Closing Flashcards
What happens at closing?
At closing, the contract for the sale of land merges with the deed, i.e. the deed becomes the controlling document and the contract disappears. This means that – except for fraud – the seller is no longer liable for promises made in the K (only those on the deed).
What are the two elements required for a deed to be valid? (And thus pass title)
it must (1) be lawfully executed and (2) be delivered
How do you satisfy the “lawful execution” requirement of a valid deed?
Valid deed requires:
- writing signed by grantor
- unambiguous description of land (vague = invalid, ambiguous = let in parol evidence); must provide “lead” for land
- ID of parties by name or description (Note: if name of grantee left blank, courts presume grantee could write it in; but if land description is blank then its void)
- words of intent to transfer (e.g. “grant”)
Note: NO consideration needed
What is considered a valid delivery, sufficient to create valid deed?
Delivery is valid when grantor either (a) physically or manually transfers the deed - e.g. mail - or (b) conduct shows clear intent to transfer (doesn’t require actual physical transfer.
Title passes immediately upon delivery (even if possession is postponed). Acceptance is presumed.
What actions will allow us to presume delivery of the deed?
- grantee has possession of the deed
- deed is handed to the grantee
- delivery is acknowledged by the grantor in front of notary
- deed is recorded
What type of evidence is admissible to prove grantor intent to pass title?
All types - but outside evidence is not permitted to show that an unconditional deed had a condition (e.g. oral statements).
Can a grantor transfer the deed via third party? When can a grantor recall the deed from the third party?
Generally, delivery to a third party with instructions to delivery the deed is considered a valid delivery.
Can also give instructions re a condition that must be met in order for third party to deliver the deed.
Written instructions re condition? Then grantor may NOT recall the deed.
Oral instructions? Then grantor MAY recall the deed while third party still has it unless there is a written K of sale.
BUT if the condition is the grantor’s death (i.e. hand over deed once I die), then the grantor cannot recall deed b/c this has conveyed a future interest.
Note: On exam, condition that grantee survive the grantor is NOT the same as condition of grantor’s death, in this case there is no future interest/no delivery/grantor can recall deed.
What is a covenant for title? What are the three types?
A covenant for title is an assurance that the grantor has what they are conveying. The three types of deeds used to convey property with different covenants for title are:
(1) quitclaim deed - worst, not even promise that grantor has title, just promise to convey whatever he rightfully has
(2) general warranty deed - warrants against all defects in title including those attributable to grantor’s predecessors
(3) special warranty deed - same warranties as general warranty deed but ONLY wrt grantor, no promises made on behalf of predecessors
What are the 6 warranties that a general warranty deed comes with? What two categories do they fall into and what is the difference between those categories?
The categories are (1) present covenants and (2) future covenants. A present covenant is one that is breached (if so) is breached at time of delivery of deed. A future covenant is one that, if breached, is breached when grantee is disturbed by the violation.
Also, present covenants cannot be enforced by future grantees but future covenants run with the property.
(1) present covenants:
- covenant of seisin - promise that they own property
- covenant of the right to convey
- covenant against encumbrances - promise property is free of liens/etc unless stated in deed
(2) future covenants
- covenant for quiet enjoyment - promise buyer wont be disturbed by third party’s lawful claim
- covenant of warranty - promise to defend against unreasonable claims of title by third party + compensate for loss due to superior title claim
- covenant for further assurances - promise to help correct title if later turns out to be imperfect
What is the difference between a void and a voidable deed? What circumstances create a void vs. voidable deed?
Courts will not enforce a void deed even if it has passed to a bona fide purchaser. Courts will only set aside a voidable deed if it has not yet passed (then is only voidable by party).
Void deeds: those forged, not delivered, dead/nonexistent grantee, obtained by fraud in factum (grantor deceived + did not realize it was a deed)
Voidable deeds: executed by minor/incompetent person, obtained by fraud in inducement, duress, undue influence, mistake, breach of fiduciary duty
What is a fraudulent conveyance?
If a deed is valid BUT (1) made with actual intent to hinder/delay/defraud grantor’s creditors + (2) made without receiving a reasonably equivalent value in exchange for the transfer, and the debtor was insolvent or became insolvent as a result of the transfer – then this will be considered a fraudulent conveyance and creditors will be allowed to set aside deed, i.e. invalidate
What documents, other than the deed, may be required at closing?
- closing disclosure - req’d to be provided by residential mortgage lenders at least 3 days prior to closing - must provide details about the mortgage including:
- principal, interest, payment amounts
- closing costs
- potential surprises to mortgagers
- cash required to close
- notification of defects - seller of residential property must provide, notifying buyer of any defects of which seller is aware
- environmental report - owner must generally pay to cure environmental damage even if occurred before they own - often negotiate these reports/gurantees
Other than a deed, how else may property be conveyed?
By gift (inter vivos) or by will.
What is required for property to validly be conveyed by inter vivos gift?
(1) donative intent (2) delivery (3) acceptance
What happens when a testator passes something to someone via will that they no longer own at death?
Ademption - meaning that the gift fails. But, if they no longer own part then the other part may still be passed.
Exceptions:
- if K was executory - i.e. not fully performed, but in process - at time of death, then grantee gets proceeds instead of land
- if property was destroyed/condemned before death, then grantee gets insurance proceeds instead of land
