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Property I Outline

Acquisition by Discovery / Capture (BEFORE MIDTERM)

- First in Time/First Possession (discovery)
- The sighting or finding of unchartered territory means that it belongs to you
• Johnson v. M’Intosh
- Whether a title conveyed by the Native Americans can be recognized by the Federal Courts?
- Discovery of land gives the exclusive right to settle, possess, and govern the new land, and the
absolute title to the soil, subject to certain rights of occupancy only in the natives.
- The United States holds absolute title with the exclusive right to convey land while the Native
Indians only had a right of occupancy that can be extinguished at any time. Conquest gives title
that the Courts cannot deny; therefore property rights are defined by law.
- First in Time/ First Possession (Capture)
• Who ever captures (possesses) something first owns it
• Pierson v. Post
- Does a person obtain possession of a wild animal by chasing it?
- Merely finding and chasing a wild animal (pursuit) does not give a person possession. Even
merely wounding the animal will not give right to possession.
- The animal must be captured or killed in order to constitute possession.
- Local custom was contrary to the rule adopted by the court
• Post would have probably won because it appeared from the record that all hunters in the
region regarded hot pursuit as giving rights to take an unimpeded first possession

• Ghen v. Rich
- Whether title to a whale is acquired under reasonable local usage when only an unequivocal mark
of appropriation is possible?
- Reasonable local usage gives title to the first taker of a whale who by acts of appropriation.
- The common law mandates that control is a necessary prerequisite to someone being able to
possess a wild animal.
- Plaintiff did everything in his power to possess the animal.
- The widespread custom in the industry recognized this as the only realistic form of possession.
- Keeble v. Hickeringill
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• Whether the Plaintiff had a property right in the ducks that were on his property?
• Landowners are considered prior possessors (first possessors) of wild animals on their land.
• Owner was using land in accordance with the law and trespasser maliciously interfered with the
owner’s livelihood
- Court might say that the landowner had "constructive" possession of the animal
- Theories/Bases of Property Rights
• John Lock : Labor Theory / First Possession
- Respect the claim of first possession because the obligation was imposed by the law of nature and
bound all men fast long before mere human conventions had been thought of
- Oil/Gas/Water
• Oil and Gas
- The resources have a fugitive character in that they wander from place to place
- The courts are induced by the fugitive nature of the resources so they liken them to wild animals
- Because ownership of wild animals has been settled in terms of the rule of capture, the courts
reasoned that ownership of oil and gas should too

• Water
- Rule of capture has played a formative role in the case of water
- Groundwater : Reasonable use rule
• Rule of capture but with the slight addition that wasteful uses of water, if they actually harm
neighbors, is considered unreasonable and unlawful
- Surface waters and some ground water
• Western states: Explicit rule of first in time or prior appropriation
- The person who first captures water and puts it to reasonable and beneficial use has a right
superior to later appropriators

• Eastern states: Riparian rights

- Each owner of land along a water source has a right to use the water, subject to the rights of
other riparians
- Relation to rule of capture because riparians claims rest on the underlying holdings of the
land and the land was originally acquired by first possession
- Alienability of property is a fundamental principle of our property law
• Good because can transfer it to whoever needs it
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- The law protects title and possession
• Title does not matter as much
• If something is rightfully possessed by you then people cannot take it
• Don’t have to prove you own something, have to prove you have possession and someone took it
from you

• Title is not determinative to prove who the animal belongs to in this dispute
• Based on proof, your rights to something have to be better than another persons’s rights to it
Economics of Property Law
- Externalities
• Decision made about how to use resources without taking full account of the effects on other
people/things
- Can be negative or positive
• One of the key reasons for private property
• Cost or benefit effects are ignored because they are external to the person
• As a consequence of externalities resources are misused or misallocated
- Ex. Pollution (negative externality)
• The concept of externalities is at the heart of the economic theory of property rights
- According to this theory the purpose of private property rights is to enhance the social welfare by
maximizing the value of scarce resources
- Property rights do this by internalizing externalities (bringing the costs of the resources use to
bear on the user)/(factor the others harm in your decision making), done in 2 ways:
- Concentrate the costs and benefits of the use on owners
- Property rights reduce the costs of negotiating with others over remaining externalities
• Tragedy of the commons
- Depleting and polluted natural resources leads to this tragedy
- In general get this problem when the resource is up for grabs and is not owned by anyone
- Illustrates the important concept of externalities
• Tragedy of the anti-commons
- Anti-commons entails multiple people having rights to veto the exploitation of a resource
- Anti-commons leads to underconsumption of a resource
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- Whole idea of anti-commons is to keep people from using a resource
- Tragedy means no one using the resource and leads to counter-productiveness
- Transaction costs
• Can prevent us from getting the efficient outcome
• Can inform our thoughts about what the legal rules should be
• Think: can we reduce the cost by abiding by the legal rules
• Categories
- Monitoring cost
- Free-rider problem
- Hold out problem

Acquisition by Find
- Armory v. Delamirie
• A finder of an object has a property interest which is not absolute, but is sufficient to allow the
finder to keep the object against all claims but those made by the rightful owner.

• The title of the finder is good as against the whole world but the true owner
- Lawyers conceive of property as referring to relationships among people with respect to things not to a
relationship between a person and a thing
- The meaning of the phrase true owner depends upon who the other claimants are
- Title or ownership is relative
- Anderson v. Gouldberg
• One who has acquired the possession of property, whether by find, bailment or tort, has a right to
retain the possession as against a mere wrong doer who is a stranger to the property

• Possession is good title against all the world except those having a better title
Acquisition by Adverse Possession (Subsequent Possession)
- Adverse Possession of Land
• Adverse possession functions as a method of transferring interests in land without the consent of the
prior owner and in spite of the dissent of such owners

• The theory that adverse possession rests on is that the adverse possessor may acquire the title at such
time as an action in ejectment by the record owner would be barred by the statute of limitations
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• Adverse possession is the running of the statute of limitations
- Statute of limitations runs when the owner could bring the suit but doesn’t
- When the elements of adverse possession are met then the statute of limitations starts running
• The running of the statute of limitations bars an action by the erstwhile owner but also vests a new
title created by operation of law , in the adverse possessor

• Once acquired, this new title relates back to the date of the event that started the statute of
limitations running and the law acts as though the adverse possessor were the owner from that date

• Purpose of adverse possession…

- The great purpose is automatically to quiet all titles which are openly and consistently asserted, to
provide proof of meritorious titles, and correct errors in conveyancing

• Earning theory of adverse possession

- Possessor by making use of property earns title because we want people to make productive use
of property

• Sleeping theory of adverse possession

- Adverse possession justified by the fact that the original owner has been negligent or sleeping on
their rights so they should be penalized for failing to enforce their rights in a timely manner

• There does not have to be a lawsuit brought for adverse possession

• Elements just have to be met for the doctrine to act
• Elements
- An entry that is actual and exclusive
• An entry is required bc adverse possession depends on a statute of limitations running against a
cause of action and the entry creates the cause of action thereby triggering the statute

• The possession has to be exclusive not the entry

- Open and notorious
• Entry has to be open and notorious so it would put reasonably attentive property owners on
notice that someone is on their property
- Continuous for the statutory period
• Entry must be continuous but not literally constant
- Adverse possessor is permitted to come and go in the ordinary course given the nature of the
property in question
- Has to be continuous because it proves the intent of the possessor and that they wanted to
acquire an interest
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- Adverse and under a claim of right
• Adverse/ hostility implies possessors wrongfully seeking something not theirs
- Not with the owners permission/ inconsistent with the owners rights
• Claim of right or claim of title implies possessors thinking something is theirs
- 3 different mental state requirement views in claim of right
• Objective standard: State of mind is irrelevant
- Once there is entry against the true owner, she has a cause of action
• Good-faith standard: The required state of mind is "I thought I owned it"
• Aggressive trespass standard: The required state of mind is "I thought I didn’t own it but I
intended to make it mine”

• Averse possession against the government

- Under common law rules, adverse possession doesn’t run against the govt; local, state or federal
- In barring adverse possession against the govt, American courts have relied on this rule as well as
state constitutional provisions restricting the alienation of state lands

• Manillo v. Gorsky
- Entry and possession of land for the required time which is exclusive, continuous, uninterrupted,
visible and notorious, even though under a mistaken claim of title, is sufficient to support a claim
of title by adverse possession. I
- In order to be open and notorious, a minor encroachment along a boundary line must be known
by the true possessor of the land.
- If the inconvenience caused by an innocent encroachment is so minor then relief might be denied
altogether
- If the encroachment takes up a substantial part of the land in question, removal might be ordered
notwithstanding the good faith of the encroaching party
- Relative hardship test
• Did plaintiff suffer irreparable harm if removal were denied
- Balancing test
• Compare the hardship to the plaintiff if removal is denied to the hardrhip to the defendant if it
is granted

• Color of title and constructive (adverse) possession

- Color of title refers to a claim founded on a written instrument or a judgement or decree that is for
some reason defective and invalid
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- Is not always a requirement
• not a universal element/ common requirement
- Color of title requirement has important advantages for the adverse possessor
• Shorter statute of limitations is applicable
• May have an advantage where the adverse possessor enters into possession of only a part of the
property
- If you take possession of some property with color of title your possession to a part of
something is deemed to be constructive possession of all of it

• Rule is limited to its application to contiguous properties

- Another advantage of this would be that the activities relied upon to establish adverse
possession reach not only the part of the premises actually occupied but the entire premises

• Boundary disputes may also be resolved by the doctrines of agreed boundaries, estoppel and
acquiescence
- Agreed boundaries: if there is uncertainty between neighbors as to the true boundary line, an oral
agreement to settle the matter is enforceable if the neighbors subsequently accept the line for a
long period of time
- Estoppel: comes into play when one neighbor makes representations about the location of a
common boundary and the other neighbor then changes her position in reliance on the
representations or conduct
- Acquiescence: long acquiescence is evidence of an agreement between the parties fixing the
boundary line

• Courts split encroachments into 2 categories

- Accidental encroachments
• The neighbor couldn’t come to me to negotiate
• Mistake happened
• No intention
• No market transaction in advance
• Compensate the other person for the encroachment/hard
• Looked at by courts as liability rule
- Intentional encroachment
• Neighbor wants to build this thing, has intention and is going to encroach
• Have a negotiation or market transaction in advance
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• Courts don’t look at it as a liability rule
• If can't come to a voluntary deal shouldn’t be allowed to do it
• The mechanics of adverse possession
- Howard v. Kunto
• To constitute adverse possession, there must be actual possession that is uninterrupted, open
and notorious, hostile and exclusive and under a claim of right made in good faith for the
statutory period.

• Summer possession can constitute continuous possession if such possession is similar to the
conduct of surrounding owners.

• Tacking of adverse possession is permitted if the successive occupants are in privity, if there is
a reasonable connection between the predecessors and the successive occupants.
- Privity is a voluntary transfer from the prior possessor to the current possessor
- Concept of tacking prior periods
• Tacking could be on the possessors side or on owners side
- Adverse possession of chattels
• O'Keeffe v. Snyder
- Possession was not open and notorious
• It was in a private home in a living room
- Has to be open and notorious so owner knows to sue you
• Can’t say owner is sleeping on their rights if its not open and notorious
- Problem: most personal property/chattels are not open and notorious to other people
• This is where the discovery rule comes in
- A thief cannot acquire title to a stolen chattel and cannot transfer good title to others, regardless of
their good faith and ignorance of the theft.
- The rule of discovery, rather than adverse possession, is the significant consideration in
determining title to chattels.
- The appropriate test is whether the owner of the chattels has acted with due diligence in pursuing
his personal property.
- If the owner of the chattel unreasonably fails to discover facts leading to a cause of action then
the statute of limitations will commence.

• When will the statute of limitations commence?

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- At the end of the statute of limitations, if no cause of action has been filed, then the possessor of
the chattel can acquire title by adverse possession.
- Opinion in O’Keeffe permits tacking of periods possession
but it appears only so long as the possessors are in privity with each other.
- In O’Keeffe there is focus on the conduct of the owner and the important point is not that there
has been a substitution of possessors but there has been a continuous dispossession of the former
owner.

Acquisition by Gift
- Enabling the property owner to do what they want with it only if they want to
- Three requirements to make a gift of personal property
• Donative Intent
- Donor must intent to make a present transfer of ownership or an existing interest in the property
- Intention to make a gift may be shown by oral evidence
• Delivery
- Donor must deliver possession to the donee with the manifested intention to make a gift
- Delivery requires objective acts to be present
- Manual/actual delivery: Have to transfer/hand over the object on top of the land
• Traditional rule: where it is possible it is required
- If manual/actual delivery is not practicable because of the size or weight of the object, or its
inaccessibility, constructive or symbolic delivery may be permitted

• Constructive delivery is handing over a key or some object that will open up access to the
subject matter of the gift.
- Giving someone means to get something
• Symbolic delivery is handing over something symbolic of the property given.
- The usual case: handing over a written instrument declaring a gift of the subject matter
- Symbol of the item or intent to coney it
- Doesn’t have to be something that actually is used with the item
• Acceptance
- By the donee
- Courts resume acceptance upon delivery unless a donee expressly refuses a gift
- Newman v. Bost
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• To constitute a gift causa mortis, a gift made in contemplation of and expectation of immediate
death, there must be an intention to make a gift and actual delivery of that gift.
• The donor of the gift can expressly or impliedly intend to make a gift, but it must be clear that the
donor knew what he was doing and that he intended to make a gift.
• Can be actual or constructive delivery
- Constructive when the gifts aren’t present or incapable of manual delivery
- Gruen v. Gruen
• An inter vivos gift requires that the donor intend to make an irrevocable present transfer of
ownership.
• Delivery of the gift can be by physical delivery or constructive delivery, sufficient to divest the
donor of dominion of the property.
• Acceptance by the donee will be presumed when the gift is of value to the donee.
• A donor can retain a life estate in a gift and constructive delivery will be acceptable in such a
situation as it would be nonsensical to actually deliver the gift to the donee and then immediately
take it back for the remainder of the donor’s lifetime

Acquisition by Creation
- The assertion is that if you create something (an entity that is tangible or intangible) — if in that
sense you are first in time — then that something is most certainly yours to exploit

• This right of exploration is separate and independent from the ownership of the entity
- Problem: the things you create are not always yours alone to exploit and you don’t always have full
rights of property in your own person

- Intellectual property law

• Grants limited monopolies over protected material
- copyright, patent, trade secrets, and trademark
- The point of the monopolies is to promote creative activity
- The point of the limits is to advance competition
- Property in One’s Expressions and Ideas: General Principles of Copyright and Patent Law
• International news service v. associated press
- There is a quasi property interest in news collected by an agency against other news collection
agencies.
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- It is unfair business competition for a news collection agency to distribute the news collected by
another news collection agency.

- Hot news doctrine— a newsgatherer may recover from a defendant when (1) the news-gathering
or collection process involves significant expenditures; (2) the collected news or information is
time-sensitive; (3) the defendant free rides on the collected material; (4) the freeriding directly
competes with the newsgatherer’s market; and (5) the freeriding is likely to diminish incentives
to collect news/information in a timely fashion.
• Copyright
- Copyright protects artistic or other creative expression, not ideas
- Generally, for works created on or after January 1, 1978, the rule is that protection extends
for the life of the author plus 70 years, and this term cannot be renewed
- 3 requirements for copyright protection
• Originality
- The work must be an independent creation of the author and must demonstrate at least
some minimal degree of creativity
- To be Copyrightable a work must be created by a human being
- Works created by animals or plants are not copyrightable
- HOWEVER: Under sweat of the brow doctrine, an author gains copyright protection
simply on the basis of effort and expense, no originality required
• Work of authorship
- Federal statute ID 8 types of such works
• Literary works, musical works, dramatic works, pantomimes and choreographic works;
pictorial, graphic and sculptural works; motion pictures and other audiovisual works;
sound recordings and architectural works
- What is not covered
• Any idea, procedure, process, system, method of operation, concept, principle or
discovery
• Strictly functional works such as systems or procedures
• Fixation
- The work be fixed in some kind of tangible medium such as a printed page, CD, canvas, or
computer hard-drive
- Feist Publications, Inc. v. Rural Telephone Service Co.
• Facts cannot be subject to copyright laws; otherwise there would be no spreading of
information or learning
• Facts are not original
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• Factual compilations can generally be copyrighted because they may possess the requisite
originality
- ex. databases
• To establish copyright infringement, two elements must be proven:
- ownership of a valid copyright and;
- copying of constituent elements of the work that are original
• Feist case id important because it rejects that doctrine and requires that the work be original
• The court indicates that the test for originality is a modicum of creativity
- Copyright estoppel
• If a copyright holder presents false info as factual, it cannot then turn around and sue for
infringement, asserting that the false info is copyrightable because of its non-factual character
• Fair use
- The most important defense in an infringement action is usually fair use
- Authors Guild v. Google, Inc.
• 4 fair use factors:
- Purpose and character of the secondary use
- Nature of the copyrighted work
- The amount and substantiality of the portion used in relation to the copyrighted work as a
whole
- The effect of the copying use upon the potential market for or value of the copyrighted
work
- Amount and substantiality of portion used
• Quantity and quality matter
• The extent to which a defendant’s work is transformative is important
- Fair use theory
• Fair use defense should apply when three conditions hold
• (1) there is a market failure, usually stemming from high transaction costs, externalities, or
interests in suppressing uses that the copyright holder does not like;
• (2) permitting the defendant to use the copyrighted work is socially desirable; and
• (3) recognizing fair use would not substantially diminish copyright holders’ incentives
• Patent
• Patent law involves a trade-off
- It grants a limited monopoly to patentees, thus encouraging creative and socially useful
enterprise
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- The specific protection that the federal patent statute grants to the patent holder is the right
to prevent others from making, using and selling the patented invention during the term of
the patent
• Patent law works on the basis of a registration system
- The registry informs other potential inventors and innovators what inventions have
been claimed already and how broad those claims are
• Under the federal Patent Act, 35 U.S.C. §1 et seq., patent applications must meet five principal
requirements in order for the patent to be granted:
- Patent-ability
• the invention fits in one of the general categories of patentable subject matter, namely
a “process, machine, manufacture, or any com-position of matter
- Novelty
• The invention has not been preceded in identical form in public prior art
- Utility
• Minimal requirement that is easily met so long as the invention offers some actual
benefit to humans
- non-obviousness
• The most important requirement
• Asks whether the invention is a sufficiently big technical advance over the prior art
- Enablement
• Requires that the patent application describe the invention in sufficient detail that "one of
ordinary skill in the art" would be able to use the invention
• Diamond v. Chakrabarty
- The general rule is that things occurring naturally in the universe may not be patented.
Neither a type of plant occurring naturally nor a natural principal could be patented.
- A live, man-made microorganism is a non-naturally occurring composition and therefore
may be patented.
- Property in One’s Person
• Foundation of Locke's labor theory of property
- Every man has property in his own person
• Moore v. Regents of the University of California
- Issue is plaintiff retaining ownership interest in his excised cells and prosecuting the defendants
for conversion
- No action based on a theory of conversion may be prosecuted where the subject matter of the
allegation are excised cells taken from Plaintiff in the course of a medical treatment
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- However, may prosecute the case based on theories of breach of fiduciary duty or lack of
informed consent
• Property is a bundle of rights
- property entails a number of disparate rights — the right to possess, the right to use, the right to
exclude, the right to transfer, etc.
- But in particular cases you might own property yet not have all of these rights
• The problem of commodification
- state and federal statutes implicitly recognize property rights in body parts, permitting gifts from
living or cadaveric donors and even permitting sales, unless the sales are for transplantation
- The ban on sales of organs for transplantation is driven, in part at least, by a concern with
commodification
- Some things, the argument runs, are not mere commodities to be trafficked in markets, for
reasons (in part or entirely) of morality
• So we have prohibition of sale of body parts for transplantation
The Public Domain (AFTER MIDTERM)
• Systems of real property and intellectual property both embrace the idea that certain resources are
best utilized when owned by the public or when the public is given broad access rights
• Three instances in which property law or intellectual property law act to create a vibrant public
domain
- The public trust doctrine
• Matthews v. Bay Head Improvement Association
- Private land is not immune from a possible right of access to the foreshore for swimming or
bathing purposes, nor is it immune from the possibility that some of the dry sand may be
used by the public incidental to the right of bathing and swimming.
- The public trust doctrine acknowledges that the ownership, dominion and sovereignty over
land flowed by tidal waters, which extend to the mean high water mark, is vested in the
State in trust for the people.
• The public trust doctrine in Matthews creates an easement that gives rights to the public
generally
• An easement provides someone other than the owner(s) of land with rights to use the land or
an opportunity to prevent land from being used in a particular manner
• The public trust doctrine extends to all land covered by the ebb and flow of the tide and, in
addition, all inland lakes and rivers that are navigable
- Copyright’s Public Domain
• The public domain in intellectual property also limits private ownership of ideas
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• With respect to copyrights and patents, the law requires that each idea or expression that is
presently owned must eventually belong to everyone, to freely use and enjoy as they see fit
• Copyright law grants creators a very long but relatively weak monopoly on expressions.
• Patent holders gain a much shorter period of exclusive control — patents generally run
for twenty years from the date on which the patent application is filed.
• Eldred v. Ashcroft
- Congress is not barred form extending the terms of an existing copyright even if the
Copyright Clause indicates that copyrights are to be granted for a limited time.
- Trademark Law’s Public Domain
• Trademark law governs brands, logos, slogans, and other signifiers used in trade
• Modern trademark law defines a trademark as any “word, name, symbol, or device” used by a
person “to identify and distinguish his or her goods” from those sold by others, and “to
indicate the source of the goods.”
• Trademark law protects whoever is first to use a distinctive mark in commerce
• Generic terms cannot be trademarked and are part of the public domain
• Three main policies underlie trademark law
- Exclusive rights to trademarks prevent consumer confusion about the origin of the goods or
service
- They encourage trademark owners to invest in and maintain a consistent level of quality
- They prevent competitors from free-riding on the trademark owner’s goodwill
• Federal Lanham Act
- Allows a trademark owner to register the mark with the Patent and Trademark Office, but
registration is not required for the mark’s validity
• Three requirements must be met for trademark protection: (1) distinctiveness; (2) non-
functionality; and (3) first use in trade
- Distinctiveness
• The mark must distinguish the good or service of one person from those of another
• The Lanham Act categorizes marks according to varying degrees of distinctiveness
- Fanciful and arbitrary marks typically get the strongest protection
• fanciful marks that coin a new word for a brand
• Arbitrary marks that use an existing word that has nothing to do with the product
- Suggestive marks are also considered inherently distinctive
• They evoke the nature of the good subtly but still require the consumer to use
“imagination and perception” to determine the nature of the product being sold
- Descriptive marks describe a purpose or characteristic of the product
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- Non-functionality
• Trademark law does not protect on the basis of functionality
• If an aspect of a good is exclusively functional, it cannot be protected by trademark law.
• A product feature is functional “if it is essential to the use or purpose of the article or if it
affects the cost or quality of the article, that is, if exclusive use of the feature would put
competitors at a significant non-reputation-related disadvantage.”
- First use in trade
• An exclusive right to use a mark requires first use, not just first adoption, of the mark in
a particular geographic market.
• Moreover, under the Lanham Act, the use must be in commerce, which has a narrower
scope than trade
• In Re Cordua Restaurants, Inc.
- Under Ginn a two-step test is applied to determine whether a given term is generic.
• First, what is the genus of goods or services at issue?
• Second, is the term sought to be registered or retained on the register understood by the
relevant public primarily to refer to that genus of goods or services?
• Evidence of the public's understanding of the mark may be obtained from any competent
source, such as consumer surveys, dictionaries, newspapers and other publications.
- Holding: The term churrascos was generic for a type of restaurant, specifically
a restaurant that serves churrascos.
• Genericide
- Generic terms may be generic from the outset or may start off as distinctive but become
generic over time as ordinary people increasingly use the mark as a synonym for the
product itself.
What Ownership Entails
• The right to exclude and its limits
- Jacque v. Steenberg Homes, Inc.
• The private landowner’s right to exclude others from his or her land is ‘one of the most
essential sticks in the bundle of rights that are commonly characterized as property
• A series of intentional trespasses, as the Jacques had the misfortune to discover in an unrelated
action, can threaten the individual’s very ownership of land.
• In sum, the individual has a strong interest in excluding trespassers from his or her land.
• Society has an interest in punishing and deterring intentional trespassers beyond that of
protecting the interests of the individual landowner.
• Society has an interest in preserving the integrity of the legal system.
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• Private landowners should feel confident that wrongdoers who trespass upon their land will
be appropriately punished.
- State v. Shack
• Non-owners may enter onto an owner’s property in order to provide governmental services,
even if the owner objects to the entry.
• Title to real property does not include control over the destiny of people the owner permits to
come onto his premises.
- Their well-being is the paramount concern of the law.
• A person’s right to his real property is not absolute. Private or public necessity may justify
entering onto his land.
- There are limits to the right to exclude, Examples:
• Civil rights legislation forbidding various forms of discrimination;
• Rent controls and other limitations on a landlord’s right to evict tenants;
• The law of adverse possession;
• bodies of doctrine granting public rights of access to private beaches;
• legislation protecting homeowners who have defaulted on mortgage payment
• The right to transfer and restraints on alienation
- Much of the importance of the right to exclude stems from the supportive role that the right plays
with respect to the use of land
- If an owner lacks the right to exclude outsiders from coming onto her property, then her rights to
use or transfer the property are substantially diminished
- Restraints on alienation (transfer of property by its current owner) may hamper the ability of the
property regime to see to it that each resource is eventually possessed by the person or entity that
can put it to its highest and best use.
• Getting resources to their highest and best users is a major theme in the law of property.
- Davis v. Davis
• An unlimited restraint on alienation is against public policy; it makes no difference if the
restraint is self-imposed
• Unlimited restraint on alienation is per se invalid, whether the life estate was created by
conveyance by a third party or by reservation by the life tenant herself.
• Invalid restraint on alienation is not validated merely because the life tenant assented to the
restraint by signing the instrument which, under the law, is void
- Impression Products, Inc. v. Lexmark International, Inc.
• The sale exhausts the patentee’s rights in that item
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• A patentee’s authority to limit licensees did not mean that patentees could use licenses to
impose post-sale restrictions on purchasers that were enforceable through the patent laws.
• An authorized sale outside the United States, just as one within the United States, exhausted
all rights under the Patent Act.
- Common law and patent law
• Certain restraints on alienation are permissible, as long as they are “reasonable
• The right to abandon
- Hawkins v. Mahoney
• The presumption or inference of intent to abandon one's property, based solely upon the acts
of the owner, is a rebuttable presumption.
• A "rebuttable presumption" is one which may be rebutted by evidence.
- The common law elements of abandonment are
• (1) the owner must intend to relinquish all interests in the property, with no intention that it be
acquired by any particular person, and
• (2) there must be a voluntary act by the owner effectuating that intent
- Abandoned property belongs to the first person who subsequently takes control of it
- Pocono Springs Civic Association, Inc. v. MacKenzie
• To abandon a property you must relinquish all right title and claim to possession with
intention to terminate ownership.
• Other actions to disassociate from the land will not be enough.
- The answer to the question of whether it is possible to abandon property depends greatly on what
kind of property is at issue.
• A fee simple interest in property cannot be abandoned, lesser interests in land sometimes can
• Personal property can be abandoned.
• Real property cant be abandoned
- Walking away from land entails walking away from duties owed to others without their
permission, with no guarantee that a new steward for the land will show up to assume
an owner’s obligations
• Trademarks/IP can be abandoned quite readily, with the law even presuming abandonment
under certain circumstances
- The Lanham Act considers a mark abandoned when “its use has been discontinued with
intent not to resume such use.
- Such intent may be inferred and that “nonuse for three consecutive years shall be prima
facie evidence of abandonment.”
• One’s birth name can’t be abandoned
 19
- One’s birth name is an integral part of one’s identity; it is not bestowed for commercial
purposes, nor is it ‘kept alive’ through commercial use.
• The right to destroy
- Eyerman [Link] Trust Co
• May the court deem a condition void if a landowner, who tries to require that his successor in
interest to do something to the land, which is against public policy?
• If a landowner attempts to require his successor in interest to do something to the property,
which is against public policy, the court may deem the condition void.
• Notably, when an owner is living, he or she is generally restrained from destroying his or her
real or personal property.
• After death, the court is allows to step in to avoid the destruction
- In re Estate of Kievernagel
• In determining the disposition of gamete material, to which no other party had contributed and
thus, as to which another party's right to procreational autonomy was not implicated, the intent
of the donor controlled.
• Holding: The probate court properly determined that the disposition of the frozen sperm was
governed by the intent of the husband
The System of Estates
• 4 possessory states classified by duration. Exam Tip: present possessory interest must be classified
as one of these (remember to look at language and duration to determine):
1. Fee simple
a) Potential of enduring forever (absolute ownership). Ex. O leaves land to A and
his heirs.
2. Fee tail
a) Potential of enduring forever, but will necessarily cease if and when the first
fee tail tenant has no lineal descendants to succeed him in possession. Ec. to A
and the heirs of his body
3. Life estate
a) Ends at the death of a person. Ex. to A for life
4. Leasehold
a) Endures for (1) any fixed calendar period or (2), from period to period until
landlord or tenant gives notice or (3), as long as both landlord and tenant desire
• The fee simple, the fee tail, and the life estate are freehold estates.
- The chief significance of this, at common law, was that a freeholder had seisin
- Seisin was possession, of a particular kind and with peculiar consequences.
• Leasehold is a nonfreehold possessory estate
 20
- These tenants do not have seisin
• The Fee Simple “to A and his heirs”
- Fee Simple Absolute – Absolute ownership and no limit on duration or heritability, cannot be
divested and it will not end on an event happening. Exam Tip: What most people think of about
owning land
• Owner?
- The person who has seisin, and who has deed
• Words of purchase “to A”, and words of limitation “and his heirs”
- Heirs have no present interest in the property (A can give property away before heirs
inherit). “to A” in modern times conveys fee simple
• Transferability – can devise land to others in will/deed, or goes to heirs after death
- Exam Tip: Heirs take when the descendent leaves no will, devisees and legatees take under
a will
- Defeasible Estates – reasons why a fee simple may not be infinite in duration
• Fee simple determinable – conveyed to another for a specific purpose using words of
limitation.
- Ex. conveyed to school board so long as used for school, if not, then land automatically
reverted back to O
- Future interest = possibility of reverter
- Exam Tip: Must use language to limit the duration of the estate in order to be valid
determinable: “so long as”, “while”
- Can be transferred, but still limited by determinable
• Fee simple subject to condition subsequent – not automatically cut short, but may be at
grantor’s election.
- Ex. grant property, but if A ever sells alcohol on it, O has right to reenter the premises
- Future interest = right of re-entry (must be exercised, not automatic)
- Exam Tip: determinable ends automatically, condition subsequent the owner must act
- Language: but if, upon condition, provided however
• Fee simple subject to an executory limitation – On the happening of a stated event, it is
automatically divested to a third party
- Ex. Property to school board, but if not used for certain purposes, then to A
- Future interest = reversion (automatic) – not in grantor, a third party
- Exam Tip: Will always be to a third party
- Language: but if, upon condition, provided however
• The Feel Tail “to A and the heirs of his body”
 21
- If no lineal descendant’s (children, grandchildren, great-grandchildren, no nephews, etc.), then it
would come back to the estate, it would cease
• Lasts as long as grantee or any descendants survive and it is inheritable only by the grantees
descendant’s
- Has been abolished in most states, and those holding a fee tail may “disentail” through the courts
in order to convey a fee simple absolute by deed
• Many states hold that A now has a fee simple absolute.
- Cannot be devised by will
- Future interests:
• Reversion: “O conveys to A and the heirs of his body”. A has a fee tail, O has a reversion in
fee simple upon expiration of fee tail (i.e. no longer and heirs of A)
• Remainder: “To A and the heirs of his body, and if A dies without issue, to B and her heirs”. A
has a fee tail, B has a remainder at the expiration of the fee tail.
• The Life Estate “To A for life”
- Ends at the death of the person
• So if O gives to A under life estate, O maintains ownership (future estate), but A presently
owns it (present estate)
- Pur autrevie – “for the life of another” O gives to A for the life of B (A has it until B dies)
- To a class “to the children of A” – last until the death of the last child of A
- Free to transfer interest (sell), lease, put a mortgage on it
• All would end on the death of the person dying and then the entire estate is lost
- Every life estate is followed by a future interest — either a reversion in the transferor or a
remainder in a transferee, or both
• To A for life means..
- Life estate in A for the life of A
- Remainder in B for the life of B
• In fee simple means it continues to B's heirs
• Contingent - cant identify who will get it or do not know the conditions
• Vesting remainder - can identify who will get it and on what conditions
- Reversion to O for the life of O
• Property to go back to O when B dies
• In fee simple means to continues to O's heirs
- Waste
• Affirmative waste
- Injurious acts that substantially reduce the value of the property in question
 22
- This is an action that the remainder interest could bring against the present possessor
• Permissive waste
- Negligence – failure to take reasonable care of the property
• Ameliorative waste
- Make improvements (maybe some that you don’t agree with). This is OK so long as it’s
adding value or at least not detracting from the value
• Leasehold “Landlord / tenant law”
- Term of years (1 year fixed lease) – automatic end with no notice required
- Period to period tenancy (month to month that automatically renew) – required to give notice
- Holdover tenancy (rights of the two parties when someone holds over before renewing lease)
- Tenancy at will (as long as each party wants to continue) – this is the default for a void lease,
which then becomes a periodic tenancy
• White v. Brown
- If there is ambiguity in a will, in regards to the passing of property, the court will prefer to pass
property as "fee simple".
- A fee simple absolute was presumed even in the absence of words of inheritance, if there was no
language that could be construed to create a remainder.
- Holding: Restraint on the sale of the house was insufficient to overcome the presumption that a
fee simple had been devised and testamentary restraint on alienation was void
- A will shall convey all the real estate belonging to the testator or in which he had any interest at
his decease, unless a contract intention appear by its words and context
• Baker v. Weedon
- The proper factors in determining whether the sale of land by a life tenant is proper, is the
prevention of waste of the property and to whether the sale is in the best interests of all the parties
including the life tenant and the remainder-men.
- The law of waste concept is designed to ensure that uses of the property maximize the properties
value.
- The central idea of the law of waste is to ensure that the life tenant of the property does not
unreasonably interfere with the expectations of the remainder-men
- Holding: The best interest of all the parties would not be served by a judicial sale of the entirety
of the property at that time; although such a sale would have provided immediate relief to the life
tenant, it would nevertheless under the circumstances have caused great financial loss to the
contingent remaindermen
• Mahrenholz v. County Board of School Trustees
- Rule: The common law states future interests in land by possibility of reverter or right of re-entry
 23
are inheritable, but are not transferable by will or by inter vivos conveyance
- Holding: The language in the deed created a fee simple determinable followed by a possibility of
reverter because the use of the word “only” in a deed followed by the words for school purpose,
demonstrates a limited grant subject to a condition, thus, creating a fee simple determinable. The
phrase, “otherwise to revert to grantors herein” coupled with the limiting word of “only” triggers
a mandatory return.
Future Interests
• Future interest: right to receive possession of property at a future time. Non-possessory interest that
will, or may, become possessory in the future.
- Note: it is still a PRESENTLY existing property right.
• Reversion: Results whenever a lesser estate is conveyed to transferee (e.g., Grant to A for Life,
reverts back to O at A’s death)
- Reversion may or may not become possessory
Retained by
- Example: to A for life, then to B and her heirs if B survives A (if A Freely transferable: may be
transferor
conveyed, devised, & inherited
• Possibility of Reverter: When a fee simple determinable is created, this is the future interest
retained by the transferor
- Estate of grantee ends automatically upon stated condition
- Not freely transferable at common law, but usually the case today
• Right of Re-entry: When a fee simple subject to a condition subsequent is created, this is the future
interest retained by the transferor
- Grants only a right to re-enter; must be acted upon in order for transferor to actually regain
ownership.
- Not freely transferable at common law, but usually the case today
• Remainder: interest retained by a transferee that is capable of becoming possessory immediately
following a naturally terminating estate
Retained by
- Vested Remainder: (1) given to an ascertained person and (2) not subject to a condition precedent
transferee
(may be subject to condition subsequent)
• Indefeasibly vested: certain to become possessory in the future
• Subject to open or vested subject to a partial divestment: e.g., if left to “children” and only one
child currently born, interest will be affected by future children
• Note: Preference for vested remainders where ambiguous
- Contingent Remainder: (1) given to an unascertained person OR (2) is made contingent upon
some event occurring other than the natural termination of the preceding estates (condition
subsequent)
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- Can only follow a life estate, a fee tail or a term of years b/c a fee simple has no natural
termination point (may endure indefinitely)
• There can also be no time gap between the end of the prior estate and the point when the
remainder becomes possessory (e.g., O to A for life, and then to B 10 minutes after A’s death)
• Executory interest: any future interest created in transferee other than a remainder.
Retained by - Shifting: Divests or cuts short in time some interest in another transferee
transferee • Example: “To B and his heirs, but if C returns from France, to C and his heirs” ➔ C has a
shifting executory interest that would divest B’s estate
- Springing: Divests the transferor in the future
• Example: “To D and her heirs, if D returns from France” ➔ D has a springing executory
interest that would divest O’s estate
• Note: The doctrine of waste applies where there is a future interest
- Courts’ willingness to enforce doctrine wanes with the increasing uncertainty with which a given
future interest is likely to become possessory (e.g., vested remainder is considered very strongly,
but contingent remainder not as much…will vary on specific likelihoods as well).
- Trusts
• Trusts involve special fiduciary in which one or more persons (trustees) manage property on behalf
of others (beneficiaries)
- Settlor: The party who puts the property in the “corpus” of the trust. May or may not be the same
person who is the trustee or the beneficiary.
• Title is split between the trustees and the beneficiaries
- Trustees hold the legal title
• Legal ownership of the property (power to sell assets and reinvest the proceeds in other assets
unless otherwise specified in instrument)
• Fiduciary held to high standard of conduct in managing the property
• Subject to personal liability for breaking fiduciary duty to beneficiaries
- Beneficiaries hold the equitable title (enforceable in equity)
• In order to be valid, trust must: Convey a present interest to the beneficiary (as opposed to a mere
expectancy), OR must ask whether the settlor gave up something immediately (otherwise it’s only a
will)
• Fiduciary Duty: Trustees must keep beneficiaries as the exclusive object of their investment goals
and actions (must act with ONLY their best interests in mind)
• Broadway National Bank v. Adams
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- Rule: If the intention of the founder of a trust is to give to the equitable life tenant a qualified and
limited, and not an absolute, estate in the income, such life tenant cannot alienate it by
anticipation, and his creditors cannot reach it at law or in equity.
- Holding: Plaintiff does not have any right or interesting to the trust fund.
• The founder of the trust was the absolute owner of his property.
• The income of the trust fund created for the benefit of the debtor could thus not be reached by
attachment before it was paid to him.
- Restraints on Alienation
• Restraints on Alienation (Restraints on transferability of interest): In general, the law views
restraints on alienation w/ great disfavor.
- Objections:
• Impairs marketability: prevents property from reaching highest value
• Perpetuates concentration of wealth: If we allow those who have to impose restraints on
alienability, may leave the wealth with one group
• Discourages improvements: both b/c owner cannot sell the land to realize the full value of the
land and b/c she cannot finance improvements by mortgaging the land
• May adversely affect creditors: may prevent from extending credit
- Three types of Restraints:
• Disabling restraints – Outright forbid owner from transferring
• Forefeiture restraints – Provide that if grantee attempts to transfer the house his interests will
be forfeited to another person
• Promissory restraints – Grantee contractually promises not to alienate the land
• Rule Against Perpetuities: No interest is good unless it must vest, if at all, not later than twenty one
years after some life in being at the creation of the interest
- Essentially imposes a time deadline for how long certain contingent future interests can exist.
- Must be logically provable (using presently existing facts) that within a period (one life + 21
years), a covered interest will either vest (become vested or possessory) or fail to vest.
- If there is any chance the future interest will remain contingent, no matter how remote, it is void.
- Rationale: protect marketability ➔ can create future interests in transferees, but only so long as it
doesn’t burden the land for to long.
- First step in applying the law
• Determine whether the future interest in question is even
subject to the Rule, which applies only to interests that are not invested at the time of the
conveyance that creates them
- (contingent remainders, contingent executory interests and class gifts)
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• Determine whether the given interest might not vest within the perpetuity period of “lives in
being plus 21 years
- Must prove the interest is certain to vest or terminate no longer than 21 years after the death
of the alive person at the creation of the interest
- Looking for a person that can allow you to prove the interest will fest or fail within the life
or death of that person or within 21 years after that persons death
• This person is called the validating life
• Rule only affects contingent interests in the transferee (does not apply to future interests in the
grantor)
- Contingent remainders
- “Contingent” Executory interests
- Class gifts (special case under the Rule Against Perpetuities)
• A corollary rule known as the “all-or-nothing rule” holds that if a gift to one member of
the class might vest too remotely, the whole class gift is void
• A class gift is not vested in any member of the class until the interests of all
members have vested
• For a class gift to be vested the class must be closed and all conditions precedent for each
and every member of the class must be satisfied within the perpetuities period
• Future interests retained by the transferor — reversions, possibilities of reverter, and rights of
entry — are not subject to the Rule Against Perpetuities.
- They are treated as vested as soon as they arise.
- The Symphony Space, Inc. v. Pergola Properties, Inc.
• Rule: An interest is void if it does not vest within twenty-one years, after a life in being,
which is measured from the time of creation of the estate.
• The courts discourage remote vesting because remote vesting creates a disincentive for
property owners to improve their property because the owner would know that another
party may claim the property at a later time, creating the sale of the property to be more
difficult.
• Point of the rule was that people who granted money or property would know who they gave
the property to plus the generation after that
- Three major categories of the rule against perpetuities
• (1) the USRAP in effect unmodified
- If at the end of 90 years following the creation of the interest, the interest is still in existence
and unvested, it is invalid.
• (2) non-USRAP versions of “wait-and-see”
 27
- Rather than invalidating an interest at the time of its creation on the basis of the what-
might-happen test, we wait and see whether a contingent interest actually vests within some
permissible vesting period.
• (3) statutes permitting some version of dynastic trusts
- No state follows the Rule in its pure form
• Takeaway: When you’re drafting a will, use names of living people!
Concurrent Interests
- Common law concurrent estates: 3 important types: tenancy in common, joint tenancy, tenancy by the
entirety
• Tenancy in common
- Tenants in common have separate but undivided interests in the property
- The interest of each is descendible and may be conveyed by deed or will
- There are no survivorship rights between tenants in common
- Presumption today that people are trying to create tenancy in common
- Tenancy in common unless it expressly indicated that it is a joint tenancy
• Joint Tenancy
- Joint tenants have the right of survivorship
• Theory underlying this right is that joint tenant together are regarded as single owner and each
tenant is seized by the share or moiety and by the whole
• Each owns the undivided whole of the property and when one tenant dies, nothing passes to
the surviving joint tenant(s)
• Rather the estate simply continues in survivors freed from the participation of the decedent,
whose interest is extinguished
- Joint tenants are one owner therefore their interests are equal in all respects
- 4 unities were essential to a joint tenancy- time, title, interest, possession
• Time: interest of each join tenant must be acquired at or vest at the same time
• Title: All joint tenants must acquire title by the same instrument or by a joint adverse
possession
• Interest: All must have equal undivided shares and identical interests measured by duration.
• Possession: each must have a right to possession of the whole (one joint tenant may voluntarily
give exclusive possession to the other after joint tenancy is created)
- If the 4 unities don’t exist, a tenancy in common is created
- If they exist at the time the joint tenancy is created but are later severed, the joint tenancy turns
into tenancy in common
• Tenancy by the entirety
 28
- Can be created only in husband and wife
- Is like joint tenancy in that the four unities are required plus a fifth, marriage
- The surviving tenant has the right of survivorship
- Husband and wife as considered to hold as 1 person at common law
- They do not hold by the moieties; rather, both are seised of the entirety
- Neither husband nor wife can defeat the right of survivorship of the other by a conveyance of a
moiety to a third party
• Only a conveyance by husband and wife together can do so.
- Neither husband nor wife, acting alone, has the right to judicial partition of property held
as tenants by the entirety.
- Divorce terminates the tenancy by the entirety because it terminates the marriage
• Absent some agreement to the contrary, the parties usually become tenants in common
- Community Property general rule
• Community= married couple
• Whoever had title has the authority to deal with it for the community (marital couple)
• Community property is defined in terms of marriage only and only applies to marriages
• When one spouse dies the property is treated as half belonging to other spouse and the other
goes to heir of dead spouse
- Severance of joint tenancies
• Severance of Joint Tenancy
- Riddle v. Harmon
• Wife held property in joint tenancy with husband and wanted to be able to convey her interest
by will instead of having it pass to husband upon her death. She tried to break the joint
tenancy by conveying the land to herself.
• Rule: joint tenancies can be severed unilaterally by one party (by conveying their interest to
someone else)
• Court holds that rule requiring a “strawman” intermediary is archaic and wife should be able to
do directly what she could otherwise do it indirectly
- Harms v. Sprague
• P and brother bought land as joint tenants. Brother later mortgaged interest in property as part
of his co-signing a note for his friend, the D.
• Trend to view mortgage as merely a lien on property interest (due to unique and narrow
character of the title transferred) rather than as a transfer of title
• Therefore, mortgage did not sever the joint tenancy
 29
• Rule: As the mortgage doesn’t sever the joint tenancy, upon the death of the joint tenant the
right of survivorship takes effect and the other joint tenant owns the property in its entirety
(unencumbered by the lien).
• Unity of title is challenged
• Action for Partition: Concurrent owners may at any time decide to terminate cotenancy. If they
can’t agree how to divide the property, may rely on the equitable action of partition.
- Partition in kind (default): Court divides up land and gives each party their “share”
- Partition by sale: Court ordered sale of land so that proceeds can be split
• Physical attributes of the land are such that partition in kind is impracticable or inequitable
• Interests of owners would be better served by sale
- Delfino v. Vealencis
• Delfinos (P) wanted to develop land that they owned as tenants in common with D. Land was
occupied by D who made a home on the land and ran a garbage disposal business there. P
wanted to use land for residential development. P sought a partition by sale. D moved for
partition in kind.
• Rule: A partition by sale should be ordered only when two conditions are satisfied: (1) the
physical attributes of the land are such that a partition in kind is impracticable or inequitable;
and (2) the interests of the owners would better be promoted by a partition by sale.
• Partition in kind was practical (no strange shapes, only 2 owners)
- The court must look to whether the property can be practically and physically divided.
• Court must consider the interests of all cotenants, not the economic gain of only one!
- To determine whether a partition in kind or partition by sale is in the best interests of the
parties, the court must look to the interests of all the parties, not just the economic gain to
one tenant.
• Ouster: exception to the rule of no rent liability to your cotenants for your own possession and use
➔ gives rise to liability for fair rental value of property
- Ouster: Finding that the possessing tenant asserted complete ownership of the land and a denial
of the cotenancy relationship (is in exclusive possession and claims sole title), or just a simple
denial of cotentant’s use and enjoyment of the land
• Begins running of statute of limitations for adverse possession
• Claim of absolute ownership may not be required (if still denied use)
- Spiller v. Mackereth
• P and D owned building as tenants in common. Tenant of the owners moved out and D entered
building and began using as warehouse. P wrote letter demanding that D vacate ½ of building
or pay ½ of rental value. D refused.
 30
• Rule: Co-tenant in possession not liable to co-tenants for value of use of property in the
absence of an agreement to pay or “ouster.”
• Rule: Each cotenant has an equal right to occupy
- D is not liable to P for rent for his use of the building unless P had specifically demanded
use of property and was denied
- Simply requesting that D vacate or pay does not amount to a demand for use and
enjoyment!
• Rule: Despite absolute right to use, one cotenant can’t prejudice the rights of the other
cotenant (you’d have a right to an accounting if the value is reduced)
• Rule: If P is ousted (e.g., denied access to use), would begin the clock on adverse possession
until P brings a claim.
• Effect of Lease: One joint tenant may lease all of the joint property without the consent of the joint
tenant and put the lessee in possession.
- Swartzbaugh v. Sampson
• Husband and wife owned land as joint tenants. Husband leased land to D without wife’s
signature or knowledge. Wife sought to cancel the leases (she didn’t want lessee to build a
boxing pavilion and tear down the walnut trees on property)
• Court holds that the lease was valid and cannot be nullified.
• Rule: Generally, a cotenant can’t bind or prejudicially affect the rights of the other without the
other’s knowledge.
• Rule: However, one joint tenant may lease all of the joint property without the consent of the
joint tenant and put the lessee in possession.
- One joint tenant has right to complete possession…the lease in this case merely passes that
right to the lessee.
- The non-lessor cotenant CAN recover share of rent from the lessor if the lessee refuses
cotenants’ use and enjoyment of the land (If P tried to enter land and was refused, it is
grounds for ouster)
• Rule: An estate in joint tenancy can be severed by destroying one or more of the necessary
unities, either by operation of law, by death, by voluntary or certain involuntary acts of the
joint tenants, or by certain acts or omissions of one joint tenant without the consent of the
other.
- A joint tenant can lease or license anything less or equal to his rights in the joint tenancy
property.
- Options available to Wife (other than invalidating lease, which didn’t work)
 31
• Partition: can always seek partition, though unclear how court would divide up the proceeds of
a partition by sale (in regards to a 5 year lease with a renewable option)
• Accounting: can ask for accounting of profits from 3rd party: entitled to half the rent being paid
under the lease
• Ouster: Can try to enter land, and if denied by lessee, can see remedies under ouster (would be
entitled to half fair rental value of land)
- Multiple Party Bank Accounts
• Usually consists of younger and older (father / son)
• 3 types of accounts:
- Gift
- Convenience
- Payable at death (for avoidance of probate)
• Rule: Surviving joint tenant takes the entire account unless there is clear and convincing evidence
that a mere convenience account was intended
• During the lifetime of the parties, presumption that the account if owned based on the % attributed to
the accounts (e.g. son 10% vs. father 90% contribution)
- So son’s creditors could only reach 10% of the joint bank account, they must look at the
contribution from each member
Marital Interests
- Rights during the Marriage
• Marriage
- Economic partnership
- Sawada v. Endo
• Rule: Neither husband nor wife has a separate divisible interest in the property held by the
entirety that can be conveyed or reached by execution. A joint tenancy may be destroyed by
voluntary alienation, or by levy and execution, or by compulsory partition, but a tenancy by the
entirety may not. The indivisibility of the estate, except by joint action of the spouses, is an
indispensable feature of the tenancy by the entirety.
• Holding: Neither defendant, husband or wife, had a separate divisible interest in the property
held by the entirety that could be conveyed or reached by execution by the wife or husbands
individual creditors.
• Equitable distribution
- Own property separately during the marriage, but upon the divorce will be split among the parties
equitably
- New York is the only place in the world where if you get a professional license while married
 32
(like a JD), then it is valued and the value is split during a potential divorce.
• Exceptions to Tenancy by the Entireties not being severed:
- IRS ! first in line.
- Federal forfeiture law
• Property used in a federal crime must be forfeited even in a tenancy by the entireties, only safe
if you have no idea that other partner committing crime
- Rights Upon Divorce
• Common Law:
- The property was owned separately, but upon divorce, the court would order support be given to
the wife unless she had been unfaithful or forfeited her right.
• Modern Law:
- The poorer spouse should be given a share in the property owned to compensate for making the
marriage a success
• Alimony (support) – No longer owed for life. Now it is rehabilitative alimony for a period of
time until she can re-enter the job market and support herself.
• Property division – common law, wife had no claim
- Common law today – wife is entitled to equitable distribution of a fractional share of the
husband’s property. Some order equitable split of all property, others only the property
during marriage. Still others only authorize division of property acquired during marriage
from earnings.
- Professional degrees:
• Some courts hold that these are not divisible property
• Some hold that the appropriate remedy is to give the supporting spouse reimbursement
alimony (returns the supporting spouse the cost of her investment in the other spouse’s
degree
• Some courts hold that it is divisible property. The earning power increased by degrees
or celebrity status is subject to equitable distribution.
• Issues in Divorce
- Allocation of assets
- Allocation of liabilities
- Alimony-maintenance
• Period of time to get the lesser earning individual back into the workforce
- Child support
- Child custody
• Marital property should be distributed equitably
 33
- Property you bring into the marriage not distributed
- How will maintenance and allocation of assets be set?
• If going to give 50/50 split, need to factor in length of the marriage, earning capacity of the
spouse, health of both parties, and the childcare responsibilities
- New York holds that the earning power increased by a professional degree acquired during the
marriage is taken into account on equitable division
• Maintenance until the lesser earning individual can get back into the workforce
• Present value analysis of the expected earnings with the professional degree vs. the average
earning power of the college graduate
• Equitable Distribution:
- However, all other states hold that an educational degree cannot be marital property subject
to division upon divorce (In re Marriage of Graham). This is because a “degree is not
exchangeable and has no value on an open market and cannot be willed”
- Rights at Death
• Common law:
- Dower – has dower in all freehold land which her husband seised during the marriage and which
is inheritable by issue born of the marriage (dower is a life estate in one-third of each parcel of
qualifying land)
• Land seised during marriage
- Only attaches to land the husband possession of, not leaseholds or remainder interest
• Land inheritable by issue
- Birth of issue immaterial, just possible for them to inherit (so it does not attach to a life
estate)
• Rights during husband’s life
- Until husband dies, dower is inchoate, wife’s interest is not yet, but may, become possessory
• Right to 1/3 of each parcel of land subject to dower. Divorce severs dower, separation does not
- Curtesy – on wife’s death at common law, husband granted life estate in all of wife’s lands (and
not merely a 3rd of them as in dower) only if issue were born of the marriage.
• Modern Statutory Elective Share:
- Surviving spouse gets an elective share in the decedents property owned at death either through
the forced elective share or what was left in the will (either 1/3 or 1/2)
• Look at what passes in the estate outside of probate, and the surviving spouse must get the
elective share of that amount. This effects to not being able to write a spouse out of the will
• Inter vivos transfers
- These are also subject to the surviving spouse, otherwise they could get completely written
 34
out of the will.
• Antenuptial transfer
- A transfer that is made without the knowledge of the prospective spouse and may be deemed
to be subject to elective share if fraudulent.
• Avoid Probate through:
- Life insurance policies
- Pensions/401K’s
- Things that pass in joint tenancy (usually property)
- Anything that passes outside of the estate and probate
- The community property system
• The fundamental idea of community property is that earnings of each spouse during marriage should
be owned equally in undivided shares by both spouses.
- The basic assumption is that both husband and wife contribute equally to the material success of
the marriage, and thus each should own an equal share of property acquired during the marriage
by their joint efforts
- Community property includes earnings during marriage and the rents, profits, and fruits of
earnings.
- Whatever is bought with earnings is community property.
- All property that is not community is separate.
- Separate property is property acquired before marriage and property acquired during marriage
by gift, devise, or descent
- Property acquired or possessed during marriage by either husband or wife is presumed to
be community property.
- In most states the husband and wife can freely change the character of their property by written
agreement and, in some states, by oral agreement.
- They can convert community property into separate property, or vice versa.
• Community property compared with common law concurrent interests
- None of the community property states recognizes dower or curtesy; none recognizes the tenancy
by the entirety
- A tenancy in common or a joint tenancy can be created between husband and wife in community
property states.
- These concurrent estates are permitted as separate property, but husband and wife cannot
simultaneously hold property both as community property and as a tenancy in common or a joint
tenancy.
- Significant differences
 35
• Community property can only exist between husband and wife; tenancy in common or joint
tenancy can exist between any 2 or more persons
• Unlike tenants in common or joint tenants, neither spouse acting alone can convey his or
her undivided one-half share of community property, except to the other spouse
• With respect to traditional community property, each spouse has the power to dispose by
will of one-half the community property at death. There is no survivorship feature, as with joint
tenancy.
• At the death of one spouse, the entire community property receives a “stepped-up” tax basis for
federal income tax purposes.
• Management of community property
- Because it can exist only between husband and wife and cannot be converted into separate
property without the consent of both spouses, community property can be conveyed to a third
person only as an undivided whole.
- In most community property states either the husband or the wife, acting alone, has the power
to manage community property, but in certain situations only one spouse may be empowered to
manage.
• Ex/ spouse that has title or operates a business then they have control over either
- In most states, however, statutes require both spouses to join in transfers or mortgages of
community real property
- The manager of community property is a kind of fiduciary.
• The community property must be managed for the benefit of the community.
• Each spouse must act in good faith in exercising authority, but good judgment is not necessary.
- In most community property states liability to creditors follows management and control.
• The creditors of a managing spouse can reach whatever community property the creditor
spouse is legally entitled to manage
• Mixing community property with separate property
- When community property is mixed with separate property, the community property states are not
all in agreement as to the consequences.
- Situation sometimes arises when property is acquired before marriage but part of the purchase
price is paid after marriage with community funds
• Under the “inception of right” rule, the character of the property is determined at the time the
wife signed the contract of purchase; the house is her separate property.
- The community is entitled only to a return of community payments plus interest.
• Under the “time of vesting” rule, title does not pass to the wife until all the installments are
paid, and hence the house is community property.
 36
• Under the pro rata sharing rule, the community payments “buy in” a pro rata share of the title
• Migrating couples
- Whether property is characterized in accord with the community property system or in accord
with the common law property system depends upon the domicile of the spouses when the
property is acquired
- Common law property states generally recognize community property when it is brought into the
state from a community property state
- Under traditional conflict-of-law rules, when a person dies, the law of the decedent’s domicile at
death governs the disposition of personal property, and the law where land is located governs the
disposition of land.
- However, a number of common law property states have enacted the Uniform Disposition
of Community Property Rights at Death Act.
• The act provides that real property located in the enacting state, purchased with or traceable
to proceeds or income from community property, will be treated as community property on
death
• The nonworking spouse loses the protection of the elective share given by the common law
property state and gains the protection of the law of the community property state.
- The community property laws in most states do not give the surviving spouse an elective
share in the decedent spouse’s property owned at death
• Rights of domestic partners
- In New York only a written or oral express contract to share earnings and assets between
unmarried partners is enforceable
- The contract approach to the rights of domestic partners, with its reliance on the express or
implied intent of the parties, has not produced what many regard as equitable results upon
separation of the partners
- Basically, the Principles require that domestic partners of the same or opposite sex share for a
significant period of time a primary residence and a life together as a couple.
• The same principle underlays common law marriage
• Whether the people shared a life together as a couple is determined by reference to a detailed
list of circumstances that indicate they shared life together
- If the partnership terminates while both partners are living, the couple’s property is divided
according to the principles set forth for the division of marital property.
- If the partnership terminates at the death of one partner, the surviving partner’s rights depend
upon the state’s law of intestate succession
- Obergefell v. Hodges
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• Rule: The right to marry is a fundamental right inherent in the liberty of the person, and under
the Due Process and Equal Protection Clauses of the Fourteenth Amendment couples of the
same-sex may not be deprived of that right and that liberty. Baker v. Nelson, 409 U.S. 810
(1972) must be and is overruled, and state law-based restrictions are held invalid to the extent
they exclude same-sex couples from civil marriage on the same terms and conditions as
opposite-sex couples.
Leaseholds: The Law of Landlord and Tenant
- Leaseholds, or tenancies, are the so-called non-freehold estates
- The principal leaseholds are the term of years, the periodic tenancy, and the tenancy at will
- Term of Years
• A term of years is an estate that lasts for some fixed period of time or for a period computable by a
formula that results in fixing calendar dates for beginning and ending, once the term is created or
becomes possessory
• At common law there was no limit on the number of years permitted, but in some American states
statutes limit the duration of terms of years
• It can be terminable earlier upon the happening of some event or condition
• No notice of termination is necessary to bring the estate to an end
- The Periodic Tenancy
• A periodic tenancy is a lease for a period of some fixed duration that continues for succeeding
periods until either the landlord or tenant gives notice of termination
• Under common law rules, half a year’s notice is required to terminate a year-to-year tenancy
• For any periodic tenancy of less than a year, notice of termination must be given equal to the length
of the period, but not to exceed six months.
• The notice must terminate the tenancy on the final day of the period, not in the middle of the
tenancy.
• The death of the landlord or tenant has no effect on the duration of a term of years or periodic
tenancy, but it does on the tenancy at will
- The Tenancy at Will
• A tenancy at will is a tenancy of no fixed period that endures so long as both landlord and tenant
desire.
• If the lease provides that it can be terminated by one party, it is necessarily at the will of the other
as well if a tenancy at will has been created
• The tenancy at will ends, among other ways, when one of the parties terminates it or dies
• Modern statutes ordinarily require a period of notice — say 30 days or a time equal to the interval
between rent payments — in order for one party or the other to terminate a tenancy at will.
 38
• Garner v. Gerrish
- Issue: Did the lease agreement create a tenancy at will permitting the current landlord to evict
the tenant?
- Holding: No. The court held there was no longer any reason why a lease granting tenant only the
right to terminate should be converted into a tenancy at will terminable by either party.
- If the lease expressly and unambiguously grants to the tenant the right to terminate and does not
reserve to the landlord a similar right, then to hold that such a lease creates a tenancy terminable
at the will of either party would violate the terms of the agreement and the express intent of the
contracting parties.
• Old Rule: A landlord is obligated only to place a tenant in legal possession of rented real
property.
• American Rule: Here, lessee should have brought an action for unlawful entry or unlawful
detainer against the former tenant, and not the landlord
- The tenancy at sufferance: Holdovers
• The so-called tenancy at sufferance arises when a tenant remains in possession (holds over) after
termination of the tenancy.
• Common law rules give the landlord confronted with a holdover essentially two options — eviction
(plus damages), or consent (express or implied) to the creation of a new tenancy.
- Some jurisdictions changed these rules
• The tenancy resulting from holding over is usually subject to the same terms and conditions as
those in the original lease, unless the parties agree otherwise or unless some term or condition is
regarded as inconsistent with the new situation.
- The lease
• A lease is a conveyance and a contract
- A lease transfers a possessory interest in land, so it is a conveyance that creates property rights.
- But it is also the case that leases usually contain a number of promises so the lease is a contract
thus creating contract rights
• Courts today commonly rely, explicitly, on contract principles to reshape the law of leases with
respect to such questions as the following:
- (1) Are the covenants in leases “mutually dependent,” such that (as in contract doctrine) a
material breach by one party excuses further performance by the other party, even if the lease
does not so provide?
- (2) If the leased premises are destroyed, is the tenant still liable for rent ?
- (3) If the tenant wrongfully abandons the leased premises, must the landlord take steps to
mitigate (reduce) the damages, say by searching for a suitable new tenant?
 39
- (4) Is a warranty of quality — that the leased premises are habitable or fit for their purpose — to
be implied in leases?
• The American statute of frauds provide that leases for more than one year must be in writing.
• The written lease contemplates a continuing relationship between landlord and tenant
• Quite typically, landlords use form leases — standardized documents offered to all tenants on a
take-it-or-leave-it basis, with no negotiation over terms.
- The Selection of Tenants
• Most most significant restraints on landlords when selecting tenants are imposed by the federal Fair
Housing Act
- Basically you cannot discriminate in offering, terms, conditions, privileges or accepting sale
based on race, religion, color, sex, familial status or national origin
- Intentional discrimination is clearly prohibited
• Fair Housing Act becoming law had an impact on private housing discrimination unlike federal govt
combating it
- A discriminatory motive need not be proved in order to make out a prima facie case under the Fair
Housing Act; proof of discriminatory impact or disparate treatment is sufficient.
- A plaintiff has to show that a defendant’s policy actually caused that disparity
• Portions of the Fair Housing Act not set out above prohibit discrimination in the financing of
housing and in the provision of brokerage services.
• It is acceptable to mention a location near bus lines, to say a credit check is required, to say no drugs
or drinking (but not no alcoholics), to refer to school districts, to mention a senior discount, or the
presence of a nursery
• Sex discrimination was added to the Fair housing Act in 1974; amendments in 1988 added the
prohibitions regarding familial status and handicapped persons
- Refusal to rent to unmarried couples is clearly not covered by the act unless it can be
demonstrated to have a disproportionate racial, ethnic, religious, or gender-based impact
- The act does not prohibit sexual-orientation discrimination
• Handicap people are apart of the act but proposed amendments that would have excluded alcoholism
and infectious, contagious, and communicable diseases from the definition failed to pass
- People with AIDS have a “handicap” for purposes of the act
• Many states and localities prohibit discrimination in the sale or leasing of housing.
- New York legislation prohibits discrimination on the basis of race, creed, color, national origin,
gender, sexual orientation, disability, or marital status
• No-pets policy would prevail only if there were no reasonable way to accommodate the type of pet
in question or if the tenant did not in fact need the pet
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• The Fair Housing Act provides for the award of reasonable attorneys’ fees to successful aggrieved
parties from losing landlords
- Has the purpose of encouraging victims of discrimination to seek judicial relief
- Award of attorneys’ fees to defendants who prevail is permitted only if the complaint is frivolous
or in bad faith
• It is difficult to get a good approximation of the extent of discrimination in the housing market
- People either don’t want to ID themselves as discriminating or people don’t know they they are
being discriminated against
- The “state of the art” in measuring housing discrimination is matched-pair testing.
• Two testers are sent out to housing providers, realtors, and lenders with identical fictitious
backgrounds, with one exception — their membership in a protected group.
• If the two testers encounter differential treatment, discrimination can be inferred.
- Delivery of Possession
• Hannah v. Dusch
- Issue: Does a lessor, even without an express covenant, have an implied covenant to deliver
possession to a lessee?
- Holding: No. The court held that defendant, absent an express provision found in the lease,
impliedly covenanted that plaintiff shall merely have the legal right to possession at the beginning
of the term; that is, that the possession shall not be withheld by defendant himself or by one
having a paramount title, but that there was no implied covenant to put the lessee in possession as
against an intruder.
• Defendant's only duty under lease was to give legal possession, not to put plaintiff in
possession against the holdover tenant.
- The injured party is entitled to recovery only such sums as will make him whole.
- This he is entitled to recover, so far as his injury has been the direct or natural cause of the
wrongful act of the other party.
• Case law on the matter of delivery of possession remains divided
- Under the American rule, the tenant’s remedies are against the person wrongfully in possession:
He may sue to recover possession and damages
- Under the English rule: upon the landlord’s default, the tenant may terminate the lease and sue for
damages
- Both of these rules are default rules meaning that the parties are free to change the delivery
obligation by agreement between themselves.
- Subleases and Assignments
• If I’m secondary liable that if I pay I have the right to recover from someone who is primarily liable
 41
- Still liable to the landlord whether you’re secondary or primarily liable
• Ernst v. Conditt
- Issue: Was the agreement between plaintiff and defendant a lease agreement?
- Holding: No, it is an assignment, not a sublease.
• The court determined that the original lessee parted with his entire interest in the property and
reserved no part of interest in the lease. The court further decided that the words sublet and
subletting in the agreement were not conclusive of the construction that had to have been
placed on the instrument. Because the sublease agreement left the lessee with no rights either
express or implied, the intention of the parties was an assignment and not a sublease.
- Rule: The general rule in determining whether the agreement was an assignment was whether the
instrument conveyed the whole term and left no reversionary interest.
• The Ernst case indicates the two ways in which courts have gone about distinguishing between a
sublease and an assignment. The first (and most commonly used) approach is formalistic:
- An assignment arises when the lessee transfers his entire interest under the lease — when, that is,
he transfers the right to possession for the duration of the term.
- If the lessee transfers anything less than his entire interest (if two years remain on the lease and
the lessee transfers for a term of one year), a sublease results.
• The second (and less common) approach to the sublease-assignment problem considers the intention
of the parties.
- The actual words used — sublease or assignment — are not conclusive (witness the Ernst case),
though they may be persuasive
• If the landlord exercises a power to forfeit the primary lease because of some breach by the original
tenant, then the landlord is entitled to possession as against sublessees and assignees.
• But if the original tenant merely gives up the primary lease voluntarily — “surrenders” it — the
rights of possession of sublessees and assignees remain intact.
• Leases typically give rise to both privity of contract and privity of estate
- Privity denotes a voluntary transactional relationship between two or more people or entities.
- With respect to leases of real property, the two types of privity reflect the dual nature of a lease as
a contract and as a conveyance
- Whether oral or in writing, the lease between the landlord and the original tenant amounts to a
conveyance of a right of possession from the former to the latter, and that conveyance creates
between the landlord and the tenant the so-called privity of estate.
- If the lease also contains promises by one party to the other (and leases almost always do), those
promises create what is called privity of contract.
- If the original tenant has transferred to a third party, T1, who subsequently breaches some
 42
provision in the lease The rights and liabilities of the various parties (L, T, T1) will turn on the
promises, if any, between L and T in the original lease, and on whether or not T1 “assumed”
those promises upon the transfer of the lease by stating that she would be liable for them.
• If T1 did assume, then she is liable on a privity of contract theory.
• If T1 did not assume, then she is only liable to parties with whom she is in privity of estate —
liable for rent, and also for damages resulting from breaches of certain kinds of promises that
are said to “touch and concern” the rented premises.
• Kendall v. Ernest Pestana, Inc.
- Issue: In the absence of a provision that such consent will not be unreasonably withheld, can a
lessor unreasonably and arbitrarily withhold his or her consent to an assignment?
- Holding: No.
- Rule: Even if a contract states that assignments can be given only by consent, the consent can
only be withheld if there is a commercially reasonable objection to the assignee or the proposed
use. (minority rule)
• A clause requiring prior consent of the lessor is for the protection of its ownership and
operation of the particular property -- not for its general economic protection.
• (majority rule allows consent to assignment/sublease to be withheld for any reason)
- The opinions in Kendall mention concerns about restraints on alienability as arguments against
allowing landlords to reject assignments and subleases arbitrarily.
• Restraints on alienability are disfavored for a number of reasons, including the concern that
such restraints will keep property from moving to its highest and best uses.
- Tenant defaults
• The tenant in possession
- Berg v. Wiley
• Issue: Did the landlord commit forcible entry ?
• Holding: A landlord's reentry in the tenant's absence by picking the locks and locking the
tenant out, although accomplished without actual violence, is forcible as a matter of law.
• Rule: The only lawful means to dispossess a tenant who has not abandoned nor voluntarily
surrendered, but who claims possession and rights adverse to those claimed by landlord, is by
judicial proceedings.
- The forcible entry and unlawful detainer statutes are intended to prevent parties from taking
the law into their own hands during the eviction process.
- Under the common-law rule, a tenant who is evicted by his landlord may recover damages
for wrongful eviction where the landlord either had no right to possession or where the
means used to remove the tenant were forcible, or both
 43
• Common-law rule: a landlord may rightfully use self-help to retake leased premises from a
tenant in possession without incurring liability for wrongful eviction provided two conditions
are met:
- (1) The landlord is legally entitled to possession, such as where a tenant holds over after the
lease term or where a tenant breaches a lease containing a reentry clause; and
- (2) the landlord's means of reentry are peaceable.
- Summary proceedings are an alternative to self-help remedies used as a quick and efficient means
to recover possession after termination of a tenancy (what was legal to do in the Berg case instead
of self-help)
• The tenant who has abandoned possession
- Sommer v. Kridel
• Issue: Were the landlords entitled to damages for the breach of content related to their lease
agreements?
• Holding: No because they had to mitigate the damages themselves.
• Rule: A landlord has a duty to mitigate damages by attempting to re-let an apartment vacated
by a tenant at fair market value where he seeks to recover rents due from a defaulting tenant.
(minority rule)
- The landlord shall be required to carry the burden of proving that he used reasonable
diligence in attempting to re-let the premises.
- In assessing whether the landlord has satisfactorily carried his burden, the trial court shall
consider, among other factors, whether the landlord, either personally or through an agency,
offered/showed the vacant apartment, advertisements, among other factors.
- The landlord need not accept less than fair market value rent or substantially alter his
obligations as established by the pre-existing lease
- There is no standard formula for measuring whether the landlord has utilized satisfactory
efforts in attempting to mitigate damages, each case must be judged upon its own facts
• Majority common law rule is that landlord may but need not mitigate damages
- Surrender
• A tenant’s offer to end a tenancy
• Surrender terminates a lease, provided, of course, that the landlord accepts the tenant’s offer.
- If he does — if the surrender is effected — this extinguishes the lessee’s liability for future
rent, but not for accrued rent or for past breaches of other covenants.
• Surrender may come about explicitly — tenant expressly offers, landlord expressly accepts.
- In such event, and if the Statute of Frauds is complied with, the lease is unambiguously
terminated.
 44
• When a tenant impliedly surrenders, the landlords implied acceptance is generally said to turn
on the intent of the landlord in retaking possession, without regard to whether the tenant is on
notice that any reletting is on the tenant’s account
- Under the intent test, one considers whether the landlord’s actions are inconsistent with or
repugnant to continuation of the original lease.
• Landlord Remedies when tenant defaults
- Rent and damages
• The landlord has a right to sue for back rent and for damages occasioned by the tenant’s breach
of lease obligations and it is straightforward.
• If the tenant is in possession, the landlord may also terminate the lease and recover possession
• If the landlord also wants to recover damages equal to the difference (reduced to present value)
between the rent reserved in the lease for the unexpired term and the reasonable rental value of
the premises for that period…
- The remedy has to do with the doctrine of anticipatory breach familiar to contract law
- In some jurisdictions, at least, the remedy is made available by statute
- Absent such a statute, it appears that the anticipatory breach remedy is generally
unavailable, at least as to a failure to pay rent.
- In the case of a tenant’s abandonment, however, repudiation is clear-cut, and here
anticipatory breach will apply if the jurisdiction in question extends that contract doctrine to
leases
- Security devices
• Techniques for landlords to protect themselves in the event of a tenant default
• Security deposits
- The purpose: to protect the landlord in the event a tenant defaults in rent, damages the
premises, or otherwise breaches the leas
- In principle, the landlord is obliged to return to the tenant, upon termination of the lease, the
deposit less any amounts necessary to compensate for defaults by the tenant
- In practice, the landlord has an incentive to imagine all sorts of reasons why he should be
entitled to retain the deposit, and with money in hand he has leverage that permits abuse
• Central concern is abuse and statutory reforms/provisions to prevent abuse are:
- limits are placed on the amount of deposits (e.g., two months’ rent);
- deposits create a trust relationship;
- deposits must be placed in a trust or escrow account;
- deposits are not to be commingled with other funds;
- the tenant’s claim to a deposit is made prior to other creditors, including, in some
 45
instances, a trustee in bankruptcy;
- the landlord must pay interest on deposits;
- the landlord must submit an itemized list of deductions from a deposit;
- penalties are levied for violations
• Other Techniques
- A lease might characterize a payment as “consideration” or a “bonus” for execution of the
lease
• Tends to work so long as there is no provision for return of the payment upon termination
- Designating the payment “advance rent”
- A deposit may be characterized as “liquidated damages”
• Might be tolerated when the amount in question is reasonable and especially when actual
damages are difficult to determine
• Most often they are regarded as an unenforceable penalty
• A liquidated damages clause is not ideal from the landlord’s standpoint in any event.
- With such a clause, once default has occurred the tenant has little incentive to
minimize damages.
- Rent acceleration — a provision that upon the tenant’s default, all rent for the entire term is
due and payable
• Accepted by a majority of courts with regard to default in rent payments
• If rent is accelerated, the landlord usually cannot take possession as well
- Landlord and Tenant Duties, Rights and Remedies
• Landlord’s Duties; Tenant’s Rights and Remedies
- Disputes between landlord and tenant regarding the condition of the premises arise in essentially
two ways.
• First, the tenant might wish to vacate, or to stay but pay less (or no) rent.
• Second, the tenant (or an invitee of the tenant) might be injured by allegedly defective premises
and claim damages against the landlord in tort.
- Tenant’s right to Quiet Enjoyment of the Land
• “In every lease there is an implied covenant that the tenant shall have the right of possession,
occupancy, and beneficial use of every portion of the leased premise”
- It was developed to protect a tenant against wrongful eviction by the landlord or someone
claiming under the landlord
- The covenant of quiet enjoyment is taken to create, of itself, a duty upon the part of
landlords to provide suitable premises
- Included not just physical eviction but other breaches that interfere with tenants’ beneficial
 46
enjoyment of the leased premises
• Village Commons, LLC. v. Marion County Prosecutor’s Office
- Issue: Did the exclusive-remedy provision of the lease bar the tenant from asserting that it
was evicted by acts or omissions of the Landlord?
- Holding: No, the appellate court held that the tenant did not violate the exclusive-remedy
provision by defending itself and counterclaiming for wrongful eviction because the
landlord evicted the tenant from the premises by not fixing the huge leak that made them
leave.
• It was concluded that (1) the exclusive-remedy provision of the Lease did not bar the
tenant from asserting a wrongful eviction defense; (2) the trial court's findings that the
tenant had been both constructively evicted and actually evicted were not clearly
erroneous; and (3) the provision of the Lease defining the time to sue did not bar the
tenant from asserting wrongful eviction as a defense or bringing counterclaims when the
Landlord initiated the action.
- Rule: Tenant has a right to quiet enjoyment of the land and a huge leak caused by the
landlord not fixing it is violating their right to quiet enjoyment
- Tenant’s Remedy of Constructive Eviction
• Eviction might mean being physically removed or kept out by the landlord, in which case there
is an actual eviction
• Further to aid the cause of tenants, courts developed the idea of constructive eviction
- If (a) the condition of the leased premises amounts to a breach of the covenant of quiet
enjoyment, and
- (b) if the breach is so substantial as to justify the tenant absenting the premises, and
- (c) if the tenant thereafter leaves within a reasonable time, then it was as though the tenant
has been evicted
• Once evicted the tenant is relieved of the obligation to pay rent.
• Partial eviction- actual and constructive
- The conventional rule holds that where a landlord commits an actual eviction, even though
from a part of the premises only, the tenant is relieved of all liability for rent notwithstanding
continued occupation of the balance.
• The landlord, may not apportion his wrong.
• Restatement (Second) of Property rejects this rule and provides that the tenant may
receive an abatement in the rent but may not withhold all rent.
- Tenant’s implied warranty of habitability
• Hilder v. St Peter
 47
- Issue: Whether a tenant is required to abandon the leased premises in order to be entitled to
damages for breach of warranty of habitability.
- Holding: No
- Rule: Because we hold that the tenant's obligation to pay rent is contingent on the landlord's
duty to provide and maintain a habitable dwelling, it is no longer necessary for the tenant to
first abandon the premises. Thus, the doctrine of constructive eviction is no longer a viable
or needed defense in an action by the landlord for unpaid rent.
• When the landlord breaches the implied warranty of habitability, tenant can withhold rent,
repair defects and deduct this cost from rent payments, seek rent already paid, and seek
punitive damages in the appropriate cases
• The warranty of habitability covers all latent and patent defects in the essential facilities
of the residential unit.
- Essential facilities are facilities vital to the use of the premises for residential purposes.
• A tenant who was aware of existing defects in the leased premises cannot be said to have
assumed the risk, removing him from the protection of the warranty nor can the implied
warranty of habitability be waived by a covenant in the lease.
• The implied warranty of habitability does not render pointless the doctrines of quiet
enjoyment, constructive eviction, and illegal leases
• The implied warranty, even where generally applicable, commonly does not apply across the
board to all residential leases
- ex. does not apply to commercial leases
• Generally speaking, an “adequate standard of habitability” has to be met, and a breach occurs
when the leased premises are “uninhabitable” in the eyes of a reasonable person.
- Standard and breach vary among jurisdiction
- The objective is safe and healthy housing, substantial compliance is required
• The implied warranty of habitability is based largely on contractual principles
- Tenant may evil himself of all the basic contract remedies - damages, rescission and
reformation
- Remedies vary with the circumstances and also from jurisdiction to jurisdiction.
- a tenant has a right to assert breach of the implied warranty of habitability as a defense
justifying rent withholding, retention of possession, and rent abatement; or to stay in
possession, pay rent, and bring an affirmative cause of action for damages
- The tenant may also terminate the lease and sue for damages.
• In any of these cases, special and consequential damages should also be recoverable and
sometimes punitive damages
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• Retaliatory eviction
- Most jurisdictions today, whether by statute or judicial decision, forbid retaliatory action by
landlords renting residential space
- A fairly common approach is to create a rebuttable presumption of retaliatory purpose if the
landlord seeks to terminate a tenancy, increase rent, or decrease services within some given
period (commonly anywhere from 90 to 180 days) after a good-faith complaint or other
action by a tenant based on the condition of the premises
- Retaliatory acts beyond the stated period are also usually prohibited, but the tenant bears the
burden of proof.
- Retaliatory eviction doctrine is inapplicable if a tenant is in default on rent payments
• Law reform and the problem of decent affordable housing
- The implied warranty of habitability, illegal lease doctrine, and the prohibition of retaliatory
evictions are all law reforms
- Rent controls are another possible solution for the problem of low income tenants
• As a general rule, residential rent regulation makes economic sense if, and only if, two
conditions occur simultaneously in the market and are both expected to last for some
time.
- Government housing programs are another possible solution for low income tenants
• Government housing programs have aimed to provide decent, affordable housing to low
and moderate income families, to eliminate blight, and to redevelop neighborhoods.
• Conventional public housing began with the federal Housing Act of 1937
• The major alternative to public housing is the housing voucher, which enables families to
rent housing in the private sector using vouchers issued by the government.
• Landlord’s tort liability
- The common law held landlords liable for tenant injuries only when the landlord negligently
breached the limited duties that arise from a handful of exceptions
- Although the majority of jurisdictions do not impose strict liability, there is a trend in the
direction of recognizing a general duty of care, a negligence standard on the part of
landlords
• Tenant's Duties; Landlord's rights and remedies
- The duty not to commit waste is breached if a tenant makes “such a change as to affect a vital and
substantial portion of the premises; as would change its
• characteristic appearance;
• the fundamental purpose of the erection;
• or the uses contemplated,
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• or a change of such a nature, as would affect the very realty itself, extraordinary in scope and
effect, or unusual in expenditure
- Not every alteration made by a tenant amounts to waste
- The degree of effect on the use and value of the leased premises is relevant, As is its permanence;
so too should be the length of the term remaining at the time the tenant makes the changes in
question.
- There is no bright line that distinguishes waste from lawful activities.
- Voluntary waste: arising from affirmative actions
- Involuntary or permissive waste arising from a failure to act
• Permissive waste provided the foundation of the tenant’s duty to repair
• It is a common view today that the tenant’s implied duty to repair no longer makes sense, the
argument being that landlords, not tenants, are generally in the best position to maintain the
property
- A commercial tenant’s duty to repair is altered by a covenant in the leased depends on the
language of the agreement in question
- A covenant that excepts “fair wear and tear” amounts to no more than the common law duty.
- Slightly different wording (say “to keep in good repair”) might be found to enlarge the tenant’s
obligations, and a number of vexing interpretive problems can arise.
- Explicit covenants to repair regularly except, in addition to fair wear and tear, damage by fire or
other casualty.
- Common law generally says a tenant must continue to pay rent after the leased premises have
been destroyed unless the lease provided otherwise
• Based on the theory “that although a building may be an important element of consideration for
the payment of rent, the interest in the soil remains to support the lease despite destruction of
the building.”
- But if the lease covers only a portion of a building, which is subsequently destroyed an exception
was made to the general rule, because the tenant never had any “interest in the soil” in the first
place
• The building, since destroyed, was the only consideration for the lease
• Therefore if it is destroyed, tenant doesn’t have to continue to pay rent after
- Accidental destruction of the building excused both parties from further performance of their
obligations under the lease.