Conveyances Flashcards
What is the process of conveying real estate?
It’s a two step process:
- The land contract, which endures until step 2.
- The closing, where the deed becomes the operative document.
What are the requirements for the land contract? Is there any exception to the SOF?
It must be in writing, signed by the party being bound (SOF). It must describe the land and state some consideration.
EXCEPTIONS: The doctrine of part performance - if you have two of the following three, the doctrine is satisfied and equity will decree specific performance of an oral contract for the sale of land:
a. Buyer takes possession;
b. Buyer pays all or part of the price; AND/OR
c. Buyer makes substantial improvements.
What is the doctrine of equitable conversion?
This addresses the problem of risk of loss. Thus, in equity, once the contract is signed, the buyer owns the land, subject of course to the condition that he pay the purchase price at closing. So if in the interim, between contract and closing, Blackacre is destroyed through no fault of either party, the buyer bears the risk of loss, unless the contract says otherwise.
New York: So long as the buyer is without fault, the risk of loss remains with seller until buyer has title or takes possession.
What are the two implied promises with every land contract?
Marketable title at the closing: seller promises to provide marketable title - which is title free from reasonable doubt, free from lawsuits or threat of litigation.
No False Statements of Material Facts: the seller promises not to make any false statements of material fact. The majority of states now also hold sellers liable for failure to disclose latent material defets. Seller is liable for material lies and material omissions.
NOTE: if the contract contains a general disclaimer of liability (e.g. property is sold as is or with all faults) - disclaimer won’t excuse seller from liability for fraud or failure to disclose.
What circumstances will render title unmarketable?
Adverse possession: If even part of the title rests on adverse possession, it is unmarketable. Seller must be able to provide good record title. Include future interests held by unborn/unascertained parties.
**Encumbrances: **marketable title means an unencumbered fee simple, thus servitudes and morgages render title unmarketable, unless buyer has waived them.
Note: Seller has the right to satisfy an outstanding mortgage or lien at the closing, with the proceeds of the sale. Thus, buyer cannot claim title is unmarketable because it is subject to a morgage prior to closing, so long as the parties understand that the closing will result in the morgage being satisfied or discharged.
Zoning violations: title is unmarketable when the land violates a zoning ordinance.
What warranties are available on a land contract?
There are no implied warranties of fitness or habitability - the standard is caveat emptor.
Exception: the implied warranty of fitness and workmanlike construction applies to the sale of a new home by a builder-vendor.
At closing, what becomes the controlling document? How does that happen?
The controlling document is the deed, which passes legal title from the seller to the buyer.
Deed passes legal title when it is lawfully executed and delivered (LEAD).
Lawful Execution: It must be in writing signed by the grantor. No consideration is needed. The description of the land does not have to be perfect - the law only requires an unambiguous description and a good lead to allow someone to research and finding the scope of the land.
Delivered: the grantor can statisfy the delivery requirement by physical tranfer of the deed to the grantee (by mail, agent, or messenger). However, delivery does not require physical transfer of the instrument itself.
The standard for delivery is a legal standard, and is a test solely of present intent. Did the grantor have the present intent to be bound irrespective of whether or not the deed itself was handed over.
You can also have delivery by escrow - where grantor delivers an executed deed to a third party, escrow agent, with instructions that the deed be delivered to grantee once certain conditions are met. Once the conditions are met, title passes to grantee.
How can delivery be defeated?
A recipient’s express rejection of the deed defeats delivery.
What are the three types of deed and what are the covenants for title of each?
- The quitclaim: it contains no covenants. Grantor isn’t even promising he has title to convey. This is the worst deed buyer could get. It doesn’t mean that grantor does not have to provide marketable title at closing - it means that any problems post-closing, and grantor is off the hook.
-
The general warranty deed: this is the best deed a buyer could hope for - warrants against all defects in title, including those due to grantor’s predecessors. A general warranty deed contains the six following covenants - the first three are present covenants meaning they can be breached at the time of delivery and second three are future covenants, meaning if it is breached ever, the grantee is disturbed in possession.
a. Present Covenants:
i. The covenant of seisin: grantor owns this estate that he is purporting to convey.
ii. The convenant of right to convey: grantor has the right or power to transfer. No temporary restraints or disability (i.e. of sound mind or of the right age).
iii. The covenant against encumbrances: No servitudes or mortgages on the land.
b. ** Future covenants:**
i. The covenant for quiet enjoyment: grantee won’t be disturbed in possession by a third party’s lawful claim of title.
ii. The covenant of warranty: grantor will defend grantee against lawful claims of title brought by others.
iii. The covenant for further assurances: grantor will do whatever is needed to perfect the title. -
The statutory special warranty deed: provided for by statute in many states, this deed contains two promises that the grantor makes only on behalf of himself, not on his predecessors in interest.
a. Grantor promises he hasn’t conveyed this estate to anyone other than you
AND
b. The estate is free from encumberance made by grantor.
