Real Property Flashcards
Severing a Tenancy by the Entirety
Severance occurs in a tenancy by the entirety when:
1. The co-tenants jointly convey to another;
2. One co-tenant conveys to the other; or
3. Divorce.
Statutory vs. Equitable Right of Redemption
Equitable redemption is the right of a borrower to redeem the property before the foreclosure sale. Whereas statutory redemption is the right of a defaulting borrower to redeem the property after the foreclosure sale (usually 6-12 months).
Either may not be “clogged”/waived at any time!
Rule Against Perpetuities
An interest in land must vest, if at all, within 21 years of a life in being at the time of the creation of the interest.
Doctrine of Merger
Although a covenant that title will be marketable is implied in a contract for the sale of land, the doctrine of merger provides that one can no longer sue on title matters contained in the contract of sale after the deed is delivered and accepted.
After closing, the contract of sale is “merged” with the deed.
AKA, a buyer seeking to sue on implied warranties that were in the contract, but merged into a quitclaim deed that provided no warranties, can no longer do so after merger/closing.
Estoppel by Deed
Estoppel by deed applies to validate a deed, particularly a warranty deed, that was executed and delivered by a grantor who had no title at that time, but who represented that they had such title and who thereafter acquired such title.
Light and Air
Negative easements for light and air have been repudiated, absent an express agreement between parties.
There is no longer an implied right to light and air, as such a right would hamper development. However, an easement for light and air may be created by express grant.
3 Types of Notice
Actual notice, constructive/record notice, and inquiry notice (should have made a reasonable inquiry to discover, circumstances would make a reasonable person inquire further).
Rule of Convenience
The class (“subject to open”) closes as soon as one member of the class becomes entitled to immediate possession of the property.
EXAMPLE: “A to B for life, remainder to the children of C.” If C currently has 2 children when B dies, any child born after the death of B is not entitled to the remainder since the class has already closed.
Fixtures
Personal property attached to real property that transfers with the real property.
To characterize the property, look to the intent — would a reasonable person thing that this property is affixed permanently to the land?
Judged objectively, according to a reasonable person standard.
Examples: a furnace, boat dock, chandelier, etc.
Ademption
“Adeemed by Extinction”: If a gift described in a will isn’t in the testator’s estate at the time of death, it is adeemed by extinction.
“Adeemed by Satisfaction”: If a gift in a will was already made during the testator’s lifetime, i.e., the beneficiary already has it, it is adeemed by satisfaction.
How to Impose a Equitable Servitude
A real covenant with no privity or not in writing may be proven the covenant through estoppel, by showing an equitable servitude.
An equitable servitude can be proven upon a showing of an intent to run (plus notice and T&C), usually by establishing a common scheme.
If a sufficient number of lots in a subdivision are burdened by the same covenant, the court may find that a common scheme binds ALL of the lots in the sub., including those without the restriction written in the deed.
Common scheme must have been evident at the time of conveyance.
Prescriptive Easement
Requires proof that the use of the property is:
1. Continuous (traditional period is 20 yrs.)
2. Hostile
3. Actual
4. Notorious and Open
5. Exclusive (may share use with the owner, but not the whole world).
Like adverse possession, but the possessor gains the right to use, instead of title.
Possibility/Right of Reverter
A future interest in the grantor following a determinable estate. Upon the happening of an event, the property will automatically revert back to the grantor.
Term of Years Lease
Has a definitive beginning and end, can be more than one year, and ends automatically at the end of the period (no notice required).
Fee Simple Subject to an Executory Interest
Uses the same language as a fee simple determinable and a fee simple subject to condition subsequent, except the interest will go to a third party.
EXAMPLE: “If B dies without marrying, to C.”
Terminating a Fee Simple Absolute/Life Estate
Can ONLY be terminated upon the owner dying without a will and heirs, in which case the property escheats back to the state.
Tenancy in Common vs. Joint Tenancy
Both give each co-tenant a possessory interest in 100% of the property.
However, joint tenancy has a right of survivorship while tenancies in common do not.
Right of Survivorship
When property is held in joint tenancy, where one co-tenant dies, the entirety of the property passes to the surviving co-tenant automatically.
Trumps a will.
Creating a Joint Tenancy
Traditionally, tenants must take at the same time, on the same title, with equal interests, and shared possession. (TTIP)
Modernly, the tenants are only required to share an equal interest and equal possession. (IP)
Common Law vs. Modern Split on Ameliorative Waste
Ameliorative waste refers to modifications that increase the value of property made without permission.
Common Law: NO substantial alterations can be made to the property at ALL, unless authorized.
Modern Rule: You can make an alteration to the property if it doesn’t affect the market value, the *remaindermen approve**, or a substantial change in the neighborhood justifies it.
Types of Present Interest
Fee tail, fee simple/life estate (+ life estate pur autre vie), and nonfreehold estates (leases).
Fee Tail
“To the heirs of his body”; only to children. Think Downtown Abbey. Not favored because of the restraint on alienability.
Future-Advance Mortgage
Any line of credit or home equity loan. Time of attachment depends on if it is an obligatory FAM or an optional FAM.
Obligatory Future-Advance Mortgage: Attaches at the date that the loan is made, but not necessarily the date that the money is accessed. Normal for automatic installment.
Optional Future-Advance Mortgage: Attaches on the first payment, but subsequent creditors can take priority over whatever is left unpaid or remaining installments. Up to the bank’s discretion as for when to disburse.
Rights and Duties of Co-Tenants
Equal possession, equal profits, and equal payment of expenses. (PPP)
Generally, there is no duty to repair or improve.
The remedy for disagreements between co-tenants is a judicial partition.
Equitable Conversion
A doctrine that regulates the ownership of real property in the interval between contract formation and closing.
Majority Rule/Common Law: The risk of loss is on the buyer when they sign the contract; follows the legal title.
Minority Rule/UVPA: The risk of loss remains with the seller until legal title and possession passes to the buyer. Follows possession.
Bona Fide Purchaser
One who pays value without notice of a competing claim.
Intermediate Lien Theory of Mortgages
The Lien Theory applies until default, and then the title theory applies.
Before default, the mortgagor/borrower possesses the property and has a right to rents and profits, but after default, the mortgagee/creditor has rights to possession, rents, and profits.
Tenancy at Sufferance
A holdover tenant. Created when the tenant does not move out at the end of the agreed tenancy.
Periodic Tenancy
Only has a set beginning date, and then continues from period to period.
The landlord or tenant must give appropriate notice in order to terminate, which could vary based on the period.
Scope of an Easement
An easement is limited to its original writing. If there is no writing, then the easement is limited to “reasonable use.”
If an easement holder is overusing the easement, they are “surcharging” it, and the landowner can sue for damages or an injunction.
Tenancy At-Will
When there is no fixed duration, and exists only as long as the landlord/tenant desire — very fragile.
A tenancy at-will terminates whenever either party wants to, and no notice is required.
Implied Reciprocal Servitude
Also called a “negative reciprocal easement.”
Created by filing a declaration containing the restrictions before any lots are sold. HOAs can then enforce the servitudes in order to keep the common scheme.
Warranty of Habitability
This warranty requires landlords to keep their property “habitable.”
Habitable: A residence that is fit for human occupation and is free of serious defects that might pose a risk to a person’s health and safety.
To claim a breach of the implied warranty of habitability, a tenant must provide notice and allow a reasonable time to repair.
Race-Notice Statute
A bona fide purchaser who records first wins.
“An unrecorded conveyance is invalid against a subsequent bona fide purchaser who takes without notice and records first.”
3 Requirements for Conveyance of a Deed
- Donative intent.
- Delivery.
2(a). Either by physically giving to the grantee,
2(b). Grantor retaining the deed to give to the grantee, or
2(c). The grantor giving the deed to a 3rd party to give to the grantee (like escrow). - Acceptance.
Requirements for an Easement by Implication
- Severance of title to land once held in common ownership.
- The use giving rise to the easement existed at the time of severance.
- Apparent previous use, and
- At the time of severance, the use was reasonably necessary for proper and reasonable enjoyment of the land/alternatives were unreasonably more expensive.
Fee Simple Absolute
Grants all possible rights that a person may have in a parcel of land.
General Warranty Deed vs. Special Warranty Deed
A general warranty deed warrants that there are no defects in the entire chain of title.
A special warranty deed only warrants that there are no defects during the time of the seller’s ownership.
Lien Theory of Mortgages
The mortgagee/creditor receives a lien, while the mortgagor/borrower keeps possession and the right to rents and profits.
The mortgagor/borrower retains all legal and equitable title, unless and until foreclosure.
Majority.
Marketable Title
Marketable title is an implied covenant in every real estate transaction. Warrants that the property is reasonably free from defects, both in facts and law at the time of closing.
Examples of defects that would cloud title:
- A covenant or easement;
- A competing claim for adverse possession;
- An unpaid mortgage;
- The violation of an existing zoning ordinance;
- A considerable encroachment.
Title Theory
Mortgagee/creditor takes title to the property, and thus has the right to possession and to all rents and profits.
“The mortgagee receives legal title to the mortgaged property and have the right to take possession and collect rents and profits as it pleases.”
Mortgagee
Lender/creditor/bank.
How to Terminate a Covenant
CREAM
1. Changed circumstances doctrine.
2. Release.
3. Estoppel.
4. Abandonment (with substantial steps).
5. Merger (when one owner gains title to both properties).
Non-Freehold Estate
A property interest that is limited in time duration; a lease.
“A to B for 1 year.”
Statute of Frauds Requirements for a Real Estate Contract
- In writing,
- Signed,
- Description of the parties (usually metes and bounds),
- Description of the property,
- Price, and
- Any conditions of price or payment (example: requirement to obtain financing or requirement for inspection to pass before conveyance).
Terminating a Joint Tenancy
A joint tenancy can be terminated by:
1. Mutual agreement;
2. Unilateral (one person) conveyance to someone else (either by sale, lease, or mortage—but only in a title theory state);
3. Judicial partition.
Notice Statute
A bona fide purchaser for value who takes without notice of any other claim prevails.
Creating a Lease
A lease can be made either orally or in writing, but if for longer than one year, must be in writing under the Statute of Frauds.
Can be implied via the payment of rent periodically, which would create a periodic tenancy.
Covenant that Runs with the Land
A covenant that runs will the land must have: (PINT)
- Be in writing +
- Privity (Modernly only vertical, but historically both V+H);
- Intent (the intent to bind successors);
- Notice (recorded); and
- Must Touch and concern the land (integrally related to the land itself; directly influences the occupation, use, or enjoyment of the premises).
Vertical Privity: The successor “steps into the shoes” of the conveyor, taking the entire title. I.e., no sublease.
Definition of an Easement
An interest in the land of another. Can be created expressly/by grant, by implication, by necessity, or via prescription. (PING)
If an express easement states its use, then only that use is allowed, otherwise the easement is being surcharged. If an easement is not created expressly, then it is limited only to “reasonable use”.
Creating a Tenancy in Common
Only unity of possession is required to create a tenancy in common.
There is no right of survivorship for tenancies in common.
4 Kinds of Leases
- Term of years;
- Periodic tenancy;
- Tenancy at-will;
- Tenancy at sufferance.
Creating an Easement
May be created expressly/in grant (by writing), by implication, by necessity, or via prescription.
PING
Mortgagor
Borrower.
Requirements for an Equitable Servitude to Run with the Land
TIN.
Must touch and concern the land, with the intent to bind successors in interest (either in writing or by showing a common scheme), and with notice.
No privity of contract required, like for a covenant.
“Subject To” vs. “Assumes” the Mortgage
Subject To the Mortgage: The buyer takes no responsibility to pay the mortgage of the seller, but the property can still be foreclosed upon.
Assumes the Mortgage: The buyer become personally liable, alongside the original borrower/seller. Property can be foreclosed upon and the assumer can be held personally liable along with the mortgagor.
Assuming the Mortgage with a Novation: A new contract between the lender and new buyer, making the new buyer 100% liable and letting the mortgagor off the hook.
Three Types of Waste
VAPE
1.Voluntary (intentional/negligent damage)
2. Ameliorative (unauthorized improvements)
2. Permissive (not taking steps to avoid damage)
Equitable Servitude
A non-possessory interest in land that allows the owner of a benefitted property to use or restrict use of the burdened property. No horizontal or vertical privity is required.
Must be in writing, touch and concern the land, intend to bind successors, and have notice (TIN).
Enforcement can only be in equity (injunction).
Easement in Gross
Benefits a person or entity, instead of a dominant estate. Example: a power company’s easement in gross to run a power line under the ground.
Rule in Dumpor’s Case
If there is an express prohibition against assignment, but the landlord waives it, it is considered waived for the remainder of the lease.
However, the landlord can reserve the right to restrict future assignments by expressly stating that the waiver is a one-time occurrence.
Assignment vs. Subletting
Assignment: Transferring ALL of the remaining rental obligation (but not releasing the tenant from their contractual obligations).
Subletting: Transferring only a portion of the remaining rental obligations (example: one year out of a five year lease).
An assignee is in privity of estate with the landlord, but a sublettor is not.
A landlord can sue an assignee for rent along with the original tenant, but not a sublettor.
Adverse Possession
CHANGE.
- Continuous & Open
- Hostile
- Adverse & Actual
- Notorious
- Goes on for the statutorily required amount of time (usually 20 years)
- Exclusive.
A minority amount of jusridictions also require the payment of property taxes.
Springing Executory Interest
An interest that follows a gap in possession or divests the estate of the transferor.
Example: “O conveys to A for life, remainder to B and her heirs one month after A’s death.” B has a springing executory interest.
A –> A dies –> Reversion to O –> Interest springs from O to B.
Shifting Executory Interest
Cuts short a prior estate created by the same conveyance.
Example: “To A, but if liquor is ever served on the premises, then to B and his heirs.” B has a shifting executory interest, because his interest may cut short A’s estate.
Lateral Support Rights
A landowner may be strictly liable if their excavation/construction causes damage to the the adjacent land, if it would not have sunk in its natural state (i.e., nothing is built on it).
However, if the weight of additional structures on the land contributed to the damage, then the excavating landowner may only be liable if they were negligent.
Rule in Spencer’s Case
A real covenant in a lease that runs with the land will pass to assignees of that lease (because there is privity in an assignee, but not necessarily a sublettor).
Validity of a Deed
To be valid, a deed must
1. Identify the parties,
2. Describe the property,
3. Contain words denoting a present intent to convey, and
4. Be signed and in writing by the grantor.
It must also be delivered. Delivery is a question of intent to pass title presently.
I.e., “I am giving you the deed to my house but you can’t have it until I die so just hold onto it.” — No delivery
Quitclaim Deed
The grantor gives NO covenants and the grantee gets whatever the grantor has at that time. The grantee takes the land subject to any defects in the tile, undisclosed easements, or other issues, with no recourse.
Six Implied Covenants in a Warranty Deed
REEFS(W)
1. Right to Convey (Present) (Guarantees he owns the land he is selling)
2. Encumbrances (Present) (Covenant Against Encumbrances)
3. Enjoyment (Future) (Quiet Enjoyment)
4. Further Assurances (Future)
5. Seisin (Present) (Same as right to convey)
6. Warranty (Future)
Breach of Implied Warranty of Quality
A builder of new homes impliedly warrants to the buyer that the home is habitable and fit for its intended purses.
This warranty applies to defects that are discovered within a reasonable time, and are due to the builder’s negligence or failure to do work in a workmanlike manner.
First-in-Time, First-in-Right
“Under common law, a grantor can convey only those rights that the grantor had at the time of conveyance. Therefore, the common law follows the first in time, first in right principals. All states have recording statutes that change the results of this common law principle.”
START ALL NOTICE ACT QUESTIONS WITH THIS!
Inquiry Notice
Examination of or conditions on the land or its reference in an instrument would lead a reasonable person to inquire.
Record Notice
The interest is recorded in the chain of title. Deeds that are recorded too late or too early are “wild deeds”. Wild deeds do not give notice.
Duties of a Tenant
The tenant must pay rent.
If the tenant does not pay rent but has abandoned the property, the landlord can either (a) sue the tenant for damages, or (b) treat it as a surrender, which excuses future rent obligations.
Constructive Eviction
A tenant can sue their landlord for constructive eviction (for both residential and commercial properties) if:
1. The landlord breached a duty to the tenant,
2. The breach caused a loss of substantial use and enjoyment
3. The tenant vacated the premises, after
4. Giving the landlord adequate notice.
Duty to Mitigate
Under Common Law, a landlord has NO duty to mitigate.
However, today, many states have done away with this and now require landlords to make a reasonable effort to mitigate damages by attempting to re-rent the premises if the tenant leaves.
Fair Housing Act
Prohibits discrimination in housing sales or rentals on the basis of race, color, religion, sex, familial status, or national origin (not occupation).
Does NOT APPLY if the owner occupies one of the units in a multi-unit dwelling containing no more than 4 unites occupied by persons “living independently of each other”.
Owners may not place discriminatory advertisements.
Abandonment of an Easmenent
Mere nonuse is not sufficient to abandon and destroy an easement. There must have been an outward act of abandonment in addition to nonuse.
English vs. American Rules for Lateral Support
If a landowner’s construction caused damage to neighboring property, and the weight of existing structures on the land did NOT contribute to the damage, then the constructing landowner’s liability will depend on if the jurisdiction has adopted the American Rule or the English Rule.
American Rule: The landowner is strictly liable for the damage to both the land and the structures on it.
English Rule: The landowner is **strictly liable ** for the damage to the land, but only liable for the damage to the structure if they were negligent.
Covenant
A covenant is a contractual obligation created in connection with the transfer of real property. If done properly, the covenant will bind and benefit not only the original obligor and obligee, but will “run with the land” to bind and benefit successors to the original parties.
May be either negative (a promise not to do something) or affirmative (a promise to do something).
Enforceable for damages.
Real Covenants vs. Equitable Servitudes
The same, except covenants can be enforced for money damages, while equitable servitudes can only be enforced for equitable relief.
Covenant of Warranty
Grantor agrees to defend the grantee against claims of title by a third party, and to compensate the grantee for any loss sustained by the claim of superior title.
Boundary Line Disputes
When neighbors take matters into their own hands and resolve boundary disputes on their own terms, law tends to uphold these determinations, even though they often have the effect of placing a boundary somewhere other than at its “true” location.
To establish a boundary by agreement, the parties must have been uncertain or unaware of the correct location, or there must have been a dispute as to the true location of the boundary.
Most courts also require the taking (and relinquishing) of possession by the parties as to the agreed line.
Tolling
The running of a statute of limitations may be tolled in certain circumstances, meaning that the statute will not begin to run.
Imprisonment, nonage and legal incompetence will be considered a disability of the owner.
However, in order to toll the statute of limitations via a disability, the disability must exist when the adverse possessor enters.
Open Mines Doctrine
If the grantor was exploiting the natural resources of an existing mine, it is presumed that the grantee has the right to continue that exploitation. On the other hand, such tenants have no right to open NEW mines and appropriate minerals therefrom.
A life tenant is permitted to take full use of existing mines and is not accountable for remaindermen.
Purchase-Money Mortgage
Purchase-money mortgages are given priority over existing mortgages and liens, even those that recorded first.
How to Spot a Fee Simple Determinable
“for so long as,”
“during,”
“while,” or
“until.”
DETERMINABLE = DURATIONAL!
No comma; all one clause.
How to Spot a Fee Simple Subject to Condition Subsequent
“provided,”
“however,”
“however if,”
“but if,”
“on condition that,” or
“in the event that.”
WILL ALWAYS HAVE A COMMA! TWO SEPARATE CLAUSES!
Ouster
If one tenant wrongfully excludes another co-tenant from possession of the whole or any part of the whole property, such conduct amounts to an ouster.
This is required before one co-tenant can begin to adversely possess the property against another co-tenant.
Horizontal Privity
Satisfied when the covenant exists between the original covenantor and covenantee. (A conveyance of land between one person to another with the original covenant included in the same deed)
Under the modern rule, horizontal privity is not required for the benefit to run with the land.
Vertical Privity
The relationship between an original party to a running covenant and the successor in interest to that party. To demonstrate, must show that the successor “stepping into the shoes of” the original party, by taking the entire interest held by that party. (Basically, any voluntary transfer of property will satisfy. I.e., not A.P.)
Required for both the benefit and the burden of a covenant to run.
HOAs
An HOA generally has standing to enforce a restrictive covenant. When a court is examining whether a board has acted properly, they will apply a rule similar to the BJR applied to corporations.
A rebuttable presumption that the board is acting in an honest, well-meaning, and informed way, in good faith.
Proft a Prendre
A nonpossessory interest in land — the holder of the profit has the right to take resources from the land of another. Can only be created expressly or by prescription.
Transferability of Easements
All easements automatically transfer/”run with the land”, with the exception of easements in gross (the benefiting party cannot convey), or a bona fide purchaser (didn’t have notice of the easement).
Traditional Rule — Easements in gross cannot be transferred.
Modern Rule — Permits transfer when the grantor of the easement intended it to, or the easement is commercial in nature.
Easement by Necessity
Found where there was severance of title once held in common ownership, and there is a STRICT necessity for the easement at the time of severance.
Difference between Easements by Implication and Easements by Necessity
An easement by implication will only require reasonable necessity, while an easement by necessity will require STRICT necessity.
How to Terminate an Easement
- Merger (when one owner gains title to both properties),
- Release,
- Abandonment (+ substantial step),
- Estoppel,
- Prescription,
- Condemnation (government acquires servient estate)
Prevailing Under a Notice Statute
To prevail under a notice statute, the claimant or real property must prove that —
(1) They took subsequent in time to another person claiming ownership,
(2) The claimant was a bona fide purchaser for value, and
(3) The claimant took the property without actual, constructive, or inquiry notice.
Shelter Rule
Provides protection for a subsequent purchaser who does not satisfy the applicable recording statute.
A bona fide purchaser protected by the recording statute gives title to a subsequent purchaser free of encumbrance. This rule applies even if the subsequent purchaser has actual, constructive, or inquiry notice.
AKA if the first conveyor was a bona fide purchaser without notice, then whoever they sell it to is also a bona fide purchaser without knowledge, even if they do have knowledge.
Covenant Against Encumbrances
The covenant against encumbrances is a promise by a conveying landowner that the property to be conveyed contains no encumbrances that would hinder the use or enjoyment of the property.
An encumbrance is a right or interest that another person has in real property that would diminish the value of the property but is consistent with the conveyance of a fee interest in the property.
The covenant against encumbrances is a present encumbrance and, as such, does NOT run with the land. The covenant is broken at the time of conveyance.
Trade Fixtures
When a tenant annexes a chattel to the land during his tenancy to advance his trade or business, it becomes a trade fixture.
In general, a tenant is free to remove a trade fixture during the tenancy (and in many states, for a brief period after the termination of the tenancy) but must repair any damages caused by the removal.
License
A privilege to do something on someone else’s property.
Does not have to be in writing or supported by consideration to be valid.
Generally freely revokable, and not transferable unless intended to be.
May be irrevocable if granted with consideration.
Expires upon the death of the licensor or the conveyance of the servient estate.
Duties of an Easement Owner
The owner of the easement is responsible for reasonable maintenance and repairs of any improvements made to the easement. A general duty to maintain the easement.
Reasonable Use Doctrine
Under the Reasonable Use Doctrine, which most U.S. jurisdictions follow, a riparian owner can make reasonable use of riparian (navigable) water as long as his use does not interfere unreasonably with the rights of other riparian land owners.
Must be navigable waters, like a river or lake. Can’t be artificial.
Mortgage “Upset Price”
A minimum price for foreclosure sale that the property cannot sell under. A set price that a foreclosure sale will have to meet.
If there is a deficiency, then the mortgagor will only have to pay the difference between the remaining balance of the mortgage and the upset price, instead of the remaining balance and the sale price.
Distributions of a Foreclosure Sale
The proceeds of a foreclosure sale are distributed
1. First to the costs of the sale,
2. Then to the security interest that foreclosed,
3. Then to any junior lienholders whose interest is terminated by the sale, and
4. Then to the mortgagor.
Junior Lienholder Prevailing Over a Senior Lienholder
A junior lienholder will prevail over a senior lienholder’s modification of their loan agreement only if the senior lienholder’s modification materially prejudiced the junior lienholder.
The rescheduling of installment payments are not generally materially prejudicial to a junior lien.
Implied Warranty of Quality
Applied in all jurisdictions. Requires NEW houses not to have significant latent defects caused by the builder or remodeler’s poor workmanship.
Also requires that the homeowner discover the defects within a reasonable time.
Note that some jurisdictions apply this warranty to resold homes as well.
Seller’s Remedy for Buyer’s Breach
- Difference between the contract price and the market price of the property at the time of breach (Expectation damages).
- Retaining the down payment (some courts may restrict this to only down payments that are 10% or less of the purchase price).
- Liquidated damages, if applicable and reasonable/not a penalty.
- Rescission of the contract.
- Traditionally, a seller could seek specific performance under a mutuality of remedy requirement, however, modernly, courts have questioned the general availability of specific performance for sellers.
Buyer’s Remedy for Seller’s Breach
- Difference between the market price at the time of breach and the contract price (expectation damages; note the English vs. American variations)
- Return of the down payment.
- Reliance damages (such as inspection costs).
- Specific performance
English vs. American Rule for Failure to Deliver Marketable Title Damages
If the seller fails to deliver marketable title…
English Rule: Minority. Buyer may seek return of their down payment, but can only receive expectation damages if the seller acted in bad faith.
American Rule: Majority. Buyer can get their down payment back and can seek expectation damages and reasonably forseeable consequential damages.
Purchase Money Mortgage
A loan in which the funds advanced are directly used to purchase land.
A purchase-money mortgage executed at the same time as the purchase of the real property encumbered takes precedence over any other claim or lien, including a previously filed judgment lien.
May be granted by a seller, by a third party, or both.
