Property 1--Conveyancing--Land sales contracts Flashcards
What is a land sale contract?
Land sale contracts often precede transfers of land that consist of escrows before closing.
Escrow - delivery of a deed to a third person to be held until the purchase price is paid.
Closing - Exchange of purchase price and deed
Property>Conveyancing
What does a land sale contract need to be enforceable?
It must be memorialized in writing + signed by the party to be charged and include the following three things:
1) a description of the property
2) identification of the parties to the contract
3) the price and manner of payment (if agreed upon)
Property>Conveyancing>Statute of Frauds Applicable
What is the doctrine of part performance?
A court may give specific performance of a contract despite the absence of a writing if additional facts present.
Real Property>Conveyancing>Land Sale Contracts>State of Frauds Applicable>Doctrine of Part Performance
What is the evidentiary theory supporting the doctrine of part performance?
Courts state that if acts done by a party can be explained only by reference to an agreement, these acts unequivocally establish the existence of an oral contract.
Real Property>Conveyancing>Land Sale Contracts>State of Frauds Applicable>Doctrine of Part Performance>Theories
What is the hardship or estoppel theory supporting the doctrine of part performance?
If acts done by a party in reliance on the contract would result in hardship to such an extent that it would be a fraud on that party were the contract not specifically enforced, the other party will be estopped from assertin gthe State of Frauds as a defense.
Real Property>Conveyancing>Land Sale Contracts>State of Frauds Applicable>Doctrine of Part Performance>Theories
In the majority of states, what is required in order to be qualified as a “part performance”?
Two of the following: (i) possession of the land by the purchaser; (ii) making of substantial improvements; and/or (iii) payment of all or part of the purchase price by the purchaser.
Property > Conveyancing > Land Sale Contracts > Statute of Frauds Applicable > Acts of Part Performance
What are the two relevant theories when determining whether a seller can obtain specific performance based on a buyer’s acts?
Evidentiary theory and hardship/estoppel theory.
Property > Conveyancing > Land Sale Contracts > Statute of Frauds Applicable > Can Seller Obtain Specific Performance Based on Buyer’s Acts?
How is the evidentiary theory used when determining whether a seller can obtain specific performance based on a buyer’s acts?
Under the evidentiary theory, it is immaterial who performed the acts constituting the part performance. Because they refer unequivocally to a contract, the seller may obtain specific performance based on the buyer’s acts.
Property > Conveyancing > Land Sale Contracts > Statute of Frauds Applicable > Can Seller Obtain Specific Performance Based on Buyer’s Acts? > Evidentiary Theory
How does the hardship and estoppel theory impact Statute of Frauds application to land sale contracts?
Under the hardship or estoppel theory, the plaintiff must be the one whose action would result in hardship if the Statute of Frauds were invoked. Consequently, the seller normally cannot rely on the buyer’s acts.
Conveyancing
What is the doctrine of equitable conversion?
Under the doctrine of equitable conversion, once a contract is signed and each party is entitled to specific performance, equity regards the purchaser as the owner of the real property. The seller’s interest, which consists of the right to the proceeds of the sale, is considered to be personal property. The bare legal title that remains in the seller is considered to be held in trust for the purchaser as security for the debt owed the seller. Note: possession follows the legal title, so even though the buyer is regarded as owning the property, the seller is entitled to possession until the closing.
Conveyancing
What is the risk of loss under the doctrine of equitable conversion?
If the property is destroyed (without the fault of either party) before the date set for closing, the majority rule is that, because the buyer is deemed the owner of the property, the risk of loss is on the buyer. Therefore, the buyer must pay the contract price despite a loss due to fire or other casualty, unless the contract provides otherwise.
Conveyancing
Casualty Insurance
Suppose the buyer has the risk of loss, as is true under the majority view but the seller has fire or casualty insurance that covers the loss. In the event of loss, allowing the seller to recover the full purchase price on the contract and to collect the insurance proceeds would be unjust enrichment. Hence, the courts require the seller to give the buyer credit, against the purchase price, in the amount of the insurance proceeds.
Real Property>Conveyancing>Doctrine of Equitable Conversion>Risk of Loss>Casualty Insurance
Passage of Title on Death
The doctrine of equitable conversion also affects the passage of title when a party to a contract of sale dies before the contract has been completed. In general, it holds that a deceased seller’s interest passes as personal property and a deceased buyer’s interest as real property.
Real Property>Conveyancing>Doctrine of Equitable Conversion> Passage of Title on Death
Death of Seller
If the seller dies, the “bare” legal title passes to the takers of his real property, but they must give upon the title to the buyer when the contract closes. When the purchase price is paid, the money passes as personal property to those who take the seller’s personal property. Note that if the property is specifically devised, the specific devisee may take the proceeds of the sale.
Real Property>Conveyancing>Doctrine of Equitable Conversion> Passage of Title on Death> Death of Seller
What happens to a buyer’s interest in property when the buyer dies before the contract of sale is completed?
The takers of the buyer’s real property can demand a conveyance of the land at the closing of the contract. Traditionally, the takers will have to pay the purchase price out of their share of the buyer’s estate. In most states, however, the takers will have to pay the purchase price unless the testator specifically provided to the contrary
Property>Conveyancing>Land Sale Contracts>Equitable Conversion>Passage of Title on Death
In what types of land sale contracts must the seller provide a title that is deemed “marketable?”
There is an implied covenant in every land sale contract that at closing the seller will provide the buyer with a title that is “marketable.”
Property>Conveyancing>Land Sale Contracts>Marketable Title
How can “marketability” of a title be defined?
A marketable title is a title reasonably free from doubt, i.e., title that a reasonably prudent buyer would be willing to accept. It need not be a “perfect” title, but the title must be free from questions that might present an unreasonable risk of litigation. Generally, this means an unencumbered fee simple with good record title.
Property>Conveyancing>Land Sale Contracts>Marketable Title>Marketability Defined
Title may be unmarketable because of a _____ in the chain of title.
Defect. Examples: variation in the description of the land.
defects in record chain of title
Most modern cases hold adverse possession titles to be marketable if: (i) the possession has been for a very lengthy period; (ii) the risk that the record owner will sue appears to be very remote; and (iii) ___________.
the probability of the record owner’s success in such a suit appears to be minimal.
adverse possession
Even though most states consider all types of____ interests to be transferable, it is often impossible for the owners of the present and future interests, acting together, to transfer a marketable fee simple absolute title.
future
future interest held by unborn or unascertained parties
Generally, ____, _____, _____, and _____ render title unmarketable unless the buyer waives them.
mortgages, liens, easements, covenants
encumbrances
When can a seller satisfy a mortgage and lein? What does that means for the title?
Sellers have the right to satisfy a mortgage or lein AT CLOSING with the proceeds from the sale–as long as the purchase price is enough and happens simultaneously with transfer of title, a buyer can’t claim that the title is unmarketable and the closing results in a marketable sale.
property > conveyancing > land sale contracts > marketable title > encumbrances > mortgages and leins
What does an easement do to the property and title? Are there any exceptions?
An easement devalues the property and renders title unmarketable.
Majority of courts hold that beneficial easements or ones that are visible/known to the buyer DOES NOT constitute an encumbrance [i.e., it would not render title unmarketable].
property > conveyancing > land sale contracts > marketable title > encumbrances > easements
Restrictive covenants _______ render title unmarketable.
NEVER
Restrictive convenants do not make the title unmarketable.
property > conveyancing > land sale contracts > marketable title > encumbrances > covenants
When does an encroachment NOT render title unmarketable?
Generally, a significant encroachment constitutes a title defect. However, an encroachment doesn’t render title unmarketable if:
(1) it’s very slight [only a few inches] and doesn’t inconvenience the owner whose land it encroaches on;
(2) the owner encroached on has indicated that they won’t sue on it; or
(3) the encroachment has existed for so long [many decades] that it’s become legal by adverse possession [as long as the state recognizes adverse possession title as marketable].
property > conveyancing > land sale contracts > marketable title > encumbrances > encroachments
What are zoning restrictions?
Zoning restrictions o do not affect the marketability of title; they are not considered encumbrances; an existing violation of a zoning ordinace, however, does render title unmarketeable
Property>Conveyancing>Land Sale Contracts>Marketable Title
