Property Comp Review

Landlord leased a house to Tenant for ten years commencing on January 1. Rent was payable in advance annually on January 1 of each year. Two years later, Tenant transferred possession of the house to Ben “for a period of two years from the date hereof” at a stated annual rental payable in advance to Tenant on January 1. (You may assume that Ben was not aware of the Landlord/Tenant lease.)

Ben paid the first year’s rent, but failed to pay rent for the second year. Tenant did not pay any rent to Landlord for two years.

Based on the foregoing, under real property principles, it is most likely that

• Landlord may hold Tenant and Ben jointly and severally liable for

  the unpaid rent for the two-year period.

• Landlord may hold Tenant liable for the unpaid rent for the two year period, but may not hold Ben liable for the rent.

• Landlord may hold Ben liable for the unpaid rent, but may not

  hold Tenant liable for the rent.

• Landlord may hold Tenant liable for the rent for the two-year

  period, but may hold Ben liable only for one-year’s unpaid rent.

Answer explanation

When Landlord leased the premises to Tenant, Landlord and Tenant were in privity of contract and privity of estate. The transaction described in these facts is a sublease by Tenant, not an assignment of his interests. An assignment is the transfer by the lessee of his entire interest in the leased. When Landlord leased the premises to Tenant, Landlord and Tenant were

in privity of contract and privity of estate. The transaction described in these facts is a sublease by Tenant, not an assignment of his interests. A is incorrect b/c Ben is not in privity of estate or contract with Landlord and is not

liable for the payment of rent. Choice C reverses Landlord’s remedies against Tenant and Ben, and therefore is incorrect. Choice D is incorrect. Landlord may hold Tenant for the entire lease; he may not look to Ben at

all.

Landlord leased an apartment to Tenant on a month-to-month basis for

$1,000 per month. When the lease commenced on June 1, Tenant attempted

to move into the premises, but was prevented from doing so by the previous

occupant, who was wrongfully holding over.

Based on the foregoing, it is most likely that

• if the so-called English rule is followed in the jurisdiction, Tenant may sue Landlord for breach of the lease agreement and may also

  recover damages arising out of the lease, but Tenant may not suethe holdover tenant to evict him.

• if the so-called American rule is followed in the jurisdiction,

  Tenant may sue Landlord for breach of the lease agreement and may also recover damages arising out of the lease, but Tenant may

  not sue the holdover tenant to evict him.

• if the so-called English rule is followed in the jurisdiction, Tenant may sue Landlord for breach of the lease agreement and may also

  recover any damages arising out of the lease; Tenant may also sue the holdover tenant to evict him.

• if the so-called American rule is followed in the jurisdiction,

  Tenant may sue Landlord for breach of the lease agreement and may also recover any damages arising out of the lease; Tenant may also sue the holdover tenant to evict him.

Answer explanation

Under the English rule, the landlord has a duty to deliver actual possession to Tenant. If the landlord fails to deliver possession, as in this case, tenant may terminate the lease and recover damages for the landlord’s breach. Or, he may continue the lease and recover damages until either he or the landlord can evict the holdover tenant. A is incorrect because it misstates the English rule. Choice B is incorrect because it misstates the American rule. Under the American rule, the landlord has the duty only to deliver the legal right to

possession (which Landlord has done), not actual possession.Finally, choice D is incorrect because Tenant cannot sue Landlord for

breach or for damages under the American rule; his remedy is to evict the

holdover.

Landlord leased a commercial building to Tenant for a term of three years.

The lease commenced on August 1 and concluded on July 31 three years

later. Rent was stated to be “$24,000 annually, payable in monthly

installments, due on the first of each month, of $2,000.” About one year

after Tenant commenced occupancy, Tenant wrote to Landlord giving the

latter 30 days’ written notice of her intent to terminate the lease.

Based on the foregoing, it is most likely that

• since this is a month-to-month periodic tenancy, the notice

  terminated the lease at the end of the succeeding month

• since this is a year-to-year periodic tenancy, one year’s notice is

  required to terminate the lease

• since this is a year-to-year periodic tenancy, six months’ notice is

  required to terminate the lease

• since this is a term of years tenancy, notice is ineffective to

  terminate the lease

Answer explanation

Since the lease in these facts has a fixed beginning and a fixed end covering a period of three years, it is a tenancy for a term of years. A term of years cannot be terminated by either party during the term. Tenant’s notice of her intent to terminate has no legal effect. She is liable for the entire three-year term. A is

incorrect; this is not a month-to-month tenancy. Choices B and C are incorrect. This is not a year-to-year tenancy; the lease has a fixed

beginning and end.

Landlord leased an apartment to Tenant for $500 per month. Landlord explained to Tenant that he normally let the apartment for $700 per month;

but since there were “some problems with the place,” he would reduce the rent if Tenant would take the premises “as is.” Tenant agreed. Upon moving

in, Tenant found that the toilets did not work, there was no hot water, and the apartment was infested with rats and cockroaches. Tenant requested that

Landlord cure these deficiencies, but Landlord refused, citing their agreement. Assume that Landlord is responsible for the conditions on the

premises and that Tenant has given Landlord reasonable notice.

Based on the foregoing, it is most likely that Tenant’s remedies are

• Tenant may treat the lease as breached and move out

• Tenant may treat the lease as breached and move out, or Tenant

  may remain in possession and withhold rent

• Tenant may treat the lease as breached, move out, and sue for

  consequential damages; or Tenant may remain in possession and

  withhold rent

• Tenant may treat the lease as breached, move out, and sue for

  consequential damages; or remain in possession without any

  further liability for rent

Answer explanation

Upon breach by the landlord of the implied warranty of habitability, Tenant has several options: He may simply terminate the lease and move out; he may also recover damages for the landlord’s breach; or he may remain in the premises and withhold part or all of the rent until the premises are repaired and made habitable. In some jurisdictions, he may even make the necessary repairs himself and deduct the cost from the rent. Choice A is incorrect in that omits the tenant’s right to remain in possession and withhold all or part of the rent. Choice B is incorrect. It omits Tenant’s remedy of suing for consequential damages or of setting them off against any rent still owed. Finally, choice D is incorrect. If Tenant remains in possession, he is not unconditionally relieved of all further liability for rent

Okie, the owner of Blackacre, a 200-acre tract of land, sold the back half of

Blackacre to Purchaser. Okie retained the front half, which abutted the

county road. The back half of Blackacre was surrounded by other tracts of

land owned by persons other than Okie or Purchaser, and was thus

landlocked.

Based on the foregoing, it is most likely that

• Purchaser has an easement by necessity that will exist only so long as the necessity exists; Okie may decide the location of the

  easement

• Purchaser has an easement by necessity in perpetuity; Okie may

  decide the location of the easement

• Purchaser has an implied easement based on prior use; but

  Purchaser may decide the location of the easement

• Purchaser has no right to an easement since the land was presumably purchased with knowledge of its condition

Answer explanation

Here, both halves of Blackacre were originally owned by Okie and were divided by sale of the back half to Purchaser, Purchaser has an easement by necessity because otherwise his property is landlocked. The easement

arises even though the deed is silent. But an easement by necessity exists only so long as the necessity exists, and the owner of the servient estate may locate the easement so long as he acts reasonably. The correct

answer is choice A. Choice B is incorrect. An easement by necessity does not exist in perpetuity. It is limited in duration to the period of necessity. Choice C is incorrect in that there are no facts that indicate that the front

half was previously used for access to the back half; further, an easement by necessity does not need a showing of prior use. Finally, choice D is incorrect in that Purchaser has an easement by necessity because he is

otherwise landlocked.

Jim owned Tract A on which he operated a used car lot. He obtained from

Ken a written easement “for purposes of ingress and egress’’ across Tract

B, which abutted Tract A on its west side. Subsequently, Jim expanded his

business by purchasing Tract C, which abutted Tract A on its east side. He

then moved the used car business to Tract C and built a repair shop on Tract A.

Based on the foregoing, it is most likely that

• Jim may continue to use the easement for ingress and egress to

  Tracts A and C

• Jim may continue to use the easement for ingress and egress to

  Tract A

• Jim may not continue to use the easement for ingress and egress to Tract A

• Jim may not continue to use the easement for ingress and egress to Tracts A or C

Answer explanation

When an easement is created, the land that benefits from the easement becomes the dominant tenement, and the parcel that is burdened by the easement is called the servient tenement. Here, Tract A is the dominant tenement, and Tract B is the servient tenement. When Jim acquired Tract C, it represented additional property that is not part of the dominant tenement. It is therefore not entitled to the benefit of the easement. The best answer is choice B. Although Jim probably may continue his access across Tract B from Tract A, he may not do so from Tract C. Choice A is incorrect because Tract C cannot use the easement owned by Tract A. Choices C and D are incorrect in that Jim probably may continue to use the easement for ingress and egress to Tract A. It is still the dominant estate

and the beneficiary of the easement.

Ortega owned Blackacre in fee simple and by his will specifically devised Blackacre as follows: “To my daughter, Eugenia, her heirs and assigns, but if Eugenia dies survived by a husband and a child or children, then to Eugenia’s husband during his lifetime with remainder to Eugenia’s children, their heirs and assigns. Specifically provided, however, that if Eugenia dies survived by a husband and no child, Blackacre is specifically devised to my nephew, Luis, his heirs and assigns.”

While Ortega’s will was in probate, Luis quitclaimed all interest in Blackacre to Eugenia’s husband, José. Three years later, Eugenia died, survived by José but no children. Eugenia left a will devising her interest in Blackacre to José. The only applicable statute provides that any interest in land is freely alienable.

Luis instituted an appropriate action against José to establish title to Blackacre. Judgment should be for

• Luis, because his quitclaim deed did not transfer his after-acquired title

• Luis, because José took nothing under Ortega’s will

• José, because Luis had effectively conveyed his interest to José

• José, because the doctrine of after-acquired title applies to a devise by will

Answer explanation

Based on the doctrine of after-acquired title, Luis effective transferred his interest to Jose and cannot try to get it back after Eugina's will comes into effect because he already transferred his right.

Arthur owns a 500-acre farm on which his dwelling is situated. He enters into the following written agreement:

I, Arthur, hereby agree to sell Walter my dwelling and a sufficient amount of land surrounding

the same to accommodate a garden and lawn. Price: $20,000. Received: $1 on account. /s/ Arthur

Arthur now refuses to perform the agreement. Walter sues for specific performance.

Judgment will likely be for

• Arthur, because Walter did not sign the agreement

• Arthur, because $1 is too nominal to constitute consideration

• Arthur, because the agreement fails to satisfy the Statute of

  Frauds

• Walter, because valid contracts for the sale of land ordinarily are

  enforceable by specific performance

Answer explanation

As a general rule, an agreement for the sale of land must be in a writing sufficient to satisfy the Statute of Frauds. The writing must contain the essential terms and must be signed by the party against whom enforcement is sought. The essential terms of the agreement must be sufficiently definite. Here, the amount of land adequate to “accommodate a garden and lawn” cannot be determined with reasonable certainty. Therefore, the agreement is probably unenforceable. A is incorrect because the Statute of Frauds is satisfied as long as

the party against whom enforcement is sought (in this instance, Arthur) signed the agreement. Choice B is incorrect because the consideration in this instance is $20,000. The “$1’’ referred to in Arthur’s writing alluded only to the deposit Arthur had received from Walter. Presumably, the balance would have been due at the closing. Finally, choice D is incorrect because, even though contracts for the sale of land are ordinarily enforceable by specific performance, this rule does not apply when an enforceable contract has not been formed.

A seller contracted to sell land to a buyer for $300,000. The contract provided that the closing would be 60 days after the contract was signed and that the seller would convey to the buyer a “marketable title” by a quitclaim deed at closing. The contract contained no other provisions regarding the title to be delivered to the buyer.

A title search revealed that the land was subject to an unsatisfied $50,000 mortgage and a right-of-way easement over a portion of the land. The buyer now claims that the title is unmarketable and has refused to close.

Is the buyer correct?

• 1. No, because nothing under these facts renders title unmarketable

• 1. No, because the buyer agreed to accept a quitclaim deed

• 1. Yes, because the right-of-way easement makes the title unmarketable

• Yes, because the unsatisfied mortgage makes the title unmarketable

A homeowner fell behind on his mortgage payments, and his mortgagee initiated foreclosure proceedings. The mortgagee auctioned the home for $200,000. At that time, the amount outstanding on the foreclosed mortgage was $75,000. However, the homeowner had used his home as security for two additional mortgages. The foreclosed mortgage was the second mortgage in order of priority. The first mortgage was for $100,000 and the third mortgage was for $150,000. All of the mortgagees were proper parties to the foreclosure proceeding.

How should the proceeds from the auction be distributed?

• The $200,000 should be divided equally between the three mortgagees.

• $75,000 to pay the balance on the foreclosed mortgage, $100,000 to pay the balance on the first mortgage, and the remaining $25,000 toward the third mortgage.

• $75,000 to pay the balance on the foreclosed mortgage, $100,000 to pay the balance on the first mortgage, and the remaining $25,000 to the homeowner.

• $75,000 to pay the balance on the foreclosed mortgage, and the remaining $125,000 toward the third mortgage.

Answer explanation

The $200,000 proceeds from the auction should be used to pay the $75,000 balance on the foreclosed mortgage and $125,000 toward the third mortgage. When only one of several mortgages on a property forecloses, the foreclosing mortgage and any junior mortgages (i.e., mortgages executed and recorded with the county clerk after the foreclosing mortgage) terminate. Senior mortgages (i.e., mortgages executed and recorded with the county clerk before the foreclosing mortgage) stay on the property, and the foreclosure buyer takes subject to them. See 55 Am. Jur. 2d Mortgages §§ 705, 711-712. Accordingly, after any costs associated with the foreclosure sale have been paid in full, the proceeds of the sale are distributed first to satisfy the mortgage being foreclosed; next, to satisfy all other junior mortgages or other junior liens in priority order; and finally, any remaining surplus to the mortgagor. Because senior mortgages are unaffected by the foreclosure, no money is distributed to the lienholders senior to the foreclosing mortgage. Here, therefore, the $200,000 auction proceeds will be distributed first to pay the $75,000 balance on the foreclosed mortgage. Next, the remaining $125,000 will go toward the third mortgage, which is junior to the foreclosed mortgage. Because this will not completely satisfy the remaining balance on the third mortgage, that mortgagee may seek a deficiency judgment against the homeowner. None of the proceeds will be distributed to satisfy the $100,000 senior mortgage, and the buyer of the home at auction will take the home subject to that senior mortgage. Answer options A, B, and C are necessarily incorrect for the same reasons.