Conveyances & The Recording System Flashcards
2 steps of a conveyance
• The conveyance of land is usually a two-step process: the land sale contract (conveys equitable title) and the closing (conveys legal title).
land sale contract (SOF & exception; what must be included)
• A. The Land Sale Contract must be in writing and signed by the party to be charged (SOF)
[• a. Exception: Doctrine of Part Performance (for specific performance only):
– allows the buyer to enforce an oral contract by specific performance, if he can provide proof of at least two of the following:
»> Full or substantial payment (more than rent) by the purchaser
»> Physical possession by the purchaser
»> Substantial improvements by the purchaser)
– seller enforcement – a seller an enforce can oral land sale contract only if the seller conveys the property to the buyer
– BUT NOTE: if the buyer is a CURRENT TENANT whose “purchase payments” are equal to his current rent, and his improvements are of the type that a tenant would normally make, this will FAIL TO SATISFY part performance because it does not show unequivocally that the acts of part performance unequivocally prove the existence of a purchase and sale contracts]
– The Land Sale Contract must DESCRIBE THE LAND in such a manner that the property may be located with certainty, such as a street address
– The Land Sale Contract must also IDENTIFY THE PARTIES and state a sale price (i.e., a land sale contract requires consideration)
real estate agent/broker (define; types of listing agreements; unauthorized practice of law)
• B. Real Estate Agent/Broker: The agent typically works for the seller and earns her commission when she finds a “ready, willing, and able” buyer. Traditionally, the commission was due even if the buyer repudiates the contract. Most modern cases award the commission only if the sale actually closes or the seller repudiates the contract.
– Types of Listing Agreements. If a broker has an “exclusive right-to-sell” listing agreement, the broker is entitled to a commission if the seller accepts an offer to purchase during the exclusive period, regardless of who procures the buyer or when the closing occurs. If a broker has an “open” or “non-exclusive” listing agreement, the broker is entitled to a commission only if the broker procures the buyer.
– Unauthorized Practice of Law. In most states, agents may fill in the blanks on standard land sale contracts, but they may not draft deeds, mortgages, or other documents that transfer interests in land. In addition, agents may not conduct closings or express opinions on the status of title or zoning laws.
title insurance
• C. Title Insurance
– A title insurance policy insures that “good record title” to the property exists as of the policy’s date, and the insurer agrees to defend the record title if litigated.
»> It insures against forgery or lack of delivery of an instrument in the chain of title, as well as the disability of a grantor in the chain of title.
»> Title insurance does not insure against claims “outside” the record, such as adverse possessors, boundary disputes, implied or prescriptive easements, zoning ordinances, or hazardous waste.
– Title insurance may be taken out by either the owner of the property or the mortgage lender.
»> An “owner’s policy” protects only the person who owns the policy (i.e., the named insured) and does not run with the land to subsequent purchasers.
»> A “lender’s policy” follows any assignment of the mortgage loan.
equitable conversion (what it means for buyer/seller; result of buyer/seller death; doctrine of exoneration; how does seller’s insurance factor in)
• Equitable Conversion (majority view): Upon execution of the PSA, the buyer is considered the equitable owner of the property (unless the contract provides otherwise).
> > > this means that, prior to closing, the RISK OF LOSS rests with the BUYER (assuming no fault on the part of the seller)
> > > if the buyer dies before closing, the property will pass to the persons entitled to the buyer’s real estate at the buyer’s death (***DEVISEES inherit real property)
> > > By contrast, if the seller dies prior to closing, the proceeds of the sale belong to the persons entitled to the seller’s personal property at the seller’s death. (***LEGATEES inherit personal property)
> > > reminder: The death of either party (or both parties) does not discharge the parties’ duties under the contract.
– common law doctrine of exoneration - the person who inherits real property will be able to compel the person who inherits the personal property to pay off the encumbrances on the property (outstanding mortgage, payment owed to seller)
– If a buyer is held liable for a loss before closing, the seller’s insurance proceeds, if any, must be credited to the buyer.
Implied Covenants Given by Sellers in Land Contracts - conveyance of marketable title
SUPER FRIGGIN IMPORTANT
– 1. seller will convey marketable title (i.e., a title free from reasonable doubt and free from non-frivolous lawsuits) at the closing (or, in the case of a land sale contract, at the end of payments)
• a. title is “unmarketable” if there are defects in the chain of title, including:
– The property was obtained by the seller by adverse possession (with no judgment)
»> i.e. the AP must quiet title before the sale
– There are encumbrances (easements/covenants/mortgages) on the title that will not be resolved at closing
»> a beneficial easement (e.g., a utility easement) will not render the title unmarketable
– The seller’s current use of the property violates existing zoning laws
– **BUT NOTE: if the seller plans to use the sale proceeds to remedy any defects (pay off a mortagage, lien, etc.), the title will be deemed marketable
- b. but the title is MARKETABLE despite the fact that the buyer’s intended use violates existing zoning laws
- other notes:
– The implied covenant of marketable title applies even if the contract calls for conveyance by quitclaim deed
– if there are marketable title issues, you have to give the seller until the closing to fix those issues – and once you close, you can’t pursue claims under the PSA like “failure to convey marketable title”
2 Implied Covenants Given by Sellers in Land Contracts
- conveyance of marketable title
- seller has not made any false statements of material fact or failed to disclose any latent material defects
Implied Covenants Given by Sellers in Land Contracts - false statements and warranties
– 2. seller has not made any false statements of material fact or failed to disclose any latent material defects
• most states require sellers to give buyers a written statement disclosing facts about the property
• in most states, a broad “as is” clause is a defense to claims based on negligent misrepresentation or failure to disclose; an “as is” clause is not a defense for claims based on intentional fraud or concealment
»> however, disclaimers for specific issues will likely be upheld
• CAVEAT EMPTOR: sellers do not make implied warranties of fitness or habitability, except when a NEW HOME is sold by a BUILDER/DEVELOPER (i.e., implied warranty of skillful construction)
Implied Covenants Given by Sellers in Land Contracts - time of the essence
– 3. time is NOT of the essence in real estate contracts, unless the contract provides otherwise (or the circumstances dictate such a term)
thus, specific performance may be sought even if one of the parties tenders late (but that party would be responsible for any damages caused by the delay)
»> remember, both the buyer and SELLER can claim specific performance
the closing - deed vs land sale contract
– 1. Upon closing, the deed supersedes the land sale contract; thus, after closing, the buyer must look exclusively to the deed for any rights, warranties, and claims of title (in other words, the implied warranty to provide marketable title is discharged at closing).
• The deed does not supersede fraud or “implied warranty of skillful construction” claims
the closing - to transfer title from seller to buyer, there must be: 2 main elements; flesh out first element
(LEAD – lawfully executed and delivered)
A “lawfully executed deed”
– i. A writing
– ii. Signed by the grantor/vendor
»> The grantee usually does not sign the deed, but is bound by any covenants therein by accepting the deed
– iii. identification of the grantor and grantee, AND
»> **can’t just call them “grantor/grantee”!
»> if the grantee’s name is left blank, some courts presume that the person taking delivery has authority to fill it in, thus validating the transfer
– iv. A description of the land sufficient so that an objective party may locate it with certainty
»> if described in multiple ways and there is a discrepancy, the PHYSICAL description will take precedence over the QUANTITY description
»> **NOTE: when there is a discrepancy between the amount of land ACTUALLY being conveyed, and the amount of land STATED IN THE DEED - we will give the purchaser the amount of land that was ACTUALLY conveyed
(**unlike PSA looks like no price term needed b/c no consideration here - not exactly a “contract”)
the closing - to transfer title from seller to buyer, there must be: 2 main elements; flesh out second element generally
(LEAD – lawfully executed and delivered)
The deed must be “delivered” to be effective
– delivery: grantor must manifest the PRESENT INTENT (shown by words and/or conduct) to be IMMEDIATELY BOUND by the conveyance (in other words, did the grantor intend to part with legal control of the property)?
»> **a deed not properly delivered is VOID
»> this is a LEGAL standard, not a LITERAL standard of delivery
– most courts hold that if the grantor executes a deed and gives it to another with instructions to give it to the grantee upon the grantor’s death, the grantor’s intent was to presently convey a future interest to the grantee (either a remainder, with a life estate reserved in the grantor, or an executory interest), and so the gift is inter vivos, not testamentary
»> BUT FOR THIS TO HAPPEN, GRANTOR MUST RELINQUISH ABSOLUTE & UNCONDITIONAL CONTROL
the closing - covenants of title (quitclaim deeds)
– 1. Quitclaim Deeds: No covenants of title (grantor conveys only what she has, which may be nothing)
**so if you failed to sue for marketable title under the PSA, you are SOL now
the closing - covenants of title (general warranty deeds - three PRESENT covenants)
• a. Three Present Covenants, which may be breached only AT closing (which is when the SOL starts to run):
“I own it; I can sell it; without encumbrances”
- Covenant of seisin (grantor owns the property)
- Covenant of right to convey (grantor has the legal right to convey the property)
- Covenant against encumbrances (there are no mortgages, liens, etc. of which the grantee is unaware)
- note: The future covenants run with the land (and are enforceable by successors), but the present covenants do not (and thus may be enforced only by the party to whom they are made).
the closing - covenants of title (general warranty deeds - three FUTURE covenants)
• b. Three Future Covenants, which may be breached only if the grantee is disturbed in possession AFTER closing (the SOL starts to run upon such breach):
“No one will bug you; If they do, I’ll defend you; After I defend you, I’ll take any steps necessary to make sure this never happens again”
• Covenant of quiet enjoyment (grantor will indemnify grantee against future claimants)
• Covenant of warranty (grantor will defend grantee’s title against lawful claims) in this instance, lawful means successful (not just colorable/nonfrivolous)
»> The grantee must give the grantor notice of such claims
»> If the grantee defends a claim and prevails, the grantee is not entitled to reimbursement because the claim was not “lawful”
- Covenant of further assurances (grantor will perform any administrative or ministerial steps necessary to perfect title)
- note: The future covenants run with the land (and are enforceable by successors), but the present covenants do not (and thus may be enforced only by the party to whom they are made).
