NC Real Property Distinctions
MAJOR DIFFERENCES BETWEEN NC AND MBE - (1 of 2)
1. MBE uses common law RAP, NC uses USRAP (90-year wait-and-see).
2. In NC, some possibilities of reverter and rights of entry have 60-year durations.
3. In NC, joint tenancy does not have automatic survivorship rights.
4. In NC, permission is presumed for prescriptive easements; majority presumes non-permission.
5. NC calculates the "disability" period for adverse possession differently than the majority.
MAJOR DIFFERENCES BETWEEN NC AND MBE - (2 of 2)
6. On MBE, equitable conversion is used for risk of loss during executory period; NC uses Uniform Vendor-Purchaser Risk Act.
7. NC is one of a small number of states with a "race" recording act; MBE uses "notice" and "race-notice" acts.
8. In NC, a lease is subject to SOF if it has a term of more than 3 years form the date of the agreement; in majority, a lease is subject to SOF if it has a term of more than one year from the date of agreement.
9. Unlike the majority of jurisdictions, NC does not recognize the doctrine of part performance as a method of satisfying the SOF for real estate contracts.
Statutory Presumption: A deed or will creates a FEE SIMPLE ABSOLUTE, unless the transferor's intent to create a lesser estate is clearly expressed in the instrument.
- Fee tails have been abolished in NC they are construed as fee simple absolutes.
RULE IN WILD'S CASE (1 of 2)
- T devises Greenacre "to A and his children." A has no children when the will takes effect at T's death.
o Majority approach: A has a LE. A's children have a contingent remainder in FSA. T's estate has a reversion (may never vest in children).
RULE IN WILD'S CASE (2 of 2)
o NC's minority approach:
(1) Since A had no children when the will took effect, interpret the language as if it had said "to A and the heirs of his body." Result = fee tail.
(2) Fee tails have been abolished, so convert fee tail into an FSA.
(3) If A has one or more children when the will takes effect, then A has 50% as a tenant in common, and the children share the other 50% as tenants in common.
RULE IN SHELLEY'S CASE
- Common Law Rule: When an instrument purports to give a LE to A and a remainder to A's heirs, A takes not just the LE but also the remainder, and A's heirs receive nothing the LE and the remainder merge and A holds title in FSA.
- North Carolina abolished the Rule in Shelley's Case However, the rule still applies to transfers of property that took effect on or before October 1, 1987.
o "To A for life, then to his heirs": If instrument took effect after October 1, 1987, then construed as A having a life estate and heirs have a contingent remainder in FSA.
DOCTRINE OF WORTHIER TITLE (1 of 2)
- Common Law Rule: When O conveys during O's lifetime "Blackacre to A for life, remainder to O's heirs," the Doctrine of Worthier Title converts the contingent remainder in O's heirs into a reversion in O. This was a rule of law, regardless of O's intent.
o Under the modern majority view, DWT is only a rule of construction and creates a rebuttable presumption that O intended to retain a reversion and did not intend to convey a contingent remainder in O's heirs.
DOCTRINE OF WORTHIER TITLE (2 of 2)
- North Carolina abolished DWT as a rule of law AND as a rule of construction.
o In NC, the meaning of a grant to a grantor's own heirs will be determined by the intent of the grantor without any presumptions.
- Precatory Language:
o Language in the instrument that merely expresses the transferor's hopes or states the motivation for making the transfer (precatory language) does not amount to a "condition" and does not result in the estate being "defeasible."
Ex: O transfers Blueacre "to A for use as a church." A holds title in FSA.
- Fee Simple Subject to a Condition Subsequent:
- Fee Simple Subject to a Condition Subsequent:
o The instrument must contain either:
(a) an express right of entry/power of termination, OR
(b) language providing that the estate will be "forfeited" or will become "null and void" upon the happening of the specified condition or event.
- Restraints on Alienation
o A divesting condition is unenforceable if it runs counter to law or public policy (unreasonable restraints on alienation).
Ex: O devised Whiteacre "to A, but if A ever tries to convey the property, then to B." A holds Whiteacre in FSA.
LIFE ESTATES (1 of 3)
- Quasi-fiduciary relationship to holder of the future interest:
o A life tenant who buys the property at a sale held to satisfy a mortgage or other encumbrance, for which both the life tenant and the future interest holder are liable, will be considered to have made the purchase also for the benefit of the future interest holder, so long as the future interest holder contributes his share of the purchase price within a reasonable time after the sale.
LIFE ESTATES (2 of 3)
- Liability for Waste:
o A contingent remainderman who sues a life tenant for committing waste is entitled to injunctive relief, but not damages.
LIFE ESTATES (3 of 3)
- Obligations of Life Tenant an Remaindermen:
o Life Tenant (at least to the extent of income earned from land) is responsible for:
Expenses: Mortgage interest payments, ordinary real estate taxes, ordinary wear and tear of structures.
o Remainderman is responsible for:
Mortagage principal payments, special assessment taxes, home owner's insurance premiums, capital improvements of structures.
NC recognizes 3 types of concurrent ownership:
- (1) Tenancy in Common
- (2) Joint Tenancy
- (3) Tenancy by the Entirety
TENANCY IN COMMON: Creation
(1) Intestate inheritance by co-heirs
o O, the owner of Bigacre, dies intestate. His heirs are his children, C & D. They will hold Big Acre as tenants in common.
(2) Deed or will
o When the co-owners under a deed or will are NOT husband and wife, there is a rebuttable presumption that they take title as tenants in common need express language to create a JT.
JOINT TENANCY: Creation
- The deed or will must contain EXPRESS language showing the transferor's intent to create a JT.
o Must contain right-of-survivorship language. For example, "to A & B as joint tenants" creates a joint tenancy on the MBE, but it creates a tenancy in common in NC.
- Also different from MBE: the owner of real property can use a single instrument (strawpersons not required!!!) to create a joint tenancy with right of survivorship between himself and one or more other persons.
TENANCY BY THE ENTIRETY: Creation (1 of 2)
- A conveyance of real property to a married couple is presumed to vest title in them as tenants by the entirety, even if the instrument doesn't identify them as being husband and wife.
o The presumption can be rebutted by language in the instrument indicating the transferor's intent to create some other type of estate.
- Upon divorce, ownership of any property held as tenants by the entirety is automatically converted to ownership as tenants in common.
TENANCY BY THE ENTIRETY: Creation (2 of 2)
- Partition Deed Exception: In NC, a partition deed or decree does NOT create a tenancy by the entirety in a former co-tenant and his or her spouse in the absence of express language indicating the intent that it have that effect.
o Without such language, the spouse of the former co-tenant receives NO INTEREST under the partition instrument.
- NC allows a married person who owns real property to create a tenancy by the entirety with his or her spouse in a direct conveyance (strawpersons not required).
LANDLORD / TENANT
TENANCY FOR YEARS
- To be enforceable as a tenancy for years in NC, a lease agreement must meet the statute of frauds writing requirement if it can exceed 3 years from the time of its making.
o Note: common law requirement is one year duration of lease itself.
- Notice required by statute for termination of periodic tenancy: unless the lease agreement provides otherwise, the notice to terminate a periodic tenancy can be oral.
o The notice, which must be given prior to the end of the current period, is:
- One month for a year-to-year,
- One week for a month-to-month, and
- Two days for a week-to-week.
TENANT'S RIGHT TO ASSIGN OR SUBLET
- When the lease does not prohibit it, a tenant (other than a tenant at will) may assign or sublet his interest without the consent of the LL.
- A provision of the lease that allows the tenant to assign or sublet only with the consent of the LL is valid and does NOT require that the LL's refusal to consent be reasonable.
- A lease provision restricting a tenant's right to assign or sublet will be strictly construed.
o For example, a provision that expressly prohibits assigning will be held not to preclude subletting (and vice versa).
- Duty of landlord to keep property in fit and habitable condition:
o When a recent case held that this duty applied only to residential property used as the tenant's primary residence, the legislature responded by enacting the Vacation Rental Agreement Act; under the act, this duty has been extended to agreements entered into on and after Jan 1, 2000 for residential property used for a vacation rental;
- Note: under this new legislation, no vacation rental agreement is valid and enforceable unless it is in writing and the tenant has signified acceptance of it.
- Applicability of Unfair and Deceptive Trade Practices Act:
o Several recent cases have established that the rental of property (residential or commercial) amount to "trade" or "commerce" and to the extent that conduct by a landlord (e.g. renting a house in deplorable condition) amounts to an unfair or deceptive trade practice, the tenant can sue under the Unfair and Deceptive Trade Practices Act
- This is significant because you get attorney's fees and treble damages under the act.
- Self-help by landlord to evict tenant:
o The statute prohibiting this does not provide for punitive damages; however, the NC Supreme Court recently held that this does not preclude recover of treble damages and attorney's fees where a landlord's conduct is so egregious that it also violates the Unfair and Deceptive Trade Practices Act.
- Death or illness of previous occupant:
o In offering property for rent or sale, it shall not be deemed a material fact that the property was occupied previously by a person who died or had a serious illness while occupying the premises.
- However, no landlord or seller may knowingly make a false statement regarding such past occupancy.
- Tenant's right to renew lease:
o Never implied must be based on a provision in the lease agreement.
o If the lease specifies that the tenant must give notice of his intent to renew by a certain time, the right to renew will be lost if tenant fails to do so.
- In the absence of a provision in the lease specifying the time by which tenant must exercise an option to renew, it must be done before the original lease expires.
Since an easement is considered an "interest in land," it is necessary for an express grant or reservation of an easement (regardless of duration or cost) to be in writing under the SOF.
- Requires proof that the use giving rise to the claimed easement was ADVERSE and continued for the full prescriptive period of 20 years.
o Since NC follows the minority view that the use of another's land is presumed to be PERMISSIVE, the claimant must be able to rebut this presumption.
- NC law recognizes easements implied based on NECESSITY and implied based on PRIOR USE.
- An easement by dedication arises where the owner of land clearly indicates an intent to dedicate the property for some public use and the proper authority indicates acceptance.
- When lots in a development are sold and conveyed by reference to a map or plat that depicts amenities such as parks, marinas, etc., the purchaser of a lot acquires a right in the nature of an appurtenant easement in such areas on the basis that this right was an inducement to and part of the consideration for the purchase
o As a consequence, the developer is estopped from later attempting to develop such areas in a manner inconsistent with the representations.
- Acceptance of a deed containing restrictive covenants is sufficient to bind the grantee.
o If the deed does not impose restrictive covenants, the grantor cannot unilaterally impose them after TITLE has passed to the grantee.
- The basic rule in construing a restrictive covenant is that the intention of the parties governs.
o However, covenants restricting the use of property are STRICTLY construed.
o When a restriction is ambiguous, the court will adopt the construction that is least restrictive.
REQUIREMENT OF "NOTICE"
- A purchaser for value is not bound by a restrictive covenant unless he or she had NOTICE of it.
o The NC supreme Court has held that a purchaser is deemed to have notice of everything effecting his title that could be discovered by a "PRUDENT" title search.
Warranty of fitness for purpose implied from restriction:
- If land is conveyed subject to a restrictive covenant on use (e.g. residential purposes only), but it cannot be used for the purpose for which it was restricted due to a defect unknown to the parties at the time of the same, buyer is entitled to rescission and restitution.
STATUTE OF LIMITATIONS
- Title to state-owned land: it can be acquired through adverse possession (except for public parks, roads, etc):
o Without color of title 30 years
o With color of title 21 years
- Title to privately-owned land:
o Without color of title 20 years
o With color of title 7 years
- Color of title: a deed, will, or other writing that appears valid, but is actually legally defective and fails to convey good title to some or all of the land that it describes.
o Examples: grantor did not own the land purportedly conveyed, or the granting instrument was defective.
DISABILITY OF OWNER
- NC recognizes the following disabilities:
o (1) Infancy
o (2) Insanity
o (3) Incompetence (lack of mental capacity to manage own affairs).
- In NC, existence of a disability does NOT toll the statute of limitations.
o However, if the owner was under a disability when the cause of action to eject the adverse possessor arose, the owner cannot be barred from bringing an ejectment until at least 3 years after the disability ends.
REQUIREMENT OF "HOSTILITY"
- Relevance of Possessor's state of mind while in possession...
o Hostility in this context means possession of another person's land with the intent to claim title.
- This element is satisfied not only when the possessor knows that the property belongs to someone else (trespasser), but also when it is based on the possessor's mistaken good faith belief that he owns it.
- Adverse possession between co-tenants (#1 - Ouster)
o (1) Requirement of Ouster
- Because every co-tenant has the right to be in possession of the common property, his possession will not be considered ADVERSE unless there is an OUSTER.
NC recognizes two types of ousters:
• (1) Actual Ouster: A clear and unequivocal act that amounts to a denial of the rights of the other co-tenants.
• (2) Constructive Ouster: Co-tenant claiming title by adverse possession must prove exclusive, continuous possession for a period of 20 years, during which time the other co-tenants claimed no rights in the property and the possessor did nothing to acknowledge their title.
Adverse possession between co-tenants (#2 - Color of Title)
o (2) Deed from co-tenant does NOT constitute color of title.
- In NC, a deed by one co-tenant that purports to convey entire ownership of the common property (to a 3rd party) is only effective to transfer that co-tenant's fractional interest and does NOT give grantee color of title to the interests of the other co-tenants.
• Therefore, the grantee can only claim title to the other co-tenants' interests by adverse possession if he can meet the 20 year SOL.
adverse possessor must bring action to quite title;
EMINENT DOMAIN - DEFINITION & NATURE
- Power vested in the state to TAKE or DAMAGE private property, if done for a "public purpose."
o The property owner is entitled to receive "just compensation" for his or her loss.
- Note: The power of eminent domain can be delegated by statute to public and private corporations when needed to provide a public benefit.
EMINENT DOMAIN - REQUIREMENTS
- (1) Public Purpose or Benefit
o A question of LAW.
o In order to justify exercise of the power of ED, the taking must be for a purpose that involves a public use or a benefit to the public interest.
- (2) Just Compensation
o A question of FACT.
o Either side (the condemnor or the landowner) may request a jury trial on the question of what amount constitutes "just compensation."
REAL ESTATE CONTRACTS
CREATION OF AN ENFORCEABLE CONTRACT - Subject matter of the contract:
o Make sure it is for an "interest in land"and complies with the SOF.
For example, the SOF writing requirement does not apply to an agreement to enter into a partnership whose purpose is buying and selling real estate and dividing up the profits.
CREATION OF AN ENFORCEABLE CONTRACT - Contract Terms
o When a SELLER seeks to enforce the agreement, there must be a writing which contains:
(1) Identity of the parties
(2) Adequate description of the land
(3) Purchase price, AND
(4) Signature of party to be charged.
o NC quirk*: When the BUYER is the party seeking enforcement, the purchase price agreed upon may be established by clear and convincing parol evidence.
CREATION OF AN ENFORCEABLE CONTRACT -- Doctrine of Part Performance Inapplicable:
o In NC, part performance can NOT be used to get specific performance of a real estate contract that fails to satisfy SOF.
However, if seller refuses to perform, buyer can recover the consideration already paid and if buyer was allowed to enter the property to make improvements, may also recover an amount equal to the value they added to the property.
• Note: a NC case involving a long-term installment contract that failed to satisfy the SOF where purchaser had been in possession and making payments for 8 years before discovering defect and trying too disavow and get his money back allowed seller to enforce agreement based on equitable estoppel, but not the doctrine of part performance (some say this is opening the door in NC to part performance).
RISK OF LOSS: UNIFORM VENDOR-PURCHASER RISK ACT
- Instead of relying on the doctrine of equitable conversion, NC has enacted the Uniform Vendor-Purchaser Risk Act to help determine who bears the risk that the property will be damaged between the time that the contract to convey is executed and title is transferred at closing.
o The Act provides that, unless contract provides otherwise, if all or a material part of the subject matter is destroyed without the fault of the purchaser, and this occurs before either possession or legal title have been transferred, the vendor cannot enforce the contract and the purchaser is entitled to recover any portion if the price paid.
RESIDENTIAL PROPERTY DISCLOSURE ACT (1 of 2)
o Residential Property Disclosure Act applies to contracts that involve the sale or exchange of residential real property consisting of 1 to 4 units.
o Requires that the owner furnish the purchaser with a disclosure statement which lists specified categories of adverse conditions.
Ex: lead-based paint, asbestos.
RESIDENTIAL PROPERTY DISCLOSURE ACT (2 of 2)
o For each category of adverse condition, the owner's response can be to:
(1) Disclose its existence and describe what she knows about it.
(2) State that she has no ACTUAL knowledge that the adverse condition exists, OR
(3) State that she makes no representation with respect to it.
o IF the required disclosure statement is delivered after the purchaser makes an offer, the purchaser may terminate the contract or withdraw the offer w/o penalty by giving written notice no later than 3 days after purchaser receives the disclosure statement.
IMPLIED COVENANT OF WORKMANLIKE CONSTRUCTION
o Implied Covenant of Workmanlike Construction: Implied in a contract for sale of a recently completed residential dwelling (or one still under construction) is a warranty that both the dwelling and its major fixtures are constructed in a workmanlike manner and free from major structural defect.
o Extends only to the original buyer of house (or his heirs) and seller must be in the business if building houses.
o 10 year statute of limitations.
o Damages = cost of repair (not diminution in value).
DEEDS - REQUIREMENTS - Competent Grantor
o Grantor must be mentally competent when deed is executed.
If the grantor has been adjudicated incompetent, then the deed is VOID.
Even if grantor is competent, a deed o
obtained by exerting duress or undue influence is voidable.
o The grantor must sign the deed. The deed is effective without witnesses or acknowledgment, but acknowledgment (notarization) is required for recording.
DEEDS - REQUIREMENTS - Competent Grantee
o To be valid, a deed must designate as grantee an existing person or legal entity capable of holding title.
o Deceased Grantee: deed is VOID.
o Unborn Child Grantee: A child in gestation at time instrument takes effect is considered to have been "in existence" for the purpose of taking title.
Presumptive gestation period is 10 lunar months (280 days).
o Heirs of a Living Person as Grantee: In NC, when a deed/will purports to give title to someone described as the "heir" of a living person, the word "heirs" shall be interpreted to mean children unless the instrument shows a contrary intent.
At CL, the deed would have been void bc it purported to convey title to the heirs of a living person and a living person has no heirs.
DEEDS - REQUIREMENTS - Description
o Watch out for deeds in which the parcel intended to be conveyed or retained is being carved out of a larger tract in that situation, the deed must adequately describe the location of the dividing line between the part intended to be conveyed or retained and the remainder of the original tract.
DEEDS - REQUIREMENTS - Delivery (1 of 2)
o Delivery of a deed is not considered to have occurred unless and until there has been "transmutation of possession" the grantor must not only intend that the instrument pass title, but must actually part with physical possession and control of the deed for at least a moment of time.
Presumptions based on possession of properly executed deed:
• Presumption of delivery, if found in the possession of GRANTEE.
• Presumption of non-delivery if found in possession of GRANTOR.
Presumptions based on recordation:
• Even if it occurs after the death of the grantor, recordation of a deed gives rise to a presumption that delivery occurred.
DEEDS - REQUIREMENTS - Delivery (2 of 2)
o Delivery to a 3rd-party for the grantee is effective, unless the grantor reserves the right to take the deed back.
o Conditional delivery directly to grantee is allowed and such oral conditions do not violate the parol evidence rule, because they go to show that the deed never became operative rather than modifying or contradicting it. Until the condition is met, delivery does not occur, and the deed does not operate to pass title to the grantee.
NC RECORDING STATUTE: PURE RACE
o NC has a pure race statute even actual notice of an earlier non-recorded conveyance is irrelevant.
o Unrecorded instruments are vulnerable to claims by purchasers for value and creditors of the grantor who record their instruments or docket their liens before the grantee records.
o If tract of land spans more than one county, best record it in both counties to be fully protected.
o Coverage of recording statute: covers not only instruments like deeds but also contracts to convey, option contracts, and any lease with a duration of > 3 years (measured from time it is made).
SPECIAL RULE FOR DEEDS OF GIFT
o Unless recorded within 2 years of when it is made (i.e. delivered), a deed of gift (a deed in which the grantee is NOT a purchaser for value) automatically becomes absolutely VOID even as between the grantor and the grantee.
REAL PROPERTY LIENS
Who can subject property to a LIEN?
Liens may be claimed by those who:
o (1) Perform work on real property.
o (2) Supply material used to improve property.
o (1) Owners of property.
o (2) Tenants of property.
o (3) Buyers with a K to buy property.
There are key differences between the legal rights of a contractor who deal directly with the owner (or tenant or buyer) of real estate and a contractor who has only been hired by another contractor. Liens are more freely given to the former.
LIENS OF THOSE WHO DEAL DIRECTLY WITH THE OWNER:
o Lien will attach to improvement made on RE and tract or lot on which it is situated.
o It arises upon the first visible furnishing of labor or materials.****
o To be enforceable, must file a claim of lien in court within 120 days after the last furnishing of goods.
o If filed within 120 days, lien will have priority over subsequent liens and recorded deeds of trust.
o Suit for enforcement must be brought within 180 days after the last furnishing of goods or services.
o Once a judgment is secured, the property can be sold at a public sale.
o The amount of the lien is the value of the work (no atty fees or other costs).
LIENS OF SUBCONTRACTORS - 2 kinds of liens (1 of 2)
o (1) Liens on funds owed to the general contractor.
If a subcontractor is not paid buy the person who hired them, it can claim a lien on funds owed to that person who hired them.
Second and third tier subcontractors are subrogated to the rights of the first and second tier subcontractors respectively.
To preserve the lien, the lien claimant must give notice to the contractor who is the obligor of the debt being attached.
LIENS OF SUBCONTRACTORS - 2 kinds of liens (2 of 2)
o (2) Liens on the Real Estate
Will result only when:
• (i) Improper Payment Lien: The owner improperly paid funds to general contractor even after a notice of lien from subcontractor.
• (ii) Subrogation Lien: When first tier subs are subrogated to the lien of general contractor on RE, first tier sub can independently take action to enforce this lien.
o Subs rights will be limited by general contractor's rights because of subrogation.
The owner may assert a failure by sub to perform work as a defense