Title, Conveyancing and Security Interests Flashcards
Equity of Redemption (Debtor’s Rights of Redemption) upon Foreclosure
Rule: AT ANY time before foreclosure Debtor can redeem prop by paying amount DUE (arrears + interest) UNLESS acceleration clause
Acceleration clause: Debtor must pay FULL balance before redeeming prop
Waiver: attempt to waive Right or Redemption on original mortgage (original purchase) is PROHIBITED but can be waived later w/SEPARATE consideration (e.g. lender modifies loan)
Statutory Right of Redemption (modern): states allow between 6mo and 1yr for Debtor to redeem AFTER foreclosure sale and pay the foreclosure price (not amount of debt owed)
Security Interest in Fixtures
If Seller of fixture provides purchase money interest (finances fixture) and files UCC Article 9 filing w/in 20days after fixture is attached CAN remove fixture w/o regard to priority of earlier security interests
Rights of Support
Lateral Support: landowner has right to have prop supported by adjoining landowners. Failure to support holds Def strictly liable to landowner
Subjacent Support: same rule
Adverse Possession
HONCAE: if one element is missing no AP
- Hostile: trespass (no right to possess)
- Open and Notorious: visible
- Continuous: as ordinary owner would use
Tacking: allowed between different APs as long as there are no GAPS
Exception: Grantor suffers from either of three “I’s” (infancy, incarceration, insanity) BEFORE the AP began
NO Tacking of disabilities - Actual
Exceptions
1) Constructive AP: AP of part of the property BUT land actually possessed MUST bear reasonable relation to the whole (e.g. AP possesses 85 acres of 100 vs possessing 1 of 100 in order to claim AP)
2) Leased land: leasing land under AP to a TP constitutes possession (e.g. AP leases prop to TP) - Exclusive: excludes others from possession
Marketable Title after AP: HONCAE + action to quiet title
Types of Notice
AIR
- Actual:
Exception: anyone w/notice can shelter under rights of BFP w/o notice - Inquiry: B MUST inspect land and inquire unexplained uses and possessions
- Record (constructive): deeds recorded in B’s DIRECT chain of title give constructive notice
Remedies for Breach of land sale K
Damages: K price - fmv of prop as of the breach
Liquidated damages: ENFORCEABLE as long as reasonable (
Water Rights: Surface water (runoff, floodwater, rainfall, melting snow)
Natural Flow: owner CANNOT change natural flow of water flowing on surface (e.g. rainfall, melting snow, runoff, floodwater)
Common Enemy: owner can do ANYTHING w/water flow (no liability to others)
Remedies for B if S does not provide marketable title
- Notify S AND provide reasonable time to cure (postponing closing is OK)
- sue for rescission OR damages OR specific performance (reduce purchase price by value of defect)
Adverse Possession against concurrent owners
NO AP against co-tenants UNLESS AP actually excludes other co-tenant + SOL
Marketable Title
Marketable Title: title that a reasonable prudent buyer would accept (minor defects: MUST sale/buy w/price reduction e.g. pair or inches encroachment)
- if seller cannot convey good and marketable title the buyer does NOT have buy a lawsuit
EVERY land K contains an implied covenant/warranty of marketable title to B that applies AT CLOSE OF ESCROW (not before)
Seller MUST satisfy:
- Title (tangible evidence of title)
- Title free of encumberances (e.g. no easements, mortgages, restrictive covenants, etc unless prev disclosed). Zoning is limitation =/= encumberance UNLESS owner is in violation of zoning
- Valid legal title AT CLOSING (not duty to provide it before closing)
Property Title Search
- Look up last entry in Grantee Index and look backwards to construct chain of title as far back as statute requires
- Look up last Grantor found in Grantor index and look forward ONLY looking at conveyances during time of ownership by that Grantor. DO NOT look at acts by Grantor BEFORE or AFTER obtaining title
Recording
Recording statutes: allows current owner to keep prop by putting subsequent owners on notice of title ownership. Protects: subsequent owners, subsequent mortgagees but NOT judgment creditors
Types of Recording statutes:
- CL: First in time, First in Right
- Notice: protects LAST BFP for value w/o (AIR) Notice
- Race: protects first BFP for value who RECORDS (NO notice required/irrelevant: B can be aware of prior owners not recorded)
- Race-Notice: protects ALL subsequent BFP for value who RECORDS AND w/o (AIR) Notice
- BFP for value is NOT a devisee, heir, donee (will is w/o consideration)
Priorities on Payment after foreclosure
FIRST IN TIME, FIRST IN RIGHT unless a different recording statute (notice, race, race-notice) applies
Exception: Purchase Money Mortgage (PMM: mortgage used to BUY prop) have priority over ANY mortgage executed OR recorded before the PMM
If PMM lender increase amount, original amount priority remains but increased amount becomes a Jr lien
Water Rights: Rivers, Lakes, underground
Riparian Rights (DEFAULT rule unless otherwise stated): domestic > agricultural or commercial use. Owner of prop bordering water (watercourses e.g. rivers, lakes) may use ALL water needed for DOMESTIC use AND reasonable use for NON-domestic use (e.g. commercial, agricultural, etc)
Prior Appropriation: First in time takes (not necessarily owner bordering water) beneficial use of water (watercourses e.g. rivers, lakes) has rights protected against ALL
Underground Water: owner entitled to reasonable use BUT CANNOT export it
Conveyance of land by will: Ademption + Exoneration
Ademption (failure) by extinction: Conveyance of RealProp by Will fails because T did not own RealProp at T’s death
- Analysis:
1) determine if T intended gift to be specific vs general
THEN
2) determine if T intended gift to fail when gift is sold/transferred etc
Ademption (testacy) -vs- Advancement (intestacy)
Exoneration:
- Modern: Devisee takes RealProp subject to encumbrances (e.g. mortgage), UNLESS T’s Will states that RealProp is to be exonerated to pay off the encumbering debt.
- CL: if RealProp has a lien, at conveyance the lien is paid off from Testator’s estate
Equitable Conversion: risk of loss and party dies before close of escrow
If K + open escrow = Equity treats B as owner (B bears ALL risk) unless state statute
Death of either party does not affect performance of transaction: Either B’s or S’s estate will perform
Seller’s interest is in personal prop (proceeds)
Buyer’s interest is in real prop
- Doctrine of exoneration (deceased buyer): B’s heir can force B’s estate to pay for the purchase and heir keeps prop
Security Interests in Real Prop
- Mortgage: includes equitable mortgages (absolute deed w/separate promise to reconvey OR sale leaseback w/option to repurchase)
- Deed of Trust: trustee holds deed of trust until loan is paid in full. If not paid: trustee can obtain Ct order to foreclose OR sell prop in public auction
- Land Sale K (installment land sale): S retains title until B pays in full
If B breaches: S can choose to cancel K, AND keep money already paid, AND retake prop BUT cannot also obtain damages OR specific performance
Deed Formalities
Deed conveyance:
- Elements: AID (acceptance, intent, delivery)
- Two steps deed execution:
1) Execution (K principals control - subject to SoF): writing, signed by seller, description of prop (K is void if description is vague), name of parties, and price - SoF requires: Signed Writing (by party against who the K is being enforced) + Description of prop (K is void if description is vague) + Name of parties + Price
- Exception (Part Performance): certain and clear oral K AND part performance proves existence of K (e.g. B takes possession and pays in full, makes improvements -vs- B takes possession and makes monthly payments)
2) Delivery: ONLY look at INTENT to pass title (Parole evidence may be used to prove intent, no physical delivery required).
- Acceptance is implied: Returning delivery has NO effect, UNLESS unequivocal rejection by grantee
- Recording deed raises presumption of delivery
- If grantor dies w/possession of deed: rebuttable presumption of NO delivery
- Delivery w/ORAL conditions: IGNORE oral condition thus delivery is complete if delivery is performed
- Delivery to Escrow w/ORAL conditions: enforceable
– Once escrow closes (deed is accepted), K merges into deed and K provision extinguish UNLESS K provides that provision survive closing OR be merged into deed
Time of Performance: close of escrow
- Close by agreed time
- If failed to close by date, add reasonable amount of time (2 months is OK)
DEFAULT: Time is NOT of the essence in land sale K UNLESS specified in K OR facts show parties intended it
Time is of the essence Clause: if party fails = TOTAL BREACH thus cannot enforce K
Ownership Prop interest in Trust
Elements:
- Writing
- Manifestation of settlor’s intent to create trust/fiduciary relationship (not outright gift, precatory language, etc)
- Trust is funded with trust res/corpus/prop (Constructive trust to prevent unjust enrichment)
- Ascertainable Bens (reasonable certainty)
- Valid purpose (corps allowed as trustee only for 21yrs)
Created: inter vivos by deed, or at death by will
Trusts ARE subject to RAP
Exception: charity-to-charity trust
Charitable Trust: same elements + Ben MUST NOT be ascertainable
Cy Pres Doctrine: Ct may alter terms of charitable trust to further Settlor’s intent
Types of Deeds
Quitclaim Deed: NO promises by Grantor regarding title
General Warranty Deed: contains SIX covenants of title (3 present + 3 future)
- Present Covenants (personal = do NOT run w/land):
1) Seisin
2) Right to convey
3) No encumberances other than disclosed
Breached when conveyance is made. B can sue IMMEDIATELY (Notice of encumberance by B is irrelevant) - Future Covenants (run w/land thus protects ALL subsequent B):
1) Quiet enjoyment: promise by Grantor to indemnify B from ANY future claims of title by TP
2) Of Warranty: promise by S to protect B against ANY party claiming title
3) Further Assurances: Grator will take necessary measure to clear Grantee’s title
Breached after closing when Grantee’s title is disturbed in possession (enforced by ALL subsequent Bs) + notify breaching party
Damages: limited by amount received by Grantor who gave the Warranty
Foreclosure: senior and junior liens
Foreclosure wipes out ALL Jr interests IF Jr liens are included as parties to foreclosure, BUT foreclosure does NOT wipe out Sr interests. Buyer takes prop SUBJECT to Sr interests.
Owner of Jr lien who forces forecloses MUST include other Jr interests as parties to foreclosure otherwise Jr lien is NOT eliminated.
Payment:
- Pay cost
- Pay off lien foreclosed on
- Pay off other Jr liens (if not enough money, Jr lien holder may obtain a deficiency against owner - personal)
- Pay remainder to Owner
- Sr Liens remain on prop and B takes subject to Sr liens1
Property w/defects at date of closing
CL: caveat emptor (B cannot recover from S as long as S did not actively conceal defects)
Modern: S has duty to disclose serious defects that S knows and not obvious to B
Implied Warranty of Fitness (merchantability): apply ONLY to NEW residential housing purchase from developer. Caveat Emptor still applies to ALL other types of purchases (e.g. commercial, agricultural, etc)
Adverse Possession against future owners
LE + Remainder: Clock for AP does not start to run until future interest becomes possessory
(e.g. to X for life, then to Y - AP against Y does not run until X’s LE ends and Y’s future remainder begins)
FSD + POR: once condition is met for the FSD, clock runs against POR (automatically)
FSSCS + RoRE: clock does not run until Grantor w/RoRE exercises his right (affirmative act)
