Conveyancing

Question 1

2 Step Process for Conveyancing

Answer 1

1. Contract of Sale
2. At closig comes the conveyance

Question 2

Contract Sale and the Escrow Period

Answer 2

• The contract of sale exists at the moment it is signed until the deed is transferred at closing.
• This period is known as the escrow period and the contract laws apply

Question 3

Contract Law Principles During the Escrow Period

Answer 3

1. Statute of Frauds
2. Doctrine of Part Performance
3. Risk of Loss - Doctrine of Equitable Conversion
4. Death of a Party before close of Escrow
5. Marketable Title
6. Time of Performance
7. Remedies for Breach of Contract for Sale of Real Property
8. Defects on the Property at Date of Closing

Question 4

Statute of Frauds for the Contract of Sale

Answer 4

Any interest in real property must be in signed writing, signed by the party to be sued. Must include:

1. Description of property
2. Names of the Parties; and
3. Price

Question 5

Doctrine of Part Performance for the Contract of Sale

Answer 5

This is an exception to the statute of fradus that can be established by satisfying 2 requirements:

1. The oral contract must be certain and clear; and
2. The act of partial performance must clearly prove the existence of the contract

Question 6

Risk of Loss - Doctrine of Equitable Conversion for Contract of Sale

Answer 6

• Once the contract is signed, equity treats the property as the buyer’s land, and therefore, the buyer has the risk of loss
• Because equity stands to enforce specific performance for a conveyance of land, equity treats the buyer as an owner of the property, even if the seller has remained in possession or control of the property

Question 7

Death of a Party Before Close of Escrow

Answer 7

Because of the Doctrine of Equitable Conversion, if either party to the contract dies before closing, equity will still order specific performance of the property if necessary

Question 8

Marketable Title and Escrow

Answer 8

Every land sale contract contains an implied covenant that the sell will deliver marketable title at the close of the escrow period

Question 9

Definition of Marketable Title

Answer 9

Marketable title is title that a reasonably prudent buyer would accept, which means minor defects do not matter (since they do not pose a serious threat of litigation)

Question 10

To satisy marketable title, the Seller must provide the Buyer with:

Answer 10

3 things:

1. Proof of Title
2. Title Free of Encumberances
3. Valid Legal Title as of Date of Closing

Question 11

Proof of Title

Answer 11

Provides buyer with tangible evidence of title

Question 12

Title Free of Encumberances

Answer 12

Title must be free of:

• Easements
• Restrictive Covenants
• Mortgages
• Options
• etc

Other than those previously disclosed to the buyer***

Question 13

If the buyer determines that the seller’s title is not marketable…

Answer 13

then the buyer must notify the seller of any defect in the title and allow the seller a reasonable time to cure the defect - even if that means postponing the date of the closing

Question 14

Buyer’s Remedies for Seller’s Failure to Deliver Marketable Title

Answer 14

1. Recission
2. Damages
3. Specific Performance
   
   • which is reflected in a reduced purchase price that reflects the defect

If the buyer proceeds to close on the contract and accepts the deed without the problems with title being cured, then the buyer has no recourse against the seller based on the contract and may only base any action on the deed.

Question 15

Time of Performance for Contract of Sale

Answer 15

• Generally, the contract will specify the date of the closing. If a party fails to perform at time of closing, they will still have a reasonable time to render performance
• Time is not of the essence for the land-sale K unless:
  
  1. The contract says otherwise; or
  2. the facts make clear that the parties intend that time is of the essence
• If a Contract includes a time of essense clause and it is violated then the party who failed to perform is in total breach and therefore cannot enforce the contract

Question 16

Rememdies for Breach of Contract For Sale of Real Property

Answer 16

1. Damages
   
   • the measue of the damage is the difference between the contract price and the value of the property at the date of the breach
   • Liquidated damages clause says that the buyer forefeits his deposit if he breaches
     
     • These are enforceable if the amount is reasonable
       
       • Reasonable = 10% or less of contract sale price
2. Specific Performance
   
   • this is an option to both buyer and seller

Question 17

Defects on the Property at the Date of Closing:

What if there are defects on the property that render the property unfit for ordinary purposes - can the buyer rescind?

Answer 17

Common Law - Caveat Emptor

• Buyer could not recover from seller. Seller had no obligation to disclose defects from the buyer, but could not conceal any defects

Modern Trend - Majority Rule for Residential Sales

• Impose a duty to disclose to a buyer serious defects that the seller knows of and are not obvious to the buyer.

Modener Rule - Implied Warranty of Fitness

• In a majority of states today, the implied warranty of merchantability and fitness applies only to a residential building by a builder-seller. Common Law rule of Caveat Emptor applies in all situations

Question 18

Once the deed has been accepeted at closing…

Answer 18

Then the contract is extinguished

• On closing the contract merges into the deed

Question 19

2 requirements for the deed to pass title

Answer 19

1. Execution
2. Delivery

Question 20

Execution of the Deed

Answer 20

• Satisfy Statute of Frauds
• The deed must describe the land with suffient accuracy in order to pass title
  
  • If the deed cannot identify the property that is being transferred, then the deed is void for vagueness and nothing gets transferred.
  • Parol evidence may be used to clarify
  • A land description by metes and bounds will description or any other more general description

Question 21

Delivery of the Deed

Answer 21

• No physical transfer needed, intent to pass title is the only thing that matters
• Recording the deed raises the presumption of delivery, even if the grantee has know idea of it
• Once delivery occurs, title passes, so returning the deed has no effect
• Parol evidence may be used to determine intent of grantor in delivery of the deed
• If the grantor dies with the deed within her possession, then title is presumed to not pass. The burden switches to the grantee to show transfer

Question 22

Conditional Delivery Problems

Answer 22

1. Delivery of a Future Interest
2. Oral Conditions
3. Delivery Conditioned on Grantee’s Payment of Purchase price

Question 23

Courts Will find Delivery of a conditional Future Interest valid if

Answer 23

The deed was physically transferred to the grantee already.

Ex: Deed physically transferred to X and it reads “to X but not until I die”

Question 24

Oral Conditions

Answer 24

Ignore the conditions and consider complete

Question 25

Delivery Conditioned on Grantee’s Payment of Purchase Price

Answer 25

This is generally valid, provided that:

1. Grantor makes delivery of the deed to a 3rd party in escrow
2. Grantor instructs escrow agent to deliver deed to grantee when the condition is satisfied (oral instructions are sufficient); and
3. Once the grantor delivers the deed to the escrow agent, the grantor cannot get the deed back. As long as the grantee satisfies the condition, the grantee gets the property

Question 26

Acceptence of Delivery of the Deed

Answer 26

• Delivery is only valid if accepted
• Aceeptance will be implied unless facts show otherwise
• Consideration not required

Question 27

Quitclaim Deeds

Answer 27

Grantor makes no promise regarding title

Question 28

Present covenenant

Answer 28

• breached at moment the conveyance is made
• personal to grantee and thus do not run with the land

Question 29

3 Present Covenants

Answer 29

1. Covenant of Seisin and Covenent Right to Convey
   
   • These are interchangable
   • Seller’s promise that seller has title and possession and can validly convey both
2. Covenant Against Encumberances
   
   • Seller promises there are no encumberances, other than those who have been previously disclosed to the buyer

Question 30

Future Covenents

Answer 30

• Future covenents not breached immedietly when the conveyance is made, but rather at a later date when the grantee is disturbed in possession
• Future covenents run with the land and thus can be enforced by subsequent holders

Question 31

3 Future Covenents

Answer 31

1. Covenant of Warranty and Covenant of Quiet Enjoyment
   
   • these are interchangeable
   • represents the buyer’s promise that someone isnt going to come along later with paramount title
2. Covenant of Further Assurances - the “Mop Up” Covenant
   
   • If seller omitted something required to pass valid title, seller promises to do whatever is necessary to pass title
     *

Question 32

Breach of a Covenant of Title

Answer 32

Where there is a breach of warranty, plaintiffs damages will be limited to the amount of the purchase price recieved by the warrantor plus incidental damages

Question 33

Estoppel by Deed Doctrine

Answer 33

courts say the grantor gave an implied covenant title will be conveyed to the grantee. Therefore the grantee can sue to compel the grantor to convey title.

A subsequent purchase by a BFP will cut off the grantee’s rights and the estoppel by deed.

Question 34

3 types of conveyance by Will Rules

Answer 34

1. Ademption
2. Exoneration
3. Lapse and Anti-Lapse Statutes

Question 35

Ademption

Answer 35

• If the Will purports to devise a parcel of land, but does not own that at the time of death, then the devise is adeemed.
• The gift fails and will not be replaced
• Does not apply to property in escrow, instead the devisee will recieive the proceeds from the sale of property

Question 36

Exoneration

Answer 36

At common law, if the devised property was subject to a mortgage or other lien, that lien had to be exonerated by the testator’s estate.

• the devisee is entitled to have the lien paid off by the testator’s residuary and the property would pass to the devisee free of the lien

The modern rule abolishes this doctrine and the devisee will take the property subject to the mortgage

Question 37

Lapse and Anti-Lapse Statutes

Answer 37

If the beneficiary died before the testator, the gift lapses and thus is void. Anti-lapse statutes will prevent lapse and allow the gift to pass to the beneificaries estate