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Property > Purchase and Sale > Flashcards

Purchase and Sale Flashcards

1
Q

Pre-contractual Period - Definition

A

The time preceding the moment at which the owner of real property executes a contract for sale with the purchaser

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2
Q

3 types of listing agreements

A

Exclusive - commission paid no matter what

Exclusive agency - commission paid unless seller finds buyer on his own

Open - Will pay commission to any broker who finds buyer

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3
Q

Commission - Common law v. Modern Rule

A

Common law - Commission paid when broker finds a ready, willing and able buyer. Even if the purchaser later walks away

Modern rule - Parties must execute a contract for sale, AND buyer must show at closing. However, if seller is the cause of buyer walking away, must still pay commission.

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4
Q

Broker - Fiduciary duties

A

Fiduciary of seller not buyer. However some jurisdictions require selling broker to maintain confidential information of buyer

3 duties owed

1) duty of Care
2) duty of loyalty
3) Duty to disclose all non frivolous offers

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5
Q

Broker - Duty of care

A

Level of care of a hypothetical competent broker specializing in the sale of real property under the circumstances

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6
Q

Broker - Duty of loyalty

A

Broker must:

  • Avoid self dealing
  • maintain confidential information
  • avoid conflicts of interest
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7
Q

Broker - Duty to disclose

A

Broker must disclose all non-frivolous offers so the seller may determine whether or not to accept.

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8
Q

Executory / contract period - definition

A

Period between execution and closing

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9
Q

Statute of frauds applies to?

A 
Conveyance of entire fee
Mortgages
Leases longer than 1 year
Conveyances of fee simple
Easements
Real covenants
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10
Q

Statute of frauds - must contain (3 P’s)

A

Price
Parties
Property

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11
Q

Exception to Statute of frauds for real property?

A

Partial performance:

Demonstrates detrimental reliance AND
acts as evidence of the agreement

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12
Q

When does a meets and bounds description meet the statute of frauds?

A

When it ends where it begins.

However, if the mistake is simply due to a clear clerical error, a court will probably enforce the contract

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13
Q

Recorded Plat

A

Survey of subdivision created by developer and filed at the county court house.

Sample description - “Lot 2 as shown of that certain plat of Turtle Ridge, created by Daniel Bogart, registered land surveyor, and recorded in plat book 3 page 10 in the orange county court house

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14
Q

US government survey

A

Covers 30 western states

All land is divided into 6 Sq mile “townships”
designated by their distance from the “baseline” and the “principle meridian”

Each township is divided into 1 sq. mile “sections”

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15
Q

Marketable Title

A

Definition - Fee simple absolute ownership that is not subject to any defects such as easements and mortgages

To be unmarketable defect must be substantial in character, and one which causes buyer to suffer injury

Facts must be known at the time which raise reasonable doubt to title. NOT possibility or conjecture that such facts might exist

Default rule - must be delivered at closing unless contracted otherwise

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16
Q

3 (4 in CA) Elements of marketable title

A

1) Seller must be record owner of title
2) Seller must have fee simple absolute ownership without encumbrances or limitations of any kind
3) By purchasing property, buyer will not be placed into a non-frivolous prospect of litigation over ownership.
4) IN CA - marketability of title must be demonstrated solely from public record

Therefore, adverse possession cannot serve as basis or marketable title unless owner files a suit to quiet title, and obtains a judgment of good title
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17
Q

Insurable title

A

Buyer will accept any title that a title company is willing to insure.

Not good for buyer because insurance companies will insure anything if the premiums are high enough.

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18
Q

Contract title

A

Parties choose to change the standard from “marketable title”

Commonly used to allow for defects buyer accepts:

Utility easements
Prior deed covenants the buyer is OK with

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19
Q

Failure to present marketable/contract title - damages?

A

Most jurisdictions limit to rescission of the contract and return of any earnest money. However if seller intentionally damages title in order to back out of the deal, benefit-of-the-bargain damages are available

A few jurisdictions allow ordinary contract law damages

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20
Q

Caveat Emptor v. Modern Rule of disclosure

A

Caveat Emptor - Old common law rule

Modern Rule - Sellers must disclose, at a minimum, defects that would not be discoverable by a reasonable inspection and that materially effect the value of the property.

21
Q

Negligent Misrepresentation

A

If a seller is unaware of a certain latent defect, but affirmatively asserts that the defect does not exist, he is liable for negligent misrepresentation

22
Q

“As is” clauses

A

1) state buyer will accept property as is
2) protects seller against liability for negligent misrepresentation
3) NO DEFENSE against outright fraud

23
Q

Statutory disclosure requirements

A

Certain states require disclosure of certain defects by statute, including CA. Some include:

Termite and pest infestations
structural problems
Water damage
Mold

Typically apply to Residential not commercial transactions

24
Q

Patent v. Latent

A

Patent defects - one that is obvious or discoverable upon a reasonable inspection

Latent Defects - Not obvious or discoverable upon a reasonable inspection - Must be disclosed if materially affects the value of the property, is peculiarly within the knowledge of the seller or is unlikely to be discovered by buyer using due care

25
Q

Affirmative inquiries to seller?

A

When the seller receives an affirmative inquiry regarding the condition of a property, the buyer is entitled to a truthful answer.

A seller can still be guilty of fraud even when an answer is literally true, but is designed to convey a false impression.

26
Q

Fiduciary duty and reasonable reliance on misrepresentation

A

Misrepresentation must cause justifiable reliance, and damage must occur as a result.

Fiduciary duty - client can justifiably rely on any statement
No Fiduciary Duty - individual must reasonably investigate in order to rely.

27
Q

Promissory note v. Mortgage

A

Promissory note - evidences the loan

Mortgage - secures the loan

28
Q

Equitable Conversion - Common Law rule

A

Buyer must take property as it is at the time of closing.

If property is damaged during executory period, buyer responsible for costs to repair

29
Q

Equitable Conversion - 3 Jurisdictions

A

1) Common Law / Old Rule
- Standard equitable conversion
- Buyer has risk of loss
- No abatement
- HOWEVER cannot profit twice - receiving insurance proceeds and no abatement on sales price

2) Equitable Conversion WITH abatement
- Unless abatement is so severe it damages the underlying nature of the transaction

3) CA Rule - MODEL ACT
- Unless title changes hands, or buyer takes possession, risk of loss stays with seller

30
Q

Equitable Conversion - Constructive Trust

A

If seller maintains insurance, court will give proceeds to buyer unless seller uses them to fix the damage

The court will treat seller as trustee of the insurance money
and buyer as beneficiary

31
Q

Damages - Available to buyer and seller

A

Buyer:
Benefit-of-the-bargain
Liquidated damages

Seller:
Benefit of the bargain
Liquidated damages
Cost of resale
Cost of ownership
32
Q

Benefit of the bargain damages

A

Places the parties in the financial position they would have been in if there was no breach

Difference between the price of the contract and the fair market value of the property ON THE DAY OF THE BREACH

33
Q

Liquidate damages

A

Specific damage amount agreed upon prior to signing the contract.

Enforceable when :

Expected damages difficult to ascertain at the time the parties entered into the contract; AND

Damages provided are reasonable

Courts will only throw out liquidated damages that are unreasonably HIGH - called a penalty

over 10% is generally considered a penalty

34
Q

Equitable Remedies

A

Specific Performance

Reformation and rescission

35
Q

Specific Performance

A

For specific performance to be granted, the requesting party must be able to complete his side of the bargain

Harder for sellers to get than buyers

Today courts focus on the costs and risks associated with continued ownership when granting specific performance to seller

36
Q

When can a contract be reformed?

A

Mutual mistake

Fraud

37
Q

equitable recession?

A

Places both parties back into their pre-contractual status.

Can occur:
When buyer can prove seller misrepresented property or committed fraud

Mutual misunderstanding of material fact

If performance is impossible

If seller cannot deliver marketable title

38
Q

Elements of a deed

A

1) Description of property
2) identification of grantor and grantee
3) Language that demonstrates grantor intends to make a present transfer; And
4) Signature of grantor

39
Q

Manual delivery of a deed?

A

Must be accompanied by words that signify a present intent to transfer the property immmediately

40
Q

Delivery of deed - unambiguous statement or action

A

Unambiguous statement or action of the actor signifying his intention to presently relinquish ownership and control over the property can constitute proper delivery, EVEN IF DEED NOT PHYSICALLY HANDED OVER OR DELIVERED

41
Q

Transfer of real property - statute of wills

A

The transfer of property upon the delivery of the grantor requires a will subject to the formal requirements

42
Q

Merger Doctrine

A

Old Rule - All promises made within the contract merge into the deed

New Rule - Only promises regarding the quality of title merge into the deed

43
Q

Three types of deeds

A

Quit Claim - Grantor makes no promises regarding title
General Warranty

General Warranty - Grantor warrants title to be free of encumbrances created at any time prior to the sale to the buyer. present and future warranties

Limited Warranty - protects grantee only against encumbrances and defects in title made by or through the grantor, and provides no warranties regarding anything created prior to his ownership.

44
Q

Damages for breach of title warranty

A

Limited to the amount grantor received for the sale of the property

Modern Trend - Only breach when violation results in loss of the value of the property to the purchaser.

45
Q

Present Warranties (covenants to title)

A

Seisin - grantor warrants that he has rightful freehold possession. ie. that grantor is owner in fee simple absolute

Authority to convey - Grantor warrants that he has the authority to convey interest in the property

No encumbrances - Grantor warrants that there are no encumbrances at the time of conveyance affecting title to the real property

46
Q

Future Warranties

A

Defense (AKA covenant to quiet title) - Grantor warrants that he will appear in court and defend grantee against a third person alleging superior title.

Quiet Enjoyment - Grantor asserts that grantee will not be disrupted in possession by someone with superior title…Requires either physical or constructive eviction to breach

Further Assurances - Grantor promises to take action as necessary to correct a title problem that would otherwise be a violation of the present warranties

47
Q

Express warranties - post closing

A

Common law of property stated that in order for express warranties to survive closing, the contract had to specifically state it.

Now any express warranty survives closing as long as it is an “affirmation of fact” not just seller’s opinion.

48
Q

Post Closing - Implied warranties

A

Common law - no implied warranties

Modern - only implied Warranty is -

Implied warranty of quality

  • only for new construction
  • Property must meet minimum standards of quality
  • transfers to consecutive owners for a reasonable time period
  • Some jurisdictions allow this to be waived, others do not
  • Damages - punitive damages available

Property (5 decks)

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