Real Property MBE2

A buyer sought to secure a loan from a bank in the amount of $75,000. The buyer and the bank executed a promissory note in that amount. As security for repayment of the loan, the buyer's mother and the bank executed a mortgage deed on a parcel of land that was owned solely by the mother. The buyer subsequently defaulted on the loan. After acceleration, the bank instituted foreclosure proceedings on the mother's land. The mother filed an appropriate action to prevent the foreclosure. Is the court likely to find in favor of the mother? A. No, because the bank has a valid mortgage. B. No, because the bank is a third-party beneficiary for the mother's mortgage. C. Yes, because the bank only has an equitable mortgage. D. Yes, because the mortgage deed is invalid since the buyer is the only signatory on the promissory note.

Solution: The correct answer is A. Answer option A is correct. A mortgage is security for the performance of an act. The performance may be by the mortgagor or by some other person. Additionally, a lender is the mortgagee under the mortgage and not a third-party beneficiary. Therefore, the mortgage granted by the mother to secure her son's debt is valid, and the bank may foreclose on the property. Answer options B, C, and D are necessarily incorrect for the same reasons.

A woman owned a tract of land. The western half of the land abutted a public highway. The land had no access to any other road. The woman conveyed the eastern half of the land to a man and also conveyed an express easement to the man that allowed him to cross the western half, which the woman had retained, to access the highway. After five years of using the easement, the man reconveyed the eastern half of the land back to the woman. The deed from the man to the woman made no reference to the easement. Three years later, the woman again conveyed the eastern half of the land, this time to a developer by way of a deed that made no reference to any easement to the public highway. Sometime after this second conveyance, the woman told the developer that it could no longer cross the woman's land for access to the public highway. At the same time, a neighbor told the developer that she would be willing to contract with the developer to allow it to cross her adjacent land to access a different public road. The developer sues the woman for the right to cross her land to access the public highway. In whose favor should the court rule? A. The developer, because the developer has an implied easement. B. The developer, because the woman's prior grant of an easement to the man estops her from now refusing the developer access. C. The woman, because the woman's express easement to the man was terminated by the subsequent reconveyance. D. The woman, because the developer has another reasonable means of access to a public road.

Solution: The correct answer is A. Answer option A is correct. An express easement, as an interest in land, should be created in writing. There are other ways an easement may be created, however, including by implication as an easement by necessity. An easement by necessity arises when a common owner conveys a parcel of land that becomes landlocked. An easement may be subsequently terminated by merger when all the benefits and burdens come into a single ownership. In this case, the express easement granted to the man was terminated by merger when he reconveyed the land to the woman, who again became the common owner of both halves. But when the woman then conveyed the eastern half of the land to the developer, the eastern half again became landlocked, and an implied easement by necessity was created at the moment the common ownership was severed. Answer option C is necessarily incorrect for these reasons. Answer option B is incorrect because there is no evidence that the developer detrimentally relied on the earlier conveyance of the easement by purchasing the land. Answer option D is incorrect because the fact that another landowner is willing to contract for public road access is irrelevant for purposes of determining whether the land is otherwise landlocked.

A buyer and a seller entered into a written land-sale agreement, signed by both parties. The seller was to convey the land by general warranty deed to the buyer for $1,000,000. Before the closing date, the buyer inspected the land and found a possessor living in a cabin on the land. The possessor told the buyer that he had been living on the land without permission for 12 years. The statute of limitations in the jurisdiction to bring an action for ejectment was 10 years. When the buyer asked the seller about the possessor's story, the seller said that he had given the possessor permission to live on the land. A title search disclosed that the seller had good record title. Concerned by the difference in the stories told by the seller and the possessor, the buyer declined to go through with the purchase. The seller then sued to compel him to complete the purchase. What is the likely result? A. The buyer will win, because a reasonably prudent buyer would not accept the seller's title on these facts. B. The seller will win, because he will give a general warranty deed and the buyer will therefore be protected. C. The seller will win, because the seller has good record title. D. The seller will be entitled to damages, but the buyer will not be compelled to go forward with the purchase because of the cloud on title.

Solution: The correct answer is A. Answer option A is correct. Every contract for the sale of land contains an implied warranty that at closing, the seller will provide the buyer with title that is marketable, i.e., title that a reasonably prudent buyer would be willing to accept. In general, this means an unencumbered fee-simple absolute with good record title, free from questions that might present an unreasonable risk of litigation. Historically, title by adverse possession was not marketable because of the risk of litigation. A person with good record title might have an unmarketable title if there is a possibility of an adverse possession claim against him. That is the case here if the possessor's story is true (and possession was hostile), which is why the buyer will win. Answer option C is necessarily incorrect for these reasons. Answer option B is incorrect because even though the buyer might have a claim under the general warranty deed after closing has occurred, the buyer is not required to go forward with the transaction because of the breach of the implied warranty of marketable title. Answer option D is incorrect. Because the seller has breached the implied warranty, the buyer does not have to go forward with the transaction and the seller is not entitled to any damages (since the seller was the breaching party).

A brother and sister owned real property by joint tenancy with right of survivorship. The brother informed the sister that he needed cash for a business opportunity and that he intended to take out a mortgage on the property with a bank. The sister did not object but refused to be a party to the mortgage transaction. A few years later, the brother died penniless, and there were no funds to pay off the remainder of the mortgage. Thereafter, the bank attempted to foreclose on the property. Who will prevail? A. The bank, because the mortgage severed the joint tenancy and converted it into a tenancy in common between the sister and the bank. B. The bank, because the sister had knowledge of the mortgage at the time it was given. C. The sister, because the mortgage was extinguished at the time of the brother's death. D. The sister, because the mortgage was invalid.

Solution: The correct answer is C. Answer option C is correct. When a property is held as a joint tenancy and one of the joint tenants takes out a mortgage, the majority view (known as the lien theory) is that the mortgage does not sever the joint tenancy. Thus, if the joint tenant who entered into the mortgage dies before paying off the obligation, the mortgage will extinguish by operation of law. That is what happened here, and thus the sister will prevail. Answer option A is incorrect because it reflects the effect of a mortgage in a title-theory state, which is not the majority view. (Under the title theory, the mortgage would have severed the joint tenancy and the bank would have been able to foreclose on the property.) Answer option B is incorrect because the sister's knowledge has no bearing on whether she will be bound by the mortgage. Answer option D is incorrect because the brother was entitled to give the bank a mortgage. It was up to the bank to determine whether it wished to protect itself by requiring the sister to sign the mortgage paperwork (and thus be bound by it) as well.

A builder sold a new house to a buyer for use as the buyer's residence. The buyer paid 10% of the purchase price and financed the rest by executing a promissory note and purchase money mortgage to the builder. A year later, the buyer missed several mortgage payments to the builder and became unable to make payments. During that year, property values in the neighborhood declined substantially. The builder suggested that the buyer deed the house back to the builder to settle all claims and avoid the costs and other disadvantages of foreclosure. The buyer deeded the house back to the builder. Does the builder now own fee simple title to the house? A. No, because the deed back to the builder constitutes a disguised mortgage. B. No, because the owner of a personal residence cannot waive the right to foreclosure. C. Yes, because of the doctrine of equitable redemption. D. Yes, because the transaction was reasonable and fair under the circumstances.

Solution: The correct answer is D. Answer option D is correct. A borrower who wishes to default on the mortgage without incurring personal liability on the promissory note may give the mortgagee-lender a deed in lieu of foreclosure. Answer option A is incorrect. By offering a deed in lieu of foreclosure, the buyer obtained a release from his mortgage obligations. Answer option B is incorrect. Answer option C is incorrect. Equitable redemption applies where the mortgagor pays off the mortgage balance in order to retain title to the property and is not applicable to this scenario.

A woman acquired land by a deed that contained the following language in the grantee section: "to [the woman], her heirs and assigns, provided, however, that said grantee may not transfer any interest in the land for 10 years from the date of this instrument." Two years later, the woman contracted to sell the land to an investor for a price based on a recent appraisal. When the investor's title search revealed the above language in the grantee section of the deed to the woman, the investor refused to close the transaction. The contract was silent as to the woman's title obligation. The woman has sued the investor for specific performance. Who is likely to prevail? A. The investor, because the woman cannot sell the land during the 10-year period specified in the deed. B. The investor, because the woman's heirs did not join in the contract. C. The woman, because the contract did not obligate her to provide marketable title. D. The woman, because the deed's restraint on transfer is void as a matter of law.

Solution: The correct answer is D. Answer option D is correct. A partial restraint on alienation is valid if the restraint is qualified so as to permit alienation to some possible alienees, and the restraint is reasonable under the circumstances. The deed's restraint on transfer is not valid because it does not permit alienation to anyone. Therefore, the restraint is void. Answer option A is incorrect. Answer option B is incorrect. The restraint is void and the woman has taken a fee simple. She is free to devise the land as she wishes without the consent of her heirs. Answer option C is incorrect. Every contract for the sale of real property, unless otherwise stated, contains an implied covenant that the seller will deliver marketable title to the buyer.

A woman duly executed a will under which she devised her farm to her nephew and bequeathed the residue of her estate to her niece. For 12 years after executing her will, the woman lived on her farm. Then she sold it and used the sales proceeds to purchase a home in the city, in which she lived until she died, never having changed her will. Following the admission of the will to probate, both the nephew and the niece claimed ownership of the home. There is no applicable statute. Who is the owner of the home? A. The nephew, because of the doctrine of ademption. B. The nephew, because of the doctrine of equitable estoppel. C. The niece, because of the doctrine of lapse. D. The niece, because she is the residuary legatee.

Solution: The correct answer is D. Answer option D is correct. Ademption occurs when a specific bequest has been made in a will, but the property bequeathed is no longer in the testator's estate when the testator dies. The gift will be adeemed, and the intended devisee will take nothing under the will. The doctrine of ademption ensures the nephew takes nothing. Answer option A is incorrect. The doctrine of ademption precludes the nephew from taking anything. Answer option B is incorrect. Courts do not normally modify wills on the basis of equity. Answer option C is incorrect. The doctrine of lapse applies when a beneficiary predeceases the testator.

A farmer owned 40 acres of farming land that had no access to a public road. He purchased an access easement from his neighbor, who owned land between the farmer's land and a state highway. Both the farmer's land and the neighbor's land were used solely for farming, and no residence existed on either property. The deed granting the easement specified the particular route the farmer was permitted to take across the neighbor's land. The farmer later purchased and built a home on a new parcel of land situated just beyond his farmland. The farmer began using the easement over the neighbor's land to drive into town approximately once every other day, which doubled the frequency of his use of the easement. The neighbor sued the farmer, asserting that the farmer's current use was beyond the scope of the easement. The neighbor sought an injunction ordering the farmer not to use the easement to drive to or from his home. Which party is likely to prevail? A. The farmer, because use of part of the farmer's land for residential purposes likely was anticipated at the time the easement was granted. B. The farmer, because the neighbor cannot demonstrate harm from the farmer's use. C. The neighbor, because the owner of the servient estate has the right to define the scope of the easement. D. The neighbor, because the farmer is using the easement to benefit a parcel other than the dominant estate.

Solution: The correct answer is D. Answer option D is correct. An appurtenant easement, which is an easement on one parcel of land (the servient estate) that is created to benefit another parcel of land (the dominant estate), may not be used to benefit an estate other than the dominant estate. At common law, if an appurtenant easement was so used, it was forfeited. There is a modern trend to award injunctive relief instead of forfeiture. Here, the farmer is using the appurtenant easement not to benefit his farmland but to benefit a different parcel of land acquired after the easement was created. Accordingly, the farmer's use of the appurtenant easement to benefit his new homestead is improper. Answer option A is incorrect because no part of the dominant estate is being used for residential purposes. Rather, another parcel of land owned by the farmer is being used for a residential purpose. Answer option B is incorrect because harm need not be shown to obtain injunctive relief under these circumstances. Answer option C is incorrect because the scope of an easement is not within the sole control of the owner of the servient estate; it is determined by the joint intent of the parties at the time the easement was created.

A homeowner and a neighbor owned adjoining parcels of land. Although the homeowner's land fronted on a public street, the homeowner also wanted access to a larger state highway adjacent to the neighbor's land. He therefore purchased an access easement from the neighbor for $5,000. The deed granting the easement did not specify the route of access over the neighbor's land. The homeowner thereafter did not use the easement. Several years later, the neighbor died, and the neighbor's daughter inherited the neighbor's land. The daughter built a fence along the entire common boundary line between the parcels. The fence remained in place, blocking the homeowner's access to the highway, in excess of the jurisdiction's statutory period. The homeowner then asserted the right to remove the fence and cross the daughter's property to access the highway. The neighbor's daughter objected, and the homeowner filed suit against her. Which party is likely to prevail? A. The homeowner, because the statute does not begin to run until the easement is asserted. B. The homeowner, because an express easement cannot be terminated by prescription. C. The neighbor's daughter, because the statutory period has elapsed. D. The neighbor's daughter, because the homeowner has abandoned the easement.

Solution: The correct answer is A. Answer option A is correct. The servient owner can extinguish an easement when she interferes with use of the easement in an adverse manner. Where, as here, the easement is not in use and the servient owner interferes with use of the easement by putting up a fence, the servient owner is not deemed to act adversely, and the statutory period does not begin to run until the dominant owner asserts her right of use. Thus, the statute has not run here, and the homeowner is entitled to enforce the easement. Answer option C is necessarily incorrect for these reasons. Answer option B is incorrect because easements can be terminated by prescription, provided that the requirements are met, including interference with use of the easement in an adverse manner for the statutory period. Answer option D is incorrect because an interest in real property is not treated as having been abandoned unless there is "clear and convincing" evidence, beyond mere nonuse, that the owner intended to abandon it. Here, no such evidence is present.

A landowner lawfully subdivided his land into 10 large lots. The recorded subdivision plan imposed no restrictions on any of the 10 lots. Within two months after recording the plan, the landowner conveyed Lot 1 to a buyer, by a deed that contained no restrictions on the lot's use. There was then a lull in sales. Two years later, the real estate market in the state had generally improved, and during the next six months, the landowner sold and conveyed eight of the remaining nine lots. In each of the eight deeds of conveyance, the landowner included the following language: "It is a term and condition of this conveyance, which shall be a covenant running with the land for the benefit of each of the 10 lots [with an appropriate reference to the recorded subdivision plan], that for 15 years from the date of recording of the plan, no use shall be made of the premises herein conveyed except for single-family residential purposes." The buyer of Lot 1 had actual knowledge of what the landowner had done. The landowner included the quoted language in part because the municipality had amended its zoning ordinance a year earlier to permit professional offices in any residential zone. Shortly after the landowner's most recent sale, when he owned only one unsold lot, the buyer of Lot 1 constructed a one-story house on Lot 1 and then conveyed Lot 1 to a doctor. The deed to the doctor contained no reference to any restriction on the use of Lot 1. The doctor applied for an appropriate certificate of occupancy to enable her to use a part of the house on Lot 1 as a medical office. The landowner, on behalf of himself as the owner of the unsold lot, and on behalf of the other lot owners, sued to enjoin the doctor from carrying out her plans and to impose the quoted restriction on Lot 1. Who is likely to prevail? A. The doctor, because Lot 1 was conveyed without the restrictive covenant in the deed to the first buyer and the subsequent deed to the doctor. B. The doctor, because zoning ordinances override private restrictive covenants as a matter of public policy. C. The landowner, because the doctor, as a successor in interest to the first buyer, is estopped from denying that Lot 1 remains subject to the zoning ordinance as it existed when the landowner conveyed Lot 1 to the first buyer. D. The landowner, because with the first buyer's knowledge of the facts, Lot 1 became incorporated into a common scheme.

Solution: The correct answer is A. Answer option A is correct. To be binding, a restrictive covenant must be placed on property at the time it is conveyed. Here, neither the deed to the first buyer nor the deed to the doctor contained the restrictive covenant. The burden cannot be attached to Lot 1 at a later time by someone who has no interest in Lot 1. Therefore, the doctor may proceed with her plan to use part of the property as a medical office. Answer option B is incorrect. This answer correctly concludes that the doctor will prevail, but it misstates the reasoning for this conclusion. Zoning ordinances do not automatically override a private restrictive covenant. The stricter of either the zoning ordinance or the covenant will prevail. Answer option C is incorrect. Public land use controls and private land use controls are separate issues. Zoning may be changed. In this case, the zoning was changed a year after the first buyer purchased Lot 1. The doctor's use of Lot 1 is governed by the zoning in existence during the time of the doctor's ownership, and the previous zoning of the property is irrelevant. Answer option D is incorrect. Here, the burden was not placed on Lot 1 when the first buyer accepted the deed. The first buyer's actual knowledge of the covenant two years later is irrelevant and does not incorporate Lot 1 into the common scheme of the subdivision. A common scheme argument may prevail as to subsequent purchasers of other lots in the subdivision.

A father conveyed a parcel of land to his son and daughter as tenants in common, each owning an undivided one-half interest. The son and daughter wanted to open a plant nursery on the land, for which they needed financing. Because no bank would lend them money, the son and daughter obtained a loan from their father, secured by a mortgage on the parcel, payable in monthly installments over the next seven years. The father did not record the mortgage. The son and daughter orally agreed that each would pay half of the installment due each month until the loan debt was paid. The daughter made her payments each month as agreed, but the son, due to financial difficulties, did not make any payments. Sympathetic to his son's situation, the father did not seek additional payment from the son or daughter. Shortly after the daughter had paid off her half of the loan, the father died, and the executor of the father's estate made demand on both the son and daughter for payment of the outstanding loan balance. The daughter demanded a release of her undivided one-half interest in the land on account of paying her half the loan. When the executor refused, the daughter brought an action to quiet title to her interest in the land. Is the daughter likely to prevail? A. No, because the land is held by the son and daughter as tenants in common. B. No, because there is no redemption of the mortgage until the entire loan is paid off. C. Yes, because the mortgage was never recorded. D. Yes, because she paid her half of the loan.

Solution: The correct answer is B. Answer option B is correct. A fractional owner of a property who pays off her pro rata share of a loan secured by a mortgage on the property does not have a right to clear title to her interest in the property until the entire loan secured by the mortgage is repaid. Answer option A is incorrect because the form of concurrent ownership of the property is immaterial to the rules regarding redemption. Answer option C is incorrect because the son and daughter are bound by the mortgage regardless of whether it was ever recorded. Recording protects parties against claims made by subsequent purchasers, which the son and daughter are not. Answer option D is incorrect because the daughter's agreement with the son that each would pay half the loan has no effect on the mortgage. The mortgagee is entitled to keep the mortgage on the property for as long as any amount of the loan remains outstanding.

A woman mortgaged her home to a bank to secure a $250,000 business startup loan. The bank promptly recorded the mortgage. Six months later, the woman mortgaged her home to a finance company to secure a $50,000 equipment loan. That mortgage was also promptly recorded. A year later, the woman sold her home to a friend. Thereafter, the friend borrowed $250,000 from his uncle, securing the loan with a mortgage on the home, with the understanding that the loan proceeds would be used to pay off the mortgage held by the bank, giving the uncle a first mortgage on the home. The uncle was unaware of the mortgage held by the finance company. His mortgage, like the others, was promptly recorded. The friend used the money he borrowed from his uncle to pay off the bank and got a release of the bank's mortgage, which he promptly recorded. When the finance company's $50,000 mortgage on the home came due, it was not paid, and the finance company brought an action to foreclose on the mortgage against the woman, the friend, and the friend's uncle, alleging that its mortgage on the home was senior to the uncle's mortgage. Which of the following determinations, if any, are required for the uncle's mortgage on the home to take priority over the finance company's mortgage? A. Only a finding that the uncle is entitled to have the bank's mortgage revived for his benefit and to be subrogated to the bank's original position as senior mortgagee. B. Only a finding that there are no countervailing equities in favor of the finance company. C. Both of the above findings are required. D. There are no findings under which the uncle's mortgage could take priority over the finance company's mortgage on these facts.

Solution: The correct answer is C. Answer C is correct. In general, the uncle's mortgage on the home would not be entitled to priority over the finance company's mortgage given the earlier timing and recordation of the finance company's mortgage. But under the doctrine of equitable subrogation, the uncle's mortgage would be entitled to priority over the finance company's mortgage if the court determines that the uncle is entitled to "step into the shoes" of the bank (subrogation) because he loaned his nephew money for the purpose of paying off the bank's mortgage (which had priority over the finance company's mortgage), and there are no countervailing equities in favor of the finance company. Answer option D is necessarily incorrect for these reasons. Answer options A and B are incorrect because each is incomplete; both findings are required.

A man borrowed money from a lender and mortgaged land that he owned to secure repayment of the loan. Before he had completely repaid the loan, the man conveyed the land to an investor, who expressly assumed the loan. The note and mortgage did not contain a due-on-sale clause. After the investor had made several payments on the loan, she defaulted on two payments. The lender notified the man and the investor of its intention to accelerate the loan pursuant to the terms of the note and mortgage unless the default was cured within 60 days. When neither the man nor the investor made the required payment, the lender accelerated the loan and initiated foreclosure proceedings, naming both the man and the investor as party defendants. The foreclosure sale resulted in a deficiency. The lender has sought a deficiency judgment against only the man, because the investor has become insolvent in the meantime. Will the court likely find the man liable for the deficiency? A. No, because the investor's express assumption of the loan released the man from liability. B. No, because the lender must first seek to obtain a deficiency judgment against the investor. C. Yes, because even after the assumption, the man remains liable as a surety of the investor in the absence of a release from the lender. D. Yes, because the note and mortgage did not contain a due-on-sale clause.

Solution: The correct answer is C. Answer option C is correct. Absent novation, mere assumption of a mortgage does not relieve the borrower of liability. A transferee who assumes a mortgage becomes primarily liable for it. The man was secondarily liable for the mortgage. Answer option A is incorrect. Answer option B is incorrect. The investor is insolvent and the man remains liable for the mortgage, so the lender may seek a deficiency judgment against him. Answer option D is incorrect. A due-on-sale clause in a mortgage provides that, if the mortgagor-borrower transfers the real property securing the mortgage, then the balance of the mortgage must be paid in full. The absence of such a clause here does not impact the man's liability.

A homeowner and a neighbor owned adjacent parcels of land. The homeowner feared that the neighbor might build a gas station on the neighbor's land, and that such a use would create a danger of oil and gas leaking across the property boundary onto the homeowner's property. The homeowner therefore paid the neighbor $1,000 in exchange for the neighbor's promise not to build a gas station on his property. The agreement, which was memorialized in a signed writing that the homeowner properly recorded, stated that it also bound the neighbor's heirs and assignees. Two years later, the neighbor sold his parcel to a gas station operator, who began building a gas station on the parcel. The gas station operator was unaware of the landowner-neighbor agreement. The homeowner sued the gas station operator for an injunction ordering her to cease building the gas station. Which party is likely to prevail? A. The gas station operator, based on a lack of horizontal privity. B. The gas station operator, based on a lack of notice. C. The homeowner, based on enforcement of the servitude. D. The homeowner, based on a theory of private nuisance.

Solution: The correct answer is C. Answer option C is correct. For purposes of injunctive relief, the doctrine of equitable servitudes, not the law of real covenants, governs whether the burden or benefit of a covenant runs with the land. Under the doctrine of equitable servitudes, the burden runs with the land if: (1) the parties intend that it do so; (2) the covenant touches and concerns the burdened property and a benefitted property; and (3) the promisor's successor in interest has notice of the covenant before purchasing the burdened property. Privity is not required. On the facts given here, intention exists because the writing indicated that it bound the neighbor's heirs and assignees. The covenant touches and concerns the burdened parcel because it restricts what can be done on that parcel. Notice exists because the agreement was recorded. Therefore, the homeowner may sue the gas station operator for an injunction enforcing the restrictive covenant. Answer options A and B are necessarily incorrect for these reasons. Answer option D is incorrect because there is no indication that the gas station is substantially and unreasonably interfering with the homeowner's use and enjoyment of the property. Rather, the homeowner is concerned about the potential of gas leaks that have not yet materialized.

A homeowner and her neighbor were both dentists. Although the neighbor had retired, the homeowner continued to practice. The neighbor owned two adjacent parcels, each with a single-family home on it. The homeowner purchased one of the neighbor's parcels. In connection with the deed from the neighbor to the homeowner, the homeowner paid the neighbor $1,000 in exchange for the neighbor's promise not to practice dentistry within the town at any time during the next five years. The agreement, which was memorialized in a signed writing that the homeowner properly recorded, stated that it also bound the neighbor's heirs and assignees. A year after the agreement was signed, the neighbor sold her remaining parcel to a buyer. The buyer opened a dental practice in the town, adversely impacting the homeowner's practice. The homeowner sued the buyer for damages for breach of the homeowner-neighbor agreement. What would be a proper basis to find in favor of the buyer? A. There is a lack of horizontal privity. B. There is a lack of vertical privity. C. The promise does not touch and concern the parcel the buyer purchased. D. There was a lack of notice.

Solution: The correct answer is C. Answer option C is correct. In order for a burden to run under the law of real covenants, the promise must touch and concern both the burdened parcel and a benefitted parcel. Although a covenant not to compete may touch and concern a burdened parcel if the covenant prohibits the promisor from operating the prohibited business on that parcel, from the facts given here, the covenant not to compete has nothing to do with the purportedly burdened parcel (which is the site of a single-family home, not a business). It is personal in nature. Accordingly, the touch-and-concern requirement for the burden to run is not met here, and the buyer is not bound by the covenant. Answer option A is incorrect. Although horizontal privity is required for the burden to run, it is present here because the promise was made in connection with a deed from the neighbor to the homeowner. Answer option B is incorrect. Although vertical privity is required for the burden to run, it is present here because the neighbor sold her entire interest in the burdened parcel to the buyer in a consensual transfer. Answer option D is incorrect because, although notice is required for a burden to run, there is constructive notice of the covenant by virtue of the agreement being properly recorded.

A man decided to give a cabin he owned to his daughter at his death. To accomplish this goal, he delivered to his attorney a deed that fully complied with the applicable statute of frauds and told his attorney to record the deed when he died unless he later gave the attorney instructions to the contrary. Three weeks after dropping off the deed, the man properly drafted and executed his own will, which left all of his real property to his son. One year later, the man died, and the attorney immediately recorded the deed. At the time of the man's death, the cabin was titled in his name and he owned no other real property. The daughter and the son now disagree as to who is entitled to ownership of the cabin. Other than the jurisdiction's statute of frauds and statute of wills, there are no applicable statutes. Who is entitled to ownership of the cabin? A. The daughter, because the attorney was, for gift-law purposes, a trustee for the daughter. B. The daughter, because the deed fully complied with the statute of frauds. C. The son, because the deed was not delivered to the daughter during the man's lifetime. D. The son, because the proper execution of the will revoked the earlier gift to the daughter.

Solution: The correct answer is C. Answer option C is correct. To validly transfer property by deed there must be intent to transfer title. Delivery made to a disinterested third party will be deemed to show the grantor's intent to transfer title on the date the deed was delivered if: (1) the grantor does not retain the power to reclaim the deed; (2) the terms for delivering the deed to the grantee are in writing; and, (3) all conditions on the transfer of title (e.g., payment of the purchase price) have been satisfied. The man told his attorney to record the deed when he died unless he later gave the attorney instructions to the contrary. Thus, the man retained the power to reclaim the deed, and the arrangement he made with his attorney did not transfer title to the daughter. As such, the son took the property by way of the will. Answer option A is incorrect. Delivery of the deed would have been necessary for the daughter to have taken the property. The man retained the power to reclaim the property and therefore the attorney could not be said to have acted as the daughter's trustee. Answer option B is incorrect. Compliance with the statute of frauds is necessary to transfer property by deed but is not itself sufficient to effectuate transfer. There must also be intent to transfer title, delivery, and acceptance. Answer option D is incorrect. No gift was ever actually made to the daughter, and therefore the will revoked nothing.

A woman owned a four-unit apartment building and lived in one of the units. When one of her tenants vacated his apartment, the woman placed an advertisement in the local paper that read as follows: "Large two-bedroom apartment available for rent. White male preferred." The woman's preference was motivated by the fact that she liked to have a mix of tenants of both genders and from various racial and ethnic backgrounds in her building, and of the remaining rented units, one was rented to an African American man and the other to a Pacific Islander woman. Based upon these facts, which of the following statements is true? A. The federal Fair Housing Act makes it illegal for the woman to refuse to rent her units to prospective tenants because of their race or gender. B. The woman's motive absolves her from any liability under the federal Fair Housing Act. C. There are no violations of any federal laws under these facts. D. Under the federal Fair Housing Act, the woman was not permitted to state a racial or gender preference in the advertisement.

Solution: The correct answer is D. Answer option D is correct. The Fair Housing Act (Title VIII of the Civil Rights Act of 1968) (FHA) prohibits discrimination in housing against members of certain protected classes who are engaging in housing-related activities (such as renting and selling). The protected classes include race, color, national origin, religion, sex, disability, and family status. Prohibited activities against the protected classes include advertising discriminatory terms. Although there is a broad exemption from the FHA for owners who have no more than three single-family dwellings or who have an owner-occupied apartment with no more than four units, that exemption does not permit discriminatory advertising. See 24 CFR § 100.10(c). Answer option A is incorrect. The FHA bars discrimination based on race, ethnicity, religion, national origin, gender, and disability in the sale or rental of a dwelling. However, with the exception of the ban on discriminatory advertising, the FHA does not apply to owners who have no more than three single-family dwellings or who have an owner-occupied apartment with no more than four units. Answer option B is incorrect. The FHA does not create an exception for landlords seeking diversity. Answer option C is incorrect for the reasons set forth above.

A homeowner listed his home for sale with a real estate broker. The written six-month exclusive-right-to-sell listing agreement provided for the payment of a commission if the home sold. In accordance with the listing agreement, the broker promptly took reasonable steps to market the home, incurring expenses for her efforts. Five months into the listing period, without involving the broker, the homeowner accepted an offer to purchase from his cousin. The broker learned of the contract only when the sale of the home to the cousin closed, one month after the listing period had expired. Is the broker entitled to any payment? A. No, because the broker engaged in no negotiations with the cousin. B. No, because the closing occurred after the listing period had expired. C. Yes, but only reimbursement for her expenses. D. Yes, the full commission, because the homeowner accepted the cousin's offer to purchase during the listing period.

Solution: The correct answer is D. Answer option D is correct. The agreement provided for the payment of a commission if the home sold during the listing period. Payment was not made contingent on the broker actually procuring the sale. Answer option A is incorrect. Answer option B is incorrect. The offer was accepted within the six-month time frame. Answer option C is incorrect. The broker is entitled to the full commission as per the agreement.

A man and his neighbor owned homes on adjacent lots in a subdivision. The subdivision's recorded restrictions did not prohibit detached storage sheds, and several homeowners in the subdivision had placed such sheds in their backyards. Because the man and the neighbor thought the sheds were unsightly, they both agreed in writing not to place detached storage sheds in their respective yards. Their agreement was drafted in recordable form and stated that it was enforceable by and against all assignees, heirs, and successors. The agreement was promptly recorded. Three years later, the neighbor gave his home to his daughter. Shortly after moving into the home, the daughter learned of the restriction. She informed the man that she planned to put a detached storage shed in her backyard, claiming that the restriction was not enforceable against her. Does the man have the right to enjoin the neighbor's daughter from placing a detached storage shed in her yard? A. No, because several homeowners in the subdivision have storage sheds in their yards. B. No, because there was no horizontal privity between the man and the neighbor. C. Yes, because the neighbor conveyed the home to the daughter by gift rather than by sale. D. Yes, because the restriction is binding on the daughter as a successor.

Solution: The correct answer is D. Answer option D is correct. The man and his neighbor created an equitable servitude, and therefore the man may take an action to enforce the restriction they agreed to impose upon use of their land. An equitable servitude is enforceable where there exists: a written document, part performance, or estoppel; intent to bind successors in interest; an agreement which touches and concerns the land; and, notice by the subsequent owner. All of these criteria were met and the agreement between the man and his neighbor runs with the land and is enforceable against the daughter. Answer option A is incorrect. The man is seeking to enforce the terms of an equitable servitude, not a common development scheme. Answer option B is incorrect. Horizontal privity is needed for real covenants, not equitable servitudes. The situation might be different if the man were seeking to enforce an agreement at law and not at equity. Answer option C is incorrect. Equitable servitudes run with the land and apply to gifts or sales.

A seller who owned land entered into a valid written agreement to sell the land to a buyer by installment purchase. The contract stipulated that the seller would deliver to the buyer, upon payment of the last installment due, "a warranty deed sufficient to convey a fee simple title." The contract contained no other provision that could be construed as referring to title. The buyer entered into possession of the land. After making 10 of the 300 installment payments obligated under the contract, the buyer discovered that there was outstanding a valid and enforceable mortgage on the land, securing the payment of a debt in the amount of 25 percent of the purchase price that the buyer had agreed to pay. There was no evidence that the seller had ever been late in payments due under the mortgage, and there was no evidence of any danger of insolvency of the seller. The value of the land was then four times the amount due on the debt secured by the mortgage. The buyer quit possession of the land, stopped making payments on the contract, and demanded that the seller repay the amounts that the buyer had paid under the contract. After the seller refused the demand, the buyer sued the seller to recover damages for the seller's alleged breach of the contract. Should damages be awarded to the buyer? A. Yes, because in the absence of a contrary express agreement, an obligation to convey marketable title is implied. B. Yes, because an installment purchase contract is treated as a mortgage, and the outstanding mortgage impairs the buyer's equity of redemption. C. No, because an installment purchase contract is treated as a security device. D. No, because the time for the seller to deliver marketable title has not arrived.

Solution: The correct answer is D. Answer option D is correct. Title does not have to be marketable until the closing date, when all payments have been received. The buyer still has 290 payments to make. A mortgage can render title unmarketable, but it is most likely in this case that title will be marketable when all of the buyer's payments have been made under the agreement. The seller has made all mortgage payments timely. The amount of the mortgage debt is 25 percent of the purchase price the buyer will pay, and the land is four times more valuable than the debt owed, so it is likely that the mortgage debt will be paid off by the time the seller must provide the warranty deed, and thus the buyer is not entitled to damages at this time. Answer option A is incorrect. It is true that in the absence of a contrary express agreement there is an obligation to convey a marketable title. A mortgage is an interest held by a third party and does make title unmarketable. The time for title to be marketable, however, is at the closing, when the seller is to provide the warranty deed. A buyer may be able to object to title earlier only if it appears unlikely that the seller will be able to provide a marketable title at the time of closing. It is most likely that title will be marketable at the time when all of the buyer's payments have been made. If not, that is the time for the buyer to object. Answer option B is incorrect. An installment purchase contract is often treated as a mortgage, and on default there must be a foreclosure of the buyer's equity of redemption. In this case, the buyer may have stopped making payments, but the seller has not yet sought to enforce the installment purchase contract. Because it is the buyer who is seeking damages, the buyer's equity of redemption, if any, is not at issue. Answer option C is incorrect. This answer correctly concludes that damages will not be awarded but misstates the reasoning for this conclusion. An installment purchase contract is a seller's security device. Payments are made over time, and when all payments have been made, a deed will be given.

In November, a seller and a buyer entered into a land-sale contract for a cabin, with the closing set for mid-January. The cabin was located in a region of the country that experiences severe cold temperatures. Although the cabin had a central heating system, the seller had not turned on the heat that winter. In mid-January, just before closing, the buyer visited the cabin and discovered that the plumbing in the cabin had frozen and pipes had burst, causing $10,000 in water damage. The parties closed on the cabin and the seller conveyed title to the buyer. The contract does not address risk of loss. Who is liable for the damage to the cabin? A. The buyer, because he bore the risk of loss under the doctrine of equitable conversion. B. The buyer, because he went through with the closing knowing that the cabin had suffered water damage. C. The seller, because he owned the cabin until closing. D. The seller, because the damage to the cabin was the result of his negligence.

Solution: The correct answer is D. Answer option D is correct. Under the doctrine of equitable conversion, the law treats the signing of the contract as vesting equitable ownership of the property in the buyer. Thus, most courts hold, the risk of loss shifts to the buyer on the signing of the contract, even if the buyer never takes possession. A key exception to this rule of shifting the risk of loss to the buyer is that the seller will bear the risk of loss if that loss is due to his negligence, as was the case here with the seller's failure to have the heat turned on while still in possession of the cabin. Thus, the seller will be liable for the damage. Answer options A and C are necessarily incorrect for these reasons. Answer option B is incorrect because the buyer going through with the transaction will not extinguish the seller's liability for damages on account of negligence.