Land Sale Contracts Flashcards
SOF Applicable
Because the real estate contract involves an interest in land, the SOF requires a writing signed by the party against whom enforcement is sought (I.e., the D).
The Writing must:
- Identify the parties
- Describe the property, and
- Include the price or a means of determining the price
Terms must be definite enough for a court to enforce the contract.
Inaccurate Description of Land
The land description in the contract may be inaccurate if this happens, then you will have a remedy of specific performance with pro rate reduction in price.
Exception to SOF - Doctrine of Part Performance
Part performance is an equitable doctrine allowing a buyer to enforce an oral real estate contract by specific performance if:
- the oral contract is certain and clear, and
- the acts of partial performance clearly prove the existence of a contract
Satisfying prong 2) the acts of partial performance clearly prove the existence of a contract
If the buyer can prove two of the following three actions, the second prong will be satisfied:
- B has taken possession of the property,
- B has paid the purchase price or a significant portion of the purchase price
- B has made substantial improvements to the premises
Doctrine of Equitable Conversion
Once we have the enforceable contract in place, we move into the time between the signing of the k and the closing.
Under the doctrine of equitable conversion, once the k is signed, equity regards the B as the owner of the real property. The K conveys equitable title to the B. By contrast, at the closing, the deed conveys legal title to the B.
The right to possession rests with the party who holds legal title. Thus, seller is entitled to possession until closing.
Risk of Loss
the K conveys equitable title to the B. One important result flows from this: Destruction. If between k and closing, the property is destroyed through no fault of either party, B bears the risk unless K says otherwise.
it is B’s loss once the k is signed.
Absent reallocation clause, B is at a loss.
Promises implied in Land Sale Contract
- Seller will provide marketable title
- Seller will not make false statements of material fact
Seller will provide marketable title
Every K contains an implied covenant that the seller will provide marketable title at closing. Marketable title is title reasonably free from doubt and the threat of litigation.
Common Defects of Marketable Title
Defects in record chain of title - most often, adverse possession
Encumbrances (mortgages, liens, easements, restrictive covenants)
Zoning Violations
When must title be marketable?
on the day of closing
Remedy if Title is not Marketable
B must notify the seller that title is unmarketable and give seller reasonable time to cure the defect.
Seller will not make false statements of material fact
S may be liable to purchaser after the closing for defects, such as a leaky roof, flooding basement, or termite infestation, if they knowingly made a false statement of material fact that the B relied on, actively concealed a defect, or failed to disclose known defects in the property.
Failure to Disclose
To be liable for failure to disclose:
S must know or have reason to know of the defect;
S must realize that the B is unlikely to discover the defect; and
the defect must be serious enough that the B would probably reconsider the purchase.
Disclaimers of Liability
General disclaimer of liability is not likely to be upheld
If Disclaimer identifies specific types of defects, It will likely be upheld.
No Implied Warranties of Fitness or Habitability
Buyer beware is norm - except sale of new home by builder
The land k contains no implied warranties of fitness or habitability.
