Transferring Property - Transactions and Title Assurance

Question 1

Purchase Contract: Purchase Contract Review (SOF 6 elements)

Answer 1

1. Elements of contract
   a) Offer
   b) Acceptance
   c) Consideration
2. SoF
   a) Essential terms:
   (1) The names of the parties
   (2) The price
   (3) The property description
   (4) Must be in writing
   b) Writing: The writing can be a formal contract or an informal
   memorandum.
   c) Signature: The writing must be signed by the party sought to be
   bound.

Question 2

Purchase Contract: 2 Elements of Equitable Enforcement of a sale in spite of SOF

Answer 2

Equitable enforcement in spite of SOF if:
(1) one party acts to his detriment in reasonable reliance on another’s oral promise; and (2) serious injury would result if enforcement is refused.

Hickey v. Green

Question 3

Purchase Contract: Title to property is unmarketable if any of 3 things are true:

Answer 3

(1) the seller’s property interest is less than the one she purports to sell;
(2) the seller’s title is subject to an encumbrance; or
(3) there is reasonable doubt about either (1) or (2).

Question 4

Purchase Contract: Lohmeyer v. Bower “Private v. Public encumbrance unmarketability”

Answer 4

Almost any private encumbrance makes a title unmarketable, but there is a much higher standard for public encumbrances.

It must expose the buyer to the risk of litigation. Found in this case.

Question 5

Purchase Contract: 2 Exceptions where the SOF is not required?

Answer 5

1. Part Performance
   a. Payment of all or part of purchase price, and
   b. Taking possession,
   c. Improvements

Many jurisdictions require possession + either payment/improvements. Some require payment + possession/improvements

2. Equitable Estoppel Hickey海

Question 6

Purchase Contract: The two ways to warrant marketability of title

Answer 6

(1) Express title provision: A sales contract might expressly require the seller to deliver marketable title, as in
Lohmeyer v. Bower. But the parties can always select another standard, such asinsurable title.

(2) Implied covenant of marketable title: If the contract does not contain an express title provision, the default rule is that seller must deliver marketable title. This implied
covenant of marketable title would have protected the buyers in Hickey v. Green if the seller’s title was defective.

Question 7

Purchase Contract: “Encumbrance” Definition

Answer 7

“a right or interest in land that reduces the value or
restricts the use of the land”

Question 8

Purchase Contract: “Free from reasonable doubt, but not every doubt” explained

Answer 8

(1) Prudent person with full knowledge of the facts and legal
consequences would be willing to accept

(2) Reasonable doubt if purchaser exposed to risk of
non-frivolous litigation concerning title
- Generally means any private interest, but doesn’t include land use restrictions imposed by law.

Question 9

The Executory Period: Equitable Conversion Defined

Answer 9

a) Upon signing of an enforceable agreement, buyer becomes the “equitable” owner because has right to specific performance

b) Seller has legal title, with a claim for purchase price secured by lien on the property.

Question 10

Allocating Risk During the Executory Period: Three Approaches:
(1)Equitable Conversion,
(2)Massachusetts Rule, and
(3)the Uniform Vender and Purchaser Risk Act

Answer 10

(1) Equitable conversion: The buyer bears the risk of loss on
the rationale that the buyer is the equitable owner(most
states)

(2) Massachusetts Rule: The seller bears the risk of loss (few
states)

(3) Uniform Vendor and Purchaser Risk Act: The party with the right to possession at the time the loss occurs bears the
risk (modern trend, grocery kart case)

Question 11

The Executory Period: The Duty to Disclose Defects, the Traditional View: Caveat Emptor defined (1 of 3)

Answer 11

a) Traditional view: Caveat emptor - Buyer can only rescind if:
(a) affirmatively misrepresented the condition of the property,
(b) actively concealed its defects, or
(c) owed a fiduciary duty to the buyer.

Question 12

The Executory Period: The Duty to Disclose Defects, The Stambovsky v. Ackley View {3E} (2 of 3)

Answer 12

Disclosure required if
1) condition created
by seller,
2) materially impairs value of contract, and
3) is peculiarly within knowledge of seller/unlikely to be discovered by prudent purchaser

(seller created condition, material, latent).

Question 13

The Executory Period: The Duty to Disclose Defects, the Modern Rule {2E} (3 of 3)

Answer 13

In most jurisdictions, the seller of residential real property is obligated to disclose defects he knows about that
(a) materially affect the value of the property and
(b) are not known to or readily discoverable by a buyer.

Question 14

The Executory Period:
Implied Warranty of Quality Defined

Answer 14

There is an implied warranty that someone constructing houses for sale has made houses fit for use.

Question 15

Strawn Ruling: Narrow duty to disclose off-site conditions

Answer 15

“Hence, we believe that it is reasonable to extend to such professionals a similar duty to disclose off-site conditions that materially affect the value or desirability of the property”

Question 16

The Closing: Delivery of Deed defined

Answer 16

Manifestation that the deed be immediately effective to transfer an interest in land to grantee. Main difference with gifts is that words alone can constitute delivery.

Question 17

The Closing: Deeds (3 requirements )

Answer 17

Deeds are only effective when
(1) delivered with

(2) Immediate intent to transfer ownership.

(3) SOF applies:
a) In Writing
b) Signed by grantor
c) Identify grantor and grantee
d) Contain words of conveyance
e) Describe the property

Question 18

The Closing: Rosengrant v. Rosengrant “Deed to be active only after current owner’s death”
In praesenti conveyance 2 elements

Answer 18

(1) actual or constructive delivery of the deed to the grantee or to a third party; and

(2) an intention by the grantor to divest himself of the conveyed interest. Death escrow has to be irrevocable to be valid.

(Delivery+Intent to divest)
Retaining the ability to revoke essentially makes it a will and not a deed.

Question 19

The Closing: Vasquez v. Vasquez “How to make a valid Death escrow”

Answer 19

When a grantor delivers a deed to a third person without a reservation of a right to recall it, and instructs the third person to deliver it to the grantee on the grantor’s death, he thereby makes an effective delivery as a matter of law.

Question 20

The Closing: Transfer on death deed (also called the beneficiary deed) Defined:

Answer 20

This deed allows an owner of real property to designate the beneficiaries she wants to receive the property upon her death; it is revocable by the grantor during her lifetime. By signing and recording such a deed, the owner causes her interest to be automatically conveyed to the listed beneficiaries upon her death. Because the deed is not legally operative until the grantor’s death, delivery is not required.

Question 21

Title Assurance: Specific Performance and Damages

Answer 21

Specific Performance
Traditionally, generally, damages are not the solution in a breach of contract to sell property. This is the case always when the seller refuses to sell, as well as in most courts when buyers refuse to buy, this is because real property is considered unique. Undue hardship can justify denying specific performance.

Damages: The non-breaching party can obtain damages, usually calculated as the difference between the contract price and the fair market value on the date of the breach. In determining whether to award “benefit of the bargain” damages, some courts consider whether the seller acted in good faith.

Question 22

Title Assurance: 3 Methods of Title Assurance

Answer 22

• Title covenants: the grantor promises in the deed that he has good title to convey.
• Title opinion based on search of public records: an attorney or other professional renders an opinion about the state of title after searching the public land records.
• Title insurance: a title insurance company issues a policy that insures the grantee’s title.

(Covenant; Opinion; Insurance)

Question 23

Title Assurance: 3 Types of Title Covenant Deeds

Answer 23

General warranty deed: the grantor warrants title against all defects, whether they arose before or after he obtained title.

Special warranty deed: the grantor warrants title against all defects that arose after he obtained title.

Quitclaim deed: the grantor makes no warranties about title, so the grantee receives only what the grantor has, if anything.

(General; Special; Quitclaim)

Question 24

Title Assurance: 6 sub types of special/general warranty deeds (3 present covenants and 3 future covenants)

Answer 24

Breached the moment the deed is delivered = 3 present covenants
(1) Covenant of seisin: a promise that the grantor owns the estate he purports to convey;
(2) Covenant of right to convey
(3) Covenant against encumbrances
(Seisin; Right; Against incumbrances)

Breached after closing = 3 future covenants
(1) Covenant of warranty: a promise that the grantor will defend the grantee against any claim of superior title;
(2) Covenant of quiet enjoyment: a promise that the grantee’s possession of the property will not be disturbed by anyone holding superior title;
(3) Covenant of further assurances: a promise that the grantor will take all future steps reasonably necessary to cure title defects that existed at closing.
(Warranty; quiet enjoyment; further assurances)

Question 25

Title Assurance: Estoppel by Deed: Explained

Answer 25

If A confers title to B that A does not actually own, and A later does actually get title, B automatically gets the title.

Question 26

Recording: Goal

Answer 26

Special protection to a subsequent bona fide purchaser who acquires title without notice of an adverse claim and pays valuable consideration.

Question 27

Recording: Mother Hubbard Clause Validity Luthi v. Evans

Answer 27

“Mother Hubbard” clause is
(1) valid between the parties to the transaction
(2) invalid against later purchasers unless they had actual knowledge of the dealing

“Mother Hubbard” clause: A clause in a conveyance that convey portions of real property not specifically described in the document itself

Question 28

Recording: Luthi v. Evans Proper Indexing and Constructive Notice

Answer 28

where an instrument of conveyance is duly recorded but not properly indexed, the fact that it was not properly indexed by the register of deeds will not prevent constructive notice. (Jurisdiction dependent)

Question 29

Recording: 3 types of Recording Act jurisdictions (+ 2 trad rules)

Answer 29

(1) Race: the purchaser who records first has priority.

(2) Notice: the subsequent bona fide purchaser has priority.

(3) Race-notice: the subsequent bona fide purchaser who records first has priority.

Common Law - “Nemo dat quod non habet”—No one can give what he does not have
First in Time: The person whose interest was created first wins

Question 30

Recording: “Wild Deed”

Answer 30

A deed recorded before the previous deed’s recording in the chain of transaction is not valid against a subsequent BFP.

(D1 sold -> D2 not recorded, but sold -> D3 records -> D2 records = D3 is invalid against a BFP)

Question 31

Recording: Notice 3 Types

Answer 31

(1) Actual notice: knowledge of a prior interest.

(2) Constructive notice
* Record notice: notice of any prior interest that would be discovered by a standard search of the public land records.
* Inquiry notice: notice of any prior interest that would have been obtained by investigating suspicious circumstances.

RARE: Imputed Notice: Knowledge imputed by some sort of special relationship

Question 32

Recording: [Raub v. General Income Sponsors of Iowa, Inc.] “Victim conveys property to investors, they mortgage it to the banks and pocket the money”

Answer 32

At the time of mortgaging, P was a tenant paying rent. If an investigation had been made, she would appear to be a tenant that had conveyed the property.

Therefore:
Possession of the property of following the execution of the warranty deed did not impart notice Victim had any interest.

Question 33

Recording: Documents that provide notice (4 Elements

Answer 33

-Valid for recording
-No technical defects
-Recorded IN CHAIN of title
-Properly indexed

Question 34

Recording Problems

Answer 34

(1) Defective Document
Invalid acknowledgement
Incorrect name
Incorrect property description

(2) Doc outside chain if
Recorded too early
Too late
Deed from grantor outside chain of title
Deed Common grantor of multiple lots

(3) Improperly indexed
Some jurisdictions do not enforce this

(4) Marketable Title - Usually limits tracing to 20-40 years for notice purposes but with a lot of exceptions

Question 35

Recording: Shelter Rule:

Answer 35

Protects ability of official BFP to sell the land

Question 36

Recording: Bona Fide Purchaser Defined

Answer 36

BFP: Someone who
1. Subsequently purchases
2. Gives valuable consideration
3. Has no notice

Question 37

Recording Analysis outline

Answer 37

1. Was there a prior unrecorded conveyance in the chain of title? (wild deed)
2. Is subsequent purchaser BFP?
3. Type of jurisdiction
   - Race
   - Notice
   - Race-notice

Question 38

Title Insurance: 2 Duties

Answer 38

Duty to Defend: Paying attorneys fees and costs of defending title, may be required even if the particular defect is not covered by the policy

Duty to Indemnify: Compensate the owner if loss occurs

Question 39

Riordan v. Lawyers Title Insurance Corp. “Insurance company claims policy only covers ‘access’ and doesn’t require good access to land”

Answer 39

• An ambiguity in policy is construed to favor the insured.
• Title policy insures the title, not the market value.
• Typically, laws/regulations affecting the land are excluded.

Plaintiff loses, insurance company wins