Land-Sale Contracts

Question 1

Land Sale Contracts

Answer 1

A land sale contract defines the parties’ rights and responsibilities with respect to the sale of the property. It must be in writing and signed by the party to be charged i.e. the . It must also contain 1) an identification of the parties 2) a description of the land 3) some words indicating an intent to sell, AND 4) the price.

Question 2

Marketable Title

Answer 2

There is an implied obligation in every land sales contract for the seller to covey a marketable title as closing. Thus, if the contract is silent as to the quality of title, a court will imply a marketable title. Marketable title means title free of all reasonable risk of attack. Title need not be perfect, but it is sufficient if reasonably prudent buyer would accept it.
1) Title is unmarketable if the seller does not own the property or if the land is subject to an encumbrance. An encumbrance is an interest in the land that reduces the value of the land. Mortgages, easement, covenants, and liens are all examples of encumbrances that render title unmarketable UNLESS express excepted. Failure to render marketable title at closing excuses the buyer from performing under the contract.

Question 3

Marketable Title - Visible Easement Do NOT Affect Marketability

Answer 3

Visible easements do not effect marketability. Visible easements that the buy should be aware of are not regarded as encumbrances affecting title because it is assumed that the buyer contracts with the visible easement in mind.

Question 4

Marketable Title - Beneficial Easements Do NOT Affect Marketability

Answer 4

A beneficial easement does not constitute an encumbrance. In other words, if the easement increase their fair market value of the land it is unlikely to prevent title from being marketable.

Question 5

Marketable Title - Title Acquired by Adverse Possession is NOT Marketable

Answer 5

Title acquired by adverse possession is not marketable. The reason for this rule is that the adverse possessor has no document to record. The adverse possessor must first establish good title in a suit to quiet title against the record owner. Because such a risk of litigation is thought of as unreasonably burdensome, the seller’s title is deemed unmarketable.

Question 6

Merge (Promises in the Contract Merge into the Deed)

Answer 6

Under the doctrine of merger, once a deed has been delivered and accepted it is too later for the buyer to sue on matters contained in the contract of sale. The seller’s promises in the contract are said to be merged into the deed and thereby extinguished. The buyer’s remedy, if any, is on the covenants in the deed. Thus, in the absence of fraud, the buyer can no longer sue for breach of contract.

Question 7

Requirements for a Valid Deed

Answer 7

A valid deed must 1) be in writing and signed by grantor 2) identify the parties 3) contain words of conveyance AND 4) adequately describe the property.

Question 8

Covenants of Title (Types of Deeds)

Answer 8

There are three types deeds common used: the general warranty deed, the special warranty deed, and the quitclaim deed. The general warranty deed provides the most title protection. It contains six specific covenants that warrant against any defect in the grantor’s title. The special warranty deed usually contains the same six title covenants but applies only to defects cause by the acts of the grantor. The quitclaim deed contains not title covenants. It merely conveys whatever rights the grantor may have in the property.

Question 9

General Warranty Deed

Answer 9

A general warranty deed provides the most title protection. It contains six covenants of title. There are three present covenants and three future covenants.

1) The three present covenants are the covenant of seisin, the right to convey, the covenant against encumbrances. A present covenant is breached at the time the deed is delivered.
2) The three future covenants are the covenants of warranty, quiet enjoyment, and further assurances. A future covenants is breached when the grantee is actually evicted by someone holding superior title

Question 10

General Warranty Deed - Covenant Against Encumbrances

Answer 10

The covenant against encumbrances warrants that there are no mortgages, easements, liens, or other encumbrances on the property at the time the deed is delivered. If this covenant is breached, the buyer may seek damages to reflect he diminished value of the property caused by the defect.

Question 11

General Warranty Deed - Covenant Against Encumbrances

Encumbrances Expressly Excluded in the Deed

Answer 11

It is common to list in the deed, as exceptions to the covenants, any specific encumbrances that the grantee has agreed to accept. Such a listing is desirable, for it avoids any dispute as to whether such matters were intended to be within the coverage of the covenants.

Question 12

General Warranty Deed - Covenant Against Encumbrances

Encumbrances that Plainly Visible

Answer 12

When the property is burdened with an obvious and visible defect, jurisdictions are split whether there is a breach. Some jurisdictions hold that are readily visible encumbrance is clear indication to the buyer that the land is a subject to an easement. In those jurisdictions, the buyer has presumably discounted the sales price and cannot reasonably expect that the covenant against encumbrances will cover the defect.
1) But a number of courts find that the covenant extends to all encumbrances unless its language indicates otherwise. Where the property is subject to an encumbrance such as an easement, the buyer may recover for diminution in the value of the land.

Question 13

Quitclaim Deed

Answer 13

A quitclaim deed contains no covenants of title. It merely conveys whatever interest the grantor may have in the property. It is a perfectly legitimate way to transfer title.

Question 14

Delivery of the Deed

Answer 14

A deed is not effective until it is delivered. An undelivered deed passes no title to the grantee. In order to deliver a deed, there must be some evidence that the grantor intended a present conveyance or an immediate transfer of title. Delivery is a question of the grantor’s intent and may be proven by either words or actions. Furthermore, recordation raises a presumption of delivery.

1) A deed may be conditionally delivered to a third party. A death escrow is where the grantor hands a deed to a third party, usually a friend or relative, with instructions to delivery it to the grantee upon the grantor’s death. To create a valid death escrow, the grantor has to place the deed beyond her control, reserving no power over it.
2) If the grantor delivers the deed to a third party without restraining any power to retried the deed, some courts find that a valid delivery has taken place by construing the deed as an immediate transfer of a future interest that merely becomes possessory upon the grantor’s death. Other courts hold that if the grantor intends the deed to take effect only upon death, no delivery has occurred.

Question 15

Acceptance

Answer 15

Acceptance is presumed if the conveyance is beneficial to the grantee.

Question 16

Recording Acts

Answer 16

At common law, the rule was first in time, first in right. Thus, priority was determined by whose interest came first. However, jurisdiction today use one of three types of recording acts: 1) race 2) notice AND 3) race notice.

Question 17

Recording Acts - Race JDX

Answer 17

In race jurisdiction, priority is given to the person who records first. Essentially, it is a race to the recorder’s office.

Question 18

Recording Acts - Notice JDX

Answer 18

In a notice jurisdiction, priority is given to a subsequent bona fide purchaser for value who takes without notice. Notice is measured at the time of delivery.

Question 19

Recording Acts - Race/Notice JDX

Answer 19

And finally, a race-notice statute is a combination of the two. It requires a subsequent bona fide purchaser for value, who takes without notice, at record first.
1) In order to qualify as a bona fide purchaser, the person must pay value for the land. Donees are not protected. Additionally, the person must take without notice at the time of conveyance.

Question 20

Notice

Answer 20

There are three different types of notice 1) actual notice 2) record notice 3) inquiry notice.

Question 21

Actual Notice

Answer 21

Actual Notice: Simply means actual knowledge of the prior interest. A person who knows that a prior interest exists has actual knowledge i.e. someone tells him.

Question 22

Record Notice

Answer 22

Record Notice: Means notice of any interest that would be discovered by conducting a title search.

Question 23

Inquiry Notice

Answer 23

Inquiry Notice: Is notice that a reasonable inspection of the land would reveal. If a party neglects to inspect the land, that party is charged with notice of any interest that would have been discovered from a reasonable inspection of the land.

Question 24

Shelter Rule

Answer 24

Shelter Rule: Under the shelter rule, a bona fide purchaser is able to pass good title to a subsequent grantee even though the grantee does not qualify as a bona fide purchaser. In other words, a grantee who has actual knowledge of another person’s interest gets the protection of the recording act because the grantee is taking from a bona fide purchaser.

Question 25

Adverse Possession

Answer 25

To acquire title by adverse possession, the claimant’s possession must be 1) actual 2) exclusive 3) open and notorious 4) adverse or hostile 5) continuous for the statutory period. This concept developed as a way to keep land in productive use.

Question 26

Actual Possession

Answer 26

The adverse possessor must take actual physical possession of the land. This element requires the claimant to use the property in the same manner that a reasonable owner would.

Question 27

Exclusive

Answer 27

Exclusive possession means the property must not be shared with either the true owner or the general public.

Question 28

Open and Notorious

Answer 28

The element of open and notorious means possession that is visible. The purpose of this requirement is to afford the true owner notice of the adverse claim.

Question 29

Adverse or Hostile

Answer 29

Possession is adverse if the person uses the land without permission of the true owner. If the owner authorizes or consents to the possession, it is not hostile.

Question 30

Continuous

Answer 30

The final element of continuous means that possession must continue without interruption for the entire statutory period. With land that is normally used for seasonable pursuits, seasonal adverse possession is continuous enough. The test is whether the adverse possessor used the land as a real owner would.

Question 31

Continuous - Tacking

Answer 31

Successive periods of adverse possession by different persons may be combine together. This process is known as tacking. Tacking is permissible only if the successive claimants are in privity with each other. Privity arises when one claimant transfer his interest to the other by deed or devise.

Question 32

ESSAY TIP

Answer 32

The examiners can only test adverse possession in of two ways: 1) by providing a date at least 20-30 years in the past OR 2) by giving the applicant a statute at the end of the fact pattern. Simple but true.

Question 33

Ouster

Answer 33

An ouster occurs when one cotenant refuses to permit access to the property to the other cotenant. Because each cotenant has an equal right to occupy the property, the adversely possession cotenant must deny the other cotenant’s interest in the property and insist that he is holding possession in his own right alone.
1) In order to oust a cotenant and acquire title by adverse possession, the cotenant in possession must unequivocally claim sole ownership of the land by taking steps that clearly notify the other cotenant of his claim.

Question 34

Easement by Prescription

Answer 34

In order to obtain an easement by prescription, the claimant’s use must meet the same elements of adverse possession except that the use need not be exclusive.
1) Similarly, in order to extinguish an easement by prescription, the servient owner must substantially interfere with the holder’s use of the easement, such as by blocking the holder from using the easement.