MBE Property Flashcards
A builder borrowed $10,000 from a lender to finance a small construction job under a contract with a homeowner. The builder gave the lender a writing that stated, “Any money I receive from the homeowner will be paid immediately to the lender, regardless of any demands from other creditors.” The builder died after completing the job but before the homeowner paid. The lender demanded that the homeowner pay the $10,000 due to the builder directly to the lender. The homeowner refused, saying that he would pay directly to the builder’s estate everything that he owed the builder. Is the lender likely to succeed in an action against the homeowner for $10,000?
No, because the writing the builder gave to the lender did not transfer to the lender the right to receive payment from the homeowner. There was no effective assignment of the builder’s rights to the lender. The writing did not sufficiently establish the builder’s intent to immediately and completely extinguish the builder’s rights under the contract with the homeowner and transfer them to the lender. A contract generally only confers rights and duties on the parties to the contract, not anyone else. However, an exception exists when a party seeks to transfer rights or duties under a contract to a third party, usually in the form of an assignment or rights or a delegation of duties. A valid assignment requires the assignor to manifest an intent to transfer his rights under the contract completely and immediately to the assignee. This intent may be determined by examining the terms language used to effectuate the assignment. Using the word “assign” is not necessary, and alternative words such as convey, sell, transfer will suffice. A third party may recover under a contract if she is an intended beneficiary, which means she has the right to sue to enforce the contract. A person is an intended beneficiary when two contracting parties intended to benefit that third party. However, a third-party beneficiary who benefits from a contract but whom the parties had no specific intent to benefit is said to be merely an incidental beneficiary with no enforceable rights.
Blackacre is a three-acre tract of land with a small residence. The owner of Blackacre rented it to a tenant at a monthly rental of $200. The tenant and the owner orally agreed that the tenant would purchase Blackacre from the owner for the sum of $24,000, payable at the rate of $200 a month for 10 years and also would pay the real estate taxes and the expenses of insuring and maintaining Blackacre. The owner agreed to give the tenant a deed to Blackacre after five years had passed and $12,000 had been paid on account and to accept from the tenant a note secured by a mortgage for the balance.
The tenant continued in possession of Blackacre and performed his obligations as orally agreed. The tenant, without consulting the owner, made improvements for which he paid $1,000. When the tenant had paid $12,000, he tendered a proper note and mortgage to the owner and demanded the delivery of the deed as agreed. The owner did not deny the oral agreement but told the tenant that she had changed her mind, and she refused to complete the transaction.
The tenant then brought an action for specific performance. The owner pleaded the Statute of Frauds as her defense. If the owner wins, it will be because:
A: nothing the tenant could have done would have overcome the original absence of a written agreement.
B: the actions and payments of the tenant are as consistent with his being a tenant as with an oral contract.
C: the tenant did not secure the owner’s approval for the improvements that he made.
D: the owner has not received any unconscionable benefit, and, therefore, the tenant is not entitled to equitable relief.
B: the actions and payments of the tenant are as consistent with his being a tenant as with an oral contract.
The Statute of Frauds mandates that any contract for the sale of land must be in writing and signed by
the party to be charged. The purpose of the statute is to prevent a party from fraudulently obtaining land by asserting that an oral contract existed where it, in fact, did not. The writing requirement serves this function by verifying the intent of the parties to enter into a contract for the sale of land. In this case, the tenant’s only evidence of an oral contract to sell Blackacre is a history of regular monthly payments and the fact that he made minor improvements to the property. If the owner prevails, it will be because the tenant’s actions are just as consistent with him being a tenant as they are with him being party to an oral contract.
Five years ago, a woman acquired Blackacre, improved with a 15-year-old dwelling. This year the woman listed
Blackacre for sale with a licensed real estate broker. The woman informed the broker of several defects in the house that were not readily discoverable by a reasonable inspection, including a leaky basement, an inadequate water supply, and a roof that leaked. The plaintiff responded to the broker’s advertisement, was taken by the broker to view Blackacre, and decided to buy it. The broker saw to it that the contract specified the property to be “as is” but neither the broker nor the woman pointed out the defects to the plaintiff, who did not ask about the condition of the dwelling.
After closing and taking possession, the plaintiff discovered the defects, had them repaired, and demanded that the woman reimburse him for the cost of the repairs. The woman refused and the plaintiff brought an appropriate action against the woman for damages.
If the woman wins, it will be because
A: the woman fulfilled the duty to disclose defects by disclosure to the broker.
B: the jurisdiction does not hold sellers liable for failure to disclose.
C: the broker became the agent of both the plaintiff and the woman and thus knowledge of the defects was imputed to
the plaintiff.
D: the seller of a used dwelling that has been viewed by the buyer has no responsibility toward the buyer.
B: the jurisdiction does not hold sellers liable for failure to disclose.
The actions of the woman would not support a misrepresentation claim (as there was no false statement
of fact) or an active concealment claim (as she did not attempt to conceal any defects). However, the woman would be liable for failure to disclose because: (i) she knew of the defects; (ii) the defects were not obvious upon reasonable inspection by the buyer; and (iii) the defects were serious. Furthermore, general “as is” provisions do not provide protection to a seller in cases of misrepresentation, active concealment, or failure to disclose. Therefore, the only way the woman would win is if the jurisdiction did not recognize failure to disclose as a cause of action.
Three years ago a landowner conveyed Blackacre to his niece for $50,000 by a deed that provided: “By accepting this deed, [the niece] covenants for herself, her heirs and assigns, that the premises herein conveyed shall be used solely for residential purposes and, if the premises are used for nonresidential purposes, the landowner, his heirs and assigns, shall have the right to repurchase the premises for the sum of one thousand dollars ($1,000).” In order to pay the $50,000 purchase price for Blackacre, the niece obtained a $35,000 mortgage loan from the bank. The landowner had full knowledge of the mortgage transaction. The deed and mortgage were promptly and properly recorded in proper sequence. The mortgage, however, made no reference to the quoted language in the deed.
Two years ago the niece converted her use of Blackacre from residential to commercial without the knowledge or
consent of the landowner or of the bank. The niece’s commercial venture failed, and the niece defaulted on her
mortgage payments to the bank. Blackacre now has a fair market value of $25,000.
The bank began appropriate foreclosure proceedings against the niece. The landowner properly intervened, tendered
$1,000, and sought judgment that the niece and the bank be ordered to convey Blackacre to the landowner, free and
clear of the mortgage.
The common law Rule Against Perpetuities is unmodified by statute.
If the court rules against the landowner, it will be because
A: the provision quoted from the deed violates the Rule Against Perpetuities.
B: the bank had no actual knowledge of, and did not consent to, the violation of the covenant.
C: the rights reserved by the landowner were subordinated, by necessary implication, to the rights of the bank as the lender of the purchase money.
D: the consideration of $1,000 was inadequate.
A: the provision quoted from the deed violates the Rule Against Perpetuities.
The quoted provision violates the Rule Against Perpetuities (RAP). RAP applies to three types of
interests: (i) vested remainders subject to open; (ii) contingent remainders; and (iii) executory interests. RAP dictates
that where any of these interests would vest outside of a life in being plus 21 years, it is void.
In this case, the facts indicate that if the property ever ceases to be used for residential purposes, the landowner
and/or his heirs have a right to repurchase, thus an executory interest. However, it could be decades before the land
is used for nonresidential purposes, meaning it could be decades before the landowner and his heirs’ interests can
become possessory. Because it may be longer than a life in being plus 21 years before that occurs, the language of
the grant violates RAP.
A leasing company owned Blackacre, a tract of 100 acres. Six years ago, the leasing company leased a one-acre
parcel, located in the northeasterly corner of Blackacre, for a term of 30 years, to a restaurant. The restaurant
intended to and did construct a fast-food restaurant on the one-acre parcel.
The lease provided that:
1. The restaurant was to maintain the one-acre parcel and improvements thereon, to maintain full insurance coverage
on the one-acre parcel, and to pay all taxes assessed against the one-acre parcel.
2. The leasing company was to maintain the access roads and the parking lot areas platted on those portions of
Blackacre that adjoined the one-acre parcel and to permit the customers of the restaurant to use them in common with
the customers of the other commercial users of the remainder of Blackacre.
3. The restaurant was to pay its share of the expenses for the off-site improvements according to a stated formula.
Five years ago, the leasing company sold the one-acre parcel to an investor; the conveyance was made subject to the
lease to the restaurant. However, the investor did not assume the obligations of the lease and the leasing company
retained the remainder of Blackacre. Since that conveyance five years ago, the restaurant has paid rent to the
investor.
The restaurant refused to pay its formula share of the off-site improvement costs as provided in the lease. The leasing
company brought an appropriate action against the restaurant to recover such costs.
The most likely outcome would be in favor of
A: the leasing company, because the use of the improvements by the customers of the restaurant imposes an implied
obligation on the restaurant.
B: the leasing company, because the conveyance of the one-acre parcel to the investor did not terminate the
restaurant’s covenant to contribute.
C: the restaurant, because the conveyance of the one-acre parcel to the investor terminated the privity of
estate between the leasing company and the restaurant.
D: the restaurant, because the investor, as the restaurant’s landlord, has the obligation to pay the maintenance costs
by necessary implication.
B: the leasing company, because the conveyance of the one-acre parcel to the investor did not terminate the
restaurant’s covenant to contribute.
The leasehold agreement created a contractual obligation that required the leasing company and the
restaurant to meet certain conditions. Since the investor did not assume the leasing company’s obligations under the
lease when he purchased the one-acre parcel, those obligations remained with the leasing company. The restaurant’s
obligations were likewise unaffected by the sale to the investor.
A woman entered into a valid written contract to purchase Blackacre, a large tract of land, from its owner for its fair
market value of $50,000. The contract was assignable by the woman. The woman duly notified the owner to convey
title to the woman and a friend of the woman whom the woman had not seen for many years.
When the woman learned that the friend would have to sign certain documents in connection with the closing, she
asked her brother to attend the closing and pretend to be the friend. The woman and her brother attended the closing,
and the owner executed an instrument in the proper form of a deed, purporting to convey Blackacre to the woman and
the friend, as tenants in common. The brother pretended that he was the friend, and he signed the friend’s name to all
the required documents. The woman provided the entire $50,000 consideration for the transaction. The deed was
promptly and properly recorded.
Unknown to the woman or her brother, the friend had died several months before the closing. The friend’s will, which
was duly probated, devised “All my real estate to my nephew” and the residue of his estate to the woman.
The woman and the nephew have been unable to agree as to the status or disposition of Blackacre. The nephew
brought an appropriate action against the owner and the woman to quiet title to an undivided one-half interest in
Blackacre.
The court should hold that legal title to Blackacre is vested
A: all in the owner.
B: all in the woman.
C: one-half in the woman and one-half in the owner.
D: one-half in the woman and one-half in the nephew.
C: one-half in the woman and one-half in the owner.
Even though the woman intended the friend to receive half of the title to Blackacre through her
assignment, that assignment was not effective. Half of the interest will remain with the owner, and half the interest
belongs to the woman, because at the time of the closing the friend was dead, so the interest could not be assigned.
As explained above, land sale contracts can be assigned just like many other types of contracts. However,
assignments require assent, acceptance, and notice. The friend could not properly accept the assignment of this land
sale contract because he died before manifesting any kind of acceptance.
