MBE One Sheets Flashcards
REAL ESTATE CONTRACTS:
First Step
General rule: a K must be:
(1) be in writing,
(2) be signed by the party to be charged, and
(3) contain essential terms (including identity of parties, price, & description of land).
A part performance exception exists if the claimant does 2/3:
(1) takes possession,
(2) makes payment in full of a substantial part of the price, or
(3) substantially improves the land.
First step cont.
- Negotiating K: persons such as brokers, real-estate agents, or attorneys can negotiate Ks if they are in an agency relationship & have legal capacity to do so.
- Payment: If a real-estate broker & seller enter into an exclusive agency agreement, broker obtains a commission only if his agent is cause of sale.
- If parties enter into an exclusive right to sell agreement, then broker is paid no matter who finds buyer—even if it is seller herself.
- Disclosure: Seller of home does not have to disclose defects unless (1) they are not obvious, (2) he knows/should know of them, & (3) defect is serious.
- However, seller** cannot **actively conceal defects.
- Warranty: for new homes sold by a builder-seller, there is an implied warranty of fitness.
2. K must satisfy/exclude
Warranty of marketable title.
- Marketable title is one “reasonably free from defects.”
- Must be given on closing day (but one can pay off a mortgage w/ proceeds of a sale).
- What makes title unmarketable? (DEVA)
1. Defect in chain of title
2. Encumbrance (mortgage/easement not mentioned in K)
3. Violation of a zoning ordinance
(4) Title acquired by adverse possession
Tip: a violation of a housing/building code does not render title
unmarketable.
3. Once K is Signed:
Legal & Equitable Title Split.
- Equitable title passes to buyer.
- Buyer’s interest is in the real property, so if something happens to the real property after K is signed (tornado destroys property), risk of loss is on buyer.
- Legal title remains w/ seller.
- Seller’s interest is the money (personal property) that seller will get from the sale.
- Closing occurs.
- Deed must be executed & delivered!
- Execution : deed identifies the parties, has words of grant, is signed by seller, & describes land.
- Delivery : intent to pass title presently.
- Delivery is presumed to have if deed is in grantee’s possession /if it is recorded.
Execution: IP, WG, SS, DL
Tip: marketable title must be given on closing date (not before).
5. Once Delivery Occurs:
Buyer Can Only Sue on Deed!
- Quitclaim deed: no warranties.
- Warranty deed: 6 covenants:
- (1) PRESENT (SEC) covenants of right to convey, seisin, no encumbrances
- (2) Future (FEW) covenants of further assurances, quiet enjoyment, & warranty.
- Merger occurs, so now buyer can ONLY SUE on the deed! He can no longer sue on the K.
RECORDING ACTS
- CL: First in time, first in right. One does not need to record one’s interest to have title.
- However, recording acts have the power to change CL result.
- Notice act: a subsequent bona fide purchaser (BFP) for value w/o notice can obtain title that is superior to that of someone who received property before him.
- Race-notice act: A subsequent BFP for value without notice who records first can obtain superior title.
- Notice can be (AIR): actual, inquiry, or record notice.
- Purchasers: Mortgagees & those who pay consideration are purchasers. Donees, heirs, & judgment lien creditors are not purchasers.
Tip: If you are given a statute to apply, look for the words “without notice” and “first records” to indicate a race-notice act. A notice act will look similar but will not have any language about recording first.
Recording Acts:
Shelter rule exception:
- Allows traditional grantees who are not protected by recording act to prevail by sheltering under rights of those who conveyed the land to them.
Recording Acts:
Forged Deed & Defective Documents:
- Forged deeds & defective documents do not give notice, so BFPs who receive these are not protected by recording acts.
Recording Acts:
Estoppel by deed:
- If grantor transfers property to grantee (when he does not have title to the property) by warranty deed & then later acquires title, title will automatically go to grantee unless grantor later gave land to a BFP.
Recording Acts:
Title insurance
- Purchaser’s protection against **unknown ** defects of record in chain of title.
- It is not required unless contractually agreed upon.
ADVERSE POSSESSION AND TRANSFER
BY OPERATION OF LAW OR BY WILL
- Adverse possession requirements (CHANGE):
- Possession must be:
- (1) continuous,
- (2) hostile,
- (3) actual,
- (4) open & notorious,
- (5) it must go on for statutory period (20 years), and
- (6) be exclusive.
- Tacking is permitted.
Note: if true owner has a disability (JIM: jail, insane, minor) at time adverse possessor enters, statutory period is tolled (paused) until disability is lifted.
ADVERSE POSSESSION AND TRANSFER
BY OPERATION OF LAW OR BY WILL
Transfer by Will Concepts:
- If property is specifically devised but testator does not own it when he dies, gift adeems (fails).
- There are exceptions (ex. if insurance proceeds were paid after death, beneficiary will take those).
Note: if beneficiary dies b/f testator, gift will lapse (unless jurisdiction has an antilapse statute that saves the gift).
ADVERSE POSSESSION AND TRANSFER
Exoneration:
- At CL, if a testator makes a specific devise of real estate that is subject to a lien, devisee is able to have lien exonerated & paid off by testator’s residuary estate. (Most states have abolished this doctrine.)
MORTGAGES AND SECURITY DEVICES
- A mortgage indicates existence of a debt.
- Mortgagor: debtor.
- Mortgagee: usually is a bank who lends money.
Tip: remember “It’s better to be the mortgagee” if you mix up these terms
Transfer by the mortgagor
- If mortgagor gives away her interest “subject to” the mortgage, original mortgagor is liable on the mortgage.
- If new transferee “assumes” the interest, both the original mortgagor and new transferee are liable.
- If there is a novation, then only the new transferee is liable.
Tip: remember the new party “assumes” liability as well.
Note: due-on-sale clauses (if mortgagor transfers interest in land w/o mortgagee’s consent, the full loan balance is due immediately) are enforceable.
Lien Theory and Title Theory
- Lien theory (majority of states): mortgagee only has a lien on the land.
- Title theory (some states): title is transferred to the bank right away upon loaning the money.
Foreclosure:
- Bank can begin foreclosure proceedings upon default.
Equity right of redemption:
- Allows a debtor to redeem the property by paying everything due under the mortgage agreement prior to foreclosure.
- This right cannot be waived in the mortgage/deed of trust but may be waived later for consideration.
Acceleration clauses:
- States entire balance is due if a payment is missed, & it is enforceable.
Other ways to discharge a mortgage:
- Full payment/mortgagor can give a deed to mortgagee in lieu of foreclosure.
Who gets paid first in a foreclosure proceeding:
- Party that forecloses & anyone “junior” to it is paid off in order of priority.
- All junior parties must be parties to the proceeding.
Note: a purchase money mortgage (PMM) (when money loaned is used to purchase the property) is senior to a non-PMM.
Increasing amount due:
- If a mortgagee voluntarily increases amount due under a mortgage, the increase in debt becomes junior to existing mortgages.
Note: Does not apply if the increase was a mandatory future advance.
Redemption after foreclosure:
Statutory Right of Redemption:
- Allows debtor to get property back after foreclosure sale by paying full purchase price w/in a period of time (ex. six months).
Other types of security devices
- Includes an absolute deed as security (parties don’t call it a “security interest” but one essentially gives a deed as security), a deed of trust (similar to a mortgage, but a trustee proceeds with foreclosure), & an installment land K (one pays off land in a “lease” & gets title to the land once all payments are made).
Present Interests:
Fee simple absolute:
- Ex.: “To A” or “To A and her heirs.”
- “A” has estate forever.
- A total restraint on transfer of ownership is not permitted, but limited conditions & rights of first refusal are permitted.
Present Interests:
Life estate
- Ex.: “To A for life.”
- Life tenants must pay taxes, pay interest on the mortgage, and make repairs.
- Life tenants cannot commit waste.
- Restrictions on alienation (transfer) are permitted.
Present Interests:
Fee simple determinable (FSD)
- Ex.: “To A for so long as A is in college.”
- A has a FSD. O has a possibility of reverter
- Measured by time
- Magic words of creation (SUWD): so long as, until, while, and during
- This estate ends automatically when time period ends.
FSDPOR
Present Interests:
Fee simple subject to condition subsequent (FSSCS)
- Ex.: “To A but if A smokes, O reserves a right of entry.”
- A has a FSSCS. O has a right of entry.
- Conditional; measured by occurrence of an event
- Magic words of creation: a right of entry must be reserved for the owner (O) (usually you’ll see “conditional” words: “but, if, upon condition…”).
- Estate ends when O enters.
Tip: if you see FSD and FSSCS language, there is a preference for a court to find a FSSCS.
Present Interests:
Fee simple subject to executory interest (FSSEI)
- Ex.: “To A but if A smokes, to B.”
- A has a FSSEI & B has executory interest.
- You will see durational/conditional language, but it will go to party B instead of back to O.
Future Interests:
- Held by grantor: right of entry, possibility of reverter, & reversion
- Held by grantee: executory interest & remainder
Future Interests:
Remainder:
- usually follows a life estate.
- A remainder is vested when remainderman is ascertained & it is certain to become possessory.
- It is contingent when remainderman is (UUU) unborn, unascertained, or if it is uncertain to vest due to a condition.
Future Interests:
Executory interest (EI)
- Shifting: when B divests a 3rd party of his interest.
- Springing: when B divests O of his interest.
- Shift: 3
- Spring: O
Concurrent Estates:
JOINT TENANCY (JT)
- Creation: (TTIP) time, title, interest, possession, plus express language needs to be used (ex. “as joint tenants with a right of survivorship”).
- Joint tenants have a right of survivorship.
- Destruction: It can be partitioned.
- Or, it can be severed by (GSAM) giving it away, signing a K of sale, an actual judicial sale by a creditor, or granting a mortgage in a title theory state.
Tip: one cannot give a JT interest away by will.
CE: TENANCY IN COMMON
- Creation: Only the right to possess the whole is needed.
- No survivorship right.
CE: TENANCY BY THE ENTIRETY
- Creation: Similar to a JT but parties must be married.
- It can only terminate by death, divorce, mutual agreement, or a mutual creditor of both executing on its interest.
CE: RELATIONS AMONG COTENANTS
(1) Possession: each tenant may possess the whole.
(2) Profits: In general, a cotenant does not have to share profits that he makes through his own efforts from the land.
- Exceptions: if there is ouster, depletion of natural resources in a way that decreases the value of the land, or lease to 3rd party.
(3) Right to contribution: for taxes, mortgage payments, & necessary repairs
LANDLORD AND TENANT:
TYPES OF TENANCIES
- Term for years: a tenancy for a* specific period of time*
(not necessarily “years”). - Periodic tenancy: tenancy without a specific end date.
- Tenancy at will: a tenancy that either party may terminate without notice.
- Holdover tenancy: a tenancy that occurs when a tenant stays past the end date of his lease.
LANDLORD AND TENANT:
RIGHTS AND DUTIES
- Tenant must pay rent & not commit waste.
- Landlord can require a security deposit.
- There is an implied warranty of habitability for *residential property *where landlord must keep property in habitable condition.
- Landlord can **constructively evict ** a tenant if there is something that renders *premises unusable, landlord fails to act after notice, & tenant leaves. *
- Tip: tenant must actually leave to win an eviction action.
- Premises unusuable, fail to act after notice, tenant leaves
LANDLORD AND TENANT:
ASSIGNMENT VS. SUBLETTING
- Assignment: When tenant assigns his entire interest, he is liable on the lease under privity of K.
- Assignee is liable under privity of estate.
- Sublease: When tenant rents his land to a sublessee but has some interest left, sublessor is liable on the lease under privity of K & estate.
- Sublessee is not liable to the landlord on the lease (but may be sued by sublessor).
Tip: nonassignment & nonsublease clauses are enforceable, but they are strictly construed & courts will try to find a waiver.
LANDLORD AND TENANT:
TERMINATION
(1) Eviction: if tenant does not pay rent, landlord can evict tenant from property.
(2) Surrender: If tenant does not pay rent but has abandoned the property, landlord can treat it as surrender. This excuses future rent obligations.
(3) Duty to mitigate: Landlord must try to mitigate damages by re-renting the land. (Note: this duty did not exist at common law.)
RULES AFFECTING THESE GIFTS:
Class gifts
- Class gifts are gifts to unnamed persons.
- Unless otherwise stated, the class closes when any member of the class can call for a distribution.
RULES AFFECTING THESE GIFTS:
Cy pres
- When a gift to a charity fails, the court may reform it to
match donor’s intention. - There are 3 considerations:
- (1) there must be property (or money) given for a charitable purpose;
(2) it must be impossible, impracticable, or illegal to carry out the purpose; and
(3) the settlor must have manifested a general intent to devote the property to a charitable purpose.
RULES AFFECTING THESE GIFTS:
Rule against perpetuities
- No interest is good unless it must vest, if at all, not later than 21 years after a life in being at the creation of the interest.
- Statutory reforms: the Uniform Statutory Rule states that an interest is good
- (a) if it is valid under CL, or (b) if it vests/terminates within 90 years after its creation.
RULES AFFECTING THESE GIFTS:
The Fair Housing Act
- Bars discrimination based on race, ethnicity, religion, national origin, gender, & disability in the sale/rental of a dwelling.
Not age
RULES AFFECTING THESE GIFTS:
Conflict of Laws—general rule:.
- The law of the situs (“the place where property is located”) controls
FIXTURES, ZONING, AND ASSOCIATIONS:
Fixtures
- A fixture passes w/ real property.
- Look at the intent to make the item a fixture & the following (DAMN) factors:
(1) Damage removal would cause,
(2) Adaptation of item to realty,
(3) Manner in which it is attached, &
(4) Nature of the item. - Trade fixtures are chattels that are used in business. They are not considered fixtures.
FIXTURES, ZONING, AND ASSOCIATIONS:
Zoning
- States may enact zoning regulations.
- Variance: a variance from an ordinance may be granted if property owner shows he has a unique hardship.
- Preexisting uses: Many zoning ordinances protect a preexisting use. But, as soon as that property is sold to a new party, the preexisting use no longer is protected.
FIXTURES, ZONING, AND ASSOCIATIONS:
Property Associations
- Owners of lots agree to contribute to the support of common property.
- In order to create it, there must be a master deed & privity between* original purchasers & developer*.
- Restrictions generally carry a presumption of reasonableness & usually are enforced.
RIGHTS IN LAND:
REAL COVENANTS
- The following is needed to enforce a covenant (PINT):
- (1) Horizontal & vertical privity (only vertical is needed for the benefit to run),
- (2) Intent for covenant to run,
- (3) Notice of covenant, &
- (4) It must touch & concern the land (make it more valuable).
- Remedy is money damages.
RIGHTS IN LAND:
EQUITABLE SERVITUDES
- Everything above is needed except privity.
- Remedy: injunction.
- Equitable defenses are available (ex. laches, unclean hands).
RIGHTS IN LAND:
EASEMENTS
- Creation: There are 4 methods of creation:
(1) Express: signed writing is required.
(2) Implied by prior use: common apparent use by a landowner who subdivides land.
(3) Implied by necessity: land is landlocked.
(4) Prescription: One uses the land openly, notoriously, continuously, & w/o permission from owner for statutory period of time. - Transfer: Dominant estate passes automatically. Servient estate passes only if the new owner has notice of the easement.
- Use: reasonable development is permitted but easement must be used for its original purpose.
- Termination: An easement can terminate in one of the following ways:
(1) Merger (if one owns the dominant & servient estate, easement ends)
(2) Release (a signed writing)
(3) Abandonment (act + intent to abandon; tip: mere nonuse is not enough)
(4) Estoppel (a statement by dominant estate holder & reliance by servient estate holder)
(5) Prescription (easement is blocked for statutory period)
(6) End of necessity (this applies only for an easement by necessity)
RIGHTS IN LAND:
LICENSES
- A license can be created orally.
- It is revocable at will unless coupled with an interest or reliance.
RIGHTS IN LAND:
PROFITS
- Profit: Right to go onto land & take a resource away (ex. wood, coal, etc.).
