Conveyancing Flashcards
In regards to land sale contracts, what are the general rules for the contract?
(1) The contract must be in writing (Statute of Frauds); (2) Presumption that time is not of the essence unless so stated; (3) Implied covenant of marketability arises.
What is the doctrine of equitable conversion?
Under this doctrine, once a contract is signed, equity regards the buyer as the owner of the real property. The seller’s interest (the right to the proceeds of sale) is considered personal property. The bare legal title that remains in the seller is considered to be held in trust for the buyer. The right to possession follows the bare legal title, however; thus, the seller is entitled to possession until closing.
If property is destroyed without fault of either party before closing, the majority rule places the risk on the buyer. Some states, however, have enacted the Uniform Vendor and Purchaser Risk Act, which places the risk on the seller unless the buyer has title or possession at the time of loss. Even though the risk of loss is on the buyer, if the property is damaged or destroyed, the seller must credit any fire or casualty insurance proceeds he receives against the purchase price the buyer is required to pay.
Under the doctrine of equitable conversion, what is the rule regarding the passage of title if a party to a land sale contract dies before the contract is complete?
If a party to a land sale contract dies before the contract is completed, the seller’s interest passes as personal property and the buyer’s interest passes as real property. Thus, if the seller dies, bare legal title passes to his heirs or devisees, but they must give up title to the buyer at closing. If the buyer dies, his heirs or devisees can demand a conveyance of the land at closing.
For a land sale contract, what is the rule regarding marketable title?
Every contract contains an implied covenant that the seller will provide marketable title (i.e. title reasonably free from doubt) at closing. It need not be perfect title, but it must be free of questions that present an unreasonable risk of litigation.
For land sale contracts, when is title considered unmarketable?
(a) Defects in record chain of title (e.g. variation in land description in deeds, defectively executed deed, evidence that a prior grantor lacked capacity to convey, property adversely possessed, future interests held by unborn or unascertained parties);
(b) Encumbrances - generally, mortgages, liens, restrictive covenants, easements, and significant encroachments render title unmarketable. An easement that is beneficial, visible, or known to the buyer does not impair the marketability of title;
(c) Zoning restrictions - zoning restrictions do not marketability, but an existing violation of a zoning ordinance does render title unmarketable.
If the seller has agreed to furnish title at the date of closing, can the buyer rescind prior to that date on the grounds that the seller’s title is not marketable?
No. Once the closing occurs and the deed changes hands, the seller is no longer liable on this implied contractual covenant. The seller is then liable only for express promises made in the deed.
For land sale contracts, what is the remedy if title is not marketable?
The buyer must notify the seller that his title is unmarketable and give him reasonable time to cure the defects. If the seller fails to cure the defects, the buyer’s remedies include rescission, damages, specific performance with abatement, and quiet title suit. But if closing occurs, the contract and deed merge, and the seller’s liability on the implied contractual covenant ends.
For land sale contracts, what is the presumptive rule regarding time of performance? When is the presumption overcome? liability?
Courts presume that time is NOT “of the essence” in real estate contracts. Thus, the closing date is not absolutely binding, and a party late in tendering her own performance can still enforce the contract if she tenders within a reasonable time (e.g. two months) after the closing date. The presumption is overcome and time is of the essence if: (i) the contract so states, (ii) the circumstances indicate that was the parties’ intent, or (iii) one party gives the other notice that the time is of the essence. If time is of the essence, a party who fails to tender performance on the closing date is in breach and may not enforce the contract. Even if the time is not of the essence, a party who is late in tendering performance is liable for incidental losses.
In land sale contracts, what is the rule regarding the obligations of the buyer and seller for tendering of performance? When is a party’s tender excused?
The buyer’s obligation to pay and the seller’s obligation to covey are concurrent conditions. Thus, neither party is in breach until the other tenders performance (even if the closing date passes). If neither party tendered performance, the closing date is extended until one of them does so. A party need not tender performance if the other party has repudiated the contract or it is impossible (e.g. unmarketable title that cannot be cured) for the other party to perform.
What are the remedies for a breach of a land sale contract?
The non-breaching party is entitled to damages (difference between contract price and market value on date of breach, plus incidental costs) or, because land is unique, specific performance. Not that if the buyer wishes to proceed despite unmarketable title, she can usually get specific performance with an abatement of the purchase price.
For land sale contracts, what are the seller’s liability for defective property?
(a) Warranty of fitness or habitability (quality) (new construction only), recognized in the sale of a new house by the builder; (b) Negligence of builder - a person may sue a builder for negligence in performing a building contract; (c) Sale of existing land and buildings, the seller of existing buildings that are not new contraction may be liable to the purchaser for defects such as a leaky roof, flooding basement, or termite infestation, on any of several different theories: (1) Misrepresentation (Fraud); (2) Active concealment; (3) Failure to disclose.
Is a disclaimer of liability in a land sale contract valid?
A general disclaimer in the sales contract (e.g. “property sold as is” or “with all defects”) is not sufficient to overcome a seller’s liability for fraud, concealment, or failure to disclose. If the disclaimer identifies specific types of defects (e.g. “seller is not liable for any defects in the roof”), it will likely be upheld.
What are deeds? What are the formalities for a deed? Can a deed validly convey real property by inter vivos gift?
Deeds transfer title to an interest in real property. A deed must be in writing, be signed by the grantor, and reasonably identify the parties and the land. A deed is not effective unless it has been delivered and accepted. Most other formalities (e.g., seal, consideration, attestation, and acknowledgement) are generally unnecessary. Thus, a deed may validly convey real property by inter vivos gift so long as the following requirements are met: (i) donative intent, (ii) delivery, and (iii) acceptance.
How do courts treat void deeds? voidable deeds?
A void deed will be set aside by the court even if the property has passed to a bona fide purchaser, but a voidable deed will be set aside only if the property has not passed to a bona fide purchaser.
When are deeds considered defective or void? voidable?
Void deeds include those that are forged, were never delivered, or were obtained by fraud in the factum (i.e., the grantor was deceived and did not realize that she was executing a deed). Voidable deeds include those executed by minors or incapacitate persons, and those obtained through fraud in the inducement, duress, undue influence, mistake, and breach of fiduciary duty.
