Opinion

CORRIGAN, J.

The statute of frauds provides that certain contracts “are invalid, unless they, or some note or memorandum thereof, are in writing and subscribed by the party to be charged . . . .” (Civ. Code, § 1624.) In this case, the Court of Appeal held that a memorandum regarding the sale of several apartment buildings was sufficient to satisfy the statute of frauds. Defendants contend the court improperly considered extrinsic evidence to resolve uncertainties in the terms identifying the seller, the property, and the price.

*762We reverse, but not because the court consulted extrinsic evidence. Extrinsic evidence has long been held admissible to clarify the terms of a memorandum for purposes of the statute of frauds. Statements to the contrary appear in some cases, but we disapprove them. A memorandum serves only an evidentiary function under the statute. If the writing includes the essential terms of the parties’ agreement, there is no bar to the admission of relevant extrinsic evidence to explain or clarify those terms. The memorandum, viewed in light of the evidence, must be sufficient to demonstrate with reasonable certainty the terms to which the parties agreed to be bound. Here, plaintiffs attempt to enforce a price term that lacks the certainty required by the statute of frauds.

I. FACTUAL AND PROCEDURAL BACKGROUND

In January 2000, defendant Lawrence N. Taylor and plaintiff Donald Sterling discussed the sale of three apartment buildings in Santa Monica owned by the Santa Monica Collection partnership (SMC). Defendant was a general partner in SMC. Plaintiff and defendant, both experienced real estate investors, met on March 13, 2000, and discussed a series of transactions including the purchase of the SMC properties. At this meeting, plaintiff drafted a handwritten memorandum entitled “Contract for Sale of Real Property.”1

*763The memorandum encompasses the sale of five properties; only the SMC properties are involved here. They are identified in the memorandum as “808 4th St.,” “843 4th St.,” and “1251 14th St.,” with an aggregate price term of “approx 10.468 X gross income[,] estimated income 1.600.000, Price $16,750.°°.” Although defendant had given plaintiff rent rolls showing the income from the properties, neither man brought these documents to the March 13 meeting. Plaintiff dated and initialed the memorandum as “Buyer,” but the line he provided for “Seller” was left blank. Plaintiff contends the omission was inadvertent. Defendant, however, asserts he did not sign the document because he needed approval from a majority of SMC’s limited partners.

On March 15, 2000, plaintiff wrote to defendant, referring to the properties by street address only, and stating “[t]his letter will confirm our contract of sale of the above buildings.” The letter discussed deposits plaintiff had given to defendant, and noted “our agreement that the depreciation allocation and tax benefits will be given to me no later than April 1, 2000, since I now have equitable tittle [sz'c].” Price terms were not mentioned. Both parties signed the letter, defendant beneath the handwritten notation “Agreed, Accepted, & Approved.”

Plaintiff claims the March 13 memorandum was attached to the March 15 letter, which defendant annotated and signed in his presence. Defendant insists nothing was attached to the March 15 letter, which he did not sign until March 30. According to defendant, his signature reflected only an accommodation to acknowledge the deposits he had received from plaintiff.

On April 4, 2000, defendant sent plaintiff three formal purchase agreements with escrow instructions, identifying the properties by their legal descriptions. SMC was named as the seller and the Sterling Family Trust as the buyer. The price terms totalled $16,750,000. Defendant signed the agreements as a general partner of SMC. Plaintiff refused to sign. Defendant claims plaintiff telephoned on April 28, saying the purchase price was unacceptable. Plaintiff asserts that after reviewing the rent rolls, he determined the actual rental income from the SMC buildings was $1,375,404, not $1,600,000 as estimated on the March 13 memorandum. Plaintiff claims he tried to have defendant correct the escrow instructions, but defendant did not return his calls. Plaintiff wanted to lower the price to $14,404,841, based on the actual rental income figure and the 10.468 multiplier noted in the memorandum.2

*764Plaintiff did not ask for the $16,750.00 purchase price stated in the memorandum. He admits that he “accidentally left off one zero” when he wrote down that figure. Defendant also acknowledges that the price recorded on the memorandum was meant to be $16,750,000.3

Defendant returned plaintiff’s uncashed deposit checks on May 23. The parties conducted further negotiations in December 2000 and January 2001. Defendant provided additional rent rolls, but no agreement was reached.

In March 2001 the trustees of the Sterling Family Trust sued Taylor, SMC, and related entities, alleging breach of a written contract to sell the properties for a total price of $14,404,841. The March 13 memorandum and the March 15 letter were attached to the complaint as the “Purchase Agreement.” The complaint included causes of action for breach of the implied covenant of good faith and fair dealing, specific performance, declaratory relief, an accounting, intentional misrepresentation, and imposition of a constructive trust.

Defendants sought summary judgment, claiming that no contract was formed, the alleged contract violated the statute of frauds, and plaintiffs could not prove fraud. Defendants contended the memorandum and letter did not satisfy the statute because they established no agreement on price, failed to sufficiently identify either the contracting parties or the properties, and were not signed by Taylor and Christina Development. The trial court granted summary judgment. It ruled that the price term was too uncertain to be enforced and the writings did not comply with the statute of frauds. The court also concluded that the undisputed facts disclosed neither a fraudulent intent on defendant’s part nor damages to plaintiff, thus foreclosing the misrepresentation claim.

The Court of Appeal reversed as to the contract causes of action, but remanded for entry of summary adjudication in defendants’ favor on the fraud claim. The court held that Taylor’s name and signature on the writings submitted by plaintiffs satisfied the statute of frauds. It also deemed the identification of the properties by street address sufficient, in light of extrinsic evidence specifying the city and state. Likewise, the court held that the price terms in the March 13 memorandum, while ambiguous, could be clarified by examining extrinsic evidence. It concluded that defendants’ evidence raised a *765triable issue as to whether the parties had agreed on a formula for determining the purchase price. The court further ruled that the fraud claim failed because plaintiffs could not prove damages. Only the contract claims are at issue in this appeal.

II. DISCUSSION

Defendants contend the Court of Appeal improperly considered extrinsic evidence to establish essential contract terms. They insist the statute of frauds requires a memorandum that, standing alone, supplies all material elements of the contract. Plaintiffs, on the other hand, argue that extrinsic evidence is routinely admitted for the purpose of determining whether memoranda comply with the statute of frauds.4

Both sides of this debate find support in California case law, sometimes in the same opinion. Part A of our discussion explains that plaintiffs’ view is correct. The statute of frauds does not preclude the admission of evidence in any form; it imposes a writing requirement, but not a comprehensive one. In part B, however, we conclude that defendants are nevertheless entitled to judgment. The Court of Appeal properly considered the parties’ extrinsic evidence, but erroneously deemed it legally sufficient under the statute of frauds to establish the price sought by plaintiffs.

A. The Memorandum Requirement of the Statute of Frauds

The statute of frauds does not require a written contract; a “note or memorandum . . . subscribed by the party to be charged” is adequate. (Civ. Code, § 1624, subd. (a).)5 In Crowley v. Modern Faucet Mfg. Co. (1955) 44

*766Cal.2d 321 [282 P.2d 33], we observed that “[a] written memorandum is not identical with a written contract [citation]; it is merely evidence of it and usually does not contain all of the terms.” (Id. at p. 323; see also Kerner v. Hughes Tool Co. (1976) 56 Cal.App.3d 924, 934 [128 Cal.Rptr. 839]; 1 Witkin, Summary of Cal. Law, supra, Contracts, § 350, p. 397.) Indeed, in most instances it is not even necessary that the parties intended the memorandum to serve a contractual purpose.6 (Rest.2d Contracts, § 133; 1 Witkin, Summary of Cal. Law, supra, Contracts, § 352, p. 398; see Moss v. Atkinson (1872) 44 Cal. 3, 16-17.)

A memorandum satisfies the statute of frauds if it identifies the subject of the parties’ agreement, shows that they made a contract, and states the essential contract terms with reasonable certainty. (Rest.2d Contracts, § 131; 1 Witkin, Summary of Cal. Law, supra, Contracts, § 353, p. 399.) “Only the essential terms must be stated, ' “details or particulars” need not [be]. What is essential depends on the agreement and its context and also on the subsequent conduct of the parties . . . .’ (Rest.2d Contracts, § 131, com. g, p. 338.)” (Seaman’s Direct Buying Service, Inc. v. Standard Oil Co. (1984) 36 Cal.3d 752, 762-763 [206 Cal.Rptr. 354, 686 P.2d 1158], overruled on another point in Freeman & Mills, Inc. v. Belcher Oil Co. (1995) 11 Cal.4th 85, 88 [44 Cal.Rptr.2d 420, 900 P.2d 669].)

This court recently observed that the writing requirement of the statute of frauds “ ‘serves only to prevent the contract from being unenforceable’ [citation]; it does not necessarily establish the terms of the parties’ contract.” (Casa Herrera, Inc. v. Beydoun (2004) 32 Cal.4th 336, 345 [9 Cal.Rptr.3d 97, 83 P.3d 497].) Unlike the parol evidence rule, which “determines the enforceable and incontrovertible terms of an integrated written agreement,” the statute of frauds “merely serve[s] an evidentiary purpose.” (Ibid.) As the drafters of the Second Restatement of Contracts explained: “The primary purpose of the Statute is evidentiary, to require reliable evidence of the existence and terms of the contract and to prevent enforcement through fraud or perjury of contracts never in fact made. The contents of the writing must be such as to make successful fraud unlikely, but the possibility need not be excluded that some other subject matter or person than those intended will also fall within the words of the writing. Where only an *767evidentiary purpose is served, the requirement of a memorandum is read in the light of the dispute which arises and the admissions of the party to be charged; there is no need for evidence on points not in dispute.” (Rest.2d Contracts, § 131, com. c, p. 335, italics added; accord, Seaman’s Direct Buying Service, Inc. v. Standard Oil Co., supra, 36 Cal.3d at pp. 764-765.)

Thus, when ambiguous terms in a memorandum are disputed, extrinsic evidence is admissible to resolve the uncertainty. (In re Marriage of Benson, supra, 36 Cal.4th at p. 1108; Seaman’s Direct Buying Service, Inc. v. Standard Oil Co., supra, 36 Cal.3d at p. 763, fn. 2; Beverage v. Canton Placer Mining Co. (1955) 43 Cal.2d 769, 774-775 [278 P.2d 694]; Searles v. Gonzalez (1923) 191 Cal. 426, 431-433 [216 P. 1003].) Extrinsic evidence can also support reformation of a memorandum to correct a mistake. (Rest.2d Contracts, § 131, com. g, p. 338; Calhoun v. Downs (1931) 211 Cal. 766, 768-770 [297 P. 548]; 1 Witkin, Summary of Cal. Law, supra, Contracts, §§ 355, 356, pp. 403-404.)

Because the memorandum itself must include the essential contractual terms, it is clear that extrinsic evidence cannot supply those required terms. (See, e.g., Friedman v. Bergin (1943) 22 Cal.2d 535, 537-539 [140 P.2d 1].) It can, however, be used to explain essential terms that were understood by the parties but would otherwise be unintelligible to others. Two early cases from this court demonstrate that a memorandum can satisfy the statute of frauds, even if its terms are too uncertain to be enforceable when considered by themselves.

In Preble v. Abrahams (1891) 88 Cal. 245 [26 P. 99], a written agreement for the sale of land described the property to be sold as “ ‘forty acres of the eighty-acre tract at Biggs.’ ”7 (Id. at p. 248.) The court observed; “[A]n agreement not in writing for the sale and purchase of real estate is void. And the description of the property in the written agreement is so entirely uncertain as to render the instrument inoperative and void, unless we can go beyond the face of it to ascertain its meaning.” (Id. at pp. 249-250.)

To give effect to the agreement, the Preble court relied on extrinsic evidence that another buyer had purchased one 40-acre tract and the defendant had agreed to purchase the remainder. (Preble v. Abrahams, supra, 88 Cal. *768at p. 250.) “We think the evidence makes the subject-matter sufficiently certain, and that is all that is necessary. Professor Pomeroy says: ‘It is not strictly accurate to say that the subject-matter must be absolutely certain from the writing itself, or by reference to some other writing. The true rule is, that the situation of the parties and the surrounding circumstances, when the contract was made, can be shown by parol evidence, so that the court may be placed in the position of the parties themselves; and if then the subject-matter is identified, and the terms appear reasonably certain, it is enough.’ (Pomeroy on Contracts, sec. 227, note.)” (Preble v. Abrahams, supra, 88 Cal. at pp. 250-251.)

In Brewer v. Horst and Lachmund Co. (1900) 127 Cal. 643 [60 P. 418], a contract was memorialized by two telegrams employing a form of shorthand notation so arcane that “[i]f there were nothing to look to but the telegrams, the court might find it difficult, if not impossible, to determine the nature of the contract, or that any contract was entered into between the parties.” (Id. at p. 646.) The defendant contended the telegrams were an insufficient “note or memorandum” to satisfy the statute of frauds. (Ibid.) The Brewer court disagreed, stating: “[T]he court is permitted to interpret the memorandum (consisting of the two telegrams) by the light of all the circumstances under which it was made; and if, when the court is put into possession of all the knowledge which the parties to the transaction had at the time, it can be plainly seen from the memorandum who the parties to the contract were, what the subject of the contract was, and what were its terms, then the court should not hesitate to hold the memorandum sufficient. Oral evidence may be received to show in what sense figures or abbreviations were used; and their meaning may be explained as it was understood between the parties.” (Ibid.)

Reading the telegrams “by the light of the circumstances surrounding the parties,” the Brewer court concluded it was clear that they referred to a contract for the purchase of 296 bales of hops on terms understood by the parties. (Brewer v. Horst and Lachmund Co., supra, 127 Cal. at p. 647.) The facts of Brewer were adapted by the drafters of the Restatements as an illustration of a sufficient memorandum for purposes of the statute of frauds. (Rest., Contracts, §207, com. a, illus. 8, p. 281; Rest.2d Contracts, § 131, com. e, illus. 7, p. 336; and see Rest.2d Contracts, Rptrs. Note on com. e, p. 340.)

Despite this venerable authority, conflicting statements appear in other California cases: “The sufficiency of a writing to satisfy the statute of frauds *769cannot be established by evidence which is extrinsic to the writing itself. (Code Civ. Proc., § 1973.)[8]” (Franklin v. Hansen (1963) 59 Cal.2d 570, 573-574 [30 Cal.Rptr. 530, 381 P.2d 386].) 9 “The preeminent qualification of a memorandum under the statute of frauds is ‘that it must contain the essential terms of the contract, expressed with such a degree of certainty that it may be understood without recourse to parol evidence to show the intention of the parties.’ (5 Browne on Statute of Frauds, sec. 371.)” (Zellner v. Wassman (1920) 184 Cal. 80, 85-86 [193 P. 84]; accord, e.g., Seymour v. Oelrichs (1909) 156 Cal. 782, 787 [106 P. 88].) “The whole object of the statute would be frustrated if any substantive portion of the agreement could be established by parol evidence.” (Craig v. Zelian (1902) 137 Cal. 105, 106 [69 P. 853]; accord, e.g., Seymour v. Oelrichs, supra, 156 Cal. at p. 787.)10 “Unless the writing, considered alone, expresses the essential terms with sufficient certainty to constitute an enforceable contract, it fails to meet the demands of the statute. [Citations.]” (Burge v. Krug (1958) 160 Cal.App.2d 201, 207 [325 P.2d 119]; Ellis v. Klaff (1950) 96 Cal.App.2d 471, 477 [216 P.2d 15].) Defendants rely on these and similar cases to argue that the Court of Appeal improperly considered extrinsic evidence to determine the *770meaning of essential but imperfectly stated terms in the memorandum drafted by plaintiff Sterling.

To clarify the law on this point, we disapprove the statements in California cases barring consideration of extrinsic evidence to determine the sufficiency of a memorandum under the statute of frauds. The purposes of the statute are not served by such a rigid rule, which has never been a consistent feature of the common law. Corbin observes: “Judicial dicta abound to the effect that the writing must contain all of the ‘essential terms and conditions’ of the contract, and it is often said that these must be so clear as to be understood ‘without any aid from parol testimony.’ But the long course of judicial decision shows that ‘essential terms and conditions’ is itself a term of considerable flexibility and that the courts do not in fact blind themselves by excluding parol testimony when it is a necessary aid to understanding.” (4 Corbin on Contracts (rev. ed. 1997) § 22.2, pp. 706-707, fns. omitted.)

“Some confusion is attributable to a failure to keep clearly in mind the purpose of the statute and the informal character of the evidence that the actual words of the statute require; some is no doubt due to differences in the attitude of the judges as to the beneficence of the statute and the wisdom of its existence.[ 11 ] Further, there are differences in the strictness of judicial requirements as to the contents of the memorandum. It is believed that sometimes these apparent differences can be explained by the degree of doubt existing in the court’s mind as to the actual making and performance of the alleged contract. The better and the more disinterested is the oral testimony offered by the plaintiff, the more convincing the corroboration that is found in the surrounding circumstances, and the more limited the disputed issue because of admissions made by the defendant, the less that should be and is required of the written memorandum.” (4 Corbin on Contracts, supra, § 22.2, p. 709, fn. omitted.)

Williston offers similar counsel: “In determining the requisites and meaning of a ‘note or memorandum in writing,’ courts often look to the origin and fundamental purpose of the Statute of Frauds. In fact, a failure to do so will often result in a futile preoccupation with the numerous and conflicting precepts and decisions involving the clauses providing for a note or memorandum, and a corresponding failure to see the forest for the trees.

“The Statute of Frauds was not enacted to afford persons a means of evading just obligations; nor was it intended to supply a cloak of immunity to *771hedging litigants lacking integrity; nor was it adopted to enable defendants to interpose the Statute as a bar to a contract fairly, and admittedly, made. In brief, the Statute ‘was intended to guard against the perils of perjury and error in the spoken word.’ Therefore, if after a consideration of the surrounding circumstances, the pertinent facts and all the evidence in a particular case, the court concludes that enforcement of the agreement will not subject the defendant to fraudulent claims, the purpose of the Statute will best be served by holding the note or memorandum sufficient even though it is ambiguous or incomplete.” (10 Williston on Contracts (4th ed. 1999) § 29:4, pp. 437-438, fns. omitted.)12

The governing principle is: “That is certain which can be made certain.” (Civ. Code, § 3538; Beverage v. Canton Placer Mining Co., supra, 43 Cal.2d at p. 774; see also, e.g., Preble v. Abrahams, supra, 88 Cal. at p. 251; Alameda Belt Line v. City of Alameda (2003) 113 Cal.App.4th 15, 21 [5 Cal.Rptr.3d 879].) We hold that if a memorandum includes the essential terms of the parties’ agreement, but the meaning of those terms is unclear, the memorandum is sufficient under the statute of frauds if extrinsic evidence clarifies the terms with reasonable certainty and the evidence as a whole demonstrates that the parties intended to be bound. Conflicts in the extrinsic evidence are for the trier of fact to resolve, but whether the evidence meets the standard of reasonable certainty is a question of law for the court. (Phillippe v. Shapell Industries (1987) 43 Cal.3d 1247, 1258 [241 Cal.Rptr. 22, 743 P.2d 1279]; Niles v. Hancock (1903) 140 Cal. 157, 163 [73 P. 840].)13

We emphasize that a memorandum of the parties’ agreement is controlling evidence under the statute of frauds. Thus, extrinsic evidence cannot be employed to prove an agreement at odds with the terms of the memorandum. This point was made in Beazell v. Schrader (1963) 59 Cal.2d 577 [30 Cal.Rptr. 534, 381 P.2d 390]. There, the plaintiff sought to recover a *7725 percent real estate broker’s commission under an oral agreement. (Id. at p. 579.) The escrow instructions, which specified a 1.25 percent commission, were the “memorandum” on which the plaintiff relied to comply with the statute. However, he contended the instructions incorrectly reflected the parties’ actual agreement, as shown by extrinsic evidence. (Id. at p. 580.) The Beazell court rejected this argument, holding that under the statute of frauds, “the parol agreement of which the writing is a memorandum must be one whose terms are consistent with the terms of the memorandum.” (Id. at p. 582.) Thus, in determining whether extrinsic evidence provides the certainty required by the statute, courts must bear in mind that the evidence cannot contradict the terms of the writing.

B. The Sufficiency of This Memorandum

As noted above, it is a question of law whether a memorandum, considered in light of the circumstances surrounding its making, complies with the statute of frauds. (Phillippe v. Shapell Industries, supra, 43 Cal.3d at p. 1258.) Accordingly, the issue is generally amenable to resolution by summary judgment. (Cf. Kahn v. East Side Union High School Dist. (2003) 31 Cal.4th 990, 1004 [4 Cal.Rptr.3d 103, 75 P.3d 30].) We independently review the record to determine whether a triable issue of fact might defeat the statute of frauds defense in this case. (Id. at p. 1003.)

A memorandum of a contract for the sale of real property must identify the buyer, the seller, the price, and the property. (King v. Stanley (1948) 32 Cal.2d 584, 589 [197 P.2d 321].)14 Defendants contend the memorandum drafted by plaintiff Sterling fails to adequately specify the seller, the property, or the price.15

The Court of Appeal correctly held that the seller and the properties were sufficiently identified. The parties themselves displayed no uncertainty as to those terms before their dispute over the price arose. It is a “cardinal rule of construction that when a contract is ambiguous or uncertain the practical construction placed upon it by the parties before any controversy *773arises as to its meaning affords one of the most reliable means of determining the intent of the parties.” (Bohman v. Berg (1960) 54 Cal.2d 787, 795 [8 Cal.Rptr. 441, 356 P.2d 185].) The same rule governs the interpretation of a memorandum under the statute of frauds. (See Rest.2d Contracts, § 131, com. g, p. 338; Seaman’s Direct Buying Service, Inc. v. Standard Oil Co., supra, 36 Cal.3d at pp. 762-763.)16

The memorandum referred to “Seller Larry Taylor, & Christina Development.” Defendants argue that the omission of the actual owner of the properties, SMC, is fatal. However, they do not dispute Taylor’s authorization to act as SMC’s agent, or his actual performance of that role. A contract made in the name of an agent may be enforced against an undisclosed principal, and extrinsic evidence is admissible to identify the principal. (Sunset Milling & Grain Co. v. Anderson (1952) 39 Cal.2d 773, 778 [249 P.2d 24]; 2 Witkin, Summary of Cal. Law (10th ed. 2005) Agency, §§ 158 & 159, pp. 202-203; see also California Canneries Co. v. Scatena (1897) 117 Cal. 447, 449-450 [49 P. 462].) If a term is stated in a memorandum with sufficient certainty to be enforced, it satisfies the statute of frauds. (Seaman’s Direct Buying Service, Inc. v. Standard Oil Co., supra, 36 Cal.3d at p. 763.) Therefore, the reference to Taylor was adequate, regardless of the apparently mistaken inclusion of Christina Development. (See Rest.2d Contracts, § 131, com. f, p. 337.)

Similarly, while the properties were identified in the memorandum only by street address, neither party displayed any confusion over their actual location. The purchase agreements Taylor prepared included full legal descriptions, and when Sterling received those agreements he did not object that he wanted to buy buildings on 4th and 14th Streets in Manhattan rather than Santa Monica. In any event, the better view has long been that extrinsic evidence may be consulted to locate property described in imprecise terms, even though a memorandum with a more complete description would be preferable. (Beverage v. Canton Placer Mining Co., supra, 43 Cal.2d at pp. 774-775, citing cases.)

As defendants forthrightly conceded in the trial court, “[t]he problem here is the price term.” The Court of Appeal concluded that the lines in the memorandum stating “approx. 10.468 X gross income[,] estimated income *7741.600.000, Price $16,750.°°” were ambiguous, given the use of the modifier “approx.” before the multiplier, the omitted zero in the price, and the uncertain meaning of “gross income.” The court then considered Sterling’s testimony that “approx.” was meant to modify the total price, not the multiplier; that the missing zero was merely an error; and that “gross income” was used by the parties to refer to actual gross annual income. It decided that this evidence, if accepted by the trier of fact, could establish an agreement to determine the price based on a formula, which would be binding under Carver v. Teitsworth (1991) 1 Cal.App.4th 845, 852 [2 Cal.Rptr.2d 446]. In Carver, a bid for either a specified price or $1,000 over any higher bid was deemed sufficiently certain. (Id. at pp. 849, 852-853.)

In this court, plaintiffs also cite Cal. Lettuce Growers v. Union Sugar Co. (1955) 45 Cal.2d 474 [289 P.2d 785], to show that a price term may be calculated from a formula. There, a price formula was derived from industry custom and the parties’ past practice. (Id. at pp. 482-483.) Plaintiffs contend the parties here negotiated a 10.468 multiplier to be applied to the actual gross rental income from the buildings in March 2000, as indicated by the fact that Taylor gave Sterling rent rolls before their March 13 meeting.

The Court of Appeal erred by deeming Sterling’s testimony sufficient to establish his interpretation of the memorandum for purposes of the statute of frauds. Had Taylor testified that the parties meant to leave the price open to determination based on a rental income figure that was yet to be determined, this would be a different case. Then, the “admissions of the party to be charged” might have supported a reasonably certain price term derived from a negotiated formula. (Rest.2d Contracts, § 131, com. c, p. 335.) Here, however, Taylor insists the price was meant to be $16,750,000, and Sterling agrees that was the number he intended to write down, underlined, as the “Price.”

$16,750,000 is clearly an approximate product of the formula specified in the memorandum, applied to the income figure stated there.17 On the other hand, Sterling’s asserted price of $14,404,841 cannot reasonably be considered an approximation of $16,750,000. It is instead an approximate product of the formula applied to an actual income figure not found in the memorandum. The writing does not include the term “actual gross income,” nor does it state that the price term will vary depending on proof or later agreement regarding the actual rental income from the buildings. In effect, Sterling would employ only the first part of the price term (“approx. 10.468 X gross *775income”) and ignore the last parts (“estimated income 1.600.000, Price $16,750.°°”). He would hold Taylor to a price that is 10.468 times the actual rental income figure gleaned from the rent rolls, but only “approximately” so because of Sterling’s computational errors. (See fn. 2, ante.)

Thus, two competing interpretations of the memorandum were before the court. Taylor’s is consistent with the figures provided in the memorandum, requiring only the correction of the price by reference to undisputed extrinsic evidence. Sterling’s price is not stated in the memorandum, and depends on extrinsic evidence in the form of his own testimony, disputed by Taylor, that the parties intended to apply the formula to actual gross rental income instead of Ihe estimated income noted in the memorandum. Even if the trier of fact were to accept Sterling’s version of the parties’ negotiations, the price he seeks is not reflected in the memorandum; indeed, it is inconsistent with the price term that appears in the memorandum. Under these circumstances, we conclude the evidence is insufficient to establish Sterling’s price term with the reasonable certainty required by the statute of frauds. (See Beazell v. Schrader, supra, 59 Cal.2d at p. 582.)

The statute of frauds demands written evidence that reflects the parties’ mutual understanding of the essential terms of their agreement, when viewed in light of the transaction at issue and the dispute before the court. The writing requirement is intended to permit the enforcement of agreements actually reached, but “to prevent enforcement through fraud or perjury of contracts never in fact made.” (Rest.2d Contracts, § 131, com. c, p. 335.) The sufficiency of a memorandum to fulfill this purpose may depend on the quality of the extrinsic evidence offered to explain its terms. In Preble v. Abrahams, supra, 88 Cal. 245, the memorandum failed to describe the property to be sold with any certainty, but extrinsic evidence established that the parties could only have been referring to the portion of a tract that was not sold to another buyer. (Id. at p. 250.) Similarly, in Brewer v. Horst and Lachmund Co., supra, 127 Cal. 643, telegrams that were otherwise inscrutable demonstrated an ascertainable agreement when the court considered the circumstances of the transaction and the parties’ understanding of the terms employed. (Id. at pp. 646-647.)

Here, unlike in the Preble and Brewer cases, the extrinsic evidence offered by plaintiffs is at odds with the writing, which states a specific price and does not indicate that the parties contemplated any change based on actual rental income. Therefore, the evidence is insufficient to show with reasonable certainty that the parties understood and agreed to the price alleged by plaintiffs. The price terms stated in the memorandum, considered together with the extrinsic evidence of the contemplated price, leave a degree

*776of doubt that the statute of frauds does not tolerate. The trial court properly granted defendants summary judgment.

III. DISPOSITION

The judgment of the Court of Appeal is reversed with directions to affirm the trial court judgment in its entirety.

George, C. J., Baxter, J., Chin, J., and Moreno, J., concurred.

KENNARD, J., Concurring and Dissenting.

I agree with the majority that extrinsic evidence is admissible to resolve the meaning of an ambiguity in a written memorandum required by the statute of frauds as evidence of an agreement, and that conflicts in the evidence are for the trier of fact to resolve. The majority, however, goes astray when it takes it upon itself to resolve an existing conflict in the evidence. In my view, the ambiguity in the language of the memorandum at issue should be resolved by the trier of fact.

I.

In January 2000, plaintiff Donald Sterling and defendant Lawrence N. Taylor, both of whom are experienced real estate investors, discussed the proposed sale of three apartment buildings in Santa Monica owned by a partnership in which defendant was the general partner. On March 13, 2000, they met again. At the meeting, plaintiff (the prospective buyer) prepared a brief handwritten memorandum entitled “Contract for the Sale of Real Property.” As relevant here, the memorandum identified properties at “808 4th St.,” “843 4th St.,” and “1251 14th St.” This is immediately followed by “approx 10.468 X gross income [j[] estimated income 1.600.000, Price $16,750,OOP.”1 The memorandum was initialed by plaintiff, but was not signed by defendant. Two days later, on March 15, 2000, plaintiff sent defendant a letter that confirmed the contract of sale but did not mention the price. Defendant signed the letter below the handwritten notation, “Agreed, Accepted, & Approved.” The parties dispute whether the March 13 memorandum was attached to the March 15 letter.

The issue is whether the document entitled “Contract for the Sale of Real Property” is a memorandum sufficient to satisfy the statute of frauds. That *777statute provides that contracts for, among other things, the sale of real estate are invalid unless evidenced by a note or memorandum signed by the party to be charged. (Civ. Code, § 1624, subd. (a)(3).) Plaintiff here claims that the memorandum meets the requirements of the statute of frauds because extrinsic evidence he offered clarifies that the agreed price was $14,404,841— determined by applying the formula in the memorandum of multiplying the actual rent times 10.468. Plaintiff’s extrinsic evidence includes the “Contract for Sale of Real Property,” the letter dated March 15, 2000, confirming the buildings’ sale signed by defendant, and defendant’s having given plaintiff information showing the actual rent received. Defendant maintains that the price is the figure $16,750,000 expressed in the memorandum.

The trial court granted defendant’s motion for summary judgment. The Court of Appeal, concluding there was a triable issue of material fact as to whether the parties had agreed to a formula for determining the purchase price, reversed.

II.

The parties’ dispute here centers on whether the price description in the memorandum is ambiguous so that extrinsic evidence is admissible to clarify its meaning and satisfy the statute of frauds. Regarding price the memorandum states: “approx. 10.468 X gross income [f] estimated income 1.600.000, Price $16,750,000.” Plaintiff claims that the word “approx.” modified the entire statement, not just “10.468 X gross income,” and that the parties understood the term “gross income” to mean actual annual gross rental income. In other words, plaintiff’s position is that the memorandum sets forth a formula for determining the actual price—10.468 multiplied by actual annual gross rental income, which results in a price of $14,404,841—and that the reference to “Price $16,750,000” is an estimate of the actual price, determined by application of the formula just mentioned, albeit using a somewhat inaccurate estimate of gross annual rental income. (See, e.g., Cal. Lettuce Growers v. Union Sugar Co. (1955) 45 Cal.2d 474,482 [289 P.2d 785] [price need not be specified if it can be objectively determined]; Carver v. Teitsworth (1991) 1 Cal.App.4th 845, 853 [2 Cal.Rptr.2d 446] [same].) Defendant disagrees, contending that the memorandum’s mention of “Price $16,750,000” reflects the actual purchase price agreed upon by the parties. Both have a point.

As the Court of Appeal observed, the language in the memorandum is ambiguous; that is, it can reasonably be read as each party proposes. (Dore v. Arnold Worldwide, Inc. (2006) 39 Cal.4th 384, 391 [46 Cal.Rptr.3d 668, 139 *778P.3d 56] [“ ‘An ambiguity arises when language is reasonably susceptible of more than one application to material facts’ ”].) To accept plaintiff’s argument would give meaning to the language in the disputed statement of “10.468 X gross income [f] estimated 1.600.000.” To accept defendant’s argument would give meaning to the term “Price $16,750,000.” Which view should be accepted is a determination to be made by the trier of fact, based on its consideration of the extrinsic evidence presented. (See Maj. opn., ante, at p. 767 [“when ambiguous terms in a memorandum are disputed, extrinsic evidence is admissible to resolve the uncertainty”].) Either way, the trier of fact’s resolution would result in a specific purchase price: one arrived at through application of a formula expressed in the memorandum, the other through acceptance of the figure $16,750,000 mentioned in the memorandum.

The majority, however, simply adopts defendant’s view instead of leaving it to the trier of fact to resolve the conflict in the evidence. In accepting defendant’s view, the majority rejects plaintiff’s view as attempting to alter rather than explain the terms of the memorandum. (Maj. opn., ante, at pp. 775-776.) I disagree.

Apparently based on its own evaluation of the evidence, which as discussed above is conflicting, the majority takes it upon itself to decide that the agreed price was $16,750,000 and then concludes that any extrinsic evidence presented by plaintiff would be inconsistent with that figure. (Maj. opn., ante, at p. 775.) The majority reasons that plaintiff is looking only to the first part of the memorandum’s price description of “approx. 10.468 X gross income,” while ignoring the last part stating “estimated income 1.600.000, Price $16,750,000.” (Ibid.) This is both a misapprehension of plaintiff’s view and a failure to appreciate that defendant’s view too is not free from ambiguity.

Plaintiff’s position that the memorandum sets forth a formula for determining the price does not ignore the memorandum’s reference to “estimated income 1.600.000, Price $16,750,000.” According to plaintiff, the memorandum’s stated price is itself an estimate, for it is the product of the estimated income of 1.600.000 times 10.468, while the actual price is to be determined by using the formula 10.468 multiplied by the actual gross income, resulting in a price of $14,404,841. Defendant’s view that the actual price is $16,750,000 finds support in the memorandum’s mention of “Price $16,750,000” but it ignores the memorandum’s formula that plaintiff relies on. Unlike the majority, I see no reason to reject plaintiff’s position as a *779matter of law when the purchase terms in the memorandum are ambiguous and are as reasonably susceptible to plaintiff’s position as to defendant’s. I would leave it to the trier of fact to resolve the ambiguity.

Unlike the majority, I would affirm the judgment of the Court of Appeal.

Werdegar, J., concurred.

Appellants’ petition for a rehearing is denied April 18, 2007. George, C. J., did not participate therein. Kennard, J., and Werdegar, J., were of the opinion that the petition should be granted.

Cutter, J.

This case is before us on a stipulation of facts (with various attached documents). A Superior Court judge has adopted the agreed facts as “findings.” We are in the same position as was the trial judge (who received no evidence and saw and heard no witnesses).2

*672Mrs. Gladys Green owns a lot (Lot S) in the Manomet section of Plymouth. In July, 1980, she advertised it for sale. On July 11 and 12, Hickey and his wife discussed with Mrs. Green purchasing Lot S and “orally agreed to a sale” for $15,000. Mrs. Green on July 12 accepted a deposit check of $500, marked by Hickey on the back, “Deposit on Lot . . . Massasoit Ave. Manomet . . . Subject to Variance from Town of Plymouth.” Mrs. Green’s brother and agent “was under the impression that a zoning variance was needed and [had] advised . . . Hickey to write” the quoted language on the deposit check. It turned out, however, by July 16 that no variance would be required. Hickey had left the payee line of the deposit check blank, because of uncertainty whether Mrs. Green or her brother was to receive the check and asked “Mrs. Green to fill in the appropriate name.” Mrs. Green held the check, did not fill in the payee’s name, and neither cashed nor endorsed it. Hickey “stated to Mrs. Green that his intention was to sell his home and build on Mrs. Green’s lot.”

“Relying upon the arrangements . . . with Mrs. Green,” the Hickeys advertised their house on Sachem Road in newspapers on three days in July, 1980, and agreed with a purchaser for its sale and took from him a deposit check for $500 which they deposited in their own account.3 On July 24, Mrs. Green told Hickey that she “no longer intended to sell her property to him” but had decided to sell to another for $16,000. Hickey told Mrs. Green that he had already sold his house and offered her $16,000 for Lot S. Mrs. Green refused this offer.

The Hickeys filed this complaint seeking specific performance. Mrs. Green asserts that relief is barred by the Statute of Frauds contained in G.L. c. 259, § 1. The trial judge granted specific performance.4 Mrs. Green has appealed.

*673The present rule applicable in most jurisdictions in the United States is succinctly set forth in Restatement (Second) of Contracts § 129 (1981).5 The section reads: “A contract for the transfer of an interest in land may be specifically enforced notwithstanding failure to comply with the Statute of Frauds if it is established that the party seeking enforcement, in reasonable reliance on the contract and on the continuing assent of the party against whom enforcement is sought, has so changed his position that injustice can be avoided only by specific enforcement” (emphasis supplied).6 The earlier Massachusetts decisions laid down somewhat strict requirements for an estoppel precluding the assertion of the Statute of Frauds. See, e.g., Glass v. Hulbert, 102 Mass. 24, 31-32, 43-44 (1869); Davis v. Downer, 210 Mass. 573, 576-577 (1912); Hazelton v. Lewis, 267 Mass. 533, 538-540 (1929); Andrews v. Charon, 289 Mass. 1, 5-7 (1935), where specific performance was granted upon a considera*674tian of “the effect of all the facts in combination”; Winstanley v. Chapman, 325 Mass. 130, 133 (1949); Park, Real Estate Law § 883 (1981). See also Curran v. Magee, 244 Mass. 1, 4-6 (1923); Chase v. Aetna Rubber Co., 321 Mass. 721, 724 (1947). Compare Gadsby v. Gadsby, 275 Mass. 159, 167-168 (1931); Nichols v. Sanborn, 320 Mass. 436, 438-439 (1946). Frequently there has been an actual change of possession and improvement of the transferred property, as well as full payment of the full purchase price, or one or more of these elements.

It is stated in Park, Real Estate Law § 883, at 334, that the “more recent decisions . . . indicate a trend on the part of the [Supreme Judicial C]ourt to find that the circumstances warrant specific performance.” This appears to be a correct perception. See Fisher v. MacDonald, 332 Mass. 727, 729 (1955), where specific performance was granted upon a showing that the purchaser “was put into possession and . . . [had] furnished part of the consideration in money and services”;7 Orlando v. Ottaviani, 337 Mass. 157, 161-162 (1958), where specific performance was granted to the former holder of an option to buy a strip of land fifteen feet wide, important to the option holder, and the option had been surrendered in reliance upon an oral promise to convey the strip made by the purchaser of a larger parcel of which the fifteen-foot strip was a part;8 Cellucci v. Sun Oil Co., 2 Mass. App. Ct. 722, 727-728 (1974), S.C., 368 Mass. 811 (1975). Compare Young v. Reed, 6 Mass. App. Ct. 18, 20-21 (1978), where the questions arose on the defendants’ motion for summary judgment and the summary judgment granted was reversed, so that the full facts could be developed at trial; Fitzsimmons v. Kerrigan, 9 Mass. App. Ct. 928 (1980). Compare also D'Ambrosio v. Rizzo, 12 Mass. App. Ct. 926 (1981).

*675The present facts reveal a simple case of a proposed purchase of a residential vacant lot, where the vendor, Mrs. Green, knew that the Hickeys were planning to sell their former home (possibly to obtain funds to pay her) and build on Lot S. The Hickeys, relying on Mrs. Green’s oral promise, moved rapidly to make their sale without obtaining any adequate memorandum of the terms of what appears to have been intended to be a quick cash sale of Lot S. So rapid was action by the Hickeys that, by July 21, less than ten days after giving their deposit to Mrs. Green, they had accepted a deposit check for the sale of their house, endorsed the check, and placed it in their bank account. Above their signatures endorsing the check was a memorandum probably sufficient to satisfy the Statute of Frauds under A.B.C. Auto Parts, Inc. v. Moran, 359 Mass. 327, 329-331 (1971). Cf. Guarino v. Zyfers, 9 Mass. App. Ct. 874 (1980). At the very least, the Hickeys had bound themselves in a manner in which, to avoid a transfer of their own house, they might have had to engage in expensive litigation. No attorney has been shown to have been used either in the transaction between Mrs. Green and the Hickeys or in that between the Hickeys and their purchaser.

There is no denial by Mrs. Green of the oral contract between her and the Hickeys. This, under § 129 of the Restatement, is of some significance.9 There can be no doubt (a) that Mrs. Green made the promise on which the Hickeys so promptly relied, and also (b) she, nearly as promptly, but not promptly enough, repudiated it because she had a better *676opportunity. The stipulated facts require the conclusion that in equity Mrs. Green’s conduct cannot be condoned. This is not a case where either party is shown to have contemplated the negotiation of a purchase and sale agreement. If a written agreement had been expected, even by only one party, or would have been natural (because of the participation by lawyers or otherwise), a different situation might have existed. It is a permissible inference from the agreed facts that the rapid sale of the Hickeys’ house was both appropriate and expected. These are not circumstances where negotiations fairly can be seen as inchoate. Compare Tull v. Mister Donut Development Corp., 7 Mass. App. Ct. 626, 630-632 (1979).

We recognize that specific enforcement of Mrs. Green’s promise to convey Lot S may well go somewhat beyond the circumstances considered in the Fisher case, 332 Mass. 727 (1955), and in the Orlando case, 337 Mass. 157 (1958), where specific performance was granted. It may seem (perhaps because the present facts are less complicated) to extend the principles stated in the Cellucci case (see esp. 2 Mass. App. Ct. at 728). We recognize also the cautionary language about granting specific performance in comment a to § 129 of the Restatement (see note 6, supra). No public interest behind G. L. c. 259, § 1, however, in the simple circumstances before us, will be violated if Mrs. Green fairly is held to her precise bargain by principles of equitable estoppel, subject to the considerations mentioned below.

Over two years have passed since July, 1980, and over a year since the trial judge’s findings were filed on July 6, 1981. At that time, the principal agreed facts of record bearing upon the extent of the injury to the Hickeys (because of their reliance on Mrs. Green’s promise to convey Lot S) were those based on the Hickeys’ new obligation to convey their house to a purchaser. Performance of that agreement had been extended to May 1, 1981. If that agreement has been abrogated or modified since the trial, the case may take on a different posture. If enforcement of that agreement still will be sought, or if that agreement has *677been carried out, the conveyance of Lot S by Mrs. Green should be required now.

The case, in any event, must be remanded to the trial judge for the purpose of amending the judgment to require conveyance of Lot S by Mrs. Green only upon payment to her in cash within a stated period of the balance of the agreed price of $15,000. The trial judge, however, in her discretion and upon proper offers of proof by counsel, may reopen the record to receive, in addition to the presently stipulated facts, a stipulation or evidence concerning the present status of the Hickeys’ apparent obligation to sell their house. If the circumstances have changed, it will be open to the trial judge to require of Mrs. Green, instead of specific performance, only full restitution to the Hickeys of all costs reasonably caused to them in respect of these transactions (including advertising costs, deposits, and their reasonable costs for this litigation) with interest. The case is remanded to the Superior Court Department for further action consistent with this opinion. The Hickeys are to have costs of this appeal.

So ordered.

Lavery, J.

The defendant appeals from the judgment of the trial court awarding the plaintiff damages for breach of the warranty against encumbrances and innocent misrepresentation of real property that the defendant conveyed to the plaintiff by warranty deed.

The defendant claims that the court was incorrect (1) in finding that she had misrepresented the property and that the plaintiff had relied on that misrepresentation to his detriment, (2) in finding that she breached the warranty deed covenant against encumbrances, and (3) in awarding damages for diminution of value to the property caused by a wetlands violation as well as damages for costs of correcting that violation. We agree with the defendant and reverse the decision of the trial court.

The record and memorandum of decision disclose the following facts. In 1978, the defendant’s brother and predecessor in title, Paul DiLoreto, subdivided a parcel of land located in Old Saybrook for the purpose of constructing residences on each of the two resulting parcels. The property abuts a tidal marshland and is, therefore, subject to the provisions of General Statutes § 22a-28 et seq.

DiLoreto built a bulkhead and filled that portion of the subject parcel immediately adjacent to the wet*403lands area, and then proceeded with the construction of a dwelling on the property. On February 21, 1984, DiLoreto transferred the subject property to the defendant by quit claim deed. On December 31,1985, the defendant conveyed the property to the plaintiff by warranty deed, free and clear of all encumbrances but subject to all building, building line and zoning restrictions as well as easements and restrictions of record.

During the summer of 1986, the plaintiff decided to perform repairs on the bulkhead and the filled area of the property. The plaintiff engaged an engineering firm which wrote to the state department of environmental protection (DEP) requesting a survey of the tidal wetlands on the property. On March 14, 1986, working with the plaintiffs engineers, the DEP placed stakes on the wetlands boundary and noted that there was a tidal wetlands violation on the property. In a letter to the plaintiff dated April 10,1986, the DEP confirmed its findings and indicated that in order to establish the tidal wetlands boundary, as staked for regulatory purposes, the plaintiff must provide DEP with an A-2 survey of the property. At some point after April, 1986, and before March, 1988, the plaintiff engaged a second group of engineers who met with DEP officials and completed an A-2 survey.

On March 28, 1988, members of the DEP water resources unit met with the plaintiffs new engineers to stake out the wetlands boundary again. On April 13, 1988, as confirmation of that meeting, Denis Cunningham, the assistant director of the DEP water resources unit, wrote to the plaintiff to advise him that the filled and bulkheaded portion of the property, and possibly the northwest corner of the house were encroaching on the tidal wetlands boundary, thereby creating a violation of General Statutes § 22a-30. This letter suggested that to correct the violation, the plaintiff would *404have to submit an application to DEP demonstrating the necessity of maintaining the bulkhead and fill within the tidal wetlands. Instead of filing the application, the plaintiff filed the underlying lawsuit against the defendant, claiming damages for breach of the warranty against encumbrances and innocent misrepresentation.

The trial court determined that the area had been filled without obtaining the necessary permits required under General Statutes § 22a-32.1 The court found that *405the defendant had breached the warranty against encumbrances and had innocently misrepresented the condition of the property by allowing the plaintiff to purchase the property in reliance on the defendant’s warranty against encumbrances. The court awarded the plaintiff damages and costs in the amount of $47,792.60, a figure that included the costs to correct the wetlands violation as well as the diminution of value of the property caused by the wetlands violation. The defendant brought the present appeal.2

This appeal turns on a determination of whether an alleged latent violation of a land use statute or regulation, existing on the land at the time title is conveyed, constitutes an encumbrance such that the conveyance breaches the grantor’s covenant against encumbrances. An encumbrance is defined as “every right to or interest in the land which may subsist in third persons, to the diminution of the value of the land, but consistent with the passing of the fee by the conveyance.” H. Tiffany, Real Property (1975) § 1002; Aczas v. Stuart Heights, Inc., 154 Conn. 54, 60, 221 A.2d 589 (1966). All encumbrances may be classed as either (1) a pecuniary charge against the premises, such as mortgages, judgment liens, tax liens, or assessments, or (2) estates or interests in the property less than the fee, like leases, life estates or dower rights, or (3) easements or servitudes on the land, such as rights of way, restrictive covenants and profits. H. Tiffany, supra, §§ 1003-1007. It is important to note that the covenant against encumbrances operates in praesenti and cannot be breached unless the encumbrance existed at the time of the conveyance. Id.

*406The issue of whether a latent violation of a restrictive land use statute or ordinance, that exists at the time the fee is conveyed, constitutes a breach of the warranty deed covenant against encumbrances has not been decided in Connecticut. There is, however, persuasive and authoritative weight in the legal literature and the case law of other jurisdictions to support the proposition that such an exercise of police power by the state does not affect the marketability of title and should not rise to the level of an encumbrance. See, e.g., Domer v. Sleeper, 533 P.2d 9 (Alaska 1975) (latent building code violation not an encumbrance); McCrae v. Giteles, 253 So. 2d 260, 261 (Fla. App. 1971) (violation of housing code noticed and known by vendor not an encumbrance); Monti v. Tangora, 99 Ill. App. 3d 575, 425 N.E.2d 597 (1981) (noticed building code violations not an encumbrance); Silverblatt v. Livadas, 340 Mass. 474, 164 N.E.2d 875 (1960) (contingent or inchoate lien which might result from building code violation not an encumbrance); Fahmie v. Wulster, 81 N.J. 391, 408 A.2d 789 (1979) (discussed infra); Woodenbury v. Spier, 122 App. Div. 396, 106 N.Y.S. 817 (1907) (a lis pen-dens filed to enforce housing code violations after conveyance not an encumbrance); Stone v. Sexsmith, 28 Wash. 2d 947, 184 P.2d 567 (1947).

Of the cases cited from other jurisdictions, Fahmie v. Wulster, supra, provides the closest factual analogue to the case before us. In Fahmie, a closely held corporation that originally owned certain property requested permission from the New Jersey bureau of water to place a nine foot diameter culvert on the property to enclose a stream. The bureau required instead that a sixteen and one-half foot diameter culvert should be installed. The corporation went ahead with its plan and installed the nine foot culvert.

The property was later conveyed to Wulster, the titular president of the corporation, who had no knowl*407edge of the installation of the nine foot culvert. Nine years after the installation of the culvert, Wulster conveyed the property, by warranty deed, to Fahmie.

In anticipation of the subsequent resale of the property, Fahmie made application to the New Jersey economic development commission, division of water policy and supply, to make additional improvements to the stream and its banks. It was then that the inadequate nine foot culvert was discovered, and the plaintiff was required to replace it with a sixteen and one-half foot diameter pipe. Fahmie sued Wulster for the cost to correct the violation claiming a breach of the deed warranty against encumbrances.

The New Jersey Supreme Court concluded that it was generally the law throughout the country that a claim for breach of a covenant against encumbrances cannot be predicated on the necessity to repair or alter the property to conform with land use regulations. By so doing, the Fahmie court refused to expand the concept of an encumbrance to include structural conditions existing on the property that constitute violations of statute or governmental regulation. The court concluded that such a conceptual enlargement of the covenant against encumbrances would create uncertainty and confusion in the law of conveyancing and title insurance because neither a title search nor a physical examination of the premises would disclose the violation. The New Jersey court went on to state that “[t]he better way to deal with violations of governmental regulations, their nature and scope being as pervasive as they are, is by contract provisions which can give the purchaser full protection [in such situations].” Id., 397.

The case before us raises the same issues as those raised in Fahmie. Here, the court found that in 1978 the wetlands area was filled without a permit and in violation of state statute. The alleged violation was *408unknown to the defendant, was not on the land records and was discovered only after the plaintiff attempted to get permission to perform additional improvements to the wetlands area.

Although the DEP first advised the plaintiff of the alleged violation in 1986, it did not bring any action to compel compliance with the statute. Rather, it suggested that the violation may be corrected by submitting an application to DEP. As of the date of trial, the plaintiff had not made such an application, there had been no further action taken by the DEP to compel compliance, and no administrative order was ever entered from which the plaintiff could appeal. Thus, the plaintiff was never required by DEP to abate the violation or restore the wetlands.

Our Supreme Court has stated that for a deed to be free of all encumbrances there must be marketable title that can be sold “at a fair price to a reasonable purchaser or mortgaged to a person of reasonable prudence as a security for the loan of money.” Perkins v. August, 109 Conn. 452, 456, 146 A. 831 (1929). To render a title unmarketable, the defect must present a real and substantial probability of litigation or loss at the time of the conveyance. Frank Towers Corporation v. Laviana, 140 Conn. 45, 53, 97 A.2d 567 (1953). Latent violations of state or municipal land use regulations that do not appear on the land records, that are unknown to the seller of the property, as to which the agency charged with enforcement has taken no official action to compel compliance at the time the deed was executed, and that have not ripened into an interest that can be recorded on the land records do not constitute an encumbrance for the purpose of the deed warranty. Monti v. Tangora, supra, 581-82. Although, under the statute, DEP could impose fines or restrict the use of the property until it is brought into compliance, such *409a restriction is not an encumbrance. Silverblatt v. Livadas, supra, 479; Gaier v. Berkow, 90 N.J. Super. 377, 379, 217 A.2d 642 (1966).

Because the plaintiff never actually filed the application, any damages that he may have suffered were speculative. The court based its assessment of damages on a proposed application and the anticipated costs of complying with that proposed application. The fact that the alleged violation was first noted by DEP only after the plaintiff made requests to rework the bulkhead and filled area, leads us to the conclusion that no litigation or loss was imminent. This position is confirmed by the fact that, as of the date of trial, no order was entered by DEP to compel the plaintiff to rectify the violative condition and no application was made by the plaintiff to gain approval of existing conditions.

We adopt the reasoning of Fahmie v. Wulster, supra, and hold that the concept of encumbrances cannot be expanded to include latent conditions on property that are in violation of statutes or government regulations. To do so would create uncertainty in the law of conveyances, title searches and title insurance. The parties to a conveyance of real property can adequately protect themselves from such conditions by including protective language in the contract and by insisting on appropriate provisions in the deed. As the Illinois Appellate Court held in Monti v. Tangora, supra, 582, “[t]he problem created by the existence of code violations is not one to be resolved by the courts, but is one that can be handled quite easily by the draftsmen of contracts for sale and of deeds. All that is required of the law on this point is that it be certain. Once certainty is achieved, parties and their draftsmen may place rights and obligations where they will. It is the stability in real estate transactions that is of paramount importance here.”

*410The plaintiff in this case is an attorney and land developer who had developed waterfront property and was aware of the wetlands requirement. He could have protected himself from any liability for wetlands violation either by requiring an A-2 survey prior to closing or by inserting provisions in the contract and deed to indemnify himself against potential tidal wetlands violations or violations of other environmental statutes.

We disagree as well with the court’s finding of innocent misrepresentation. The elements of innocent misrepresentation are (1) a representation of material fact (2) made for the purpose of inducing the purchase, (3) the representation is untrue, and (4) there is justifiable reliance by the plaintiff on the representation by the defendant and (5) damages. Johnson v. Healy, 176 Conn. 97, 405 A.2d 54 (1978). From the evidence adduced at trial, no representation was made relating to the wetlands area. The court relied exclusively on the warranty against encumbrances as the “assertion” that the property was free and clear of all encumbrances as the material fact misrepresented. Because we have held that the warranty of a covenant against encumbrances was not violated, no misrepresentation was made.

The judgment is reversed as to the award of damages for breach of the warranty against encumbrances and for innocent misrepresentation of real property, and the case is remanded with direction to render judgment in favor of the defendant on those issues.3

In this opinion the other judges concurred.

Day, J.

This is an action for specific performance of an executory contract for the sale of certain lands, brought by the assignee of the purchaser against the vendor. The plaintiff prayed for a decree of specific performance, with an abatement of the purchase price to the extent of the value of a house upon the premises, which had been destroyed by fire after the date of the contract. The plaintiff also prayed that, should specific performance with abatement from the purchase price be denied, the defendant be decreed to return to the plaintiff the purchase money which had theretofore been paid upon the contract. The trial court entered a decree for the plaintiff for specific performance, and allowed him an abatement of the purchase price to the extent of the insurance money which the defendant had collected. From this judgment the plaintiff appeals. He now asks that this court, upon a trial de novo, grant specific performance of the contract, and that it decree the loss occasioned by the destruction of the house to fall upon the vendor, and that the purchase price.be abated to the extent of the full value of the house.

The facts out of which the controversy arises are as follows: On'July 2/1919, the defendant, Martha Forrest,-who was the fee owner of the W.% of the N. W.% of section 11, township 9, range 7 east of the sixth p. m., in Lancaster county, Nebraska, entered into a written contract wtih one Jacob M. Miller, by the terms of which she agreed, upon the payment of the purchase price by *311said Miller in accordance with the provisions of the contract, to convey to him said lands by warranty deed free and clear of all encumbrance. The contract provided that the purchase price to be paid by Miller was $16,400, payable as follows: $1,000 cash at the time of the making of the contract, $5,400 on or before March 1, 1920, and Miller to execute a mortgage for $10,000 upon the lands due in ten years with interest at 5% per cent, payable semi-annually from March 1, 1920, with the privilege of paying instalments thereof on any interest paying date. The contract further provided that its covenants and agreements should be binding upon the heirs, executors, administrators, and assigns of the respective parties. The contract was assigned by Miller to William J. McGinley, the plaintiff, herein. At the time of the making of the contract the land Avas leased to a tenant until March 1, 1920, and full possession was not to be given to the purchaser until that date. He was, however, accorded the privilege of entering upon the stubble land and serving fall Avheat. This right he exercised. At the time of the execution of the contract there was on said premises a frame house, estimated to be worth, by the plaintiff’s witnesses, from $2,000 to $3,500, and by defendant’s witnesses as Ioav as $500. The defendant had insurance' upon the building in the sum of $500, which, after the destruction of the house by fire, was paid to the defendant. The house was destroyed by fire on January 15, 1920, through no fault or neglect of either of the parties. The defendant at the time Avas the owner of a fee simple title, and was in position to convey the land» in accordance with the terms of his contract, and, at the time, there Avas no default of the contract on the part of the purchaser. The sole question presented by the record is as to which of the parties, vendor or purchaser, shall suffer the loss of the building destroyed by fire. Of course, it would be competent for the parties to agree as to which of them should bear the loss in case of an accidental destruction of the property, but in the case before *312us the contract is silent upon that subject.

While the authorities are not entirely uniform, the great weight of judicial decisions, as well as text-writers, upon this subject support the view that where a contract for the sale of land contains no express provision as to which party shall bear the loss in case of destruction of the buildings thereon before the final delivery of the deed, or that the vendor should deliver the land with the buildings thereon in the same situation as when the contract was made, or words of similar import, and the buildings on the land are accidentally destroyed by fire, through no fault of either party, pending the contract and before conveyance, the vendor having at the time of the sale a fee simple title and there being no default on the part of the purchaser, the loss in equity, as upon a bill for specific performance, will fall upon the purchaser, he being regarded as the real owner. All of the decisions agree that the loss should be borne by the owner, but there is some diversity of opinion upon the question as to which party, vendor or purchaser, is to be regarded as the owner. The cases supporting the majority rule are based upon the theory that equity regards that as done which ought to be done, and that, when a valid and enforceable contract for the sale .of land has been made, equity will regard the vendor as holding the title for the benefit of the purchaser, and the purchaser as holding the unpaid purchase money for the benefit of the vendor, and that, therefore, the purchaser must be regarded in equity as the real owner.

The leading case in. which the rule is announced is Paine v. Meller, 6 Ves. Jr. (Eng.) *349, and this rule has been followed by many state decisions in this country, among them the following: Marks v. Tichenor, 85 Ky. 536; Skinner & Sons Co. v. Houghton, 92 Md. 68; Thompson v. Norton, 14 Ind. 187; Lombard v. Chicago Sinai Congregation, 64 Ill. 477; Manning v. North British & Mercantile Ins. Co., 123 Mo. App. 456; Marion v. Wolcott, 68 N. J. Eq. 20; Sutton v. Davis, 143 N. Car. 474; Dunn *313v. Yakish, 10 Okla. 388; Woodward v. McCollum, 16 N. Dak. 42; Reed v. Lukens, 44 Pa. St. 200; Wetzler v. Duffy, 78 Wis. 170; Brewer v. Herbert, 30 Md. 301; Sewell v. Underhill, 197 N. Y. 168, also, note under Sewell v. Underhill, 27 L. R. A. n. s. 233; 39 Cyc. 1641; 27 R. C. L. 555, sec. 293.

In Lombard v. Chicago Sinai Congregation, supra, the court pointed out that there is a difference in the rights and relations of the parties in the ordinary case of an executory contract for the sale of land at law and in equity, and it was held that in law the contract conferred upon the vendee a mere right of action, the estate remaining in the vendor and the unpaid purchase money re-' maining that of the vendee. In equity, however, the estate from the making of the contract is regarded as the real property of the vendee, attended by most of .the incidents of ownership, and the purchase money as that of the vendor. Whether there is a sound distinction to be drawn between the rights of the parties in law or in equity, it is not necessary to determine, but it is proper to note that in some of the decisions in which the minority rule is announced the actions were at law.

The rule above announced is not applicable unless there is an ability, as well as a willingness, on the part of the vendor to convey, and it has been held that where the vendor is in a position where he cannot make title according to the contract, and the property is damaged, the loss will fall upon the vendor. The case of Kinney v. Hickox, 24 Neb. 167, cited by the appellant, falls within the exception to the rule. In that case at the time of the loss the vendor was not in a position to convey good title. There were certain liens upon the premises which he could or would not remove, among them being taxes, a judgment, and a mechanic’s lien. Other cases cited by appellant were either law actions, or within the minority rule.

No claim is made by the defendant that there was an improper application of the money collected on the insurance policy, and that question will not be discussed *314further than to say that, under the circumstances established, it would seem that the trial court was correct in abating the contract purchase price to the extent of the insurance money collected.

The decree of the district court is right, and the judgment is

Affirmed.

Dean, J.,

dissenting.

While the authorities conflict, in respect of the sole question which is presented by the record,- it does not appear that the great weight of authority supports the rule adopted by the majority. I respectfully submit that a drastic rule, which is admittedly based on a legal fiction, has been adopted, and a reasonable and well-recognized rule of law, which is applicable to the facts, has been ignored.

When the rule, adopted by the majority, is applied in the present case to the facts before us, its injustice is apparent. The contract, as made by the parties, is so simple in form and so clear in expression that it affords no room for strained and technical interpretation. It should be enforced only as made. An element should not be interpolated that was not in the minds of the parties when the contract was made. When the buildings were destroyed, the time fixed by the parties for the delivery of the deed and property to the vendee had not yet arrived.' True, as the opinion suggests, the parties might have agreed, in their contract, as to which of them should suffer the loss of the building in case of fire or other casualty. A sufficient answer is that they made no such agreement. In the language of the opinion, “the contract is silent upon that subject.” Is not the law fulfilled when the contract is enforced to Avhich the parties themselves gave voice? The main opinion, after observing that the contract contains “no express provision as to who should bear the loss,” straightway proceeds to impose the loss, for which the parties made no provision, upon the vendee. This was done by the grace of a legal *315fiction which is said to have originated in England, and which has been adopted in some of the states. The rule is not properly applicable to the facts before us, nor is it supported by the cited English case.

It is elementary that, in the absence of fraud or of mistake or of ambiguity in the terms of a contract, the duty of the court is fully accomplished when it enforces contractual obligations according to the plainly expressed provisions of the contract. The court should not supply material stipulations nor in any case make a contract for the parties. Clearly, the vendor, who was in possession, should be compelled to account to the vendee for the reasonable value of that which he- contracted to deliver but did not deliver. From the viewpoint of natural justice, as some law-writers express it, and from a practical viewpoint and for reasons that are obvious, the party in possession should be holden for the loss. I respectfully submit that the rule to which the majority opinion commits the court has been adopted, not because it appeals to the reason or to the conscience, nor because it is right, but merely because the weight of authority is said to be on that side. The weight of evidence is not determined by counting the witnesses, and by the same token the better rule is not always determined by counting the authorities.

When the authorities conflict as between two opposing rules of law, the court should choose the rule that more nearly accords with reason and with settled principles of equity. The question before us is new in this state, but it has been' discussed at some length in other states. In Wicks v. Bowman, 5 Daly (N. Y.) 225, it was held that, while it may be equitable and just that the vendee should bear the loss where the building is burned down after he enters upon the possession, “it is not just nor equitable to impose it upon him Avhilst the vendor is in possession of the premises.”

Sewell v. Underhill, 197 N. Y. 168, cites and approves the rule of law announced in the Wicks case. But the decision in the Sewell case turned on another point, as *316the discussion of the facts in the body of the opinion discloses. It is there said: “The title was accepted and the contract was consummated, prior to the fire, and what was deferred was the matter of placing the deed and the mortgage upon the records; a formality which it was agreed should operate as a delivery, on either side. There is the further feature of this case that the plaintiff, as vendee, went into the possession of the premises upon the execution of the contract, not as a tenant paying rent, but as their equitable owner and entitled to their beneficial enjoyment.” The Sewell case is cited in the majority opinion, but, in view of the facts in that case, it plainly appears that it does not support the views adopted by the majority in the present case.

Thompson v. Gould, 20 Pick. (Mass.) 134, involved a parol agreement for the purchase of land with its appurtenances. Before a deed was given or tendered the house was destroyed by fire, and it was expressly held, as disclosed in the syllabus, that the vendee “was entitled to recover back the money, on the ground of a failure of the consideration.” In the bocLy of the opinion it was observed that the contract could not be enforced by the vendor, even though it had been commenced in a court of equity, because, the house having been destroyed, the vendor was no longer able to perform his part of the contract. The court then made the terse observation that no reason has been given, nor can be given, why the same principle that applies to the sale and purchase of personal property, that has been destroyed before delivery, should not be applied to real estate. It was declared that there can be no distinction between the two classes of property in this respect. '

Wells v. Calnan, 107 Mass. 514, involved facts similar to those before-us. Judge Gray, who wrote the opinion for the court, held that the vendee’s agreement to pay the purchase price contemplated the tender of a deed of the whole estate, including both the land and the buildings, and, the latter having been wholly destroyed by fire be*317fore the day agreed upon for the conveyance, the vendor did not and could not tender such a conveyance as he had agreed to make or as the defendant vendee was bound to accept, and could not therefore maintain any action against the vendee upon the agreement.

In Phinizy v. Guernsey, 111 Ga. 346, 50 L. R. A. 680, it was held that to require a vendor to pay damages to his vendee, for a failure to convey property which subsequent to the execution of the contract of sale was destroyed by fire, is no greater hardship than to require a vendor to pay damages on account of his having ignorantly, though honestly, sold something which he did not own, but which he believed was his own. In Conlin v. Osborn, 161. Cal. 659, it was held that where improvements are destroyed by fire, while in the vendor’s possession, he is excused from further performance of the contract, but in such case he can neither retain purchase money paid nor can he enforce the collection of money remaining unpaid, and the vendee may rescind the contract and recover back money that has been paid or deposited under the contract. The court further observed that, whatever may be the rule in other states, the rule is settled in California. Besides the foregoing authorities the following cases seem to support the, so-called, minority rule: LaChance v. Brown, 41 Cal. App. 500; Wilson v. Clark, 60 N. H. 352; Powell v. Dayton, S. & G. R. R. Co., 12 Or. 488; Good v. Jarrard, 93 S. Car. 229; Huguenin v. Courtenay, 21 S. Car. 403, 53 Am. Rep. 688; Smith v. Cansler, 83 Ky. 367; Gould v. Murch, 70 Me. 288, 35 Am. Rep. 325.

Paine v. Meller, 6 Ves. Jr. (Eng.) *349, the leading English case, as announced in the majority opinion, is discussed by Chief Justice Daly in the Wicks case, and it is there pointed out by the distinguished chief justice that the English rule, announced by Lord Eldon in the Paine case, was “where the purchaser had expressed himself satisfied with the title, but before the conveyance was prepared the houses were destroyed by fire.” Lord Eldon, with respect to the premises, and the purchaser’s *318relation thereto, expressly declared: “They are vendible as his, chargeable as his, capable of being incumbered as. his; they may be devised as his; they may be assets; and they would descend to his heir.” And that: “The houses being burnt before a conveyance, the purchaser is bound, if he accepted the title.” It appears that in England the vendee prepares the deed, instead of the vendor, as with us, and presents it to the vendor for execution. So that, if the vendee was “satisfied with the title,” it was ■ incumbent on him at once to prepare and present the title deed to the vendor for execution. If he did not do so but delayed, and, in the meantime, loss occurred, such loss was rightfully his. In that view of the facts, and in view of the following English citation, it appears that the Paine case is not an authority that may properly 'be invoked in support of the main opinion. Taking the language of the Paine case, in its usually accepted sense, it plainly appears that the vendee was the owner of the real estate for every purpose known to the law.

Stent v. Bailis 2 P. Wms. (Eng.) 217, 220, is the English case above referred to. It bears date as of 1724. The head note, and the opinion throughout, both bear the imprint of blunt and rugged honesty. The head note reads: “Against natural justice that any one should pay for a bargain which he cannot have.” In the body of the. opinion is this observation': “If I should buy an house, and, before such time as by the articles I am to pay for the same, the house be burned down by casualty of fire, I shall not in equity be bound to pay for the house, and yet the house may be built up again.”

I fear the opinion of the majority contains possibilities of substantial embarrassment to those who may hereafter buy real estate in any form, whether it be a home, a business property, or lands, that have not heretofore obtained in this state. If the vendee must suffer loss by fire, after execution of the contract and while the property is in possession and under control of the vendor, unless he protects himself in advance by his contract, it may be that *319the ingenuity of those who delight in legal fictions will bring about a condition which will compel the vendee, not only to protect himself, in advance, against such loss by fire, but as well from loss arising from judgment liens .that may be obtained after the execution of the contract and before delivery of the deed and of the land, and perhaps, too, from claims of a spouse or of heirs, where a vendor dies in the interval between the date of the contract and the date of such delivery.

Some legal writers refer to the so-called English rule as a legal fiction. It is well named. Legal fictions are .the bane of the law. They should not be permitted to propagate further in this state. Why should we lift the lid from a Pandora box of legal plagues?- There is a better way pointed out in the wholesome rule that prevails in Maine, New Hampshire, Massachusetts, New York, California, Oregon, South Carolina, Georgia, and Kentucky; I submit the “great weight of authority” in this country can scarcely be claimed for a rule of law which does not find support in the jurisdictions just cited. Nor should Stent v. Bailis, 2 P. Wms. (Eng.) 217, be lost sight of. We should adhere to the reasonable rule of law there announced. Where a vendor contracts to deliver an entire estate, it is clear that his obligation is unfulfilled if he delivers only a part of it. Lord Bacon said: “Chancery is ordained to supply the law, not to subvert the law.” 2 Story, Equity Jurisprudence (14th ed.) title page.

An argument that is advanced in support of the conclusion of the majority opinion is that, if a man buys real estate for an agreed price and pays a part of the earnest money and agrees to pay the remainder on a given date, he is entitled to his bargain, even though in the meantime the value of the land should have appreciated. Even so. The thing is in existence. The land contracted' for is there for delivery, and under the contract the buyer is, of course, entitled to that which he bought. If the land depreciated in value he would, of course, be compelled to *320pay for it, no matter what the depreciation, because the commodity that he bought, all of it, is there for delivery. The argument is not formidable. It is not even plausible, and much less is it conclusive. To illustrate: A. sells to B. for sufficient consideration land bordering on the Missouri river. The contract provides that B. shall pay the purchase price, or the unpaid part thereof, as the case may be, on a future named date, and on that date delivery of the deed and the land is to be made to B. On the day fixed for delivery A. sets out with B. to the farm to deliver to him his purchase. Upon arrival they find that on the preceding day the river changed its course, as is its wont at times, and where the land was, there is now pothing but a gurgling swirl of yellow water. Upon whom shall fall the loss by this act of God? Shall it be the loss of A. who was in possession and who contracted to deliver and now has nothing to deliver and therefore cannot fulfil his contract? Clearly the loss will fall on A., the vendor, because every vestige of that which he agreed to deliver, the res, has been destroyed. But if only that part of the land upon which the buildings were situate was destroyed, and if the vendee did not provide against loss from so calamitous an event in the contract, under the rule announced by the majority, the loss of the engulfed buildings would be his. Reduced to its last analysis there is something about the rule, as applied to -the facts in the present case, that makes it appear almost ridiculous. Clearly a doctrinaire’s rule of law, a legal fiction its progenitor, has been ingrafted upon the jurisprudence of Nebraska.

A contract to deliver an entire estate can no more be fulfilled by delivery of a part of the estate than it can be fulfilled by failing to deliver any part of the estate. It is nowhere asserted that the contract is ambiguous. But, even if it Avere, the construction that the parties themselves placed upon it would prevail. It appears, in the majority opinion, that the vendor collected the insurance, a trifling sum, thereby asserting' an act of ownership. *321But, by tbe grace of judicial compulsion, he paid the insurance money to the vendee, who was not a party to the insurance policy. In view of the fact, however, that, as announced in the main opinion, the sole question is, as to which of the parties shall suffer the loss, the question of insurance is a mere passing incident.

For the reasons herein expressed, I respectfully dissent from the judgment of the majority of the court.

In an action to recover a down payment made pursuant to a contract for the sale of real property, the plaintiffs appeal from an order of the Supreme Court, Queens County (Sampson, J.), entered July 14, 2014, which denied their motion for summary judgment on the complaint.

Ordered that the order is reversed, on the law, with costs, and the plaintiffs’ motion for summary judgment on the complaint is granted.

The plaintiffs entered into a contract to purchase real property from the defendant Linda Catalano (hereinafter the seller), pursuant to which the plaintiffs made a down payment of $45,500. The plaintiffs’ obligations under the contract were contingent upon the issuance of a commitment from an institutional lender. The contract of sale provided that in the event that a commitment could not be obtained, the plaintiffs were entitled to the return of the down payment.

The plaintiffs subsequently received two separate commit*1064ments from an institutional lender, but these commitments were contingent upon a satisfactory appraisal of the subject real property. Before the conditions of these commitments could be satisfied, Hurricane Sandy struck the area and caused damage to the subject property. The institutional lender subsequently denied the plaintiffs’ application for a mortgage loan based upon a post-storm appraisal that showed that the value of the property was not sufficient to secure the proposed loan amount.

The plaintiffs commenced this action to recover their down payment. They moved for summary judgment on the complaint, arguing that they were entitled to the return of the down payment since they never received a firm commitment from an institutional lender. They also argued that General Obligations Law § 5-1311 (1) (a) (1) required the seller to return the down payment to them, since that statute provides, in relevant part, that “if all or a material part” of the subject real property “is destroyed without fault of the purchaser . . . the vendor cannot enforce the contract, and the purchaser is entitled to recover any portion of the price that he [or she] has paid.” The Supreme Court denied the plaintiffs’ motion. We reverse.

“For more than a century it has been well settled in this State that a vendee who defaults on a real estate contract without lawful excuse, cannot recover the down payment” (Maxton Bldrs. v Lo Galbo, 68 NY2d 373, 378 [1986]; see White v Farrell, 20 NY3d 487, 501 n 2 [2013]; Micciche v Homes by Timbers, Inc., 18 AD3d 833, 834 [2005]). Where, however, the obligations of a purchaser under a contract of sale are contingent upon the issuance of a firm financing commitment by a lender, a purchaser may be entitled to recover the down payment if he or she was unable to secure a firm commitment in accordance with the terms of the contract (see Walker v Cascardo, 113 AD3d 841, 842 [2014]; Severini v Wallace, 13 AD3d 434, 435 [2004]).

Here, the contract of sale was conditioned upon the issuance of a written commitment from an institutional lender. The contract of sale expressly provided that “a commitment conditioned on the Institutional Lender’s approval of an appraisal shall not be deemed a ‘Commitment’ hereunder until an appraisal is approved.” Accordingly, the plaintiffs established their prima facie entitlement to judgment as a matter of law by demonstrating that they were unable to secure a firm commitment in accordance with the contract of sale, and that they were entitled to the return of their down payment pursuant to the terms of the contract (see Walker v Cascardo, 113 AD3d at *1065842; Severini v Wallace, 13 AD3d at 435; see also Munson v Germerican Assoc., 224 AD2d 670, 671 [1996]; Kressel, Rothlein & Roth v Gallagher, 155 AD2d 587, 587 [1989]). In addition, the plaintiffs demonstrated, prima facie, that they were entitled to a return of their down payment by virtue of General Obligations Law § 5-1311, since a “material part” of the property was destroyed by Hurricane Sandy before legal title or possession of the property could be transferred (General Obligations Law § 5-1311 [1] [a] [1]).

In opposition, the seller failed to raise a triable issue of fact. Contrary to the seller’s contention, she failed to raise a triable issue of fact as to whether the plaintiffs forfeited the down payment by violating certain terms of the contract of sale (see Wenzler v Williams, 17 AD3d 452, 453 [2005]). The seller’s remaining contentions are without merit.

Accordingly, the Supreme Court should have granted the plaintiffs’ motion for summary judgment on the complaint.

Skelos, J.P., Leventhal, Austin and Miller, JJ., concur.

“Under New York’s Recording Act (Real Property Law § 291), a mortgage loses its priority to a subsequent mortgage where the subsequent mortgagee is a good-faith lender for value, and records its mortgage first without actual or constructive knowledge of the prior mortgage” (Washington Mut. Bank, FA v Peak Health Club, Inc., 48 AD3d 793, 797 [2008]). Here, at the time *681the plaintiff, Lend-Mor Mortgage Bankers Corp. (hereinafter Lend-Mor), received a mortgage on the subject property for the sum of $244,000, a prior mortgage in favor of the defendant Ameriquest Mortgage Company (hereinafter Ameriquest) was unrecorded and did not appear in the chain of title. On its motion for summary judgment, Lend-Mor demonstrated its prima facie entitlement to judgment as a matter of law (see Alvarez v Prospect Hosp., 68 NY2d 320, 324 [1986]) by establishing that its mortgage was valid and superior in priority to Ameriquest’s mortgage. Lend-Mor provided evidence establishing that it gave valuable consideration for its recorded mortgage, and that it did not have actual knowledge of Ameriquest’s unrecorded mortgage or knowledge of facts that would have put it on “inquiry notice” of that mortgage (see Real Property Law § 291; Washington Mut. Bank, FA v Peak Health Club, Inc., 48 AD3d at 797). Lend-Mor obtained a title search which did not contain any indication that the subject property was encumbered by the Ameriquest mortgage. To the contrary, both the mortgage application and a credit report indicated that the Ameriquest mortgage at issue encumbered a different property. Since, in opposition, Ameriquest failed to raise a triable issue of fact, the Supreme Court correctly granted that branch of Lend-Mor’s motion which was for summary judgment declaring that the mortgage held by it was superior in priority to the mortgage held by Ameriquest (see Alvarez v Prospect Hosp., 68 NY2d at 324). Moreover, the court properly denied that branch of Ameriquest’s cross motion which was for summary judgment declaring, inter alia, that the mortgage held by it was superior in priority to the mortgage held by Lend-Mor.

We do not reach Ameriquest’s contention concerning that branch of its cross motion which was to compel Lend-Mor to respond to certain discovery demands. That branch of the cross motion was not addressed by the Supreme Court in the order appealed from and remains pending and undecided (see Mobarak v Mowad, 55 AD3d 693, 694 [2008]; Magriples v Tekelch, 53 AD3d 532 [2008]; Moncrief v DiChiaro, 52 AD3d 789, 790 [2008]; Katz v Katz, 68 AD2d 536, 543 [1979]). Rivera, J.P., Miller, Dickerson and Roman, JJ., concur.

Hunter, J.

Petitioners seek transfer to this Court as a result of an adverse ruling by the Court of Appeals. Plaintiff-respondents originally brought suit to obtain possession of certain real estate through the enforcement of a forfeiture clause in a land sale contract. Plaintiff-respondents suffered a negative judgment, from which they appealed. The Court of Appeals reversed, holding that the defendant-petitioners had breached the contract and that the plaintiff-respondents had not waived their right to enforce the forfeiture provisions of the contract.

In December of 1958, Mary Burkowski, as vendor, entered into a land sale contract with Charles P. Marshall and Agnes P. Marshall, as vendees. The contract provided for the sale of certain real estate for the sum of $36,000.00, payable as follows:

“$500.00, at the signing, execution and delivery of this contract, the receipt whereof is hereby acknowledged; $500.00 or more on or before the 25th day of December, 1958, and $2500.00 or more on or before the 15th day of January, 1960, and $2500.00 or more on or before the 15th day of January of each and every year thereafter until the balance of the contract has been fully paid, all without *229interest and all without relief from valuation and appraisement laws and with attorney fees.” (See 289 N. E. 2d at 770.)

The contract also contained a fairly standard section which provided for the treatment of prepayments — but which the Court of Appeals found to be of particular importance. It provided as follows:

“Should Vendees have made prepayments or paid in advance of the payments herein required, said prepayments, if any, shall at any time thereafter be applied in lieu of further principal payments required as herein stated, to the extent of such prepayments only.” (Id.)

The following is the forfeiture/liquidated damages provision of the land sale contract.

“It is further agreed that if any default shall be made in the payment of said purchase price or any of the covenants and/or conditions herein provided, and if any such default shall continue for 30 days, then, after the lapse of said 30 days’ period, all moneys and payments previously paid shall, at the option of the Vendor without notice or demand, be and become forfeited and be taken and retained by the Vendor as liquidated damages and thereupon this contract shall terminate and be of no further force or effect; provided, however, that nothing herein contained shall be deemed or construed to prevent the Vendor from enforcing specific performance of this agreement in the event of any default on the part of the Vendees in complying, observing and performing any of the conditions, covenants and terms herein contained. * * (Id.) (Emphasis added.)

The vendor, Mary Burkowski, died in 1963. The plaintiffs in this action are the assignees (under the vendor’s will) of the decedent’s interests in the contract. They received their assignment from the executrix of the estate of the vendor on June 27, 1968. One year after this assignment, several of the assignees filed their complaint in this action alleging that the defendants had defaulted through non-payment.

The schedule of payments made under this contract was shown by the evidence to be as follows:

*230Total of “Date Amount Paid Paid Principal

12/1/1958 $ 500.00 $ 500.00

12/25/1958 500.00 1,000.00

3/26/1959 5,000.00 6,000.00

4/5/1960 2.500.00 8.500.00

5/23/1961 2.500.00 11,000.00

4/6/1962 2.500.00 13.500.00

1/15/1963 2.500.00 16,000.00

6/30/1964 2.500.00 18.500.00

2/15/1965 2.500.00 21,000.00”

(289 N. E. 2d at 770.)

No payments have been made since the last one indicated above — 815,000.00 remains to be paid on the original contract price.

In response to the plaintiff’s attempt to enforce the forfeiture provision, the defendants raised the affirmative defense of waiver. The applicable rule is well established and was stated by the Court of Appeals as follows:

“Where a contract for the sale and purchase of land contains provisions similar to those in' the contract in the case at bar, the vendor may waive strict cornpliance with the provisions of the contract by accepting overdue or irregular payments, and having so done, equity requires the vendor give specific notice of his intent that he will no longer be indulgent and that he will insist on his right of forfeiture unless the default is paid within a reasonable and specified time.” (289 N. E. 2d at 771, emphasis added, citing)

“Smeekens v. Bertrand (1969), 144 Ind. App. 656, 248 N. E. 2d 48. (transfer denied); Conner v. Fisher (1964), 136 Ind. App. 511, 202 N. E. 2d 572; McBride v. Griffith, et al. (1962), 134 Ind. App. 12, 185 N. E. 2d 22; Chambers et al. v. Boatright et al. (1961), 132 Ind. App. 378, 177 N. E. 2d 600; Carr et al. v. Troutman et al. (1954), 125 Ind. App. 151, 123 N. E. 2d 243; Hill v. Rogers (1951), 121 Ind. App. 708, 99 N. E. 2d 270 (transfer denied); Clayton v. Fletcher Savings & Trust Co. (1927), 89 Ind. App. 431, 155 N. E. 539 (transfer denied.)”

It follows that where the vendor has not waived strict compliance by acceptance of late payments, no notice is required to *231enforce its provisions. (289 N. E. 2d at 771, citing Conner v. Fisher, supra; Clayton v. Fletcher Savings & Trust Co., supra.)

In essence, the Court of Appeals found that there was no waiver because the vendors were obligated to accept prepayment, and, “the payments made, although irregular in time and amount, were prepayments on the unpaid balance through and including the payment due on January 15, 1965.” (289 N. E. 2d at 771.) The Court concluded that up to January 15, 1966, “the vendors waived no rights under the contract, because they were obliged to accept prepayment.” (Id.) and that, “[t]he vendors could not have insisted on forfeiture prior to January 15, 1966, the date of the first missed payment.” (Id.) (We believe the Court of Appeals miscalculated here; the vendors could not have insisted on forfeiture until January 16,1968.)

If forfeiture is enforced against the defendants, they will forfeit outright the sum of $21,000, or well over one-half the original contract price, as liquidated damages, plus possession.

Forfeitures are generally disfavored by the law. Carr v. Troutman (1954), 125 Ind. App. 151, 123 N. E. 2d 243. In fact, “. . . [e]quity abhors forfeitures and beyond any question has jurisdiction, which it will exercise in a proper case to grant relief against their enforcement.” 30 C. J. S., Equity, § 56 (1965) and cases cited therein. This jurisdiction of equity to intercede is predicated upon the fact that, “the loss or injury occasioned by the default must be susceptible of exact compensation.” 30 C. J. S., supra.

Pomeroy defines this doctrine of equitable interference to relieve against penalties and forfeitures as follows:

“Wherever a penalty or a forfeiture is used merely to secure the payment of a debt, or the performance of some act, or the enjoyment of some right or benefit, equity, considering the payment, or performance, or enjoyment to be the real thing intended by the agreement, and the penalty or *232forfeiture to be only an accessory, will relieve against such penalty or forfeiture by awarding compensation instead thereof, proportionate to the damages actually resulting from the non-payment, or non-performance, or non-enjoyment, according to the stipulations of the agreement. The test which determines whether equity will or will not interfere in such cases is the fact whether compensation can or cannot be adequately made for a breach of the obligation which is thus secured. If the penalty is to secure the mere payment of money, compensation can always be made, and a court of equity will relieve the debtor party upon his paying the principal and interest . . .

“ [The granting of relief in such circumstances is based on the ground that it is wholly against conscience to say that because a man has stipulated for a penalty in case of his omission to do a particular act — the real object of the parties being the performance of the act — if he omits to do the act, he shall suffer a loss which is wholly disproportionate to the injury sustained by the other party.]” Pomeroy, Equity Jurisprudence, § 433, 5th Edition (1941). (Emphasis added.)

Paragraph 17 of the contract, supra, provides that all prior payments “become forfeited and be taken and retained by the Vendor as liquidated damages.” “Reasonable” liquidated damage provisions are permitted by the law. See 22 Am. Jr., 2d Damages §212 (1965). However, the issue before this Court, is whether a $21,000 forfeiture is a “reasonable” measure of damages. If the damages are unreasonable, i.e., if they are disproportionate to the loss actually suffered, they must be characterized as penal rather than compensatory. See Melfi v. Griscer Industries, Inc. (1967), 141 Ind. App. 607, 231 N. E. 2d 54; Czeck v. Van Helsland (1968), 143 Ind. App. 460, 241 N. E. 2d 272. Under the facts of this case, a $21,000 forfeiture is clearly excessive.

The authors of American Law Reports have provided an excellent analysis of forfeiture provisions in land contracts:

“As is frequently remarked, there is no single rule for the determination of whether a contractual stipulation is one for liquidated damages or a penalty, each case depending largely upon its own facts and equities, and this *233apothegm is fully applicable to the decisions.involving provisions in land contracts for the forfeiture of payments.

“There is a plethora of abstract tests and criteria for the determination of the nature of a contractual provision as one for a penalty or liquidated damages, and in most instances the courts struggle valiantly to make the result reached by them accord reasonably well with one or more of the more prominent of these abstract tests. But it must be observed that, in the last analysis, these factors and criteria are so vague and indefinite that it is doubtful if they are of much aid in construing a specific contractual provision, even assuming that the court makes a conscious and conscientious effort to apply them. At any rate, a reading of the cases collected herein conveys the impression that the ultimate catalyst is the court’s belief as to the equities of the case before it.

“Granting this, however, certain tendencies of decision are clearly discernible in the cases. If, for example, the contract involved calls for deferred payments of the purchase price which are relatively small in amount and extend over a number of years, and if it appears that at the time of the purchaser’s breach and the consequent invocation of the forfeiture clause by the vendor a comparatively small proportion of the total price remains unpaid, the courts are prone to find that the forfeiture clause was one for a penalty, at least if, as is usually the case, such a holding will tend to give the purchaser another chance to complete the purchase.

“On .the other hand, if the amount of the payments received by the vendor at the time the purchase was abandoned represents but a small percentage of the total purchase price, and if the purchaser’s breach occurred soon after the execution of the agreement (and particularly if the circumstances indicate that the purchase was made for speculative purposes or that the breach represented an effort on the part of the purchaser to escape an unfortunate turn in the market), the courts tend to hold that the forfeiture clause was one for liquidated damages with the result that the purchaser cannot recover back the payments made.” 6 A. L. R. 2d 1401 (1949.)

If we apply the specific equitable principle announced above — namely, that the amount paid be considered in relation to the total contract price — we are compelled to conclude that the $21,000 forfeiture as liquidated damages, is incon*234sistent with generally accepted principles of fairness and equity. The vendee has acquired a substantial interest in the property, which, if forfeited, would result in substantial injustice.

Under a typical conditional land contract, the vendor retains legal title until the total contract price is paid by the vendee. Payments are generally made in periodic installments. Legal title does not vest in the vendee until the contract terms are satisfied, but equitable title vests in the vendee at the time the contract is consummated. When the parties enter into the contract, all incidents of ownership accrue to the vendee. Thompson v. Norton (1860), 14 Ind. 187. The vendee assumes the risk of loss and is the recipient of all appreciation in value. Thompson, supra. The vendee, as equitable owner, is responsible for taxes. Stark v. Kreyling (1934), 207 Ind. 128, 188 N. E. 680. The vendee has a sufficient interest in land so that upon sale of that interest, he holds a vendor’s lien. Baldwin v. Siddons (1910), 46 Ind. App. 313, 90 N. E. 1055.

This Court has held, consistent with the above notions of equitable ownership, that a land contract, once consummated constitutes a present sale and purchase. The vendor “ ‘has, in effect, exchanged his property for the unconditional obligation of the vendee, the performance of which is secured by the retention of the legal title.' ” Stark v. Kreyling, supra, at 135. The Court, in effect, views a conditional land contract as a sale with a security interest in the form of legal title reserved by the vendor. Conceptually, therefore, the retention of the title by the vendor is the same as reserving a lien or mortgage. Realistically, vendor-vendee should be viewed as mortgagee-mortgagor. To conceive of the relationship in different terms is to pay homage to form over substance. See Principles of Equity, Clark, 4th edition, Sec. 9, p. 23.

■ The piercing of the transparent distinction between a land contract and a mortgage is not a phenomenon without prece*235dent. In addition to the Stark case, supra, there is an abundance of case law from other jurisdictions which lends credence to the position that a land sales contract is in essence a mortgage:

“While the legal title remains in the vendor, the vendee in possession acquires an equitable title and the vendor holds the legal title in trust as it were for the vendee. There is an equitable conversion so that while the heirs of the vendor in case of his death must make conveyance of the legal title, the rights of the vendor under a contract, in case of his death intestate, pass to his representatives rather than to his heirs; the title of the vendee in possession is such that in the event of his death intestate, his interest in the realty descends to his heirs; so that, following the doctrine that equity deems that as done which ought to be done, the vendee in possession for all practical purposes becomes the owner of the property with all the rights of an owner in the operation of it, subject only of course to the terms of the contract; the vendor holds the legal title as security for the performance of the contract, but in effect has a vendor’s lien upon the property; the status of the parties is somewhat analogous to that of mortgagor and mortgagee. 3 Pomeroy’s Equity Jurisprudence (4th Ed.), p. 3042, §1261; Champion v. Brown, 6 Johns. Ch. 398, 10 Am. Dec. 343; Sewell v. Underhill, 197 N. Y. 168, 90 N. E. 430, 27 L. R. A. (N. S.), 233, 134 Am. St. Rep. 863, 18 Am. Cas. 795.” Conners v. Winans (1924), 122 Misc. 824, 204 N. Y. Supp. 142, 145;

“Where one contracts to convey real estate to another upon the payment of the agreed price, retaining the title until payment is fully made, it is not very important, in our opinion, what the security so retained is called, whether a trust, a vendor’s lien, an equitable mortgage, an equitable security, or any other kind of a lien. Like the Supreme Court of Tennessee:

“ ‘We are not able to draw any sensible distinction between the cases of a legal title conveyed to secure the payment of a debt, and a legal title retained to secure the payment of a debt. In both cases, courts of chancery consider the estate only as security for the payment of the debt, upon a discharge of which the debtor is entitled to a conveyance in one instance, and a reconveyance in the other.’ Graham v. McCampbell, 19 Tenn. 52, 33 Am. Dec. 126.

*236“Where the title is retained by the seller as security for the payment of the debt, the security is, in this country, very generally regarded as possessing all the essential features of a mortgage, and the vendor as standing for all practical purposes as mortgagee in relation to the vendee. See 29 Cyc. pp. 770, 771, and notes; Hardin v. Boyd, 113 U.S. 764, 5 Sup. Ct. 771, 28 L. Ed. 1141; Lewis v. Hawkins, 90 U.S. 126, 23 L. Ed. 113; Wheeling Bridge & T. Ry. Co. v. Reymann Brewing Co., 90 Fed. 189, 32 C. C. A. 571; Seattle L. S. & E. Ry. Co. v. Union Trust Co., 79 Fed. 179, 24 C. C. A. 296. And as such, he seems to be regarded by statute in Idaho. Rev. St. Idaho 1887, §§ 3440, 4520, and 4521.” Ferguson v. Blood (1907), 82 C. C. A. 482, 152 Fed. 98, 103; cited with approval in 243 F. 2d 478 and 373 P. 2d 565;

“. . . The position of a vendor in a land contract is in many respects similar to that of an equitable mortgagee. In an early case, Button v. Schroyer, 5 Wis. 598, in speaking of the relationship of a vendor and vendee in a land contract, the court said:

“ ‘The relation between the parties is analogous to that of equitable mortgagor and mortgagee. The former has an equity of redemption, the latter has the correlative right of foreclosure.’ ” Harris v. Halverson (1927), 192 Wis. 71, 211 N. W. 295, 297;

“This court has several times said that — ‘Where a vendor sells land, takes the notes of the vendee for the purchase money, and executes to him a bond for title, the effect of the contract in equity is to create a mortgage in favor of the vendor upon the land to secure the purchase money subject to all the essential incidents of a mortgage.’ Newman v. Mountain Park Land Co., 85 Ark. 208, 107 S. W. 391, 122 Am. St. Rep. 27; Strauss v. White, 66 Ark. 170, 51 S. W. 64, and cases there cited.” Fairbairn v. Pofahl (1920), 144 Ark. 313, 222 S. W. 16, 17;

“ ‘Where a sale of land is evidenced by a contract only, and the purchase price has not been paid, and the vendor retains the legal title, the parties occupy substantially the position of mortgagor and mortgagee. The vendor has a lien for his purchase money by virtue of his contract.’ Roby v. Bismarck National Bank, 4 N. D. 156, 160, 59 N. W. 719, 720, 50 Am. St. Rep. 633. See, also, First National Bank v. Zook, 50 N. D. 423, 429, 196 N. W. 507, 509. “The general rule is that where in a contract for sale the vendor reserves title, ‘the transaction creates in equity the relation of mortgagor and mortgagee.’ ” D. S. B. Johnston *237Land Co. v. Whipple (1930), 60 N. D. 334, 234 N. W. 59, 61. See also 77 A. L. R. 270 and cases cited therein.

It is also interesting to note that the drafters of the Uniform Commercial Code abandoned the distinction between a conditional sale and a security interest. Section 1-201 of the UCC (IC 1971, 26-1-1-^01 (Ind. Ann. Stat. §19-1-201 [1964 Repl.])) defines “security interest” as “an interest in personal property or fixtures which secures payment or performance of an obligation . . . retention or reservation of title by a seller of goods notwithstanding shipment or delivery to the buyer is limited in effect to a reservation of ‘security interest.’ ” We can conceive of no rational reason why conditional sales of real estate should be treated any differently.1 .

A conditional land contract in effect creates a vendor’s lien in the property to secure the unpaid balance owed under the contract. This lien is closely analogous to a mortgage — in fact,, the vendor is commonly referred to as an “equitable mortgagee.” D. S. B. Johnston Land Co. v. Whipple, supra; Harris v. Halverson, supra. In view of this characterization of the vendor as a lienholder, it is only logical that such a lien be enforced through foreclosure proceedings. Such a lien “has all the incidents of a mortgage” (D. S. B. Johnston Land Co. v. Whipple, supra, at 61), one of which is the right to foreclose.

There is a multitude of cases upholding the vendor’s right to foreclose. (See 77 A. L. R. 276, and the cases cited therein.) The remedy is most often referred to as a foreclosure of an *238executory contract. (A land contract is “executory” until legal title is actually transferred to the vendee.) A 1924 New York case best describes this remedy:

“Out of the nature of the relationship created by a land contract, where the vendee is in possession, there have developed certain equitable remedies, among which is the right of the vendor in a proper case to sell out the interest of the vendee for the purpose of satisfying his lien under the contract, in case of default, and while it seems a misnomer, for convenience this remedy is spoken of as foreclosure, and the action as one to foreclose the contract. 3 Pomeroy’s Equity Jurisprudence (4th Ed.) 3046, § 1262.” Conners v. Winans (1924), 122 Misc. 824, 204 N. Y. Supp. 142, 145. See also, Keller v. Lewis (1878), 53 Cal. 113, for another excellent characterization.

The foreclosure of a land sale contract is undeniably comprehended by our Trial Rules. TR. 69(c) deals with the foreclosure of liens upon real estate:

“Unless otherwise ordered by the court, judicial foreclosure of all liens upon real estate shall be conducted under the same rules and the sale procedures applicable to foreclosure of mortgages upon real estate, including without limitation redemption rights, manner and notice of sale, appointment of a receiver, execution of deed to purchaser and without valuation and appraisement. Judicial lien foreclosures including mortgage foreclosures may be held at any reasonable place stated in the notice of sale. In all cases where a foreclosure or execution sale of realty is not confirmed by the court, the sheriff or other officer conducting the sale shall make a record of his actions therein in his return to be filed promptly with the record of the case and also in the execution docket maintained in the office of the clerk.” (Emphasis added.)

The vendor’s interest clearly constitutes a “lien upon real estate” and should, therefore, be treated as one. The basic foreclosure statute — that is for mortgages executed after July 1, 1957 — provides for a six-month period of redemption, commencing with the filing of the complaint. Additionally, it establishes the procedures attendant to the foreclosure sale. The statute reads as follows:

*239“Mortgages executed after July 1, 1957 — Time of issuing execution — Sale—Notices.—In any proceeding for the foreclosure of any mortgage hereafter executed on real estate, no process shall issue for the execution of any such judgment or decree of sale for a period of six [6] months after the filing of a complaint in any such proceeding: Provided, That such period shall be twelve [12] months in any such proceeding for the foreclosure of any mortgage executed prior to July 1, 1957. Thereafter, upon the filing of a praecipe therefor by any judgment creditor in said proceeding a copy of the judgment and decree shall be issued and certified by the clerk under the seal of the court, to the sheriff, who shall thereupon proceed to sell the mortgage premises or so much thereof as may be necessary to satisfy the judgment, interest and costs, at public auction at the door of the court house of the county in which said real estate is situated, by advertising the same by publication once each week for three [3] successive weeks in a daily or weekly newspaper of general circulation printed in the English language and published in the county where the real estate is situated, the first of which publications shall be made at least thirty [30] days before the date of sale; and by posting written or printed notices thereof in at least three [3] public places in the township in which the real estate is situated, and at the door of the courthouse of the county:

Provided, That if the sheriff be unable to procure the publication of such notice within such county he may dispense with such publication but he shall in his return state his inability to procure such publication and the reason therefor. [Acts 1931, ch. 90, § 1, p. 257; 1957, ch. 220, § 1, p. 476.]” IC 1971, 32-8-16-1 (Ind. Ann. Stat. §3-1801 [1968 Repl.]).

TR. 69(C) requires that the procedures outlined in the above statute be applied “without limitation” to the “judicial foreclosure of all liens upon real estate.” We believe there to be great wisdom in requiring judicial foreclosure of land contracts pursuant to the mortgage statute. Perhaps the most attractive aspect of judicial foreclosure is the period of redemption, during which time the vendee may redeem his interest, possibly through refinancing.

Forfeiture is closely akin to strict foreclosure — a remedy developed by the English courts which did not contemplate *240the equity of redemption. American jurisdictions, including Indiana, have, for the most part, rejected strict foreclosure in favor of foreclosure by judicial sale:

“The doctrine of strict foreclosure developed in England at a time when real property had, to a great extent, a ■fixed value; the vastly different conditions in this country, in this respect, led our courts to introduce modifications to the English rules of foreclosure. Generally, in consonance with equity’s treatment of a mortgage as essentially a security for the payment of the debt, foreclosure by judicial sale supplanted strict foreclosure as the more equitable mode of effectuating the mutual rights of the mortgagor and mortgagee; and there is at the present time, in the majority of the American states, no strict foreclosure as developed by the English courts — either at law or in equity —by which a mortgagee can be adjudged absolute owner of the mortgaged property. The remedy of the mortgagee is by an action for the sale of the mortgaged premises and an application of the proceeds of such sale to the mortgage debt, and although usually called an action to foreclose, it is totally different in its character and results from a strict foreclosure. The phrase ‘foreclosure of a mortgage’ has acquired, in general, a different meaning from that which it originally bore under the English practice and the common law imported here from England. In this country, the modern meaning of the term ‘foreclosure’ denotes an equitable proceeding for the enforcement of a lien against property in satisfaction of a debt.” 55 Am. Jur. 2d, Mortgages, § 549 (1971).

Guided by the above principles, we are compelled to conclude that judicial foreclosure of a land sale contract is in consonance with the notions of equity developed in American jurisprudence. A forfeiture — like a strict foreclosure at common law — is often offensive to our concepts of justice and inimical to the principles of equity. This is not to suggest that a forfeiture is an inappropriate remedy for the breach of all land contracts. In the case of an abandoning, absconding vendee, forfeiture is a logical and equitable remedy. Forfeiture would also be appropriate where the vendee has paid a minimal amount on the contract at the time of default and seeks to retain possession while the *241vendor' is paying taxes, insurance, and other upkeep in order to preserve the premises. Of course, in this latter situation, the vendee will have acquired very little, if any, equity in the property. However, a court of equity must always approach forfeitures with great caution, being forever aware of the possibility of inequitable dispossession of property and exorbitant monetary loss. We are persuaded that forfeiture may only be appropriate under circumstances in which it is found to be consonant with notions of fairness and justice under the law.

In other words, we are holding a conditional land sales contract tobe in the nature of a secured transaction, the provisions of which are subject to all proper and just remedies at law and in equity.

Turning our attention to the case at hand, we find that the vendor-assignees were seeking forfeiture, including $21,000 already paid on said contract as liquidated damages and immediate possession. They were, in fact, asking for strict application of the contract terms at law which we believe would have led to unconscionable results requiring the intervention of equity. “Equity delights in justice, but that not by halves.” (Story, Eq. Pl. § 72.) On the facts of this case, we are of the opinion that the trial court correctly refused the remedy sought by the vendor-assignees, but in so refusing it denied all remedial relief to the plaintiffs. Eauity will “look upon that as done which ought to have been done.” (Story, Eq. Jur. § 64(g)). Applying the foregoing maxims to the case at bar, where such parties seek unconscionable results in such an action, eauity will treat the subject matter as if the final acts and relief contemplated by the parties were accomplished exactly as they should have been in the first instance. Where discretionary power is not exercised by a trial court, under the mistaken belief that it was without this power, a remand and direction by a court of review is necessary and proper. 5 Am. Jur. 2d § 773, p. 216, *242n.3 (cases cited therein). This is not an unwarranted interference with the trial court’s function. Upon appeal to this Court, we have the judicial duty to sua sponte direct the trial court to apply appropriate equitable principles in such a case. 5 Am. Jur. 2d, §656, p. 107, citing: Mark v. Kahn (1956), 333 Mass. 517, 131 N. E. 2d 758, 53 A. L. R. 2d 908. Consistent with such above-stated rules, this Court has the undeniable authority to remand with guidelines which will give substantial relief to plaintiffs under their secured interests and will prevent the sacrifice of the vendees’ equitable lien in the property.

For all of the foregoing reasons, transfer is granted and the cause is reversed and remanded with instructions to enter a judgment of foreclosure on the vendors’ lien, pursuant to Trial Rule 69(C) and the mortgage foreclosure statute (IC 1971, 32-8-16-1 (Ind. Ann. Stat, §3-1801 [1968 Repl.])) as modified by Trial Rule 69(C). Said judgment shall include an order for the payment of the unpaid principal balance due on said contract, together with interest at 8 % per annum from the date of judgment. The order may also embrace any and all other proper and equitable relief that the court deems to be just, including the discretion to issue a stay of the judicial sale of the property, all pursuant to the provisions of Trial Rule 69(C). Such order shall be consistent with the principles and holdings developed within this opinion.

Reversed and remanded with instructions.

Arterburn, C.J., DeBruler and Prentice, JJ., concur in this opinion on the merits; Prentice, J., filing an additional statement ; Given, J., dissents.

Concurring Statement

Prentice, J.

I have some concern that our opinion herein might be viewed by some as indicating an attitude of indiference towards the rights of contract vendors. Such a view would not be a true reflection.

*243Because the installment sales contract, with forfeiture provisions, is a widely employed and generally accepted method of commerce in real estate in this state, it is appropriate that a vendee seeking to avoid the forfeiture, to which he agreed, be required to make a clear showing of the inequity of enforcement. In any given transaction anything short of enforcing the forfeiture provision may be a denial of equity to the vendor. It has been set forth in the majority opinion that if the vendee has little or no real equity in the premises, the court should have no hesitancy in declaring a forfeiture. It follows that if the vendee has indicated his willingness to forego his equity, if any, whether by mere abandonment of the premises, by release or deed or by a failure to make a timely assertion of his claim, he should be barred from thereafter claiming an equity.

If the court finds that forfeiture, although provided for by the terms of the contract, would be unjust, it should nevertheless grant the vendor the maximum relief consistent with equity against a defaulting vendee. In so doing, it should consider that, had the parties known that the forfeiture provision would not be enforceable, other provisions for the protection of the vendor doubtlessly would have been incorporated into the agreement. Generally, this would require that the transaction be treated as a note and mortgage with such provisions as are generally included in such documents customarily employed in the community by prudent investors. Terms customarily included in such notes and mortgages but frequently omitted from contracts include provisions for increased interest during periods of default, provision for the acceleration of the due date of the entire unpaid principal and interest upon a default continuing beyond a reasonable grace period, provisions for attorneys’ fees and other expenses incidental to foreclosure, for the waiver of relief from valuation and appraisement laws and for receivers.

Note. — Reported in 301 N. E. 2d 641.

MEMORANDUM AND ORDER

MAGNUSON, District Judge.

This matter is before the Court on Plaintiffs Motion for Partial Summary Judgment. For the reasons that follow, the Motion is granted in part and denied in part.

BACKGROUND

A. Plaintiff and the Property

In 1979, Plaintiff Susan Brown purchased a single family home located at 4034 42nd Avenue South in Minneapolis, Minnesota (“Property”). In 1999, Brown *1094refinanced her mortgage on the Property with Norwest Bank (now Wells Fargo Home Mortgage). Her mortgage payments were approximately $1,000 per month. In 2001, Brown fell behind on her mortgage payments. After she lost her job in February 2002, she fell further behind.

Brown filed for Chapter 13 bankruptcy in February 2002. In the bankruptcy petition, Brown set the value of the home at $100,000 and her mortgage payment at $1,140 per month. On June 20, 2002, the Bankruptcy Court authorized Wells Fargo Home Mortgage to proceed with foreclosure. The foreclosure sale took place on September 19, 2002. When the foreclosure occurred, Brown owed Wells Fargo Home Mortgage approximately $99,090 on her mortgage.

B. Defendants and the Agreement

Defendant Hendrie Cutler Grant is president of Defendant Grant Holding and Defendant Cutler Mortgage.1 Defendant Douglas Grimm, a former agent for Grant Holding, was responsible for identifying homeowners who had substantial equity in their homes but who were facing foreclosure. He was also responsible for soliciting those homeowners and representing that refinancing the mortgage debt would allow the homeowners to keep their homes.2

Prior to the expiration of the redemption period on the foreclosure sale, Grant contacted Brown and informed her that he was an investor that could help her save her home from foreclosure. Thereafter, Grimm visited Brown several times and explained that, despite her circumstances, he wanted to help her avoid foreclosure and keep her home by structuring a real estate transaction between Grant Holding and Brown. Specifically, he offered to have Brown convey her home to Grant Holding, and then Grant Holding would lease the property back to Brown with an option to repurchase it.

According to Brown, Grimm failed to explain several key details of the transaction during these visits. For example, Grimm did not reveal that the agreement could require Brown to pay rent in an amount greater than what she had been paying as a mortgage payment. (Grimm Aff. ¶ 7.) He also did not disclose that Brown would have to pay a $25,000 fee in order to repurchase the Property from Grant Holding. (Id.)

On March 17, 2003 — a day before the redemption period expired — Brown decided that she wanted to proceed with the transaction. Consequently, Grimm described the terms of the transaction and had Brown execute a quit claim deed conveying title to Grant Holding. However, the parties dispute whether Grimm provided Brown sufficient information to make an informed decision. Brown relies on an affidavit of Grimm, in which he questions whether he explained the transaction with sufficient clarity to ensure that Brown understood the consequences of her failure to perform. Specifically, although Grimm informed Brown that she could be evicted from the Property if she failed to meet the terms of the agreement, he did not advise *1095her that she would lose the approximately $60,000 in equity she had in the Property if she was evicted or if she failed to repurchase the Property before the expiration of the contemplated lease agreement. (Grimm Aff. ¶¶ 10-11.)

In contrast, Defendants contend that Grimm provided sufficient information to Brown and note that his answer to an interrogatory explains:

[Brown] said she wanted to keep her house, and asked me to explain the terms to her. I explained the terms that Grant Holding required, including deeding the house to Grant Holding and subsequently paying rent. I clearly explained the rent would be around $1,000 per month. I also clearly explained that there would be a $25,000 fee if and when she repurchased the home.

I reminded her as clearly as possible that if she did not pay rent, Grant Holding would enforce eviction procedures rigorously.

(Tigue Aff. Ex. B at 2-3.)

On March 18, 2003, Brown and Grant Holding executed an agreement, whereby Brown agreed to quit claim the Property to Grant Holding and enter into a lease for one year (“Transaction Agreement”). The Transaction Agreement states:

Granf/Cutler will purchase the property for its redemption cost. GranVCutler will lease the property back to Brown for fair market rent in the amount of $1,050 ... per month for the term of one year (the “Lease”). During the term of the Lease, Brown will have the option to purchase (“Option to Purchase”) the property for the sum of: Redemption Costs, plus any other “out-of-pocket” expenses incurred to redeem/finance/carry the Property, plus $25,000.00.

(Grant Aff. Ex. D. ¶ 4.)

On March 19, 2003, Brown executed a Power of Attorney, authorizing Grant to act on her behalf. Grimm advised Brown that the Power of Attorney was necessary to ensure that Grant Holding could help her stay in the home. The same day, Grant Holding executed three mortgages on the Property in favor of Defendant Cutler Mortgage so that the redemption period would extend twenty-one days. Ultimately, Cutler Mortgage redeemed the Property for the sum of $99,090.

On April 21, 2003, Grant Holding asked Brown to sign a lease agreement with an option to purchase. Under the lease agreement, Brown was to pay $1050 per month in rent. Brown neither executed the lease nor paid Defendants any rent.

C. The Unlawful Detainer Action and Settlement Agreement

Because Brown failed to pay rent, Grant Holding commenced an unlawful detainer action in June 2003. Both represented by counsel, the parties settled the action. The settlement agreement called for Brown to pay Grant Holding $5,351 and to sign a lease with option to purchase by July 11, 2003. It also provided that if payment was made before July 1, 2003, the amount would be reduced to $5,246.

The settlement agreement further provided that the Hennepin County Housing Court would immediately issue a writ of recovery if Brown did not make the payment and sign the lease by July 11, 2003. In addition, it provided that Brown agreed to vacate the Property and remove all of her personal belongings from the premises if a writ of recovery was issued. Furthermore, Brown agreed to sell Grant Holding her personal property if she failed to re*1096move it. Finally, the settlement agreement contained a release, which stated:

Grant Holding and Brown mutually agree to release, acquit, forever discharge and agree not to participate in any lawsuit against each other for any and all actions ... on account of, or in any way growing out of, any and all known and unknown damages resulting or to result from or asserted which arose from the beginning of time up to the date of the execution of this release in connection with the property.

(Tigue Aff. Ex. G.)

Brown failed to make any payments or execute the lease agreement by July 11, 2003. Accordingly, Grant Holding obtained a writ of recovery from the Hennepin County Housing Court on July 17, 2003. Grant Holding evicted Brown from the Property on July 24, 2003. Because Brown had failed to remove her personal property from the Property, Grant Holding seized her personal property and tendered $100 to Brown.

On September 3, 2003, Brown filed a Verified Petition for Emergency Relief and Related Claims, seeking an order to return her personal property. On December 17, 2003, Brown and Grant Holding orally settled that action, and Brown’s attorney summarized the settlement terms in a letter. Under the settlement terms, Grant Holding agreed to pay Brown $5,000 as compensation for her personal property. It also agreed to forgive Brown the $5,800 that Grant Holding alleged due for rent. The parties were to execute a formal settlement agreement in December 2003, but the settlement agreement and stipulation of dismissal were never executed.

Brown commenced this action in March 2004, bringing claims under the Truth in Lending Act, 15 U.S.C. § 1601 et seq., the Home Ownership and Equity Protection Act, 15 U.S.C. § 1639, and various state law claims. The Complaint also alleges the existence of an equitable mortgage. Brown now moves for partial summary judgment, seeking an order that the March 2003 transaction created an equitable mortgage and dismissing Defendants’ fraud counterclaim. Defendants submit that the equitable mortgage claim is baseless and barred by waiver, res judicata, and the Rooker-Feldman doctrine. They also submit that factual disputes preclude the dismissal of their fraud counterclaim.

DISCUSSION

A. Standard of Review

Summary judgment is proper if there are no disputed issues of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). The Court must view the evidence and the inferences that may be reasonably drawn from the evidence in the light most favorable to the nonmoving party. Enter. Bank v. Magna Bank, 92 F.3d 743, 747 (8th Cir.1996). However, as the United States Supreme Court has stated, “summary judgment procedure is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a whole, which are designed to secure the just, speedy, and inexpensive determination of every action.” Celotex Corp. v. Catrett, 477 U.S. 317, 327, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

The moving party bears the burden of showing that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law. Enter. Bank, 92 F.3d at 747. A party opposing a properly supported motion for summary judgment may not rest on mere allegations or denials, but must set forth specific facts in the record showing that there is a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

*1097Whether a transaction created an equitable mortgage generally cannot be determined at summary judgment because the issue turns on what the parties intended when the transaction occurred. See Albright v. Henry, 285 Minn. 452, 174 N.W.2d 106, 112-13 (1970); Gagne v. Hoban, 280 Minn. 475, 159 N.W.2d 896, 900 (1968) (“In the final analysis, the question of whether the parties to a conveyance really intended it to be absolute or security for indebtedness is for the triers of fact.”); Fraser v. Fraser, Nos. C6-01-812 and C801-813, 2003 WL 21743707, at *3 (Minn.App.2003) (warning about the inappropriateness of a summary judgment ruling on the existence of an equitable mortgage).

B. Equitable Mortgage

Plaintiff submits that the March 2003 transaction in which she conveyed a quit claim deed to Grant Holding was a security conveyance by which she would use her equity to stay in her home. Conversely, Defendants submit that the transaction was an outright sale and leaseback arrangement.

Courts presume that a deed is a conveyance. Ministers Life & Cas. Union v. Franklin Park Towers Corp., 307 Minn. 134, 239 N.W.2d 207, 210 (1976). However, Minnesota courts have applied the doctrine of equitable mortgages “to prevent an overreaching by one party that would unfairly exploit the other party’s financial position or relative lack of real estate dealings.” Id. To create an equitable mortgage, all circumstances must indicate that both parties intended the transaction to be a loan advanced on security of realty. Trondson v. Janikula, 458 N.W.2d 679, 682 (Minn.1990); First Constr. Credit. Inc. v. Simonson Lumber of Waite Park, Inc., 663 N.W.2d 14, 18 (Minn.App.2003).

1. Intent of Parties

The key determination of whether a transaction is an outright sale or an equitable mortgage is the intention of the parties. Ministers Life & Cas. Union, 239 N.W.2d at 210. Testimony that one party intended the transaction to be an equitable mortgage is insufficient. Id. Rather, because the deed is presumed to be a conveyance, it must be clear that both parties intended that the transaction result in a mortgage. Id.; see also Hewitt v. Baker, 222 Minn. 292, 24 N.W.2d 47, 52 (1946).

The Court may examine documents relating to the transaction to determine the intent of the parties at the time of the conveyance. Ministers Life & Cas. Union, 239 N.W.2d at 210-11. For example, the lack of terms such as “debt,” “security,” or “mortgage” is strong evidence indicating that the transaction is not a mortgage. Id.; see also First Nat’l Bank of St. Paul v. Ramier, 311 N.W.2d 502, 503-04 (Minn.1981) (finding of equitable mortgage inappropriate when document conclusively states that it is an unsecured loan). However, the fact that documents do not express the existence of a loan is not controlling if all the circumstances indicate that the transaction is really a loan advanced on security. Gagne, 159 N.W.2d at 899; Hewitt, 24 N.W.2d at 52 (evidence of no bond or promissory note must be considered, “but it is not complete or conclusive evidence that a transaction was a sale, and not a mortgage”); Fraser, 2003 WL 21743707, at *3 n. 3 (“it is not necessary that a promissory note be issued to prove that money advanced is a loan where there is other evidence sufficient to show that the transfer is a loan”).

The parties dispute what their intentions were when they executed the March 2003 transaction. Brown insists that she intended to enter into a loan arrangement that allowed her to use her equity as secu*1098rity so that she could continue living in her home. In contrast, Grant declares that he never contemplated that the transaction was a mortgage. Rather, he intended the transaction to be a conveyance of the Property to Grant Holding, and a subsequent leaseback with a right to purchase. Moreover, the Transaction Agreement in this case is devoid of any language such as “debt,” “security,” or “mortgage.” Indeed, the Transaction Agreement specifies that Grant Holding was purchasing the Property, and that Brown was leasing the Property with an option to purchase the Property back. These facts weigh in favor of finding that the transaction was a conveyance and not an equitable mortgage.

2.Disparity Between the Value of the Property and the Price Paid

Another factor that the Court may consider is the difference between the market value of the Property and the price paid by Grant Holding. River Run Props. v. Kappendahl, No. C2-03-10463, at 10-12 (Anoka County Dist. Ct. July 12, 2004) (“disparity between a property’s value and its sale price [is] an important factor in determining the intention of transacting parties”). If the value of the Property was greater than the consideration given for the quit claim deed, that fact weighs in favor of finding that the transaction was intended to operate as a mortgage. Id.; see also Gagne, 159 N.W.2d at 900.

In this case, the amount owed for redemption was $99,090. An independent appraiser valued the Property at $170,000, and Grant Holding received a mortgage for $127,500 based on that appraisal. However, Grant Holding resold the property to a third party for $110,000. The dispute in the valuation of the Property creates a genuine issue as to whether there was a disparity between the price Grant Holding paid and the actual value of the Property.

3. Nature of Solicitation that Gave Rise to the Transaction

Also relevant to the Court’s determination is the nature of solicitation that gave rise to the transaction in question. River Run Props., at 15 (“[T]he message of the advertisement is to allow the customer to be bailed out and keep their home. The advertisement is not directed to one who is interested in selling his home.”) (emphasis in original).

In this case, Grimm frequently stressed that the purpose of the transaction was to allow Brown to keep her home and continue to live in it. Moreover, the Court notes that Defendants are experienced real estate professionals who approached Brown, an unsophisticated homeowner, to enter into the transaction at a time of extreme financial distress and while the Property was in foreclosure. These facts weigh in favor of finding an equitable mortgage.

However, Defendants counter with evidence that Grimm explained all of the necessary details to Brown, that Brown indicated that she understood the terms, and that she would have the funds to make the rental payments. These facts indicate that Brown understood that she was selling the Property and leasing it back with the option to repurchase.

4. Attempts to Sell the Property in the Open Market

The Court also may consider whether the Property was sold on the open market. The failure to list the Property on the open market indicates that the transaction was intended to be a security arrangement and not an outright sale of property. Id., at 16.

In this case, the parties negotiated the deal without undergoing the normal steps accompanying a real estate sale. In particular, neither the Power of Attorney, the *1099quit claim deed, nor the Transaction Agreement was generated by the normal mechanisms of an open market sale. These facts support a finding that the transaction created an equitable mortgage.

5. Negotiated Sale Pnce

The Court may also weigh whether the parties negotiated the price of the Property. “Pegging the sales price on an amount other than — and far less than — the Property’s value is conduct by the parties that is inconsistent with an intention to complete an outright sale of the Property.” Id. at 17.

In this case, the parties did not negotiate a sale price. Rather, Grant Holding merely purchased the Property for the redemption price of $99,090. This weighs in favor of finding that the transaction created an equitable mortgage.

6. Continuous Occupancy

Finally, the Court notes that Brown continued to occupy the Property after the Transaction Agreement was executed. Minnesota law recognizes the significance of a grantor remaining in occupancy and not relinquishing possession. For example, in Gagne, the grantor-plaintiff gave a deed, but took an option to purchase back. The Gagne Court found the transaction to be a loan transaction in large part because “the option contract ... gave plaintiff the right to continue in use and occupancy of the property.” 159 N.W.2d at 900.

In this case, Brown remained in possession of the Property after the execution of the Transaction Agreement. Notably, however, the fact that she remained in possession of the Property is also consistent with a leaseback with option to buy. Thus, the Court finds this factor neutral in determining the intent of the parties.

Because the factors are split — and because Minnesota courts have warned that the issue is for the trier of fact — the Court cannot rule as a matter of law that the March 2003 transaction resulted in an equitable mortgage. Accordingly, the Court denies Plaintiffs’ Motion on this point.

B. Procedural Bars

In addition to attacking the claim on its merits, Defendants maintain that several procedural doctrines bar the equitable mortgage claim.

1. Res Judicata

Defendants first argue that res judicata precludes litigation of the equitable mortgage claim. ' In particular, they contend that Brown could have interposed her equitable defense in the unlawful detainer proceedings and litigated it there. The preclusion principle of res judicata prevents the re-litigation of a claim that was raised or that could have been raised in a prior suit. Banks v. Int’l Union Elec., Technical. Salaried & Mach. Workers, 390 F.3d 1049, 1052 (8th Cir.2004) (citing Lane v. Peterson, 899 F.2d 737, 741 (8th Cir.1990)). The Court examines three factors to determine if res judicata applies: “(1) whether the prior judgment was rendered by a court of competent jurisdiction; (2) whether the prior judgment was a final judgment on the merits; and (3) whether the same cause of action and the same parties or their privies were involved in both cases.” Id.

Brown argues that the Housing Court decision has no preclusive effect because she could not have raised her equitable defense in that proceeding. “An unlawful detainer action merely determines the right to present possession and does not adjudicate the legal or equitable ownership rights of the parties.” Fed. Land Bank of St. Paul v. Obermoller, 429 N.W.2d 251, 257 (Minn.Ct.App.1988) (citation omitted); see also Minn.Stat. § 504B.001 (defining “eviction” as “a sum*1100mary court proceeding to remove a tenant or occupant from or otherwise recover possession of real property”). Minnesota courts have not decided whether an equitable defense may be raised in an eviction proceeding. However, they have held that courts should not interfere with the summary nature of eviction proceedings when an alternate process is available to resolve equitable claims. Amresco Residential Mortg. Corp. v. Stange, 631 N.W.2d 444, 445-46 (Minn.App.2001) (affirming dismissal of equitable counterclaims in a housing court action, but stating that the party could file a separate proceeding asserting those claims and seeking to enjoin the eviction action); see also Fraser v. Fraser, 642 N.W.2d 34, 40-41 (Minn.Ct.App.2002) (“to the extent [a party] has the ability to litigate her equitable mortgage and other claims and defenses in alternative civil proceedings, it would be inappropriate for her to seek to do so in the eviction action”).

Brown is now seeking relief in an alternate proceeding. It therefore would have been improper for her to raise her equitable mortgage claim in the unlawful detain-er action. Accordingly, the unlawful detainer action judgment has no preclusive effect on the equitable mortgage claim.

2. Rooker-Feldman

Defendants also submit that the Rooker-Feldman doctrine bars the equitable mortgage claim. The Rooker-Feldman doctrine states that lower federal courts lack subject matter jurisdiction to review state court judicial determinations. Dist. of Columbia Court of Appeals v. Feldman, 460 U.S. 462, 476, 103 S.Ct. 1303, 75 L.Ed.2d 206 (1983); Rooker v. Fidelity Trust Co., 263 U.S. 413, 44 S.Ct. 149, 68 L.Ed. 362 (1923); Prince v. Ark. Bd. of Exam’rs in Psychology, 380 F.3d 337, 340 (8th Cir.2004). The doctrine bars not only straightforward review of state court judgments, but also “indirect attempts by federal plaintiffs to undermine state court decisions.” Lemonds v. St. Louis County, 222 F.3d 488, 492 (8th Cir.2000). In determining whether Rooker-Feldman applies, a federal court must determine whether the claim is “inextricably intertwined” with the claim already decided in the state court. Id. at 492-93. A claim brought in federal court is inextricably intertwined if the federal district court must nullify the state court decision to find in favor of the federal plaintiff. Id. at 493. Thus, “Rooker-Feldman precludes a federal action if the relief requested in the federal action would effectively reverse the state court decision or void its holding.” Snider v. City of Excelsior Springs, 154 F.3d 809, 811 (8th Cir.1998); see also Johnson v. City of Shorewood, 360 F.3d 810, 819 (8th Cir.2004) Rooker-Feldman bars federal review if requested relief would effectively reverse the state court decision or void its ruling.

Because the Hennepin County Housing Court only decided whether Brown could retain possession of the Property — and could not decide the equitable claim — Rooker-Feldman does not apply.

3. Waiver

Defendants also argue that the June 2003 settlement agreement bars Brown from raising the equitable mortgage claim. Brown responds that the settlement agreement lacked consideration.

Assuming that the March 2003 transaction created an equitable mortgage, Brown reasons that she already had the right to stay in her home because Defendants could not evict her without following proper foreclosure procedures. If the March 2003 transaction created an equitable mortgage, title and right to possession remained with Brown until the completion of proper foreclosure procedures. Thus, Grant Holding could not evict Brown, but *1101instead was required to foreclose by action, and Brown would retain equitable and legal rights of redemption. See Albright, 174 N.W.2d at 111; Stipe v. Jefferson, 257 N.W. 99, 100 (1984). Because the issue of whether the March 2003 transaction created an equitable mortgage remains, the Court defers ruling on whether the settlement agreement lacked consideration and is therefore unenforceable.

C. Defendants’ Fraud Counterclaim

The fraud counterclaim is based on alleged misrepresentations made by Brown that she would be able to make the rental payments, and that she would obtain money from her parents if necessary.

Fraud encompasses intentional misrepresentation. Iverson v. Johnson Gas Appliance Co., 172 F.3d 524, 529 (8th Cir.1999); Dvorak v. Maring, 285 N.W.2d 675, 678 n. 4 (Minn.1979) (“we see no distinction between a theory of recovery based on intentional misrepresentation and one based on fraud”). To state a claim for intentional misrepresentation under Minnesota law, Defendants must show that: (1) Brown made a false representation relating to a past or present material fact that the fact was susceptible of knowledge; (2) Brown knew it was false or asserted it as of her own knowledge without knowing whether it was true or false; (3) Brown intended to induce Defendants to act and Defendants were indeed induced to act; and (4) Defendants acted in reliance on the representation and were thereby damaged. M.H. v. Caritas Family Servs., 488 N.W.2d 282, 289 (Minn.1992) (citing Florenzano v. Olson, 387 N.W.2d 168, 174 n. 4 (Minn.1986)). “It is a well-settled rule that a representation or expec tation as to future acts is not a sufficient basis to support an action for fraud merely because the represented act or event did not take place.” Vandeputte v. Soderholm, 298 Minn. 505, 216 N.W.2d 144, 147 (1974). “Where a representation regarding a future event is alleged, ... an additional element of proof is that the party making the representation had no intention of performing when the promise was made.” Martens v. Minn. Mining & Mfg. Co., 616 N.W.2d 732, 747 (Minn.2000).

The statements on which Defendants rely do not relate to past or present facts. Rather, they are promises of future payment. Moreover, there is no evidence that Brown knew her representations were false. To the contrary, the record indicates that Brown was exploring financial aid measures to assist her to make lease payments, but that she ultimately was unable to secure the aid. Accordingly, Defendants’ fraud counterclaim fails as a matter of law.

CONCLUSION

Summary judgment is an inappropriate vehicle to deteimine whether the March 2003 transaction created an equitable mortgage or outright conveyance and leaseback, especially since the intent of the parties is unclear. In contrast, no question remains that Defendants have failed to present a factual dispute on their fraud counterclaim. Accordingly, IT IS HEREBY ORDERED that:

1. Plaintiff’s Motion for Partial Summary Judgment (Clerk Doc. No. 76) is GRANTED in part and DENIED in part; and

2. Defendants’ Fraud Counterclaim is DISMISSED WITH PREJUDICE.

OPINION OF THE COURT

Joan B. Lefkowitz, J.

Does a prior recorded mortgage that is improperly indexed by name of the mortgagor lose priority to a subsequent mortgage properly recorded and indexed where the subsequent mortgagee lacks actual knowledge of the prior mortgage *9at the time of making the subsequent one? This interesting issue is presented herein by the subsequent mortgagee’s motion addressed to the merits of the claim of the first mortgage.

In an action to foreclose a mortgage defendant Chemical Bank moves for an order dismissing the complaint as to it and, further, for declaratory relief. A nonparty moves by counsel for an order authorizing submission of an affirmation in opposition as amicus curiae.

In September 1983 the mortgagor, Susan Levine-Rodriguez, executed a mortgage to Intercounty Mortgagee Corp. in the sum of $68,700. Intercounty assigned the mortgage to plaintiff. The mortgage was recorded in Rockland County on September 23, 1983. The deed into Levine-Rodriguez had no hyphen and was indexed under the letter "R”. However, the mortgage used the hyphen and was indexed by the County Clerk under the letter "L”.

On May 1, 1989 Mr. and Mrs. Levine-Rodriguez executed a mortgage in favor of Chemical Bank in the sum of $70,000. A title search located a prior mortgage of $20,000 dated April 3, 1986 under the name Rodriguez. The mortgagors’ attorney certified that Chemical Bank would have second lien on the property when the mortgage was recorded. The title search did not pick up the plaintiff’s mortgage as it was indexed under "L” and not "R”. Since Rockland County uses an alphabetical mortgagor-mortgagee filing system, Chemical Bank could properly rely on the information to it at the time of closing. Chemical Bank’s mortgage was recorded on October 22, 1990.

Priority of Mortgages

For Chemical Bank to prevail herein it must establish that it was a subsequent mortgagee without notice of the rights of the plaintiff. (Metrobank for Sav. v Bergman, NYLJ, May 15, 1991, at 25, col 2 [Sup Ct, Rockland County].) Usually priority of mortgage is determined by date of recordation. (Real Property Law § 291.) A mortgage is deemed recorded at the time of delivery to the recording officer (Real Property Law § 317). An index of mortgagors and mortgagees forms part of the record of the mortgage recorded (Real Property Law § 316).

Prior to the amendment of section 316 of the Real Property Law in 1924 (L 1924, ch 582) indexes were not part of the record and a mistake regarding the index did not affect the priority of a mortgage. (Mutual Life Ins. Co. v Dake, 87 NY *10257 [1881].) The "mistake” in Dake was the total failure of the Clerk to index the mortgage. The relevant statutes at the time required the Clerk to maintain an index but there was no statutory requirement that the index form part of the record. In an action to foreclose a mortgage the Court of Appeals held that the first mortgage delivered to the Clerk’s office for recording had priority over a subsequent mortgage that was recorded before the first mortgage was properly indexed. The Court of Appeals viewed indexing as a convenience for title searches. However, it did observe (87 NY, at 264-265): "It may be that the index, both for convenience and safety, should be made part of the record; but until it is so made by the legislature, we can but pronounce the law as it is.”

In the absence of a statute mandating maintenance of an index, no such requirement exists on government officials. (Matter of D’Alessandro v Unemployment Ins. Appeal Bd., 56 AD2d 762 [1st Dept 1977].) However, such a duty does exist in the real property field. What is indexing with regard to real property instruments? One learned treatise has said (66 Am Jur 2d, Records and Recording Laws, § 89, at 395): "An index is one of the facilities to be used in making a search for a record; its object is to point out the book and page in which a particular record may be found, and its utility and practical necessity are unquestioned.” Another authority has said (76 CJS, Records, § 16 [a], at 121): "If there is no index of an instrument in the book, one who has searched is entitled to assume that no such instrument is on file or record.”

There is a sharp conflict in the cases in other jurisdictions as to whether the index is part of the record for recordation purposes (66 Am Jur 2d, op. cit, §§ 90-92, 130; 76 CJS, op. cit., § 16 [b]; Annotation, Records of Title — Improper Indexing, 63 ALR 1057 [1929]; 2 Merrill, Notice §§ 1066-1072 [1952]; Cross, The Record "Chain of Title” Hypocrisy, 57 Colum L Rev 787 [1957]; Osborne, Mortgages § 203 [2d 1970]; Thompson, Real Property § 4306 [1963 ed]; 4 American Law of Property § 17.31). Professor Merrill, writing in his 1952 treatise, found the majority’s view, to which New York subscribed, to be that the recorder’s mistakes on indexing do not defeat constructive notice of the record (2 Merrill, op. cit., § 1070), whereas a substantial minority view concluded otherwise (id., § 1070). Other secondary authority made similar observations. (Annotation, op. cit., 63 ALR 1057, §§ II, III; 66 Am Jur 2d, op. cit., §§ 89, 90; Cross, op. cit., 57 Colum L Rev, at 790-791, 797.) Professor Osborne, in the most recent statement on the sub*11ject, appears to find that a majority of jurisdictions place the burden on the party who presents the instrument for recordation to see to it that it is properly indexed or else suffer the consequences. (Osborne, Mortgages, §203 [2d ed 1970]; see, Hochstein v Romero, 219 Cal App 3d 447, 268 Cal Rptr 202 [4th Dist 1990] [where document improperly indexed and not locatable by a proper search, mere recordation is insufficient to charge a subsequent purchaser with notice].)

Many jurisdictions place the burden on the grantee to insure that full recordation occurs properly on the theory that where one of two innocent persons must suffer a loss the onus should be on the one who was in the best position to correct the situation. (66 Am Jur 2d, op. cit., § 130.) In the cited treatise it is said (at 421): "A cogent reason underlying the rule which places upon the grantee of a deed or other instrument the responsibility for seeing that the record made of the instrument is accurate is that one who files a paper for recording] always has it in his power to examine the records and satisfy himself that his paper has been duly and accurately recorded, while it is impossible for a prospective purchaser or creditor to anticipate and inquire about and ascertain the innumerable forms which the negligence or mistakes of the [recording] officer may assume.”

Professor Merrill, in turn, postulates similar arguments in discussing which view (majority or minority in 1952) is better. (2 Merrill, Notice, § 1071 [1952].) He boils it down to whose ox is being gored because the Recording Acts are designed to protect both prior and subsequent encumbrancers and concludes that it is best for the Legislatures to decide among competing interests which are too "nicely balanced” since, whichever rule is adopted, "some innocent people are going to be hurt” (id., at 702). Professor Cross in his law review article on the subject reached a similar conclusion but specifically called for statutes that make proper indexing a part of the record, the burden of which is on the party filing the document (Cross, op. cit., 57 Colum L Rev, at 799). He also called for mandatory tract indexing, such as block and lot, which exists in certain counties in New York (Andy Assocs. v Bankers Trust Co., 49 NY2d 13 [1979]) but not in Rockland County.

Mutual Life Ins. Co. v Dake (87 NY 257, supra) placed New York among those States which hold that the filer of the mortgage instrument need not stand by or later investigate to see if the document was properly recorded, since delivery of the document to the recorder is itself sufficient. (Antoneli v *12City of Mt. Vernon, 234 NYS2d 550 [Sup Ct, Westchester County 1962]; Real Property Law § 317.) Prior thereto, in Frost v Beekman (1 Johns Ch 288 [1814], revd on other grounds 18 Johns 544 [Ct of Errors 1820]), it was held that a subsequent purchaser "is not bound to attend to the correctness of the registry. It is the business of the mortgagee, and if a mistake occurs to his prejudice, the consequences of it lie between him and clerk, and not between him and the bona fide purchaser” (1 Johns Ch, at 298).

As will be seen from the following discussion, New York law on the issue presented is somewhat tortured. In 1924 section 316 of the Real Property Law, which prior thereto back to the time antecedent to Dake (supra), required the recording officer to maintain an alphabetical index, was amended (L 1924, ch 582) to add the following language as it appears today: "Such indexes shall form a part of the record of each instrument hereafter recorded.” (See, 4A Warren’s Weed, NY Real Property, Recording, § 3.06.)

In Chittick v Thompson Hill Dev. Corp. (230 App Div 410 [2d Dept 1930], affd 259 NY 233 [1932]) the court overlooked the 1924 amendment and applied the rule that priority is not affected by a mistake in indexing. In denying reargument on the ground of loches the court acknowledged the existence of the amendment and modified its decision, but not its result (232 App Div 818 [2d Dept 1931]).

Thereafter, in O’Neill v Lola Realty Corp. (264 App Div 60, 63 [2d Dept 1942]) it was held that a mistake in indexing, caused by the mortgagee, rendered the mortgage void as against subsequent purchasers for value in good faith.

In Baccari v De Santi (70 AD2d 198 [2d Dept 1979]) a prior mortgage was improperly indexed in the wrong municipality. The property was later sold and a title search failed to disclose the second mortgage. The sale was financed by the purchaser by way of proceeds loaned by a creditor to whom a new mortgage was given and was recorded. The prior mortgagee sued to declare the rights of the parties and to impose liability on the County Clerk’s office. The Appellate Division rejected the argument that an improperly indexed mortgage still constitutes constructive notice (as previously held in Mutual Life Ins. Co. v Dake, 87 NY 257, supra), at least in cases of alleged Clerk misfeasance as distinguished from nonfeasance (such as failure to record) (70 AD2d, at 202) and relied on Frost v Beekman (1 Johns Ch 288, supra) as author*13ity. Parenthetically, it should be noted that all prior authorities of primary importance were argued by the defendants (see, defendants-appellants’ brief, pt III, at 9-12, Record on Appeal No. 10940, 2d Dept, as maintained by the White Plains Sup Ct Library).

The court observed that, as here, the prior mortgage was recorded but not properly indexed and, therefore, the recording did not constitute constructive notice of the prior mortgage. As to actual notice or the lack thereof, the court noted that the complaint did not frame the issue but, in any event, summary judgment was not proper at that time because the attorney who handled the prior mortgage transaction also participated at the closing on the sale by the mortgagor to the current mortgagor and may have mentioned the improperly indexed mortgage at the closing. That is, the court believed that a question of fact existed on the issue of actual notice, which affected priority of the mortgages and potential liability of the County Clerk.

It is noteworthy that the court in Baccari (supra) uneqivocally held the County Clerk liable for misfeasance in misindexing the prior mortgage if it was to be established that the subsequent mortgagee lacked actual knowledge of the existence of the prior mortgage (70 AD2d, at 203).

Baccari (supra) was decided in September 1979. Eight months earlier a decision was rendered in Camfield v Luther Forest Corp. (98 Misc 2d 903 [Sup Ct, Saratoga County 1979]). The full opinion may be found in Record on Appeal No. 3674, Third Department, pages 10a-23a, as maintained by the Supreme Court Library in White Plains. While truly an adverse possession case, the court also dealt with the question of priority of deeds where an earlier deed was not properly indexed. Justice Ford referred to a document in the Bill Jacket to the 1924 amendment to section 316 of the Real Property Law, the holdings in Chittick v Thompson Hill Dev. Corp. (230 App Div 410, 232 App Div 818, supra) concluded Mutual Life Ins. Co. v Dake (87 NY 257, supra) was no longer controlling, held that the index was a part of the record and, where, as there, a mistake was made in indexing the prior deed (it simply was not indexed until 48 years after it was recorded), the prior deed did not constitute notice (98 Misc 2d, at 905-906; see also, Real Property Law § 316-a [8] [once error in indexing is corrected the instrument shall constitute constructive notice "only from the time when the same shall be properly indexed”]). In the unpublished portion of the opinion *14the court held that the evidence established title by adverse possession in the defendant.

The Appellate Division, Third Department, affirmed nisi prius, holding that its determination on adverse possession was correct. (Camfield v Luther Forest Corp., 75 AD2d 671 [3d Dept 1980].) However, the appellate court in dicta addressed the recording question and, in apparent ignorance of Baccari (supra, which was not called to its attention in the briefs) and in contravention of seemingly direct precedent in point by way of analogy (Greene v Foremost Locations, 7 AD2d 780 [3d Dept 1958] [failure to index restrictive covenants in deed of common grantor means that said deed is not constructive notice]), held that the first recorded deed retained priority even though indexes are part of the record (75 AD2d, at 672). The court relied on Bake (supra), that the first grantee need not see to it that the deed was properly recorded, mere delivery to the recording officer being sufficient.

Interestingly, the respondent had argued (defendant-respondent’s brief, pt I, at 2-11, Record on Appeal No. 3674) that the trial court’s reliance on the Bill Jacket contents to the 1924 amendment to section 316 of the Real Property Law was misplaced because the document referred to therein was really ambiguous, not authored by a sponsor and did not discuss the significance or effect of the proposed amendment to make indexes part of the record. Respondent’s counsel opined that the purpose behind the amendment was to require recording officers to be "more careful” regarding indexing. (Respondent’s brief, supra, at 9.) These arguments were not discussed by the appeals court. However, Camfield (supra) may be reconciled with Baccari (supra) as holding that the first recorded document constitutes constructive notice where the recording officer is guilty of nonfeasance for failing to index the document at all.

Thereafter, in Henrietta Bldg. Supplies v Rogers (117 Misc 2d 843 [Sup Ct, Monroe County 1983]), Justice Tillman snythesized the legal principles discussed above and held that neither the first opinion in Chittick (230 App Div 410, supra) nor Camfield (75 AD2d 671, supra) were to be followed, as section 316 of the Real Property Law since 1924 means that an improperly indexed mortgage is not constructive notice that a recorded mortgage exists. The court further held that where, as there, conflicting affidavits raised a question of actual notice, the complaint would not be dismissed.

*15The court quoted from letters in the Bill Jacket pertaining to the 1924 amendment to section 316 of the Real Property Law and held (117 Misc 2d, supra, at 845): "Clearly, the amendment to section 316 in 1924 (L 1924, ch 582) was intended to enact that an error in indexing prevents the record from constituting constructive notice of the filed instrument. Until this amendment, the law had been governed by the Court of Appeals case, Mutual Life Ins. Co. of N. Y. v Dake (87 NY 256, 264), but wherein the court clearly indicated that it thought the law should be amended.”1

From this discussion it may be said that the state of the law regarding improper indexing of mortgages and priority rights is tortured and evolving. (See, 4A Warren’s Weed, New York Real Property, Recording, fl 4.04; 77 NY Jur 2d, Mortgages, §§ 110, 112; 92 NY Jur 2d, Records and Recording, § 81.) That the distinct principles of law uttered in the various cases has led to confusion is demonstrated by the following passage in 3A Warren’s Weed, New York Real Property (Mortgages, ¶ 8.03 [b], at 129): "An improper indexing by a clerk of a mortgage properly delivered did not impart constructive notice to subsequent mortgagors. As a result of the loss of priority, the first mortgage was subordinated to the second mortgage in time. It has been held that improper indexing by the clerk of a mortgage or assignment does not deprive the mortgagee or assignee of his or her priorities.” Clearly, a tension exists between the posits quoted above.

Other commentators on New York law in the real property and mortgage field appear to agree that indexing must be accurate or else the record does not constitute constructive notice. (2 Harvey, Real Property and Title Closing § 680; 1 Drussel and Foran, Mortgages & Mortgage Foreclosure in New York §§ 8.4, 8.5 [rev ed] [esp 1991 Cum Supp, at 165].) Of course, a mistake in indexing not induced by the mortgagee (O’Neill v Lola Realty Corp., 264 App Div 60, supra) does not invalidate the instrument but results in rendering the recorder liable for any loss the first to file mortgagee suffers on loss of priority. (Baccari v De Santi, 70 AD2d 198, supra; 66 Am Jur 2d, Records & Recording Laws, § 89.) This court believes that is the implicit intent behind the 1924 amendment to section 316 of the Real Property Law. (2 Merrill, *16Notice, § 1072 [1952].) Errors in indexing involving the name of the mortgagor are sufficient to vitiate constructive notice of record. (Id.; Note, Recording and Registry Laws, 52 Harv L Rev 170 [1938].) Thus, the court is of the opinion that the harm, if any, in cases of this kind vis-á-vis competing mortgagees must be borne by the party who presents the instrument for recording for, as it has been noted, that is the one party who can readily ascertain if the instrument was properly indexed as part of recording. As a practical matter, the court is aware of the fact that it is accepted practice for a representative of the title insurer (assuming one is used) to cause the instruments to be delivered to the public officials and the reality is that the title insurer for diverse reasons may be called upon to pay its client for the loss of priority or improper indexing. Better practice may now dictate that shortly after presentation of the document the title company (or filer) run an additional search as of the date of recordation to establish proper indexing. (Cf., Peoples Natl. Bank v Weiner, 129 AD2d 782, 785 [2d Dept 1987] [imposing similar duty on filer of UCC financing statements "to insure that those documents had indeed been received and recorded”].) In any event, if the mistake occurred through the fault of the recording official, ultimate liability lies there.

At bar, a vice-president of Chemical Bank has stated by sworn affidavit that the bank had no notice, actual or constructive, of the plaintiffs mortgage until the commencement of this litigation. Plaintiff offers no opposition to the motions and, it seems, that the issues must be resolved in Chemical’s favor.

Amicus Curiae

[The court denied leave to plaintiffs assignor’s title insurer to appear as amicus.]

Conclusion

While the court is persuaded that the 1924 amendment to section 316 of the Real Property Law overruled the rule of law pronounced in Mutual Life Ins. Co. v Dake (87 NY 257, supra) and its progeny (Henrietta Bldg. Supplies v Rogers, 117 Misc 2d 843, supra), even if the Dake principle has vitality today on a recording officer’s nonfeasance (Baccari v De Santi, 70 AD2d *17198, supra), a distinction without a difference in my opinion,2 this case involves misfeasance and, therefore, the plaintiff’s mortgage as improperly indexed does not constitute constructive notice. No triable issues of fact have been advanced or exist on this record regarding the question of actual notice of the existence of the plaintiff’s mortgage by Chemical Bank.

Accordingly, the complaint must be dismissed against Chemical Bank and the rights of the parties declared that Chemical’s subsequent mortgage has priority over plaintiff’s mortgage.

MARTINEZ, Justice.

In this case we consider whether an interest in the property' of homeowners, acquired through a fraudulent scheme, properly passed to purchasers without actual or constructive notice of the fraud. We examine the doctrine of inquiry notice, particularly notice of the rights of persons in exclusive possession of real property and of rights acquired by quitclaim deed. Because we find inquiry notice in the factual circumstances of *1203this case, we reverse the decision of the court of appeals. Martinez v. Affordable Hous. Network, Inc., 109 P.3d 983 (Colo.App.2005).

I. Facts and Proceedings Below

In the early fall of 1999, Affordable Housing Network, Inc. (AHN) sent a mail solicitation to Marvin and JoRene Martinez (collectively “Martinez”). The solicitation targeted homeowners who had fallen behind on their mortgage payments and were in need of financial assistance. AHN advertised financial counseling services, assistance with refinancing homes, assistance .with avoiding foreclosure, and other similar services. After contacting AHN, Martinez met several times with Tom Skaggs and E.W. Brossman, representatives of AHN. Skaggs and Brossman falsely claimed that AHN was a nonprofit, volunteer organization qualifying under section 501(e)(3) of the Internal Revenue Code. Skaggs and Brossman also falsely represented' to Martinez that AHN was part of a HUD-approved program affiliated with Fannie Mae. They offered to help Martinez refinance the home and, if that failed, help Martinez sell the property and purchase a new home with the remaining equity.

Based upon these representations, Martinez entered into an option agreement with AHN on October 2, 1999. Under the agreement, AHN had an option to purchase the property for an option fee equivalent to the amount needed to cure the mortgage deficiency. AHN could purchase the home under certain conditions, including that AHN cure the default within ten days arid place the deed into escrow with Rocky Mountain Title.1 The deed could be removed from escrow only after receiving written instructions from AHN and with proof that the two mortgages had been paid in full or would be satisfied at closing.

On October 7, 1999, Skaggs and Brossman met with Marvin and JoRene Martinez and asked them to sign a quitclaim deed to their home. Skaggs and Brossman told Martinez that the quitclaim deed was for AHN’s “protection” should the homeowners abandon the property once AHN cured the mortgage default.

On October 28, 1999, twenty-six days after the option agreement was executed, AHN cured the mortgage deficiency with a payment of $9,020.00 and subsequently put the property up for sale. Among the terms of the option agreement, AHN was to pay the arrears within ten days, declare in writing to the homeowners the intent to exercise the option, and deliver the deed into escrow. Although AHN failed to cure the mortgage default within the specified ten-day limit, Martinez never objected to the late payment.

For the next six months, Martinez cooperated with AHN’s efforts to sell the property. Martinez became increasingly dissatisfied with AHN’s lack of communication, lack of effort to refinance the home, and failure to show the couple comparable homes for purchase in the event their home sold. Martinez began receiving solicitations to refinance the home and, ultimately, Martinez decided to keep the home, refinance, and reimburse AHN the $9,020.00 for the deficiency.

Martinez testified that on May 2, 2000, a real estate agent telephoned the Martinez home because she wished to bring a potential buyer over to see the property. JoRene Martinez told the agent that she and her husband were no longer interested in selling their home and intended to refinance and pay the money owed to AHN for the deficiency.

The real estate agent “got silent on the plione” and the parties ended the call. The agent then contacted Brossman who in turn phoned JoRene Martinez and insisted that she allow the real estate agent to show the house.

When the real estate agent arrived at the Martinez residence, JoRene Martinez confronted the agent at her doorstep. JoRene Martinez again stated that she did not wish to sell the home and told the agent not to enter the home. The real estate agent ignored JoRene Martinez’ protests, pushed her way into the home, and proceeded to show the home to Overton, a Troco, Inc. investor. *1204Although Overton arrived with the real estate agent and was “right behind her” as she entered the home, Overton testified that he had no knowledge of JoRene Martinez’ statements to the agent or JoRene Martinez’ objection to their viewing of the property. Overton also claimed to be unaware of any fraudulent conduct on the part of AHN; however, none of the Troco investors — including Overton — sought any additional assurances from AHN, conducted a title search, or acquired title insurance before purchasing AHN’s interest in the property.

Several days after the real estate agent showed the property to Overton, the agent phoned the Martinez home and again spoke with JoRene Martinez. JoRene Martinez insisted that the real estate agent remove the sale sign from the yard and remove the lockbox for the realtor keys from outside the home. The real estate agent went to the Martinez home and removed the sign and lockbox that day.

Within the week, however, the Respondents, Troco, Inc. and Strong (collectively “Troco”), agreed to purchase AHN’s interest in the property for $25,000.00. Martinez was not informed of this agreement by AHN, the real estate agent, or Troco. On May 8, 2000, AHN completed and recorded the Martinez quitclaim deed.

Prior to recording the deed, AHN did not place the deed into escrow, did not inform Martinez of any arrangement to sell the property, and did not pay the balance of the two home mortgages or provide any proof that the mortgages would be satisfied at closing.

The next day, on May 9, 2000, AHN quit-claimed the property to Troco. The deed was recorded that same day. The mortgages were not paid.

The parties do not dispute that placing the deed into escrow was part of the agreement between AHN and Martinez. The parties also stipulate that AHN breached the terms of the agreement and AHN did not deliver the deed to Rocky Mountain Title to hold in escrow. Instead, AHN recorded the deed and conveyed its interest to Troco without the knowledge or consent of Martinez.

Troco purchased the home with the understanding that its interest was subject to the balance of the two mortgages totaling $112,646.00. However, the liens on the home were never assigned to AHN or Troco, and Martinez remained personally liable for the balance of the two mortgages. While Troco averred that it intended to pay the balance of the mortgages with the sale of the home, Troco assumed no actual obligation to do so. The profits from the sale to Troco were retained by AHN and distributed in part to Skaggs and the real estate agent. At no point did AHN offer to return the skimmed equity to Martinez.

On May 10, 2000, Martinez received a letter from AHN indicating that the home had been sold to Troco. In a letter dated May 18, 2000, Martinez was informed by Overton that Martinez had the option of repurchasing the home for $150,000.00 or vacating it by June 15, 2000. Martinez then filed suit.2 Pursuant to a court order, Martinez has remained in the home and has continued to make all mortgage payments on the home. As part of the order, the mortgage payments are said to be the equivalent of rent. Martinez contributes to the equity in the home in exchange for physical occupation of the home and the reduction of Martinez’ personal liability on the two mortgages.

At the close of. Martinez’ evidence, Troco moved for a directed verdict on the rescission claim. The trial court found that Martinez had abandoned the claim for rescission by failing to restore to AHN the option price that would have put AHN in the position it would have been in but for the contract. The court further reasoned that Troco was a bona fide purchaser entitled to rely upon the deed recorded by AHN. Based on these findings, *1205the trial court quieted title with Troco and dismissed the Martinez’ claims against them. A jury returned verdicts for Martinez and against the other defendants on all of the remaining claims.

Martinez raised a number of issues on appeal, the majority of which were appropriately resolved by the lower courts and will not be disturbed here. We address only those issues raised with respect to Martinez’ quiet title claim. In the argument to the appellate court, Martinez asserted that the trial court erred in quieting title with Troco on three grounds: 1) the property should have been returned to Martinez under Colorado’s stolen property statute, section 18-4-405, C.R.S. (2003)3; 2) the trial court improperly dismissed the Martinez’ rescission claim; and 3) the purchasers had notice of Martinez’ interests.

The court of appeals found that the stolen property statute was not applicable. The court went on to agree with the trial court that the rescission claim had been abandoned and that the purchasers received good title as bona fide purchasers for value. In reaching this result, the court found that the trial record supported the conclusion that the purchasers paid value, in good faith, and took title without actual or constructive notice of any defect.

We granted certiorari to determine whether the two quitclaim deeds resulted in valid title passing to bona fide purchasers.4

II. Analysis

Martinez argues that the deed to AHN is void because the deed was never delivered into escrow and, consequently, the conditions precedent to the release of the deed from escrow were never satisfied. In response, Troco asserts that Martinez was fraudulently induced to quitclaim the deed to AHN and fraudulent inducement renders the deed merely voidable. Therefore, Troco asserts, it is protected as a subsequent bona fide purchaser for value, notwithstanding the agreement between Martinez and AHN to hold the deed in escrow.

In Part A, we begin with a review of the determinations made by the courts below with particular focus on the courts’ treatment of whether Troco qualifies as a bona fide purchaser. In Part B, we address whether inquiry notice was triggered by the circumstances of this case. In that latter part of our analysis, we look closely at the factual circumstances of the ease to determine whether the knowledge of AHN’s fraud may be correctly imputed to Troco, thereby defeating Troco’s bona fide purchaser status.

A.

In its order quieting title with Troco, the trial court found that Martinez had abandoned the claim for rescission and that Troco was a bona fide purchaser entitled to rely upon the deed recorded by AHN. The court of appeals affirmed the trial court on both issues.

In its analysis of the rescission issue, the court of appeals correctly determined that Martinez signed the deed and that material changes to the deed were insufficient to render the deed a forgery. Thus, the deed was not void and the burden was on Martinez to rescind the fraudulently procured deed prior to its conveyance to a subsequent bona fide purchaser. The court correctly determined that Martinez’ failure to tender to AHN the $9,020.00 resulted in the abandonment of Martinez’ right to rescind. However, because a deed voidable for fraud only protects a subsequent purchaser if the subsequent purchaser took the property for value and without notice of any defect in title, see Upson v. Goodland State Bank & Trust Co., 823 P.2d 704, 705-06 (Colo.1992), the disposition of this case turns upon whether Troco was a bona fide purchaser.

*1206In the quiet title order, the trial court found that Troco was a bona fide purchaser of the property. The court of appeals subsequently affirmed, finding that Troco qualified as a bona fide purchaser because Troco paid value, in good faith, without any notice of defect in title. Martinez, 109 P.3d at 988-89. Upon examination of the record, we find no error with the determination that Troco paid value in good faith. A closer examination of whether Troco took the property without notice of a defect in title, however, is warranted.

We have traditionally recognized three forms of notice: actual notice, constructive notice, and inquiry notice. Franklin Bank, N.A. v. Bowling, 74 P.3d 308, 313 (Colo.2003). Actual notice occurs when a party has actual knowledge of a title defect. Id. While both “constructive and inquiry notice operate to impute knowledge to a party under certain specific conditions,” we recognize them as separate inquiries. Id. at 313 n. 11. Constructive notice arises where a search of the title records would have revealed a defect. See id. at 313. “Inquiry notice arises when a party becomes aware or should have become aware of certain facts which, if investigated, would reveal the claim of another.” Id. However, notice will not be “imputed to a purchaser if a reasonable search would prove, or would have proven, futile.” Littlefield v. Bamberger, 32 P.3d 615, 619 (Colo.App.2001).

From the record below, it is clear that Troco did not have actual notice of a defect in title. It is also clear that constructive knowledge of a defect in title cannot be imputed from the record title at the time of Troco’s purchase. The record title would have revealed that title was recorded in Martinez’ name, but it would not have revealed a defect in the then unrecorded quitclaim deed held by AHN, or the underlying fraud used to procure said deed.

The trial court addressed inquiry notice only briefly during the court’s oral order at trial:

This claim against them is really on the weakest thread, which is — is that at the time they went over to the house and Ms. Martinez expressed some regret about showing the house or about wanting to go through with it, that this should have put them on notice .... The law is not intended to ask bona fide purchasers to inquire into whether or not a manifestation of some outward response is ... buyer’s remorse.

At this stage of the trial, the court properly considered the facts in the light most favorable to Martinez by assuming that Troco had knowledge of the conversation between the real estate agent and JoRene Martinez. The court then found that this knowledge was not enough to give rise to a duty of inquiry.

The court of appeals largely adopted the trial court’s conclusion that inquiry notice had not been triggered. Martinez, 109 P.3d at 988-89. The court of appeals further held that even if a reasonable inquiry had been conducted, it “would have shown that AHN possessed legitimate title pursuant to the terms of an executed option agreement and that [Martinez’] possession of the property was in accordance with this agreement.” Id. at 989.

Both the trial court and the court of appeals concluded that even if an appropriate inquiry were conducted, such an inquiry would have led to the discovery of the option agreement, but would not have revealed the fraud of the underlying transaction. In its suggestion that an inquiry would have merely revealed “buyer’s remorse,” the trial court implicitly acknowledged the sales arrangement that was embodied in the option agreement. The court of appeals explicitly recognized that an inquiry would have led to the option agreement:

[T]he evidence at trial indicates that a reasonable investigation would not have revealed the fraud perpetrated by AHN. Instead, a reasonable inquiry would have shown that AHN possessed legitimate title pursuant to the terms of an executed option agreement and that [Martinez’] possession of the property was in accordance with this agreement.

Id.

We do not find any error with the analysis of the lower courts recognizing that the option agreement would have been discovered *1207upon reasonable inquiry. However, for reasons discussed below, we reject the conclusion of the lower courts that the facts of this ease did not require reasonable inquiry that would have revealed the underlying fraud.

B.

Because the court of appeals determined that an inquiry would not have revealed that the deed was voidable due to the underlying fraud, the court never fully addressed whether inquiry notice was triggered by the circumstances of this case. Mindful of the procedural posture of this case, we now examine the evidence presented at trial to resolve this issue before returning to the conclusion of the lower courts that a reasonable inquiry would have been futile.

Inquiry notice imputes knowledge where the circumstances are such that they would have aroused the suspicions of an ordinary purchaser. See Littlefield, 32 P.3d at 618-19. And, once there is a duty to inquire, the purchaser “will be charged with all knowledge that a reasonable investigation would have revealed.” Franklin Bank, N.A., 74 P.3d at 313; see also Burman v. Richmond Homes Ltd., 821 P.2d 913, 919 (Colo. App.1991).

It is well settled in Colorado that, with certain exceptions inapplicable here, possession of real estate is sufficient to put an interested person on inquiry notice of any legal or equitable claim the person or persons in open, notorious, and exclusive possession of the property may have. See Hitchens v. Milner Land, Coal & Townsite Co., 66 Colo. 597, 601, 178 P. 575, 576 (1919); Colburn v. Gilcrest, 60 Colo. 92, 94, 151 P. 909, 910 (1915); Yates v. Hurd, 8 Colo. 343, 344, 8 P. 575, 576 (1885); Tiger v. Anderson, 976 P.2d 308, 310 (Colo.App.1998).

This court has found that the rule applies where “the party having and alleging possession is the plaintiff in a suit to reform an instrument which purports to vest title to the land, so possessed, in another.” Hitchens, 65 Colo. at 601, 178 P. at 577. Further, where the party in possession is the sole tenant and lessee, certain circumstances may give rise to a duty to inquire as to their rights as tenants beyond mere possessory rights. See Cohen v. Thomas & Son Transfer Line, Inc., 196 Colo. 386, 388, 586 P.2d 39, 41 (1978).

In Cohen, we rejected the assertion that a prospective purchaser with constructive notice of the lessee’s tenancy has only the limited duty to inquire about the possessory rights of the tenant. Id. The party in possession of the property in Cohen was the lessee of a commercial property which had been conveyed from the lessor/grantor to a third-party grantee. Id. at 387, 586 P.2d at 40. The lessee sought specific performance of a right of first refusal contained in the lease. Id. The lease was never recorded, and the lease term had actually expired at the time of the sale. Id. Although the purchasers were aware of the existence of the expired lease, they never asked to see the lease, nor did they question the lessee. Cohen, 196 Colo. at 387-88, 586 P.2d at 40. Under those circumstances, we concluded that a “reasonable inquiry would have included inquiry of the lessee who was the sole tenant in possession.” Id. at 388, 586 P.2d at 41.

The present case is not dissimilar on the facts. Troco was aware that Martinez was in physical possession of the property. Troco also had a duty to inquire as to Martinez’ rights as a lessee, and is deemed to have constructive notice of those rights. Id. at 388, 586 P.2d at 40. See also Cook v. Hargis, 164 Colo. 368, 376, 435 P.2d 385, 390 (1967). Here, the lease agreement was contained within the option agreement. Thus, Troco was on inquiry notice of Martinez’ rights as contained in the option agreement. As in Cohen, the lessee had both tenancy and possessory rights contained in an agreement of which the purchaser had inquiry notice. Consequently, Troco had a duty under the circumstances to inquire as to both the Martinez’ possessory and tenancy rights.

In determining that the circumstances of this transaction were sufficient to put Troco on inquiry notice, we also consider that these conveyances were made by quitclaim deeds.

Colorado has rejected the now disfavored notion that a quitclaim deed is enough, in itself, to put a purchaser on notice of a defect *1208in title. Franklin Bank, N.A., 74 P.3d at 313 n. 12. Although it is true that a quitclaim deed does not convey title but only that interest that the grantor has to convey, we do not find this limitation so unusual that a purchaser should, on this basis alone, be wary of the validity of this type of conveyance. However, while a conveyance by quitclaim should not automatically raise suspicion, it should not shield a transaction from scrutiny either. When a grantor chooses to convey property by quitclaim, an element of risk is imposed upon the buyer that would not otherwise be present if the conveyance were by warranty deed. Thus, although by no means dispositive, a conveyance by quitclaim is a significant factor to be considered when assessing inquiry notice. See id.

Here, there were two back-to-back quitclaim conveyances. Troco purchased the second quitclaim deed from AHN without conducting a title search or making any further inquiry into the transaction. Troco also purchased the property fully aware that the Martinez’ two recorded mortgages had not been satisfied. It does not appear that Troco made any inquiry as to why the property remained subject to these liens. From the buyer’s standpoint, this is an unusual transaction to simply accept at face value.

Pursuant to two back-to-back quitclaim conveyances — neither of which satisfied the attendant mortgages prior to sale — Troco purchased the property from AHN fully aware that Martinez was in physical possession of the property. We find that an ordinary purchaser in Troco’s position would have been suspicious of the circumstances surrounding this transaction and should have inquired further. A reasonable inquiry would have included both an inquiry into Martinez’ tenancy rights as well as into Martinez’ possessory rights. Moreover, a reasonable inquiry into the tenant’s rights in this case would have led, without further inquiry, to the possessory interests precisely because the lease was contained in the fraudulent option agreement.

Although it was not necessary for the trial court to resolve the issue of whether Troco was aware of the conversation between JoR-ene Martinez and the real estate agent in a mid-trial order, it is a circumstance relevant to inquiry notice. If Overton was aware of JoRene Martinez’ statements to the real estate agent (i.e., her statements that they did not wish to sell their home, planned to repay AHN, and remain in the home), her statements would have put Troco on notice that there was a potential problem with the quitclaim conveyance to AHN. JoRene Martinez’ statements, described by the trial court as “buyer’s remorse,” indicated a conflict in the ownership of the property.

Contrary to the trial court’s legal conclusion, it is not too much to ask that a buyer make further inquiries when made aware that the person in physical possession of the property believes they are in fact the true owner of the property. When a reasonable person is made aware that someone in physical possession of property claims ownership, the prudent course of action is to make further investigations.

Whether Troco was aware of JoRene Martinez’ statements is a relatively minor consideration in our- analysis of inquiry notice in this case. That Troco knew Martinez was living in the home, especially when considered together with the quitclaim deeds and unsatisfied mortgages, created a duty on the part of Troco to inquire further.

As noted in Part A and in our discussion of tenancy rights, a reasonable inquiry would have led to the option agreement between Martinez and AHN. The lower courts concluded that the discovery of the option agreement would not have revealed the underlying fraud. Martinez, 109 P.3d at 989. However, upon review of the agreement, we find this conclusion in error.

By its express terms, the option agreement would have plainly revealed that AHN had not purchased the quitclaim deed according to the option terms. This conclusion may be drawn from Troco’s averment that they took the quitclaim deed subject to the mortgages, in conjunction with the plain language of the option agreement that required that the two mortgages be satisfied as a condition precedent to the release of the deed from escrow. Given that Martinez remained liable on the mortgages and the property remained subject to the liens when Troco purchased the property, it would have been apparent that *1209the conditions of the contract were breached byAHN.

In sum, a reasonable investigation would have revealed the option agreement and the underlying fraud. Hence, because Troco had a duty to inquire, we impute the knowledge of the contract breach and resultant defect in delivery of the deed to Troco. Therefore, Troco is not protected as against Martinez’ claim, because Troco was on inquiry notice that the deed was fraudulently procured.

III. Conclusion

We conclude that the trial court erred when it found at mid-trial that Troco was a bona fide purchaser without notice. Accordingly, we reverse the decision of the court of appeals affirming the trial court’s quiet title order. We remand for further proceedings consistent with this opinion.

OPINION OF THE COURT

Rivera., J.

The legal question raised in this appeal is whether plaintiff Dorothy Faison is time-barred under CPLR 213 (8) from seeking to set aside and cancel, as null and void, defendant Bank of America’s mortgage interest in real property conveyed on the authority of a forged deed. Under our prior case law it is well-settled that a forged deed is void ab initio, meaning a legal nullity at its inception. As such, any encumbrance upon real property based on a forged deed is null and void. Therefore, the statute of limitations set forth in CPLR 213 (8) does not foreclose plaintiffs claim against defendant. As the Appellate Division affirmed the dismissal of plaintiffs claims as time-barred, we now reverse.

*223L

Plaintiff is the daughter and administrator of the estate of her father, Percy Lee Gogins, Jr. Gogins and his sister, defendant Dorothy Lewis (Lewis), inherited from their mother, as tenants in common, a three-family house in Brooklyn. A few years after the mother’s death, in May 2000, Lewis conveyed by quitclaim deed her half-interest in the property to her daughter Tonya Lewis (Tonya). In February 2001, Tonya recorded a deed claiming to correct the prior deed from Lewis. This corrected deed, dated December 14, 2000, allegedly conveyed Gogins’s half-interest in the real property to Tonya. Thus, if the corrected deed were valid, it would convey to Tonya a fee interest in the property. Gogins passed away in March 2001.

In September 2002, plaintiff filed an action on behalf of Gog-ins’s estate against Lewis and Tonya, claiming the corrected deed was void because her father’s signature was a forgery. In April 2003, Supreme Court dismissed the complaint on the ground that plaintiff lacked capacity to sue because she was not the estate’s administrator. At the time, Gogins’s widow was the administrator.

In December 2009, Tonya borrowed $269,332 from defendant Bank of America (BOA), which she secured with the mortgage, granted in favor of defendant Mortgage Electronic Registration Systems, Inc. (MERS). Several months later, in July 2010, Surrogate’s Court appointed plaintiff administrator of Gogins’s estate. In her supporting affidavit explaining her delay in seeking appointment, plaintiff asserted that her mother’s lawyer led her to believe that he had secured a judgment in favor of the estate, when in fact the lawyer, now disbarred, had failed to take action on her mother’s behalf.

The month following her appointment, in August 2010, plaintiff filed the underlying action against Lewis, Tonya, BOA and MERS to declare the deed and mortgage null and void based on the alleged forgery. Thereafter, BOA moved to dismiss the complaint under CPLR 3211 (a) (5) as untimely under CPLR 213 (8), and plaintiff cross-moved to dismiss the statute of limitations affirmative defense asserted in the BOA and MERS joint answer. Supreme Court granted the motion to dismiss the complaint in its entirety as time-barred, and denied plaintiffs cross motion as moot.

The Appellate Division modified the order, denying the motion to dismiss as against the individual defendants and MERS, *224on procedural grounds, leaving the action pending against those defendants (Faison v Lewis, 106 AD3d 1047 [2d Dept 2013]). On the merits, the Appellate Division concluded, in reliance on Second Department precedent, that plaintiffs forgery-based claim against defendant BOA was subject to the six-year statute of limitations for fraud claims set forth in CPLR 213 (8) (id. at 1048). We granted plaintiff leave to appeal against defendant BOA (22 NY3d 1193 [2014]).1

IL

As a preliminary matter, because this is an appeal from a dismissal under CPLR 3211 (a) (5), “[w]e accept the facts as alleged in the complaint as true, accord plaintiff! ] the benefit of every possible favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory” (Leon v Martinez, 84 NY2d 83, 87-88 [1994] [citations omitted]). Accordingly, for purposes of this appeal, we must assume that the deed is forged.2

Plaintiff contends that a forged deed has long been treated as void ab initio, entirely without effect from inception. Therefore, the CPLR 213 (8) statute of limitations does not apply to her claims to vacate and declare the deed and defendant BOA’s mortgage-based interest in the property a legal nullity. We agree.

In Marden v Dorthy, this Court held that a forged deed was void at its inception, finding it to be a “spurious or fabricated paper” (160 NY 39, 53 [1899]), a forgery characterized by “the fraudulent making of a writing to the prejudice of another’s rights” {id.). As Mar den noted, a forged deed lacks the voluntariness of conveyance (see id. at 54). Therefore, it holds a unique position in the law; a legal nullity at its creation is never entitled to legal effect because “[v]oid things are as no things” (id. at 56).

A forged deed that contains a fraudulent signature is distinguished from a deed where the signature and authority for conveyance are acquired by fraudulent means. In such latter cases, the deed is voidable. The difference in the nature of the two justifies this different legal status. A deed containing *225the title holder’s actual signature reflects “the assent of the will to the use of the paper or the transfer,” although it is assent “induced by fraud, mistake or misplaced confidence” (Marden, 160 NY at 50; see also Rosen v Rosen, 243 AD2d 618, 619 [2d Dept 1997]; 26A CJS, Deeds § 153 [“where the grantor knowingly executes the very instrument intended, but is induced to do so by some fraud in the treaty or by some fraudulent representation or pretense, the deed is merely voidable”]). Unlike a forged deed, which is void initially, a voidable deed, “until set aside, . . . has the effect of transferring the title to the fraudulent grantee, and . . . being thus clothed with all the evidences of good title, may incumber the property to a party who becomes a purchaser in good faith” (Marden, 160 NY at 50).

A forged deed, however, cannot convey good title, and “[i]t is legally impossible for any one [sic] to become a bona fide purchaser of real estate, or a purchaser at all, from one who never had any title, and that is this case” (id. at 56 [emphasis omitted]; see also Yin Wu v Wu, 288 AD2d 104, 105 [1st Dept 2001] [“A forged deed is void and conveys no title”]; 2-15 Warren’s Weed, New York Real Property § 15.01 [“A purchaser who takes title through a forged deed cannot be a bona fide purchaser, even if the purchaser did not have knowledge of the forgery”]). New York’s rule reflects a general well-established principle of real property law (see e.g. Harding v Ja Laur Corp., 20 Md App 209, 214, 315 A2d 132, 135 [1974] [“A forged deed . . . is void ab initio”]; Scott D. Erler, D.D.S. Profit Sharing Plan v Creative Fin. & Invs., L.L.C., 349 Mont 207, 214, 203 P3d 744, 750 [2009] [“forged conveyances are void ab initio and do not transfer title” (emphasis omitted)]; Brock v Yale Mtge. Corp., 287 Ga 849, 852, 700 SE2d 583, 586 [2010] [“we have also long recognized that a forged deed is a nullity and vests no title in a grantee”]; Akins v Vermast, 150 Or App 236, 241 n 7, 945 P2d 640, 643 n 7 [1997] [“If fraud is ‘in factum,’ such as a forged deed or a situation analogous to forgery, the deed is void ab initio and will not support subsequent title in any person” (emphasis omitted)]; First Natl. Bank in Albuquerque v Enriquez, 96 NM 714, 716, 634 P2d 1266, 1268 [1981] [“a forged deed is a void deed and transfers no interest”]; Williams v Warren, 214 Ark 506, 511, 216 SW2d 879, 881 [1949] [“No one can claim that an estate in land should be divested by forgery”]).

It is similarly true that no property shall be encumbered, including by a mortgagee, in reliance on a forged deed (see *226Marden, 160 NY at 51; see also Cruz v Cruz, 37 AD3d 754, 754 [2d Dept 2007] [“A deed based on forgery or obtained by false pretenses is void ab initio, and a mortgage based on such a deed is likewise invalid”]; Jiles v Archer, 116 AD3d 664, 666 [2d Dept 2014] [“If a document purportedly conveying a property interest is void, it conveys nothing, and a subsequent bona fide purchaser or bona fide encumbrancer for value receives nothing”]; 2-15 Warren’s Weed, New York Real Property § 15.09 [“If the conveyance is void, the purchaser or encumbrancer will not enjoy any of the rights of a bona fide purchaser”]; 43A NY Jur 2d, Deeds § 218 [“a forged deed is null and void, and conveys nothing, and a purchaser or mortgagee from the grantee, even for value and without notice of the forgery, will not be protected”]).

Moreover, New York’s recording statute (Real Property Law § 291) does not apply to a forged deed (see Albany County Sav. Bank v McCarty, 149 NY 71, 74 [1896]; Grosch v Kessler, 231 App Div 870, 870 [2d Dept 1930]). Neither can recording a forged deed transform it into a document with legal authority to establish a valid property interest, for it “does not change the legal rights of any one [sic]” (Marden, 160 NY at 56). “The fact that a false and fabricated writing of this character is deposited in a public office for record, and is actually recorded, can add nothing to its legal efficacy” (id.). The recording statute applies to “genuine instruments and not to forged ones” (id., citing Albany County Sav. Bank, 149 NY 71).

Given the clarity of our law that a forged deed is void ab initio, and that it is a document without legal capacity to have any effect on ownership rights, the question remains whether a claim challenging a conveyance or encumbrance of real property based on such deed is subject to a time bar. Our case law permits only one answer: a claim against a forged deed is not subject to a statute of limitations defense.

As this Court held in Marden, a forged deed is void, not merely voidable. That legal status cannot be changed, regardless of how long it may take for the forgery to be uncovered. As this Court made clear in Riverside Syndicate, Inc v Munroe, a statute of limitations “does not make an agreement that was void at its inception valid by the mere passage of time” (10 NY3d 18, 24 [2008], citing Pacchiana v Pacchiana, 94 AD2d 721 [2d Dept 1983]). Consequently, plaintiff may seek to vacate the deed and defendant’s encumbrance upon the property. If, as plaintiff claims, the deed is a forgery, then it was never *227valid and Tonya lacks title to Gogins’s half-interest in the property based on the “corrected” deed.

Indeed, this is the prevailing approach in other jurisdictions (see e.g. Moore v Smith-Snagg, 793 So 2d 1000, 1001 [Fla Dist Ct App, 5th Dist 2001] [“(o)f course, there is no statute of limitations in respect to the challenge of a forged deed, which is void ab initio” (emphasis omitted)]; see also Wright v Blocker, 144 Fla 428, 432-436, 198 So 88, 90-91 [1940]). The high court of West Virginia, for example, has observed that “there is no statute of limitations regarding void deeds” (MZRP, LLC v Huntington Realty Corp., 2011 WL 12455342, *4, 2011 W Va LEXIS 240, *13 [Mar. 10, 2011, No. 35692] [void tax deed]), while the high court of Idaho held that “[b]ecause [a] lease agreement was void ab initio, it could be challenged at any time” (Thompson v Ebbert, 144 Idaho 315, 318, 160 P3d 754, 757 [2007] [attempted lease void based on a lack of authority to lease only a portion of the property]).

III.

Defendant BOA contends that plaintiffs claim is time-barred because forgery is a category of fraud, and, like any other claim based on fraud, an action challenging a forged deed is subject to the limitations period of CPLR 213 (8). That conclusion cannot be squared with our decisions in Marden and Riverside Syndicate, nor with general principles of real property law. Nor is it supported by compelling policy reasons. On the contrary, our long-standing commitment to the protection of ownership interests and the integrity of our real property system favors the continued treatment of challenges to forged deeds as distinct from other claims, and exempt from a statute of limitations defense.3

Most notably, defendant wholly fails to address Marden and the well-established authority distinguishing forged deeds as void ab initio from instruments that are merely voidable. Instead, defendant, and our dissenting colleagues, seek to *228distinguish Riverside as a case about illegal contracts, not deeds, and thus should be limited to its subject matter, namely instruments void at inception due to illegality. We are unpersuaded. The fact that Riverside involved an illegal agreement is no basis to limit its analysis as regards the statute of limitations. Instead, the language and analysis employed in Riverside make clear that the holding was based on a rule that is generally applicable to claims involving void documents, including, obviously, forged deeds.

First, Riverside relied on “the nature of a statute of limitations” (10 NY3d at 24). That, of course, refers to the statute’s function as barring stale claims. In contrast, a statute of limitations cannot grant legal significance to a document expressly rejected under the law; it cannot be deployed to validate what the law has never recognized.

Second, Riverside cited Pacchiana, a case that exempted a void document from the application of the statute of limitations, and in doing so distinguished between void and voidable documents, highlighting the significance of that legal distinction. In Pacchiana, the Appellate Division held that where a prenuptial agreement fails to comply with real property rules regarding the proper recording of a conveyance, the agreement is void at its inception and cannot be subject to the statute of limitations (Pacchiana, 94 AD2d at 722). Although the case involved a contract and not a forged deed, the Court nevertheless relied on statutory rules of real property conveyance, not general public policy against illegal contracts, in finding the prenuptial agreement to be void {id. at 721). Given this Court’s reliance on Pacchiana, the Riverside decision clearly applied a rule of general applicability regarding void documents to the specific facts of that case. There is, then, no reason to limit Riverside’s reach, or forgo application of the same general rule — a document void at its inception has no effect and cannot be subject to a statute of limitations — to cases involving a forged deed.

The defendant notes that the agreement in Riverside violated the Rent Stabilization Code, and because of its illegal nature violated public policy. However, defendant ignores the significant public policies underlying our real property system, which have animated the previously discussed real property rules that treat forged deeds as a legal nullity. The public policy concerns that underlie prohibitions on enforcement of illegal contracts are surely no more consequential than those appli*229cable to forged deeds, and a forged deed is no less offensive to our legal system than an illegal contract. As the Court stated in Marden, a forged deed is essentially “[a] false making, with an evil design” (160 NY at 55). Indeed, New York has determined that forgery is sufficiently morally unacceptable and dangerous to society that our State has criminalized forgery, subjecting wrongdoers to potential criminal prosecution with the attendant risk of incarceration (see Penal Law §§ 170.05, 170.10, 170.15). Therefore, we will not impose statutes of limitations on forged deeds because the resulting prejudice to the “rights of the true owner of real estate” only “open[s] the door for the destruction of all titles, and make[s] it much easier for the criminal to purloin real than personal property” (see Marden, 160 NY at 57-58).

Having failed to persuade based on our case law, the defendant argues that a statute of limitations is necessary to protect the sanctity of real property titles. However, section 213 (8) contains a two-year discovery rule, which potentially extends the life of a claim years beyond the six-year statutory term. As a consequence, land titles already are subject to challenge, based on a forged deed, far into the future.4

Moreover, in a line of cases including Ford v Clendenin (215 NY 10 [1915]) and the more recent Orange & Rockland Util, v Philwold Estates (52 NY2d 253 [1981]), we recognized that certain property interests are exempt from any time limit. This Court observed in Ford that

“an owner in possession has a right to invoke the aid of a court of equity at any time while he is so the owner and in possession, to have an apparent, though in fact not a real incumbrance discharged from the record and such a right is never barred by the Statute of Limitations. It is a continuing right which exists as long as there is an occasion for its exercise” (215 NY at 16; see also Orange & Rock-land Util., 52 NY2d at 261, citing Ford).

Similarly, this Court held in Cameron Estates, Inc. v Peering that the statute of limitations did not bar plaintiffs action *230challenging the forced sale of property where plaintiff paid all required taxes, rendering the underlying tax deed void ab initio (308 NY 24, 31 [1954]). Thus, contrary to defendant’s argument, there are property claims that cannot be extinguished by the passage of time.

Our dissenting colleagues argue that a statute of limitations is necessary in order to avoid litigation over claims which are difficult to defend because of the mere passage of time (see dissenting op at 234). As we have stated, the discovery provision in the statute allows for this possibility (see CPLR 213 [8]). In any case, the stale claims alluded to are just as likely to be difficult to prove, reducing the number of claims that will be filed when evidence has been destroyed and memories have faded.5 6 Moreover, the argument for bringing finality to potentially stale claims fails to make the case for why the desire for repose is any more significant than the need to ferret out forged deeds and purge them from our real property system. As the law makes clear, a forged deed has no legal significance and cannot convey title, therefore there is no reason to impose barriers to those who seek to vacate such deed as null and void.6

IV

For over a century, since this Court’s decision in Marden, a forged deed has been treated in New York as void ab initio. As the Court recognized in Riverside, a statute of limitations cannot validate what is void at its inception. Therefore, a void deed is not subject to a statutory time bar. The defendant’s arguments are in contravention of Marden and Riverside, and would subject a claim of deed forgery to a six-year statute of *231limitations under CPLR 213 (8), with the result that a forged deed may be relied upon to convey title and for purposes of encumbering real property. However, under well-established real property principles, because only a holder of legal title may convey an interest in real property, no property interest can be conveyed by a forged deed, and no person may be a bona fide purchaser of real estate on the force of such deed. Moreover, our recording statute does not apply to a forged deed, with the consequence that recording a forged deed cannot transfer title. We, thus, decline the defendant’s invitation to unsettle this established doctrine to the detriment of our State’s real property recording system.

To adopt defendant’s position is to permit a forged deed to accomplish, by the mere passage of time, what has always been forbidden — the encumbrance and transfer of title. Neither law nor public policy nor common sense dictates such outcome. Defendant fails to present a compelling reason to overturn or ignore our prior case law in the area of real property because as we have recognized, “parties in business transactions depend on the certainty of settled rules, fin real property more than any other area of the law, where established precedents are not lightly to be set aside’ ” (172 Van Duzer Realty Corp. v Globe Alumni Student Assistance Assn., Inc., 24 NY3d 528, 535 [2014], citing Holy Props., v Cole Prods., 87 NY2d 130, 134 [1995]). No less so with respect to forged deeds, because landowners, banks, mortgagees, insurers, and a myriad of others depend on the simple rule that a forged deed is a legal nullity that cannot divest ownership or serve to encumber real property.

Accordingly, the order of the Appellate Division, insofar as appealed from, should be reversed and defendant Bank of America, N.A.’s motion to dismiss the complaint against it pursuant to CPLR 3211 (a) (5) denied.

Chief Judge Lippman

(dissenting). I believe that plaintiffs action against defendant Bank of America, seeking to invalidate the Bank’s mortgage interest in real property conveyed by an allegedly forged deed, is subject to the six-year statute of limitations under CPLR 213 (8). Because plaintiff did not commence this action within either the applicable six-year limitation period, or two-year discovery window provided by the statute, I would find that the claim is time-barred. In 1996, defendant Dorothy Lewis and her brother, Percy Lee Gogins, Jr., *232inherited property located at 1900 Bergen Street in Brooklyn. They took title to the property as tenants in common, each with an undivided one-half interest. Dorothy Lewis subsequently conveyed her interest in the property to her daughter, defendant Tonya Lewis, by quitclaim deed dated May 21, 2000. On February 14, 2001, Tonya Lewis recorded a “correction deed” dated December 14, 2000. That document, which plaintiff alleges is a forgery, purported to correct the earlier quitclaim deed by adding Percy Gogins as an additional grantor, thereby conveying the entire property to Tonya Lewis. Percy Gogins died in March 2001.

Plaintiff Dorothy Faison, Percy Gogins’ daughter, commenced a pro se action in Supreme Court in September 2002, alleging that the Lewis defendants had engaged in a scheme to defraud by forging and filing a false deed. The complaint was dismissed under CPLR 3211 (a) because plaintiff lacked capacity to maintain it, as she had not been appointed the administrator of her father’s estate, and for failure to state a cause of action upon which relief could be granted.

Years passed, during which plaintiff took no further action. In December 2009, defendant Tonya Lewis obtained a mortgage on the property from defendant Bank of America in the amount of $269,332. Soon thereafter, plaintiff petitioned Surrogate’s Court for a decree appointing her the administrator of Percy Gogins’ estate. In connection with that proceeding, plaintiff submitted an affidavit of delay, in which she represented that she had discovered the existence of the forged deed “[a]t some time in or around 2003.” Plaintiff was appointed the administrator of her father’s estate in July 2010.

The following month, plaintiff commenced this action, in her capacity as administrator of Gogins’ estate, against the Lewis defendants, Bank of America and defendant Mortgage Electronic Registration Systems, Inc. (as nominee for Bank of America). According to the complaint, plaintiff is a resident of the State of Georgia. Plaintiff alleged that Gogins had never authorized the transfer of his ownership interest in the property and that the December 2000 correction deed was a forgery. She sought a judgment declaring the deed null and void, directing defendant Tonya Lewis to disgorge half of all rents and profits generated by the premises, and setting aside and canceling the mortgage. The courts below granted Bank of America’s motion to dismiss the action under CPLR 3211 (a) (5) on statute of limitations grounds.

*233The majority finds that plaintiffs action should not have been dismissed as untimely — indeed, that it is not subject to any statute of limitations whatsoever — because the allegedly forged deed was void and therefore incapable of conveying any property interest. Since the void deed is a nullity, the majority finds that a property owner has no obligation to take prompt legal action to enforce her rights. The majority correctly relies on Marden v Dorthy (160 NY 39 [1899]) for the proposition that a forged deed is void at its inception (see majority op at 224). We agree with this long-held position. However, Marden is not a statute of limitations case and, therefore, reliance on its authority is inappropriate at this procedural juncture.

While a deed proved to have been a forgery cannot operate to affect ownership rights, this does not compel the result that the opportunity to challenge such conveyance is without limit. “Statutes of Limitation are essentially arbitrary time limitations barring the commencement of an action, and they reflect the legislative judgment that individuals should be protected from stale claims” (McCarthy v Volkswagen of Am., 55 NY2d 543, 548 [1982]). While statutes of limitations foreclose a party’s claim, they do not extinguish a party’s underlying right (see Hulbert v Clark, 128 NY 295, 298 [1891]; see also Siegel, NY Prac § 34 at 44 [5th ed 2011] [“The theory of the statute of limitations generally followed in New York is that the passing of the applicable period does not wipe out the substantive right; it merely suspends the remedy”]).

“In examining the policies underlying Statutes of Limitation, this Court has emphasized both a defendant’s interest in repose and ‘in defending a claim before [the] ability to do so has deteriorated through passage of time.’ We have also taken note of considerations of judicial economy and possible plaintiff fraud where excessive factual inquiries would be necessary. Balanced against these considerations is the injured person’s interest in having a reasonable opportunity to assert a claim” (Blanco v American Tel. & Tel. Co., 90 NY2d 757, 773-774 [1997] [citations omitted]).

I would conclude that an action to invalidate a forged deed is subject to a statute of limitations defense. Forgery is closely related to and essentially a type of fraud. We have previously observed that forgery was “defined by the common law to be the fraudulent making of a writing to the prejudice of *234another’s rights, or the making malo animo of any written instrument for the purpose of fraud and deceit” (Marden, 160 NY at 53 [citations omitted]). It is therefore logical and reasonable to apply the statute of limitations for fraud to forgery claims (see e.g. Piedra v Vanover, 174 AD2d 191, 194 [2d Dept 1992]). Under CPLR 213 (8), such a cause of action must be commenced within “the greater of six years from the date the cause of action accrued or two years from the time the plaintiff . . . discover^] the fraud, or could with reasonable diligence have discovered it.” The application of the statute of limitations here has the benefit of imposing some limit on the time in which claims can be brought, while also leaving a discovery window for forgery claims which, like fraud, can be concealed from the plaintiff.

A contrary rule under which plaintiff would prevail entails no statute of limitations applicable to an action alleging forgery. We have never so held. To the contrary, the CPLR imposes a six-year limitations period for “action [s] for which no limitation is specifically prescribed by law” (CPLR 213 [1]). And, despite the majority’s repeated invocation of the well-settled principle that a forged deed is a void instrument, not one of the cases it cites addresses the timeliness of this type of action. Rather, New York courts that have considered the issue have consistently applied a six-year statute of limitations to situations like this one (see Vilsack v Meyer, 96 AD3d 827 [2d Dept 2012]; Shalik v Hewlett Assoc., L.P., 93 AD3d 777 [2d Dept 2012]; JP Morgan Chase Bank, N.A. v Kalpakis, 91 AD3d 722 [2d Dept 2012]; Coombs v Jervier, 74 AD3d 724 [2d Dept 2010]; Georgiou v Panayia of Mtns. Greek Orthodox Monastery, Inc., 16 AD3d 998 [3d Dept 2005]; Piedra, 174 AD2d 191; see also Endervelt v Slade, 194 AD2d 305 [1st Dept 1993]).

Indeed, the absence of any limitations period could result in the commencement of actions that the passage of time makes exceedingly difficult, or impossible, to defend; a plaintiff could, for instance, bring the claim long after the relevant events, but just after the death of the crucial defense witness. Notably, although the majority observes that Florida technically imposes no statute of limitations in this context, that state has the “Marketable Record Title Act,” which, with certain exceptions, essentially deems properly recorded deeds to be valid after a 30-year period (see Fla Stat § 712.02; H & F Land, Inc. v Panama City-Bay County Airport & Indus. Dist., 736 So 2d 1167, 1172 [Fla 1999] [“a root of title based upon a forged deed would *235prevail even over an otherwise entirely valid deed recorded earlier in the chain of title”]; Marshall v Hollywood, Inc., 236 So 2d 114, 120 [Fla 1970]).

In analogous circumstances to those presented here, we have required individuals to abide by applicable limitations periods (see e.g. Ford v Clendenin, 215 NY 10, 17 [1915] [applying a 10-year statute of limitations to an action in equity to quiet title by one who was out of possession]; 8-87 Warren’s Weed, New York Real Property § 87.45; Hechter v New York Life Ins. Co., 46 NY2d 34, 39 [1978] [applying a six-year statute of limitations to a UCC claim “against a bank for collecting an instrument over a forged indorsement”]). And, while forgery is subject to criminal liability, there is also a statute of limitations applicable to those crimes (see CPL 30.10 [2] [b], [c]; Penal Law §§ 170.05, 170.10, 170.15 [five years for the felony offenses of first- and second-degree forgery and two years for the misdemeanor offense of third-degree forgery]).

Plaintiff asserts that the decision below conflicts with our holding in Riverside Syndicate, Inc. v Munroe (10 NY3d 18 [2008]), wherein we determined that an agreement to pay illegal rent for a rent-stabilized apartment was void and unenforceable by either party. The agreement, under which the tenants agreed to waive the benefit of rent stabilization in exchange for the ability to use the apartment as a second home, was deemed to be violative of public policy and contrary to the express terms of the Rent Stabilization Code (see Riverside Syndicate, 10 NY3d at 22). We rejected the argument that the landlord’s action, seeking a declaration that the agreement was void, was barred by the six-year statute of limitations pertaining to contractual obligations or liability (see Riverside Syndicate, 10 NY3d at 24; CPLR 213 [2]). We noted that “[t]his action [was] not one ‘upon a contractual obligation or liability’ ” for which the six-year limitations period was set forth in CPLR 213 (2), but was “to declare that no valid contractual obligations ever existed” (Riverside Syndicate, 10 NY3d at 24).

Riverside is unlike the situation presented here. It is well settled that “illegal contracts, or those contrary to public policy, are unenforceable and that the courts will not recognize rights arising from them” (Szerdahelyi v Harris, 67 NY2d 42, 48 [1986]). “[T]he law ‘will not extend its aid to either of the parties [to an illegal contract]’ or ‘listen to their complaints against each other, but will leave them where their own acts have placed them’ ” (Stone v Freeman, 298 NY 268, 271 [1948], quot*236ing Schermerhorn v Talman, 14 NY 93, 141 [1856]). Plaintiffs claim, seeking to invalidate an allegedly forged deed, does not involve the same public policy concerns. In contrast with the situation presented by parties attempting to enforce an illegal contract — which only involves those parties — in a dispute over real property ownership rights, the rights of an unlimited number of innocent purchasers who rely on the transfer documents in a chain of title can be affected by a forged deed.*

Plaintiff also relies upon Cameron Estates, Inc. v Deering (308 NY 24 [1954]), in which we held that the statute of limitations could not be invoked to prevent a taxpayer from challenging a void tax deed. That case, however, is also inapt. The plaintiff in Cameron Estates had paid the taxes on the property and brought the action to remove a cloud on his title.

“When void tax deeds are attempted to be made prima facie evidence of the regularity of the proceedings, equity will interfere to permit removal as a cloud on title which right may be invoked by the owner in possession at any time as ‘such a right is never barred by the Statute of Limitations’ ” (Cameron Estates, 308 NY at 31 [citations omitted]).

Plaintiff does not claim to be in possession of the property and it is therefore unnecessary to address the consequences of what would flow from such fact.

The stability of the State’s real property system is plainly important and the idea of losing one’s property because of a forged deed is, of course, offensive. But it is no more so than the plight of any innocent plaintiff being barred from attempting to obtain relief from an injury by failing to commence an action within the time limits set by the legislature. Indeed, it is the prospect of no repose, particularly where the property may have changed hands since the allegedly forged deed, that would appear to endanger the stability of real property transactions. The majority’s rule permits a person who discovers a *237forged deed to sit on his or her rights and commence an action at any time. Thus, a plaintiff could do nothing until it became impossible to defend a claim of forgery, thereby making title to real property subject to reversal indefinitely. Contrary to the majority’s position that its rule will foster security, in fact, the absence of a statute of limitations will result in just the opposite because, under the majority’s holding, every deed is subject to attack at any time. Limitation periods can sometimes work a hardship, but they are set for a reason and particularly where, as here, a discovery window applies, there is no compelling reason to exempt an entire cause of action from any time limit at all.

Here, the deed was allegedly forged in December 2000. In addition, according to her Surrogate’s Court submission, plaintiff had been aware of the deed no later than 2003 (indeed, a prior action was commenced in Sept. 2002). Since, in this circumstance, the two years afforded by the discovery rule would not have extended the six-year statute of limitations, I would find that this action as against the Bank, which was not commenced until August 2010, was untimely and was properly dismissed by the courts below.

Judges Read, Pigott and Fahey concur; Chief Judge Lipppman dissents in an opinion in which Judges Abdus-Salaam and Stein concur.

Order, insofar as appealed from, reversed, with costs, and defendant Bank of America, N.A.’s motion to dismiss the complaint against it pursuant to CPLR 3211 (a) (5) denied.

BOYD, Justice.

This cause is before the Court on petition for certiorari to review the decision of the court below, Love v. Elliott, 350 So.2d 93 (Fla.lst DCA 1977), on the ground that it is in conflict with a decision of another district court of appeal. We have jurisdiction. Art. V, § 3(b)(3), Fla.Const.

*648Mary V. Nowling Elliott, now deceased, brought an action seeking the cancellation of a deed. The trial court found that Mrs. Elliott, a simple, elderly woman who could neither read nor write, owned an undivided one-fifth interest in the minerals underlying a seventy-five acre tract of land. In January 1972 B. G. Russell offered to buy her entire interest, but she refused. She orally agreed to sell Mr. Russell two of the thirteen to fifteen mineral acres she owned for $3300.00. The trial court found further:

Defendant Russell prepared the mineral deed, and instead of the two acres of minerals agreed upon, fraudulently substituted the clause: “one-fifth (Vs) interest in and to all the oil, gas, and other minerals” and then inserted the legal description of the 75 acres. Obviously, one-fifth of 75 acres is 15 acres — a deal that the Plaintiff had consistently refused to make.

Mrs. Elliott lived with her daughter, who could read, write, and understand simple things. The daughter looked over the instrument Russell had prepared. Although she did not understand the deed, she advised Mrs. Elliott that she guessed it was all right.

Several days later, Russell contacted Mrs. Elliott and told her that he had made a mistake in drawing up the deed. He offered to pay her $15,000 for the interest that had been conveyed. She refused and insisted on a reconveyance of that portion of the interest which she had not intended to sell. “[0]n February 16, 1972, Russell and his wife purported to reconvey to Plaintiff the thirteen seventy-fifths (13/reths) interest of which she had been defrauded.” On February 11,1972, however, Russell conveyed a substantial portion of the same mineral rights to C. P. McClelland, who later conveyed to respondents Messrs. Love, Harris, and Carpenter. Mrs. Elliott remained ignorant of the Russell-McClelland and subsequent transactions until October 1973 when she wanted to sell more of her mineral rights and a title search revealed them. She sued for cancellation of the deed. The trial court held in her favor, concluding:

By trick and fraud the Plaintiff was induced to sign a conveyance other than the one she intended to sign. Therefore, there was no lawful delivery of such instrument. The instrument is void. In light of her lack of education and attained age, the Court finds she was free of any negligence or inattention.

On appeal, the district court reversed. The court characterized the central question as being whether a deed procured by such fraud as was found in this case is void at law, as the trial court held, or merely voidable in equity on petition of the defrauded grantor. If the deed was void, then no legal title passed to the grantee. If the deed was only voidable in equity, then the equitable defenses of laches and of a bona fide purchaser are available. See Holley v. May, 75 So.2d 696 (Fla.1954); Bryson v. Bridges, 51 Fla. 395, 41 So. 28 (1906).

A bona fide purchaser has the right to rely on the record title of his grant- or, but this protection extends only to those purchasing a legal title. Myers v. Van Buskirk, 96 Fla. 704, 119 So. 123 (1928). The recording of a void or forged deed is legally insufficient to create a legal title, and affords no protection to those claiming under it. Reed v. Fain, 145 So.2d 858 (Fla.1962); Wright v. Blocker, 144 Fla. 428, 198 So. 88 (1940). (The question of whether a void or forged deed can constitute the root of title under the operation of the Marketable Record Titles law, chapter 712, Florida Statutes (1977), is not at issue in this case.)

The district court implicitly held that the deed in the instant case was voidable, as is indicated by the court’s discussion of the applicability of the defenses of purchaser-without-notice and laches. In so doing it created conflict with Houston v. Mentelos, 318 So.2d 427 (Fla.3d DCA 1975).

The trial court cited Houston v. Mentelos in support of its holding that the deed was void. In that case, the plaintiff had orally agreed to lease her land. She signed two documents prepared by the purported lessee. One was a contract for sale and the other a warranty deed. The trial court *649found “that plaintiffs signature on the ‘Warranty Deed’ was obtained through the fraud of the defendant Thomas E. Mentelos who misrepresented that the documents which plaintiff signed embodied the oral lease agreement.” 318 So.2d at 430. Also, the contract for sale was altered subsequent to its execution “by the addition of language which made the document to read like a contract to convey the subject real property rather than a lease agreement.” Id. at 428. Mentelos, the fraudulent grantee, then executed a mortgage in favor of a mortgagee for value who had no notice of the fraud. Based on the trial court’s conclusions that there was fraud and that there was no negligence on the part of the grantor, the district court held that the deed was void. We disapprove the holding of Houston v. Mentelos, 318 So.2d 427 (Fla.3d DCA 1975), to the extent that it held that a deed, the execution of which is procured by fraud, is void ab initio.

In Houston v. Mentelos, the court relied on the cases of Houston v. Adams, 85 Fla. 291, 95 So. 859 (1923) and Houston v. Forman, 92 Fla. 1,109 So. 297 (1926). The rule enunciated in those cases was that where a grantor executes a deed and then places it in escrow, subject to conditions agreed to in a contract for sale, and the grantee gets possession of the deed through fraud, the deed is void, there is no conveyance, and a bona fide purchaser from the grantee will not be protected.

Delivery is an essential requisite of the execution of a deed conveying valid legal title. Without delivery, nothing passes to the grantee. Bould v. Coe, 63 So.2d 273 (Fla.1953); Lance v. Smith, 123 Fla. 461, 167 So. 366 (1936); Parken v. Jafford, 48 Fla. 290, 37 So. 567 (1904); Ellis v. Clark, 39 Fla. 714, 23 So. 410 (1897). The rule of Houston v. Adams that a deed procured by fraud is void is limited to situations where the fraud in the execution is such that it can be said there was a complete failure of delivery.

In Houston v. Adams, the grantor had attempted to condition the delivery through an escrow agreement. The grant- or thus had given up actual possession of the deed but attempted to place conditions on its delivery. The grantor did not participate in the events leading to the grantee’s obtaining possession of the deed. No act of his made the fraud possible. The court likened the grantor’s passivity in this matter to the situation where a safe is broken into and an undelivered deed stolen. We hold that the rule applied there is not appropriate to this case. Here, the execution of the deed, including delivery, was complete in all its legal requisites. The trial court’s findings of fact that the grantee committed fraud and that the grantor was not negligent do not compel the conclusion that there was such a substitution of documents as to constitute failure of delivery or such an alteration of documents as to be the equivalent of a forgery. The grantor knew that she was executing and delivering a deed of mineral rights. The law charged her with the responsibility of informing herself as to the legal effect of the document she was signing. See Lewison v. Frumkes, 64 So.2d 321 (Fla.1952); Ross v. Richter, 187 So.2d 653 (Fla.2d DCA 1966).

Where all the essential legal requisites of a deed are present, it conveys legal title. Fraud in the inducement renders such a legally effective deed voidable in equity. Anders v. Anders, 143 Fla. 721, 197 So. 451 (1940). We hold that the district court was correct in holding that the deed was merely voidable, and that it conveyed a legal title to the grantee.

Because of its holding that the deed was void, the trial court granted summary judgment in favor of the plaintiff. Therefore there were no findings of fact on the issue of the good faith of the purchasers from McClelland. While the district court was correct in holding the deed voidable rather than void, there was no basis for it to conclude from the record that the defendants were bona fide purchasers. The case should be remanded for trial of this factual issue.

The decision of the district court, insofar as it held the deed voidable, is approved. It *650decision holding for the respondents is quashed with directions that the cause be remanded to the trial court for further proceedings consistent with this opinion.

It is so ordered.

ENGLAND, C. J., SUNDBERG and ALDERMAN, JJ., concur.

OVERTON, J., dissents with an opinion, with which ADKINS, J., concurs.

OVERTON, Justice,

dissenting.

I dissent. The decision of the trial court was correct. I would hold the deed void under the factual circumstances of this case, which I find consistent with our holding in Houston v. Adams, 85 Fla. 291, 95 So. 859 (1923).

ADKINS, J., concurs.

The opinion of the Court was delivered by

POLLOCK, J.

The primary issue is whether a farm labor service that employs migrant farmworkers from Puerto Rico and provides them with living quarters must dispossess a worker, not by self-help, but in a judicial proceeding after terminating his employment.

Natividad Vasquez, a Puerto Rican farmworker, instituted this action after he was dispossessed without notice following the termination of his employment by Glassboro Service Association, a farm labor service organization. Glassboro had employed Vasquez pursuant to a contract negotiated with the Puerto Rican Department of Labor. The Chancery Division ruled that Glassboro should not have dispossessed Vasquez by self-help, but in a summary dispossess proceeding. Vasquez v. Glassboro Service Association, 159 N.J.Super. 310 (1976). The Appellate Division affirmed. 159 N.J.Super. 218 (1978). We granted certification. 79 N.J. 478 (1979).

We hold that a farm labor service may not use self-help, but must proceed in a judicial action to dispossess a farmworker who remains in possession of his living quarters after termination of his employment. We reach that conclusion although we hold that a migrant farmworker is not a tenant or otherwise included within N.J.S.A. 2A:18-61.1(m) pertaining to the dispossession of certain residential tenants. We hold further that the failure of the Glassboro contract to provide a migrant farmworker with a reasonable opportunity to find shelter before dispossession is against the public policy of the State, and we imply into the contract a provision for a reasonable time to find alternative housing. In resolving a dispute between a farmworker and a labor service, a court may grant time to the worker to find housing, direct the labor service to assist him in obtaining *91housing or provide him with return passage to Puerto Rico, or order other appropriate relief.

I

Although our analysis is based on facts which occurred in 1976, there is no indication that the essential facts, including the contract, relationships of the parties, or working conditions have changed since that time. Glassboro is a non-profit corporation comprised of farmers who contracted with Glassboro for migrant farm labor. The farmers called Glassboro as they needed workers to pick crops, and Glassboro transported workers from its labor camp to the farms. The length of time that a worker stayed at a farm varied, depending primarily on the time needed to pick a crop. Glassboro paid the worker his wages, and the farmer paid Glassboro for those wages plus a commission for Glassboro’s services.

Only men were hired; the workers’ families remained in Puerto Rico. Glassboro paid a farmworker $2.40 per hour and charged him $23 per week for meals. The worker agreed to work eight hours a day for six days a week, plus overtime as mutually agreed.

The 1976 contract stated that a worker was to pay for his transportation from Puerto Rico. If he completed his contract, he would be reimbursed for the cost of transportation from and provided return transportation to Puerto Rico. If the worker did not fulfill his contract, Glassboro was not obliged to reimburse him for the cost of transportation. Although the contract provided that Glassboro would furnish a non-negotiable airplane ticket to Puerto Rico for a worker who became physically unfit, there was no comparable provision for a worker who was fired. The contract period was for 28 weeks, or until December 1, whichever came first.

The contract provided that, if an employee was to be discharged, a hearing was to occur no later than five days after the employee was given notice of termination. The contract did not *92require a minimum amount of time to elapse between notice and termination of employment.

The contract provided further for administrative review within the Puerto Rican Department of Labor whenever a worker had a complaint “regarding the breach, application, interpretation or compliance” with the contract. If the Secretary of Labor determined that Glassboro had “not adequately remedied the complaint”, the Secretary could represent the worker and sue Glassboro.

Pursuant to the contract, Glassboro supplied living quarters for workers at its labor camp in New Jersey. Those quarters consisted of barracks housing up to 30 men. Each worker received a mattress, bedding, and a locker. The barracks were equipped with common toilets, showers, and lavatories. Although some farmers charged the workers for housing while the workers were at the farms, Glassboro did not impose any extra charge for housing at its labor camp. The contract did not require a migrant farmworker to live at Glassboro’s labor camp. Nonetheless, the parties contemplated that the farmworker would reside at the labor camp.

In 1976, Vasquez was recruited in Puerto Rico and came to New Jersey to work for Glassboro. According to Glassboro’s foreman, Vasquez’s work was not satisfactory. On July 19, 1976, the foreman told Vasquez that he was to be discharged. A few hours later Vasquez had his “hearing” with the foreman and a field representative of the Puerto Rican Department of Labor. Thereafter the foreman decided to complete the discharge, a decision Vasquez does not challenge in this action. Although there were vacant spaces at the Glassboro barracks, Vasquez was not permitted to remain overnight. The foreman told him to gather his belongings and leave.

Unable to speak English and without funds to return to Puerto Rico, Vasquez sought the assistance of the Farmworkers Corporation, a federally funded non-profit corporation dedicated to the needs of farmworkers. He also consulted with the *93Farmworkers Rights Project of the Civil Liberties Education and Action Fund of the American Civil Liberties Union of New Jersey. A Rutgers law student returned with Vasquez to the camp and requested that Vasquez be allowed to remain overnight. The request was refused. Vasquez stayed with a friend who was participating in a job training program conducted by the Farmworkers Corporation.

The Farmworkers Rights Project filed a complaint on July 22, 1976, seeking an order permitting Vasquez to reenter his living quarters and enjoining defendants from depriving him of the use of the quarters except through judicial process. The complaint also sought damages, but Vasquez has abandoned that demand.

The trial court interpreted a provision of N.J.S.A. 2A:18-61.1 to apply to Vasquez. N.J.S.A. 2A:18-61.1 provides that a landlord may not remove a tenant except by establishing one of enumerated grounds as good cause. N.J.S.A. 2A:18-61.1(m) states good cause exists if “[T]he landlord or owner conditioned the tenancy upon and in consideration for the tenant’s employment by the landlord or owner as superintendent, janitor or in some other capacity and such employment is being terminated.” The court found Vasquez to be included within the phrase “in some other capacity”, Vasquez, supra, 159 N.J.Super. at 313, 387 A.2d 1245, and ruled that Glassboro reinstate Vasquez to his living quarters.

Although Vasquez has since found housing, other workers have been evicted, one at 3:00 a. m. Shelter for dispossessed migrant farmworkers remains scarce. The Farmworkers Corporation estimates it provides emergency housing for approximately 500 workers each season.

Under the contract, once a worker’s employment was ended, he had no right to stay at the camp. Glassboro had no obligation to arrange for alternative shelter. As with Vasquez, within the same day, Glassboro could notify a worker of the termination of his employment, meet with a representative of the *94Puerto Rican Department of Labor, complete the termination of the employment, and dispossess the employee.

The parties have urged that the dispossession of migrant farmworkers is likely to recur and have requested that we not treat the case as moot. We agree that the public interest requires that we resolve whether a migrant farmworker should be dispossessed from his living quarters through a judicial proceeding. See Dunellen Bd. of Ed. v. Dunellen Ed. Ass’n, 64 N.J. 17, 22 (1973); Busik v. Levine, 63 N.J. 351, 364 (1973), app. dism. 414 U.S. 1106, 94 S.Ct. 831, 38 L.Ed.2d 733 (1973).

II

At common law, one who occupied premises as an employee of the owner and received the use of the premises as part compensation for his services or under a contract of employment was not considered a tenant. See Scottish Rite Co. v. Salkowitz, 119 N.J.L. 558 (E. & A. 1938) (caretaker who received monthly salary and use of premises was not a tenant but an employee who became a trespasser when his employment ended); Gray v. Reynolds, 67 N.J.L. 169 (Sup.Ct.1901) (agreement for one year between owner and sharecropper does not create landlord-tenant relationship); McQuade v. Emmons, 38 N.J.L. 397 (Sup.Ct.1876) (employee who received $25 per month and use of tenant house is a trespasser after end of employment); Schuman v. Zurawell, 24 N.J.Misc. 180 (Cir.Ct.1946) (apartment superintendent is not a tenant). But see Morris Canal and Banking Company v. Mitchell, 31 N.J.L. 99 (Sup.Ct.1864) (lock tender who used dwelling house as part compensation summarily dispossessed as a tenant).

The statute that the trial court found to be dispositive, N.J.S.A. 2A: 18-61.l(m), modifies the common law rule by declaring an employee whose housing is conditioned upon employment to be a tenant. Consequently, an employee covered by the statute is entitled to three days’ notice prior to institution of an eviction action. N.J.S.A. 2A:18-61.2(a). If N.J.S.A. 2A:18-61.-*95l(m) applied to Vasquez, he would have been entitled to three days’ notice after termination of his employment and before commencement of an eviction action.

The initial question is whether the Legislature intended to include migrant farmworkers in the phrase “in some other capacity” in N.J.S.A. 2A:18-61.1(m). Neither the words of the statute nor the legislative history indicates that the Legislature contemplated including farmworkers within that phrase. Consequently, the meaning of the phrase may be gleaned by applying principles of statutory construction. Where general words follow a specific enumeration, the principle of ejusdem generis requires that the general words are applicable only to the same class of things already mentioned. Transcontinental Gas Pipeline Corp. v. Dept, of Conserv., 43 N.J. 135, 146 (1964). In N.J.S.A. 2A:18-61.1(m), the general words “in some other capacity” follow the specific enumeration of “superintendent” and “janitor”. We determine that, within the meaning of the statute, a farmworker does not belong to the same class of employees as a janitor or superintendent. A farmworker who possesses a mattress and locker in an unpartitioned barracks while waiting to be sent to work on a farm is different from a superintendent or janitor residing with his or her family in an apartment house. The farmworkers are all men who come from Puerto Rico without their families. They live in large barracks with no privacy, sleeping in bunks in an unpartitioned room and sharing toilets and showers. Their occupancy of the barracks is intermittent, since it is a base camp for use while they are awaiting assignment to farms.

Courts in other jurisdictions have considered whether a migrant farmworker is a tenant for the purpose of determining if a right of access should be provided to third parties to visit the migrant farmworker. In Washington v. Fox, 82 Wash.2d 289, 510 P.2d 230 (Sup.Ct.1973), cert. den. 414 U.S. 1130, 94 S.Ct. 868, 38 L.Ed.2d 754 (1974), the court noted that, since the workers paid for the right to live in a labor camp, they were tenants. *96Accordingly, the court held that an attorney and labor union organizer had the right to visit the farmworker. In Folgueras v. Hassle, 331 F.Supp. 615 (W.D.Mich.1971), the court concluded that the farmworkers were tenants even though they did not pay rent. The court noted that the free rent was “one justification for the low wage paid migrant laborers.” Id. at 624. The workers and their families had exclusive possession of bungalows in the work camp. The court found that the workers had the right to receive visitors such as student coordinators providing social services and doing research.

Migrant farmworkers were described as tenants sui generis who had a right of access to information from service organizations and a right to receive visitors in Franceschina v. Morgan, 346 F.Supp. 833 (S.D.Ind.1972). In reaching its conclusion, the court stated that it did not matter whether the workers were characterized as tenants or employees. The offer of free rent did not prevent a finding that the workers were entitled to a right of access. The court found that the migrant worker, in effect, paid for the housing because he “swells the pool of agricultural labor in the area, which is to the company’s advantage in that it tends to guarantee the flow of crops to its canneries. This is consideration enough, it seems to the Court, to denote the migrant a tenant for the term of the crop season.” Id. at 838.

These cases from other jurisdictions holding farmworkers to be tenants are distinguishable. They have described farmworkers as tenants in reaching the conclusion that the farmworkers have a right to information and services from third parties. This Court has already ruled, without characterizing migrant farmworkers as tenants, that they are entitled to receive visitors, members of the press, and persons providing charitable and governmental services. State v. Shack, 58 N.J. 297, 307 (1971). The Court expressly reserved the question before us: “We of course are not concerned here with the right of a migrant *97[farm]worker to remain on the employer’s property after the employment is ended.” Ibid. That issue is before us because Vasquez asserts he is a tenant within N.J.S.A. 2A:18-61.1(m). The import of that assertion is that a farm labor service could dispossess a farmworker only after giving notice as required by N.J.S.A. 2A:18-61.2 and by recourse to a judicial proceeding in either the superior court or the county district court. N.J.S.A. 2A:18-61.1. See R. 6:2-1, R. 6:3-4, R. 6:5-2.

Our analysis of the words of the statute, the absence of any illuminating legislative history, and the application of principles of statutory construction lead to the conclusion that a migrant farmworker is not a tenant within the meaning of N.J.S.A. 2A:18-61.1(m). The special characteristics of migrant workers’ housing, the absence of a contractual provision for the payment of rent, the lack of privacy, the intermittent occupancy, and the interdependence of employment and housing support this conclusion. Accordingly, we modify the judgment of the Appellate Division insofar as it holds that a migrant farmworker is a tenant within the meaning of the summary dispossess statute. However, our conclusion that Vasquez was not a tenant does not end our inquiry or preclude a finding that a farm labor service may dispossess a migrant farmworker only by judicial process.

Ill

In ascertaining whether a farmworker is entitled to notice before dispossession, we turn next to the Glassboro contract. As stated above, the contract resulted from negotiations between the Puerto Rican Department of Labor and Glassboro. No migrant farmworker participated directly or through a labor union in the negotiations. The record does not demonstrate whether or not the Puerto Rican Department of Labor has the same interests as the migrant farmworkers. The Puerto Rican Department of Labor may have been concerned also about reducing unemployment in Puerto Rico by finding jobs for its residents on farms in New Jersey. Whatever the interests of *98the parties to the negotiations, a migrant farmworker was required to accept the contract as presented by Glassboro.

The contract in evidence is written in English. Although Vasquez spoke Spanish only, the record does not show that he received a Spanish translation of the contract. Nonetheless, he signed a copy of the contract.

Once a migrant farmworker came to Glassboro’s labor camp in New Jersey, he depended on Glassboro for employment, transportation, food, and housing. He was separated by over 1300 miles from his home and family. Although an American citizen, he was isolated from most citizens in New Jersey by his inability to speak English. An invisible barrier separated a migrant farmworker from the rest of the State as he was shuttled from the labor camp to the farms. The lack of alternative housing emphasized the inequality between Glassboro and the migrant farmworkers. Once his employment ended, a farmworker lost not only his job but his shelter. The fear of discharge, and with it the loss of income, housing, and return passage to Puerto Rico permeated the contractual relationship. This is the setting in which we measure the contract against the public policy of the State.

Public policy eludes precise definition and may have diverse meanings in different contexts. Henningsen v. Bloomfield Motors, Inc., 32 N.J. 358, 403 (1960). The sources of public policy include federal and state legislation and judicial decisions. Allen v. Commercial Casualty Insurance Co., 131 N.J.L. 475, 478 (E. & A. 1944).

In the past, courts in New Jersey have refused to enforce contracts that violate the public policy of the State. Houston Petroleum Co. v. Automotive Products Credit Ass’n, 9 N.J. 122, 130 (1952). No contract can be sustained if it is inconsistent with the public interest or detrimental to the common good. Driscoll v. Burlington-Bristol Bridge Co., 10 N.J.Super. 545, 575 (Ch.Div.1950), mod. 8 N.J. 433 (1952), cert. den. 344 U.S. 838, 73 *99S.Ct. 25, 97 L.Ed. 652 (1952). Contracts have been declared invalid because they violate statutes, promote crime, interfere with the administration of justice, encourage divorce, violate public morality, or restrain trade. See, e. g., Staedler v. Staedler, 6 N.J. 380, 389 (1951) (contract to bring suit for divorce or to make no defense to such suit is illegal and void); see generally 6A Corbin, Contracts (1962) §§ 1373-1378 at 1-27; 14 Williston, Contracts (3 ed. Jaeger 1972), §§ 1628-1629 at 2-11; 17 Am.Jur.2d, Contracts, § 155 et seq. With respect to employment contracts that have an otherwise lawful purpose, courts have afforded judicial sanction to post-employment restrictive covenants only to the extent that the covenants are reasonable and comport with public policy. See, e. g., Karlin v. Weinberg, 77 N.J. 408 (1978) (restrictive employment covenants between physicians enforceable only to the extent they are reasonable); Whitmyer Bros., Inc. v. Doyle, 58 N.J. 25 (1971) (postemployment agreement found reasonable); Solari Industries, Inc. v. Malady, 55 N.J. 571 (1970) (noncompetitive agreements are enforceable to the extent they are reasonable under the circumstances and not injurious to the public).

The courts and Legislature of New Jersey have demonstrated a progressive attitude in providing legal protection for migrant farmworkers. See, e. g., Staff of Senate Subcomm. on Migratory Labor, Comm, on Labor and Public Welfare, 92d Cong., 2d Sess., Federal and State Statutes' Relating to Farmworkers (Comm. Print 1972). In 1945 the State .Legislature passed the Migrant Labor Act which, among other things, regulated housing and imposed sanitation standards for the benefit of migrant workers. L.1945, c. 71. That act was amended and the regulation of housing was extended in the Seasonal Farm Labor Act. L.1967, c. 91.

In 1971, the Legislature took further action to protect the rights of migrant farmworkers. Growers are required to provide drinking water and toilet facilities. N.J.S.A. 34:9A—1 et seq., 37 to 41. The laws require that Spanish interpreters and *100other personnel be available to assist seasonal workers in matters involving communications with any governmental agency. N.J.S.A. 34:9A-7.2. The Legislature also provided for the inspection by state officials of labor camps. However, those provisions may have been preempted by OSHÁ. Occupational Safety and Health Act of 1970, § 2 et seq., 29 U.S.C.A. § 651 et seq. See Harrington v. Department of Labor and Industry, 163 N.J.Super. 595 (Law Div.1978). Enforcement of those statutes “resulted in a marked improvement in living conditions for migrant workers in New Jersey.” Office of Agricultural Worker Compliance, New Jersey Department of Labor and Industry, Status Report 1 (1978).

In 1979, the federal government, pursuant to OSHA, assumed responsibility for inspection of many migrant labor camps. However, certain labor camps are still being inspected by New Jersey’s Office of Agricultural Worker Compliance for the Federal Employment Service in order to comply with the federal requirement that housing be inspected prior to clearing any orders for interstate recruitment of migrant workers. See Wagner-Peyser National Employment System Act, § 1 ei seq., 29 U.S.C.A. § 49 et seq. The constant attention accorded by Congress and the State Legislature demonstrates a legislative concern for the well-being of migrant farmworkers.

In Shack, supra, 58 N.J. 297, this Court reversed convictions for trespass of a fieldworker and an attorney for organizations providing services for migrant farmworkers. Declining to characterize the migrant farmworker as either tenant or employee, Chief Justice Weintraub wrote:

We see no profit in trying to decide upon a conventional category and then forcing the present subject into it. That approach would be artificial and distorting. The quest is for a fair adjustment of the competing needs of the parties, in the light of the realities of the relationship between the migrant worker and the operator of the housing facility. [Shack, supra, 58 N.J. at 307]

*101The Court weighed the property rights of the farmer against the rights of the farmworkers to information and services and found that the balance tipped in favor of the farmworker. Underlying that conclusion was recognition of the fundamental right of the farmworker to live with dignity. Id. at 308. As in Shack, the appropriate result in this case arises from the status and the relationship of the parties.

Later cases have manifested a continuing concern for the plight of the migrant farmworker. In Freedman v. New Jersey State Police, 135 N.J.Super. 297 (Law Div.1975), the right of access of the press to migrant camps was extended to include a college newspaper reporter and photographer. See Harrington v. Department of Labor and Industry, 163 N.J.Super. 595 (Law Div.1978) (New Jersey’s Drinking Water and Toilet Facilities Act held enforceable); Five Migrant Farmworkers v. Hoffman, 136 N.J.Super. 242 (Law Div.1975) (OSHA preempts Seasonal Farm Labor Act for purpose of preoccupancy inspection, except for workers covered by Wagner-Peyser Act).

The enlightened approach of the courts and the Legislature provides the context in which we assess the Glassboro contract and consider how a migrant farmworker should be dispossessed from his living quarters at a labor camp.

A basic tenet of the law of contracts is that courts should enforce contracts as made by the parties. However, application of that principle assumes that the parties are in positions of relative equality and that their consent is freely given. See Henningsen v. Bloomfield Motors, Inc., 32 N.J. 358, 386 (1960). In recent years, courts have become increasingly sensitive to overreaching in contracts where there is an inequality in the status of the parties. In Shell Oil Co. v. Marinello, 63 N.J. 402 (1973), this Court found that Shell was the dominant party and could dictate its own terms. Id. at 408. Accordingly, the Court “read into”'a lease and franchise agreement between a major oil company and one of its dealers a restriction against unilateral *102termination by the oil company absent good cause. Id. at 410. The Court reached that decision from a consideration of the instruments, the relationship between the parties, and the public policy of the State affecting that relationship. Id. at 406.

In a variety of other situations, courts have revised contracts where there was an inequality in the bargaining power of the parties. See, e. g., Ellsworth Dobbs, Inc. v. Johnson, 50 N.J. 528, 555 (1967) (owner of real estate not liable for commission to broker where sale was not consummated due to default of purchaser because of “substantial inequality of bargaining power” between owner and broker); Allen v. Metropolitan Life Ins. Co., 44 N.J. 294, 305 (1965) (insurer and insured “not equally situated” and life insurance binder construed against insurer to permit recovery on life insurance policy); Henningsen, supra, 32 N.J. at 404 (“the grossly disproportionate bargaining power” between an automobile manufacturer and a buyer led to the invalidation of a disclaimer by the manufacturer of an implied warranty of merchantability in the sale of an automobile); Grossman Furniture Co. v. Pierre, 119 N.J.Super. 411 (Cty.Ct. 1972) (grossly unequal bargaining position of a welfare mother who signed an installment contract to purchase furniture and a refrigerator provided ground to reform the contract to exclude a recapture clause).

The principle has been applied also to leases. In Kuzmiak v. Brookchester, 33 N.J.Super. 575 (App.Div.1955), the court invalidated a clause in an apartment lease exculpating a landlord from liability for negligence. The court took judicial notice that the housing shortage resulted in “unequal bargaining power between apartment house owners and tenants . . . .” Id. at 587. This Court took cognizance of the housing shortage and the inequality in bargaining power of landlords and tenants in Marini v. Ireland, 56 N.J. 130 (1970). In Marini, this Court implied a covenant of habitability into a lease to permit a tenant to deduct the cost of repairing a toilet from rent due a landlord. More recently the inequality in bargaining power between land*103lord and tenant led this Court to comment that “lease agreements are frequently form contracts of adhesion . . . .” Trentacost v. Brussel, 82 N.J. 214, 226 (1980). In Trentacost the Court concluded that the implied covenant of habitability obliged a landlord to furnish reasonable safeguards, such as a lock on the front door of an apartment building, to protect tenants from foreseeable criminal activity on the premises. Id. at 228.

A migrant farmworker has even less bargaining power than a residential tenant. Although the contract did not require a migrant farmworker to live at the labor camp, the realities of his employment forced him to stay at the camp. Residence at the labor camp benefited not only the farmworker, but also Glassboro and its member farmers. It was more convenient for them if the workers resided at the camp: the pool of labor was at hand, and the workers could be transported conveniently to the farms. The contract assured Glassboro that there would be a labor source available on its property.

Under the contract, once a worker’s employment was ended, he had no right to stay at the camp. Glassboro’s possible need for the bed of a discharged farmworker, particularly during the growing season, is relevant, but not persuasive. In this case, Glassboro had ample space for Vasquez, yet he was turned out of the barracks on the same day he was fired. The interest of neither the migrant farmworker nor the public is served by casting the worker adrift to fend for himself without reasonable time to find shelter.

The status of a worker seeking employment with Glassboro is analogous to that of a consumer who must accept a standardized form contract to purchase needed goods and services. Neither farmworkers nor consumers negotiate the terms of their contracts; both must accept the contracts as presented to them. In both instances, the contracts affect many people as well as the public interest.

*104With respect to a standardized form contract, the intention of the consumer has been described as “but a subjection more or less voluntary to terms dictated by the stronger party, terms whose consequences are often understood only in a vague way, if at all.” Kessler, Contracts of Adhesion-Some Thoughts About Freedom of Contract, 43 Colum.L.Rev. 629, 632 (1943). After noting the “gross inequality of bargaining position” between the parties in Henningsen, supra, 32 N.J. at 391, this Court stated that no meaningful consent had been given by the consumer to the terms of the contract. A contract where one party, as here, must accept or reject the contract does not result from the consent of that party. Id. at 390. It is a contract of adhesion:

There being no private consent to support a contract of adhesion, its legitimacy rests entirely on its compliance with standards in the public interest. The individual who is subject to the obligations imposed by a standard form thus gains the assurance that the rules to which he is subject have received his consent either directly or through their conforming to higher public laws and standards made and enforced by the public institutions that legitimately govern him. [Slawson, Standard Form Contracts and Democratic Control of Lawmaking Power, 84 Harv.L.Rev. 529, 566 (1971)]

The absence of a provision in the contract for reasonable time to find housing after termination of his employment bespeaks Glassboro’s superior bargaining position. Further, by failing to provide for a reasonable time to find alternative housing, the contract is inconsistent with the enlightened attitude of the Legislature and the courts towards migrant farmworkers.

The crux of this case thus becomes the unconscionability of the contract as it is sought to be enforced against the migrant workers. The unconscionability of the contract inheres not only in its failure to provide a worker with a reasonable opportunity to find alternative housing, but in its disregard for his welfare after termination of his employment. The inherent inequity of the contract arouses a sense of injustice and invokes the equita*105ble powers of the courts. In the absence of any concern demonstrated for the worker in the contract, public policy requires the implication of a provision for a reasonable time to find alternative housing.

IV

At common law, on termination of employment, an employer could dispossess an employee who occupied premises incidental to his employment. McQuade v. Emmons, 38 N.J.L., 397, 400 (Sup.Ct.1876). Similarly, a landlord could dispossess peaceably a holdover tenant. Mershon v. Williams, 62 N.J.L. 779, 784 (E. & A. 1899); Todd v. Jackson, 26 N.J.L. 525, 530-532 (E. & A. 1857). To that extent, both an employer and landlord could use self-help to regain possession peaceably. The advantage to them was that they were assured of prompt restoration of the use of their property. However, an inherent vice in self-help is that it can lead to confrontations and breaches of the peace. See Thiel v. Bull’s Ferry Land Co., 58 N.J.L. 212 (Sup.Ct.1895).

In the absence of self-help, a landlord or employer at common law was remitted to an action in ejectment. The problem with ejectment is that it was slow and expensive. VI-A American Law of Property, § 28.21 at 61 (1954). In New Jersey, ejectment has been replaced with a statutory action, N.J.S.A. 2A:35-1; however, that action is not a summary proceeding. Shuster v. Bd. of Education of Hardwick Tp., 8 N.J.Super. 415 (Ch.Div. 1950), aff’d 17 N.J.Super. 357 (App.Div.1952).

With regard to real property occupied solely as a residence, the Legislature has resolved the dilemma by prohibiting entry without consent and by providing a summary dispossess proceeding. N.J.S.A. 2A:39-1 and N.J.S.A. 2A:18-53 et seq. Similarly, the Legislature has provided a summary dispossess proceeding for the removal of residential tenants. N.J.S.A. 2A:18-61.2. As explained above, migrant farmworkers are not tenants, and *106there is no comparable statute providing for their summary dispossession on termination of their employment. In fashioning a suitable remedy, we acknowledge that the realities of the relationship between the migrant worker and a farm labor service are unique and summon a judicial response unrestricted by conventional categories, such as employer-employee and landlord-tenant. See Shack, supra, 58 N.J. at 307. We cannot confine ourselves to traditional actions for possession such as ejectment or summary dispossession.

After oral argument, we requested the parties to submit supplemental briefs analyzing the applicability of the unlawful detainer statute to a farmworker who remains peaceably in possession of his living quarters following termination of his employment. That question had not been presented previously for consideration by the trial court, Appellate Division, or this Court. One type of unlawful detainer statute, N.J.S.A., 2A:39-4, pertains to holdover tenants. Another unlawful detainer statute pertains to persons taking possession “without the consent of the owner or without color of title . . . .” N.J.S.A. 2A:39-5. Although a migrant farmworker would qualify under the latter alternative as one who enters without color of title, the question remains whether he has “possession”.

At common law, an employee who occupied his employer’s premises had no possession of his own, but only the possession of his employer. Schwinn v. Perkins, 79 N.J.L. 515, 518 (E. & A. 1910); McQuade v. Emmons, 38 N.J.L. 397, 399 (Sup.Ct.1876); see generally Annotation, “Statute prescribing damages for forcibly ejecting or excluding one from possession of real property as applying to possession held by one as servant or employee”, 14 A.L.R. 808 (1921). Consequently, on termination of his employment, the employee was considered a trespasser. McQuade, supra, 38 N.J.L. at 402.

The meaning of “possession” varies with the context of its use. Comment, Defects in the Current Forcible Entry and *107Detainer Laws of the United States and England, 25 U.C.L.A.L. Rev. 1067, 1084 (1978). One writer suggests that “possession can only be usefully defined with reference to the purpose in hand; and that possession may have one meaning in one connection and another meaning in another.” Shartel, Meanings of Possession, 16 Minn.L.Rev. 611, 612 (1932). Although there are no cases discussing possession under N.J.S.A. 2A:39-5, in Poroznoff v. Alberti, 161 N.J.Super., 414 (Cty.D.Ct.1978), aff’d 168 N.J.Super. 140 (App.Div.1979), the trial court concluded that a week-to-week resident at a YMCA did not have possession under a related statute pertaining to forcible entry and detainer. Generally, a worker remains at Glassboro’s camp only while waiting for assignment to a farm. Together with approximately 30 other men, he shared unpartitioned space in the barracks. We conclude that a migrant farmworker does not have possession of his living quarters within the meaning of N.J.S.A. 2A:39-5 and that the remedy of unlawful detainer is not available.

Even if the unlawful detainer act applied, it provides an imperfect solution to the conflicts between migrant workers and their employers. In an unlawful detainer action, a migrant farmworker could raise equitable defenses relevant to the right of possession, but not to collateral issues. Vella v. Hudgins, 20 Cal.3d 251, 254, 572 P.2d 28, 30, 142 Cal.Rptr. 414, 416 (Sup.Ct. 1977); Heiser v. Rodway, 247 N.W.2d 65, 67 (S.D.Sup.Ct.1976).

A migrant worker should be allowed to raise equitable claims or defenses even though they might be considered collateral to the issue of possession. That result is consistent with our conclusion that a tenant may assert equitable as well as legal defenses in a dispossess action. See Marini v. Ireland, 56 N.J. 130, 140 (1970). It is consistent also with the incorporation by the legislature of equitable considerations into the summary dispossess act by providing in N.J.S.A. 2A:18-55 that proceedings to dispossess a tenant for nonpayment of rent shall stop on payment of the rent. See Vineland Shopping Center, Inc. v. *108DeMarco, 35 N.J. 459, 469 (1961). Even after granting a judgment of possession against a tenant, a judge has the statutory authority to stay the issuance of a warrant for removal or a writ of possession. N.J.S.A. 2A:42-10.6. He may delay eviction for a period no longer than six months “if it shall appear that by the issuance of the warrant or writ the tenant will suffer hardship because of the unavailability of other dwelling accommodations

In the absence of a contractual provision or legislation addressing the plight of a migrant farmworker on termination of his employment, the courts, exercising equitable jurisdiction, should devise a remedy to fit the circumstances of each case. See Sears, Roebuck & Co. v. Camp, 124 N.J.Eq. 403, 411 (E. & A. 1938); American Assoc. of Univ. Profs, v. Bloomfield College, 129 N.J.Super. 249, 274 (Ch.Div.1974), aff’d 136 N.J.Super. 442, 448 (App.Div.1975). Depending on the circumstances, an equitable adjustment of the rights of the parties may vary from one case to another. See, e. g., Cooper v. Nutley Sun Printing Co., 36 N.J. 189, 198 (1961); Westinghouse Electric Corp. v. United Electrical, Radio and Machine Workers Local No. 410, 139 N.J.Eq. 97, 108 (E. & A. 1946). An appropriate remedy might include time in addition to that implied in the contract, assistance in obtaining alternative housing, return passage to Puerto Rico, or some other form of relief. By abolishing self-help and requiring dispossession through a judicial proceeding, we provide a forum for an equitable resolution of a controversy between a farm labor service and a migrant farmworker on termination of the latter’s employment.

We are mindful of the special considerations pertaining to migrant farmworkers and of the need for a prompt resolution of disputes between farmworkers and a farm labor service. In general, a summary action under R. 4:67 should be a more appropriate proceeding than a plenary action. In fact, the present case was instituted on complaint and order to show cause returnable three days later, at which time the court heard *109testimony, reserved decision, and rendered a written opinion seven days later. We conclude that a dispute concerning the dispossession of a migrant farmworker on termination of his employment, whether instituted by a farm labor service or, as here, by a farmworker, should proceed in a summary manner under R. 4:67.

We affirm the judgment of the Appellate Division as modified and remand the matter to the trial court for the entry of an order consistent with this opinion.

For affirmance —Chief Justice WILENTZ and Justices SULLIVAN, PASHMAN, CLIFFORD, SCHREIBER, HANDLER and POLLOCK—7.

For reversal—None.

Opinion

BROUSSARD, J.

This case concerns the effect of a provision in a commercial lease1 that the lessee may not assign the lease or sublet the premises without the lessor’s prior written consent, The question we address is whether, in the absence of a provision that such consent will not be unreasonably withheld, a lessor may unreasonably and arbitrarily withhold his or her consent to an assignment.2 This is a question of first impression in this court.

*493I.

This case arises on appeal from an order sustaining a demurrer without leave to amend.3 We review the allegations of the complaint applying the established principle that a demurrer “admits the truth of all material factual allegations in the complaint. ...” (Alcorn v. Anbro Engineering, Inc. (1970) 2 Cal.3d 493, 496 [86 Cal.Rptr. 88, 468 P.2d 216]; Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 213-214 [197 Cal.Rptr. 783, 673 P.2d 660].)

The allegations of the complaint may be summarized as follows. The lease at issue is for 14,400 square feet of hangar space at the San Jose Municipal Airport. The City of San Jose, as owner of the property, leased it to Irving and Janice Perlitch, who in turn assigned their interest to respondent Ernest Pestaña, Inc.4 Prior to assigning their interest to respondent, the Perlitches entered into a 25-year sublease with one Robert Bixler commencing on January 1, 1970. The sublease covered an original five-year term plus four 5-year options to renew. The rental rate was to be increased every 10 years in the same proportion as rents increased on the master lease from the City of San Jose. The premises were to be used by Bixler for the purpose of conducting an airplane maintenance business.

Bixler conducted such a business under the name “Flight Services” until, in 1981, he agreed to sell the business to appellants Jack Kendall, Grady O’Hara and Vicki O’Hara. The proposed sale included the business and the equipment, inventory and improvements on the property, together with the existing lease. The proposed assignees had a stronger financial statement and greater net worth than the current lessee, Bixler, and they were willing to be bound by the terms of the lease.

The lease provided that written consent of the lessor was required before the lessee could assign his interest, and that failure to obtain such consent *494rendered the lease voidable at the option of the lessor.5 Accordingly, Bixler requested consent from the Perlitches’ successor-in-interest, respondent Ernest Pestaña, Inc. Respondent refused to consent to the assignment and maintained that it had an absolute right arbitrarily to refuse any such request. The complaint recites that respondent demanded “increased rent and other more onerous terms” as a condition of consenting to Bixler’s transfer of interest.

The proposed assignees brought suit for declaratory and injunctive relief and damages seeking, inter alia, a declaration “that the refusal of Ernest Pestaña, Inc. to consent to the assignment of the lease is unreasonable and is an unlawful restraint on the freedom of alienation. . . .”6 The trial court sustained a demurrer to the complaint without leave to amend and this appeal followed.

II.

The law generally favors free alienability of property, and California follows the common law rule that a leasehold interest is freely alienable. (See Kassan v. Stout (1973) 9 Cal.3d 39, 43 [106 Cal.Rptr. 783, 507 P.2d 87]; 49 Am.Jur.2d, Landlord and Tenant, § 398 (1980).) Contractual restrictions on the alienability of leasehold interests are, however, permitted. (See Kassan v. Stout, supra.) “Such restrictions are justified as reasonable protection of the interests of the lessor as to who shall possess and manage property in which he has a reversionary interest and from which he is deriving income.” (Schoshinski, American Law of Landlord and Tenant (1980) § 8:15, at pp. 578-579. See also 2 Powell on Real Property, ¶ 246[1], at p. 372.97.)

The common law’s hostility toward restraints on alienation has caused such restraints on leasehold interests to be strictly construed against the lessor. (See Schoshinski, supra, § 8.16, at pp. 583-588; 2 Powell, supra, t 246[1], at pp. 372.97, 372.100.) Thus, in Chapman v. Great Western *495Gypsum Co. (1932) 216 Cal. 420 [14 P.2d 758, 85 A.L.R. 917], where the lease contained a covenant against assignment without the consent of the lessor, this court stated: “It hardly needs citation of authority to the principle that covenants limiting the free alienation of property such as covenants against assignment are barely tolerated and must be strictly construed.” (Id., at p. 426.)7 This is particularly true where the restraint in question is a “forfeiture restraint,” under which the lessor has the option to terminate the lease if an assignment is made without his or her consent. (See Karbelnig v. Brothwell (1966) 244 Cal.App.2d 333, 341 [53 Cal.Rptr. 335]; Ser-Bye Corp. v. C.P. & G. Markets, supra, 78 Cal.App.2d at p. 919; Civ. Code, § 1442 [“A condition involving a forfeiture must be strictly interpreted against the party for whose benefit it is created.”]; 2 Powell, supra, ¶ 246[1], at pp. 372.100-372.101.)

Nevertheless, a majority of jurisdictions have long adhered to the rule that where a lease contains an approval clause (a clause stating that the lease cannot be assigned without the prior consent of the lessor), the lessor may arbitrarily refuse to approve a proposed assignee no matter how suitable the assignee appears to be and no matter how unreasonable the lessor’s objection. (See, e.g., B & R Oil Co., Inc. v. Ray’s Mobile Homes, Inc. (1980) 139 Vt. 122 [422 A.2d 1267]; Dress Shirt Sales, Inc. v. Hotel Martinique Associates (1963) 12 N.Y.2d 339 [236 N.Y.S.2d 613, 190 N.E.2d 10]; Jacobs v. Klawans (1961) 225 Md. 147 [169 A.2d 677]; Segre v. Ring (1961) 103 N.H. 278 [170 A.2d 265]; Gruman v. Investors Diversified Services (1956) 247 Minn. 502 [78 N.W.2d 377]; Annot., 31 A.L.R.2d 831 (1953); 51C C.J.S., § 36(1).) The harsh consequences of this rule have often been avoided through application of the doctrines of waiver and estoppel, under which the lessor may be found to have waived (or be estopped from asserting) the right to refuse consent to assignment.8

*496The traditional majority rule has come under steady attack in recent years. A growing minority of jurisdictions now hold that where a lease provides for assignment only with the prior consent of the lessor, such consent may be withheld only where the lessor has a commercially reasonable objection to the assignment, even in the absence of a provision in the lease stating that consent to assignment will not be unreasonably withheld. (See Boss Barbara, Inc. v. Newbill (1982) 97 N.M. 239 [638 P.2d 1084]; Jack Frost Sales v. Harris Trust & Sav. Bank (1982) 104 Ill.App.3d 933 [433 N.E.2d 941, 949]; Fernandez v. Vasquez (Fla.App. 1981) 397 So.2d 1171 [21 A.L.R.4th 181]; Warmack v. Merchants Nat. Bank of Fort Smith (1981) 272 Ark. 166 [612 S.W.2d 733]; Funk v. Funk (1981) 102 Idaho 521 [633 P.2d 586]; Hendrickson v. Freericks (Alaska 1980) 620 P.2d 205; Homa-Goff Interiors, Inc. v. Cowden (Ala. 1977) 350 So.2d 1035; Shaker Building Co. v. Federal Lime & Stone Co. (1971) 28 Ohio Misc. 246 [57 Ohio Ops.2d 486, 277 N.E.2d 584]; Rest.2d Property, § 15.2(2) (1977); Annot., 21 A.L.R.4th 188 (1983).)9

For the reasons discussed below, we conclude that the minority rule is the preferable position. Although this is an issue of first impression in this court, several decisions of the Court of Appeal have reflected the changing trend in the law on this question. In Richard v. Degen & Brody, Inc. (1960) 181 Cal.App.2d 289 [5 Cal.Rptr. 263], the court adopted the majority rule: “ ‘[W]here a subletting or assignment of the leased premises without the consent of the lessor is prohibited, he may withhold his assent arbitrarily and without regard to the qualifications of the proposed assignee, unless ... the lease provides that consent shall not be arbitrarily or unreasonably withheld. . . ” (Id., at p. 299, quoting 51 C.J.S., § 36.) Richard was not followed or cited on this point until the decision in Laguna Royale Owners Association v. Darger (1981) 119 Cal.App.3d 670 [174 Cal.Rptr. 136], which questioned the “continuing vitality” of the rule in Richard and then distinguished it on its facts. (Id., at p. 681.)10 The court in Laguna Royale *497rejected the contention that an approval clause confers an absolute right to withhold consent: “We hold that in exercising its power to approve or disapprove transfers or assignments Association must act reasonably, exercising its power in a fair and nondiscriminatory manner and withholding approval only for a reason or reasons rationally related to the protection, preservation and proper operation of the property and the purposes of Association as set forth in its governing instruments. ” (Id., at p. 680.)

Two years later, in Cohen v. Ratinoff (1983) 147 Cal.App.3d 321 [195 Cal.Rptr. 84], the same district of the Court of Appeal that had decided Richard (the Second District) directly confronted and rejected the rule of that case. The court held that “where, as here, the lease provides for assignment or subletting only with the prior consent of the lessor, a lessor may refuse consent only where he has a good faith reasonable objection to the assignment or sublease, even in the absence of a provision prohibiting the unreasonable or arbitrary withholding of consent to an assignment of a commercial lease. Examples of bases for such good faith reasonable objection would be inability to fulfill terms of the lease, financial irresponsibility or instability, suitability of premises for intended use, or intended unlawful or undesirable use of premises. No such bases were raised by the lessor.” (Id., at p. 330.)11

Shortly thereafter, the First District of the Court of Appeal followed suit in Schweiso v. Williams (1984) 150 Cal.App.3d 883 [198 Cal.Rptr. 238], adopting the rule set forth in Cohen. The court further noted that “denying consent solely on the basis of personal taste, convenience or sensibility or in order that the landlord may charge a higher rent than originally contracted for have been held arbitrary reasons failing the tests of good faith and reasonableness under commercial leases. (Chanslor-Western O. & D. Co. v. Metropolitan San. D. (1970) 131 Ill.App.2d 527 [266 N.E.2d 405]; citing Broad & Branford Place Corp. v. J.J. Hockenjos Co. (1944) 132 N.J.L. 229 [39 A.2d 80, 82].)” (Id., at p. 886, fn. omitted.)

Before the conflict among the Courts of Appeal reached this court for resolution, the United States Court of Appeals for the Ninth Circuit was forced to resolve the conflict in Prestin v. Mobil Oil Corp. (9th Cir: 1984) 741 F.2d 268 (applying California law). The Ninth Circuit reviewed the *498cases discussed above and stated: “[Richard has no support in later California cases,] having been rejected by the one court which has bothered to mention it [Laguna Royale].[12] We therefore find that the California Supreme Court would adopt the rule recently enunciated in Cohen v. Ratinoff, 147 Cal.App.3d at 330, 195 Cal.Rptr. 84, that a lessor . . . may refuse consent to an assignment or sublease only when the lessor has a good faith reasonable objection to it.” (Id., at p. 271.) We now adopt the rule tentatively ascribed to us by the Prestin court, and disapprove the holdings in Richard v. Degen & Brody, Inc., supra, 181 Cal.App.2d 289 and Hamilton v. Dixon, supra, 168 Cal.App.3d 1004.

III.

The impetus for change in the majority rule has come from two directions, reflecting the dual nature of a lease as a conveyance of a leasehold interest and a contract. (See Medico-Dental etc. Co. v. Horton & Converse (1942) 21 Cal.2d 411, 418 [132 P.2d 457].) The policy against restraints on alienation pertains to leases in their nature as conveyances. Numerous courts and commentators have recognized that “[i]n recent times the necessity of permitting reasonable alienation of commercial space has become paramount in our increasingly urban society.” (Schweiso v. Williams, supra, 150 Cal.App.3d at p. 887. See also Homa-Goff Interiors, Inc. v. Cowden, supra, 350 So.2d at 1037; Funk v. Funk, supra, 633 P.2d at 589; 2 Powell, supra, ¶ 246[1], at pp. 372.97-372.98; Comment, The Approval Clause in a Lease: Toward a Standard of Reasonableness (1983) 17 U.S.F. L.Rev. 681, 683, 689; Note, Landlord-Tenant—Lessor’s Rejection of Sublease Agreement, Pursuant to a Consent Clause, Must be Judged Under a Reasonable Commercial Standard (1978) 9 Cum. L.Rev. 309, 312.)

Civil Code section 711 provides: “Conditions restraining alienation, when repugnant to the interest created, are void.” It is well settled that this rule is not absolute in its application, but forbids only unreasonable restraints on alienation. (Wellenkamp v. Bank of America (1978) 21 Cal.3d 943, 948 [148 Cal.Rptr. 379, 582 P.2d 970]; Cohen v. Ratinoff, supra, 147 Cal.App.3d at p. 329; Laguna Royale Owners Assn. v. Darger, supra, 119 Cal.App.3d at p. 682.) Reasonableness is determined by comparing the justification for a particular restraint on alienation with the quantum of restraint actually imposed by it. “[T]he greater the quantum of restraint that results from enforcement of a given clause, the greater must be the justification for that enforcement. ” (Wellenkamp v. Bank of America, supra, 21 Cal.3d at *499p. 949.) In Cohen v. Ratinoff, supra, the court examined the reasonableness of the restraint created by an approval clause in a lease; “Because the lessor has an interest in the character of the proposed commercial assignee, we cannot say that an assignment provision requiring the lessor’s consent to an assignment is inherently repugnant to the leasehold interest created. We do conclude, however, that if such an assignment provision is implemented in such a manner that its underlying purpose is perverted by the arbitrary or unreasonable withholding of consent, an unreasonable restraint on alienation is established.” (Id., 147 Cal.App.3d at p. 329, italics added.)

One commentator explains as follows; “The common-law hostility to restraints on alienation had a large exception with respect to estates for years. A lessor could prohibit the lessee from transferring the estate for years to whatever extent he might desire. It was believed that the objectives served by allowing such restraints outweighed the social evils implicit in the restraints, in that they gave to the lessor a needed control over the person entrusted with the lessor’s property and to whom he must look for the performance of the covenants contained in the lease. Whether this reasoning retains full validity can well be doubted. Relationships between lessor and lessee have tended to become more and more impersonal. Courts have considerably lessened the effectiveness of restraint clauses by strict construction and liberal applications of the doctrine of waiver. With the shortage of housing and, in many places, of commercial space as well, the allowance of lease clauses forbidding assignments and subleases is beginning to be curtailed by statutes.” (2 Powell, supra, f 246[1], at pp. 372.97-372.98, fns. omitted.)13

The Restatement Second of Property adopts the minority rule on the validity of approval clauses in leases: “A restraint on alienation without the consent of the landlord of a tenant’s interest in leased property is valid, but the landlord’s consent to an alienation by the tenant cannot be withheld unreasonably, unless a freely negotiated provision in the lease gives the landlord an absolute right to withhold consent.” (Rest.2d Property, § 15.2(2) (1977), italics added.)14 A comment to the section explains: “The landlord may have an understandable concern about certain personal quali*500ties of a tenant, particularly his reputation for meeting his financial obligations. The preservation of the values that go into the personal selection of the tenant justifies upholding a provision in the lease that curtails the right of the tenant to put anyone else in his place by transferring his interest, but this justification does not go to the point of allowing the landlord arbitrarily and without reason to refuse to allow the tenant to transfer an interest in leased property.” (Id., com. a.) Under the Restatement rule, the lessor’s interest in the character of his or her tenant is protected by the lessor’s right to object'to a proposed assignee on reasonable commercial grounds. (See id., reporter’s note 7 at pp. 112-113.) The lessor’s interests are also protected by the fact that the original lessee remains liable to the lessor as a surety even if the lessor consents to the assignment and the assignee expressly assumes the obligations of the lease. (Peiser v. Mettler (1958) 50 Cal.2d 594, 602 [328 P.2d 953, 74 A.L.R.2d 1]; Samuels v. Ottinger (1915) 169 Cal. 209, 212 [146 P. 638].)

The second impetus for change in the majority rule comes from the nature of a lease as a contract. As the Court of Appeal observed in Cohen v. Ratinoff, supra, “[s]ince Richard v. Degen & Brody, Inc. [espousing the majority rule] was decided, . . . there has been an increased recognition of and emphasis on the duty of good faith and fair dealing inherent in every contract.” (Id., 147 Cal.App.3d at p. 329.) Thus, “[i]n every contract there is an implied covenant that neither party shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract. ...” (Universal Sales Corp. v. Cal. etc. Mfg. Co. (1942) 20 Cal.2d 751, 771 [128 P.2d 665]. See also Bleecher v. Conte (1981) 29 Cal.3d 345, 350 [213 Cal.Rptr. 852, 698 P.2d 1154].) “[W]here a contract confers on one party a discretionary power affecting the rights of the other, a duty is imposed to exercise that discretion in good faith and in accordance with fair dealing.” (Cal. Lettuce Growers v. Union Sugar Co. (1955) 45 Cal.2d 474, 484 [289 P.2d 785, 49 A.L.R.2d 496]. See also, Larwin-Southern California, Inc. v. JGB Investment Co. (1979) 101 Cal.App.3d 626, 640 [162 Cal.Rptr. 52].) Here the lessor retains the discretionary power to approve or disapprove an assignee proposed by the other party to the contract; this discretionary power should therefore be exercised in accordance with commercially reasonable standards. “Where a lessee is entitled to sublet under common law, but has agreed to limit that right by first acquiring the consent of the landlord, we believe the lessee has a right to expect that consent will not be unreasonably withheld.” (Fernandez v. Vasquez, supra, 397 So.2d at p. 1174; accord, Boss Barbara, Inc. v. Newbill, supra, 638 P.2d at p. 1086.)15

*501Under the minority rule, the determination whether a lessor’s refusal to consent was reasonable is a question of fact. Some of the factors that the trier of fact may properly consider in applying the standards of good faith and commercial reasonableness are: financial responsibility of the proposed assignee; suitability of the use for the particular property; legality of the proposed use; need for alteration of the premises; and nature of the occupancy, i.e., office, factory, clinic, etc. (See Fernandez v. Vasquez, supra, 397 So.2d at p. 1174; Cohen v. Ratinoff, supra, 147 Cal.App.3d at p. 330; Rest.2d Property, § 15.2, reporter’s note 7 at pp. 112-113; Annot., 54 A.L.R.3d 689 (1973); 1 Friedman on Leases (1974) § 7.304c.)

Denying consent solely on the basis of personal taste, convenience or sensibility is not commercially reasonable. (Broad & Branford Place Corp. v. J. J. Hockenjos Co., 132 N.J.L. 229 [39 A.2d 80, 82]; Fernandez v. Vasquez, supra, 397 So.2d at p. 1174; Rest.2d Property, § 15.2, reporter’s note 7 at pp. 112-113.) Nor is it reasonable to deny consent “in order that the landlord may charge a higher rent than originally contracted for.” (Schweiso v. Williams, supra, 150 Cal.App.3d at p. 886. See Bedford Inv. Co. v. Folb, supra, 79 Cal.App.2d 363; 1010 Potomac Assoc, v. Grocery Manufacturers (D.C.App. 1984) 485 A.2d 199, 208-210; Funk v. Funk, supra, 633 P.2d 586; Fernandez v. Vasquez, supra, 397 So.2d at p. 1174; Chanslor-Western O. & D. Co. v. Metropolitan San. D. (1970) 131 Ill.App.2d 527 [266 N.E.2d 405]; Ringwood Associates, Ltd. v. Jack’s of Route 23, Inc. (1977) 153 N.J.Super. 294 [379 A.2d 508].) This is because the lessor’s desire for a better bargain than contracted for has nothing to do with the permissible purposes of the restraint on alienation—to protect the lessor’s interest in the preservation of the property and the performance of the lease covenants. “ ‘[T]he clause is for the protection of the landlord in its ownership and operation of the particular property—not for its general economic protection.’” (Ringwood Associates v. Jack’s of Route 23, Inc., supra, 379 A.2d at p. 512, quoting Krieger v. Helmsley-Spear, Inc. (1973) 62 N.J. 423 [302 A.2d 129], italics added.)

In contrast to the policy reasons advanced in favor of the minority rule, the majority rule has traditionally been justified on three grounds. Respondent raises a fourth argument in its favor as well. None of these do we find compelling.

First, it is said that a lease is a conveyance of an interest in real property, and that the lessor, having exercised a personal choice in the selection of a *502tenant and provided that no substitute shall be acceptable without prior consent, is under no obligation to look to anyone but the lessee for the rent. (Gruman v. Investors Diversified Services, supra, 247 Minn. 502 [78 N.W.2d 377, 380]; see also, Funk v. Funk, supra, 102 Idaho 521 [633 P.2d 586, 591] (Bakes, C. J., dis.).) This argument is based on traditional rules of conveyancing and on concepts of freedom of ownership and control over one’s property. (Funk v. Funk, supra, 633 P.2d at p. 591 (Bakes, C. J., dis.).)

A lessor’s freedom at common law to look to no one but the lessee for the rent has, however, been undermined by the adoption in California of a rule that lessors—like all other contracting parties—have a duty to mitigate damages upon the lessee’s abandonment of the property by seeking a substitute lessee. (See Civ. Code, § 1951.2.) Furthermore, the values that go into the personal selection of a lessee are preserved under the minority rule in the lessor’s right to refuse consent to assignment on any commercially reasonable grounds. Such grounds include not only the obvious objections to an assignee’s financial stability or proposed use of the premises, but a variety of other commercially reasonable objections as well. (See, e.g., Arrington v. Walter E. Heller International Corp. (1975) 30 Ill.App.3d 631 [333 N.E.2d 50] [desire to have only one “lead tenant” in order to preserve “image of the building” as tenant’s international headquarters]; Warmack v. Merchants Nat. Bank of Fort Smith (1981) 272 Ark. 166 [612 S.W.2d 733] [desire for good “tenant mix” in shopping center]; List v. Dahnke (Colo.App. 1981) 638 P.2d 824 [lessor’s refusal to consent to assignment of lease by one restaurateur to another was reasonable where lessor believed proposed specialty restaurant would not succeed at that location].) The lessor’s interests are further protected by the fact that the original lessee remains a guarantor of the performance of the assignee. (See ante, p. 500.)

The second justification advanced in support of the majority rule is that an approval clause is an unambiguous reservation of absolute discretion in the lessor over assignments of the lease. The lessee could have bargained for the addition of a reasonableness clause to the lease (i.e., “consent to assignment will not be unreasonably withheld”). The lessee having failed to do so, the law should not rewrite the parties’ contract for them. (See Gruman v. Investors Diversified Services, supra, 78 N.W.2d at pp. 381-382; Funk v. Funk, supra, 633 P.2d at pp. 590, 592 (Bakes, C. J., dis.).)

Numerous authorities have taken a different view of the meaning and effect of an approval clause in a lease, indicating that the clause is not “clear and unambiguous,” as respondent suggests. As early as 1940, the court in Granite Trust Bldg. Corp. v. Great Atlantic & Pac. T. Co., supra, 36 *503F.Supp. 77, examined a standard approval clause and stated: “It would seem to be the better law that when a lease restricts a lessee’s rights by requiring consent before these rights can be exercised, it must have been in the contemplation of the parties that the lessor be required to give some reason for withholding consent.” (Id., at p. 78, italics added.) The same view was expressed by commentators in the 1950’s. (See Note, Landlord and Tenant—Right of Lessor to Refuse Any Settlement When Lease Prohibits Transfer Without Consent (1957) 41 Minn. L.Rev. 355, 358-359; Note, Real Property—Landlord and Tenant—Lessor’s Arbitrary Withholding of Consent to Sublease (1957) 55 Mich. L.Rev. 1029, 1031; 2 Powell, supra, § 229, fn. 79 (1950).) Again in 1963, the court in Gamble v. New Orleans Housing Mart, Inc. (La.App. 1963) 154 So.2d 625, stated: “Here the lessee is simply not permitted to sublet without the written consent of the lessor. This does not prohibit or interdict subleasing. To the contrary, it permits subleasing provided only that the lessee first obtain the written consent of the lessor. It suggests or connotes that, when the lessee obtains a subtenant acceptable or satisfactory to the lessor, he may sublet. . . . Otherwise the provision simply would prohibit subleasing.” (Id., at p. 627, final italics added.) In Shaker Building Co. v. Federal Lime & Stone Co., supra, 28 Ohio Misc. 246 [277 N.E.2d 584], the court expressed the same view: “While the lease before the court clearly states that no assignment may take place without prior consent, inherent, however, in that provision is the representation that an assignment is possible. This court is of the opinion that equally inherent in that provision is the representation that such prior consent will not be withheld under any and all circumstances, reasonable or unreasonable.” (Id., 277 N.E.2d at p. 587, italics added.)16

In light of the interpretations given to approval clauses in the cases cited above, and in light of the increasing number of jurisdictions that have adopted the minority rule in the last 15 years, the assertion that an approval clause “clearly and unambiguously” grants the lessor absolute discretion over assignments is untenable. It is not a rewriting of a contract, as respondent suggests, to recognize the obligations imposed by the duty of good faith and fair dealing, which duty is implied by law in every contract.

The third justification advanced in support of the majority rule is essentially based on the doctrine of stare decisis. It is argued that the courts *504should not depart from the common law majority rule because “many leases now in effect covering a substantial amount of real property and creating valuable property rights were carefully prepared by competent counsel in reliance upon the majority viewpoint.” (Gruman v. Investors Diversified Services, supra, 78 N.W.2d at p. 381; accord, Funk v. Funk, supra, 633 P.2d at p. 592 (Bakes, C. J., dis.); Hamilton v. Dixon, supra, 168 Cal.App.3d at p. 1008.) As pointed out above, however, the majority viewpoint has been far from universally held and has never been adopted by this court. Moreover, the trend in favor of the minority rule should come as no surprise to observers of the changing state of real property law in the 20th century. The minority rule is part of an increasing recognition of the contractual nature of leases and the implications in terms of contractual duties that flow therefrom. (See Green v. Superior Court (1974) 10 Cal.3d 616, 624 [111 Cal.Rptr. 704, 517 P.2d 1168].) We would be remiss in our duty if we declined to question a view held by the majority of jurisdictions simply because it is held by a majority. As we stated in Rodriguez v. Bethlehem Steel Corp. (1974) 12 Cal.3d 382 [115 Cal.Rptr. 765, 525 P.2d 669], the “vitality [of the common law] can flourish only so long as the courts remain alert to their obligation and opportunity to change the common law when reason and equity demand it.” (Id., at p. 394.)

A final argument in favor of the majority rule is advanced by respondent and stated as follows: “Both tradition and sound public policy dictate that the lessor has a right, under circumstances such as these, to realize the increased value of his property.” Respondent essentially argues that any increase in the market value of real property during the term of a lease properly belongs to the lessor, not the lessee. We reject this assertion. One California commentator has written: “[W]hen the lessee executed the lease he acquired the contractual right for the exclusive use of the premises, and all of the benefits and detriment attendant to possession, for the term of the contract. He took the downside risk that he would be paying too much rent if there should be a depression in the rental market. . . . Why should he be deprived of the contractual benefits of the lease because of the fortuitous inflation in the marketplace^] By reaping the benefits he does not deprive the landlord of anything to which the landlord was otherwise entitled. The landlord agreed to dispose of possession for the limited term and he could not reasonably anticipate any more than what was given to him by the terms of the lease. His reversionary estate will benefit from the increased value from the inflation in any event, at least upon the expiration of the lease.” (4 Miller & Starr, Current Law of Cal. Real Estate (1977) 1984 supp., § 27:92 at p. 321.)

Respondent here is trying to get more than it bargained for in the lease. A lessor is free to build periodic rent increases into a lease, as the lessor *505did here. (See ante, p. 493.) Any increased value of the property beyond this “belongs” to the lessor only in the sense, as explained above, that the lessor’s reversionary estate will benefit from it upon the expiration of the lease. We must therefore reject respondent’s argument in this regard.17

A different argument in favor of the majority rule is suggested by the Court of Appeal in its opinion in this case, though the point was never raised by the parties. The Court of Appeal drew an inference from Civil Code section 1951.4 that the Legislature, when it adopted that section in 1970, considered and rejected the minority rule on approval clauses.

Section 1951.4 provides, in essence, that a lessor can avoid the statutory duty to mitigate damages (see Civ. Code, § 1951.2) by contracting to shift that duty onto the lessee.18 Absent such a shifting, the lessor could only *506recover, in the event of the lessee’s breach, that amount of damages which the lessor could not reasonably avoid by reletting the premises. Since the statutory scheme would be frustrated if the lessor could first contract to shift the duty of mitigation onto the lessee and then block the lessee’s attempts to assign or sublease, the statute provides that where consent to assignment is required, the lease must expressly state that such consent will not be unreasonably withheld. (Civ. Code, § 1951.4, subd. (b)(3).)

It is true that section 1951.4 impliedly recognizes that absent a “reasonableness” clause, a lessor might believe that he or she had a common law right arbitrarily to withhold consent to assignment, and thus frustrate the statutory scheme. However, implicit recognition in a statute of an existing common law rule that is not the subject of the statute does not constitute a codification of that rule, and certainly does not prevent a court from reexamining it. We cannot agree with the Court of Appeal’s speculation that the Legislature, when it adopted section 1951.4 in 1970, considered and rejected the minority position on the interpretation of an approval clause in a lease.

IV.

In conclusion, both the policy against restraints on alienation and the implied contractual duty of good faith and fair dealing militate in favor of adoption of the rule that where a commercial lease provides for assignment only with the prior consent of the lessor, such consent may be withheld only where the lessor has a commercially reasonable objection to the as*507signee or the proposed use. Under this rule, appellants have stated a cause of action against respondent Ernest Pestaña, Inc.

The order sustaining the demurrer to the complaint, which we have deemed to incorporate a judgment of dismissal,19 is reversed.

Bird, C. J., Reynoso, J., Grodin, J., and Kaus, J.,* * concurred.

LUCAS, J.

I respectfully dissent. In my view we should follow the weight of authority which, as acknowledged by the majority herein, allows the commercial lessor to withhold his consent to an assignment or sublease arbitrarily or without reasonable cause. The majority’s contrary ruling, requiring a “commercially reasonable objection” to the assignment, can only result in a proliferation of unnecessary litigation.

The correct analysis is contained in the opinion of Justice Carl Anderson for the Court of Appeal in this case. I adopt the following portion of his opinion as my dissent:

“This case is strikingly similar to a recent case this court decided— Schweiso v. Williams (1984) 150 Cal.App.3d 883, ... In Schweiso, we decided to follow the case of Cohen v. Ratinoff (1983) 147 Cal.App.3d 321 [195 Cal.Rptr. 84], which held that where ‘the lease provides for assignment or subletting only with the prior consent of the lessor, a lessor may refuse consent only where he has a good faith reasonable objection to the assignment or sublease, even in the absence of a provision prohibiting the unreasonable or arbitrary withholding of consent to an assignment of a commercial lease.’ (Id., at p. 330.)

“Both Schweiso and Cohen recognize that they are themselves departures from the long-established rule in California that such a lease proviso had heretofore meant that the lessor may, indeed, refuse consent arbitrarily and even without a good faith reasonable objection. The lease in question herein was written long before Schweiso and Cohen, and was interpreted by the trial court four months before the first of these decisions was filed. For reasons which follow, we believe both Schweiso and Cohen were wrongly decided, now decline to follow them, and affirm the decision of the trial court sustaining the demurrer herein.

“The plain language of the lease provides that the lessee shall not assign the lease ‘without written consent of Lessor first had and obtained .... *508Any such assignment or subletting without this consent shall be void, and shall, at the option of Lessor, terminate this lease.’ The lease does not require that ‘consent may not unreasonably be withheld’; the lease does not provide that ‘the lessor may refuse consent only where he has a good faith reasonable objection to the assignment.’ Neither have the parties so contracted, nor has the Legislature so required. Absent such legislative direction, the parties should be free to contract as they see fit.

“Appellant urges this court to rewrite the contract by adding a limitation on the lessor’s withholding of consent—‘that such consent may not be unreasonably withheld.’ He urges that such must be implied in the term ‘without written consent of lessor first had and obtained’; and he places the burden on the lessor to add language to negate that, if such be his intent-language such as ‘such consent may be arbitrarily, capriciously and/or unreasonably withheld.’

“However, it is obvious that the attorney for the lessor agreeing to such a term was entitled to rely upon the state of the law then existing in California. And at such time (Dec. 12, 1969), it is clear that California followed the ‘weight of authority’ in these United States and allowed such consent to be arbitrarily or unreasonably withheld absent a provision to the contrary. (Richard v. Degen & Brody, Inc. (1960) 181 Cal.App.2d 289 [5 Cal.Rptr. 263].) The Richard v. Degen & Brody court clearly held that the weight of authority as expressed in 51 Corpus luris Secundum section 36 was the law of California: ‘ “. . . where a subletting or assignment of the leased premises without the consent of the lessor is prohibited, he [lessor] may withhold his assent arbitrarily and without regard to the qualifications of the proposed assignee, unless ... the lease provides that consent shall not be arbitrarily or unreasonably withheld, and in granting his assent may impose such conditions as he sees fit.”’ (Id., at p. 299.)

“Even those few jurisdictions and authorities which have rejected the ‘arbitrary and capricious’ rule have forthrightly recognized that in doing so, they depart from the majority: ‘The general rule throughout the country has been that when a lease contains an approval clause, the landlord may arbitrarily and capriciously reject proposed subtenants.’ (Homa-Goff Interiors, Inc. v. Cowden (Ala. 1977) 350 So.2d 1035, 1037.) See also the reporters’ note to the Restatement Second of Property, section 15.2, at page 111, which proposes the very result advanced by appellants: ‘The rule adopted in subsection (2) of this section that the landlord may not unreasonably withhold his consent to a transfer by the tenant is contrary to the established common-law rule that if the lease mandates the consent of the landlord to validate a transfer, and the lease does not provide for the landlord to give *509consent if the transferee is reasonably suitable, such consent may be withheld arbitrarily by the landlord. ’ [Fn. omitted.]

“Those jurisdictions adopting the Restatement’s proposed departure from the settled common law appear to do so upon the shaky public policy rationale that the consent of a lessor should not be withheld unreasonably and that to hold otherwise is to violate the principle that restraints on alienation should be narrowly construed. (See Fernandez v. Vasquez (Fla. 1981) 397 So.2d 1171; Funk v. Funk (1981) 102 Idaho 521 [633 P.2d 586]; Shaker Building Co. v. Federal Lime & Stone Co. (1971) 28 Ohio Misc. 246 [277 N.E.2d 584]; Arrington v. Walter E. Heller International Corp. (1975) 30 Ill.App.3d 631 [333 N.E.2d 50].) Some even cite ‘moral needs’ (Homa-Goff Interiors, Inc. v. Cowden, supra, 350 So.2d at p. 1038) or the ‘increased recognition of and emphasis on the duty of good faith and fair dealing inherent in every contract’ (Cohen v. Ratinoff, supra, 147 Cal.App.3d 321, 330), or the egregious motive in enforcing the clause seeking ‘additional amounts of “blood” money from the appellants as a condition of consent to the assignments’ (Schweiso v. Williams, supra, 150 Cal.App.3d 883, 887 . . .).

“Some jurisdictions have overruled the common law, at least as to residential leases, by legislative action. (See Alaska Stat., § 34.03.060 (1975); Delaware Code Ann., tit. 25, § 5512, subd. (b) (1915); Hawaii Rev. Stat., § 516-63 (Supp. 1975).) This would appear to be the wisest procedure, if only to effect the repeal prospectively and thereby give force to those contracts entered into when the common law prevailed. See Justice Blood-worth’s dissent in Homa-Goff Interiors, Inc. v. Cowden, supra, 350 So.2d at page 1039: ‘To overturn a century and a quarter of existing real estate law without giving contracting parties “fair notice” is my principal complaint with the majority’s opinion. At the very least, I think the majority ought to make the rule they have adopted “prospective.” ’

“However, those jurisdictions which reject the temptation to follow what the minority call ‘the trend’ (see Fernandez v. Vasquez, supra, 397 So.2d at p. 1173) do so because they simply refuse to rewrite unambiguous language within a lease. (B & R Oil Company, Inc. v. Ray’s Mobile Homes, Inc. (1980) 139 Vt. 122 [422 A.2d 1267].) They so refuse in order to uphold the integrity of the contract and the inalienable rights of citizens to seek and obtain enforcement thereof by the courts. For those the motives and reasons for exercise of rights fairly contracted for are simply irrelevant: ‘This commercial lease expressly provided that it could not be assigned without the landlord’s consent; there was no limitation in the lease that such consent should not be unreasonably withheld. ... In the circumstances, the landlord was merely exercising its legal contractual rights in refusing to consent to *510an assignment of the lease unless the lease was modified to increase the rent. Such an exercise of the landlord’s legal rights does not constitute economic duress so as to entitle the tenant to damages. [Citation.]’ (Herlou Card Shop, Inc. v. Prudential Insurance Co. of America (1979) 73 App.Div.2d 562 [422 N.Y.S.2d 708] [reversing a $55,000 award to tenant].)

“Further persuading us that Cohen and Schweiso were wrongly decided is the failure of either case to discuss the history of what action the California Legislature has taken and, perhaps more importantly, not taken. For if the Legislature has considered adopting appellant’s position as the law of California and, having so considered, has rejected such a change, that refusal to act certainly implies legislative recognition and approval of current law. And this appears to be precisely the case in California. For in 1970 the Legislature added section 1951.4 to the Civil Code (elf. July 1, 1971) to permit landlords to recover rent due under the lease when the lessee breaches and abandons if the lease permits the lessee to ‘[s]ublet the property, assign his interest in the lease, or both, with the consent of the lessor, and the lease provides that such consent shall not unreasonably be withheld'. ’ (Civ. Code, § 1951.4, subd. (b)(3), italics added.) If the lease does not so provide then section 1951.2 of the Civil Code places upon the lessor the burden of retaking the premises and reletting the property in order to minimize damages.

“The Law Revision Commission comment on this addition makes clear the advantage to lessors in agreeing not to withhold consent unreasonably: ‘Where the lease complies with this section, the lessor may recover the rent as it becomes due under the terms of the lease and at the same time has no obligation to retake possession and relet the property in the event the lessee abandons the property. This allocation of the burden of minimizing the loss is most useful where the lessor does not have the desire, facilities, or ability to manage the property and to acquire a suitable tenant and for this reason desires to avoid the burden that Section 1951.2 places on the lessor to mitigate the damages by reletting the property.’ (Cal. Law Revision Com., com. § 1951.4.)

“Thus, the California Legislature has considered the situation of lessors contracting for the right (and then exercising it) of unreasonably withholding consent to an assignment. That it has provided an increased measure of damages (and thus an incentive) to those who forego this right is a clear recognition that the contractual right does exist.

“While we harbor great reverence for the doctrine of stare decisis and do not lightly reject the holdings in Cohen and Schweiso, we respectfully suggest that it is not for this court either in Cohen or Schweiso or the case at *511bar to imply a requirement of reasonableness when the Legislature specifically refused to do so 14 years earlier. [Fn. omitted.]

“To rewrite this contract (as appellant would have us do) for the benefit of one who was not an original party thereto, and to the detriment of one who stands in privity with one who was, and to hold that there is a triable issue of fact concerning whether respondents unreasonably withheld their consent when they had already contracted for that right, creates only mischief by breeding further uncertainty in the interpretation of otherwise unambiguously written contracts. To so hold only encourages needless future litigation.

“We respectfully suggest that if California is to adopt the minority rule and reject the majority rule which recognizes the current proviso as valid, unambiguous and enforceable, that it do so by clear affirmative legislative action. To so defer to the legislative branch, protects not only this contract but ‘those tens of thousands of landlords, tenants and lawyers who have relied on our unbroken line of judicial precedent. ’ (Homa-Goff Interiors, Inc. v. Cowden, supra, 350 So.2d at p. 1041.)”

I would affirm the judgment.

Mosk, L, concurred.

J. SKELLY WRIGHT, Circuit Judge:

These cases present the question whether housing code1 violations which arise during the term of a lease have any effect upon the tenant’s obligation to pay rent. The Landlord and Tenant Branch of the District of Columbia Court of General Sessions ruled proof of such violations inadmissible when proffered as a defense to an eviction action for nonpayment of rent. The District of Columbia Court of Appeals upheld this ruling. Saunders v. First National Realty Corp., 245 A.2d 836 (1968).

Because of the importance of the question presented, we granted appeallants’ petitions for leave to appeal. We now reverse and hold that a warranty of habitability, measured by the standards set out in the Housing Regulations for the District of Columbia, is implied by *1073operation of law into leases of urban dwelling units covered by those Regulations and that breach of this warranty gives rise to the usual remedies for breach of contract.

I

The facts revealed by the record are simple. By separate written leases,2 each of the appellants rented an apartment in a three-building apartment complex in Northwest Washington known as Clifton Terrace. The landlord, First National Realty Corporation, filed separate actions in the Landlord and Tenant Branch of the Court of General Sessions on April 8, 1986, seeking possession on the ground that each of the appellants had defaulted in the payment of rent due for the month of April. The tenants, appellants here, admitted that they had not paid the landlord any rent for April. However, they alleged numerous violations of the Housing Regulations as “an equitable defense or [a] claim by way of recoupment or set-off in an amount equal to the rent claim,” as provided in the rules of the Court of General Sessions.3 They offered to prove

“[t]hat there are approximately 1500 violations of the Housing Regulations of the District of Columbia in the building at Clifton Terrace, where Defendant resides some affecting the premises of this Defendant directly, others indirectly, and all tending to establish a course of conduct of violation of the Housing Regulations to the damage of Defendants * * *.”

Settled Statement of Proceedings and Evidence, p. 2 (1966). Appellants conceded at trial, however, that this offer of proof reached only violations which had arisen since the term of the lease had commenced. The Court of General Sessions refused appellants’ offer of proof4 and entered judgment for the landlord. The District of Columbia Court of Appeals affirmed, rejecting the argument made by appellants that the landlord was under a contractual duty to maintain the premises in compliance with the Housing Regulations. Saunders v. First National Realty Corp., supra, 245 A.2d at 838.5

*1074II

Since, in traditional analysis, a lease was the conveyance of an interest in land, courts have usually utilized the special rules governing real property transactions to resolve controversies involving leases. However, as the Supreme Court has noted in another context, “the body of private property law * * *, more than almost any other branch of law, has been shaped by distinctions whose validity is largely historical.” 6 Courts have a duty to reappraise old doctrines in the light of the facts and values of contemporary life — particularly old common law doctrines which the courts themselves created and developed.7 As we have said before, “[T]he continued vitality of the common law * * * depends upon its ability to reflect contemporary community values and ethics.” 8

The assumption of landlord-tenant law, derived from feudal property law, that a lease primarily conveyed to the tenant an interest in land may have been ..reasonable in a rural, agrarian society; it may continue to be reasonable in some leases involving farming or commercial land. In these cases, the value of the lease to the tenant is the land itself. But in the case of the modern apartment dweller, the value of the lease is that it gives him a place to live. The city dweller who seeks to lease an apartment on the third floor of a tenement has little interest in the land 80 or 40 feet below, or even in the bare right to possession within the four walls of his apartment. When American city dwellers, both rich and poor, seek “shelter” /today, they seek a well known package of goods and services 9 — a package which includes not merely walls and ceilings, but also adequate heat, light and ventilation, serviceable plumbing facilities, secure windows and doors, proper sanitation, and proper maintenance.

Professor Powell summarizes the present state of the law:

“ * * * The complexities of city life, and the proliferated problems of modern society in general, have created new problems for lessors and lessees and these have been commonly handled by specific clauses inserted in leases. This growth in the number and detail of specific lease covenants has reintroduced into the law of estates for years a predominantly contractual ingredient. In practice, the law today concerning estates for years consists chiefly of rules determining the construction and effect of lease covenants. * * * ” 10

Ironically, however, the rules governing the construction and interpretation of “predominantly contractual” obligations in leases have too often remained rooted in old property law.

Some courts have realized that certain of the old rules of property law *1075governing leases are inappropriate for today’s transactions. In order to reach results more in accord with the legitimate expectations of the parties and the standards of the community, courts have been gradually introducing more modern precepts of contract law in interpreting leases.11 Proceeding piecemeal has, however, led to confusion where “decisions are frequently conflicting, not because of a healthy disagreement on social policy, but because of the lingering impact of rules whose policies are long since dead.”12

In our judgment the trend toward treating leases as contracts is wise and well considered. Our holding in this /case reflects a belief that leases of url ban dwelling units should be interpreted 'and construed like any other contract.13

Ill

Modem contract law has recognized that the buyer of goods and services in an industrialized society must rely upon the skill and honesty of the supplier to assure that goods and services purchased are of adequate quality.14 In interpreting most contracts, courts have sought to protect the legitimate expectations of the buyer and have steadily widened the seller’s responsibility for the quality of goods and services through implied warranties of fitness and" merchantability.15 Thus without any special agreement a merchant will be held to warrant that his goods are fit for the ordinary purposes for which such goods are used and that they are at least of reasonably average quality. Moreover, if the supplier has been notified that goods are required for a specific purpose, he will be held to warrant that any goods sold are fit for that purpose. These implied warranties have become widely accepted and well established features of the common law, supported by the overwhelming body of case law.16 Today most states as well as the District of Columbia17 have codified and enacted these warranties into statute, as to the sale of goods, in the Uniform Commercial Code.

Implied warranties of quality have not been limited to cases involving sales. The consumer renting a chattel, paying for services, or buying a combination of goods and services must rely upon the skill and honesty of the supplier to at least the same extent as a purchaser of goods. Courts have not hesitated to find implied warranties of fitness and mer*1076chantability in such situations.18 In most areas product liability law has moved far beyond “mere” implied warranties running between two parties in privity with each other.19

The rigid doctrines of real property law have tended to inhibit the application of implied warranties to transactions involving real estate.20 Now, however, courts have begun to hold sellers and developers of real property responsible for the quality of their product.21 For example, builders of new homes have recently been held liable to purchasers for improper construction on the ground that the builders had breached an implied warranty of fitness.22 In other cases courts have held builders of new homes liable for breach of an implied warranty that all local building regulations had been complied with.23 And following the developments in other areas, very recent decisions24 and commentary 25 suggest the possible extension of liability to parties other than the immediate seller for improper construction of residential real estate.

Despite this trend in the sale of real estate, many courts have been unwilling to imply warranties of quality, specifically a warranty of habitability, into leases of apartments. Recent decisions have offered no convincing explanation for their refusal26; rather they have relied without discussion upon the old common law rule that the lessor is not obligated to repair unless he covenants to do so in the written lease contract.27 However, the Supreme Courts of at least two states, in recent and well reasoned opinions, have held landlords to implied warranties of quality in housing leases. Lemle v. Breeden, S.Ct.Hawaii, 462 P.2d 470 (1969); Reste Realty Corp. v. Cooper, 53 N.J. 444, 251 A.2d 268 (1969). See also Pines v. Perssion, 14 Wis.2d 590, 111 N.W.2d 409 (1961). In our judgment, the old no-repair rule can*1077not coexist with the obligations imposed on the landlord by a typical modern housing code, and must be abandoned28 in favor of an implied warranty of habitability.29 In the District of Columbia, the standards of this warranty are set out in the Housing Regulations.

IV

A. In our judgment the common law itself must recognize the landlord’s obligation to keep his premises in a habitable condition. This conclusion is compelled by three separate considerations. First, we believe that the old rule was based on certain factual assumptions which are no longer true; on its own terms, it can no longer be justified. Second, we believe that the consumer protection cases discussed above require that the old rule be abandoned in order to bring residential landlord-tenant law into harmony with the principles on which those cases rest. Third, we think that the nature of today’s urban housing market also dictates abandonment of the old rule.

The common law rule absolving the lessor of all obligation to repair originated in the early Middle Ages.30 Such a rule was perhaps well suited to an agrarian economy; the land was more important31 than whatever small living structure was included in the leasehold, and the tenant farmer was fully capable of making repairs himself.32 These historical facts were the basis on which the common law constructed its rule; they also provided the necessary prerequisites for its application.33

Court decisions in the late 1800’s began to recognize that the factual assumptions of the common law were no longer accurate in some cases. For example, the common law, since it assumed that the land was the most important part of the leasehold, required a tenant to pay rent even if any building on the land *1078was destroyed.34 Faced with such a rule i and the ludicrous results it produced, in _1863 the New York Court of Appeals declined to hold that an upper story tenant was obliged to continue paying rent after his apartment building burned down.35 The court simply pointed out that the urban tenant had no interest in the land, only in the attached building.

Another line of cases created an exception to the no-repair rule for short term leases of furnished dwellings.36 The Massachusetts Supreme Judicial Court, a court not known for its willingness to depart from the common law, supported this exception, pointing out:

“ * * * [A] different rule should apply to one who hires a furnished room, or a furnished Louse, for a few days, or a few weeks or months. Its fitness for immediate use of a particular kind, as indicated by its appointments, is a far more important element entering into the contract than when there is a mere lease of real estate. One who lets for a short term a house provided with all furnishings and appointments for immediate residence may be supposed to contract in reference to a well-understood purpose of the hirer to use it as a habitation. * * * It would be unreasonable to hold, under such circumstances, that the landlord does not impliedly agree that what he is letting is a house suitable for occupation in its condition at the time. * * * "37

These as well as other similar cases 38 demonstrate that some courts began some time ago to question the common law’s assumptions that the land was the most important feature of a leasehold and that the tenant could feasibly make any necessary repairs himself. Where those asjsumptions no longer reflect contempo|rary housing patterns, the courts have Icreated exceptions to the general rule that landlords have no duty to keep their premises in repair.

' It is overdue for courts to admit that these assumptions are no longer true with regard to all urban housing. Today’s (urban39 tenants, the vast majority of ¡whom live in multiple dwelling houses, ‘are interested, not in the land, but solely in “a house suitable for occupation.” Furthermore, today’s city dweller usually has a single, specialized skill unrelated to maintenance work; he is unable to make repairs like the “jack-of-all-trades” farmer who was the common law’s model of the lessee.40 Further, unlike his agrarian predecessor who often remained on one piece of land for his entire life, urban tenants today are more mobile than ever before. A tenant’s tenure in a specific apartment will often not be sufficient to justify efforts at repairs. -In addition, the increasing complexity of today’s dwellings renders them much more difficult to repair than the structures of earlier times. In a multiple dwelling repair may require access to equipment and areas in the control of the landlord. Low and middle income tenants, even if they were interested in *1079making repairs, would be unable to obtain any financing for major repairs since they have no long-term interest in the property.

Our approach to the common law of landlord and tenant ought to be aided by principles derived from the consumer protection cases referred to above.41 In a lease contract, a tenant seeks to purchase from his landlord shelter for a specified period of time. The landlord sells housing as a commercial businessman and has much greater opportunity, incentive and capacity to inspect and maintain the condition of his building. Moreover, the tenant must rely upon the skill and bona, fides of his landlord at least as much as a car buyer must rely upon the ear manufacturer. In dealing with major problems, such as heating, plumbing, electrical or structural defects, the tenant’s position corresponds precisely with “the ordinary consumer who cannot be expected to have the knowledge or capacity or even the opportunity to make adequate inspection of mechanical instrumentalities, like automobiles, and to decide for himself whether they are reasonably fit for the designed purpose.” Henningsen v. Bloomfield Motors, Inc., 32 N.J. 358, 375, 161 A.2d 69, 78 (1960).42

Since a lease contract specifies a particular period of time during which the tenant has a right to use his apartment for shelter, he may legitimately expect that the apartment will be fit for habitation for the time period for which it is rented. We point out that in the present cases there is no allegation that appellants’ apartments were in poor condition or in violation of the housing code at the commencement of the leases.43 Since the lessees continue to pay the same rent, they were entitled to expect that the landlord would continue to keep the premises in their beginning condition during the lease term. It is precisely such expectations that the law now recognizes as deserving of formal, legal protection.

Even beyond the rationale of traditional products liability law, the relationship of landlord and tenant suggests further compelling reasons for the law’s protection of the tenants’ legitimate expectations of quality. The inequality in bargaining power between landlord and tenant has been well documented.44 Tenants have very little leverage to enforce demands for better housing. Various impediments to competition in the rental housing market, such as racial and class discrimination45 and standardized form leases,46 mean that landlords place tenants in a take it or leave it situation. The increasingly severe shortage47 of adequate housing further increases the landlord’s bargaining power and escalates the need for maintaining and improving the existing stock. Finally, the findings by various studies of the social impact of bad housing has led to the realization that poor housing is detrimental to the whole society, not mere*1080ly to the unlucky ones who must suffer the daily indignity of living in a slum.48

Thus we are led by our inspection of the relevant legal principles and precedents to the conclusion that the old common law rule imposing an obligation _upon the lessee to repair during the lease term was really never intended to apply to residential urban leaseholds. Contract principles established-in other areas of the law provide a more rational framework for the apportionment of landlord-tenant responsibilities; they strongly suggest that a warranty of habitability be implied into all contracts49 for urban dwellings.

B. We believe, in any event, that the District’s housing code requires that a warranty of habitability be implied in the leases of all housing that it covers. The housing code — formally designated the Housing Regulations of the District of Columbia — was established and authorized by the Commissioners of the District of Columbia on August 11, 1955.50 Since that time, the code has been updated by numerous orders of the Commissioners.. The 75 pages of the Regulations provide a comprehensive regulatory scheme setting forth in some detail: (a) the standards which housing in the District of Columbia must meet; 51 (b) which party, the lessor or the lessee, must meet each standard; and (c) a system of inspections, notifications and criminal penalties. The Regulations themselves are silent on the question of private remedies.

Two previous decisions of this court, however, have held that the Housing Regulations create legal rights and duties enforceable in tort by private parties. In Whetzel v. Jess Fisher Management Co., 108 U.S.App.D.C. 385, 282 F.2d 943 (1960), we followed the leading ease of Altz v. Lieberson, 233 N.Y. 16, 134 N.E. 703 (1922), in holding (1) that the housing code altered the common law rule and imposed a duty to repair upon the landlord, and (2) that a right of action accrued to a tenant injured by the landlord’s breach of this duty. As Judge Cardozo wrote in Lieberson:

“ * * * We may be sure that the framers of this statute, when regulating tenement life, had uppermost in thought the care of those who are unable to care for themselves. The Legislature must have known that unless repairs in the rooms of the poor were made by the landlord, they would not be made by any one. The duty imposed became commensurate with the need. The right to seek redress is not limited to the city or its officers. The right extends to all whom there was a purpose to protect. * * * ”

134 N.E. at 704. Recently, in Kanelos v. Kettler, 132 U.S.App.D.C. 133, 135, 406 F.2d 951, 953 (1968), we reaffirmed our position in Whetzel, holding that “the Housing Regulations did impose maintenance obligations upon appellee [landlord] which he was not free to ignore.”52

The District of Columbia Court of Appeals gave further effect to the Housing Regulations in Brown v. Southall Realty Co., 237 A.2d 834 (1968). There the landlord knew at the time the lease was signed that housing code violations existed which rendered the apartment “unsafe and unsanitary.” Viewing the lease as a contract, the District of Columbia Court of Appeals held that the premises were let in violation of Sections *10812304 53 and 2501 54 of the Regulations and that the lease, therefore, was void as an illegal contract. In the light of Brown, it is clear not only that the housing code creates privately enforceable duties as held in Whetzel, but that the basic validity of every housing contract depends upon substantial compliance with the housing code at the beginning of the lease term. The Brown court relied particularly upon Section 2501 of the Regulations which provides:

“Every premises accommodating one or more habitations shall be maintained and kept in repair so as to provide decent living accommodations for the occupants. This part of this Code contemplates more than mere basic repairs and maintenance to keep out the elements; its purpose is to include repairs and maintenance designed to make a premises or neighborhood healthy and safe.”

By its terms, this section applies to maintenance and repair during the lease term. Under the Brown holding, serious failure to comply with this section before the lease term begins renders the contract void. We think it untenable to find that this section has no effect on the contract after it has been signed. To the contrary, by signing the lease the landlord has undertaken a continuing obligation to the tenant to maintain the premises in accordance with all applicable law.

This principle of implied warranty is well established. Courts often imply relevant law into contracts to provide a remedy for any damage caused by one party’s illegal conduct.55 In a case closely analogous to the present ones, the Illinois Supreme Court held that a builder who constructed a house in violation of the Chicago building code had breached his contract with the buyer:

“ * * * [T]he law existing at the time and place of the making of the contract is deemed a part of the contract, as though expressly referred to or incorporated in it. * * *

“The rationale for this rule is that the parties to the contract would have expressed that which the law implies ‘had they not supposed that it was unnecessary to speak of it because the law provided for it.’ * * * Consequently, the courts, in construing the existing law as part of the express contract, are not reading into the contract provisions different from those expressed and intended by the parties, as defendants contend, but are merely construing the contract in accordance with the intent of the parties.”56

We follow the Illinois court in holding that the housing code must be read into housing contracts — a holding also required by the purposes and the structure of the code itself.57 The duties imposed by the Housing Regulations may *1082not be waived or shifted by agreement if the Regulations specifically place the duty upon the lessor.58 Criminal penalties are provided if these duties are ignored. This regulatory structure was established by the Commissioners because, in their judgment, the grave conditions in the housing market required serious action. Yet official enforcement of the housing code has been far from uniformly effective.59 Innumerable studies have documented the desperate condition of rental housing in the District of Columbia and in the nation. In view of these circumstances, we think the conclusion reached by the Supreme Court of Wisconsin as to the effect of a housing code on the old common law rule cannot be avoided:

“* * * [T]he legislature has made a policy judgment — that it is socially (and politically) desirable to impose these duties on a property owner — which has rendered the old common law rule obsolete. To follow the old rule of no implied warranty of habitability in leases would, in our opinion, be inconsistent with the current legislative policy concerning housing standards. * * * ”60

We therefore hold that the Housing Regulations imply a warranty of habitability, measured by the standards which they set out, into leases of all housing that they cover.

V

In the present cases, the landlord sued for possession for nonpayment of rent. Under contract principles,61 however, the tenant's obligation to pay rent is dependent upon the landlord’s performance of his obligations, including his warranty to maintain the premises in habitable condition. In order to determine whether any rent is owed to the landlord, the tenants must be given an opportunity to prove the housing code violations alleged as breach of the landlord’s warranty.62

At trial, finder of fact must make two findings: (1) whether the alleged violations 63 existed during the period for which past due rent is claimed, and (2) what portion, if any or all, of *1083the tenant’s obligation to pay rent was suspended by the landlord’s breach. If no part of the tenant’s rental obligation is found to have been suspended, then a judgment for possession may issue forthwith. On the other hand, if the jury determines that the entire rental obligation has been extinguished by the landlord’s total breach, then the action for possession on the ground of nonpayment must fail.64

The jury may find that part of the tenant’s rental obligation has been suspended but that part of the unpaid back rent is indeed owed to the landlord.65 In these circumstances, no judgment for possession should issue if the tenant agrees to pay the partial rent found to be due.66 If the tenant refuses to pay the partial amount, a judgment for possession may then be entered.

The judgment of the District of Columbia Court of Appeals is reversed and the cases are remanded for further proceedings consistent with this opinion.67

So ordered.

Circuit Judge ROBB concurs in the result and in Parts IV-B and V of the opinion.

In July of 1983 petitioner landlord commenced the within summary nonpayment proceeding against respondents Randolph and Kikuchi, tenants of a loft space on the fourth floor of petitioner’s building on West 20th Street in Manhattan, alleging nonpayment of rent since July 1981. The tenants’ answer set forth as affirmative defenses that because they were unable to use two thirds of the loft space due to the landlord’s renovations and other conditions, they were entitled to an abatement of two thirds of the rent, and that as to the remaining one-third space, they were entitled to a further rent abatement due to the landlord’s failure to supply essential services. The tenants also counterclaimed for breach of *246warranty of habitability, seeking both actual and punitive damages and attorney’s fees.

A trial was held in Civil Court before Justice Saxe in November of 1983. It was stipulated that rent was due and owing from October 1981 through November 1983 in the amount of $12,787 ($200 due for Oct. 1981, $450 due each month from Nov. 1981 through Dec. 1982, and $567 per month since Jan. 1983).

Respondents commenced residency of the loft space in 1976 pursuant to a commercial lease. Petitioner offered a commercial lease even though at the time of the signing of the lease the building was used predominantly for residential purposes and the respondents had informed petitioner that they would use the loft as their residence. The loft space measures 1,700 square feet, approximately two thirds of which is used as a music studio for Mr. Kikuchi, where he composes, rehearses and stores his very expensive electronic equipment and musical instruments. The remainder of the space is used as the tenants’ residence.

Late in 1977, the fifth-floor tenant began to operate a health spa equipment business which included the display of fully working Jacuzzis, bathtubs, and saunas. The Jacuzzis and bathtubs were filled to capacity with water. From November 1977 through February 1982, respondents suffered at least 40 separate water leaks from the fifth floor. At times the water literally poured into the bedroom and bedroom closets of respondents’ loft, ruining their clothes and other items. Water leaked as well into the kitchen, the bathroom and onto Mr. Kikuchi’s grand piano and other musical instruments. Respondents’ complaints to petitioner went unheeded.

In January of 1978 the fifth-floor tenant began to sandblast the walls, causing sand to seep through openings around pipes and cracks in the ceiling and into respondent’s loft. The sand, which continued to fall into the loft even as the parties went to trial, got into respondents’ clothes, bed, food and even their eyes.

In September of 1981, the landlord commenced construction work in the building to convert the building into a class A multiple building. To convert the freight elevator into a passenger elevator, petitioner had the elevator shaft on respondent’s side of the building removed. The workers threw debris down the elevator shaft, raising "huge clouds of dust” which came pouring into the loft and settled everywhere, on respondents’ clothes, bed, food, toothbrushes and musical *247equipment. The musical equipment had to be covered at all times to protect it from the dust. Respondents began to suffer from eye and sinus problems, nausea, and soreness in their throats from the inhalation of the dust. Respondents attempted to shield themselves somewhat from the dust by putting up plastic sheets, only to have the workmen rip them down.

To demonstrate the hazardous nature of some of the construction work, respondents introduced evidence that as the landlord’s workers were demolishing the stairs from the seventh floor down, no warning signs were posted, causing one visitor to come perilously close to falling through a hole in the stairs. The workers jackhammered a new entrance to the loft, permitting the debris to fall directly onto the floor of respondents’ loft. The workmen would mix cement right on respondents’ floor. A new entrance door to the loft was sloppily installed without a door sill, and loose bricks were left around the frame. A day later, brick fragments and concrete fell on tenant Randolph’s head as she closed the door.

The record contains many more examples of dangerous construction and other conduct interfering with respondents’ ability to use and enjoy possession of their loft. From 1981 until the time of trial, Kikuchi was completely unable to use the music studio portion of the loft. His musical instruments had been kept covered and protected against the sand and later the dust since 1978.

The jury rendered a verdict awarding respondents a rent abatement of 80% for July 1981 through November 1983, as compensatory damages on the theory of constructive eviction from the music studio portion of the loft; a 40% rent abatement for January 1981 through November 1983, on the remainder of the rent due for the residential portion of the premises, on a theory of breach of warranty of habitability; a 10% rent abatement on the rent attributable to the residential portion of the premises for all of 1979, on a breach of warranty of habitability theory; and punitive damages in the amount of $20,000. After trial the court granted respondents’ motion made pursuant to Real Property Law § 234 for reasonable attorney’s fees, awarding respondents $5,000. The court also granted petitioner’s motion to set aside the verdict and for other relief, only to the extent of reducing the award for punitive damages to $5,000. Final judgment was entered on March 23,1984.

On appeal to the Appellate Term that court reversed the judgment. Holding that the doctrine of constructive eviction *248could not provide a defense to this nonpayment proceeding, because tenants had not abandoned possession of the demised premises, the court reversed the jury’s award as to the 80% rent abatement predicated on the constructive eviction theory. The court ordered a new trial on the counterclaim for breach of warranty of habitability, concluding it likely that the jury’s consideration of the constructive eviction claim impacted on the breach of warranty of habitability claim. The court also struck down the award of punitive damages, concluding that, even if punitive damages could properly be awarded in habitability cases, the facts herein did not support a finding of "high moral culpability” or "criminal indifference to civil obligations”, as required by Walker v Sheldon (10 NY2d 401, 405), so as to warrant punitive damages. We reverse and hold that the tenants were entitled to avail themselves of the doctrine of constructive eviction based on their abandonment of a portion of the premises and that the award for punitive damages was permissible and warranted by these facts.

We agree with the holding and reasoning of East Haven Assocs. v Gurian (64 Misc 2d 276) that a tenant may assert as a defense to the nonpayment of rent the doctrine of constructive eviction, even if he or she has abandoned only a portion of the demised premises due to the landlord’s acts in making that portion of the premises unusable by the tenant. The rule of Edgerton v Page (20 NY 281) the first decision to establish the requirement of abandonment of premises as a condition to asserting the defense of constructive eviction, is not undermined by our acknowledgement of a defense for partial constructive eviction. Edgerton v Page (supra, at 285) emphasized that the tenant’s obligation to pay rent continues as long as "the tenant remains in possession of the entire premises demised” (emphasis added). It is not contrary to this rule nor against any established precedent to hold that when the tenant is constructively evicted from a portion of the premises by the landlord’s actions, he should not be obligated to pay the full amount of the rent. (East Haven Assocs. v Gurian, supra, 64 Misc 2d, at 279-280.) Indeed "compelling considerations of social policy and fairness” dictate such a result. (Supra, at 277.) None of the cases cited by the landlord reaches or warrants a contrary conclusion. (See, Barash v Pennsylvania Term. Real Estate Corp., 26 NY2d 77, 83; Two Rector St. Corp. v Bein, 226 App Div 73, 76; 300 W. 56th St. Corp. v Kelly, 153 NYS2d 978.)

As for petitioner’s argument on appeal that the tenants never abandoned any portion of the premises and, in fact, *249continued to use the entire loft even up until the day of trial, we note that this assertion is unaccompanied by any citation to the record. This was no mere inadvertent error, for there is absolutely nothing in the record to support such a claim. The evidence at trial fully supported a finding that respondents were compelled to abandon the music studio portion of the loft due to "the landlord’s wrongful acts [which] substantially and materially deprive[d] the tenantfs] of the beneficial use and enjoyment” of that portion of the loft. (Barash v Pennsylvania Term. Real Estate Corp., supra, 26 NY2d, at 83.)

Petitioner does, however, correctly point out that as the constructive eviction claim was asserted as a defense to the nonpayment of rent and respondents did not request an abatement for any months other than those in which they did not pay rent, the jury’s award of an 80% rent abatement as to the months July, August, September and half of October of 1981 must be stricken.

The award for punitive damages, as reduced by the Civil Court to $5,000, should be reinstated as well. Although no exception to the court’s charge permitting the jury to award punitive damages was made,. we discuss the issue of the propriety of submitting this issue to the jury in light of petitioner’s argument that the award subjects it to a liability for which there is no support in the law and in light of Appellate Term’s inconclusive comment on whether or not punitive damages could, as a matter of law, be awarded in habitability cases.

Although generally in breach of contract claims the damages to be awarded are compensatory, in certain instances punitive damages may be awarded when to do so would "deter morally culpable conduct”. (Halpin v Prudential Ins. Co., 48 NY2d 906, 907; Williamson, Picket, Gross v Hirschfeld, 92 AD2d 289, 295 [punitive damages for conduct involving bad faith].) The determining factor is " 'not the form of the action * * * but the moral culpability of the defendant’ ” and whether the conduct implies a "criminal indifference to civil obligations.” (Walker v Sheldon, supra, 10 NY2d, at 404-405.)

With respect to this State’s strict housing code standards and statutes, made enforceable through civil and criminal sanctions and other statutory remedies, it is within the public interest to deter conduct which undermines those standards when that conduct rises to the level of high moral culpability or indifference to a landlord’s civil obligations. Therefore, it has been recognized that punitive damages may be awarded in breach of warranty of habitability cases where the landlord’s *250actions or inactions were intentional and malicious. (See, e.g., Pleasant E. Assocs. v Cabrera, 125 Misc 2d 877, 883-884; Century Apts. v Yalkowsky, 106 Misc 2d 762, 766; Davis v Williams, 92 Misc 2d 1051, 1054-1055; Kipsborough Realty Corp. v Goldbetter, 81 Misc 2d 1054, 1058-1060.)

Accordingly, the issue of punitive damages was properly submitted to the jury, and we are satisfied that this record supports the jury’s finding of morally culpable conduct in light of the dangerous and offensive manner in which the landlord permitted the construction work to be performed, the landlord’s indifference to the health and safety of others, and its disregard for the rights of others, so as to imply even a criminal indifference to civil obligations. (See, Walker v Sheldon, supra, 10 NY2d, at 405.) One particularly egregious example of the landlord’s wanton disregard for the safety of others was the way in which the stair demolition was performed: steps were removed and no warning sign even posted. The landlord’s indifference and lack of response to the tenants’ repeated complaints of dust, sand and water leak problems demonstrated a complete indifference to their health and safety and a lack of concern for the damage these conditions could cause to the tenants’ valuable personal property. Such indifference must be viewed as rising to the level of high moral culpability. Accordingly, the award of punitive damages is sustained.

We likewise reject petitioner’s argument that respondents cannot rely on their lease in order to recover attorney’s fees pursuant to the provisions of Real Property Law § 234. This statute has the effect, inter alia, of implying into a lease for residential property which contains a provision permitting the landlord to recover attorney’s fees in a summary proceeding brought pursuant to the lease a similarly binding covenant by the landlord to pay the tenant’s reasonable attorney’s fees incurred in the successful defense of a summary proceeding commenced by the landlord arising out of the lease. We find totally without merit petitioner’s interpretation of the decision of another Civil Court Judge, holding that the landlord could not take advantage of the waiver of jury trial lease provision, as meaning that respondents cannot now rely on the lease at all in seeking an award of attorney’s fees. This is an action under the lease and this lease has not been voided. Furthermore, residential occupants of lofts are afforded the same protections available to other residential tenants under the Real Property Law (see, Multiple Dwelling Law § 286 [11]). Thus, the award for attorney’s fees was proper.

*251Except to eliminate any rent abatement for July through mid-October of 1981, the Civil Court judgment should be reinstated. Concur — Sandler, J. P., Carro, Asch and Ellerin, JJ.

J. SKELLY WRIGHT,

Circuit Judge:

In March 1965 the appellant, Mrs. Yvonne Edwards, rented housing property from the appellee, Nathan Habib, on a month-to-month basis. Shortly thereafter she complained to the Department of Licenses and Inspections of sanitary code violations which her landlord had failed to remedy. In the course of the ensuing inspection, more than 40 such violations were discovered which the Department ordered the landlord to cor*689rect. Habib then gave Mrs. Edwards a 30-day statutory notice1 to vacate and obtained a default judgment for possession of the premises.2 Mrs. Edwards promptly moved to reopen this judgment, alleging excusable neglect for the default and also alleging as a defense that the notice to quit was given in retaliation for her complaints to the housing authorities. Judge Greene, sitting on motions in the Court of General Sessions, set aside the default judgment and, in a very thoughtful opinion, concluded that a retaliatory motive, if proved, would constitute a defense to the action for possession.3 At the trial itself, however, a different judge apparently deemed evidence of retaliatory motive irrelevant and directed a verdict for the landlord.

Mrs. Edwards then appealed to this court for a stay pending her appeal to the District of Columbia Court of Appeals, and on December 3, 1965, we granted the stay, provided only that Mrs. Edwards continue to pay her rent. Edwards v. Habib, 125 U.S.App.D.C. 49, 366 F.2d 628 (1965). She then appealed to the DCCA, which affirmed the judgment of the trial court. 227 A.2d 388 (1967). In reaching its decision the DCCA relied on a series of its earlier decisions holding that a private landlord was not required, under the District of Columbia Code, to give a reason for evicting a month-to-month tenant and was free to do so for any reason or for no. reason at all.4 The court acknowledged that the landlord’s right to terminate a tenancy is not absolute, but felt that any limitation on his prerogative had to be based on specific statutes or very special circumstances.5 Here, the *690court concluded, the tenant’s right to report violations of law and to petition for redress of grievances was not protected by specific legislation and that any change in the relative rights of tenants and landlords should be undertaken by the legislature, not the courts. We granted appellant leave to appeal that decision to this court. We hold that the promulgation of the housing code by the District of Columbia Commissioners at the direction of Congress impliedly effected just such a change in the relative rights of landlords and tenants and that proof of a retaliatory motive does constitute a defense to an action of eviction. Accordingly, we reverse the decision of the DCCA with directions that it remand to the Court of General Sessions for a new trial where Mrs. Edwards will be permitted to try to prove to a jury that her landlord who seeks to evict her harbors a retaliatory intent.

I

Appellant has launched a constitutional challenge to the judicial implementation of 45 D.C. Code §§ 902 and 910 in aid of a landlord who is evicting because his tenant has reported housing code violations on the premises. We do not, however, reach the question whether it is unconstitutional for the court to apply the statute in such circumstances because we think Congress never intended that it be so applied. Nevertheless, because constitutional considerations inform the statutory construction on which our decision rests, we do discuss them briefly.6

Appellant argues first that to evict her because she has reported violations of the law to the housing authorities would abridge her First Amendment rights to report violations of law and to petition the government for redress of grievances. But while it is clear beyond peradventure that the making of such complaints is at the core of protected First Amendment speech,7 and that punishment, in the form of eviction, if imposed by the state would unconstitutionally abridge First Amendment rights, it is equally clear that these rights are rights against government, not private parties. Consequently, before appellant can prevail on this theory she must show *691that the government is in some relevant sense responsible for inhibiting her right to petition for redress of grievances; she must show, in other words, the requisite “state action.” 8 Appellant seeks to overcome this obstacle by arguing that the use of courts to effect her eviction sufficiently implicates the state as to bring into play constitutional constraints. She relies on an unreported decision of the United States District Court for the Southern District of New York, where the court invoked just such a theory to support the issuance of a preliminary injunction restraining an alleged retaliatory rent increase. Tarver v. G. & C. Construction Corp., S.D.N.Y., November 9, 1964.

There can now be no doubt that the application by the judiciary of the state’s common law, even in a lawsuit between private parties, may constitute state action which must conform to the constitutional strictures which constrain the government. New York Times Co. v. Sullivan, 376 U.S. 254, 84 S.Ct. 710, 11 L.Ed.2d 686 (1964). This may be so even where the court is simply enforcing a privately negotiated contract. Shelley v. Kraemer, 334 U.S. 1, 68 S.Ct. 836, 92 L.Ed. 1161 (1948). But the nature and extent of the judicial involvement required to bring into play these constitutional constraints is unclear. The central case is, of course, Shelley v. Kraemer, where the Court ruled that judicial enforcement of private agreements containing restrictive covenants against selling to Negroes violated the Fourteenth Amendment’s command that “[n]o State shall * * * deny to any person within its jurisdiction the equal protection of the laws.” But the contours of Shelley remain undefined and it is uncertain just how far its reasoning extends.9 Judge Greene declined to rest his opinion on Shelley for fear that if, for constitutional purposes, every private right were transformed into governmental action by the mere fact of court enforcement of it, the distinction between private and governmental action would be obliterated. He accepted the reasoning of Mr. Justice Black, who joined in the Shelley opinion but has since maintained that its doctrine applies only where, as in Shelley itself, the court is called upon to upset a transaction between a willing buyer and a willing, seller.10 Others, *692however, have urged different interpretations of Shelley, ones which would extend its principle beyond its facts but would still leave certain private rights, even when judicially enforced, immune from the Constitution’s restraints on government.

Some commentators have suggested that private action is subject to constitutional scrutiny only when the state has encouraged or sanctioned it.11 Qthers have gone further and suggested that at least where racial discrimination is involved the state denies the equal protection of the law when it does not act affirmatively to assure equal protection by legislating against privately ini- | tiated, as well as governmental, discrim1 ination.12 But these commentators are careful to point out that Shelley should not be read to hold that a state cannot enforce any discrimination which it could not itself make.13 There is, on this view, unconstitutional action by inaction ex*693cept in those situations where the Constitution itself demands inaction; that is, in those situations where the state could not legislate equality because to do so would impinge on the individual discriminator’s countervailing rights of liberty, property and privacy.14 The state, through its police or courts, could aid an individual in his quest to keep Negroes from a dinner party in his home even though it could not keep Negroes from a courthouse cafeteria15 or even from a privately owned hotel solely on account of their race. Consequently this theory might dull, but it would not obliterate, the distinction between private and state action.

Were this analysis of state action by inaction under the equal protection clause unqualifiedly applied where the question was governmental action under the First Amendment, there is no doubt that Mrs. Edwards’ eviction could not be sustained. Not only would the government have failed to protect her against private reprisals for the exercise of her First Amendment rights (and clearly it could constitutionally protect her if it chose to do so),16 but it would, through its court, actually be aiding the individual who seeks to intimidate the exercise of those rights.17 It may be, however, that what is state action under the Fourteenth Amendment is not always state action under the First. To begin with, the Reconstruction amendments were enacted with a particular purpose in mind: to eradicate forever the vestiges of slavery and the black codes.18 In addition, the language of the First Amendment, “Congress shall make no law * * is not as amenable as the Fourteenth Amendment is to the construction that there is state action by inaction or by judicial action which merely gives legal effect to privately made decisions. Indeed those who have expounded this theory of state action have been careful to limit their case to the area of racial discrimination.19

But this does not end the matter. In New York Times Co. v. Sullivan, supra, the state of Alabama neither forced nor even encouraged Police Commissioner Sullivan to sue the New York Times. It simply provided courts in which such a suit could be brought, and its common law provided the doctrine upon which the dispute would be settled. There was no suggestion in the Supreme Court’s opinion that the doctrine was not fairly and honestly applied by the state court. Yet the Court, hardly pausing even to *694consider the question of state action,20 held that a libel judgment against the Times, on the facts of that case, unconstitutionally abridged the Times’ First Amendment rights as incorporated in the Fourteenth Amendment’s due process clause. The fact that Congress and the state legislature had “made no law” was apparently irrelevant to this determination.21 ■

A state court judgment, then, even by adjudicating private lawsuits, may unconstitutionally abridge the right of free speech as well as the right to equal protection of the laws. Of course, the federal court review in Times was technically under the due process clause of the Fourteenth Amendment as it incorporates the First, while here the challenge is made under the First Amendment itself. But there is no reason to think that review under the First Amendment is more limited.22 In any case, review under the Fifth Amendment’s due process clause would not be. Bolling v. Sharpe, 347 U.S. 497, 74 S.Ct. 693, 98 L.Ed. 884 (1954). And it may be that the more flexible concept of due process is preferable where the question is one involving First Amendment rights and the government, though perhaps sufficiently implicated in the abridgement to bring into play constitutional constraints, is not directly responsible *695for it. It may be instructive to borrow again from other state action theorists whose analyses, though concerned primarily with racial discrimination, are somewhat less rigid and therefore may transfer more comfortably from the area of racial discrimination under the Fourteenth Amendment into the context of First Amendment rights.

It has been suggested that there is state action, not only when an individual asserts a claim of right against a state, but also when he asserts a claim of right against the claims of right of other persons and the state resolves the conflict according to. its policy of what is reasonable under the circumstances, i. e., according to its law.23 Once this “state action” is established, the question then becomes simply “whether the particular state action in the particular circumstances, determining legal relations between private persons, is constitutional when tested against the various federal constitutional restrictions on state action.”24

The question in the instant case would then be whether a court can consistently with the Constitution prefer the interests of an absentee landlord25 in evicting a tenant solely because she has reported violations of the housing code to those of a tenant in improving her housing by resort to her rights to petition the government and to report violations of laws designed for her protection. On this theory, if it would be unreasonable to prefer the landlord’s interest, it would also be unconstitutional.26 Mr. Justice Black, who is not prone to weigh interests where First Amendment rights are involved,27 seems to have taken jiist this approach in writing for the Court in Marsh v. State of Alabama, 326 U.S. 501, 66 S.Ct. 276, 90 L.Ed. 265 (1946), which, like the instant case, involved state-aided privately-initiated, abridgement of First Amendment freedoms.28 *696The question before the Court in Marsh was “whether a State, consistently with the First and Fourteenth Amendments, can impose criminal punishment on a person who undertakes to distribute religious literature on the premises of a company-owned town contrary to the wishes of the town’s management.” 326 U.S. at 502, 66 S.Ct. at 277. In answering it, Mr. Justice Black felt compelled to “balance the Constitutional rights of owners of property against those of the people to enjoy freedom of press and religion” and in doing so remained mindful “of the fact that the latter occupy a preferred position.” 326 U.S. at 509, 66 S.Ct. at 280. He concluded that the state acted unconstitutionally in preferring the property rights of the town’s owners to those of the defendant and the town’s residents29 through the application of its criminal trespass statute to Mrs. Marsh. “Insofar as the State has attempted to impose criminal punishment on appellant for undertaking to distribute religious literature in a company town, its action cannot stand.” Ibid.

Again it should be remembered that in Times the state did not initiate the action, nor did it encourage the private parties involved to do so. And in Marsh there could have been no prosecution without a private complaint. In both cases the state simply provided courts and laws to settle essentially private disputes.30 Where its settlement impinged on First Amendment freedoms, a balancing process was utilized on review to determine whether it did so unconstitutionally.31 But we need not undertake such a weighing of interests here or even decide if such a process is appropriate, for we find, as indicated in Part III, that Congress, by directing the enactment of the housing code, impliedly directed the court to prefer the interests of the tenant who seeks to avail himself of the code’s protection.

II

Appellant argues that, even if Shelley and the concept of “state action” are interpreted narrowly, and if the judicial implementation of the D.C. Code to effect a retaliatory eviction does not violate her First Amendment rights, her eviction would be unconstitutional nonetheless because the right to petition the government and to report violations of law is constitutionally protected against private as well as governmental interference. There is strong support for this position. In Crandall v. State of *697Nevada, 73 U.S. (6 Wall.) 35, 18 L.Ed. 744 (1868), decided before the Fourteenth Amendment was enacted, the Court struck down Nevada’s one-dollar tax on anyone leaving the state in part because the Court felt that such a tax might infringe the individual’s right to travel to Washington to participate in, and seek redress from, the government. And in United States v. Cruikshank, 92 U.S. (2 Otto) 542, 23 L.Ed. 588 (1876), in dictum32 and in In re Quarles and Butler, 158 U.S. 532, To S.Ct. 959, 39 L. Ed. 1080 (1895), as holding, the Court was even more explicit in recognizing the right to petition the government for redress of grievances and the right to inform the government of violations of law as rights of federal citizenship arising frpm.'.rQÜr.’_£pnstitutional system as a "whole, not just from the First Amendment or- from any. other particular constitutional clause or provision. In Quarles the Supreme Court affirmed the conviction under the Civil Rights Act of a private citizen for conspiring to “injure, oppress, threaten, or intimidate [another] in the free exercise * * * of [a] right * * * secured to him by the Constitution or laws of the United States, or because of his having so exercised the same.” 33 The defendant and his accomplices had threatened and beaten one Worley for informing federal officers that the defendant was violating the federal liquor law. The defendant argued that Worley had no right to inform that was protectable against private interference. But the Court rejected this argument, stating that:

“The right of a citizen informing of a violation of law, like the right of a prisoner in custody upon a charge of such violation, to be protected against lawless violence, does not depend upon any of the Amendments to the Constitution, but arises out of the creation and establishment by the Constitution itself of a national government, paramount and supreme within its sphere of action. * * *

“* * * [As yjg Qourt said in Ex parte Yarbrough, 110 U.S. 651, 662, 4 S.Ct. 152, 28 L.Ed. 274 *698(1884)] : ‘The power [to protect certain rights from private interference] arises out of the circumstance that the function in which the party is engaged, or the right which he is about to exercise, is dependent on the laws of the United States. * * * [I]t is the duty of that government to see that he may exercise this right freely, and to protect him from violence while so doing, or on account of so doing. This duty does not arise solely from the interest of the party concerned, but from the necessity of the government itself * * *.

******

“The necessary conclusion is * * that this right is secured to the citizen by the Constitution of the United States * * * ” 158 U.S. at 536-537, 15 S.Ct. at 961.

This right, appellant argues, is accordingly protected against private as well as governmental interference.34 It is on the basis of this theory that Judge Greene found that proof of a retaliatory purpose constituted a valid defense.

But though this argument from Quarles is persuasive, it is not conclusive, for at issue in Quarles was the applicability and constitutionality of the Civil Rights Act to punish private interferences with the right to report violations of law, not the questions, first, whether such interferences were themselves unconstitutional in the absence of remedial legislation, and second, if unconstitutional, what legal consequences attached to them. The DCCA rejected the argument for just this reason, saying that Quarles was a case where “Congress enacted special legislation to secure certain rights.” 227 A.2d at 391. Presumably the legislation referred to is the Civil Rights Act, and the DCCA apparently felt that current civil rights statutes would not apply to this case. But the enforcement section of the Civil Rights Act provided remedies for the deprivation of rights secured by the Constitution or laws of the United States, It did not create new rights. And the Supreme Court held in Quarles that the right to report violations of law was a constitutional right protectable by federal legislation against private interference, not that it was itself a right created by the Civil Rights Act. It is this constitutional right that Mrs. Edwards is setting up as a defense to the landlord’s action of eviction. It is not necessarily relevant, therefore, that because of the peculiar requirements of the civil rights statutes they may not provide her with additional affirmative civil35 or criminal remedies36 for violation of the same right.37

*699III

But we need not decide whether judicial recognition of this constitutional defense is constitutionally compelled. We need not, in other words, decide whether 45 D.C. Code § 910 could validly compel the court to assist the plaintiff in penalizing the defendant for exercising her constitutional right to inform the govenment of violations of the law; -for we are confident that Congress did not intend it to entail such a result.

45 D.C. Code § 910, in pertinent part, provides:

“Whenever * * * any tenancy shall be terminated by notice as aforesaid [45 D.C. Code § 902, see Note 1 supra], and the tenant shall fail or refuse to surrender possession of the leased premises, * * * the landlord may bring an action to recover possession before the District of Columbia Court of General Sessions, as provided in sections 11-701 to 11-749.”

And 16 D.C. Code § 1501, in pertinent part, provides:

“When a person detains possession of real property * * * after his right to possession has ceased, the District of Columbia Court of General Sessions * * * may issue a summons to the party complained of to appear and show cause why judgment should not be given against him for restitution of possession.”

These provisions are simply procedural. They neither say nor imply anything about whether evidence of retaliation or other improper motive should be unavailable as a defense to a possessory action brought under them. It is true that in making his affirmative ease for possession the landlord need only show that his tenant has been given the 30-day statutory notice, and he need not assign any reason for evicting a tenant who does not occupy the premises under a lease. But while the landlord may evict for any legal reason or for no reason at all, he is not, we hold, free to evict in retaliation for his tenant’s report of housing code violations to the authorities.38 As a matter of statutory construction and for reasons of public policy,39 such an eviction cannot be permitted.

*700The housing and sanitary codes,40 especially in light of Congress’ explicit direction for their enactment, indicate a strong and pervasive congressional concern to secure for the city’s slum dwellers decent, or at least safe and sanitary, places to live.41 Effective implementation and enforcement of the codes obviously depend in part on private initiative in the reporting of violations. Though there is no official procedure for the filing of such complaints, the bureaucratic structure of the Department of Licenses and Inspections establishes such a procedure,43 and for fiscal year 1966 nearly a third of the cases handled by the Department arose from private complaints.42 To permit retaliatory *701evictions, then, would clearly frustrate the effectiveness of the housing code as a means of upgrading the quality of housing in Washington.44

*700“The Commissioners of the District of Columbia hereby find and declare that there exist residential buildings and areas within said District which are slums or are otherwise blighted, and that there are, in addition, other such buildings and areas within said District which are deteriorating and are in danger of becoming slums or otherwise blighted unless action is taken to prevent their further deterioration and decline.

“The Commissioners further find and declare that such unfortunate conditions are due, among other circumstances, to certain conditions affecting such residential buildings and such areas, among them being the following: dilapidation, inadequate maintenance, overcrowding, inadequate toilet facilities, inadequate bathing or washing facilities, inadequate heating, insufficient protection against fire hazards, inadequate lighting and ventilation, and other insanitary or unsafe conditions.

“The Commissioners further find and declare that the aforesaid conditions, where they exist, and other conditions . which contribute to or cause the deterioration of residential buildings and areas, are deleterious to the health, safety, welfare and morals of the community and its inhabitants.”

*701As judges, “we cannot shut our eyes to matters of public notoriety and general cognizance. When we take our seats on the bench we are not struck with blindness, and forbidden to know as judges what we see as men.” Ho Ah Kow v. Nunan, C.C.D.Cal., 12 Fed.Cas. 252, 255 (No. 6546) (1879). In trying to effect the will of Congress and as a court of equity we have the responsibility to consider the social context in which our decisions will have operational effect. In light of the appalling condition and shortage of housing in Washington,45 the expense of moving, the inequality of bargaining power between tenant and landlord,46 and the social and economic importance of assuring at least minimum standards in housing conditions,47 we do not hesitate to declare that retaliatory eviction cannot be tolerated. There can be no doubt that the slum dweller, even though his home be marred by housing code violations, will pause long before he complains of them if he fears eviction as a consequence. Hence an eviction under the circumstances of this ease would not only punish appellant for making a complaint which she had a constitutional right to make, a result which we would not impute to the will of Congress simply on the basis of an essentially procedural enactment, but also would stand as a warning to others that they dare not be so bold, a result which, from the authorization of the housing code, we think Congress affirmatively sought to avoid.

The notion that the effectiveness of remedial legislation will be inhibited if those reporting violations of it can legally be intimidated is so fundamental that a presumption against the legality of such intimidation can be inferred as *702inherent in the legislation even if it is not expressed in the statute itself.48 Such an inference was recently drawn by the Supreme Court from the federal labor statutes to strike down under the supremacy clause a Florida statute denying unemployment insurance to workers discharged in retaliation for filing complaints of federally defined unfair labor practices.49 While we are not confronted with a possible conflict between federal policy and state law, we do have the task of reconciling and harmonizing two federal statutes so as to best effectuate the purposes of each.50 The proper balance can only be struck by interpreting 45 D.C. Code §§ 902 and 910 as inapplicable where the court’s aid is invoked to effect an eviction in retaliation for reporting housing code violations.51

This is not, of course, to say that even if the tenant can prove a retaliatory purpose she is entitled to remain in possession in perpetuity. If this illegal purpose is dissipated, the landlord can, in the absence of legislation52 or a binding contract, evict his tenants or raise their rents for economic or other legitimate reasons, or even for no reason at all.53 The question of permissible or impermissible purpose is one of fact for the court or jury, and while such a determination is not easy, it is not significantly different from problems with *703which the courts must deal in a host of other contexts, such as when they must decide whether the employer who discharges a worker has committed an unfair labor practice because he has done so on account of the employee’s union activities.54 As Judge Greene said, “There is no reason why similar factual judgments cannot be made by courts and juries in the context of economic retaliation [against tenants by landlords] for providing information to the government.”

Reversed and remanded.

McGOWAN, Circuit Judge

(concurring except as to Parts I and II):

The considerations bearing upon statutory construction, so impressively marshalled by Judge Wright in Part III of his opinion, have made it unnecessary for me to pursue in any degree the constitutional speculations contained in Parts I and II; and it is for this reason that I do not join in them. The issue of statutory construction presented in this case has never seemed to me to be a difficult one, nor to require for its resolution the spur of avoidance of constitutional questions. A Congress which authorizes housing code promulgation and enforcement clearly cannot be taken to have excluded retaliatory eviction of the kind here alleged as a defense under

a routine statutory eviction mechanism also provided by Congress.

DANAHER, Circuit Judge

(dissenting):

Basically at issue between my colleagues and me is a question as to the extent to which the power of the court may here be exercised where by their edict the landlord’s right to his property is being denied. They concede as they must1

“that in making his affirmative case for possession the landlord need only show that his tenant has been given, the 30-day statutory notice, and he need not assign any reason for evicting r. tenant who does not occupy the premises under a lease.”

That fundamental rule of our law of property must give way, it now develops. My colleagues so rule despite the absence of a statutory prescription of discernible standards as to what may constitute “violations,” or of provision for compensating2 the landlord for the deprivation of his property. They say that the court will'not “frustrate the effectiveness of the housing code as a means of upgrading the quality of housing in Washington.” Since they recognize that there is an “appalling condition and shortage of housing in Washington,”3 *704they say the court must take account of the “social and economic importance of assuring at least minimum standards in housing conditions.” So to meet such needs, the burden would now be met, not pursuant to a congressionally prescribed policy, with adequate provision for construction or acquisition costs, or for compensation to property owners, but by private landlords who will be saddled with what should have been a public charge.

Note how my colleagues achieve that result as they rule:

“But while the landlord may evict for any legal reason or for no reason at all, he is not, we hold, free to evict in retaliation for his tenant’s report of housing code violations to the authorities. As a matter of statutory construction and for reasons of public policy, such an eviction cannot be permitted.”

Just as do my colleagues, I deplore the effort of any landlord for a base reason to secure possession of his own property, but if his right so to recover in accordance with our law is to be denied, Congress should provide the basis. Appropriate standards as a pre-condition thus could be spelled out in legislation and just compensation thereupon be awarded if found to be due.4

I am not alone in my position, I dare say, as I read the Congressional Record for March 13, 1968, page H 1883. In President Johnson’s message to the Congress he said:

“One of the most abhorrent injustices committed by some landlords in the District is to evict — or threaten to evict — tenants who report building code violations to the Department of Licenses and Inspections.

“This is intimidation, pure and simple. It is an affront to the dignity of the tenant. It often makes the man who lives in a cold and leaking tenement afraid to report those conditions.

“Certainly the tenant deserves the protection of the law when he lodges a good faith complaint.

“I recommend legislation to prevent retaliatory evictions by landlords in the District.” (Emphasis added.)

He seems to think as do I that congressional action is required.5 It may be doubted that the President would so have recommended legislation except upon the advice of the legal authorities upon whom he relies. Certainly he is aware of the due process protective considerations which must be accorded to a landlord, even one who might be guilty of “an affront to the dignity” of a tenant. He must know that a community burden is not to be borne alone by landlords, charged with allegedly “retaliatory” 6 evictions because of complaints *705of “violations,” undefined and vague and lacking in standards.

That my colleagues ultimately upon reflection began to doubt the sufficiency of their position seems clear enough, for they observe:

“This is not, of course, to say that even if the tenant can prove a retaliatory purpose she is entitled to remain in possession in perpetuity.” (Emphasis added.)

“Of course” not, I say; not at all as the law has read, until now, I may add. My colleagues continue:

“If this illegal purpose is dissipated, the landlord can, in the absence of legislation or a binding contract, evict his tenants or raise their rents for economic or other legitimate reasons, or even for no reason at all.”

And so, it may be seen according to the majority, we need never mind the Congress, the aid of which the President would invoke. We may disregard, even reject, our law of such long standing. We will simply leave it to a jury to say when a landlord may regain possession of his own property, although “the determination is not easy,” my colleagues concede.7

I leave my colleagues where they have placed themselves.

OPINION OF THE COURT

Hancock, Jr., J.

To maintain a summary holdover proceeding a landlord must allege and prove that, as of the time the proceeding is commenced, the tenant remains in possession beyond the expiration of his term (RPAPL 711, subd 1). The tenancy must have ended automatically by lapse of time and not by election of the landlord to forfeit the lease for breach of a condition (see Beach v Nixon, 9 NY 35; 14 Carmody-Wait 2d, NY Prac, § 90:12; 2 Rasch, NY Landlord & Tenant, Summary Proceedings [2d ed], § 1006). If a clause in a lease provides that the lease cannot endure beyond the time when a contingency happens, it creates a conditional limitation upon the occurrence of which the lease automatically expires; a summary proceeding will lie to evict a tenant who remains thereafter (see 14 Carmody-Wait 2d, NY Prac, § 90:14; 2 Rasch, NY Landlord & Tenant, Summary Proceedings [2d ed], § 1008). Because such a proceeding is entirely statutory in origin, there must be strict compliance with the statute to give the court jurisdiction (see Cotignola v Lieber, 34 AD2d 700, 701; Radlog Realty Corp. v Geiger, 254 App Div 352; 14 Carmody-Wait 2d, NY Prac, § 90:8). The principal questions here concern two provisions in a lease and whether either constitutes a conditional limitation that would support a holdover proceeding, and, if so, whether the notice of termination served on the tenant and the allegations in the petition are sufficient to confer jurisdiction on the court.

Petitioner is the owner of a building on Buffalo Road in the Town of Gates, part of which was let to respondent *3under a written lease for use as an off-track betting parlor. In October, 1979 respondent exercised its option to renew and in November agreed with petitioner to rent additional space. Shortly after respondent moved into the enlarged premises difficulties arose. Petitioner served a notice of termination on February 14, 1980 and began a summary proceeding in Gates Town Court alleging several violations of the lease. It obtained a favorable judgment. On the appeal from Town Court, County Court held that a summary proceeding would not lie for any of the alleged violations and that petitioner’s remedy was an action in ejectment over which Town Court had no jurisdiction. Accordingly, it reversed and dismissed the petition with leave to bring an ejectment action in Supreme Court. Petitioner has appealed and we affirm.

The following provisions of the lease are pertinent:

“1st. That the Tenant shall pay the annual rent * * * said rent to be be paid in equal monthly payments in advance on the 15th day of each and every month during the term aforesaid, as follows: $458.33 per month. Tenant will pay its proportionate share of any increase in realty taxes after the 1975-76 tax is issued.

“4th. That the Tenant * * * shall not * * * make any alterations on the premises, without the Landlord’s consent in writing * * * and in the event of a breach the term herein shall immediately cease and determine at the option of the Landlord as if it were the expiration of the original term.

“17th. It is expressly understood and agreed that in case the demised premises shall be deserted or vacated, or if default be made in the payment of the rent or any part thereof as herein specified * * * or if the Tenant shall fail to comply with any of the statutes, ordinances, rules, orders, regulations and requirements of the Federal, State and Local Governments or of any and all their Departments and Buréaus, applicable to said premises * * * the Landlord may, if the Landlord so elects, at any time thereafter terminate this lease and the term hereof, on giving to the Tenant five days’ notice in writing of the Landlord’s intention so to do, and this lease and the term hereof shall expire and come to an end on the date fixed in such notice as if the *4said date were the date originally fixed in this lease for the expiration hereof. Such notice may be given by mail to the Tenant addressed to the demised premises.” (Emphasis added.)

The notice of termination advises respondent that its “term as tenant has expired” (emphasis added) and that it must vacate the premises within 10 days. The notice and the petition charge respondent with several violations of the lease including making alterations to the premises without the landlord’s written consent, failure to pay the agreed upon increases in real estate taxes and allowing patrons and employees to park in fire lanes.1 There was evidence in Town Court establishing these violations. Neither the notice of termination nor the petition makes reference to respondent’s violation of paragraph 1 or to its failure to pay rent or real estate taxes as rent. Nor does either the notice or the petition refer to paragraph 17.

In examining paragraph 4 (forbidding alterations without written consent) we readily conclude, as did County Court, that the clause creates a condition and not a conditional limitation. The significant language is: “in the event of a breach the term herein shall immediately cease and determine at the option of the landlord as if it were the expiration of the original term” (emphasis added). Although the clause specifies that the term “shall immediately cease” upon the happening of the contingency (i.e., the making of alterations without the landlord’s consent), this language does not become operative unless and until the landlord elects to exercise its option to give it effect. In holding a similar provision to be a condition, the court in *5the leading case of Beach v Nixon (9 NY 35, 36, supra) noted: “The lessor, upon breach, is not to be in immediately of his former estate, but, at his option, the * * * relation of landlord and tenant [is] to cease, and [is], of course, to continue, until he shall otherwise elect.” Since the termination under paragraph 4 was by forfeiture for breach of condition and not by lapse of time, a breach would not make respondent a holdover tenant subject to a summary proceeding (see Beach v Nixon, supra; Janes v Paddell, 67 Misc 420).

Paragraph 17, in contrast to paragraph 4, provides that in the event of a breach “the Landlord may, if the Landlord so elects” terminate the lease by giving five days’ notice in writing of its intention to do so “and this lease and the term hereof shall expire and come to an end on the date fixed in such notice as if the said date were the date originally fixed in this lease for the expiration hereof” (emphasis added).2 County Court held, and we agree, that paragraph 17 creates a conditional limitation, for the lease, once the five-day notice is served, expires automatically on the happening of a specified contingency, the arrival of the termination date fixed in the notice (see Matter of Miller v Levi, 44 NY 489; 14 Carmody-Wait 2d, NY Prac, § 90:15, and cases cited at p 29, n 10; 2 Rasch, NY Landlord & Tenant, Summary Proceedings [2d ed], §§ 749, 750, and cases cited at p 198, n 8; cf. Beach v Nixon, supra). Unlike the clause in paragraph 4, it is not the tenant’s conduct which, at the option of the lessor, operates on the lease to effect the termination. Under paragraph 17, lessor’s option “is not one to terminate the lease, but merely to have the event, that is, the lapse of time fixed in a notice, occur which will without further action or option operate on the lease to cause it to expire on the occurrence of the event” (14 Carmody-Wait 2d, NY Prac, § 90:15, p 30; see 2 Rasch, NY Landlord & Tenant, Summary Proceedings [2d ed], § 749).

Given that paragraph 17 creates a conditional limitation, the question is whether the petition should, neverthe*6less, have been dismissed. Petitioner contends that dismissal was error and that the proceeding was properly before Town Court because the lease had automatically expired pursuant to paragraph 17 by virtue of two violations of the lease asserted in the notice of termination: i.e., respondent’s failure to pay the increased real estate taxes as increased rent and its violations of State and local enactments in blocking designated fire lanes. We disagree. The notice of termination, while specifying by number several paragraphs of the lease, makes no reference to paragraph 17. Nor does it advise the tenant, as provided by paragraph 17, that the term “shall expire and come to an end on the date fixed in [the] notice”, i.e., five days from the date of the notice. On the contrary, it advises the tenant that its “term as tenant has expired” (emphasis added) and that it must move its “goods, equipment and employees from the premises within ten (10) days from the date of [the] notice.” We decline to give the notice a strained construction so as to impart to it an effect that apparently was not intended (i.e., triggering the termination clause under paragraph 17). A contrary holding would violate accepted rules requiring strict construction of language in written instruments which could work a forfeiture (see Gillette Bros. v Aristocrat Rest., 239 NY 87, 92) and of the statutory provisions creating the summary proceeding remedy (see Cotignola v Lieber, 34 AD2d 700, 701, supra).

The notice of termination in reciting respondent’s refusal to pay any share of the increase in property taxes could not, in any event, have actuated the conditional limitation in paragraph 17. The contingency detailed therein is that “default be made in the payment of the rent or any part thereof” as specified in the lease. The notice, however, refers not to respondent’s failure to pay the rent but its refusal “to pay [its] share of the increase in property taxes for the building” (emphasis added). It is a settled rule that in the absence of an express provision making it so, taxes may not be treated as part of the rent for the purposes of bringing summary proceedings (see River View Assoc. v Sheraton Corp. of Amer., 33 AD2d 187, 190, affd 27 NY2d 718; Matter of Petrakakis v Crown Hotels, 3 AD2d 635; Atkinson v Trehan, 70 Misc 2d 614, 615). There is no *7such express provision. The obligations to pay rent and taxes, although treated in successive sentences in the same paragraph of the lease (see par 1, quoted supra) are nevertheless separate and distinct.

Moreover, the notice of termination, even if otherwise sufficient, could not have been effective with respect to the alleged violations of the lease by respondent’s employees and patrons in parking in designated fire lanes. Nothing in paragraph 17 pertains to parking or to designated fire lanes. To be sure, as petitioner argues, respondent’s employees and patrons in blocking designated fire lanes may have contravened some particular code provision or other enactment, the violation of which would have constituted a breach of the specific provisions of paragraph 17.3 However, the notice of termination makes no reference to the violation of any such code provision or any other applicable enactment and such meaning may not be read into it (see Gillette Bros. v Aristocrat Rest., 239 NY 87, 92, supra; cf. Schnitzer v Fruehauf Trailer Co., 283 App Div 421, affd 307 NY 876; see, generally, Janks v Central City Roofing Co., 271 App Div 545, 548; North Shore Motor Lodge Corp. v Land, 68 Misc 2d 87).

In sum, paragraph 4 creates a condition and not a conditional limitation which would support a summary proceeding. Although paragraph 17 creates a conditional limitation, neither the notice nor the petition contain allegations sufficient to give rise to jurisdiction over a summary proceeding under RPAPL article 7.4

The order should be affirmed.

Callahan, Denman, Boomer and Moule, JJ., concur.

Order unanimously affirmed, with costs.

MEMORANDUM

MOTZ, District Judge.

In this action Harold and Carla Sullivan allege that they were unlawfully discriminated against on the basis of race and disability in violation of the Fair Housing Act, 42 U.S.C. § 3601, et seq. (“FHA”), and the Civil Rights Act of 1866, 42 U.S.C. § 1981, et seq. (“section 1981”) when their application for rental housing was rejected. They have brought suit against Jan Hernandez, Noah & Cummings Property Management, Inc. (“Noah & Cummings”), Susan Ronan, and Long and Foster Real Estate, Inc. (“Long and Foster”). Hernandez and Noah & Cummings joined Ronald and Maureen Carroll as third-party defendants. Discovery has been completed, and the defendants and the Car-rolls have filed a joint motion for summary judgment. Plaintiffs have filed a cross-motion for summary judgment as to their claims for disability discrimination. For the reasons that follow, I will deny both motions.

I.

On December 31, 1998, the Sullivans, who are both African-American, met with Hernandez, an agent for Noah & Cummings, in order to discuss rental properties. After the Sullivans and Hernandez spoke, Hernandez took the Sullivans to view several properties. One property viewed by the Sullivans was 503 Curry Ford Road, owned by the Carrolls. After viewing this property, the Sullivans completed a rental application for it on December 31, 1998. Subsequently, Hernandez delivered the application to Susan Ronan, an agent for Long and Foster who listed the Carrolls’ property. Ronan asserts that she did not receive the Sullivans’ application until January 4,1999.

A few days before Ronan allegedly received the Sullivans’ application, Ronan received a rental application for the Car-rolls’ property from Partha Bagchi. Long and Foster personnel then obtained background information on the Sullivans and Bagchi, including credit reports, information about the rental history of the applicants, and information about the applicants’ employment. Specifically, the reports indicated that (1) Bagchi’s salary was $90,000 compared to the Sullivans’ collective salary of approximately $50,000, (2) the Sullivans’ had a reserve in mutual funds and bank accounts totaling approximately $27,000, (3) there were two negative credit reports in Mrs. Sullivan’s history, (4) Mrs. Sullivan had one prior bankruptcy, and (5) on one prior occasion Bagchi violated a rental lease by vacating *638a premises more than six months prior to the lease’s expiration without landlord approval. On January 8, 2002, Ronan read the reports to Mr. Carroll.1 After listening to these reports, the Carrolls chose to rent the home to Bagchi.

II.

Courts have adapted the McDonnelT-Douglas framework to housing discrimination claims. See, e.g., Mencer v. Princeton Square Apartments, 228 F.3d 681, 634 (6th Cir.2000). Thus, in order to survive summary judgment, the Sullivans must allege sufficient facts to establish a prima facie case of housing discrimination. To establish a prima facie case of housing discrimination, the plaintiff must prove that: (1) he or she is a member of a statutorily protected class; (2) he or she applied for and was qualified to rent or purchase certain property or housing; (3) he or she was rejected; and (4) the housing or rental property remained available thereafter. See Mencer 228 F.3d at 634-35; Soules v. U.S. Dept. of Housing and Urban Development, 967 F.2d 817, 822 (2d Cir.1992). The first three elements are undisputed. The Sullivans are African-American. Additionally, the Sullivans applied to rent the Carroll’s property, were qualified to rent the property, and their application was rejected.

The defendants and third-party defendants (to whom, for ease of presentation, I will collectively refer as “defendants”) dispute the final element of a prima facie case. They contend that the Sullivans cannot establish that the rental property remained available because another application was accepted immediately after their application was rejected. That argument fails because it would allow a discriminating party to avoid a discrimination suit simply by accepting another application. The final element of a prima facie case does not require a plaintiff to establish that the property remained available indefinitely or for a long period. It simply requires a plaintiff to show that the property remained available immediately after the application in question was received. Here, the property was available when the Sullivans’ application was received by the Carrolls and their real estate agent, Ronan, even though Bagchi’s application was subsequently accepted. Thus, the Sullivans have established a prima facie case of housing discrimination.

The burden shifts to the defendants to offer a legitimate, non-discriminatory explanation for selecting Bagchi’s application. In an affidavit submitted in support of defendants’ summary judgment motion, Mr. Carroll states that he selected Bagchi’s application because he believed that: (1) Bagchi had a stronger credit history than the Sullivans; (2) Bagchi had a greater income than the Sullivans; (3) several creditors reported that Mrs. Sullivan had not paid her debts; and (4) Mrs. Sullivan had declared bankruptcy. (Carroll Aff. ¶ 7.) Although the Sullivans debate the merits of which applicant was better qualified financially, on its face Carroll’s explanation is both reasonable and non-discriminatory.

Thus, the burden shifts back to the Sullivans to establish that the Carrolls’ explanation is pretextual. A plaintiff may establish pretext by demonstrating that “the employer’s proffered explanation is unworthy of credence.” Reeves v. Sanderson Plumbing Products, Inc., 530 U.S. 133, 143, 120 S.Ct. 2097, 147 L.Ed.2d 105 (2000) (quoting Texas Dep’t of Community Affairs v. Burdine, 450 U.S. 248, 256, 101 *639S.Ct. 1089, 67 L.Ed.2d 207 (1981)). “Inconsistent post-hoc explanations” by an employer for its adverse action “is probative of pretext.... ” Dennis v. Columbia Colleton Medical Center, Inc., 290 F.3d 639, 647 (4th Cir.2002) (citing EEOC v. Sears Roebuck, 243 F.3d 846, 852-53 (4th Cir.2001)); see also Thurman v. Yellow Freight Sys., Inc., 90 F.3d 1160, 1167 (6th Cir.1996) (“An employer’s changing rationale for making an adverse employment decision can be evidence of pretext.”).

In this case, the Carrolls initially offered an explanation for selecting Bagchi’s application over the Sullivans which is inconsistent with the more recent affidavit Mr. 'Carroll has submitted. In their answers to interrogatories, they cited three factors that led to their decision: Bagchi’s financial and “fully qualified” status, the fact that Ronan recommended Bagchi’s application, and the fact that Bagchi’s application was received first.2 When confronted with potential disputes over two of these factors, the Carrolls retreated and dwindled their explanation down to one factor: Bagchi’s financial status.

A reasonable jury could find that the shift in the Carrolls’ position was not incidental and raises a question concerning defendants’ motivation. First, there is an inconsistency regarding Ronan’s role in the decision to choose Bagchi’s application. In their interrogatory answers, the Car-rolls stated that they chose to enter into a lease with Mr. Bagchi because “Mr. Bag-chi’s application was recommended to us by our trusted real estate agent, Ms. Ro-nan.” (See Pl.Ex. 4 at 5.) In contrast, in his current explanation, Mr. Carroll downplays Ronan’s role in the decision. In fact, Mr. Carroll’s recent affidavit, makes no reference to advice from Ronan. (See Def. Ex. 5 ¶¶ 6-8.) The reason for this change may be that defendants now realize that Ronan, but not the Carrolls, had reviewed the rental application, which included copies of the Sullivans’ drivers’ licenses. By detaching Ronan from the decision to choose Bagchi, the defendants are able to argue (and, in fact, do argue) that the decision to choose Bagchi could not have been discriminatory because Mr. Carroll made the decision without knowledge of the Sullivans’ race.

Second, there is an inconsistency regarding the timing of the applications. In their interrogatory answers, the Carrolls stated that they chose Bagchi’s application because it “was the first that [they] received.” (See Pl.Ex. 4 at 5.) Mr. Carroll’s later affidavit, however, makes no reference to the order in which the applications were received. This is significant because the evidence is contradictory concerning when Ronan received the Sullivans’ application. Ronan testified that she did not receive the application from Hernandez until January 4, 2002. (Ronan Dep. at 41-42, Pl.Ex. 10.) Hernandez, on the other hand, testified that she dropped the application off at Ronan’s office on December 31, 2001. (Hernandez Dep. at 29-34, PL Ex. 9.) Again, an inconsistency is presented that could lead a reasonable jury to infer that the legitimate, nondiscriminatory explanation offered by the defendants is *640pretextual. Accordingly, I will deny the defendants’ motion for summary judgment.

III.

I will now briefly address the Sullivans’ contention that they should be granted summary judgment claim for disability discrimination. The Carrolls rejected the Sullivans’ application, in part, because of Carla Sullivan’s credit history and prior bankruptcy. This negative credit history was allegedly due to Carla Sullivan’s disability. The Sullivans argue that simply because Mr. Carroll knew that the Sullivans’ income was from disability payments, the defendants must be held per se liable for housing discrimination. They cite no authority for this proposition, and I find it entirely unpersuasive.

A separate order is being entered herewith.

ORDER

For the reasons stated in the accompanying memorandum, it is, this 1st day of August 2002

ORDERED that

1. Defendants’/Third-Party Defendants’ motion for summary judgment is denied; and

2. Plaintiffs’ motion for summary judgment is denied.

POSNER, Circuit Judge.

The defendants in this civil rights suit — a real estate brokerage firm (Raj Realty), its owner (Chandra Dwivedi), and two of its employees — appeal from a judgment, entered after a jury verdict, for $12,000 in compensatory damages, attorney’s fees of almost $72,000, and an injunction. The defendants had been charged with violating two statutes. The first, 42 U.S.C. § 1982, part of the Civil Rights Act of 1866, grants all citizens of the United States the same rights as white people with respect to property. The second, 42 U.S.C. § 3604, part of Title VIII of the Civil Rights Act of 1968, forbids (so far as potentially relevant to this case) making a dwelling unavailable to any person because of his race, § 3604(a); discriminating on racial grounds against any person in the provision of services in connection with the sale of a dwelling, § 3604(b); or falsely representing to any person because of his race that any dwelling is not available for inspection or sale. § 3604(d). The parties agree that both section 1982 and each of the above subsections of section 3604 forbid racial steering by real estate brokers, but they do not agree on what “racial steering” is.

A suburban community of some 20,000, located thirteen miles west of downtown Chicago, Bellwood was once all white but by the time of trial in 1987 was 45 percent black. The adjoining suburbs continue to have very few black residents. Many people in Bellwood are concerned that if the percentage of blacks in the community continues to increase, a point will soon be reached where the remaining whites become so uncomfortable that they exit en masse, making the community all black. The Village has energetically employed the legal tools available to it to prevent this “tipping” from taking place. Whether and by what means a community can or should prevent racial tipping, at inevitable cost to those blacks who would like to move into it even if it ends up with fewer or even no whites, is a profound social question, but is not directly presented by this appeal.

Raj Realty opened in Bellwood in 1982. More than 90 percent of its customers are black, and this has been true from the agency’s inception. In 1985, officials of the Village, learning that 80 percent of the Village’s new residents were black, decided to investigate a number of real estate agencies, including Raj Realty, to determine whether any of them were steering black home seekers to Bellwood and white ones to the adjoining suburbs. It retained the Leadership Council for Metropolitan Open Communities, a nonprofit corporation that promotes integrated housing, to conduct the investigation. The Council hired both black and white couples to serve as “testers.” Twenty-eight of these couples went to Raj Realty, posing as customers. Their reports convinced the Council that Raj Realty was encouraging blacks to buy in Bell-wood and whites to buy in the other suburbs — more precisely that Raj Realty was encouraging blacks to buy in east Bellwood and whites in west Bellwood (which is still mainly white) as well as in the white suburbs that surround Bellwood, but we ignore west Bellwood to simplify the opinion. Village, Council, and testers joined together as plaintiffs to bring this suit. (Similar suits were brought against three other real estate agencies.) The jury’s verdict did not distinguish between the two statutes the defendants were charged with violating, and did not award the testers any damages.

1. There is a nonwaivable question of subject-matter jurisdiction: whether all the plaintiffs have standing under Article III of the Constitution to maintain this suit. That the Village does is settled by Gladstone, Realtors v. Village of Bellwood, 441 U.S. 91, 110-11, 99 S.Ct. 1601, 1613-14, 60 L.Ed.2d 66 (1979), an earlier steering suit by the Village in which the Supreme Court detailed the various types of injury (for example to the tax base) that tipping, brought about by racial steering, can inflict — injury being the essential requirement of Article III standing. Valley Forge Christian College v. Americans United for Separation of Church & State, *1526Inc., 454 U.S. 464, 472, 102 S.Ct. 752, 758, 70 L.Ed.2d 700 (1982). The Council’s standing is established by Havens Realty Corp. v. Coleman, 455 U.S. 363, 379, 102 S.Ct. 1114, 1124, 71 L.Ed.2d 214 (1982); our contrary ruling in Village of Bellwood v. Gladstone Realtors, 569 F.2d 1013, 1017 (7th Cir.1978), on which the Supreme Court did not pass in affirming our decision, cannot stand in the face of Havens. South Suburban Housing Center v. Santefort Real Estate, Inc., 658 F.Supp. 1450 (N.D.Ill.1987), which we affirmed in part and reversed in part without issuing a published opinion citable as precedent, 857 F.2d 1476 (7th Cir.1988) (table); 7th Cir.R. 53(b)(2)(iv), rejected the standing of a fair-housing agency similar to the Leadership Council because the agency’s ability to provide counseling had not been impaired by the defendant’s discriminatory practices. Havens makes clear, however, that the only injury which need be shown to confer standing on a fair-housing agency is deflection of the agency’s time and money from counseling to legal efforts directed against discrimination. These are opportunity costs of discrimination, since although the counseling is not impaired directly there would be more of it were it not for the defendant’s discrimination. That is especially clear in a case such as the present, where the Council was paid less by the Village than the costs incurred in the Council’s investigation. Had it been paid more, it might actually have profited from the defendants’ alleged misconduct!

The standing of the testers is, as an original matter, dubious. They are investigators; they suffer no harm other than that which they invite in order to make a case against the persons investigated; there is no suggestion in this case that they were paid less to be testers than the opportunity costs of their time. The idea that their legal rights have been invaded seems an arch-formalism. Havens, however, holds that a tester to whom a real estate agent makes a misrepresentation forbidden by 3604(d) has standing to complain about the misrepresentation, because the statute creates a right to be free from such misrepresentations. 455 U.S. at 374, 102 S.Ct. at 1121. Congress created this right so that private persons could enforce the statute as private attorneys general without running afoul of Article III. The objective and the method are permissible. If Congress had created a system of bounties for bringing offenders to justice, bounty-hunters would have a justiciable interest in offenses committed against other persons, just as government informers have a stake in the rewards offered informers, though in both cases the plaintiff’s claim is a contract claim against the government rather than a tort claim against the offender. Like the standing of informers and bounty hunters, tester standing is within the scope of the principle that “Congress may enact statutes creating legal rights, the invasion of which creates standing, even though no injury would exist without the statute.” Linda R.S. v. Richard D., 410 U.S. 614, 617 n. 3, 93 S.Ct. 1146, 1148 n. 3, 35 L.Ed.2d 536 (1973).

It is true that these must be substantive rights. Congress may not circumvent Article III by authorizing someone whose substantive rights have not been invaded to sue to redress an invasion of someone else’s substantive rights. The statute invalidated in McClure v. Carter, 513 F.Supp. 265 (D.Idaho) (three-judge court), aff'd without opinion, 454 U.S. 1025, 102 S.Ct. 559, 70 L.Ed.2d 469 (1981), authorized a member of the United States Senate (Senator McClure) to bring a federal suit challenging the legality of the appointment of a federal judge (Judge Mikva). No substantive right of Senator McClure’s had been invaded by that appointment; such harm as he might have sustained in common with the rest of the nation’s population as a result of a judicial appointment arguably in violation of the emoluments clause (Art. I, § 6, cl. 2) was too diffuse to invade any of his legally enforceable rights. (He was not, for example, a party to any proceeding before Judge Mikva.) But Congress can create new substantive rights, such as a right to be free from misrepresentations, and if that right is invaded the holder of the right can sue without running afoul of Article III, even if he *1527incurs no other injury (for example, the loss of a home-buying opportunity). The distinction may seem tenuous but it is the distinction between Havens and McClure, and it binds us.

No misrepresentations were proved here. But the logic of Havens embraces discrimination in the provision of services, forbidden explicitly by section 3604(b) and implicitly by section 3604(a). If the plaintiffs’ evidence is believed, the testers were treated in a racially discriminatory fashion, even though they sustained no harm beyond the discrimination itself, just as testers are not fooled by the misrepresentations made to them.

2. A second threshold question is whether this suit is barred by the 180-day statute of limitations in 42 U.S.C. § 3612(a) as it existed before the Fair Housing Amendments Act of 1988. (Contrary to the plaintiffs’ assertion, the defendants did not waive their statute of limitations defense in the district court.) That Act extended the statute of limitations for private suits to two years. 42 U.S.C. § 3613(a)(1)(A). But since the Act itself delays its effective date for 180 days after its enactment, and since statutes of limitations are intended to secure repose for defendants — to let them go about their business, after a definite time, untroubled by fear of being sued — we are not impressed by the plaintiffs’ argument that the longer statute of limitations should be applied to this case, filed years before that statute was enacted.

It is true that there is a presumption that new laws are to be applied to pending cases, Bradley v. Richmond School Board, 416 U.S. 696, 94 S.Ct. 2006, 40 L.Ed.2d 476 (1974), but the presumption is reversed when it is proposed to use a newly enacted statute of limitations to revive a previously barred claim. “[I]f a statute of limitations sets a period of two years, a subsequent statute setting a period of five years presumptively would not apply to a claim that became barred under the old law before the new one was enacted.” United States v. Kimberlin, 776 F.2d 1344, 1347 (7th Cir.1985) (dictum). In the absence of evidence of a contrary legislative purpose, “subsequent extensions of a statutory limitation period will not revive a claim previously barred.” Davis v. Valley Distributing Co., 522 F.2d 827, 830 (9th Cir.1975). To same effect see Carter v. Supermarkets General Corp., 684 F.2d 187, 191 n. 10 (1st Cir.1982); Herm v. Stafford, 663 F.2d 669, 683 n. 20 (6th Cir. 1981) (contra, Friel v. Cessna Aircraft Co., 751 F.2d 1037 (9th Cir.1985) (per curiam)), and with specific reference to the new statute of limitations in the 1988 amendments to the Fair Housing Act Ragin v. Macklowe Real Estate Co., 126 F.R.D. 475, 479 n. 1 (S.D.N.Y.1989). The plaintiffs have presented no evidence of a congressional purpose or desire to depart from the rule. It is true that a regulation of the Department of Housing and Urban Development (not cited in the briefs or at argument) states that the 1988 amendments should be applied retroactively, Fair Housing Complaint Processing, 54 Fed.Reg. 3259 (1989), but the reference is to HUD enforcement rather than private enforcement, and there is no explicit mention of the statute of limitations.

Only one of the alleged acts of steering occurred within the 180-day period, except with respect to. defendant Chaudhary, whom we are about to dismiss. That one act was the alleged steering of a tester couple, the Gomezes, to Bellwood. Mr. Gomez is Hispanic, and white; Mrs. Gomez is also white. However, after the defendants showed the Gomezes houses in Bellwood, the plaintiffs decided to treat Mr. Gomez for purposes of the suit as if he were black, on the assumption, which is circular, that since the defendants “steered” the Go-mezes to Bellwood, they must have thought he was black. If the defendants considered both Gomezes white yet showed them houses in black neighborhoods, there was no steering — there was indeed the opposite of steering. But what race the defendants believed Mr. Gomez to be a member of was a factual question for the jury, which delivered a general verdict and thus made no separate finding of discrimination against the Gomezes. No such finding can *1528be inferred either, since no tester was awarded damages. But the defendants do not argue that the jury’s failure to award damages to any of the testers exonerates the defendants of the charge of racial steering and makes the verdict against them incoherent.

If there was discrimination against the Gomezes (or even just against Mr. Gomez), then the essential condition for reaching back to conduct that occurred before the 180-day statute of limitations expired- — at least one violation during that period — is satisfied. Malhotra v. Cotter & Co., 885 F.2d 1305, 1310 (7th Cir.1989). But there must be at least that one act, which means that the jury should have been — but was not — instructed that to render judgment for the plaintiffs it had to find discrimination against one or both of the Gomezes. On this ground alone a remand is necessary. It would not be if the jury had been asked whether it found liability under section 1982 as well and had answered yes, since the parties agree that the proper “borrowed” limitations period for suits under section 1982 is two years. We need not decide whether the parties were correct to agree on this, but we point out that authority for a two-year statute of limitations for section 1982 suits brought in Illinois can be derived by combining Baker v. F & F Investment, 420 F.2d 1191, 1198 (7th Cir.1970), which holds that the statute of limitations is the same in section 1982 and section 1983 cases, and Wilson v. Garcia, 471 U.S. 261, 280, 105 S.Ct. 1938, 1949, 85 L.Ed.2d 254 (1985), which holds that the proper limitations period for the latter is the state statute governing actions for an injury to person or reputation, which in Illinois is two years. Ill.Rev.Stat. ch. 110, ¶ 13-202.

3. Indu Chaudhary questions the sufficiency of the evidence that he engaged in racial steering. Only one tester couple dealt with Chaudhary and their testimony was the entire evidence against him. The couple was black, and testified that several times while they were looking in the listings book at homes in other suburbs, Chaudhary took the book out of their hands and turned it back to the Bellwood section. This evidence was insufficient to justify a rational jury in concluding that Chaudhary had engaged in racial steering. Steering implies different treatment of testers of different races. A broker determined to “steer” all customers, of whatever race, to a particular neighborhood is not guilty of racial steering, because he is not treating the races differently. If a white tester couple had also testified about their treatment by Chaudhary, and their testimony had shown that he was not eager to sell them a house in Bellwood, then the verdict against him could stand. But as far as the evidence shows, he was treating this couple the way he treated every other couple — trying to sell them houses in the area with which he was most familiar, the area in which the real estate agency was located: Bellwood. He did not refuse to show the couple houses in the white suburbs, and did actually show them a house in one of those suburbs.

The jury’s verdict was modest by usual standards, but together with the award of attorney’s fees it represents a large judgment against an individual employed by a small agency to sell real estate. Chau-dhary might have to pay the whole thing because he is jointly and severally liable for the entire judgment, although he would not be liable for punitive damages assessed against another defendant. This is the usual rule in tort cases, Douglass v. Hustler Magazine, Inc., 769 F.2d 1128, 1146 (7th Cir.1985), and we applied it to Title VIII in Phillips v. Hunter Trails Community Ass’n, 685 F.2d 184, 190 n. 6 (7th Cir.1982). If, all by itself, the act of taking a listings book out of a customer's hands and turning to a section that lists homes in a community with a large representation of members of the customer’s race exposes a real estate agent to liability under Title VIII, it will be hard to find people to staff real estate agencies. Chaudhary’s motion for judgment notwithstanding the verdict should have been granted.

Because the case against Chaudhary should have been thrown out, the plaintiffs cannot use it to get under the bar of the *1529statute of limitations. This is so even though it is conceivable that Raj Realty could be guilty of using Chaudhary to steer blacks to Bellwood even if he himself was innocent. Suppose Raj had hired Chau-dhary knowing that he knew nothing about other suburbs and perforce would steer all his customers — most of whom would be black because most of Raj’s customers are black — to Bellwood. Then Chaudhary might be an unwitting pawn in Raj’s game of steering. But the plaintiffs have not made this argument, and it is therefore waived.

4. The other defendants complain about an instruction given to the jury over their objection:

The plaintiff need not show that the defendant intended to discriminate in order to establish his claim under Title VIII. The plaintiff will have proved that the defendant violated Title VIII if he can show, by a preponderance of the evidence, that the defendant’s conduct actually or predictably had a substantial adverse impact on the group of which the plaintiff claims to be a part — -that is, if he can show that the defendant’s conduct was likely to have a discriminatory effect.

An instruction requiring the plaintiffs to prove the defendants’ intent to discriminate was given in connection with the section 1982 charge, and if the jury had been asked to indicate which statute it was awarding damages under and had named section 1982, that would be the end of these defendants’ appeal. The jury could however have found that there was no liability under section 1982, but that there was liability under section 3604 precisely because the judge had instructed it that it did not have to find an intent to discriminate in order to impose liability under that section. The plaintiffs properly ask us to consider the instructions as a whole, Lynch v. Belden & Co., 882 F.2d 262, 267 (7th Cir.1989), but no other instruction requires the jury to find intentional discrimination in order to impose liability under section 3604, or otherwise pulls the sting from the instruction we have quoted. The question then is whether section 3604 forbids unintentional racial steering — more aptly, perhaps, whether there is such an animal. If it does, and there is, the instruction was correct.

Suppose a real estate broker falsely states to a black customer that no homes are for sale in Village X, which is primarily white, and he does so because the customer is black, so that the statement is a deliberate, racially motivated falsity. By doing this he denies a dwelling to a person because of the person’s race (§ 3604(a)), discriminates on racial grounds against the person in the provision of real estate services (§ 3604(b)), and misrepresents to the person on racial grounds that a dwelling is not for sale (§ 3604(d)). He is acting intentionally to prevent a black from buying a house in a white neighborhood. He is treating a black customer differently from a white one because the customer is black. He knows they are of different races and treats them differently because of that knowledge. This is deliberate conduct, and unquestionably it is racial steering.

Misrepresentation is not the only species of racial steering. If a broker simply refuses a customer’s point-blank request to show him a house in a neighborhood that the broker wants to reserve for persons of a different race, this is steering even though there is no misrepresentation. The broker would be violating sections 3604(a) and (b), but not (d) — that is all. A point-blank refusal is not necessary; any effort to discourage will do. There was sufficient evidence (except against Chaudhary) to allow the jury to find violations of sections 3604(a) and (b).

The mental element required in a steering case is the same as that required in employment discrimination cases challenged either under Title VII of the Civil Rights Act of 1964 (and section 3604 is part of the same Act) or under 42 U.S.C. § 1981 (the standard of liability in which is similar to that in Title VII, Hunter v. Allis-Chalmers Corp., 797 F.2d 1417, 1420 (7th Cir.1986)) on a theory of disparate treatment. “Disparate treatment” means treating a person differently because of his race; it implies consciousness of race, and a pur*1530pose to use race as a decision-making tool. International Brotherhood of Teamsters v. United States, 431 U.S. 324, 335 n. 15, 97 S.Ct. 1843, 1854-55 n. 15, 52 L.Ed.2d 396 (1977). “Proof of discriminatory motive is critical” in a Title VII disparate treatment case, “although it can in some situations be inferred from the mere fact of differences in treatment.” Id. Whether or not the judge must instruct the jury that disparate treatment means intentional discrimination, he should not confuse them by equating a difference in outcome to a difference in treatment.

“Intent” is, we grant, a chameleon, a puzzle, and possibly a chimera. The judge can elide the question of intent, however, by simply instructing the jury that the unlawful conduct is treating a person differently because of the person’s race, as distinct from treating a person differently because of other, noninvidious characteristics which may be correlated with race. It is that distinction which must be preserved. Maybe more people who want to live in integrated communities are black than white, but the broker who shows a black person houses in an integrated community because that person requests to see houses there is not treating him differently because of race. The instructions obliterated this distinction.

To test what unintentional racial steering might mean, we put the following hypothetical case to the plaintiffs’ counsel. A black person comes to Raj Realty and tells the agent that he wants to know the racial composition of the various communities in the listings book because he wants to live in an integrated community. The agent answers that Bellwood is integrated but that the other suburbs are white, and he proceeds to show the customer only houses that are for sale in Bellwood. In such a case the real estate agent would not be trying to “steer” (in some invidious sense that might ground legal liability) a black person to a community that already had a large black population, unless the agent would have refused to cooperate equally if that person wanted to live in a white community. The agent would simply be trying to give the black person what that person wanted. Yet if many black people would prefer to live in an integrated community, the effect of the agent’s conduct, in combination with similar conduct by other real estate agents, could be to “tip” the community, transforming it from integrated to resegregated; or, more realistically, to fail to prevent tipping.

The plaintiffs’ counsel told us that a real estate broker should not answer a customer’s inquiry about the racial composition of the communities he serves, cf. Zuch v. Hussey, 394 F.Supp. 1028, 1051 n. 11 (E.D.Mich.1975), although, when pressed, said the broker could answer if he knew the exact racial composition of those communities from the census tracts. Yet nothing in the language or sparse legislative history of the statute supports an inference that it was intended either to make real estate agents speculate about the possible effects on racial patterns in housing of truthful answers to inquiries by their customers or to impose strict liability for honest mistakes in answering such questions. The statute prohibits real estate agents from refusing to show properties because of the race of the customer, or misleading the customer about the availability of properties because of his race, or cajoling or coercing the customer because of his race to buy this property or that or look in this community rather than that. It does not place on individual brokers the duty to solve the collective-action problem that results when brokers serving (but not encouraging) the preferences of individual customers cumulatively affect the overall racial pattern in housing.

A person who serves as a conduit for another person’s discrimination can, it is true, be guilty of intentional discrimination, or, what is the same thing, of disparate treatment. Suppose a merchant refuses to hire black workers not because he is racist but because he believes that his customers do not like blacks and will take their business elsewhere if he hires any. The refusal is nevertheless discrimination, because it is treating people differently on account of their race. It is intentional dis*1531crimination, because it necessarily is based on the merchant’s awareness of racial difference and his decision to base employment decisions on that awareness. And it is actionable discrimination, regardless of its effects and notwithstanding the merchant’s own freedom from racial animus. Rucker v. Higher Educational Aids Board, 669 F.2d 1179, 1181 (7th Cir.1982). Discrimination may be instrumental to a goal not itself discriminatory, just as murder may be instrumental to a goal not itself murderous (such as money); it is not any the less — it is, indeed, more clearly — discriminatory on that account. Cf. United States v. McAnally, 666 F.2d 1116, 1119 (7th Cir.1981).

The parallel in Title VIII to the merchant in our Title VII example is not, however, the broker who does his customer’s bidding aware that it is influenced by racial preferences or aversions. It is the broker who refuses to show the customer a property in which the customer is interested and does so not because he dislikes persons of the customer’s race but because he fears being boycotted by persons of a different race if he refuses to abide by the community’s racial mores. Such a broker is discriminating against his customer on grounds of race and therefore violates the statute. But our first broker, the broker who responds to the customer’s desires, is not discriminating against the customer, or denying the customer a dwelling, or misrepresenting to the customer the unavailability of a dwelling. The statute does not require a broker to endeavor to make his customers better people by withholding information that they request about the racial composition of the communities in which the broker sells houses. It does not impose liability for failing to promote integration, or for failing to coordinate individual integrative acts that have an aggregate resegregative effect. If the broker treats all his customers the same, regardless of race, he is not liable.

The acid test of our suggested distinction is the case where the seller of a house instructs the broker not to show the house to blacks. Obviously in following the instruction the broker is not discriminating against the seller, and the seller is a customer. But the broker is discriminating— on explicitly racial grounds — against his black buyer-customers to whom he refuses to show the house. He violates section 3604.

The plaintiffs’ principal evidence that the defendants were intentionally discriminating against customers on racial grounds was the comparative experience of white and black testers. Black testers were primarily shown homes in integrated Bellwood; white testers were primarily shown homes in the adjacent white suburbs. This evidence supported but did not compel an inference that the defendants were not merely responding to their customers’ desires but trying to mold those desires in order to segregate Chicago’s western suburbs by race. It established a prima facie case but did not warrant a directed verdict (in which event the error in instructions would have been harmless).

Plaintiffs in Title VIII cases can use a method of proof similar to that which the Supreme Court in McDonnell Douglas Corp. v. Green, 411 U.S. 792, 93 S.Ct. 1817, 36 L.Ed.2d 668 (1973), created for disparate treatment cases brought under Title VII. Phillips v. Hunter Trails Community Ass’n, supra, 685 F.2d at 190; Kushner, Fair Housing: Discrimination in Real Estate, Community Development and Revitalization 225 (1983). They can therefore use evidence that blacks were shown primarily houses in black areas and whites primarily houses in white areas to place on the defendants the burden of giving a non-invidious reason for the difference in treatment. But customer preference, in this setting, is a noninvidious reason — a reason not forbidden by the statute — because the statute is for the protection of customers. The challenged instruction prevented the jury from considering this reason.

Whether it is likely that the instruction affected the outcome of the trial depends on how closely balanced the evidence was. The plaintiffs introduced a great deal of evidence, but there were gaps and puzzles, as well as contrary evidence. *1532Why for example these defendants would have wanted to discriminate in the manner they were charged with was never explained, and while an explanation was not indispensable to the plaintiffs’ case, because not everything people do is rational, the absence of an explanation weakened that case. Setting aside the fact that the defendants are Indians and that people who discriminate against blacks often discriminate against Indians as well (even though Indians are Caucasian), we note that the defendants were catering to blacks, not to whites. Was it not therefore in the defendants’ pecuniary interest to sell homes anywhere to blacks? If that drove whites out, all the better for the defendants’ pocketbooks, since there would be more homes to sell to blacks. Although the defendants may have hoped that if enough blacks moved into Bellwood the remaining whites would leave in a panic and there would be even more homes to sell to blacks, there is no evidence that they harbored this intent and none that they engaged in “blockbusting” — that is, tried to induce whites to sell their homes by telling them that other whites were leaving and the community would soon be virtually all black. 42 U.S.C. § 3604(e); Gladstone, Realtors v. Village of Bellwood, supra, 441 U.S. at 110 n. 23, 99 S.Ct. at 1613 n. 23; United States v. Bob Lawrence Realty, Inc., 474 F.2d 115 (5th Cir.1973). A number of the defendants’ real customers (as distinct from testers) testified that they had not been steered to Bellwood because of their race. The jury did not have to believe this testimony, or if they believed it accept it as representative; but it is a further indication that this was a close enough case to make an error in jury instructions material. It was at the very least a close case with regard to the defendants’ treatment of the Gomezes; and the plaintiffs had to convince the jury that the Gomezes had been steered, for if they were not, there was no violation of section 3604 within the limitations period and the section 3604 count would have to be dismissed even if there were conclusive evidence of earlier violations.

Here is another circumstance that weakened the plaintiffs’ case, though again not fatally: since few of the defendants’ customers were white, the defendants had little experience with white customers and may therefore have treated the white testers differently out of ignorance rather than design. The plaintiffs’ counsel attempted to scotch this possibility in his closing argument by criticizing Raj Realty for catering to blacks, and we are disturbed by this because disparagement of a suburban real estate firm for catering to black people who want to move to the suburbs is a curious way to promote integration and a possible mask for preventing it. The line between wanting to keep black people from being “steered” into a community that already has a large black population and wanting to minimize the community’s black population, period, is a fine one, but it is essential to preserve it if section 3604 is not to be perverted from its purpose of promoting integrated housing. The danger that the line will be crossed is acute if a jury is permitted to find racial steering whenever the race of a real estate broker’s principal customers is correlated with the location of the houses that the broker sells them. It is difficult to see how a real estate agency that mainly serves a racial minority could protect itself from the threat of liability under Title VIII as interpreted in the challenged instruction unless it actively discouraged black people from buying homes in communities that already had many blacks — and that would be jumping from the frying pan into the fire, and inviting suit by the agency’s black customers. Cf. Smith v. City of Cleveland Heights, 760 F.2d 720 (6th Cir.1985). It may be significant that no genuine customers of Raj Realty are plaintiffs in this suit and that the jury awarded no damages to the testers.

In contesting the proposition that Title VIII is not violated by conduct that merely has a greater adverse impact on one race than on another, the plaintiffs rely primarily on our decision in Metropolitan Housing Development Corp. v. Village of Arlington Heights, 558 F.2d 1283 (7th Cir.1977). The Village of Arlington Heights, *1533which had almost no black residents, refused to rezone a tract to permit the construction of federally subsidized low-cost housing, which would have had a number of black residents. The court held that although there was no showing of intentional racial discrimination by the Village, the refusal to rezone would violate Title VIII if no other tract in Arlington Heights was suitable for federally subsidized low-cost housing. The analysis that led to this conclusion was in fact though not in words the “disparate impact” analysis familiar from Title VII cases. The Village had offered no strong reasons for refusing to rezone the tract in question. If, therefore, the refusal had a discriminatory impact, the failure to establish “business necessity” could, by analogy to Title VII disparate impact cases, condemn the refusal notwithstanding the absence of proof, direct or indirect, of racial animus.

Whether the analogy works, especially after the Supreme Court curtailed Title VII disparate impact liability in Wards Cove Packing Co. v. Atonio, — U.S. -, 109 S.Ct. 2115, 104 L.Ed.2d 733 (1989); see also Allen v. Seidman, 881 F.2d 375 (7th Cir.1989), is not a question we need decide. Section 3604 covers a variety of practices, well illustrated by the difference between the facts in this case and those in Arlington Heights. Some practices lend themselves to the disparate impact method, others not. We cannot imagine the practice (innocent in intent, discriminatory in impact, Griggs v. Duke Power Co., 401 U.S. 424, 430, 91 S.Ct. 849, 853, 28 L.Ed.2d 158 (1971)) on which a disparate impact theory might be based in this case. Either the defendants deliberately tried to alter their customers’ preferences in favor of a pattern of racially segregated housing, or they honestly tried to serve those preferences— and if they did the latter, but through ineptitude or sheer bad luck contributed to such a pattern in the western suburbs or (more realistically) created a risk of reseg-regation, they did not violate the statute. It is one thing to require a municipal government to consider the impact of its zoning decisions on the racial composition of the municipality, another to require an individual broker to consider and take steps to prevent the aggregate impact of many brokers’ efforts to give individual customers what those customers want individually, though not collectively. An effective decree based on such a theory of liability would require the court to regulate a broker’s dealings with his customers in minute detail.

Our decision in Arlington Heights has been cited for the proposition that “a significant discriminatory effect flowing from rental decisions is sufficient to demonstrate a violation of the Fair Housing Act.” United States v. Mitchell, 580 F.2d 789, 791 (5th Cir.1978). That is correct in the sense that effect is probative of intent, International Brotherhood of Teamsters v. United States, supra, 431 U.S. at 335 n. 15, 97 S.Ct. at 1854-55 n. 15; Sanders v. Dorris, 873 F.2d 938, 943-44 (6th Cir.1989), so that an unexplained discriminatory effect may by itself support an inference of discriminatory intent — an insight at the heart of the McDonnell Douglas method of proving disparate treatment. But the passage from Mitchell is misleading if used to equate discriminatory effect with liability in every factual situation to which section 3604 might be applied. A generality in a judicial opinion can become a loose cannon when taken out of context; Mitchell was a clear case of deliberate steering, rich with misrepresentations. 580 F.2d at 791.

Heights Community Congress v. Hilltop Realty, Inc., 774 F.2d 135, 140 (6th Cir.1985), formulates the legal standard more precisely than Mitchell does: “If a statement or act would have a discriminatory effect and is made with the intent to steer, it violates section 3604(a).” Expanding on this formulation, we hold that (1) a real estate broker who treats customers differently from one another because of their race violates Title VIII; (2) even without direct evidence of such difference in treatment, if the broker sells blacks houses in black neighborhoods and whites houses in white ones and he can offer no noninvidious reason (such as customer preference) for this pattern, then an inference of disparate treatment can be drawn *1534from the discriminatory effect. But discriminatory effect is not, as the challenged instruction conveyed, the violation; it is merely evidence of violation.

Some comments at oral argument, especially the statement by the plaintiffs’ counsel that he does not “think that very many people are really interested in race in looking for housing,” make us wonder about the good faith of this suit. There unquestionably is discrimination in housing against blacks in this country today. Yinger, Measuring Racial Discrimination With Fair Housing Audits: Caught in the Act, 76 Am.Econ.Rev. 881 (1986); Galster, More Than Skin Deep: The Effect of Housing Discrimination on the Extent and Pattern of Racial Residential Segregation in the United States, in Housing Desegregation and Federal Policy 119 (Goering ed. 1986); Massey & Denton, Trends in the Residential Segregation of Blacks, Hispanics, and Asians: 1970-1980, 52 Am.Soc.Rev. 802 (1987); Darden, Socioeconomic Status and Racial Residential Segregation: Blacks and Hispanics in Chicago, 28 Int’l J.Comp.Soc. 1 (1987); H.R.Rep. No. 711, 100th Cong., 2d Sess. 15 (1988). The plaintiffs’ counsel— who has represented the Village of Bell-wood in its other housing cases before this court and the Supreme Court — is well aware of this fact. Earlier in this opinion we remarked the danger that Title VIII might be used to achieve objectives opposite to those stated by its framers, and specifically might conduce to a system of “benign” quotas not perceived as benign by the intended beneficiaries, including blacks who might like to live in Bellwood even though their presence would increase the percentage of blacks living there. Our suspicions are not grounds for reversal. But they reinforce our belief that these cases should be tried under instructions that require the jury to find disparate treatment before it can impose liability, under a statute designed to promote rather than retard integration, on real estate agents who are attempting to find suburban housing for blacks.

For the guidance of the district judge on remand, we suggest the following instruction. This is just a suggestion; we do not want to put the judge in a straitjacket.

If you find that the defendants treated their black and white customers differently on account of the customers’ race, or in other words if you find that the defendants were influenced by a customer’s race in deciding whether to show the customer properties in one area or another, then you should conclude that the defendants engaged in racial steering in violation of section 3604. Even if you decide that there is no or insufficient direct evidence of a racially motivated difference in treatment, if you find that the defendants showed their black customers primarily homes in predominantly black areas, and their white customers primarily homes in predominantly white areas, and if, in addition, you do not believe the defendants’ explanation of this pattern, then you may infer that the defendants were steering their customers racially, in violation of the statute. If you do not find that the defendants treated their white and black customers differently on account of their race, then your verdict should be for the defendants. For purposes of this instruction, the tester couples were customers of the defendants even though they were not really interested in buying homes but were merely investigating the defendants’ practices.

The judgment is reversed with directions to vacate the injunction, to enter judgment for defendant Chaudhary, to grant a new trial to the remaining defendants, and to vacate the award of attorney’s fees pending the outcome of the new trial.

Reversed and Remanded with Directions.