The Land Sale Contract Flashcards
Formation of Land Sale Contract
Subject to general contract requirements
- Offer
- acceptance
- consideration AND
- subj. to the SOF
Real Estate Brokers & Agents
The majority of real prop. sales are negotiated by RE brokers
- Both S & B can hire brokers to conduct the transaction on their behalf
Real Estate Broker - Duty to Disclose
As agents, RE brokers have a duty to disclose material information that they have actual knwoledge of
Real-Estate Broker - Seller’s Agent
- Broker who gets the listing from the seller & is responsible for assisting in the sale of the prop.
- Owes Fiduciary Duty to Seller
- entitled to commission for finding a “ready, willing and able” buyer
Real-Estate Broker - Buyer’s Agent
- Responsible for showing the buyer properties that he might be interested in buying
- Receives commission-based fee upon slae of the prop.
Real-Estate Broker - Dual Agent
Serves as agent for both buyer & seller
- Many states prohibit a person from serving as dual agent due to likelihood of conlict of interest
Land Sale K & SOF
The land sale K must:
- Be in writing
- Be signed by the party to be charged, AND
- Contain all of the essential terms
- Parties
- property description
- terms of price and payment
also applies to other prop. int.
- Assignments & oprions regarding the purchase of real prop.
- Leases over one year
- Deed
Exceptions to the SOF
- Part Performance
- Detrimental Reliance
- Admission
Exceptions to SOF - Part Performance
Under Doctrine of Part Performance, Courts will recognize an oral K for the sale of land if there has been part performance. Requires 2 of the following:
- Payment of all or part of the purchase price,
- Poss. by the purchaser AND/OR
- Substantial improvement of the prop. by the purchaser
Exceptions to SOF - Detrimental Reliance
Specific perf. may be permitted when:
- the party seeking enforcement
- has reasonably relied on the K and
- would suffer such hardship
- Other party will be estopped from asserting SOF as a defense to the K
Exceptions to SOF - Admission
Party may be able to enforce an oral land sales contract when the other party admits the existence of the K
What is the covenant of Marketable Title ?
Implied Promise by seller to deliver title to the prop. that is:
- free from defects or unreasonable risk of litigation
- at the time of closing
How can a covenant of marketable title be contracted for?
It is implied, unless the K says otherwise
When does the seller have to have marketable title?
On the date of closing
What types of marketable title defects generally occur?
- Unpaid mortgage or lien
- Covenants & easements which restrict the use of the land
- Title acquired by adverse poss. (need judicial decree declaring they are owner)
- An existing zoning or ord. violation of the prop.
At the date of closing what happens to the land sale K?
It merges into the deed
What is the merger doctrine?
On the date of closing, the land-sale contract merges in to the deed
When is the only time a buyer can claim a defect in marketable title under the land-sale contract?
Only on date of closing
- Raising claim later is too late b/c it becomes the deed
- Raising it earlier is too early b/c claim doesn’t manifest until closing
If buyer finds defect in the title after the date of closing what are their options?
They can only sue on a warranty deed
Time is of the essence Clause
- Not enforced unless part of K (express/implied)
- Party fails to perform on closing day = breach
Implied Warranty of Fitness and workmanlike construction
Implied in land sale K for purchase of new construction homes
- Seller asserts he used adequate materials & goods workmanship in working on the residence
- Covers latent construction defects (can’t be discovered by reas. observation)
- Can be disclaimed by builder or waived by homeownerif done so with lang that is clear & unambig. BUT gen. disclaimer is not sufficient
Suit for breach of implied warranty of fitness - Timing & Damages
Must be brought within a reas. timae after discovering the defect & damages based on the cost of repairs to bring the home into compliance with the warranty
Duty to Disclose Defects
ALL Homes
- Seller must disclose all known material physical defects not readily observable
Tender of Performance
Concurrent Conditions
- If one party repudiates then the non repudiating party is excused
- B must give S sufficient time to cure title defect
Remedies for Breach
- Damages
- Specific Performance
Remedies for Breach - Damages
- Difference b/w K price and market value
- Some juris. - limited to B’s out of pocket expenses if seller is unable to deliver marketable title but acted in good faith
Remedies for Breach - Liquidated Damages
For a liquidated damges clause to be enforceable:
- Amount of LD must be reasonable
- deposits of no more then 10% of the purchase price have been found to be reasonable
- Courts can consider factors relating to the transaction or refuse to enforce LD clauses when S suffers no actual loss
Remedies for Breach - Specific Performance
Buyer entitled to SP for seller’s breach of a K to sell land b/c B’s remedy at law is considered inadequate b/c of unique nature of land
- Theory of Mutuality of remedies - S permitted to seek SP & force buyer to purchase
Doctrine of Equitable Conversion
Doctrine of Equitable Conversion - When the land sale K is signed:
- B of real prop. becomes the equitable owner of title to the prop., binding her to purchase the land at a later date (Equitable title passes to B)
- Seller has pers. prop. int. (legal title remains with seller until it passes to B at closing)
Death after equitable Conversion
Seller - Heir or devisee entitled to pers. prop. int. only b/c there is no more real prop. int. after execution
Buyer - Heir or devisee entitled to real prop. int. b/c buyer gets this int. after execution
Damages or Destruction After Equitable Conversion
Who risks any loss between the signingof the K & closing?
Majority View - Buyer bears ROL unless K expressly provides otherwise
Minority View - Risk of loss on Seller, unless B has title or poss. when the loss occurs.
Option Contract
One party gets the right to purchase property, usually during a specific time pd., in exchange for consideratin
Right of First Refusal
- Preemptive right that gives its holder the opportunity to get prop. b/f its transfer to another
- Valid unless unreasonable
What is seller’s duty of care to the buyer?
- Must disclose material latent defect
- Defects known to seller but not readily observable or known to the buyer
