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Property Class Agenda - December 22nd

This is the agenda for the 22nd property class, including admin stuff, office hours change, review class, and assignments.

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Property Class Agenda - December 22nd

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  1. Agenda for 22nd Class • Admin stuff • Name plates • Handouts • Slides • Takings Handout • Office hours change for rest of semester • Mondays 4-5PM starting in 101 and then in my office • Primarily for Property, but Civ Pro students welcome • Today 4-4:45 • Fridays 12-1PM starting in 101 and then in my office • Primarily for Civ Pro students, but Property students welcome • Review class • M 12/10 (day before exam) 10AM? • M 12/3 10AM? • TA led review session. Sat Dec 8 at noon? • Review of Co-Ownership • Marital Property

  2. Assignment for Next Class I • Review any questions we did not discuss in class today • Read Takings handout • Questions to think about / Writing Assignments • Do you think the Court’s decision in Kelo was correct as a matter of law, justice and/or policy? (WG1, 2 &3) • If you were a member of state legislature, would you vote to restrict eminent domain power to prevent takings like those in the Kelo case? (WG4) • Watts is one of the poorest neighborhoods in Los Angeles. The city of Los Angeles would like to improve the neighborhood by selling it to developers who would build high-end condominiums. Can the government use its eminent domain power to take the property, pay the current owners market value, and sell it to developers? (WG5) • Suppose Prof. Altman owns farmland in Nebraska. The government decides to build a highway and offramp on his land. To do so, they need one of the 100 acres that Prof. Altman owns. The farmland was worth $2000 per acre before the highway was built. After the highway was built, Prof. Altman’s farm was worth $10,000 per acre, because his land is now suitable for commercial development (e.g. gas stations, restaurants, and hotels). How much compensation should the government be required to pay Prof. Altman? (WG6)

  3. Assignment for Next Class II • Questions to think about / Writing Assignments (continued) • Suppose housing in East Dakota is monopolized by a few large corporations which own nearly all the land and houses. Most inhabitants of East Dakota rent their homes from the corporations. East Dakota decides that it would like to increase homeownership in the state, so it takes 90% of the homes from the large corporations that own them, pays the corporations fair market value, and then sells the homes to those who currently rent them. Is East Dakota’s action constitutional? (WG7) • Do you think the Court’s decision in Loretto was correct as a matter of law, justice, and/or policy? (WG1) • The city of Oneida owns the local electric utility. It needs to construct new power lines across Prof. Rasmussen’s property. If one of the electricity poles will be on Prof. Rasmussen’s property, does the city have to pay Prof. Rasmussen compensation? (WG2&3) • Same as the previous question, except the poles will be on public land, but the power lines will cross Prof. Rasmussen’s property, 20 feet above the ground? (WG4&5) • Prof. Barnett owns property on the Pacific coast of Oregon. The government decides that the coast is more beautiful and more friendly to wildlife if there are no buildings on it, so it forbids Prof. Barnett and similarly situated landowners from building on their property. Does Oregon need to compensate Prof. Barnett? (WG6)

  4. Assignment for Next Class III • Questions to think about / Writing Assignments (continued) • The federal government decides to build a military base next to Dean Guzman’s yoga retreat center. They own the land upon which they build the base, and they are happy to let Dean Guzman continue to operate his retreat. Nevertheless, the noise from the military helicopters and target practice ranges interfere with the mediation that retreat center attendees try to practice. Can Dean Guzman sue the government for compensation? (WG7) • Optional: Examples & Explanations Ch. 34 • Pp. 605-13, Examples 1-6

  5. Review of Last Class I • Co-Ownership • Tenants in Common • No right of survivorship • Share transferrable by gift, sale, will, or inheritance • Joint tenancy with Rights of Survivorship • Upon death of one, share goes to other • Severed (converted to tenancy in common) if one joint tenant sells interest • Q does mortgage sever joint tenancy • Lien states – no (Harms v. Sprague); title states – (mostly) yes • Rights of co-owners • Each has right to use and possess • Except cannot “oust” co-owner • No need to pay rent (Martin v. Martin) • Must share profits from rental and other activities (Martin v. Martin) • Contribution only for carrying charges • Taxes, mortgage interest, and regularly scheduled mortgage principal • Reimbursement for repairs and improvements only • On sale or if accounting for profits • Partition ends co-ownership -- in kind or by sale

  6. Marital Property I • 2 different legal regimes • Community property states (Cal, other western and southwestern states) • Common law states (separate property) • Community property states • Most property is “community property” • “separate property” is owned by one spouse • Assets owned by spouse before marriage • Inheritances, gifts, devises • Even if acquired during marraige • In some states, income from separate property • E.g. dividends from stock owned before marriage • Assets must be kept separate • Otherwise subject to complicated tracing rules • On death or divorce, 50-50 split of community property • Each spouse can dispose of property by will

  7. Marital Property II – Common Law • Marital property • All property acquired in marriage (some states) • All property acquired in marriage, except gifts, inheritances, and devises (some states) • All property (some states) • Separate property • Anything not marital property • On divorce • “equitable distribution” of marital property • Take into account income and property at time of marriage & divorce, duration of marriage, age & health, occupation & skills, special needs, contributions of each during marriage… • Trend toward equal distribution • On death • Property belongs to spouse who acquired it • If neither spouse had assets prior to marriage or any inheritances and only husband worked, he owns everything acquired during marriage • Spouse has elective share = her choice of • Amount left to her in will • Statutory share (usually 1/3 or ½ of his assets)

  8. Pre-Marital Agreements • Parties may sign agreements that alter disposition on divorce or death • Especially common for 2nd marriages where one or both spouse has high net worth • Traditionally not enforceable • Modern trend • Enforced as long as • Not unconscionable when made and/or • Complaining spouse received full financial disclosure and/or • Complaining spouse received notice of waiver of rights • California • Spouse must have had 7 days to review it • Spouse must have been represented by a separate attorney • Cannot affect child support

  9. O’Brien v. O’Brien • Wife supported husband while he was in medical school training to be surgeon • Wife relinquished opportunity to get permanent teaching certificate • 2 months after husband got his medical license, he filed for divorce • Court held that professional degree was marital property worth 472K • Present discounted value of additional post-tax earnings • Wife’s contribution was 103K • Court awarded wife 40% of value of medical license: 189K • To be paid in 11 annual installments • Do you think the court reached the correct result in O’Brien v O’Brien as a matter of law, justice, and/or policy? • New York is a common law (separate property) state. How do you think a case like O’Brien v O’Brien would be decided in a community property state? • Suppose the parties in O’Brien v O’Brien had signed an agreement, before they married, which contained the following provision: “If husband and wife divorce without children, husband will pay wife $1000 per month. If husband and wife divorce after having children, husband will pay wife $1000 per month plus $500 per child under 18.”

  10. More on Professional Degrees • O’Brien v. O’Brien is minority approach • Only a few states consider professional degrees to be marital property • NY overturned O’Brien v. O’Brien by statute • Other approaches • Reimbursement alimony (California) • Spouse with professional degree must reimburse other spouse for out-of-pocket contributions to educational expenses • Tuition and books, but not living expenses • Income of spouse with professional degree is relevant to “equitable distribution” in common law states • Contributions of spouse without professional degree is also relevant to “equitable distribution” in common law states

  11. Marital Property Qs • Assume for this and the next slide: • The statutory share in a common law state is 50%. • A common law state considers property acquired during marriage to be marital property, regardless of the source and excludes from marital property only property owned before the marriage began. • A community property state considers income (e.g. rents or dividends) from separate property to be separate property. • Suppose that when Bill and Hillary marry they have no assets. They each work as lawyers and deposit their paychecks into a joint account. Hillary earns twice as much as Bill. When Bill receives a 25K bonus, he deposits it into a Vanguard account in his name only. He invests the money in a stock market mutual fund. Later, Hillary inherits 100K from her father, which she deposits in a Fidelity account in her name only. On December 31, 2018, there is 10K in their joint account, the Vanguard mutual fund in Bill’s name is worth 50K (as the result of 10K in dividends and 15K in capital appreciation), and the Fidelity mutual fund in Hillary’s name is worth 110K (as the result of 10K in dividends and no capital appreciation). Suppose, on December 31, 2018: • If Bill and Hillary divorce. How much do each get if they live in a common law state? in a community property state? • Bill dies leaving all his property by will to Monica. How much does Hillary get, if they live in a common law state? in a community property state?

  12. Marital Property Qs • Suppose that when Donald and Ivana married, he had 100 million in assets, and she had 200K. During their marriage, they kept their assets separate and by the end of 2018, as a result of their investment decisions, Donald’s assets were worth 100 million and Ivana’s were worth 400K. Suppose that on December 31, 2018: • If Donald and Ivana divorce. How much do each get, if they live in a common law state? For this and the next question, assume that Donald and Ivana signed a prenuptial agreement, but a court declared it invalid. • If Donald and Ivana divorce on December 31. How much do each get, if they live in a community property state? • Donald dies leaving all his property to Stephanie by will. How much does Ivana get if they live in a common law state? • Donald dies leaving all his property to Stephanie by will. How much does Ivana get if they live in a community property state?

  13. Other Mortgage Questions • Prof. Rasmussen owns two parcels, 1 & 2 Eastfield Rd. Bank1 has mortgage on 1 Eastfield Rd for 500K, Bank 2 has mortgage on 2 Eastfield Rd. for 500K. Prof. Rasmussen defaults on the loan to Bank 1. Instead of foreclosing on 1 Eastfield Rd., Bank1 gets a judgment lien, which, according to statute in the jurisdiction, gives it a lien on all of Prof. Rasmussen’s property. Creditor 1 then foreclosed on both its mortgage and the judgment lien. The sale of 1 Eastfield raised 400K and the sale of 2 Eastfied raised 700K. How much does each creditor get? How much does Prof. Rasmussen get? • Prof. Barnett owns 1 Crest Rd, which he financed with a mortgage for 1m from WaMu that was never recorded. Prof. Barnett sold the property for 2m to Prof. Rose and moved to Peru. Prof. Barnett then stopped paying monthly payments on the mortgage. WaMu then petitioned the court to foreclose on 1 Crest Rd. Can it do so?

  14. Questions on Mortgage Brokers • Consider the way home mortgages are often sold. A bank contracts with a mortgage broker. A mortgage broker is an independent businessperson, not an employee of the bank. The mortgage broker solicits customers and, when a customer wants a loan, helps the customer fill out the relevant paperwork and sends the paperwork to the bank for approval of the loan. • a) The contract with the mortgage broker might specify that the mortgage broker gets a fixed salary – perhaps $3000 per month. What problems might occur under such a contract? Would the bank be wise to offer such a contract? • b) The contract with the mortgage broker might specify that the mortgage broker gets a percentage of the value of all loans approved. For example, the mortgage broker might get 0.5% of the value of each loan, which would be $2500 on a $500,000 loan. What problems might occur under such a contract? Would the bank be wise to offer such a contract? • c) What macro-economic problems might occur if most loans were negotiated through contacts such as those described in (b)? • d) Can you think of a better contract between the bank and the mortgage broker?

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