Conveyancing

Question 1

What are the two steps involved in selling land?

Answer 1

1. Contract for sale

2. Conveyance of Deed

Question 2

What is required to satisfy statute of frauds for land?

Answer 2

• description of property (so parties can specifically identify it)
• names of parties
• price

Question 3

What is the exception to statute of frauds for land?

Answer 3

Part performance (need two of 3, except need all 3 in TX):

• Possession;
• Paying all or part of purchase price
• ejecting improvements

Question 4

Once a contract for sale of property is signed, who bears the risk of loss of destroyed or damaged property?

Answer 4

Buyer bears the risk of loss because equitable conversion has taken place, even if seller retains possession and control.

• only applies if seller is not at fault

Question 5

Once a contract for sale of property is signed, how does death of a party before conveyance of the deed affect the contract?

Answer 5

Seller dies before closing: buyer closes with seller’s estate. Seller’s interest is real property.

Buyer dies before closing: seller closes with buyer’s estate. Buyer’s interest is real property.

All this is under doctrine of equitable conversion

Question 6

What is doctrine of marketable title?

Answer 6

Every land sale contract contains an implied warranty that at closing, seller will give buyer marketable title (not perfect, just one that a reasonable person would accept).

Question 7

What defects make a title unmarketable?

Answer 7

• Defects in record chain of title (variations in property description, lacked capacity, improperly executed deed)
• encumbrances not mentioned in contract for buyer
• zoning restrictions do not affect marketability of title, but existing violation of zoning violation does make title unmarketable (unless violation of housing or building code)

Question 8

Do zoning restrictions result in unmarketable title?

Answer 8

-zoning restrictions do not affect marketability of title

BUT existing violation of zoning violation does make title unmarketable (unless violation of housing or building code)

Question 9

Does mortgage on a property result in unmarketable title?

Answer 9

Not if the mortgage is to be paid out of proceeds of the sale.

Question 10

Is title acquired by adverse possession marketable?

Answer 10

It is not marketable, but defect may be cured with a judgment of title in the seller or a quitclaim deed from the party against whom the adverse possession occurred.

Question 11

When can buyer rescind if he finds out that seller does not have marketable title prior to closing?

Answer 11

Only at the time valid legal title is required to be delivered (usually on day of closing); NOT any day before.

Question 12

What are buyer’s remedies if seller’s title is unmarketable?

Answer 12

Buyer most notify seller and give him reasonable time to cure, even if closing is postponed.

If problem not corrected:

• rescission by buyer
• damages for breach
• specific performance (buyer has option to take what seller has, at price adjusted to cover defect)

Question 13

Does buyer have any remedies if seller’s title is unmarketable but buyer accepts deed at closing?

Answer 13

No. Under the doctrine of merger, there is no recourse and any further action must be based on the deed the buyer accepted.

Question 14

What is the presumed time of performance in land sale contracts?

Answer 14

presume time is not of the essence and seller just needs to tender deed in a reasonable time.

BUT

time of essence clause overrules this

Question 15

What remedies are available to non-breaching party for breach of sales contract?

Answer 15

Damages: difference between value of land and contract price

Liquidated damages: buyer’s deposit can be forfeited as long as it is not more than 10% of sales price

Specific performance

Question 16

What is the general rule for seller’s liability for defective property?

Answer 16

No warranties of quality or fitness pertaining to physical condition of property.

BUT, see exceptions

Question 17

What are exceptions to general rule for seller’s non-liability for defective property?

Answer 17

Seller of new construction: warranty of good workmanship and warranty of habitability

Resale: No, implied warranties but seller: (a) must disclose serious defects that are not obvious to buyer;

(b) can’t actively conceal defects; and
(c) can’t make false statement regarding property

Question 18

Who is responsible for environmental damage on property?

Answer 18

The owner of the property, whether the environmental damage occurred before the owner owned the property.

*BUT, buyer can ask seller to guarantee that property complies with environmental laws.

Question 19

What is a deed?

Answer 19

document that transfers legal title;

must comply with SOF and have proper execution, delivery, and acceptance

Question 20

What are the formalities of a deed?

Answer 20

• in writing
• signed by grantor
• identify grantor and grantee (can’t be dead grantee, although estate can enforce by new deed to buyer’s estate)
• sufficient property description (to identify particular property)
• conveyancing language

NO CONSIDERATION NEEDED

Question 21

What determines whether a deed was delivered?

Answer 21

• Intent (not physical transfer) to pass title
• Recording deed raises presumption of delivery, even if grantee does not know of deed.
• can use parol evidence to show intent

Question 22

What is the effect once deed is properly delivered and accepted?

Answer 22

Title passes and later returning deed to grantor or tearing up of deed has no effect.

Question 23

What is conditional delivery of a deed?

Answer 23

Grantor hands over deed, but tries to condition delivery on some event

e.g. “to A, but not until I die” and deed is handed to A

Written condition: valid

Oral condition: not valid

Question 24

Can delivery be conditional on paying purchase price?

Answer 24

Yes, if grantor delivers deed to escrow with instructions to transfer deed when condition is satisfied

Once in escrow, grantor cannot get deed back if money is paid (even if grantor changes his mind)

Question 25

How can acceptance of deed be shown?

Answer 25

Presumed acceptance unless there is a rejection

Question 26

What is a quitclaim deed?

Answer 26

Quitclaim deed: no protection on behalf buyer
General Warranty Deed: protects against all defects in deed
Releases whatever interest grantor has so no covenants of title are included or implied.

Question 27

What are the usual covenants in a general warranty deed?

Answer 27

SR. WEA

PRESENT COVENANTS (breached at time of conveyance)

• covenant of seisin/right to convey: grantor covenants that he has title/possession she purports to convey
• covenant against encumbrances: grantor covenants that there are no encumbrances on the land

FUTURE COVENANTS (only breached at some point in the future if disturbance of buyer’s possession occurs)

• Covenant of Warranty and Quiet Enjoyment and Warranty: Seller will protect buyer against anyone who later shows up and claims title.
• Covenant of Further Assurances: if seller forgot to do something to properly pass title, seller promises to do whatever else is necessary

Question 28

What is a special warranty deed?

Answer 28

same covenants as general warranty, but seller doesn’t guarantee against any defects in clear title that existed before they took possession of the property

Question 29

What are the allowable damages for breach of covenants of seisin, right to convey, general warranty/quiet enjoyment, or special warranty?

Answer 29

If there is a breach damages limited to purchase price received by warrantor, plus incidental damages

Question 30

What are the allowable damages for breach of covenant against encumbrances?

Answer 30

(a) cost it would take to remove the encumbrance from the land; or
(b) diminished FMV if encumbrance cannot be removed

Question 31

What is estoppel by deed (“doctrine of after-acquired title” in TX)?

Answer 31

If grantor purports to convey an estate in property that she does not own, her subsequent acquisition of the estate goes to grantee

BUT,

if grantor transfers to a BFP after getting title, then the original grantee loses and cannot rely on estoppel by deed.