Selling Real Property/ Duty to disclose Flashcards
Hickey v Green (rescinding agreement to buy home after deposit)
Rule of statute of frauds- An oral agreement for the sale of an interest in real property is not enforceable.
Exception: Part performance, Estoppel
Ruling: Estoppel exception shown by Hickeys. Remanded to require conveyance by Green (and instead of
specific performance, determine restitution $).
Estoppel
- One party acts in “reasonable reliance”
on another’s oral promise; and - Serious injury would result if
enforcement is refused.
part performance exception to the
Statute of Frauds
An oral contract for the sale
of real property may be
enforced if the buyer:
1.Takes possession;
2.Pays at least part of the
purchase price; and
3.Makes improvements to
the property
Seller’s duty to convey marketable title
Every contract for the sale of real property contains a promise that the seller will deliver MARKETABLE TITLE to the buyer (express or if silent, implied)
Marketable Title and What Raises Doubts
MARKETABLE TITLE is title free from doubts as to its validity. Examples of
situations that raise doubts are:
1. Seller’s property interest is less than what she purports to sell;
2. Seller’s title is subject to an encumbrance; or
3. There is reasonable doubt as to #1 or #2
When to bring action against the Seller (to rescind the contract)?
The buyer must bring the action BEFORE closing. Upon closing all rights under the
purchase agreement extinguished. Any rights will be governed by the deed.
Lohmeyer v Bower (defects from title before closing)
Rule : Peatling v Baird: a title is unmarketable if it exposes the party holding it to the hazard o litigation. Defect must be of substantial and diminish quantity, quality or value. A mere possibility that these issues may be developed later is not sufficient
Holding: Title was unmarketable due to zoning code violation and HOA covenant violation exposed buyer to liability,
and neither was exempted. (Buyer did not agree to accept the violation of a zoning code in the purchase
agreement.)
* “notwithstanding the contract provides the conveyance was…subject to all restrictions and easements of
record, … it is the violation of the restrictions imposed by both the ordinance and [HOA covenant], “not
the existence of those restrictions, that renders the title unmarketable.
- Buyers complaint was not about restrictions of record but on the presently existing violation of ordinance thereof.
Marketable Title and Public Restrictions
Municipal zoning restrictions in effect at the time of signing of the purchase agreement
are NOT encumbrances that allow a buyer to invalidate a purchase agreement
* Buyer has a duty to research
* If zoning code + location of the house (or something else) = violation in existence at the
time of purchase contract, title will be unmarketable under Lohmeyer.
Marketable Title and Private Covenants
(Development covenants, Declaration, HOA bylaws, etc.)
Private covenants are typically disclosed to the buyer or will constitute an encumbrance
* Absolutely will constitute an encumbrance if not disclosed and the house is in violation
(as in Lohmeyer).
* Buyer typically cannot research private covenants (they are, however, often shown in a
title search!)
Modern Rule in Equitable Conversion
Risk apportioned based on the right to
possession at time loss occurred.
Brush Grocery v Sure Fine Market
Facts:
- hail storm during negotiation period before closing
- important: purchase provision in lease, they were unable to agree on price within time so renter/ buyer vacated and stopped insurance coverage
- here renter/ buyer beared the risk
Sellers duty to disclose
Today, sellers having actual knowledge of defects have a duty to disclose those defects if they:
a)Materially affect the value of the property; and
b)Are not known to or readily discoverable by a buyer.
Stambovsky v Ackley (sellers duty)
Facts
- haunted house case. Seller knew it was haunted, had capitalized on that years prior, and didnt tell buyer
Holding
- Where a condition that has been created by the seller materially impairs the value of the contract and is peculiarly within the knowledge of the seller OR unlikely to be discovered
by a prudent purchaser exercising due care with respect to the transaction,
nondisclosure constitutes a basis for rescission.
Strawn v Canuso (off site condition)
Professional sellers enjoy markedly super access to information. Sophistication level.
- Limit the duty to disclose off-site conditions that are material to the transaction (not social
conditions, changing nature of the neighborhood, etc.) - Liable for nondisclosure of off-site physical conditions known to professional sellers but unknown
and not observable by buyers. The conditions affect the habitability, use, or enjoyment of the
property and therefore render the property substantially less desirable or valuable to the
objectively reasonable buyer
