Property Flashcards
Land sale contract
Transfer of land are preceded by K of sale.
Land sale K Statute of Frauds
To be enforceable, a land K must be memorialized in a writing that is signed by the party to be charged. SoF requires that the writing contain all “essential terms’” of the K including (1) a description of the property; (2) identification of the partes to the K; and (3) the price and manner of payment.
Land sale K doctrine of part peformance
Court may give specific performance of a K despite absence of a writing if there is part performance. Requires 2 or more of (1) possesion of hte land by the purchaser; (2) making substantial improvements; and/or (3) payment of all or part of the purchase price by the purchaser.
Land sale K specific performance
Land is unique so it is subject to specific performance for the buyer. Under evidentiary theroy, the seller can also enforce specific performance but under hardship or estoppel, the seller cannot unless they would suffer hardship.
Doctrine of equitable conversion
Once a K is signed and each party is entitled to specific performance, equity regards the purchaser as the owner of real property. Seller’s interest, consitting of right ot the proceeds of the sale, is personal property. Bare legal title remains in the seller and is considered to be held in trust for the purchaser as security for the debt owed the seller. Seller is entitled to possession until the closing.
Equitable conversion risk of loss
If property is destroyed without fault of either party, before date set for closing, majority rule is that, because buyer is deemed owner of the property, risk of loss is on the buyer. Buyer must pay K price despite fire etc unless K says otherwise. Some states place risk on seller. If seller has casualty insurance, must give buyer credit against purchase price for amount of insurance proceeds.
Equitable conversion passage of title on death
Deceased seller’s interest passes as personal property and a deceased buyer’s interest as real property.
If seller dies, bare legal title passes to takers of real property, but they must give up the title to buyer when K closes. When purchase price is paid, money passes as personal property to those who take seller’s perosonal property.
Death of buyer - if buyer dies, taking of real property can demand a conveyance of the land at the closing of the K. In majority of states the takers of real property will take it subject to the vendor’s lien for the purchase price. The takers of the real property will have to pay the price unless the testator specifically provided to the contrary.
Marketable title
Implied covenant in every land sale K that at closing the seller will provide the buyer with a title that is marketable: reasonably free from doubt. Need not be perfect title but must be free from questions that might present an unreasonable risk of litigation - be unencumbered fee simple with good record.
Unmarketable title - defects in record chain of title
Title may be unmarketable. E.g. variation in the description of land from one deed to the next, deed that was defectively executed, evidence that prior grantor lacked capacity to convey the property. Most courts say ancient liens or mortgags don’t matter - look for SOL.
unmarketable title - adverse posession
On Bar: Title acquited by AP is unmarketable despite fact that most modern cases disagree.
Unmarketable title future interest held by unborn or unascertained parties
IT is often impossible for the owners of the present and future interests, acting together, to transfer a marketable fee simple absolute title.
Unmarketable title encumberances
Mortages, liens, easements, and coveneants render title unmarketable unless the buyer waives them.
Mortgates and liens - Seller has the right to satisfy them at closing with proceeds of the sale.
Easements - if reduce the value of property, renders title unmarketable. most courts find Beneficial or visible or known one likely does not.
Covenants and options - restrictive covenants and options to purchase render title unmarketable.
encroachments render title unmarketable unless it is only a few inches and does not inconvenience the owner on whose land it encroaches; (2) the owner encroached upon has indicicated they will not sue; or (3) it has existed for so long - decades- that it has become legal by AP.
zoning restrictions - do not affect the marketability of title and are not encumberances. But an existing violation does render it unmarketable.
Quitclaim deed does not effect marketability.
Time of marketability
Usually, seller agrees to furnish title at date of closing. The buyer cannot rescind prior tot hat date on grounds that the seller’s title is not markeatable.
In an installment land K, the seller’s obligation to furnish marketable title when delivery is to occur, e.g. when the buyer has made the final payment. The buyer cnanot withhold payments or seek other remedies (recision) on grounds that the seller’s title is unmarketable prior to the date of promised delivery. Buyer may get recisionary relief before the date of delivery by showing that the seller cannot possibly cure the defects in time. Or, under compelling circumstances a court might require the seller to quiet title during the K period.
timing of Remedy if title is not marketable
Must notify the seller and give a reasonable time to cure the defects even if this requires extension of the closing date. Notice must specify the nature of the defects. If seller fails to cure defects, buyer may pursue remedies.
Remedy if title is not marketable
recision, damages, specific performance - absence a K stipulation to the contrary, if title is not marketable, buyer can rescind, sue for damages for breach, get specific performance with an abatement of the purchase price, or in some jx, require the seller to quiet title. Seller CANNOT sue successfully for damages for specific performance.
Merger: If buyer permits the closing to occur, K merges with the ded and in absence of fraud, seller is NO LONGER liable on the implied covenant of marketable title (the k disappears) after closing. But, buyer may have an action for violation of promises in the deed.
Merger DOES NOT apply to nontitle matters such as covenants regarding the physical condition of the property.
Time of performance of K
presumption - time is NOT of the essence. Clsoing date is not absoultely binding in equity and a late party can still tender peformance and enforce K if tenders within reasonable time (a month or two). Still liable for incidental losses.
Presumption is overcome if (1) K stipulates; (2) circumstances indicate it was parties intention e.g. rapidly fluctuating land value; (3) one party gives the other notice they desire to make time of the essence and does so within a reasonable time prior the closing date.
If time IS of the essence, closing date breach is total breach and loses right to enforce K.
Tender of K performance
Buyer’s obligation to pay purchase price and seller’s obligation to convey title are concurrent conditions. Neither party is in breach until other party tenders perofrmance even if after the closing date.
PArty’s tender of K performance is excused when
(1) party’s tender is unncessary and excused if the party has repudiated the K or if it is impossible for the other party to perform e.g. the seller doesn’t have marketable title.
Neither party to a K tender performance
if neither party tenders peformance, the closing date is auto extended indefinitely until one does tender.
Buyer finds seller’s title unmarketable
buyer must give seller a reasonable time to cure the defects.
Condition precedent in K unsatisifed
Most Ks for sale of residential property contain mortgage contingency clauses which provide that if buyer is unable to obtain a mortgage, K is voidable. Buyer must make a good faith effort to satisfy the condition precedent. Refusal to complete transaction for any other reason is buyer’s breach.
Remedies for breach of the sales K - Damages
Difference between K price and market value of land on date of breach. Incidental damages such as title examination can be recovered.
Liquidated damages - usually the amount deposited as earnest money and if buyer breaches, seller can keep it as liquidated damages. Most courts uphold retention of 10% or more deposit.
Remedy for breach of sales K specific performance
If buyer tenders purchase price, court of equity will order seller to convey title b/c land is unique. If seller cannot give marketable title, but buyer wants to proceed, they get specific performance and an abatement in the price.
Sellers generally get specific performance also. Modern courts may not if the land isn’t unique e.g. house in a big subdivision.
Remedy rules for unmarketable title
If title is unmarketable for reasons that are not due to seller’s bad faith, half of courts limit buyer’s recovery of damages to incidental out-of-pocket costs and return buyer’s earnest money deposit. Other half, give buyer standard measure of K damages.
Seller’s liability for defects on property warranty of fitness or quality
New construction only - generally, no K or deed carry implied warranties of quality of fitneess unless it is a K for sale of a residential building under construction or to be ocnstructed, on the ground that the buyer has no opportunity to inspect. Most Ks extend implied warranty of fitness or quality to sale of any new house by the builder. Warranty implied is that the new house is designed and constructed in a resonably workmanlike manner and suitable for human habitation.
Seller’s liability for defects on property - negligence of builder
Person who Ks for construction may always sue builder for negligence. Often, the ultimate vendee can sue the builder even though the seller hired the builder and the buyer lacks privity of K.
Liability for sale of existing land and buildings
Seller of exsting land and buildings may be liable to purchaser for defects in improvement for (1) misrepresentation (fraud) - requires proof that the seller made a false statement of fact to the buyer that the buyer relied on the statement and that it materially affected the value of th eproperty. Sller must have known statement was false or made it negligently (2) active concealment - sller took steps to conceal a defect in the property; (3) failure to disclose if (a) seller knows or has reason to know of the defect; defect is not obvious or apparent and seller realizes that the buyser is unlikely to discover it by ordinary inspection; and (c) defect is seroius and would probably cause the buyer to reconsider the purchase if it were known.
Courts are more likely to impose liabilty on seller if property is a personal residence, defect is dangerous, and seller personally created the defect or previously attempted to repair it and failed to do so.
Contract disclaimers of liabilty
As is clause - is NOT sufficient to overcome seller’s liability for fraud, concealment, or failure to disclose.
Specific disclaimers for specific defects ar elikely upheld.
Real estate brokers
Real estate sales K are negotiated by real estate brokers. Broker who obtained the listing from seller is seller’s agent. Other agents who participate in sale, are also seller’s agents unless they specifically agree to serve as buyer’s agent. Still owe a fiduciary duty to the seller, but also have duty to buyer to disclose material information about the property if they have actual knowledge of it.
Exclusive listing agreements
Seller may enter into an exclusive listing agreement with a real estate broker. Broker’s best efforts to sell the property is deemed consideration. Best efforts include expenditure of time, effort, or money.
Title insurance
title insurance policy insures that a good record title of the property exsts as of the policy’s date and agrees to defend the record title if litigated. Insurance can be taken out of either owner of the property or the mortgage lender. An owner’s policy protects only the person who owns the policy and DOES NOT run with the land to subsequent purchasers. A LENDER’s policy, follows any assignment of the mortgage loan.
Deeds
Generally, a transfer of title to an interest in real property can only be accomplished by a properly executed deed.
Deed formalities statute of fraud
Requires that a deed be in writing and signed by the grantor.
Deed formalities description of the land and parties
Must identify the land (not formal) but must be unambiguous. Parties may also be identified by name or description. If deed is delivered with identity of grantee blank, courts presume that the person taking delivery has auhtority to fill in the name and if they do so, it is valid. If land description is blank, no authority is presumed and deed is void unless grantee was explicitly given authority to fill it in and does so.
Deed formalities words of intent
Deed must evidence intention to transfer realty, but technical words are unnecssary. “grant” is sufficient.
Deed formalities consideration not required
Deed need not recite any consideration, nor must consideration pass to make it valid. Deed may validly convey real property by inter vivos gift as long as (1) donative intent, (2) delivery, and (3) acceptance.
Deed formalities - seal is unncessary
Deed formality attestation and acknowledgement
gennerally uncessary. Either or both might be required for the deed to be recorded though.
