purchase/sale of real estate Flashcards
purchase/sale of real estate
Every conveyance of real estate consists of a 2-step process.
- The land K
- The closing
purchase/sale of real estate
land K
The land K endures until the closing
- Land K and SoF
- Problem of risk of loss
- 2 implied promises in every land K
- Caveat emptor
purchase/sale of real estate
land K
land K and SoF
The standard: The land K must be 1) in writing 2) signed by the parties to be bound (buyer & seller), 3) must describe the land, and 4) state some consideration.
purchase/sale of real estate
land K
land K and SoF
If amount of land in land K is more than the actual size of the parcel
When the amount of land recited in the land K > the actual size of the parcel, B’s remedy is specific performance WITH a pro rata reduction in price.
purchase/sale of real estate
land K
land K and SoF
doctrine of part performance
Equity will decree specific performance of an oral K for land sale if the doctrine of part performance is satisfied.
The doctrine of part performance is satisfied if two of the three elements is met:
1. B takes possession.
2. B pays all or part of the price
3. B makes substantial improvements
purchase/sale of real estate
land K
problem of risk of loss
equitable conversion
destruction
purchase/sale of real estate
land K
problem of risk of loss
equitable conversion
Under the doctrine of equitable conversion, equity regards as done that which ought to be done.
In equity, once the K is signed, B owns the land subject to the condition that he pay the purchase price at closing.
The K provides equitable title
purchase/sale of real estate
land K
problem of risk of loss
destruction
If, in the interim between K and closing, Blackacre is destroyed through no fault of either party, B bears the risk of loss (unless the K says otherwise).
purchase/sale of real estate
land K
2 implied promises in every land K
Promise to provide marketable title
Promise to not make any false statements of material fact
purchase/sale of real estate
land K
2 implied promises in every land K
Promise to provide marketable title
Seller promises to provide marketable title at closing.
The standard
3 circumstances that render title unmarketable
purchase/sale of real estate land K 2 implied promises in every land K Promise to provide marketable title The standard
Title is free from reasonable doubt.
Title is free from lawsuits and the threat of litigation.
purchase/sale of real estate land K 2 implied promises in every land K Promise to provide marketable title 3 circumstances that render title unmarketable
Adverse possession
Encumbrances
Zoning violations
purchase/sale of real estate land K 2 implied promises in every land K Promise to provide marketable title 3 circumstances that render title unmarketable adverse possession
If even part of the title rests on adverse possession, it is unmarketable.
Seller must be able to provide good record title.
purchase/sale of real estate land K 2 implied promises in every land K Promise to provide marketable title 3 circumstances that render title unmarketable encumbrances
Marketable title means an unencumbered free simple.
The presence of any servitude will render title unmarketable unless buyer has waived them.
Seller has the right to satisfy an outstanding mortgage or lien at closing w/proceeds of the sale.
Buyer cannot claim title is unmarketable b/c it is subject to a mortgage prior to closing as long as the parties understand that the closing will result in the mortgage being satisfied or discharged.
purchase/sale of real estate land K 2 implied promises in every land K Promise to provide marketable title 3 circumstances that render title unmarketable zoning violations
Title is unmarketable when Blackacre violates a zoning ordinance. (This can make it subject to a lawsuit.)
purchase/sale of real estate
land K
2 implied promises in every land K
Promise to not make any false statements of material fact
The majority of states now hold seller liable for failing to disclose latent material defects.
Seller is liable for material lies and omissions of latent defects.
If the K contains a general disclaimer of liability, disclaimer won’t excuse seller from liability for fraud or failure to disclose.
purchase/sale of real estate
land K
caveat emptor
The land K contains NO implied warranties of fitness or habitability
Common law norm is caveat emptor (let the buyer beware).
Exception: The implied warranty of fitness and workmanlike construction APPLIES to the sale of a NEW HOME by a builder-vendor.
purchase/sale of real estate
closing
At the closing, the land K dies and the controlling document is now the deed.
Deed passes legal title from seller to buyer.
To pass legal title, the dead must be LEAD
Lawful Execution and
Delivery with
Covenants for title and 3 types of deeds.
purchase/sale of real estate
closing
Lawful Execution of a deed
The deed must be in writing signed by the grantor.
The deed need not recite consideration nor must consideration pass to make a deed valid.
The land description does not have to be perfect.
Deed needs only to have an unambiguous description of the land and a good LEAD.
purchase/sale of real estate
closing
Delivery of a deed
delivery requirement legal standard recipient's express rejection of the deed oral condition delivery by escrow
purchase/sale of real estate
closing
Delivery of a deed
delivery requirement
Delivery requirement could be satisfied when grantor physically transfers to grantee.
It is permissible to use mail, an agent, or messenger.
purchase/sale of real estate
closing
Delivery of a deed
legal standard
Delivery does not require physical transfer of the deed itself.
The standard for delivery is a legal standard and is a test solely of PRESENT INTENT.
If grantor had the PRESENT INTENT to be bound irrespective of whether or not the deed itself was handed over, the legal standard is met.
purchase/sale of real estate
closing
Delivery of a deed
recipient’s express rejection of the deed
Recipient’s express rejection of the deed DEFECTS DELIVERY.
purchase/sale of real estate
closing
Delivery of a deed
oral condition
If a deed, absolute on its face, is transferred to grantee w/ an oral condition, the oral condition drops out and delivery is achieved.
An oral condition is void and not provable.
(Too susceptible to fraud.)
purchase/sale of real estate
closing
Delivery of a deed
delivery by escrow
Delivery by escrow is allowed.
Grantor may deliver an executed deed to a 3rd party, known as an escrow agent, with instructions that the deed be delivered to grantee once certain conditions are met.
Once the conditions are met, title passes to grantee.
purchase/sale of real estate
closing
Delivery of a deed
delivery by escrow - advantage of escrow
If grantor dies, becomes incompetent, or is otherwise unavailable before the express conditions are met, title still passes from escrow agent to grantee once the conditions are met.
purchase/sale of real estate
closing
covenants for title and 3 types of deeds
quitclaim, general warranty, special warranty
purchase/sale of real estate
closing
covenants for title and 3 types of deeds
quitclaim deed
Quitclaim contains no covenants.
Grantors isn’t even promising he has title to convey.
Worse deed buyer could hope for.
But even here, seller did implicitly promise in the land K to provide marketable title at closing.
With any problems post-closing, seller is off the hook.
purchase/sale of real estate
closing
covenants for title and 3 types of deeds
general warranty deed
General warranty deed warrants against all defects in title including those due to grantor’s predecessors
Best deed a buyer could hope for.
General warranty deed typically contains all 6 covenants:
(present covenants - covers delivery) covenant of seisin, covenant of right to convey, covenant against encumbrances
(future covenants - covers post-delivery) covenant for quiet enjoyment, covenant of warranty, covenant for further assurances
purchase/sale of real estate closing covenants for title and 3 types of deeds general warranty deed present covenants
A present covenant is breached, if ever, at the moment of delivery.
The SoL for breach of a present covenant begins to run from the instant of delivery.
covenant of seisin, covenant of right to convey, covenant against encumbrances
purchase/sale of real estate closing covenants for title and 3 types of deeds general warranty deed present covenants covenant of seisin
covenant of seisin: Grantor owns this estate
purchase/sale of real estate closing covenants for title and 3 types of deeds general warranty deed present covenants covenant of right to convey
covenant of right to convey: Grantor has the power to transfer. No disability, no temporary restraints on alienation.
purchase/sale of real estate closing covenants for title and 3 types of deeds general warranty deed present covenants covenant against encumbrances
covenant against encumbrances: There are no servitudes or mortgages on Blackacre
purchase/sale of real estate closing covenants for title and 3 types of deeds general warranty deed future covenants
A future covenant is not breached, if ever, until grantee is disturbed in possession.
The SoL for breach of a future covenant will not begin to run until that future date.
covenant for quiet enjoyment, covenant of warranty, covenant for further assurances
purchase/sale of real estate closing covenants for title and 3 types of deeds general warranty deed future covenants covenant for quiet enjoyment
Covenant for quiet enjoyment: Grantee won’t be disturbed in possession by a 3rd party’s lawful claim of title.
purchase/sale of real estate closing covenants for title and 3 types of deeds general warranty deed future covenants covenant of warranty
Covenant of warranty: Grantor will defend grantee against lawful title claims brought by others.
purchase/sale of real estate closing covenants for title and 3 types of deeds general warranty deed future covenants covenant for further assurances
Covenant for further assurances: Grantor will do what is needed in the future to perfect the title.
purchase/sale of real estate
closing
covenants for title and 3 types of deeds
special warranty deed
Special warranty deed contains 2 promises that grantor makes ONLY on his own behalf and not of his predecessors in interest.
- Grantor promises she hasn’t conveyed Blackacre to anyone other than grantee.
- Blackacre is free from encumbrances made by grantor.
