University of Montana

Property II Outline

Case Topic Loc. Rule Facts

Urquhart v. Teller (Mont. 1998) Assignability & restrictive covenants Blackboard Restatement of Property 406 Teller had 280 acres in Ravalli Co. He sold 270 of it to Urquhart. In the contract for deed, they agreed that Urquhart would have the right of first refusal to purchase the remaining 10 acres at up to $12,000 if Teller decided to sell the property. There were also restrictive covenants stating that Urquhart couldn't develop the land or sell parcels. However, the Urquharts developed the property and sold parcels, and the Tellers sold their 10-acre parcel to someone else. 1. Is a right of first refusal in a contract for deed valid? 2. Do restrictive covenants in a contract for deed go with the

Issue

Holding 1. There are several factors to consider when determining whether a right of first refusal or a restriction on assignability is valid: a. If the price for purchase is fixed and disproportionate to its value, then it might be unreasonable. b. You have to determine whether the restraint was entered into with mutual consent by parties with equal bargaining power or if it was intended to restrain alienability. c. If the restraint serves some purpose other than restricting alienability, it might be reasonable. d. You have to look at whether the restraint is limited in duration and allows several types of transfers. e. If not limited to the number of person to whom transfer is prohibited, then it might be unreasonable f. Does the restraint increase or decrease the value of the property? If decreases it, then might be unreasonable. 2. In general, all terms in a contract for deed merge into the deed. There is an exception when the parties intended the contract for deed to be a collateral agreement. Generally, covenants relating to title, quantity, and possession of land are not collateral. App. 1. The right of first refusal in the contract for deed was invalid. The price was disproportionate. The only purpose was to restrict alienability. And, it possibly violated the rule against perpetuities. 2. There was no indication that the parties intended the agreement to be a collateral one. So, the restrictions merged into the deed. Since the deed did not contain the restrictions, they could not be enforced. Case Alsup v. Montoya (TN 1972)

Topic Loc. Facts

Rules promoting alienability and marketability 621 The father of three daughters left his land to his daughters for life, then to their grandchildren. The father's will explicitly prohibited the sale of the farm. Daughters (p./ae.) lived in CA and wanted to sell the farm. Grandchildren did not. Chancery court found there had been a material change in conditions and that it was in the best interest of the parties to have the land sold for reinvestment. The restraint on alienation was invalid.

Issue

Is a restraint on alienation in a will valid?

Holding The law generally is clear that any restraint which undertakes to wholly remove the power of a life tenant to alienate his estate is absolutely void. The alternative is to create a trust. The governing issue here is testamentary intent. App. The restraint on alienation was invalid. The father would have probably wanted to re-write the will if he knew what would happen.

Page 3 of 78

Restraints on Alienation Notes There are three methods of restraint of alientation: 1. Disabling restraints withhold the power of alienation (A to B, and any attempted transfer by B shall be void and of no effect 2. Forfeiture restraints provide that the grantee will lose her interest if she attempts to transfer the property (A to B so long as B does not convey) 3. Promissory restraints expose the grantee to contract remedies in the event of an attempted transfer (A to B, and B promises never to convey the lands Type of Restraint Disabling Forfeiture Promissory Fee Simple Invalid Invalid Possibly okay if partial and reasonable Life Estate Prohibited Okay Okay Leasehold Okay Okay Okay

Habendum clause: the part of a deed that limits and defines an estate Restrictions on use are not void. Restrictions on the ability to sell or transfer the land are void. Restrictions on use are merely the conveyance of a fee simple subject to a condition
subsequent

Restraints on alienation might be okay for charitable gifts. Some jurisdictions allow this. If a gift is to a charity, the restraint might be able to be enforced. It enforces charitable gifts. Not all non-profits are charitable; most fraternal organizations are non-profit, but not charitable. Horse Pond Fish & Game Club, p. 631. There are several factors to consider when determining whether a right of first refusal or a restriction on assignability is valid (Urquhart): 1. If the price for purchase is fixed and disproportionate to its value, then it might be unreasonable. 2. You have to determine whether the restraint was entered into with mutual consent by parties with equal bargaining power or if it was intended to restrain alienability. 3. If the restraint serves some purpose other than restricting alienability, it might be reasonable. 4. You have to look at whether the restraint is limited in duration and allows several types of transfers.

5. If not limited to the number of person to whom transfer is prohibited, then it might be unreasonable 6. Does the restraint increase or decrease the value of the property? If decreases it, then might be unreasonable. Statutes MCA 70-1-405: Conditions restraining alienation void Conditions restraining alienation, when repugnant to the interest created, are void. [But court will apply a reasonableness test. Urqhart] Cases
Case Loc. Facts Alsup v. Montoya (TN 1972) 621 The father of three daughters left his land to his daughters for life, then to their grandchildren. The father's will explicitly prohibited the sale of the farm. Daughters (p./ae.) lived in CA and wanted to sell the farm. Grandchildren did not. Chancery court found there had been a material change in conditions and that it was in the best interest of the parties to have the land sold for reinvestment. The restraint on alienation was invalid. Issue Is a restraint on alienation in a will valid?

Holding The law generally is clear that any restraint which undertakes to wholly remove the power of a life tenant to alienate his estate is absolutely void. The alternative is to create a trust. The governing issue here is testamentary intent. App. The restraint on alienation was invalid. The father would have probably wanted to re-write the will if he knew what would happen. Mountain Brow Lodge No. v. Toscano (CA 1967) 626 Toscano (d./ae.) left property to Mountain (p./at.) with the following condition: "Said property is restricted for the use and benefit of Mountain, only; and in the event the same fails to be used by Mountain or in the event of sale or transfer by Mountain of all or any part of said lot, the same is to revert to Toscano, successors, heirs or assigns."

Case Loc. Facts

Page 5 of 78

Issue

Is the provision valid?

Holding Yes and no. The clause that prohibits Mountain from selling or transferring the land under penalty of forfeiture is an absolute restraint against alienation and is invalid. The clause restricting use is merely the conveyance of a fee simple subject to a condition subsequent with Toscano retaining a reversion interest. No formal language is required to create a fee simple subject to a condition subsequent. The important distinction here is a restriction on use versus a restriction on selling and transferring. The ultimate effect may be the same, but restrictions on use are valid. Case Loc. Rule Facts Urquhart v. Teller (Mont. 1998) Blackboard Restatement of Property 406 Teller had 280 acres in Ravalli Co. He sold 270 of it to Urquhart. In the contract for deed, they agreed that Urquhart would have the right of first refusal to purchase the remaining 10 acres at up to $12,000 if Teller decided to sell the property. There were also restrictive covenants stating that Urquhart couldn't develop the land or sell parcels. However, the Urquharts developed the property and sold parcels, and the Tellers sold their 10-acre parcel to someone else. 1. Is a right of first refusal in a contract for deed valid? 2. Do restrictive covenants in a contract for deed go with the

Issue

Holding 1. There are several factors to consider when determining whether a right of first refusal or a restriction on assignability is valid: a. If the price for purchase is fixed and disproportionate to its value, then it might be unreasonable. b. You have to determine whether the restraint was entered into with mutual consent by parties with equal bargaining power or if it was intended to restrain alienability. c. If the restraint serves some purpose other than restricting alienability, it might be reasonable. d. You have to look at whether the restraint is limited in duration and allows several types of transfers. e. If not limited to the number of person to whom transfer is prohibited, then it might be unreasonable f. Does the restraint increase or decrease the value of the property? If decreases

Page 6 of 78

it, then might be unreasonable. 2. In general, all terms in a contract for deed merge into the deed. There is an exception when the parties intended the contract for deed to be a collateral agreement. Generally, covenants relating to title, quantity, and possession of land are not collateral. App. 1. The right of first refusal in the contract for deed was invalid. The price was disproportionate. The only purpose was to restrict alienability. And, it possibly violated the rule against perpetuities. 2. There was no indication that the parties intended the agreement to be a collateral one. So, the restrictions merged into the deed. Since the deed did not contain the restrictions, they could not be enforced.

Page 7 of 78

Preventing Waste Notes Types of waste: Voluntary (affirmative) waste is the result of a deliberate and affirmative act, such as destroying a building or logging timber. Permissive waste is the result of a failure to act, such as failure to repair buildings. Ameliorative waste is the result of an act that changes the land in a manner that increases the market value of the land, such as developing agricultural land into a shopping mall. Remedies Compensatory damages: in the Moore case the district court determined that the total damages from the deterioration of the farmhouse was $10,433. Many jurisdictions, including Montana, allow treble damages (MCA 70-16-106). Injunctive relief: requiring the life tenant to take certain actions (such as repair) or stop certain actions (such as logging). Forfeiture: some states allow the court to terminate the life estate, but usually applied only in context of egregious or malicious acts. Bringing actions The remainderman does not have to wait until the life tenant dies. For permissive waste, injury continues and statute of limitations does not commence to run until life tenant dies. Life estate expenses As between a life tenant and remainderman, who should bear the cost of permanent improvement or expenses that have long-term benefits. For example, $30,000 in attorney fees incurred in defending water rights that benefit both the life tenant and the remainderman? Necessary versus discretionary costs See Harris v. Audubon Soc. of Rhode Island, 468 A.2d 258 (R.I. 1983) (life tenant could not compel remainderman to contribute to cost of commercial kennel improvements required by governmental order where improvements were for use discretionary with life tenant and were neither necessary to preserve remainder interests nor beneficial to remainderman). Insurance If a building burns down, and the life tenant maintained insurance on the building, should the life tenant be required to replace the building? In Ellerbusch v. Myers, 683 N.E.2d 1352 (Ind. App. 1997), the court held that a life

tenant cannot be compelled to rebuild property damaged by an insured casualty for remainder's benefit nor will the court impress a trust on insurance proceeds for the remainderman's benefit. Natural Resources To what extent can life tenant log timber or drill for oil and gas? Life tenant is entitled to cut timber for use in carrying out his or her duties to prevent waste and to make normal uses of the land (such as to repair buildings, fences; burn for heat). Also allowed as necessary for good husbandry Existing Activities If the grantor was logging/extracting minerals at the time of division of the fee simple into a life estate/remainder, the life tenant can continue such activities. The theory is that the party creating the present and future estates intended to allow the holder of the present estate the same advantages as the creator was enjoying before the division. Forcing Sales See Baker There must be a necessity; for example, if income were not sufficient to pay taxes and necessary maintenance, land could be sold. Must be in best interest of all parties. Statutes MCA 70-16-102: Rights of life tenant The owner of a life estate may use the land in the same manner as the owner of a fee simpleEntitled to use the property for his exclusive benefit and to all the income and profits generated by the property.... The life tenant must do no act to the injury of the inheritance. MCA 70-16-103: Duties of a life tenant The owner of a life estate must keep the buildings and fences in repair from ordinary waste and must pay the taxes and other annual charges and a just proportion of extraordinary assessments benefiting the whole inheritance. Cases
Case Topic Moore v. Phillips (KS 1981) Protection of future interests: avoiding waste

Page 9 of 78

Loc. Facts

634 Moore (p./ae.) was the daughter of Brannan. Brannan died and her executrix was Phillips (d./at.). Brannan had a life estate and Moore had a remainder interest. Moore alleged that Brannan allowed the house on the property to deteriorate, and she sued the estate to recover damages. She waited until her mother died to sue.

Holding The point of this case is to outline several key principles relating to waste. See p. 636. The holding here was that the defense of laches and estoppel did not apply. Thus, Moore could wait until her mother died to sue. Case Topic Loc. Facts Baker v. Weedon (MS 1972) Protection of future interests: avoiding waste 641 John Weedon had a few marriages. By his first marriage he had children who didn't look after him. He had grandchildren by them. His third marriage was to Anna. In his will, he left his property to Anna as life tenant with the remainder to his grandchildren from the first marriage. Anna didn't make much money, and she wanted the property sold so she could survive. The grandchildren didn't want this. The court ordered the property sold with the proceeds to go to Anna and then the grandchildren. May a court order property held in a life estate to be sold with the proceeds going to the tenant and then to the remaindermen?

Issue

Holding Yes, but only when it is necessary. It must be done so with caution and the need must be evident. Waste of the property is not the ultimate test to determine whether a sale is proper. You must also look at the future interests.

App.

The property was worth much more as commercial property than agricultural property. However, a judicial sale would have resulted in a great financial loss to the remaindermen. Not all of the property could be sold.

Page 10 of 78

The Recording System Notes [See Recording Statute problem] Early common law established the first in time, first in right principle. Record system The record system developed to sort out the relative rights between two grantees, both of whom have paid value for an interest in the same piece of property. The recording system (1) imposes a duty on the first grantee to record his deed from Owner to protect his interest; OR (2) imposes a duty on the subsequent grantee to protect his interest by checking the chain of title or taking other steps (inspection of the property) to make certain that there are no prior conveyances ; (3) or both. Recording a deed does not validate an otherwise invalid deed. Recording Systems: Race A purchaser for value will prevail if she records first. Notice is not relevant. Policy: were not going to get into fights about whether a subsequent grantee had notice or not; reliance on records alone.

Notice A purchaser for value will prevail if she did not have either actual or constructive notice of the prior conveyance. Who records first is not relevant. Policy: were not going to protect a subsequent purchaser who knew, or should have known of a prior conveyance.

Race-Notice A purchaser for value will prevail if (1) she did not have either actual or constructive notice of the prior conveyance, and (2) she records first. Both notice and recording first are important. Policy: well protect a purchaser without notice, but also impose a duty on that purchaser to act diligently to record.

Notice the purchaser of value language statutes will only protect those who have paid some consideration for the property.

Statutory language: Race No conveyance of land shall be valid to pass any property, as against lien creditors or purchasers for a valuable consideration, BUT FROM the time of registration [of such conveyance].

Notice No instrument affecting real estate is of any validity against subsequent purchasers for valuable consideration, without notice, unless filed in the office of the recorder of the county in which the same lies.

Race-Notice Every conveyance of real property is void as against any subsequent purchaser of the same property in good faith [notice element] and for a valuable consideration, whose conveyance is first duly recorded.

Types of notice actual notice: a subsequent purchaser has actual knowledge of the prior transfer (from whatever source, such as a statement made by the owner or first grantee, from looking at a copy of the deed to the first grantee, etc.) inquiry notice (sometimes called implied actual notice): facts (such as a visible road crossing the property you want to purchase) that if investigated, would reasonably lead to actual knowledge of a prior conveyance (that an easement exists). Inquiry of the seller will not always satisfy the inquiry duty. constructive notice: knowledge or notice a purchaser could gain by searching the deed records. Physical inspection and notice Purchasers are deemed to have notice of any defects that would be evident upon a physical inspection of the property. Wild deed (see problem starting at PowerPoint slide 38) Deed outside the chain of title. E.g., a deed recorded after the conveyance from Owner to Purchaser is recorded. It wont give rise to constructive notice. You only have to make a reasonable search of the records, which in most jurisdictions would be from the date Owner acquires his interest to the time Owner fully conveys his interest Shelter principle see PowerPoint on Title Insurance and Recording System. The Shelter Principle protects a purchaser of property who purchased it in good faith and, thus, also protects subsequent purchasers. If a purchaser purchased property in good faith, he is protected from subsequent claims against the land. Look for a multiple choice question on this.

Page 12 of 78

Statutes See handout Cases

Case Loc. Facts Mister Donut of America, Inc. v. Kemp (MA 1975) 452 Donut (p./lessee) leased property from Kemp (d./lessor). The lease contained an option to purchase the land. Donut sought specific performance of that option. The owner prior to Kemp only had a photocopy of lease, but that copied covered a portion of the option clause. However, part of it was legible. Trial court eventually ruled for defendants. Holding Neither the bank nor Kemp had actual notice of the option, but they had constructive & inquiry knowledge, and that was sufficient to validate the option. Case Loc. Facts Gagner v. Kittery Water District (ME 1978) 454 Gagner (p./ae.) purchased property from Warren's Realty. Allegedly unbeknownst to Gagner, the Kittery Water District (d./at.) had a water maintenance easement across the property. Gagner sued Kittery. ME recording statute stated that no conveyance would be effectual against any person ... Except persons having actual notice thereof unless the deed or lease is acknowledged and recorded. (Pure notice statute) The current deed didn't have any language about the easement, but previous deeds did. Holding Gagner's attorney was put on "inquiry notice" when he learned of the previously existing easement. He checked with Realty, but he should have also checked with Kittery to see if they still claimed the easement. When facts known to the purchaser cast doubt upon the very existence of the seller's title, he is bound to inquire of him whether he has any real title or not. Buyers are chargeable with notice of the facts which by ordinary diligence they would have ascertained.

Page 13 of 78

App. Case Loc. Facts

Gagner's attorney was put on notice of the easement, and it was valid. Miller v. Green (WI 1953) 457 Miller (p.) leased farm land from Green (d.) who later sold the land to Miller. Green, however, then sold the land to Hines (d.). Hines lived near the farm land, and Miller had actively farmed it. Miller argues that Hines' purchase of the land did not extinguish Miller's purchase of land because Hines was put on constructive notice of the purchase by virtue of Miller's farming activities. Hines argues he never drove past the farm land and that he wasn't put on constructive notice.

Holding This was a race-notice jurisdiction. Possession of land generally constitutes inquiry and constructive notice Farming activities constitute constructive knowledge of possession, as well as inquiry notice. In order that possession may constitute constructive notice, such possession must be "open, visible, exclusive, and unambiguous." The requirements for constructive notice and adverse possession are virtually the same. Just because the nature of a possessory interest changes doesn't mean that the nature of constructive notice changes. App. Hines' conveyance was invalid.

Page 14 of 78

Title Opinions, Abstracts, and Title Insurance Notes An abstract of title is a chronological summary of the history of a piece of land, including all conveyances, interests, liens and encumbrances that affect title to the property. Abstracts An abstract of title does not, in and of itself, provide an opinion as to the present state of title. The abstracter commonly provides a certification that the abstract provided is a full, true and correct abstract of title to the property for a particular period of time. All legal opinions and title insurance policies are based upon an abstract of title. Attorneys and title opinions Historically, attorneys reviewed an abstract of title prepared either by the attorney or another abstracter, and then delivered a legal opinion whether the title is marketable. Attorneys who render opinions of title are bound by the traditional negligence standard of reasonable care and skill. The attorney owes the client a duty of investigation that cannot be disclaimed (see note 4, p. 493). Courts divide on whether a lawyer hired by a seller to render an opinion can be held liable to buyer. (see note 5, p. 494) In order to prevail against an abstracter or an attorney rendering a title opinion, the plaintiff must establish negligence. Negligence is determined by asking whether the abstracter or attorney undertook a reasonable review of the chain of title. Abstracters and attorneys are not liable for off-record defects, such as forgeries, encroachments, or unrecorded documents. Title insurance Title insurance has become the dominant form of title assurance in most of the United States, replacing abstracts of title and legal opinions in most jurisdictions. Montana and many other jurisdictions have enacted legislation regulating title insurance. MCA 33-1-212: Title insurance is insurance of owners of property or others having an interest therein or liens or encumbrances thereon against loss by encumbrance, defective titles, invalidity, or adverse claim to title. --indemnity contract

Title insurance components All title insurance policies contain the following components: Identification of insured risks Exclusions from coverage Conditions and terms of coverage Schedule A: identifies particular transaction (date of policy, amount of insurance, name of insured, name of owner, description of land) Schedule B: general and specific exceptions pertaining to this transaction Endorsements Endorsements to extend coverage may be purchased for an additional premium, including: ALTA Endorsement Form 5.1 - 06 Planned Unit Development (0617-06) ALTA Endorsement Form 7 - 06 Manufactured Housing Unit (0617-06) ALTA Endorsement Form 7.2 - 06 Manufactured Housing Conversion: Owner's (06-17-06) ALTA Endorsement Form 8.1 - 06 Environmental Protection (0617-06) ALTA Endorsement Form 9 - 06 Restrictions, Encroachments, Minerals (06-17-06) ALTA There is a national organization of title insurance companies known as the American Land Title Association (ALTA). ALTA develops standard forms of title insurance. Title insurance policies are usually issued to: Owners (purchasers) Lenders (mortgagees) In 2006, ALTA updated and revised its standard owners and lenders policies. Unique characteristics of title insurance Single premium What is insured against? Insured risks existing AS OF DATE OF CONVEYANCE Does not insure against title defects arising after the date of conveyance What is period of coverage? Indefinite Remains in force for the benefit of the original insured and certain classes of successors-in-interest of the insured What is amount payable? Generally limited to amount of purchase price Inflation protection or increased coverage available for a higher premium

Page 16 of 78

The 2006 ALTA policy will insure two types of risks arising after the date of the policy: Any defects, liens or encumbrances created during the gap of time between effective date of policy and actual recording of deed that conveys the property to the insured (para 10) Any court order entered after the date of policy that voids a transfer that occurred prior to the vesting of title in the insured under fraudulent conveyance laws (para 9) Most title companies will exclude liens. Title insurance commitment A title insurance commitment is a contract to enter into a contract; the title company agrees to issue a policy upon certain conditions. Also referred to as a preliminary title report. In Montana, the seller typically pays the cost of title insurance and orders the report. --premiums established with State Auditor Who is the insured? The purchaser (or, for a lenders policy, the bank or other lender) See sample commitment to insure Encumbrances An encumbrance is "any right in a third party which diminishes the value or limits the use of the land granted." MCA 70-20-305. The term "encumbrances" includes taxes, assessments, and all liens upon real property. Property will be insured for unmarketable title. But umarketability of title and unmarketability of the property are two separate things. Unmarketability of property is not insured. See Haw River. Defects in the physical condition of property do not render the title unmarketable. Access Insures against loss arising from no right of access to and from the Land. What level of access is insured? Pedestrian? Vehicular? The shortest route? P. 508: when an insurer contracts to insure against lack of access to property, it must be deemed to have insured against the absence of access which, given the nature and location of the property, is reasonable access under the circumstances. In the context of land located in Raleigh, the N.C. Supreme Court found that it would strain credulity beyond reasonable limits to hold that the parties understood that the insurance as to access could be satisfied by pedestrian Page 17 of 78

access. Numerous courts have ruled that coverage for a "lack of right of access" to the insured property is not triggered where access is merely impractical or difficult as long as the right to access exists. Insured had right of access via road that was impassible without substantial clay and rock fill, 390 So. 2d 805 (Fla. Ct. App. 1980) Insured had right of access via street that was flooded by tides in the spring and fall, 381 So. 2d 1088 (Fla. Ct. App. 1979)

Violations of laws or ordinances Insures against loss arising from the violation or enforcement of any law, ordinance, permit, or governmental regulation (including those relating to building and zoning) restricting, regulating, prohibiting, or relating to (a) the occupancy, use, or enjoyment of the Land; (b) the character, dimensions, or location of any improvement erected on the Land; (c) the subdivision of land; or (d) environmental protection IF If, and only if, a notice, describing any part of the Land, is recorded in the Public Records setting forth the violation or intention to enforce, but only to the extent of the violation or enforcement referred to in that notice. See e.g. Haw River Land and Timber. The ordinance has to refer to that specific parcel of land for the insurance to be triggered. Insureds Insured includes: Successors by operation of law, such as devisees and heirs Successors to entities as a result of dissolution, merger, reorganization Transfers by insured to wholly owned entites Transfers by insured to a trust established by the insured for estate planning purposes Coverage continues in favor of an insured For so long as insured retains an interest in the land If insured sells the land and finances the sale, for so long as insured holds a security interest in the land For so long as the insured has liability by reason of warranties given by insured in favor of any purchaser or mortgagee Danger: if you use a quitclaim deed without warranties, you can lose coverage The insured must notify the company of any claims. If the company is prejudiced by lack of notice, the companys liability is reduced Page 18 of 78

to the extent of the prejudice. Defense Company is obligated, at its own cost, to defend insured in litigation in which a third party asserts a claim Company can select counsel Company has option to tender limits of policy instead of defend Company has option to settle If company exercises either of these options, no further duty to defend Company has right, at its cost, to prosecute an action If it exercises this right to prosecute and loses, the amount of insurance is increases by 10% under paragraph 8(b) Amount of insurance The costs of defense or prosecution are in addition to the amount of insurance. See 8(c). Under paragraph 8, the maximum amount payable by the company is the amount of insurance or, if less, the loss sustained by insured Loss is measured by difference of value of title as insured and value of title after taking into account the defects Insurance continues after the battle, but the amount of insurance is reduced by any payments made under the policy (para. 10) Statutes MCA 33-25-111: Abstracts of title distinguished from title insurance policy and preliminary report (1) A title insurance policy is not an abstract of title or representation as to the condition of title to the stated property. (2) A preliminary report is not an abstract of title. The rights, duties, and liabilities applicable to the preparation and issuance of an abstract of title are not applicable to the issuance of a preliminary report. A preliminary report does not constitute a representation as to the condition of title to real property, but constitutes a statement of the terms and conditions upon which the issuer is willing to issue its title insurance policy. Cases
Case Loc. Williams v. Polgar (MI 1974) 489

Page 19 of 78

Facts

Williams (p.) purchased land from Polgar (d.). The abstract was issued by the Macomb County Abstract Co. (American Title Insurance Co. was successor). The abstract failed to include a deed conveying the southern 60 feet of the property to the county board of road commissioners. Williams sued Polgar and the abstract company. Should abstracters be liable for foreseeable as well as known reliance?

Issue

Holding Yes. Abstracters are liable to known and foreseeable buyers who rely on a faulty abstract to their detriment. The cause of action for a faulty abstract is most likely negligent misrepresentation. This is not strict liability. The abstractor must have committed negligence in reviewing the records. App. Case Loc. Facts The abstracter could be held liable. White v. Western Title Insurance Co. (CA 1985) 497 White (p./ae.) purchased a piece of property and had title insurance from Western (d./at.) Unbeknownst to White, there was an easement across the property for water rights. The easement was recorded, but Western didn't discover it. There were exceptions in the policy concerning easements and water rights, but it wasn't clear that the easement in question would have actually been excluded. To what extent are title insurance companies liable for their omissions?

Issue

Holding Any ambiguity is construed against the title insurance company. The insurer serves as an abstractor of title and must list all matters of public record regarding the subject property in its preliminary report. A title insurer is liable for his negligent failure to list recorded encumbrances in preliminary title reports. The failure of a title company to note an encumbrance is prima facie negligent. A covenant of good faith and fair dealing is implied in every insurance contract, including title insurance contracts. App. Western didn't identify the easement in the report, so it was negligent, and it breached the covenant of good faith and fair dealing by claiming it wasn't liable Haw River Land & Timber Co. v. Lawyers Title Insurance Corp. (4th Cir. 1998) 503

Case Loc.

Page 20 of 78

Facts

Haw (p./at.) purchased timber rights to 712 acres. It had title insurance from Lawyers. An ordinance protected 179 acres from harvest. The title policy specifically excluded coverage for damages resulting from an ordinance. Haw claimed the title was covered under the provision guaranteeing marketability of title.

Holding Marketability of title and marketability of property are different. An insurance policy insuring legal title covers only the right of the owner to assert ownership against others claiming ownership or an interest in that ownership. A policy insuring marketability only guarantees a title that could be enforced in a suit for specific performance, not the economic value of the timber purchased. App. The title was marketable, and coverage for the loss was specifically excluded by the policy.

Page 21 of 78

Landlord and Tenant Rights Notes Types of leasehold estates: Term of Years: fixed duration Periodic Tenancy: initial fixed term that renews automatically unless terminated Tenancy at Will: no fixed duration; can be terminated at any time by either party Tenancy at Sufferance: tenant wrongfully remains after termination of lease Notice required At common law, six months prior notice for annual lease; otherwise notice must correspond with term (one month notice for monthly lease). Tenancy at sufferance If the landlord accepts rent, and fails to take action to evict the tenant who remains after the end of the term, the landlord may be construed to have consented to a renewal of the lease. Right of quiet enjoyment Either express or implied in all leases: covenant of quiet enjoyment. Neither the landlord nor anyone else will interfere with the tenants lawful possession The covenant is breached: If the landlord evicts the tenant If another person exerts a superior legal title or claim to possession Types of eviction Eviction requires A wrongful act by the landlord Which deprives the tenant of either the actual possession of the premises (total or partial ) OR the beneficial enjoyment of the premises (constructive eviction) Elements of actual eviction Actual eviction occurs when the landlord wrongfully ousts the tenant from physical possession. p. 664 There must be a physical expulsion or exclusion. Example: the landlord changes the lock or padlocks the door Partial actual eviction occurs when the tenant is unable to use a portion of the premises Constructive eviction Constructive eviction exists where, although there has been no physical expulsion or exclusion of the tenant, the landlords wrongful acts

substantially and materially deprive the tenant of the beneficial use and enjoyment of the premises. p. 664 Tenant remedies for actual eviction For a total actual conviction, the tenant is relieved from his duty to pay any further rent, and may also seek damages for breach of the agreement. For example, tenant is ousted from a store where he pays $1,000/month rent. He finds a comparable rental for $1,200/month rent. He may seek damages for the $200 increase in rent for the remainder of the leases term, as well as incidental damages (storage costs while looking for a new rental, moving costs). Can he also sue for lost profits for the month it took him to find a new rental? A tenant who suffers a partial actual eviction may vacate the premises and be relieved from the duty to pay further rent. In most jurisdictions, an ouster has to reach some level of substantiality before partial actual eviction occurs. For example, ouster from 10 square feet of a 1000 square feet store will not give rise to a partial eviction, unless that 10 square feet is an important part of the leased premises (such as the obstruction of the only handicap-accessible entrance to the building). However, the tenant may still bring a claim for damages (versus the remedy of rescission). What if the tenant continues to remain in the premises after a partial actual eviction occurs? Because the landlord is not allowed to apportion his wrong, liability for all rent is suspended although the tenant remains in possession if a partial actual eviction occurs. Constructive eviction With regard to constructive eviction, the majority of courts have ruled that there can be no constructive eviction if the tenant remains in the premises beyond a reasonable period of time after the event giving rise to the constructive eviction occurs. Unlike partial eviction, a tenant may not remain in the premises and expect to be relieved from the obligation to pay rent. Warranty of habitability Tension Under property law, landlords do not have a duty to provide certain features or maintain and repair (absent an agreement otherwise or a statutory duty). In contrast, contract law, particularly the UCC, implies that goods are fit for their ordinary purposes; no contractual obligation required. Policy Page 23 of 78

The Jarvins court, in deciding to recognize an implied warranty of habitability or fitness in residential properties, notes several policy reasons: Old rule was based on the assumption that land was more important than the structures on it Housing Regulations create legal rights and duties enforceable in tort; Housing Code should be read into housing contracts; may not be waived Unequal bargaining power of tenants

Statutes MCA 70-26-201. Term of lease when none specified. A hiring of real property, other than lodgings and dwelling houses, in places where there is no usage on the subject, is presumed to be for 1 year from its commencement unless otherwise expressed in the hiring. MCA 70-24-201. [Residential] Rental agreement -- terms and conditions. (2) Unless the rental agreement provides otherwise: (e) the tenancy is week to week in the case of a roomer who pays weekly rent and in all other cases month to month. MCA 70-26-204. Renewal of lease by lessee's continued possession. If a lessee of real property leased under an arrangement not governed by chapter 24 [residential] remains in possession thereof after the expiration of the hiring and the lessor accepts a rent from him, the parties are presumed to have renewed the hiring on the same terms and for the same time, not exceeding 1 month when the rent is payable monthly, or in any case 1 year.

Cases
Case Loc. Facts Barash v. Pennsylvania Terminal Real Estate Corp. (NY 1970) 662 Barash (p.) a law firm, leased building space from Pennsylvania (d.), the landlord. During the evenings and weekend hours, the landlord wouldn't turn on the air or heat. Barash claimed the landlord had orally agreed to circulate air so that it would be comfortable during those hours. The landlord didn't do so, and Barash sued. He sued under the theory partial actual or constructive eviction.

Holding To be an eviction, actual or constructive, there must be a wrongful act by the landlord, which deprives the tenant of the beneficial enjoyment or actual possession

Page 24 of 78

of the demised premises. An actual eviction occurs only when the landlord wrongfully ousts the tenant from physical possession. There must be a physical expulsion or exclusion. Even if only partial. Constructive eviction occurs when, although there has been no physical expulsion or exclusion of the tenant, the landlord's wrongful acts substantially and materially deprive the tenant of the beneficial use and enjoyment of the premises. The tenant must abandon possession in order to claim that there was a constructive eviction. App. The lease didn't require the landlord to turn on the heat or air, and the tenant didn't abandon the property. So, there couldn't be a claim for eviction. East Haven Assocs. v. Gurian (NY 1970) 666 Gurian (d.) left before his lease was up and didn't pay the remaining portion of the lease. East Haven (p.) sued to recover the rent. Gurian claims he didn't pay the rent because the terrace had fallen into disrepair, and he hadn't been able to use it. But, he only left 17 months after it had fallen into disrepair.

Case Loc. Facts

Holding A tenant can be partially constructively evicted. App. Didn't qualify for constructive, actual, or partial actual eviction. However, it was partial constructive eviction because Gurian stopped using the terrace. Javins v. First National Realty Corp. (D.C. 1970) 672 Landlord sued tenants to recover rent. Tenants claimed they didn't want to pay rent because of building code violations.

Case Loc. Facts

Holding There is an implied warranty of habitability incorporated into rent and lease agreements. This includes the incorporation of housing codes.

Page 25 of 78

Uniform Residential and Landlord Tenant Act Notes The Act Adopted in more than 20 jurisdictions (including Montana) Obligates landlords of residential properties to comply with housing codes, to keep the premises in a fit and habitable condition, and to provide certain services, including heat and water Provides remedies for both landlord and tenant The Act applies to residential dwelling units, rentals of rooms in homes, and government owned housing units. Excluded: student housing is excluded, prisons, nursing homes, counseling centers, religious housing, fraternity/sorority housing, hotels, commercial or agricultural leases, occupancies that accompany hunting or fishing privileges, landlord employees, Rental agreements do not have to be in writing, but they are subject to the statute of frauds (leases running longer than a year must be in writing). Unsigned leases If the landlord does not sign and deliver a written lease that the tenant has signed, acceptance of rent without reservation gives the rental agreement the same effect as if it had been signed by the landlord. Ditto for tenant that does not sign a lease signed by the landlord. But cannot be effective for more than 1 year. As long as a term is not prohibited, it may be included in a residential lease. For example, a landlord may prohibit smoking on the premises. In the absence of an agreement for a definite term of lease, the Act provides a rental term (for tenants other than roomers) that is month-to-month. Unless the rental agreement provides otherwise: 1. Rent is payable at the landlords address 2. Periodic rent is payable in advance at the beginning (rather than the end) of a term of a month or less 3. Rent is uniformly apportionable from day to day If the amount of rent is not specified, the court will impose a fair rental value. This is a departure from common law, pursuant to which the court refuses to enforce a lease that fails to provide the essential term of the rental amount (Riis v. Day, 188 Mont. 253)

A landlord or person authorized to enter into a rental agreement on his behalf shall disclose to the tenant in writing at or before the commencement of the tenancy the name and address of: 1. The person authorized to manage the premises 2. The owner of the premises or a person authorized to act for the owner for the purposes of service of process and receiving notices and demands. Waiver A rental agreement may not provide that a party: 1. Agrees to waive or forego rights or remedies under this chapter. 2. Authorizes any person to confess judgment on a claim arising out of the rental agreement. 3. Agrees to the exculpation or limitation of liability resulting from the other party's purposeful misconduct or negligence or to indemnify the other party for that liability or the costs or attorney's fees connected therewith. Housing codes A landlord must comply with the requirements of applicable building and housing codes materially affecting health and safety in effect at the time of original construction in all dwelling units where construction is completed after July 1, 1977. Landlords maintenance duties (cannot be waived) Not knowingly allow criminal activity Repairs Common areas are clean and safe o Might mean that it is landlords duty to shovel walks, mow, etc. in multifamily residences, but in single family residences, the tenant has to take care of it. Garbage Water and heat is available o running water and reasonable amounts of hot water at all times and o reasonable heat between October 1 and May 1 o except if the building that includes the dwelling unit is not required by law to be equipped for that purpose or the dwelling unit is so constructed that heat or hot water is generated by an installation within the exclusive control of the tenant; o A landlord and tenant of a one-, two-, or three-family residence may agree in writing that the tenant perform the landlord's duties specified in subsections (1)(f) [garbage disposal] and (1)(g) [water, heat] and specified repairs, maintenance tasks, alteration, and remodeling but only if the transaction is entered into in good faith and not for the purpose of evading the obligations of the landlord. Page 27 of 78

Electrical and plumbing are in working order Smoke detectors Building codes

Shifting duties to the tenant A landlord and tenant of a one-, two-, or three-family residence [NOT AN APARTMENT] may agree that the tenant is to perform specified repairs, maintenance tasks, alterations, or remodeling only if: (a) the agreement of the parties is entered into in good faith and not for the purpose of evading the obligations of the landlord and is set forth in a separate writing signed by the parties and supported by adequate consideration; (b) the work is not necessary to cure noncompliance with subsection (1)(a) [housing codes]; and (c) the agreement does not diminish the obligation of the landlord to other tenants in the premises. Tenant remedies If a landlord fails to maintain the premises in a manner that affects the health or safety or the tenant, available remedies are: Right of termination. Tenant may deliver a written notice to the landlord specifying the acts and omissions constituting the breach and that the rental agreement will terminate upon a date not less than 30 days after receipt of the notice if the breach is not remedied in 14 days. Special Rules. How much time does the landlord have to repair if the breach is an emergency? Failure to repair within 3 days of notice gives right to terminate at end of 3 day period. What if the same act or omission which constituted a prior noncompliance recurs within 6 months? The tenant may terminate the rental agreement upon 14 days written notice; no right to repair. What if the damage is caused by the tenant or her guests? No right to terminate Self-help. If the tenant has given the landlord notice and the landlord has not made the repairs within a reasonable time, the tenant may make repairs that do not cost more than 1 month's rent and deduct the cost from the rent. If the repair is required in a case of emergency and the landlord has not made the repairs, the tenant may have repairs made only by a person qualified to make the repairs. Damages. In addition to the right to terminate and the right to self-help repairs, the tenant may recover actual damages and obtain injunctive relief for any noncompliance by the landlord with the rental agreement or Page 28 of 78

70-24-303. Essential services If contrary to the rental agreement or 70-24-303 the landlord purposefully or negligently fails to supply heat, running water, hot water, electric, gas, or other essential services, the tenant may give written notice to the landlord specifying the breach and may: Procure the essential services and deduct from rent, Recover damages, or Procure substitute housing and be relieved from duty to pay rent. Tenant duties (a) comply with all obligations primarily imposed upon tenants by applicable provisions of building and housing codes materially affecting health and safety; (b) keep that part of the premises that the tenant occupies and uses as reasonably clean and safe as the condition of the premises permits; (c) dispose from the dwelling unit all ashes, garbage, rubbish, and other waste in a clean and safe manner; (d) keep all plumbing fixtures in the dwelling unit or used by the tenant as clean as their condition permits; (e) use in a reasonable manner all electrical, plumbing, sanitary, heating, ventilating, air-conditioning, and other facilities and appliances, including elevators, in the premises; (f) conduct oneself and require other persons on the premises with the tenant's consent to conduct themselves in a manner, that will not disturb the tenant's neighbors' peaceful enjoyment of the premises; and (g) The tenant must use the parts of the premises, including the living room, bedroom, kitchen, bathroom, and dining room, in a reasonable manner. This section does not preclude the right of the tenant to operate a limited business or cottage industry on the premises, subject to state and local laws, if the landlord has consented in writing. The landlord may not unreasonably withhold consent if the limited business or cottage industry is operated within reasonable rules of the landlord. A tenant may not destroy, deface, damage, impair, or remove any part of the premises or permit any person to do so. A tenant may not engage or knowingly allow any person to engage in any activity on the premises that creates a reasonable potential that the premises may be damaged or destroyed or that neighboring tenants may be injured by any of the following: (a) criminal production or manufacture of dangerous drugs; (b) operation of an unlawful clandestine laboratory; or (c) gang-related activities.

Page 29 of 78

A tenant is not free to assign or sublet under the Act. Absent an emergency, a landlord may not enter the rental unit without the consent of the tenant or a court order. But consent may not be unreasonably withheld. If a landlord exercises her right to terminate the lease for breach of the agreement or noncompliance with the Act, the landlord must give the following notice: Unauthorized pet 3 days Unauthorized person residing in the rental unit 3 days Unpaid rent 3 days Damage or destruction of property 3 days Operation of meth lab 3 days Other infractions 14 days If substantially the same act or omission that constituted a prior noncompliance of which notice was given recurs within 6 months 5 days If the noncompliance is remediable by repairs, the payment of damages, or otherwise and the tenant adequately remedies the noncompliance before the date specified in the notice, the rental agreement does not terminate. No right to cure when o If the tenant destroys, defaces, damages, impairs, or removes any part of the premises. o If the tenant has been arrested for or charged with an act that violates the provisions of 70-24-321(3): criminal production or manufacture of dangerous drugs; operation of an unlawful clandestine laboratory; gang-related activities In the absence of a breach of the agreement or non-compliance of the Act, a landlord or tenant may terminate a month-to-month tenancy upon 30 days notice. Landlord remedies Right of termination (subject to notice and right to cure) Claim for unpaid rent and other damages Possession There is a duty to mitigate. Abandoned property What if the tenant leaves personal property in the premises after abandoning the lease? MCA 70-24-430: procedure that allows landlord to store goods and charge storage charges. The landlord may dispose of the property after notice by public or private sale.

Page 30 of 78

In an action under the Act, the prevailing party is entitled to attorneys fees, even if the agreement provides otherwise. Before a landlord may deduct cleaning charges from a tenants security deposit, the landlord must give notice to the tenant and give the tenant an opportunity within 24 hours to clean the dwelling unit (unless the tenant has vacated without notice). Any landlord who fails to provide the departing tenant with a written list of damage and cleaning charges shall forfeit all rights to withhold any portion of the security deposit for the damages or cleaning charges. The list must be provided within 30 days of termination. Deposit must be returned in 10 days if no damages or unpaid rent. Any person engaged in the rental of property for residential purposes who requires a security deposit must provide the tenant with a list, at the beginning of the lease, of the condition of the dwelling unit. Wrongful withholding of deposit A landlord is liable for an amount equal to the deposit wrongfully withheld. Attorney fees may be granted to tenant at discretion of court. HB 188 proposed to treble damages for wrongful withholding of security deposits. Has passed house with DOUBLE damages or 2 months rent, whichever is less pending before senate Negligence per se Plaintiff must establish: (1) The defendant violated a particular statute; (2) the statute was enacted to protect a specific class of persons; (3) Plaintiff is a member of that class; (4) Plaintiffs injury is the sort the statute was enacted to prevent (5) the statute was intended to regulate a member of defendants class. Dobrocke v. City of Columbia Falls, 300 Mont. 348 (2000) The Court ruled that the Residential Landlord and Tenant Act expressly required the landlord to make repairs to keep the premises in a fit and habitable condition and to maintain all electrical facilities in good condition. Landlords failure to repair as required by the statute constituted negligence per se. The court also found error in allowing a jury instruction on comparative negligence. Injured guests Page 31 of 78

What if a guest of the tenant sustained injuries? Can the guest assert a claim for negligence per se against the landlord for failure to repair? Are guests within the class of persons the statute intends to protect? Kunst v. Pass (288 Mont. 264, 1998): a landlords liability is not limited to tenants, but also extends to third persons who may foreseeably be on the premises. Court also awarded attorneys fees to the guest under the statute. 70-24442

Cases
Case Loc. Facts Gore v. People's Savings Bank (CT 1995) 688 Tenant's child ingested lead paint and sued landlord. Lead content violated statutes and plaintiffs claimed negligence per se. Raised strict liability and negligence per se claim. Holding Lead paint concentration statutes could give rise to negligence per se, but the landlord would not be liable if there were excuses or justifications (e.g., it didn't have notice). Didn't impose strict liability - only negligence per se. Breach of contract claim.

Page 32 of 78

Assignment/Subletting; Notes Disclosures Radon: MCA 75-3-606: disclosure required in context of a sale only (not lease) Mold: MCA 70-16-703(2): Whenever a seller or landlord or an agent of either has knowledge that a building has mold present, the seller, landlord or agent of either shall, prior to or upon entry into a contract for the purchase, rent, or lease, disclose to the buyer or renter the presence of the mold. Meth labs: MCA 75-10-1305: An owner of inhabitable property that is known by the owner to have been used as a clandestine meth drug lab shall notify in writing any subsequent occupant or purchaser of that fact IF the inhabitable property has not been remediated. Sub-lease vs. assignment An assignee acquires the tenants entire estate. In a sublease, the original lessee transfers his right of possession for a time shorter than the entire remaining term of the lease Privity of estate Privity of estate is an important concept in property law. Among other matters, it is a factor in determining who can enforce a covenant that burdens a particular piece of land, against whom. A mutual or successive relationship to the same right in property, as between grantor and grantee or landlord and tenant. Blacks Law Dictionary. Privity of contract Privity of contract is an important concept in contract law, determining who can sue whom for breach of contract. The relationship between the parties to a contract, allowing them to sue each other but preventing a third party from doing so. Blacks Law Dictionary. Examples Is there privity of estate between the landlord and the assignee of a lease? Yes, the assignee comes into privity of estate with the landlord Lease covenants run with the land and burden the estate The assignee becomes responsible to perform all of the original lessees covenants under the lease Is there privity of estate between the landlord and the original lessee after an assignment? No; an assignment terminates the privity of estate between the landlord

and original lessee. Kintner v. Harr, 146 Mont. 461 (1965). Is there privity of contract between assignee and the landlord, that permits the landlord to bring a contract claim against the assignee? No there is no contractual privity between the landlord and the assignee. However, if the assignee agrees to assume the contractual obligations under the lease, the assignee is liable to the landlord under a third-party beneficiary theory. Davey v. Nessan, 252 Mont. 397 (1992) Is there privity of contract between the original lessee (assignor) and the landlord? Yes, the original lessee (assignor) and the landlord remain in privity of contract, and landlord can bring a contract claim against her. The original lessee is not relieved from her contractual obligations unless the landlord agrees to release the original lessee from her contractual obligations Consent by a landlord to the assignment of a lease does not in and of itself relieve the original lessee from her obligations under the lease. Kintner v. Harr, 146 Mont. 461 (1965)

Privity and sub-leases The sub-lessee is not in privity of estate with the landlord The sub-lessee is not in privity of contract with the landlord Lacking either privity of estate or contract, the sub-lessee is not liable to the landlord to pay rent or perform any covenant of the lease The landlord is in privity of estate and privity of contract with the original lessee, and can enforce against the original lessee The original lessee is in privity of contract and privity of estate with the sublessee, and can enforce under either theory against the sub-lessee Novation In novation, the obligation between the original landlord and tenant is completely extinguished and a new obligation between the landlord and the assignee/sub-lessee is created and substituted for the previous one. See MCA 28-1-1502. Assignment of a lease with the consent of the lessor and lessors acceptance of rent directly from the assignee does not, in and of itself, create a novation. But if the landlord also agrees to release the original lessee, that may constitute a novation. Common law and subleasing At common law, the tenant has the right to assign or sub-let the premises, as long as the sublessee uses the lease is a manner which is not injurious to the property or inconsistent with the lease.

Page 34 of 78

Restraints on alienation Restraints on an owners ability to transfer a fee simple are disfavored Total restraints are not enforceable Partial restraints (time limitations, limitations on people to whom the grantee may transfer the land) are disfavored, but in most jurisdictions are enforceable if reasonable Restraints on leasehold interests are not disfavored and are generally enforceable Recall MCA 70-24-305: A [residential] tenant may not allow the possession of the property to be transferred to a third person or sublet the property unless the landlordhas consented in writing. Leases allowing assignability with consent that may not be unreasonably withheld Withholding Reasonableness is a question of fact, not of law. Governed by the principles of fair dealing and commercial reasonableness. Standard is what a reasonably prudent person in the landlords position would do, exercising reasonable commercial responsibility. Proper criteria include financial responsibility of proposed sublessee, character of his business, suitability for the building, legality of proposed use, nature of the occupancy. Arbitrary considerations of personal taste, sensibility or convenience are not proper criteria. Tenant remedies What is the remedy of the tenant whose landlord unreasonably withholds consent to assign? The Montana Supreme Court ruled that termination was not an appropriate remedy). Statutes

Cases
Case Loc. Facts Funk v. Funk (ID 1981) 701 Lessor and lessee entered a ten-year farm lease. The lease provided that it could be sublet subject to the lessor's consent. Lessee wanted to sublet it, and lessor didn't consent. Lessee said it was denied arbitrarily. May a lessee sublet a lease if the lease allows for subletting subject to the lessor's consent, but the lessor withholds consent arbitrarily?

Issue

Page 35 of 78

Holding Yes. The consent of a lessor to sublet may not be unreasonably withheld if a lease allows for subletting. The burden of showing that the withholding of consent is unreasonable is on the party challenging the withholding. At common law, you can assign a lease. Here, factors to consider would be proper farming practices and financial responsibility. App. Notres There was no reason why the lessor withheld consent. It was arbitrary and unreasonable. The lessee could sublet. a. You can limit assignability through the lease. b. But, it cannot be unreasonably withheld. c. Why did lessors refuse to give their consent i. Lessees were charging sub-lessees more than what lessees were having to pay. ii. Undermarket rental d. Majority rule - there is an absolute rule to withhold consent e. Minority rule - a reasonableness requirement into withholding consent. i. The court here went this route ii. factors in farm leases 1. assurances of proper farming practices 2. financial responsibility iii. See not on 706 - 3 f. Dissent argues that this merely drags the court into the issues. g. Burden of proof - tennants to prove unreasonableness h. However, you can explicitly say you, as the landowner, reserve absolute right and discretion to withhold consent

Page 36 of 78

Landlord Remedies Notes Basics of damages

a. know for short answer what the remedies are i. Landlord 1. Repossession 2. Damages a. Past due rent b. future rent i. Mitigation

Summary judicial proceedings Most states today allow a landlord to bring an action to evict a tenant for nonpayment of rent or other breaches. MCA 70-24-427(1) [Residential]: Landlord has a claim for possession must be heard within 20 days after the tenants appearance or the answer date stated in the summons [5 business days for meth labs] Tenant only has 10 days within which to answer [MCA 70-24-429] if tenant appeals to district court, must be heard within 20 days of transmittal [5 for meth lab] MCA 3-10-302: Justice courts have concurrent jurisdiction with the district courts for repossession proceedings. Commercial lease proceedings MCA 70-27-108: Unlawful detainer defined. A tenant is guilty of unlawful detainer if she continues in possession after expiration of the term after non-payment of rent and failure to cure within 3 days notice After committing another type of breach (including breach of covenant not to assign), and failure to cure within 3 days notice Notice may be served (a) personally or (b) by affixing a copy in a conspicuous place on the property and giving a copy to anyone present and sending a copy in the mail to the propertys address Landlord must verify complaint (70-24-113); tenant has 10 days of service within which to answer (70-24-114) If filed in justice court, must be tried within 10 days of appearance or answer date May be continued if defendant gives an undertaking Right of re-entry MCA 70-27-106: Whenever the right of reentry is given to the lessor in a lease, the reentry may be made at any time after the right has accrued, upon 3 days

notice. Treble damages Under MCA 70-27-206, damages are available in an amount equal to three times the actual damages for a forcible or unlawful detainer. Self-help/possession At common law, two conditions must be met: (1) Landlord is legally entitled to possession For example, if tenant holds over after term has ended For example, lease provides for repossession after tenant breach (2) Landlords means of entry are peaceable. MCA 70-24-428: Except in the case of abandonment, surrender, or as permitted in this chapter, a landlord may not recover or take possession of the dwelling unit by action or otherwise, including purposeful diminution of services by interrupting heat, running water, hot water, electricity, gas or other essential services. No comparable provision for commercial leases. MCA 70-27-102: A person is guilty of a forcible entry: if they enter property by breaking open doors, windows or other parts of a house or by any kind of violence or terror Or if they enter peaceably, the turn out by force, threats or menacing conduct the party in possession Treble damages Damages Approaches to damages (1) Choose not to terminate the lease; sue for rent as it comes due. No repossession No duty to mitigate and re-let unless landlord actually re-enters OR Lease allows the landlord to re-enter without accepting surrender, forfeiting the lease or evicting the tenant (2) Treat as anticipatory repudiation: Repossess Recover present value of future rentals less cash market value for the remaining term of the lease Duty to mitigate (3) Treat as anticipatory repudiation: Repossess and re-let Recover for difference between (future) contract rent and amount received under a new lease Duty to mitigate Page 38 of 78

(4) Declare a forfeiture of lease and relieve tenant of liability for future rent. Mitigating damages To use objectively reasonable efforts to fill the premises when the tenant vacates in breach of the lease (p. 728) The replacement tenant must be suitable under the circumstances. Future rents
if you want to get future rents, you can't re-enter. Malpractice in MT if you don't include a provision in the lease allowing landlord to collect future rent.

Acceleration clauses An acceleration clause allows the landlord to advance the due date of future rents in the event the tenant defaults in any installment or otherwise breaches the lease. Cases
Case Loc. Facts Berg v. Wiley (MN 1978) 715 Wiley (d./at.) leased property to Berg (p./ae.). Berg had a restaurant on the property. The lease provided that repairs couldn't be conducted without prior written authorization. Wiley believed repairs were being made without his permission. So, he tried to change the locks and force himself in. May a landlord result to self-help when he suspects a lease has been violated?

Issue

Holding Sometimes. The landlord may result to self-help if: 1. the landlord is legally entitled to possession 2. reentry is peaceable. The majority of jurisdictions now prohibit reentry altogether. App. Wiley's reentry wasn't peaceable. So, he didn't properly employ self-help. Berg was entitled to damages. Austin Hill Country Realty, Inc. v. Palisades Plaza, Inc. (TX 1997) 724 Palisades (p.) entered a lease with Austin (d.). There was some work to be done beforehand, and it was delayed when Palisades received conflicting instructions from various representatives at Austin. Palisades said Austin had to pick a representative to speak for it, or Palisades would sue for anticipatory breach. Palisades sued. Austin argued Palisades had a duty to mitigate its damages. Trial court disagreed,

Case Loc. Facts

Page 39 of 78

and Austin appealed. Issue Does a landlord have a duty to mitigate damages when it sues its tenant?

Holding Yes, in some circumstances. A landlord must mitigate damages when suing for: 1. anticipatory repudiation/breach 2. actual reentry 3. a contractual right to reentry When exercising the option to maintain the lease in effect and sue for rent as it becomes due following the tenants breach and abandonment, the landlord has a duty to mitigate only if: 1. the landlord actually reenters 2. the lease allows the landlord to reenter without accepting surrender, forfeiting the lease, or being construed as evicting the tenant. App. Palisades had to mitigate its damages.

Page 40 of 78

Concurrent Ownership of Property [See Worksheet] Cases

Case Loc. Facts Tenhet v. Boswell (CA 1976) 742 Johnson and Tenhet (p.) were joint tenants with right of survivorship. Johnson leased his interest to Boswell (d.) for 10 years with an option to purchase. Johnson died three months after executing the lease. Boswell argued that the lease had to be honored. Holding A joint tenant may, during his lifetime, grant certain rights in the joint property without severing the tenancy. But, when such a joint tenant dies, his interest dies with him, and any encumbrances placed by him on the property become unenforceable against the surviving joint tenant. A lease falls within this rule. App. The lease only applied to Johnson's interest. When he died, the lease, as an encumbrance, died with him. So, it could not be enforced after death. Riddle v. Harmon (CA 1980) 747 Mr. and Mrs. Riddle owned property in joint tenancy. When Mrs. Riddle learned that Mr. would take when she died, she conveyed the land to herself, thus making it a tenancy in common.

Case Loc. Facts

Holding The old common law required a strawman, but the Court of Appeals said this was no longer necessary. The new rule is that a joint tenant can unilaterally effect a severance. App. The wife's interest was severed into a tenancy in common.

Case Topic Loc. Facts

Carr v. Deking (WA 1988) Can a cotenant act unilaterally? 751 Joel and George Carr owned some farmland as tenants in common. George wanted to lease the land to Deking (d.). Joel (p.) did not. George and Deking secretly entered a lease, and Joel wanted the lease terminated. Can a tenant in common who refuses to join in a lease executed by the other tenant in common eject the lessee? No. the proper remedy is a partition. Each tenant in common of real property may use, benefit, and possess the entire property subject only to the equal rights of cotenants. A contenant may lawfully lease his own interest in the common property to another without the consent of the other tenant and without his joining in the lease. The nonjoining cotenant is not bound by the lease of the common property to third persons. A nonjoining tenant may not demand exclusive possession as against the lessee but may only demand to be let into copossession. The lessee steps into the shoes of the leasing cotenant and becomes a tenant in common with the other owners for the duration of the lease.

Issue Holding

App.

Joel couldn't eject Deking. And, he couldn't claim any benefits from the lease without accepting the entirety of the lease. All of this would hold until the land was partitioned. Threatt v. Rushing (MS 1978) Can a cotenant act unilaterally? 754 A cotenant may not sever timber from the land without consent of the other cotenants. If a cotenant cannot obtain such consent, he may have to resort to partition proceedings or some other form of litigation, but he may not unilaterally partition the property himself by simply cutting timber, even though he cuts only his own fractional interest of timber ownership.

Case Topic Loc. Holding

Case Topic

Martin v. Martin (KY 1994) Accounting to cotenants

Page 42 of 78

Loc. Facts

757 Garis and Peggy had a 1/8 interest in a piece of property that had a trailer park on it. Charles and Mary had the remaining 7/8 interest and had paid for construction of the trailer park. Garis and Peggy put a trailer on the lot but didn't pay rent to Charles and Mary. Charles and Mary argued they should get rent, and the trial court agreed. Must one cotenant who occupies a portion of the land at the exclusion of the other pay rent to those excluded cotenants? No. Rent must only be paid if the the cotenants are excluded from the entire property. Each cotenant, regardless of the size of his fractional share of the property, has a right to possess the whole.

Issue Holding

App.

Charles and Mary were not being excluded from the entire property, so Garis and Peggy didn't have to pay rent. Estate of Hughes (CA 1992) Accounting to cotenants 759 An ouster in is the wrongful dispossession or exclusion by one tenant of his cotenant or cotenants from the common property of which they are entitled to possession. Whether there has been an ouster is a legal question. The cotenant claiming ouster bears the burden of proof. Ouster may be established by a cotenant's unambiguous conduct manifesting an intent to exclude another cotenant from gaining or sharing possession of jointly owned property. This conduct may include physical conduct such as changing locks or legal conduct, such as filing an action in court declaring entitlement to property.

Case Topic Loc. Holding

Case Topic Loc. Facts

Schnell v. Schnell (ND 1984) Partition 766 Husband and wife lived on a ranch. They got a divorce, and the husband wanted to force a sale of the farm. There was evidence presented that the land was worth more as a whole than if it was partitioned. The trial court forced a sale.

Issue

Page 43 of 78

Holding

The law favors partition in kind where it can be made without great prejudice to the parties. The burden of proving that partition in kind cannot be made without great prejudice is on the party demanding a sale. Unless great prejudice is shown, a presumption prevails that partition in kind should be made. The law disfavors forced sales. Several factors are considered other than the optimal economic result.

App.

A forced sale was not appropriate, because the economics would have only worked in favor of the husband, and the wife had emotional attachment to the land.

Page 44 of 78

Express Easements Notes Nonpossessory interest Easements are not considered to be estates in land. They are nonpossessory interests in real property. Their duration depends upon the intent of the parties. For example, you may create an easement for an indefinite period, for the life of a particular person, or for a term of years. Affirmative easement An affirmative easement is the right of one person to enter real property owned by or in possession of another person to use the property for a specific purpose. The right of Rachel, who owns Parcel A, to use her neighbor Johns land for access to Parcel A is an affirmative easement. The right of Montana Power Company to build a utility line across Johns property is an affirmative easement. Affirmative easements, creating a right to use another persons land for a particular purpose, can govern a variety of uses (MCA 70-17-101): (1) the right of pasture; (2) the right of fishing; (4) the right-of-way; (6) the right of transacting business upon land; (17) the right of burial. Negative easement A negative easement prohibits a person who owns or possesses real property to use the real property in a specified way. John enters into a conservation easement pursuant to which he agrees not to use his land for commercial development. At common law, negative easements were disfavored, and would only be enforced for one of 4 purposes: Air Light Subjacent/lateral support Unimpeded flow of an artificial stream Statutes in many states have expanded the subject matters which may be governed by negative easements. In Montana, those include (MCA 70-17-101 and 102) (18) the right of conserving open space to preserve park, recreational, historic, aesthetic, cultural, and natural values on or related to land; (19) the right of receiving sunlight or wind for recognized nonfossil forms

of energy generation; Rights of servient estate When the owner of a servient estate grants an easement, is the owner of the servient estate precluded from using or entering the land subject to the easement? No; the owner of the servient estate still has the right to possess, use and enter the land subject to the easement. But the owner may not possess, use or enter in a manner that would interfere with the dominant estates right of use. Appertunant easement An easement is appurtenant when the easement is intended to benefit a particular parcel of land. The right of Rachel, who owns Parcel A, to use her neighbor Johns land for access to Parcel A is an easement benefiting Parcel A and is thus appurtenant to Parcel A. Easement in gross An easement is in gross when the easement is intended to benefit the public in general, a particular individual, or a group of individuals (and not their landholdings). The right of Montana Power Company to build a utility line across Johns property is not intended to benefit land owned by Montana Power Company, but the customers of Montana Power Company. A conservation easement is not intended to benefit an adjacent parcel of land, but the public in general. Assignment of easements in gross An easement in gross is a purely personal right, and is not assignable, and terminates upon the death of the individual for whom it was created. Parties can agree to make it assignable. Even absent an agreement to assign, most courts allow assignment of an easement in gross if the use is commercial. You can be assured that Montana Powers attorneys didnt leave it to a court to decide whether their utility easements were assignable; they all have assignability clauses in them.

Easement in gross v. appurtenant easement Judicial preference to construe an easement to be appurtenant rather than in gross. Factors: Page 46 of 78

At the time of the original grant, did the grantee own adjacent land that would benefit from the easement? Was the contemplated use intended to benefit the dominant estate (versus its owner)?

Dominant/servient estates Every appurtenant easement requires two pieces of land which are owned by two different persons: The dominant estate, which is the land benefited by the easement (or profit). The owner of this estate is called the dominant tenant. This terminology is only used for appurtenant easements. The servient estate, which is the land burdened by the easement (or profit). The owner of this estate is called the servient tenant. This terminology is used for gross and appurtenant easements. Licenses A license is not an interest in land; it simply permits one person to enter the real property owned or in possession of another person without being a trespasser. For example, a ticket to a movie theater or a ski hill is a license. Most, but not all, licenses are revocable at will. As a general rule, a license is personal and is not assignable, absent an intent otherwise. Profit a prendre A profit a prendre (or profit) is the right of one person to remove from real property owned or in possession of another some product of the land, such as gravel, timber, minerals, hay, or game. It includes the right to go onto the real property as necessary to remove the product. A profit a prendre may be appurtenant (intended to benefit a specific parcel of land) or in gross (to benefit an individual, group of individuals or the public). Covenants Affirmative covenants obligate a landowner to do something that she is otherwise not obligated to do. For example, Amy can agree to build a home that is at least 5,000 square feet in size on her lot. Unlike an easement, a covenant does not give others the right to use Amys land for a particular purpose. A restrictive (or negative) covenant obligates a landowner to refrain from doing something that she otherwise has the right to do. For example, Amy can agree to refrain from building a home within 10 feet of his boundaries. The law of negative covenants enforces many more restrictions than the Page 47 of 78

common law allowed for negative easements. The Restatement (3rd) on Property treats negative easements as negative covenants.

Appurtenant easements running with the land Appurtenant easements run with the land. (MCA 70-20-308). The benefit runs with the dominant estate, and the burden runs with the servient estate. The right of Rachel, who owns Parcel A, to use her neighbor Johns land for access to Parcel A runs with Parcel A. When Rachel sells Parcel A, the new owner has the same right to use the easement. If John sells his land, his successor is burdened by the easement. Failure to comply with recording statutes may cut off the benefits and burdens of easements. Easement in gross runs with servient estate The burden of an easement in gross generally runs with the servient estate. Creation of an express easement An express easement is deliberately created by the owner of the servient estate. It does not arise by operation of law. An express easement conveys must comply with the same formalities that apply to conveyances of interests in land, including the statute of fraud. 70-17-104 Who may grant servitude. A servitude [including easements] can be created only by one who has a vested estate in the servient tenement. 70-17-105 Who may not hold servitude. A servitude thereon cannot be held by the owner of the servient tenement. Can Thirteen Mile Lamb & Wool create an easement across Section 34 for access to Parcels A and B while it owns both? No, not while it owns the property. Language When creating an easement by grant, use language of grant: Seller grants an easement to Seller transfers an easement to Seller conveys an easement to When creating an easement by reservation, use Seller reserves Dont simply say this conveyance is subject to an easement. See Blazer v. Wall. the verbage subject to is insufficient in and of itself to create an easement.However, if a deed refers to a recorded certificate of survey on which an easement was adequately described, the easement cannot be defeated on the grounds that words of grant or reservation are not used. This is referred to as the easement by reference doctrine. Page 48 of 78

Recording Nelson v. Barlow It is not enough for an encumbrance to be recorded in the chain of title of an easements dominant estate. In order for the landowner of the servient estate to be bound, the encumbrance must also be found in the servient estates chain of title. Lesson learned: ALWAYS record your easement in the chain of title for BOTH the servient estate and the dominant estate. Fee Simple v. Easement Chevy Chase, p. 826: 1911 deed Land Company conveys a one-mile strip of land to the railroad its successors and assigns, a free and perpetual right of way. Defendant (successor to railroad) argues that the deed granted the strip of land to the railroad in fee simple absolute. Previous courts had construed a grant of a right of way to a railroad as a limited fee which allows exclusive right of possession and use to the railroad. 239 US 441; 81 Mont. 361. More recently, courts have construed grants of a right of way to railroads as an easement; presumption of easement must be overcome by clear intent. Whether a right of way is construed as an estate in fee simple or an easement has significant implications for the utility of the land upon abandonment. p. 828 If the deed conveys a fee simple to the strip of land, the railroad will retain ownership even if it ceases to use the land for any transit purposes. If its an easement, the railroad must use the easement within its stated purpose. See, for example, MCA 70-17-111 which provides for the extinguishment of an easement by the performance of any act by the owner of the servitude that is incompatible with its nature or exercise. The court concludes that the conveyance to the railroad was an easement. What type of easement, appurtenant or in gross? An appurtenant easement runs with the land and benefits any subsequent landowners. Can the owner of an easement in gross assign its rights to use the easement to anyone? See discussion at p. 845. In 1988, the railroad conveyed its easement to Montgomery County, Maryland for a public hiker/biker trail.

Scope of use 70-17-106 Extent of servitude. The extent of a servitude [including easements] is determined by the terms of the grant or the nature of the enjoyment by which it was acquired. Page 49 of 78

The owner of the dominant estate cannot exceed the scope of use as established at the time the easement was created. Factors: Language of the grant/reservation Circumstances at the time of creation More specific factors is the new use of the same quality of use as anticipated in the original grant? Does the change in use impose any unreasonable new burdens on the dominant estate? A potential purchaser of the servient estate must be able to safely rely upon the granting language an easements use may change over time to accommodate technological developments, but encompasses only those technological developments that further the particular purpose for which the easement was granted. Leffingwell Ranch If the easement is not specifically defined, it need only be such as is reasonably necessary and convenient for the purpose for which it was created. An exercise of the right, with the acquiescence and consent of both parties, in a particular course or manner, fixes the rights and limits it to that particular course or manner.

Burden 70-17-107 Apportionment of burden upon partition of dominant tenement. In case of partition of the dominant tenement, the burden must be apportioned according to the division of the dominant tenement but not in such a way as to increase the burden upon the servient tenement. Relocation of an easement Great majority of courts do not permit changes in the location of an easement unless consented to by both the servient and dominant estate. Restatement (3rd), p. 839: authorizes servient estate owner to make reasonable changes in the location or dimension of an easement, so long as the servient owner bears the expense and the change does not interfere with or frustrate the dominant tenants use.

Page 50 of 78

Statutes

Cases
Case Topic Loc. Facts Chevy Chase Land Co. v. U.S. (MD 1999) Interpreting and applying express easements 826 Chevy conveyed to a railroad "its successors and assigns, a free and perpetual right of way" over land. The railroad then conveyed that property to the county in return for $10 million. The county turned it into a hiking and biking trail. Chevy sued. It argued that the conveyance was only an easement - not a conveyance in fee simple absolute. And, it also argued the use as a trail was beyond the scope of the easement. Holding Deeds that convey a right-of-way are presumed to be easements only for the right of passage over another man's ground. Broadly drafted easements will be construed against the grantor. No alteration can be made by the owner of the dominant estate that would increase the restriction on the land except by mutual consent of both parties. App. This was an easement. The use as a hiking and biking trail was not beyond the scope of the easement. Nothing in the easement prohibited such a use. Marcus Cable Assocs. v. Krohn (Tex. 2002) Interpreting and applying express easements 834

Case Topic Loc.

Holding A cable company tried to piggy-back on the easement owned by an electric company. The easement provided a right of way for "electric transmission or distribution line or system." Cable television lines were beyond that scope, and the cable company could not piggyback. Case Topic O'Neill v. Williams (ME 1987) Appurtenant Easements v. Easements in Gross

Page 51 of 78

Loc. Facts

839 Beachfront property case.

Holding Whenever possible, an easement should be presumed to be appurtenant to the land of the person for whose use the easement is created. An easement in gross terminates upon the death of the person for whom it was created. An appurtenant easement runs with the land. Case Topic Loc. Miller v. Lutheran Conference and Camp Assoc. (PA 1938) Transferring easements in gross 841

Holding Easements in gross may be assigned if that was contemplated at the time the easement was formed. But, that doesn't mean the easement is divisible.

Page 52 of 78

Implied Easements Notes Duty to maintain The general rule in Montana is that the dominant tenant has the duty to keep the easement in repair. The owner of the servient estate is under no duty to maintain or repair the easement in the absence of an agreement. License An easement is a nonpossessory interest in land. A license is NOT an interest in land; it allows the holder of the license to occupy or use property for a specified purpose and time frame. Generally, a license is revocable at will by licensor or licensee. P. 850: A license is too slender and fragile to support the kind of investment that is routinely made in easements. Remedies for breach of license are contractual. Easement by estoppel Can a license ever give rise to easement-like rights? See Where a licensor/licensee have: (1) entered into an oral license agreement and (2) the licensee has expended money (or its equivalent in labor The license becomes irrevocable. The license will continue for so long as the nature of it calls for. Montana law on easement by estoppel Equitable estoppel is not favored and will be sustained only upon clear and convincing evidence. Based on the principle that a party cannot, through his intentional conduct, actions, language or silence induce another party to unknowingly and detrimentally alter his position and then subsequently deny the just and legal consequences of his intentional acts. Rests on the concealment or representation of facts by the estopped party. Burden of proof on party seeking estoppel Easement by implication Elements
i. ii. the two tracts must have been severed from common ownership - severed from unity of ownership. At the time of severance, the alleged easement must be 1. in use

iii.

visible, apparent, or open from the perspective of the person wishing to exercise the easement. 3. reasonably necessary The parties must have intended the use to continue after division of the property

2.

Restatement (Third) of Property 2.2 o The following factors tend to establish that the parties had reasonable grounds to expect that the conveyance would not terminate the right to continue prior use: The prior use was not merely temporary or casual; Continuance of the use was reasonably necessary to enjoyment of the parcel benefited by the use; Existence of the prior use was apparent or known to both parties; Prior use was for underground utilities serving either parcel.

Scope of implied easements The scope of an implied easement is limited to the use intended by the parties at the time of severance. The scope of an easement by implication is not permanently frozen at the time of severance, but rather it is measured by such uses as the parties might reasonably have expected from future uses of the dominant tenement. 2008 MT 461 Easement by necessity
i. Elements ii. The two tracts at issue must have been severed from common ownership 1. Someone owned both the dominant and servient estates ii. The severence creates a necessity for an easement iii. What level of necessity? 1. Strict in most jurisdictions (incl. MT) Rationale 1. Anyone who grants a thing to someone is understood to grant that without which the thing cannot be or exist. note 2, p. 859 2. Public policy: land should be economically usable by providing access. Necessity measured at time of severance. 1. The necessity that gives rise to an easement by necessity must exist at the time of severance. 2. If the necessity ceases, the easement ceases. 3. If necessity arises later, an easement is not created.

iv.

v.

Montana statutes Montana grants the state the right of eminent domain to take private property for public use. MCA 70-3-101. Public use includes the acquisition of roads, streets and alleys for the benefit of a county, city, or town or the inhabitants of a county, city or town. MCA 70-30-102

Page 54 of 78

MCA 70-3-107 states that private roads may be opened in the manner prescribed by this chapter, but in every case the necessity of the road and the amount of all damages to be sustained by the opening of the road must be first determined by a jury, and the amount of damages, together with the expenses of the proceeding, must be paid by the person to be benefited.

Cases
Case Topic Loc. Facts Stoner v. Zucker (CA 1906) Easements by estoppel 847 Landowner gave adjoining landowner permission to enter land and construct an irrigation ditch. The adjoining landowner spent a lot of money constructing the system, but the landowner then revoked permission.

Holding Where a licensee has entered under a parol license and has expended money, or it is equivalent in labor, in the execution of the license becomes irrevocable, the licensee will have a right of entry upon the lands of the licensor for the purpose of maintaining his structure or, in general, his rights under his license and the license will continue for as long as the nature of it calls for. Case Topic Loc. Facts Williams Island Country Club v. San Simeon at the California Club, Ltd. (1984) Easements by implication and necessity 852 Golf path case

Holding Implied easements can be created where: 1. the parties intended to grant or reserve an easement as part of the conveyance of land based on the circumstances at the time of the conveyance 2. the use of the land for the easement must be apparent or visible or reasonably discoverable at the time the unity of title was severed 3. the use must be such a that a permanent use was intended 4. the easement must be reasonably necessary for the use and benefit of the dominant tenement. App. Case Topic Golf path easement was implied. Dupont v. Whiteside (FL 1998) Easements by implication and necessity

Page 55 of 78

Loc. Issue

855 Implied easement of a way of necessity if there is no practicable route of ingress or egress. It will not be granted if there is other reasonable access to the property. But, It must be absolutely necessary. Easement by necessity - Where a private landowner conveys to another individual a portion of land in a certain area and retains the rest, it is presumed at common law that the grantor has reserved an easement to pass over the granted property if such passage is necessary to reach the retained property.

Case Topic Loc.

Leo Sheep Co. v. United States (US 1979) Easements by implication and necessity 864

Holding The government did not reserve any implied easements when it granted lands to the railroad in checkerboard fashion. Easement by necessity - Where a private landowner conveys to another individual a portion of land in a certain area and retains the rest, it is presumed at common law that the grantor has reserved an easement to pass over the granted property if such passage is necessary to reach the retained property.

Page 56 of 78

Prescriptive Easements Notes Elements (six) Actual use Open and notorious use o To be "open and notorious," roadway use must give the landowner actual knowledge of the claimed right, or be of such a character as to raise a presumption of notice. Hitshew v. Butte/Silver Bow County, 293 Mont. 212, para 17 (1999). o Open and notorious use can be established by showing that the condition of use was so obvious that the owner was not deceived and should have known of the claimant's use. o The open and notorious use element cannot be satisfied when the owner of the property was deceived as to the location of the alleged easement. Gelderloos v. Duke, 321 Mont. 1, PP 31-32 (2004) Hostile use (adverse use) (claim of right) o Adverse use is exercised under a claim of right--not as a license revocable at the pleasure of the servient estate. Public Lands Access Ass'n v. Boone & Crockett Club Found., 259 Mont. 279, 283 (1993) o Such a claim must be known to, and acquiesced in, by the owners of the land. Lemont Land Corp. v. Rogers, 269 Mont. 180, 185 (1994) o When use of an easement begins as a permissive use, it cannot ripen into a prescriptive right no matter how long it continues, unless there is a distinct and positive assertion of a right hostile to the owner. Robertson v. Hughes, 204 Mont. 515 (1983). Continuous and uninterrupted use o To be "continuous and uninterrupted," the use of a claimed right must not be abandoned by the user or interrupted by an act of the landowner. Granite County v. Komberec, 245 Mont. 252, 257 (1990). o "[c]ontinuous use . . . does not mean constant use. Rather, if the claimant used the right-of-way whenever he desired, without interference by the owner of the servient estate, the use was continuous and uninterrupted." Cook v. Hartman, 317 Mont. 343, P 29 (2003). Exclusive use (in a minority of states) o "Exclusive" use does not mean that no one else may use the claimed roadway except the easement claimant. Instead, the element requires only that the claimant's right of use does not depend on the like right in others. Hays v. De Atley, 65 Mont. 558, 561 (1923). o Others may have used the road as long as their use did not interfere with the claimant's use just as the owner of the servient estate may use his property in any manner and for any purpose consistent with the

enjoyment of the easement by the claimant. For the statutory prescriptive period

Burden of proof The person seeking to establish a prescriptive easement must prove the necessary elements by clear and convincing evidence. Renner v. Nemitz,, 306 Mont. 292, P13 (2001). Presumption P. 870: Continuous use of an easement over a long period of time without the landowners interference is presumptive evidence of its existence. Montana has consistently followed the minority rule, which holds that open, notorious, continuous, uninterrupted and exclusive use raises a presumption that the use was also adverse. Wareing v. Schreckendgust , 280 Mont. 196, 209 (1996). Scope of prescriptive easement Once established, the owners of a prescriptive easement are limited to the use and frequency of use that was established during the prescriptive period. Kelly v. Wallace, 292 Mont. 129, P31 (1998). "It is settled law in Montana that in acquiring a prescriptive easement, 'the right of the owner of the dominant estate is governed by the character and extent of the use during the period requisite to acquire it.'" Warnack v. Coneen Family Trust, 266 Mont. 203, 217-18, 879 P.2d 715, 724 (1994) Montana law Mere occasional recreational use is insufficient to raise the presumption of adverse use. Kessinger v. Matulevich, 278 Mont. 450 (1996) The Matulevichs raised both a private and prescriptive easement claim, and both were denied. But see Wolf v. Owens, 340 Mont. 74 (2007) (discussed in a short prepared by Tyson OConnell at 69 Mont. L. Rev. 523 (2008)) Recreation
Mere recreational use is insufficient to raise the presumption of adverse use. Kessinger. Only applies to private easement. You can prove a recreational, private prescriptive easement. You just don't get the benefit of a presumption.

Overhanging branches probably constitute a prescriptive easement. Cases MacDonald Properties Bel-Air Country Club has used the land owned by MacDonald Properties as a Page 58 of 78

rough for its sixth hole from sometime prior to 1936 (conveyed Bel-Air conveyed the property to MacDonalds predecessor in title) to the filling of the suit in 1974. This use gives rise to the presumption that the easement exists. P. 870: Presumption puts the burden on the party resisting the easement to prove permissive use. If a claimant establishes by clear and convincing evidence the elements of open, notorious, exclusive, continuous, and uninterrupted use of an easement, a presumption arises that the use is adverse to the servient estate and the burden then shifts to the owner to show the use was permissive. Steiger v. Brown, 336 Mont. 29 (2006).

Lyons v. Baptist School (Maine 2002) A road crossing the undeveloped Chapman lot owned by the Baptist School was subject to continuous public recreational use for at least 20 years. In 2000, Baptist School placed a barrier across the road. Plaintiffs, all of whom own property in the area, bring a suit alleging that a public easement by prescription has been established on the road. The court notes the rule that open and continuous use for the statutory period is presumed to be adverse and under a claim of right to a private prescriptive easement. However, application of such a presumption to a public, prescriptive easement claim for recreational uses is inappropriate when that claim applies to open fields or woodlands and the ways traversing them. Was the claim in the Bel-Air case based on recreational use? Private or public? Public recreational uses of unposted open fields or woodlands and the ways through them are presumed permissive. p. 874 Predicated on the notion that such use by the general public is consistent with, and in no way diminishes, the rights of the owner in his land. It is the public recreational uses of land, not the nature of the land alone, that triggers application of the rebuttable presumption of permissive use in public prescriptive easement cases. Boone & Crockett Boone & Crockett Club owns land ten miles west of Dupuyer. The Dupuyer Canyon Road runs from Dupuyer through BCC land to a popular recreational area located on National Forest Service land beyond BCCs property. Although BCCs predecessors in title allowed vehicular traffic on a year-round basis to access the Forest Service Land, in 1970s the road was closed to vehicular traffic and a walk-in policy was established. Public Lands Access Association brought a law suit to open the road to yearround vehicular access on the theory of a public prescriptive easement. BCC arguments Page 59 of 78

Use of the road was not adverse but was permissive under the neighborly accommodation doctrine. The use of the road was for recreational activities, which do not give rise to the level necessary to establish a public prescriptive easement. Road was used for purposes of fishing, camping and sight-seeing. This type of occasional use has been held to be insufficient to raise a presumption of adverse use. Can a public prescriptive easement ever be established for recreational use? What sort of evidence would you have to present Neighborly accommodation know this for test Bottom p. 2: A use of a neighbor's land based upon mere neighborly accommodation or courtesy is not adverse and cannot ripen into a prescriptive easement. where the use of a way by a neighbor was by express or implied permission of the owner, it was held that the continuous use of the way by the neighbor was not adverse and did not ripen into a prescriptive right. Wilson v. Chestnut (1974), 164 Mont. 484, 491, 525 P.2d 24, 27). Two land-owners who had lived in the area for years testified that neighborly accommodation was the rule for travel in that area. Top of p. 3: There existed an understanding among landowners that permission was not required every time a person needed to cross his neighbors land. Permission was automatic if the individual closed the gates and respected his neighbors property. Gates A property owner erecting a gate across a road located on his property provides strong evidence that use of the road past the gate is permissive only. P. 3: The fact that the passage of a road has been for years barred by gates or other obstructions to be opened and closed by the parties passing over the land, has always been considered as strong evidence in support of a mere license to the public to pass over the designated way. (quoting Maynard v. Bara 96 Mont. 302, 307 (1934). The presence of unlocked gates was not enough to rebut the presumption of adverse use when the gates were only closed during the summer months and were constructed to control cattle rather than stop human traffic. Kostbade v. Metier , 150 Mont. 139 (1967); Parker v. Elder, 233 Mont. 75, 80 (1998).

Page 60 of 78

Restrictive Covenants Notes Development of restrictive covenants Easements are interests in land and are governed by property law. They are created by conveyance or by operation of law. An affirmative easement entitles someone else (the dominant tenant) to enter onto your land (the servient estate) for a specified purpose. A negative easement restricts your use of your land. At common law, negative easements were limited to a handful of purposes: light, air, lateral/adjacent support, and unimpeded flow of an artificial stream. A negative easement could not be created, for example, that prohibited the owner of the servient estate from using the property for commercial purposes, or from building within ten feet of the boundary line. Modern property law recognizes additional types of negative easements, including conservation easements, historic preservation easements, and solar access easements. Common law generally did not recognize an affirmative easement obligating the servient tenant to perform certain acts. Affirmative easements were generally limited to allowing someone else to come onto and use the servient estate for a specific purpose. An affirmative easement, for example, could not obligate the servient tenant to plant trees on her property or to pay fees to a homeowners association. To overcome the limitations of easements, property law developed the concept of the real covenant. A real covenant is an agreement that is binding not only upon the original parties to the covenant, but also upon subsequent owners of the properties burdened and benefited by the covenant. The courts approached real covenants cautiously, not wanting to burden fee simple estates nor restrain the marketability or alienability of land. Today, real covenants form an important part of land use regulation (particularly in residential neighborhoods), and are often referred to as private zoning. See pp. 881-82 for list of affirmative and negative restrictions commonly contained in real covenants. Requirements (1) the real covenant must be in writing (2) there must be privity of estate horizontal

vertical (3) the real covenant must touch and concern the land Both the burdened estate and the benefited estate (4) the original parties to the covenant must have intended that the covenant run with land, i.e., be binding upon successors in interest.

Notice Common law did not have a notice element. In other words, it was not a requirement that the subsequent owners of the land have notice of the real covenant in order for it to be enforceable. But the recording statutes do impose notice or recording requirements. If a real covenant is not recorded and/or a subsequent purchaser for value does not have notice of it, a subsequent purchaser for value will take free of the real covenant. Equitable servitudes Real covenants were enforced at law, with payment of damages as the available remedy. Equity also developed principles that allowed enforcement of equitable servitudes. Most notably, equity did not require privity of estate. Rather than payment of damages, the appropriate remedy in equity was specific enforcement of the equitable servitude. Requirements Equity enforces an equitable servitude if the following requirements are met: (1) notice For an equitable servitude to be enforceable, the party against whom enforcement is sought must have notice of the servitude. If the servitude has been recorded, a subsequent purchaser has constructive notice of the servitudes existence. (2) touch and concern (3) intent that the servitude run with land The statute of frauds also generally requires a writing, but equitable estoppel or other defenses may apply to prevent assertion of the statute of frauds. Dual nature Good case: Runyon v. Paley A landowners promise to do something or not do something may be enforceable as both a real covenant and an equitable servitude. The choice of what to call the promise may depend upon the remedy sought. Real covenants injunction and damages Equitable servitudes only injunction Today, with the blending of courts of law and equity, there is a trend to Page 62 of 78

disregard the differences between real covenants and equitable servitudes. Regrettably, the differences still exist for purposes of this class and the bar exam. The Restatement (3rd) of Property abolishes all differences between real covenants and equitable servitudes. 1.4 Terms "Real Covenant" and "Equitable Servitude" Dropped. The terms "real covenant" and "equitable servitude" describe servitudes encompassed within the term "covenant that runs with land" and are not used in this Restatement except to describe the evolution of servitudes law.

Touch and concern A covenant must touch and concern the land in order that it may run with the land. You must analyze touch and concern from two aspects: the running of the burden and the running of the benefit. The burden can run only if it touches and concerns the servient estate. The benefit can run only if it touches and concerns the dominant estate. P. 886: It is essentialthat the covenant in some way affect the legal rights of the covenanting parties as landowners. Where the burdens and benefits created by the covenant are of such a nature that they may exist independently from the parties ownership interests in the land, the covenant does not touch and concern the land and will not run with the land. A restriction limiting the use of land clearly touches and concerns the estate burdened with the covenant because it restricts the owners use and enjoyment of the property and thus affects the value of the property. p. 886 It must be shown that the covenant somehow affects the dominant estate by, for example, increasing the value of the dominant estate. Does a use restriction always increase the value of the benefited estate? What if it decreases the value of the benefited estate? Considering the close proximity of the lands involved and the secluded nature of the area, the court concluded that the restrictions would affect the ownership interests of the persons owning the dominant estate, and thus touched and concerned the dominant estate. The Restatement also abolishes the touch and concern requirement (Servitudes Sec. 3.1). It replaces the touch and concern requirement with a list of policy considerations, including whether the restriction burdens constitutional rights, unreasonably restrains alienation, unreasonably restrains trade, or is arbitrary or spiteful. Privity See chart p. 894 Horizontal privity refers to the relationship between the original parties at the time the covenant was created. Page 63 of 78

Vertical privity refers to the relationship between the original parties and those who succeed to the interests of the original parties in the land. Under traditional real covenant law, you need both horizontal and vertical privity to enforce a covenant. Horizontal privity arises in three ways: Landlord tenant (for example, a tenant agrees with the landlord not to sell alcohol on the leased premises); Ownership of simultaneous interests in real estate (a life tenant and remainderman or co-tenants enter into a covenant not to cut timber from the premises); A covenant created in connection with a conveyance of an interest in land, such as Mrs. Gaskins deed to Mr. Brugh. Vertical privity exists between Mrs. Gaskin and her daughter, plaintiff Williams, who acquired Mrs. Gaskins lakeside parcel. Vertical privity exists between the original covenantors, Brughs, and defendant Paley, who acquired the Brughs land through a series of mesne conveyances. Vertical privity does not exist between Mrs. Gaskin and plaintiff Runyons. If Mrs. Gaskins had owned both lake-side parcels at the time of the conveyance to Brughs, and had subsequently conveyed the southern parcel to Runyons, would the Runyons have been able to enforce the covenant? Many jurisdictions distinguish between the vertical privity required for the running of a burden and the running of a benefit. For a burden to run, the vertical privity requirement is satisfied only if the successor acquires the same estate as the grantor. For a benefit to run, the grantee can acquire a lesser estate than the grantor.

Intent of the parties The original parties to the covenant must intend that the covenant burden and benefit those who succeed to their interest in the land. Test the intent separately as to the burden and the benefit. In determining whether that intent existed, always begin by looking at the deed. See deed p. 884: certain restrictionsrunning with said land by whomsoever owned Clearly indicates intent that the burden run. But does it clearly indicate an intent that the benefit run? Burden on plaintiffs to show that the benefit was intended to run to them. The law does not favor restrictions; must show intent that benefit/burden runs. Court concluded that the parties intended for the benefit to run with the property retained by Mrs. Gaskins: The nature of the restriction itself; residential character of the area; grantor retained adjacent land that benefited from the restrictions. Page 64 of 78

Cases
Case Loc. Facts Runyon v. Paley (NC 1992) 884 Gaskins conveyed property to Runyon (p.) and Brughs. The deed of conveyance to Brughs contained a restrictive covenant that limited construction of certain types of structures and uses of those structures. Brughs later conveyed the property to Paley (d.). Paley began constructing condos on his property, and Runyon sued to enjoin. Holding Restrictive covenants A restrictive covenant runs with the land of the dominant and servient estate only if: 1. the subject of the covenant touches and concerns the land 2. there is (horizontal and vertical) privity of estate between the party enforcing the covenant and the party against whom the covenant is being enforced, and 3. the original covenanting parties intended the benefits and burdens of the covenant to run with the land. Touch and concern To show touch and concern, the covenant must affect the legal rights of the covenanting parties as landowners or have an economic impact on the parties' ownership rights. A use restriction doesn't always touch and concern the dominant estate. Privity of estate Horizontal - privity of estate between the covenantor and the covenantee at the time the covenant was created vertical - privity of estate between the covenanting parties and their successors of interest. Equitable servitudes To enforce an equitable servitude: 1. the covenant touches and concerns the land 2. the original covenanting parties intended the covenant to bind the person against who enforcement is sought and to benefit the person seeking to enforce the covenant. A restrictive covenant is not enforceable at law or equity unless notice of the covenant is contained in an instrument in his chain of title. App. Runyon satisfied all but the privity elements of the restrictive covenant. There was no vertical privity between Runyon and Gaskins as covenantee. The relationship between Runyon and Gaskins arose before the covenant was established.

Page 65 of 78

Equitable servitude as to Runyon could not be established because there was no evidence that Runyon was intended to benefit from the covenant. Case Loc. Facts Davidson Bros., Inc. v. D. Katz & Sons, Inc. (NJ 1990) 896 Davidson (p.) owned two grocery stores about two miles from one another. Davidson sold one of them to Katz (d.). The conveyance contained a restrictive covenant prohibiting Katz from operating the property as a grocery store. Katz, though, in conjunction with the city, did just that.

Holding "touch and concern" used to be the test when it came to enforcement of a restrictive covenant. That test, though, should be replaced by a reasonableness test, where touch and concern is but a factor. Reasonableness factors (see p. 899): 1. The intention of the parties when the covenant was executed, and whether the parties had a viable purpose which did not at the time interfere with existing commercial laws, such as antitrust laws, or public policy. 2. Whether the covenant had an impact on the considerations exchanged when the covenant was originally executed. This may provide a measure of the value to the parties of the covenant at the time. 3. Whether the covenant clearly and expressly sets forth the restrictions. 4. Whether the covenant was in writing, recorded, and if so, whether the subsequent grantee had actual notice of the covenant. 5. Whether the covenant is reasonable concerning area, time or duration. Covenants that extend for perpetuity or beyond the terms of a lease may often be unreasonable. 6. Whether the covenant imposes an unreasonable restraint on trade or secures a monopoly for the covenantor. This may be the case in areas where there is limited space available to conduct certain business activities and a covenant not to compete burdens all or most available locales to prevent them from competing in such an activity. 7. Whether the covenant interferes with the public interest. 8. Whether, even if the covenant was reasonable at the time it was executed, changed circumstances now make the covenant unreasonable. App. There wasn't enough information here to make the determination of reasonableness, so it was remanded.

Page 66 of 78

Condominiums, Subdivisions, and Common Interest Living Communities Notes Common Interest Communities In 1950s, Federal Housing Administration encouraged subdivisions to adopt common covenants and restrictions binding on all homeowners in the subdivision. Homeowner associations were created to enforce the restrictions, to assess and collect fees to pay for maintenance, and to hold title to common areas. Condominiums Another form of common interest community is a condominium. Homeowners purchase a condo unit, and share ownership of common spaces, including hallways, parking lots, and amenities. As with subdivisions, an owners association enforces the restrictions applicable to the condos, assesses and collects fees to pay for maintenance, and holds title to common areas. Cooperatives Some states authorize cooperatives. A non-profit cooperative owns not only the common areas, but the individual units. The cooperative then enters into a long-term or perpetually renewable lease with the cooperative owner. Each lessee of a unit becomes a member of the cooperative association. Restrictive covenants Typically, the developer of a subdivision records: a survey of the subdivision that plats out the various lots; and A set of restrictive covenants. As the developer sells lots, each deed either includes the restrictive covenants, or more commonly incorporates the recorded declaration of restrictive covenants by reference, specifically making the transfer subject to the declaration of restrictive covenants. These are sometimes referenced as CCRs Covenants, Conditions, and Restrictions What happens if the developer includes a reference to the covenants in the deeds for Lots 1 through 10, but fails to include the restrictive covenants in subsequent deeds? See California case, pp. 907-08 Owners Association

Risk Anyone who buys a unit in a common interest development with knowledge of its owners associations discretionary power accepts the risk that the power may be used in a way that benefits the commonality but harms the individual. Subordination of individual property rights to the collective judgment of the owners association is a chief attribute of a common interest development. Each unit owner gives up a certain degree of freedom of choice. Courts will uphold decisions made by the board so long as they: represent good faith efforts to further the purposes of the common interest development; are consistent with the developments governing documents; comply with public policy.

Statutory limitations Californias condominium legislation states that use restrictions contained in a projects recorded declaration are enforceable unless unreasonable. Florida case: restrictions contained in a declaration should be clothed with a very strong presumption of validity and should be upheld even if they exhibit some degree of unreasonableness. Policy Enforcement of restrictions contained in a declaration protects the general expectations of condominium owners that restrictions in place at the time they purchase their units will be enforceable. Encourages development of common interest communities. Attracts buyers who prefer a stable, planned environment. Presumption The California court determines that there is a presumption of reasonableness. Challenger has burden to prove the restriction is unreasonable. Arbitrary; Violate fundamental public policy No relationship to use of land A presumption of validity discourages lawsuits by owners of individual units seeking personal exemptions from the restrictions. Associations can proceed to enforce covenants without fear that their actions will embroil them in costly and prolonged legal proceedings. New Restrictions Many declarations of restrictive covenants allow either a majority (or supermajority) of owners in a common interest community to amend or add Page 68 of 78

restrictions. Others allow the homeowners association to amend or add restrictions. Many courts apply a heightened standard to later-adopted restrictions. Those who have the power to amend/adopt restrictive covenants are required to enact rules and make decisions that are reasonably related to the promotion of the health, happiness and peace of mind of the unit owners.

Discriminatory covenants Under the equal protection clause of the Fourteenth Amendment, state courts cannot enforce racially restrictive covenants that prohibit a property owner from selling or leasing property to minorities. Many senior common interest communities prohibit long-term residence of persons under a certain age. Exemption allowed under Fair Housing Act; see p. 927. Cases
Case Loc. Facts Schovee v. Mikolasko (MD 1999) 909 A real estate developer subdivided some property. Excluded from the subdivision in the recorded declarations was a 50-acre lot. Purchasers thought the 50-acre lot was in the subdivision, even though they were provided a contract for sale that explicitly referenced the Declaration. The developer wanted to further subdivide the 50 acres and the purchasers sued.

Holding under the doctrine of implied negative reciprocal easement, restrictions may be enforced against land not expressly subject to them if the party seeking that enforcement shows that (1) a common owner subdivided property into a number of lots for sale, (2) the common owner had an intention to create a general scheme of development for the property as a whole, in which the use of the land was restricted, (3) the vast majority of subdivided lots contain restrictive covenants that reflect the general scheme, (4) the property against which application of an implied covenant is sought was intended to be part of the general scheme of development, and (5) the purchaser of the lot in question had notice, actual or constructive, of the condition. App. The evidence suggested that the developer did not intend to include the 50 acre lot as part of the subdivision. There was no evidence that the developer acted inconsistently with the exclusion of the 50 acre lot. Nahrstedt v. Lakeside Village Condominium Association (CA 1994)

Case

Page 69 of 78

Loc.

916

Holding The legislature has made common interest development use restrictions contained in a project's recorded declarations enforceable unless unreasonable. App. Prohibiting ownership of pets in a condominium is not unreasonable.

Page 70 of 78

Conservation Easements A conservation easement is an agreement between a landowner and a government agency or non-profit organization that restricts the landowners use of the land, with the purpose of preserving open space, natural habitat, historic sites, and similar preservation purposes. Remember that common law only recognized a handful of negative easements; as conservation easements began to be used, there were questions as to their enforceability. Conservation easements are widely used to implement conservation policies because the acquisition of an easement is usually much less costly than the acquisition of a fee simple absolute, for example, in elk wildlife habitat. Federal and state tax laws allow an income tax deduction for the value of the conservation easement. Reduction in property tax values. Montana law Montana was one of the first states to recognize the enforceability of conservation easements. In 1969, it enacted the Open-Space Land and Voluntary Conservation Easement Act. In 1982, the National Conference of Commissioners on Uniform Laws adopted the Uniform Conservation Easement Act. It is the legislature's intent that the requirements of this chapter provide adequate remedies for the protection of the environmental life support system from degradation and provide adequate remedies to prevent unreasonable depletion and degradation of natural resources. Montanas population spread and its attendant development are disrupting and altering the remaining natural areas, biotic communities, and geological and geographical formations and thereby providing the potential for the destruction of scientific, educational, aesthetic, and ecological values; (1) authorize and enable public bodies and certain qualifying private organizations voluntarily to provide for the preservation of native plants or animals, biotic communities, or geological or geographical formations of scientific, aesthetic, or educational interest; (2) provide for the preservation of other significant open-space land anywhere in the state either in perpetuity or for a term of years. "Open-space land" means any land which is provided or preserved for:

(a) park or recreational purposes; (b) conservation of land or other natural resources; (c) historic or scenic purposes; or (d) assisting in the shaping of the character, direction, and timing of community development. (3) encourage private participation in such a program by establishing the policy to be utilized in determining the property tax to be levied upon the real property which is subject to the provisions of this chapter. Conservation easement" means an easement or restriction, running with the land and assignable, whereby an owner of land voluntarily relinquishes to the holder: Rights to construct improvements upon the land Rights to substantially alter the natural character of the land Except as these right are expressly reserved in the instruments evidencing the easement. Typical restrictions (1) restrictions on structures; (2) restrictions on landfill ; (3) restrictions on removal of vegetation; (4) restrictions on removal of minerals, gravel, soil and similar materials; (5) restrictions on surface use that are intended to keep the surface predominantly in its existing condition; (6) restriction of acts detrimental to conservation; (7) restriction on subdivision of land. Conservation easements may be granted either in perpetuity or for a term of years. If granted for a term of years, that term may not be less than 15 years. For federal tax purposes, no charitable deduction is allowed unless the conservation easement is perpetual. IRC 170(h). Section 170(h) provides an income tax deduction for the donation of a "qualified conservation contribution" to a "qualified organization" for "conservation purposes. As a general rule, the income tax deduction is equal to the fair market value of the subject property before the conservation easement minus the fair market value of the subject property after the conservation easement, or, the "value before" minus the "value after. Many people think you can get an income tax deduction under section 170(h) for putting fewer houses on a piece of property than allowed under local zoning. "I have one hundred acres, and under local zoning I can put one hundred houses on it. Instead of doing that, I'm going to limit it to twenty houses, and put an easement on it, and take a huge deduction for the eighty houses I give up. Page 72 of 78

The fundamental error here is that the code does not give you a deduction for building fewer houses. The code gives you a deduction for conservation purposes, including protecting open space, protecting wildlife habitat, protecting farmland and forestland and watershed and scenic property. A conservation easement must be granted to an eligible grantee, including: A public body, meaning the state, counties, cities, towns, and other municipalities. "Qualified private organization," meaning a private organization: (a) competent to own interests in real property; (b) which qualifies and holds a general tax exemption under the federal Internal Revenue Code, section 501(c); and (c) whose organizational purposes are designed to further the purposes of this chapter. Local review In order to minimize conflict with local comprehensive planning, all conservation easements shall be subject to review prior to recording by the appropriate local planning authority for the county within which the land lies. It shall be the responsibility of the entity acquiring the conservation easement to present the proposed conveyance of the conservation easement to the appropriate local planning authority. The local planning authority shall have 90 days from receipt of the proposed conveyance within which to review and to comment upon the relationship of the proposed conveyance to comprehensive planning for the area; merely advisory. The proposed conveyance may be recorded after comments have been received from the local planning authority or the local planning authority has indicated in writing it will have no comments or 90 days have elapsed, whichever occurs first. All conservation easements must be recorded in the county where the land lies so as to effect the land's title in the manner of other conveyances of interest in land and must describe the land subject to the conservation easement by adequate legal description or by reference to a recorded plat showing its boundaries. All conservation easements, whether held by public bodies or qualifying private organizations, shall be considered to run with the land, whether or not such fact is stipulated in the instrument of conveyance or ownership. (1) The owner of any estate in a dominant tenement or the occupant of such tenement may maintain an action for the enforcement of an easement attached thereto. (2) Public bodies holding conservation easements shall enforce the Page 73 of 78

provisions of these easements. (1) Conservation easements may be enforced by injunction or proceedings in equity. Representatives of the grantee of the conservation easement shall be entitled to enter the land in a reasonable manner and at reasonable times to assure compliance. (2) No conservation easement shall be unenforceable on account of lack of privity of estate or contract or lack of benefit to particular land or on account of such conservation easement not being an appurtenant easement or because such easement is an easement in gross.

Page 74 of 78

Terminating and Amending Easements Notes

70-17-111 extinguishing servitudes and easements a. If you own both servient and dominant estates, the easements are merged and extinguished. b. Permanent destruction of the servient estate i. Easement for a ditch and the ditch is destroyed. c. If you have a prescriptive easement and stop using it.

Statutes

Cases
Case Topic Loc. Facts Hatcher v. Chesner (PA 1966) Terminating easements, covenants, and servitudes 949 Owner of land drafted into a deed a right of way. The land was split. Plaintiff sued defendant arguing defendant had obstructed the right of way. A tree on plaintiff's property had been planted and allowed to obstruct the right-ofway. Defendant also had structures that obstructed the right of way. Right-of-way had not been used since 1932 Holding Mere non-use, no matter how long extended, will not result in extinguishment of an easement created by deed. An easement may be lost by abandonment, according to the Restatement. But, PA also requires the servient estate to establish adverse possession. There is one exception to this requirement, though, - abandonment is sufficient (and not adverse possession) if the owner of the dominant estate took actions inconsistent with the enjoyment and use of the easement (e.g., placed an obstruction). App. Plaintiff or prior owners planted the tree, which blocked the easement. This action was inconsistent with use of the easement. Right of way was extinguished. Morris v. Nease (WV 1977) Terminating easements, covenants, and servitudes

Case Topic

Loc. Facts

950 Chiropractor (def.) bought some land that had a restrictive covenant running with it that prohibited commercial use. Chiropractor established a clinic. Before the clinic, the building had been leased as five separate dwellings. Plaintiffs sued chiropractor.

Holding Changes in surrounding neighborhood's character can nullify restrictive covenants affecting neighborhood property. Changed conditions will not be sufficient to defeat the right to enforce restrictive covenants unless the changes are so radical as to practically destroy the essential purpose and objects of the agreement. A defendant may succeed, though, if the complainant has acquiesced in the violation of the same type of restriction as third parties. The defendant has been induced into assuming the restrictions are no longer in effect. App. The changed conditions were not drastic, but the complainants had acquiesced in the operation of the "commercial" leasing of the property. Restrictive covenant was extinguished. Public Lands Access Assoc. v. Boone and Crockett Club Foundation, Inc. (Mont. 1993) Extinguishing easements Electronic

Case Topic Loc.

Holding Prescriptive easements can be extinguished by reverse adverse possession. A servitude is extinguished by the performance of any act upon either tenement by the owner of the servitude or with his assent which is incompatible with its nature or exercise. Blocking and road and creating and maintaining a walk-in hunting program evidences a distinct and positive assertion of a hostile right. If a prescriptive easement exists, subsequent acts inconsistent with the claim by prescription, support the conclusion that the prescriptive easement has been extinguished. Case Topic Loc. Facts Urquhart v. Teller (Mont. 1998) Extinguishing easements, merger Electronic. Restrictive covenants were contained in the contract for deed but were not contained in the warranty deed that was ultimately delivered to the purchasers once they fully

Page 76 of 78

paid the purchase price. Holding Generally, all provisions in a contract for sale are merged into the deed. When a deed has been executed, the purchaser's rights are generally founded in the deed covenants, not the executed contract. An exception to this general rule occurs when the parties intended for an agreement in a contract for sale to be collateral. Covenants relating to title, quantity, and possession of land are generally not collateral. If a declaration of restrictions is separate from a contract for deed and filed separately, it is more likely to be valid. However, there can be valid restrictions in a contract for deed. App. The restrictions in the contract for deed were not enforceable. The contract for deed was recorded late. The warranty deed made no reference to the contract for deed. General rule of merger applies here.

Page 77 of 78

Zoning Start with 4/15 & Zoning PowerPoint