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Property > Land Transactions Review > Flashcards

Land Transactions Review Flashcards

1
Q

Who are the players in a land transaction?

A

Buyer
Seller
Escrow Agent
Title Insurers
Mortgagee [lends money to a borrower for the purpose of buying real estate]
[deed of trust definitely allows self-help without judicial intervention; most states with mortgagees allow that anyways]
Assignees from Mortgagee
Mortgage Backed Securities [secured by pools of these mortgages]
Brokers [Buyer broker + Seller Broker] each geta commission
Attorneys [In Commercial Real Estate, not typical in Residential]
An attorney representing both parties is more ideal

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2
Q

What is the procedure for land transaction?

A

1: Contract Formation
2: Closing later

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3
Q

Can a contract specify excusing conditions?

A

Yes, they may imply them as well.

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4
Q

When can the buyer walk away without having breached the contract and get their down payment back and be excused from the contract?

A

Mortgage Contingency,
Inspections,
Attorney Review,
Marketable title

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5
Q

What is a Mortgage contingency? What happens?

A

Buyer’s obligation to try and obtain a mortgage typically.

If Buyer doesn’t try to obtain in good faith buyer can be held in breach of K.

If buyer endeavors in good faith but just can’t that is typically an excusing condition

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6
Q

What are Inspection conditions/contingencies?

A

Buyer has the right to inspect the premises and walk away if there are some material defects.

Could renegotiate the price with the seller.

Material defect allows you to walk away.

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7
Q

What is Attorney review as an excusing condition?

A

Parties have the right to have their attorney look over the contract.

If dissatisfied, within 5 days usually, then can walk away from the contract. Attorney gets 5 days from when the contract is created to disaffirm.

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8
Q

Does the attorney need good-faith legal reasons to walk away?

A

Some cases say yes, others say no.

Attorney is instructed by client to say they are dissatisfied because client found a better deal elsewhere.

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9
Q

How can marketable title be used as an excusing condition?

A

Zoning, Convenants, Closing, Warranties of Title

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10
Q

Does the zoning have to be perfect for marketable title issues to not exist?

A

Zoning ordinances do not create marketable title problems ordinarily.

Exceptions:
1. if violations of the laws exist [Lohmeyer case] due to the risk of litigation rather than the presence of the ordinances in and of themselves.

  1. Where zoning regulations are imposed after the contract is entered into and where they would materially frustrate the buyer’s intended use of the property. Many courts will not enforce the contract.
  2. Seller knows of relevant zoning laws that would interfere with the buyer’s intended use of the property but informs the buyer such use would be permitted, the courts will refuse to enforce the K.
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11
Q

If the covenants are violated, could that affect marketable title and thus excusing conditions?

A

Yes, If the covenant says you can’t build a three story house and you have a three story house then that is a problem allowing the buyer to pull out.

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12
Q

What is the timing for marketable title excusing condition

A

Between contract formed and the closing

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13
Q

Where are warranties of title mentioned?

A

Could be the contract, usually the deed will specify some as well.

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14
Q

What if the K makes more extravagant promises than the deed does or less extravagant than deed does?

A

Merger doctrine says that deed’s warranties trump over the K warranties.

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15
Q

What are the different types of deeds?

A

General warranty deed, Special Warranty Deed, Quick Claim Deeds

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16
Q

What is a general warranty deed?

A

Broadest.
Assurance that I have good title, nothing else in t
he record that has cluttered the title either

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17
Q

What is a special warranty deed?

A

I the seller am warranting that I have not done anything to mess up the title. Not warranting that somebody else has not.

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18
Q

What is a quitclaim deed?

A

Most minimal.

I don’t know whether I own the land or not, insofar as I might conceivably have the title I’m giving the land to you.

I won’t challenge your title, but somebody else could

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19
Q

What is a Present Covenant?

A

Assurances.

If violated at all it would be immediately on the transfer of the land.

In other words:
It can only be violated at the time of the transfer of ownership of the property.

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20
Q

What are future covenants? Where are they contained?

A

If somebody makes a claim to title I will protect you against that.

Only violated when someone comes to challenge.

Sometimes contained in Deed, Assurance of Quiet Enjoyment.

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21
Q

What is the duty of quiet enjoyment?

A

If somebody were to come along 10 years later and try to kick you out and claim they are the owner of the land, I will defend your title of the land against theirs.

Future convenance.

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22
Q

What is the affect of Future vs. Present Covenance?

A

It affects the statute of limitations.

For Present: SOL starts running immediately upon the transfer. [You have 5 years from transfer].

Future: Only when someone comes in to disturb then there is a violation of the covenants

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23
Q

Does a real estate contract have to be in writing?

A

Yes, According to Statute of Frauds. MY LEGS. There are exceptions.

Writing that is signed by the party to be charged + has to contain essential terms [typically price + description of the property]

Exceptions: Part-Performance Doctrine, Promissory Estoppel, Duty to Disclose Defects

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24
Q

What is the Part-Performance Doctrine?

A

When the buyer has moved onto the land and has started to construct a structure on the land. [Universally accepted as Part-Performance]

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25
Q

What is Promissory Estoppel?

A

If you have a promise and a promisor could reasonably expect reliance + actual substantial reliance then maybe you have to live up to the promise even if there is no writing.

Not all courts have embraced because it is potentially too broad [ Some embrace and some don’t ]

Reliance is common, courts may not feel comfortable creating a judicial exception to a statutory rule that applies in most cases.

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26
Q

Is there a duty on the part of sellers to disclose material defects to the buyer? If yes, can the buyer get tort damages?

A

Traditional view: No, caveat emptor, except for fraud.
Modern View: Yes
For known, latent defects.
All states say it excuses the contract.

Can the buyer get tort damages? Some states say yes, some say no.
CA excuses the contract + may enable tort damages.

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27
Q

Can a misrepresentation by the Broker excuse the K?

A

If there is negligent or intentional misrepresentation it can excuse the K.

Not if it is an innocent misrepresentation.

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28
Q

What is risk of loss?

A

For example something bad happening to the property between time of K and closing.

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29
Q

Who bears the burden of risk of loss?

A

Traditional View: Risk is put on the buyer AKA they can’t get out of the contract.
Rationale: Equitable ownership idea

Modern View + Statute of Uniform Vendor/Vendee Act:
Risk is on the seller. Rationale: Seller is in possession of the land between the K and the closing. If anyone can do anything it’s the Seller.

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30
Q

What are the remedies for breach of K if the seller breaches?

A

Specific performance, maybe expectation/restitution/reliance

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31
Q

Why can the buyer receive specific performance?

A

B/c land is unique

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32
Q

Explain expectation damages in the context of Seller breaching.

A

Difference between K price and Market Price: MP - KP.

Not clear if awarded for good faith breaches of title.

Flureou doctrine:
1. Codified by CA Civil Code.
2. If seller in good faith is unable to transfer title to you:

  1. Buyers can not get difference in money damages/Expectation damages or specific performance for a good faith failure to produce title.
  2. Can only get down payment back + reliance expenses.
33
Q

What remedies are available for the seller if the buyer breaches K?

A

Specific Performance, Expectation Damages

34
Q

Is Specific Performance likely when the buyer breaches? How does it work?

A

Order that the K go through.

Turn over the money and receive the deed.

Harder to justify SP on the seller side b/c K for something not unique.

35
Q

Can the seller receive expectation damages when the buyer breaches? If so what is the math?

A

Yes. KP - MP or KP - Resell Price [RP]

36
Q

What is the distinction between special and general warranty deeds?

A

Rockafellor v. Gray Case: When you’re not in privity you can sue only to the amount of recital in consideration.

General and Specific difference:
Specific Warranty deeds protects the buyer against he seller buying the title.

General: Assurance that the title is good, nobody has wrecked it.

37
Q

Does a general warranty extend to remote purchasers? For example. A -> gen. warr B -> special warr C. Can C sue all the way up to A?

A

Yes but perhaps only to the amount of money stated in the deed.

38
Q

What is the Estoppel by Deed Doctrine?

A

If I sold you land, and at the time I sold it I didn’t own, but then I subsequently came to own it.
AKA Don’t own land title when I sell it but acquire title later.

The rule is: Title flows through to the buyer.

39
Q

What were the significant changes in the mortgage market?

A
  1. Secondary Market in Mortgages maintained by both private and government sponsored enterprises
  2. Private entities or govmt. sponsored enterprises package and sell MBS to investors backed by pools of these mortgages
  3. Don’t run dry on credit in particular areas due to not enough money being deposited.
40
Q

PT 2 of significant changes: What were the 2008 events?

A

2008 Events: Mortgages that were extended where it was very unlikely that people would repay.

Mortgages made to people unlikely to repay.

41
Q

What is the Dodd Frank Act, why was it passed?

A

Passed in response to 2008 events.

Banks must investigate the credit worthiness of their debtors. Qualified mortgages are presumptively ok.

42
Q

What is predatory lending?

A

Wasn’t a concept before 2008. Reverse redlining argument.
Banks were at fault for making loans to people they should have known would be unable to pay them back.

43
Q

What is the California Mortgage Foreclosure Process?

A
  1. You must inform the debtor of their right to seek renegotiation of a loan.
  2. If the debtor so desires, no double tracking.
  3. Notice of Default 90 days before the sale occurs
  4. Notice of Sale says 30 days.
  5. Redemption: Debtors given a right to redeem the loan 15 days until the sale or shortly before the sale, but not afterwards.
44
Q

What is the foreclosure subsidy system in CA?

A

Helps low income people in debt.

Govmt. money that can help with back payments but also provides a 60 day moratorium on foreclosure by applying.

As of 2/2024 still lots of money that has not been claimed.

45
Q

Is Predatory lending considered discrimination?

A

Can be turned into anti discrimination statute.

Horne v. Harbour Portfolio: Court allowed the case to go forward.

IF what you did was sell the houses on installment contracts to black people, not expecting them to repay, what you are doing is disparately impacting people on race, even if it is not your purpose.

46
Q

What is another type of K akin to a mortgage? [Not used very often]

A

Installment K’s where seller retains title until the buyer pays all the money owed.

47
Q

How does an Installment K work?

A

Buyer has to pay in installments but seller retains the title until all the money is paid by the buyer.

Might have paid 750 k and lose your land b/c you miss one monthly payment.

Rest. extends mortgage protections: Right to insist that the land be sold and you are credited with anything above the surplus.

However if it was just another mortgage you will likely get turned down anyways.

48
Q

How do you know you will get good title?

A

Public Recording System.

49
Q

How do you check to see if there is good title?

A

Standard Title Search

50
Q

How do standard title searches exist?

A

County Recorder Offices usually have grantor/grantee indexes.

Take each deed and file twice. Once under each party name.

States create an index for grantor and grantee. Makes it harder to search.

51
Q

You represent C who wants to buy land from B. How do you check if there is good title?

A

Look in Grantee Index under B’s name. Ideally you find something for ex. A -> B.

Then look in grantor index under B’s name to make sure B didn’t transfer title to somebody else.

How do we know A had good title? Look under grantee index under A, find a deed from D to A. Make sure that A did not unload the property on someone else before they unloaded to B.
Look in grantor index Under A.

52
Q

Do we have to look back for the entire chain of title?

A

No. Two factors: Custom or
Marketable Title Statutes: deeds 40 years in the past not re-recorded are not valid anymore.

53
Q

What is the client held for constructive notice of?

A

Everything that could have been found if they conducted a standard title search.

54
Q

Which is stricter? Filing vs. Deed. Case?

A

Stricter for what has to be filed than for what has to be in the deed based on the cases.

Case where they sold oil leases: Required specific listing of all properties to constitute notice for each. Were not considered to have given notice for specific oil leases not noted.

Although this is perfectly good for the parties in the deed, the searchers of the record need to know. Therefore, obligation to list them more specifically.

55
Q

Can a deed be recorded without being notarized? Can it be used as a filing?

A

Yes, even if the notarization is fake it doesn’t affect validity of deed vis-a-vi the parties,

but it does affect the validity of filing. Ineffective as a filing.

Could provide actual notice if someone saw it. Does not provide record notice or constructive notice.

56
Q

Who bears the risk of indexing mistakes?

A

It depends on if the mistake is by the filling parties or the clerk.

57
Q

Who bears the risk of mistakes by the filing parties?

A

The filer bears the risk. Its the filers job to spell the parties name correctly in general.

Considered burdensome to imagine all of the bad spellings, whereas the person who knows who the parties are can spell their names right.

Counter: Idem Sonans: if the word you wrote sounds the same as the correct name then that gives notice. [Not all courts embrace]. Orr v. Byers did not embrace.

58
Q

Who bears the risk of mistakes by the clerk?

A

Succeeding party bears the risk.

Held to have constructive notice of what would have happened if the deed was filed correctly.

Although original parties could double check to see if it got filed in the right place.

Unfair to successors who have know way of knowing how it got misfiled.

Could hold clerks liable but they are immune.

59
Q

What are deeds supposed to describe as to land?

A

Supposed to be in writing and a description of the land is supposed to be mentioned.

60
Q

How do you describe a parcel of land?

A

Plot number for Urban Land.

Landmarks, metes + bounds landmarks are used for Rural Land.

Jefferson system divides into a grid and creates sections and quarter sections. This solution helps immensely.

61
Q

What are the types of recording acts?

A

Pure Race, Pure Notice, Race-Notice [California Adopts]. For all these situations think what does it take to reverse CL rule?

62
Q

What is the common law rule on recording acts/ property as a whole?

A

First in time is first in right.

But this is harsh to the B’s of the world if A has not taken possession of the land. A should have put the world on notice.

63
Q

Pure Race. What does it take to reverse CL rule?

A

First to file has rights to the land.

64
Q

O -> A not filed
O -> B filed, with notice of O-> A
A files
THis is in chronological order

Under Pure Race, Who has superior title? Under Pure Notice who has superior title?
Under Race-Notice who has superior title?

A

B has superior title under Pure race.

Pure Notice: A wins. Subsequent party, B, had notice.

Race-Notice: A wins. Subsequent party B filed first, but had notice.

65
Q

What is Pure Notice? What does it take to reverse the CL rule?

A

Subsequent party must lack notice, constructive or actual. [Recorded or physically seeing the deed].

66
Q

O -> A not filed
O -> B, filed with notice of O-> A
A files.

Who wins under Pure Race, Pure Notice, Race-Notice?

A

Pure Race: B wins.

A wins under pure notice because B knew of O->A transfer.

Race Notice: A wins.

67
Q

O -> A not filed
O-> B, no notice of O-> A
A files
B files

Who wins under Pure Race, Pure Notice, Race-Notice?

A

Pure Race: A wins
B wins under Pure Notice
Race Notice: A wins

68
Q

What is Race-Notice? Who adopts it? What is required to reverse Common Law? What is the common law Rule?

A

Race-Notice says that you must be the first to file and lack notice to reverse the common law rule.

California is the major state adopting this rule.

Common law rule is first in time is first in right

69
Q

O -> A, not filed
O -> B, no notice of O->A
B files
A files
Who wins under Race, Notice, and Race-Notice?

A

Race: B
Notice: B
B wins under Race-Notice because they filed first and lacked notice of O-> A

70
Q

What are the types of Notice?

A

Constructive/Record, Actual, Inquiry

71
Q

What is the rule with Constructive Notice?

A

Only expected to discover those things you would have discovered through a standard title search

72
Q

What is a problem that comes up in Constructive/Record notice?

A

The Wild Deed problem.

No constructive notice for a subsequent party if the only filing is a subsequent transaction not including the owner.

73
Q

What is an example of Wild Deed problem and what’s the ruling?

A
  1. O -> A not filed
  2. A -> B filed
  3. O -> C, C without notice of O-> A, filed
  4. C or B?
    a. Does B’s filing put C on notice that someone else claims property in the land?
    i. No, C could not find through standard title search. If O->A was filed then they would have notice.
  5. No constructive notice for C
    a. Could still have actual notice
74
Q

What is actual notice?

A

Someone showing you the deed, telling you, or you seeing it

75
Q

What is inquiry notice?

A

From certain facts that you know, it is your duty to inquire and discover other facts.

2 situations:
1. Case where parties filed a deed in real estate records that referenced an earlier deed and was meant to replace that deed. If you followed up and asked the parties, you would have learned it was life estate and not fee simple interest. Because of what was filed, you are on notice to require as to the things referenced in the document.

  1. Possession, party in possession of the land, nevertheless the fact that they are in possession suggests that you should inquire. Duty to find out the interest that person has. Are they a squatter etc.
76
Q

Independent of Race, Notice, Race-Notice Statutes, who is protected by recording statues?

A
  1. Subsequent Purchasers for value.
    Can’t be donee or beneficiary of bequest
    If you paid for land we will protect you.
    Must be more than nominal value.
    Fair Market V not required.
  2. Mortgagees [sometimes treated as purchasers or protected parties based on statutes]
  3. Judgment Lien Creditors [probably in most states]
    If they filed an abstract of judgment creating a lien on the real estate, if they did that and there is nothing on record indicating the person did not own the land then they are protected.
  4. Shelter Principle
77
Q

What is the shelter principle? Is it common law?

A

If a party is protected by the recording statutes, then his or her successor is also protected, even if they wouldn’t be on their own initiative.

78
Q

CA Case Race-Notice
O->A not filed
O->B, no notice, filed
A files
B conveys to C
Does C have good title under shelter principle?

A

C prevails because of the shelter principle even though they had no notice of A.
B is protected party under the statute.

We want B to have the ability to market the land. Unfair to say you own the land but can not sell it.

79
Q

Talk about Torrens Alternative vs. Title Insurance. Why don’t we have the two etc.

A
  1. Torrens Alternatives + Title Insurance [Quirky link between the two]
    a. Lets just create a single document that affects everything on the title for the property. Go to court and get declaratory judgment that you own the property. If you transfer or mortgage then that gets marked on the certificate too. Anything not marked on certificate doesn’t count. Official title document for the land.
    b. Some countries make it work like New Zealand
    c. Title Insurance
    i. Savior of American real estate transactions
    ii. Title Insurance companies maintain good records of title, issue insurance policies that insure nothing they know about. All they provide is a warranty of there being anything else. Do a good job of finding everything that is out there.
    d. Title Insurance companies are thought of to fight against the Torrens System.
    i. Title Insurance thrive on the system being complex.
  2. Vested interest blocking Torrens Alternative
  3. Titles tend to be clear in the U.S.

Property (10 decks)

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