Real Estate Transactions

Washington Supreme Court prohibits private nonjudicial foreclosure when the mortgage note is not a negotiable instrument

/ Mortgages, Real Estate Transactions

After the subprime crisis, some courts became quite strict in their requirements for foreclosures, both nonjudicial and judicial, while other courts were far more lenient in forgiving banks who did not strictly comply with statutory requirements to prove a right to foreclose. A recent case by the Supreme Court of Washington held that the beneficiary of a deed of trust (similar to a mortgage arrangement) could not engage in a private, nonjudicial foreclosure because state law defined the beneficiary entitled to private foreclosure as one who was the “holder” of the promissory note which was the basis of the lien on the property. The Court interpreted the word “holder” in the state foreclosure statute to mean the holder of a negotiable instrument as defined by the Uniform Commercial Code. Since the note in this case was not a negotiable instrument, nonjudicial foreclosure was not available. Certification from the U.S. District. …

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Fee simple grant “to A and his heirs and assigns forever” does not convey any property rights to the “heirs” or “assigns”

/ Estates and Future Interests, Real Estate Transactions

In an elementary explanation of a doctrine familiar to almost all first year law students, the Fifth Circuit (applying Texas law) reaffirmed that the words “and his heirs” in a deed are “words of limitation” meant to define the estate as a fee simple absolute rather than “words of purchase” which would vest a future interest in the heirs. Brown v. Carrington, 2025 WL 3172647 (5th Cir. 2025). While the wording added “and assigns forever,” the court held that this is not sufficient to alter the rule based on the presumption against forfeitures that a conveyance does not create a future interest unless the language purporting to do so is clear and cannot be interpreted any other way. The wording here used the magic phrase “and his heirs” so the language that followed should be interpreted in the same vein as words of limitation, not words of purchase.

A possessor without title can lease land to a tenant

/ Leaseholds, Real Estate Transactions, Title Issues, Trespass

The Alabama Supreme held that a possessor of land can lease it to another and that the lease is enforceable against by the tenant. Hembree Ins. Tr. V. Maple Indus., Inc., 2025 WL 1085479 (Ala. 2025). The lease in this case said that a lease in the name of an individual is valid even though the property was actually owned by a limited liability company (an LLC) owned by the individual. The court noted that “a party need not be the owner of a property to lease it to another. While the right to let property is an incident of the title and possession, a lessor may validly lease property to another, despite the fact that the title to the property is in a third person, if the lessor lawfully possesses the property.” This is arguably an application of the doctrine of relativity of title, which holds that a peaceable …

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Real estate buyer entitled to specific performance when sellers mistakenly omitted a contingency from the sales agreement

/ Real Estate Transactions

Intending to buy a lot to build a new home, sellers put their house up for sale and signed a contract with buyers. Then the lot the sellers hoped to buy was purchased by someone else and sellers tried to back out of their promise to sell their home to buyers. Although the sellers had intended the sale to be contingent on their getting title to the now-unavailable lot, that contingency was not included in the sales contract for their home because the realtor that drew up the agreement left it out and sellers apparently did not notice that when they signed the agreement. The buyers wanted to go through with the deal and refused to accept damages instead; they sought specific performance of the real estate sales contract, and the Wyoming Supreme Court gave it to them.  Morningstar v. Robison, 527 P.3d 241 (Wyo. 2023). The trial court relegated …

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Arizona Supreme Court holds that the implied warranty in new home sales cannot be disclaimed

/ Consumer Protection, Real Estate Transactions

In an important decision, the Arizona Supreme Court held that buyers of new homes have a nonwaivable right to a warranty of fitness. Zambrano v. M & RC II, LLC, 254 Ariz. 53, 517 P.3d 1168 (Ariz. 2022). The court explained that allowing waivability would mean the end of the implied warranty since all builders would include such a waiver in their agreements and buyers would neither know to contest it nor have the power to get the buyer to change the contract terms. The dissent argued that “freedom of contract” should prevail and that it is important to give the parties the benefit of the bargain they made, whatever that is.

Tax foreclosures violate the takings clause if they government entity retains proceeds beyond the unpaid taxes

/ Real Estate Transactions, Takings

In an important case, the Supreme Court held in Tyler v. Hennepin County, 143 S.Ct. 1369 (2023), that it violates the takings clause for a municipality to foreclose on property for nonpayment of property taxes and to retain the value of the property that exceeds the unpaid taxes (with costs). The purpose of a tax foreclosure is to pay off the taxes owed. The equity in the property beyond that belongs to the homeowner (and/or the lender). In one sense, the ruling is unexceptional and tracks the goals of tax foreclosure laws (and other foreclosure laws in general). In a different sense, the opinion goes beyond other cases that have been held to be takings and could have significant consequences for mortgage foreclosures that are effected through court proceedings (judicial foreclosures). Most foreclosures do not result in paying of fair market value for the property, thereby (in my view, improperly) shifting …

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Marketable title act does not prevent enforcement of reversionary interest in the root of title

/ Estates and Future Interests, Real Estate Transactions

The Ohio Supreme Court ruled that a reversionary interest in a deed donating a park to the city was not extinguished by operation of the state marketable title act. Cleveland Botanical Garden v. Worthington Drewien, 2022 Ohio LEXIS 2153 (Ohio 2022). When the park was donated to the city of Cleveland, it contained a possibility of reverter that would be activated if the city ever stopped using the property for public park purposes. The deed required the park to be “open at all times to the public” and to be used only for “park” purposes. The heir complained when the city’s lessee closed the park on Mondays, began charging admission to enter the park, and constructed and operated a parking garage on part of the property. The court first determined that the terms of the conveyance had not been violated because the city (and its lessee) had the power to create …

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Vermont Supreme Court denies reserved easements implied from prior use unless they are strictly necessary

/ Easements, Real Estate Transactions, Servitudes

While owners can generally get an easement by necessity to obtain access to landlocked land over remaining lands of the grantor, most states also recognize easements implied from visible, continuous prior use before the parcels were separated if the access is helpful (“reasonably necessary”) to the dominant estate. The prior use doctrine rests on the right to reform a deed because of mutual mistake. Such easements can arise by grant (giving an easement to the grantee/buyer) or reserved by the grantor/seller. However, the Vermont Supreme Court has held in the case of Greenfield v. Luce, 2022 WL 16848175, 2022 Vt. Unpub. LEXIS 97 (Vt. Nov. 10, 2022) that it will find an easement to be reserved unless it is necessary to access a landlocked estate. Most states have a stricter test for easements by reservation because they “derogate from the grant” and the buyer should not be surprised to find that …

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Implied warranty of workmanship & habitability in new housing cannot be waived

/ Consumer Protection, Real Estate Transactions

The Arizona Supreme Court has held in Zambrano v. M & RC. II LLC,, 517 P.3d 1168 (Ariz. 2022) that the implied warranty of workmanship and habitability in new housing cannot be disclaimed or waived. The involved a sales contract with a detailed express warranty that disclaims any obligation to comply with common law obligations under the implied warranty as defined in Arizona law. The Arizona Supreme Court held that any waiver of the implied warranty was void even if it was partial, as it was here because an express warranty existed, albeit narrower than the implied warranty. The Court refused to make an exception for sophisticated buyers (the buyer here was a licensed real estate agent) because such a rule would be hard to administer and because even sophisticated buyers need the protection of the rule which protects buyers from latent defects that the buyer could not have reasonably discovered at the time …

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Texas Supreme Court interprets life estate as a fee simple because the remainders were subject to divestment

/ Concurrent or Common Ownership, Estates and Future Interests, Real Estate Transactions, Wills and Inheritance

In Jordan v. Parker, 2022 WL 17998227 (Tex. Dec. 30, 2022), the Texas Supreme Court held that a conveyance of a life estate actually conveyed a fee simple since the remainders were subject to alteration or even complete divestment by the life estate owner. In this case, a man devised his entire estate to his widow for life with remainders in their children, but the devise gave the widow complete power to transfer both the life estate property and to redirect ownership of the remainders. Part of the estate was a fractional ownership interest in a ranch. Some years later, while the widow was still alive, a son who was a remainder owner conveyed his remainder interest to his daughters (the granddaughters of the widow and the testator). The widow never exercised her power to alter the remainders in her children during her lifetime, and the question was whether the widow …

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