Real Property Flashcards
Common Law doctrine of Caveat Emptor
Under the common law doctrine of caveat emptor, a builder made no warranties to a home buyer regarding the quality of the structure. The buyer took the home “as is.” Today, however, most states recognize an implied warranty of habitability or an implied warranty of workmanlike construction either by statute or by judicial precedent. Typically, this warranty is that the home is “designed and constructed in a workmanlike manner and fit for habitation.”
Jurisdictions differ, however, on whether the warranty between a builder and a buyer runs to downstream buyers such as Adam, who acquired the house from Bert and not from the builder (Connie). Some jurisdictions say that the warranty does run to downstream buyers, others say that it does not, and yet others have not addressed the issue at all. Thus, under these facts, whether Adam has a claim against Connie depends on the jurisdiction in which the house is located.
Six Covenants
Warranty deeds include six covenants: three present covenants, which are enforceable only by the warrantee named in the warranty deed (here Bert), and three future covenants, which are enforceable by the named warrantee and all future transferees, such as Adam. The most relevant of the future covenants here is the covenant of quiet enjoyment. This covenant protects the warrantee and any remote grantee (here Adam) against claims based on the warrantor’s (here Connie’s) absence of title to all or a portion of the land conveyed in the warranty deed.
However, a warranty deed may expressly exclude (or “except”) from the warranties in the deed claims based on titles, easements, covenants, and restrictions “of record,” meaning titles, easements, covenants, and other restrictions that have been filed in the land records of the county in which the land is located. These records include the land records maintained by the county recorder as well as all court judgments and probate records. Where such exclusion is provided for in the warranty deed, as here, the downstream buyer has no cause of action against the warrantor for breach of the covenant of quiet enjoyment because the buyer’s quiet enjoyment was disturbed as the result of an excluded title.
Marketable Title
[NOTE: Marketable title is relevant only to the question of whether a buyer can refuse to close a transaction and to take title of land from a seller due to a title defect. Once the deed is delivered, the issue of marketable title is irrelevant, and the claims relating to title defects are based solely on the nature of the deed received. In the case of Bert, he took the land by a warranty deed that excluded the adverse possession claim, and in the case of Adam, he took by a quitclaim deed that contained no warranties at all.]
Easement by necessity
An easement by necessity is an encumbrance on the land. Because the covenant of quiet enjoyment in Connie’s deed to Bert did not expressly except that encumbrance from the warranty, Connie ordinarily would be liable to the downstream buyer for breach of the covenant of quiet enjoyment.
[NOTE #1: The language in the deed excepting “all titles, covenants, and restrictions on record with the county recorder” would not be a basis for excepting the easement by necessity from the warranty because these easements arise by operation of law and thus are not recorded.]
Covenant of quiet enjoyment
Other courts hold that the fact that the buyer could see a visible use of the property that might constitute an easement does not preclude the buyer from suing on the covenant of quiet enjoyment. Although the buyer may see the encumbrance, the buyer knows little or nothing about its legal status. Because, as between the seller and the buyer, the seller has better knowledge of the easement’s status, the risk of loss from an erroneous assessment of its existence and the need to expressly exclude is on the seller. See S. Kurtz, et al., supra, at 686-87. In these jurisdictions, Adam has a claim because there was no exclusion in the warranty deed.
Two kinds of warranty deeds
[NOTE #3: There are two kinds of warranty deeds: the warranty deed (a/k/a “general warranty deed”) and the “special warranty deed.” The latter may be evidenced either by using the word “special” before “warranty” or by language in the warranties limiting them to actions occurring only during the time the seller owned the property. That is, by using a special warranty deed, the seller is not guaranteeing the condition of the title during any period of ownership by anyone but the seller. Here, there are no facts suggesting that Connie conveyed the land to Bert by a special warranty deed. If Connie had conveyed the land to Bert by a special warranty deed, another reason that Adam would have no claim against Connie under Issue #2 might be that the statute of limitations that benefited Diane had fully run before Connie acquired the land. A similar argument might also be made with respect to Issue #4.]
