Conveyancing

Question 1

What is a sales contract?

Answer 1

A sales contract transfers equitable title, but not legal title. It is like a promise to make the transfer at a future time.

Question 2

When is a sales contract valid?

Answer 2

When it conforms to the statute of frauds, meaning: (i) it is in writing, (ii) includes a description of the property, (iii) identifies the parties to the contract, (iv) the price of the land, and (v) is signed by the party to be charged.

OR,

if part performance applies, i.e. two of the following apply: (i) possession of the land by the purchaser, (ii) purchaser made substantial improvements to the land, and (iii) payment of part or all of the purchase price by the purchaser.

Question 3

What is the remedy for the breach of a sale of contract?

Answer 3

Specific performance. This can be enforced by either the buyer or the seller.

Question 4

What is the doctrine of equitable conversion?

Answer 4

Once the sales contract is signed by both parties, the buyer has equitable title of the property and the seller retains possession and a right to the proceeds from the sale, i.e. an interest in personal property.

Question 5

Who bares the risk of loss (the destruction of the property) once the sales contract is signed?

Answer 5

The buyer. So, he must pay the price of the property even if it was destroyed before the deed was delivered.

In a minority of states, the burden is not he seller.

Question 6

What if the sales contract is signed, the property is destroyed, and seller has casualty insurance?

Answer 6

Seller is required to credit the buyer in the amount of the insurance proceeds against the purchase price.

Question 7

What happens when one of the parties dies after the sales contract is signed but before the deed is delivered?

Answer 7

The seller takes real property (the cash from the sale) and the buyer takes legal title to the property.

Question 8

What is marketable title?

Answer 8

Title that leaves the buyer free from doubt.

Question 9

What are common examples of defects in the chain of title that leave title unmarketable?

Answer 9

(i) significant variation in the description of the land from one deed to the next
(ii) a defectively executed deed in the chain of conveyance
(iii) evidence that a prior grantor lacked capacity to convey a deed.

BUT, ancient mortgages that have exceeded the statute of limitations don’t undermine marketable title.

Question 10

Is title acquired by adverse possession marketable?

Answer 10

No.

Question 11

Is title marketable when there are unascertained remaindermen?

Answer 11

No. But, it will become marketable gift he remainder men become definite and all of them agree to a conveyance.

Question 12

Do mortgages, liens, easements, and covenants render title unmarketable?

Answer 12

Yes, unless they are waived by the buyer. But, the seller can satisfy mortgages and liens with the proceeds from the sale at the time of sale.

Negative easements make title unmarketable unless they were known.

Restrictive covenants make title unmarketable.

Encroachments render title unmarketable unless they are (i) very slight and don’t inconvenience the owner of the land, (ii) the owner has indicated that he will not sue on the encroachment, (iii) the encroachment has existed for so long that it has become legal by adverse possession, provided adverse possession creates legal title in the jurisdiction.

Question 13

Do existing ordinance violations make title unmarketable?

Answer 13

Yes.

Question 14

What must the buyer do if he finds out before closing that the title is not marketable?

Answer 14

(i) notify the seller so he has an opportunity to correct the title;
(ii) if the seller does not correct title, the buyer can sue and recover damages or specific performance and a price reduction or allow the sale contract to merge with the deed. Once merger happens, the seller cannot be held liable.

Question 15

Is time presumptively of the essence in real estate contracts?

Answer 15

No. Each party can be late in tendering their performance as long as they tender within a reasonable time after the official closing date.

Question 16

When is time of the essence?

Answer 16

When:

(i) the contract status so;
(ii) the circumstances indicate that it was the parties’ intentions that performance be timely
(iii) one party gives the other notice that she thinks time is of the essence within reasonable time before the closing

Question 17

What happens if time is of the essence an a party fails to perform?

Answer 17

That party is in breach and loses their ability to enforce the contract.

Question 18

What is a non-performing party’s liability when time is not of the essence?

Answer 18

Damages for the incidental loses she has caused, such as additional mortgage interest.

Question 19

What are concurrent conditions in a conveyance of property?

Answer 19

The buyer’s obligation to pay the purchase price and the seller’s obligation to convey title. They are called concurrent because one party can’t enforce its side of the contract unless it has tendered performance.

Question 20

What happens if neither party tenders performance?

Answer 20

The closing date is automatically extended indefinitely.

Question 21

Do warranties of fitness apply to land?

Answer 21

No.

Except from the builder of a new house. The requirement is that the new house is designed and constructed in a reasonably workmanlike manner and suitable for human habitation.

Question 22

When can a seller be liable for defects in land and property the seller did not build?

Answer 22

1. when the seller engaged in misrepresentation
   - - The seller made a (i) false statement of fact to the buyer that (ii) the buyer relied on and that (iii) materially affected the value of the property.
2. the seller will be liable if he took steps to conceal a defect in the property
3. sellers are also liable for failure to disclose when (i) the seller knows or has reason to know of the defect, (ii) the defect is not obvious or apparent and the buyer is unlikely to discover it, and (iii) the defect is serious and would probably cause the buyer to reconsider the purchase if it were known.

Question 23

Are sellers attempts to contract around liability for defects likely to be upheld?

Answer 23

No.

Question 24

What is included in a valid deed?

Answer 24

1. It is in writing
2. It contains a description of the land that is unambiguous. A description is sufficient if it provides a good lead to the property.
3. Identifies the parties
4. Words of intent. But, this can just be the word “grant.”
5. Grantor’s signature or trustee’s if held in trust.

Question 25

What is accretion?

Answer 25

The slow change in the boundaries of long caused by erosion or deposits from a water way.

Question 26

What is the effect of accretion?

Answer 26

It either increases the land held by title or decreases it.

Question 27

What is avulsion?

Answer 27

The sudden transformation of property by water.

Question 28

What is the effect of avulsion?

Answer 28

Nothing. It leaves property the same.

Question 29

When does possession transfer by deed?

Answer 29

When the deed is delivered.

Question 30

Does deed delivery have to be actual?

Answer 30

No. It can be constructive. Deliver occurs as long as the grantor intended delivery. This is the case where the grantor engages in words or conduct evidencing the grantor’s intention that the deed have some present operative effect.

Question 31

What is the effect of physical delivery?

Answer 31

It creates a presumption of the passage of title.

Question 32

What is the effect of the grantor’s retention of a deed?

Answer 32

That title has not passed.

Question 33

When is the seller allowed to clear encumbrances without the sale contract being void for unmarketable title?

Answer 33

The seller of the land is entitled to use the proceeds of the sale to clear title if she can ensure that the purchaser will be protected. Usually this is done by establishing an escrow account.

Question 34

Can title defects be waived?

Answer 34

Yes.

Question 35

When does a buyer have a right to marketable title?

Answer 35

Marketable title is implied in every sale of land and applies unless waived.

Question 36

What damages can be recovered for breach of sales contract?

Answer 36

1. The difference between the contract price and FMV at the date of the breach.
2. Incidental damages
3. Liquidated damages, as long as the damages are reasonable in light of anticipated damages

Question 37

What does title insurance do?

Answer 37

It insures that a good record title of the property exists as of the policy’s date and agrees to defend the record title if litigated.

Question 38

When does title insurance transfer?

Answer 38

An owner’s policy protects only the person who owned to policy (property owner not lender). It does not run with the land.

A lender’s policy follows any assignment of the mortgage loan.

Question 39

How can a seller avoid liability for defects in the property?

Answer 39

A specific disclaimer, which identifies and disclaims liability for specific types of defects, is likely to be upheld.

Question 40

What is exclusive possession for purposes of adverse possession?

Answer 40

Exclusive possession means not sharing possession with the true owner or the general public.

Question 41

When is possession open and notorious?

Answer 41

When it is such as the usual owner would make of the land and is sufficient to put the true owner on notice of the possession.

Question 42

What kinds of notice satisfy the notice requirement in notice jurisdictions?

Answer 42

1. Actual notice - what the BFP actually knows
2. Record notice - notice imputed by law caused by a deed being properly recorded.
3. Inquiry notice - what the purchaser would have discovered by inquiring into the property.

Question 43

Recording acts do not protect subsequent purchasers against ________.

Answer 43

Interests that arise by operation of law, e.g. implied easements, title by adverse possession, because there is no instrument to record in order to perfect such interests.

Question 44

What happens when a deed leaves the name of the grantee blank or ambiguous?

Answer 44

Some courts presume that the person taking delivery has authority to fill in the name of the grantee. If this is done, the deed is valid.

Question 45

What is hostility for purposes of adverse possession?

Answer 45

Possession under a claim of right.

Question 46

When is reformation of a land sale contract permissible?

Answer 46

When the contract does not conform to the intent of the parties (mistake). In those cases, the contract can be reshaped to conform to the parties’ intentions.

Question 47

Are visible easements that increase the value of property and that were known by the buyer at the time of conveyance encumbrances that void marketable title?

Answer 47

No. In a majority of jurisdictions, this is an exception to the rule that easements are encumbrances that void marketable title.

Question 48

Can the delivery of a deed be canceled?

Answer 48

No. Delivery of a deed cannot be canceled.

Question 49

When is a deed voidable?

Answer 49

(i) undue influence, (ii) duress, (iii) fraud in the inducement, (iv) mistake, (v) or breach of fiduciary duty.

However, a deed will never be set aside if it is conveyed to a bona fide purchaser.

Question 50

What is estoppel by deed?

Answer 50

A claims to convey Black Acre to B. A doesn’t own Black Acre. At some later point, A comes into possession of Black Acre. B can estopp A from claiming the conveyance was invalid.

Question 51

What happens to an estoppel by deed if a second conveyance occurs to a bona fide purchaser?

Answer 51

Good Ol’ BFP is protected and the argument fails.