Land Sale Contracts Flashcards
What is the difference between before closing vs after closing?
Before closing, a land contract has been established between parties that conveys equitable title. At this point contract law applies. Issues relevant to this period (and up until closing) have to do with parties trying to back out of sale due to things they find out. The period between the K and closing = escrow.
Closing occurs when the deed passes legal title to the new owner. Real Property law applies to issues arising after closing (e.g. discovering an easement).
What is req’d for a real estate K to be valid?
Typical contract elements + SoF requires land K’s to be in signed writing - signed by party who is being sued.
The writing must clearly identify (a) parties (b) describe the property and (c) include the price or means of determining the price.
When can a K for sale of land be exempted from the SoF req’s?
Under the doctrine of part performance, an oral contract for the sale of land will be enforced when:
(a) the oral contract is certain and clear (same terms as writing)
(b) the acts of partial performance clearly prove the existence of a K
(b) can be proven by showing at LEAST 2 of the following:
- buyer has taken possession of land
- buyer has paid in full or significant part towards land
- buyer has made substantial improvements to the land
What is the doctrine of equitable conversion? Who has the right to possess at each point in the deal?
Under the doctrine of equitable conversion, signing the K transfers equitable title to the owner and begins the escrow period. At this point, the new owner is the owner of the property but does not yet have possession rights.
Closing occurs at the end of this period when the deed transfers legal title to the new owner. Legal title gives the right to possess, so the new owner does not have right to possess until the deed is transferred.
Who has risk of loss upon signing K vs closing?
Once buyer signs K, they own the land so risk of loss passes to them. But, seller must give over any proceeds from insurance given to seller.
What happens if buyer or seller dies during escrow?
Right to property or right to purchase price transfers to estate.
What are the two implied covenants in every sale of land K?
(1) seller will provide marketable title and (2) seller will not make any false statements of material fact
What does the implied covenant of marketable title provide?
It says that seller must transfer a marketable title to buyer - i.e. a title that is free from doubt or litigation.
Defects that make a title unmarketable include:
- defects in record chain (e.g. adverse possession - even if one portion rests on AP)
- encumbrances (mortgages, liens, easements, restrictive covenants)
Note: these are ok if buyer waives them or if doesnt inconvenience owner too much , or an easement that is beneficial, visible, known to buyer
- existing zoning violations
- when future interest is held by unborn or unascertainable person
When will mortgage make a title unmarketable?
Generally it will make it unmarketable unless buyer has waived this or if closing will result in mortgage’s discharge.
What may a buyer do if a title is not marketable?
If discovered during escrow period, Buyer MUST notify seller and give seller reasonable time to cure the defects (just must be marketable at closing time).
If the seller fails to cure, then buyer is entitled to rescission, damages, specific performance with abatement, and quiet title suit.
Once closing occurs, this ENDS seller’s liable wrt marketability (it was part of sale K not deed).
What is the implied covenant that seller will not make false statements of material fact?
This states that the seller will not knowingly make a false statement of fact that the buyer relied on, actively conceal a defect, or fail to disclose known defects in the property.
Failure to disclose =
(a) seller knew or had reason to know of the defect
(b) seller realized the buyer was unlikely to discover the defect
(c) defect was serious enough that it would likely cause buyer to reconsider purchase
Can sellers disclaim liability re disclosure of defects?
Disclaimers will be upheld if very specific - i.e. identifies certain type of defect (e.g. “on the roof”).
When does a land contract come with an implied warranty of fitness or habitability?
Generally not unless its a sale of a new home.
What happens if one party tenders their performance after the closing date?
Generally ok in land K’s b/c time is presumed to not be of the essence unless K state, conduct implies, or notice was given.
