Land Purchase:Sale

Question 1

What are the 2 steps in the conveyance of real estate?

Answer 1

1) The land K, which endures UNITILL…
2) The closing, where the DEED becomes the operative document

Question 2

How is risk of loss apportioned in land sales?

NOTE: NY Distinction

Answer 2

The std is Equitable Conversion = once the K is signed, the buyer is the owner of he land (s/t the condition to pay purchase price at closing)

• At sigining, the risk of loss (i.e. destruction without FAULT) is on the BUYER (i.e. has to pay FULL K price), UNLESS the K states otherwise

NY DISTINCTION: in NY so long as the buyer is w/out fault, the ROL remains with the SELLER until the buyer takes possession

Question 3

What are the requirements of the land K?

Answer 3

1) The land K must be in WRITING, signed by the would-be ∆ (p/t SOF)

• SOF EXCEPTION: the “doctrine of part performance”; if you have TWO of the following THREE elements, DON’T need a writing…
  
  1. Buyer takes possession;
  2. Buyer pays ALL or PART of the price;
  3. Buyer makes subtl improvements

2) It must describe blackacre and state some consideration?
* When the amt of land receited in the K is MORE than the actual size of the parcel, the REMEDY is specific performance w/ a pro rata reduction in price

Question 4

What are 2 implied promises in every land K?

Answer 4

1) Seller promises to provide MARKETABLE title at the closing
* The std = the title is free from reasonable doubt (i.e. free from litigation or the threat of litigation)

• UNMARKETABLE TITLE =
  
  1. Title acq’d by adverse possession (even if just PART of title)
     
     • BUT, if the seller brings a succesful c/a action to quiet title and is successful, then CAN sell
  2. Encumberances (no servitudes or mtgs UNLESS waived by buyer) [NOTE: seller has a right satisfy existing mtg w/ sale proceeds]
  3. Zoning violations (BUT not when blackacre is subject to an adverse zoning req)

2) Seller promises not to make any false stmt of material fact
* Seller is liable for failure to disclose LATENT material defects
* Even if K states a general disclaimer of liability (e.g. “property sold as is”), it wont relieve seller from liability for FRAUD or FAILURE to disclose

Question 5

Do land Ks contain implied warranties of fitness OR habitability?

Answer 5

At common law, NO! (caveat emptor)

EXCEPTION: the implied warranty of fitness and workmanlike construction APPLIES to sale of a NEW home by a BUILDER vendor

Question 6

What is the purpose of a deed?

Answer 6

At closing, the deed PASSES legal title from the seller to the buyer

Question 7

What are the 4 requirements for a deed to pass legal title?

Answer 7

“L-E-A-D” = Lawfully Executed And Delivered

1) Lawful execution of the deed
2) Delivery of the deed

Question 8

What is the std for the lawful execution of a deed?

Answer 8

The std = the deed must be (1) in WRITING (signed by the grantor); AND (2) have a DESCRIPTION of the land

• The land description doesn’t have to be perfect, just UNAMBIGUOUS
  
  • YES: “All of O’s land”
  • NO: “Some of O’s land”
• NOTE: need not recite consideration, NOR must consideration pass to make a deed valid

Question 9

What is requirements for a deed to be properly “delivered”?

Answer 9

“Delivery” is accomplished…

1) When grantor PHYSICALLY transfers deed to the grantee (via the mail, agent OR messenger);
2) When the deed has been LEGALLY transfered (governed by grantor’s present INTENT); OR** *
3) When delivered by ESCROW (via an escrow agent once conditions are met); **BUT*
4) NOT when the grantee expressly REJECTS the deed

NOTE: if deed (absolute on its face) is transferred to grantee with an oral condition, the oral condition DROPS OUT (it’s not provable), BUT delivery is accomplished

Question 10

What are the 3 types of deeds?

NOTE: NY Distinction

Answer 10

1) The quitclaim deed (containing NO cov’ts)
2) The general warranty deed (containg 6 cov’ts)
3) The statutory special warranty deed (containing 2 cov’ts)
* NY DISTINCTION: in NY known as a “bargain and sale deed”

Question 11

What is a quitclaim deed?

Answer 11

A deed that conatins NO COV’TS

• Grantor isn’t even promising that the deed won’t have any post-closing issues (BUT the sales K has an implied promise to deliver marketable title at CLOSING)
• The WORST possible deed for a buyer

Question 12

What is a general warranty deed AND it’s 6 cov’ts?

Answer 12

The general warranty deed warrants against ALL defects in title, INCLUDING those due to grantors predecessors

3 present cov’ts where SOL starts running from the instance of delivery at closing

1) Cov’t of seisin = promise that the grantor owns this estate
2) Cov’t of right to convey = promise that grantor has the pwr to trnfr (i.e. he’s under no RESTRAINT or DISABILITY like age/sound mind)
3) Cov’t against encumbrances = promise that there are NO servitudes or mtgs on blackacre

3 future cov’ts where SOL for breach does not begin to run UNTIL the breach occurs (e.g. the date of the disturbance)

1) Cov’t for quiet enjoyment = promise that grantee won’t be DISTURBED in possession by a 3d party’s lawful claim of title
2) Con’t of warranty = promise that grantor will defend grantee against lawful claims of title asserted by others (indemnification)
3) Cov’t for further assurances = promise that grantor will do what’s needed to perfect to the title in the future (post-closing)

Question 13

What is a statutory special warranty deed AND its 2 cov’ts?

NOTE: NY Distinction

Answer 13

Deed that’s provided for by statute in many states, containing TWO promises that the grantor makes ONLY on behalf of himself (and NOT on behalf of his predecessors)

1) Grantor promises that he hasn’t conveyed this estate to anyone other than grantee
2) The estate is free from encumberances made by the grantor

NY DISTINCTION: in NY this type of deed is called a bargain and sale deed

Question 14

What is the shelter rule?

Answer 14

Scenario: O→A (does NOT record); O→B, BFP (records); B→C (C is B’s heir, and has knowledge of O→A transaction, so NOT a BFP)

Shelter rule says…

C takes shelter in B’s BFP status (steps into B’s shoes).

• Protects B, and BFP’s right to transfer land

Question 15

What are the 2 types of recording statutes?

NOTE: NY Distinction

Answer 15

2 types of jx: race notice jx (rnjx) vs. notice jx (njx)

1) Rnjx: If B is a BFP, and were are in a rnjx, B wins IF she records properly before A
* NY DISTINCTION: This is the rule in NY
2) Njx: the LAST BFP (B) wins regardless of who records first

Question 16

What is a bona fide purchaser (BFP)?

Answer 16

Bona Fide Purchaser (BFP) =

1) Purchases land for value; AND
2) Does not have notice of another’s claim to land

• “Notice” = _“A-I-R” _
  
  1. Actual;
  2. Inquiry (whatever examination of land would reveal); OR
  3. Record (properly recorded)

Question 17

How do you identify a notice statute vs. a race-notice statute?

Answer 17

1) Notice statute = “A conveyance of an interest in land shall NOT be valid against any subsequent purchaser for value, without notice thereof, unless the conveyance is recorded.”
2) Race-notice statute (NY!!) = “Any conveyance of an interest in land shall NOT be valid against any subsequent purchaser for value, without notice thereof, whose conveyance is 1st recorded.”

Question 18

What is estoppel by deed?

Answer 18

One who conveys property in which she has no interest, but subsequently acquires an interest is estopped from later denial of the validity of the initial transfer

• B/t 1960-1969 X is estopped from denying the trxn; A would win during this time...
• BUT after 1970, when B is a BFP, he’d have title under rnjx and njx (A’s recording in 1950 is a nulltity as he recorded too early)

Question 19

What is a wild deed?

Answer 19

Scenario: O→A (does NOT record); A→ B (B records)

Wild deed is a recorded deed that has a grantor (here A) unconnected to the chain of title (b/c A never recorded O→A transfer)

A wild deed INCAPABLE of giving record notice to subsequent BFPs

• B’s recording is VOID
• Here, if O→C (BFP; records), then the A→B wild deed does NOT give C notice; C WINS in both rnjx OR njx