Property Handout Week 9 COMMUNITY PROPERTY (MINORITY) During Marriage: The earnings of each spouse are owned equally

in undivided shares. Includes: earnings of either spouse during marriage and rents, property, and other fruits of those earnings Management of CP Generally, either spouse can manage community property on his/her own. o But, they may be under a fiduciary duty to use it in the interests of the marriage o Where there is a business interest, spouse managing CP has sole management/control. Division of property at death/divorce: equal division. Gifts o Majority rule: do not need both to consent for gifts, except for large/odd gifts. o Minority (W.C. Fields): requires all gifts to be jointly made. Conveyances during life are voidable during life and ! voidable upon death. ! Bona fide purchasers are exempted from this rule. Inception of Community Property Rights Comingling of property: if the sources of comingled property can be identified as separate or community funds, the commingled property will be divided as such. If impossible to trace, three options: o Inception of Right: Character of property determined at time of purchase. o Time of vesting: Character of property is determined when title passes. Thus, if community funds were used to pay after marriage, property is owned by community o Pro-rata: Community payments buy in a pro rata share of the title. Community labor and separate property: amount of communitys share turns on whether increased value of separate property is primarily attributable to spouses personal effort or separate capital investment. Migrating Couples Property rights of earnings are determined by the state of domicile when they are earned, and they keep that nature even when the couple moves. Some states (CA) do not follow this latter part of the rule. Disposal at death: (a) law of decedents domicile at death governs disposition of personal property (b) law where land is located governs disposition of real property. The elective share: almost all common law property states give the surviving spouse an elective share (usually one-half or one-third) of the decedents probate estate even if the decedent spouse left a lesser share by will to surviving spouse. However, community property states do not have elective share statutes. INTRODUCTION TO LEASEHOLD ESTATES (1) Term of Years (1) Fixed period of time (2) period of time calculable by setting calendar dates for beginning and ending. Termination: o Duration must be for a fixed period but can terminate sooner if an event or condition occurs o No notice of termination required. May be determinable or subject to condition subsequent. (2) Periodic Tenancy Lasts for a period of fixed duration, recurs for successive periods. Termination: If year-to-year, common law requires six months notice If less than a year, common law requires that notice must be equal to length of the period Notice must terminate the tenancy on the final day of the period, not during a period o What happens if notice is ineffective (i.e. notice on 12/20 to terminate on 12/31)? (3) Tenancy at Will Tenancy of no fixed period that endures as long as both LL and T desire Termination: Either party can terminate (although statutes usually require 30 days notice). Also ends at the death of one of the parties, or upon conveyance of the property, or if tenant tries to assign o But see Garner v. Gerrish: Holding determinable life estate is created where landlord leased property to tenant on terms that provided Gerrish privilege of termination . . . at a date of his own choice. (4) Tenancy at Sufferance: Occurs when a tenant wrongfully holds over after the termination of a tenancy Landlords Options: (A) Evict and receive damages (B) Give consent (either expressly or implicitly) to the creation of a new tenancy Modern way around this problem: double or triple rent for each day held over

Property Handout What if there is ambiguity as to the length of term? o Option 1: length of the original term (max 1 year) o Option 2: Based on way that rent is computed in lease (i.e., $12k for year, or $1k per month) o Option 3: Some statutes set maximum length of holdover tenancy (ex: a month)

Week 9

IS IT A LEASE? Just because an arrangement resembles a lease (or even expressly declares itself to be a lease) does not make it a leasecould be license, an easement, or a life estate. This will be fact-sensitive determination. This distinction is important because leases give rise to certain liability, rights and remedies that do not attach to other relationships o Leases usually cant be terminated unless they follow specific termination rules (licenses can be terminated at any time) o Leases are generally assignable o Leases create LL-T relationship (implied warrant of habitability, etc.) What factors should be considered in identifying licenses and leases? o Intention of parties o Number of restrictions on use (More restrictions " license) o Interference with the right of possession? (More like a license) o Is there a stated term? (Term " more like a lease) o Exclusivity of possession (Exclusive " more like a lease) o Degree of control retained by grantor (Control " more like a license) o Presence or absence of incidental services, etc. (Incidentals " more like a lease) ! SELECTION OF TENANTS Old rule: Landlord could pick or reject any tenant for any reason Civil Rights Act of 1866: All citizens of the US shall have the same right . . . as is enjoyed by white citizens . . . to inherit, purchase, lease, sell, hold, and convey real and personal property. Bars racial or ethnic discrimination only Applies to all real property No Mrs. Murphy exception Requires intentional discrimination Court awards injunction and damages Broader than FHA: (A) it contains no exceptions; (B) extends to all real property, not just dwellings Narrower than FHA: (A) only reaches racial discrimination; (B) doesnt deal with discrimination in provision of services; (C) doesnt prohibit discriminatory advertising; (D) burden of proof is higher Fair Housing Act of 1968 3604 prohibits o (a) making unavailable or denying a dwelling to any person because of race, color, religion, sex, familial status, or national origin o (b) discrimination in terms, conditions, or privileges of sale on those bases o (c) advertising a preference, limitation, or discrimination on those bases 3604(f) prohibits discrimination on the basis of handicap o See 3602(h) for definition of handicap Distinctive features of FHA o Mrs. Murphy Exemption: Permits discrimination on basis of race, color, religion etc. in private homes and small, owner-occupied apartment complexes o Dont need to show proof of discriminatory motive; proof of discriminatory impact or disparate treatment is sufficient (i.e. need not be intentional) o Applies to race, color, religion, sex, familial status, handicap, and national origin o Applies to decision to lease, terms of lease, and advertisements for housing States/localities cannot narrow the FHA/CRA but they can expand their protections to prohibit discrimination on many other grounds; common expansions include age, sexual orientation, and marital status PPL: Thomas Schelling, Mircromotives and Macrobehavoir o Macrobehavoir refers to aggregate results that the individual neither intends nor needs to be aware of o Segregated communities may arise not from intentional discrimination but simply from small preferences among groups of people to be near people who are like them. If segregation already exists, it is reinforced even if people do not prefer it, as they will elect to be in like areas.

Property Handout o Less sinister motive of segregationwhat does this suggest from a policy point of view?

Week 9

DELIVERY OF POSSESSION Distinguish (1) right to possession; (2) delivery of possession; (3) right to quiet enjoyment o The landlord has a legal duty to put the tenant in legal possession of the leased property o Once the tenant takes possession, he must protect himself from trespassers (see Hannan v. Dusch) Does a landlord have a duty to put a tenant in physical possession? o American rule (minority): Landlord is bound to put the tenant in legal possession, not in physical possession o English rule (majority): Landlord has a legal duty to put the tenant in both legal and physical possession ! This is the majority rule, and the rule Prof. Heller prefers. ! Expectations of the parties (unreasonable that T would sign lease expecting to file a lawsuit) ! LL is the cheapest cost avoider (LL more likely than T to know if ex-tenant likely to stay; LL has more experience dealing in LL-T disputes) Both default rules; parties can avoid self-help situation by inserting clause that expressly requires LL to give physical possession to T. Discussion here a good example of where legal regime lags behind social solution. SUBLEASES AND ASSIGNMENTS Assignment: Conveys the whole term of a lease to the subtenant Privity of estate (POE) between the landlord and the subtenant Privity of contract (POC) between the landlord and the tenant POE, T is generally still obligated to pay rent if subtenant fails to do so o One exception here is when there is a novationwhen the landlord changes the terms in some way so as to disadvantage the T. This releases the T, creates a new, direct relationship between ST and LL. Partial assignment: assign some portion of premises Even if assignment is subject to defeasible condition, most courts still call it an assignment Sublease: Tenant transfers anything less than his entire interest to the subtenant Here, there is privity of estate and privity of contract between landlord and tenant, and between tenant and subtenant. In this scenario (one landlord, one tenant, one subtenant), can the landlord sue the subtenant if the subtenant defaults on the rent? o Cannot sue directly unless ST makes an explicit promise to T to be bound by terms of main lease. If that happens, LL can sue under a third party beneficiary theory. Generally, contracts made between two parties intended to benefit a third may be enforced by third party o Alternatively: LL could sue T, who could then sue ST Agreements that touch and concern land (rent, keep the land in good shape, etc.) travel with POE; ones that dont (agreement to babysit, perform other services) travel with POC Distinguishing a sublease from an assignment o (1) Intent of parties. Use of the word sublease or assignment is persuasive, but not dispositive. o (2) Is the whole interest transferred? Yes " Assignment, No " Sublease Ernst v. Conditt: Court says relationship is an assignment even though language of sublease is used. Court purports to apply the modern rule, but merely uses circular reasoning to apply old rule. ! Was the distinction between sublease and assignment significant in Ernst? ! Whats the problem with looking at the intent of parties here? When can a lessor withhold consent from assignment/sublease? o Background Common Law Rule: Where a lease contains an approval clause, the lessor may arbitrarily refuse to approve a proposed assignee & has no duty to mitigate. o Minority Rule (Kendall): Where a lease provides for assignment only with the prior consent of the lessor, such consent may be withheld only where the lessor has a commercially reasonable reason. ! Factors for whether objection is commercially reasonable: (1) financial responsibility of proposed assignee (2) suitability of use for the particular property (3) legality of proposed use (4) alteration of premises (5) nature of the occupancy ! Parties can contract around the rule, see n.22. ! Does not apply to residential leases, see n.20. o Trend: More suspicion towards restraints on alienation; lease-as-contract: good faith & fair dealing Termination and recapture clause (n.24): Would permit the result LL desired in Kendall.

Property Handout Week 9 o Landlords can protect themselves from long-term tenants subleasing at a profit when prices rise Must L mitigate where T defaults? Traditionally, no. Now, more and more yes (imported from contract law). Problem variables: Privity of estate; privity of contract; third party beneficiary rule; subrogation; assuming covenants; covenants that run with the land; assignment v. sublease; novation