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Real Estate Brokerage Exam > Legal Aspects Of Sales, Lease And Mortgages > Flashcards

Legal Aspects Of Sales, Lease And Mortgages Flashcards

1
Q

What do you call a transaction where the seller gives permission to another for the enjoyment of use of a property at a certain price? For a time period that can be definite or indefinite. (Not more that 99 years)

A

LEASE

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2
Q

What are the distinctions between sale, lease and mortgage?

A
  1. Sale and lease are principle contracts, while mortgage is an accessory contract
  2. In sale and lease, there is transfer of possession, while in mortgage, there is no transfer of possession
  3. In sale, there is transfer of ownership, while in mortgage and lease there is no transfer of ownership
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3
Q

Cause or consideration in the contracts of sale, lease & mortage

A
  1. Contract of sale = sale price for the vendor and property sold for the Vendee
  2. Contract of lease = rent for the lessor and enjoyment of leased property for the lessee
  3. Contract of mortgage = security or collateral for the Mortgagee and credit extended to the Mortgagor
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4
Q

The unconditional and unqualified agreement to the offer

A

ACCEPTANCE

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5
Q

Property belonging exclusively to the husband

A

CAPITAL PROPERTY

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6
Q

A contract whereby personal property is recorded in the chattel mortgage register as a security for the performance of a obligation

A

CHATTEL MORTGAGE

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7
Q

One that can be paid off only on the date of maturity

A

CLOSED MORTGAGE

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8
Q

Property owner in common by the husband and wife

A

CONJUGAL PROPERTY

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9
Q

The concurrence of the offer and acceptance over the thing and the case which constitutes the act

A

CONSENT

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10
Q

Is a meeting of minds between two persons whereby one binds himself with respect to the other, to give something to render some service

A

CONTRACT

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11
Q

What is the concept where contracting parties obligate themselves to transfer ownership of a thing and another party buys the item with money or its equivalent?

A

SALE

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12
Q

An agreement between the buyer and the seller whereby there is transmission of ownership on the object in the contract

A

CONTRACT OF SALE

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13
Q

An agreement whereby the seller promises to sell a thing in consideration of the buyer’s compliance with the terms and conditions of the contract and that only after the buyer’s compliance will the seller be obligated to transfer or convey the ownership of the thing subject of the contract

A

CONTRACT TO SELL

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14
Q

This happens whenever the ownership of an individual thing or right belongs to different persons

A

CO-OWNERSHIP

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15
Q

A qualified or conditional acceptance

A

COUNTER-OFFER

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16
Q

It is a judgement for the Mortgagor to may the balance of an individual obligation if the proceeds of the foreclosure sale is not sufficient to cover the principal obligation

A

DEFICIENCY JUDGEMENT

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17
Q

A process instituted by a mortgagee by which the mortgaged property is sold at a public auction to satisfy the principal obligation which the debtor failed to fulfill

A

FORECLOSURE

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18
Q

A mortgage subordinate to an earlier mortgage to appropriate the property as his own upon failure of the debtor to fulfill the principal obligation

A

JUNIOR MORTGAGE

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19
Q

Money in which a debt, or other obligation calling got money, may be lawfully paid, if the contract does not specify the medium of payment

A

LEGAL TENDER

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20
Q

A contract whereby property given as a collateral to secure the performance or fulfillment of an obligation

A

MORTGAGE

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21
Q

The lender in a mortgage, typically a bank

A

MORTGAGEE

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22
Q

The borrower in a mortgage, typically a homeowner.

A

MORTGAGOR

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23
Q

Proposal to make a contract

A

OFFER

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24
Q

A mortgage that can be paid off anytime even before the date of maturity

A

OPEN MORTGAGE

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25
Q

An agreement whereby one party concedes to the other for a determinate period and under fixed conditions, the power which is left to his sole will, to decide whether a principal contract will be celebrated

A

OPTION CONTRACT

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26
Q

Automatic appropriation by the creditor of the thing pledged or mortgaged upon the failure of the debtor to pay the principal obligation

A

PACTUM COMMISSORIUM

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27
Q

Property exclusively belonging to the wife

A

PARAPHERNAL PROPERTY

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28
Q

Is the transfer of an item of value from one party (such as a person or company) to another in exchange for the provision of goods, services or both, or to fulfill a legal obligation.

A

PAYMENT

29
Q

A contract in which immovable property or a real right over immovable property is specially made subject to secure the performance of a principal obligation

A

REAL ESTATE MORTGAGE

30
Q

Compensation either in money, provisions, chattels or labor received by the lessor of the soil it the property rented from the lessee

A

RENT

31
Q

When earnest money is given in a Contract of Sale, it shall be considered as part of the price and as proof of the perfection of the contract

A

RULES OF EARNEST MONEY

32
Q

By the contract of sale, the lessor obligated himself to transfer the ownership of and to deliver a determinate thing to the lessee to pay in money or its equivalent

A

SALE

33
Q

A lease of a property by a tenant to a subtenant.

A

SUBLEASE

34
Q

A judicial right which gives a means to the acquisition of real property rights but which in itself is insufficient

A

TITLE

35
Q

The essential elements of the contract are:

A
  1. There must be consent and meeting of the minds, an agreement to transfer ownership in exchange of a price
  2. Agreement is based on one piece of land and cannot be exchanged for another mid contract
  3. A certain price in money or its equivalent
36
Q

Characteristics of Sale

A
  1. Consensual: agreed by both parties
  2. Principal: can stand by itself and not dependent on other contracts
  3. Onerous: rights acquired are in exchange of a valuable consideration to be given
  4. Bilateral: both parties are bound to one another
  5. Commutative: both parties give and receive equivalent values
  6. Nominate: has a special designation or name under the civil code
37
Q

Kinds of Contract of Sale

A
  1. Absolute: when the sale is not subject to any condition – one where the property is sold, transferred irrevocably upon the consumption of the contract and subject to no other condition whatsoever
  2. Conditional: Arrangement where a buyer takes possession of an item, but its title and right of repossession remains with the seller until the buyer pays the full purchase price (usually in installments stretched over months or years). Common type of agreement used in the financing of machinery and equipment, and real estate.
38
Q

Perfection and Delivery

A

The CONTRACT OF SALE is perfected at the moment there is a meeting of minds between the seller and the buyer upon the object and the price

The OWNERSHIP of the thing sold shall be transferred to the vender upon the actual or constructive delivery thereof

39
Q

Obligations of the Vendor (Seller)

A
  • to deliver a determinate thing that may be actual or constructive
  • transfer of ownership, vendor just execute all necessary documents to transfer ownership of the property sold
  • warrant against eviction of hidden defects
  • take care of the things pending delivery of property
  • pay all expenses of the deed of sale (execution and registration expenses) and all taxes required unless stipulated in the contract
40
Q

Obligations of a Vendee (Buyer)

A
  • Vendee is bound to accept the delivery of the property sold at the time and place stipulated in the contract
  • Vendee is bound to pay the price of the property sold at the time and place stipulated in the contract
41
Q

Expense for the execution and registration of sale/power mortgage and sell

A

Expense for the execution and registration of the sale (plus attorney’s fees and documentary stamps) shall be borne by the Vendor (Seller) unless stipulated in the contract.

42
Q

Execution of Special Power of Attorney

A
  • the specific power of authority being delegated to the Attorney-in-fact
  • the terms and conditions under which the property shall be sold or mortgaged
  • complete description of the property

*SPA must n duly subscribed and notarized

43
Q

Warranty Against Defects VS. Warranty Against Eviction

A
  1. Warranty Against Defects
    Implied Warranty: that thing shall be free from any hidden faults or defects, or any charge or encumbrance not declared or made known to the buyer
  2. Warranty Against Eviction
    Implied Warranty Against Eviction: Vendee (buyer) is deprived of a whole or part of the thing purchased and due to a right prior to the sale or act input able to the vendor (seller). Seller must answer for eviction unless nothing has been said
44
Q

Capacity to enter into a Contract of Sale

A

Only persons who may be obligated to enter into a Contract of Sale or all persons in the New Civil Code

The following persons cannot be given consent to a contract:

  • Unemancipated minors
  • Insane or demented person and deaf-mutes who cannot read or write
  • non Filipino citizens or corporations with less than 60% companies owned by Filipinos
  • people who are not qualified by the Philippine constitution and Civil Code to own/buy/sell land
  • a Filipino/Filipina married to a foreigner that still retains their right to acquire lands
  • Filipino citizens who become citizens of other countries: can still acquire and keep land before they change citizenship
45
Q

Individuals who cannot acquire by purchase, even public or judicial auction:

A
  1. Guardians: property of the ward/guardianship
  2. Agents: property entrusted to them, unless principal has given permission
  3. Executors and Administrators: property under their care
  4. Public Officials and Employees: property of the state, subdivisions etc
  5. Justices, judges, fiscals, clerks of court and other judicial authorities: property in litigation or levied upon execution before the court within their jurisdiction
  6. Lawyers: property and rights which are subject to litigation and take part by virtue of their profession
46
Q

Contract of Sale VS. Contract to Sell

A

Contract of Sale

  • consummated contract in which ownership is transferred, subject to fulfillment of the conditions agreed upon
  • transfer of ownership

Contract to Sell

  • merely an executory contract where ownership is not transferred
  • no transfer of ownership bit a mutual promise to buy and sell
47
Q

Earnest money: concept, part of price, proof of perfection

A

Concept: payment of a sum of money or omen to bind the bargain, delivery and acceptance of which marks the final and conclusive assent of both parties to the contact

Part of price: earnest money is part of the purchase price. Aka down payment

Proof of perfection: giving and acceptance of earnest money is proof of the perfection of the Contract of Sale

48
Q

Earnest Money VS. Option Money

A

Earnest money: part of the purchase price
Aka down payment

Option money: given as distinct consideration from an option contract
Aka reservation deposit (not a guarantee of a sale)

49
Q

Rules in case the land sold is different from the land stated in the contract

A
  1. If lump sum: no increase or decrease of the price
  2. Statement if it’s area at the rate of a certain price per sqm:
    A. if area is BIGGER:
    • accept the area in the contract and reject the excess
    • accept the whole area but must pay the excess of the contract
      B. If area is SMALLER:
    • choose to have the proportional reduction of the price OR;
    • rescind the contract provided: the lack in area be not less that 10% of what is stated in the contract or would not have bought the land if he knew it was smaller
50
Q

Rule of double sale or sale of Real Estate to two or more buyers:

A
  • The buyer who first REGISTERED the property with the Registry of Deeds
  • If there is no INSCRIPTION or is not REGISTERED, buyer with first POSSESSION
  • Should there be neither INSCRIPTION, REGISTRATION or POSSESSION, whoever can present the oldest title
51
Q

CAVEAT EMPTOR

A

“Let the purchaser beware”, buyer must be in charge or the knowledge of facts which are seen on the face of the title

52
Q

Sale with Mortgage vs. Sale with Assumption of Mortgage

A
  1. Sale with Mortgage: installment basis with transfer of ownership, a Contract of Sale where part of the price is paid upon execution of contract – 2 registrations are paid because it has 2 contracts
  2. Sale with Assumption of Mortgage: sale of a property subject to a pre-existing mortgage where the buyer pays a fixed amount and assumed the mortgage obligation – 1 registration and 1 contract
53
Q

Pacto de Retro Sale or Sale with Right to Repurchase

A

The essence of a pacto de retro sale is that the seller can buy back the property or redeem it within an agreed period BUT cannot exceed 10 years but if nothing is mention, 4 years is the standard

  • preference is contract to sell so buyer can just cancel the contract (no transfer for ownership), in the sale with mortgage buyer needs to wait for the redemption period before re-acquiring the title (transfer for ownership)
54
Q

Marital Consent in a Deed of Sale

A
  1. Marital consent is REQUIRED:
    a. Property is one of “Absolute Community of Property”
    b. Property is one of “Conjugal Partnership” and was acquired during marriage with common fund and by inheritance or exclusive funds of the acquiring spouse
  2. Marital consent is NOT REQUIRED
    a. Property is one of “complete separation of property”
    b. Property is one of “Conjugal Partnership”:
    • was brought into the marriage by either of the spouses as the husband’s capital property or the wife’s paraphernal property
    • was acquired by either spouse by inheritance
    • was acquired with the exclusive funds of either spouse
55
Q

Sale of Inherited Property

A

The following must be presented to the Register of Deeds:

  1. Deed of Extra-Judicial Settlement of Estate (Affidavit of Adjudication for only one heir)
  2. Deed of Sale
  3. Affidavit of Publication from newspaper published that the Extra-Judicial Settlement was published once a week for three consecutive weeks
  4. BIR certificate of Estate Tax Payment
  5. BIR certificate of Capital Gains Tax Payment
  6. Municipal/City Certificate of Non-Delinquency in Real Tax
  7. Owner’s duplicate title
56
Q

Maceda Law: Rights of Buyers under installment sale

A

Republic act No. 6552 or Maceda Law:

  1. Less than two years of payment: he is entitled to a grace period of 60 days, if payment is not made then he is still entitled to a notarial notice of at least 30 days duration is made before the seller can cancel or rescind the contract
  2. At least two years payment:
    A. PAY without additional interest, unpaid installments due within the total grace period earned by him: one month for every year, used only once in every five years of the contract or its extension
    B. REFUND is cancelled after notarial notice of cancelation or rescission of at least 30 days, cash surrender value is 50% of total payment effected during the five years but not elected 90% of the total payment
    - can transfer of assign their rights in the contract
    - pay in full the purchase price before the expiration of the contract term without interest
    - have contract annotated on the title
57
Q

LIS PENDES

A

Notice to the public that the property is subject to court litigation, buyers are aware of the risk when purchasing the property

58
Q

Subject to Sec. 4 rule 74 of the Rules of Court

A

Property is subject to a pending litigation it case, a dispute in the title of the property with its heirs, creditors and any other person with lawful right can file their claim within two years

59
Q

Dacion en Pago

A

Handing back the keys to their lender and involves signing a Deed at a Notary Public in exchange of being discharged for the remaining mortgage debt. The catch is that the property must not be in negative equity.

Struggling borrowers decide to hand the keys back to the bank in order to avoid being repossessed. Repossessed properties are usually left in negative equity, meaning you owe more money than what the property can raise in an auction. If after this you are in negative equity, the lender can actually pursue you abroad in your home country for the difference. The property itself, the collateral, was only guaranteeing the bank loan.

60
Q

TACITA RECONDUCTA

A

If at the end of the lease period the Lessee continues to occupy in silence of the lessor and without notice to vacate, it is understood that there is in implied new Lease Contract

61
Q

Essential Characteristics of a Mortgage

A
  1. Real Rights: mortgagee has the right to the exclusion of all other claimants to satisfy his claim in case the principle obligation is not paid
  2. Immovable: property that cannot be moved
  3. Accessory: mortgage subjects the property to the fulfillment of the principal obligation (i.e. Loan) for whose security (i.e. Property) which is accessory
  4. Indivisible: mortgage cannot be considered paid in full if only a portion is paid off
  5. It is real property: mortgage is attached to real property
  6. Inseparable: mortgage follows the property u in whatsoever possession it may be found
  7. Characterized by PUBLICITY to be INSCRIBED in the REGISTRY OF PROPERTY of the province where the property lies
  8. Limitation of ownership: gives the mortgage the right to have the property resisters for in the province where the property lies to have it validly constituted
  9. It is a Lien: the land will stay with the owner til the time it is either paid off in the time period, will be confiscated once the timeframe expires and they are unable to pay – putting a lien on the land
62
Q

Extent of Inclusions of Mortgage

A
  1. Natural Accessions: if a land bordering a river is mortgaged and its area is increased by alluvial deposits or sediments, the increase in area is also subject to mortgage
  2. Improvements: present and future houses or buildings in the land mortgaged are subject to mortgage unless otherwise stipulated
  3. Growing fruits: all fruits mortgages upon real estate included all fruits of the property not collected when the obligation falls due
  4. Rents and income: not yet received when the obligation falls due
  5. Indemnity owning it granted to the proprietor from the insurers of the property mortgaged or by virtue of expropriation for public use
63
Q

PACT COMMUSSORIUM

A

Authorizes the mortgage to appropriate the property as his own automatically upon the failure of the Mortgagor to fulfill the Principal obligation.

Authorizes the Mortgagee to sell property upon failure of payment

64
Q

PACTUM DE NON-ALIENDO

A

Prohibits the Mortgagor from alienating the property within the period of the mortgage.

65
Q

Two kinds of Foreclosure:

A
  1. Extrajudicial foreclosure: allows the Mortgagee to sell property in an auction of the Principal obligation is not fulfilled, it is undertaken by a sheriff, municipal judge or notary public
    • one year from after the sale to redeem the property
    • can only pursue a personal action in court for the deficiency
  2. Judicial foreclosure: no express authority in the Mortgage Deed to the Mortgagee to foreclose extra-judicially, it is undertaken through court
    • redeeming the property after foreclosure is not possible (except banks: DBP and PNB)
    • can ask for Deficiency Judgement to cover any part still unpaid
66
Q

Procedures of Extra-judicial Foreclosure

A
  • Mortgagee files an application with the Sheriff’s office to foreclose the mortgage
  • Foreclosure was filed with the Sheriff’s office is posted in conspicuous places where the property is located and published in newspapers of general circulation
  • After posting and publication of Notice of Sale, the sale itself is conducted under the direction of the Sheriff
  • The Sheriff follows the proper bidding procedures – sells the property to the highest bidder
  • The Sheriff issues a Certificate of Sale in favor of the highest bidder
  • Certificate of Sale is annotated on the title of the property
67
Q

Procedures in Judicial Foreclosures:

A
  • Mortgagee files a petition or complaint in court with competent jurisdiction, petition or complaint he is the Plaintiff, the Mortgagor or Defendant
  • The Plaintiff (Mortgagee) proves the existence of the mortgage, the amount thereof, the existence of the principal obligation and the non-payment for non-fulfillment thereof by the Defendant (Mortgagor) in a formal hearing
  • If the court is satisfied, it orders the Defendant to pay the debt within 90 days otherwise it will be auctioned
  • The Sheriff sells it to highest bidder and submits to the court the Certificate of Sale and the court approves the sale
68
Q

Contract of Antichresis

A

The Creditor acquired the right to receive the fruits of a property of his Debtor to serve as payment for the interest

69
Q

Requisites of Anticresis

A
  • Constituted to secure the fulfillment of a Principal obligation
  • The Debtor be the absolute owner
  • The person constituting the Antichresis has free disposal of his property and in the absence thereof,that he be legally authorized for the purpose
  • The amount of the Principal and the interest shall be specified in writing – without it will be void
  • Stipulated in the contract that the Creditor shall have the right to receive the fruits of the property of his Debtor with the obligation to apply them to the payment of the interest and to the Principal of his credit

Real Estate Brokerage Exam (10 decks)

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