Real Property Flashcards
T/F. A joint creditor of both spouses can execute a judgment against the property, terminating the tenancy by the entirety.
T
a creditor of only one spouse cannot
T/F. The mutual agreement of the spouses (e.g., deed executed by both spouses) will sever a tenancy by the entirety.
T
The Rule Against Perpetuities provides that certain interests in property are void if there is _____, however _____, that they may _____ more than _____ years after _____ at the _____.
any possibilityremotevest21some life in beingcreation of the interest
T/F. A deed or mortgage executed by one spouse is effective to cause a severance of a tenancy by the entirety.
F
The Rule Against Perpetuities applies to the following interests in property:
(i) contingent remainders;(ii) executory interests;(iii) class gifts (even if vested remainders);(iv) options and rights of first refusal; and(v) powers of appointment.
Under a __________ statute, a subsequent purchaser who pays valuable consideration and takes without notice of the prior conveyance prevails over a prior grantee who failed to record.
notice
The Rule Against Perpetuities provides that . . .
certain interests in property are void if there is any possibility, however remote, that they may vest more than 21 years after some life in being at the creation of the interest. The Rule applies to the following interests in property:(i) contingent remainders;(ii) executory interests;(iii) class gifts (even if vested remainders);(iv) options and rights of first refusal; and(v) powers of appointment.
Mechanics of Recording
1) Filing Copy
The grantee or her agent normally presents the deed to the county recorder, who photographs it and files the copy in the official records. These records are kept _____.
2) Indexing
The recorder also indexes the deed to permit title searches. The usual indexes are the _____ and _____ indexes, which are arranged by reference to _____. Tract indexes, which index the property by_____, exist in some urban localities.
chronologically
grantor-grantee
grantee-grantor
the parties to the conveyance
location
_____ are not subject to the Rule Against Perpetuities.
Future interests in the grantor (i.e., reversions, possibilities of reverter, and rights of entry)
Types of recording acts . . .
CL - first in time (first grantee)
Notice - subsequent grantee if BFP
Race Notice - subsequent grantee if BFP + recorded first
R - whoever records first
Which interest violates the Rule Against Perpetuities and is stricken if it follows a defeasible fee and has no limit on the time within which it must vest?
An executory interest
When is someone a BFP for purposes of recording acts:
The person must:
(i) Be a purchaser (or mortgagee or creditor if the statute so allows);
(ii) Take without notice (actual, constructive, or inquiry) of the prior instrument; and
(iii) Pay valuable consideration.
A possibility of reverter is the _____ retained by _____ who conveys a _____. Future interests in the grantor are not subject to _____.
future interesta grantorfee simple determinable (a defeasible fee)the Rule Against Perpetuities
“Without notice” means that the purchaser had no _____ (3) notice of the prior conveyance at the time _____. While no one has a legal duty to perform a title search, a subsequent purchaser will be charged with the notice that such a search would provide, whether or not she actually searches. However, the fact that the purchaser obtains knowledge of the adverse claim after the conveyance but _____ it is immaterial; she only has to be “without notice” at _____.
actual, record, or inquiry
she paid the consideration and received her interest in the land
before she records
the time of the conveyance.
At common law, the unities of _____ are required to create a _____.
time, title, interest, and possessionjoint tenancy
T/F. Actual notice, for purposes of recording statutes, includes knowledge obtained from any source (e.g., newspaper, word-of-mouth, etc.).
T
The unity of time requires that the interest of _____ joint tenant vest _____.
eachat the same time
T/F. The fact that a deed has been recorded does not always mean that a purchaser will be charged with notice of it.
T
The fact that a deed has been recorded does not always mean that a purchaser will be charged with notice of it. A subsequent purchaser will be held to have record notice only if the deed in question is recorded “in the chain of title,” which means that it is recorded in a fashion that a searcher could reasonably find it. There are several situations in which a deed might be recorded, but very difficult or impossible for a search to locate.
The unity of title requires that _____ joint tenants acquire _____ by _____.
alltitlethe same instrument
A subsequent purchaser will be held to have record notice only if the deed in question is recorded “_____,” which means that it is recorded _____.
in the chain of title
in a fashion that a searcher could reasonably find it
The unity of interest requires that the _____ of each joint tenant be _____.
interestof the same type and duration
O owns Blackacre, which she contracts to sell to A. The contract is not recorded, and O remains in possession. A thereupon conveys Blackacre by deed to B, and B records. O then conveys Blackacre by deed to C. Did B’s recordation charge C with constructive notice of B’s claim to equitable title to Blackacre derived through A?
No. C is not charged with notice because there was no way for him to find the AB deed. Nothing related it to O. It was not in O’s chain of title; it was a “wild deed.”
Compare: If the jurisdiction maintained a tract index, it would not be hard to find that A-B deed. It would be indexed under Blackacre’s block and lot number. But it is impossible to find in a grantor-grantee index without looking at the descriptions of all the recorded properties.
The unity of possession requires that each joint tenant have the right to possession of _____.
the whole
O conveys to A on May 1. O conveys to B, a donee, on May 15. B records on June 1. A records on June 15. B conveys to C on July 1. C has no actual notice of the O-A deed.
B v. A:
C v. A: In notice statute jurisdictions
If B in the example above were a BFP _____.
B v. A: As between A and B, A would win because B (a donee) was not a bona fide purchaser.
C v. A: In notice statute jurisdictions, most courts hold that C will prevail over A because the O-A deed was recorded “late” and is not in C’s chain of title; i.e., the search burden is too great if C is required to search “down” the grantor index to the present time for each grantor in the chain.
In several race-notice jurisdictions, however, A’s recordation is treated as giving constructive notice to any purchaser subsequent to such recordation. In these states, the title searcher must search to the present date under the name of each person who ever owned the property in order to pick up deeds recorded late.
Exception—Shelter Rule
If B in the example above were a BFP, C would win in any event, for she would “shelter” under B. This result would be the same even if C had actual knowledge of the O-A deed; otherwise B’s power to transfer would be restricted.
If these four unities are not present, a joint tenancy _____. Instead, a _____ results.
cannot be created at common lawtenancy in common: is a concurrent estate with no right of survivorship.
Inquiry notice means that _____.
if the subsequent grantee is bound to make reasonable inquiry, she will be held to have knowledge of any facts that such inquiry would have revealed (even though she made none).
A tenancy in common is a _____ estate with no _____.
concurrentright of survivorship
A court will never reform a deed that has been _____. Reformation is an equitable action in which the court rewrites a deed to make it conform to _____. Reformation will be granted if the deed does not express what the parties agreed to for any of the following reasons:
relied on by a bona fide purchaser
It reflects the parties’ mutual mistake;
It contains a drafting error; or
It reflects one party’s unilateral mistake—but only if that mistake was induced by the other party’s misrepresentation or inequitable conduct.
A tenancy by the entirety is a marital estate akin to _____ in that _____ are required for its creation, and _____. _____, however, is not required to create a joint tenancy.
a joint tenancyfour unities (plus a fifth—marriage)the surviving spouse has the right of survivorshipMarriage
In order to prevail over a prior grantee under a race statute, when must a subsequent transferee record
Before the prior grantee records.
All of the interests are valid under the common law Rule Against Perpetuities in a conveyance from O “to A for life, then to A’s widow for life, then to A’s __________.”
Children
T/F. In order to prevail over a prior grantee under a race statute, a subsequent transferee must record before she learns of the prior grant.
F
Before the prior grantee records.
A contingent remainder is a remainder that . . .
is (i) subject to a condition precedent, or (ii) created in favor of unborn or unascertained persons.
_____, _____, and _____ are not BFPs because they do not give value for their interests; i.e., they are not purchasers.
Donees
heirs
devisees
If O conveys property “to A for life, then to B’s heirs” and A predeceases B, at common law the heirs’ interest is void under the __________.
Rule of Destructibility of Contingent Remainders
A mortgagee of the land can be protected as a BFP of land. Mortgagees for value (but not those _____) are treated as purchasers, either expressly by recording acts or by judicial classification. Thus, mortgagees for value who take without notice can be protected as BFPs.
who receive a mortgage only as security for a preexisting debt
At common law, a contingent remainder had to vest _____ termination of the preceding estate or it was destroyed.
prior to or upon
A donee from a bona fide purchaser of the land can be protected as a BFP of land. Under the _____ rule, anyone who takes from a _____ will be treated _______. This rule exists to protect the BFP by preserving his ability to convey property. It applies even ______. However, a non-BFP who previously had title cannot acquire BFP status by selling the land to a BFP and then _____.
shelter
BFP
like a BFP (i.e., will prevail against any interest her transferor would have prevailed against)
when his transferee had actual knowledge of a prior unrecorded interest or did not take for substantial pecuniary value (i.e., was a donee)
repurchasing it
Under the Doctrine of Merger, whenever the same person acquires _____, a merger occurs resulting in _____ in _____. At common law, if the person acquired all of the interests except a contingent remainder, the merger would _____, and the contingent remainder would _____.
all of the existing interests in land, present and futurefee simple absolutethat personwould occur anywaybe destroyed
If a deed never was delivered, but the listed grantee discovers the deed and records it, the deed is:
void
If a deed never was delivered, but the listed grantee discovers the deed and records it, the deed is void. A deed is not effective unless it has been delivered and accepted. While proper acknowledgment and recording raises the presumption that a deed is authentic and was validly delivered, this presumption is rebuttable in most states. Recording a deed, by itself, does not validate any aspect of an otherwise invalid conveyance (e.g., a forged or undelivered deed). Here, the grantor never delivered the deed; thus, it is not valid (i.e., void). A void deed will be set aside by a court even if title purportedly has passed to a bona fide purchaser.
Under the common law Rule in Shelley’s Case, a conveyance that purports to give a grantee a _____ with a _____ to the grantee’s heirs instead gives the grantee both _____ and .
freehold estate (e.g., a life estate) remainderthe freehold estatethe remainder
T/F. Physical transfer of a deed is necessary for a valid delivery.
F
Under the common law Doctrine of Worthier Title, a remainder limited to the grantor’s heirs is _____, and the grantor retains _____.
invalida reversion in the property
T/F. Physical transfer of a deed alone establish delivery.
F
In general, a life tenant commits voluntary waste when he _____, unless _____.
Consumes or exploits natural resources on the property(e.g., timber, minerals, oil).However, there are exceptions to this rule which allow the life tenant to consume or exploit such resources:(i) in reasonable amounts when necessary for repair and maintenance of the land;(ii) when the life tenant is expressly given the right to exploit such resources in the grant (e.g., a mineral lease);(iii) when prior to the grant, the land was used in exploitation of such natural resources, so that the grantor most likely intended the life tenant to have the right to exploit; and(iv) in many states, when the land is suitable only for such exploitation (e.g., a mine).
“Delivery” (deeds) refers to the _____; it is satisfied by _____ evidencing the grantor’s intention that the deed have some _____; i.e., that _____.
grantor’s intent
words or conduct (note the presumptions related to deed delivery)
present operative effect
title pass immediately and irrevocably, even though the right of possession may be postponed until some future time.
When a life tenant fails to make required repairs to the land or pay required carrying charges (e.g., interest on encumbrances, ordinary taxes), he commits _____.
permissive waste
Presumptions Relating to Delivery
As a matter of theory, a deed may be delivered by words without an act of physical transfer. Delivery is presumed if the deed is: _____. Unless there is _____, the continued possession of the deed by the grantor raises a presumption of _____ and therefore _____. Conversely, possession by a grantee of a properly executed deed raises a presumption that _____. Note, however, that the presumptions involved are _____.
(i) handed to the grantee, or (ii) acknowledged by the grantor before a notary and recorded.
some clear expression of intent that the grantor envisioned the passage of title to the grantee without physical delivery
nondelivery
no passage of title
the delivery requirement has been satisfied
rebuttable
A life tenant commits permissive waste when he . . .
fails to make required repairs to the land or pay required carrying charges (e.g., interest on encumbrances, ordinary taxes), he commits _____.
There must be an acceptance by the grantee in order to complete a conveyance. In most states, acceptance is presumed if _____. In other states, acceptance is presumed only where _____. Acceptance is presumed in all states if the grantee is _____.
the conveyance is beneficial to the grantee (whether or not the grantee knows of it)
the grantee is shown to have knowledge of the grant and fails to indicate rejection of it
an infant or an incompetent
When a life tenant substantially changes the use of the property in a way that increases its value (e.g., he demolishes a run-down building), he commits _____. Courts will permit this when performed by a _____ when _____.
ameliorative wastelong-term tenantneighborhood changes make the previous use infeasible
A deed requires ____ and _____.
delivery and acceptance
A __________ restraint provides that any attempted transfer of the property is ineffective.
Disabling
When a watercourse or body of water forms the boundary of a parcel of real property, accretion causes the legal boundary to change due to the _____. The slow erosion of the bank of a river or stream serving as a boundary results in the owner _____. Similarly, the slow deposit of soil belongs to _____. Where accretion builds up in an irregular pattern over the lands of several adjacent property owners, courts determine title to it by _____.
In contrast,_____ is the sudden, perceptible change of a watercourse serving as a boundary. Avulsion does not change the legal boundaries, which remain where they were even if _____. Similarly, the legal boundary line _____ changed by the encroachment of the body of water. When property is encroached upon by a body of water (e.g., a lake enlarges), previously fixed boundary lines _____. The boundary lines can be proven even if the land is completely under water.
slow and imperceptible deposit of soil
losing title to that area
the owner of the abutting land
(i) extending each owner’s property line out into the water, or (ii) dividing up the newly formed land in proportion to the owners’ interests in the adjoining lands.
avulsion
this results in a landowner who had river access finding himself landlocked
is not
do not change and ownership rights are not affected
A disabling restraint provides that _____. Disabling restraints on any legal interest are_____.
any attempted transfer of the property is ineffective. A conveyance from “O to A, and neither A nor her heirs shall have the right to transfer the land or any interest therein” contains a disabling restraint. void
There are three types of deeds characteristically used to convey property interests other than leaseholds: _____. The major difference between these deeds is the _____ of assurances (covenants for title) they give to the grantee and the grantee’s successors regarding the title being conveyed.
the general warranty deed, the special warranty deed (usually statutory), and the quitclaim deed
scope
A _____ provides that if the grantee attempts to transfer the property, it is surrendered to another person.
forfeiture restraintA conveyance from “O to A, but if A attempts to transfer the land or any interest therein during her lifetime, to B” contains a forfeiture restraint. Partial (i.e., limited in time and purpose) forfeiture restraints on legal interests generally are valid.
In this day of recording acts and title insurance, covenants for title are not much relied upon for title assurance. A general warranty deed is one in which the grantor covenants against title defects created by _____. In a special warranty deed, however, the grantor covenants _____. General warranty deeds are a rarity in a number of states where many conveyances are made with statutory form special warranty deeds.
both himself and by all prior titleholders
only that he himself did not create title defects; he represents nothing about what prior owners might have done
A forfeiture restraint provides that _____. _____ on legal interests generally are valid.
if the grantee attempts to transfer the property, it is surrendered to another personPartial (i.e., limited in time and purpose) forfeiture restraints
A grantor may give any or all of the following covenants, which are classified as the “usual covenants for title.” A deed containing such covenants is called a “general warranty deed.”
1) Covenant of Seisin
The covenant of seisin is a covenant that the grantor has the estate or interest that she purports to convey. Both title and possession at the time of the grant are necessary to satisfy the covenant.
2) Covenant of Right to Convey
The covenant of the right to convey is a covenant that the grantor has the power and authority to make the grant. Title alone will ordinarily satisfy this covenant, as will proof that the grantor was acting as the authorized agent of the titleholder.
3) Covenant Against Encumbrances
The covenant against encumbrances is a covenant assuring that there are neither visible encumbrances (easements, profits, etc.) nor invisible encumbrances (mortgages, etc.) against the title or interest conveyed.
4) Covenant for Quiet Enjoyment
The covenant for quiet enjoyment is a covenant that the grantee will not be disturbed in her possession or enjoyment of the property by a third party’s lawful claim of title.
5) Covenant of Warranty
The covenant of warranty is a covenant wherein the grantor agrees to defend on behalf of the grantee any lawful or reasonable claims of title by a third party, and to compensate the grantee for any loss sustained by the claim of superior title. This covenant is generally considered to be similar to the covenant for quiet enjoyment.
6) Covenant for Further Assurances
The covenant for further assurances is a covenant to perform whatever acts are reasonably necessary to perfect the title conveyed if it turns out to be imperfect.
7) No Implied Warranties or Covenants
In the absence of a statute, no covenants of title are implied in deeds. Moreover, the implied (or express) covenant of marketable title found in contracts of sale of real estate is no longer assertable once a deed has been delivered, unless fraud or mistake is shown.
A conveyance from “O to A, but if A attempts to transfer the land or any interest therein during her lifetime, to B” contains a _____.
forfeiture restraint
1) Covenant of Seisin
The covenant of seisin is a covenant that the grantor has the estate or interest that she purports to convey. Both _____ are necessary to satisfy the covenant.
2) Covenant of Right to Convey
The covenant of the right to convey is a covenant that the grantor has _____. ____ alone will ordinarily satisfy this covenant, as will proof that the grantor was _____.
3) Covenant Against Encumbrances
The covenant against encumbrances is a covenant assuring that there are _____.
4) Covenant for Quiet Enjoyment
The covenant for quiet enjoyment is a covenant that the grantee will not be disturbed in her possession or enjoyment of the property by _____.
5) Covenant of Warranty
The covenant of warranty is a covenant wherein the grantor agrees to _____. This covenant is generally considered to be similar to the covenant for quiet enjoyment.
6) Covenant for Further Assurances
The covenant for further assurances is a covenant to perform whatever acts are reasonably necessary to _____.
7) No Implied Warranties or Covenants
In the absence of a statute, no covenants of title are implied in deeds. Moreover, the implied (or express) covenant of marketable title found in contracts of sale of real estate is no longer assertable once a deed has been _____, unless fraud or mistake is shown.
title and possession at the time of the grant
the power and authority to make the grant
Title
acting as the authorized agent of the titleholder
neither visible encumbrances (easements, profits, etc.) nor invisible encumbrances (mortgages, etc.) against the title or interest conveyed.
a third party’s lawful claim of title
defend on behalf of the grantee any lawful or reasonable claims of title by a third party, and to compensate the grantee for any loss sustained by the claim of superior title
perfect the title conveyed if it turns out to be imperfect
delivered
A conveyance from “O to A, and neither A nor her heirs shall have the right to transfer the land or any interest therein” contains a _____.
disabling restraint
Three of the covenants (_____) are present covenants and are breached, if at all, ______. _____ are future covenants and are breached only upon _____. This distinction is important in that it determines _____ begins running and whether a remote grantee of the covenantor can sue.
seisin, right to convey, against encumbrances
at the time of conveyance
Quiet enjoyment, warranty, and further assurances
interference with the possession of the grantee or her successors
when the statute of limitations
A promissory restraint provides that _____. Partial promissory restraints on legal interests generally are _____.
that the grantee covenants not to transfer the property. A conveyance from “O to A, and A hereby covenants not to transfer the land or any interest therein without O’s consent” contains a promissory restraint. valid
Parol evidence is admissible to show oral conditions on the delivery of a deed if the deed _____. A grantor may deliver a deed by giving it to a _____ who is instructed to give it to the grantee. Parol evidence generally is admissible to show the _____, even though the deed itself is unconditional.
was placed in escrow
third party (i.e., an escrow)
conditions and terms on which the deed was placed in escrow
A conveyance from “O to A, and A hereby covenants not to transfer the land or any interest therein without O’s consent” contains a _____.
promissory restraint
Statutory Special Warranty Deed
Statutes in many states provide that (unless expressly negated) the use of the word “_____” in a conveyance creates by implication the following two limited assurances against acts of _____:
grant
the grantor (not her predecessors)
(i) that prior to the time of the execution of such conveyance, the grantor has not conveyed the same estate or any interest therein to any person other than the grantee; and (ii) that the estate conveyed is free from encumbrances made by the grantor.
In most states, when tenants by the entirety divorce, they hold the property as _____. On the other hand, in a minority of states, when tenants by the entirety divorce, they hold the property as _____.
Tenants in commonjoint tenants with right of survivorship
Quitclaim Deeds
A quitclaim deed is basically _____.
a release of whatever interest, if any, the grantor has in the property. Hence, the use of covenants warranting the grantor’s title is basically inconsistent with this type of deed; i.e., if the deed contains warranties, it is not a quitclaim deed.
A tenancy at will is a _____ that is terminable at the will of _____.
leasehold estate in land either the landlord or the tenant
On Day 1, A, who does not own Blackacre, purports to convey Blackacre to B by general warranty deed. On Day 1, B has no interest in Blackacre. On Day 3, A acquires Blackacre from O. That interest automatically passes to B, so that on Day 3 B owns Blackacre. A’s warranties will prevent her from denying ownership when she executed the deed on Day 1. This is called _____.
Estoppel by Deed
If a grantor purports to convey an estate in property that she does not then own, her subsequent acquisition of title to the property will automatically inure to the benefit of the grantee.
In most states, the reservation of an annual rent, payable monthly, in a lease with no set termination date creates a __________.
Year-to-year periodic tenancy
Estoppel by deed applies to _____, but does not usually apply to _____.
general warranty deeds
quitclaim
A periodic tenancy is a tenancy that _____. It may be created by implication if _____.
continues from period to period until terminated by proper notice by either the landlord or the tenanta lease with no set termination date provides for the payment of periodic rent
A deed delivered to a grantee who is dead at the time of delivery is:
void
A tenancy at will is a tenancy that _____. Although a tenancy at will can arise when a lease _____, a provision requiring annual rent payments will convert it to a _____.
continues only until the landlord or the tenant gives notice and time to quithas no set termination dateperiodic tenancy
A deed delivered to a grantee who is dead at the time of delivery is void. A deed is not effective to transfer an interest in real property unless it has been delivered. The grantee must actually exist at the time of delivery; otherwise, the deed is not valid (i.e., void). A void deed will be set aside by a court even if _____.
title purportedly has passed to a bona fide purchaser
A tenancy for years is a tenancy that _____. A _____ with no stated duration is not a tenancy for years.
continues for a fixed period of time and then ends automatically on its termination datelease
The fact that _____ would charge a purchaser of realty with inquiry notice. Inquiry notice means that a subsequent grantee is held to have knowledge of any facts that a reasonable inquiry would have revealed, even if he made no inquiry. When a grantor’s deed is unrecorded, the grantee is expected—at her peril—to demand a viewing of her grantor’s title documents at the time of the purchase and insist that they be recorded.
her grantor’s deed is unrecorded
Personal property that is not affixed to land may be classified as a fixture if _____.
the item is uniquely adapted to the realty
T/F. The grantor’s use of a quitclaim deed would not charge a purchaser of realty with inquiry notice.
T
A fixture is _____. Under the doctrine of constructive annexation, an article of personal property also may be considered a fixture if _____.
a chattel that has been so affixed to the realty that it has ceased being personal property and has become part of the realty. it is so uniquely adapted to the land that it makes no sense to separate it (e.g., keys to doors, carpet cut to fit an unusually shaped room)
A quitclaim deed releases whatever interest a grantor might have in the property and contains no _____.
covenants for title
A fixture is a _____ that has been so affixed to the realty that it has ceased being _____ and has become _____. Under the doctrine of _____, an article of personal property also may be considered a fixture if it is so uniquely adapted to the land that it makes no sense to separate it (e.g., keys to doors, carpet cut to fit an unusually shaped room).
chattelpersonal propertypart of the realtyconstructive annexation
(Inquiry notice) If a _____ instrument makes reference to _____, the grantee is bound to make inquiry to discover the nature and character of _____. However, this duty to inquire does not extend to situations in which an _____ (unless the purchaser has _____.
recorded an unrecorded transaction the unrecorded transaction unrecorded instrument refers to the prior transaction actual knowledge of it)
Whether an item is classified as a fixture is NOT determined by whether the annexor _____ intends that the item pass with the realty. When a landowner owns a chattel that is annexed to the realty, whether the item is a fixture generally depends on the annexor’s _____ intention, which is determined by considering:
subjectivelyobjective1. The nature of the chattel (i.e., how essential it is to the normal use of the realty);2. The manner in which the chattel is attached to the realty (the more substantially attached, the more likely it was intended to be permanent);3. The amount of damage that would be caused by the chattel’s removal; and4. The adaptation of the chattel to the use of the realty (e.g., custom window treatments, wall-to-wall carpet).
A forged deed is most likely to be set aside as against a bona fide purchaser because _____.
In contrast, deeds _____ are _____.
a forged deed is void, and deeds that are void will be set aside by a court even if the property has passed to a bona fide purchaser.
executed by a minor grantor or executed under duress
voidable
Voidable deeds will be set aside only if the property has not passed to a bona fide purchaser.
A deed executed by a debtor with intent to defraud a creditor may be set aside by the grantor’s creditors as a fraudulent conveyance. Under the Uniform Fraudulent Transfer Act, which nearly all states have adopted, a conveyance is fraudulent if _____. However, such a conveyance will not be set aside as against _____.
the grantor/debtor actually intended to hinder, delay, or defraud a creditor; or if the grantor (i) did not receive a reasonably equivalent value in exchange for the transfer and (ii) was insolvent or became insolvent as a result of the transfer
a grantee who took in good faith and paid reasonably equivalent value (i.e., a bona fide purchaser)
T/F. It is necessary that the annexor expressly provide that the item is to pass with the realty for an item to be classified as a fixture.
false. Thus, it is not necessary that the annexor expressly provide that the item is to pass with the realty for an item to be classified as a fixture.
Under a race statute, a subsequent transferee with notice of a prior conveyance can prevail over the prior grantee.
race
If L leases a residence to T for five years, ending on December 31, at $400 per month, and T remains in possession of the premises on January 1 of the sixth year, L may hold T to a __________.
month-to-month tenancy at $400 per monthExplanationIf L leases a residence to T for five years, ending on December 31, at $400 per month, and T remains in possession of the premises on January 1 of the sixth year, L may hold T to a month-to-month tenancy at $400 per month. If a tenant continues in possession after the termination of a lawful tenancy, the landlord may evict the tenant or bind the tenant to a new periodic tenancy. The terms and conditions of the expired tenancy (e.g., rent, covenants, etc.) apply to the new tenancy. Although a commercial tenant holding over after termination of a lease for one year or more generally may be held to a year-to-year tenancy, most courts would rule a residential hold-over tenant a month-to-month tenant, irrespective of the term of the original lease. If the landlord notifies the tenant before termination of the tenancy that occupancy after termination will be at an increased rent, the tenant will be held to the new rent if he does not surrender. Here, T’s five-year tenancy for years automatically expired on December 31. Thus, on January 1 he was a hold-over tenant and L could bind him to a new periodic tenancy. As a residential tenant, the period would be month to month rather than year to year. Because there is no evidence that L informed T of the rent increase prior to December 31, T will be liable only for $400 per month. L may not hold T to a month-to-month tenancy and now demand $500 per month because L did not notify T of the rent increase prior to the expiration of his five-year tenancy. L may not hold T to a year-to-year tenancy at $400 per month because T is a residential rather than a commercial tenant. L may not hold T to a year-to-year tenancy and now demand $500 per month because T is a residential rather than a commercial tenant, and because L did not notify T of the rent increase prior to the expiration of his five-year tenancy.
T/F. Under a race statute, notice is irrelevant.
T
A tenant leases premises that are destroyed without the fault of either the landlord or the tenant.Under the majority view, which is true in the absence of a contrary lease provision?The common law rule differs from the majority view in that _____. Note that the ____ common law rule has been modified by_____ in most states. T/F. Absent a contrary lease provision, if under applicable law the lease remains effective after destruction of the leased premises without the fault of either the landlord or the tenant, the tenant may cease paying rent.
The lease may be terminated at the tenant’s option, and the tenant may cease paying rentif the leased premises are destroyed without the fault of either the landlord or the tenant, the lease remains effective and the tenant must continue paying rentharshstatuteFalse. May NOT cease paying rent.
T/F/ Under any recording statute other than a race statute, a subsequent transferee with notice of a prior conveyance cannot prevail over the prior grantee.
T
__________ waste results when a tenant intentionally or negligently damages the leased premises.
Voluntary
When a grantee’s successor is lawfully ejected by a third party, the original grantor who conveyed the general warranty deed may be held liable for breaching _____.
The covenant of warranty
_____ waste results when a tenant fails to make ordinary repairs to keep the leased premises in the same condition as at the commencement of the lease term, excluding _____ (unless _____).
Permissiveordinary wear and tearthe tenant covenanted to repair ordinary wear and tear
The usual covenants for title include present covenants, which can be breached only _____; and future covenants, which can be breached only _____.
Which runs with the land and which does not? What does that mean?
at the time of conveyance
upon eviction (i.e., interference with the possession of the grantee or his successors by someone with better title)
Future covenants run with the land, and thus a grantor may be liable for its breach if the grantee’s successor is disturbed in possession.
Present covenants, in contrast, do not run with the land. Thus, the original grantor cannot be liable to the grantee’s successors for breaching the present covenants of seisin, right to convey, or against encumbrances. Through the covenant of seisin, the grantor warrants that she has the estate or interest she purports to convey (i.e., both title and possession) at the time of the grant. Through the covenant of right to convey, the grantor warrants that she has the power and authority to make the grant (i.e., she has title or is the titleholder’s authorized agent). Through the covenant against encumbrances, the grantor warrants that there are no encumbrances (e.g., easements, profits, or mortgages) against the title or interest conveyed. These present covenants can be breached only at the time of the initial conveyance and thus do not run to the grantee’s successors.
Ameliorative waste results when _____. Modern courts will permit _____ that have _____ if:
a tenant makes substantial alterations to the leased premises that increase the value of the propertya change in the character of premisessignificantly decreased in value over time1. The change increases the value of the premises;2. The change is performed by a long-term tenant (e.g., 25 years) or a life tenant; and3. The change reflects a change in the nature and character of the neighborhood.
When O does not acquire title to property until after he purported to convey the property to A, A can ______ because of the doctrine of _____.
accept title to the land or possibly sue O for breach of covenants for title
estoppel by deed
T/F. A covenant against assignment prevents the tenant from subleasing her interest.
False.
T/F. When O does not acquire title to property until after he purported to convey the property to A, A will acquire title regardless of the terms of her deed.
Why?
F
Estoppel by deed applies to grantees who take by warranty deed (i.e., deeds that contain covenants for title). In most states, the doctrine will not be applied when the conveyance is by a quitclaim deed—i.e., a deed releasing whatever interest, if any, the grantor has in the property.
If a landlord consents to one transfer that violates a covenant against assignment or sublease, he waives his right to avoid future transfers.
False.
T/F. When O does not acquire title to property until after he purported to convey the property to A, A will acquire title only if she was a bona fide purchaser (“BFP”).
F
BFP is irrelevant for estoppel by deed
If a landlord consents to one transfer that violates a covenant against assignment or sublease, he waives his right to avoid future transfers.
True.
Requirements of a valid deed:
- SOF - writing and signed by grantor
- description of the land - doesn’t have to be formal, but must be unambiguous.
- description of the parties - can be by description (to my eldest daughter)
- words of intent (grant alone is enough - nothing special but express intent to transfer realty
seal and attestation by W not required.
The grantor may designate an agent to sign on the grantor’s behalf, but if the signing is not done in the grantor’s presence, the Statute of Frauds generally requires that the agent’s authority be written. In the case of deeds by corporations, statutes usually provide for execution by two officers of the corporation and the affixing of the corporation’s seal. If the deed represents a conveyance of all or a substantial part of the corporation’s assets, a resolution of the board of directors approving the transfer may be necessary. The grantee’s signature is not necessary even if the deed contains covenants on her part. Her acceptance of the deed (called a “deed poll” when signed only by the grantor) is sufficient to make the covenants enforceable.
Under the _____ if a landlord consents to one transfer that violates a covenant against assignment or sublease, he waives his right to avoid future transfers. The landlord may reserve the right to avoid future transfers, but such reservation must _____.
Rule in Dumpor’s Casetake place at the time of granting consent
Is this a sufficient description of land for a valid deed?
A conveyance of “all my land,” or “all my land in Alameda County.”
Yes.
A description is sufficient if it provides a good lead as to the identity of the property sought to be conveyed. The intention of the grantor is clear and the meaning of this intention can be proved without difficulty (by checking the land records of Alameda County).
Under the implied warranty of habitability, the landlord assures that _____. The standard usually applied is _____.
assures that the premises are suitable for human residence the local housing code
Is this a sufficient description of land for a valid deed?
A conveyance of “one acre off the western end of my 30-acre tract” (the 30-acre tract being adequately described).
No.
Would probably fail for uncertainty. “Off the western end” is too vague to ascertain which acre, and the admission of parol evidence here would be considered a violation of the Statute of Frauds.
Under the covenant of quiet enjoyment, the landlord assures that she nor _____ will _____. The covenant of quiet enjoyment may be breached by _____, _____ , or _____.
someone with paramount title interfere with the tenant’s quiet enjoyment and possession of the premisestotal actual evictionpartial actual evictionconstructive eviction
A deed must identify the land to be conveyed. When a mistake or inconsistency in the description leaves in doubt the exact location of the property, and the court otherwise lacks clear evidence of the parties’ intent, the following rules of construction apply:
- Natural monuments (e.g., “from Moss Lake to the oak tree”) prevail over all other methods of description, including artificial monuments, courses and distances, and quantity measurements;
- Artificial monuments (e.g., stakes, buildings) prevail over all but natural monuments;
- Course measurements (e.g., “North 25 degrees to Main Street”) prevail over distance measurements (e.g., “East 45 feet to Grace Street”); and
- All of the foregoing prevail over general descriptions such as name or quantity (e.g., “10 acres of land known as Blackacre”).
The covenant against encumbrances is a covenant contained in _____, assuring that _____.
a general warranty deedthere are neither visible encumbrances (e.g., easements) nor invisible encumbrances (e.g., mortgages) against the title or interest conveyed.
The doctrine of estoppel by deed will apply if the grantor __________.
Expressly purports to convey land he does not then own
“No conveyance or mortgage of an interest in land is valid against any subsequent purchaser whose conveyance is first recorded” is an example of a _____ statute.
race statute.
A leasehold is a _____ in land.
nonfreehold estate
The majority rule is that any type of parol evidence, including conduct or statements made by the ____, _____ the alleged delivery, is _____.
grantor
before or after
admissible to prove her intent
A leasehold is not a freehold estate in land. Freehold estates in land (e.g., fee estates and life estates), like leaseholds, give _____, but their _____.
possessionduration is regarded as longer than that of the nonfreehold (or leasehold) estates
If a deed is ____ on its _____ and is given _____ , in most jurisdictions parol evidence is not admissible to show _____.
unconditional
face
directly to the grantee
that the delivery was subject to a condition.
A leasehold IS an estate in land. Possessory interests in land are estates in land. Both the tenant and the landlord have _____ in leased premises. In contrast, nonpossessory interests in land (e.g., _____) are not estates in land.
possessory interests easements, profits, and covenants
While parol evidence is not admitted to prove that a delivery was subject to an oral condition, parol evidence is admissible to prove that the grantor _____.
did not intend the deed to have any present effect at all
T/F. Parol evidence is always admissible to show that a deed absolute on its face was intended by the parties to be a mortgage; i.e., there was no intent to convey title outright.
T
O delivers an absolute deed of Blackacre to A, but tells A that the deed is effective only if A pays off the encumbrance on the property, or only if O does not return from the hospital. Under the above rule, even if A never pays off the encumbrance or if O returns from the hospital, _____ is the owner of Blackacre and _____ cannot claim that there was no valid delivery.
note: “tells” - SOF
A
O
If a deed is unconditional on its face and is given directly to the grantee, in most jurisdictions parol evidence is not admissible to show that the delivery was subject to a condition.
Rationale: The rule is designed to avoid unsettling of land titles which appear to be in the grantee’s name, and to protect both innocent third parties and grantees from testimony fabricated by grantors.
O tells A, “I want you to have Blackacre when I die, and I’m giving you this deed to Blackacre so that you can have it at that time.” Most courts would hold that O’s statements are _____ admissible/inadmissible, and that despite the unconditional nature of the deed itself, they show that O did not intend the deed to have any _____.
admissible
present effect
while parol evidence is not admitted to prove that a delivery was subject to an oral condition, parol evidence is admissible to prove that the grantor did not intend the deed to have any present effect at all.
Even though the grantor is allowed to show, via parol evidence, that no delivery at all was intended as against the grantee, he often is estopped to assert lack of delivery against _____.
an innocent purchaser
O gives A a deed but does not intend the deed to be presently effective. A shows the deed to an innocent purchaser, B, who buys the land in reliance thereon. B will prevail in litigation with O, the original grantor, if it appears that O negligently permitted A to have possession of the deed. Rationale: As between two innocent parties, the one who contributed most directly to the loss must bear the burden of it, and in many cases O must be deemed responsible for entrusting A with a deed absolute on its face. The same result occurs where the grantee records the deed and an innocent purchaser relies on the recordation.
O gives A a deed but does not intend the deed to be presently effective. A shows the deed to an innocent purchaser, B, who buys the land in reliance thereon. B will prevail in litigation with O, the original grantor, if it appears that O _____.
negligently permitted A to have possession of the deed
Rationale: As between two innocent parties, the one who contributed most directly to the loss must bear the burden of it, and in many cases O must be deemed responsible for entrusting A with a deed absolute on its face. The same result occurs where the grantee records the deed and an innocent purchaser relies on the recordation.
Parol evidence is always admissible to show that a deed absolute on its face was intended by the parties to be a mortgage; i.e., there was no intent to convey title outright. (See VII.A.4., infra.)
Suppose O gives A a deed for examination by A’s attorney (deed not intended to be effective at this point). A wrongfully records it and sells to B, a bona fide purchaser (“BFP”). On these facts, O would prevail against B unless estopped to assert lack of delivery (see below). In other words, absent estoppel, a subsequent BFP is not protected; if there was no_____, the BFP’s grantor had no power to convey.
delivery
Even though the grantor is allowed to show that no delivery at all was intended as against the grantee, he often is estopped to assert lack of delivery against an innocent purchaser.
Example: O gives A a deed but does not intend the deed to be presently effective. A shows the deed to an innocent purchaser, B, who buys the land in reliance thereon. B will prevail in litigation with O, the original grantor, if it appears that O negligently permitted A to have possession of the deed. Rationale: As between two innocent parties, the one who contributed most directly to the loss must bear the burden of it, and in many cases O must be deemed responsible for entrusting A with a deed absolute on its face. The same result occurs where the grantee records the deed and an innocent purchaser relies on the recordation.
T/F. Absent estoppel, a subsequent BFP is not protected; if there was no delivery, the BFP’s grantor had no power to convey.
T.
Suppose O gives A a deed for examination by A’s attorney (deed not intended to be effective at this point). A wrongfully records it and sells to B, a bona fide purchaser (“BFP”). On these facts, O would prevail against B unless estopped to assert lack of delivery (see below). In other words, absent estoppel, a subsequent BFP is not protected; if there was no delivery, the BFP’s grantor had no power to convey.
(1) Estoppel in Favor of Innocent Purchaser
Even though the grantor is allowed to show that no delivery at all was intended as against the grantee, he often is estopped to assert lack of delivery against an innocent purchaser.
Example: O gives A a deed but does not intend the deed to be presently effective. A shows the deed to an innocent purchaser, B, who buys the land in reliance thereon. B will prevail in litigation with O, the original grantor, if it appears that O negligently permitted A to have possession of the deed. Rationale: As between two innocent parties, the one who contributed most directly to the loss must bear the burden of it, and in many cases O must be deemed responsible for entrusting A with a deed absolute on its face. The same result occurs where the grantee records the deed and an innocent purchaser relies on the recordation.
4) Comment
Obviously, the above rules give the courts flexibility to find either delivery or nondelivery in many situations. It is also evident that there exists a theoretical inconsistency in admitting parol evidence to show that no delivery was intended, but not to show that delivery was “conditional.” This inconsistency has been criticized by numerous commentators.
Proper recordation gives all prospective subsequent grantees constructive notice of the existence and contents of the recorded instruments; i.e., there can be no subsequent ____. Recordation also raises presumptions that the instrument has been validly _____ and that it is _____. These presumptions are _____, not conclusive.
BFPs
delivered
authentic
rebuttable
T/F. Recordation is not necessary for a valid conveyance. Nor does recordation validate an invalid conveyance, such as a forged or undelivered deed.
T
Recordation does not protect a subsequent purchaser against interests that arise by _____, rather than from a recordable document (e.g., _____ (3)). Because there ______, the recording acts do not apply, and subsequent purchasers take subject to the interests. (Remember: If the recording act is inapplicable, the _____ priority rules apply.)
Exception
A court may protect a subsequent BFP from _____.
operation of law
dower rights; prescriptive and implied easements; title by adverse possession
is no instrument to record in order to perfect such interests
common law
an unrecorded implied easement that is not visible upon inspection of the premises (e.g., an underground sewer).
O is the record owner of Blackacre. X adversely possesses Blackacre for the period of the statute of limitations. O then conveys Blackacre to A, a BFP. Who prevails between X and A?
Even though X’s interest has never been recorded, X prevails against A.
Does Not Protect Against Interests Arising by Operation of Law
Furthermore, recordation does not protect a subsequent purchaser against interests that arise by operation of law, rather than from a recordable document (e.g., dower rights; prescriptive and implied easements; title by adverse possession). Because there is no instrument to record in order to perfect such interests, the recording acts do not apply, and subsequent purchasers take subject to the interests. (Remember: If the recording act is inapplicable, the common law priority rules apply.)
Recorder’s Mistakes
An instrument is considered recorded from and after the time it is filed at the recorder’s office, irrespective of whether it is actually listed on the indexes. If the recorder’s office has made an error in recording, the subsequent purchaser _____.
has an action against the recorder’s office. There is a strong minority view that protects the searcher
The recording acts require that before an instrument can be recorded, it must be acknowledged by the grantor before a notary. What happens if the recorder, by oversight, records a deed that has not been acknowledged or has been defectively acknowledged?
No Acknowledgment—No Constructive Notice
Because an unacknowledged deed does not qualify for recordation, it does not give constructive notice to subsequent purchasers. Hence, unless the subsequent purchaser has other notice of the earlier deed, the subsequent purchaser will prevail.
Compare—Defective Acknowledgment
When a recorded instrument has been acknowledged, but the acknowledgment is defective for some reason not apparent on the face of the instrument, the better view is that the recordation does impart constructive notice. Rationale: A hidden defect in the acknowledgment should not be allowed to destroy the constructive notice that the document otherwise clearly imparts. Purchasers should be entitled to rely on what appears to be a perfectly recorded document.
O conveys Blackacre to A by a deed that is not acknowledged, but the recorder nevertheless records it. Later, O conveys to B by an acknowledged deed, which B records. As between A and B, _____ prevails over _____ unless _____.
B
A
B had actual notice of the deed from O to A (which she might have if she searched the title records) or inquiry notice (as she would have if A was in possession of Blackacre).
Effect of Recording Unacknowledged Instrument
As discussed above, the recording acts require that before an instrument can be recorded, it must be acknowledged by the grantor before a notary. What happens if the recorder, by oversight, records a deed that has not been acknowledged or has been defectively acknowledged?
1) No Acknowledgment—No Constructive Notice
Because an unacknowledged deed does not qualify for recordation, it does not give constructive notice to subsequent purchasers. Hence, unless the subsequent purchaser has other notice of the earlier deed, the subsequent purchaser will prevail.
A deed bears what appears to be a valid acknowledgment but is in fact invalid because the notary was disqualified to act or because the grantor did not appear personally in front of the notary to acknowledge her signature, as required by law. Does the deed impart constructive notice?
No. When a recorded instrument has been acknowledged, but the acknowledgment is defective for some reason not apparent on the face of the instrument, the better view is that the recordation does impart constructive notice. Rationale: A hidden defect in the acknowledgment should not be allowed to destroy the constructive notice that the document otherwise clearly imparts. Purchasers should be entitled to rely on what appears to be a perfectly recorded document.
Example: A deed bears what appears to be a valid acknowledgment but is in fact invalid because the notary was disqualified to act or because the grantor did not appear personally in front of the notary to acknowledge her signature, as required by law.
T/F. A judgment creditor would not be entitled to prevail against a prior transferee under “notice” and “race-notice” statutes.
T/F. A mortgagee for value would be entitled to prevail against a prior transferee under “notice” and “race-notice” statutes.
T
In other words, they do not meet the reqs. of a BFP
In nearly all states, a plaintiff who obtains a money judgment can obtain, by statute, a judgment lien on the defendant’s real estate. The majority of cases hold that the judgment lienor is not protected either because (i) he is not a BFP because he did not pay value for the judgment, or (ii) the judgment attaches only to property “owned” by the defendant, and not to property the defendant has previously conveyed away, even if that conveyance was not recorded.
T
Notice and race-notice recording acts protect bona fide purchasers (“BFPs”) from prior unrecorded conveyances of the same property.
T/F. When a grantee’s successor is ejected by a third party, the original grantor who conveyed the general warranty deed is breaching the covenant of seisin.
F
A general warranty deed contains covenants for title through which the grantor warrants against title defects created by himself and prior titleholders. Through the covenant of seisin, the grantor warrants that he has the estate or interest he purports to convey (i.e., both title and possession) at the time of the grant. The covenant of seisin can be breached only at the time of the initial conveyance; thus, it does not run to the grantee’s successors.
On the other hand, the original grantor who conveyed the general warranty deed is breaching some of the usual covenants for title in a general warranty deed. Among the usual covenants in a general warranty deed are future covenants, which run with the land. Thus, a grantor could be liable for breaching one of these covenants for title, as explained below, if the grantee’s successors are disturbed in possession.
When a grantee’s successor is ejected by a third party, the original grantor who conveyed the general warranty deed is breaching the covenant for quiet enjoyment. Through this covenant, a grantor warrants that the grantee will not be disturbed by a third party’s lawful claim of title to the property. This covenant runs with the land to the grantee’s successors and can be breached multiple times. The lawful ejectment of the grantee or her successor would constitute a breach.
The original grantor also is breaching the covenant of warranty. Through this covenant, the grantor agrees to defend the grantee’s title from any third party’s lawful or reasonable claims of title, and to compensate the grantee for any related loss. This is generally considered similar to the covenant for quiet enjoyment, and its benefit also runs with the grantee’s estate.
T/F. If a grantor executes and delivers a deed to a grantee but asks the grantee not to record the deed for a week, title pass to the grantee when the grantee records the deed a week later
F
When the grantor delivers the deed to the grantee
In a __________ deed, the grantor covenants against only the title defects he himself created.
Special warranty
What is not an effect of properly recording a deed?a. Raising a presumption that the deed is authentic
b. Raising a presumption that the deed was validly delivered
c. Protecting a purchaser against interests arising by adverse possession
d. Placing subsequent grantees on constructive notice of the deed’s contents
c.
T/F. A properly recorded deed raises the presumption that the deed was validly delivered.
T
T/F. A properly recorded deed raises the presumption that the deed is authentic.
T
Against whom may a grantee invoke the doctrine of estoppel by deed?
a. The original grantor only
b. The original grantor and subsequent bona fide purchasers only
c. The original grantor and any successor to the grantor’s after-acquired title
a.The original grantor only
T/F. When a grantor transfers land to hinder a creditor, the creditor may seek to have the transfer set aside.
A creditor may set aside a fraudulent conveyance under the Uniform Fraudulent Transfer Act (“UFTA”), which nearly all states have adopted. A conveyance is fraudulent if the grantor/debtor actually intended to hinder, delay, or defraud a creditor; or if the grantor (i) did not receive a reasonably equivalent value in exchange for the transfer and (ii) was insolvent or became insolvent as a result of the transfer.
A deed will not be set aside under the UFTA as against any grantee who took in good faith and paid reasonably equivalent value. However, the transfer may be set aside by a court if the land was given as a gift (i.e., without receiving reasonably equivalent value).
A deed will not be set aside under the UFTA as against any grantee who _____.
took in good faith and paid reasonably equivalent value
If a deed is delivered with the identity of the grantee left blank, courts will presume that _____.
the person taking delivery has authority to fill in the blank.
“No conveyance or mortgage of an interest in land is valid against any subsequent purchaser for value without notice thereof, unless it is recorded” is an example of a typical ____ statute.
notice
A grantor hands a deed to a grantee and says, “I want you to hold on to this deed so you can have my land when I die.”
Will a court likely rule that delivery occurred? (parol evidence)
No, because the grantor’s statement is admissible to show that the deed was not delivered
T/F. A donee from a bona fide purchaser of the land can be protected as a BFP of land.
T
Under the shelter rule, anyone who takes from a BFP will be treated like a BFP (i.e., will prevail against any interest her transferor would have prevailed against). This rule exists to protect the BFP by preserving his ability to convey property. It applies even when his transferee had actual knowledge of a prior unrecorded interest or did not take for substantial pecuniary value (i.e., was a donee). However, a non-BFP who previously had title cannot acquire BFP status by selling the land to a BFP and then repurchasing it.
T/F. Courts generally will presume that a grantee’s possession of a deed means it has been delivered.
T
Unless the grantor clearly expressed his intent that title pass to the grantee without physical delivery, the grantor’s continued possession of the deed raises a presumption of nondelivery. Conversely, the grantee’s possession of a properly executed deed raises a presumption of delivery.
T/F. The grantor’s continued possession of the deed raises a presumption of nondelivery.
T
Unless the grantor clearly expressed his intent that title pass to the grantee without physical delivery, the grantor’s continued possession of the deed raises a presumption of nondelivery. Conversely, the grantee’s possession of a properly executed deed raises a presumption of delivery.
To what extent (in most states), does a buyer who has paid only part of the purchase price under an installment land contract protected by recording acts?
only to the extent of payments made
In a dispute between a subsequent purchaser under an installment land contract and a prior claimant of the same land, the court may:
- Award the contract purchaser a share of the property equal to the proportion of payments made as a tenant in common with the prior claimant;
- Award the land to the prior claimant, but give the contract purchaser a lien on the property to the extent of the amount paid; or
- Award the land to the contract purchaser, but give the prior claimant a lien on the property to the extent of the balance still owed.
_____is a security interest in land by which the debtor (i.e., the trustor) transfers title to the land to a third party (i.e., the trustee), such as the lender’s lawyer or a title insurance company, acting on behalf of the lender (i.e., the beneficiary). In the event of default, the lender instructs the trustee to foreclose the _____ by selling the property.
deed of trust
5 types of security interest in land
mortgage = usually foreclosure sale conducted by sheriff required
deed of trust = third party; many states allow judicial and nonjudicial (sale not conducted by sheriff)
installment land = get deed transferring title at the end of series of payment; In case of default, the contract usually contains a forfeiture clause providing that the vendor may cancel the contract, retain all money paid to date, and retake possession of the land.
absolute deed= give you the deed in place of mortgage in exchange for cash - but may be interpreted as equitable mortgage by court if land give as security
sale-Leaseback=
A landowner needing to raise money may sell her land to another for cash and may then lease the land back for a long period of time. As in the case of the absolute deed, the grantor/lessee may attack such a transaction later as a disguised mortgage.
An equitable mortgage exists if a court concludes that a grantor transferred _____ to serve as security for an obligation. If the court so determines, the grantee must foreclose by _____, as with any other mortgage. The court will consider:
an absolute deed
judicial action
(i) The existence of a debt or promise of payment by the grantor;
(ii) The grantee’s promise to return the land if the debt is paid;
(iii) Whether the amount advanced to the grantor was much lower than the value of the property;
(iv) The degree of the grantor’s financial distress; and
(v) The parties’ prior negotiations.
__________ is the right of a mortgagor to free the land of the mortgage by paying the amount due, plus interest, at any time before the foreclosure sale.
Equitable redemption
Equitable redemption is the right of a mortgagor to _____ at any time before the foreclosure sale. (If the mortgage so requires, the mortgagor may have to pay a prepayment charge as well.) If the mortgagor defaulted and the mortgage or note contained an acceleration clause, then the _____ must be paid in order to redeem in equity. This right cannot be waived in the mortgage itself; doing so is known as “_____.” However, the right can be waived later for _____.
free the land of the mortgage by paying the amount due, plus interest,
full balance
clogging the equity of redemption
consideration
Statutory redemption, in contrast to equitable redemption, is the right of a mortgagor to free the land of the mortgage by _____. About half the states provide a statutory right to redeem for some fixed period after the foreclosure sale has occurred, usually six months or one year. The amount to be paid usually is the foreclosure sale price, rather than the amount of the original debt. This right extends to mortgagors and, in some states, to junior lienors.
paying the foreclosure sale price after the sale has occurred
A “_____” clause authorizes the trustee in a deed of trust to advertise, give appropriate notices, and conduct a nonjudicial foreclosure sale personally. All states allow mortgages to be foreclosed by judicial sale, while about one-half also allow nonjudicial sale under a _____.
power of sale
power of sale for deeds of trust
Must a junior mortgagee be named as a party to a senior mortgagee’s foreclosure action? Why?
Yes, because it has the right to pay off the senior mortgage to avoid being wiped out by foreclosure
A _____ must be named as a party to a senior mortgagee’s foreclosure action because it has the right to pay off the senior mortgage to avoid being wiped out by foreclosure. Foreclosure destroys _____ junior to the mortgage being foreclosed. Thus, if a senior mortgage is in default, a junior mortgagee has the right to pay it off (i.e., _____) to avoid being wiped out by its foreclosure. Failure to join the junior mortgagee results in _____. In contrast, those with interests senior to that of the foreclosing party are _____ parties because their interests are not affected by foreclosure. The buyer at the sale takes subject to senior interests, which remain on the land.
junior mortgagee
interests (e.g., liens, mortgages, leases, easements)
redeem it
the preservation of its interest despite foreclosure and sale
not necessary
T/F. Those with interests senior to that of the foreclosing party are not necessary parties because their interests are not affected by foreclosure.
T
How is the priority of a mortgage generally determined?
However, priority may be modified in several ways, such as by _____ if a mortgagee fails to record its mortgage, or through _____ between mortgagees.
By the order in which it was placed on the property.
operation of the recording acts
subordination agreements
If an installment land contract provides that the debtor forfeits her interest in the property on default, and the vendor sends notice that he is electing the forfeiture remedy, the vendor can pursue _____.
no other remedies
The contract may contain a forfeiture clause providing that the vendor may cancel the contract upon default, retain all money paid, and retake possession of the land. Because forfeiture is such a harsh remedy, courts have tended to resist enforcing forfeiture clauses, e.g. by treating installment contracts as mortgages. A number of decisions allow for forfeiture of the debtor’s interest in the property but require the vendor to refund to the purchaser any amount by which his payments exceed the vendor’s damages.
T/F. A vendor who pursues a forfeiture under an installment land contract cannot also pursue damages or specific performance.
T
If an installment land contract provides that the debtor forfeits her interest in the property on default, and the vendor sends notice that he is electing the forfeiture remedy, the vendor can pursue no other remedies. In an installment contract, the debtor (i.e., the buyer) contracts with the vendor to pay for the land in regular installments until the full contract price has been paid, plus interest. Only then will the vendor transfer legal title to the buyer. The contract may contain a forfeiture clause providing that the vendor may cancel the contract upon default, retain all money paid, and retake possession of the land. Because forfeiture is such a harsh remedy, courts have tended to resist enforcing forfeiture clauses, e.g. by treating installment contracts as mortgages. A number of decisions allow for forfeiture of the debtor’s interest in the property but require the vendor to refund to the purchaser any amount by which his payments exceed the vendor’s damages.
Hence, a vendor who pursues a forfeiture cannot also pursue damages or specific performance. It is commonly held that the vendor who elects to pursue a forfeiture cannot also bring an action for damages or for specific performance. If the vendor chooses the forfeiture remedy, he must forgo all others.
If a debtor deeds land to her creditor in exchange for cash, a court may treat the conveyance as a security interest if _____. A court will likely treat such a transaction as _____ and not as a conveyance of the land outright. In determining whether the parties intended the transfer only to serve as security for an obligation, the court will consider:
(i) The existence of a _____ or promise of payment by the grantor;
(ii) The grantee’s _____ to return the land if the debt is paid;
(iii) Whether the amount _____ was much lower than the value of the property;
(iv) The degree of the grantor’s _____; and
(v) The parties’ prior _____.
Considering the above, a court is not likely to treat the conveyance as a security interest if the creditor agreed to accept the land as _____.
If the court thus concludes that the deed was given as security, the grantee-creditor must foreclose it like any other mortgage. It will be treated as an equitable mortgage even if the parties _____.
the creditor promised to return the land when the cash is repaid in full
an equitable mortgage debt promise advanced to the grantor financial distress negotiations
payment in full for the loan
did NOT execute a mortgage contract.
T/F. If the court thus concludes that the deed was given as security, the grantee-creditor must foreclose it like any other mortgage. It will be treated as an equitable mortgage even if the parties did not execute a mortgage contract.
T.
T/F. The mortgagor’s exercise of her statutory right of redemption will preclude the mortgagee’s right to foreclose upon the mortgagor’s default.
F
Rather, statutory redemption is the right of a mortgagor to recover the land by paying the foreclosure sale price after the sale has occurred. Note that this differs from equitable redemption, which is the right of a mortgagor to recover the land by paying the amount overdue on the mortgage, plus interest, at any time before the foreclosure sale. The mortgagor’s exercise of her equitable right of redemption prior to the foreclosure sale would indeed preclude the mortgagee from foreclosing.
Equitable redemption is the right of a mortgagor to recover the land by paying the amount overdue on the mortgage, plus ____, at any time _____ the foreclosure sale.
interest
before
May a vendor who has accepted late payments for six months on an installment land contract declare a forfeiture if payment is late the seventh month?
No, because the vendor has waived strict performance of the contract
Forfeiture clauses are NOT void in all jurisdictions, but because forfeiture is such a harsh remedy, courts have tended to resist enforcing them. One way courts have done so is by finding a waiver of strict performance when a vendor has established a pattern of accepting late payments from the purchaser. To reinstate strict performance, the vendor must notify the purchaser of her intent to do so and must allow the purchaser a reasonable time to make up any late payments.
T/F. All parties to a mortgage or deed of trust can transfer their interests.
T
Ordinarily, the mortgagor transfers by deeding the property, while the mortgagee usually transfers by indorsing the note and executing a separate assignment of the mortgage. The note and mortgage must pass to the same person for the transfer to be complete.
All parties to a mortgage or deed of trust can transfer their interests. Ordinarily, the mortgagor transfers by _____, while the mortgagee usually transfers by _____. The _____ must pass to the same person for the transfer to be complete.
deeding the property
indorsing the note and executing a separate assignment of the mortgage
note and mortgage
NOTE: courts split on whether it is presumed that the transfer of the mortgage automatically transfers the note as well, unless the mortgagee-transferor expressly reserves the rights to the note. Other states hold that, because the note is the principal evidence of the debt, a transfer of the mortgage without the note is a nullity and is void.
Transfer of mortgage without note =
Transfer of note without mortgage =
courts split - some presume that mortgage auto transfer some the transfer is null and void
The note can be transferred without the mortgage, but the mortgage will automatically follow the properly transferred note, unless the mortgageetransferor expressly reserves the rights to the mortgage (which there would rarely be any reason for the mortgagee to do)
The note may be transferred either by _____ and _____, or by _____. Only if the _____ is used can the transferee become a holder in due course under U.C.C. Article 3.
indorsing it
delivering it to the transferee
a separate document of assignment
former method (indorsing it and delivering)
Holder in Due Course Status
To be a holder in due course of the note, the following requirements must be met:
(1) The note must be _____ in form, which means that it must be payable _____. It must contain a promise to pay _____ amount of money (although _____ is permitted), and no _____, except that it may contain _____.
(2) The original note must be indorsed (i.e., signed) by _____. Indorsement on _____ is not acceptable.
(3) The original note must be delivered to the _____. Delivery of a _____ is not acceptable.
(4) The transferee must take the note _____ and must _____. The transferee must not have any notice that the note _____.
negotiable
“to bearer” or “to the order of” the named payee
a fixed
an adjustable interest rate
other promises
an acceleration clause and an attorneys’ fee clause
the named payee
a photocopy or some other document
transferee
photocopy
in good faith
pay value for it (“Value” implies an amount that is more than nominal, although it need not be as great as the note’s fair market value.)
is overdue or has been dishonored, or that the maker has any defense to the duty to pay it
Benefits of Holder in Due Course Status
A holder in due course will take the note free of any _____ defenses that the _____ might raise. These defenses include _____. The holder in due course is, however, still subject to “_____” defenses that the _____ might raise. These include _____.
personal
maker
failure of consideration, fraud in the inducement, waiver, estoppel, and payment
real
maker
infancy, other incapacity, duress, illegality, fraud in the execution, forgery, discharge in insolvency, and any other insolvency
Effect of Payment to Original Mortgagee After Transfer of Note
Under the version of the U.C.C. enacted in a large majority of states, if the original payee transfers possession of a negotiable instrument, a payment to the original payee will not count, and the holder of the instrument can still demand payment. [See U.C.C. §3-602 (1995)] However, many notes secured by mortgages on real property are not negotiable in form (e.g., because their promise to pay is conditional or they are not payable to “bearer” or “order”). If the original mortgagee transfers possession of a nonnegotiable note, the mortgagor’s payment to the original mortgagee is effective against the transferee until the mortgagor receives notice of the transfer. [Restatement (Third) of Property: Mortgages §5.5]
A borrows $50,000 from B and gives B a nonnegotiable note for that amount, secured by a mortgage on Blackacre. One year later, B assigns the note and mortgage to C, transferring actual possession of the note to C. Two years thereafter, A, who does not realize that B no longer holds the note, pays $50,000 plus interest to B. This payment is effective against _____. C’s recourse is against _____.
C
B
A purchase money mortgage (“PMM”) is a mortgage given to _____ or _____. Who has priority among the two.
A vendor’s purchase money mortgage usually has priority over a third-party lender’s purchase money mortgage. A purchase money mortgage (“PMM”) is a mortgage given to (i) the vendor of the property as a part of the purchase price, or (ii) a third party who lends funds to allow the buyer to purchase the property. As between a vendor PMM and a third-party PMM imposed as part of the same transaction, the vendor’s is presumed to have priority, irrespective of the order of recording.
As between two third-party lender PMMs, priority is determined by _____, subject to any subordination agreement.
the chronological order in which the mortgages were placed on the property
Junior lienors are entitled to proceeds of a mortgage foreclosure sale, but only after certain expenses and the foreclosing party’s loan have been paid. The priority of the proceeds from a foreclosure sale is:
- Expenses of the sale, attorneys’ fees, and court costs;
- The principal and accrued interest on the foreclosing party’s loan;
- Any junior lienors or other junior interests in the order of their priority; and then
- The mortgagor.
T/F. Junior interests do not remain on the property after the sale.
T
they are extinguished by foreclosure if they are properly made parties to the foreclosure proceeding. In contrast, foreclosure does not affect any interest senior to the mortgage being foreclosed, which remains on the property.
May the vendor of an installment land contract containing a forfeiture clause reinstate strict performance once she has waived it?
Yes, by giving the purchaser notice and a reasonable time to catch up on payments
A due-on-sale clause permits the mortgagee to _____.
Permits the mortgagee to demand full payment of a mortgage debt if the mortgagor transfers her interest without the lender’s consent
When may a mortgagor redeem her land in equity?
Before the foreclosure sale.
T/F. The right to redeem your land in equity exist only in a foreclosure sale context.
F
A mortgagor may redeem her land in equity before the foreclosure sale. At any time prior to the foreclosure sale—i.e., this right does not exist only during the foreclosure sale—the mortgagor has the right to redeem the land or free it of the mortgage by paying off the amount due, plus interest. If the mortgage or note contained an acceleration clause, which permits the mortgagee to declare the full balance due in the event of default, the full balance must be paid in order to redeem.
What does it mean for a grantee to assume a mortgage?
The grantee becomes primarily liable to the lender.
Assumption of a mortgage does not mean the grantee becomes a surety for the original mortgagor. The assuming grantee becomes primarily liable to the lender, and the original mortgagor becomes _____ as a _____.
secondarily liable
surety
