Real Estate Sale Ks Flashcards
What does SoF do with regards to RE sale Ks?
SoF makes real estate sale K unenforceable unless the K or some memorandum is made in writing.
What elements must be in writing for RE sale K?
- Identification of parties.
- identification of land (pref. legal description).
- Words indicating sale
- Signature of party to be charged
- The price and the terms of payment if not a cash sale.
V and P enter into an oral K of sale of V’s farm. P gives V a check for $2K earnest money which includes the following notation “toward sale of V’s farm in X count, Y state, for $50K” (V has only one such farm.) The check is signed by P and endorsed by V. May V enforce the K?
Yes– and so can P–because endorsed
If the K is enforceable, what remedies may a V and P obtain?
- Damages (measured by loss of bargain –diff between K price and MV at the date of breach)
- Specific performance (compelling the breaching party to perform)
- Rescission (placing the parties back where they started)
Assume written K states, “if P refuses to complete the purchase, V may retain the $2K earnest money as liquidated damages for P’s breach of K.” This clause is enforceable if:
- Earnest money is reasonable estimate of probable damages (approx. 10% of price or less)
- According to some court–v actually suffers some damages
Assume V prefers a different remedy, rather than liquidated damages. May V obtain: actual damages? specific performance?
- NO–unless K expressly says so– rare
2. SP- Yes.
V and P enter into an oral K of sale of V’s farm. There is no writing but before closing P does the following acts of part performance: Actual possession, partial payment of price, making substantial improvement)
If V reneges, may P get damages? SP?
If P reneges, may V get damages? SP?
- For P: No, but yes to SP
2. For V: NO, but yes to SP depending on theory of part performance.
What are the acts of partial performance?
- Taking possession
- Partial payment of price
- Making substantial improvements
(most states require at least two of these three acts).
Two theories of Part performance:
Evidentiary: V can enforce the K;
Reliance: V can’t enforce K
V and P enter into a written K of sale for V’s farm. Prior to closing, P discovered that an easement for a high-pressure gas transmission line runs across the land, a fact not mentioned in the K.
This title is unmarketable, breaching and implied covenant of the K of sale.
P can rescind the K–after telling V what the defect is and give V reasonable time to cure.
If V acted in good faith; may P recover loss-of-bargain damages?
split 50/50
If V acted in bad faith; may P recover loss-of-bargain damages?
Yes
What are some other breaches of marketable title:
- A title that is less than FSA
- A building on the land that overlaps the boundary (an encroachment)
- Any mortgages, leases, liens, etc (encumbrances) unless they will be discharged at closing or unless they benefit the property.
When must P assert the breach of the marketable title covenant?
Before closing
V and P enter into a written K of sale of V’s farm. K states “closing will occur on Aug 1” -On aug 1, P has not completed his financing arrangements, but he is ready to close by Aug 10. Can P enforce the K is V reneges?
Yes because time is generally not of essence (breach isn’t material as long as reasonable)
P could be liable for interim damages for the delay– cost of keeping property for those days.
What can make time “of the essence”
- A statement to that effect in K
- A notice from one party to the other, given a reasonable time before closing date.
- The time of closing is very important to one party, and the other party knows it.
- if breached, P is in material breach, cannot enforce K, and is liable for any provable bargain damages.
Equitable conversion
During executory period, the vendor’s interest is considered PERSONAL property, and the purchaser’s interest is considered REAL ESTATE.
V and P enter into a written K of sale of V’s farm. Prior to the closing, the farmhouse burns down through no fault of either party. Can V still enforce the K against P at the originally-agreed price?
YES. So P has the risk of loss. If V collects on a fire insurance policy, V must credit P with insurance proceeds against the price.
If V dies before the closing, who is entitled to the purchase price at closing?
Money goes to whoever inherits personal property.
If P dies before the closing, who gets the land?
Real estate so whoever gets P’s RE. Personal property assets pay the price.
Conveying by Deed
A deed is a conveyance, not a K. It purposes is to pass title from grantor to grantee
The deed must be in writing and contain:
- Identification of Parties
- Identification of Land
- Words indicating title is to be passed.
- Signature of grantor
(no date, price, or consideration is needed)
X who has no title to land at all, executes a deed to A. X purports to sell the land to A for its market value. A believes in good faith that X is owner of the land and A records the deed. What title does A have?
NO TITLE at all.
GR may have the deed executed by an against but Unless the GR is present the agent’s authority must be…
In writing.
What is required for a deed executed by a corporation?
The deed must be executed by 2 officers and bear the corporation’s seal. If it conveys all or a substantial part of the corporation’s assets, a resolution of BoD must be necessary.
What makes a deed effective?
ONLY WHEN DELIVERED.
Delivery requires proof of?
Two elements: some ACT done by the grantor, signifying AN INTENT that the deed operates to pass title immediately.
What does recording have to do with delivery?
Recording is PRESUMED to have been delivered.
If GE fulfills the condition set by GR and X (escrow) delivers the deed. Who gets title?
Grantee gets title
IF GR dies or becomes incompetent before GE fulfills the condition, but GE later does so, who gets title?
Grantee gets title
If GE does NOT fulfill condition, and X wrongfully delivers deed anyways, who gets title?
GRANTOR still has title.
Quitclaim Deed
A deed containing no covenants of title
Full Warranty or general warranty
Contains any or all of the following covenants:
Present: seisin, right to convey, against encumbrances
Future: Warranty, quiet enjoyment, further assurances.
Assume GR executes a deed to GE which contains only the “present” title covenants.
When does SoL begin to run against GE?
DATE deed is delivered
IF GE later conveys to GE2 and GE2 discovers a title defect, may GE2 recover against GR?
NO because present covenants do not run with land.
Assume GR executes a deed to GE which contains only the “future” title covenants. When does SoL begin to run against GE?
When GE is evicted by someone with better title.
If GE later conveys to GE2 and GE2 is evicted by a person with better title, may GE2 recover against GR?
YES because Future covenants run with land.
GR has no title at all to the land, but executers and delivers a warranty deed to GE (of course, GE gets no title at time). Some years later. GR acquires title to the land in question. Now who owns the land?
GE because goes right through GR to GE.
New Home Warranties of Quality
Implied warranty of structural soundness in the sale of:
- A new residence
- Suit must be by the first purchaser
- Suit must be against the builder
Existing Homes and other properties
Theres no implied warranty of quality. but the seller may still be held liable for FRAUDULENT concealment if the seller had actual knowledge of a material defect in the property, and did not disclose it.
Fixtures:
Items of personal property that are ATTACHED to real estate.
Three main issues of fixtures:
- Removal at termination of a lease: can remove before termination date and repair damage
- Sale of the RE: P entitled to fixture or its value if attached with intent that is be a permanent part of RE
- Competing security Interests
Competing security interests with fixtures
The first secured party to file or record has priority.
Exceptions: the Art 9 fixture lender will have priority if” the lender has a PMSI and the fixture filing occurred within 20 days of the date the fixtures are installed.
