Property: Titles Flashcards
Statute of Frauds requirement for a land sale contract ∑3
(a) must be in writing
(b) signed by the party to be charged
(c) must include essential terms
SoF for a land sale contract: “essential terms” requirement
parties, price and payment, and description of the property.
SoF for a land sale contract:
3 exceptions
(1) Part performance
(2) Full performance
(3) Detrimental reliance
SoF for a land sale contract: part performance
A performance by either seller or buyer may be treated as evidence that K existed if 2 of the 3 exist:
(1) payment of all or part of purchase price
(2) possession by the purchaser
(3) substantial improvement by the purchaser
SoF for a land sale contract: rescission
Rescission of a contract to transfer land need not be in writing.
Liability during land sale contract
In contract stage of the land sale contract, liability is based on a contract provision. In deed stage of the land sale contract, liability is based on a deed provision
Doctrine of merger in a land sale contract
Covenants under the contract are merged into the deed.
© not applicable to obligations that are collateral to and independent of the conveyance
Implied covenant of marketable title
Every land sale includes this.
A seller must deliver marketable title at closing. A defect in title must be cured/fixed before closing.
Marketable title
Title is marketable when it is free from unreasonable risk of litigation concerning title.
(e.g. unmarketable if adverse possession without quiet title, right of first refusal)
Marketable title is not a title without defects or encumberances. It is the UNDISCLOSED encumbrance that makes a title unmarketable
Seller right to cure a defective title
Buyer must give time to cure after closing, unless time is of the essence
Waiver of unmarketable title:
Buyer can waive title defects in the contract of sale or subsequently.
Remedies for unmarketable title
Buyer may sue for breach, rescind, or specific performance to get a discount.
Usually can’t do those until the date of closing.
Timing of closing
presumption that time is not of the essence (may delay closing date) and delay in closing is not a ground for rescission
Implied warranty of fitness/suitability:
applies to new residential construction. warrants that suitable materials are used in construction.
Initial H/O + subsequent purchasers may seek damages (§M)
Implied warranty of fitness/suitability: statute of limitation
reasonable time after the discovery of defect
Implied warranty of fitness/suitability: disclaimer
A general disclaimer (e.g., “property is sold as is”) is typically NOT sufficient.
may be disclaimed by the builder or waived by the homeowner if done so with language that is clear and unambiguous.
Seller duty to disclose defects
general
exception
Majority–A seller of a residential home must disclose to buyer all (a) known, (b) physical and (c) material defects.
© no duty if readily observable or not latent
Seller duty to disclose defect: material defect
a defect is material if it substantially affect the value of the home, health of occupants, desirability
Seller duty to disclose defect: disclaimer
A general disclaimer (e.g., “property is sold as is”) is sufficient in some states
© still not sufficient to preclude the seller’s liability for misrepresentation or fraudulent concealment.
Types of remedies in land sale contracts
(1) expectation damages
(2) rescission (to sell to someone else or to cancel K and return payment)
(3) specific performance
Measure of expectation damages in a land sale contract
the difference between the K price and the market price on the date of performance
Liquidated damages clause
generally enforceable if the amount of liquidated damages is reasonable.
Traditionally, deposit of 10% or less of the purchase price is reasonable.
Risk of loss if damage/destruction to property between execution of K and closing:
Majority—Buyer carries risk of loss © Loss is due to seller intentional/negligent actions;
Minority—Seller carries risk (Uniform Vendor and Purchaser Risk Act)
Doctrine of equitable conversion:
equitable title to real property passes to the buyer upon entering the contract, even though the seller retains legal title.
The seller effectively holds the property in trust for the buyer, and he has a duty to keep up the property.
Seller duty to carry insurance
Seller has no duty to carry casualty insurance on the property. But if seller has casualty insurance and the risk of loss is on the buyer, seller must give the buyer credit against the purchase price.
When seller dies after land sale contract, who has the ownership of the land?
Buyer, under the doctrine of equitable conversion
Doctrine of ademption
a devise of real property fails (or is “adeemed”) when the testator no longer owns the property upon death. Once adeemed, benecificiary gets nothing.
When seller dies after land sale contract, who owns the sales proceeds of the land contract?
Majority—the devisee of the seller-decedent’s personal property;
Minority (anti-ademption statutes)—the devisee of the seller-decedent’s real property.
A deed passes title upon
A deed passes title upon
(a) delivery and
(b) acceptance.
Deed: delivery requirement
- Physical transfer not required.
- Grantor must have the intent to make a PRESENT TRANSFER of the property.
e.g. Can transfer a future interest, but can’t intend that transfer of a deed be effective at death–An intent to have a transfer be effective at the grantor’s death is not valid in a deed unless the deed expressly reserves a life estate
Deed: delivery to grantee’s agent
presumption of delivery (that grantor had requisite intent) to make a present transfer
Deed: delivery to grantor’s agent
presumption of no delivery.
Physical transfer not required. If transfer can be revocable, it’s not delivered.
Transfer is treated as if the grantor had retained the deed, even when the grantor has instructed the agent to deliver the deed to the grantee at some future time or upon the happening of an event
Deed: acceptance
Acceptance of a deed is generally presumed if the transfer is for value
Can real estate agents and brokers can prepare a contract of sale?
Yes
Real estate agents and brokers can prepare a deed?
No
Deed: content requirements
a valid deed must contain:
(a) identified parties
(b) signed by the grantor
(c) words of transfer and
(d) sufficient description of the property
Deed: identified parties requirement
Majority—deed must identify the grantee in order to pass title.
Extrinsic evidence, however, can be admitted to identify the grantee.
Deed: words of transfer requirement
Granting clause: a portion of a deed that contains the words that transfer an interest
Deed: signature requirement—equal dignities rule
if the agent is required to sign (e.g. execute the deed), then the agency relationship must be created in writing.
Deed: sufficient description requirement
Property is sufficiently described if it is reasonable definite.
It need not be a legal description. Extrinsic evidence is admissible to clarify
Deed: forged signature
A deed that contains a forged grantor’s signature is void, even if relied upon by a bona fide purchase
Deed: voidable deed
A deed is voidable if it is executed by a minor or incapacitated person or is obtained through fraud in the inducement, duress, undue influence, mistake, or breach of fiduciary duty.
© A voidable deed will be set aside only if the property has not passed to a BFP
Deed: 3 types of deeds
general warranty deed, special warranty deed, quitclaim deed
Deed: general warranty deed
Grantor warrants title against all defects.
Grantor guarantees that he holds 6 covenants of title: CN of seisin, CN of right to convey, CN against encumbrances, CN of quiet enjoyment, CN of warranty; CN of further assurances
Deed: covenant of seisin
A present covenant that warrants that the deed describes the land in question.
Deed: covenant of right to convey
A present covenant that warrants that grantor has the right to convey.
Deed: covenant of encumbrances
A present covenant that warrants that there are no undisclosed encumbrances that would limit the property’s value
Deed: covenant of quiet enjoyment
A future covenant that warrants that grantee’s possession will not be disturbed by a third party’s lawful claim for title
Deed: covenant of warranty
warrants that Grantor will defend against future LAWFUL claims of title. must notify the grantor of the interference and grantor must refuse.
© grantor not required to defend against a wrongful claim. Grantee can only recover from the grantor when the title is defective.
Deed: covenant of further assurances
A future covenant where grantor promises to fix future title problems
Breach of present covenants of a warranty deed
occurs at the time of conveyance
Breach of future covenants of a warranty deed
occurs only upon interference by third parties.
Standing to enforce covenants in a warranty dead
Subsequent grantees can enforce future covenants (covenants of quiet enjoyment, warranty, further assurances)
Remedies for breach of covenants in a warranty deed:
right to monetary damages, not right to possess.
Deed: special warranty deed
warrants that grantor has not caused the title defect.
Estoppel by deed (after-acquired property) doctrine
if a person purports to transfer property that she does not own, the subsequent acquisition of the property by the transferor automatically operates to transfer ownership of the property to the transferee.
Validity of restraints on alienation
Absolute restraint on alienation is void.
Partial restraint is valid if it is for (a) limited time and (a) reasonable purpose.
Transfer of property despite restraint on alienation
If a restraint on alienation is valid, any attempt to alienate the property is void.
If a restraint on alienation is void, the property can be alienated
Right of first refusal: definition
A preemptive right that gives its holder the opportunity to acquire property prior to its transfer to another, and it is valid unless it is unreasonable
Right of first refusal: validity
valid if it complies with the Statute of Frauds and the terms are reasonable.
Right of first refusal: recording acts
subject to recording acts
Right of first refusal: RAP
RAP applies to right of first refusal
© RAP doesn’t apply if
(1) granted to a current leasehold tenant or
(2) when the property right is created in a commercial transaction.
Subjects that recording acts apply to
deeds, mortgages, leases, options, judgments affecting title, other instruments creating an interest in land such as easement, covenant
Recording acts: race-notice statute
requires a subsequent purchaser to take the interest without notice of a prior conflicting interest and be the first to record.
Recording acts: notice statute:
A purchaser who purchases without notice of the prior interest prevails
*(A purchaser need not record in order to prevail over a prior interest in a notice jurisdiction, but he must record to prevail against a subsequent purchaser.).
Recording acts: race statute
a purchaser who records first prevails, regardless of his knowledge of any prior conflicting interests.
Recording acts: protected parties
subsequent purchasers and grantees who paid value for an interest.
© Not grantees who acquire by gift, devise or descent
Recording acts: mortgagees
Mortgagees are protected under recording acts unless mortgage is not given simultaneously with a loan
Recording acts: creditors
Creditors are protected under recording acts only against claims that arise after a judgment against the debtor is recorded, unless statute says otherwise.
Recording acts: estoppel by deed
Subsequent purchasers are protected against people who obtain title under estoppel by deed doctrine.
Recording acts: adverse possession
subsequent purchasers are NOT protected from a property interest acquired by operation of law, such as a property interest acquired by adverse possession or prescriptive easement.
Recording acts: shelter rule
exception
Grantors who are protected by recording act protect their grantees.
© Exception to shelter rule: purchaser who has notice of a prior interest can’t sell his interest to another without such notice and then buy back the property
Recording acts: types of notice
actual notice, inquiry notice, constructive notice
Recording acts: inquiry notice:
exists if a reasonable investigation would’ve disclosed the existence of a prior claim.
e.g. when someone else has possession of the property; when chain of title references a prior interest
Recording acts: constructive notice
exists when prior conveyances are properly recorded
Recording acts: wild deed
An exception to constructive notice.
A document may be filed with the recorder of deeds but be unconnected with a purchaser’s chain of title. The majority of jurisdictions hold such a wild deed does not impart record notice to purchaser.
Fixture: whether an object can be removed by seller of property – factors
Factors:
- whether removable without damage (removable)
- whether item is specially designed for use with property (not removable)
- whether integral to function of the property (not removable).
