Land Sale Contracts

Question 1

what are the two steps to every conveyance of real estate?

Answer 1

1) land sale contract
2) closing

Question 2

what does the land sale contract convey?

Answer 2

equitable title (which endures until step 2)

Question 3

what does the deed convey?

Answer 3

legal title (becomes the operative document)

Question 4

what is the gap between the land sale contract and closing called?

Answer 4

the escrow period

Question 5

what is the purpose of the escrow period?

Answer 5

gives buyer time to do requisite inspections, get a mortgage, check title integrity, etc (due diligence)

Question 6

does the statute of frauds apply to land sale contracts?

Answer 6

yes

Question 7

what has to be in the land sale K to satisfy the SoF?

Answer 7

writing must…
- be signed by the party against whom enforcement is sought
- ID the parties
- describe the property
- include the price (or means of determining price – FMV, etc)

Question 8

what remedy does a buyer have when the land K overstates the size of the land actually conveyed?

Answer 8

specific performance with an appropriate pro rata reduction in price

Question 9

what is the one exception to the SoF in a land sale K?

Answer 9

the doctrine of part performance

Question 10

what is the doctrine of part performance?

Answer 10

doctrine that allows a buyer to enforce an oral real estate K by specific performance if…
1) oral K is certain and clear, and
2) acts of partial performance clearly prove the existence of a K

Question 11

how can a buyer prove sufficient acts of partial performance to show the K exists?

Answer 11

buyer just needs 2 of 3…
1) buyer has taken possession
2) buyer has paid the purchase price or significant portion of it
3) buyer has made substantial improvements to the premises

Question 12

what is the doctrine of equitable conversion?

Answer 12

(once enforceable K in place)
once the K is signed, equity regards the buyer as the owner of the REAL PROPERTY (conveys EQUITABLE title to the buyer)

Question 13

with which party does the right to possession rest?

Answer 13

with the party who holds LEGAL title (thus, seller entitled to possession until closing)

Question 14

who bears the risk of loss to the property between contract and closing? (destruction)

Answer 14

the buyer (assuming no fault of either party) UNLESS the K says otherwise

Question 15

what are the two promises implied in every land sale K?

Answer 15

1) seller will provide marketable title
2) seller will not make false statements of material fact

Question 16

what is marketable title?

Answer 16

title reasonably free from doubt and the threat of litigation

Question 17

what are the common defects that render title UNmarketable?

Answer 17

• defects in record chain of title (usually adverse possession)
• encumbrances (mortgages, liens, easements, etc)
• zoning violations

Question 18

generally, what kinds of encumbrances will render title UNmarketable?

Answer 18

mortgages, liens, restrictive covenants, easements, options to purchase, and SIGNIFICANT encroachments (more than a foot counts)

Question 19

when will an easement NOT affect marketability of title?

Answer 19

when the easement is beneficial, visible, or known to the buyer

Question 20

when is a buyer PRESUMED to take subject to an easement?

Answer 20

when that easement is visible/obvious

Question 21

do zoning restrictions render title unmarketable?

Answer 21

NO

Question 22

does an existing violation of zoning ordinances/restrictions render title unmarketable?

Answer 22

yes

Question 23

when MUST title be marketable?

Answer 23

on the day of closing (seller has up until that time to correct defects)

Question 24

what must a buyer do when they discover title is unmarketable?

Answer 24

notify the seller and give them reasonable time to cure the defects

Question 25

if the seller fails to cure defects, what are the buyer’s remedies?

Answer 25

rescission, damages, specific performance with abatement, and quiet title suit

Question 26

when will a buyer NOT be able to proceed against a seller for failing to cure unmarketable title?

Answer 26

once closing occurs (contract and deed merge, seller’s liability on implied covenant ends)

Question 27

does a quitclaim deed get around the implied covenant to produce marketable title?

Answer 27

no

Question 28

when is a seller liable for making a false statement of material fact? (3 situations)

Answer 28

1) if they knowingly made a false statement of material fact that the buyer relied on, or
2) actively concealed a defect, or
3) failed to disclose known latent, material defects in the property

Question 29

when is a seller liable specifically for failure to disclose? (3 elements)

Answer 29

1) seller must know or have reason to know of the defect, and
2) seller must realize that the buyer is unlikely to discover the defect, and
3) defect must be serious enough that the buyer would probably reconsider the purchase

Question 30

can the seller avoid liability for fraud/failure to disclose by including a general disclaimer of liability?

Answer 30

NO

Question 31

what kind of disclaimer COULD potentially absolve seller of liability for defects?

Answer 31

a disclaimer that identifies SPECIFIC types of defects (ie – seller not liable for defects in roof)

Question 32

does a land sale K include an implied warranty of habitability?

Answer 32

NO (the common law norm is caveat emptor = buyer beware)

Question 33

under what circumstance will a court recognize a warrant of fitness/quality in land sale Ks?

Answer 33

the sale of a new home by the builder himself