Land Sale Contracts Flashcards
Seller
Owner looking to unload property
Buyer
Person looking to buy property
Broker
An intermediary between buyer and seller
Listing agent
Agent who is assisting the seller in promoting and selling the property
Seller’s agent
a sub-agent for the listing agent who helps find buyers
Buyer’s Agent
Broker who serves as the representative of the buyer; will receive commission similar to the seller’s gent fee
Dual Agent
Represents both buyer and seller (many states forbid this - conflict of interest)
Two Stages of Land sale
Contract (parties negotiate terms) & Deed (where parties transfer property)
Liability
Determined by the state where the breach occurs
Contract stage
Any liability must be based on a contract provision
Deed Stage
Any liability must be based on a deed warranty
Doctrine of Merger
Convents under the contact are merged into the deed and any remedy will flow from the deed once in the deed stage
Statute of Frauds
Land sale contracts are subject to the state of frauds
Three requirements
1. Must be in writing
2. Signed by the party to be charged; AND
3. Must include essential terms
Statute of frauds essential terms
- Parties involved
- Description of the property (does NOT have to be legal description)
- Price and payment information
Exception to statute of frauds
- Part Performance
- Detrimental Reliance (ESTOPPEL)
***These often go hand in hand
Part Performance (SOF Exception)
Partial performance by either the seller or buyer is treated as evidence that the contract existed
Partial performance may look like…
- Payment of all or part of the purchase price
- Possession by the purchaser
- Improvements by the purchaser
**Many states require at least two acts of performance for partial performance to apply
Detrimental Reliance
An estoppel doctrine that applies where a party has reasonably relied on the contract and would suffer hardship if the contract was not enforced
Marketable Title
Every land sale contract includes an implied covenant of marketable title.
Title that is free from an unreasonable risk of litigation
What would make title unmarketable
- Title acquired by adverse possession that hasn’t been quieted
- Private encumbrances
- Violation of a zoning ordinance
Private Encumbrance
A claim against the property by a party that is not the owner
Unmarketable Standard
Standard is that of a reasonable buyer
If seller cannot deliver marketable title
The buyer’s remedy is recision of the contract
Are pets considered an Encumbrance?
Yes - if it would prevent a buyer form having a pet for eventually selling to anyone with a pet
Delays for land contracts
Time is not of the essence. Failure to close on the set date may be a breach of contract, but not grounds for recision.
Implied Warranty of Fitness or Suitability
Applies to defects in new construction
Most jurisdictions: Both initial homeowner-purchaser and subsequent purchaser may recover damages
Minority: Only original buyer can enforce this warranty
Duty to disclose defects
Most jurisdictions impose a duty on the seller to disclose to the buyer all know, physical and material defects
Defects
Latent or hidden effects
Material defects must substantially affect the value of the home, health and safety of its occupants, or the desirability of the home
“as is” will not satisfy sellers duty to disclose
Deed and contract merger
After closing, obligations contained in the contract are merged into the deed. If there was something important in the contract that is not in the deed the cause of action is lost because the deed controls after closing.
Sellers remedies on buyer’s breach
- Damages: measure is the difference between the contract price and market price on date of the breach
- Recision: seller can sell the property to someone else
- Specific performance
Buyers remedies on Seller’s breach
- Damages: measure is the different between contract and market value on date of the breach (if breach was in good faith, can only recover out of pocket expenses)
- Recision: return payments to the buyer and cancel the contract
- Specific performance
Equitable conversion and risk of loss
Who bears the risk of loss if there is damage to or destruction to the property during the sale of land?
Equitable conversion: Majority
The buyer holds equitable title during the period between the execution of the contract and the closing and delivery of the deed.
Equitable conversion: minority
Risk of loss is on the seller until the closing and delivery of the deed.
