breach by the Seller:
1. Rescission: rescind the K and recover her down payment, can’t do it prior to closing
b/c the seller either party has until then to perform.
2. Specific Performance (equitable remedy but if specific performance would work an
undue hardship upon the D it will be denied)
a. If sellers title is defective and buyer still wants the property, the buyer is
entitled to an abatement of the price to reflect the diminution in value
attributable to the defect.
3. Damages: usually the benefit of the bargain.
 a. In most states the buyer may sue for the difference between the K price and
the market value of the property on the date performance is due (benefit of
bargain damages)
ii. Remedies of the Seller on Buyer breach (SEE SAME)
1. Damages: Buyers Breach See Jones v. Lee
a. Deposit Retention (Kutzin v. Pirnie)
b. Out of Pocket
c. Liquidated Damages
e. Duties of Disclosure and Implied Warranties (Duties imposed by law on Sellers to Disclose Known
defects and the warranty of quality in the construction of buildings):
i. Duties of Disclosure:
1. CL: absent fiduciary relationship seller has no duty to disclose known defects. But
must refrain from intentional misrepresentation or active concealment. This rule of
caveat Emptor : buyer must examine for himself largely abandoned today.
a. Fiduciary Relationship: seller should reveal
b. Disclosure of seller created conditions: seller is obligated to disclose
conditions that 1) are created by seller, 2) materially impair property value,
and 3) are not likely to be discovered by a reasonably prudent buyer using due
care. (Stambovsky v. Ackley)  Ghost in house.
c. Disclosure of latent material defects (Majority Rule)
i. Johnson v. Davis
d. Statutory disclosure obligations some states have statutes requiring sellers
to disclose a number of specified conditions. EX: CA from buyer beware to
seller tell all.
e. Broker’s disclosure obligations
f. Post closing survival of causes of action for nondisclosures
ii. Implied Warranty of Quality
1. Traditional Rule: builder had no liability to anyone for his poor workmanship unless he
had given express warranty of quality. Then it was implied into the K between builder
and owner but builder’s liability for economic loss resulting from breach of this
warranty was limited to those with whom he was in Privity of K (the immediate
purchaser).
2. Modern: Most jxd have abandoned it and now imply a warranty of quality by the
builder on a new home that may be enforced by subsequent purchasers of the structure.
a. Lempke v. Dagenais—implied by law runs to subsequent purchasers w/
respect to latent defectsmobile society defects often manifest themselves
after a structure has changed hands.
3. No disclaimer: Courts differ on the result of it though.
4. Limitations Period: subsequent purchasers can bring suit against original builder for a
reasonable time, period long enough to find out the latent defects.
f. Risk of Loss and Equitable Title (Problems can arise between making of K and closing—property can be
destroyed or damaged, or one or both parties can die) CL REACTION TO THIS:
i. Equitable Title (Equitable Conversion)
1. Equitable ownership passes to buyer at the moment the K of sale is made.
a. Application to the death of a party
2. Application to risk of loss of the property
a. Entitlement to insurance proceeds
b. Minority: places risk of loss on the seller despite the equitable title.
DEEDS (168-178)
I) Formal Requirements and Component Parts:
a. SOF writing signed by grantor in order to transfer the interest in land.
b. Notarial acknowledgment usually not needed but virtually all deeds have them b/c they are universally
almost required for recording the deed in the public land records.
c. The Grant: Words effecting the grant, description of the grantee, consideration, description of the land.
i. Rules of Construction: If a property description is internally inconsistent, plainly mistaken, or
incomplete, courts strive to determine the intentions of the parties. If there are no better clues to
intent, court employ rules to sort these problems out:
1. Original survey markers, natural monuments, artificial monuments, maps, courses of
direction, distances, common names, and quantity.
II) Warranties of Title: Seller’s warranties concerning the state of the title conveyed are expressly contained, if at
all, in the deed.
 a. 3 Types:
i. General Warranty Deed: Warrant title against defects arising before as well as during the time
the grantor had title.
1. Usually Contains 6 covenants concerning title:
a. Covenant of Seisin: Grantor promises that he owns what he is conveying by
deed.
b. Covenant of Right to Convey: He has power to convey
c. Covenant against encumbrances: he has no liens, mortgages, easements,
covenants restricting use, etc
d. Covenant of general warranty: warrants that he will defend against lawful
claims of a superior title and will compensate grantee for loss suffered by
successful assertion of superior title.
e. Covenant of quiet enjoyment
f. Covenant of further assurances
ii. Special Warranty Deed:
1. Usually has the same 6 above.
2. Grantor Warrant against defects of title that arose DURING the grantor’s time of
holding the title.
3. Defects arising BEFORE grantor’s ownership NOT covered.
iii. Quitclaim Deed: Warrants nothing. Merely transfers whatever right title or interest he has.
Useful in clearing defects in title
b. Merger of K into Deed: Buyer can only sue for breach of the deed covenants of title and may not rely on
the K of sale’s provisions w/ respect to title.
c. BREACH OF COVENANTS OF TITLE
i. PRESENT covenants (breached at the moment the deed is delivered)
1. Breach of covenant of Seisin,
2. right to convey, and
3. against encumbrances
a. Frimberger v. Anzellotti
b. Measure of damages for breach depends on whether the encumbrance is
removable by the grantee. If grantee can remove grantee is entitled to recover
what he spent removing it.
4. Statute of Limitations
5. Assignment of Present Covenants (Rockafellor v. Gray)
ii. Future Covenants (representations as to future events, guaranteeing grantee’s security of title in
the future—breached only when grantee is actually or constructively evicted)
1. Breach of general warranty, quiet enjoyment, and further assurances. **Remember that
statute of limitation on the present covenants can expire.
2. Brown v. Lober Brown was not constructively evicted b/c the mere existence of a
paramount title does not constitute a breach of the covenant of quiet enjoyment. If
owner of the other 2/3 started mining under Brown’s land, brown would be actually
evicted. If in order to prevent a real and manifest threat of such mining Brown bought
the other 2/3 that would be constructive eviction.
3. Breach of future covenants.
4. Benefit runs w/ estate: If there is Privity of estate between the original grantor and the
remote grantee the benefit of a future covenant given to the original grantee runs w/ the
estate conveyed to the remote grantee. For this purpose, Privity of estate means that the
original grantor conveyed either title or possession and the same interest was conveyed
to the remote grantee. . P. 173.
5. Extent of the obligation to defend: Covenant of general warranty obliges the grantor to
defend against lawful superior claims of title, but imposes no obligation to defend
against the spurious claim of paramount title. B/c it is impossible to know one from the
other w/ certainty prior to litigation, the effect is to require the grantee to defend.
iii. General Limit on Damages for Breach: Majority: grantee may not recover more than what the
grantor in breach received for the property. Problematic for 2 reasons:
1. Suit by original grantee
2. Suit by remote grantee
iv. After acquired title (estoppel by deed): grantor is stopped from denying scope of original deed
b/c once he acquires title it automatically goes to the grantee.
III) Delivery
a. Does not necessarily require a physical act of handing over paper deed to grantee.
 Doing something that demonstrates grantor’s intent to transfer immediately an interest in land to the
b.
grantee is enough.
i. Presumed Delivery: rebuttal presumption that delivery occurred under 1) physical transfer to the
grantee, 2) notarial acknowledgement of the deed or 3) recording of deed. (Sweeney v.
Sweeney)
ii. Attempted Delivery at Death: mostly ineffective Rosengrant v. Rosengrant: voided the deed
b/c there was never any intent to give outright ownership at the time of delivery…should have
been done by will.
1. Exception—Irrevocable Escrow
2. Uncertain Exception—Express conditions
iii. Delivery subject to oral condition
iv. Commercial Escrows
1. The transfer of a deed into escrow along w/ written instructions is a completed delivery
2. Also completed when the deed is given to the escrow holder under oral instructions if
there is a written sale contract.
a. Equitable Title—relation back doctrine (the buyer’s title, once acquired out of
the escrow, will relate back to the moment the deed was delivered into
escrow)
v. Even if Grantor does not intend to deliver a deed, he will be estopped from denying delivery in
two circumstances:
1. Entrustment to a deceitful grantee b/c grantor had more opportunity than the BFP to
avoid the problem.
2. Entrustment to a negligent escrow agent
a. Rational for estoppel
b. Rationale for No Estoppel
FINANCING DEVICES: MORTGAGES, DEEDS OF TRUST, and INSTALLMENT K

A. Mortgages
a. Lender will require borrower to give him a mortgage on the property.
b. Mortgage gives lender power to sell the property in the event of default on the loan and apply the
proceeds to repayment of loan.
c. Leftovers go to borrower.
d. Promissory Notes: personal promise to repay the loan on terms contained in the note. (Loan evidence)
e. Mortgage evidenced by a doc called mortgage (security agreement between the parties by which the
borrower gives the lender the right to sell the property if he defaults on the loan)
f. Mortgage usually recorded in the public land records giving notice of lender’s security interest in the
property!!!!!
g. Some places: note and mortgage combined into a single instrument but still perform separate functions
h. Borrower: mortgagor
i. Lender: mortgagee
j. Statutory Right of redemption: about 20 states have created this giving borrower a defined period of time
AFTer the foreclosure sale in which the borrower can redeem the property from the purchaser at the sale.
k. Types of Mortgages
i. First and Second
ii. Fully Amortized Mortgage
iii. Balloon Payment Mortgage
iv. Purchase money mortgage
l. Some states take Title theory others Lient theory : determines who has possession
m. Sale or Transfer by Mortgagor (borrower)
i. Acquisition subject to the mortgage
ii. Assumption of the mortgage
iii. Due on sale Clauses: what lenders insert to prevent the original mortgagor from transferring his
“equity”—his interest in the property.
n. Default by Mortgagor
i. Anti Deficiency statutes
ii. Statutory right of redemption
iii. Inadequate sale price at foreclosure—sale price at foreclosure is inadequate in the sense that it is
less than fair market value will not by itself void the foreclosure sale.
1. It will stand unless it shocks the conscience or fraud or other unfairness is present.
a. Murphy v. Financial Development Copr!! P. 181
B. Deeds of Trust Used in many states as the form of mortgage
a. How it works:
i. Borrower conveys real property to a 3 rd party as trustee for the lender, for the limited purpose of
securing repayment of the debt.
ii. Gives power of sale to trustee to use the proceeds to pay off the debt, and return excess to the
borrower.
b. Difference: judicial foreclosure time consuming = mortgage//deed of trust relatively quick
C. Installment Sale K:
a. Paying by installments and you get the title after it’s all paid.
b. Treated as a K for sale
c. Treated as a security device (Bean v. Walker)