Ch2. Property Law — Ownership, Usufructuary Rights, and Security Interests

Foundational Principles of Property Rights

Property right (in rem right): a right that directly governs a thing and is enforceable against the entire world (a right good against all).

The Numerus Clausus Principle

Under US property law, the types of property interests recognized by law are limited to a defined set — parties generally cannot create novel property interests by contract alone. → This principle, known as numerus clausus (Latin: “the number is closed”), prevents unlimited fragmentation of property rights. (Restatement (Third) of Property: Servitudes; Restatement (Third) of Property: Mortgages)

Characteristics of Property Rights

① Enforceability against the world: a property right may be asserted
   against anyone who interferes with it
② Exclusivity: no two identical property interests can exist
   simultaneously in the same thing
③ Priority over contract rights: in rem rights generally trump
   in personam (contractual) claims
④ Right to trace (follow the property): the holder may assert the
   right wherever the property is located

Ownership

Ownership (fee simple absolute): the fullest estate in real property — the right to use, enjoy (receive rents and profits from), and dispose of property, subject only to law.

Methods of Acquiring Ownership

Original acquisition (title arises for the first time):
- Capture of unowned personal property
- Finding lost property (with statutory obligations)
- Accession, confusion, and specification (fixtures, commingled goods)
- Adverse possession

Derivative acquisition (title transferred from another):
- Sale, gift, or bequest
- Foreclosure sale or judicial sale

Adverse Possession

Adverse possession — general US requirements:
The claimant must occupy the property in a manner that is:
① Actual: genuine physical occupation
② Open and notorious: visible to a reasonable owner
③ Exclusive: not shared with the true owner
④ Hostile (adverse): without the owner's permission
⑤ Continuous: for the full statutory period

Statutory periods vary by state:
- Most states: 10 to 21 years for real property
- Tacking: a successor may add the predecessor's period if
  there is privity of possession
- Color of title + payment of taxes may shorten the period
  in some states (e.g., California: 5 years)

Personal property: varies; many states use 3–6 years

Transfer of Property Interests

Transfer of Real Property Interests

Delivery and recording: a deed must be delivered to be effective; recording it in the public land records gives constructive notice to the world.

Voluntary conveyance: deed + delivery → title transfers
Operation of law: inheritance, eminent domain, judicial sale,
  court judgment → title transfers without a deed
  (but recording is required before further conveyance)

The US recording system and the bona fide purchaser rule: unlike a pure “title registration” system, the US recording acts protect a bona fide purchaser for value without notice (BFP). A subsequent BFP who records first (under a race-notice statute) takes free of prior unrecorded interests.

Usufructuary Interests

Easements

An easement is a non-possessory right to use another’s land for a specific purpose.

Types of easements:
Easement appurtenant: benefits a neighboring parcel (the "dominant
  tenement"); the burdened parcel is the "servient tenement."
Easement in gross: benefits a person or entity, not a parcel
  (e.g., utility easements)

Duration rules vary; express easements may run in perpetuity or
for a fixed term.

Easements are in rem rights → they run with the land and bind
successive owners who take with notice.

Easement by implication / necessity:

Unity of title: the dominant and servient parcels were once held by the same owner
Prior use (for implied easements) or strict necessity (for easements by necessity)
Severance (the parcels were divided)

Profits à Prendre

A right to enter another’s land and remove something from it (timber, minerals, game).

Example: right-of-way easement
Dominant estate (benefits) ←── use ──→ Servient estate (burdened)

An easement appurtenant passes automatically with transfer
of the dominant estate (non-assignable separately).

Life Estates and Leaseholds

A life estate grants the life tenant the right to use and enjoy real property for the duration of a measuring life; the property reverts to the grantor (reversion) or passes to a third party (remainder) upon the measuring life’s end.

Life estate vs. Leasehold:
Life estate: a freehold estate (not a lease), transferable
  (but the grantee takes only the life estate measure);
  court orders partition or sale if co-tenants disagree
Leasehold: a non-freehold estate created by a lease contract;
  the tenant has a contractual possessory right and may have
  statutory protections under state landlord-tenant law

Security Interests in Real Property

Liens (Mechanics’ / Materialmen’s Liens)

A lien is a non-possessory security interest that gives its holder the right to retain a claim against property until a debt secured by the property is satisfied.

Creation requirements:
① Another party owns or possesses the property
② The debt arises in connection with work done on the property
③ The debt is due
④ No waiver of lien in a valid contract

Key features:
- No need to take possession (the lien encumbers title)
- Foreclosure: the lienholder may force a judicial sale
- Priority: generally determined by the date of recording
  (but mechanics' liens often "relate back" to the date work began)

Mortgages

A mortgage is a security interest in real property given to a lender (mortgagee) by the borrower (mortgagor) to secure repayment of a loan, without surrendering possession.

Mortgage characteristics:
Accessory nature: the mortgage follows the underlying debt —
  if the debt is paid in full, the mortgage is discharged
Assignment: the mortgage passes with the note it secures
Indivisibility: the entire property secures the debt even if
  only part of the debt remains
Subrogation / insurance: if the mortgaged property is destroyed,
  the mortgagee's interest may attach to insurance proceeds
  (Restatement (Third) of Property: Mortgages § 4.4)

Shared mortgage / blanket mortgage: a single mortgage may encumber multiple parcels; upon default the mortgagee may elect to foreclose all parcels simultaneously or in sequence.

Revolving / Open-End Mortgages (Home Equity Lines)

A form of mortgage that secures a credit facility rather than a fixed debt — the borrower may draw and repay repeatedly up to a stated maximum.

Maximum credit limit: typically 100–125% of the property's
  appraised value (varies by lender policy)
Recording: the instrument states the credit limit, borrower,
  and mortgagee

Distinction from a standard mortgage:
Open-end (revolving): the outstanding balance fluctuates;
  the stated maximum is the ceiling on secured debt
Standard (closed-end): the secured debt is fixed at closing

Key Concept Cards

Easement by Necessity ★★★★★ : When parcels are severed and one parcel is landlocked, the landlocked parcel’s owner obtains an easement by necessity over the grantor’s remaining land. Automatically arises at the point of severance. Memory hook: landlocked = easement by necessity at severance

Mechanics’ / Materialmen’s Lien Priority ★★★★★ : In most states, a properly filed mechanics’ lien relates back to the date the work or materials were first furnished — meaning it can prime a later-recorded mortgage. Purchasers at foreclosure generally take subject to unperfected liens of which they have notice. Memory hook: mechanics’ lien = not extinguished at sale, buyer takes subject to it

Open-End Mortgage Maximum ★★★★☆ : The instrument secures a credit limit, not the actual outstanding balance. The public records show only the maximum — the actual debt may be less. Lenders typically lend up to 80–90% LTV. Memory hook: credit limit ≠ current debt

Practice Quiz

Q. What is the accessory nature of a mortgage, and what is an example?

A mortgage is an accessory to the underlying obligation. When the secured debt is fully repaid, the mortgage is automatically discharged — the mortgagor may then record a release (satisfaction of mortgage) to clear the title.

Q. Can a mechanics’ lienholder force a judicial sale of the property to collect the debt?

Yes. After perfecting the lien by recording within the statutory period, the lienholder may bring a foreclosure action. The property is sold; the lienholder is paid from the proceeds. By contrast, an unpaid contractor who has not perfected a lien must sue on the contract and obtain a judgment before levying on the property.

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