Land Sale Contracts and Mortgages

Question 1

Implied promises in every land sale contract

Answer 1

1. Seller promises to provide marketable title at closing (free from reasonable doubt/lawsuits/treats of litigation)
2. Seller promises not to make false statements of material fact

Question 2

Circumstances that will render title unmarketable

Answer 2

1. Adverse possession: If even part of the title rests on adverse possession, it is unmarketable. Seller must be able to provide good record title.
2. Encumbrances: Marketable title means an unencumbered fee simple. Thus, servitudes and mortgages render title unmarketable, unless the buyer has waived them.
3. Zoning violation

Question 3

How does the deed pass legal title from seller to buyer?

Answer 3

It must be “LEAD”- Lawfully Executed and Delivered.

Question 4

Quitclaim Deed

Answer 4

It contains no covenants. Grantor isn’t even promising that he has title to convey. This is the worst type of deed buyer could hope for. The Grantor agrees to provide (may be implicit promise) marketable title at the closing. Any problems post-closing and seller is off the hook.

Question 5

General Warranty Deed

Answer 5

Warrants against all defects in title, including those due to Grantor’s predecessors.

Question 6

Present Covenants for General Warranty Deed

Answer 6

1. Seisin- promises he owns estate
2. Right to Convey- Grantor has power to transfer
3. Against Encumbrances- no servitudes or liens on estate.
   (Breached if ever at time of delivery. SOL begins to run from the moment of delivery)

Question 7

Future Covenants for General Warranty Deed

Answer 7

1. Quiet Enjoyment- Will not be disturbed by 3rd party’s lawful claim of title
2. Warranty- Grantor will defend Grantee against lawful claims of title brought by others.
3. Future Assurances- Grantor will do whatever is required in the future to perfect the title if it turns out to be flawed.
   A future covenant is not breached, if ever, until Grantee is disturbed in possession. SOL will not begin to run until some future date when Grantee serves disturbance in possession.

Question 8

Statutory Special Warranty Deed

Answer 8

Provided for by statute in many states, this deed contains two promises that grantor makes on behalf of himself

1. Grantor promises he has not conveyed estate to someone other than Grantee
2. Estate is free from encumbrances made by Grantor.

Question 9

Bright-line rules for Recording Statutes

Answer 9

1. If B is a Bona Fide Purchaser, and we are in a NOTICE jurisdiction, B wins regardless of whether or not she records before A does.
2. If B is a Bona Fide Purchaser, and we are in a RACE-NOTICE jurisdiction, B wins if she records properly before A does.

Question 10

Bona Fide Purchaser

Answer 10

one who:

1. purchases land for value and
2. No notice that someone else got there first.

Question 11

Recording Statutes do not protect

Answer 11

Donees, Heirs, or Devisees unless the shelter rule applies.

Question 12

Inquiry Notice for Recording System

Answer 12

a. Whether he looks or not, B is on notice of: whatever an exam of Blackacre would show.
The buyer of real estate has a duty to inspect before transfer of title, to see, for example, whether anyone else is in possession. If another is in possession, B has inquiry notice, regardless of whether buyer actually bothered to look or not.
b. If a recorded instrument makes reference to an unrecorded transaction, grantee or inquiry notice of whatever a reasonable follow-up would show.

Question 13

Rules for Record Notice

Answer 13

To give record notice to subsequent takers, the deed must be recorded properly, within the chain of title, which refers to that sequence of recorded documents capable of giving record notice to later takers. In most states, the chain of title is established through a title search of the Grantor/Grantee index.

Question 14

Shelter Rule

Answer 14

One who takes from a BFP will prevail against any entity that the transferor-BFP would have prevailed against. In other words, the transferee “takes shelter” in the status of her transferor, and thereby “steps into the shoes” of the BFP even though she otherwise fails to meet the requirements of BFP status.

Question 15

Estoppel by Deed

Answer 15

One who conveys realty in which he has no interest, is estopped from denying the validity of that conveyance if he later acquires the previously transferred interest.

Question 16

mortgage

Answer 16

Union of two elements:

i) a debt
ii) a voluntary lien in debtor’s land to secure the debt

Question 17

equitable mortgage

Answer 17

Instead of executing a note or mortgage deed, O hands Creditor a deed to Blackacre that is absolute on its face. Parol evidence is admissible to show intent between O and Creditor.

Question 18

Creditor-Mortgagee can transfer his interest by:

Answer 18

1. Endorsing the note and delivering it to transferee
   or
2. Executing a separate document of assignment

Question 19

Personal defenses which can be raised against original creditor

Answer 19

Lack of consideration, Fraud in the inducement, unconscionability, waiver, and estoppel

Question 20

“Real Defenses” against Holder in interest in Land

Answer 20

MAD FIFI4
Material
Alteration
Duress
Fraud in the Fact
Incapacity
Illegality
Infancy
Insolvency

Question 21

Requirements to be a Holder in Due Course

Answer 21

1. Note must be negotiable, made payable to named mortgagee
2. The original note must be endorsed, signed by the named mortgagee
3. The original note must be delivered to the transferee. A photocopy is unacceptable
4. The transferee must take the note in good faith, without any notice of illegality and
5. The transferee must pay value for the note, meaning some amount that is more than nominal.

Question 22

“Assumed the mortgage”

Answer 22

If O sells Blackacre to B, and if B has “assumed the mortgage”
Both O and B are personally liable.
B is primarily liable.
O is secondarily liable.

Question 23

“Subject to the Mortgage”

Answer 23

If O sells Blackacre to B, and if B takes “subject to the mortgage”
B assumes no personal liability
Only O is personally liable
But, if recorded, the mortgage sticks with the land. Thus if O does not pay, the mortgage may be foreclosed.

Question 24

Effect of Foreclosure

Answer 24

It will terminate interests junior to the mortgage being foreclosed but will not affect senior interest. Junior lienholders should be able to proceed for a deficiency judgment. But once foreclosed of a superior claim, with the proceeds distributed appropriately, junior lienholder can no longer look to property for satisfaction.

Question 25

Necessary parties to foreclosure action

Answer 25

1. Mortgagees with junior interests to foreclosing party.
2. the debtor-mortgagor must be joined, particularly if the creditor wishes to proceed against debtor for a personal deficiency judgment

Question 26

Purchase Money Mortgage

Answer 26

A mortgage given to secure a loan that enables the debtor to acquire the encumbered land.

Question 27

Redemption in Equity

Answer 27

Equitable Redemption is universally recognized up to the date of sale. At any time prior to the foreclosure sale: the debtor can try and redeem the land by paying off the missed payment or payments plus interests and costs.

Question 28

Clogging the Equity of Redemption

Answer 28

A debtor/mortgagor cannot waive the right to redeem in the mortgage itself. Law will not allow the debtor on the front end of the deal waive any of its rights on default including to redeem rights in event of default.

Question 29

Statutory Redemption

Answer 29

Recognized in 1/2 of states, gives the debtor-mortgagor a statutory right to redeem for some fixed period after the foreclosure sale has occurred (6 months- 1 year). To redeem the debtor would normally have to pay the foreclosure sale price rather than the amount of the original debt.

Question 30

Right to Lateral Support

Answer 30

If land is improved by buildings and adjacent landowner’s excavation causes that improved land to cave in, the excavator will only be liable if negligent.
Strict liability does not attach to the excavator’s actions unless plaintiff shows that because of defendant’s actions, Plaintiff’s improved land would have collapsed in its natural state.

Question 31

Riparian Doctrine

Answer 31

Water belongs to those who own the land along its course. These people are known as riparians who share the right to reasonable use of water. Thus one riparian will be liable if his or her use unreasonably interferes with other’s use.

Question 32

Prior Appropriation Doctrine

Answer 32

The water belongs initially to the state, but the right to divert it and use it can be acquired by an individual regardless of whether or not he happens to be a riparian owner.
Rights are determined by priority of beneficial use. The normal allocation is first in, first in right. Thus, a person can acquire the right to divert and use the water from the watercourse merely by doing so first. Any productive or beneficial use of the water, including for agriculture is sufficient to create the appropriation right.

Question 33

Groundwater Rules

Answer 33

Surface owner is entitled to make reasonable use of groundwater, however it must NOT be wasteful.

Question 34

Surface Waters

Answer 34

Common Enemy Rule:
A landowner may change drainage or make other changes, improvements on his land to combat the flow of surface water. Many courts have modified the common enemy rule to prohibit unnecessary harm to other’s land.

Question 35

Remedy for Regulator Taking

Answer 35

i) Compensate the Owner

ii) Terminate the regulation and pay owner for damages that occurred while it was in effect

Question 36

Unconstitutional Exactions

Answer 36

Those amenities it seeks in exchange for granting permission to build
To pass constitutional scrutiny, these exactions must be reasonably related both in nature and scope to the impact of the proposed development