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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Rhode Island Supreme Court allows foreclosure even though the promissory note has been lost

/ Mortgages

While the ordinary way to foreclose on real estate is to produce the note or other evidence that one is a party entitled to enforce the note, foreclosure may be commenced even when the note cannot be produced even if the current mortgagee cannot produce the note and never possessed it. Porch Swing Holdings LLC v. Mallory, 345 A.3d 404 (R.I. 2025). Rhode Island had precedents which held that the holder of the mortgage has the right to foreclose. In this case, the mortgage was placed in the name of MERS (Mortgage Electronic Registration Service) and gave it the power to foreclose  (the “power of sale”) and to assign the power to foreclose to another. Not all courts agree and the confusion created by the subprime mortgage crisis led to conflicting court judgments about how a mortgagee can prove they have the right to foreclose. In general, the note holder …

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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.

Foreclosure at 10% of fair market value shocks the conscience and justifies setting aside the foreclosure sale, but sale under 30% is valid unless is evidence of unfairness other than inadequacy of price

/ Mortgages

The Alabama Supreme Court has held that a foreclosure sale is invalid if the foreclosure price is unconscionably low. In Collins v. W. Ala. Bank & Trust, 2025 WL 2627910 (Ala. Sept. 12, 2025), it held that sale for 10% of fair market value is, by itself, a sufficient reason to undo the sale. However, sales for 30% or less (meaning for 10% up to 30%) are valid unless there is other evidence of “unfairness, misconduct, fraud, or even stupid management.” Since the sales were were for 47.5% and 26.4% of its fair market value, they were valid because the owners could not show “other circumstances” that would justify setting aside the foreclosure. Collins v. W. Ala. Bank & Trust, 2025 WL 2627910 (Ala. Sept. 12, 2025). While this case reflects the prevailing law, it seems to violate the legislative intent behind foreclosure statutes and arguably wrongfully strips owners of …

Foreclosure at 10% of fair market value shocks the conscience and justifies setting aside the foreclosure sale, but sale under 30% is valid unless is evidence of unfairness other than inadequacy of price Read More »

Easements by necessity remain attached to the dominant estate even if they are not used for a long time

/ Easements, Servitudes

The Idaho Supreme Court held, in Easterling v. Clark, 574 P.3d 349 (Idaho 2025), that statutes of limitation that require suit within four years of the claim accruing did not apply to easements by necessity because owners of land benefited by such easements have vested interests in the right to reach a public way. Non-use for a long time does not result in a loss of rights.

Pennsylvania does not allow joint tenants to sever the right of survivorship by a deed to themselves

/ Concurrent or Common Ownership

In this case, a mother conveyed real property to her son and to herself as joint tenants. Later the mother sued for partition and then attempted  to sever the joint tenancy from conveying her 50 percent interest to herself. The mother died before the partition proceedings had finished and she left her  50 percent interest to her daughter. If her deed to herself severed the joint tenancy, the daughter would win and own a 50 percent interest as a tenant in common with her brother. If the deed did not sever the joint tenancy and end the right of survivorship, the brother would own a 100% interest and the daughter would own nothing. Affirming the rulings of the lower courts, the Pennsylvania Supreme Court held in Grant v. Grant, 341 A.3d 685 (Pa. 2025), that you cannot sever a joint tenancy by conveying your fractional interest to yourself. The court …

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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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Foreclosure price of 10% of market value not so unconscionable as to set aside the sale, given legal uncertainties about which mortgage had priority

/ Mortgages

Another court holds that a foreclosure sale at a very low value (10% of fair market value) is not a problem, does not “shock the conscience” and is not enough to set aside the sale. This case is by the District of Columbia Court of Appeals (the supreme court of D.C., not the federal court with a similar name). Flagstar Bank v. Advanced Fin. Invs., LLC, 333 A.3d 851 (D.C. 2025). The court approved a sale for $26,000 of property worth $256,632.00. The court explained its reasoning by noting that at the time of the foreclosure sale, the law was unclear as to whether the property was subject to an undischarged mortgage held by a third party. If that were so, the total debts of the homeowner would exceed the value of the property, and the homeowner would have been entitled to nothing in any event. In that light, $26,000 …

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Real property can be partitioned based on equitable factors even if only party’s name is on the deed

/ Concurrent or Common Ownership, Marital Property, Title Issues

North Dakota law allows partition of real property when two parties intend to share ownership of the house, and they both contribute to its purchase and/or maintenance, even if the deed is in the name of only one of the parties. Berger v. Repnow, 2025 ND 25, 16 N.W.3d 452 (N.D. 2025) (applying N.D. Cent. Code §32-16-01. The court explained that North Dakota law affirms that “although legal ownership of property is strong evidence of an intention to not share property, legal ownership is not dispositive when the person who is not the legal owner has financially contributed to the acquisition of the property.” However, the court held that the trial court erred in granting title to the house to one of the parties rather than dividing it between them by “determin[ing] the parties’ respective ownership interests based on their contributions to [the] property and any other relevant factors, and …

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