Conveyance - Purchase and Sale of Real Estate

Question 1

Land sale contracts SOF

Answer 1

Real estate contract involves an interest in land, the SOF requires a writing signed by the party against whom enforcement is sought

Also need
- identity of parties
- description of the property, and
- price or a means of determining the price

Need to be definite enough to enforce the contract

Question 1

Conveyance of land process

Answer 1

Every conveyance of real estate consist of a two-step process
- step 1: the land contract, which coneys equitable title
- step 2: the closing, deed passes legal title and becomes operative document

Question 2

Inaccurate description of land in sales contract

Answer 2

Sometimes the land description in the k will overstate or understate the amount of land being transferred

Doesn’t matter - specific performance with pro-rata decrease or increase in price

Question 3

Doctrine of Part Performance

Answer 3

Exception to SOF

Equitable doctrine

Allows a buyer to enforce an oral real estate contract by specific performance if
- the oral contract is certain and clear, and
- the acts of partial performance clearly prove the existence of a contract

Two of the three acts necessary

Question 4

Partial performance acts - 2 of 3

Answer 4

Second requirement in doctrine of part performance is usually satisfied if the buyer can prove two of the following three actions:
- buyer has taken possession of the property
- buyer has paid the purchase price or a significant portion of the purchase price
- buyer has made substantial improvements to the premises

Question 5

Doctrine of Equitable Conversion

Answer 5

Once contract is signed, equity regards the buyer as the owner of the real property
- contract gives equitable title to the buyer
- right to possession still rests with seller because rests with party who holds legal title

Led to risk of loss

Question 6

Escrow period

Answer 6

Contract signed and the time between contract signed and closing

Question 7

Risk of loss

Answer 7

Contract conveys equitable title to the buyer so if the property is destroyed through no fault of either party after contract signed, the buyer bears the risk of loss

K terms can reallocate loss and most do today

But seller must credit any fire or casualty insurance proceeds they receive against the purchase price

Question 8

Death of either party during escrow period

Answer 8

The interest still passes to their estate

Question 9

Marketable title - implied covenant

Answer 9

Every contract contains an implied covenant that the seller will provide marketable title at closing

Marketable title is title reasonably free from doubt and the threat of litigation
- defects in record chain of title
- encumbrances
- zoning violations

Question 10

Adverse possession and marketable title

Answer 10

If even a portion of the title rests on adverse possession, it is unmarketable

Need to provide good record title to be marketable

Unless a suit has been brought to quiet title, title acquired by adverse possession does not appear in the record and thus, defect in record chain of title

Question 11

Encumbrances and marketable title

Answer 11

Mortgages, liens, restrictive covenants, easements, options to purchase, and significant encroachments render title unmarketable unless the buyer has waived them

Marketable title at closing - so seller can satisfy liens and mortgages at closing

Question 12

Easements and marketable title

Answer 12

An easement that is beneficial, visible, or known to the buyer does not impair the marketability of title

Question 13

Zoning violations and marketable title

Answer 13

Zoning restrictions do not affect marketability

But an existing violation of a zoning ordinance does render title unmarketable

Question 14

Implied covenant of marketability of title post closing

Answer 14

Once the closing occurs and the deed changes hands, the seller is no longer liable on the implied contractual covenant

Then only liable for express promises made in the deed

Question 15

False statements of material fact - land contract and failure to disclose

Answer 15

Implied promise that the seller will not make any false statements of material fact

To be liable for failure to disclose:
- seller must know or have reason to know of defect
- buyer unlikely to discover the defect (latent), and
- serious enough that the buyer would probably reconsider the purchase (material)

Question 16

Disclaimers of liability - land contract

Answer 16

General disclaimers are not effective - like property sold as is or with all faults

But if the disclaimer identifies specific types of defects, it will likely be upheld

Question 17

Implied warranties of fitness or habitability - land contract

Answer 17

Land contract contains no implied warranties of fitness or habitability

Caveat emptor is the common law norm

Exception - new home construction

Question 18

New home construction exception

Answer 18

Most courts recognize a warranty of fitness or quality in the sale of a new home by the builder - builder is also the seller

Question 19

Contract to deed (merge)

Answer 19

Closing occurs and the contract is said to merge with the deed

In absence of fraud, the seller is no longer liable on the promises in the contract, only those in the deed

Controlling document is the deed

Question 20

Deed generally & how to pass legal title

Answer 20

Transfers legal title from grantor to grantee

To pass legal title from the grantor to the grantee, the deed must be lawfully executed and delivered

Question 21

Lawful execution of a deed (4 requirements)

Answer 21

Executing a valid deed requires
- a writing signed by the grantor
- unambiguous description of the land
- identification of the parties by name or description
- words of intent to transfer, such as grant

Deed does not need to recite consideration and consideration is not needed to pass to make a deed valid

Question 22

Description of land - deed

Answer 22

Does not need to be perfect, but must be unambiguous and at least provide good “lead”

“All” of X’s land is ok but “some” of X’s land is not

If land description is left blank, the deed is void unless the grantee was explicitly given authority to fill in the description

Question 23

Deed with name of grantee left blank

Answer 23

If a deed is delivered with the name of the grantee left blank, the court presumes the person taking delivery has authority to fill in the name of the grantee

Question 24

Delivery requirement of a deed

Answer 24

Not effective to transfer unless it has been delivered

Delivery turns on the grantor’s intent that title pass immediately, even if possession is postponed
- grantor physically or manually transfers the deed to the grantee
- doesn’t actually need to be physically delivered, standard is a legal standard and just for present intent

Did grantor have present intent to part with legal control?

Question 25

Acceptance and rejection of deed

Answer 25

Rejection defeats delivery

Acceptance is presumed, but if a grantee expressly rejects the deed, the deed is ineffective to pass title

Question 26

Deed delivery with oral conditions

Answer 26

If a deed, absolute on its face, is transferred to the grantee with an oral condition, the oral conditions drop out

Question 27

Grantor gives deed to escrow agent

Answer 27

Grantor gives executed deed to escrow agent with instructions

Once conditions met, title goes to grantee

Escrow agent is given written instructions, grantor is bound by delivery to the agent

But if gives oral instructions, grantor may change the instructions and recall the deed while its still in the agent’s hands, unless there is a written contract of sale
- cannot get the deed back if the condition is the grantor’s death because intended to presently convey future interest

Question 28

condition of survival vs grantor’s death

Answer 28

Different

Unlike the condition of the grantor’s death, which conveys a future interest, a conveyance to the grantee only if the grantee survives the grantor indicates that the grantor does not intend to part with anything until death
- so no delivery

Question 29

Types of deeds

Answer 29

Three types of deeds used to convey property interests other than leaseholds
- the general warranty deed,
- special warranty deed
- quitclaim deed

Question 30

Quitclaim deed

Answer 30

No covenants

Worst deed for a buyer - conveys only what the grantor has at the time of the conveyance

Question 31

The general warranty deed

Answer 31

Best deed for a buyer - warrants against all defects in title, including those attributable to grantor’s predecessors

Generally contains all six of the covenants

Question 32

Present covenants

Answer 32

Covenant is breach at the time the deed is delivered
- so SOL begins to run at the time of delivery

Three of them
- the covenant of seisin - grantor owns the estate
- the covenant of the right to convey - grantor can transfer
- covenant against encumbrances - no servitudes/liens

Question 33

Visible and known encumbrances - contract vs deed

Answer 33

Contracts - purchaser is generally presumed to have contracted to accept the land subject to visible easements

Deeds - most jurisdictions hold that the covenant against encumbrances is breached even if the grantee knew of the encumbrance

Question 34

Future covenants

Answer 34

Not breached until the grantee is disturbed in possession - SOL runs when grantee is distributed

Three future covenants
- covenant for quiet enjoyment: grantee will not be disturbed in possession by a third party’s lawful claim
- covenant of warranty: grantor promises to defend against reasonable claims of title by a third party and to compensate the grantee for any loss sustained by the claim of superior title
- covenant for further assurances: grantor promises to do whatever is needed to perfect grantee’s title if it later turns out to be imperfect

Question 35

Special warranty deed

Answer 35

Contains the same covenants as the general warranty deed, but the grantor makes those promises only on behalf of himself - no representations on behalf of the predecessors in interest

Question 36

Statutory special warranty deed

Answer 36

Many states have statutes that provide for what type of deed is conveyed by the use of the word grant in a conveyance without a designation of the type of deed

Two limited assurances against acts of the grantor (not her predecessors)
- grantor has not conveyed the same estate or any interest therein to anyone other than the grantee, and
- the estate is free from encumbrances made by the grantor

Question 37

What can be recorded

Answer 37

Practically any kind of instrument affecting an interest in

Question 38

Bona fide purchaser

Answer 38

To be a bona fide purchaser, a grantee must
- be a purchaser or a margate lender (not one who received the property by gift, will, or inheritance)
- Pay valuable consideration
- take without notice of the prior conveyance

If not a BFP, not protected by the recording act and the common law rule of first in time applies

Good faith purchase = bona fide purchaser

Question 39

Bargain basement sale and BFP

Answer 39

Does not matter that got deal on it, person will be a BFP if they paid substantial pecuniary consideration

Question 40

Notice - generally and when measured

Answer 40

Without notice means no actual, constructive, or inquiry notice of a prior conveyance at the time they paid consideration and received the interest

Actual, inquiry, and record notice

Question 41

Inquiry notice

Answer 41

Whether examines the property prior to closing or not, on inquiry notice of whatever an examination of the property would have revealed

If another is in possession of the land, inquiry notice

Inquiry notice of whatever a reasonable follow-up would have revealed if a recorded instrument makes reference to an unrecorded transaction

Question 42

Duty to inspect

Answer 42

Buyer of real estate has a duty to inspect the premises

To see, for example, whether anyone else is in possession

Question 43

Record notice

Answer 43

Chain of title

If a deed was properly recorded within the chain of title, record notice

Question 44

Race statute

Answer 44

Very unlikely to be on exam

Common law rule that notice of a prior conveyance does not matter - whoever is the first to record wins

Language: “not be invalid against a subsequent purchaser for value unless the conveyance is first recorded”

Question 45

Notice statute

Answer 45

Last BFP to enter the fact pattern wins

A subsequent purchaser who had no notice of a prior conveyance by the grantor will prevail over a prior grantee who failed to record
- even if they don’t record either

language: “not be valid against any subsequent purchaser for value, without notice thereof, unless the conveyance is recorded”

Question 46

Race-Notice statute

Answer 46

Subsequent purchaser does not have any notice of the prior grant and records first

Language: “not be valid against any subsequent purchaser for value, without notice thereof, whose conveyance is first recorded”

Question 47

Chain of title - to give notice to subsequent takers

Answer 47

To give record notice to subsequent takers, the deed must be recorded properly within the chain of title

Chain of title is established thru title search of grantor/grantee index

Three chain of title problems
- the shelter rule
- problem of the wild deed
- estoppel by deed

Question 48

The shelter rule

Answer 48

Anyone who takes from a BFP will prevail against any interest the BFP would have prevailed against
- transferee takes shelter in the status of her transferor, and thereby steps into the shoes of the BFP even though she otherwise fails to meet the requirements of the BFP status
- even if the grantee had actual notice of a prior unrecorded conveyance

Question 49

Wild deed

Answer 49

Wild deed is a recorded deed that is not connected to the chain of title

Does not impart constructive notice because subsequent purchaser could not feasibly find it

If a deed, entered on the records, has a grantor unconnected to the chain of title, the deed is a wild deed and is incapable of giving record notice of its existence

Equal to not recording at all

Question 50

Estoppel by deed

Answer 50

One who conveys realty in which he has no interest, is estopped from denying the validity of that conveyance if he subsequently acquires the title that he had previously purported to transfer

Grantee is entitled to assume that no one sells or conveys land until they first own it