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Real Property > Conveyance, Mortgages and MISC > Flashcards

Conveyance, Mortgages and MISC Flashcards

1
Q

Sale of land and SoL considerations

A

Land sale contracts - subject to the SoF and must be:

  1. In writing;
  2. Signed by the parties to be bound; and
  3. Articulate essential terms ( e.g., consideration to be paid, description of the land)

Exception - partial performance

  • A land sale contract is outside the SoF if the buyer does any two of the following:
  1. Pays all or part of the purchase price;
  2. Takes possession; and/or
  3. Makes substantial improvements
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2
Q

What are the stages of a sale of land

A
  1. Contract - agreement to buy/sell land
  2. Escrow period - transfer of funds through escrow
  3. Closing - escrow completion to deed transfer
  4. Conveyance - successful deed transfer, upon which property is conveyed to the new owner
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3
Q

What is equitable conversion

A

When, after the parties have entered into a binding contract for the sale of land, the buyer becomes the “equitable owner” before the delivery of the deed.

During escrow (after land sale contract but before deed delivery), buyer owns the real property, but seller owns personal property (i.e., the right to proceeds of the sale)

  • Seller holds legal title in trust for buyer
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4
Q

Equitable conversion and the death of a party effects

A

Death of a party - if buyer or seller dies before closing, rights to the contract pass according to interests held

  • Seller’s interest- passes as personal property
    • I.e., seller’s heirs can sue for sale proceeds
  • Buyer’ s interest- passes as real property
    • I.e., buyer’s heirs can sue for delivery
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5
Q

Equitable conversion and Risk of Loss

A

if property is destroyed before closing through no fault of the parties, buyer bears the risk of loss

  • Parties can contract differently
  • Seller must credit any insurance proceeds from loss against the purchase price

e.g., if a house on the property burns down after the contract has been signed, but before the deed is conveyed, the buyer will nevertheless have to pay the agreed-upon purchase price for the land.

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6
Q

What are the implied promises on a sale of land contract

A

Every land sale contract contains two implied promises:

  1. Promise to provide marketable title
  2. Promise to disclose & make no material false statements
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7
Q

What is the Promise to provide marketable title

A

Promise to provide marketable title

  • Promise that title is free from risk of litigation
  • Defects rendering title unmarketable:
    1. Acquired by adverse possession,
    2. Encumbered by interests (e.g., servitude, mortgage, future interest); but seller has the right to satisfy outstanding mortgages or liens with sale proceeds, or
    3. Zoning ordinance violations existing at sale
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8
Q

What is a Promise to disclose & make no material false statements?

A
  • Seller must not materially misrepresent facts or make false statements concerning the property
  • Seller must disclose latent material defects
  • Seller cannot limit liability through disclaimers
  • New property - seller/builder is subject to an implied warranty of fitness/quality in construction
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9
Q

Option for a buyer when breach of implied promises in land sale contracts

A

Remedy for breach - buyer must notify seller before closing and give reasonable time for seller to cure defects

  • If seller fails to cure, buyer can rescind, file for damages, demand specific performance, or file suit to quiet title
  • If buyer fails to notify seller before closing, contract merges with the deed and seller is not liable
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10
Q

What are the requirements of a deed?

A

Requirements - to be effective, a deed must be:

  1. Lawfully executed - deed must be signed by granter and must reasonably identify the parties and the land; and
  2. Delivered - requires intent to be bound by the conveyance
  • >> Title passes upon effective delivery; cannot be rescinded
  • >> Present intent controls; physical transfer not required
  • >> Acceptance- grantee must accept the deed; acceptance is usually presumed upon vaIid delivery
  • >> Rejection by grantee = ineffective delivery
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11
Q

What are the three types of deeds

A
  1. General warranty - includes six covenants for title
  2. Special warranty - granter assures that:
    • He has not conveyed the land to another; and
    • The land is free from encumbrances made by granter
  3. Quitclaim - transfers whatever interest granter purports to have in property
    • No covenants included; granter is not even promising he has title to convey
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12
Q

What covenants are included in a General Warranty Deed?

A

Present covenants - only breached at the time of delivery:

  1. Seisin - granter covenants that he is the rightful owner (i.e., has title, possession) and that deed covers described land
  2. Right to convey - granter covenants that he has the right to convey
  3. Against encumbrances- granter covenants that the land is free from encumbrances (e.g., servitudes, mortgages)

Future covenants- only breached after delivery:

  1. Quiet enjoyment - granter covenants that grantee will not be disturbed by a third party’s claim of lawful title
  2. Warranty- granter agrees to defend against lawful claims of title by others
  3. Further assurances - granter promises to perform future acts reasonably necessary to perfect the title conveyed
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13
Q

What are the covenants of a General Warranty Deed? SR WEAQ

A
  • Seisin (Own the property)
  • Right to Convey
  • Warranty (defend and compensate)
  • Encumbrances
  • Assurances
  • Quiet enjoyment (no disturbance)
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14
Q

What is Bona Fide Purchasers

A

A BFP is one who purchases property for value (i.e., gives pecuniary consideration) without notice of a prior conveyance

Note- whether a buyer is a BFP is important in the context of recording statutes

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15
Q

A Bona Fide Purchaser

A

Purchasers:

  • Includes mortgagees for value
  • Does not include donees, heirs, or devisees

>> Not protected by the recording statutes unless the Shelter Rule applies

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16
Q

When a Bona Fide Purchaser obtains notice

A

Notice - a buyer has notice of a prior conveyance by any of:

  • Actual notice - actual knowledge, from any source
  • Inquiry notice - what a reasonable inspection of the land would reveal (regardless of whether buyer actually inspects)
  • Record notice - knowledge from a routine title search
    • E.g., a previous conveyance properly recorded in the chain of title (not a wild deed)
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17
Q

Recording Statutes (Essay Answer)

A

If a prior conveyance or interest is not recorded, a subsequent purchaser/mortgagee may be protected under a recording statute

  • Level of protection depends on the type of recording statute
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18
Q

Recording Statutes (Types)

A

Notice statutes – subsequent BFP always prevails

  • Whether or not she recorded first, a subsequent BFP always prevails over a prior grantee who fails to record

Race-notice statutes- first subsequent BFP to record prevails

  • Sample language: ‘‘No conveyance or mortgage of an interest in land shall be valid against any subsequent purchaser for value without notice thereof whose conveyance is first recorded’’

Race statutes - first grantee to record prevails, regardless of whether buyer is a BFP

  • E.g., non-BFP purchaser who records first prevails over BFP
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19
Q

Recording statutes difference of language

A
  • Notice statutes:
    • Sample language: ‘‘No conveyance or mortgage of an interest in land shall be valid against any subsequent purchaser for value without notice thereof unless it is recorded (no matter when)’’
  • Race-notice statutes:
    • Sample language: ‘‘No conveyance or mortgage of an interest in land shall be valid against any subsequent purchaser f_or value_ without notice thereof whose conveyance is first recorded’’
  • Race statutes:
    • Sample language: ‘‘No conveyance or mortgage of an interest in land shall be valid against a subsequent purchaser (no value) whose conveyance is first recorded‘’
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20
Q

What is the shelter rule?

A

Shelter Rule - one who takes from a BFP will prevail against any interest the transferor-BFP would have prevailed against, even if the transferee had actual notice of a prior conveyance

  • Protects donees, heirs, or devisees of BFPs who cannot qualify as BFPs and would not otherwise receive protection under notice or race-notice statutes
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21
Q

What are wild deeds?

A

Wild deeds - a recorded deed unconnected to the chain of title (e.g., due to a clerk’s filing error)

  • Record notice cannot be derived from a wild deed
22
Q

What is an estoppel by deed

A

Estoppel by deed - one who conveys land in which she has no interest is estopped from denying the validity of the conveyance if she subsequently acquires the same interest

  • Prevents one from fraudulently conveying land and later validly acquiring it (i.e., laundering title)
23
Q

Differences between a seller broker and a buyer broker

A
  • Seller’s agent (‘‘listing broker’’)- broker who obtains listing from seller, i.e., engaged by seller to assist in sale of property
    • Has fiduciary duty to seller
    • Earns commission from sale of property once the sale closes
    • Seller’s agent may still earn commission if the sale fails to close due to seller’s fault (e.g., seller backs out)
  • Buyer’s agent (‘‘selling broker’’) - primary relationship is with buyer, e.g., shows buyer potential properties buyer may purchase
    • Typically compensated by receiving a portion of listing broker’s commission, i.e., gets paid out of seller’s agent’s commission
    • Owes a fiduciary duty to seller b/c buyer’s agent is technically a subagent of the seller’s agent
24
Q

Duties by real estate agents

A

Agents have a duty to disclose material information about which they have actual knowledge

25
Q

Mortgages

A

A mortgage is a security interest in land that serves as collateral for the repayment of a loan (a.k.a. ‘‘mortgage deed,” ‘‘note’’)

  • Writing required - must be in writing to satisfy the SoF
  • Mortgagor= debtor/borrower/landowner
  • Mortgagee = creditor
26
Q

Parties’ rights (Mortgage)

A
  • Lien Theory (majority) - mortgagor has title and the right to possession absent foreclosure (see card 58)

>> Mortgagee has a lien, conferring a right to take action for ownership of the land if the mortgagor defaults on the loan

  • Title theory (minority) - mortgagee has title to the property during loan term, not mortgagor­ borrower
  • Note - unless instructed otherwise, assume lien theory applies on the MBE
27
Q

What is an equitable mortgage?

A

Equitable mortgage - debtor gives creditor a deed to his land as collateral for the debt (instead of executing a mortgage)

28
Q

Acceleration clauses (Mortgage)

A

Acceleration clauses - terms in loan agreements that require mortgagor to pay off full loan immediately if certain conditions are met, e.g., if mortgagor misses too many payments

29
Q

How to transfer of a mortgage

A

A mortgagee (creditor) can transfer her interest by:

  • Endorsing the mortgage note and delivering it to transferee
  • Executing a separate assignment of the mortgage interest
30
Q

How a Holder in due course takes a mortgage

A

Holder in due course – a holder in due course takes a mortgage note free of any personal defenses mortgagor could have raised against original mortgagee (e.g., lack of consideration, fraudulent inducement)

  • He still remains subject to real defenses (e.g., material alteration, duress, fraud, incapacity, infancy, illegality, insolvency)
31
Q

What are the requirements to be a holder in due course?

A
  1. Negotiable note – note must be negotiable, made payable to the named mortgagee;
  2. Endorsed and signed - note must be endorsed or signed by the named mortgagee;
  3. Delivered - note must be delivered to the transferee; and
  4. Good faith and value paid - transferee must take the note in good faith (i.e., without notice of illegality) and pay value
32
Q

How a foreclosure is made?

A

Foreclosure - upon default, mortgagee can satisfy debt through foreclosure by judicial action

  • Property is sold to satisfy the debt in whole or in part
  • Deficiency_judgment - if the debt exceeds sale proceeds, mortgagee can file suit against mortgagor for debt balance
  • If proceeds exceed the debt balance, junior liens are paid in order of priority
33
Q

Foreclosure redemption in equity

A

Redemption in equity - at any time prior to the foreclosure sale, mortgagor can redeem the property by paying the amount due

  • Some jurisdictions allow mortgagor, for a certain period, to buy back the property after foreclosure sale
34
Q

Mortgagee possession

A

Mortgagee possession - mortgagee’s right to possession prior to foreclosure depends on the jurisdiction:

  • Lien theory- no right to possess prior to foreclosure
  • Title theory - right to possess at any time upon demand
  • Mortgagee can always take possession with mortgagor’s consent or abandonment
  • Mortgagee in possession assumes the risk of accounting for rents, managing property, and tort liability to third parties
35
Q

Priority of creditors

A

Priority of creditors - creditors must record their interests

  • Recorded interests take priority in the order recorded
  • Purchase money mortgages (PMM) - superior to all interests
    • PMM = mortgage given in exchange for funds used to buy the property; PMM is given either to the seller as part of the purchase price or to a third-party lender (if both, seller’s PMM is senior to the third­ party lender)
  • Creditors can agree to subordinate priority to a junior creditor
36
Q

Junior interests (Foreclosure)

A

Junior interests - terminated by foreclosure of a superior claim

  • Foreclosure terminates all junior interests; junior interest holders cannot look to the land to satisfy debts
    • Junior interest holders can seek a deficiency judgment against debtor, ensuring the debtor remains liable for the balance on the junior mortgage
  • Junior interests are necessary parties and must be included in a senior foreclosure action
    • Otherwise, the junior mortgage will remain on the land
37
Q

Senior Interests (Foreclosure)

A

Senior interests - unaffected by junior interest foreclosures

  • Buyer of foreclosed property takes it subject to senior interests
    • Buyer is not liable for senior debt, but the senior mortgage remains on the land
38
Q

Lateral Support (Rights of a land ownership)

A

Lateral support - ownership of land includes the right to have land supported in its natural state by adjoining land; landowners can be liable for excavations that cause damage to adjacent land

  • P can bring claims under two types of liability:
  1. Negligence - if adjacent landowner’s excavation causes damage to developed land, excavating owner is only liable if he acted negligently
  2. Strict liability - P must show his land would have collapsed, even in its natural state, due to D’s excavations
39
Q

Subjacent Support (Rights of a landowner)

A

Subjacent support - underground (subjacent) structures must support surface structures existing when the subjacent estate was created

  • Subjacent structures include parking garages, tunnels, mines, etc.
  • Liability:
    • Strict liability- subjacent owners are strictly liable for failure to support surface land and pre-existing surface structures
    • Negligence - subjacent owners are negligent for failure to support subsequently constructed buildings
40
Q

What is water rights in watercourses?

A

Land bordering watercourses (natural or artificial bodies of water, e.g., lakes and rivers) is governed by either the riparian doctrine or the prior appropriation doctrine

41
Q

Riparian doctrine

A

Water belongs to those who own land bordering the watercourse. Two theories:

  1. Reasonable use theory_(majority) – riparian owners share rights to reasonable use and are liable to other owners if their use unreasonably interferes with other owners’ use
    • Balance utility of use vs. gravity of harm
  2. Natural flow theory_(minority) - riparian owners may be enjoined for any use resulting in a substantial or material reduction in others’ water quantity or quality
    • Natural uses prevail over artificial uses (under both theories)
42
Q

Prior appropriation doctrine

A

Water rights are originally acquired by actual use

  • Priority of beneficial use determines rights to water

>> E.g., first individual to make a beneficial use of water (i.e., productive use) has superior legal right to its use

43
Q

Rights on Groundwater

A

Groundwater - water beneath the surface not confined to a known channel (e.g., water in wells)

  • Surface owner is entitled to make reasonable use of groundwater, but must not be wasteful
44
Q

Rights on surface water

A

Surface water - water from rain, springs, or other runoff that has not yet reached a natural watercourse

  • Landowners can generally use surface water as they please, but may be liable for interrupting its flow
  • Liability depends on which theory applies:
    • Natural flow theory- owners cannot unreasonably alter natural drainage
    • Common enemy theory- owners can do anything to change drainage or combat flow unless it causes unnecessary damage to others’ land
    • Reasonable use theory - utility of use is balanced against the gravity of harm from that use
45
Q

Zoning power

A

Zoning power - govt. may enact laws to reasonably control land use (cities and counties must be authorized by an enabling act)

  • Limitation - zoning ordinances must be reasonably related to the public welfare, not too restrictive, and not racially discriminatory
46
Q

Variances on zoning ordinance

A

Variances - landowners can get govt. permission to be exempt or vary from literal restrictions of a zoning ordinance

  • Requirements - to qualify for a variance, a landowner must show:
  1. Undue hardship; and
  2. Variance will not be contrary to public welfare
47
Q

Nonconforming use of zoning ordinance

A

Nonconforming use - a once lawful existing use for property, now deemed nonconforming under new zoning laws

  • Govt. cannot eliminate a use all at once (i.e., ‘‘zone out’’) unless just compensation is paid
    • Govt. may provide the landowner with amortization, whereby govt. will make payments to the landowner over a set period of time until the landowner recoups the value of the nonconforming use
48
Q

Zoning special use permit

A

Certain property uses require a special use permit even where zoning generally allows the type of use (e.g., hospitals and drive-thrus in commercial zoning districts)

49
Q

What is an exaction?

A

Condition for govt. approval of a new development

  • Condition is usually a payment or gift of property to govt. to offset the development’s demands on pubIic services
    • E.g., due to population increase from a new housing development, govt. will have to install new bus stops and traffic lights in surrounding areas- govt. can seek some exaction (e.g., payment) from developer
50
Q

Requirement of an exaction

A

Requirements – exactions are unconstitutional unless they satisfy the following:

  1. Nexus- there must be a rational relationship (nexus) between the exaction sought by the govt. and the burden on public facilities; and
  2. Proportionality - exaction must reasonably relate, in nature and scope, to the impact of the development
51
Q

Conflict of law in real property

A

Real property is subject to the law of the jurisdiction where it is situated

  • E.g., a dispute over property in CA is generally governed by CA law
  • Applies to the disposition of real property, whether by descent, deed, or other method

Ks related to real property - generally governed by the law of the place where the property is situated

  • Traditional conflict of law rules may apply if property is merely incidental to a K and the K is of a personal nature

Real Property (6 decks)

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