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Chapter 23

Chapter 23, 25, 22 - Real, Property, and Intelle.docx

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Department
Business
Course
BU451
Professor
Charles Davidson
Semester
Winter

Description
Chapter 23: Interests in Land and Their Transfer Land - “land” includes the surface but everything under it, including natural resources...and everything above the surface, including buildings on the land...and the air above it - Includes “fixtures”, all things attached to it permanently (trees, buildings, fences) - “title” is holding ownership of a thing - “real action” = an action to repossess an interest in land that had been interfered with VS personal action, which is money damages w/o recovering interest - “estates in time” = the right to exclusive possession of the land for a period of time - Rights dealing with the use of the land and not exclusive possession to it are “interests less than estates” Estates in Time Freehold estate  an interest in land that is indeterminate in time - Fee simple (infinite time)  the interest in land closest to complete ownership o When talking about land ownership, we talk fee simple o Holder of the fee simple holds it for all time present and future...can designate next owner and carve it up any way they please o If dies, it goes to whoever’s in the will...without a will, goes to relatives...if neither, goes to government - Life estate (indefinite time)  an estate in land for the life of one person... can be by the life of the person who holds it, or by another’s life - Reversion  when the grantor of life estate reserves balance of the fee simple for herself and her heirs OR Remainder  goes to a third person o Hard to sell land subject to a life estate o Life tenant is limited in changes she can make without the consent of the remainderman. Cannot destroy fixtures, even to replace with something more valuable, but can let buildings decay o Cannot compel the remainderman to contribute anything to the cost of repairs - Life estate is usually used for tax planning/family situations Leasehold Estates - Interest in land for definite period of time - Lessee  person who interest is granted to - Lessor  grantor of interest - Leaseholds must be derived from freeholds Sharing Title: “Co-Ownership” - Tenancy in common  concurrent holders of equal shares in an estate...each interest is an undivided interest (cannot fence off part of it as their own) - Joint tenancy  difference between this and tenancy in common is the right of survivorship... if a joint tenant dies, the interest goes to the other tenant instead of their heirs (helps for taxes) o By using severance, can turn a joint tenancy into a tenancy in common Interests Less than Estates Easements  a right enjoyed by one landowner over the land of another for a special purpose but not for occupation of the land - Ie. Right-of-way  an easement that allows you to go on their land to get to your own land - Once granted, easements attach to the land and binds subsequent owners - Must have a dominant tenement (piece of land that benefits from the easement) and a servient tenement (the land subject to the easement) owned by a different person...and they must be close - A “statutory easement” is a right created by statute ie. Telephone company has easement to run wires under the ground - “easement by prescription”  the creation of an easement over adjoining land through exercising a right continuously and openly... Is created if: o Continuously exercises a right for over 20 years o Openly o Without fraud, deceit, force, or threats against the owner o Without consent or permission of the owner or payment to the owner Covenants  sell land yet continue to control or restrict the use of the part they sell - Courts decided it was too dangerous to permit creation of interests in land for perpetuity - Restrictive covenants  courts let people do these...it restricts from doing stuff on the land o Similar rules to easement - Building-scheme covenant  regulates land use over an entire neighbourhood or shopping centre o Gradually being replaced by zoning by-laws Other Interests - Right to remove materials usually found in lease o Allowed to occupy part of the surface o Allowed to travel over the land, lay pipes and move equipment o Allowed to permanently remove materials extracted from the ground - A license is not an interest...no rights involved o Contractual licences create rights binding between the original parties Government Regulation of Land - Can’t destroy your land like you destroy your property - Lots of zoning now to regulate development and usage - A right to dower is right to a life interest in 1/3 of the real property held by her husband in fee simple before his death o It has been replaced by family law legislation Leasehold Estates - Residential tenancy statutes often are consumer protection legislation where rent increases are regulated, etc Condominiums - Usually it’s a fee simple in units without interest in surface land or ground - Common elements are shared areas external of the unit aka laundry - Also becomes member of the condominium corporation, but individual owns the unit itself (but not any common elements) Cooperative Housing - More direct involvement in management than a condo needed The Transfer of Interests in Land By Sale or Gift - Deed = deed of conveyance...made under seal - Transfer = the equivalent of a grant; not required to be made under seal o when landlord grants a lease, he retains the reversion (possession returns to him at lease’s end), or when holder of a fee simple grants a life estate, reversion stays with him and his heirs. - If you only want to keep a tiny bit of it, it’s a reservation  part of an interest retained by transferor - Dying Intestate  dying without leaving a will - Expropriation  compulsory sale of land to public body Adverse Possession - An unauthorized occupant can jack the title of land for himself...known as adverse possession o Open, exclusive possession of the land o Without the permission of the owner o For the legislated limitation period for real property claims (ie. 10 years) - Most places have eliminated this though... Registration of Interests in Land First in Time - Registrations are based on priority of registration - 2 types of registration systems: land registry system and land titles system Land Registry System - Older of the 2 systems...being phased out - Labour intensive - Any errors can bone the current owner Land Titles System - Each transaction is reviewed before recording it - A lot less searching Addendum: read unread pages...get general gist of registries and the histories and why they’re good Chapter 25: Mortgages of Land and Real Estate Transactions The Essence of Mortgage Law The Mortgage as a Contract - Most important term is the promise to pay off the debt and the mortgagee to discharge its interest in the land upon repayment o Mortgagor covenants:  Pay the debt + interest  Keep property insured in the name of the mortgage  Pay taxes on it  Keep the premises in a reasonable state of repair - Mortgages almost always have an acceleration clause, whereby on default of an instalment, the whole of the principal + interest is due immediately - If mortgagor paid for most of it, and defaulted on a small amount, he can redeem it by paying the rest...called the equity of redemption o Can’t redeem it years after the mortgagee improved the land... after a reasonable period of time, the right to redeem expires... foreclosure period is established by provincial legislation - Mortgagees rarely take possession til after foreclosure: o Generally, mortgagee wants money rather than property, and encourages the mortgagor to pay off the debt o Possession would be uncertain because mortgagor might be able to redeem interest at any moment o Must account for any benefits received from occupying the land and deduct it from the amount owing if the mortgagor tenders payment - Under land titles system, mortgages are called charges, people are chargers and charges o Charges aren’t conveying legal title...it’s just a liens recorded on the title to the land, for which the remedy is to sell the land and pay back - Again, priority of the interest for mortgage registration is by order of registration Rights of the Mortgagee and Mortgagor The Mortgagee - Sue the mortgagor and obtain a personal judgement - Dispossess the mortgagor and occupy the land itself - Sell the land under its contractual/statutory power of sale - Court action for foreclosure and eventually destroy the mortgagor’s right to redeem - Subsequent to foreclosure, can sue again, provided it is willing and able to reconvey the land - Landlord can claim “distress” and go in and seize assets The Mortgagor (after default) - Repay the mortgage loan up to the date of foreclosure and obtain a release of his land - Obtain an accounting for any benefits obtained from the land by the mortgagee and deduct them from the amount owing on redemption - If sued, can require the mortgagee to prove that it is ready and able to reconvey the land upon repayment - If sued, can attack the sale price or sale expenses as unreasonable - Obtain relief against the consequences of an acceleration clause - Ask a court to stop the foreclosure proceedings and hold a sale The Mortgagee’s Remedies Upon Default Foreclosure - 3 stages: o Mortgagee goes to court, gets a time limit for redeeming o After redemption period expires, court issues final issue of foreclosure that ends any claim by the mortgagor o After that, mortgagee is recognized as the owner - Bank doesn’t want to foreclose because they really don’t want your house, because you can redeem your house and buy out the equity but also because of environmental law o If you have oil leaking out of your basement and poisons the environment, the bank can be ordered to clean up any pollution that you have left there Sale by the Court - A reserve priced is set, but not disclosed – if no bids are over the reserve price, land remains unsold - If sale produces a sum larger than what is owed + court fees, etc, the surplus is returned to the mortgagor Sale by the Mortgagee - Power of sale to be exercised privately without court action or supervision o Banks will almost always move to Power of Sale rather than foreclose - Need advance notice to the mortgagor Sale by a Mortgagor of His Interest Financial Arrangements - New buyer usually must assume the mortgage liability for making payments - Sometimes if the mortgagor has already reduced the first mortgage mostly, the purchaser doesn’t have enough money to buy off the whole equity, so they have to take out a bigger mortgage and use it to pay Effect of Default by the Purchaser - The mortgagee retains all rights on the land...it can obtain possession and sell the land. It can also recover from the mortgagor on his covenant to repay the debt o Mortgagor can then sue the purchaser for the full sum he was required to pay  by paying off the mortgage, he has effectively purchased the subrogation rights - Mortgagee cannot sue the purchaser outright, but the mortgagor often assigns a right to indemnity to the mortgagee in which case it Can Second Mortgages Rights of a Second Mortgagee - Ranks behind the first mortgagee in priority of payment - Has personal covenant of mortgagor and no personal covenant of mortgagee - If mortgagor defaults, then the first mortgagee can start action for foreclosure nd o If completed, the interest of mortgagor and 2 mortgagee are destroyed o Only has a right of action against mortgagor, who may be insolvent by now nd - If property is sold, 2 mortgagee only gets leftovers of sale o 2 mortgagee can buy out the 1 mortgage, receiving an assignment of it, then it’s up to them to take action (foreclosure, sale, etc) Risks for a Second Mortgagee when the Mortgagor Defaults - Sometimes the first mortgagee is willing to sit tight and see what the subsequent mortgagees and creditors do (kuz they’ll get their money one way or another) nd o If the 2 mortgagee forecloses on their interest, they become the owner of the property subject to prior interest of the 1 mortgagee, and owe the mortgage to Them now Mortgagee’s Rights Compared with Rights of Other Creditors - General creditor: no security other than debtor’s promise to pay - Secured creditor: has collateral security in the form of a prior claim against specified assets of the debtor o General creditors must wait until secured creditors are satisfied out of the assets against which they have their claims - A mortgage is a secured claim Transferring a Mortgagee’s Interest in Land - Can sell the mortgage rather than wait to collect debt - Assigns the rights to the covenants, and grants its interest in the land to the purchaser of the mortgage - After mortgagor finishes paying off the whole mortgage, he is entitled to a discharge from the mortgagee  is acknowledging that the debt has been paid, and cancels the lien on the land...is done so that mortgagee can’t sell the land to anyone - Partial discharge  discharge of a definite portion of the mortgaged lands Reverse Mortgages - Reverse mortgage  no repayment is due until the mortgagor sells or dies - Helps seniors citizens who are retired...”house rich and cash poor” - They get a lump sum/payments, and when they die, the house is sold to repay the mortgagor Mortgage Fraud - Identity theft  one pretends to be a registered land title holder, another is a purchaser... they get mortgage financing, then never pay it back... then the
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