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Bar Exam > Real Property: Land Conveyancing > Flashcards

Real Property: Land Conveyancing Flashcards

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1
Q

Process of Conveyance

A

Every conveyance of real estate consists of a two-step process:

(1) The land contract, which endures until step 2 (short period of time)
(2) The closing, where the deed becomes the operative document

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2
Q

The Land Contract: Standard

A

Statute of Frauds and Land Contract

Land contract must

(1) be in writing
(2) signed by the party to be bound (i.e. Defendant) and the other party
(3) describe the land
(4) state some consideration

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3
Q

The Land Contract: Amount of land in contract is more than actual size of parcel

A

Remedy: specific performance with a pro rata reduction in price

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4
Q

The Land Contract: Statute of Frauds Exception

A

Doctrine of Part Performance:

Equity will require specific performance of oral contract for sale of land if 2/3 satisfied:

(a) B takes possession
(b) B pays all or part of the price
(c) B makes substantial improvements

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5
Q

The Land Contract: Risk of Loss

A

Equitable conversion applies: Equity regards as done that which ought to be done – so, inequity, once a contract is signed the buying party owns the land (subject to payment on closing)

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6
Q

The Land Contract: Risk of Loss - Destruction

A

If between contract and closing the property is destroyed through no fault of either party, Buyer bears the risk of loss, unless K specifies otherwise

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7
Q

The Land Contract: Implied Promises

A

Two implied promises in every land contract

(1) Seller promises to provide marketable title at closing
(2) Seller promises not to make any false statements of material fact

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8
Q

The Land Contract: Implied Promises - Marketable Title

A

Seller promises to provide marketable title at closing – i.e., free from reasonable doubt, free from lawsuits and threat of litigation

Title is unmarketable if: AEZ

(a) Adverse possession: even if only part of title rests on adverse possession, or
(b) Encumbrances: servitudes and mortgages render title unmarketable (but can satisfy at closing with proceeds from sale), unless buyer has waived them
(c) Zoning violations: unmarketable if violates zoning ordinance

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9
Q

The Land Contract: Implied Promises - No False Statements of Material Fact

A

Seller is liable for material lies and material omissions

General disclaimer of liability (e.g., “as is” or “with all faults”) will not excuse seller from liability for fraud

Majority of states hold seller liable for failure to disclose latent material defects

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10
Q

The Land Contract: Implied Warranties

A

Land contract contains no implied warranties of fitness or habitability (caveat emptor – buyer beware)

EXCEPTION: implied warranties of fitness and workmanlike construction apply to sale of a new home by a builder-vendor

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11
Q

The Deed: Definition and Requirements

A

The deed passes legal title from seller to buyer

Requirements: LEAD - Lawfully Executed and Delivered

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12
Q

The Deed: Lawful Execution

A

Standard: Deed must be (1) in writing and (2) signed by the grantor.

Consideration is not required.

Description of the land does not have to be perfect, simply must be an unambiguous description

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13
Q

The Deed: Delivery

A

Delivery requirement can be satisfied by:

(a) Physical transfer from grantor to grantee
(b) Via mail, a messenger, or an agent
(c) Legal standard: present intent to transfer (regardless of physical transfer)
(d) Via escrow with instructions that conditions be met before transfer

Recipient’s express rejection of the deed defeats delivery

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14
Q

The Deed: Oral conditions

A

If a deed, absolute on its face, is transferred to grantee with an oral condition, the oral condition drops out and delivery is done

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15
Q

Quitclaim Deed

A

Contains no covenants

Grantor isn’t even promising he has title to convey (but still promising marketable title at closing)

*Worst deed buyer can get

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16
Q

General Warranty Deed

A

General warranty deed warrants against all defects to title, include those attributable to grantor’s predecessors

Typically contains six covenants:

Present Covenants (would breach on delivery) (don’t run with land)

(1) Covenant of seisin: grantor owns the estate
(2) Covenant of right to convey: grantor has power to transfer
(3) Covenant against encumbrances: no servitudes or mortgages on blackacre

Future Covenants (breaches only if grantee disturbed in possession)

(4) Covenant for quiet enjoyment: grantee won’t be disturbed in possession by 3rd party w/ lawful claim of title
(5) Covenant of warranty: grantor will defend grantee against lawful title claims brought by others
(6) Covenant for further assurances: grantor will do what’s needed in the future to perfect title

  • Best deed buyer can get
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17
Q

Statutory Special Warranty Deed

A

Contains two promises grantor makes on behalf of himself

(1) Grantor promises he hasn’t conveyed to anyone other than grantee
(2) Land is free from encumbrances made by grantor

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18
Q

Notice Statute

A

(O conveys to A, and the O conveys to B)

The last bona fide purchaser to enter wins.

A conveyance of an interest in land shall not be valid against any subsequent purchaser for value, without notice thereof, unless the conveyance is recorded

If, at the time B takes, he is a bona fide purchaser, he wins. It doesn’t matter if A ultimately records before B (so long as not recorded when B buys)

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19
Q

Race Notice Statute

A

(O conveys to A, and the O conveys to B)

To prevail, B must (1) be a BFP and (2) win the race to record.

Any conveyance of an interest in land shall not be valid against any subsequent purchaser for value, without notice thereof, whose conveyance is first recorded.

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20
Q

Bona Fide Purchaser

A

One who

(1) Purchases for value, and
(2) Is without notice that someone else got there first

21
Q

Notice: Types

A

Three Types of Notice: AIR

(1) A - Actual: B learns of A’s purchase before B’s closing
(2) I - Inquiry: (a) on notice of whatever an examination of the land would show (buyer has duty to inspect); (b) if recorded instrument makes reference to unrecorded transfer, buyer has duty to do reasonable follow up
(3) R - Record: deed was properly recorded

22
Q

The Shelter Rule

A

One who takes from a BFP will prevail against any entity that the transferor-BFP would have prevailed against

23
Q

Wild Deed

A

If a deed, entered on the records, has a grantor unconnected to the chain of title, the deed is a wild deed. It is incapable of giving record notice of its existence.

24
Q

Estoppel by Deed

A

One who conveys realty in which he has no interest (e.g. has already conveyed it away) is estopped from denying the validity of that conveyance if he later acquires that previously transferred interest

25
Q

Mortgage: Definition

A

A mortgage is the conveyance of a security interest in land, intended by the parties to be collateral for the repayment of a debt

Debt + Voluntary lien in debotr’s land to secure the debt

26
Q

Mortgage: Terms

A

Mortgagor/Debtor: landowner conveying land interest for money

Mortgagee/Creditor: entity lending money

27
Q

Legal Mortgage

A

A mortgage evidenced by a writing

Also known as: note, security interest in land, deed of trust, mortgage deed, sale lease-back

28
Q

Equitable Mortgage

A

Debtor/Mortgagor hands deed, absolute on its face, to Creditor/Mortgagee, instead of executing a note or mortgage deed

Parol evidence is allowed to show intent

29
Q

Debtor/Mortgagor’s Rights

A

Unless and until foreclosure, debtor/mortgagor has title and the right to possess

30
Q

Creditor/Mortgagee’s Rights

A

Has a lien on the property

31
Q

Mortgage: Transfer of Interests

A

All parties to a mortgage can transfer their interests

32
Q

Mortgage: Transfer of Interests - Creditor/Mortgagee’s Transferability

A

Creditor/Mortgagee can transfer his interest by:

(1) Endorsing the note and delivering it to the transferee. If this happens, transferee is eligible to become holder in due course

or

(2) Executing a separate document of assignment

33
Q

Mortgage: Transfer of Interests - Holder in Due Course - Terms

A

If a note is endorsed and delivered, the transferee is eligible to become a holder in due course, which means he takes the note

(1) Free of any personal defenses that could have been raised against the original mortgagee (e.g. lack of consideration, fraud in the inducement, unconscionability, waiver, estoppel)

but

(2) Subject to real defenses the mortgagor might raise

34
Q

Mortgage: Transfer of Interests - Holder in Due Course - Real Defenses

A

MAD FIFI4

M - Material
A - Alteration
D - Duress

FIF - Fraud in the Factum
I - Incapacity
I - Illegality
I - Infancy
I - Insolvency
35
Q

Mortgage: Transfer of Interests - Holder in Due Course - Note Criteria

A

To be a holder in due course of the note, must meet all criteria:

(1) Note must be negotiable (made payable to named mortgagee)
(2) Original note must be endorsed, signed by the named mortgagee
(3) Original note must be delivered to transferee (photocopy unacceptable)
(4) Transferee must take note in good faith, without and notice of any illegality
(5) Transferee must pay value (more than nominal) for the note

36
Q

Mortgage: Transfer of Interests - Recording

A

All recording statutes apply to mortgages as well as deeds

If debtor-mortgagor sells mortgaged land, the lien remains on the land so long as the mortgage was properly recorded

37
Q

Mortgage: Transfer of Interests - Liability - Buyer Assumes the Mortgage

A

O sells to B, land has mortgage/lien on it

If B “assumes to mortgage”, O and B are personally liable – B is primarily liable, O is secondarily liable

38
Q

Mortgage: Transfer of Interests - Liability - Buyer Takes Subject to Mortgage

A

O sells to B, land has mortgage/lien on it

If B takes “subject to the mortgage,” only O is personally liable and B assumes no personal liability

BUT, if the mortgage is recorded, it stays with the land and if O doesn’t pay the land may be foreclosed

39
Q

Foreclosure: Process

A

Mortgage must be foreclosed by proper judicial action. At foreclosure, land is sold and sale proceeds go to satisfying the debt.

40
Q

Foreclosure: Proceeds less than amount owed

A

Mortgagee/creditor brings a deficiency action against mortgagor/debtor

Mortgagee tries to convince court to seize something else to satisfy the debt.

Each claimant is entitled to satisfaction in full before a subordinated/junior lienholder may take.

If the proceeds are entirely used by more senior creditors, more junior creditors must look to something other than the land for satisfaction.

41
Q

Foreclosure: Proceeds more than amount owed

A

Junior liens are paid in order of priority, and the remaining surplus goes to the debtor/mortgagor.

42
Q

Foreclosure: Necessary parties

A

(1) Those with interests subordinate to those of the foreclosing party are necessary parties to the foreclosure action
(2) Debtor-mortgagor is a necessary party and must be joined (especially if creditor/mortgagee wants to proceed with personal deficiency judgment)

Failure to include necessary party preserves that party’s claim and mortgage stays on the land

43
Q

Foreclosure: Effect on Interests

A

(1) Interests senior to the mortgage being foreclosed are not affected – the buyer at a foreclosure takes subject to such interest. Buyer is not personally liable to the senior interest, but it does mean foreclosure is likely
(2) Interests subordinate to the foreclosing party must be joined and their interests will be terminated

44
Q

Foreclosure: Priorities

A

(a) Creditor/mortgagor has no priority until he records
(b) Once recorded, priority is determined by first in time, first in right
(c) EXCEPT, purchase money mortgage is highest priority
(d) If a mortgage obligates lender to make further advances of funds, those future advances have the same priority as the mortgage, BUT if the later advance is optional it loses priority

45
Q

Foreclosure: Priorities - Purchase money mortgage

A

A mortgage given to secure a loan that enables the debtor to acquire the encumbered land

Highest priority mortgage

46
Q

Foreclosure: Redemption in Equity

A

In all states

Debtor/mortgagor can try to redeem the land any time prior to the foreclosure sale; after the sale, equitable redemption is not possible

Satisfy equitable redemption by (a) paying off missed payment plus interest and costs, or (b) if acceleration clause, by full balance plus interests and costs

47
Q

Foreclosure: Statutory Redemption

A

In half the states

Debtor/mortgagor has statutory right to redeem for some fixed period after foreclosure sale (typically 6 months to a year). Must pay foreclosure sale price (rather than original debt).

Redemption nullifies the sale

48
Q

Covenant Against Encumbrances

A

The covenant against encumbrances ensures that there are neither visible (easements, servitudes, etc.) nor invisible encumbrances (mortgages, etc.) against the title or interest conveyed

This is a present covenant and is breached, if at all, at the time of conveyance.

Majority: present covenants do not run with the land and cannot be enforced by remote grantees

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