Property Slides Section 3604 Section 3604

Property Slides

Section 3604 • Section 3604 makes it unlawful – – Because of race, color, religion, sex, familial status, or national origin – • To refuse to sell or rent after a bona fide offer or to refuse to negotiate or to make unavailable a dwelling to a person; • To discriminate against a person in the terms, conditions, or privileges of a sale or rental of a dwelling; and – To make, print, or publish, or cause to be made, printed, or published a notice or advertisement about a sale or rental of a dwelling that indicates a preference based on race, color, religion, sex, handicap, familial status, or national origin. 2

§ 3603(b) exemptions Nothing in section [3604] (other than subsection (c)) shall apply to-– Any single-family house sold or rented by an owner: • Provided, That such private individual owner does not own more than three such single-family houses at any one time. . • Provided further, That after December 31, 1969, the sale or rental of any such single-family house shall be excepted from the application of this title only if such house is sold or rented – (A) without the use in any manner of the sales or rental facilities or the sales or rental services of any real estate broker, agent, or salesman, or of such facilities or services of any person in the business of selling or renting dwellings, or of any employee or agent of any such broker, agent, salesman, or person and – (B) without the publication, posting or mailing, after notice, of any advertisement or written notice in violation of section [3604(c)]; • but nothing in this proviso shall prohibit the use of attorneys, escrow agents, abstractors, title companies, and other such professional assistance as necessary to perfect or transfer the title, or 3

§ 3603(b) exemptions (cont’d) Nothing in section [3604] (other than subsection (c)) shall apply to-– Rooms or units in dwellings containing living quarters occupied or intended to be occupied by no more than four families living independently of each other, if the owner actually maintains and occupies one of such living quarters as his residence. . 4

Section 3603(b) revision • Section 3603(b) exempts the following properties from the general discrimination rules (other than § 3604(c)): – Rooms or units in a dwelling containing no more than four independent living quarters for families, if the owner maintains and occupies one of the living quarters as his or her residence; and – Any single-family house sold or rented by a private individual owner but only if it is sold or rented - • Without using the facilities or services of any real estate broker, agent, or salesman (including any agent or employee); and • Without violating § 3604(c) (prohibiting discriminatory advertising). • The second exemption does not apply if the owner owns – – More than three such single-family houses at any one time or – The right to receive sales or rental proceeds from more than three such houses at any one time. 5

Definitions and other matters • A house is not owner-occupied if the owner was not the most recent resident of the house immediately before the sale. • Note that the second exemption does not prohibit the use of attorneys, escrow agents, abstractors, title companies, and other professionals necessary to perfect or transfer title. 6

Problem 3, pages 433 -34 • Mrs. Murphy has an apartment to rent in her home. Assume that the apartment is the only one in her home. She puts the following advertisement in the newspaper: – For rent: Furnished basement apartment in a private white home. • A black couple applies and is rejected by Mrs. Murphy because of race. Are there any violations of the Fair Housing Act or § 1982? . 7

Variations of Problem 3 • Suppose that Murphy’s advertisement omitted the word "white? " • Suppose that the advertisement had said that it was rented "only to persons speaking Polish, German, or Swedish? " • Would Mrs. Murphy violate either act if she discriminated against German people in renting the apartment in her building? 8

Variations of Problem 3 (cont’d) • Would advertising that featured only white (or black) models be discriminatory? • Should the following discrimination be protected under the Fair Housing Act: An owner of a large apartment building reserves a certain number of units for white applicants to protect against white flight and maintain integrated housing? 9

Problems (page 442) • T leases a large piece of open land from L to be used for hunting and trapping and pays a year's rent in advance. There is no public access to the land neighbors refuse to grant T ingress and egress. What result? • L leases property to T for a specified term, but after T takes possession and pays rent for several months, T learns that L had already leased the premises to another person for the same term. T remains in possession but stops paying rent. L sues for the rent and T countersues for the rent already paid. What result? 10

Privity of contract and estate • If a landlord leases property to a tenant, the landlord and tenant have both privity of contract and privity of estate. • Each privity obligates the parties to perform the obligations under the lease. • Thus, if a tenant has privity of contract or estate with the landlord, the tenant is obligated to pay rent under the lease. 11

Privity of contract • The original tenant retains privity of contract with the original landlord whether that tenant assigns his or her lease interest or subleases a portion of that interest to another. • An assignee or sublessee may have privity of contract with the landlord to the extent the landlord is a third party beneficiary of the assignment or sublease. 12

Privity of estate • The landlord (and his or her direct or indirect assignee) and the tenant (and his or her direct or indirect assignee) are in privity of estate. • For example, if L leases land to T, who assigns the lease to T 1, who in turn assigns the lease to T 2, L and T 2 are in privity of estate. 13

Examples L L L leases property to T. T T assigns her lease interest to T 1 L is in privity of contract with T. L is in privity of estate with T 1 and may be in privity of contract with T 1 as a third party beneficiary. T T subleases an interest in the property to T 1 L is in privity of contract and privity of estate with T. L may be in privity of contract with T 1 as a third party beneficiary. 14

Question • Joe rents land with two houses to Mary for two years. • Mary immediately leases one house to Sally for the full two-year term. • Is Mary’s lease to Sally a sublease or assignment? 15

Problem 3(a) (page 448 -49) • L leases to T for a term of three years at a monthly rent of $1, 000. • One year later T "subleases, transfers, and assigns" to T 1 for a period of "one year from date. “ • Thereafter, neither T nor T 1 pays rent to L. • What rights does L have against T or T 1? 16

Problem 3(b) (page 449) • L leases property to T for a term of three years at a monthly rent of $1, 000. • The lease provides that "T covenants to pay said rent in advance on the first day of each month. " It also provides that "T shall not sublet or assign with the permission of L. “ • Six months later, T, with the permission of L, transfers its lease interest to T 1 for the balance of the term. • Thereafter, T 1 pays the rent to L directly for a few months and defaults. L sues T for the rent due. • What result and why? 17

Problem 2(c) (page 449) • L leases to T for a term of three years at a monthly rent of $1, 000. T covenants to pay the rent in advance on the first day of each month and also covenants to keep the leased premises in good repair. • Six months later, T assigns his entire interest in the lease to T 1, who agrees in the instrument of assignment to "assume all the covenants in the lease" between L and T. • Three months later, T 1 assigns his entire interest in the lease to T 2, and three months after that T 2 assigns his entire interest in the lease to T 3. • T 3 defaults on the rent payments and fails to keep the premises in good repair. • L sues T, T 1, T 2, and T 3. What are the liabilities of the tenants to L and among themselves? 18

Problem 1(a) (pages 457 -58) • L leases to T for a term of years. After two years, T wishes to transfer the lease to T 1. • L refuses, because T 1 is a tenant in another of L's buildings under a lease that is about to expire. L and T 1 have been actively negotiating a new lease, and L wants to avoid losing T as a tenant in the other building. • Is L's consent to the assignment unreasonably withheld? 19

Problem 3 (pages 458 -59) • L leases property to T for a term of five years at a $900 monthly rent. T covenants to pay rent and not to sublet or assign the lease without L's permission. • T, with L's permission, thereafter assigns the lease to T 1, but T 1 does not expressly assume the obligations of the lease. • Later, T 1 assigns the lease to T 2 without first obtaining L's permission. • T 2 defaults in the rental payments, and L sues T 1 for the past-due rent. What is the result? 20

Problem 4 (page 459) • L leases a building to T for ten years. • A lease clause states that T cannot transfer the lease without L’s permission. • T merges into ABC. – Is the merger a transfer of the lease that triggers the permission clause? – Would it matter if T and ABC are related? 21

Review Problems – Chapter 3 • In each of the problems below, describe the estates that are created under modern and, if different, common law. • Assume in each case, that O owns a fee simple interest in Blackacre before the conveyance. 22

Review Problems (cont’d) • O conveys Blackacre to A for life. • O conveys Blackacre to A and her heirs, but if A fails to use Blackacre as a residence, O has a right of entry. – What happens if A conveys her interest to C? – Can O convey his remaining interest to D? – Can O's remaining interest be transferred by will or intestacy? • O conveys Blackacre to A as long as A uses Blackacre as a residence. – What happens if A conveys her interest to C? – Can O convey his remaining interest to D? – Can O's remaining interest be transferred by will or intestacy? • O conveys Blackacre to A and the heirs of his body, then to B and her heirs. A devises his interest in Blackacre to C but dies without issue. – How does your answer change if shortly before A dies, he legally adopts his lawyer? 23

Review Problems (cont’d) • O conveys Blackacre to A for ten years, then to B. • O conveys Blackacre to A and his heirs until B graduates from law school. • O conveys Blackacre to A to have and hold during B's life. • O conveys Blackacre to A and the heirs on her mother's side. • O conveys Blackacre to A for life. In a separate transaction, A transfers her interest in Blackacre to B. – What if, instead, O transferred his interest in Blackacre to B? • O conveys Blackacre to A for the life of B. A dies intestate, leaving B as her only heir. • O conveys Blackacre to A, but if A divorces, then the property reverts back to O. • O conveys Blackacre to A for life, and A then conveys his interest in Blackacre to B for ten years. 24

Review Problems (cont’d) Describe disadvantages that may arise if a legal life estate or fee tail is conveyed. 25

Reading from left to right • Example 7 – O conveys “to A for life, then to B and her heirs if B survives A, and if B does not survive A to C and his heirs. ” • Example 8 – O conveys “to A for life, then to B and her heirs, but if B does not survive A, to C and his heirs. ” 26

Reading from left to right • Example 7 – O conveys “to A for life, then to B and her heirs if B survives A, and if B does not survive A to C and his heirs. ” • Example 8 – O conveys “to A for life, then to B and her heirs, but if B does not survive A, to C and his heirs. ” 27

Reading from left to right • Example 7 – O conveys “to A for life, then to B and her heirs if B survives A, and if B does not survive A to C and his heirs. ” • Example 8 – O conveys “to A for life, then to B and her heirs, but if B does not survive A, to C and his heirs. ” 28

Reading from left to right • Example 7 – O conveys “to A for life, then to B and her heirs if B survives A, and if B does not survive A to C and his heirs. ” • Example 8 – O conveys “to A for life, then to B and her heirs, but if B does not survive A to C and his heirs. ” 29

Rules of thumb • If the first future interest is a contingent remainder in fee simple, the second future interest will be as well. • If the first future interest is a vested remainder in fee simple, the second will be an executory interest. 30

Problem 1(a) (page 270) • O conveys “to A for life, then to A’s children and theirs, but if at A’s death he is not survived by children, then to B and her heirs. ” – At the time of the conveyance A has no children. – Two years thereafter, A has twins, C and D. – C dies during A’s lifetime, and A is survived by B and D. • At each juncture, what is the state of title? 31

Problem 1(b) (page 270) • O conveys “to A for life, then to such of A’s children as survive him, but if none of A’s children survive him, to B and her heirs. ” – At the time of conveyance, A has two children, C and D. – C dies during A’s lifetime, and A is survived by B and D. • At each juncture, what is the state of title? 32

Problem 1(c) (page 270) • O conveys “to A for life, then to B and her heirs, but if A is survived at his death by any children, then to such surviving children and theirs. ” – At the time of conveyance, A has two children, C and D. – C dies during A’s lifetime, and A is survived by B and D. • At each juncture, what is the state of title? 33

Problem 2 (page 270) • T devises $10, 000 “to my cousin, Don Little, if and when he survives his wife. ” • What interest does Don Little have at the time of the devise? • Why would the testator make that devise? 34

Common-law Rule Against Perpetuities • Under the rule, a “contingent” interest must vest or fail within the perpetuities period (i. e. , lives in being plus 21 years). • The rule may apply to a contingent remainder, executory interest, or class gift. 35

Common-law Rule Against Perpetuities (cont'd) • The rule invalidates interests that might vest too remotely, regardless of what actually happens (the "what-might-happen" rule). • If a transfer creates more than one interest subject to the rule, the rule applies separately to each interest. – There may be a different validating life for each interest. 36

Examples • O conveys Blackacre to A for life, then to A's first child to reach age 21. • O conveys Blackacre to A for life, then to A's first child to reach age 25. • T devises property to my grandchildren who reach age 21. • T conveys property to my grandchildren who reach age 21. 37

Corollaries of the "what-mighthappen" rule • The "fertile octogenarian" rule is a conclusive presumption of lifetime fertility, regardless of age or medical history. • The "unborn widow" rule presumes that a person may marry someone not born at the time of the conveyance or devise, regardless of the person's age at that time. 38

Class gifts • Under the "all-or-nothing" rule, if a gift to one class member might vest too remotely, the whole class gift is void. • For a class gift to be vested under that rule, the following two conditions must be met during the perpetuities period -– The class must be closed; and – All conditions precedent for each member must be satisfied. • A class may close “naturally” or under the rule of convenience. 39

Rule Against Perpetuities -flowchart No Does the conveyance involve a contingent remainder, executory interest or class gift? RAP does not apply. Yes Determine lives in being causally connected with the conveyance. No RAP does not Can a person other than a life in being acquire a possessory interest in the property? apply. Yes 40

Rule Against Perpetuities – flowchart (cont’d) To what interest might an after-born person succeed? Might that interest vest more than No 21 years after any lives in being? RAP does not apply. Yes RAP invalidates that interest. 41

Problems 1 -2 (pages 289 -90) • O conveys Blueacre "to A for life, then to B if B attains the age of 30. " B is now 2 years old. • O conveys Greenacre "to A for life, then to A's children for their lives, then to B if B is then alive, and if B is not alive, to B's heirs. " – Assume also that at the time of the conveyance, A and B are alive but A has no children. 42

Problems 3 -5 (page 290) • O, a teacher of property law, declares that she holds in trust $1, 000 "for all members of my present property class who are admitted to the bar. " – Suppose, instead, that O held the $1, 000 in trust "for the first child of A who is admitted to the bar. " • O conveys Brownacre "to A for life, then to A's children who reach age 25. " A has a child, B, age 26, living at the time of the conveyance. • O conveys Redacre "to A for life, then to A's widow, if any, for life, then to A's issue then living. " 43

Problem 6 (page 290) T dies survived by A and B. T devises property "to A for life, and on A's death to A's children for their lives, and upon the death of A and A's children, to -– – – B if A dies childless; B if A has no grandchildren then living; B's children then living; A's grandchildren; or T's grandchildren. 44

Question • How does the Rule Against Perpetuities apply in each of the following cases? O conveys Blackacre -– to the School Board, as long as it is used as a school, then to A and his heirs. – to the School Board, but if it ceases to use Blackacre for school purposes, then to A and his heirs. • In the last two situations, what could you do to achieve O’s intent? 45

Questions -- Future Interests • O conveys Blackacre to A and his heirs, but if the property ceases to be used for agricultural purposes, then to B and her heirs. • O conveys Redacre to A and his heirs as long as the property is used for agricultural purposes, then to B and her heirs. • O conveys Whiteacre to A's children who reach age 30. At time of the conveyance assume that A has two children, Fred, age 29, and Sally, age 2, and that -– A is dead; or – A is alive. 46

Questions – Future Interests (cont’d) • O transfers Blueacre to all of his grandchildren who will be born in the next 30 years. Assume alternatively that the transfer is -– An inter vivos conveyance, or – A devise. • O devises Greenacre to his great-grandchildren, with the devise to take effect when any of his grandchildren first reaches age 21. – At O's death, his wife is pregnant with O's first and only child, A, who is born four months later. – A dies at age 30, leaving a wife pregnant with their only child, B, who is born five months later, and subsequently at age 18, bears a son, C. – B subsequently reaches age 21. 47

Questions – Future Interests (cont’d) • O devises Purpleacre to A for life, then to A's first son for life, then to C and his heirs if O's first grandchild is a girl. At the time of the devise, O has one child, X, but A has no children. • O conveys Yellowacre to A for life, then to B for life, then 22 years after the death of B, to C. 48

Questions – Future Interests (cont’d) • O conveys Orangeacre to A for the life of X, then to B for as long as B is alive, then to C if C gets married, but if C divorces, then to D. • O conveys Brownacre to A, but if the property is not used primarily for recreational purposes, to B. • O devises Grayacre to my first grandchild who shall reach age 70. O has one child, A, age 18, and no grandchildren at O's death. 49

Problem (page 477) • O owns Blackacre. He executes and delivers a deed transferring the property to his daughter as a gift. A does not record the deed. • Later, O tells A that he wants Blackacre back. A hands the deed back to O and says “The land is yours again. ” O tears up the deed. • Who owns Blackacre? 50

Problem (page 477) • O owns Blackacre. He executes and delivers a deed conveying the property to himself and A, his daughter, as joint tenants. The deed is not recorded. • Later, A tells O that she wants her son, B, to have her interest in Blackacre. O agrees, and to save recording fees, A “whites out” her name and replaces it with B’s name. The deed is recorded and O dies. • Who owns Blackacre? 51

What sort of symbol is E-sign referring to? 52

What sort of sound is E-sign referring to? Michael Jackson 53

Problem 2(a) (page 685) • • A conveys to B, who does not record. O conveys to A, who does not record. B conveys to C, who records. A conveys to D, who records. D is shown the deed from O to A. • O conveys to E, who records. – Who prevails in a notice jurisdiction? – Who prevails in a race-notice jurisdiction? 54

Problem 2(b) (page 685) • O conveys to A, who does not then record. • O conveys to B, who knows of the deed from O to A and does not then record. • O conveys to C, who does not record. • B conveys to D, who does not then record but is shown the deed from O to B. • A records, then B records, and finally, D records. – Who prevails in a notice jurisdiction? – Who prevails in a race-notice jurisdiction? – If after D records, A conveys to E, who promptly records, who prevails - • In a notice jurisdiction? • In a race-notice jurisdiction? 55

Problem 3 (page 685) • O sells its property to A on June 1, the date that the deed is dated. • A borrows money from B and executes a mortgage in B's favor. A also borrows money from O and executes a mortgage stating that it is subordinate to the mortgage from A to B. • The mortgage from A to O is recorded on August 1; the deed from O to A is recorded on August 15; and the mortgage from A to B is recorded on August 30. • C buys the property on January 1 of the next year. • Is C bound by either mortgage? 56