Life Estates

There are a lot of nuances that are tested about life estates. But first, it's important to understand what a life estate is. 

A life estate is an estate measured by the life or lives of one or more people. The estate terminates upon the death of the holder(s) of the life estate. Often, a life estate is measured by the life of the grantee, but not always. A life estate may also be measured by a life other than the grantee's life. For example, a grantor can grant a life estate to x for the life of y. 

Nobody lives forever, at least not yet. For that reason, whenever a life estate is granted, a future interest is included with that life estate. For example, "to x for y and then to z" will grant to x a life estate, and to z a remainder. "From x to y for life" does not include a remainder, so that grant includes a reversion back to the grantor once y dies. 

Often tested in the context of life estates are the obligations that a life tenant has to those who will later receive the property (the future interest holders). In general, the life tenant is entitled to all ordinary uses and profits from the land held during the life tenant's life. But the life tenant must not commit waste. There are three types of waste. 

Voluntary waste occurs when the life tenant's actual, overt conduct causes the property value to drop. For example, if a life tenant depletes a property's natural resources, that might be deemed voluntary waste. Exploitation of natural resources is generally limited to situations in which such exploitation is necessary for repair or maintenance of the land, or when the land is suitable only to such use. It might also be proper if the grantor (who granted the life estate) expressly or impliedly permitted such use. If mining was done on the land prior to the life estate, the life tenant can continue to mine any mines that are already open. This is called the Open Mines Doctrine (not a lot of creativity in coming up with that name!) 

Permissive waste occurs when a life tenant fails to comply with their obligations to keep the land from falling into disrepair. The life tenant must preserve the land and keep all structures on the land in a reasonable state of repair. The life tenant also must pay ordinary taxes on the land, though this is limited to the extent of the total income/ profits generated from the land or the reasonable rental value of the property. 

The life tenant also must pay interest on mortgages burdening the land (distinguish this from the principal which is generally paid by the future interest holder), and pay special assessments for public improvements of short duration. Improvements of longer duration are generally apportioned among the life tenant and the future interest holder. A life tenant is not responsible for insuring the property for the benefit of the future interest holder, nor is a life tenant responsible for damages caused by third party tortfeasors. 

Ameliorative waste might be the most counterintuitive of them all. Ameliorative waste is a change to the property made by the life tenant that benefits the property economically. The life tenant cannot enhance the property's value in this way unless consent is given by future interest holders. The idea here is that there may be sentimental value lost even if property value increases. A change will not be deemed ameliorative waste, however, if the market value of the future interest is not diminished and either the future interest holders do not object or a substantial and permanent change in the neighborhood conditions deprives the property in its current form of reasonable productivity or usefulness. 

A final point is that a life tenant can renounce his/her interest in the life estate after receiving the interest by will or inheritance. If a life tenant renounces, the future interest following the life estate is generally accelerated so that the future interest becomes a present possessory estate. 

Future Interests

The topic of future interests is not a topic that most students enjoy. They didn't like it in law school, and having to study it for the bar exam reminds them about why they didn't like in law school.

But one thing that will clear up quite a lot of the angles tested on this topic is to remember that possession and ownership are two very different things. If x has a life estate and y has the remainder, x has both a possessory interest in that life estate (because x can possess it now, until x dies), and an ownership interest. Y doesn't have a possessory interest, because y needs to wait for x to die before y can possess. But y does have an ownership interest. Y owns the remainder. 

Simplest way to say this: you can own something even if you can't possess it. And it's that ownership interest that plays into so many of these questions. When y tries to convey that interest during y's life, or devise that interest by will, or etc., it's temping to think y can't do that because it's not y's property till x dies. But it is y's property. Y owns it, but cannot, for now, possess it. Separate the concepts of ownership from possession and you're on your way to better understanding this topic.

Water Rights

This post will focus on everything you've ever wanted to know about water rights. Two doctrines will guide what you need to know about water rights: the riparian doctrine, and the prior appropriation doctrine.

Under the riparian doctrine, water belongs to those who own the land bordering a watercourse. These rights attach to all contiguous tracts held by the same owner, provided one of the tracts abuts the water. 

The riparian doctrine can be subdivided into two theories:

The natural flow theory states that a riparian owner's use of the water may be terminated if it results in substantial or material diminution of the water's quantity, quality, or velocity. The reasonable use theory, in contrast, states that all those who have riparian rights share the right of reasonable use. One riparian owner's use of the water is not enjoinable unless it substantially interferes with the use of another riparian owner's rights. Courts balance the utility of the owner's use against the harm to other owners, and to do so they use the following factors: purpose of use; extent of use; destination of water taken; alteration of the flow of the water; whether the water has been polluted; etc. 

Under both the natural flow theory and the reasonable use theory, natural uses of the water prevail over artificial uses of the water.  

The prior appropriation doctrine differs in material ways from the riparian doctrine. Under the prior appropriation doctrine, the water initially belongs to the state. The right to divert the water and use it for their own benefit can be acquired by an individual through actual use. Generally, the principal of first in time, first in right applies. The person who first uses or diverts the water will acquire the rights to that water. Worth noting that this right can be lost by abandonment. 

There are a few specific rules to note about groundwater, water beneath the surface of the earth. The absolute ownership doctrine states that the owner of the land that overlays the groundwater can take all the water for any purpose. A more limiting doctrine is the reasonable use doctrine which states that one use, exporting the water, is allowable only if it does not harm other owners who have rights in the same water. The correlative rights doctrine states that owners of the land overlaying the groundwater own the water as joint tenants and each joint tenant is allowed reasonable use. The appropriative rights doctrine looks to priority: the the first to use the groundwater will determine ownership. The Restatement has a bit to say on this as well: under the Restatement, an owner of groundwater may use the groundwater unless such use unreasonably harms neighboring landowners, exceeds the owner's reasonable share, or directly and substantially affects surface waters and unreasonably harms the users of surface water. 

In contrast to groundwater rules are the rules dealing with surface waters. Surface water is water above the surface of the earth that has not yet reached a natural watercourse, such as rainwater, water from melting snow, etc. A landowner can use surface water within their boundaries for any purpose. There are, however, some limits as to the methods by which landowners might attempt to change the natural flow of that surface water. 

The natural flow theory states that owners cannot alter natural drainage patterns. This is the most limiting theory on surface water. The common enemy theory, in contrast, states that an owner can take any protective measures to get rid of the water or divert its flow. This is the least limiting theory on surface water. Lastly, the reasonable use theory balances the right of the owner to divert the water with the rights of others not to be harmed by that diversion. 

With surface water, the key contrast is between capturing and diverting. There is no limit to the capture of surface water, but there may be some limits on diverting it. 

Future Interests (a Quick Review)

X grants property to y, so long as y farms the property. Y has a fee simple determinable. X has retained a possibility of reverter. Why a possibility of reverter? Because Y might continue to farm the property, in which case x will never get the reverter. It's possible, but not definite.

X grants property to y, but if y does not farm the property, x will enter the property and reclaim it. Y has a fee simple subject to a condition subsequent. X has retained a right of re-entry.

X grants property to y for life. Y has a life estate. X has retained a reversion. Why a reversion? Because Y will not live forever, and unlike with a possibility of reverter, Y is certain to die. At some point x (or x' heirs) will get the reversion.

X grants property to y for life and then to z. Y has a life estate. Z has a remainder. X has nothing. Why does x have nothing? The life estate + the remainder = 100% of the property. There is nothing left for x.

X grants property to y, so long as y farms the property, but if y does not farm the property, then to z. Y has a fee simple subject to an executory limitation. Z has an executory interest. X has nothing. Once again 100% of the property has been granted.

X grants property to y, so long as y farms the property, but if y does not farm the property then to z for life. Y has a fee simple subject to an executory limitation. Z has an executory interest in life estate. X has retained a possibility of reverter. Z is sure to die, but x retains only a possibility of reverter, since y might continue indefinitely to farm the property. X's reversion is therefore not definite

Termination of an Easement

Assume that a valid easement has been created. Easements do not, necessarily, last indefinitely, so it must be determined how a valid easement that has been created can be terminated. And there are quite a few ways to do so. 

Estoppel pops up from time to time in multiple areas of law. Here, too, even an oral expression of an intent to abandon an easement might terminate the easement if the person burdened by the easement materially changes his/her position in reasonable reliance on the easement holder's assurances that the easement will be abandoned. 

Easements created by necessity can, likewise, terminate as soon as the necessity ends. If the land burdened by an easement (the servient estate) is destroyed, any easement on the land is terminated. 

An interesting issue that sometimes shows up on the exam is sort of a hybrid easement/eminent domain issue. Imagine that the land burdened by an easement is rightfully condemned by the government. Any easement on the land condemned is terminated. Whether the easement holder is entitled to any of the compensation required to be paid by the government is a question not entirely agreed upon by the courts. 

Another avenue for terminating an easement is through release. A release by the person benefitted by the easement to the person burdened by the easement will terminate the easement. Similarly, abandoning the easement will terminate it, but be sure that there is some physical act (rather than just an oral promise to abandon) that evidences the intent to abandon (for example, building a structure that blocks the easement).

An important method for terminating an easement is termination by merger. An easement is extinguished when title to the easement and title to the land burdened by the easement become vested in the same person. If the same person acquires ownership of both the easement and the servient estate, these merge and the easement is terminated. 

Lastly, an easement may be terminated by prescription. Here the owner of the land burdened by the easement adversely possesses the easement in such a way that the easement is terminated. The elements are similar but slightly different than the elements traditional to adverse possession. To terminate an easement through prescription, the owner of the servient estate must continuously interfere with the easement holder's right to use the easement, and that interference must be open/notorious, actual, and hostile to the easement holder. As with creating an easement by prescription, the element of exclusivity is not required. 

Creation of Easements

In a recent post, I outlined the different types of easements that show up on the bar exam. But the first part of any easement analysis will be to determine whether a valid easement has been created. There are multiple ways in which that can happen, and the most straight-forward way is by grant. 

To grant an easement, that easement must be memorialized in writing and signed by the holder of the servient tenement (the land burdened by the easement) unless its duration is brief enough to be outside of the Statute of Frauds. 

A writing is not, however, required to create an easement by implication (an implied easement). Rather, implied easements are created by operation of law, and can take many forms. The first form is known as an easement implied from preexisting use (sometimes referred to as a quasi easement). Here, one person owns two lots. The person who owns both lots sells one of the lots without any mention as to whether the buyer will have an easement over the other lot. The court will imply an easement for the buyer to use the other lot if the previous use of the other lot was apparent to the buyer when the buyer purchased the land from the seller, and if it would have been reasonable for the buyer to expect that the use of both lots would continue after the sale of one of the lots to buyer. 

There are also implied easements without preexisting use. In one scenario, lots are sold in a subdivision with reference to a recorded plat or map that shows streets leading to the lots. Buyers of those lots have an implied easement to use the streets to access those lots. In another scenario, anyone with a profit a prendre (the right to take resources such as minerals or timber or etc. from the land of another) will have an implied easement to pass over the surface of that land in order to extract those resources. 

Another type of implied easement, and one that is often tested, is called an easement by necessity. This easement will be implied if a landowner (the grantor) conveys a portion of land and the buyer has no way out from the purchased land except over some part of the grantor's remaining land. In other words, the buyer is landlocked. 

If you understand well adverse possession, you'll also understand the next type of implied easement called an easement by prescription. Just as with adverse possession, to acquire a prescriptive easement requires continuous and uninterrupted use of the easement for the statutory period, open and notorious use of the easement, actual use, and hostile use. You might notice that the difference between a prescriptive easement and adverse possession is that the use need not be exclusive to acquire a prescriptive easement. To be sure, an easement will never be exclusive since by its nature someone is merely using the land of another. Title is not acquired by a prescriptive easement as it is by adverse passion. What's gained is the right to continue to use the property of another person. 

Lastly, once an easement has been created, the scope of the easement must be determined. That's easy enough if the easement was created by grant: the scope is determined by the terms of the grant. If an easement is created by implication, then scope will be determined by the conditions that created it. A standard of reasonableness is a good rule of thumb.

The landowner burdened by the easement may select the location of the easement as long as that selection is reasonable. If there are no specific limitations selected, courts assume that the easement was intended to meet both present and future needs of the person benefited by the easement. 

The landowner burdened by the easement generally may use the burdened land in any manner, provided that such use does not interfere with the easement. The person benefited by the easement must make repairs to the easement if that person is the sole user of the easement. If both the benefited person and landowner burdened by the easement are both users of the easement, court will apportion repair costs among them. 

 

Types of Easements

The topic of easements quickly becomes complex. But a great place to begin is to understand that there are two main types of easements: affirmative easements and negative easements. And then within each type, there are appurtenant easements and easements in gross. With that backdrop, it's easier to fill in the details. 

Most easements are affirmative. An affirmative easement gives the easement holder (sometimes called the dominant tenant) the right to do something on the servient tenement (the land imposed upon by the easement). 

A negative easement, on the other hand, entitles the dominant tenant to prevent the servient tenant from doing something on the servient tenement that would otherwise be permissible. Unlike affirmative easements, negative easements can be only be created expressly by a writing signed by the grantor. 

Both positive and negative easements can be either appurtenant or in gross. An easement appurtenant is one that benefits the holder of the easement in the physical use of the easement holder's own land. Think of it this way: two parcels of land are involved in an easement appurtenant, and the ability to use another's land benefits a person in that person's use of his own land. The classic example here would be when the holder of an easement is given the right of way across another's land.

An easement in gross, in contrast, benefits the holder of the easement, but the benefit is a personal or pecuniary benefit that is not related to the holder's use of the holder's own land. As an example, imagine a holder of an easement is given the right to swim on another's land. The privilege has nothing to do with the holder's own land: the land on which the holder of the easement can swim is burdened, however. 

This distinction might seem academic, but there are practical consequences. An appurtenant easement passes automatically if the holder of the easement (the person benefited by the easement) transfers the land benefited by the easement. This is true regardless of whether the easement is mentioned in the conveyance. It's said that the easement "runs with the land." 

Likewise, if the land burdened by the easement is transferred, the purchaser of the burdened land will be burdened by that easement unless the purchaser is a bona fide purchaser without notice of the easement. An easement in gross, in contrast, in not transferable (it does not "run with the land") unless it is for commercial purposes. 

The next post will focus on the various ways that easements are created. 

Future Interests (a quick review)

 A quick review:

From x to y and y's heirs:
y: fee simple absolute
x: nothing

From x to y for life: y: life estate x: reversion From x to y for life and then to z. y: life estate z: remainder x: nothing From x to y so long as y doesn't drink on the property. y: fee simple determinable x: possibility of reverter From x to y, but if y drinks on the property then x has the right to reclaim it y: fee simple subject to a condition subsequent x: right of re-entry From x to y but if y drinks on the property then to z y: fee simple subject to an executory limitation z: a shifting executory interest x: nothing And one last tough one: From x to y if y doesn't drink on the property and then to z so long as z doesn't drink on the property. y: fee simple subject to an executory limitation z: a shifting executory interest determinable x: a possibility of reverter That's really all you need to know on this stuff. They can always combine these to make them more difficult, but this is the foundation of it all. #MBE

MBE Tip: Recording Statutes

MBE Tip:

A quick and easy way to determine in a Property question the type of recording statute: Below, let "+" indicate that the word shows up in the statute; let "-" indicate that the word does not show up in the statute. All of you've got to do is skim the statute for these words: Notice (+), First (-) = notice statute

Notice (-), First (+) = race statute

Notice (+), First (+) = race notice statute

MBE Tip: Variances

You'll probably see some zoning questions in Property. I'd say that's a safe bet, likely on the MBE and maybe on an essay. You'll want to know what what the term "variance" means in this context.

A variance is created when a local government gives a landowner permission to deviate from a zoning requirement that the landowner would others be forced to oblige. The definition is simple enough: they'll probably test on the requirements for obtaining a variance. Two notable requirements: the first is that the variance cannot deviate from the zoning plan in a way that would be contrary to the public interest. The second is that enforcement of the zoning requirement would cause the landowner unnecessary hardship. You'll want to distinguish variances from non-conforming uses (an MBE trap right there). A non-conforming use might be granted if you were using the property in a certain way before the zoning requirements took effect. If so, you may be able to continue that use for a limited time. Variances don't have either these requirements or these limitations. Probably less important, but might be worth noting the two types of variances: use variances allow the land to be used differently than the zoned uses, and area variances allow for structures on the land to look differently than structures in the rest of the zoned area.

Fructus Industriales vs. Fructus Naturales

Occasionally, Property questions on the MBE will test you on crops. There are two types of crops that are generally conveyed along with conveyed land: fructus industriales and fructus naturales. Fructus industriales are produced through cultivation (for example, wheat and corn) and are considered to be personal property. Fructus naturales occur naturally (for example, wild mushrooms) and are considered as a part of the real property. 

That distinction between personal and real property is where the MBE will go should it test this topic. A landowner (as opposed to a tenant) is presumed to own both types of crops. Likewise, if the landowner conveys the land on which those crops grow, the landowner is presumed to have conveyed the crops along with the land. 

There is, however, an important exception to that presumption when the crops are fructus industriales. The exception for such crops is known as the "doctrine of emblements." That doctrine provides that if a lease of uncertain duration is terminated through no fault of a tenant, the tenant has the right to re-enter the land to remove, harvest, or cultivate the crops that the tenant planted during the time of the tenant's tenancy. The policy here is generally to protect a tenant who might risk losing ownership of crops if the land on which the crops grow changes ownership (for example, through foreclosure). For this reason, if the tenant were to die, the doctrine of emblements would likewise apply so that the crops pass to the tenant's heirs.

Might be worth noting that there is a time limit to this exception. These crops are generally considered personal property of the tenant only until the first harvest after the termination of the tenant's tenancy. Likewise, if a tenant's tenancy ends due to the fault of the tenant, the doctrine of emblements will not apply and the crops will be forfeited. They will be treated not as personal property but rather as the real property owned by the landowner and will thus pass with the real property. 

Future Interests: A Quick Review

From x to y so long as y farms the property.
x: fee simple determinable
y: possibility of reverter

From x to y but if y doesn't farm the property then x will reclaim it. x: fee simple subject to condition subsequent y: right or re-entry From x to y for life. x: reversion y: life estate From x to y for life and then to z. x: nothing y: life estate z: remainder From x to y for life and then to z for life. x: reversion y: life estate z: remainder in life estate From x to y if y farms the property and if not then to z x: nothing y: fee simple subject to an executory limitation z: shifting executory interest From x to y if y farms the property and if not then to z for z's life: x: reversion y: fee simple subject to an executory limitation z: shifting executory interest in life estate

Constructive Adverse Possession

Adverse possession shows up quite a lot on the UBE. A nuance sometimes tested is a specific type of adverse possession called constructive adverse possession.

The general rule is that an adverse possessor cannot acquire title by adverse possession unless the possessor goes into actual possession of the land. But the exception of "constructive adverse possession" modifies the analysis. If a possessor enters the land under a "colorable" document (sometimes known as entering under "color of title") but only takes possession of a portion of the entire area described in the document, the possessor may be able to claim title to the portions described in the document that were not actually possessed. It's important (it always is!) not to allow the exception to become the general rule. In other words, for this exception to apply requires specific elements. They are as follows:

--The area not possessed by the possessor has to be reasonable in size.

--The area not possessed by the possessor has to be adjacent to the area actually possessed.

--The portion possessed and the portion not possessed must be owned by the same person.

Don't be too concerned about what might constitute "reasonable in size," for example. If it's a close question of fact then it's more likely to be tested on the essays. Know the elements; that's what important. And then argue both sides. 

I sometimes describe learning the law as similar to peeling back an onion. The first layer of the onion here would be the elements of adverse possession. Notorious, continuous, all that stuff. But then, by peeling back the onion one more layer, you arrive at this nuance. An issue for many people taking the test is that they need to peel back that onion one or two more layers.

First know the basics. That's the foundation. But the test writers will, more often than not, expect you to also go a bit deeper than that.  

Future Interests: The Basics

Learning future interests is a grind. But begin here: once you know which future interest attaches to which present possessory estate, you're on track to answering these questions correctly:

x -> y so long as y farms the property. 

y has a fee simple determinable; x has a possibility of reverter.

 

x -> y but if y does not farm the property then x will re-enter and reclaim it.

y has a fee simple subject to a condition subsequent; x has a right of re-entry.

 

x -> y for life.

y has a life estate; x has a reversion

 

x -> y for life and then to z. 

y has a life estate; z has a remainder.

 

x -> y so long as y farms the property and if y does not farm the property, then to z.

y has a fee simple subject to an executory interest; z has an executory interest. 

 

One last tricky one:

x -> y so long as y farms the property and if y does not farm the property, then to z so long as z farms the property. 

y has a fee simple subject to an executory interest; z has an executory interest determinable; x has a possibility of reverter. 

Marshalling. What Even Is It?

There's a concept that shows up rarely but occasionally on Real Property questions called marshalling. It's sometimes referred to as the two funds rule of marshalling and it applies as follows:

Marshalling applies when two or more parcels of land are each subject to at least one mortgage and one of the parcels is subject to competing mortgages. For example, assume 2 parcels of land and further assume that the same debtor has taken out mortgages on both parcels. Parcel 1 is encumbered by 2 mortgages, a senior mortgagee (Bank A) who recorded first and a junior mortgagee (Bank B) who recorded after the senior. Parcel 2, on the other hand, is encumbered by only one mortgage with the same senior mortgagee as in parcel 1 (Bank A). 

When the debtor defaults, Bank A, as the senior mortgagee, would generally have the choice to foreclose either on Parcel 1 or on Parcel 2. In other words, the senior mortgagee (Bank A) would have the right to foreclose on Parcel 1 before foreclosing on Parcel 2, even though that decision would negatively affect the junior mortgagee on Parcel 1 (Bank B).

But the two funds rule of marshalling changes this analysis. With this rule, the junior (Bank B) can request that the senior (Bank A) first foreclose on Parcel 2 since there are no subordinate interests on Parcel 2. Bank A will have to abide by that request, assuming that Bank A will not be materially harmed by doing so. 

The policy behind the two funds rule of marshalling is one of fairness. If Parcel 2 upon foreclosure produces enough money to pay off Bank A's entire loan, parcel 1 won't get subjected to foreclosure until Bank B is ready to do so. And, the theory goes, this will avoid unnecessary harm to Bank B. 

Cooperatives & Condominiums

A relatively new topic tested in Property on the MBE is the topic of Cooperatives & Condominiums. You won't see many questions on the exam in this area but it's very likely you'll see a few. 

Understanding cooperatives requires an understanding as to how title is held in the property. In a cooperative, title to both land and buildings is held by a corporation. The corporation leases individual apartments to its shareholders. Individual owners are regarded as tenants, and direct restraints on alienation of an individual is valid. 

In a condominium, each owner owns the interior of his/her individual unit. Each owner also owns an undivided interest in the exterior and an undivided interest in common areas of the condominium. Unlike with a cooperative, the ordinary rules against restraints on alienation do apply. 

You might see some questions on homeowners' associations. These associations oversee the common areas of the condominium property, and the owner of each condominium is a member of the homeowners' association. A board will manage the property and the owners will elect the board. 

Fees are required by condominium owners (generally monthly) which is paid to the homeowners' association and used for upkeep of the property and such. The monthly fees may not be sufficient to cover the required purposes in which case a special fee or special assessment may be imposed (generally not more than 1 time per year) and each owner will be required to pay that fee. 

Homeowners' associations may pass bylaws that will place requirements/limitations on the owners' use of the property. These rules are binding and either the individual owners or the homeowners' association may enforce any bylaws that were validly passed.

Waste

A variety of waste is tested in Property questions on the MBE. Perhaps the one that is tested most often is permissive waste but three types of waste are fair game and this post will outline each of them. 

The overarching idea here is that there will be a life tenant and a future interest holder. The life tenant will be limited in how he/she can use the land because if used in certain ways the future interest holder will be harmed. So the idea is to figure out that balance. 

Affirmative Waste: This is sometimes called voluntary waste and these terms are interchangeable. Exploitation of natural resources by a life tenant is limited to only a few situations. A life tenant can exploit natural resources on the land if necessary for repair or for maintenance or if the land is only suitable for exploitation. If neither of those are true the life tenant is not out of luck provided that such exploitation is expressly or impliedly permitted by the grantor. Importantly, there is a doctrine called the 'open mines doctrine' which states that if mining was done on the land prior to the life tenant taking possession then the life tenant can continue mining. The life tenant, however, will be limited by only having the right to mine on mines that were already open when the life tenant took possession.

Permissive Waste: A life tenant is obligated to preserve the land and structures in a reasonable state of repair. Tested quite often is the idea that a life tenant must pay interest on mortgages (though the future interest holder is generally obligated to pay the principal). The life tenant must also pay ordinary taxes on the land and pay special assessments for public improvements of short duration. All of these obligations placed on the life tenant are limited to the extent of the income or profits generated from the land or the reasonable rental value of the land. In other words, if no income or profits are generated and if the land is such that the reasonable rental value of the property is very low, then the obligations placed on the life tenant to make any payments will be similarly low.  A life tenant is not obligated to insure the property for the benefit of the future interest holder and is not responsible for damages caused by a third-party tortfeasor. 

Ameliorative Waste: This is the one I found most interesting/strange when first learning it. Ameliorative waste is a change that benefits the property economically and yet at common law was still considered waste that was actionable. For MBE purposes, a life tenant may alter or demolish existing buildings if the market value of the future interests is not diminished and either the future interest holder does not object or a substantial and permanent change in the neighborhood conditions has deprived the property in its current form of reasonable productivity and usefulness. A distinction that might be worth noting is that a leasehold tenant (as opposed to a life tenant) will remain liable for all ameliorative waste even if the conditions stated here are satisfied.

Eminent Domain & Leases

An interesting issue that shows up on the MBE deals with the government taking private property for pubic use. The government is using its eminent domain power but the property taken is subject at the time to a lease.  Here's how to analyze that:

If property is condemned and the government pays "just compensation" and if at the time the property is condemned it is occupied by a tenant rather than occupied by the owner, the tenant is entitled to a share representing the current value of the unexpired term of the lease less any rent that has not yet been paid. So, importantly, tenants are entitled to a portion of the condemnation award.

The next issue generally deals with whether the tenant must continue to pay rent to the owner after the property is condemned. This will depend on whether the condemnation was partial or total.  If only part of the property is condemned, the relationship between landlord and tenant is generally unaffected; the tenant is generally still liable for rent reflecting the amount of the property not condemned. If, however, the property is completely condemned, the tenant will be absolved of any future responsibility to pay rent.

Nonconforming Uses

I've written previously about certain topics on the subject of zoning that are showing up with greater frequency on the MBE and on the MEE. This post will dig a bit deeper into one of those topics: nonconforming uses.

The purpose of a zoning ordinance is to prevent certain land uses within the zoned area. These ordinances are generally enacted by municipalities to control and direct the development of property within their borders. But even those ordinances that prohibit a given use may allow others to continue the now-prohibited use of their property if they were using their property in the now-prohibited way prior to the ordinance taking effect.

These uses that are allowable notwithstanding the zoning ordinance are known as nonconforming uses and are said to be justified both on grounds of fairness and practicality. The goal of the nonconforming use doctrine is to protect prior investments. Problems arise when a person attempts to take a prior use and change it in such a way that in effect a new investment is created.

The takeaway here is to remember that a nonconforming use cannot be extended or intensified in ways that constitute a substantial change to the property. In contrast, insubstantial changes are allowable and in general repairs to the property that render the property practicable for current purposes will be deemed as insubstantial changes. Doubts as to whether a change is substantial or insubstantial are generally resolved against the change, however.

The basis for disallowing substantial changes to the property that is claiming protection under the nonconforming use doctrine is that the policy behind allowing nonconforming uses is aimed at protecting investments undertaken prior to the zoning ordinance. But when the property undergoes substantial change, it's more likely that the nature of the investment is changed in such a way that the changes are intended to protect a future investment rather than a prior one. And because the protection of future investments was never a policy driven by the doctrine, the use of that property with the substantial changes will lose its status as a protected nonconforming use and may then violate any zoning ordinance in place at that time.

Equitable Subrogation (mortgages)

Equitable subrogation in the context of mortgages doesn't show up with much frequency on the MBE but it's given very little focus in many of the outlines even though it does show up on the exam.

When a lender advances funds used to satisfy a senior mortgage, the doctrine of equitable subrogation allows the lender to "step into the shoes" of the senior mortgagee. The significance here is that it will allow the lender to obtain priority over all interests that were junior to the senior mortgagee.

Some jurisdictions (the majority view) take the view that a lender will not take priority over liens that were junior to the senior mortgage if the lender had actual knowledge of those liens at the time that payment was made. The minority view is that either actual or constructive knowledge of the junior liens is sufficient to avoid application of the doctrine. The Restatement (Third) of Property, in contrast, treats notice or knowledge of the other liens as irrelevant, instead stating that the determining factor is simply whether the lender satisfied the senior lien and whether application of the doctrine will prevent unjust enrichment. The rationale here is that because the lender is merely taking the place of the senior mortgagee, the junior mortgagees are in no worse position than they would have been in had the doctrine not applied to give the lender that priority over them.

It's enough for purposes of the MBE to recognize that this doctrine exists and to understand how it can grant priority to a lender who pays off the debt owed to a senior mortgagee. And because it's an equitable doctrine, equitable defenses such an unclean hands and laches should always be considered.