Class Twelve: Real Property Modern Challenges in Property Law

1. Class Twelve: Real Property Modern Challenges in Property Law

2. Last Time We Spoke About: • We Will Discuss: • - Fixtures • - Adverse Possession • - COACHEN • 1. Continuous, • 2. Open, • 3. Actual, • 4. Claim of Right, • 5. Hostile, • 6. Exclusive, and • 7. Notorious. • - Conveyances • - CMDR • 1. Contract, • 2. Mortgage, • 3. Deed, and • ` 4. Recording • - Who Wants to Be a Homeowner

3. Tonight We Will Speak About: - The Value of Title Searches - A Review of Real Property - The wonderful world of Land Use - The Law of Nuisance and Trespass - The Law of Zoning; and - The Law of Eminent Domain and Takings - Urban Renewal vs. Personal Property Rights

4. Review of Real Property The Value of Title Searches • A purchaser can only get the property rights of the seller • Title searches identify the property rights the seller has • Title searches prevent mistakes like the Creamery Bldg. • Title searches make the buyer eligible for title insurance • Title insurance guarantees rights found in title searches • Title searches help the buyer know what they purchase

5. Review of Real Property Looking Back to See our Way Forward

6. In Review: The Four Postulates of Property Law: 1. Property needs to be seen as a collection of “Rights” not a collection of “Things”; 2. Property Rights are those recognized by Law and the Law evolved from Property Rights; 3. Our Foundations of Law recognized that we are endowed with Property Rights; and 4. Property Rights can be summarized by E-PUT

7. Real Property Basics • Historically, Real Property has meant wealth, power and life. • To truly understand Real Property and its legal concepts, one must think in terms of possession and time. • Complex legal rules and holdings of Real Property have developed because of the inherent value and uniqueness of real property.

8. Real Property Taxes • There are two types of taxes, and really only two types of taxes, which tax you on what you own or have, not upon what you earn or acquire. These two types of taxes are Real Property Taxes and Estate (or Death) Taxes. • In New York State, Real Property Taxes are used to finance local governments and schools. • TheSTAR Program in New York Shifts school tax revenue from real property taxes to the State income taxes. • Governments us the Real Property Tax, to generate revenue because its is a more dependable, less fluctuating, source of revenue.

9. Interests in Land • Like all property, interests in land are a collection of rights • Interests in Land need to be seen through the prism of: • Possession • Time • Two Major Questions • Possession – Does the interest allow possession of the realty? • Time – What time will the interest in the property be executed?

10. Interests in Land Possessory Interests in Land(Either present or in future) 1. Fee Simple Absolute 2. Defeasible Estates - Fee Simple Determinable with Possibility of Reverter - Fee Simple Subject to a Condition Precedent - Fee Simple Subject to an Executory Interest 3. Fee Tail 4. Life Estate Non possessory interests in land:(An Interest with a right that can be executed but is not presently possessed 1. Easements 2. Profits, 3. Covenants, and 4. Equitable Servitudes

11. Estates in Land • Present, possessory interests. • Highest Level Estate in Land: • FEE SIMPLE ABSOLUTE • 1. Invests the owner with all possible rights (E-PUT) now and in the future. • 2. It is the presumed form of ownership grant, unless a lesser estate grant was expressly intended. • 3. Is of perpetual and infinite duration (lasts forever). • 4. Is the form of ownership from which all lesser forms are derived. • Magic Language: “To Grantee and their heirs”

12. Estates in Land • Defeasible Estates. • These are possessory fee estates of infinite duration • that can be terminated by the happening of a specified event. • These are a lesser estate than fee simple absolute. • FEE SIMPLE DETERMINABLE (Possibility of Reverter) • 1. An Estate that AUTOMATICALLY terminates upon the happening of a stated event. • 2. Stated event must be for a lawful purpose. • Magic Language: “To Grantee and their heirs • for so long as” or “while” or “during” or • “until” (the occurrence of an event).

13. Estates in Land • Defeasible Estates. • FEE SIMPLE SUBJECT TO A CONDITION SUBSEQUENT • An Estate that can terminate upon the happening • of a stated event and the taking of an action of the party granted such rights by the transferring owner. • Known as a RIGHT OF RE-ENTRY, this termination is NOT AUTOMATIC and needs the grantor to take action • Magic Language: “To Grantee and their heirs upon the condition that” or “provided that” or “but if” or “if it happens that” (the occurrence of an event).

14. Words of purchase-describe who takes by grant, gift, inheritance or bequest. Words of limitation-describe the type and duration of the estate taken by the transferee. Words of Purchase vs. Words of Limitation

15. What are the words of purchase? What are the words of limitation? Fee Simple Absolute“To A and his heirs” A Words of purchase and his heirs Words of limitation Infinity

16. Estates in Land • Present, possessory interests. • FEE TAIL • 1. An Estate limited to the grantee and his or her family • 2. Reverts to grantor if not owned by heir • 3. No longer recognized in almost any state • Now FEE SIMPLE ABOSOLUTE. • Magic Language: “To Grantee and heirs of their body”

17. Estates in Land • Present, possessory interests. • LIFE ESTATE • 1. By Marital Right (dower and curtesy) • 2. For Life of Grantee • 3. Pur Autre Vie (Life of Another) • Magic Language: “To Grantee for Life”

18. Estates in Time - Life Estates The remainder is the estate in time. - Possibility of Reverters The reversion is the estate in time. - Rights of Re-Entry The right of re-entry is the estate in time.

19. Joint Interests/Concurrent Estates - Tenancy in the Entirety By Marital Right – only between husband and wife Right of Survivorship – by operation of law Severance Limited (Death, divorce, agreement, joint creditor execution) - Joint Tenancy Created by unity of time, title, interest and possession Right of Survivorship – by operation of law Severance Less Limited (Inter vivos conveyance or contract to convey, death, agreement, foreclosure on lien) - Tenants in Common No Right of Survivorship. Freely alienable. Joint ownership based upon percentage. Share and responsible proportionally in all gains and liabilities.

20. Future InterestsRemember – We need to think of possession & timeBlack’s Law Dictionary – DefinitionFuture Interests: “Interests in land or other things in which the privilege of possession or of enjoyment is future or non present.”

21. As a result …Possessory Interests in LandCan be:Present Possessory Interests or Future Interests

22. Interests in Land • A Two Step Dance: Posession and Time • Possessory Interests in Land(Either presently or in the future) • 1. Fee Simple Absolute • 2. Defeasible Estates • - Fee Simple Determinable with Possibility of Reverter • - Fee Simple Subject to a Condition Precedent • - Fee Simple Subject to an Executory Interest • 3. Fee Tail • 4. Life Estate • Present interests(When the RIGHT to possess is NOW) • Future interests(When the RIGHT to possess is in the future )

23. Reversionary Interests Reversions Possibility of Reverter Right of Re-entry Remainders Indefeasibly vested remainder Vested remainder subject to open Vested remainder subject to complete divestment Contingent remainder Executory Interests (Limitations) Shifting executory interest Springing executory interest Types of Future Interests

24. Title Limitation Rules • Rule in Shelley’s Case –(To A for Life with remainder in A’s Heirs: Now to A in Fee Simple Absolute) • Doctrine of Worthier Title –(To A for Life with remainder in O’s Heirs: Now to A with reversion in O) • Rule Against Perpetuities –(No property interest is good unless it must vest, if at all, not later than 21 years plus lives in being) • Rule Against Restraints on Alienation –(All disabling and absolute restraints are void, some equitable, promissory, temporary restraints can be upheld) These Rules All Seek to Promote Marketable Title and Ensure that Real Property is NOT Controlled for any significant time from Beyond the Grave

25. Fixtures • In General: • A “fixture” is a chattel that has been affixed to land and as such has ceased being personal property and has become part of the realty. • Common Fixtures: • Stoves, affixed flat screen TV’s, curtain rods, door keys. • Challenging Items: • Flat Screen TV’s, In Room Air Conditioners • Electrical Generators, Art Collections • Screened Yard Houses, Satellite Dishes • Basketball Units

26. Adverse PossessionGenerallyAt the core of adverse possession is a statute of limitationsStatutes of Limitation bar suits after some period of time after the cause of action accruesUnder New York State Law (Section 212 (a) of the CPLR) the statute of limitations (time period for adverse possession) for an action to recover real property is 10 years.

27. Adverse PossessionBasic Issues* In context of actions to recover possession of real propertythe cause of action accrues at the time the wrongdoer enters and takes possession of the property.* A Cause of action for wrongful possession differs from cause of action for trespass.* In trespass, there is a wrongful entry, not wrongful possession* If some one is purchases a building on top of property not owned or leased by them the owner of the land can sue the building owner for ejectment and make them take the building off the land.

28. Adverse PossessionUnderlying Policies – Why the Law Recognizes It • To reward productivity with the land • To avoid continuing, unresolved, title disputes • To penalize true owners for sitting on their rights and not protecting their land

29. Adverse PossessionSpecific Requirements - COACHEN C – O – A - C – H – E – N

30. Adverse PossessionSpecific Requirements - COACHEN • Continuous • Open • Actual • Claim of Right • Hostile • Exclusive • Notorious

31. Adverse PossessionTacking and Tolling • Tacking • - Under New York State Law, an adverse possessor may tack (or add to) his time under the statute of limitations, the adverse possession time of the previous land owner. • Tolling • - Under New York State Law, certain disabilities of the true land owner can toll (or stop the time running of) the statute of limitations. These include: Minority (under the age of 18); Mental incompetence; Imprisonment; and Soldiers and Sailors on active duty.

32. Non Possessory Interests “Possessory Interests”, are interests in real property that either are, or will be (pre-vested interests) possessed by the holder of the property. “Non Possessory Interests”, are interests in real property interests where the holder of such interest does not ever actually possess the property. It is the right to use land possessed by someone else.

33. Non Possessory Interests • Easements • Profits • Covenants • Servitudes

34. Non Possessory Interests: EASEMENTS • An Easement is defined as: “The right to use a tract of land for a specific purpose” • Types of Easements: - Affirmative (Allows a non possessor to use land) - Negative (Prevents possessor from a specific use) - Appurtenant (Permits adjoining landowner a use) - In Gross (Permits use by non adjoining landowner)

35. Creation of Easements The basic methods of creating an easement are: • Express grant • Express reservation • Implication, and • Prescription.

36. Transfer of Real Property Conveyances - CoMmanDeR There are four major factors to a transfer of real property. They are: • Contract • Mortgage • Deed • Recording

37. Transfer of Real Property: Conveyances The Contract: • Because of the Statute of Frauds, all agreements for the sale of real property must be in writing and signed by the Party to be charged. • Because of Specific Performance – Both Parties sign a Contract to purchase Real Estate • Most contracts are provided by non lawyer realtors and contain a standard “attorney approval clause which allows the buyers to have an attorney examine the same within a specified period of time and cancel it if it is not in their best interest.

38. Transfer of Real Property: Conveyances The Contract: In the Contract, there is an implied warranty to transfer: • Marketable Title - Title (ability to pass ownership) is free from doubt - Free from Encumbrances (Mortgages, liens, easements, covenants, encroachments) • Although most contracts provide for the sale of the premises “as is”, a duty to disclose known defects has been upheld by the courts and is now standard form in nearly all real estate contracts. Active concealment by a seller is deemed fraud. • Sellers frequently now also add specific disclaimers of liability, particularly on expensive items like leaky foundations or roofs.

39. Transfer of Real Property: Conveyances The Contract: Most buyers find real estate through a Real Estate Agent: • The Real Estate Agent is an “Agent” for the Seller, and the Seller by means of a written listing agreement is liable for their commission, usually between 6 to 7 percent of the sale value. • Real Estate Agents are licensed by the State of New York . • They are sales people, who make their income from making sales of real estate. Although they work for and must represent the Seller, they have a vested interest in making the buyer happy and enthusiastic about the purchase of the property. Also because they may represent many buyers, they can offer one buyer several choices, especially through the multiple listing service.

40. Transfer of Real Property: Conveyances The Mortgage: The Mortgage is the Legal Instrument by which Real Estate can be Financed. A mortgage is both a loan contract and a lien Elements of a Mortgage: • Must be in writing –Statute of Frauds • Must Describe the Land and the Parties • Like all contracts, they can have different terms (duration, interest rates and payment structures) but most clauses are both federally and state regulated, causing them to be highly uniform so they can be sold on the secondary mortgage market (Fannie Mae and Freddie Mac – Federal National Mortgage Association and Federal Home Mortgage Corporation). • Under Federal and State tax law, Home Mortgage interest is tax deductible. • Mortgage Interest Rates are front loaded so early payments are much more heavily interest than principal. As a result a 15 year mortgage is far less costly due to a shorter term of interest payment than a 30 year mortgage. • Mortgages are an exception to the Homestead exemption and can foreclose on tenants by the entirety because both owners would be required to sign mortgage.

41. Transfer of Real Property: Conveyances The Mortgage: Types of Mortgages: • First and Second Mortgages – A property may contain more than one mortgage. The first mortgage is the first in time (and usually the first in right). The second or secondary mortgage (often a home equity loan) is financing on whatever amount between the amount of the first mortgage and the amount of the value of the home (i.e. the equity). • Amortized Mortgage – A mortgage for a specified term of years – usually 15 or 30 years – where the principal and interest are amortized over the period of the loan in equal payments. • Balloon Payment Mortgage - A mortgage for a specified term of years where after a period of equal loan payments, a single, large balloon payment is due upon the conclusion of the loan. • Assumed Mortgage – A mortgage taken by a previous owner of the property that is assumed (i.e. taken over) by a subsequent owner. • Purchase Money Mortgage – A mortgage loan made by the owner of the property to the purchaser of the property for a portion of the purchase price.

42. Transfer of Real Property: Conveyances The Mortgage: Types of Mortgages: • Prime Rate Mortgages – A mortgage made at market interest rates. • Fixed Rate Mortgage – A mortgage made at a rate of interest consistent and unchanging during the course of the loan. • Variable Rate Mortgage – A mortgage made at a rate of interest that fluctuates during the course of the loan (most often tied to prime rates or treasury bills plus a fee amount). • Convertible Mortgage - A variable rate mortgage convertible for a time period during the term to a fixed rate upon the payment of a fee. • Sub Prime Mortgage – A mortgage with a variable rate that begins at an interest rate below the prime rate. • Due on Sale Clause – Most mortgages require the mortgage to be paid off in total upon the sale of the property. An assumable mortgage is not due on sale. • Foreclosure – The right of the Mortgagor to repossess and sell the property for the mortgagee’s failure to provide payment of the mortgage pursuant to its terms. Mortgagor is also entitled to collect a deficiency if one exists, or remit the balance if there is a surplus.

43. Transfer of Real Property: Conveyances The Deed: The Deed is the Legal Instrument by which the title to the Real Property is passed. (We no longer do livery of seizen) Form and Content of the Deed: • Must be in writing –Statute of Frauds • Must Describe the Land and the Parties • Must provide “words of intent” – How the property is transferred and held – i.e. fee simple absolute or any terms of limitation. • Consideration is unnecessary, since the Deed merely represents the title and not the contract or agreement under which terms it is passed. • Seal and Attestation are also unnecessary, but can be required for recording. • A signature is required from the grantor. A grantee’s signature is not required even if it contains covenants as their acceptance of the deed is deemed acceptance of the covenants or limitations.

44. Transfer of Real Property: Conveyances The Deed Continued: • A deed must be delivered and accepted to be effective • Title to property passes upon effective delivery, as a result returning it back to the grantor has no effect, since title has already passed. • Physical or manual (through the mail or courier) delivery is required • Delivery is presumed if handed to grantee, if delivery is acknowledge before a notary by the person delivering the deed to the grantee, or if the deed is recorded.

45. Transfer of Real Property: Conveyances The Deed Continued: There are three types of deeds characteristically used to convey property interests: • The general 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 five covenants for title as will be seen ahead • The special warranty deed contains fewer and more limited assurances. • The quitclaim deed usually contains no assurances; it releases to the grantee whatever interest the grantor happens to own.

46. Transfer of Real Property: Conveyances Recording: • At common law, in nearly all cases priority was given to the grantee first in time. First in Time was considered first in right • Thus, if A conveyed Blackacre to B and then made an identical conveyance to C, B would prevail over C on the theory that after the first conveyance A had no interest left to convey.

47. Transfer of Real Property: Conveyances Recording: 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 Bona Fide Purchasers from secret, unrecorded interests of others. 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.

48. Transfer of Real Property: Conveyances Recording Continued: 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 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 lispendens (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. 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 reference

49. The Law of Land Use • Nuisance • Trespass • Zoning and Planning • Governmental Taking (Eminent domain)

50. Nuisance • The law has long recognized the concept that one must not use one’s property to injure another’s property. When this type of conduct occurs it can legally be classified as Nuisance. • Private Nuisance – A private nuisance is the substantial interference with private rights to use and enjoy land, produced by either intentional and unreasonable conduct, or by unintentional conduct that is either negligent, reckless, or so inherently dangerous that strict liability is applied. • Public Nuisance – A Nuisance that affects the rights held in common by many landowners, i.e. the public, rather than the specific rights of an individual, targeted landowner can be classified as a public nuisance.