Land Sale Contracts (Modules 11-12)

Question 1

Conveyance of Real Estate Process

Answer 1

Step 1a: Land Sale Contract (conveys equitable title)

Step 1b: Escrow (time for buyer to inspect, get mortgage, check title, etc.; promises in K apply in this period)

Step 2: Closing (deed passes legal title, promises from K disappear and only what’s in the deed prevails)

Question 2

SOF Requirements for Land Sale Contract

Answer 2

1) Signature of party AGAINST WHOM enforcement is being sought

2) Identify the parties

3) Describe the property in adequate detail

4) Include the price or a means of determining the price

Question 3

Inaccurate Description of Land in Sale of Land Contract

Answer 3

Most commonly will over/understate the amount of land being sold; if understated (ex. K for 100 acres actual size is 98) then remedy will be specific performance with pro rata reduction in price

Question 4

SOF Exception in Property - Part Performance

Answer 4

If there’s no writing for a sale of land, part performance is an equitable doctrine allowing a buyer to enforce an oral K by specific performance only if:

1) the oral contract is certain and clear
2) at least two of the three below are satisfied
- valuable improvements
- possession
- payment (significant part or whole)

Question 5

Doctrine of Equitable Conversion

Answer 5

Once the land sale contract is signed (phase 1) then equitable title is conveyed to the buyer; however, legal title (i.e., the deed) isn’t conveyed until closing and thus the seller actually remains in possession of the land until closing

Shitty for the buyer because if during escrow the property is destroyed then the risk of loss is actually on the buyer even though they don’t legal title yet

Question 6

Passage of Title on Death (Land Sale K)

Answer 6

if buyer or seller dies in escrow, their rights (buyers = equitable title; seller = right to purchase price) passes to their estate who steps into the decedent’s shoes and teh K lives on

Question 7

Two Promises Implied in Every Land Sale K

Answer 7

1) marketable title
2) no false statements of material fact

Question 8

Marketable Title

Answer 8

implied in every sale of land contract (not deed)

marketable means that the title is reasonably from free doubt and threat of litigation

Title must be marketable ON THE DAY OF CLOSING; seller must be given a rxble time to cure any title defects before then, even if time is of the essence

Question 9

Marketable Title - Installment Contracts

Answer 9

if it’s an installment contract then seller doesn’t need to provide marketable title until buyer has made last payment

Question 10

Common Defects Rendering Title Unmarketable

Answer 10

1) defects in record chain of title (e.g., adverse possess, wild deed, etc)

2) encumbrances (mortgage, lien, easement, significant encroachments)
- encroachment of a few inches doesn’t matter but over a foot will
- beneficial or visible (obvious) easement doesn’t impair marketability

3) zoning violations

4) future interest held by unborn/unascertained party (contingent remainder)

Keep in mind that seller has the right to attempt to remedy unmarketable title before closing so these don’t necessarily make it so that buyer can just leave deal

Question 11

Remedy for Breach of Marketable Title

Answer 11

If sailer fails to cure defects of title in rxble time after being notified by buyer, remedies of buyer are:

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

NOTE: once closing occurs, the contract and deed merge, and seller’s liability for marketable title ends

Question 12

No False Statements of Material Fact by Seller (Land Sale Ks)

Answer 12

If seller knowingly makes false statement of material fact that buyer relied on, actively concealed a defect, or failed to disclose a known defect, then seller may be liable to the purchaser even AFTER CLOSING

Failure to disclose means:
- seller k/rtk of the defect
- buyer is unlikely to discover the defect
- if buyer knew they would probably reconsider the purchase

Question 13

No Implied Warranties of Habitability of Fitness in Land Sale K (and exceptions)

Answer 13

Won’t be implied warranty of habit/fitness in a sale of land K, but exception is if it’s a new home construction

Buyer can also sue the builder of the property for negligence even though they’re not in privity of K

Question 14

Time for Performance in Sale of Land K

Answer 14

Presumption is that time is NOT of the essence; thus closing date is not absolutely binding and just must be done in rxble time (but late party can be liable for incidental damages resulting from delay)

Presumption can be overcome though if:

1) Contract - the contract states it
2) Intent - the circumstances indicate that timing being important was part of the intent
3) Notice - party gives notice to the other that time is of the essence`

Question 15

Tender of Performance (Sale of Land K)

Answer 15

Buyer and seller’s obligations (pay/convey) are CONCURRENT, so neither is in breach until the other tenders performance (even if closing date passes)

Tender is excused if either party has repudiated or if the contract is impossible to perform (ex. unmarketable title can’t be cured)

Question 16

Remedies for Breach of Land Sale K

Answer 16

Damages, Specific Performance, Liquidated Damages (“earnest money)

Nonbreaching party is entitled to either damages or specific performance (bc land is unique)

Liquidated Damages: buyer puts for “earnest money” up front and if buyer breaches the seller can keep it as long as its rxble in light of the damages

Question 17

Types of Listing Agreements w/ Real Estate Broker

Answer 17

1) Exclusive Listing: broker’s “best effort” gets them their commission even if property doesn’t sell

2) Exclusive Agency: can only list property with that broker but seller can still sell it own their own

3) Exclusive Right-to-Sell: only the broker can sell it and if another broker or the seller sells then broker still entittled to commission

Question 18

Title Insurance

Answer 18

Insures that good record title of the property exists as of the policy’s date and promise to defend the record title if litigated

Question 19

Closing Document and Elements (i.e., Deed)

Answer 19

The sales K merges into the deed upon closing and the seller is no longer liable on the promises in the contract, only the deed

To pass legal title the deed must be “Lawfully Executed and Delivered”

Question 20

Elements of Lawfully Executed Deed

Answer 20

Requires:

1) writing signed by the grantor
2) unambiguous description of the land (doesn’t have to be perfect)
3) identify the parties by name or description
4) words of intent to transfer

Question 21

Delivery Requirement (Execution of Deed in Sale of Land)

Answer 21

Does not have to actually be physically delivered; considered delivered by “test of present intent” i.e., did the grantor have present intent to part with legal control

Acceptance is presumed; if grantee expressly rejects it’s ineffective to pass title

Can have parol evidence to prove grantor’s intent

Written conditions are valid, oral is not (e.g., O –> A but says out loud “only if you survive me”, A has title now)

Question 22

Delivery of Deed to a 3rd Party

Answer 22

If grantor delivers to 3P with instructions then it’s valid

If delivers without instructions, probably valid if the 3P is an agent of the grantee, otherwise not

Question 23

Types of Deed Covenants (i.e., Warranties)

Answer 23

1) Quitclaim Deed

2) General Warranty Deed

3) Special Warranty deed

Question 24

Quitclaim Deed

Answer 24

Grantor isn’t even promising they have title to convey, conveys only what they actually have at the time of the conveyance

Question 25

General Warranty Deed

Answer 25

Contains 3 present covenants and 3 future covenants

Present Covenants
1) SEISIN (grantor owns this estate)

2) RIGHT TO CONVEY (grantor has power to transfer)

3) NO ENCUMBRANCES (no servitudes/liens against it)

Future Covenants
4) QUIET ENJOYMENT (there won’t be any superior title claims)

5) WARRANTY (if there are superior title claims, defend against 3P title claims/compensate grantee for any loss)

6) FURTHER ASSURANCES (catch-all)

Question 26

Statutory Special Warranty Deed

Answer 26

When it’s not clear which type of deed it is (just says “grant” in a conveyance without designation of type), two promises are implied by statute:

1) Right convey
2) No encumbrances

Question 27

Void Deeds

Answer 27

Will be set aside even if it passed to be a BFP

Void if:
- Forged (if in a joint tenancy and forge other’s signature, passage of other person’s interest is void so new buyer is a TIC with them)
- Never delivered
- Issued to dead grantee
- Fraud in factum (grantor didn’t even know they were passing deed bc they were deceived)

Question 28

Voidable Deeds

Answer 28

Will be set aside, but not if it was passed to a BFP

Voidable if:
- executed by minor/incapacitated person
- fraud in the inducement
- duress
- mistake
- breach of fiduciary duty

Question 29

Conveyance by Grantor to Avoid Creditors

Answer 29

Even if a deed complies with all the formalities, it can be set aside by the grantor’s creditors if:

1) was made with intent to hinder, delay, or defraud any creditor of the grantor

2) they sold it for a really low amount and they’re also insolvent as a result of the transfer

Question 30

Closing Documents (Sale of Land K)

Answer 30

1) Closing Disclosure
2) Notification of Defects
3) Environmental Report