Prof. Michael Kent
Real Property
Fall 2009
Real Property
1. Concept of Property & its Acquisition
What is Property?
Bundle of rights. Right to use and possess, right to exclude, right to transfer. The amalgamation of the rights and obligations that people have vis-a-vis an object.
First Possession
· Grays Rule: First possession arises from dominion and control over object. Possession is deemed to occur when there is absolute dominion and control.
· Need to be a communication of possession by clear act which can reasonably be understood by people as possessory.
· Under the common law capture rule, property rights in wild animals occur only through physical possession. (Pierson v Post). Exception – where you own the land you are deemed to constructively possess the wild animals, minerals, etc.
· Where an actor undertakes significant but incomplete steps to achieve possession of a piece of abandoned personal property and the effort is interrupted by the unlawful acts of others, the actor has a legally cognizable pre-possessory interest in the property. That pre-possessory interest constitutes a qualified right to possession which can support a cause of action for conversion.(Popov v Hayashi)
· Policy Rationale to protect rights of possessors:
a) Protect owner who has shown indication of ownership
b) Entrusting goods to another is an efficient practice
c) Prior possessors expect to prevail over subsequent possessors
d) Protecting peaceful possession is an ancient policy
2. Right to Exclude
Why do we need the right to exclude?
i) This is the most important right in the bundle of rights. It is the right to bar someone from your property.
ii) Without the right to exclude (and especially enforcement of this right), property ownership would be meaningless. To enjoy a legal “right” means, inter alia, that one will be able to rely on the protection of governmental agencies in case these rights are encroached upon. (Jacques v Steenberg Homes)
Exception to right to exclude: Right to exclude does not extend to cover gov’t agencies and services which are seeking to assist persons on the property. The rule that is applied is the Inalienability rule. (State v Shack)
Policy Rationale to protect right of exclusion:
a. That without gov’t protection and enforcement of rights, people may resort to vigilantism.
b. However, property rights serve human values. Title to real property does not include dominion over the destiny of persons the owner permits to come onto that property. Their well-being must remain the paramount concern of a system of law. The parties cannot contract away what is deemed to be essential for their health, welfare, or dignity.
· Property Rule (Calabresi/Melamamed)
o Rights are fully protected against unwanted takings.
o “Rights trump utility”.
o It is a right that is shielded from wealth-maximizing or felicific functions.
o Ex ante (prior to): Can be stopped by an injunction.
o Ex post (after the fact): Subjective valuation of damages.
o Punitive damages can be awarded without compensatory damages due to subjective nature of damage caused. Barnard Rule overturned in cases of intentional trespass. (Jacques v Steenberg Homes)
· Liability Rule
o An ex post determination of damages where the amount is set by the state.
o Objective valuation of damages based upon fair market value.
Example of Property Rule v Liability Rule:
· “A” trespasses on land belonging to “B” even though “B” prohibits it.
· Under Property Rule –
o i) If prior to trespass occurring, B can get an injunction against A prohibiting trespass.
o ii) After trespass occurs, B can sue for damages based upon B’s subjective valuation.
· Under Liability Rule –
o i) A can trespass and the state will determine an objective valuation for the trespass based upon fair market value.
3. Right to Exclude vs. the Right to Possess
ADVERSE POSSESSION
1. Definition: somebody who possesses the land of another for an extended period of time may be able to claim legal title to that land. It is a means of acquiring the property of another by long, uninterrupted possession that is open and notorious.
Requirements for Adverse Possession (POACHER):
Possession must be:
1. Open and notorious
2. Active
3. Continuous
4. Hostile
5. Exclusive
6. For the required period of time (statutory period).
o POSSESSION: Must exercise dominion and control over all or part of the property either actively or by constructive possession through color of title.
o OPEN & NOTORIOUS:
§ Overt actions not covert actions on part of the AP.
§ The AP must act in a manner consistent with that of a TO. Must seem to 3rd parties that it is the TO.
§ Virtual per se rule that fences constitute open & notorious possession.
§ (Stump v Whibco)
o ACTIVE: The claimant must be actually using the land or some part of it, and the use must be one which is suitable for the type of land involved.(Mullis v Winchester)
o CONTINUOUS: Possession must be continuous for the required statutory period. E.g. paying taxes, maintaining land. It may be possible to claim AP even if there is a transfer of ownership through the principle of “tacking” – for example, a former owner’s twelve years of AP can be “tacked” to the present owner’s eight years, for a cumulative twenty years of AP.
o HOSTILE: Possessor must be asserting an interest in the land that is inconsistent with the True Owners (TO) claim. i.e AP cannot be a lessee or on the land with owners consent. (Norman v Allison)
§ If AP can prove all other elements, hostility is presumed.
§ It is an objective test of hostility not a subjective “state of mind” or “intent to claim”. (i.e by meeting all other criteria of adverse possession, the AP objectively proves hostility).
§ Intent to claim approach is problematic because it seemingly promotes piracy. It is easy to manipulate because it draws on a distinction that people usually do not make. Also, it encourages people to lie and encourages attorneys to counsel clients to unethical conduct. It is therefore a minority ruling and is not used.
o EXCLUSIVE: Others cannot have possession of land at the same time. AP’s relationship with 3rd parties as to exclusion from property- AP has right to exclude others from p
possessory interest with no future interest.
· Potentially infinite duration.
· Freely alienable (transferable), deviseable (able to be handed down via will) and inheritable (goes to heirs when one dies intestate).
· Not subject to conditions of use.
· Not subject to waste doctrine since there is no future interest.
· Created by “To A and his heirs”
White v. Brown (1977): will said “I leave her my house to live in and not to be sold.” Held, the court has a strong presumption in favor of the free alienability of property and so a fee simple absolute will be construed in the transfer of property rights (transferor intends to transfer all property interest to transferee) unless there is a clear indication to the contrary. The attempted absolute restraint on alienation is void.
Policy Rationale for free alienability:
Arguments against restraints on alienability
It makes property unavailable for its most economically valuable use.
It perpetuates concentration of wealth by not allowing owner to sell land and invest money.
It is a disincentive for improvement on land.
Creditors are less likely to loan against land if they cannot take absolute title.
Standard of Review:
Enforce if it is reasonable (weighing utility of restraint against injurious consequences)
Total restraints are presumptively void unless there is strong public policy justification
Types of Restraints
Disabling Restraint: withholds from grantee option of transferring interest; complete restriction on alienation; attempted transfer is void
Absolute—always void (to A but never to be sold)
Limited Class—can be enforced so long as it is reasonable under the circumstances, i.e., not arbitrary and capricious (to A but never to be sold to B)
Forfeiture Restraint: if the grantee attempts to transfer his interest it is forfeited to another person (to A but if he tries to sell it then to B)
It would be possible to buy the future so A has fee simple
Restatement—partial restraint can be valid if it’s reasonable under the circumstances
Promissory Restraint: grantee promised not to transfer his interest; permissible because holder could bargain with grantor to let him sell; damages or injunction (considered separate contract from conveyance of land)
Fee Simple Determinable: (aka Automatic Defeasance)
· Freehold estate
· Defeasible (conditions upon ownership)
· Subject to conditions of use.
· Automatically terminates and reverts to grantor upon stated condition occurring.
