Competing Claimants (60% MBE) Flashcards
What is Adverse Possession
Legally sanctioned stealing of title to land away from the rightful owner.
How to establish someone’s claim to property?
3
- adverse possession;
- land sale contract
- conveyance
Adverse possession has three major components
- Physical: obvious
- Mental: against owner’s interest
- Time: statutory period
What is the physical component of adverse possession?
actually, opening, notoriously, and exclusively occupying the land
Adverse possessor would put the true owner on notice
What is the physical component of adverse possession?
Additional element of minority jurisdiction?
Have to pay taxes on the land
What is the mental component of adverse possession?
The possessory must have an intent in possession that is contrary to the owner’s interest
- claim of right (claims as their own)
- color of title (has a mistaken belief they have a deed to the property)
What is fatal to adverse possession?
Anytime prior to adverse possessing period, if they receive permission, then defeats adverse possession
knowledge ≠permission
When can co-tenants adversely possess against another?
If one of the co-tenants ousts another for the statutory period (tells other co-tenant to not come on)
Will a mistaken encroachment satisfy hostile intent?
Majority?
Minority?
Yes, it is sufficient.
Minority: must shows they would have intentionally encroached even if they had known
What is the time component of adverse possession?
Have to hold the property continuously for the entire statutory period
What is the time component of adverse possession if no statute?
20 years
What does holding a property continuously mean for adverse possession?
It’s context specific. When is it normally occupied.
What is tacking?
It combines adverse possession periods to meet the statutory requirement
When does tacking occur?
If there has been a transfer of interest in property from one adverse possessor to another
What does the adverse possessor obtain if successful?
Gets the land interest of the actually occupied land
What can an adverse possessor that obtain if they enter through color of title?
If entered under color of title
+
occupies significant portion of what is described in the deed
Then, gets everything described
What is color of title?
When someone believes their title is valid but it is not because of some flaw in the deed.
What land rights does an adverse possessor get?
Whatever rights the owner has that he took them from.
- any encumbrances on the land remain
- if a life estate, still sticks
What does a disability do in statute of limitations on adverse possession?
it suspends the running of statute of limitations for adverse possession
A disability will only toll the running of a statute of limitations if
(4)
One of the following disabilities exists at the START of the adverse possession
- infancy (
Up until the time the adverse possession period has run, the true owner can
have the adverse possession ejected off the land and sue for damages
As soon as the statute of limitations runs, the adverse possession relates back to
the date of the entry onto the land, meaning that the true owner can longer sue
Once the adverse possession period has run, the adverse possessor is:
the true owner of the land
Statute of Frauds requirements
6
(A) a writing for a transfer of an interest in real property.
(B) The writing must be signed by the party to be charged and must include the following essential terms:
(1) description of the property;
(2) description of the parties;
(3) price; and
(4) any conditions of price or payment if agreed on.
When does ownership of the land change in a land sale contract?
When the deed to the property is exchanged at the date of closing
What is the doctrine of equitable conversion?
When a land sale contract is formed, at that point there is a bifurcation of title.
Equitable title passes to the buyer
Legal title remains with seller until it passes to the buyer at closing
Under the majority approach, risk of loss follows which title?
equitable title - if anything happens before closing they still must go through
Who has equitable title before closing?
the buyer
Under the Uniform Vendor and Purchaser Risk Act (minority rule), risk of loss follows which title?
The risk of loss remains with the seller until there is a transfer of
- possession; or,
- legal title
Covenant Marketable Title is?
A promise by the seller to deliver marketable title to buyer
-implied in every land sale contract unless specifically says otherwise
Marketable title means a title that is
reasonably free from defect
What types of marketable title defects generally occur?
4
- unpaid mortgage or lien
- covenants and easements which restrict the use of the land
- Title acquired by adverse possession (needs a judicial decree declaring they are owner)
- an existing zoning or ordinance violation of the property (≠buyer wants to do something that is a violation)
How to contract for covenant of marketable title?
implied, unless contract says otherwise?
When does the seller have to have marketable title?
on the date of closing
What if seller has a defective title at date of closing? Majority rule?
Can make arrangements on the date of closing to earmark part of the purchase price to remedy the defect and make the title marketable
At the date of closing what happens to the land-sale contract?
It merges into the deed, and remedies only from the deed are available
What is the merger doctrine?
On the date of closing, the land-sale contract merges into the deed?
When is the only time a buyer can bring up a defect in marketable title under the land-sale contract?
on the date of closing
- later is too late because it becomes the deed
- earlier is too early because it does not manifest until closing
If the buyer finds a defect in the title after the date of closing, what are their options
they must sue on the deed, can only sue on warranty deed
What is a quitclaim deed
You are taking the property as is; cannot sue on quitclaim deed
What is a warranty deed
A warranty deed contains covenants of title
What is a general warranty deed
A general warranty deed contains covenants of title for all owners of the property in the past
What is a special warranty deed?
The warranty only covers the period of the seller’s ownership of land
What are the present covenants of title?
3
seisin
right to convey
encumberances
What are the future covenants of title?
3
quiet enjoyment
warranty
further assurances
What is the covenant of seisin?
Covenant that the grantor owns the property
What is the covenant of right to convey?
grantor can convey
What is the covenant of encumberances?
there are no encumberances
What is the covenant of quiet enjoyment?
A third party will not assert a claim to the land
What is the covenant of warranty?
If a third party asserts a claim to the land, the grantor will indemnify
What is the covenant of further assurances?
the grantor will do anything reasonably necessary to perfect grantee’s title
Which covenants of title run with the land?
Run with the land, breach can be at the time of closing or afterwards
When must a breach of present covenants occur?
Only can be breached at time of closing
When must a breach of future covenants occur?
can occur at the closing or afterwards
What is seller’s duty of care to buyer?
needs to disclose material latent defects known to the seller but not readily observable and not known to the buyer
if a landlord assigns his interest, who does the tenant pay rents to?
to the landlord until they receive actual notice of the change
What are the only ways a tenancy by the entirety can be severed?
(2)
- divorce
2. if the couple both agree to sell
Where one co-tenant is in sole possession of the co-tenancy property
-what are the other tenants liable for
contribution for taxes and insruance
(minus)
the value of any benefit the sole tenant derived from the property
If a member of a joint tenancy has a lien on their share of the property, what happens at death?
It disappears when the others recover it through right of survivorship
What has to be completed in selling a joint tenancy interest for the tenancy to be split?
equitable title must pass to someone else
legal title does not have to pass
When there is a life tenant and a remainderman, who is responsible for paying mortgage principal and interest?
remainderman = principal
life tenant = interest
if a landlord assigns his interest, who does the tenant pay rents to?
to the landlord until they recieve actual notice of the change
What are the only ways a tenancy by the entirety can be severed?
(2)
- divorce
2. if the couple both agree to sell
Where one co-tenant is in sole possession of the co-tenancy property
-what are the other tenants liable for?
contribution for taxes and insurance
(minus)
the value of any benefit the sole tenant derived from the property
If a member of a joint tenancy has a lien on their share of the property, what happens at death?
It disappears when the others recover it through right of survivorship
What has to be completed in selling a joint tenancy interest for the tenancy to be split?
equitable title must pass to someone else
legal title does not have to pass
When there is a life tenant and a remainderman, who is responsible for paying mortgage principal and interest?
remainderman = principal
life tenant = interest
There are three requirements for a valid conveyance of real property by deed
- deed must be sufficient to satisfy the statute of frauds
- delivery of the deed
- Deed must be accepted by the buyer
Four requirements of a valid deed writing
- sufficiently identifies the parties (know exactly who they are)
- Words indicating intent to transfer
- Sufficient description of the property (metes and bounds or a descriptive term for a parcel of land)
- Grantor’s signature
What does not need to be included in a valid deed writing?
- signature of grantee
- consideration (property can be given away)
- notarization
- does not have to be record
Delivery of a deed exists if
the grantor presently intends that the property transfer to the grantee (state of mind)
Grantor will do one of three things with the deed to delivery it
(3)
- giving the deed to the grantee
- grantor may retain the deed
- give the deed to third party and let them carry out conveyance
If a grantor physically gives a deed to the grantee, is there delivery?
gives rebuttable presumption that the grantor presently intends that the property transfer to the grantee
-Can be rebutted by extrinsic evidence that shows that under no circumstances did they intend the transfer (≠conditions)
If the grantor retains the deed after writing a deed to another, is there delivery?
gives rebuttable presumption that the grantor presently intends not to transfer the property to the grantee
-Can be rebutted by extrinsic evidence that shows that under circumstances he did intend the transfer (≠conditions)
If the grantor gives the deed to a third party after deeding property to another, is there delivery? If so, when?
Escrow
When a deed is given to the third party and tells them to give it to the grantee, when the grantee gets the deed from the third party the delivery date relates back to when deed was first given to the third party
When the grantor hands the deed to the third party and places conditions on the delivery, what is the effect?
Generally, one condition will not defeat the relation back doctrine
If > 1 condition, the relation back doctrine will be defeated and delivery will be third party –> grantee
What is the relation-back doctrine ?
When a deed is given to the third party and tells them to give it to the grantee, when the grantee gets the deed from the third party the delivery date relates back to when deed was first given to the third party
If Grantor gives the deed to X, the third party, and says, “X, give this deed to grantee when I die.”
What’s the effect?
Death Escrows
Interpreted as giving the grantor a life estate and conveying a remainder to the grantee
A present delivery prior to death
Ways to defeat the relation-back doctrine?
- multiple conditions on delivery by third party
2. If the grantor expressly retains the right to reclaim the deed from the third party:
How can Deed be accepted by the buyer?
if transfer of property to the grantee is beneficial, then it is presumed
If the grantee refuses to accept the conveyance of property, then
there will be no valid conveyance of property
If a homebuyer signed a purchase and sale agreement and then dies, what is the result on the contract?
right to receive land under an enforceable contract passes to the deceased’s heir.
There is a strong presumption that first in time is
first in right
If there is a race statute:
The person who records first wins
If there is a notice statute:
For a subsequent purchaser to previal, they must be a bona fide purchaser (someone who takes without notice and pays value)
If there is a race-notice statute:
Under a race-notice statute an unrecorded conveyance or other instrument is invalid against a subsequent bona fide purchaser (purchases for value, and takes without notice), who records first.
How to evaluate recording act statutes?
Only evaluate valid transfers
Then, tells you when a subsequent claimant can beat a previous claimant
What does a bona fide purchaser mean?
someone who takes without notice
+
pays value (> nominal consideration, a mortgage issued at time of loan, ≠ judgement creditor)
What are the types of notice?
Actual notice
Constructive notice:
Inquiry notice
What is actual notice
facts the person actually knowns
What is Constructive notice
comes from the recording itself
What is inquiry notice?
There are enough facts to known to prompt reasonable inquiry, held to have noticed the facts that would have come up upon investigation
How to record a conveyance
2
Tract index (minority) Grantor/Grantee Index (Majority)
The recording process of a tract index
The best when it comes to giving notice
Records for each parcel within the county with a chronological listing of each conveyance of the property
Always will be constructive notice if prior recording
The recording process of a grantor/grantee index (name) system
2 sets of books (grantor, grantee)
Grantor books show all conveyances under the grantor’s name
Grantee books shows all conveyance under the grantee’s name
- look in grantee books to find when the grantor received the property
- look in grantor books to see if grantor transfered property between receiving and now selling it
- Go to grantor books and find the grantor to the grantor
From recording statutes, when is notice measured?
at the date of conveyance to the purchaser
What is a wild deed?
A deed recorded outside of the chain of title
What is estoppel by deed?
When?
Minority v. Majority Approach?
Applies when a grantor transfers title to property that they do not currently own; however, subsequently, they acquire the title
- minority: title automatically passes to previous grantee
- majority: the previous grantee must go to court and assert a claim to the title
What is the shelter rule?
If your grantor has a good claim, then future purchasers can shelter under their good title
Bona fide purchasers who collect by will
≠ have to pay value
Two instruments that make up a mortgage
- mortgage
2. Note
Types of security devices
4
- mortgage
- deed of trust
- absolute deed
- installment land sale contract
What is a mortgage?
An interest in real property that is meant to secure the performance of an obligation (generally repayment of a debt)
Who is the mortgagor?
The borrower of money who issues the mortgage on the property to the lender
Who is the mortgagee?
The lender because they are receiving the mortgage
What is the mortgage document?
What is the note document?
Which follows which?
Mortgage represents the interest in the land.
Note represents the debt of mortgagor.
Mortgage follows note, if you have it then presumed to have the mortgage
What is a deed of trust?
Debtor borrows money and deeds the property to a third party, the third party releases the deed back to debtor once they have paid the lender
What is an absolute deed?
Debtor borrow’s money then issues a deed to the creditor
-if extrinsic evidence establishes that it is meant to be a security, then it will be a mortgage
Installment land sale contract is what?
Seller retains the deed until all of the payments are made
-if buyer defaults, then seller keeps land and all previous payments (unless they have previously forgiven default)
What does mortgagee receive
Lien theory?
Title theory?
Intermediate Theory?
Lien theory - mortgagee gets a lien on property, mortgagor retains rights to possess and get rents and profits
Title theory - mortgagee gets title to the property, mortgagor retains possession (until default) but mortgagee gets rents and profits produced.
Intermediate Theory-the lien theory applies until default, then the title theory kicks in
Duties of person who has possession of mortgaged property
manage the property in a reasonably prudent manner; cannot commit waste
-if they do, can be sued for damages
Prepayment of mortgage right?
No right to prepay a mortgage debt unless expressly authorized
If prepayment is permitted, generally involves prepayment fees (generally upheld)
What is a deed in lieu of foreclosure?
If mortgagor goes into default, the mortgagor can issue a deed to mortgagee to discharge the mortgage debt (debt is satisfied)
-mortgagee takes it subject to all junior liens attached
Two types of foreclosure
- Judicial Foreclosure – a judicial proceeding
2. Private (power of sale)
Foreclosure Private sale in default is only available
if the mortgage instrument allows for it
A deficiency judgment is
if the foreclosure sale does not cover the amount of the debt
Debtor’s equitable right of redemption is?
Cannot be taken away
At any time prior to the foreclosure sale, debtor can redeem by paying the debt
In what order do mortgages attach?
Follow the priority order of land conveyances
What interests are affected by foreclosure sales?
Only junior interest (discharged provided they are notified and allowed to participate)
Senior interests are not affect - buyer of property at foreclosure still has the senior interests attached
Debtor’s statutory right of redemption?
Only exists if there is a statute authorizing it
After foreclosure, debtor has a limited period of time where they can force the foreclosure purchaser to pay the debtor whatever they paid for it
2 types of Purchase Money Mortgages
Mortgage must be executed at the same time as the purchase of property
- vendor purchase money mortgage: a mortgage issued to the seller to ensure payment of purchase price
- third party purchase money mortgage: borrowing money from a third party and issuing a mortgage to the third party
What type of mortgage has priority over all other mortgages?
Purchase money mortgage - once issued and recorded
Future Advance mortgages are?
Line of credit, future advance loans
If at the time the arrangement is entered into notice is given to future creditors, then it will have priority of the time it is entered into
What happens when mortgage property is transferred?
The mortgage runs with the land (provided it is properly recorded).
If taking title
- subject to the mortgage
- assuming the mortgage
- if language is ambiguous
subject - no personal liability, land can be seized but deficiency only against original debtor
assume - personal liability, land can be seized, and they take on primary personal liability
ambiguous: default = subject to
Rights of the grantor against the grantee if there has been an assumption:
The grantor is secondarily liable, if the grantor is sued, then can get the grantee to pay the debt (exoneration)
Rights of the grantor against the grantee if there has been an assumption and grantor makes payments following transfer
Then can get money from grantee
Subrogation is?
Rights of the grantor against the grantee if there has been an assumption
Grantor pays off the debt and becomes creditor to grantee
Due-on-sale clauses are?
Gives the mortgagee the ability to call the entire balance on an attempt to transfer the property
-has to be specifically mentioned in mortgage
-Generally is enforceable.
How to tell what type of recording statute you are dealing with?
(2)
- Race component= first records or records first
2. Notice = good faith in value or without notice in value
When will a non-refundable down payment be held invalid?
When it is a liquidation damages clause that is unenforceable
When is a liquidation damages clause enforceable?
When it is a reasonable attempt at a fair compensation in the event of breach
≠penalty for failure to perform
How can a land-sale contract be enforced absent a writing?
partial performance
- payment
- possession
- substantial improvements
Will an option to purchase property be enough to trigger the doctrine of equitable conversion?
no, must be a land-sale agreement
The existence of an encumbrance, such as a covenant or equitable servitude which the buyer did not agree to accept as part of the conveyance, renders title:
unmarketable
What must a senior interest in property do to extinguish a junior interest in property?
(3)
- make junior interest a ∆ in a foreclosure action
- give junior interest notice
- make foreclosure sale
When there is a modification to a senior mortgage, what is the effect on a junior mortgage?
A junior mortgage prevails over the modification if the modificaiton materially prejudices the holder of the junior mortgage
(e.g. increasing the principal amount)
≠ increasing the maturity date
When does a property owner commit waste that is actionable by a mortgagee?
When they make
Physical changes to the property
That result in the reduction of the property’s value
In a lien theory jurisdiction, what options does mortgagee have when there is waste?
- foreclosure
- obtaining an injunction
- recover damages
≠ eviction
How must adverse possession be recorded?
It is outside of the recording acts and does not need to be recorded to take effect; the proper analysis is first in time first in right
Can a grantor revoke delivery of a deed to escrow?
Not if the grantor manifested present intent to create a future interest in her bridge partner
what does the shelter rule protect
any person who is the successor in interest to a grantor protected by the recording act is also protected by the act
In the absence of a contract provision dealing with quality title, what is the default promise?
implied covenant that the title conveyed by the seller will be marketable (no encumbrances)
