Chapter 8: Selling Real Property

Question 1

Statute of Frauds

What must be contained within the writing?

Answer 1

1. The essential terms of the transaction (identity of parties, price, property description)
2. Formal writing or informal memo
3. Signature of the party sought to be bound

Question 2

Statute of Frauds

Three ways of describing property

Answer 2

1. Government survey
2. Metes and bounds
3. Subdivision map

Question 3

Statute of Frauds

What is contained within a government survey?

Answer 3

• Begins at initial point call Principal Meridian (37 in US) - Runs NS
• Each line running perpendicular called “base line”
• Townships are divided into 36 1-mile square sections
• Range designations indicate property’s location east or west of the Principal Meridian

Question 4

Statute of Frauds

What is contained within Metes and bounds

Answer 4

Based largely on visible topographic features - ridge lines, streams, and trees

Question 5

Statute of Frauds

What is contained within a subdivision map?

Answer 5

• A tract of land is subdivided into smaller parcels
• A map shows where each lot is located
• Each lot is designated by name (eg “lot 10”) with a reference to specific map and page

Question 6

Statute of Frauds

Who is bound by the agreement?

Answer 6

Enforecement may only be sought against parties that have signed the document

Question 7

Statute of Frauds

What must the buyer have done to be entitled to the part performance Exception to the Statute of Frauds?

Answer 7

Buyer
1. takes possession;
2. pays at least part of the purchase price; and
3. Makes improvements to the property
4. (some jx require that buyer take possession and either pay the purchase price or make improvements)

Question 8

Statute of Frauds

Estoppel Exception to the Statute of Frauds

Answer 8

1. One party acts in detriment in reasonable reliance on other’s oral promise and
2. Serious injury would result if enforcement is refused

Question 9

Statute of Frauds

Estoppel Exception to the Statute of Frauds

Answer 9

1. One party acts in detriment in reasonable reliance on other’s oral promise and
2. Serious injury would result if enforcement is refused

Question 10

Marketable Title

A title is generally unmarketable if . . .

Answer 10

1. Seller’s interest in property is less than he purports to sell
2. Title is subject to encumbrance
3. There is reasonable doubt about (1) or (2)

Question 11

Marketable Title

Under what conditions does buyer accept unmarketable title?

Answer 11

1. Property is burdened by visible encumbrance
2. Buyer actually knows
3. The buyer accepts the deed at closing

Question 12

Marketable Title

How much time does a seller have to cure defects?

Answer 12

Seller is given time before closing to cure any market defects

Question 13

Equitable Conversion

What is the time between contract signing and closing called?

Answer 13

Executory Period

Question 14

Equitable Conversion

What are the 3 approaches to dealing with risk of loss during the executory period?

Answer 14

1. Buyer bears the risk as the equitable owner
2. Seller bears the risk as the legal owner
3. Party entitled to possession bears the risk

Question 15

Equitable Conversion

Can a party recover specific performance and keep proceeds from the insurance?

Answer 15

In some jurisdictions, yes.

Question 16

Equitable Conversion

What if buyer or seller die before closing?

Answer 16

Contract is still valid
May be enforced by heirs and devisees of either party.

Question 17

Duty to Disclose

What must seller disclose?

Answer 17

Defects seller knows about that
1. Materially effect the value of the property
2. Are not known or readily discoverable by a buyer

Question 18

Duty to Disclose

Examples of typical required disclosures?

Answer 18

1. Building code violations
2. Zoning violations
3. Structural defects
4. Drainage issues
5. Not psychological stigmas

Question 19

Duty to Disclose

What is the implied warranty of quality?

Answer 19

Seller of newly developed property implies warranty that property is fit for its intended use.

Question 20

The Deed

When is the deed effective?

Answer 20

ONLY when it is delivered - even if signed. MUST manifest intent to immediately transfer title

Question 21

The Deed

What is the controlling element to determine delivery?

Answer 21

INTENT - manual transfer generally satisfies intent. So does recording of the deed. (acceptance is required but normally presume)

Question 22

The Deed

What is a death escrow?

Answer 22

When the grantor deposits the deed with a third party and instructs them to deliver the deed only when the grantor dies - must not reserve right to recall

Question 23

The Deed

What is a beneficiary deed?

Answer 23

Allows owner of real property to designate beneficiaries she wants to receive the property upon death; it is revocable and delivery is not required

Question 24

Remedies for Breach

When is specific performance granted?

Answer 24

Only when monetary damages are inadequate - land is generally considered to be unique and therefore damages are usually an inadequate remedy

Question 25

# Remedies for Breach Are sellers entitled to specific performance?

Answer 25

Illogically, courts say "yes"

Question 26

# Remedies for Breach What role does hardship play in the remedy?

Answer 26

Performance has been denied when seller became disabled and moving would have been a hardship (eg may have been fatal for the affected buyer)

Question 27

# Title Covenants What is the *doctrine of merger*?

Answer 27

Provides that once a grantee accepts the deed, all prior promises are extinguished

Question 28

# Title Covenants What is the *general warranty deed*?

Answer 28

Provides best protection: grantor warrants title against all defects, whether they arose before or after grantor obtained the title

Question 29

# Title Covenants What is the *special warranty deed*?

Answer 29

Grantor warrants against title defects that arose after the grantor obtained the title

Question 30

# Title Covenants What is the *quitclaim deed*?

Answer 30

Grantor makes no warranties about the title - grantee only receives what the grantor has, if anything

Question 31

# Title Covenants What are the 3 standard *present* covenants?

Answer 31

1. Covenant of seisin 2. Covenant of right to convey 3. Covenant against encumbrances

Question 32

# Title Covenants Define *covenant of seisin*

Answer 32

A promise that the grantor owns the estate that he purports to convey

Question 33

# Title Covenants Define *convenant of right to convey*

Answer 33

A promise that the grantor has the right to convey title

Question 34

# Title Covenants Define *covenant against encumbrances*

Answer 34

A promise that there are no encumbrances on the title other than the ones expressly listed in the deed

Question 35

# Title Covenants What are the 3 standard *future* covenants?

Answer 35

1. Covenant of warranty 2. Covenant of quiet enjoyment 3. Covenant of further assurances

Question 36

# Title Covenants Define *convenant of warranty*

Answer 36

A promise that the grantor will defend the grantee against any claim of superior title

Question 37

# Title Covenants Define *covenant of quiet enjoyment*

Answer 37

A promise that the grantee's posssession of the property will not be disturbed by anyone holding superior title

Question 38

# Title Covenants Define *convenant of further assurances*

Answer 38

A promise that the grantor will take all future steps reasonably necessary to cure title defects that existed at closing

Question 39

# Title Covenants What is the standard measure of damages for breach of a title covenant

Answer 39

The price paid by the grantee plus interest

Question 40

# Title Covenants What is the standard for breach of the covenant against encumbrances?

Answer 40

The lesser of 1. The amount necessary to remove the encumbrance **or** 2. The amound by which it reduces the property value

Question 41

# Title Covenants What are the rights of remote grantees?

Answer 41

A cause of action is usually transferable - future covenants run with the land to remote grantees and most states allow for present covenants to be transferred as well

Question 42

# Title Covenants Define *estoppel by deed*

Answer 42

If the A grants to B with warranty deed but does not actually have title but later acquires it, it automatically passes to the B

Question 43

# How to Search Title What are the two things a searcher must do to determine the state of the title?

Answer 43

1. Locate the recorded documents that affect title 2. Evaluate their legal significance

Question 44

# How to Search Title What are the two systems for recording title?

Answer 44

1. The *grantor-grantee index* 2. The *tract index*

Question 45

# The Recording Acts What is the universal exception to the *first-in-time* rule?

Answer 45

The *bona fide purchaser doctrine*

Question 46

# The Recording Acts What is the rule in *notice jursidictions*?

Answer 46

A subsequent purchaser for value prevails if he takes without notice or a prior interest - subsequent purchaser does not have to record

Question 47

# The Recording Acts What is the rule in *race-notice jurisdictions*?

Answer 47

A subsequent purchaser for value who *both* takes without notice *and* records first prevails

Question 48

# The Recording Acts What is the *Zimmer* rule

Answer 48

A subsequent purchaser is deemed to have recorded his conveyance only if all prior conveyances in his chain of title are properly recorded

Question 49

# The Recording Acts When is a deed *void*?

Answer 49

If the deed is 1. Undelivered or 2. Forged

Question 50

# The Recording Acts When is a deed *voidable*?

Answer 50

If the deed is induced by fraud

Question 51

# The Recording Acts Define the *shelter rule*

Answer 51

A *bon fide purchaser* is allowed to transfer his protection to a later grantee

Question 52

# The Recording Acts Describe the alternative approach to Title Registration: the *Torrens system*

Answer 52

Title is passed by registration in a government agency (few states use it because it was not mandatory, initial determination was expensive, exceptions undermined it)

Question 53

# The Recording Acts A conveys to B, who does not record B conveys to C C records S conveys to D who does record Who owns the property? Why?

Answer 53

D owns the property B-C deed is *wild* because a reasonable searcher would not be able to discover it

Question 54

# The Recording Acts A conveys to B, who does not record A conveys to C, who records and has actual knowledge of B B records C conveys to D, D records Who owns the property? Why?

Answer 54

D owns the property The S-B deed was recorded *too late* when D is no longer searching under A's name and does not provide notice

Question 55

# The Recording Acts A owns Greenacre B conveys to C, C records A conveys to B, B records B conveys to D, D records Who owns the property? Why?

Answer 55

D owns the property The deed was recorded *too early* because the B-C deed was recorded at a point when D is not looking under B's name

Question 56

# The Recording Acts A owns Greenacre and Forestacre A conveys Greenacre to B granting an easement to cross Forestacre, B records A conveys Forestacre to C who is unaware of the easement, C records What becomes of the easement? Why?

Answer 56

C would not discover the easement because it is part of B's deed relating to Greenacre - this is a *deed from a common grantor*

Question 57

# What constitutes notice? What are the 3 primary forms of notice?

Answer 57

1. *Actual notice* 2. *Record notice* 3. *Inquiry notice*

Question 58

# What constitutes notice? Define *actual notice*

Answer 58

Knowledge of the prior interest

Question 59

# What constitutes notice? Define *record notice*

Answer 59

Notice of any prior interest that would be discovered by a standard search of the public land records

Question 60

# What constitutes notice? Define *inquiry notice*

Answer 60

Notice of any prior interest that would have been obtained by investigating suspicious circumstances

Question 61

# Title Insurance What are the 5 sections of the ALTA (Am. Land Title Assoc.) owner's policy?

Answer 61

1. Cover page 2. Exclusions 3. Schedule A 4. Schedule B 5. Conditions

Question 62

# What constitutes notice? What is in the *Cover page* of the ALTA owner's policy?

Answer 62

Sets forth the scope of the coverage provided

Question 63

# What constitutes notice? What is in the *Exclusions* of the ALTA owner's policy?

Answer 63

Lists specific items that are excluded from coverage for all properties

Question 64

# What constitutes notice? What is in the *Schedule A* of the ALTA owner's policy?

Answer 64

States name of the insured party, the max amount insured by the policy, and the estate that is insured

Question 65

# What constitutes notice? What is in the *Schedule B* of the ALTA owner's policy?

Answer 65

Lists specific items that are excepted from coverage for the property

Question 66

# What constitutes notice? What is in the *Conditions* of the ALTA owner's policy?

Answer 66

Specifies procedural requirements, such as time and manner for making claims