Chapter 20

Ten Common Mistakes in Applying Property Law

In This Chapter

Identifying some common mistakes in applying property law

Understanding how to avoid these common mistakes

Everyone makes mistakes. In fact, people often make the same mistakes. This chapter is all about ten common mistakes property law students make in applying property law. Now, I don’t have any evidence that these are the most common mistakes, but I’ve certainly seen them a lot in my experience teaching. Not only can this list help you avoid making these mistakes yourself, but it can help you better understand what’s right.

Misapplying the Rule against Perpetuities

There are so many ways to mess up in applying the rule against perpetuities that I could use half this list of ten just listing rule-against-perpetuities mistakes. Or I could just say the common mistake is not applying the rule correctly and send you to Chapter 9 for help. But I’ll be more specific.

The rule against perpetuities says that no interest is good unless it must vest, if at all, not later than 21 years after some life in being at the creation of the interest. Here are some of the most common mistakes in applying this rule:

Confusing vesting and taking possession: To be good, a remainder doesn’t have to be certain to take possession within 21 years of a life in being at the creation of the interest; instead, the remainder is good as long as it’s certain to vest or fail within that period of time.

Calculating the perpetuities period from the moment the prior estate ends rather than the moment the future interest was created: A future interest is created when the grantor delivers the deed that creates the future interest or when the testator whose will creates the future interest dies. The interest isn’t possessory until sometime in the future, but the interest has already been created. So for the rule against perpetuities, the question is whether at the moment the future interest is created there is someone alive within whose lifetime plus 21 years the interest is certain to vest, if it ever vests at all.

Considering only the lives of particular people in deciding that a future interest is void: If the interest is good under the rule, you only need to identify one person (or group of people) within whose lifetime plus 21 years the interest is certain to vest or fail and explain why that is. But if the interest is void under the rule, you have to explain why there’s no one alive at the time of the conveyance within whose lifetime plus 21 years the interest is certain to vest or fail. It isn’t enough to say that the interest isn’t certain to vest or fail within 21 years of the lifetime of the life tenant, which is probably the most common mistake of this kind. You should consider all the possible lives-in-being at the creation of the interest whose lifetimes might be connected to the occurrence of the vesting condition.

Considering what actually happened after the conveyance: The rule against perpetuities is unaffected by what actually happens after the interest is created. The question is whether, at the moment of creation, you could’ve looked into the future and been certain that it would vest or fail within 21 years of some living person’s lifetime. So unless you’re told to consider a “wait and see” variant of the rule against perpetuities, events after the interest was created don’t count.

Mislabeling Present and Future Estates

Law students often mislabel estates. Mislabeling sometimes isn’t a big deal, as long as you understand who has the right of possession and in which circumstances. But it’s still important to correctly describe to others who owns what kind of estate, and sometimes labeling mistakes lead to substantive mistakes, too.

One common labeling mistake is to conclude that an estate is determinable or on condition subsequent when really it’s subject to an executory limitation. The mistake results from the difference in how the condition of defeasibility is expressed when the estate is determinable rather than on condition subsequent:

When an estate is determinable, words of duration express the condition of defeasibility: “to A as long as the property is not used to host a circus.” If A does host a circus on the property, it will revert to the grantor.

When an estate is on condition subsequent, the condition of defeasibility uses words of condition: “to A, but if used to host a circus, the grantor may re-enter and take possession.”

The mistake is to read words of duration describing a condition and assume that the estate is determinable. Students may become so focused on the differences in how a condition is expressed that they forget to consider who will get the estate. If the grant says “to A as long as the property is not used to host a circus, then to B,” the property doesn’t revert to the grantor; it goes to a third party, B, on occurrence of the condition. That means A has a fee simple subject to an executory limitation and B has an executory interest.

If the property goes to a third party rather than the grantor, the estate is never determinable or on condition subsequent. Those estates are followed by reversionary interests in the grantor. If the property goes to a third party after the occurrence of a condition of defeasibility, the future interest is either a remainder or an executory interest — those are the only two future interests created in third parties.

When labeling a defeasible estate, first check whether the grant says the property will revert to the grantor after the condition occurs or whether it will go to a third party. If it goes to a third party, it doesn’t matter how the condition of defeasibility is expressed; the estate is subject to an executory limitation, and the third party owns an executory interest. You need to differentiate words of condition from words of duration only if the grant doesn’t specify a third party who gets possession when the condition occurs.

A grant may create two or more future interests in succession, sometimes resulting in all sorts of confusion and mislabeling of the future interests. The key is to think through and label one estate at a time, in chronological order. A grant can create only one present estate, and that’s the place to start. Correctly labeling the present estate will tell you which type of future interest must follow it, as Chapter 9 details. After you label the first future interest, consider which type of present estate that person will own when her future interest becomes possessory. That tells you what the next future interest must be. Continue until you identify the last person in line — someone who has a future interest in a fee simple absolute.

Misunderstanding Hostility

Hostility or adversity is one element of claims for title by adverse possession as well as claims for prescriptive easements. A common mistake is to reason that use isn’t hostile or adverse because the record owner has acquiesced or agreed to the use or possession. But the record owner’s acquiescence or agreement doesn’t necessarily mean the use or possession isn’t hostile in the way these rules require.

Use or possession is hostile or adverse if it’s objectively inconsistent with the record owner’s title. It doesn’t have to be inconsistent with the record owner’s desires. If someone uses or possesses the property simply because the record owner gave permission — that is, she has a license — then that use or possession is consistent with the record owner’s title. But if someone uses or possesses the property because the record owner agreed to give her an easement or to give her ownership (or if the record owner assented to her assertion of an easement or ownership), that use is hostile or adverse because it conflicts with the record owner’s title, even though the record owner agrees and even welcomes the use or possession.

Don’t make the mistake of asking whether the record owner agreed to the use or possession or opposed it. Instead, ask whether the record owner would have reason to think that the user was acting as if she had an easement that she could keep using even if the record owner were to object. Or in adverse possession cases, ask whether the record owner would have reason to think that the possessor was acting as if she owned the property and could keep possessing it even if the record owner were to object. See Chapters 14 and 6 for more information on this requirement.

Considering the Intent to Create a Covenant Rather than Intent to Run

A covenant is said to run with the land when successive owners of the relevant lands are bound or benefitted by the covenant. One requirement for a covenant to bind a successor to the original covenantor is that the original parties intended successive owners of the burdened land to be bound. Likewise, one requirement for a covenant to benefit a successor to the original covenantee is that the original parties intended successive owners of the benefitted land to have the right to enforce the covenant.

A common mistake is to talk about the original parties’ intent to create a covenant rather than their intent to bind or benefit successors. This mistake seems to happen especially when talking about implied covenants. It isn’t enough to observe that the original parties intended to create a covenant; you must consider whether the original parties intended for the covenant to run with the relevant property interest. You can read more about running covenants in Chapter 5.

Considering Only Notice of a Covenant’s Burden

To enforce a covenant in equity, the burdened party must have had notice of the benefitted party’s covenant right. Often law students talk only about the burdened party’s notice that the land was burdened by a covenant, but that doesn’t satisfy the notice requirement.

The burdened party must have notice that the person seeking to enforce the covenant was a benefitted party. Here are a couple of ways to remember that:

Remember that a covenant isn’t just a burden; it’s a legal right to enforce a promise against the burdened property. So knowing that the property is burdened is only half the story; unless you know who owns the right to demand performance of the covenant, you don’t really know about the covenant. Having notice of a covenant always means having notice that person X has the right to enforce a promise against person Y.

Think about the reason for the notice requirement. The burdened party must know to whom she owes the obligation of performing the covenant. A stranger to the covenant and the properties — like me — obviously couldn’t take the burdened party to court to make her comply with her covenant. That right belongs only to benefitted parties. If the burdened party wants to use the property in a way not allowed by the covenant, she has to know who to talk to and get permission from. So it wouldn’t be equitable for a person to enforce the covenant against her if she had no notice that she owed the duty to that person.

Applying Estoppel or Part Performance without Evidence of an Agreement

The statute of frauds generally makes an easement agreement unenforceable if it’s not evidenced in writing. But there are two relevant exceptions to the statute of frauds that allow an easement agreement to be enforced without a writing: estoppel and part performance.

Sometimes law students make the mistake of arguing that a person has an easement because she has satisfied the requirements for estoppel or part performance, without even talking about whether the parties had an easement agreement in the first place. The estoppel and part performance doctrines don’t create an easement contract when the parties never formed a contract. The party claiming an easement must still prove that the parties had a contract giving an easement to her (even though they may not have called it an easement). The estoppel and part performance doctrines simply allow that contract to be enforced even though there isn’t the required written evidence of it. You can read more on easements in Chapter 6.

Deciding a Joint Tenancy Exists without the Four Unities and Express Intent

A joint tenancy can exist only when all the joint tenants have unity of time, title, interest, and possession. (Chapter 10 explains what each of those unities means.) But when a grant expressly says that someone’s a joint tenant, it’s easy to conclude that she’s a joint tenant without considering whether she’s eligible to be a joint tenant. For example, if the grant says “1/3 to A and 2/3 to B as joint tenants with right of survivorship and not as tenants in common,” A and B can’t be joint tenants; their different fractional interests mean that they don’t have unity of interest. So before concluding that a joint tenancy exists, you must consider both whether the grant expressly indicates the intention to create a joint tenancy and whether the four unities are present.

You can make a mistake the other direction, too. Sometimes students argue that because the four unities are present, the co-owners are joint tenants. That’s not enough, either. The grant creating the co-ownership must expressly say it creates a joint tenancy to overcome the presumption of a tenancy in common.

Applying the Equitable Conversion Doctrine Where It Doesn’t Apply

The equitable conversion doctrine (covered in Chapter 15) says that if a buyer has an enforceable contract to buy land, equitably she is already the owner of the land, even though she hasn’t completed the purchase and received a deed yet.

A common mistake is to apply the doctrine of equitable conversion where it doesn’t belong. As the equitable owner, the buyer bears the risk of damage to the land and must go forward with the purchase even if the property is physically damaged before closing. But the equitable conversion doctrine doesn’t apply to other types of risks and doesn’t trump other covenants and conditions of the contract. For example, if a loss results from a title defect during the executory contract period, the buyer doesn’t bear the risk of loss under the equitable conversion principle; the implied marketable title condition — or an express title condition in the contract — excuses the buyer from purchasing if the title isn’t marketable or doesn’t meet the contract standard title.

Failing to Identify the Landlord’s Wrongful Act in a Constructive Eviction

A landlord may breach the covenant of quiet enjoyment by constructively evicting the tenant (see Chapter 12 for details). A constructive eviction requires proof of all three of the following:

The landlord commits a wrongful act.

The act substantially interferes with the tenant’s enjoyment of the leased premises.

The substantial interference causes the tenant to abandon the premises.

A common mistake in applying this rule is to overlook or misunderstand the first requirement, that the landlord commits a wrongful act. The wrongful act must be an act in violation of some legal obligation. So if you’re arguing that the landlord has constructively evicted a tenant, you must identify the source of some duty that the landlord has breached. The covenant of quiet enjoyment itself doesn’t create duties to maintain or repair the premises or any other duties in relation to the condition of the leased premises.

If the failure to maintain and repair has caused the tenant to abandon the premises, that’s a constructive eviction only if the contract says the landlord has a duty to maintain and repair in that way. With residential leases, you might instead argue that the landlord breached a statutory duty to maintain the premises in a habitable condition as required by local housing codes, although some courts say that’s a public duty and can’t be the basis for a constructive eviction.

Applying Purchase Agreements after Closing and Deeds before Closing

Chapter 16 explains the merger doctrine that a purchase agreement generally isn’t enforceable after closing, when the seller gives a deed to the buyer and the buyer gives the purchase money to the seller. The deed effectively takes the place of the purchase agreement, and the parties indicate by going forward with closing that the other party’s performance is acceptable and that they waive any unfulfilled conditions to their obligation to perform.

When a dispute arises after closing, students sometimes mistakenly suggest that the buyer could rescind the purchase because of a failure of a condition in the purchase agreement, such as a failure of marketable title. However, after closing, it’s too late for such a remedy. The buyer’s only contract-based claims are for breach of the deed covenants of title — if the deed includes them. The merger doctrine doesn’t apply in some situations, however, as I note in Chapter 16. If a dispute does arise after closing, you should consider whether any of those exceptions would allow a claim based on the purchase agreement — but don’t talk about such claims unless you first explain why merger wouldn’t prevent the claim.

Sometimes people make mistakes the opposite direction, too. When a dispute arises before closing, sometimes people mistakenly argue about whether the deed covenants of title have been breached. The deed covenants of title aren’t made until closing, even though the purchase agreement may say that the seller will give a warranty deed to the buyer when closing occurs. If a title problem arises before closing, the buyer’s remedy is to rescind the contract or possibly abate the purchase price, as I note in Chapter 15. The buyer can’t sue for damages under the deed covenants of title.