A. Def.: system of laws governing the relation between people with respect to resources

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Silien -

I. Property

A. Def.: system of laws governing the relation between people with respect to resources

B. necessary because resources are limited

C. Property is governed by set of rules

1. Promote equity & efficiency

D. 3 types

1. Real Property: land and what is built on land

2. Personal Property: tangible resources that aren't real property

3. Intangible Property:stocks,bonds, gov't entitlements, etc...

E. Major course areas

1. Acquisition of property

2. State limits on freedom to use property

3. Tenants v. landlords rts.

4. incompatible uses of land

II. Definitions

A. Entitlement - legal right

B. Efficiency (pgs. 29-32 supp)

1. Kaldor-Hicks: reallocation will make someone better off & that person can compensate those harmed by the reallocation

2. *** Based on willingness & ability to pay

3. use efficiency to determine outcome

4. if transaction costs low, who has entitlement is not as important for efficiency

5. fewer parties usually means greater efficiency

6. gov't can have rules to limit transaction costs and to provide info creating greater efficiency

C. Coase Theorem (pg. 6 supp)

1. if no transaction costs & clearly defined property rights exist, efficient allocation of resources is independent of the distribution of property rights

2. ie efficiency will prevail

3. regardless of who has entitlement, outcome is the same

4. Problem: transaction costs do exist (including strategic bargaining)

a. Legislation needed to create efficient result

5. Miller v Schoene (pg. 2 supp) - same result may have been possible without entitlement (bargain) if trans. costs were low

6. Schalg proposes alternative to Coase (pg. 12-28 supp)

a. eliminate transaction costs by assigning entitlement to party who desires & values it the most

b. they won't sell them

c. minority view

D. Reservation Price - price a person is willing to sell an item for (not necessarily market price)

E. Free Riders: people who do not contribute to efficient result knowing that the benefit will apply to them anyway

F. Eminent Domain: gov't can take property if compensate for it

G. Externalities *********

1. certain costs/benefits not being taken into account during decision-making - can lead to inefficiency

** 2. Demsetz (pg. 42) argues private property internalized externalities & reduced transaction costs for remaining ones (by limiting # of people involved)

a. mention as one theory why property developed

b. argues communal ownership increases externalities

c. property promotes efficiency

3. 2 types

a. technological - leads to misallocation of resources (inefficient)

b. pecuniary - one party bearing cost of another party's actions (redistributes wealth)

H. Alienation - ability to transfer property rights

I. Bilateral Monopoly (pg. 137, footnote)

1. creates very high transaction costs

2. strategic bargaining

III. Ownership & Allocation of resources (property)

A. Ownership

1. creation (ie inventions)

2. conquest

3. first possession

B. Allocation (many possible methods)

1. equally, market (who can pay), need based, power, common, utility, gov't ownership, inheritance, possession, etc...

C. Early law

1. Pursuit alone doesn't yield property rts. (Pierson v. Post, pg. 20); requires control [fox chase]

2. Theory of First Possession (Discovery)

a. quick, efficient way to distribute property to private owners

b. First-in-time (Johnson v. M'Intosh, pg. 3)

1. explains gov't ownership & indian occupation

c. Discovery leads to conquest or right of preemption

d. problem: defining possession

3. Trespassers have few rts. (Keeble, pg. 31 [duck pond])

a. allows efficient use of land

b. no malicious interference of trade

c. can't interfere w/ another's property

4. animals are property of owner while on property (constructive possession, pg. 34) & Rule of capture (pg.38)

5. water use - pg. 40

D. Methods of decision-making

1. custom - Ghen [whaling case] (pg. 27); must be limited to people aware

2. policy - Pierson dissent

3. precedent/formalism - Pierson

E. Custom

1. Advantages: flexible, community norms, efficiency

2. Disadvantages: inefficient, affects 3rd parties, morally wrong

IV. Adverse Possession (pg. 121)

A. method of reallocating resources

B. Elements:

1. actual exclusive possession

a. only claim piece that is occupied

b. don't have to use entire property if normal user would only use portion (ie. leaving some farm land fallow)

c. limits claim to one person

d. delimits area claimed

e. allows owner to know someone is there

f. exception: use under color of title (see C below)

2. open & notorious

a. gives notice to actual owner so statute of limitations can be stopped

3. adverse & under claim of right/title (see D below)

a. can't have owners permission

4. continuous

a. ensures adverse possessor present when owner "checks" property

b. Tacking (see E below)

5. duration of statutory period (varies)

C. Color of Title - "Constructive Adverse Possession"

1. document (deed) showing ownership that is not correct or legal

a. must be good faith reliance on document

2. if occupying part of land stated under color of title, claim is to all land

3. avoids requirement of total possession

4. still must meet other requirements

5. if real owner actually using part of land, color of title does not apply; can only claim piece occupied (like normal adverse possession)

6. ex. X owns property and uses part

Y deeds same property to Z

Z cannot constructively adversely possess entire property

Z only has claim to piece used unless X not present

7. if deed is for multiple plots, only claim plots being used unless they are contiguous and have the same true owner

D. Claim of Title (Adversity) requirement

- state of mind (intent) required varies by jurisdiction & choice of rationale (see F)

1. guilty - knowledge property not theirs

2. innocent - think property is theirs

3. doesn't matter

4. ex. if rationale 3 used, requiring innocence makes sense

ex. if rationale 1 used, intent may not matter

5. Maine Doctrine: requires a guilty mindset unless would have claimed anyway had you known w/ innocent mindset (limited use)

6. controversial in Van Valkenburgh v Lutz (pg. 125)

a. case dealt w/garden & shack

b. used both tests for various parts of case

c. NY statute on pg. 129

E. Tacking (pg. 149)

1. possession must be continuous but not necessarily the same person

2. if privity (relationship) exists, one person's time can be added to 2nd person

a. ex. wills, grant of property, selling

b. privity must be voluntary

3. applies to both adverse possessors and owners

4. ex. if owner sells after not checking for 13 yrs., new owner only has 2 yrs. (if 15 yr. limit)

F. Retaking ownership by true owner

1. must intend to take back

2. must be sufficient interruption

3. make other party give up land

4. can use legal system

5. NOTE: if use of land by other party is knowingly permitted, it is not adverse

G. Common uses

1. transfer from A to B lacks proper legality

2. faulty deed descriptions

3. person intentionally takes over another's property

H. Rationale

1. limits rt. of owner not to use his land/punishes 'lazy' owner for allowing reliance

2. encourages efficient use of land

3. long-term reliance (protection of innocent (unfair to take away))

4. quiets title

5. redistributive result

I. Disadvantage

1. gives something owned by one person for free to another (often a trespasser)

J. Sample problems & answers on pg. 143

K. Improvements on land while adversely possessed (pg. 150)

1. common law - owner gets them

2. modern trend - grant market value compensation or permit removal

L. Disabilities & Adverse Possession (pg. 151)

1. only count if existed as time of cause of action

2. ex. insane, under age, etc...

M. Adverse Possession against Gov't (pg. 152)

1. common law - cannot occur

2. some states allow it or modify time period necessary
V. Estates in Land

A. Present Possessory Interests

1. Fee Simple (see C)

a. exclusive, infinite & freely transferrable interest in land

b. potentially infinite in time; inheritable

2. Fee Tail

a. tenant can sell land, but on tenant's death, land reverts to heirs of tenant

b. abolished almost everywhere

1. can cheat buyers (sell & then revert)

2. concentration of wealth

3. restraint on alienation

c. also originally used for "A and the heirs of his body" (continue thru generations); then revert

3. Life Estate

a. used in place of fee tail

b. measured by a life (not necessarily tenant's life)

c. ex. to A for C's life, then to B (B has future interest)

d. freely transferable but remains based on original life (ex. A sells to D; D owns for A's life)

e. "Life Tenant"

f. must comply with Doctrine of Waste (see E below)

g. if life estate not invested well, tenant can ask ct. to sell property & then reinvest

h. not used much anymore - use trusts instead

1. trustee holds deed to property (can buy, sell, etc) - legal title

2. income distributed to beneficiaries (equitable owners)

3. can't assign principal or income to creditors in advance Bdwy Nat'l Bank v Adams, pg. 284

4. spendthrift trust - for person who can't control their money (pg. 290)

i. see pg. 233 for problems w/ life estate

4. Estate For Years - set number of years

5. Periodic Estate

6. Estate at Will

7. Estate at Sufference

B. A1-3 last at least a lifetime

A4-7 are for a limited period of time - "Leasehold Estates"

C. Fee Simple (types)

1. * Fee Simple Absolute

a. has the most rights attached

b. infinite

c. no future interest (infinite present interest)

2. * Fee Simple Subject to a Condition Subsequent

a. Right of Entry+: grantor has the right to reclaim interest if certain conditions are met

3. * Fee Simple Determinable

a. Possibility of Reverter+: grantor automatically reclaims if certain conditions are met

4. * Fee Simple Subject to an Executory Interest

a. Executory Interest+: automatically ends title in grantee (like 3) but changes title to another grantee if certain conditions are met

* Present Possessory Interests

+ Future Interests (see G)

2-4 are Defeasable Fees

5. Problem: deciding if something is a fee simple determinable or a fee simple subject to a condition subsequent

a. must look at language and context

b. Mahrenholz (pg. 238) - transfer to school for school purposes

6. cts. prefer to find a fee simple subject to a condition subsequent over a fee simple determinable if its close

a. easier to settle title

b. determinable is auto. forfeiture which cts. dislike

c. see Mountain Brew Lodge (Odd Fellows) v Toscano (pg. 247) - also dealt w/ 7 & 8 below

7. use restrictions are allowed

8. transfer restrictions are usually forbidden (restrains alienation)

a. some use restrictions result in transfer restrictions (these are ok)

D. Restraints on alienation are typically void

1. based on efficiency-resources to people who pay the most

2. complete bars usually eliminated

3. "unreasonable restraints" eliminated

a. some factors include:

1. portion of the market excluded (who can't buy)

2. remedy if condition broken

a. defeasance (lose property) - cts. most concerned with this

b. covenant (promise) - dmgs. or injunction (not lose land)

3. is public policy violated in other ways (ex. against minorities; preventing marriage, etc...)

4. Rationale

a. permit dead to control the living

b. inefficient to hinder transfer rts. - inhibits those

who value property from acquiring

5. Analysis:

a. if transaction costs high, holder of future interet could bargain w/ present interest holder to eliminate condition by creating fee simple absolute

b. high transaction costs won't lead to efficiency

1. many owners of future interest

2. don't know who will hold future interest (contingent)

6. Negative effects of doctrine

a. no incentive to amass wealth to control future use

b. overrules intent of testator (grantor)

E. Doctrine of Waste (pg. 231)

1. Life tenant (life estate) can't diminish value of future interest (can't unreasonable interfere)

2. Types of waste

a. Voluntary - affirmative action which substantially reduces value

1. exception for resources or mine: if resource being extracted at beginning, you can continue; if not, must leave it for future

b. Ameliorative - affirmative action which increases property value

1. future interest holder usually can't claim damages

c. Permissive - failure to maintain property in reasonable repair

1. no duty to pay more expenses than income from the property

2. if living on property, don't need to pay more than value of occupation (fair market rent value)

3. Rationale - promotes efficiency

a. prevents life tenants from maximizing property during their life instead of maintaining future value

F. General Principles

1. grantor can pay grantee to give up ("release") present rts. thus giving grantor fee simple absolute

2. Future interests to grantor aren't eliminated by Rule Against Perpetuities

3. Future interests to 3rd parties (C4) are subject to Rule Against Perpetuities

4. Doctrine of Escheat - goes back to state if no heirs left

5. Reversion = goes to grantor

6. Remainder = goes to 3rd party

7. Heirs survive a decedent; noone is heir to a living person

G. Future Interests

1. Def. - nonpossessory estate capable of becoming possessory

2. Reversionary - held by grantor

a. reversion - interest remaining in grantor when conveying less than whole of rts. (ex. to A for life; reverts)

b. possibility of reverter - interest remaining in grantor when conveying fee simple determinable

c. right of entry - grantor can elect to take back if condition subsequent occurs

3. Remainders & Executory interests - held by 3rd parties

a. remainders - future interest in transferee which can become possessory at termination of prior estate & doesn't divest prior estate (must be natural end of prior estate)

1. ex. to A for life & then to B; remainder to B

2. vested remainder - if identified person(s) have an unconditional rt. to possession upon termination of preceding interest (no condition precedent)

a. ex. to A for life then to B

3. contingent remainder - 3 types

a. created in favor of ascertained person but subject to a condition subsequent

1. ex. to A for life then to B if B reaches 21 (no remainder if not 21; goes back)

b. created in favor of unborn person

1. to A then to kids of B (who is infant) - if none, goes back to grantor

c. created in favor of existing but unascertained person

1. to A for life then to B or C, whoever has most kids at A's death

4. Executory Interests - future interest which in order to become posessory must either:

a. Shifting executory interest - divest or cut short interest in another transferee

1. to A but if A serves liquor to B

b. Springing executory interest - divests transferor

1. to B when B reaches 21

5. Examples in notes

H. Rule Against Perpetuities (pg. 299)

1. affects: contingent remainders & executory interests

2. doesn't affect: vested interests & reversionary interests

3. purposes

a. make property more alienable

b. eliminate dead hand control

c. efficiency (requires transferability)

d. promotes marketability of property

e. curbs accumluation of wealth in families

f. prevent reliance on future money

4. disadvantages

a. very complicated

b. defeats intent of transferor

c. doesn't cover all eternal interests

d. limits freedom of testation

** 5. Identify problems where this is an issue but don't solve

a. "give case to trusts & estates lawyer"

6. Rule: no interest is good unless it must vest, if at all, not later than 21 yrs. after a life in being at the creation of the interest

7. applied at time of gift if grantor alive; or at time of death

8. if ex. can be found where it soes not vest, Rule violated

a. clause stricken

9. summary: as long as 1 life in being can be found that will always vest within 21 yrs. after death, its ok

10. see notes if necessary

11. executor can be life in being

12. Wait & See Doctrine - some cts. will wait to see if it vests before deciding (pg. 319)

13. Lucas v Hamm (pg. 81 supp, but see notes instead)

VI. Concurrent Ownership (3 types)

A. multiple owners can have consecutive rts. (present & future) or concurrent rts. (own at same time)

B. form of common property

C. Tenancy in Common

1. no rt. of survivorship

a. at death, transferred by will or state laws

2. presumption in favor of these

3. can alienate share of property w/out permission of cotenants

4. each cotenant has equal rt. to use & possess

D. Joint Tenancy

1. each has rt. to possess and use

2. rt. to sell share w/out permission or knowledge of others

3. rt. of survivorship - survivor automatically gets ownership of deceased share (avoids probate)

4. ex. marriage commonly uses this

5. Creation (4 unities):

a. Time - all must get property simultaneously

b. Title - must get share by same legal instrument or joint adverse possession

c. Interest - identical fractions of property

d. Possession - equal rt. to use & possess

6. if one unity broken (ex. one person transfers share), joint tenancy ends

a. result: becomes tenants in common

b. can't pass the interest in a will

7. Doctrine of unilateral severance - can end a joint tenancy by transfering share of property to self or 3rd party)

a. notice to others not necessary

b. Riddle v Harmon (pg. 330)

8. creditor can foreclose on share of property (becomes tenancy in common) - if debtor alive ("life case")

9. "death case" - cannot foreclose after death of debtor

a. property shifts - no remaining interest

b. Harms v Sprague (pg. 336)

10. Creating a permanent joint tenancy (see pg. 335)

11. Joint tenancy bank accounts (see pg. 342)

E. Tenancy by the entirety

1. protects against unilateral severance

2. rt. of survivorship in spouse is indestructable without consent

3. only applies to marital estates

4. creditor can only foreclose w/ both parties consent to loan

5. for gov't seizure: see 1500 Lincoln Ave. (pg. 376)

6. effect of divorce (pg. 382)

F. Partition (pg. 345)

1. cts. can divide property if conflict exists

2. used only w/ joint tenants & tenants in common

3. 2 methods

a. sale

1. use if partition impracticable or inequitable

2. & if interets served better by sale

3. see Delfino

b. in kind - divide into lots within property

4. favor in kind

a. Delfino v Vealencis (pg. 346)

5. don't consider adjacent land when deciding allocation

G. Sole use and posession

1. tenant using property has no rent obligation to other and can't be forced to leave unless ouster:

a. adverse possession

b. denying use to the other owners

2. if 3rd party uses, must split rent

3. Spiller v Mackereth (pg. 353) - covers G1

H. Incentives for efficient use (see pgs. 364-365)

1. Doctrine of Improvements

a. equal contributions not required but if partitioned, increased value goes to person getting benefit

b. encourages tenants in possession to improve

2. Doctrine of Waste

a. tenant in possession can't waste

b. if waste, liable for dmgs.
VII. Protection of Property Rights

A. Liability Rule - property can be forced to be given up but compensation required (ex. partition by sale)

B. Property Rule - can't force party to give up property

1. must be consensual transfer

C. Inalienability Rule - protect property by freezing rts. (can't transfer)
VIII. Condos & Co-Ops

A. Bridge between rental (leasehold estates) & ownership (freehold estates)

B. Ownership

1. Condo - each unit owned in fee simple absolute

a. common areas: tenants in common

2. CoOp - corporation owns

a. indiv. are shareholders in corp.

b. proprietary lease (tenants)

C. Financing

1. Condo - each owner has separate mortgage

2. CoOp - blanket mortgage for bldg.

a. indiv. mortgage for units

D. Fees/Expenses/Taxes

1. Condo - unit pays own taxes, mortgage, common area charges

a. interest is deductable

2. CoOp - corp. pays taxes, blanket mortgage

a. indiv. pay maint. charge (like rent) based on shares & indiv. mortgage

b. interest is deductable

E. Governance

1. Condo - Condo Assoc.: create bylaws, covenants

2. CoOp - Bd. of Directors

F. Subassigning interests in leasehold estates

1. most co-ops require approval for sale or transfer (rare for condos)

2. if approval required, must be reasonable (rationally related) and fair and nondiscriminatory - low scrutiny test (see pg. 930)

3. Preemptive rt. - many condos have this

a. can buy @ same price as sale to 3rd party

b. if not used, can sell to 3rd party

4. Rt. of approval greater restraint on alienation

a. coops rely on payments from indiv.

5. Laguna Owners Assoc. v Darger (pg. 924)

a. reasonable test discussed (F2)

b. wanted to subdivide during yr. (rotate ownership)

c. found refusal unreasonable

G. Covenants Conditions & Restrictions (CC&Rs)

1. supposed to be binding

2. if they interfere w/ others, apply reasonable test

3. 2 cases

a. move in after rule created

1. knew rule & should be bound (consent) vs. no bargaining power

b. rule change occurs after moving in

1. might result in majority changing rule against particular target (unfair)

2. harsher consequence than (a)

4. cts. more likely to strike (b)

5. Nehrstadt (pg. 936) - dealt w/ keeping a cat

a. must apply reasonable test to facts of the case, not to rule in general

b. found reg. prohibiting cats unreasonable but many disagree w/ this decision

H. Preemptive rt. of purchase (pg. 933)

1. many include this in lease

2. get first rt. to purchase

I. often cheaper than owning house

1. expensive land market leads to more condos & co-ops

2. condos exceed co-ops (except in NYC)


IX. Homeownership (freehold) vs. Renting (leasehold)

A. Homeownership advantages

1. greater control over living environment

a. renovations, pets, etc...

b. limited in condos & co-ops

2. possibility of appreciation in value

a. renters pay more rent as value increases

3. control over risk of escalating housing costs

a. fixed rate mortgage (knows costs in advance)

b. renters recontract periodically - uncertainty

4. incentive to optimize maint. & care

a. maintains value (future & current)

b. get all benefits of improvements & bear all costs of not maintaining

c. can affect neighbors (improve/hurt their value)

1. externality

d. rentals underinvest

1. landlords not immediately hurt by problems

2. no benefit from improvements

3. rely on tenants for upkeep (little incentive)

5. Tax Subsidy

a. deduct property taxes & interest on mortgage

1. also applies to owners of rental bldgs.

b. landlords taxed on rental income

1. owner-occupied not taxed for that unit

B. Disadvantages of homeownership

1. risk of price depreciation

2. sub-optimal diversification of assets

a. most assets sunk into home (risky)

3. illiquidity & immobility

a. transaction costs make it hard to sell & move quickly & cheaply

C. Special disadvantages of condos and co-ops

1. tranaction costs of decision-making

2. lost economies of scale

a. ex. maint. - independent instead of volume discount like rental property

b. advantage over homeowners
X. Leasehold Estates (Landlord/Tenant Relations)

A. right to use property vs. right to control property

B. cts. now favor tenants & use

1. Fed. & state law limiting discrimination

2. limits on withholding consent to subleases/assignments

3. use law, not self-help for eviction

4. mitigate dmgs. by rerenting

5. implied warranty

6. ceilings to increase affordability

7. protection of tenants

C. Analyse based on fairness & efficiency

D. Types of Tenancy's for Leasehold Estates

1. Term for years - certain time period, then ends

2. Periodic tenancy - fixed period

a. automatic renewal unless either party gives notice (statutes proscribe notice period)

3. Tenancy at will - indefinite period

a. ends by notice of either party (statutes proscribe notice period)

4. Tenancy at sufferance - holdover tenancy

a. tenant stays without permission of landlord

b. use cts. to evict

5. NOTE: 1-4 create a future interest in the landlord or 3rd party

a. reversion if to landlord

b. remainder if to 3rd party

6. effect of death (landlord or tenant) on 1-4

a. 1&2 - no effect

b. 2 - ends it

E. Leases

1. create relationship

2. use both contract & property law (emphasis on contract)

3. if longer than a yr., subject to statute of frauds (written)

4. sometimes form leases (unequal bargaining power)

F. modern trend - view lease as K (contract & prop. law applies)

1. common law - lease is conveyance of land

2. modern law - lease is like a contract

** 3. always examine from both perspectives
XI. Antidiscrimination Law (see XII)

A. Does market foster or eliminate discrim?

1. eliminate - no discrim. = higher demand = higher prices

a. result: discrim. costs $ & will drive person out

2. foster - discrim = demand premium from tenants who prefer all-white housing

a. Sunstein article explains how markets foster discrim. (pgs. 149-156 supp)

B. discrim. more prevalent w/ homeowners than tenants (no rational reason)

C. Many sources of fed. law to fight discrim. (states supplement)

1. tension between fighting discrim. & protecting rt. of association for individuals

2. states & local can expand on fed. rules

a. ex discrim. vs. children, sexual orientation, marital status

3. increasing scope increases costs of enforcement

4. increasing categories detracts from enforcement money going to the most 'important' areas of discrim.

D. Constitution - Equal Protection Clause

1. applies only to gov't actions, not private parties

2. must prove intent/purpose, not just occurance

E. Civil Rights Act - 42 USC §1982

1. limited to race

2. must prove intent

3. all citizens have same rt. as a white person w/ respect to property

** F. Fair Housing Act (1968) [see text: pgs. 441-443]

1. amended in 1988

2. §3604 - prohibitions on discrimination

a. discriminate because of race, color, religion, sex (added in '74), national origin

1. 1988 - added disabilities & families w/ children

2. handicap doesn't include addiction to a controlled substance (see pg. 446)

b. (a) - refuse to sell or rent, or negotiate for sale or rent, or make unavailable or deny a dwelling

c. (b) - terms, conditions or privileges or provision of services or facilities in sale or rental

d. (c) - make, print, publish (or cause those) any notice, statement or ad re: sale or rental indicating preference, limitation or discrim.

e. (d) - represent that a dwelling is not available for inspection, sale or rental when it is available

f. (e) - induce another for profit under above

g. (f1-3; see text) - handicap

1. must make reasonable modifications

2. after 1988 - must make new bldgs. accessable

3. §3603 & § 3607 (see 3603(a)) - exceptions (3604 does not apply)

a. religious organizations & private clubs in some circumstances

b. familial status rules don't apply to

1. state or fed. housing for elderly persons

2. senior housing (62+)

3. housing w/ at least 80% 55+ yrs. & facilities are provided for seniors (ie retirement homes)

c. 3603(b) [see text] - 3604 does not apply to:

1. (1) single family houses sold/rented by owner if:

a. owner doesn't own more than 3 such family houses at once

b. & if owner selling didn't live in house, exemption only applied once in a 24 month period

c. & owner can't sell or have stake in > 3

2. (1) after 12/31/69, above exception for single family houses only applies if sold or rented:

a. without sales or rental broker, agency, etc...

b. without publication, posting or mailing ?? (after notice) of any ad or written notice violating 3604(c)

3. note: if advertise, exemption (1) doesn't apply

4. (2) if dwelling contains 4 or less families living independently & the owner uses one of these as his residence

4. enforcement

a. can seek injunctive relief & damages (including punitive) for violations

b. HUD must investigate complaints & hold hearings if reasonable (D can remove to fed. ct.)

5. all new bldgs. with 4 or more units & all ground floors in existing bldgs. must meet design requirements

G. Differences between Civil Rts. Act (CRA)&Fair Housing Act(FHA)

1. CRA broader

a. covers all racial discrimination (private & public) in sale or rental of property

2. CRA narrower

a. deals only w/ race

b. doesn't deal w/ provision of services or facilities

c. doesn't deal w/ advertising

** H. NOTE on analysis

1. state possible violations & exemptions (don't jump right to exemption)

2. look at both CRA & FHA

I. Note: if person collects rent, they are a landlord

1. ex. student sharing apt.

J. Types of FHA discrimination cases

1. Disparate Treatment

a. 3 step case - P bears burden of proof

1. cited in Asbury v Brougham (pg. 149 supp.)

b. (1) - P must establish a prima facie case

1. member of protected group

2. qualified to rent

3. denied opportunity

4. opportunity was actually available

c. (2) - if above met, D must give reason for denial (Burden of Production)

1. if D fails, D loses

2. if D produces evidence of legitimate, non- discrim. reasons, continue to (3)

d. (3) - P bears burden of proving that D's reasons are not legitimate (purely pretexts)

e. can infer discrim. intent from circumstantial evidence

2. Disproportionate Impact (Discriminatory Effect)

a. prima facie case is different

b. (1) show some rule of entity which may be facially neutral has a discrim. effect on a protected group

1. can use statistics

c. (2) burden shifts to D - burden of proof & production to show justification

1. cts. require showing the business necessity of the rule

2. high standard of proof

d. (3) burden back to P to counter D

e. ex. rule forbidding single parents w/ kids

may discrim. against black families

f. see Starrett City below

3. Differences

a. Discrim. effect - once data established, P usually wins (easier standard for P)

1. D has burden of proof

2. intent is irrelevant

3. effect is key

b. Disparate treatment - P has burden 1. must show intent (hard to do, even if inferred)

c. Effects test may lead to quotas to avoid impact of rules

XII. Segregation (see XI & XXXII)

A. still very prevalent, especially in cities

B. Theories

1. predjudice & discrimination against non-whites

2. correlation between poverty & race (drawn to low income housing)

3. different tastes for integration; transition of neighborhoods

C. Tipping - when % of blacks reaches a certain level, it tips the balance & whites leave (White Flight)

1. rapid change can cause whites to flee or refuse to enter

2. as this happens, blacks increasingly move in

a. blacks seem to prefer 50/50 split while whites want to be in substantial majority

3. neighborhood shift accelerates - more whites leave

a. fear of complete shift

b. loss of property values

D. Quota systems - Starrett City (pg. 446)

1. had quotas to prevent tipping & help integration

a. used separate waiting lists

2. ct. ruled it was discrim. effect (motives irrelevant)

3. unresolved tension between promoting integration & preventing discrim. (both policies in FHA)

4. ct. set standards for when quotas are ok

a. fixed term

b. history of discrim. within complex

c. access quotas (minimums) allowed, ceiling quotas (maximums) not allowed

d. based on Title VII (employment) & previous cases

5. analogized to Title VII

6. distinguished from Otero (pg. 453) which allowed quota for initial sale of units in a gov't renewal zone

a. quota was fixed term

b. quota not racial

7. dissent argued that leg. intent of FHA would allow this

a. end segregated housing

b. Title VII can't apply (no tipping in employment)

8. Note: affirmative action not barred by FHA

a. Starrett City allows it in certain circumstances

XIII. Assignments & Subleases

A. Privity of Contract: relationship between 2 or more contracting parties

1. always exist between landlord & first contracting party unless a release is signed (even when person than subleases or assigns)

B. Privity of Estate: relationship between mutual or successive owners of the same property

1. no intervening estate allowed

a. must 'touch' each other

b. ex. leases (A to B)

2. successive privity of estate: ex. A sells to B

3. mutual privity of estate: ex. to A for life, than B

1. both A & B own property

2. B has remainder; A has life estate

4. relationship where one party's estate is carved out of the other party's estate

C. Legal relief requires at least one of the above exist

1. landlord & tenant have both of above

2. Privity of Contract - can sue on anything contained in lease

3. Privity of Estate - can only sue on promises/obligations that "touch & concern the land"

a. rent clauses fit in this category as an exception

b. ex. building, not wasting

D. Modern Rule: intent governs when deciding if sublease or assignment exists; not actual wording

1. most states use common law to help implement modern rule

2. Common law rule:

a. assignment - give up entire term & rights (no reversionary interest)

b. sublease - give up part of term or rights

3. see Ernst v. Conditt where ct. found assignment even though lang. indicated a sublease

*** 4. NOTE: examine w/ formalistic approach (common law) & modern rule (intent)

E. Assignment

L=landlord T=Tenant A=assignee

1. privity of estate between L & A

2. no privity of contract between L & A

a. exception: if L had to approve T assigning to A in a written agreement - "assumption agreement"

1. L requires A to sign document assuming terms of lease (creates privity of K)

3. assignment terminates privity of estate between L & A

F. Sublease

L=landlord T=tenant S=sublessee

1. without assumption agreement (see E2a), no privity of contract between L & S

a. privity of K between L & T

2. no privity of estate between L & S

a. T is intervening estate

3. privity of estate between L & T and T & S

4. L can't sue S unless assumtion agreement

5. L can sue T who sues S

G. General Principles

1. subleasing or assigning doesn't release liability to landlord unless a release clause is signed (remain liable)

a. Ernst v. Conditt (pg. 469)

b. still have privity of contract

?? 2. can require approval for assigning or subleasing

3. look for assumption agreements

a. will create privity of K

b. therefore won't matter if assignment or sublease

4. Right of reversion if default occurs isn't enough for sublease

5. Forfeiture (if necessary, see pg. 476)

H. 3rd Party Beneficiary Contract Doctrine

1. if 2 people make a contract w/ intent of benefit going to 3rd party, that party can enforce the benefit

2. ex. Ernst could have argued direct contract or 3rd party benficiary (Ernst v Conditt)

I. Approval of transfers

1. commercial leases - must be specified in contract

a. refusal can't be unreasonable unless unreasonability also specified in contract

1. Kendall v Ernest Pestana, Inc. (pg. 477) (1a-d)

b. rationale

1. intent of parties (wouldn't sign arbitrary provision)

2. public policy - avoid restraining alienation

a. prevents efficient use of property

b. UCC good faith requirement

c. factors for reasonableness

1. financial responsibility of buyer

2. suitability of the use

3. legality

4. need for alteration to premises

5. nature of occupancy

d. unreasonable refusals

1. personal taste

2. convenience

3. to get a higher rent than originally contracted for (protect ownership, not economics)

e. alternate argument

1. if ct. allowed arbitrary withholding approval, parties would bargain amongthemselves (payoff) - just as efficient

* f. some cts. will allow unreasonable refusals

1. conveyance of real property (full rts.)

2. approval clause gives absolute discretion

3. rt. to benefit from increased value of property

???? 2. residential leases

a. unknown if reasonableness applies

b. many say no - not as much as a premium on amt. of land available

c. leave decision to leg.

XIV. Tenant Obligations (common law)

A. Can't permit waste - implied in all leases

1. can't reduce value of the reversion

2. must make repairs that will prevent waste

a. return property in same condition (minus normal wear & tear)

b. not responsible for structural repairs

c. modern trend: move away from tenant responsibility for repairs

B. Can't engage in nuisances - unreasonable interference w/ other's use and enjoyment of land

C. pay rent - absolute duty provided landlord doesn't interfere w/ occupation

1. even if some duties breached by landlord

2. sue for breach after paying (ex. turning off heat)

D. lease as independent covenant

E. lease as conveyance of land (use of land; not what's on land)

F. as lease came to be seen as contract as well, this view changed

a. purpose frustrated, no rent

b. led to dependent covenants dominating leases

XV. Covenants (promises)

A. Dependent

1. if one part is breached, other party can sue for breach

2. breach excuses other party from performance

3. typical of contracts

4. modern view of leases (trend)

a. rationale - greater tenants rights

B. Independent

1. breach by one party does not excuse breach by other side

2. common law - leases are independent

a. pay rent unless evicted
XVa. Inalienable Rights vs. Gap-fillers

A. Gap-filling rules/Default rules - terms the law will imply in a l lease if it is otherwise silent

1. can contract around these

B. Inalienable entitlements - rules can't be contracted out of

1. can't bargain away
XVI. Allocating Risks - Risk of destruction of property

A. common law - tenant bears all risk

B. 2 exceptions

1. impossibility - when specific property bargained for (ex. a bldg.) & that property is destroyed making it impractical/impossible for the purpose to be acheived, tenant is excused from obligations

2. lease for portion of a bldg. - no conveyance of actual land

a. destruction relieves tenant

3. see Greenfield v. Kolea pg. 542 for above propostions

C. Rationale:

1. efficiency - least cost of bearing risk w/ landlord

2. allocates risk as part of K

* D. Modern view: look at control of risk creating activities

1. can change activity level

2. buy insurance

3. raise rent to shift burden

E. landlord can buy long-term cheaper ins./economies of scale

F. tenant can insure his items

easier for tenant to take day-to-day precautions in activity

G. Moral Hazard - take fewer precautions because other party bears the risk

H. overall, unsure who should bear risk (can argue both sides)

I. Allocating risk is a gap-filler when K is silent

1. can be contracted around

2. cts. may gap fill in favor of either party when allocaitng risk

J. Doctrine of Frustration of Purpose

1. increasingly used by cts.

2. if purpoes of lease is frustrated, obligations relieved
XVII.Landlord Remedies (self-help/repossession)

A. Tenant In Possession

1. Common law rule - self-help allowed if:

a. entitled to possession

b. and must be peaceable

1. just because tenant not present, doesn't mean peaceable

2. problem of what is permissible force

2. Modern rule - must use the judicial process (summary proceedings - judicial method of evicting)

a. prevent violence & taking law into own hands

b. see Berg v. Wiley (pg. 489) - commercial case

c. advantages:

1. lower transaction costs (time & $)

2. prevents waste

d. rule not based on efficiency (see below)

3. states are mixed on which approach to use

a. most use modern rule

b. some states make eliminating self-help inalienable, not gap filler

c. some apply to residential & commercial; others to only one

d. can lead to inefficiency

1. ex. rt. worth $50 to landlord but only $25 to tenant

2. efficient result: bargain for reduced price ($26-49) discount to renter

3. summary proceedings can be time & $ consuming

4. inalienable - can't bargain

e. public policy for inalienability

1. account for externalities like costs of police

2. tenants can't judge true value of rt.

3. shouldn't reduce value to $

B. Tenant who has abandoned possession (must show abandonment)

1. common law - landlord had no obligation

a. tenant must pay rent even if abandoned

b. tenant could find sublessor or assignee if not prohibited

2. modern rule - landlord must try to mitigate dmgs. by re-renting

a. based on lease as contract

b. fairness & efficiency

c. must actively try to relet apt.; treat apt. as part of normal, available stock

1. landlord has burden of proof

2. tenant bears reasonable costs

d. inalienable

e. see Sommer v Kridel (pg. 500) - residential lease

3. modern rule is becoming majority rule

a. shifts burden

b. some say landlord better equipped to find new tenant

c. issue of commercial property undecided

1. some cts. say it applies but is a gapfiller (can bargain around)

4. landlord has 2 options under modern rule

a. accept 'surrender' of lease ending all obligations

1. explicit or implied (based on intent-pg.509)

b. rent on account of tenant - tenant responsible for difference in value

5. landlord can lose $ under modern rule

a. instead of getting 2 rents (vacant & abandoned apt.), must rent abandoned apt.

b. ct. says each piece of real estate is unique - landlord not really losing

c. landlord better off under common law

6. arguments for common law rule

a. tenant by wrongdoing shouldn't be able to penalize landlord

b. tenant made a 'purchase'

c. shouldn't have to continuously look for tenants

C. many landlords use security devices like deposits or security
XVIII.Summary of gapfillers vs. inalienable rts.

case gapfiller inalienable

Kendall reasonable requirement

Greenfield risk of dmg.

Berg no self-help

Sommer duty to mitigate
- many say duty to mitigate should be gapfiller
XIX. Landlord Duties & Tenant Rights

A. Common law - caveat emptor applied (buyer beware)

1. no implied warranties & no responsibilities unless explicit in lease except:

a. furnished dwellings (short term lease) - had to be fit for habitation

b. latent defects - duty to notify, not fix, if known

c. fraud - can't misrepresent nature of premises

d. common areas - reasonable care required; liable for negligence

e. negligent repair - can't make situation worse

2. Covenant of quiet enjoyment & Doctrine of Constructive Eviction

a. implied in every lease

b. act or omission of a duty by landlord or agent of landlord or person with power paramount (ie bank- mortgage) which renders the premises substantially unsuitable for the purpose for which it was leased or which seriously interferes with beneficial enjoyment of premise and leads to tenant abandoning property

1. if relying on interference, must be permanent

c. doesn't create new duties for landlord

d. constructive eviction - unbearable situation where tenant leaves (not actually evicted)

e. allows tenant out of obligations

f. Reste Realty v Cooper (pg 514)

1. discusses above & tenant can rely on promise to remedy

g. partial constuctive eviction usually doesn't relieve tenant of paying rent

h. actual eviction from part of premises does

B. changed as lease came to be seen as contract instead of just conveyance of land

1. covenant of quiet enjoyment & constructive eviction continues to exist

2. modern rules - see below

3. Illegal Lease also led to modern rules - if housing code violated when lease entered into, not valid

C. Implied Warranty of Habitability

1. Reste later interpreted to create this warranty

2. implied in residential leases

a. most jurisdictions unsure if it applies to commercial

b. some have warranty of fitness (many don't)

c. use quiet enjoyment

3. major change in law that created new duty for landlord

** a. inalienable right - even to obvious defects

4. advantages to warranty

a. added obligations/duty (not just 5 exceptions)

1. applies to patent & latent defects

b. don't have to abandon & risk ct. finding for landlord

5. fitness of premises for leases purposes

a. warranty implies premises are safe, clean & fit for human habitation

b. violation of housing code is priam facie violation

6. must give notice to landlord & allow reasonable time to repair

7. options for tenant (dependent covenant)

a. stop paying rent due to breach

b. repair & deduct costs

c. abandon & end lease

d. sue for dmgs. (contract)

1. diff. in value between value as warranted & existing value (see 534-5)

2. hard to determine fair market value (based on if habitable)

3. may be more than actual rent

4. can also seek punitive dmgs. & $ for discomfort & annoyance

8. see Hilder v St. Peter pg. 525

9. Rationale for use: (see 528)

a. landlord in a better position to maintain

b. tenants in inferior bargaining position (shortage of housing) - doesn't apply everywhere

10. Problems:

a. most likely cause rents to increase

1. w/out, landlord would charge $200/month

w/, landlord must charge $250/month

2. tenant can't choose lower rent even if more efficient

b. limits freedom of personal choice

c. tenant bears burden of enforcement; most don't know it exists

11. Rationale for making rt. inalienable

a. choices limited (insufficient income)

b. information limited - not fully aware of risks/costs

c. lots of externalities

d. leads to better quality housing

D. Modern uses for Quiet enjoyment & constructive eviction

1. special provisions/duties in lease

2. jurisdictions without habitability warranty (very few)

*** 3. commercial leases

E. Doctrine of Retaliatory Eviction

1. tenants are protected from eviction within a given time period after making a good-faith complaint

2. prevents landlords evicting as retaliation

F. Tort liability of landlord for injuries/accidents (pg. 538)

1. common law - very limited liability

2. most states have extended liability to neg.

a. creates duty of reasonable care (forseeability)

b. ex. adequate security measures

3. minority of states have strict liability for latent defects

G. Implications of landlord/tenant reform

1. raises costs to landlords

a. often passed on to tenants

2. problem: if tenant values rt.< increase in rent, the benefit goes to 3rd party

3. if landlord can't pass along costs (ie poor tenants or rent control), bear full burden

a. if return driven too low, landlord will quit

b. may lead to housing being abandoned

c. discourage new landlords

d. reduce housing availability

4. studies mixed on who actually bears costs

H. Issues to consider

1. when should consensual agreements be respected & when should inalienable rules govern?

2. if purpose is redistribution, who makes decision (judge, leg.)?

3. will rule achieve purposes in long-run? or hurt?

4. even if purposes achieved, who should bear cost? (tenant as beneficiary, landlord, gov't)

5. does reform actually help tenant?
XX. Rent Control (see also XXXIIB)

A. Statutory, not common law

B. Typical features

1. can't be evicted w/out good cause

2. renewable leases

C. NY as example

1. Rent control - strict system

a. tenant has most rts.

b. small increases in rent

c. applies to bldgs. up to 1947

2. Rent Stabilization

a. more generous rent increases

b. as units in rent control become vacant, they become rent stabilized

c. every time apt. becomes vacant, can increase base rent

d. applies to bldgs from 1947-1974

3. units are either being stabilized, decontrolled or converted to condos/coops

?? 4. conversions

a. eviction based

b. non-eviction based (easier)

c. some tenants will be stabalized in condos/coops

requires threshold # of units being sold to insiders (can unite & bargain for good 'insider' price)

5. Demolition of bldg. allowed if:

a. if demo. for new bldg. containing at least 20% more housing

1. rent control bd. may require stipends for tenants during demolition

b. demo. for bldg. not for housing but landlord pays for relocation expenses

D. Modern ordinances

1. provide landlord chance to get 'fair return' on investment

2. can pass along portion of increasing operating costs & capital expenses

a. incentive to modernize & maintain

3. usually applies only to 6 or more units

4. new bldgs. are not rent regulated (incentive to build)

5. tenant must occupy as primary residence

6. usually difficult or prohibited to demolish bldg.

E. Nash (pg. 165 supp.)

1. challenged demolition requirements on ground that it violated his due process rts. (limit liberty by forcing to remain a landlord)

2. didn't challenge on property rts.

3. wanted strict scrutiny test (vs. rational relation)

a. see ***********

4. ct. applied rational basis

5. said he could delegate, withhold vacant units or sell

6. leg. later overruled this (pg. 185 supp.)

F. 2 main types of rent control

1. strict - like NY rent control

2. moderate - allows passing on portion of operating & maint. costs (like rent stabalization)

G. Factors/Problems to consider before imposing rent control

1. applies to all tenants regardless of income (not means tested)

2. deterioration of housing stock

a. landlord less likely to repair when rate of return becomes too small

2a. solution: tie rent increases to costs of repair & improvement

a. ex. rent stabalization or use moderate rent control (stay near market value)

2b. tied to supply & demand

see 3/4/94 notes

Notes: empirical data shows

1. strict rent control leads to deterioration in quality & shortage in housing

2. moderate rent control - similar results don't appear

a. might be because control set at market value

3. problem may not be rent control but tenant incomes in poor neighborhoods

a. can't afford higher rents

b. rent control doesn't matter - would have to leave if rents raised

4. strict rent control

a. short term - little change in supply

b. long term - change to condos & coops

1. decrease supply

2. fewer new landlords

3. undermaint.

5. moderate rent control - no firm relation between supply & moderate controls

6. political climate

7. who gets benefits (income)

8. short-term need

9. diversity

10. possible discrimination (low supply=selectivity)

11. lack of mobility

12. key $ - black market extra charges

13. subletting illegally

14. drive value of bldg. down leading to decreased property taxes

15. fairness of redistributing $ from landlord to tenant

* 16. inefficiency (one argument)

a. less maint., less production, bad allocation

b. cost of administering regulatory system very high

c. also questionable on distributive grounds

1. helps all incomes

2. newer, low income families hurt - restricted market

17. 'free' as far as tax $ to implement

18. rt. of tenant to choose location

19. see Fed. Report on why rent control bad (pg. 204 supp)

H. Succession to rent controlled units

1. statutory

2. NY - Braschi (pg. 210 supp)

a. law allowed family members to succeed

b. case decided gay lovers counted (way cases indiv.)

c. inefficient case-by-case basis

d. regs. amended to allow

3. broad issue: should succession be allowed at all?

I. Alternatives to rent control

1. regulatory approaches probably inefficient

a. ex. warranty of habitability, rent control

2. raise taxes & spend $ directly

a. hard politically

b. regulatory approaches are 'free' in terms of taxes used (biggest reason for continuing use)

c. if taxes used for low income housing, higher income families will leave

d. more local benefits increases (attracts) more low income families

3. redistributive programs (like 2 above)

a. should be fed. sponsored, not local to avoid problems in I2

1. part of reason rent control used at local level

4. supply programs

a. mortgage assistance

b. certificates ties to bldg.

5. demand progrms

a. vouchers

J. General comments

1. if affordability sole problem, giving $ directly to people would solve problems

K. Article by Muth (pg. 110 supp)

1. rent control in long run will increase costs by reducing supply of controlled housing

2. rent control reduces income to owners (often lower income people)

3. doubtful that effect on distribution of income is appreciable

4. impacts allocation of resources & freedom to use property as one chooses

L. Commentary on Muth by Berger (pg. 126 supp)

1. difference between strict & moderate rent control

2. Muth only accurate for strict

M. Schill's position

1. deconcentrate areas of ultra-poverty

2. concentrations of poverty create more pverty & underclass behaviors

3. social programs (supply-oriented) tend to concentrate poor in confined areas

4. vouchers can target populations much better

5. goal: facilitate deconcentration

a. improve mobility

b. use demand-oriented programs

6. use supply programs for homelessness, neighborhood redevelopment

**** 7. see Pgs. 260-268 supp. for supply v demand programs

N. Procedural due process & programs

1. Section VIII & other housing programs aren't entitlement programs

a. issue: are they property rights that must be protected through due process

2. Holmes v NYC Housing Authority (pg. 221 supp)

a. procedural due process required for public housing when choosong tenants

b. must be ascertainable standards for pub. housing

3. Hill v Group III (pg. 232 supp.)

a. Section VIII private subsidy involved

b. same problem as Holmes

c. no due process requirement

d. landlord has no obligation to accept tenant therefore no utility to using due process

e. no property rt. involved (required for due process)

1. expectation or hope of subsidy is not enough

2. must be an entitlement

4. reconciling Holmes & Hill

a. neither is an entitlement

b. private landlord vs. gov't control (subsidy vs. public housing)

** c. Sup. Ct. rule - actual property interest required to benefit from due process (anticipating a property interest doesn't count)

5. summary: Due process & public housing

admission eviction

public housing yes yes

Section VIII no yes

a. private landlords can evict at will

b. public housing has several requirements before eviction & before a court hearing (ie reasons, see file, cross x witnesses, etc.)

c. rationale for difference w/ Section VIII: once person is in, property rts. exist

1. entitled to due process

6. issue: level of due process required

7. Tradeoffs/Costs of due process

a. takes time & $ for hearings

b. acts as check on gov't

c. troublemakers can't be evicted quickly

1. neg. effect in closeknit community

d. harder to screen out troublemakers

8. some argue landlords should have more screening power

O. Tenant as an individual (personal attachment to property)

(pgs. 186-195 supp)

P. Rental Housing as a Public Utility (pgs. 196-199 supp)

1. rationale for allowing regulations

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