Property for the Bar Flashcards
Which of the following would render title to land unmarketable?
A) A very slight encroachment onto an adjacent landowner’s land
B) An existing violation of a zoning ordinance
C) A mortgage that the seller will satisfy at closing
C) An existing violation of a zoning ordinance would render title to land unmarketable.
While the mere existence of a zoning ordinance does not constitute an encumbrance, if land currently violates a zoning ordinance, it would likely be considered unmarketable.
How may a buyer respond if a buyer determines that a seller’s title to land is unmarketable?
The buyer must notify the seller and give the seller reasonable time to cure the defects.
What does the Implied Covenant of Marketable Title provide?
Every land sale contract contains an implied covenant that the seller will provide marketable title at closing.
Marketable title is title reasonably free from doubt, which a reasonably prudent buyer would accept. While it need not be perfect title, it must not present the buyer with an unreasonable risk of litigation.
Generally, this means an unencumbered fee simple with good record title.
True or False:
If a mortgage exists on property when a real estate contract is signed, and the mortgage is not satisfied by the seller, the contract for sale of the property is VOID.
False.
The mortgage will remain on the land and will encumber the title in the hands of the buyer unless it is satisfied.
If the mortgage is not timely satisfied, the seller will breach the implied covenant of marketability, for which the buyer may pursue several remedies (e.g., rescission, damages, or specific performance with abatement of the purchase price).
However, the contract is not void.
Easements are generally considered encumbrances that render title unmarketable; so if an easement is not provided for in the contract, it usually renders the seller’s title unmarketable.
What is the exception?
Exception:
A majority of courts have held that a beneficial easement that was visible or known to the buyer does not constitute an encumbrance.
The hostility element of adverse possession requires that the possessor _______________________.
The hostility element of adverse possession requires that the possessor lack the true owner’s permission to be on the land.
- What interest does A hold, based on the below?
“To A, so long as the premises are used for organic farming.”
- Is A’s interest devisable?
- A holds a Fee Simple Determinable.
- Yes, all Fee Simple Determinable’s are devisable, descendible, and alienable, but will always be subject to the condition.
What future interest accompanies a Fee Simple Determinable?
A Possibility of Reverter.
If the conditions of a Fee Simple Determinable are violated, defeasance is _______________ and __________.
If the conditions of a Fee Simple Determinable are violated, defeasance is immediate and automatic.
- What interest does A hold, based on the below?
“To A, but if X occurs, Grantor reserves the right to re-enter and re-take.”
- What interest does the Grantor have?
- A holds a Fee Simple Subject to Condition Subsequent.
2. Grantor holds a Right of Entry.
True or False:
Foreclosure destroys interests junior to the mortgage being foreclosed.
True.
Foreclosure destroys interests junior to the mortgage being foreclosed.
Thus, if a senior mortgage is in default, a junior mortgagee has the right to pay it off (i.e., redeem it) to avoid being wiped out by its foreclosure. Failure to join the junior mortgagee results in the preservation of its interest despite foreclosure and sale.
Statutory redemption is the right of a mortgagor to recover the land after the foreclosure sale has occurred, usually by paying __________.
Statutory redemption is the right of a mortgagor to recover the land after the foreclosure sale has occurred, usually by paying the foreclosure sale price.
About half the states provide a statutory right to redeem for some fixed period after the foreclosure sale has occurred, usually six months or one year. The amount to be paid is generally the foreclosure sale price, rather than the amount of the original debt.
This right extends to mortgagors and, in some states, to junior lienors.
Equitable redemption is the right of a mortgagor to recover the land by paying ________________.
Equitable redemption is the right of a mortgagor to recover the land by paying the amount overdue on the mortgage, plus interest, at any time before the foreclosure sale.
The order of priority for allocating mortgage foreclosure sale proceeds is as follows, from first to last:
- ____________
- ____________
- ____________
- ____________
The order of priority for allocating mortgage foreclosure sale proceeds is as follows, from first to last:
- Expenses of the sale, including attorneys’ fees, and court costs;
- The principal and accrued interest on the foreclosing party’s loan;
- Any junior lienors in the order of their priority; and then
- The mortgagor.
In many cases, no surplus remains after the principal debt is paid off.
Homeowner’s house is foreclosed upon and sold in a foreclosure sale.
The mortgagor (that foreclosed) only recovered $50,000 in the foreclosure sale, but Homeowner owed $100,000 on the mortgage.
Is Homeowner still liable to the mortgagor for the remaining $50,000?
Yes, Homeowner is liable to the mortgagor for the full $50,000 amount.
Absent any anti-deficiency statutes, the investor remains personally liable to pay for any shortfall arising from the foreclosure sale.
Which of the following parties cannot be protected as a bona fide purchaser of land?
A) A donee from a bona fide purchaser of the land.
B) A purchaser from an heir to the land.
C) A devisee of the land.
D) A mortgagee of the land.
C) A devisee of the land.
Donees, heirs, and devisees are not BFPs because they do not give value for their interests; i.e., they are not purchasers.
The absence of his grantor’s deed from the chain of title will charge a purchaser of that property with __________ Notice.
Inquiry Notice.
When a grantor’s title documents are unrecorded, the grantee is required, at his peril, to insist on seeing the deed and requiring it to be recorded.
A recording act that provides:
“Any conveyance of an interest in land, other than a lease for less than one year, shall not be valid against any subsequent purchaser for value, without notice thereof, unless the conveyance is recorded,” is a ______ statute.
Notice Statute.
Under a notice statute, a later purchaser of land will prevail over an earlier grantee if she takes without actual or constructive (e.g., record) notice of the earlier grant.
In a pure notice jurisdiction, who owns the property?
A. Purchaser 1: buys property from Seller but does not record
B. Purchaser 2: subsequently buys property from Seller for value and without notice of Purchaser 1, but also does not record.
B. Purchaser 2: buys property for value and without notice of Purchaser 1, but also does not record.
In a pure notice statute, a subsequent purchaser for value and without notice of a prior conveyance will prevail over the prior transferee.
What is the “shelter rule”?
The Shelter Rule allows a person who takes from a bona fide purchaser to prevail against any interest that the transferor-bona fide purchaser would have prevailed against.
When is a property that has been acquired via Adverse Possession considered to have a Marketable Title?
Owner’s adverse possession itself will not establish marketable title.
Absent an action to quiet title or other tangible proof that title has actually been acquired, the owner’s title is not marketable.
The owner must offer the buyer additional proof that the buyer can use to defend any lawsuit challenging title.
What is a Purchase Money Mortgage?
A Purchase Money Mortgage is a mortgage typically given to a third-party lender, who is lending the funds to allow the buyer to purchase a property.
A Purchase Money Mortgage has priority over mortgages, liens, and other claims against the mortgagor that arise _______ to the mortgagor’s acquisition of title.
A. Prior
B. Subsequent
A. Prior
A Purchase Money Mortgage has priority over mortgages, liens, and other claims against the mortgagor that arise prior to the mortgagor’s acquisition of title.
A Purchase Money Mortgage is subject to being defeated by subsequent mortgages or liens by operation of the recording acts.
A recording act that provides:
“No conveyance or mortgage of real property shall be valid against a subsequent purchaser for value and without notice whose conveyance is first record.” is a ______ statute.
A race notice statute.
Under a race notice statute, a bona fide purchaser is protected only if…..
The bona fide purchaser records before the prior transferee/mortgagee records.
Under a race notice statute, a bona fide purchaser is protected only if the bona fide purchaser records before the prior transferee/mortgagee records.
