Land Transactions Flashcards
Good merchantable (aka marketable) title standard
Standard = marketable title is title free from reasonable doubt as to its validity (free from lawsuits & threat of litigation)
- Marketable title = unencumbered fee simple
3 circumstances that will render the title unmarketable
1) Adverse Poss.
2) Encumbrances - Right to, interest in, or legal liability on real property that does not prohibit passing title to the property but that typically diminishes its value
3) Zoning violation - mere existence of an ordinance does not make it unmarketable but if it violates a zoning ordiance
Damages for when the seller is unable to convey marketable title (two rules)
English Rule = Buyer can typically recover just her deposit plus interest
American Rule = Buyer can recover both general and special damages in K
Fixture
- Moveable property that is permanently attached to the property that makes removal difficult - become part of the real property
- Where items become incorporated into the realty so they lose their identity they become part of the realty (i.e bricks) or/and
- Where identification is possible but removal would occasion considerable loss or destruction items are considered fixtures (i.e heating pipes embedded into the wall of the house)
Equitable Conversion
- Once a contract is signed the buyer is deemed the equitable owner of the land, subject to the condition that he they remit the balance of the purchase price at closing
- Risk of loss is on the buyer
- Applies to most states but is modified by sales K
A sales k must be:
In writing
Signed by the parties to be bound
Describing the land and
Reciting some consideration
2 implied promises in every sales contract
1) Seller implicitly promises to provide merchantable/marketable title at closing and
2) Seller implicitly promises to disclose material defects
- Maj. of states now hold the seller liable for failing to disclose latent, material problems the seller knows about
- Material = of such a nature that knowledge of the item would either affect the buyers decision to purchase the property or have a significant negative impact on the market value of the property
Four remedies available to the non-defaulting party in the event that the contract for sale is breached
1) Specific Performance of the K
2) Damages
3) Rescission and retention of the deposit (for sellers) or restitution of the deposit (buyers)
4) Liens
Different Damages available to the non-defaulting party in the event that the contract for sale is breached
1) Compensatory = cover the loss of the nonbreaching party incurred as a result of the breach of contract
- General = difference between the purchase price and the market value of the property at the time of the breach (loss of the bargain value)
- Special = damages resulting as the natural and probable consequence of the breach that breaching party should have anticipated from the facts and circumstances (consequential damages)
2) Punitive Damages = over and above compensation to P that are awarded to punish D and deter D and others from engaging in similar conduct
3) Liquidated damages clauses (if in the sales K)
- Parties agree to the amount of damages in the event of breach of contract
- Such agreement is generally enforceable so long as the stipulated amount is not disproportional to the damage actually sustained
Two exceptions to the Statute of Frauds:
1) Doctrine of part performance and
Satisfied if any two of the following are satisfied
- Buyer takes physical possession of land
- Buyer pays all or a substantial part of purchase price
- Buyer makes substantial improvements
2) Estoppel
- Applies when unconscionable injury would result from denying enforcement of an oral K after one party has been induced by the other to seriously change their position in reasonable reliance of the K
- Estoppel may also apply when unjust enrichment would result if the party who has received the benefit of the others performance were allowed to rely on the statute
Retention of deposit (for sellers) maj and min rules
1) Minority rule = when a buyer breaches a contract to purchase land the seller is not entitled to retention of the deposit in excess of damages incurred
2) Majority rule = when a buyer breaches a contract to purchase land the seller may elect to retain the entire deposit which courts generally limit to 10% of the contract price or less
Requirements to pass legal title from seller to buyer (deeds)
To pass legal title from seller to buyer, the deed must be lawfully executed and delivered
How to lawfully execute a deed
The deed has to be lawfully executed in accordance with the given jurisdictions formal statutory requirements but all deeds must contain at a minimum:
a. Be in writing and
b. Identify the grantor and grantee
c. Describe the property to be conveyed
d. State the grantors intent to convey and
e. Contain the grantors signature
Proper delivery of a deed
- Words or conduct that evinces an intent to be immediately bound by the transfer
- Manual delivery is common but it is possible to establish delivery by words alone if the req intent is present
Doctrine of Merger (deeds)
- Provides that when a buyer accepts a deed the buyer is deemed to be satisfied that all contractual obligations have been met
- Thus the K merges into the deed and the deed is deemed the final act of the parties expressing the terms of their agreement
- Buyer can no longer sue the seller on the promises in the K of sale not contained in the deed but must sue the seller on the warranties if any contained in the deed
