Real Property Flashcards
Adverse possession
- Actual possession (physical occupation)
- Open and notorious (visible use)
- Hostile (no consent)
- Continuous for the statutory period (seasonal use ok if type of property permits that. Tacking allowed if privity)
- Exclusive (true owner excluded)
Land sale contract merger rule
Land sale K governs agreement until closing, then deed governs under merger doctrine.
- Any obligation in K is discharged at closing unless the obligation is repeated in the deed.
Land sale K requirements
Governed by K law and SOF applies. SOF requirements:
- K must be in writing,
- Identify parties,
- Signed by party to be bound,
- Describes land sufficiently,
- States consideration (purchase price)
SOF part performance exceptions
PIP
- Possession by purchaser
- Substantial improvement
- Payment for all or part
Marketable title
Implied promise in every land sale K that title is free from:
- from defects or claims that would make it unacceptable to a reasonable buyer,
- any threats of litigation or disputes about ownership.
Marketable title - Seller’s duties
- Seller not required to deliver marketable title until the day of closing
- If encumbrances not cured by closing, buyer can sue seller for breach of the implied covenant
- If buyer does not discovery encumbrance until after closing, buyer must sue for breach of deed warranty (not breach of K bc K merged with deed)
Equitable conversion
Once K is signed, buyer is deemed the owner. If property is destroyed (at no fault of either party) prior to closing, the risk of that loss is imposed on buyer
Remedy for breach of land sale K
Damages (difference between market price and K price) or specific performance (preferred remedy since land is unique)
Mortgage
- Conveys property interest in real prop as security for loan.
- Must be in writing and satisfy SOF
(think 2 parties)
Deed of trust
seller of land gives/loans money to buyer and buyer in exchange executes a promissory note (doc) that promises to pay seller back. Deed of trust is what secures that, and when executed, buyer gives title to prop to trustee. It involves 3 parties: seller, trustee, and buyer. If buyer pays everything back, trustee gives title back to property. If not, trustee on seller’s order, can sell property and give proceeds to owner. Takeaway: always involves 3 parties.
Rights of parties (lien theory v title theory)
- Lien theory (majority): mortgagor is owner until foreclosure. Mortgagee cannot take possession prior to foreclosure. Mortgages are transferable.
- Title theory (minority): Mortgagee is owner, and mortgagor has the right to regain ownership upon satisfaction of obligation
Foreclosure
If borrower fails to repay loan, then lender can foreclose (take back property in satisfaction of debt).
- mortgagee must foreclose by judicial proceeding
Foreclosure approach
(1) State rule
(2) Identify what the security interests are aka who has the right to foreclose (e.g., mortgage, deed of trust)
(3) Who gets paid first after a judicial proceeding, aka who has priority? First in time, first in right rule applies with exceptions of PMM’s and recording acts.
(4) Then distribute proceeds.
- First, costs associated with sale,
- Second, PMM or secured senior interest,
- Third, secured junior interest
- Fourth, unsecured interests
*Note: senior interests are not destroyed, goes to land
Priority of loans
After land is sold, proceeds are used to satisfy debts secured by the property. Priority of interests:
- The first mortgage (senior) generally gets priority over later mortgages (junior) (first in time, first in right).
Exception to priority of loans
- PMM may take priority over non-PMM
- If state recording act applies
Deficiency judgment
Occurs when property is worth less than the amount owed on loan(s). Lender can sue debtor personally for the deficiency difference only if:
(1) There was a judicial foreclosure;
(2) The loan was not a PMM.
Redemption
After default on obligation, but prior foreclosure sale, mortgagor may retain the property by paying the full amount of the loan obligation.
Deeds requirements
(1) Identify property and parties,
(2) In writing and signed by grantor
(3) Include words of present intent to transfer (“grant”)
(4) Be properly delivered and accepted
Deed - delivery requirement
- Transfer/delivery of deed from grantor to grantee: creates a presumption of intent to transfer
- Transfer from 3P agent to grantee with condition: not delivered if grantor reserves right to take deed back
- Transfer from 3P agent to grantee with no right to take back: intent to presently transfer determined by the facts
Testamentary transfers
No present intent to transfer bc transfers only on death, must satisfy wills requirements
3 types of deeds
- Quitclaim: no covenants of title
- General warranty deed: warrants against all defects, contains 6 covenants
- Special warranty: contains some covenants, only warrants against defects arising during time grantor had title
General warranty present covenants (breached at time of sale, if at all)
- Seisin: G owns what he purports to own
- Right to convey: G has power to make conveyance
- No encumbrances: no mortgages, liens, easements or use restrictions on land (breached even if purchaser had notice)
General warranty: Future covenants (breached, if at all, when grantee is disturbed in possession)
- Title: promises to defend against any lawful claims
- Quiet enjoyment: grantee will not be disturbed by 3P’s lawful claims of title
- Further assurances: G will take reasonably necessary acts to perfect title
Defenses to breaches of covenants
- Unclean hands
- Laches
- Waiver
Recording acts strategy
- Apply common law rule “first in time, first in right” first
- Then all recording acts (race, notice, race-notice)
Pure race statute
Person who records first wins
Pure notice statute
Person who purchases land without notice of a prior interest wins
Race-notice statute
Person who purchases land without notice of the prior interest AND records first wins.
Recording acts protect
- BFPs: purchasers who take for value and without notice of prior interest
- Mortgagees
*and no one else (do NOT protect devisees, heirs, etc bc they dont take for value)
3 types of notice
- Actual (buyer had actual knowledge of prior interest)
- Inquiry: reasonable investigation would’ve disclosed prior claims
- Recorded (constructive): grantees are on notice of any interest properly recorded in the chain of title
*Exception: wild deeds (not within chain of title bc recorded weirdly, do not provide constructive notice)
Shelter doctrine
Grantors who are protected by the recording act protect (or “shelter”) their grantees who would otherwise be unprotected.
Example: A sells land to B. B does not record his interest. A then sells the same land to C, who has no notice of B’s ownership. C records her interest on Monday. B records his interest on Tuesday. C later sells the land to D. D is sheltered under C’s BFP status.
Fee simple absolute
Absolute ownership of potentially infinite duration, default
“To A” “To A and his heirs”
Fee tail
Allows owner of land to ensure land remains in family
“To A and the heirs of his body”
Fee simple defeasible
Allows a prop to be held or conveyed to another but the property is subject to a limitation. 3 types
- Fee simple determinable
- Fee simple subject to condition subsequent
- Fee subject to an executory interest
Fee simple determinable
Automatically terminates if stated event occurs. Prop automatically reverts to grantor
- Possibility of reverter is the future interest held by grantor
- Created by words of duration “so long as” “during” “while” “until” “unless”
Fee simple subject to condition subsequent
Has potential to terminate an estate if stated event occurs but termination is NOT automatic.
- Right of reentry is the future interest the grantor retains
- Created by “right of reentry” and includes conditional language “but if” “provided that” “upon condition that”
Fee simple subject to an executory interest
- Automatically terminates a preceding estate if stated event occurs, estate passes to a 3P rather than reverting back to the grantor.
- Executory interest is the future interest 3P holds (subject to RAP)
“To A but if X occurs, to B”
Life estate
Interest that lasts for lifetime of a person (life tenant).
- Life estate pur autre vie is a life estate that ends at lifetime of identified 3P
- Defeasible: can be defeasible like fee simple such that life estate ends before life tenant dies
- Conveyable: life estate holder may convey interest, but can’t greater than his own lifetime or pur autre vie lifetime
“To A for life” “To A for life of B”
Future interest: Possibility of reverter follows
Fee simple determinable
Future interest: Right of reentry follows
Fee simple subject to condition subsequent
Future interest: Reversion
When holder of estate transfers to another something less than entire estate
Future interest: Remainder
Becomes possessory upon expiration of a prior possessory estate created by same instrument. (NEVER follows a defeasible fee)
Vested remainder
- Ascertained person AND
- Not subject to a condition precedent
Contingent remainder
- Unascertained person (i.e., unborn), AND/OR
- subject to condition precedent
2 types of executory
- Shifting: follows defeasible fee and cuts short the prior interest (shifts from one holder to next)
- Springing: becomes possessory at some point in future WITHOUT cutting short a prior interest (springs from one holder to another)
Restraint on alienation
A grantor can place a restraint on the grantee’s ability to freely transfer only if it’s reasonable. Absolute restraints on alienation are unreasonable and thus, not allowed.
**Unreasonable restraints will be stricken from conveyance.
RAP
Interest must vest no later than 21 years after life in being at creation of the interest. Applies to:
- Contingent remainders
- Executory interests
- Class interests
