Property Outline PART 1 (Midterm) Flashcards
1
Q
Dominant vs Servient estates
A
Dominant estate/tenement = the estate benefited by the easement
Servient estate/tenement = the estate burdened by the easement
2
Q
Easement appurtenant vs easement in gross
A
Easement appurtenant: benefits the holder in her use of a specific parcel of land
Easement in gross: benefits the holder personally but not in reference to any land she owns = personal right attached to a
person
–There is no dominant estate, only a servient
estate
–Not transferrable, unless commercial easement in
gross
3
Q
Affirmative easement vs negative easement
A
Affirmative easement = gives holder a right to do something on land that someone else owns or possesses
–Right of way
–Utilities
Negative easement = gives holder a right to prevent another owner/possessor from doing something on their own land
–Limited number and types: flow of air or light; support of building; flow of artificial stream
–Must be created expressly
–If not available, goal can usually be achieved by RC/ES
4
Q
Created by grant vs created by reservation
A
- Created by grant: grantor is owner of servient land and “grants” another an easement over her land
- Created by reservation: grantor is owner of dominant estate and “reserves” or retains an easement for herself in the servient estate
5
Q
License vs Easement
A
- License is a privilege re: use of land that can be created orally or in writing; generally is revocable at will
- An easement is an enforceable property interest
6
Q
Easement vs “profit a prendre” or profit
A
Easement gives right to perform an act on the property, e.g. enter or cross
A profit gives right to enter property and to detach and take something away from it, e.g. timber or minerals
7
Q
6 Main Ways to Create an Easement
A
1. Express By Implication 2. Implied from Subdivision Plats 3. Implied from Prior Use 4. Implied by Necessity 5. By Prescription (= servitude version of adverse possession) 6. Irrevocable license/Estoppel
also:
Implied dedication to public
Eminent domain
Regulatory taking
8
Q
Express Easement (rules)
A
- Must comply with Statute of Frauds
- Be in writing
- Be signed by party to be bound
9
Q
Alft v. Stewart (easements)
A
An easement is presumed to be appurtenant, as opposed to personal.
10
Q
Scope of Express Easement (analysis steps)
A
- If issue directly addressed in grant: Apply strictly
- If issue not directly addressed in grant, look to: Reasonable intent of original parties; can admit extrinsic evidence to clarify
- If not clear, and change is increase in “same use”
- If “different use”:
i. If not reasonably foreseeable at time of grant, then
ii. per se violation, and irrelevant whether or not increase burden on servient estate
11
Q
Types of Easements by Implication
A
Implied from Prior Use
Implied by Necessity
Implied from Subdivision Plats
12
Q
Implied from Prior Use (elements)
A
- Prior common ownership before severance of title to land
- An existing, apparent, and continuous use at time of severance
- Reasonable necessity for the use at time of severance
Maj: reasonable necessity
Min: Reasonable necessity BUT strict necessity if reserved
13
Q
Implied by Necessity
A
- Prior common ownership before severance of title to land
2. “Strict necessity” for the use at time of severance
14
Q
Bob’s Ready to Wear, Inc. v. Weaver (easements)
A
A court finds an easement by implication if a commonly owned tract is severed, and the grantor intended that a particular use of one portion of the property for the benefit of another be continued despite the severance.
15
Q
Melendez v. Hintz
A
For purposes of a prescriptive easement, an adverse use is one that constitutes some actual invasion or infringement of the owner’s rights.
16
Q
Difference between Easement by prior use and necessity
A
Amount of necessity:
Prior use: Reasonable Necessity
Necessity: Strict Necessity
17
Q
Prescriptive Easements (elements)
A
- Open and notorious use = visible or discoverable upon inspection or with knowledge of owner/possessor of servient estate
- Adverse use = use must be an actual invasion or infringement of right of owner/possessor, meaning without permission or consent of owner/possessor (i.e. trespass)
Need not be exclusive use to be adverse
General rule: presume adverse, so owner of servient estate has BOP to show use was permissive - Continuous use for the statutory period = regular use, but does not have to be constant
Successive claimants may “tack” as in possessory version of AP
18
Q
Irrevocable License/Easement by Estoppel (elements)
A
- License (express or implied)
- Substantial reasonable reliance by licensee
- Knowledge (or reasonable expectation) of reliance by licensor/true owner
- Inequitable to revoke license now
19
Q
Scope of Easements & Violations
A
Types of violations:
1. Change in use
A. Increased use of same kind
B. Different use
2. Maintenance and repair
3. Relocation
4. Use to benefit another parcel of land (Brown v. Voss)
20
Q
Heydon v. Mediaone
A
A commercial, exclusive, prescriptive easement in gross can be apportioned so long as the apportionment does not unreasonably increase the burden on the servient estate.
Understanding terms:
– Exclusive or nonexclusive
– Assignable (transferable)
– Apportionable (divisible)
21
Q
Transfer of Easements (appurtenant)
A
“Attached to land” so automatically run with land to subsequent owners of both dominant and servient estates,
EVEN if not included in later deed!
BUT if
- express easement and
- subsequent owner qualifies for protection under the relevant Recording Act and
- subsequent owner has no notice (actual, record or inquiry), then this subsequent owner not subject to the easement
22
Q
Transfer of Easements (gross)
A
Run with land on servient estate to subsequent owners
If non-commercial: owner cannot transfer
If commercial: owner can transfer
23
Q
Termination of Easements
A
Written Conveyance or Release
Merger
Prescription: servient estate owner’s interference with use of easement
Abandonment (owner of the easement acts in an affirmative way that shows a clear intent to relinquish the easement)
Stated scope or condition in easement: e.g. “an easement for 10 years” or “so long as”
If created by necessity: terminate when necessity ends
If created by estoppel: terminate when licensee has recouped value of reliance investment
Condemnation of servient estate by government under Eminent Domain
24
Q
Affirmative RC/ES vs negative RC/ES?
A
Affirmative: promise to perform a specific act on or related to own land
Negative: promise to not perform a specific act on own land
25
Negative Real Covenant vs negative easement?
Both are owner’s promise to not do something on own land that otherwise could legally do
Different requirements for creation
26
What if there’s both a Promissory Servitude and Zoning?
General rule: Zoning ordinances do not automatically override a private restrictive covenant.
If both are valid, the stricter of either the zoning ordinance or the covenant will prevail.
27
Real Covenant requirements:
1. SoF
2. Intent to run with the land (explicit or implied)
3. Privity (Horizontal and Vertical)
4. Touch and Concern
5. Notice
28
(Express) Equitable servitude requirements
1. SoF
2. Intent to run with the land (explicit or implied)
3. Notice
i. Actual
ii. Constructive
a. Constructive
b. Inquiry
4. Touch and Concern
29
(Implied) Equitable servitude requirements
1. Initial common owner, common plan, and intent to apply to this parcel
2. Intent to run with the land (implied)
3. Notice
i. Actual
ii. Constructive
a. Constructive
b. Inquiry
4. Touch and Concern
30
SoF requirement (Servitudes)
MAJ: RC can only be created explicitly with writing
MIN: allows traditional exceptions to SOF (estoppel and part performance)
What is required?
1. Writing
2. Signed by the grantor/promisor (For transfer of property interest via a deed, grantee not required to sign. Her acceptance of the deed binds her to any RC in it)
3. Identify the grantor/promisor and grantee/promisee
4. Describe the property at issue
5. Contain the subject/promise
6. Usually in a deed, lease or other document used to convey a property interest
31
Intent to Run with the Land requirement
Explicit:
Traditional language: “I, owner of Blackacre, on behalf of myself, my heirs, successors and assigns promise...”
Implied:
Implied from nature of restriction, relationship of parties and other circumstances at the time of the creation of the covenant
(trying to infer the intent of the original covenantors)
32
Does Plaintiff need to prove HP? (RCs)
Majority rule: Plaintiff (person claiming benefit of RC) must prove HP if she is enforcing the burden of the RC on a successor in interest (the defendant)
Minority rule: Plaintiff never required to prove HP (3rd Restatement)
33
Two Alternative Tests for Meeting the HP Requirement
(1) Mutual interests test
| (2) Successive Relationship Test
34
Mutual interests test (HP alternative test)
At the time when the provision was agreed to the originally covenanting parties both had some preexisting interest in the same property that was independent of the covenant
Both parties owned interest in the same property
(ie. easement appurtenant or landlord-tenant relationship)
35
Successive Relationship Test (HP alternative test)
Original parties were in a successive (i.e. grantor-grantee) relationship regarding the covenant because the covenant was expressly included in conveyance with the parcel at issue
Successor had covenant in the deed
36
When is vertical privity required? (RCs)
Traditional rule/Majority rule:
Always if a subsequent owner involved
(a) If the plaintiff seeks to impose the burden of the agreement on a subsequent owner, vertical privity is required
(b) If the plaintiff is a subsequent owner and seeks to claim the benefit of the agreement, vertical privity is required. She must show that the benefit of the covenant runs to her
Minority rule:
The 3rd Restatement generally discards the traditional Vertical Privity requirements and replaces them with distinct rules for various kinds of interests. For our purposes, we’ll treat the Restatement as merely discarding the Vertical Privity Rules.
37
What kind of vertical privity is required?
(a) For the plaintiff to impose the burden, the successor landowner (defendant) must own the identical durational interest in land that the original covenanting party owned, (e.g. if she had a fee simple, she must have transferred a fee simple) = I call this “strong VP”
(b) For the plaintiff to claim the benefit: the plaintiff must own some interest in the land that the original covenanting party owned (e.g. OK if original covenantor had a fee simple and the plaintiff owns a life estate or leasehold estate in the same land) = I call this “weak VP”
38
Notice (RCs)
Notice of the RC is not a common law requirement to create a RC that runs with the land
BUT in many situations if the defendant did not have any kind of notice of the RC (e.g. actual, record or inquiry), then under the relevant recording act the defendant can raise lack of notice as a defense against enforcement of the RC against her
39
Final Bits on Privity to attack questions
* Analyze Does Benefit Run? and Does Burden Run? separately
* What needs to be proved about privity (i.e. HP, VP on one side of the transaction, or VP on both sides) depends upon who is suing whom
* If both Plaintiff and Defendant are subsequent owners consider “electric circuit” metaphor
40
Touch and Concern Rule and Test (RCs)
Rule: A covenant touches and concerns the property if it affects the owners in their legal relations as owners of the property so that enforcement of the covenant will benefit or burden the owners in their use and enjoyment of the property.
If the benefit is in gross, the burden won’t run.
Test:
If enforcement of the covenant would affect the value of the property in the market, the covenant touches and concerns the land.
41
Types of notice and how established (ESs)
Actual: Read, heard about or saw the agreement
Constructive:
Record: The fact was duly recorded in the public records so all members of the public are charged with knowing it, whether or not they ever actually checked the records.
Inquiry: Defendant knew one fact that would lead a reasonable person to perform an investigation.
A reasonable investigation would have revealed some other fact
Defendant is charged with knowing this other fact, whether or not they ever actually conducted any investigation.
42
Implied Negative Reciprocal ES Doctrine
Elements required to substitute for SOF:
1. Initial Common Owner
2. Common Plan for All of the Parcels
3. Intent to Apply Plan to the Parcel at Issue
Two SOF and Notice problems that it solves:
Sloppy Developer: ES re “no commercial use” accidentally left out of deeds to B and F
Opportunistic Developer: ES re “no commercial use” intentionally left out of deeds to B and F to promote sales in down market
43
Arbitrary RCs/ESs
Presume reasonable and enforceable, but unenforceable if “unreasonable”:
Arbitrary
Violate fundamental public policy
Or Impose a burden on the use of affected land that far outweighs the benefit
Nahrstedt v Lakeside Village Condo Assn (cat case) vs Gabriel v. Cazier (swimming lessons)
44
Ways both RC and ES can be terminated:
```
Termination by nature of the RC or ES
Express Agreement/Release- must be from all benefited owners
Merger
Prescription
Abandonment
Eminent Domain
Changed Conditions
Estoppel
Laches
Acquiescence
Unclean Hands
```
45
Stages of a Land Transaction
1. Offer to Purchase & Negotiations
2. Land Sale Contract
3. Executory Period
4. Closing
5. Post-Closing
6. Post Move-In Issues
46
Actions Necessary for Broker to Earn a Commission
Majority: Does not require that brokers actions actually result in a sales contract. Does not require that deal closes.
Minority: Broker’s commission is not earned until sale closes (no closing = no commission)
However: if the seller breaches the sales contract and refuses to close, then seller must pay the broker the commission (liable due to interference with a contract for a prospective advantage)
If buyer breaches, then breaching buyer may have to pay the broker’s commission.
Backdrop: Broker must procure a “ready, willing and able” buyer – procure the sale
47
Listing Agreements
What is a listing agreement? = employment contract that authorizes payment of broker for services
Legal requirements for listing agreement:
1. Must be in writing
2. But could be implied if a broker is instrumental in achieving a sale
3. Must state the commission
48
Types of Listing Agreements
Open listing agreement?
--Seller can use another broker to sell
Exclusive agency contract?
- -Seller cannot use another broker (or must still pay commission if another broker is used)
- -But seller retains the right to sell by herself, in which case, no commission owed
- -Broker receives a commission no matter who sells the property
49
Essential Terms for a Land Sale contract
(1) Identify the parties (both buyer and seller)
(2) Include words showing intent to buy or sell
(3) State the price or how it will be determined
(4) Describe the property adequately
- -Street address or other clear identifier sufficient for purchase and sale contract
5. Must be signed by the party or parties to be charged (who would be defendants)
- -Agent can sign instead of principal if principal-agent relationship in writing
50
What is required and what is sufficient for the “Writing”?
```
Memorandum of an oral contract is sufficient if all of the required elements are present
Documents can be:
1. in electronic form
2. informal (e.g. letters or a check)
3. prepared after agreement
```
51
Exceptions to SOF: Part Performance (land sale)
Buyer must show there was an oral contract and its basic terms and two of the following three:
1. Paid the purchase price (Jxn split: partial/substantial/full payment)
2. Took possession by moving onto the property
3. Made substantial improvements to the property
52
Exceptions to the SOF: Equitable Estoppel or Detrimental Reliance
(1) Evidence of an oral contract
(2) Buyer substantially changed position by doing reasonable/justifiable reliance
(3) Serious/irreparable injury will occur if not perform the contract
Some courts add: Knowledge of reliance by seller
Part performance doctrine is narrower: actions based on contract relate to land (payment, taking possession, and/or improvements)
Equitable estoppel doctrine is broader: actions explicable by the contract do not have to relate to the land at issue (e.g. cared for elderly relative based on oral contract to receive the property; entered into other contracts on expectation of owning land; etc.)
53
Concurrent conditions (land sale)
Failure of seller or buyer to meet conditions by the time of closing entitles the other party to rescind.
54
Title is unmarketable if:
"free from reasonable doubt, but not every doubt"
1. The seller does not own the title they purport to be selling,
or
2. It is subject to any liens, easements, or other encumbrances. (unless specified?)
55
AP and Marketable title
MAJ: Treat as marketable if
1. seller in possession for very long time,
2. risk of lawsuit is remote and
3. probability of success in lawsuit is minimal
MIN: title acquired by AP as unmarketable
56
Encumbrance Does NOT make title unmarketable if the encumbrance is:
1. Disclosed in the sales contract and
2. the offer is made subject to that encumbrance → by signing contract the buyer is waiving it.
Special rules regarding easements (MAJORITY RULE)
1. Beneficial to the property
2. Visible (may be less important if Known)
3. Known to the buyer before entering the contract
MINORITY RULE: If buyer should have known
57
Example of Conditions that do NOT render title unmarketable
Physical defects in the property – physical defects do not relate to the TITLE and do not make it unmarketable
Leaky roof, toxic leak, landlocked, etc
Duty to disclose physical defects is a separate issue
Violation of housing or building codes (as distinct from violation of zoning ordinances)
58
If Buyer Discovers Title Defect Before Closing
Buyer who discovers title defect has duty to inform seller and give reasonable opportunity to cure defect
Seller may extend closing date for reasonable period to cure defect, if no “time is of the essence” clause.
“Time is of the essence” clauses strictly enforced
Seller has right to pay an unpaid mortgage and other liens at closing with proceeds of sale.
59
If Seller can’t deliver marketable title at closing:
1. Buyer is excused from performance and
2. Seller is in breach
- -The seller’s lack of knowledge of the defect is irrelevant.
- -Buyer has the right to rescind even if the defect doesn’t matter to the buyer’s contemplated use.
60
Buyer’s remedies if Seller can’t deliver marketable title at closing:
1. Seek specific performance with an abatement (value of the defect)
2. Rescind the contract and recover the down payment and other restitution
3. Sue seller for damages
61
If Buyer discovers the defect after the closing (land sale)
Unless contract provides otherwise, the title protections expire by “merging” with the deed.
Buyer’s remedy will be in covenants of title in the deed or title insurance.
Doctrine of merger subject to two exceptions:
1. Not apply to collateral promises in contract not relating to title, e.g. promise to replace roof before closing
2. Seller committed fraud
62
Zoning and Marketable Title
Zoning does not make unmarketable, but violation of zoning ordinance does
Violating of building code not make unmarketable
63
Tender of performance
Seller’s duty to deliver the deed and Buyer’s duty to pay purchase price are concurrent conditions–neither is in breach until the other tenders performance.
A tender of performance = offer to perform
Tender is excused if a party exercises a contingency to void the contract or under other limited circumstances (e.g. prior repudiation or performance is impossible)
64
Time for performance (land sale)
If the sales contract does not include a closing date, then the parties with close within a “reasonable time”
If the sales contract includes a closing date (but does not include a “time is of the essence” clause and a court will not infer that time is of the essence based upon the circumstances when the contract was formed), then the parties have a “reasonable time” after the stated closing date to resolve issues and close.
Late performance:
if delay followed by a successful closing, the delaying party is still liable for actual damages caused by delay
65
Time is of the essence
If the sales contract includes a “time is of the essence” clause, then the parties must be ready to close on the stated closing date.
Close to strict liability
66
Can buyer void contract for sale if they discover possible Adverse Possession claim before closing?
No, cloud on title does not itself constitute a breach by seller
Buyer must notify seller and provide a reasonable time to cure
67
Can seller void the contract? (land sale closing)
No, seller has duty to provide marketable title. Can’t use their own failure to provide marketable title as an excuse to back out of deal.
68
Remedies for breach by seller (land sale closing)
If seller unjustifiably refuses to close, what remedies can buyer seek?
1. Seek specific performance–usually preferred
2. Sue for damages
3. Rescind the contract, recover down payment and other restitution
If the seller fails to provide marketable title by the closing date (or a reasonable time thereafter), what additional remedy can buyer seek?
4. Specific performance with an abatement of the purchase price (based upon value of title defect)
69
Remedies for breach by buyer (land sale closing)
If the buyer breaches (unjustifiably refuses to buy), what remedies can the seller seek?
1. Collect liquidated damages pursuant to the agreement (usually just keeps deposit)
2. Sue for monetary damages
3. Sue for specific performance
70
Liquidated damages clause sets amount of damages if default
Enforceable if:
1. Actual damages likely to be uncertain/difficult to determine in advance
2. Clause sets reasonable amount
3. Not functioning as a “penalty”
4. Usually OK if 10% or less of purchase price
Min rule: compare amount in contract with actual damages incurred
71
Loss of bargain damages
= difference between the contract price and the fair market value at the time of breach
72
If seller not deliver marketable title and was in good faith: Jurisdictional split
Some jxns: If good faith, (e.g. seller didn’t know of title defect when entered contract to sell), buyer gets only payments made to seller and incidental damages, not loss of bargain damages
Other jxns: Good faith of seller not matter, buyer still entitled to loss of bargain damages
If buyer breaches, generally they lose their deposit
Unless amount of loss of bargain damages sufficient to justify seller bringing a lawsuit
But minority rule: if deposit > seller’s actual damages, buyer gets difference back
73
Damages (land sale)
Incidental damages = transaction costs or out-of-pocket expenses incurred in reliance on the contract
Consequential damages = special foreseeable consequential damages (e.g., lost rents; anticipated profit on re-sale)
If provable with reasonable certainty
But if buyer gets full loss of bargain damages usually not get consequential damages too.
74
Breach rescission and restitution (land sale contract)
Rescission: Cancel the contract, so excused from performance
Restitution: Restore parties to positions before the contract, usually by returning the performance(s) given by other party
If Seller breach, usually means returning Buyer’s deposit and incidental expenses
Can include settling up because of other expenses incurred by other party during the executory period
75
Specific Performance and defenses (land sale)
General requirements: Equitable remedy when monetary damages [at law remedy] are inadequate
Equitable defenses to this equitable remedy:
1. Unusual hardship to defendant
2. Laches
3. Unclean hands
76
Contingency Regarding Condition of the Property
A well-negotiated purchase and sale contract will include a contingency regarding the physical condition of the property and allow an inspection.
If the inspection reveals problems, the buyer may decide not to proceed, exercise the contingency and terminate the contract. Most likely if major problems, e.g. severely cracked foundation.
Or, if there are minor problems (e.g. termite remediation), the parties might renegotiate the price of the property and possibly renegotiate the closing date.
77
Doctrine of Equitable Conversion
Majority rule: After a valid purchase and sale contract is signed and each party is entitled to specific performance, under the C/L doctrine of equitable conversion:
The buyer has an equitable interest in the property = is the owner “in equity”
Nature of this seller’s interest is deemed personal property
Because buyer is owner in equity, the risk of accidental loss is on the buyer.
So, if the property is accidentally damaged or destroyed before closing, the buyer must go through with the deal and pay the agreed contract price for damaged or destroyed property
No mortgage for Seller, cannot create the encumbrance on the property even if still in possession of property (only bare legal title)
78
Equitable Conversion and Risk of Loss (JDX rules)
Majority C/L rule: If the property is accidentally destroyed prior to closing, the buyer bears the risk. So if there’s damage due to accidental fire or something else, buyer still has to go through with the purchase at the agreed contract price.
Minority C/L rule: Some state’s common law reject the EC doctrine.
Massachusetts rule rationale: if the seller can’t deliver the “subject of the contract” then consideration fails, and buyer doesn't have to go through with sale
Subject to contract: These are only default rules, parties can negotiate about who bears the risk of loss.
79
What if seller carries property insurance? (equitable conversion)
If equitable conversion doctrine applies, there is an accidental loss, and only the seller carries property insurance that covers it (eg fire and casualty insurance)
Then seller will be required to apply the insurance proceeds to the sales price or keep them in trust for the buyer to use for repairs
Otherwise would be unjust enrichment
80
Equitable Conversion and Death of Seller Prior to Closing
If seller dies:
Seller only had “bare” legal title, her estate must complete the conveyance, and her property interest is treated as a “personal property interest” in the proceeds of the sale.
If died testate:
Devisees who got real property interests must go through with the deal and transfer title to the buyer
Devisees who got personal property interest get to keep the proceeds of the sale
If died intestate
Estate must go through with the deal and will distribute the proceeds to the heirs under state’s Statute of Intestacy
81
Equitable Conversion and Death of Buyer Prior to Closing
If buyer dies:
Testate
Devisees of her real property can demand conveyance at closing
Maj rule: If they do, devisees of real property will take subject to seller's rights to proceeds, so they will have to pay the purchase price, unless the will provides someone else will pay.
Min rule: C/L doctrine of exoneration: devisees of personal property will have to pay the purchase price to “exonerate” (= release from obligation) the gift for the devisees of real property.
Intestate
Don’t worry about it
82
Three Rules in Disclosing Defects/Land Sale
Contemporary common law: several jurisdictional rules
1. Seller has affirmative duty to disclose material latent defects of residential property under certain conditions
2. Prohibit seller from committing fraud, making affirmative misrepresentations, or actively concealing defects on any real property sale
3. Builder’s Implied Warranty of Quality
Statutes
State: MAJ: duty to disclose through forms
83
Rule 1: Duty to disclose defects
Maj common law rule: Seller’s must disclose material, latent defects
Applies to only residential property. Law assumes parties in commercial real estate transaction will negotiate terms on issues they care about.
Relevant defects:
Applies only to defects known to the seller or should have known
Maj: applies only to the property’s characteristics, not to off-site conditions that might affect property value or health
Min: Some courts extend to off-site conditions and legal defects
Min: Some courts include “psychologically impacted” property but limited by statute (ghosts)
84
“Material” and "latent" defects
Maj use “objective” rule:
1. Reasonable person standard or
2. Significantly affect property value
Min: “subjective” standard: the seller knows would be important to the buyer
“Latent” defects: would not be discovered by a reasonable inspection
85
Can duty to disclose be waived and remedies for failure to disclose
Maj: a clear, specific waiver is enforceable
Unclear if an “as is” clause in the sales contract is sufficient
remedies: Rescission and restitution
86
Rule 2: No Fraud, Affirmative Misrepresentation, or Active Concealment
Applies to both residential and commercial properties
Less demanding than affirmative duty to disclose defects
Applies in all jurisdictions: No jurisdiction wants to allow fraud in real estate transactions
Elements of fraudulent misrepresentation:
1. A false statement of material fact
2. Known to the seller to be false
3. With the intent to mislead and induce the buyer to purchase
4. Which the buyer justifiably relies on in deciding to purchase
5. To the buyer’s detriment or loss
87
Rule 3: Builder’s Implied Warranty of Quality
Majority: Imply warranty of quality in sale of all new homes
AKA implied warranty of fitness, suitability, habitability
Extension of “implied warranty of habitability”
What is the warranty?
Building is constructed in a “workmanlike manner” and is “fit for human habitation”
Only covers significant defects
Only covers latent defects
Maj: only covers residential, not commercial
Maj: Can be waived if clear and unambiguous waiver, not if a “boilerplate” waiver though.
Maj rule that successor owner can enforce against builder
88
Elements of a Valid Transfer by Deed
1. Valid deed
2. Valid delivery of deed
3. Acceptance of deed
89
“deed by estoppel”
If grantor purports to convey ownership of real property with a warranty deed to which he does not have legal title at the time of the conveyance,
And the grantor later acquires that property
It automatically vests in the grantee when the grantor acquires it
90
Doctrine of Merger
When buyer accepts the deed (usually at closing) the promises/covenants in contract for sale “merge” into the deed, and then buyer’s rights regarding title are largely determined by whatever type of deed has been delivered and accepted
Exceptions
Fraudulent deed
Collateral promises, i.e. not relating to title (e.g., that seller would repair roof before closing)
91
Requirements for a valid deed
1. Statute of frauds (exceptions: Partial performance and Equitable estoppel) (signed)
2. Must state: Grantor’s name, Identify grantees: by name or other means
3. Contain words of conveyance
4. Description/identification of the land being conveyed
And maybe obvious, but the grantor must have legal capacity to convey and grantees must have capacity to receive
Rule: if deed does not include all required elements, it is void and cannot legally convey any interest
No consideration needed
92
General Warranty Deed
All six covenants. Grantor will warrant and defend the title against the claims regarding title defects, including defects caused by prior owners.
93
Special Warranty Deed
Usually contains all six deed covenants of title (can be modified to exclude one or more)
But grantor only warrants to defend the title based upon title defects caused by grantor’s own acts or omissions while she owned the property.
94
Quitclaim Deed
By this deed the grantor “quits” (i.e. terminates or gives up) any right or claim to the property referenced in the deed
Includes no covenants of title
95
Interpretation of Ambiguous Deed
Follow the intent of the parties (general rule)
Process
1. Determine intent from the “four corners” of the deed itself, including words in context
2. If ambiguous, admit extrinsic evidence to clarify intent (e.g. statements and conduct of grantor and grantee)
3. If still ambiguous, apply rule of construction
Here: assume grantor intended to convey her entire interest in the property, unless deed clearly manifests contrary intent
96
fraud in the factum (void deed)
e.g. grantor didn’t know signing a deed
Especially if grantor is elderly, infirm or unsophisticated
BUT subsequent BFP wins over grantor if grantor was capable and negligent (grantor estopped)
97
“Fraud in the inducement” (voidable deed)
grantor knows what she’s doing, but incentive is fraudulent.
Defrauded true owner can rescind transaction and recover title
But subsequent BFP wins over true owner because true owner in better position to discover the fraud.
98
Fraudulent Conveyance
Conveying deed to avoid creditor, court can pull that back
BUT if grantee paid reasonably equivalent value and took in good faith, then not set aside deed (because this not hurt creditor’s rights since creditor can go after borrower who got the proceeds of the sale)
99
Valid Delivery Touchstone
Rule: grantor must manifest by words or actions an intent that the deed be immediately effective to transfer an interest in land (i.e. title) to the grantee
Generally any type of parol evidence, including conduct or statements made by the grantor before or after the alleged delivery, is admissible to prove her intent.
Words or actions can evidence the grantor’s intent
Intent must be to make immediately effective transfer of title
Relinquishing dominion and control over deed and property = evidence of intent.
Can be a future interest, so not necessarily right to immediate possession.
100
Deed in a box cases
Grantor executes a valid deed and then takes some act to put it out of her direct control, (e.g. puts it in a box) but does not give it to a person
So far, clear that NO delivery has occurred
Then takes additional act
E.g. gives key to box to grantee
Unclear if had necessary intent because not necessarily irrevocable. (ie. if grantor also has key to box)
In contrast, makes public announcement of intent while signing the deed before putting it in box.
Suggest there was necessary intent
101
Conditional Delivery to Grantee
Absolute deed delivered to grantee with oral condition
Majority: Valid delivery (i.e. ignore the oral condition)
Written condition stated in the deed making conveyance of the title dependent upon the happening of a condition or event other than delivery which is unmet at time of purported delivery
“To grantee, this deed to become effective when grantee turns 25 years old” and gives deed to grantee
Majority: No delivery (with some exceptions)
Written condition stated in the deed that is unmet at the time of [purported] delivery
Majority: No delivery (with some exceptions)
Exception 1: Death Condition (“To grantee effective at my death”)
Majority: Delivery of a future interest (remainder in FSA) and Grantor retains present interest in life estate
Exception 2: Condition allowing grantor right to revoke (“To grantee, but grantor retains right to revoke grant”)
Majority: Delivery of present interest (FS C/S) and Grantor retains the RoE/PT
Formalistic justification
102
Delivery to Third Party (unconditional)
Unconditional delivery of absolute grant to grantee’s agent is valid delivery to grantee (Caruso)
103
Delivery to Third Party (conditional)
Sale Escrow/”True Escrow”
Conditional delivery of absolute deed to neutral 3P with written instructions regarding contract conditions = Valid delivery automatically occurs when the conditions are met.
But grantor retains title if conditions not met
Delivery of deed from escrow before conditions are met:
is ineffective (rogue escrow agent)
But if conflict between BFP against negligent grantor, then BFP wins
Equitable “relation back” doctrine re date of delivery:
When the conditions are fulfilled and physical delivery of the deed occurs, “if required to prevent injustice,” the date of delivery relates back to when the deed was initially deposited into escrow
104
Donative Transfer
(= no enforceable contract to convey the property)
Grantor gives deed “Blackacre to A in FSA when she marries” to Third Party for delivery to grantee
If condition not yet met, no delivery yet, so Grantor can retrieve the deed from Third Party
But if condition met and deed delivered, Grantor cannot retrieve
105
“Death Escrow” to a Third Party
Delivery of an absolute deed to a third party with oral condition to deliver deed to grantee at grantor’s death
Validity of the delivery depends upon grantor’s ability to retrieve or revoke the deed from the third party (which is proxy for her present intent to deliver the interest)
If grantor has NOT retained control = “irrevocable death escrow” = valid delivery
If deed purports to convey FSA, interpret as inter-vivos gift that immediately conveys future interest (indefeasibly vested remainder in FSA) which becomes possessory at grantor’s death (who retains a life estate)
If grantor has retained sufficient control, then no delivery
E.g. if grantor instructs third party to give deed to grantee only if grantee survives grantor or third party is agent of grantor
106
Transfer on Death Deed
Delivery is not required because deed has no legal effect until grantor dies
Usually require:
Contain essential elements of a reasonable deed
Written condition that title transfers at grantor’s death
Recorded before the grantor dies
Grantor retains normal ownership rights until death:
Can revoke at any time before death
Can sell or mortgage
If this property is not in estate at death, then no conveyance
107
Facts to consider in analysis delivery of deed
1. Does a delivery presumption apply? Is it rebutted?
2. What did grantor do with the deed?
- -Put in a box
- -Gave to grantee
- -Gave to 3P
3. Was it an absolute deed or with written condition?
4. Was there an oral condition?
5. Is there an applicable statute?
Remember the touchstone: Grantor must manifest by words or actions an intent that the deed be immediately effective to transfer title in land to the grantee.
108
Acceptance (deeds)
Explicit acceptance: grantee accepts deed in person or states consent
Implied acceptance: When ownership would be beneficial to the grantee
But grantee can disclaim the property within a reasonable time after becomes aware of the conveyance.
109
Estoppel by Deed Doctrine
If:
Grantor not own property interest at time of conveyance
Grantor delivers a warranty deed to purportedly convey the property interest to an innocent grantee (who does not know that grantor does not then own the land), and
Grantor later actually acquires title to the property interest
Then:
In equity, grantor is estopped to claim title superior to the grantee in the property interest
So, grantee owns the property interest
110
Land Sale vs Deed Law issues
Breach
Warranty of Marketable title can be breached by possibility of uncertain title and therefore risk of litigation
Deed covenants of title can general only be breached if title is actually defective
Remedy
Remedy for breach of land sale contract include rescission and specific performance–can get out of the deal or make the conveyance happen
Remedy for breach of Deed Covenants of Title is generally only damages; cannot unwind prior conveyance
Merger rule
If applies, only remedies for title defects for buyer who accepted a deed are from Deed Covenants of Title or title insurance
If fraud, can ask court to “set aside the deed” to avoid the merger doctrine
111
Deed Covenants of Title: Legal Issues Analysis
1. Which covenants of title does the deed include?
2. Are there any exceptions?
3. What constitutes a violation?
4. Are the covenants limited in scope? (possible defendants)
5. Who can sue? (possible plaintiffs)
112
SIX COVENANTS IN DEEDS
Present:
Covenant of Seisin
Covenant of Right to Convey
Covenant Against Encumbrances
Future
Covenant of Warranty: Grantor promises to defend grantee against any lawful claim by someone with superior title made against grantee’s title and to compensate grantee for successful claim made against title.
Covers both complete loss of title and encumbrance on title
Often likely to be breached by initial grantor, but problem may not be discovered right away
Why not protect against unlawful claims? That would be a “general legal insurance policy” which isn’t what covenant of title is
Covenant of Quiet Enjoyment: Grantor promises no one has superior title or interest in the property and so no one will lawfully interfere with grantees rights to property and possession
Covenant of Future Assurances: Grantor promises to take whatever steps are reasonably necessary to perfect title and thereby protect grantee’s title
113
Covenant of Seisin
Grantor owns the property interest (both type and quantity) that purports to convey
Breach: Not owning the type and amount of interest in the property purporting to convey
114
Covenant of Right to Convey
Grantor has the legal right to convey the property interest
Breach: Not having the legal right to convey, often overlaps with Covenant of Seisen
But can sometimes only breach this covenant
115
Covenant Against Encumbrances
No encumbrances
Role of buyer’s knowledge in obvious and visible encumbrances:
Majority rule: Covenant extends to all encumbrances even if known by buyer when accepted deed, unless deed language states otherwise (e.g. stated as an exception)
Minority rule: Presume buyer’s knowledge of “obvious and visible encumbrances” and that waived/took into account, so not a violation
Contrast this from rules whether easements violate warranty of marketability
116
Covenant of Warranty
Grantor promises to defend grantee against any lawful claim by someone with superior title made against grantee’s title and to compensate grantee for successful claim made against title.
Covers both complete loss of title and encumbrance on title
Breach: Someone with superior title actually or constructively evicts grantee, or grantee suffers some other damage by superior title exercising right
Remedy: Compensatory damages for value of lost property interest and attorneys’ fees for grantee’s unsuccessful defense of the title.
117
Covenant of Quiet Enjoyment
Grantor promises no one has superior title or interest in the property and so no one will lawfully interfere with grantees rights to property and possession
Breach: Someone with superior title disturbs grantee’s possession and enjoyment of the land, identical to CoW (just do one analysis for both)
118
Covenant of Future Assurances
Grantor promises to take whatever steps are reasonably necessary to perfect title and thereby protect grantee’s title
Usually to provide additional documents (e.g. reform deed, execute a release or a waiver)
Breach: Grantor fails to take reasonably necessary steps to “perfect” title and therefore protect grantee’s title
119
Different rules re zoning ordinances
Existence alone is not encumbrance.
But, split on whether violation of zoning ordinance is an encumbrance
Some yes due to risk of litigation
Some no because only a risk and not a present lien or interest and may not be discoverable by title search of physical inspection
120
Who can sue on a breach of a present covenant
Majority rule: only the immediate grantee of this deed
| Minority rule: remote grantees (subsequent owners or successors in interest) can also sue
121
Remedies (breach of future covenants)
Usually compensatory damages for value of loss based upon defect, usually purchase price plus interest if total loss; otherwise proportional to loss
Damages for breach of most covenants (including seisen and right to convey) cannot exceed the purchase price paid by the grantee/plaintiff
Damages for breach of covenant against encumbrances, warranty and quiet enjoyment = amount necessary to remove defect (if possible) or loss of FMV of property caused by defect on the purchase date
Majority rule: Donee cannot recover damages against donor, even if warranty deed. Remember: most property rules intend to make workable market in land
