Texas Real Property Distinctions Professor Zachary Kramer Arizona State University College of Law

TEXAS REAL PROPERTY DISTINCTIONS PROFESSOR ZACHARY KRAMER ARIZONA STATE UNIVERSITY COLLEGE OF LAW

CHAPTER 1: OWNERSHIP (PRESENT ESTATES AND CONCURRENT OWNERSHIP) The primary goal of this lesson is to highlight the key differences between real property law in general and real property law in Texas. The secondary goal of this lesson is to reinforce your understanding of some of the core concepts of property law.

We start with the forms of ownership, which consists of three interrelated topics:

• Present Estates • Concurrent Estates • Future Interests

Keep in mind that real property is alienable, which means it can be ______. Common methods of transfer are sale, gift, devise, and ______.

In a transfer of real property, the seller/donor is called ______and the buyer/recipient is called the ______. A. Present Estates A present estate gives the owner the ______to currently ______the property.

Note 1: An owner need not actually use or occupy the property. The important point is that the owner has the right to possess the property. 1. Fee Simple Absolute

The fee simple absolute is the ______ownership interest recognized by law and therefore, not surprisingly, the most common form of ownership of real property.

o Alienable—Freely alienable, which means the owner can easily transfer the property o Duration—Has an infinite duration, which means it’s capable of lasting ______o Creation—At common law, a grantor needed to use particular words of limitation to create a fee simple absolute: “and his/her heirs.” . Texas Distinction: In Texas, conveyances that are ambiguous are considered a fee simple unless 1) the conveyance is ______or a ______is created. Example 1: O conveys Blackacre “to A.” At common law, this would not have created a fee simple absolute. Under Texas law, however, a fee simple is created. Example 2: O conveys Blackacre “to A for life.” This would not create a fee simple absolute under Texas law because the words of limitation (“for life”) create a lesser estate.

o Future Interest—No future interest associated with a fee simple absolute. 2. Defeasible Fees A fee simple can also be made to be defeasible, which means it may be ______by the occurrence of an event.

o Fee Simple Determinable—A fee simple that is limited by specific ______language. Classic examples of duration are “so long as,” “while,” “during,” “until,” etc.

. The future interest associated with a fee simple determinable is a possibility of reverter. This future interest is held by the ______and it vests ______once the durational period ends. Example 3: O conveys Blackacre “to A and her heirs so long as the land is farmed.” A acquires a fee simple determinable and O retains a possibility of reverter. If A or her heirs ever stops farming the land, title will vest automatically in O or O’s heirs.

o Fee Simple Subject to Condition Subsequent—A fee simple that is limited by specific ______language. Classic examples include “provided that,” “on the condition that,” “but if,” etc.

. The future interest associated with a fee simple subject to a condition subsequent is a right of entry. This future interest is held by the ______and it does not vest automatically. A grantor must exercise her right to re-enter the property. Example 4: O conveys Blackacre “to A and her heirs, but if the land isn’t used as a farm, O may re-enter and re-take. A acquires a fee simple subject to condition subsequent and O retains a right of entry. If A stops farming the land, O must exercise the right to re- take in order to take possession of Blackacre.

o Fee simple Subject to Executory Interest—A fee simple that will end upon the happening of an event and the future interest will vest in ______, i.e. someone other than the grantor or the grantee.

2 | © 2017 Themis Bar Review, LLC | TX Real Property Distinctions . The future interest associated with this fee simple is an executory interest. An executory interest vests automatically. Example 5: O conveys Blackacre “to A and her heirs, but if liquor is served on the premises, then to C and her heirs. A has a fee simple subject to executory limitation and C has an executory interest.

3. Life Estate

o A life estate is a present estate that is limited to ______duration. The lifetime can be measured against the grantee’s lifetime or a third-party’s lifetime. Example 6: O conveys Blackacre “to A for life.” This life estate will end at A’s death.

Example 7: O conveys Blackacre “to A for B’s life.” A has the life estate, which is measured against B’s life. This is known as a life estate pur autre vie.

o Creation—Most life estates are created with the words of limitation “for life.” Example 8: O conveys Blackacre “to A for life.” A has a life estate.

. Texas Distinction: No ______to create a life estate. Example 9: O conveys Blackacre “to A until her death.” In Texas, this will create a life estate in A.

o Future Interest—The future interests associated with the life estate are the ______and the ______. o Waste—Although a life tenant has the right to occupy and use the property, the life tenant cannot use the property in such a way as to cause a decrease in the value of the property.

. The future interest holders can enter the property to inspect for waste, or bring suit to obtain damages or an injunction to prevent such waste.

B. Concurrent Estates A concurrent estate is ownership or possession of real property by two or more persons ______.

1. Tenancy in Common—The ______concurrent interest.

o Tenants in common have equal rights to posses or use the property. o No ______exists. This means that each tenant can transfer her interest individually, even at death. o Presumption that a conveyance to two or more people creates a tenancy in common.

o Four Unities (“PITT”)—There are four unities necessary to have a joint tenancy: . Possession: Each joint tenant must have an equal right to possess or use the property. . Interest: Each joint tenant must have an equal interest. . Time: Each joint tenant must acquire their interest at the same time. . Title: Each joint tenant must acquire their interest in the same instrument. Note: If any unity is broken, then joint tenancy is severed and becomes a ______.

o Texas Distinction: Unlike most states, a joint tenancy in Texas does not automatically include a right of survivorship. Instead, joint tenants can create a right of survivorship by ______agreeing to allow their interests to pass under a right of survivorship.

3. Tenancy by the Entirety—A joint tenancy between ______persons. Includes a right of survivorship

o Texas Distinction: Because it is a ______jurisdiction, Texas does not recognize the tenancy by the entirety.

CHAPTER 2: FUTURE INTERESTS • Future Interest: An interest in property that gives the owner the right to possess the property in the future. • A couple key features:

o Present vs. Future—Though it concerns the future, a future interest is a presently-existing right. o Possession—Like with present estates, future interests are concerned with the owner’s right to ______the property.

A. Grantor Interests • Reversion—Future interest held by the ______after the grantor conveys a life estate or an estate for years but does not convey the balance to a third party. Note that the reversion is not subject to the Rule Against Perpetuities. Example 10: O conveys Blackacre “to A for five years.” A has a term of years; O retains a reversion.

• Possibility of Reverter—Future interest held by the ______following a fee simple determinable.

o Texas Distinction: Texas does not have a statute that limits the duration of the possibility of reverter. Note also that the possibility of reverter is not subject to the Rule Against Perpetuities.

• Right of Entry—Future interest held by the ______following a fee simple subject to condition subsequent. Example 12: O conveys Blackacre “to A and her heirs, but if liquor is served on the premises, O can re-enter and re-take. O retains a right of entry.

Texas Distinction: Texas does not have a statute that limits the duration of the right of entry. Note also that the right of reentry is not subject to the Rule Against Perpetuities.

B. Grantee Interests • Remainder—A future interest held by a ______that is capable of becoming possessory upon the natural expiration of a prior possessory estate.

o Vested Remainder—An interest that is: 1. Given to an ______grantee, and 2. That is not subject to a ______. Example 13: O conveys Blackacre “to A for life, then to B and her heirs.” B has a vested remainder. B is ascertained and B does not have to satisfy any condition in order to take the interest.

. Vested Subject to Open—An interest given to a class of grantees and at least one member of the class has ______. Example 14: O conveys Blackacre “to A for life, then to A’s children who reach 21.” A has three kids—B is 25, C is 18, and D is 15. The remainder is vested as to B, but the class remains open until C, D, or any other kids born to A reach 21.

. Vested Subject to Complete Divestment—An interest that will be divested upon the happening of a specific event. Example 15: O conveys Blackacre “to A for life, then to B and her heirs, but if B becomes a lawyer, to C and her heirs.” B’s remainder is vested, but if B becomes a lawyer, B’s remainder will be divested by C. [C has an executory interest].

TX Real Property Distinctions | © 2017 Themis Bar Review, LLC | 5 o Contingent Remainder—An interest that is: 1. Given to an ______grantee, or 2. Subject to a ______. Example 16: O conveys Blackacre “to A for life, then to A’s heirs.” This is a contingent remainder because A’s heirs are not ascertained. We won’t know A’s heirs until A is dead.

Example 17: O conveys Blackacre “to A for life, then to B if B survives A.” This is a contingent remainder because B’s interest is subject to a condition precedent. B must survive A in order to vest.

. Texas Point of Law: In Texas, a contingent remainder is not destroyed if it has not vested by the time the prior estate terminates. Like in most states, Texas will wait to see if the contingent remainder ultimately vests. Example 18: O conveys Blackacre “to A for life, then to B if B graduates from law school.” Say that B is in her second year of law school when A dies. B’s contingent remainder is not destroyed. The property will revert to O to wait and see if B ultimately graduates from law school.

Note 2: No fancy remainder cases! • Executory Interests—An interest in a ______that cuts short the prior estate upon the occurrence of a specified condition. Executory interests are transferrable and they are subject to the Rule Against Perpetuities. Example 19: O conveys Blackacre “to A for life, then to B and her heirs, but if B becomes a lawyer, to C and her heirs.” C’s interest is a ______executory interest. In order to vest, C must cut short another grantee’s interest (B’s vested remainder).

Example 20: Prof. Kramer conveys “$1000 to Themis students who pass the Texas Bar.” The Themis students who pass the bar have a ______executory interest. In order to vest, the students must divest the grantor (Prof. Kramer’s fee simple).

Helpful hint: A remainder will never follow a vested fee.

C. The Rule Against Perpetuities (“RAP”) Under RAP, specific future interests are valid only if they must vest or fail by the end of a life in being, plus 21 years. RAP is best understood by example:

6 | © 2017 Themis Bar Review, LLC | TX Real Property Distinctions Example 21: O conveys Blackacre “to A and her heirs, but if the land is ever used as a business, to B and her heirs.” This violates RAP. It is possible that some time in the future, long after O, A, and B have died, one of A’s heirs will operate a business on Blackacre. Thus we strike B’s interest entirely.

Example 22: O conveys Blackacre “to A for life, then to A’s children who reach the age of 18.” The children’s contingent remainder does not violate RAP. Eighteen years after A dies, we will know whether the interest vests or fails. This is within the perpetuities period of a lifetime plus 21 years.

D. Texas Distinctions: RAP, Charitable Trusts, and Cy Pres • Property held in trust is subject to RAP. In Texas, ______and ______trusts violate RAP.

o However, in Texas, RAP does not apply to charitable trusts. Example 23: Richie Rich conveys Blackacre “to A, in trust, so long as the land is farmed, then to the city of Hilly Flats to be used as a public park.” The gift to Hilly Flats is not subject to RAP.

• Courts use the doctrine of cy pres to ______a charitable trust when its particular purpose has become impossible or impractical. Example 24: Richie Rich conveys Blackacre “to the Hilly Flats School of the Arts, in trust, to support the school’s pottery program.” Say that because of low enrollment, the school ends its pottery program and replaces it with a graphic design program. Using the cy pres doctrine, the court can modify Rich’s trust to support the school’s new graphic design program.

CHAPTER 3: LANDLORD AND TENANT A. Types of Tenancies • Tenancy for Years—An estate measured by a ______amount of time. Estate ends when time period is up. Example 25: O leases Blackacre “to A for two years.” A has a term of years, which ends automatically after two years.

• Periodic Tenancy—An estate that is ______and ______for a set period of time. Example 26: O leases Blackacre “to A on month-to-month basis.” A has a periodic tenancy.

TX Real Property Distinctions | © 2017 Themis Bar Review, LLC | 7 o Termination—The big issue in periodic tenancies is termination. o Texas Distinction for terminating a periodic tenancy. . Situation 1: Period is Month-to-Month In this situation, the tenancy ends on the later of:

1) The day given in the termination notice, or 2) One month after the day notice is given. Note: A tenant can give more than a month’s notice

. Situation 2: Period is less than A Month (e.g. week-to-week) The tenancy ends on the later of:

1) The day given in the termination notice, or 2) The day following the expiration period

• Tenancy at Will—A tenancy that may be terminated by either ______or ______• Tenancy at Sufferance—Case of the ______tenant, the tenant who stays in possession after her tenancy has ended

o Terms of the prior lease control o Texas Distinction 1: A landlord must provide a holdover tenant at least ______days’ notice to vacate before the landlord can evict the tenant. o Texas Distinction 2: Unlike most states, Texas does not allow landlords to collect double rent from a willful holdover.

B. Tenant’s Duties A tenant has a number of important duties (e.g. pay rent). We’re only going to focus on particular bits of Texas law.

1. Damage Resulting in Inhabitability

o If damage to the premises causes complete inhabitability—i.e., ______—then either landlord or tenant can terminate by giving written notice. o Limitation: The tenant—or tenant’s family or guest—cannot have been the cause of the damage. o Scope: We’re talking really bad damage, e.g., ______, ______, ______etc.

o A tenant may not assign or sublease to another tenant without the ______of the landlord.

C. Landlord—Remedies and Duties (Texas Distinction) 1. Remedies—Say the tenant fails to pay rent. What are the landlord’s remedies?

o Damages: If landlord provides proper written notice, the landlord may recover ______, plus $500. o Lock Out: Texas allows a landlord to “lock out” a tenant, i.e. ______.

. Commercial Lease: In a commercial setting, landlord can lock out tenant after placing a note on the tenant’s front door, explaining where a new key may be obtained after back rent is paid. . Residential Lease: Landlord can lock out a residential tenant if the lease ______provides for this remedy. Note 1: A tenant can get a new key regardless of whether back rent has been paid!

. If the lock out was ______, tenant can get two remedies:

• Possession of the property or terminate the lease, and • Damages—One month’s rent plus $1000 in damages and costs.

o Security Deposit: A landlord must refund a tenant’s security deposit within ______days after tenant surrenders the premises for a commercial lease. (Note: For residential leases, the time period is only 30 days.) Note 1: If Landlord retains all or part of the security deposit, the landlord must provide a ______report of the deductions. Note 2 Exception: Landlord doesn’t have to provide the written report if tenant owes back rent.

2. Duties

o Duty to Mitigate: Say the tenant surrenders the leasehold before the lease is up. In Texas, a commercial landlord has a duty to mitigate damages.

. A commercial landlord must make ______to mitigate damages . Unless, the commercial landlord and tenant agree otherwise in the lease.

Editor's Note 1: The professor misspoke. Both commercial and residential landlords have a duty to make reasonable efforts to mitigate damages when a

TX Real Property Distinctions | © 2017 Themis Bar Review, LLC | 9 tenant breaches the lease and abandons the property. A lease provision that waives a right or exempts a landlord from this duty to mitigate is void. . The burden is on the ______to prove that the commercial landlord failed to mitigate damages

o Anticipatory Breach: Say the tenant abandons the premises. Most jurisdictions do not permit landlords to sue for future rent due. Texas does permit it.

. In Texas, a landlord can treat the breach as anticipatory and either:

• ______, and sue for value of future rentals less the current value of remaining term, or • ______, and sue for difference between original contract price and new tenant’s rent.

o Warranty of Habitability: Landlords in Texas must provide a safe, decent, and sanitary dwelling, as well as make repairs that threaten the health or safety of an ordinary tenant. Note: We’re talking about ______leases. If the tenant is going to live there, it must be a safe place to live.

o Landlord’s duty to make repairs: In Texas, a landlord must make a ______effort to repair a condition, if:

. The tenant gives ______of the condition in need of repair; . The tenant is ______on rent at time notice is given; and . The condition ______the health and safety of an ordinary tenant.

CHAPTER 4: ADVERSE POSSESSION The Gist: Adverse possession grants ______to a person who wrongfully ______property for a certain amount of time.

The Test: To acquire title by adverse possession, a trespasser’s use must be:

• ______. This is where we will spend the bulk of our time in this lecture. • ______. The basic idea of the open and notorious requirement is that the possessor’s use must be out in the open, such that a reasonable true owner would be aware that someone is using her land.

10 | © 2017 Themis Bar Review, LLC | TX Real Property Distinctions Example 27: O owns Blackacre but has never visited it. A trespasses on Blackacre and begins living there. To conceal her trespass, A only goes out at night and never uses lights. A’s use would not be open and notorious, as it is designed to avoid detection.

• Hostile. The basic idea of the hostility requirement is that the possessor’s use must be adverse to the true owner’s interest. An easy way to think of this is that ______use will not ripen into good title. Example 28: O owns Blackacre. O invites her friend A to live on Blackacre while O is out of the country. A’s use is permissive; it cannot form the basis of an adverse possession claim.

• ______. The adverse possessor cannot share possession with the true owner. Example 29: O owns Blackacre. O uses the land as a grazing spot for his cattle. A puts her cattle on Blackacre. A’s use is not exclusive; she is sharing the space with O.

• Texas Distinction: Continuous Use: Texas has particular rules governing the continuity requirement. The basic rule is that an adverse possessor’s use must be continuous for ______years.

Editor's Note 2: Professor Kramer misspoke. An adverse possessor does not need to show that she paid taxes on the property for the adverse possession period of 25 years.

o In specific cases, the adverse possession period is shorter than 25 years: . 10-Year Period: If the land is fewer than ______acres, then the adverse possession period is ten years. . 5-Year Period: The statutory period is reduced to five years if the claimant has:

• Cultivated, used, or enjoyed the property; • Paid taxes, and • Is claiming rights to the property ______. This is often referred to as “color of title,” where the adverse possessor acquired a deed in ______and took possession thinking she had acquired good title. Example 30: A is gullible and B is a shady character. B sells A title in Blackacre. The problem is that B doesn’t have any rights to Blackacre. When A takes possession, A does so under color of title from an invalid deed.

. 3-Year Period: A true owner must bring suit to evict a trespasser within three years when the trespasser based title on color of title or an improper recording.

TX Real Property Distinctions | © 2017 Themis Bar Review, LLC | 11 o Texas Distinction: Tolling for Disabilities: If the true owner of the property is disabled at the time the adverse possession ______, then the 3-year, 5- year, and 10-year statutes of limitation don’t begin running.

. Why? Because, if disabled, the true owner can’t ______the adverse possessor

• Texas Distinction: Terminating Adverse Possession

o Adverse possession is terminated when the owner files a ______to recover possession of her land. Example 31: O owns Blackacre. A takes possession of Blackacre and begins farming it. When O realizes A is in possession, O enters Blackacre and shouts at A, “Get off my land, you good-for-nothing creep!” O has not terminated the adverse possession under Texas law.

CHAPTER 5: LAND SALE CONTRACTS AND RECORDING PROBLEMS Editor's Note 3: We are only going to cover land sale contracts to the extent that they diverge from general property law.

A. Equitable Conversion and Risk of Loss • Normally, there is a gap in time between when parties enter into a real estate contract and the closing on the property, what we call the ______period.

o Under the doctrine of equitable conversion, the seller effectively holds the property ______for the buyer during the executory period. o As trustee, the seller has the ______the property, as well as the duty to ______the property in good condition. o Most states place the risk of loss on the ______. This means that the buyer bears the burden of risk for damage during the executory period. o Texas Distinction: Texas has adopted the Uniform Vendor and Purchaser Risk Act. Under this statute, the risk of loss during the executory period is placed on the ______. Example 32: Seller and Buyer enter into a contract for the sale of Blackacre Manor. Their closing will take place in a week. Before the closing, a freak storm sweeps through the area and destroys Blackacre Manor. Seller may not enforce the contract against Buyer and Buyer may recover the portion she already paid under the contract.

o Purchase money mortgage: Device used where person takes out a loan for the purchase of property. Example 33: Buyer is interested in purchasing Blackacre Manor. Buyer has a small amount of cash to put down and will receive the balance from a loan from Lender. In exchange for the loan, Buyer gives Lender a mortgage on Blackacre.

o Future Advance Mortgage: Device used where borrower receives a line of credit (often referred to as a “______”) used for home equity, construction etc. Example 34: Years after purchasing Blackacre Manor, Buyer needs to put on an addition to accommodate her growing family. Buyer takes out a line of credit from Lender. Buyer gives Lender a mortgage interest in Blackacre Manor. 1. Default

o What happens when borrowers default on their loans? In a mortgage note, lenders reserve the power to force a ______sale to satisfy the debt. o Statutory Redemption: Many states have a provision that enables buyers/borrowers from recovering the property after a foreclosure sale. The effect of such a process is to ______the foreclosure sale. Example 35: Buyer purchased Blackacre Manor for $100,000, paying $20,000 in cash and taking out a loan, which was secured by a mortgage, for $80,000 at an interest rate of 5% per year. Buyer can’t afford to make payments and defaults. Purchaser buys the house at a foreclosure sale. In a state with a statutory redemption, Buyer can nullify the subsequent sale to Purchaser.

o Texas Distinction: Texas does not have a statutory redemption period. Therefore, in Texas, a foreclosure sale is ______.

2. Mortgage Alternatives

o Installment Contracts: An installment contract is a contract for a ______. The seller retains title until the buyer makes final payment. Normally, if a buyer can’t continue making payments, the buyer defaults and the seller gets to keep the buyer’s interest.

TX Real Property Distinctions | © 2017 Themis Bar Review, LLC | 13 o Texas Point of Law: Texas law seeks to protect ______in contracts for a deed. The seller must give statutory ______before forfeiting the purchaser’s interest. Note: If the purchaser has paid ______or more of the amount due, the seller has the power to sell the purchaser’s interest in the property to a new purchaser. 3. Foreclosure in Texas

o Judicial Foreclosure: A foreclosure supervised ______. Once the court declares a foreclosure, the property is ______at a public sale. o Non-Judicial Foreclosure: A foreclosure sale that is overseen by the ______. A purchaser at a non-judicial foreclosure sale in Texas takes the property ______, without any express or implied warranties. o Deficiency Judgments: When the foreclosure sale brings in less than the outstanding debt on the property, a court may issue a deficiency judgment. The court determines the ______of the property ______. o Redemption: A homeowner may ______her debt ______the foreclosure sale begins. This process is known as an “equity of redemption.”

. Remember: There is no after-sale right of redemption in Texas.

o Deed in Lieu of Foreclosure: If a homeowner can’t pay off her debt, she can convey the property to the lender in exchange for ______or canceling any outstanding debt.

C. Deeds and Recording Problems 1. Valid Deed: In order to be valid, a deed must ______the parties (grantor and grantee), include ______(e.g. “do grant and convey”), and ______the property.

o Texas Distinction: Texas recognizes the Strips and Gores doctrine. This doctrine concerns property that ______a roadway or right-of-way. o Helpful Hint: Did the grantor ______an easement or right-of-way interest in the strip of land between the conveyed property and the center of the public road?

. If yes, then the grant does not convey title up to the center of the roadway. . If not, then the grant does convey title up to the center of the roadway.

Note 2: Strips and Gores does not apply if the strip is larger and more valuable than the conveyed tract.

2. Correction Instruments: Say that an original deed or record has an ______in it. Texas allows a person to record a correction instrument to fix the error in the record.

o Nonmaterial Correction: A person with personal ______of the error can execute a correction instrument to correct a nonmaterial error. Example 36: Oliver inherited Blackacre Manor from his father. A nut for all things historical, Oliver discovered an error in his father’s deed to Blackacre Manor. The deed spells the father’s name incorrectly and incorrectly states that the father was single at the time. Oliver is entitled to execute an instrument correcting the record.

o Material Corrections: Only a party to the ______transaction may execute a correction instrument to fix a material error in the deed. Example 37: Shortly after buying Blackacre Manor, Oliver discovers that the deed he received for the property did not describe the adjacent lot, which Oliver paid for and believed was part of the deal. Oliver can execute a correction instrument to fix this material error.

3. Restraints on Alienation: A restraint on alienation is a provision in a deed that seeks to restrict an owner from ______the property. In Texas, if a restraint on alienation is void, it does not render the entire deed void. Example 38: Buyer purchases property from Seller. Because Seller is a racist, Seller includes a provision in the deed that prohibits Buyer from selling the property to a mixed-race family. Such a restraint on alienation is void. The deed is still valid, however. Note: The facts in example 38 raise an important point about Texas law. Under Texas law, a restriction that affects real property cannot prohibit the use, sale, or rental to a person because of race, color, religion, or national origin. This covers both ______and ______.

TX Real Property Distinctions | © 2017 Themis Bar Review, LLC | 15 CHAPTER 6: LAND USE A. Easements • An easement is a right to ______another person’s property. • The land burdened by an easement is called the ______estate. • The land benefited by an easement is called the ______estate.

1. Classifying an Easement

o Appurtenant: An easement that is ______. The holder of an easement appurtenant is benefited in her use of the land. Example 39: Dominic and Sally are neighbors. Dominic has the right to cross Sally’s land to reach the highway. Dominic has an easement appurtenant. Dominic’s estate is the ______estate and Sally’s estate is the ______estate.

o In Gross: An easement that benefits the holder ______. Example 40: Sally has a lovely pool. Dominic is an avid swimmer. Sally permits Dominic to use her pool. Dominic has an easement in gross. Sally has the ______estate.

Note 1: In an easement in gross, there is no dominant estate, only a servient estate.

Note 2: Texas Distinction: In Texas, an easement in gross is not transferable or assignable, except for ______.

2. Types of Easements:

o Express Easements—An easement affirmatively created by the parties ______that satisfies the statute of frauds. The scope of an express easement is determined by the terms of the written grant or reservation.

o Easement by Necessity—An easement where a ______piece of property is severed, rendering one of the tracts landlocked. o Easement by Implication—An easement that is implied by prior use, where use was continuous, apparent, and reasonably necessary to the dominant estate. Prior owner must have used the property as a ______before conveying the dominant tract.

. Texas Distinction: In Texas, the prescription period to create an easement is ______. Example 41: Oliver owns a tract of line that borders a highway. Sally lives on the neighboring tract. Sally starts crossing a small path on Oliver’s property to reach the highway. Her use is open and hostile to Oliver’s rights. Sally will have to use the path for ten years in order to create an easement by prescription.

Editor's Note 4: Professor Kramer misspoke in the above example. Sally’s use need not be exclusive in order to obtain an easement by prescription. It is sufficient that her use was actual, open, hostile, and continuous for ten years.

B. Water Rights Two basic theories of water rights:

1. Riparian Rights: Holds that landowners who ______a waterway own the rights to the waterway. Riparians share the right to ______of the water, such that one riparian is liable to another for interference with the other’s use.

o Texas Distinction: Texas used a riparian rights regime until 1895. Only landowners who can trace their title back between 1823 and 1895 can make use of this doctrine today.

2. Prior Appropriation: Texas, like most other western states, follows the doctrine of prior appropriation.

o First in Time, First in Right: The first person to use the water, regardless of where their land is located, has the rights to the water. o Beneficial Use: In a prior appropriation jurisdiction, the user must put the water to a ______use. Any productive use satisfies this standard. o Exception—Groundwater: Texas does not follow the prior appropriation doctrine when it comes to groundwater.

. Texas Distinction: A landowner owns the groundwater ______of the landowner’s property.

• Landowner has ______over the groundwater.

TX Real Property Distinctions | © 2017 Themis Bar Review, LLC | 17 CHAPTER 7: HOMESTEAD • Texas provides a homestead exemption for ______and ______. • A homestead exemption is designed to protect a family’s ______from a ______to satisfy ______after the death of the head of household.

A. Types of Homestead 1. Rural Homestead Consists of not more than:

o ______acres for a ______; or o ______acres for a ______. 2. Urban Homestead

o Consists of not more than ______acres of one or more contiguous lots. o What makes it urban? . Located within the ______; and . Served by ______, ______, and at least three of either electric, natural gas, sewer, storm sewer, or water services. Note 1: There cannot be a mixed homestead of part urban and part rural.

Note 2: The two types of homesteads cannot exist simultaneously.

3. Personal Property—Can personal property qualify as homestead?

o In order to qualify as a homestead under Texas law, personal property must be on the owner’s land and have some level of ______to the land. The best example is a ______attached to the land, e.g. a barn or related building. o A prominent Texas case involved a man who lived on a boat and tried to claim the boat as his homestead. The court concluded that the boat was not a homestead because it wasn’t sufficiently ______to the land. A fixture needs to be a ______part of the realty.

4. Business Homestead A business may also be a homestead in Texas.

o Urban: A business can qualify as a homestead if it is on the same ______as the homestead or a lot ______to the homestead, and does not exceed ______acres. Imagine a person living above their business.

18 | © 2017 Themis Bar Review, LLC | TX Real Property Distinctions o Rural: A non-contiguous parcel can qualify as a rural homestead provided the owner can show the parcel is ______to the use and enjoyment of her ______.

B. Legal Effects of Homestead • Basic Protection: The homestead exemption protects a home from a forced sale to satisfy the owner’s creditors. • Exceptions—Situations where the home is not protected:

o Purchase Money: The Texas Constitution permits creditors to force a sale if the purchase money on the home is due. o Taxes on the Property: Homestead property is not protected from the forced sale for the payments of any taxes assessed and levied on the property. o Refinance of a lien: Encumbrances may be properly fixed on homestead property for the ______of a lien against the homestead. o Construction Improvements: The Texas Constitution permits the forced sale of the homestead for loans made in connection with improvements to the property, provided the work and material used were contracted for ______and with the ______of both spouses. o Home Equity Loans: Homestead property is not protected from the forced sale for the payments of a home equity loan. o Reverse Mortgage: Homestead property is not protected from the forced sale for the payments of a reverse mortgage. A reverse mortgage is a line of credit available to people over the age of ______, which enables them to access a portion of the equity in their home. o Owelty: Homestead property is not protected from the forced sale to satisfy an owelty of partition. Owelty is the money paid following the partition (that is, ______) of a co-tenancy when an equal partition isn’t possible.

• Transfers: Spouses cannot transfer or encumber a homestead without the ______of the other spouse. • Termination: A homestead ends in the following situations:

o If a claimant dies without a ______to take the homestead, or o ______. To prove abandonment, there must be ______intent not to use the property as a homestead. . Divorce does not destroy the homestead, provided one of the spouses is able to ______the homestead.

A. Mechanic’s Lien In Texas, a contractor, subcontractor, architect, engineer, surveyor, or other supplier of materials (“materialman”) or labor to be used for the ______or ______of a home or building, may secure a mechanic’s lien.

• Purpose: The purpose is to ensure that those engaged in building projects will receive payment for their labor. • Scope: It covers payment for ______, materials ______, or for the ______.

o The lien does not extend to ______, ______, or ______that are public. o A subcontractor may not claim a lien that exceeds an amount equal to the labor performed, materials used, and proportionate profit margin.

• Priority: The holder of a mechanic’s lien has preference over other creditors of the original contractor. • Practical Issues

o Affidavit of lien: A person claiming the lien must file an affidavit with the county clerk not later than the ______of the ______after the day the indebtedness accrues. o Indebtedness depends on whether we’re dealing with the original contractor or a subcontractor.

. Original Contractor: Indebtedness accrues on the last day of the month in which:

• A ______is received by the original contracting parties stating that the original contract has terminated, or • The original contract has been completed, settled, or ______.

. Subcontractor: Indebtedness accrues on the last day of the last month in which the ______or the ______.

o Notice: Any person who files an affidavit must notify the ______at her last known address. Notification is done by ______.

20 | © 2017 Themis Bar Review, LLC | TX Real Property Distinctions . If the filer is not the original contractor, the filer must also send a copy to the original contractor. . Notification must occur no later than the ______day after the affidavit is filed in court. . A subcontractor must give the original contractor written notice of any unpaid balance no later than the ______day of the ______month in which the subcontractor’s labor was performed or material delivered.

o Priority: A mechanic’s lien attaches to the house, building, or improvements in preference to any prior lien, encumbrance, or mortgage on the land.

. However, the mechanic’s lien does not affect any lien, encumbrance, or mortgage on the land at the time of the inception of the mechanic’s lien.

B. Liens and Mortgages • Texas is a ______state, not a ______state. • This means that the mortgagee or creditor has a lien or security interest in the property, not title to the property.

C. Vendor’s Lien • In a contract for a deed (______), a breach may give rise to a lien in favor of the ______(also known as the vendor). • An equitable lien may be imposed for the benefit of a vendor who passed legal title to the buyer (vendee) but did not receive the entire purchase price.

o In Texas, a vendor’s lien should be expressly ______in the deed of trust. o If the buyer (vendee) defaults, the vendor may ______the lien and sue for the balance owed under the contract, rescind the contract and take possession, or sue to recover title and possession.

Editor's Note 5: As Professor Kramer notes, Texas permits a vendor to expressly reserve a lien for the payment of the purchase price of the real property. Typically, a vendor will do so in document of conveyance (deed), not the deed of trust. Upon the buyer’s default, the vendor retains legal title to the property and may sue the buyer for the outstanding obligation owed to the vendor.

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