Land Transaction Flashcards
Events and Phases in the Land Transaction
Two big events: (1) Contract of Sale (2) Closing Phases: (1)Pre-contract phase (2)Post-closing phase (3)Executory Period
Contract of Sale requirements to satisfy the SOF
-In order to satisfy SOF, the contract of sale must include (1) a writing that identifies the buyer and the seller (2) a promise for the seller to sell and the buyer to buy (3) a physical description of the property (4) the price or formula for calculating price (5) time for closing *not a huge requirement because courts will infer a reasonable amount of time (6) signature of the parties against whom it will be enforced**ASK
Electronic Signature
- Are ok as long as parties have agreed to conduct business electronically (look at conduct)
- Texas has adopted ESIGN which allows it
Exceptions to the SOF
(1) Equitable Estoppel
(2) Part Performance
*Texas only recognizes part performance
Equitable Estoppel Elements
(1) Oral agreement is admitted to exist or clearly proved
(2) The promisor reasonably expected to induce action
(3) The promisee acted on reliance to their detriment
(4) Serious or irreparable injury would result should specific performance not be allowed
Part Performance Elements
(1) Took possession of property
(2) Paid all or part of the purchase money
(3) Made improvements
OR
Show facts that would make the transaction a fraud upon the purchaser if enforced
*Most jurisdictions require only 2. Texas requires all 3.
Marketable Title
A record title that is free from reasonable doubt such that a prudent person, with knowledge of all salient facts and circumstances and their significance, would be willing to accept it. (REQUIRED TO BE DELIVERED)
- There is either an express title covenant addressing the quality of title that must be delivered by closing OR
- Implied covenant that the titel is going to be marketable
What makes a title unmarketable?
(1) the seller does not own what he claims to own
-Concurrent Interest, Color of
Title. Life Estate etc.
(2) The title has an encumbrance
-Zoning laws are not an
encumbrance
(3) Presence of defects that would subject the buyer to a chance of litigation
-Wild deed
-Estoppel by Deed
-Adverse Possessor
-Easement
*if encumbrance is disclosed the
title is marketable
What if the title is not marketable?
Buyer can rescind:
- If by closing seller has not removed encumbrance, but the buyer continues with the sale, the buyer takes subject to encumbrance
- If the covenant is already violated, buyer can rescind
Doctrine of Equitable Conversion
- As of day of signing for sale, the buyer is viewed in equity as the owner of the property holding equitable title. Equitable title is real property. Seller has legal title as trustee for the buyer: this ensures the seller has a claim for the sale price secured by a vendor’s lien on the land
- Legal title is considered personal property
Common-Law Majority Rule Equitable Conversion
-Buyer must buy the land no matter what happens to the land
Minority Rule Equitable Conversion
VPRA: Vender and Purchaser Risk Act: Risk of loss remains with seller
Texas Rule Equitable Conversion
VPRA: Risk of loss remains with the seller
Seller’s Duty to Disclose Minority Approach
Caveat Emptor:
- Seller has no duty to disclose.
- Buyer has no remedy
Seller’s Duty to Disclose Modern/Majority Approach
(1) A duty to disclose is generally imposed if the seller knew the defect and the defect is materially latent
- Material: important to a reasonable person and would be induced to act in regards to the transaction
- Latent: something that would not be discovered upon reasonable inspection
(2) If duty is violated, the buyer has basis for rescinding or obtaining damages
Types of Defects
(1) Physical
(2) Psychological
(3) Reputational
(4) Off-Site
Caveat Emptor Exceptions
(1) Confidential or fiduciary relationship between parties
(2) If the seller’s conduct constitutes active concealment
-Failure to mention is one thing
but to actively hide is another
(3) If Condition:
-a. Was created by the seller
-b. Materially impairs the value of
the contract
-c. Peculiarly within the
knowledge of the seller or is.
unlikely to be found by a prudent
purchaser.
-Even if an express discliamer exists, it wont protect the seller if the defect are peculiarly in the knowledge of the seller
Texas Approach: Duty to Disclose
5.008 of Property Code: notice of defects needs to be delivered on or before the effective date of K. If notice is delivered after effective date, buyer can terminate for any reason within 7 days of receiving notice.
“As-is” clause in Texas is generally enforceable absent fraud, failure to disclose when required or concealment.
New Builds
New builds have two warranties:
(1) Implied warranty of quality and habitability; and
(2) Implied warranty of workmanship
Implied Warranty of Quality and Habitability; and
Implied Warranty of Workmanship
IWOQH: Purpose is to protect the buyer who lacks the ability and expertise to discover the defect in the new home (such as being on a toxic waste site
IWOW: Defines the level of performance when parties fail to make an express provision in their k (Minimum level of care) (ex: floor tiles arent properly set and begin to pop up)
