Conveyancing: Purchase and Sale of Real Estate Flashcards
Conveyance of Real Estate: Two Steps
- Land Sale (Real Estate) Contract: conveys equitable title
- Closing: deed passes legal title
After closing: real property law applies
Before closing: contracts law applies
What is “escrow period” and what are common problems that arise during it?
Period between signing contract and closing date
Closing date usually specified in contract.
Common Problems
* Title defects
* Termites
* Bad plumbing
* Buyer/seller wants to rescind contract
What is required under Statute of Frauds for real estate contract?
Contract in writing
Signed by party (being sued)
Parties to contract
Property description
Price (or means of determining price, like FMV)
Meet: Offer, Acceptance, Consideration + SOF
Essay: To satisfy SOF, terms must be definite such that a court can tell who the parties are, which parcel is being conveyed, and what consideration is being used.
What is the remedy if the contract inaccurately describes the land/real property?
(usually overstates size of parcel)
Specific performance with pro rata reduction in price (because land is unique)
What is an exception to SOF for real estate contract?
(oral contract or writing doesn’t meet requirements)
Part Performance
Part performance is equitable doctrine that allows buyer to enforce oral real estate contract with specific performance if:
(1) oral contract clear and certain
(2) two of the following:
* possession: buyer took possession of property
* payment of purchase price: buyer paid price or significant part of it
* substantial improvements: buyer made substantial improvements to premises
Essay: Start by stating SOF requires contracts for sale of land to be in writing + signed by party being sued. Here, contract is oral and isn’t enforceable unless it falls under exception. Part performance exception applies here.
What is doctrine of equitable conversion?
Once contract signed:
Buyer: Owner of real property (assumes risk of property loss before closing)
* Death: Interest passes as real property to estate
Seller: Right to possession until closing
* Death: Interest passes as right to purchase price (personal property)
If property damaged/destroyed, seller must credit insurance proceeds against purchase price
What type of title does buyer have after signing contract? Seller?
Buyer has equitable title
Seller has legal title
Implied promise in each real estate contract
What are two implied promises in every land sale contract?
(1) Seller’s promise of marketable title
(2) Seller won’t make false statements of material fact
Implied promise in each real estate contract
What is marketable title?
Title reasonably free from doubt and threat of litigation (unreasonable risk of litigation)
Buyer wants unencumbered fee simple with good record title.
Common Defects
* Record chain of title (ex. adverse possession)
* Encumbrances (mortgages, liens, easements, restrictive covenants, significant encroachments over a foot) - for visible easements, purchaser is presumed to accept subject to them
* Zoning violations - existing zoning violations render title unmarketable
Implied promise in each real estate contract
Is title marketable if seller wants to satisfy mortgage/lien at closing with proceeds of sale?
Yes.
Implied promise in each real estate contract
When do zoning violations render title unmarketable?
When there is an EXISTING violation of a zoning ordinance.
Zoning restrictions by themselves don’t affect marketability
Implied promise in each real estate contract
When must title be marketable and what happens if it’s not? Remedies?
On day of closing
If unmarketable, buyer must notify seller and give seller reasonable time to cure defects.
Remedies: Rescission, damages, specific performance with abatement, quiet suit title
Installment land contract: when buyer’s made his last payment
Implied promise in each real estate contract
If title is not marketable, can seller use a quitclaim deed to bypass requirement to provide marketable title?
NO. Quitclaim deed does NOT affect implied covenant to provide marketable title. Seller’s not off the hook.
Implied promise in each real estate contract
Seller’s promise not to make false statements of material fact
Seller cannot knowingly make false statement of material fact that buyer relies on OR actively conceal defect OR fail to disclose known defects in property [failure to disclose latent, material defects]
Liability requires:
* Seller knew/had reason to know of defect
* Seller knew buyer was unlikely to discover defect
* Defect was serious such that buyer would have reconsidered purchase
Ex. Wallpapered over water damage (concealing defect), leaky roof, flooding basement, termite infestation
Disclaimers of Liability
Can the seller avoid liability for fraud or failure to disclose by including in the contract a general disclaimer of liability, such as “property sold as is” or “with all faults”?
NO general disclaimers allowed. However, disclaimer that identifies specific types of defects OK (ex. seller not liable for any defects in roof).
