risk of loss/disclosure duties

Question 1

Equitable Conversion

Answer 1

Once a contract is formed, the buyer bears the risk of loss.
If the property is damaged or destroyed before closing, the buyer must still take the property in its damaged condition.

Question 2

Contractual Exception:

Answer 2

Parties can contract out of the buyer bearing the risk of loss by including a specific provision in the contract.

Question 3

under new york law risk of loss remains with the seller until:

Answer 3

Legal title is transferred, or
Possession is transferred to the buyer.
Unless the contract expressly states otherwise.

Question 4

under new york law Buyer’s Remedies if Property is Damaged Before Closing:

Answer 4

Rescind the contract
Seek specific performance with an abatement in price

Question 5

Insurance Proceeds and Risk of Loss
Majority Rule:

Answer 5

The party who bears the risk of loss is entitled to the insurance proceeds, regardless of who procured the policy.

Question 6

If the seller collects the proceeds from insurance, they must hold them in trust for the buyer

Answer 6

Subject to claims for:
Unpaid purchase money
Insurance premiums

Question 7

A seller may be required to disclose material defects if the following conditions are met:

Answer 7

The defect materially impairs the property’s value.
The defect is known by the seller.
The defect is unlikely to be discovered by a prudent buyer (i.e., a latent defect).

Question 8

As-Is Clause Limitation:

Answer 8

An as-is clause does not override the duty to disclose latent defects.
As-is provisions only apply to conditions that a reasonable buyer knew or should have known.

Question 9

A seller’s failure to disclose may justify rescission if:

Answer 9

The seller creates a condition that materially impairs the property’s value.
The condition is peculiarly within the seller’s knowledge or unlikely to be discovered by a prudent buyer.

Question 10

A seller may be held liable for fraud if they make an:

Answer 10

Affirmative false representation about a material fact (e.g., roof condition).
Remedies for fraudulent misrepresentation include:
Rescission
Other equitable remedies

Question 11

Duty to Disclose Latent Defects

Answer 11

A seller must disclose latent material defects that:
Are known to the seller.
Materially affect the property’s value or desirability.
Are not readily observable or known to the buyer.