Pg 48 Flashcards
If a future interest holder is unborn or unascertained, can that be a defect that makes title and marketable?
Yes
When would a code violation be considered to be a defect that would make title unmarketable?
If a reasonable buyer would not accept title with the violation
When would a hidden defect make title unmarketable?
If a reasonable buyer would not accept title with the hidden defect
When would an encumbrance make title unmarketable?
Anytime someone else has a right in land, that makes title unmarketable unless the buyer contracted to accept it or the encumbrance is minor
What are examples of encumbrances that would make title unmarketable?
Leases, covenants, mineral reservations, easements, party wall agreement, marital rights, liens, unpaid mortgages, etc.
What would be an example when title would be unmarketable but an encumbrance doesn’t affect title?
If land has no public access. Title would be unmarketable until an easement or a public way is created
Is it proper for a seller to discharge an encumbrance from the sale proceeds and thus not have title be unmarketable?
Yes. The land would be subject to a mortgage or lien, but if the seller discharges it from the proceeds of the sale as long as the price is enough to cover it and precautions are taken, then closing makes title marketable. The same is true for removal of cloud on title
If it is very unlikely that the seller will be able to cure defects in title before closing, is it possible for the buyer to rescind?
Yes, but only if it is very unlikely because the seller doesn’t need marketable title until closing
Does a buyer have a duty to examine the title of property he is buying?
No, but he should
If the buyer of property discovers a defect that would make title unmarketable, what must he do?
Notify the seller and allow a reasonable time to cure. If the seller doesn’t cure, the buyer can avoid the contract. The time to cure may extend past the closing date, even if time is of the essence
How are “Time of the essence“ clauses in land sale contracts treated?
They are strictly enforced. So if you were hospitalized on the date of tender, you still breached
How does merger relate to marketability of title?
At the time the buyer accepts the deed, any title claims that can be brought have to be under the deed’s title covenants. This means that the contract title covenants merge into the deed and they cannot be the basis of legal action anymore.
The land sale contract merges into the deed, so after closing, the buyer cannot sue on the contract anymore, he can only sue on the deed if there’s a problem with the land.
– modernly: this is limited to title provisions of the contract and does not apply to fraud or mistake cases. It can be rejected if the parties show contrary intent
– uniform line transactions act: totally rejects merger unless the parties agreed to it in the contract
What is the remedy for unmarketable title?
– Notice and time to cure
– if there is no cure: rescission, damages, specific performance with abatement on price, quiet title suit
How do title insurance policies usually work?
The insurance company ensures that the person has marketable title, so if an issue comes up later, the insured can get recovery on the policy
If there is no wording in the land sale contract about time being of the essence, what is presumed?
It is presumed to not be of the essence
When does warranty of fitness or quality apply?
Only to new construction
What are different remedies that a buyer can get for defects on property?
– Warranty of fitness or quality: for new construction only
– negligence suit against the builder as long as there was privity
– misrepresentation/fraud
If there is an existing building on the property, does the seller have a duty to disclose defects or facts that would affect its value?
– Original rule of caveat emptor: buyer beware, so no duty on the seller to disclose defects
– modernly: many buyers can bring suit against sellers for not revealing defective conditions
Is the seller allowed to conceal defects or things that would affect the value of property?
The seller has a duty to disclose when he knows facts that materially affect the value or desirability of property which are not known or accessible to a diligent buyer. Ie: gruesome murders happened in the house which make the value 10K less, there is a duty to disclose
If a seller makes an affirmative misrepresentation about the property that is relied on by the buyer, what happens?
The seller is liable for fraud
If there is a special relationship of trust between the buyer and seller (fiduciary), what duty does the seller have?
The duty of candour and complete disclosure. This can come from the buyer asking a question that requires a candid and full response
Is passive failure to disclose defects on property actionable?
Not usually, but there is a growing trend that holds sellers liable for not disclosing material defects that are readily discernable from the buyer’s inspection of the property
Can a seller be liable to remote buyers even if there’s no privity for non-disclosure of defects?
Yes if he had reason to expect the nondisclosure would affect later buyers
If the buyer became aware of defects in the property from inspection or other sources before buying, or the defects were obvious, does the seller have liability?
No
What does it mean if property is stigmatized or psychologically impacted?
It was the site of something like a murder scene or has some psychological impact with no discernable defects, so it is considered undesirable because of its history or reputation, or its history negatively impacted the value.
Must a seller disclose to the buyer stigmatized property or psychologically impacted property such as a murder scene?
Many states do not require disclosure of this, but others do
Is it possible for a seller to disclaim a duty to disclose defects of property?
Yes, but only if it is done clearly and specifically. It must be explicitly bargained for and specifically identify the type of defect that the seller is not liable for. Just having an “as is“ clause is not enough
What are the considerations for a builder’s liability for the sale of a new house?
– The gravity of the harm inflicted by a nondisclosure
– fairness of imposing a duty of disclosure on the buyer as an alternative to compelling disclosure
– impact on the stability of contracts if rescission is allowed
– if the property is residential and bought by an unsophisticated buyer
– defect created personally by the seller
– seller gave reassurance to the buyer about the quality of the property
