Real Property (MBE) - PRACTICE QUESTIONS

An owner entered into a contract to sell her house to a buyer. The contract's only provision concerning the closing date provided that the closing would occur on July 1. On July 1, the buyer informed the owner that she was unable to close at that time because of an unavoidable overseas obligation required by her job. The buyer stated that she would be able to close on July 8. The owner, having recently found another buyer willing to pay more for the house, has filed an action to rescind the contract.Is the owner likely to succeed in his action to rescind the contract? A No, because strict adherence to the closing date set in the contract is not required. B No, because the buyer has not breached the contract. C Yes, because the buyer has breached the contract. D Yes, because the owner was ready to perform her duties under the contract by the closing date.

Answer choice A is correct. A court will assume that time is not of the essence in a real estate contract, unless the contract specifically states that time is of the essence, circumstances indicate that this was the intention of the parties, or one party gives the other party notice that time is of the essence. If time is not of the essence, strict adherence to the closing date set in the contract will not be required in equity. Thus, a failure to perform on the closing date will generally not be grounds for rescission of the contract. Answer choice B is incorrect because, regardless of whether time is of the essence in a real estate contract, the party that fails to render performance on the date set for closing in the contract will be in breach. Answer choice C is incorrect because, although the buyer did breach the contract, this is not a valid ground to rescind the contract. Answer choice D is incorrect. A party who establishes that he was ready to perform on the date set for closing is entitled to damages for the other party's failure to close, but proof that a party is willing and able to perform his obligation under the contract will not justify rescission of the contract.

A man bought a warehouse as part of his new manufacturing business. The warehouse required several upgrades in order to serve as an office and storage area. To finance these upgrades, the man took out a loan from a bank secured by a mortgage on the warehouse. The mortgage provided that the bank could declare the entire loan due and payable if the warehouse was ever sold, transferred, or encumbered without the bank's permission. The bank promptly recorded the mortgage and the man made timely payments for six years.The man later decided to expand his business and required a loan for new equipment. He took out a loan from a second bank secured by a mortgage on the warehouse. The second bank recorded its mortgage. Upon learning of the mortgage to the second bank, the first bank demanded the balance of the man's mortgage obligation, plus interest.Can the first bank foreclose on the property if the man refuses to pay the balance? A Yes, because the mortgage contains a valid due-on-encumbrance clause. B Yes, because the first bank holds the senior mortgage interest on the property. C No, because the man's mortgage payments were current. D No, because the warehouse was being used for commercial purposes.

Answer choice A is correct. A due-on-encumbrance clause gives the lender the right to accelerate a mortgage obligation upon the mortgagor obtaining a second mortgage or otherwise encumbering the property. A due-on-encumbrance clause is generally enforceable to the same extent as a due-on-sale clause. Upon such an encumbrance, the lender can demand immediate payment of the full amount of the outstanding obligation, including interest. If the mortgagor refuses to pay the balance, he is in default and the lender can foreclose on the property. In this case, the first bank's mortgage contained a valid due-on-encumbrance clause. The man violated this clause when he obtained a second mortgage without the first bank's permission. Accordingly, the first bank can demand the balance of the mortgage obligation. If the man fails to pay, he is in default and the first bank can foreclose on the property. Answer choice B is incorrect. Although it is true that the first bank holds the senior mortgage interest, this is not the reason why it can foreclose on the property. The first bank would be able to foreclose on the property even if it held a junior mortgage interest because the mortgage obligation contained a valid due-on-encumbrance clause. Answer choice C is incorrect. Although the man had not defaulted on his mortgage payments to the first bank, he violated the due-on-encumbrance clause by obtaining a second mortgage without the first bank's permission. Accordingly, the man will be in default if he fails to pay the balance of the mortgage pursuant to the due-on-encumbrance clause. Therefore, the first bank can foreclose on the property even though the man's mortgage payments prior to the violation of the clause were up to date. Answer choice D is incorrect because a due-on-encumbrance clause is valid regardless of whether the property is for commercial or residential use.

A partnership purchased land intending to develop it commercially and financed the purchase with a loan from a bank. As security for the loan, the bank took a mortgage in the land, which the bank recorded. The partnership subsequently defaulted on the bank loan and the bank initiated foreclosure proceedings on its mortgage. At the foreclosure sale, as permitted by state law, the bank purchased the land. Several months later the bank sold the land to a developer for less than the bank paid for it at the foreclosure sale.To what extent does the bank have an interest in the land? A None, because the bank's mortgage on the land was extinguished by the foreclosure sale. B The bank's mortgage remains to the extent that the bank suffered a loss on the resale of land to the developer. C The bank's mortgage remains in full, because the bank, as mortgagee, purchased the property at the foreclosure sale. D The bank's mortgage remains in full, because the developer, as a subsequent purchaser, had record notice of the bank's mortgage.

Answer choice A is correct. A foreclosure sale extinguishes the mortgage interest being foreclosed upon. Consequently, the developer's ownership of the land is not subject to the bank's mortgage. Answer choice B is therefore incorrect. Neither the fact that the mortgagee purchased the property at the foreclosure sale, nor the fact that the mortgagee subsequently suffered a loss in reselling the property, serves to revive any portion of the mortgagee's interest in the property. Answer choice C is also therefore incorrect. Answer choice D is incorrect because, even if the local land records at the time of the developer's purchase of the land from the bank continued to indicate that the bank held a mortgage on the land, such records, while they may give one property interest priority over another, do not operate to create an interest in real property when none exists.

A private company managed a publicly funded experimental project for the conversion of garbage into energy through biological means. Despite locating the project in a sparsely populated area on land purchased from a real-estate investment trust, the company has nevertheless received complaints from those living near the project about the repugnant smells emanating from the site. One neighbor who rents a farmhouse for use as his personal residence on an annual basis from an individual farmer can no longer reside on the property. He has filed suit against the company, seeking damages.Of the following doctrines, which provides the neighbor with the best chance for recovery? A Private nuisance B Public nuisance C Constructive eviction D Waste

Answer choice A is correct. A private nuisance is a substantial, unreasonable interference with another individual's use or enjoyment of his property. The interference may be intentional, negligent, reckless, or the result of abnormally dangerous conduct. Anyone with possessory rights in the property may bring a nuisance claim. Here, the smells emanating from the project prevent the neighbor from living in the farmhouse. Although this interference is clearly substantial, it is arguable as to whether it is unreasonable. Nevertheless, of the four options, a private nuisance provides the neighbor with the best chance of recovery. Answer choice B is incorrect. A public nuisance is an unreasonable interference with the health, safety, or property rights of the community. Although the smells emanating from the project site are adversely affecting those who live in the area, to recover for a public nuisance, a plaintiff must show that he suffered a different kind of harm than that suffered by the rest of the community. There is no indication that the harm suffered by the neighbor is different in kind from that suffered by the rest of the community in this case. Answer choice C is incorrect because constructive eviction is based on a landlord's substantial interference with the tenant's use and enjoyment of the leasehold premises by breaching a duty owed by the landlord to the tenant. Here, there is no landlord-tenant relationship between the private company that is managing the experimental project and the lessee of the neighboring farmhouse. The lessor of the farmhouse is an individual farmer. The conduct of the individual farmer has not caused the neighbor's issue. Answer choice D is incorrect. Although the neighbor is complaining of the adverse effects of the handling of garbage, a legal action for waste is available only to a plaintiff who holds an interest in the same property as the defendant, such as a life tenant and a remainderman or a tenant-in-common against another tenant-in-common. Because the neighbor does not have a property interest in the site where the project is being conducted and the private company does not have a property interest in the farmhouse rented by the neighbor, waste is not available as a cause of action that the neighbor can pursue against the company.

A developer obtained a loan from a bank to construct an apartment building. The loan was evidenced by a note and secured by a mortgage on the apartment building. After making the required installment payments on the note to the bank for several years, the developer defaulted on the loan. The bank elected not to foreclose on the mortgage, but instead, sued the developer personally for the unpaid balance of the note because the note contained an acceleration clause that made the entire unpaid balance due upon default. The court rendered a judgment in the bank's favor. The bank promptly and properly filed the judgment creating a lien, pursuant to the applicable state law, on any real property then owned or subsequently acquired by the developer for the next 10 years. Subsequently, the developer secured a loan from a private investor to purchase a small strip mall. This loan was also evidenced by a note and secured by a mortgage on the mall. Once again, after making the required installment payments on the note to the private investor for several years, the developer defaulted on this note. The private investor filed an action to foreclose on the mortgage it held on the mall. The bank was made a party to this action and sought to enforce its judgment lien against the mall. The court recognized the rights of both the private investor and the bank in the mall, and ordered the sale of the mall. The proceeds from the sale, after the costs associated with the sale were paid, were more than sufficient to satisfy the developer's outstanding obligation to the private investor or judgment obtained by the bank, but not both.Who has priority to the net sale proceeds? A The private investor, because the funds from the loan were used to purchase the mall. B The private investor, because the investor initiated the foreclosure on the mall. C The bank, because the judgment lien occurred before the mortgage on the mall. D The bank, because a judgment lien has priority over a mortgage.

Answer choice A is correct. A purchase-money mortgage is a mortgage granted to (i) the seller of real property or (ii) a third-party lender, to the extent that the loan proceeds are used to acquire title to the real property or construct improvements on the real property if the mortgage is given as part of the same transaction in which title is acquired. A purchase-money mortgage has priority over mortgages and liens created by or that arose against the purchaser-mortgagor prior to the purchaser mortgagor's acquisition of the property, whether or not recorded. Here, with regard to the mall, the private investor has a purchase money mortgage because the developer used the funds loaned by the private investor to purchase the mall. Consequently, the private investor's mortgage has priority over any other mortgages or liens on the mall. Answer choice B is incorrect. Although the private investor initiated the foreclosure action, the private investor's priority to the net proceeds from the sale of the mall stems from the status of the investor's mortgage as a purchase money mortgage, not from the private investor's role as plaintiff in this action. Answer choice C is incorrect because, although the judgment lien was created prior to the creation of the mortgage on the mall, the investor's mortgage on the mall has priority because it was a purchase money mortgage. Answer choice D is incorrect because a judgment lien does not automatically have priority over a mortgage.

Pursuant to a written lease, the owner of a warehouse leased the premises to a manufacturer for a term of one year at a total rent of $60,000. The lease called for the rent to be paid in monthly installments of $5,000 at the beginning of each month. The lease contained no provisions regarding termination or extension. The manufacturer promptly made the required rental payment each month. At the end of the year, the owner did not provide notice to the manufacturer of the termination of the lease. The manufacturer tendered a rental payment of $5,000 for the following month to the owner, which the owner refused to accept.In the absence of an applicable statute, how much advance notice must the owner give the manufacturer before seeking to evict the manufacturer? A None, because the manufacturer is a tenant at sufferance. B A reasonable time, because the manufacturer is a tenant at will. C A month, because the manufacturer, by tendering a rental payment, has created a periodic tenancy. D Six months, because the manufacturer, by tendering a rental payment, has created a tenancy for years.

Answer choice A is correct. A tenancy for years is an estate measured by a fixed and ascertainable amount of time. Termination occurs automatically upon the expiration of the term; no notice is required. Any right to renew the agreement must be explicitly set out in the lease. In this case, the owner and the manufacturer had a tenancy for years. This tenancy expired at the end of its term, which was one year. The owner was not required to give notice of its termination. Consequently, by remaining on the premises after the termination of the tenancy for years, the manufacturer became a holdover tenant (i.e., a tenant at sufferance). Because the owner refused to accept the manufacturer's tender of a rental payment, a new tenancy was not created. Therefore, the owner may file a legal action to evict the manufacturer without further notice because the manufacturer, by remaining in the warehouse past the expiration of the one-year term of the lease, is wrongfully in possession of the premises. Answer choice B is incorrect. Although a landlord must give a tenant at will a reasonable time in which to vacate the premises, the manufacturer is not a tenant at will. There was no express or implied agreement between the owner and the manufacturer for the manufacturer to continue to occupy the warehouse. Answer choice C is incorrect. Although a landlord can create a periodic tenancy by accepting a tenant's tender of a rental payment after the expiration of the lease, here the owner did not accept the manufacturer's tendered rental payment. Answer choice D is incorrect. A landlord, by accepting rent after the termination of a lease, creates a periodic tenancy, even when the prior tenancy was a tenancy for years. However, the owner did not accept the manufacturer's rental payment in this case. Thus, neither a tenancy for years nor a periodic tenancy was created. In addition, although six months' notice is required when a year-to-year periodic tenancy exists, a landlord is not required to give notice of the termination of a tenancy for years.

A purse maker sought to market its line of "smart" purses that were compatible with a new handheld device. As part of its plans, the purse maker sought to purchase a store from which to sell its purses. The purse maker found a suitable store, and entered into a contract with the owner of a store. The contract was in writing, signed by both parties, and stated the essential terms, including a closing date in 30 days. Due to the purse maker's plan to sell her purses in advance of the release of the new handheld device, the contract stated that the closing date could not be delayed. One week before the closing date, the purse maker discovered that the store was in violation of a zoning ordinance that mandated an updated version of the current fire sprinkler system. The owner promised that he would promptly update the fire sprinkler system and that, although it would not be finished by the closing date, it would be done in time for the grand opening of the store. In addition, the owner promised to provide a warranty deed upon closing to shield the purse maker from any potential liability stemming from the outdated fire sprinkler system. On the day before the grand opening, the purse maker refused to close the land sale deal.In an action by the owner for specific performance against the purse maker, who will prevail? A The purse maker, because the owner did not provide marketable title to her on the closing date as stated in the land sales contract. B The purse maker, because the warranty deed would not protect her from liability for the zoning ordinance violation. C The owner, because the warranty deed would protect the purse maker from liability for the zoning ordinance violation. D The owner, because the fire sprinkler system would be updated in accordance with the zoning ordinance before the store's grand opening.

Answer choice A is correct. Absent contrary language, an implied covenant of marketable title (i.e., a title free from defects) is part of a land sales contract. Here, the owner was obligated to deliver marketable title to the purse maker on the date of the closing. Generally, a court will assume that time is not of the essence in a real estate contract, unless the contract specifically states that time is of the essence, circumstances indicate that this was the intention of the parties, or one party gives the other party notice that time is of the essence. In this case, the contract specifically stated the closing date could not be delayed, and thus time was of the essence. Because the out-of-date fire sprinkler system in the warehouse was in violation of a zoning ordinance on the closing date, the title was unmarketable*, and the purse maker was not obligated to close the land sale deal. This is true even if the issue was corrected within a reasonable time after the closing date because time was of the essence. Answer choice B is incorrect because the warranty deed would most likely protect the purse maker from liability for the zoning violation and, even if it did not, the owner was not entitled to specific performance of the contract because he had failed to provide marketable title to the purse maker at closing. Answer choice C is incorrect because, although the warranty deed would likely protect the purse maker from liability, the owner is still required to provide marketable title upon closing. Answer choice D is incorrect because even if the fire sprinkler system was updated before the store's grand opening, this did not obligate the purse maker to close without marketable title. *Good and Marketable Title means such title free from all liens, mortgages, security interests, encumbrances and adverse claims or other charges.

A mother owned a vacation cabin, but as she no longer visited it, she decided to convey the cabin to her daughter. The mother executed a valid, written deed, and promptly and properly recorded it. The mother did not tell her daughter about her intention of giving the cabin to her because she wanted to surprise her with the gift at an upcoming family reunion. Prior to the reunion, the daughter died suddenly. In her will, the daughter left her entire estate to her best friend. The mother, not wanting the cabin to go to someone who was not a family member, brought an action to set aside the conveyance to the best friend.Who will prevail? A The best friend, because the mother recorded the deed conveying the cabin to her daughter. B The best friend, because the mother's intent was evidenced by a valid deed in writing. C The mother, because she did not deliver the deed to her daughter. D The mother, because the daughter did not accept her mother's gift.

Answer choice A is correct. Although it is often stated that a deed must be delivered in order for a real property interest to pass (i.e., a delivery requirement), the term "delivery" is used as shorthand for the existence of the necessary grantor intent. Physical transfer of a deed is not required and is not conclusive evidence of the grantor's intent. The execution and recording of a deed creates a rebuttable presumption that the deed is to be presently operative. Here, there is a presumption of delivery because the mother recorded the deed. Answer choice B is incorrect because, although a valid, written deed does evidence the mother's intent to make a gift to her daughter, the deed on its own does not create a presumption of delivery. Answer choice C is incorrect because actual, physical delivery is not required--the recording of the deed was sufficient to create a presumption of delivery. Answer choice D is incorrect because, although acceptance is required for a transfer to be complete, the grantee is generally presumed to have accepted any beneficial conveyance. Acceptance relates back to the time the deed was transferred, unless a bona fide purchaser or creditor of the grantor would be negatively affected by doing so, which is not the case here.

A man purchased undeveloped land with a bank loan secured by a mortgage on the property. The deed and mortgage were promptly recorded. A year later, the man decided to sell the property to a wealthy widower. The widower purchased the property, recorded his interest, and assumed the mortgage. Several years later, the widower gave the property to his daughter. The widower did not tell his daughter about the mortgage but instead continued to make the mortgage payments. The deed, which contained no mention of the mortgage, was promptly recorded by the daughter. When the widower died, he devised all of his real property to his daughter. He left the remainder of his estate to his son. Following the widower's death, no one made payments on the loan, causing it to fall into default.May the bank foreclose on the property? A Yes, because the bank recorded its mortgage. B Yes, because the daughter received the property as a gift. C No, because the daughter recorded her deed that made no mention of the mortgage. D No, because of the exoneration of liens doctrine.

Answer choice A is correct. Every jurisdiction has enacted a recording statute. However, if the recording act does not govern, the common law first in time, first in right rule generally applies to determine priorities between competing interests in land. All of the recording acts require that the later grantee acquired the property for value in order to be protected by the act. Here, the daughter received the land as a gift, so she cannot claim protection of the recording act, and the common law first in time rule gives priority to bank. This analysis seems to implicate answer choice B, however that is not the end of the inquiry. Under the shelter rule, a grantor who is protected by the act can pass that protection on to a grantee who would otherwise by unprotected. Here, the daughter is not protected by the shelter rule because the widower is, himself, not protected by the recording act. Because the bank properly recorded its mortgage prior to the widower's purchase of the property, the widower was (i) on notice of the mortgage, and/or (ii) failed to record first. Thus, under any recording act, the widower is not protected because the bank properly recorded its interest. It is for this reason that the daughter is also not protected under the shelter rule. Answer choice B is incorrect because the manner in which the daughter acquired the property is irrelevant. The bank would have prevailed even had the daughter purchased the land from the widower because the bank recorded its mortgage prior to the man's transfer of the land to the widower, providing notice and/or recording first under any type of recording act. Answer choice C is incorrect because although the daughter had no personal knowledge of the mortgage nor did the deed reference the mortgage, she took the property subject to the recorded mortgage. Answer choice D is incorrect because the exoneration of liens doctrine does not apply to the mortgage on the land. The land was transferred to the daughter prior the widower's death; it did not pass to the daughter through the widower's will.

A buyer and seller entered into a written agreement for the purchase and sale of a residential home. The land sales contract stated that the buyer would pay $250,000 in exchange for the delivery of a general warranty deed. The contract called for the closing to take place on March 15. After executing the land sales contract but prior to the closing, the buyer encountered substantial difficulties in obtaining the financing necessary to purchase the home despite acting in good faith. On March 10, the buyer informed the seller in writing that he would not be able to close on March 15 and would need "a few extra days." On March 19, the buyer attempted to pay the seller the $250,000 but the seller refused, and did not provide the buyer with a general warranty deed. The seller realized that he could get a better offer on the home. The buyer brought an action seeking specific performance of the land sales contract.Will the buyer likely prevail? A Yes, because the buyer was ready to perform within a reasonable time after the intended closing date. B Yes, because the buyer acted in good faith in attempting to obtain financing prior to the closing date. C No, because the buyer breached the contract by failing to pay on the closing date. D No, because monetary damages are an adequate remedy for the buyer.

Answer choice A is correct. Generally, a court will assume that time is not of the essence in a real estate contract, unless the contract specifically states that time is of the essence. If time is not of the essence, strict adherence to the closing date set in the contract will not be required in equity. Thus, a failure to perform will generally not be grounds for rescission of the contract. A party can sue for specific performance, though, as long as the party was ready to perform within a reasonable time from the date set for performance. Here, the buyer was not able to close on the anticipated closing date of March 15. However, there are no facts to indicate that "time was of the essence." As a result, the buyer can sue for specific performance because he was ready to perform under the contract within a reasonable time from the date set for performance (i.e., the closing date). Answer choice B is incorrect because the buyer will not prevail merely because he acted in good faith in attempting to obtain financing, but because he was able to perform shortly after the original closing date. Answer choice C is incorrect because, although the party that fails to render performance on the date set for closing in the contract will be in breach, the party can still sue for specific performance as long as the party was ready to perform within a reasonable time. Answer choice D is incorrect. The buyer is entitled to specific performance for a seller's breach of a contract to sell a real property interest because the buyer's remedy at law is considered inadequate due to the unique nature of land.

A business owner borrowed money from a financial institution in order to expand his business. The business owner executed a nonnegotiable promissory note to evidence his personal liability to repay the financial institution. In addition, the business owner granted the financial institution a mortgage on his condominium that was evidenced by a written document as security for the loan. By a separate written document, the financial institution assigned its interest in the note to a third party. This document made no mention of the mortgage.What is the effect of this transaction on ownership of the mortgage? A The third party owns the mortgage, because the mortgage follows the note. B The financial institution owns the mortgage, because there was no mention of the mortgage in the document assigning the note to the third party. C The financial institution owns the mortgage, because a transfer of the note without the mortgage is void. D The mortgage is discharged by the independent transfer of the note.

Answer choice A is correct. If the promissory note is transferred without the mortgage, the mortgage is treated as having been transferred as well under the principle that the mortgage follows the note. Answer choice B is incorrect because, although the written assignment of the note made no mention of the mortgage, because the mortgage serves as security for the note, ownership of the mortgage is deemed to follow the note. Answer choice C is incorrect because, while in some states the transfer of a mortgage without the transfer of the note is void, the transfer of the note is treated as also transferring the mortgage. Answer choice D is incorrect because the transfer of the note by itself is generally deemed to result in the transfer of the mortgage as well.

A limited partnership purchased a parcel of land that it intended to develop for commercial purposes. The limited partnership borrowed half the purchase price from a bank and paid the remainder from its own funds. The loan from the bank was secured by a mortgage on the land. The loan document stated that the bank agreed to look solely to the real property for satisfaction of the loan. The limited partnership made several payments on this nonrecourse loan and then, shifting its focus to the development of another parcel of land, defaulted on the loan despite having the ability to make the required payments on the loan.Can the bank foreclose on its mortgage? A Yes, because the mortgage secured repayment of the loan and the loan was in default. B Yes, because the loan proceeds were used to purchase the parcel of land. C No, because a mortgage is unenforceable unless there is personal liability on the obligation for which the mortgage serves as security. D No, because, despite the language in the loan document, the bank is required to first sue the limited partnership as the limited partnership has the ability to make the required loan payments.

Answer choice A is correct. The bank, as mortgagee, may enforce its mortgage through foreclosure proceedings upon the mortgaged property when the borrower (the mortgagor) defaults. Answer choice B is incorrect because a mortgagee can foreclose whether or not the mortgage was a purchase-money mortgage. Similarly, the loan funds do not have to be used to purchase the mortgaged property. Answer choice C is incorrect because the bank, as mortgagee, may enforce its mortgage even though the mortgagor is not personally liable for the obligation for which the mortgage serves as security. Answer choice D is incorrect because a mortgagee may enforce its mortgage without first suing the mortgagor on the underlying obligation. Moreover, in this case, the mere fact that the limited partnership has the ability to make the loan payments does not transform a nonrecourse loan into a loan for which the limited partnership is personally responsible.

A widow executes a will in which she leaves her house to her son and the remainder of her estate to her daughter. The house is subject to a purchase money mortgage, the unpaid portion of which is nearly equal to the value of the residuary estate. The son demands that the personal representative of the estate use the residuary estate to pay off the mortgage. The will contains a general provision for the payment of all the testator's debts, but not a specific provision authorizing the payment of the outstanding balance of the mortgage. The jurisdiction follows the common law.Should the personal representative accede to the son's demand? A Yes, because the son has a right to the exoneration of the mortgage. B Yes, because the will contains a general provision for the payment of the testator's debts. C No, because the doctrine of satisfaction does not apply to a specific devise. D No, because the mortgage is a purchase-money mortgage.

Answer choice A is correct. The devisee of real property is entitled under the common-law doctrine of exoneration of liens to have any outstanding balance of a mortgage or other encumbrance on the property to be paid from the remaining assets of the testator's estate. Note that today, most jurisdictions have abolished this doctrine and property passes subject to any encumbrance. Answer choice B is incorrect because a general provision that requires the payment of a testator's debts does not require the personal representative of the estate to pay off any mortgages or other encumbrances on real property of the testator. Answer choice C is incorrect because the doctrine of satisfaction refers to the receipt of a gift from the testator prior to death that satisfies a devise made by the testator in the testator's will. Answer choice D is incorrect because the doctrine of exoneration of liens applies to all encumbrances, not just purchase-money mortgages.

A man owned a building. He executed a deed conveying the building to a local church "for the purpose of using the building to further religious education." Six years later, the man died, leaving his niece as his sole heir. The man's duly probated will left his entire estate to a friend. Eighteen months later, the local church, having never made use of the building, conveyed all of its interest in the building to an investor for valuable consideration. The investor has filed an action to quiet title against the friend and niece. The investor has also joined a state official who argues that a valid charitable trust was created, and that the attorney general of the state should be permitted to enforce the charitable trust.In whom should the court find proper title is vested? A The investor B The friend C The state official D The niece

Answer choice A is correct. The man conveyed the building to the church in fee simple because the language "for the purpose of using the building to further religious education" is precatory language that only limits the property's purpose, rather than conditional language (e.g., "so long as") that is necessary to create a defeasible fee. The church then conveyed its interest in the building to the investor, who now possesses title to the building outright. Answer choice B is incorrect. The man's will did not devise the building to his friend because he no longer owned the building at his death. Additionally, because the man had conveyed the building in fee simple, the man did not retain a future interest that was devised to his friend. Answer choice C is incorrect. A charitable trust is one with a stated charitable purpose made to benefit the community at large or a particular segment of the community. In a charitable trust, the beneficiaries must be reasonably numerous and unidentifiable. On the other hand, if the language of a conveyance limits only the purpose for which the property is to be used, as does the conveyance by the man to the church in this case, it is treated as transferring a fee simple absolute interest in the property. Answer choice D is incorrect. Even if the man retained a reversionary interest in the building, his niece would not be entitled to it because the man left a valid will devising his entire estate to his friend.

A landowner gave her property's mineral rights to her son. After the transfer but before the son began to mine the minerals, the landowner sold the property to a corporation that built a commercial warehouse on the property. As a consequence of the son's subsequent mining activities, which were conducted with reasonable care and in compliance with all laws and regulations, the land subsided and the warehouse was damaged.Can the corporation recover for the damage to its warehouse? A No, because the son exercised reasonable care in the conduct of the mining activities. B No, because the warehouse was used for commercial rather than residential purposes. C Yes, because the corporation acquired the property by purchase rather than gift. D Yes, because the corporation built the structure before the son began to mine the minerals.

Answer choice A is correct. The owner of mineral rights is not liable for damage done to structures built on the surface of the land after the mineral rights were transferred unless the owner fails to exercise reasonable care in removing the minerals. Because the facts indicate the son did exercise reasonable care in conducting the mining operation, he is not liable for the damage to the warehouse. Answer choice B is incorrect because the right to subjacent support with regard to structures on the land does not turn on whether the structure was for residential or commercial use, but rather on when it was constructed. Answer choice C is incorrect because the manner of acquisition of the land does not affect the right of the owner of the land to subjacent support with regard to underground mining activities. Answer choice D is incorrect because the right to subjacent support with regard to structures on the land does not turn on when the mining began. If the structure was constructed before the rights were acquired, the owner of the mining rights is strictly liable for the failure to provide subjacent support. If the structure was constructed after the rights were acquired, as is the case here, the owner of mining rights is liable for the failure to provide subjacent support only if the owner failure to exercise reasonable care in removing the minerals. Here, the construction began after the rights were acquired; it is irrelevant that the son had yet to begin extracting the minerals.

A farmer owned a very large, undivided tract of land. He sold a parcel from the northeast corner of the land to a rancher. The deed to this parcel included a covenant under which the rancher and the rancher's "heirs and assigns" agreed to purchase all of their animal feed from the farmer for a fair market price. For many years, the rancher purchased all of his animal feed from the farmer. When the rancher died, his son inherited the ranch. The son was unsatisfied with the quality of the animal feed sold by the farmer and began purchasing all of his animal feed from another supplier. The farmer brought an action against the son to enjoin him from purchasing animal feed from another supplier.In a jurisdiction that follows the common law for all applicable issues, what is the son's best defense against the farmer's action? A The covenant does not touch and concern the land. B The covenant is an unduly restrictive restraint on alienation. C There is no horizontal privity of estate between the son and the farmer. D There is no vertical privity of estate between the son and the rancher.

Answer choice A is correct. To run with the land, a covenant must touch and concern the land, which means that the benefit or burden must affect both the promisee and the promisor as owners of the land, and not merely as individuals. The benefit in this case is an economic benefit, rather than a benefit affecting the land's physical use. Therefore, it arguably fails to touch and concern the land. Answer choice B is incorrect because the covenant does not prevent the son from selling the property. Answer choice C is incorrect. Although it is true that there is no horizontal privity between the son and the farmer, such privity is not required. For the burden of the covenant to run to the son, there must have been horizontal privity between the farmer and the rancher. Here, there was such privity because the rancher bought the parcel of land to which the covenant allegedly applies from the farmer. Answer choice D is incorrect because the rancher owned the parcel in fee simple absolute, and the son inherited the entire servient estate; consequently, vertical privity exists between the son and the rancher.

An accountant had only two children—a clerk and a doctor. The accountant made an inter vivos conveyance of land to a banker, "for the life of the banker, and then to my heirs; but if none of my heirs survive the banker, then to my lawyer." Two months later, the accountant died, leaving the clerk and the doctor as his only heirs. Recently, the doctor died. The banker is still living. The jurisdiction does not apply the Rule in Shelley's Case or the doctrine of worthier title.Of the following, which best describes the clerk's current property interest in the land? A The clerk has a vested remainder subject to complete divestment. B The clerk has a vested remainder subject to open. C The clerk has a contingent remainder. D The clerk has no interest in the land.

Answer choice A is correct. When the accountant transferred ownership of the land, the banker took a life estate, and, since the doctrine of worthier title* does not apply, the accountant's heirs had a contingent remainder. This remainder was contingent because, since the accountant was still alive, his heirs were not then ascertainable. The clerk had a mere expectancy in the land because he was not an heir of the accountant at that time. When the accountant died, the clerk's interest, as the accountant's heir, became a vested remainder. This remainder is subject to complete divestment by the lawyer, who has an executory interest, if the clerk dies before the banker, who is still living. Answer choice B is incorrect. Although the clerk did acquire a vested remainder interest in the land upon the death of the accountant as one of the two heirs of the accountant, this remainder interest was not subject to open. The only individuals who could become heirs of the accountant were determined at the time of the accountant's death. Answer choice C is incorrect. A remainder is contingent if it is created in a grantee that is unascertainable, or if it is subject to an express condition precedent to a grantee's taking. Although the remainder interest in the accountant's heirs was contingent at the time it was created because the accountant was alive and his heirs were not then ascertainable, the clerk himself did not have an interest in the land at the time. He had a mere expectancy as a potential heir of the accountant. Upon the accountant's death, the clerk, as an heir of the accountant, held a vested remainder in the land subject to complete divestment if he does not survive the banker. Answer choice D is also incorrect. In states that apply the doctrine of worthier title, the doctrine cuts off remainders in the heirs of the transferor. In such states, the conveyance of a life estate followed by a remainder to the "grantor's heirs" is treated as creating a reversion in fee simple in the grantor, instead of a remainder interest in the grantor's heirs. However, this jurisdiction does not adhere to this doctrine. *A doctrine in real property law creating a presumption that when a grantor conveys a future interest to the grantor's own heirs, the grantor actually intended to keep the interest in himself or herself. May be overcome with sufficient evidence of a contrary intent. **Rule in Shelley's Case: At common law, the rule in Shelley's Case prevented contingent remainders in the grantee's heirs by defeating the grantor's intent and changing the interest that the grantor purported to give to the grantee and his heirs to a vested remainder in the grantee. Most jurisdictions have abolished the rule in Shelley's Case, and the parties now take the present and future interests according to the language in the deed.

An attorney was a sole practitioner specializing in family law. Her niece was a recent law school graduate, and her nephew was an attorney. The attorney decided to retire, and conveyed the historic building that housed her law practice "to my niece, but if she fails to pass the bar exam within a year of her law school graduation, to my nephew."Which of the following is an accurate description of the property interests created? A The niece has a fee simple subject to condition subsequent, the nephew has a right of re-entry, and the attorney has no interest. B The niece has a fee simple subject to an executory interest, the nephew has an executory interest, and the attorney has no interest. C The niece has a fee simple determinable, and the attorney and the nephew each have a possibility of reverter. D The niece has a fee simple subject to condition subsequent, the attorney has a right of re-entry, and the nephew has an executory interest.

Answer choice B is correct. A fee simple subject to an executory interest (sometimes referred to as a "fee simple subject to an executory limitation") is a present fee simple estate that is limited in duration by specific conditional language (e.g., "provided that," "on condition that," "but if") such that, upon the occurrence of the specified condition, title will automatically pass to a third party (i.e., someone other than the grantor or the holder of the present fee). The future interest held by the third party is an executory interest. Unlike the corresponding future interest in the grantor (right of entry), the executory interest automatically comes into existence; there is no need for the third party to take any action (e.g., an eviction action). In this case, the niece had a fee simple subject to an executory interest due to the conditional language in the grant. The nephew had an executory interest that would become a possessory interest if the niece did not pass the bar exam. Answer choices A and D are incorrect because the title would pass to a third party, rather than the grantor. A fee simple subject to a condition subsequent is a present fee simple that is limited in duration by specific conditional language, such as "provided that." With a fee simple subject to condition subsequent, the grantor may terminate the estate upon occurrence of the stated condition. Here, the grantor did not retain the right to terminate the estate, but rather gave the nephew an executory interest. Answer choice C is incorrect. A fee simple determinable is a present fee simple estate that is limited by specific durational language (e.g., "so long as," "while," "during," "until"), such that it terminates automatically upon the happening of a stated condition, and full ownership of the property is returned to the grantor (or his successor in interest). In this case, the grant contained conditional language (i.e., "but if"), indicating a fee simple subject to a condition subsequent or subject to an executory interest. Because the attorney (the grantor) did not retain the right to terminate the estate, and instead gave the nephew an executory interest, the grant was a fee simple subject to an executory interest. Accordingly, neither the attorney nor the nephew had a possibility of reverter. LEARN WHYNEXT QUESTION

A landowner sold the right to access and remove oil from below the surface of the property to a company. As a consequence of the removal of the oil, the ground subsided, although the company exercised reasonable care and complied with all laws and regulations. The landowner's residence, which had been on the property long before the landowner purchased the land, was damaged due to the subsidence.Can the landowner recover from the company for the damage to his residence? A Yes, because the property damaged was a personal residence. B Yes, because the residence predated the company's oil rights. C No, because the company exercised reasonable care in removing the oil. D No, because the company complied with all laws and regulations.

Answer choice B is correct. A landowner enjoys the right to subjacent support when the landowner transfers the rights to access and remove oil or minerals from the property. The transferee of such rights is strictly liable for any damage that occurs to existing structures on the land as a consequence of subsidence caused by the removal of the oil or minerals. Answer choice A is incorrect because the right to subjacent support with regard to structures on the land does not turn on the type of structure on the land, but on the time of construction of the structure in relationship to the time of the transfer of the mineral rights. Answer choice C is incorrect because the exercise of care by the company does not protect the company from strict liability. Answer choice D is incorrect because, although compliance with all laws and regulations may demonstrate the reasonableness of the company's actions in removing the oil, it does not protect the company from strict liability with regard to existing structures.

The owner of a commercial building obtained a nonrecourse, five-year loan from a lender and used the proceeds to fund another business project. The lender secured the loan with a mortgage on the building. Under the terms of the loan, monthly loan payments constituted only interest on the loan. The loan required a single payment of the principal amount (i.e., a "balloon" payment) at the end of the five-year period. Three years after the loan was made, the building was damaged by an unexpected hurricane. The owner did not repair the damage done by the hurricane and did not take action to protect the building from further damage. The contract was silent with regard to any obligation to repair the building. At the end of the five-year period, despite an overall rise in property values for commercial buildings in the area, the value of the building was less than the amount of the balloon payment due to its state of disrepair. The owner did not make the balloon payment. The lender sued to foreclose its mortgage. After the foreclosure sale, the lender filed an action against the owner personally.If the court finds for the lender, which of the following is the most likely reason? A The loan was in default. B The owner committed waste. C The applicable jurisdiction permits a mortgagee to seek a deficiency judgment. D The applicable jurisdiction follows the title theory of mortgages.

Answer choice B is correct. A mortgagor has a duty not to commit waste at least to the extent that the waste impairs the mortgage's security. While the damage done to the building by the hurricane does not constitute waste because it was due to natural forces, the damage done by the owner's failure to take action to prevent further damage to the building could constitute waste. Because the overall value of commercial buildings in the area had risen during the five-year period and the decline in the value of the building was due to its state of disrepair, it is likely that the owner's failure was in part responsible for the impairment of the lender's security. Answer choice A is incorrect because, even though the loan was in default, the loan was a nonrecourse loan. A nonrecourse loan, as the name implies, is a loan secured by collateral, but for which the borrower is not personally liable; in the event of default, the lender can seize the collateral, but nothing else. Consequently, the lender was not personally responsible for payment of the loan. Answer choice C is incorrect because, even though the applicable jurisdiction permits a mortgagee to seek a deficiency judgment, because the loan was a nonrecourse loan, the owner is not personally liable for the deficiency. Answer choice D is incorrect. Many states that follow the title theory of mortgages permit a privately conducted foreclosure sale and deny a subsequent judgment against the mortgagor for any deficiency. Even if the applicable jurisdiction does not deny a deficiency judgment as a matter of course, the owner in this case is not personally liable under these facts because the loan was a nonrecourse loan.

The owner of a retail store sold the store to two of her employees, the manager and the bookkeeper. The employees took ownership of the store as tenants in common with equal ownership interests. At the time of the sale, there was an existing mortgage on the store that the owner had granted to a bank in exchange for a loan. The manager and the bookkeeper did not assume the obligation to repay the loan. Six months later, the former owner became insolvent and the loan went into default. Responding to the bank's threat to foreclose on the mortgage, the manager paid off the loan.Can the manager enforce the mortgage against the bookkeeper's interest in the store? A Yes, because the manager could not recover from the former owner due to the former owner's insolvency. B Yes, but only to the extent of one-half of the payment made by the manager. C No, because the bookkeeper did not assume the obligation to repay the mortgage loan. D No, because the mortgage was extinguished by the manager's payment of loan for which the mortgage served as security.

Answer choice B is correct. A person who pays off a loan that is secured by a mortgage in order to protect her own interests acquires the rights of the original mortgagee-lender and may therefore enforce the mortgage. This concept is called "subrogation." As a tenant in common with an equal ownership interest in the store with the bookkeeper, the manager is entitled to contribution from the bookkeeper for one half of the payment made by the manager because the payment protected the manager's interest in the store as well as the bookkeeper's. Answer choice A is incorrect. The manager, having paid off the loan to protect his own interest in the store, is entitled to seek recovery from the former owner of the store as the person primarily liable for payment of the loan. While the former owner's insolvency makes this avenue unlikely to be worth pursuing, there is no requirement that the manager pursue this option first or establish its futility before seeking to enforce the mortgage itself. The mortgagee can enforce a mortgage without first seeking the personal liability of the mortgagor. Answer choice C is incorrect because, although the bookkeeper did not assume the obligation to repay the mortgage loan, the store, including the bookkeeper's half interest in it, was subject to the mortgage. Permitting the bookkeeper to retain that interest without compensating the manager to the extent that the manager's payment of the loan benefited the bookkeeper would result in the unjust enrichment of the bookkeeper. Answer choice D is incorrect because, although generally the payment in full of a loan for which a mortgage serves as security results in the extinguishment of the mortgage, in this case the manager's payment of the loan resulted in the manager becoming subrogated to the bank's rights to enforce the mortgage.

Two brothers own a large parcel of land as joint tenants. The parcel contains 10 acres of undeveloped land and is surrounded by public roads. The applicable zoning ordinance allows the land to be developed for residential use, commercial office space, or both. The brothers disagree about how to develop the land. The older brother wants to build a single-family home for himself and his family. The parcel has been in their family for generations and he does not want to sell the land. The younger brother wants to build an office park or sell the parcel. The land is located in a developing area and the sale price would be high. After weeks of heated debate about how to develop the land, the older brother filed a partition action with the court.Should the court partition the property? A Yes, the court should sell the property at a public auction. B Yes, the court should divide the property into two equal parcels. C No, because the brothers did not agree to voluntarily partition the property. D No, because a joint tenancy, unlike a tenancy in common, cannot be partitioned.

Answer choice B is correct. A tenant in common or a joint tenant has the right to unilaterally partition the property. This can be either voluntarily through the parties' agreement or involuntarily through court action. Courts prefer a partition in kind if the division is practical and fair. In this case, the property can be divided equally between the brothers without any unfairness. Each brother would own 5 acres of land to develop (or sell) as he chooses. The zoning ordinance is broad and both parcels will have access to public roads, so a partition in kind is fair and practicable here. Answer choice A is incorrect because courts prefer a partition in kind. If the facts indicated impracticality or unfairness, the court would sell the property at a public auction and split the proceeds equally. However, neither is present here. Answer choice C is incorrect because voluntary partition is only one method. A joint tenant can also seek an involuntary partition through court action. Answer choice D is incorrect because a joint tenancy, like a tenancy in common, may be partitioned voluntarily or by court action.

The owner of a used car lot put the property up for sale. A car dealer was looking for another car lot upon which to sell its cars, and it made a generous offer to the owner. The owner and the dealer promptly executed a valid land sales contract for the used car lot, which contained all of the essential terms. Prior to the closing date, the owner's estranged son discovered that his father had contracted with the dealer to sell the car lot. The son immediately contacted the dealer and truthfully informed him that his father only had a life estate interest in the car lot, and that he had a future interest in the property in fee simple. The son also said that he would not agree to the sale unless his father paid him $25,000. The owner promised the dealer that his son would agree to the sale because he would pay him $25,000 in the future. On the closing date, the dealer refused to close. The owner has filed an appropriate action against the dealer for specific performance.Will he prevail? A No, because the owner may not keep his promise. B No, because the title was unmarketable. C Yes, because the owner conveyed marketable title. D Yes, because the owner had a life estate in the car lot.

Answer choice B is correct. Absent contrary language, an implied covenant of marketable title (i.e., a title free from defects) is part of a land sales contract, regardless of the type of deed created. Here, the owner was obligated to deliver to the dealer marketable title on the date of the closing. Because the son had a future interest in the car lot and did not agree to the conveyance, the title is unmarketable, and the dealer is not obligated to close. For this reason, answer choice C is incorrect. Answer choice A is incorrect because it is irrelevant whether the owner keeps his promise to pay his son $25,000. The central issue is that the dealer cannot be forced to close the deal because the owner did not provide marketable title on the date of closing. Answer choice D is incorrect because a life estate owner cannot provide marketable title when the future interest holder does not agree to the conveyance.

Upon her death, the owner of six acres of undeveloped land devised her property to her brother and sister as "joint tenants with the right of survivorship" with a 1/3 interest in the land allocated to the owner's brother and a 2/3 interest in the land allocated to the owner's sister. Neither the brother nor the sister transferred their interest in the land during their lifetime. The brother, upon his death, willed his interest in the land to a friend. The sister later died intestate. Her sole heir inherited all of her property.Who owns the undeveloped land? A The sister's sole heir owns the six acres of undeveloped land outright. B The sister's sole heir owns a 2/3 interest and the brother's friend owns a 1/3 interest in the land as tenants in common. C The sister's sole heir owns four acres of the land, and the brother's friend owns two acres of the land, each in fee simple absolute. D The sister's sole heir owns a 2/3 interest and the brother's friend owns a 1/3 interest in the land as joint tenants with the right of survivorship.

Answer choice B is correct. Although the owner used the term "joint tenants with the right of survivorship" in devising the undeveloped land to her brother and sister, each held their interest in the property as tenants in common with one another. They did not own equal shares of the land because the sister was devised a 2/3 interest, while the brother was devised a 1/3 interest. Thus, they did not satisfy the unity of interest requirement to holding the property as joint tenants with the right of survivorship. However, because the owner did indicate by use of the term "joint tenants with the right of survivorship" that she wanted her brother and sister to own the land jointly, they took their respective interests as tenants in common. A tenancy in common is not subject to the right of survivorship. Consequently, upon the brother's death, his 1/3 interest in the land passed pursuant to the terms of his will to his friend. Upon the sister's death, her 2/3 interest in the land passed in accord with the intestacy laws to her sole heir. Answer choice A is incorrect because as discussed above, the owner's brother and sister held their interests in the undeveloped land as tenants in common, thus there is no right of survivorship. Had the undeveloped land been held as a joint tenancy with the right of survivorship, the sister's sole heir would own the property outright. Answer choice C is incorrect. The brother and sister took their respective interests as tenants in common because the owner indicated by use of the term "joint tenants with the right of survivorship" that she wanted her brother and sister to own the land jointly. As tenants in common, each person had an undivided share of the entire six acres, a common characteristic of concurrently held property. Thus, neither person owned a specific acreage. Answer choice D is incorrect. Although the owner used the term "joint tenants the right of survivorship" in devising the undeveloped land to her brother and sister, each sibling held their interest in the property as a tenant in common with one another. Since they did not own equal shares of the land, they did not satisfy the unity of interest requirement to holding the property as joint tenants with the right of survivorship.

A widower owned a residence in fee simple absolute. His only child, a daughter, also had only one child, a son, who had a child, Ann. The widower executed a will in which the residence was devised to his daughter for her life, and then remainder to his grandson's children. The widower left the rest of his estate to a charity. After the widower's death, his grandson had a second child, Bill. Subsequently, the widower's daughter died. A year later, the grandson had a third child, Claire. Recently, the widower's grandson died. All three of the grandson's children have survived him. The applicable jurisdiction continues to follow the common-law Rule Against Perpetuities as well as the Rule of Convenience.Who now owns the residence? A Ann B Ann and Bill C Ann, Bill, and Claire D The charity named in the will.

Answer choice B is correct. At the time of the widower's (W's) death, his daughter (D) had a life estate interest in the residence, Ann (A) had a vested remainder subject to open, and the grandson's (G's) unborn children (Bill and Claire, B and C) had contingent remainders in the residence. Just prior to the death of the widower's daughter [the life estate holder], G's living children, A and B, each had a vested remainder subject to open. Because the class of the G's children had members at the time that it became possessory (upon the death of D), the class closed at that time because the jurisdiction applies the Rule of Convenience. Consequently, A and B are part of the class, but C, being born after the class closed, is not entitled to share ownership of the residence with her siblings. Answer choice A is incorrect because, although Ann's remainder interest vested upon the widower's death, her interest was subject to being shared with subsequent siblings. Even though B was born after W's death, the class did not close until D's death (when the interest became possessory). Thus, B also owns the residence. Answer choice C is incorrect because C was born after the class closed. Answer choice D is incorrect because it assumes the devise violated the Rule Against Perpetuities (RAP). As a remainder interest, the devise to the G's children was subject to the RAP, and the residence would have passed to the charity, as the owner of the rest of the widower's estate, if the RAP voided the devise. However, RAP was not violated, because, while the widower's grandson (G) could have had another child more than 21 years after the death of D (who was a measuring life), G, a person who was alive at time that the remainder interest was created and on whom his children's existence obviously depended, is also a measuring life. Since the children of the grandson were fixed upon his death, the grandson was also a validating life with respect to the remainder interest in his children. While distribution of the remainder interest among A, B, and C would not violate RAP, the Rule of Convenience required, as discussed with regard to answer choice B, that the class closed upon the death of D before C was born. Thus, A and B are entitled to the residence.

A homebuyer financed the purchase of her home with a loan from a bank, granting the bank a mortgage in the home to secure her loan obligation. The bank promptly recorded its mortgage interest. A few years later, the homebuyer borrowed money from a finance company to pay for a child's tuition expenses. The finance company took a mortgage in the home, which it promptly recorded. Subsequently, the homebuyer, while maintaining payments to the finance company, defaulted on her bank loan. The bank initiated foreclosure proceedings against the homebuyer. The finance company did not receive notice of these proceedings. The home was sold at a judicial foreclosure sale to an investor who intended to rent out the home.Has the finance company's mortgage in the home been eliminated? A No, because the finance company's loan was not in default at the time of the foreclosure sale. B No, because the finance company did not receive notice of the foreclosure sale. C Yes, because the finance company's mortgage was a junior mortgage. D Yes, because the home has been sold at a judicial foreclosure sale.

Answer choice B is correct. Because the finance company took a mortgage in the home after the bank took and recorded its mortgage in the home, the finance company's mortgage is a junior mortgage over which the bank's mortgage has priority. Generally, the foreclosure of a senior mortgage by a sale eliminates any junior mortgages. However, when a junior mortgagee is not given notice of the foreclosure proceedings, the junior mortgage is not eliminated. Answer choice A is incorrect because the foreclosure on a senior mortgage eliminates a junior mortgage, regardless of whether the junior mortgage is in default at that time. Answer choice C is incorrect because, although the finance company's mortgage was a junior mortgage because it was taken after the bank took and recorded its mortgage, it was not eliminated by the foreclosure sale because the finance company did not receive notice of the foreclosure proceedings. Answer choice D is incorrect. While the home has been sold at a foreclosure sale, the junior mortgage was not eliminated because the junior mortgagee did not receive notice of the sale.

An investor purchased undeveloped land with the aid of a loan from a bank. The loan, which was evidenced by a note, was secured by a mortgage on the property. The note contained a "due on sale" clause. Subsequently, the investor sold the land to a developer. The bank agreed to waive the "due on sale" clause if the developer assumed the mortgage, which the developer did; the waiver was silent as to the note. The following year, the developer failed to make timely payments on the note, resulting in a default. The developer filed for bankruptcy, and his personal liability for the note was completely discharged.Would the bank be successful in an action against the investor based on the default of note? A Yes, because the developer is no longer liable on the note. B Yes, because the investor is liable on the note. C No, because the bank waived the "due on sale" clause. D No, because the developer assumed the mortgage.

Answer choice B is correct. Following the transfer of a mortgage, the investor, as maker of the note, remains liable on the note absent a release by the bank or other act that would discharge the investor's liability. Answer choice A is incorrect because the investor's liability to the bank for the default does not depend on the developer's liability. A discharge of the developer does not discharge the investor. Answer choice C is incorrect because although the bank waived the "due on sale" clause, which would have triggered the investor's liability for the full amount of the loan upon the sale of the land, the bank did not release the investor from liability on the note. Answer choice D is incorrect because assumption of a mortgage by a transferee of the mortgaged property does not eliminate the transferor's liability, but instead makes the transferee also liable to the mortgagee for payment of the note. The elimination of the transferee's personal liability through bankruptcy does not absolve the transferor of liability with respect to the note.

A homeowner bought a home with the proceeds of a loan from a thrift institution. The loan was secured by a mortgage on the home. Under the terms of the loan, the full amount of the outstanding loan obligation was to become due and payable if the home was sold or otherwise transferred without the prior permission of the thrift institution. The thrift institution recorded its mortgage. Subsequently, the homeowner established a living trust and transferred ownership of her home to the living trust. The homeowner recorded this ownership transfer. Upon learning of the transfer, the thrift institution demanded that the homeowner pay the outstanding amount due on the loan immediately. When the homeowner refused, the thrift institution brought a foreclosure action to collect the full amount of the outstanding loan obligation.Is the thrift institution likely to succeed? A No, because the transfer of ownership of the home to the living trust was recorded. B No, because ownership of the home was transferred to the homeowner's living trust. C Yes, because the thrift institution recorded its mortgage. D Yes, because the thrift institution's mortgage is a purchase-money mortgage.

Answer choice B is correct. Generally, an acceleration clause (due-on-sale clause) in a mortgage loan document is enforceable. However, federal law provides a residential real property exemption, exempting certain transfers of residential real property from the requirement that states give effect to an acceleration clause. Among the exempt transfers is a transfer by the mortgagor-borrower to her living trust. Consequently, it is unlikely that the court will give effect to the acceleration clause in this situation and find the loan in default due to the transfer of ownership from the homeowner to her living trust. Answer choice A is incorrect because, while recording a transfer in ownership can give the transferee priority over a prior unrecorded transfer, the thrift institution recorded its mortgage. Moreover, the transferee, the living trust, was not a bona fide purchaser of the property who could claim protection under a recording statute. Answer choice C is incorrect. Although the recording of a mortgage interest can protect the mortgagee from ownership claims by other subsequent takers of the property, the mortgagee here cannot foreclose because the mortgagor is not in default. As noted with regard to answer choice A, the transfer of the home from the homeowner to his living trust does not trigger the acceleration clause. Answer choice D is incorrect because, although the fact that a mortgage is a purchase-money mortgage can give the mortgagee priority over the holders of non-purchase-money mortgages in the same property, in this instance, this status has no bearing on the applicability or enforcement of the acceleration clause.

A restaurant owner purchased kitchen equipment from a supplier and gave the supplier an unsecured, nonnegotiable promissory note. Prior to the date on which payment of the note was required, the owner asked the supplier for an extension of time to pay the note. The supplier demanded in exchange that the restaurant owner execute a deed of trust with respect to the restaurant itself to serve as security for payment of the note. When the restaurant owner refused this demand, the supplier threatened to falsely report health code violations by the restaurant owner to the local health department. Acting under duress, the restaurant owner executed the deed of trust, which the supplier promptly recorded.Shortly afterwards, the owner sold the restaurant to the restaurant's chef. The chef assumed the obligation to pay the promissory note. The cash amount paid by the chef to the owner was less than the fair market value of the restaurant because the cash payment reflected the assumed obligation. The note is now in default and the trustee has instituted foreclosure proceedings on the deed of trust.Can the chef assert the owner's defense of duress against the trustee? A No, because the supplier recorded the deed of trust prior to the sale of the restaurant to the chef. B No, because the cash amount paid by the chef reflected the assumption of the owner's obligation on the note. C Yes, because, by assuming the owner's obligation, the chef is entitled to assert the owner's defenses. D Yes, because duress is a defense to the enforcement of a mortgage.

Answer choice B is correct. If the purchase price reflects the assumption of the mortgage, the purchaser of a mortgaged property who assumes the mortgage cannot assert the defenses of the mortgagor-seller against the enforcement of the mortgage. Otherwise, the purchaser would, by being permitted to avoid the assumed obligation, be unjustly enriched. (Note: A deed of trust functions as a mortgage in many states.) Answer choice A is incorrect because the question asks about the chef's ability to assert the owner's duress defense. The supplier's recording of the deed of trust serves only to protect the supplier from any claim by the chef, that the purchaser's rights have priority over the supplier's deed of trust. Under these facts, the supplier's recording of its deed of trust is not relevant. Answer choice C is incorrect because permitting the chef to assert the owner's defenses would result in a windfall to the chef, because the chef's promise to assume payment of the note was part of the price that the chef paid for the restaurant. Answer choice D is incorrect because, although duress is a valid defense to the enforcement of a deed of trust or a mortgage, the chef, as transferee, cannot in this case assert a defense that belongs to the transferor because it would unjustly enrich him.

A corporate officer purchased a house with the aid of a loan at a favorable interest rate from the corporation. The corporation required the officer to grant it a mortgage as security for the loan. The officer also signed a note promising to repay the loan over a period of ten years. The note contained a due-on-sale clause, which required, at the corporation's option, payment of the full outstanding amount of the loan if the officer sold the house without first obtaining the corporation's written consent. After making timely payments on the loan for three years, the officer sold the house to an unrelated buyer without obtaining the corporation's consent. The deed given by the officer acknowledged that the house was being transferred subject to the mortgage. After payment of the purchase price to the officer, the buyer promptly recorded the deed. Subsequently, neither the officer nor the buyer made any payments on the loan to the corporation. The corporation has sued the buyer for the outstanding amount of the loan.Of the following, which is the buyer's best defense to this action? A The due-on-sale clause is void as an impermissible restraint on alienation. B The buyer is not personally liable for repayment of the outstanding amount of the loan. C The buyer is not in privity of estate with the corporation. D The officer remains personally liable for repayment of the outstanding amount of the loan.

Answer choice B is correct. If the transferee-buyer takes title "subject to" an existing mortgage obligation, then the transferee-buyer is not personally liable upon default. In this case, the buyer purchased the house subject to the mortgage held by the corporation. As a result, the buyer did not assume personal responsibility for the loan. Therefore, the buyer is not personally liable to the corporation for repayment of the mortgage loan. Answer choice A is incorrect because, although a due-on-sale clause may constitute a restraint on the alienation of property, such a clause is specifically permitted by federal law, subject to several restrictions on residential real property, none of which are applicable in this situation. Answer choice C is incorrect. It is true that the buyer is not in privity of estate with the corporation. Privity of estate requires both parties to an agreement to share an interest in the property that is the subject of the agreement. Here, there is no agreement between the buyer and the corporation. However, the fact that the buyer is not in privity of estate with the corporation has no effect on the buyer's liability for the outstanding amount of the loan. Answer choice D is incorrect. Although the officer remains personally liable for repayment of the outstanding amount of the loan, this liability does not automatically shield the buyer from personal liability with regard to the loan. Had the buyer agreed to assume the mortgage obligation, the buyer, as well as the officer, would have been personally liable for repayment of the outstanding amount of the loan.

A childless widow died. By the terms of her will, she left her residence to her favorite niece for life, and then to such of her niece's children who reach the age of 21. At the time of the widow's death, the niece had two children, a son who was 25 and a daughter who was 13. Before her death, the niece had a second daughter. At the time of the niece's death, her son was 40, her older daughter was 28, and her younger daughter was 15.The applicable jurisdiction continues to follow the common-law Rule Against Perpetuities.Immediately before the niece's death, who held a vested remainder in the residence? A Only the son B The son and the older daughter C All three children D None of the children, due to the "bad as to one, bad as to all" rule.

Answer choice B is correct. Immediately prior to the death of the widow's niece, two of her children had reached the age of 21. Consequently, both the niece's son and the niece's older daughter have a vested remainder in the widow's residence. Each of these vested remainders is subject to open, because the niece's younger daughter is not yet 21 years old. The younger daughter has a remainder, but this remainder is not vested, because it is contingent on her reaching the age of 21. Answer choice A is incorrect. Although only the son had a vested remainder subject to open at the time of the widow's death, his sister's remainder interest that was contingent on her reaching age 21 became a vested remainder upon her reaching that age. Answer choice C is incorrect. Because immediately before the niece's death (and at her death), the niece's younger daughter had not reached the age of 21, her remainder interest in the residence remained contingent rather than vested. Answer choice D is incorrect because the "bad as to one, bad as to all" rule does not apply to this situation. Although the niece's younger daughter was not alive at the time of the widow's death, she may still reach age 21 within 21 years of the death of her mother, the widow's niece, who was alive at the time that the contingent remainder in the niece's children was created. Thus, the Rule Against Perpetuities does not apply to void the younger daughter's contingent remainder. Because the son's remainder was vested at the time that it was created, as he was already more than 21 years old, and the older daughter's contingent remainder became vested when she reached age 21, there is no future interest that is voided by the Rule Against Perpetuities.

A man decided to sell his house after receiving a new job in a neighboring state. Before putting the house on the market, the man told his friend, who had always said how much she enjoyed the house, that he was selling the house and she could buy it at a lower price than he would seek from other potential buyers. Excited at the prospect of home ownership and the lower price, the friend immediately agreed to purchase the house and entered into a contract with the man for the sale of the house, without inquiring as to any issues with the house the man had experienced or knew about. Although he did not say anything to the friend, the man was not aware of any issues. Pursuant to the contract, the man delivered a general warranty deed to the friend at the closing. The friend then moved into the house and decided she would hire a contractor to perform some slight renovations to the upstairs bathroom. As soon as the contractor broke through the wall, he discovered black mold all throughout the interior of the bathroom and along the pipes. Upon further inspection black mold was found behind the walls, throughout the upstairs. The friend brought suit against the man for damages.Pursuant to statute, a seller has a duty of disclosure in all home-sale transactions in the jurisdiction.For whom is the court likely to rule? A The man, because the friend did not ask about the condition of the house. B The man, because he was not aware of the black mold. C The friend, because the covenants contained in the general warranty deed were breached. D The friend, because the black mold constituted a material physical defect in the house.

Answer choice B is correct. In a majority of jurisdictions, including the jurisdiction here, a seller of a residence has a duty to disclose. The seller must disclose all known material physical defects to the buyer. The defect must not be readily observable or known to the buyer. In this case, the man was not aware of the presence of black mold in his house. Therefore, he did not violate the duty of disclosure imposed on him by statute. Answer choice A is incorrect. The man had a duty to disclose all known material physical defects to the friend, even if the friend did not first ask about the condition of the house. However, the man was not aware of the black mold, and accordingly, he cannot be held liable for failure to disclose. Answer choice C is incorrect. The six covenants of title that are contained in every general warranty deed only protect the buyer from defects in title, not defects in the condition of the home. Answer choice D is incorrect. To be material, a defect must substantially affect the value of the residence, impact the health or safety of a resident, or affect the desirability of the residence to the buyer. Although the presence of black mold falls within the definition of a material physical defect, the man will not be held liable here because that defect was not known.

In 1959, a man owned a tract of land that he divided into two parcels, each of which was adjacent to a stone retaining wall. The man sold both parcels. In the deeds that created the parcels, the purchasers mutually agreed that: "the owners, their heirs, and assigns agree to maintain a retaining wall made of stone between the properties. They further agree that they will share equally any expenses associated with the retaining wall." The deed was properly recorded. Subsequently, each of the parcels was sold several times, and none of the owners properly maintained the retaining wall. In 2009, the owners of the parcels made the joint decision to dismantle the wall. In 2012, one of the parcels was sold, and the new owner decided to rebuild the retaining wall. The new owner asked the other owner to pay half of the expenses to rebuild the wall, and the other owner refused. The new owner paid to erect the retaining wall, and then brought suit against the other owner to collect half the expenses.Can the new owner successfully bring suit against the other owner for half of the expenses? A No, because the covenant was effectively terminated by a change in circumstances. B No, because the previous owners decided to dismantle the retaining wall. C Yes, because the deed created an equitable servitude. D Yes, because the covenant ran with the land.

Answer choice B is correct. In order for a covenant to be enforceable it must be in writing, with the intent that the duties and rights run with the land, must touch and concern the land, subsequent purchasers must have notice of the covenant (either actual, constructive, or inquiry notice), and the parties must have horizontal privity (the estate and the covenant are contained in the same instrument) and vertical privity (an unbroken chain of ownership from the original parties). A covenant may be terminated in the same ways as an easement, including by abandonment. A covenant can be terminated by abandonment if the parties to the covenant act in an affirmative way that shows a clear intent to relinquish the covenant right; mere nonuse, however, or statements of intent without affirmative conduct, will not constitute abandonment. Here, the parties satisfied the criteria for creating a covenant appurtenant in 1959. The covenant was then abandoned by subsequent owners who dismantled the retaining wall that the covenant was created to maintain. Answer choice A is incorrect because there was not a drastic change in circumstances that would justify not enforcing the covenant. If a restriction (i.e., real covenant or equitable servitude) on a property no longer makes sense to enforce due to drastic changes in the surrounding area since the restriction was first contemplated, it will not be enforced. The facts in this case do not indicate that there was any such drastic change. Answer choice C is incorrect because only equitable remedies such as injunctions are available to the holder of an equitable servitude. In this case, the new owner is seeking money damages, which are available only for breach of a covenant appurtenant. Answer choice D is incorrect because, although the covenant ran with the land, it was subsequently terminated by abandonment.

An owner conveyed one of his properties to his son for the son's life, remainder to his daughter. The son lived on the property without paying any rent, although the property could have been rented for $4,000 a month. The property was assessed annual property taxes of $10,000. The son did not pay the taxes on the property. Not wanting to have a lien on the property or otherwise have it foreclosed upon, the daughter paid the property taxes. The fair market value of the life estate was 10 percent of the fair market value of the property held in fee simple absolute.How much can the daughter recover from the son for the tax payments? A $10,000, because life tenants are responsible for paying the full amount of taxes assessed on the property. B $10,000, based on the reasonable rental value of the property. C $1,000, the amount of taxes owed based on the fair market value of the life estate. D Nothing, because the property taxes are the responsibility of the holder of the remainder interest.

Answer choice B is correct. Life tenants have the obligation to pay all ordinary taxes on the land and interest on the mortgage to the extent he receives a financial benefit from the property. When the life tenant occupies the property, his financial benefit is measured by the fair market rental value of the property. When the holder of a future interest pays the taxes because the life tenant fails to do so, the holder can bring an action against the life tenant personally to recover these payments from the life tenant, up to the value of the financial benefit the life tenant received from the property. Because the property in question is not producing income but has a reasonable rental value of $48,000 per year ($4,000 per month), the life tenant is liable to the holder of the remainder interest for the full amount of the taxes paid by the holder of the remainder interest, $10,000, as that amount does not exceed the reasonable rental value. Answer choice A is incorrect. Life tenants are not necessarily responsible for paying the full amount of taxes assessed on the property. Life tenants have the obligation to pay all ordinary taxes on the land to the extent he receives a financial benefit from the property. If the life tenant occupies the property, as in this case, the life tenant is responsible for taxes and mortgage interest to the extent of the reasonable rental value of the land. Answer choice C is incorrect because the amount of taxes owed by the son is not based on the fair market value of the son's life estate, but rather the reasonable rental value of the property. Answer choice D is incorrect because the life tenant owes the holder of a future interest a duty to pay the property taxes to the extent of the financial benefit he receives from the property.

An individual received a contingent remainder interest in land by will. Subsequently, the individual sought to transfer this interest to his niece via a document. The unsigned document identified the individual as the grantor, the niece as the grantee of the interest, contained an adequate description of the property interest to be conveyed, and expressed an intent to transfer the interest.Does this document operate to transfer the contingent remainder interest to the niece? A No, because the document did not indicate that the transfer was made for good and valuable consideration. B No, because the individual did not sign the document. C Yes, because a contingent remainder may be transferred during the owner's lifetime. D Yes, because the document constitutes a valid deed.

Answer choice B is correct. The grantor's signature is generally required for a document to be a valid deed. Because the individual who held the contingent remainder did not sign the document, it is not a valid deed and will not operate to transfer his contingent remainder interest to his niece. Answer choice A is incorrect because a deed does not require a recitation of consideration. Many deeds effect a gratuitous transfer of property, as is presumably the case in this transfer. Answer choice C is incorrect because, while in most states a contingent remainder may be transferred during the remainderman's lifetime, the document in question is not a valid deed. Answer choice D is incorrect because, as noted with respect to answer choice A, the document is not a valid deed because the grantor did not sign the document.

The owner of a house in a suburban neighborhood converted a driveway from rock to asphalt. The owner's neighbor did not have a driveway but instead parked on the street that ran in front of both of their homes. When asked by the neighbor, the owner told the neighbor that she could also use the driveway to access her house. For 11 years, the neighbor used the driveway on occasion when engaged in tasks such as bringing furniture and appliances into her house, or on days when it was raining heavily. Throughout these years, only the owner maintained the driveway. Recently, the owner sold his house to a couple. The owner informed the couple about the neighbor's use of the driveway when they first looked at the house, but neither the contract of sale nor the deed made reference to it. When the neighbor used the driveway on the first rainy day after the couple moved in, the couple told her that she could no longer use their driveway. The neighbor sued the couple, seeking a judgment that she has a right to use the driveway. In the applicable jurisdiction, the term for the creation of a prescriptive easement is 10 years.Who is likely to succeed? A The couple, because a license, as a property interest, must be in writing. B The couple, because the neighbor's license to use the driveway has been revoked. C The neighbor, because her use of the driveway created a prescriptive easement. D The neighbor, because the couple had notice of her driveway use before buying the house.

Answer choice B is correct. The owner's oral promise to his neighbor constituted a license, which is a non-possessory right to enter the land of another for some delineated purpose. Generally, a license is revoked upon the transfer of the servient estate. Here, the owner sold the house, the servient estate, to the couple. Although a license may not be revoked if detrimentally relied upon, there is no indication that the neighbor expended money or otherwise relied on the owner's promise to her detriment. Consequently, the license that the owner had granted to the neighbor to use the driveway has been revoked. Answer choice A is incorrect because a license, unlike an easement, may be created orally. Answer choice C is incorrect. Although it is arguable that the neighbor's use of the driveway was sufficient to permit the creation of a prescriptive easement, and it is clear that the neighbor's use of the driveway exceeded the 10-year period required by law, the neighbor's use of the driveway did not create a prescriptive easement because it was done with the owner's permission. Answer choice D is incorrect because the couple's notice of the neighbor's use of the driveway prior to entering into a contract to purchase the owner's residence does not bind them to permit that use to continue.

By statute, a jurisdiction provides: "Any judgment properly filed shall, for ten years from filing, be a lien on the real property then owned or subsequently acquired by any person against whom the judgment is rendered." In addition, the recording act of the jurisdiction reads, in its entirety, as follows: "No conveyance or mortgage of real property shall be good against subsequent purchasers for value and without notice unless the same be recorded according to law." This act has been interpreted as not providing any grace period for recording a conveyance or mortgage.An owner conveyed land by a warranty deed to his adult child. The child recorded the deed a week later. Three days after the conveyance to the child and without knowledge of it, a creditor of the owner properly filed a judgment against the owner. The creditor then filed suit against the owner and his child to foreclose the judgment lien against the land.If the court rules against the creditor, which of the following is the most likely reason? A The owner's warranty of title to his child protects the land from the creditor's claim. B The creditor is not a purchaser for value. C The warranty deed has priority over any valid judgment lien on the land. D The child's week-long delay in recording the deed was not unreasonable.

Answer choice B is correct. The recording act protects a subsequent purchaser for value of real property from prior unrecorded conveyances or mortgages of that property of which the subsequent purchaser did not have knowledge. At the time that the creditor properly filed a judgment against the owner, thereby creating a judgment lien against real property owned or subsequently acquired by the owner, the conveyance of the land from the owner to the child had not been recorded and the creditor had no knowledge of this conveyance. Thus, the creditor would be protected by the recording act, but only if the creditor was treated as a purchaser for value. Because the court ruled against the creditor, the jurisdiction, like a majority of jurisdictions, must not treat a lien creditor as a purchaser for value. Answer choice A is incorrect because the owner's warranty of title, as part of a warranty deed, runs to his child, as grantee. Although the owner may be obligated to defend the child's interest in the land against a challenge by the creditor as a consequence of this warranty of title, the warranty has no effect on the rights of the creditor to the land. Answer choice C is an incorrect statement of the law. A judgment lien on real property has priority over a subsequent conveyance of real property, even when that conveyance is by a warranty deed. Answer choice D is incorrect because the recording act provides no grace period for a reasonable delay in recording a deed. Thus, the fact that the child's delay in recording the conveyance was likely reasonable would not result in a judgment for the child and against the creditor.

An individual obtained a loan from a bank to purchase a house for use as a residence. As security for the loan, the individual granted the bank a mortgage on the house. Due to an oversight by a bank employee, the mortgage was not recorded. After three years during which time the individual complied with the terms of the loan, the individual sold the house to a third party. Under the terms of the sale, the third party obtained a new loan from the bank with the same terms as the individual's loan, and the bank agreed to excuse the individual's loan obligations. The third party did not live in the house, but instead rented it out to a couple. Five years later, the couple moved out, and the third party, unable to find another renter, failed to make the required payments on the loan. The bank has filed an action against the individual to recover the unpaid balance of that loan.Which of the following is the individual's best defense to this action? A There is no privity of estate between the individual and the bank. B There was a novation with regard to the individual's obligation to the bank. C The bank failed to record the mortgage. D The individual is personally liable to the bank, but only secondarily.

Answer choice B is correct. The third party entered into a new loan with the bank and the bank agreed to excuse the individual's loan obligation (a novation). Consequently, the individual is not personally liable to the bank. Answer choice A is incorrect because, although the individual is no longer in possession of the property, the individual would nevertheless remain liable for repayment of the loan in the absence of a novation. Answer choice C is incorrect because, while the failure to record a mortgage can affect the bank's rights in the house with respect to other creditors, it does not alter the bank's rights with respect to the individual and the initial loan. Answer choice D is incorrect because the novation results in the individual not being personally liable to the bank, even in a secondary capacity.

A widower who owned a vacation cabin in the mountains executed a will under which the cabin was devised to his niece. The will contained a residuary clause that devised the testator's remaining estate to his son. Subsequent to the execution of the will, the widower sold the cabin and invested the proceeds in an oceanside condominium. After the death of the widower, the personal representative of his estate determined that the niece was entitled to the condominium. The son has challenged this determination in court.Which of the following legal concepts provides the strongest support for the son's position that the condominium should pass under the terms of the will to him? A Intestate succession B Ademption C Exoneration D Lapse

Answer choice B is correct. Under the doctrine of ademption, the transfer of property by a testator subsequent to the execution of a will removes the property from his estate and the devise of the property is adeemed. Here, the son could contend that the devise of the cabin to the widower's niece was adeemed when the widower sold the property during his lifetime. Answer choice A is incorrect because rules regarding intestate succession only apply to the extent that a decedent has not devised his property by a will. Here, the will contains a residuary clause that passes the remainder of the widower's estate that is not otherwise devised to the son. Consequently, the widower's will, and not the rules regarding interstate succession, govern the transfer of the widower's property upon his death. Answer choice C is incorrect because the doctrine of exoneration applies to the payment by the decedent's estate of an encumbrance on real property that is devised to a beneficiary. Here, there is no indication that either property was subject to a mortgage or lien. Answer choice D is incorrect because the doctrine of lapse applies when a designated beneficiary in a will dies before the testator. The doctrine prevents the devise from passing to the beneficiary's descendants. Here, the niece has survived the widower.

A woman obtained ownership of a cottage after her grandmother died. The owner, who lived out of state, decided to sell the cottage to a buyer. The parties agreed that closing would occur the following week. The owner had casualty insurance on the cottage, while the buyer did not obtain such insurance. On the evening before the closing was to take place, a fire caused by lightning destroyed the cottage.The jurisdiction has not adopted the Uniform Vendor and Purchaser Risk Act.If the seller seeks specific performance, may the buyer rescind the contract for the sale of the cottage? A No, because the buyer bears the risk of loss. B No, but the owner must give the buyer credit against the purchase price in the amount of the insurance proceeds. C Yes, because the owner has casualty insurance and can more easily bear the loss. D Yes, but the buyer must reimburse the owner for the cost of the casualty insurance.

Answer choice B is correct. Under the doctrine of equitable conversion, equitable title to real property passes to the buyer upon entering the contract, even though the seller retains legal title. Most jurisdictions place the risk of loss between the contract and the closing on the buyer. However, if the seller has casualty insurance on the property, the seller must give the buyer credit in the amount of insurance proceeds against the purchase price. Answer choice A is incorrect because it is incomplete; although the buyer does bear the risk of loss, if the seller has insurance, the buyer will not be liable for the full amount. Answer choice C is incorrect because the fact that the seller has casualty insurance does not mean that the seller has to bear the loss entirely. Answer choice D is incorrect because it misstates the law; the buyer is under no duty to reimburse the seller for the cost of the insurance; the buyer must proceed with the sale, minus any insurance proceeds received by the seller.

A buyer and seller entered into a contract for the sale of a business including the building in which the business was conducted and the land on which the building was situated. In the contract, the seller agreed to convey marketable title subject to any restrictions of record, such as easement and covenants, and all applicable zoning laws and ordinances. Before closing, the buyer learned that the operation of the business violated the zoning laws, but nevertheless was confident that it could obtain a variance for the operation of the business at that location.If the seller refused to transfer title to the building and land, can the buyer seek specific performance of the contract? A No, because the covenant of marketable title has been violated. B No, because the contract specifically provides that property is being sold subject to the zoning ordinances. C Yes, because the seller breached the covenant of marketable title. D Yes, because the buyer is confident that it can obtain a variance for the operation of the business at that location.

Answer choice C is correct. A buyer is entitled to specific performance when a seller breaches a contract to sell a real property interest because the buyer's remedy at law (i.e., damages) is considered inadequate due to the unique nature of land. In addition, when the buyer seeks specific performance with respect to property for which there is a title defect (e.g., an encumbrance), the buyer may also obtain an abatement in the purchase price to compensate the buyer for the defect. Here, because the seller breached the contract, the buyer is entitled to specific performance, if it wants the property despite the defect. Answer choice A is incorrect because, although the seller's violation of the zoning laws is a title defect that constitutes a breach of the covenant of marketable title, the buyer can nevertheless compel the seller to transfer ownership of the real property to the buyer. Answer choice B is incorrect because, although the contract provides that the property is being sold subject to the applicable zoning laws and ordinances, the contract does not also carve out an exception for the seller's violation of the zoning laws. Consequently, the title that the seller can provide the buyer is defective. Answer choice D is incorrect. The fact that the buyer is confident that it can obtain a variance for the operation of the business at that location is a reason for the buyer to seek specific performance, but is not a requirement for the buyer to do so. Whatever the buyer's reason for wanting to compel the seller to transfer title to the building and land, the seller is required by contract to do so. The lack of marketable title does not give the seller an out.

A buyer entered into a written contract to purchase real property from its owner. The buyer asked that the owner convey the property to the buyer and her brother as tenants in common. The owner noted that the buyer's brother would need to attend the closing to sign the necessary paperwork. Because the brother lived in another state and could not attend the closing, the buyer brought her roommate to the closing instead. The roommate pretended to be the buyer's brother and signed all the necessary paperwork with the brother's name. The buyer paid the full purchase price, and the deed granting the buyer and her brother half interests as co-tenants was recorded on the same day. Unknown to any of the parties, the evening before the closing, the buyer's brother had died in a car accident. The brother's valid probated will devised all of his property to his wife. The brother's wife has brought an action against the buyer, who has taken sole possession of the property, and the original owner to quiet legal title to an undivided one-half interest in the property.Who should the court find has legal title to the real property, and in what proportions? A The original owner. B The buyer. C One-half in the buyer and one-half in the original owner. D One-half in the buyer and one-half in the brother's wife.

Answer choice C is correct. A deed to a nonexistent grantee is void as to the nonexistent grantee. Therefore, the purported conveyance of a one-half interest in the real property to the buyer's brother failed, and the original owner retains this one-half interest. The conveyance of a one-half interest in the property to the buyer is unaffected. (Note: The buyer should be successful in an unjust enrichment action to recoup one-half of the purchase price from the original owner.) Answer choice A is incorrect because the deed, although void as to the buyer's brother, is still valid as to the buyer. Answer choice B is incorrect because the buyer was only granted a one-half interest in the real property. The remaining one-half interest granted to her brother by the deed does not go to her just because she paid the purchase price, although she would have an action against the original owner for unjust enrichment. Answer choice D is incorrect. When one of the contracting parties dies prior to the performance date of the contract, the person entitled to the buyer-decedent's real property can compel the transfer of the property to herself. However, here, the brother was not the buyer because he was never actually a party to the contract and never authorized the buyer's roommate to act as an agent on his behalf in the transaction. Consequently, the one-half interest deeded to the buyer remains with the original owner.

The owner of a commercial building leased the premises at fair rental value to a civic organization for a 25-year term. The lease contained a reasonable right of first refusal provision granting the organization a right to purchase the building if the owner found a buyer who was ready, willing, and able to purchase the building at a price agreed to by the owner and the buyer.Fifteen years into the lease, the owner was approached by a friend who was ready, willing, and able to purchase the building. Because of the friendship, the owner agreed to a purchase price that was below the market price. The owner notified the civic organization of the proposed sale, and the organization invoked its right of first refusal. However, the owner refused to sell the building to the organization for less than its fair market value.The applicable jurisdiction has retained the common law with respect to the Rule Against Perpetuities.May the civic organization compel the owner to sell the building to the organization at the price agreed upon by the owner and the friend? A No, because the organization's right of first refusal violates the Rule Against Perpetuities. B No, because the organization's right of first refusal constitutes an encumbrance on marketable title. C Yes, because the right of first refusal was reasonable. D Yes, because the right of first refusal was a valid covenant running with the land.

Answer choice C is correct. A promissory restraint on alienation, such as a right of first refusal, may be enforceable by an injunction if it is reasonable. The organization's right of first refusal was a reasonable provision in a commercial lease and consequently is enforceable through an injunction compelling the owner to sell the building to the organization. Answer choice A is incorrect because the Rule Against Perpetuities does not apply to a right of first refusal that is granted to a lessee in conjunction with a lease. Answer choice B is incorrect because the civic organization is seeking to enforce its right to purchase the building based on its own right of first refusal and thus it would not constitute an encumbrance on the title that the organization would receive. An undisclosed right of first refusal would constitute an encumbrance on marketable title for another purchaser, such as the friend. Answer choice D is incorrect because whether the right of first refusal is a covenant running with land, which affects the rights of subsequent owners, is irrelevant because the owner and the civic organization are the original parties to the agreement. LEARN WHYNEXT QUESTION

A woman received a loan from a bank to purchase a new home. She secured the loan by a mortgage on the home. The woman made regular payments on the mortgage for 8 years. However, the woman fell into debt and eventually defaulted on the loan. The bank gave the woman proper notice of foreclosure proceedings. Before the foreclosure sale took place, the woman received an inheritance from a distant relative. The woman contacted the bank and offered to pay the remaining balance of the loan and any accrued interest in exchange for clear title to the property.Is the bank required to accept the woman's offer? A No, because the bank has already initiated foreclosure proceedings. B No, because the bank can sell the property in a judicially supervised public sale. C Yes, because the woman exercised her right under the equity of redemption. D Yes, because the woman exercised her statutory right of redemption.

Answer choice C is correct. After default on a mortgage obligation, but before a foreclosure sale, the mortgagor may regain clear title to the property under the doctrine of equity of redemption. The mortgagor must pay the amount of the loan obligation currently owed, which, if there is an acceleration clause, can be the full amount of the unpaid loan obligation, plus any accrued interest. In this case, the woman defaulted on the loan but the bank has not yet conducted a foreclosure sale. Thus, the woman can obtain clear title to the property after paying the entire amount of the outstanding debt. Answer choice A is incorrect. Although the bank has already initiated foreclosure proceedings, it has not yet sold the property. Therefore, the woman can still exercise her equitable right to redeem the property. Answer choice B is incorrect because the woman has timely exercised her equitable right of redemption. The bank cannot proceed with the sale after the woman has asserted this right. Answer choice D is incorrect because the statutory right of redemption arises after a foreclosure sale. A jurisdiction may provide this right by statute to allow additional time for the mortgagor to compensate the party who purchased the property at the foreclosure sale and reclaim the property. Here, the foreclosure sale had not yet taken place and there are no facts that indicate this jurisdiction permits statutory redemption.

A brother and sister own parcels of adjacent property. Their father had owned the land in its entirety, and when the siblings graduated from college, he split his estate in two and gave each sibling a parcel. The brother's property was landlocked, so his sister granted him an easement over her property in order to access the sole public road. The easement was not recorded. Five years later, the brother, having never set foot on his parcel, sold it to his sister. The sister eventually resold this parcel to a stranger, after telling the stranger about the easement she had granted her brother. Shortly thereafter, she sold her own parcel to a colleague. The stranger seeks access over the colleague's parcel in order to reach the public road, but the colleague refuses.Does the stranger have a right to an easement across the colleague's parcel? A No, because the brother's easement was not recorded. B No, because the brother's easement was extinguished upon the sister's acquisition of her brother's parcel. C Yes, because the stranger requires an easement by necessity. D Yes, because the colleague had notice of the brother's easement.

Answer choice C is correct. An easement by necessity arises when property is virtually useless without the benefit of the easement across neighboring property, such as when it is landlocked. In order for an easement by necessity to exist, there must be a necessity, the dominant and servient estates must have once been owned by the same person, and the necessity must have arisen at the time that the property was severed and the two estates were created. Here, these requirements are met: the stranger cannot access his land without the easement, both the stranger's and colleague's parcels were under the common ownership, and the necessity arose at the time that the sister sold the parcel to the stranger. Answer choice A is incorrect because an easement by necessity need not be recorded. In fact, it need not even be written. An easement by necessity is binding on the servient estate as long as the necessity exists. Answer choice B is incorrect because, while merger of the dominant and servient estates did terminate the easement granted by the sister to her brother, the stranger enjoys an easement by necessity upon the separation of the parcels again. Answer choice D is incorrect. Although the stranger's notice of the brother's easement might have prevented the enforcement of that easement against the stranger if the easement had not been terminated through merger, the stranger's easement is based on necessity; it is not necessary that the colleague have notice of the easement.

A small company specializing in providing meditation retreats purchased a tract of land fronting a river in a rural residential area. As the residential area grew around the company's tract of land, the tract became essentially cut off from the only public road. Hoping to avoid the expense of building a bridge across the river, the company approached an owner of one residential plot separating the company's tract from the road to request an easement. The owner, without requiring consideration, granted the company an easement by deed to a strip of land 30 feet wide across his property. The deed did not place any express limitations on the easement's use. The company built a narrow dirt road across the easement to accommodate the limited number of vehicles attending its occasional meditation retreats.A year later, the company began to offer outdoor yoga classes each night. This new service was wildly popular, resulting in increased daily traffic across the easement. On busy evenings, visitors also parked on the dirt road for the duration of their class. After a month of enduring the additional traffic, the owner erected a concrete barrier to prevent any use of the easement to access the company's tract. The company objected, and the owner brought an action to terminate the easement across her property.Should the court allow the owner to terminate the easement on these facts? A Yes, because the company's current use of the dirt road greatly exceeded its initial use of the road. B Yes, because the granting of the easement was not supported by consideration and is thus freely revocable. C No, because the easement is not terminated by the company's expanded use of the dirt road. D No, because the owner, by blocking the dirt road, can no longer seek equitable relief.

Answer choice C is correct. An express easement arises when it is affirmatively created by the parties in a writing that is in compliance with the Statute of Frauds. In addition to any express terms in the written instrument that allow for termination of the easement, an express easement may be terminated by an express written release, merger, severance, abandonment, prescription, or estoppel. Here, although the owner of the servient estate may be able to thwart a change in the scope of an express easement, this change does not constitute grounds for terminating the easement. Answer choice A is incorrect. Although the expanded use of an easement may be enjoined by the owner of the servient estate if such use is not in conformity with the express terms of the easement or is otherwise unreasonable, expanded use is not an independent ground for termination of an easement. Answer choice B is incorrect because an express easement need not be supported by consideration. Once created, the easement cannot unilaterally be revoked by the owner of the servient estate. Answer choice D is incorrect. Although the owner could be sued for interfering with the company's express easement, the proper remedies for this conduct do not include barring the owner from challenging the easement and seeking equitable relief in court.

A landowner died and left a piece of land to his three sons as joint tenants with the right of survivorship. The youngest son sold his interest in the property to the oldest son. The oldest son then died and left all of his real property interests to his daughter. The youngest son later died. Following the youngest son's death, the middle son gave his interest in the property to a nephew.The applicable jurisdiction continues to follow the common law with regard to joint tenancy.Who owns the property? A The nephew owns the property outright. B The daughter and the nephew each own a one-half interest in the property as tenants-in-common. C The daughter and the nephew hold the property as tenants-in-common, with the daughter owning a one-third interest and the nephew a two-thirds interest. D The daughter and the nephew hold the property as tenants-in-common, with the daughter owning a two-thirds interest and the nephew a one-third interest.

Answer choice C is correct. At the landowner's death, each of the three sons held a one-third interest in the property as joint tenants with the right of survivorship. The sale of the property from the younger son to the older son severed the unity of title; therefore, upon the youngest son's sale of his interest to the oldest son, the oldest son held a one-third interest as a tenant-in-common, and a one-third interest as joint tenant with the middle son. (Note: The youngest son's subsequent death had no effect on ownership rights in the property, because he had already transferred his interest.) Upon the oldest son's death, the daughter was entitled by the terms of her father's will to the one-third interest he held as a tenant-in-common. His remaining one-third interest became the property of the middle son pursuant to the right of survivorship, giving the middle son a two-thirds interest as a tenant-in-common with the daughter. The middle son then gave this interest to his nephew. Thus, the nephew owned a two-thirds interest in the property as a tenant-in-common with the daughter. Answer choice A is incorrect because the oldest son purchased the youngest son's one-third interest, which was held as a tenant-in-common, and which he passed to his daughter through his will. Thus, the nephew held only a two-thirds interest. Answer choice B is incorrect because the daughter is entitled to the portion of the property owned by the oldest son that could be devised. The oldest son held a two-thirds interest in the property, but only the one-third interest held as a tenant-in-common passed to the daughter upon the oldest son's death. The other one-third interest became the middle son's by right of survivorship, and the middle son gave this to his nephew, along with his own one-third interest. Answer choice D is incorrect because the nephew is entitled to the portion of the property owned by the middle son. Upon the death of the oldest son, the middle son had a two-thirds interest in the property as a tenant-in-common with the oldest son's daughter, who owned the remaining one-third interest.

A professor made a gift of rental property to her daughter. Subsequently, the professor sold the rental property to a buyer. Prior to the sale, the professor supplied the buyer with the records that indicated the rent received and the expense associated with the property. The professor also fraudulently stated that her daughter was managing the property for her. The buyer did not directly question the daughter, who was unaware of the professor's actions with regard to the property. The day after the sale, the buyer and daughter met by chance. The daughter learned of her mother's sale of the property and the buyer learned of the gift of the property to the daughter. The next day the buyer properly recorded her deed, but not before the daughter had properly recorded her donative deed. The professor vanished with the sale proceeds. The recording act of the jurisdiction reads: "No conveyance or mortgage of real property shall be good against subsequent purchasers for value and without notice unless the same be first recorded according to law."In an action to determine ownership of the rental property between the buyer and the daughter, will the buyer be successful? A Yes, because the daughter received the property as a donee. B Yes, because the buyer purchased the property without notice of the prior transfer. C No, because the daughter recorded her deed first. D No, because the buyer learned of the prior transfer before recording his deed.

Answer choice C is correct. Because the jurisdiction follows a race-notice recording statute, the buyer cannot prevail if the daughter records her deed first (as is the case here). Answer choice A is incorrect because, although the recording act does not protect a subsequent grantee who is a donee from an unrecorded deed, it does protect any grantee (including a donee), who records his deed prior to a subsequent grantee recording his deed. Answer choice B is incorrect because, even though the buyer did not have actual, constructive, or inquiry notice as to the prior conveyance, the buyer did not record her deed before the daughter recorded hers. Answer choice D is incorrect because, although knowledge obtained after a conveyance does not constitute notice, the buyer lost the race to record.

A widow held a life estate in a house and several acres of land in a semi-rural area. She lived in the house and harvested berries from the numerous wild berry bushes on the property each June. The widow personally consumed the berries or gave them away to family and friends, but did not sell them to third parties. One May, just before the berries were to be harvested, the widow died. The widow's children, her heirs, sought to enter the land to harvest the berries, but the remainderman, the new owner, objected, claiming that he had sole right to the berriesDo the heirs have the right to return and harvest the berries? A Yes, because the berries were the widow's personal property. B Yes, because the widow would have been able to harvest them had she survived. C No, because the berries grew wild. D No, because the widow did not sell the berries to third parties.

Answer choice C is correct. Fructus naturales are wild crops that are not cultivated; such crops are considered real property and pass automatically with the land. Here, title to the land, including the unharvested berries, reverted to the remainderman at the time of the widow's death. Accordingly, the remainderman has the sole right to the berries. Had the berries been fructus industriales, that is, had the widow purposely planted and cultivated the berries, then they would have been considered personalty. Answer choice A is incorrect because the berries were not yet the widow's personal property; they would have become her personal property if she had already harvested them, and they would have been considered personalty had she cultivated them. However, because they grew wild, they pass with the land. Answer choice B is incorrect because, while it is true that she would have been able to harvest them had she survived, the land, including the berries, passed to the remainderman at the time of her death. Answer choice D is incorrect because what the widow did with the berries is irrelevant to the question of whether her heirs are entitled to enter the land and harvest them.

A farmer owned a farm in joint tenancy with her brother. The farmer lived on the farm while her brother lived upstate in a major metropolitan area. The farmer and her brother took ownership of the farm pursuant to their father's will upon his death. Several years later, the farmer took out a loan from a local lending institution in order to build a new barn on the farm. The farmer executed a promissory note in favor of the lender. The farmer also granted the lender a mortgage on her interest in the farm. After the barn was constructed, the farmer defaulted on the loan and died shortly thereafter. The jurisdiction adheres to the title theory of mortgages.Can the lender enforce its mortgage by foreclosing on the farm? A No, because, upon the farmer's death, her brother became the sole owner of the farm. B No, because the farmer's death terminated the mortgage. C Yes, as to the farmer's one-half interest in the farm that she owned at death. D Yes, because the farmer had completed construction of the barn before her death.

Answer choice C is correct. In a jurisdiction that follows the title theory of mortgages, the granting of a mortgage by less than all of the joint tenants severs the joint tenancy and transforms it into a tenancy in common. Consequently, after the farmer granted a mortgage with respect to her interest in the farm, she and her brother became tenants in common, each owning a one-half interest in the farm, because each joint tenant owns an equal interest in property held in joint tenancy. Upon default of the loan obligation by the farmer-mortgagor, the lender-mortgagee can foreclose on its mortgage. Answer choice A is incorrect. As noted with respect to answer choice C, the ownership of the farm was converted from a joint tenancy to a tenancy in common by the farmer's granting of a mortgage because the applicable jurisdiction follows the title theory of mortgages. Consequently, because there is no right of survivorship with respect to a tenancy in common interest, the farmer's brother did not become sole owner of the farm upon his sister's death. Answer choice B is incorrect because a mortgage, as a property interest, is not terminated by the death of the owner of the property. Answer choice D is incorrect because completion of the barn, while it likely increased the value of the property subject to the mortgage, is irrelevant with respect to the ability of the mortgagee to enforce its mortgage upon default of the loan for which the mortgage served as security.

After inheriting a substantial amount of money, a man purchased a large estate in the mountains adjacent to a ski resort intending to operate the estate as a seasonal rental property used exclusively to generate rental income. The man made the purchase with cash. Unable to properly manage his wealth, he was impoverished a few months later. He therefore procured a mortgage on the estate from a credit union, and the mortgage was properly executed and recorded. In light of a struggling economy, credit union executives were confident the man would default on the loan and wanted to ensure the estate was properly maintained in anticipation of a subsequent sale. The credit union therefore sought to obtain a court order confirming its right to possession of the estate in order to make repairs and prevent further deterioration of the property.Could the credit union take possession of the estate? A No, in a title theory state, absent default by the mortgagor. B No, in a lien theory state, unless the mortgage included an acceleration clause. C Yes, in a title theory state, until the mortgage has been fully satisfied. D Yes, in a lien theory state, because the mortgagee is considered the owner of the land during the term of the mortgage.

Answer choice C is correct. In a title theory state, legal title is in the mortgagee (here, the credit union) until the mortgage has been fully satisfied. Thus, the mortgagee is theoretically entitled to take possession at any time, although the mortgagee is typically prohibited by the terms of the mortgage from taking possession of the property before default occurs. As such, the credit union can make repairs, take rent, prevent waste, and lease out vacant space. Answer choice A is incorrect because in a title theory state, the mortgagee has the right to possession even if the mortgagor has not yet defaulted. Answer choice B is incorrect. It is true that the mortgagee cannot take possession prior to foreclosure in a lien theory state because the mortgagor is considered to be the owner of the land until foreclosure. However, an acceleration clause would not change that outcome here. An acceleration clause provides that the full amount of the mortgage obligation becomes due upon default. It does not change what party has a right to possess the mortgaged property. Answer choice D is incorrect because in a lien theory state, the mortgagee cannot take possession prior to foreclosure because the mortgagor is considered to be the owner of the land until foreclosure.

A farmer informed his best friend, who had fallen on hard times, that he wanted to give him a small farm he had recently acquired. The friend told the farmer that he would be honored to own it. The farmer had his attorney prepare a proper deed transferring the farm to his friend. The farmer signed the deed, and his signature was notarized. On his way to deliver the deed to his friend, the farmer stopped by his home for lunch. The farmer placed the deed on a small table in the entryway, along with his car keys and wallet. The farmer had lunch and then took a nap. While napping, he died. The farmer's adult son, from whom he had been estranged for several years, claims that the deed is not valid. The friend contends that the farmer's deed was effective to convey the farm to him. The farm is located in a race-notice jurisdiction.Did the farmer likely transfer his farm to his friend? A No, because the deed was not validly delivered. B No, because the deed was not validly recorded. C Yes, because the farmer intended to deliver the deed to his friend. D Yes, because the farmer's son had notice of the deed.

Answer choice C is correct. In order to validly transfer a real property interest, the grantor must make a present transfer of the interest; this is usually demonstrated by the delivery of the deed to the recipient. However, intent can be implied from the words and conduct of the grantor, even if the deed has not been actually delivered. Here, there is significant evidence that the farmer intended to presently transfer an interest to the friend. He signed and notarized the deed. Acceptance of a beneficial transfer, such as this one, is generally presumed; in any event, the friend had indicated his acceptance of the gift. The friend is most likely correct that the deed effectively transferred the farm to him. Answer choice A is incorrect because, as noted above, delivery is not required. Failure to deliver the deed does give rise to a presumption that the grantor did not intend to make a present transfer, but that presumption can be rebutted with parol evidence. Answer choice B is incorrect because recording a deed is not a requirement for a valid deed; recording is only relevant to establish priority among various individuals who claim an interest in the land. Answer choice D is incorrect because a third party's notice of a deed is also not a requirement for a valid deed; a third party's notice is only relevant to establish priority.

A private investor purchased a 50-unit apartment building and took up residence in one of the apartments. The purchase was enabled by a nonrecourse loan obtained by the investor from a bank. As security for the loan, the bank took a mortgage in the apartment building. The mortgage contained an acceleration clause that provided that, in the event that the apartment building was transferred, the full amount of the outstanding obligation was, at the election of the bank, due and payable unless prior permission of the bank was obtained. Several years later, the investor, having timely made all required loan payments, sold the apartment building to a real estate investment firm. The firm assumed personal liability for the loan. The bank, upon learning of the transfer, demanded that the firm pay the full amount of the outstanding loan obligation. When the firm refused, the bank brought a foreclosure action to collect the full amount of the outstanding loan obligation.Is the bank likely to succeed? A No, because the loan obtained by the private investor was without recourse. B No, because the mortgaged property was residential. C Yes, because the "due on sale" clause is enforceable. D Yes, because the real estate investment firm assumed personal liability for the loan.

Answer choice C is correct. Pursuant to federal law, a mortgagee-lender is generally entitled to enforce a clause, such as a "due on sale" clause, that accelerates the mortgagor-borrower's loan obligation upon the transfer of the mortgaged property. If the mortgagor-borrower fails to pay the full amount of the outstanding loan obligation upon demand by the mortgagee-lender, the mortgagee-lender may declare the loan in default and proceed to foreclose on its mortgage. Answer choice A is incorrect because, although the mortgagee-lender by making a nonrecourse loan agrees not to pursue the mortgagor-borrower personally if the loan is not paid (the lender can only take the collateral), this does not preclude the mortgagee-lender from enforcing its mortgage. Answer choice B is incorrect because, while federal law exempts certain transfers of residential real property from the requirement that states give effect to an acceleration clause, the sale of the residential real property is generally not an exempt transfer. In addition, although the private investor lived in the apartment building, for purposes of the federal law residential property exemption, the residential real property must contain less than five dwelling units. Answer choice D is incorrect because, even though the real property investment firm agreed to assume the loan, upon default of a loan obligation, a mortgagee-lender may elect to proceed against mortgagor-borrower personally or to foreclose on its mortgage.

The sole, unmarried owner of a residence died. She validly devised the residence to her long-term companion with whom she had lived for over 20 years. The residence was devised to the companion "for life or until she vacates the premises, and then to my nephew." Several years after the owner's death, the nephew transferred by quitclaim deed "any interest I have" in the residence to a creditor in satisfaction of a debt that the nephew had incurred. The deceased owner's companion continues to live in the residence.Which of the following most accurately describes the creditor's interest in the residence? A The creditor has a vested remainder in the residence. B The creditor has an executory interest in the residence. C The creditor has both a vested remainder and an executory interest in the residence. D The creditor has a mere expectancy with regard to the residence until the companion dies or vacates the premises.

Answer choice C is correct. The deceased owner's companion has a determinable life estate. The nephew had two future interests in the residence. The nephew held a vested remainder in the residence that will be transformed upon the companion's death into a fee simple absolute. A vested remainder interest is transferrable during the holder's life as well as upon death. The nephew also held a shifting executory interest that will be transformed into a fee simple absolute in the event that the companion vacates the premises prior to her death. In most jurisdictions, an executory interest may be transferred during the holder's life as well as upon her death. Consequently, the nephew's creditor now holds both future interests, the vested remainder and the executory interest, in the residence. Note that neither the fact that the transfer was made by a quitclaim deed nor the fact that the transfer was made in satisfaction of antecedent debt affects the creditor's interests in the property. Answer choice A is incorrect because, although the nephew did have a vested remainder in the residence, which he transferred to the creditor during his lifetime, the nephew also had an executory interest in the residence, which he also transferred to the creditor. Answer choice B is incorrect because the nephew had an executory interest in the residence, which he transferred to the creditor during his lifetime. The nephew also had a vested remainder in the residence, which he also transferred to the creditor. Answer choice D is incorrect. An expectancy is not a true property interest, only a right that will not come into existence until the happening of an event. For example, an heir is said to have an expectancy of an inheritance, but the heir has no legal right to any property until the death of the property owner to whom the heir is related. Here, the creditor holds two future legal property interests in the residence.

An owner was diagnosed with a terminal illness by his doctor. Upon arriving home immediately after receiving the news, the owner wrote the following: "I, Owner, now transfer my property, Greenacre, to my son." The owner, who owned Greenacre in fee simple absolute, then signed and dated the document. The owner took this document to his neighbor and asked the neighbor to hold it until the owner died and then to give it to his son. The neighbor complied with the owner's directions. Upon the owner's death shortly thereafter, among the owner's personal papers was a will. The owner had executed the will in compliance with the required formalities soon after his wife's death 11 years prior to his own. Under the terms of the will, Greenacre was devised to the owner's daughter. The daughter and son were the owner's only heirs. After learning of the document and the will, the son and daughter each claimed ownership of Greenacre outright.In an appropriate action to determine ownership of Greenacre filed by the personal representative of the owner's estate after admission of the will to probate, who is entitled to ownership of Greenacre? A The daughter, because the will was executed before the document. B The daughter, because the document was never delivered to nor accepted by the son prior to the owner's death. C The son, because the document took effect before the will. D The son, because the document was executed after the will.

Answer choice C is correct. The document was a deed that created a vested remainder interest in Greenacre in the son with the owner retaining a life estate. The document was valid as a deed because it identified the grantor and grantee, contained a description of the property, and was signed by the grantor. In the deed, the owner expressed his intent that the transfer take place immediately. By giving the deed to a third party without reserving the right to reclaim the deed, the owner effected delivery of the deed. Finally, although the son did not physically accept the deed until after the owner's death, the son's acceptance is presumed at the moment that the owner delivered the deed to the neighbor since the transfer was beneficial to the son. Answer choice A is incorrect because the date of execution, while important in determining priority of conflicting wills, does not determine priority between a deed with inter vivos effect and a will. A will, regardless of when executed during the testator's lifetime, does not take effect until the testator's death. Consequently, although the daughter was entitled to Greenacre under the terms of the will, the deed resulted in a lifetime transfer of a remainder interest in Greenacre to the son. Consequently, the testamentary devise of Greenacre was adeemed. Answer choice B is incorrect because, as noted with regard to answer choice C, the deed is deemed to have been both delivered and accepted prior to the owner's death. Answer choice D is incorrect because the fact that the deed was executed after the will does not give it priority. In addition, as noted with regard to answer choice C, mere execution of a deed is not sufficient to transfer title; delivery and acceptance are also required.

A businessman mortgaged his residence as security for a bank loan, the proceeds of which were used in his business. The bank duly recorded the mortgage. Subsequently, the businessman obtained a second loan for his business, this time from a private investor. The businessman again pledged his residence as security for this second loan. The promissory note executed by the businessman provided that the sole remedy for the private investor upon default of the loan obligation was foreclosure on the mortgage. Several years later, the businessman failed to make timely payments to the private investor and defaulted on that loan.Can the private investor foreclose on the mortgage of the residence? A No, because the businessman has not defaulted on the senior bank loan. B No, because a mortgage is unenforceable if the borrower is not personally liable for the loan to which the mortgage serves as security. C Yes, because the mortgage secured repayment of the loan and the loan was in default. D Yes, because the private investor's mortgage, as the more recent mortgage, has priority over the bank's mortgage on the residence.

Answer choice C is correct. The private investor, as a mortgagee, may enforce his mortgage through foreclosure proceedings upon default of the obligation for which the mortgage serves as security. Note that the rights of the senior interest are not affected by the foreclosure. Answer choice A is incorrect because, while the bank's mortgage on the businessman's residence has priority over the private investor's mortgage, the investor can still foreclose on his mortgage even though the bank's mortgage is not in default. Answer choice B is incorrect because the private investor, as mortgagee, may enforce its mortgage even though there is no personal liability with regard to the obligation for which the mortgage serves as security. Answer choice D is incorrect because a mortgage, as a property interest, is subject to the general "first in time, first in right" rule. Consequently, while the private investor is entitled to foreclose on his mortgage, that mortgage does not have priority over the bank's mortgage on the residence.

A rancher subdivided a portion of his ranch that had recently been annexed by the city into 30 two-acre lots. The rancher filed a subdivision plan that restricted the use of each lot to one single-family residence, but placed no other restrictions on the lots. The rancher then sold a lot to a speculator. The deed contained the single-family residential restriction, but no other restrictions. Immediately thereafter, the housing market in the area plummeted and the rancher was unable to sell any of the remaining lots for almost three years. During the next two-year period, the rancher sold 28 of the remaining 29 lots. At the time that the portion of the ranch was annexed by the city, the city's building code prohibited a single-family residence of more than two stories. After the rancher sold the first lot to the speculator, but before he sold any of the remaining lots, the city, acting in response to complaints by developers, modified its building code to permit three-story single-family residences. However, the rancher did not want any of the residences built on the lots to be as high as his own three-story residence located on the ranch. Thus, he included in the deeds to each of the 28 lots that he sold after the market rebounded a two-story height restriction for each single-family residence. The rancher made the speculator aware of this height restriction by letter, but the speculator did not respond. Subsequently, the speculator sold his lot to a couple. The deed to the couple contained the single-family residence restriction, but made no mention of the two-story height limitation. The rancher, upon learning of the couple's plans to construct a three-story family residence, has filed suit on his own behalf, as well as the owners of the other 28 lots, seeking an injunction to prevent the couple from building a three-story family residence. All of the 28 owners of the other lots who have built residences on their lots have not violated the two-story height restriction.For whom is the court likely to rule? A The rancher, because the common scheme of the two-story height restriction was readily apparent to the couple. B The rancher, because he made the speculator aware of the height restriction before the speculator sold his lot to the couple. C The couple, because the two-story height restriction was not contained in their deed, the speculator's deed, or the subdivision plan. D The couple, because the city building code takes priority over a private restrictive covenant.

Answer choice C is correct. The two-story height restriction was not contained in the couple's deed, the speculator's deed, or the recorded subdivision plan. Therefore, this restriction cannot be imposed on the couple's use of the lot as either a real covenant or an express equitable servitude. Answer choice A is incorrect because the common scheme did not exist at the time that the rancher transferred the first lot to the speculator, but was developed by the rancher in response to the change in the city building code. Even if the couple was aware of the common scheme from the fact that there were no three-story residences on any of the other developed lots, this awareness does not bind them as owners of their lot to that common scheme because the rancher failed to manifest an intent to bind their lot to that scheme at the time that he sold it to the speculator. Had the rancher evidenced his intent to impose this restriction on all thirty lots prior to the sale of the lot to the speculator, such as by including a provision in the subdivision plan, then the speculator and the couple might have been subject to the restriction as an implied reciprocal servitude. Answer choice B is incorrect because, as with the couple's awareness of the common scheme, the speculator's knowledge of the two-story height restriction did not arise until after he had become the owner of the lot. Moreover, the height restriction was not included in either deed or the subdivision plan. Answer choice D is incorrect. Although the couple is subject to the city's building codes, if they were also subject to the two-story height restriction found in the deeds of the 28 lots (which they are not), then the private restriction could still be enforced. The owners of private property may subject their property to greater restrictions on the use of their property than are imposed by a governmental entity.

A fitness company entered into a ten-year lease with the landlord of a gym facility. The lease required the fitness company to maintain the gym equipment in proper, working condition, and to upgrade or replace any of the equipment as required by the safety guidelines for gymnasiums issued by a national organization of gymnasiums. In addition, the lease specified that all of the fitness company's clients must sign a valid waiver releasing the current landlord from liability for any injury arising from their improper use of the gym equipment. One year into the lease, the landlord transferred the remaining term of the fitness company's lease to a large fitness conglomerate. The transfer occurred without the fitness company's consent. The fitness company paid rent to the conglomerate, but they stopped making their clients sign the liability waiver because the conglomerate did not require any of their gym members to sign one. The conglomerate has brought an action against the fitness company to enforce this covenant in the lease.Who will prevail? A The fitness company, because the conglomerate does not require liability waivers from its members. B The fitness company, because they did not consent to the assignment of the gym facility. C The conglomerate, because the liability waiver requirement touches and concerns the land. D The conglomerate, because the fitness company had required its clients to sign the waiver in the past.

Answer choice C is correct. Under the doctrine of attornment, the tenant is bound to honor any covenant in his lease that has been assigned by the landlord to a third party, if the covenant touches and concerns the land*. Here, the liability waiver touches and concerns the land because it has to do with clients using gym equipment in the gym facility. Answer choice A is incorrect. Although the conglomerate does not require liability waivers from its members, the covenant in the lease requires such liability waivers by clients of the fitness company in using the gym facility. Answer choice B is incorrect because the landlord can assign his ownership interest to a third party without the tenant's consent. Answer choice D is incorrect. The fact that the fitness company had required its clients to sign the waiver in the past does not make the covenant enforceable by the conglomerate. The liability waiver covenant must touch and concern the land in order to be enforceable. *A contractual obligation that relates to the ownership and/or use and enjoyment of real property. "Touch and Concern": The status that a covenant has with regard to a particular parcel of land if the terms of the covenant call for actions or restrictions that are in regard to that parcel of land

A buyer entered into a contract to purchase a 20-year-old residence from its current owner and occupant. Among the terms of the contract was a warranty that the residence was free from termite infestation and damage and a requirement that the seller obtain a termite inspection and provide the buyer with a report of the inspection. The seller timely complied with this requirement. In the report, the inspector indicated that no evidence of termites was found, but noted that there were certain areas of the house that the inspector was unable to access due to existing structures, such as interior walls and ceilings. At closing, the seller provided the buyer with a deed that the buyer promptly and properly recorded. A few weeks later, the buyer, in the process of remodeling the residence, uncovered live termites and extensive damage in the wooden beams that supported the walls and floor of the house. The seller had not been aware of the presence of the termites in the house or the damage that they had done to its structure. The buyer sued the seller for breach of the warranty relating to termites.Who will prevail? A The buyer, because the seller breached the warranty of fitness or suitability. B The buyer, because the buyer could not have learned about the existence of the termites or their damage to the residence through a reasonable pre-sale inspection. C The seller, because promises in the contract merged into the deed. D The seller, because the seller complied with the terms of the contractual warranty.

Answer choice C is correct. Under the doctrine of merger, a buyer of property generally cannot sue on promises contained in the contract, such as a termite warranty, once closing has taken place. Answer choice A is incorrect because, while the warranty of fitness or suitability does apply to the sale of a residence, it only applies to a newly constructed residence and is imposed only on a commercial seller, typically the builder or developer of the residence. Here, the residence was neither newly constructed nor was the home owner a commercial seller. Answer choice B is incorrect because the express warranty given by the seller does not require, unlike the implied warranty of fitness or suitability, the buyer to lack the ability to uncover the presence of termites or their damage of the residence. Answer choice D is incorrect because, despite the seller's lack of knowledge about the termites, the seller breached the contractual warranty by failing to deliver a termite-free home. However, because the contract merged into the deed, the seller would prevail here whether or not she even made the attempt to comply with the provision, had the buyer still accepted the deed.

In anticipation of the Fourth of July holiday, a fireworks dealer borrowed money from a lender to finance the purchase of fireworks to sell at a roadside stand. Later the same day, the dealer transferred ownership of real estate to the lender. The deed, which contained no mention of the loan, was promptly recorded by the lender. When the dealer paid off the loan, the dealer demanded that the lender return the property, contending that the parties had an oral agreement that the lender would return the property when the loan was paid off. The lender instead sold the property to an unrelated third party who had no knowledge of the loan.If the dealer files an action seeking the return of the property, which of the following would likely be the largest stumbling block to his success? A The parol evidence rule prohibits the introduction of evidence regarding the agreement. B The statute of frauds prohibits the oral transfer of property rights. C The property has been sold to a good faith purchaser. D The lender recorded the deed.

Answer choice C is correct. While a court may recognize an equitable mortgage (or one created through fairness, not an explicit agreement) even though the deed provides for the absolute transfer of the real property, a court will not order the return of the property if there are countervailing equities, such as the ownership of the property by a good faith purchaser. Answer choice A is incorrect because, although the parol evidence rule prohibits the introduction of prior or contemporaneous evidence that contradicts a written agreement, that writing must be the final and complete expression of the parties' agreement. Here, the dealer is contending that the deed was not the complete expression of the agreement between himself and the lender. Answer choice B is incorrect. While the statute of frauds does require that an interest in property cannot be transferred without written evidence of the transfer, in this case there is a writing -- the deed. The dealer seeks to introduce oral evidence that explains that the written document was intended to serve as security for the loan. Answer choice D is incorrect because, although recording the deed may protect the lender from claims advanced by subsequent purchasers of the property, recording offers no protection from a claim that the transfer of the deed was intended as security for the loan.

A painter and a dentist own adjacent parcels of land. A one-story building was located on each of the parcels. The dentist's office was on her parcel. The painter lives in the rear portion of the building on his parcel and runs a morning painting class in the front room. Last year, the dentist decided to demolish her office and build a three-story office building, planning to rent out the additional office space. After obtaining all of the necessary governmental approvals and verifying that the zoning code will allow the construction, she demolished her old office and began construction of the three-story building. As construction progressed, the painter realized that the new structure would cast a dark shadow over his property. Because his painting class relied primarily on natural light, he predicted that the structure would significantly reduce his profits by deterring student attendance. The painter brought an action against the dentist to enjoin the construction and to demand damages for his predicted loss of business. He even presented uncontroverted evidence that another painting studio had suffered an extreme drop in profits when deprived of natural light.How should the court rule on the painter's action? A Award the painter monetary damages. B Grant the injunction requested by the painter. C Hold in favor of the dentist, because the construction complied with the zoning code and the dentist obtained all necessary approvals. D Hold in favor of the dentist, because the painter does not have a legal right to natural light.

Answer choice D is correct. A property owner, as an attribute of owning the property, does not have a legal right to sunlight or to a view. Consequently, the painter cannot prevent the dentist from constructing his three-story building. Answer choice A is incorrect. A property owner may collect damages for a private nuisance. A private nuisance is a substantial, unreasonable interference with another individual's use or enjoyment of his property. Because the painter does not have a legal right to sunlight on his property, the dentist's blockage of sunlight that would otherwise fall on the painter's property is not an unreasonable interference, particularly since the blockage results from the dentist's appropriate use of his own property, constructing a higher building to make money, rather than solely to interfere with the painter's access to sunlight. Consequently, the painter cannot recover damages for any potential damage to his business based on a private nuisance. Answer choice B is incorrect. Injunctive relief can also be a remedy for a nuisance claim, but as explained above, the painter cannot succeed in a nuisance action against the dentist. Instead, he would have to rely on an enforceable negative easement or restrictive covenant. Because none exists on these facts, the painter cannot obtain an injunction. Answer choice C is incorrect because the dentist's compliance with these rules and regulations would not ensure her success in this action if the painter had a legally enforceable right to natural light under a negative easement.

A grantor owned two tracts of land, one 10 acres and the other 20 acres. Fifteen years ago, the grantor conveyed the larger tract to a friend and retained the smaller tract for himself. The deed to the friend contained, in addition to all requirements for a valid deed, the following provision:"I, the grantor, bind myself that in the event I offer to sell the smaller tract that I now retain, I will notify the grantee in writing, and the grantee shall have the right to purchase the smaller tract for its fair market value as determined by a board of three qualified expert appraisers."The deed also contained a reciprocal provision conveying a similar right to the grantor for the right to purchase the larger tract from the friend.Five years ago, the grantor decided to sell the smaller tract of land. He informed the friend in writing of his intention to sell the property. The friend had no interest in buying the smaller tract and released his right to purchase the tract. The grantor sold the property to a buyer.Several months ago, the friend decided to sell the larger tract of land. However, the friend failed to inform the grantor in writing of his intention to sell the property. The grantor learned of the offer to sell the property through a local newspaper. The grantor approached the friend with an offer to purchase the property at fair market value. The friend refused because he believed he could sell the property for a higher value.The common law Rule Against Perpetuities is unmodified in this jurisdiction and there are no applicable statutes.The grantor has brought an action for specific performance of the right of first refusal.Is he likely to succeed? A No, because the friend's release operates as a waiver of any right to purchase. B No, because the provision providing the right to purchase violates the Rule Against Perpetuities. C Yes, because the Rule Against Perpetuities does not apply to the right to purchase provision. D Yes, because the terms of the right to purchase are reasonable.

Answer choice D is correct. A right of first refusal is a preemptive right that gives its holder the opportunity to acquire property before it is transferred to another. Such a provision is valid if it complies with the Statute of Frauds and the terms are reasonable. Under the reasonableness standard, the utility of the purpose served by the restraint is balanced against the likely harm that would result from its enforcement. In this case, the original deed from the grantor to friend created the right of first refusal in both the grantor and the friend. This provision complied with the Statute of Frauds. Because the fair market value is to be determined by a panel of experts, the pricing of the property is likely fair and reasonable. Answer choice A in incorrect because both the friend and the grantor have the right of first refusal. The grantor's ability to exercise his right of first refusal is not impacted by the friend's waiver of his right as to the smaller tract of land. Answer choice B is incorrect because the provision does not violate the common law Rule Against Perpetuities. This provision is specific to the grantor and the friend without reference to heirs or successors in interest. It is not possible for the right to be exercised more than 21 years after a life in being because each person's right will end upon his death. Answer choice C is incorrect because the Rule Against Perpetuities applies to rights of first refusal. The Rule does not apply when the right is granted to a current leasehold tenant. However, that is not the case here.

A landlord, the owner of the only shopping center in a small town, and a tenant, a new small-business owner, entered into a lease for a commercial shopping space in the shopping center. The tenant was unsure that the community would support her new business, so she wanted to limit the terms of the lease to a maximum of two years. The landlord, however, insisted on an at-will tenancy for a minimum of ten years, and included the following clause in the lease: "pursuant to this Lease, Landlord is given the express right to terminate the leasehold with Tenant by giving 30 days' notice." The lease omitted language giving the tenant a similar termination right. Due to the lack of commercial space available to rent in the area, the tenant agreed. Six months into the lease, the tenant terminated the lease in writing with 30 days' notice, explaining that, although sales at the shopping space were technically covering all of the tenant's expenses, the tenant had found lower rent in a nearby town, which she believed would be a more successful market. The landlord sued the tenant for breach of the lease.Will the landlord prevail in the breach of lease action? A Yes, because the lease contract reserved the right of termination only for the landlord. B Yes, because the tenant's reasons for terminating the lease were in bad faith. C No, because termination rights in at-will tenancies cannot be limited. D No, because the lease's unconscionability gave the tenant the right to terminate the lease.

Answer choice D is correct. A tenancy at will is a leasehold estate that may be terminated by either the landlord or the tenant. If only one party is expressly given the right to terminate the leasehold, the lease may, when taking into account all other circumstances, be unconscionable. In such a case, either party is given the ability to terminate the lease. In this case, the landlord—being the owner of the only commercial shopping center in town—had such superior bargaining power that enforcing the terms of the lease against the tenant would be unconscionable. Accordingly, both parties had the right to terminate this lease. Answer choice A is incorrect because an at-will tenancy terminable by only one party is often unconscionable, and if so, the tenant's right of termination exists by implication. Answer choice B is incorrect because good faith is irrelevant in determining whether a party validly terminated an at-will tenancy; here, the tenant gave proper notice of termination. Answer choice C is incorrect because termination rights in at-will tenancies can be limited; for example, a landlord is not granted an implied right of termination when a lease expressly gives a tenant the right of termination but is silent as to the landlord.

A speculator and the original owner of a condominium unit entered into a contract for the sale of the unit. The contract, which contained no reference to the marketability of the title, called for the owner to transfer the unit to the speculator by quitclaim deed, which the owner did on the date called for in the contract. A year later, the speculator entered into a contract to sell the unit to a third party at a price significantly higher than the price paid by the speculator for the unit. The contract specifically required the speculator to provide the third party with title to the unit free from all defects. Upon investigation, the third party discovered that the unit was subject to a restrictive covenant that rendered the title to the unit unmarketable, and that the restrictive covenant had existed at the time that the speculator had purchased the unit. The third party refused to complete the transaction. The speculator subsequently sued the original owner of the condominium unit for breach of contract.For whom is the court likely to rule? A The speculator, because a covenant of marketable title was implied in the contract. B The speculator, because of the warranty against encumbrances. C The original owner, because the condominium unit was transferred by a quitclaim deed. D The original owner, because of the merger doctrine.

Answer choice D is correct. Absent contrary language, an implied covenant of marketable title (i.e., a title free from defects) is part of a contract to sell real property. However, under the doctrine of merger, obligations contained in the contract of sale, including the seller's duty to deliver marketable title, are merged into the deed and cannot thereafter be enforced through a breach of contract action. Consequently, the speculator cannot sue the original owner for a breach of the covenant to deliver marketable title. Answer choice A is incorrect. Although there is an implied covenant of marketable title in a contract to sell real property, this covenant merges into the deed and cannot thereafter be enforced through a breach of contract action. Answer choice B is incorrect because, although there is an implied covenant of marketable title in a contract to sell real property, this covenant merges into the deed and cannot thereafter be enforced through a breach of contract action. Moreover, because the original owner transferred the condo unit by a quitclaim deed, the original owner did not give the speculator any general title warranties, include the warranty against encumbrances. Answer choice C is incorrect. The contract between the original owner and the speculator is treated as containing a covenant of marketability even though the contract did not specifically provide for this covenant. This covenant is implied even in the case of a contract that calls for transfer by a quitclaim deed. However, because of the doctrine of merger, the speculator cannot now sue on the breach of this covenant.

The owner of a restaurant decided to pursue a different line of work, so he conveyed the restaurant to an up-and-coming chef. The owner executed a valid, written deed to the chef, who did not record the deed. The chef was talented, but he did not understand how to run a business, so his restaurant failed within a few months. A culinary school, in search of a new location to hold their cooking classes, purchased the restaurant from the chef. The chef executed a valid, written deed to the culinary school, and the culinary school promptly recorded the deed. After the sale, but before the culinary school had a chance to occupy the restaurant space, the original owner noticed that the restaurant was vacant. The owner then conveyed the space to a fast-food chain, and the fast food chain promptly recorded the deed. The owner did not tell the fast-food chain of his earlier conveyance of the restaurant to the chef and the fast-food chain otherwise lacked actual knowledge of this conveyance. Subsequently, the chef recorded the deed from the owner conveying the restaurant to him. When the fast-food chain attempted to take possession of the restaurant, it discovered the culinary school had moved into the restaurant.The fast-food chain has filed an appropriate action for quiet title against the owner, the chef and the cooking school. The jurisdiction in which the restaurant is located applies a race-notice recording statute.Who will prevail? A The owner B The chef C The culinary school D The fast-food chain

Answer choice D is correct. Although an instrument is recorded and indexed in the recording office, it's possible that it was not recorded in such a way as to give notice to subsequent purchasers. The school's recording would not suffice to put the fast-food chain on notice of the earlier sale because the chef never recorded his deed. A search by the owner's name would indicate that the owner had the ability to transfer a valid deed to the fast-food restaurant. Here, the restaurant is located in a race-notice jurisdiction. Under the race-notice statute, the culinary school's prior recording of the deed from the chef to the culinary school does not count because it is a "wild deed"—a deed not within the chain of title—due to the failure of the chef to promptly record his deed to the restaurant that he received from the owner. In addition, the fast-food chain did not have inquiry notice of the owner's deed to the chef at the time of its purchase of the restaurant from the owner because the restaurant was then unoccupied. The fast food chain also did not have actual or constructive notice of the deed to the chef. For these reasons, the fast food chain will prevail, and thus answer choices A, B, and C are incorrect.

A limited partnership purchased land with a loan from a bank. Neither the individual partners nor the limited partnership was personally obligated to repay the loan. As security for the loan, the limited partnership granted the bank a mortgage on the land. Subsequently, the limited partnership sold the land to a buyer. The buyer did not enter into an agreement with respect to the limited partnership's loan. After the sale, the limited partnership defaulted on the loan. The applicable jurisdiction follows the lien theory of mortgages.Can the bank foreclose on the land owned by the buyer? A No, because the buyer did not agree to assume the limited partnership's loan. B No, because no one was personally obligated to repay the loan. C Yes, because the applicable jurisdiction follows the lien theory of mortgages. D Yes, because the buyer took the land subject to the mortgage.

Answer choice D is correct. Although the buyer did not assume the limited partnership's loan, the buyer nevertheless took the land subject to the bank's mortgage. Consequently, although the buyer was not personally liable to repay the loan, the bank has the right to enforce its security interest through foreclosure. Answer choice A is incorrect because, even though the buyer did not assume personal liability for the limited partnership's loan, the buyer did take ownership of the land subject to the bank's mortgage. Answer choice B is incorrect because a mortgage is enforceable even though no one is personally liable to perform the obligation for which the mortgage serves as security. Answer choice C is incorrect because the fact that the applicable jurisdiction follows the lien theory of mortgages is irrelevant to the mortgagee's ability to foreclose on mortgaged property. Regardless of whether a jurisdiction follows the lien or title theory of mortgages, a person who acquires property that serves as security for an obligation takes the property subject to the loan.

A widower owned a parcel of land. At his death, ownership of the parcel of land was transferred by his will to his three adult children as joint tenants with the right of survivorship. Several years later, the youngest child sold his interest in the parcel to an investor. Recently, the oldest child died, willing all of his real property to his daughter.Who currently owns the parcel of land? A The investor, the daughter of the oldest child, and the middle child of the widower each own a one-third interest in the parcel as tenants in common. B The investor and the middle child of the widower each own a one-half interest in the parcel as joint tenants with the right of survivorship. C The investor and the middle child of the widower each own a one-half interest in the parcel as tenants in common. D The investor owns a one-third interest and the middle child of the widower owns a two-thirds interest in the parcel as tenants in common.

Answer choice D is correct. Although the widower's three children held the parcel of land as joint tenants with the right of survivorship, each holding a one-third interest in the parcel, the sale by the youngest child of his interest in the parcel to the investor resulted in the severance of the joint tenancy with respect to that interest. However, it left intact the joint tenancy with the right of survivorship between the middle child and the oldest child. Thus, following the sale by the youngest child, the investor held a one-third interest as a tenant in common with the oldest child and the middle child. The oldest child and middle child each held a one-third interest as joint tenants with the right of survivorship. Upon the death of the oldest child, the middle child became sole owner of the two-thirds share of the parcel that had been held by the oldest child and the middle child as joint tenants. Therefore, the middle child holds a two-thirds interest in the parcel as a tenant in common with the investor, who holds the remaining one-third interest in the parcel. Answer choice A is incorrect because although the youngest child's sale of his interest did result in the severance of the joint tenancy with respect to that interest, it left intact the joint tenancy with the right of survivorship between the oldest child and the middle child. Due to the right of survivorship, the oldest child's interest in the parcel did not pass by will to his daughter upon his death. Instead, the oldest child's interest passed to the middle child. Moreover, although the investor and the middle child own the parcel as tenants in common after the death of the oldest child, the middle child owns a two-thirds interest in the parcel, and the investor owns a one-third interest in the parcel. Answer choice B is incorrect because the youngest child's sale of his interest resulted in the severance of the joint tenancy with respect to that interest. Accordingly, the investor holds only the youngest child's one-third interest as a tenant in common. Answer choice C is incorrect. Although the investor and the middle child own the parcel as tenants in common after the death of the oldest child, the middle child owns a two-thirds interest in the parcel, and the investor owns a one-third interest in the parcel.

A homeowner whose house sat on an irregularly shaped lot constructed a storage shed that by mistake rested entirely on his neighbor's property. The storage shed stood for 16 years before the neighbor discovered the mistake when selling her property. The homeowner apologized and dismantled the shed. The neighbor then transferred title to her property to a buyer who promptly recorded the deed. Six months later, the homeowner died, devising all of his real property interests to his son. When the son sought to construct a storage shed in the same location as the prior shed, the buyer objected and initiated a lawsuit against the son.In the applicable jurisdiction, the statute of limitations for adverse possession is 15 years and the recording act is a race type recording act.Which of the following is the buyer's best argument that the land on which the original storage shed was located belongs to the buyer? A The buyer is entitled to this land under the recording act. B The buyer is the owner of the land pursuant to the doctrine of estoppel by deed. C The homeowner's removal of the shed returned not only possession but also ownership of this land to the neighbor. D The homeower's possession of this land was not hostile.

Answer choice D is correct. Among the requirements for adverse possession is that the adverse possession must be hostile. In a majority of jurisdictions, "hostile" merely means without the owner's permission; it does not require that the possessor purposefully seeks to defeat the owner's title because the intent of the possessor is irrelevant. In jurisdictions that consider intent, some will grant title to a possessor who, in good faith, thought he had the legal right to possess (i.e., believed that the property was not owned or thought that he owned the property). Others require the intent to be based on bad faith (i.e., aggressive trespass). Here, because the homeowner did not act in bad faith, and the other answer choices do not defeat the homeowner's adverse possession of the land, this is the buyer's best argument. Answer choice A is incorrect. Under a race recording act, a purchaser of property who records his property interest before the competing claimant has priority over that claimant, regardless of whether the purchaser has notice of the other claim at the time of purchase. Although a buyer is generally protected under this type of recording act from any person whose property rights arose prior to the buyer's acquisition of the property, no type of recording act protects a subsequent taker for value from a property interest acquired by operation of law, such as property acquired by adverse possession. Since generally such ownership arises automatically upon the expiration of the statutory period, there is no documentation to be recorded. Answer choice B is incorrect. The doctrine of estoppel by deed prevents a grantor who does not own property at the time that the grantor purports to transfer ownership of it to the grantee from asserting ownership of that property when the grantor subsequently acquires ownership of the property. Here, this doctrine does not apply because the homeowner did not deed the property in question to the buyer. Answer choice C is incorrect because, once the homeowner's right to this property arose because of adverse possession, the homeowner cannot return ownership of this property orally or by simply removing the trespassing structure. The homeowner must transfer ownership of the adversely possessed property by deed.

An adult college student entered into a written, one-year lease of a condominium unit owned by a professor who was taking a one year sabbatical in France. The lease, which began on September 1, called for a yearly rent of $12,000 to be paid in monthly installments of $1,000. The student lived in the unit for four months and paid rent to the professor for each of those four months. The student moved out of the unit in late December and has not made any rental payments since then. In a signed note, the student transferred all of his rights under the lease for the remaining eight months to an employee of the college. Nothing in the lease prohibited the student from making this transfer. The employee moved into the unit on January 1. She lived there for five months, and mailed the $1,000 monthly payments for those five months to the professor in France, but otherwise had no contact with the professor. At the end of May, the employee moved out and has not made any further rental payments. Despite making a good faith effort through friends at the college, the professor was unable to find anyone to rent the condominium unit for the remaining three months of the lease. Under the terms of the lease, the student is liable to the professor for any unpaid rent. However, upon his return from France in September, the professor sued the employee for the unpaid rent of $3,000.Is the employee liable to the professor for the unpaid rent? A No, because the employee did not enter into a lease agreement with the professor. B No, because the student remained liable for the rent under the terms of the lease. C Yes, because the employee was the person who vacated the condominium unit. D Yes, because the employee was in privity of estate with the professor.

Answer choice D is correct. An assignment is a complete transfer of the tenant's remaining lease term. Assignee tenants are in privity of estate with the landlord, and thus they are liable to the landlord for the rent and any other covenants in the lease that run with the lease. In this case, the student's transfer of all of his rights under the lease to the employee constituted an assignment rather than a sublease because the transfer was for the full remaining term of the lease (i.e., the eight months from January through August), and the student retained no interest in the property. Consequently, the employee, as an assignee tenant, was in privity of estate with the professor-landlord, and became liable to the professor-landlord for the rent for the remaining term of the lease, because the obligation to pay rent is a covenant in a lease that runs with the lease. Because the professor-landlord was unable to mitigate damages by renting out the unit for the remaining three months of the lease, the employee is liable to the professor-landlord for the full amount of the rent for those three months, which is $3,000. Answer choice A is incorrect because, although the employee did not enter into a lease agreement with the professor-landlord and consequently was not in contractual privity with the professor-landlord, the employee was in privity of estate with the professor-landlord. As such, the employee was liable to the professor-landlord for the rent for the remaining term of the lease. Answer choice B is incorrect because, even though the student remained liable to the professor-landlord for the rent under the terms of the lease, the student's liability does not absolve the employee of her liability to the professor-landlord as an assignee. Answer choice C is incorrect. The employee's liability to the professor-landlord stems from the student's assignment of his leasehold interest in the condominium unit to the employee, making the employee an assignee, in privity of estate with the landlord. The employee's vacating the unit does not terminate this privity.

A man owned a 25-acre tract of land. He conveyed 20 of the 25 acres to a developer by warranty deed and continues to live on the five-acre portion he retained. The deed to the 20-acre tract was promptly recorded and contained the following:"It is a condition of this deed that all owners, their heirs and assigns, of any portion of the 20-acre tract shall use the land for single-family residences only."The applicable zoning ordinance allows for single and multi-family homes in this area. The developer fully developed the tract into a residential subdivision consisting of 20 lots with a single-family home on each lot. The lots were subsequently sold and the deed to each lot referenced the quoted provision. A woman purchased one of the lots and decided to build an addition to the house. The woman plans to build an entirely separate apartment and rent it to college students. A nosy neighbor in an adjoining subdivision opposes this development because she does not want rowdy college students driving through the neighborhood.Can the neighbor prevent the woman from building the apartment? A Yes, because the original parties intended for the rights and duties to run with the land. B Yes, because the restriction is valid under the common-law Rule Against Perpetuities. C No, because the zoning ordinance allows for multi-family homes as well as single-family homes. D No, because the neighbor does not have the right to enforce the restriction.

Answer choice D is correct. Equitable servitudes are covenants about land use that are enforced at equity by injunction. For a servitude to be enforced at equity, it must be in writing and meet the following requirements: (i) there must be intent for the restriction to be enforceable by and against successors in interest, (ii) the servitude must touch and concern the land, and (iii) if the person against whom the servitude is to be enforced is a purchaser, he must have notice (whether actual, record, or inquiry notice) of the servitude. In this case, there is a valid equitable servitude on the 20-acre subdivision. The restriction is contained in the deed between the original parties. The phrase "all owners, their heirs and assigns" shows the parties' intent that the benefits and burdens run with the land. The restriction touches and concerns the land because it affects the owners as property owners, not merely individuals. Finally, subsequent purchasers had notice of the restriction in their deeds. However, the neighbor cannot enforce the equitable servitude because she does not own property in that subdivision. The benefit of enforcing an equitable servitude is held only by successors in interest to the original deed. Answer choice A is incorrect. Although the original parties did intend for the rights and duties to run with the land by their language, "all owners, heirs and assigns," this would not give the neighbor, who does not own property in the subdivision, the right to prevent the woman from building the apartment. Answer choice B is incorrect. Equitable servitudes are not affected by the Rule Against Perpetuities. However, the mere fact that the restriction is not subject to the Rule does not mean the neighbor has a right to enforce the restriction. Answer choice C is incorrect because the equitable servitude prevails over the zoning ordinance in terms of its limitations. Compliance with a zoning restriction does not protect an owner from a suit for breach of a covenant and compliance with a covenant does not protect an owner from a zoning violation action. Another owner in the same subdivision could enforce the equitable servitude against the woman. However, the neighbor cannot.

A man and woman were neighbors whose small yards were separated only by small bushes. After a discussion about building a one-foot thick stone wall to separate the two properties, the neighbors agreed that the man would pay for the wall, as the woman did not have the funds to do so, and as a consolation, the wall would be built on the woman's property so as to not reduce the square footage of the man's yard. Years later, the woman sold her property in a valid transaction with a buyer, but she told the buyer that the man had actually paid for and built the wall and that she had agreed to keep it there. Regardless, the buyer then spoke to the man about her desire to tear down the wall to open up the space and stated that she would pay for the destruction of the wall. The man objected to tearing down the wall.May the man prevent the buyer from tearing down the wall? A Yes, because he has a separate security interest in the materials used to build the wall. B Yes, because he paid for materials and construction of the wall. C No, because the wall constituted an easement in gross. D No, because the buyer validly purchased the land from the woman.

Answer choice D is correct. Fixtures, or structures built on real property, become part of the realty. Therefore, the wall became part of the woman's land, which was then sold to the buyer. When the buyer bought the woman's property, the wall, as a fixture, was included in the sale—whether the man paid for its construction or not. Absent some other legal prohibition not mentioned in the facts, the buyer could unilaterally decide to tear down the wall. Answer choice A is incorrect because once the materials were incorporated into the wall, they became an integral part of the property, and the man was not subject to any security interest in the materials. Answer choice B is incorrect because although the man paid for the wall, he had no security interest and no right to object to the wall's destruction. Answer choice C is incorrect because the wall did not constitute an easement on the woman's property. While easements in gross are not tied to the land, that is, they remain tied to one person, the relevant person is the owner of the dominant estate (here, the man), not the owner of the servient estate (here, the woman). Therefore, even if the wall did constitute an easement, it would benefit the man, and the buyer would be prevented from tearing it down. However, the wall would be more accurately characterized as a fixture, and therefore the buyer is the new owner of the wall.

A bank made a loan to a homeowner to enable the homeowner to buy his primary residence. The homeowner executed a promissory note to the bank. As security for payment of the note, the homeowner granted the bank a mortgage in the residence. The mortgage loan document contained the following acceleration clause:Upon a transfer of the property without the permission of the lender, the full amount of the outstanding loan obligation becomes due and payable.One year later, the homeowner married. Shortly thereafter, the homeowner retitled ownership of the residence in his and his wife's names as tenants by the entirety. Five years later, the homeowner and his wife divorced. The divorce decree mandated that the homeowner transfer his ownership interest in the residence to his ex-spouse. The homeowner complied with the court's decree. In neither case did the homeowner notify the bank of the transfer.Do these changes in ownership likely give the bank valid grounds to enforce the acceleration clause? A Yes, because both ownership changes violate the acceleration clause. B Only the retitling of the residence in the names of both spouses allows the bank to enforce the acceleration clause. C Only the transfer of the homeowner's ownership interest pursuant to the divorce decree allows the bank to enforce the acceleration clause. D No, neither ownership change allows the bank to enforce the acceleration clause.

Answer choice D is correct. Generally, an acceleration clause (due-on-sale clause) in a mortgage loan document is enforceable. However, federal law provides a residential real property exemption exempting certain transfers of residential real property from the requirement that states give effect to an acceleration clause. Among the exempt transfers are a transfer of property to a spouse or child and a transfer of property to an ex-spouse due to a divorce. Consequently, it is unlikely that a court would find that either of the ownership changes effected by the homeowner will allow enforcement of the acceleration clause. Consequently, answer choices A, B, and C are incorrect.

A woman and a man each owned tracts of adjacent farmland. The woman used her land as an active farm; the man maintained a large vegetable garden near his home, but otherwise used his farmland simply to enjoy the outdoors, taking leisurely walks around different parts of his property almost daily. Thirty years ago, the woman began planting crops on the man's property. As of twenty years ago, the woman had planted crops on approximately ten acres of the man's land. Because the man used the land only for his daily walks, he did not mind that the woman planted seasonal crops on his land. In fact, he enjoyed walking through them and watching them grow; approximately once a week, the man would visit the ten acres upon which the woman planted her crops. The woman recently died, leaving her farm to her son. Her son informed the man that the woman had acquired the ten acres on which the crops were planted by adverse possession, and that he planned to use the ten acres as his own. The jurisdiction in which the farms are located has a twenty-year period for adverse possession.If the man and the son bring suit to quiet title to the ten acres and the man wins, what is the most likely reason? A The woman did acquire title by adverse possession, but the son is unable to tack his ownership to hers. B The woman never acquired titled to the land because she did not acquire possession of the entirety of the ten acres at once. C The woman never acquired title to the land because she planted the crops only seasonally, not continuously. D The woman never acquired title to the land because she was not in exclusive or hostile possession of it.

Answer choice D is correct. In order to acquire ownership of land by adverse possession, the possession must be continuous, open and notorious, actual, exclusive, and hostile. To be exclusive, the possessor cannot share the land with the actual owner. In this case, the owner was aware that the woman planted crops on his land, and he walked through her crops on a weekly basis. The owner never relinquished his own possession of the land, even though the woman regularly planted crops on it. Answer choice A is incorrect because had the woman been able to establish ownership by adverse possession, the son would have been able to tack her possession to his own. An adverse possessor may tack on his predecessor's time in order to satisfy the statutory period, as long as there is privity between successive possessors. Privity is satisfied if the possessor takes by any non-hostile means (such as descent, devise, contract, or deed). Here, there would have been privity between the woman and her son because the property passed by will to the son. Answer choice B is incorrect because the woman would have been able to possess the land incrementally; however, her ownership of each area of land would have been incremental, as well. In any event, the woman did not meet the exclusive or adverse requirements for adverse possession, as explained above. Answer choice C is incorrect because seasonal use of the land is sufficiently continuous to satisfy the continuous requirement if it is consistent with the type of property being used. Here, is it normal for farmland to be used only seasonally.

A grandmother had lived in her family's mansion for her entire life, but she decided to sell the property and move into a smaller home. The grandmother, desiring to keep the mansion in her family, sold the mansion to her grandson at a below-market price. The grandmother included a right of first refusal clause in the valid, written deed to her grandson. The clause stated that, in the event the grandson, his heirs, devisees, or assigns attempted to sell the property to a non-family member, the grandmother, her heirs, devisees, or assigns would have the opportunity to purchase the property before the transfer. One year after the grandson purchased the property, he was approached by a buyer who offered him twice the price he had paid his grandmother. The grandson readily accepted, and immediately sold the mansion to the buyer. The grandmother subsequently read about the sale in the local newspaper, and brought an action against the buyer to enforce her right of refusal. The jurisdiction adheres to the common law Rule Against Perpetuities.Which of the following doctrines will help determine whether the grandmother will be able to enforce the right of first refusal clause? A Doctrine of Worthier Title B The Statute of Frauds C The Parol Evidence Rule D The Rule Against Perpetuities

Answer choice D is correct. Rights of first refusal are subject to the Rule Against Perpetuities. For the grandmother to prevail, she must prove that the right of first refusal clause was valid. Under the Rule Against Perpetuities, specific future interests are valid only if they must vest or fail by the end of a life in being, plus 21 years. If this requirement is not met, then the clause is invalid, and the grandmother loses. Answer choice A is incorrect because the Doctrine of Worthier Title is a rule of construction that prevents remainders in the grantor's heirs. Answer choice B is incorrect because the facts make clear that the clause and the deed met the Statute of Frauds requirements. Answer choice C is incorrect because the grandmother wants the clause in the deed to control, so any previous or contemporaneous evidence will not be helpful.

The owner of land donated it to a charity by quitclaim deed. The charity did not record the deed. The following month, the owner sold the same land by warranty deed to a woman who paid valuable consideration and did not know about the prior gift of the land to the charity. The woman promptly and properly recorded her warranty deed. A month later, the charity recorded its quitclaim deed. The following year, the woman gave the property to her son by quitclaim deed. Although the land had remained undeveloped at all relevant times, the son discovered the possible conflict with the charity's claim after the conveyance. The son then recorded his deed. The recording act of the jurisdiction provides: "No unrecorded conveyance or mortgage of real property shall be good against subsequent purchasers for value without notice, who shall first record."Who owns the land? A The charity, because the charity recorded its deed before the son recorded his deed. B The charity, because the son was not a purchaser for value. C The son, because the charity was not a purchaser for value. D The son, because his mother's purchase and recording of her deed terminated the charity's right to the land.

Answer choice D is correct. The applicable recording act is a race-notice statute. A race-notice statute requires a subsequent purchaser to take the interest without notice of a prior conflicting interest and be the first to record. Although grantees who acquire title to property by gift, intestacy, or devise are not protected by the recording act against prior claims, grantors who are protected by the recording act protect (or "shelter") their grantees who would otherwise be unprotected. Here, the woman is protected by the race-notice act because she purchased the property without notice of its prior transfer to the charity and recorded her deed before the charity recorded its deed. As a protected purchaser of the property, she shelters her son, who as a donee of the property, would otherwise not be protected by the recording act. Answer choice A is incorrect. Although the charity did record its deed before the son recorded his deed, the charity did not record its deed before the woman recorded her deed. The son's rights to the property depend on his mother's rights to the property, and against her rights, the charity's rights to the property are subordinate pursuant to the recording act. Answer choice B is incorrect because the son, although not a purchaser for value of the property, is protected under the shelter rule. Answer choice C is incorrect because a recording act, regardless of the type of act, protects a grantee who promptly records his interest, regardless of whether the grantee is a purchaser for value or one who acquires title to property by gift, intestacy, or devise, against persons who acquire an interest in the property after the grantee has recorded his interest. Consequently, here the charity does not have priority over the son because the charity failed to record its interest before the woman recorded her interest, and not because, as this answer choice indicates, the charity was a donee taker of the property.

In exchange for $1,000, the owner of a ranch granted a potential buyer a 90-day option to purchase the ranch at $10 million. The next day the owner was stricken with an illness that has left the owner unable to manage her own affairs. As a consequence a guardian for the owner's property has been appointed. The option holder proposed to the guardian that he would purchase the ranch immediately for $9.5 million. The guardian rejected this offer. On the 90th day, the option holder mailed his intent to exercise the option, which the guardian received on the following day. The guardian has refused to sell the ranch to the option holder.In an action brought by the option holder to compel the guardian to sell the ranch, if the court rules for the guardian, what is the reason? A The option holder failed to record the option. B The option terminated at the time that the owner became incapacitated. C The option was revoked by the option holder's counteroffer. D The option holder failed to timely exercise the option.

Answer choice D is correct. The guardian did not learn of the option holder's decision to exercise the option until after the expiration of the 90-day period. The mailbox rule, which treats an acceptance as valid upon the mailing of the acceptance, does not apply to the exercise of an option. Answer choice A is incorrect because a property right is valid as between the parties that created the right without being recorded. Answer choice B is incorrect because an option contract, unlike an offer, does not terminate upon the incapacity of the grantor of the option. Answer choice C is incorrect because, although an offeree rejects an offer by making a counteroffer, an option holder may propose to alter the terms for purchasing the property subject to the option without sacrificing the right to exercise the option.

The owner of a wooded parcel of land conveyed the land "to [her accountant] and his heirs, provided that, if this parcel is developed, [the owner] and her heirs may reenter and retake the property." Subsequently, the owner transferred "all my interests in real property" to her friend. When the owner died, she willed "all my interests in real property" to her coworker, with whom she had developed a longtime friendship. At the time of her death, the owner's only heir was her niece. One year after the owner's death, the accountant began construction of a house on the wooded parcel of land.Property taxes assessed against this parcel of land may be challenged only by the owner of the property who holds the current possessory interest in the land.Based on these facts alone, who may challenge the property taxes assessed against this parcel of land? A The friend B The coworker C The niece D The accountant

Answer choice D is correct. The owner conveyed the parcel of land to the accountant in fee simple subject to a condition subsequent because she used the phrase "provided that" in limiting the property interest transferred to him. She retained for herself and her heirs a right of reentry. Unlike the possibility of reverter, a right of reentry does not automatically trigger the transfer of ownership of the property to the holder of the right of reentry. This property interest gives its holder the right to compel the holder of the fee simple subject to a condition subsequent to transfer ownership and possession to the holder upon the breach of the condition. Until the holder of the right of reentry exercises that right, the holder of the fee simple subject to a condition subsequent retains the current possessory interest in the property. Consequently, the accountant, as the holder of the fee simple subject to a condition subsequent interest in the parcel, is the only person who may challenge the property taxes assessed against the parcel of land. Answer choice A is incorrect because, although the owner purported to transfer her right of reentry to her friend during her lifetime, in most states, this right may not be transferred by the holder during the holder's life. In addition, even if the owner's inter vivos transfer of the right of reentry is valid, until the holder of this right takes action to assert it, the holder of the fee simple subject to a condition subsequent remains the holder of the current possessory interest in the property, and, consequently, the only person who can challenge the property taxes assessed against this parcel of land. Answer choice B is incorrect. Although the coworker is the current holder of the right of reentry, because the owner can and did validly transfer this property interest at death, the coworker has taken no action to trigger the transfer of the ownership of the parcel of land to herself, despite the accountant's breach of the condition imposed on his ownership of the parcel. Consequently, the accountant remains the holder of the current possessory interest in the parcel and therefore is the person who may challenge the property taxes assessed against it. Answer choice C is incorrect. Although the niece was the owner's only heir, she is not the current holder of the right of reentry. This right may be passed by will (i.e., devisable) and it may be inherited (i.e., descendible). Because the owner devised all of her real property interests to the coworker, not the niece, the coworker is the current holder of the right of reentry. However, the coworker will not have a current possessory interest in the property until he takes action and exercises the right of reentry.

Twenty-five years ago, a hunter found a cabin in a remote wooded area while on an extended hunting trip with his friend. The hunter and his friend stayed in the cabin for the season and left when the weather became too severe for the cabin to be habitable. Upon returning to town, the hunter asked around to find out who owned the cabin. A bartender, believing in good faith that the hunter was describing a different cabin, stated that he owned the cabin. The hunter paid the bartender and received a quitclaim deed to the bartender's cabin, erroneously believing that the deed was to the cabin that the hunter had found. The hunter and his friend used the cabin every hunting season. Last year, the hunter's friend died. Shortly after the friend's death, the true owner of the cabin, who had been incarcerated for 30 years, was released from prison. The true owner brought a suit against the hunter to quiet title to the cabin.The statutory period for adverse possession in the jurisdiction is 25 years.If the true owner wins his suit against the hunter to quiet title to the cabin, what is the most likely reason? A Because the hunter shared the property with his hunting buddy, his use of the property was not exclusive for the statutorily required time. B The hunter's quitclaim deed made his use of the cabin permissive, negating the hostility requirement of adverse possession. C The hunter's seasonal use of the cabin is neither notorious nor significantly continuous to meet the statutory requirements of adverse possession. D The statute of limitations did not run against the true owner because he was imprisoned at the inception of the adverse possession.

Answer choice D is correct. The statute of limitations for quiet-title actions against those alleging adverse possession does not run against a true owner who is afflicted with a disability at the inception of the adverse possession. Insanity, infancy, and imprisonment may all qualify as disabilities that toll the statute of limitations. Answer choice A is incorrect because, although possession cannot be shared with the true owner or the public while establishing adverse possession, two or more people can join together to create a tenancy in common by adverse possession without violating the requirement of "exclusive use." Answer choice B is incorrect because the hunter's quitclaim deed does not affect his ability to meet the requirements of adverse possession. Although one of the required elements of adverse possession is hostility, the transfer of a real-property interest through a quitclaim deed does not by itself negate the hostility requirement of adverse possession. The hunter still occupied the cabin with the intention of exercising ownership rights over it, meeting the "hostility" requirement of an adverse-possession claim. Answer choice C is incorrect because seasonal or infrequent use may be sufficiently continuous if it is consistent with the type of property that is being possessed.

A buyer entered into a contract to purchase a house from its owner. The contract called for the buyer to make equal monthly installment payments over 10 years, during which time the owner was to retain title to the house and the buyer was granted the right to occupy the premises. Under the contract, once the buyer made all of the required payments, the owner was to transfer ownership of the house to the buyer. The contract contained an acceleration clause under which all future installment payments were to become due in the event of any failure to timely make a required installment payment, and a forfeiture clause, which stated that time was of the essence and permitted the owner to terminate upon the buyer's failure to timely make a required installment payment, regain possession of the house, and retain any payments already made by the buyer.After making timely payments for seven years, the buyer failed to make three monthly payments. In accord with his rights under the contract, the owner filed a summary ejectment action to evict the buyer from the house. The applicable jurisdiction treats an installment land contract as a mortgage, follows the lien theory of mortgages, and does not recognize a mortgagee's right of strict foreclosure. The buyer appeared at the summary ejectment proceeding and tendered the missed payments.Should the court award possession of the house to the owner? A Yes, because the buyer failed to timely make required installment payments. B Yes, because the owner did not utilize self-help but acted through the judicial system. C No, because the buyer tendered the missed payments. D No, because there has not been a foreclosure sale.

Answer choice D is correct. This agreement is an installment land contract. Because the applicable jurisdiction treats an installment land contract as a mortgage, follows the lien theory of mortgages, and does not recognize a mortgagee's right of strict foreclosure, the owner cannot regain possession of the residence until a foreclosure sale has been held. Answer choice A is incorrect because, although the buyer's failure to timely make the required installment payments does constitute a default, this failure does not give the owner the right to retake possession of the residence. As noted with regard to answer choice D, the owner has this right only after a foreclosure sale is held. Answer choice B is incorrect. Although the owner did not attempt to regain possession of the resident through self-help, but instead chose judicial means, because the applicable jurisdiction treats an installment land contract as a mortgage and follows the lien theory of mortgages, the owner is entitled to possession only after a foreclosure sale is held. Answer choice C is incorrect. Because the applicable jurisdiction treats an installment land contract as a mortgage, the buyer possesses the equity of redemption, under which the buyer can redeem the property until there has been a foreclosure sale. However, the buyer's tender of the three missed payments does not satisfy the buyer's contractual obligations. Due to the presence of an acceleration clause in the contract, the buyer, as a result of the default, is required to tender the total amount of the remaining installment payments.

Anticipating the death of his mother and needing money, the only child of a terminally ill widow represented himself as owner of the widow's residence to a couple. The couple paid the son $200,000 for the residence. Although the couple did not immediately move into the residence, they promptly recorded the warranty deed they received from the son in the land records for the county in which the residence was located. The couple was unaware of the mother's ownership of the residence, which was also reflected in those same land records. One week after the land sale, the mother died. Upon her death, the residence passed by the terms of the mother's will to her son. The son, claiming ownership of the residence, has moved into it. The son has offered to return the $200,000 to the couple and pay for any expenses they have incurred with regard to this matter. The recording act of the applicable jurisdiction reads: "No conveyance or mortgage of real property shall be good against subsequent purchasers for value and without notice unless the same be recorded according to law."Of the following, which provides the best argument for the couple that they hold title to the residence? A The son's rights to the residence have been lost through ademption. B The couple's ownership of the residence is protected by the recording act. C The son's ownership of the residence vests automatically in the couple under the shelter rule. D The residence belongs to the couple by application of the estoppel by deed doctrine.

Answer choice D is correct. Under the "estoppel by deed" doctrine, a grantor who conveys a real property interest by warranty deed before actually owning it is estopped from later denying the effectiveness of his deed. Consequently, when the grantor does acquire ownership of the land, the after-acquired title is transferred automatically to the prior grantee. In this case, because the widow's son purported to transfer the residence to the couple by warranty deed prior to owning the residence, his acquisition of ownership of the residence upon the death of his mother results in the automatic transfer of his after-acquired title to the couple. Answer choice A is incorrect because ademption is not relevant under these facts. Under the doctrine of ademption, a devise fails (or is "adeemed") because the testator no longer owns the property upon death. Here, at the time of her death, the mother owned the residence. Answer choice B is incorrect. The recording act of the applicable jurisdiction is a notice act. Since the mother's ownership of the residence was recorded at the time of the purported sale of the residence by the son, the couple is deemed to have constructive notice of that ownership. Consequently, they cannot claim protection under the recording act. Answer choice C is incorrect. Under the shelter rule, grantors who are protected by the recording act protect (or "shelter") their grantees who would otherwise be unprotected. Here, the son, the grantor, was not protected by the recording act. Thus, the shelter rule does not serve to protect the couple.

A couple entered into a contract to purchase a house from the owner. The couple did not record the contract of sale. Prior to the execution of the contract, the owner incurred a debt to a creditor. Subsequent to the execution of the contract, the creditor obtained a judgment against the owner. Unaware of the contract of sale, the creditor recorded her judgment in the land records for the county in which the house was located, thereby giving the creditor a lien against property owned by the owner in the county. After the owner deeded the house to the couple and they recorded the deed, the creditor sought to execute the lien and levy on the house. The couple filed an action to enjoin the creditor from executing the lien. The applicable recording act reads: No conveyance or mortgage of real property shall be good against subsequent purchasers for value and without notice unless the same be recorded according to law.Who will prevail? A The creditor, because she recorded her judgment prior the couple's recording of their deed and without notice of their purchase of the house. B The creditor, because she had reduced her claim to judgment. C The couple, because they were protected by the recording act as purchasers for value of the house. D The couple, because the doctrine of equitable conversion protected their interest in the house from the judgment creditor.

Answer choice D is correct. Upon execution of the land sales contract, the couple became the equitable owners of the house; the owner merely held legal title which he was required to convey at closing to the couple. Consequently, the creditor's judgment lien, which was obtained after the contract was executed, was not enforceable against the house because the house no longer belonged to the owner. Answer choice A is incorrect because, although the creditor did record her interest in the property without notice of the sale of the property to the couple, the recording act does not protect a judgment creditor who is not deemed to be a purchaser for value. Answer choice B is incorrect because, while the creditor had reduced her claim to judgment, the judgment was against the owner. As such, the judgment was enforceable only against property owned by the owner. Once the contract was executed, the owner no longer was equitable owner of the house. Answer choice C is incorrect because the recording act does not protect the couple. They did not record the contract of sale and, although they did record the deed, they had constructive notice of the judgment lien because it had previously been recorded.

A brother and sister coowned a farm on which they lived. The sister held a 60 percent interest in the farm, and the brother held a 40 percent interest. Each moved away. The sister rented the farm to a third party at a yearly rent of $10,000. The brother subsequently died. By will, he left all of his property to a cousin. When the sister received the next annual rental payment from the third party, the cousin demanded that she pay him his share of the rental payment, but she refused. The cousin then sued the sister for $4,000, representing 40 percent of the total rental payment that she had received from the third party.Who will be successful? A The sister, because she has the right to possess the entire farm. B The sister, because, upon the death of her brother, she owns the farm outright. C The cousin, because he has the right to prevent the third party from possessing 40 percent of the farm. D The cousin, because he owns a 40 percent interest in the farm.

Answer choice D is correct. Upon the brother's death, the cousin received the brother's 40 percent interest in the farm through the brother's will. The cousin is entitled to the rents received by the sister from the third party in proportion to his ownership interest in the farm. Consequently, he is entitled to $4,000 of the $10,000 rental payment made by the third party to the sister. Answer choice A is incorrect because, although the sister, as a tenant in common first with her brother and now with the cousin, is entitled to possess the entire farm, this does not give her the right to all of the rents collected from a third party for use of the farm. Instead, she is required to share the third-party rents with the cousin in proportion to his ownership interest in the farm. Answer choice B is incorrect. Because coownership in the form of a joint tenancy with the right of survivorship requires the interests held by each joint tenant to be equal, the sister did not own the farm with her brother as joint tenants with right of survivorship, as their interests in the farm were not equal. Instead, as a tenant in common, the brother could validly devise his interest in the farm to his cousin. Answer choice C is incorrect. As a coowner, the cousin has the right to possess the entire farm. Because the sister has leased her right to the third party, the cousin cannot prevent the third party from possessing the entire farm, just as the third party cannot prevent the cousin from possessing the entire farm. Consequently, although the cousin is entitled to 40 percent of the rental payment received by the sister from the third party, he is not entitled to prevent the third party from possessing 40 percent of the farm.

Two brothers owned a pasture as joint tenants with the right of survivorship. The older brother had one child, a daughter. The younger brother was a bachelor. Together the brothers deeded a 20 percent interest in the land to the older brother's daughter. Recently, the older brother gave his daughter an additional 10 percent interest in the land.Under a traditional joint-tenancy analysis, what are the current ownership interests in the land? A The two brothers have a 70 percent interest, and the daughter has a 30 percent interest, each as joint tenants with the other two. B The two brothers have a 70 percent interest as joint tenants, and the daughter has a 30 percent interest as a tenant in common with her father and uncle. C The two brothers each have a 35 percent interest and the daughter has a 30 percent interest, each as a tenant in common with the other two. D The younger brother has a 40 percent interest, the daughter has a 30 percent interest, and the older brother has a 30 percent interest, each as a tenant in common with the other two.

Answer choice D is correct. Upon the transfer by the brothers of a 20 percent interest, the brothers held an 80 percent interest as joint tenants and the daughter held a 20 percent interest as a tenant in common with her father and uncle. The transfer by the older brother of an additional 10 percent interest to his daughter severed the joint tenancy between him and his brother, equally dividing the 80 percent interest between them and leaving them as tenants in common. In addition, since this second transfer was done by the older brother, his interest, which was 40 percent, was reduced by 10 percent, leaving him with a 30 percent interest. The younger brother retained a 40 percent interest. By the second transfer, the daughter's 20 percent interest was increased by 10 percent to 30 percent. Answer choice A is incorrect because the daughter never had a joint tenancy with her father and uncle since she did not receive her interest at the same time as they did and her interest was not the same amount as theirs. In addition, the two brothers are not joint tenants; the transfer by the father to the daughter severed the joint tenancy between them and left them with unequal shares. Answer choice B is incorrect because the brothers are not joint tenants; the transfer by the father to the daughter severed the joint tenancy between them and left them with unequal shares. Answer choice C is incorrect because the older brother alone transferred an additional 10 percent interest to his daughter and thus his individual interest is reduced to reflect that.

A married couple bought a house to use as a residence. Their bank loan was secured by a mortgage on the house. The following year, the couple granted a second mortgage to a savings and loan association in exchange for a loan. The proceeds from this loan were used in the couple's business. Several years later, the couple defaulted on both loans. The couple offered their interest in the house to the bank by deed in lieu of foreclosure and the bank accepted.What effect does this transaction have on the savings and loan association's mortgage? A As an interest with priority over the bank's mortgage, the savings and loan association's mortgage is unaffected. B As a junior interest to the bank's mortgage, the savings and loan association's mortgage is completely eliminated. C The savings and loan association cannot foreclose on its mortgage, but must look to the personal liability of the couple, now that the bank owns the house. D The house remains subject to the savings and loan association's mortgage.

Answer choice D is correct. While the bank's acceptance of the couple's deed in lieu of foreclosure extinguished the bank's mortgage on the house, this transaction did not affect the savings and loan association's mortgage on the house. The bank took title to the house subject to the savings and loan association's mortgage. Answer choice A is incorrect because, while the savings and loan association's mortgage is unaffected by the transfer of the couple's interest in the house to the bank, this is not because this mortgage enjoyed priority over the bank's mortgage. Under the "first in time, first in right" rule, the savings and loan association's mortgage was the junior mortgage on the house. Answer choice B is incorrect. Although under the "first in time, first in right" rule the savings and loan association's mortgage was the junior mortgage on the house, it was not eliminated by the deed in lieu of foreclosure transaction between the bank and the couple. This transaction eliminated the bank's mortgage, but left the savings and loan association's mortgage unaffected. Answer choice C is incorrect because, despite the transfer of title to the house to the bank, the house remains subject to the savings and loan association's mortgage. The transfer of property on which there is a mortgage by the mortgagor does not eliminate the mortgage. While its mortgage remains on the property, the savings and loan can still foreclose.

A woman who has never married and has no children duly executes a will. Under her will, her residence is devised to her nephew and all personal property is devised to her niece, except for a bequest of $100,000 to a specific local charity. The will does not specify any alternate takers for her property and does not contain a residuary clause. The woman dies and her will is properly probated. Because the nephew served as a witness to his aunt's will, he, under state law, is an interested witness and therefore is prohibited from receiving a devise under the will. Under the applicable law of intestate succession, the woman's sister, who is the mother of the niece and nephew, is entitled to inherit the woman's estate. All property that does not pass by will or by operation of law escheats to the state.Who is entitled to the residence? A The woman's sister, because of the intestacy statute. B The woman's niece, because of the terms of the will. C The charity, because of the doctrine of cy pres. D The state, because the property escheats to it.

Answer choice is A is correct. The woman's residence passes by operation of law to the woman's sister. Although an individual may dictate through a will who takes her property after her death, the devise of her residence to her nephew failed. Although she could have named an alternate taker of the residence or a person to take the remainder of her estate, she did neither. Consequently, since the valid portion of the will does not specify a taker of the residence, it passes under the applicable intestacy statute. Answer choice B is incorrect because the niece is only entitled to her aunt's personal property, not her real property. Answer choice C is incorrect because the doctrine of cy pres addresses ownership of property to a charity when the specific purpose for which the property was to used is impossible, impracticable, or illegal. Because the woman's residence was not transferred to the charity, the cy pres doctrine is inapplicable. Answer choice D is incorrect because the decedent's property escheats to the state only when neither the terms of the decedent's will nor the applicable intestacy statute provides for a taker of the property. Here, the residence passes to the woman's sister under the intestate statute.