004 03 Property-Land Sale Transactions/support/water Rights

Front 1

Coveyancing

Back 1

2 step process: 1. K of sale 2. Deed

Front 2

K of Sale--governing rules

Back 2

all rules of contract plus:

1. SOF
2. Legal Effect of K of sale between time of signing and closing

Front 3

K of Sale-SOF

Back 3

K of sale of an interest in property must be in writing and signed by the one who is sued "the one who is charged"
--writing must have:
1. a description
2. names of parties
3. price

Front 4

$ K of Sale-SOF--exeption

Back 4

Doctrine of Part Performance--Equitable Estoppel in Tn
oral K ok if:
1. oral contract is CERTAIN and CLEAR
2. Acts of part performance clearly PROVE UP a K
--look for claimant in possession AND either paying full purchase price OR erecting improvements

Front 5

K of Sale-Sale...Closing

Back 5

4 Issues:
1. Risk of Loss
2. Death of a P before closing
3. Marketable Title
4. Time of Performance

Front 6

K of Sale-Sale...Closing--Risk of Loss

Back 6

If property damaged before closing, B loses. Equitable conversion has taken place when K is signed i.e. title is in B for all practical purposes EVEN IF S remains in possession

Equitable conversion:

P is regarded as equitable owner of land

S is regarded as equitable owner of personal property, primarily the right to purchase price.

Front 7

K of Sale-Sale...Closing--Death of P before closing

Back 7

Equitable Conversion preserves the rights as set in the K for sale and D does not effect them.

If S dies, S's interest is personal property

If B dies, B's interest is real property

Front 8

K of Sale-Sale...Closing--Marketable Title

Back 8

Implies warranty that S will give B marketable title.

S must give B 3 things:
1. Proof of Title (abstract copy of all deeds recorded in chain of title)
2. Title free from encumbrances (no easements, no restrictive covenants, no mortgages(but can be satisfied out of proceeds of the sale), no options, etc. that are not mentioned in the contract).

3. Valid Legal Title on DAY OF CLOSING

--implied into land sale K which requires only tender of a quitclaim deed.

--title acquired by AP, S must have brought action to quiet title or title is NOT marketable.

--easement that is BENEFICIAL that is VISIBLE or KNOWN to the buyer is NOT an encumbrance for purposes of merchantable title.

Front 9

K of Sale-Sale...Closing--Marketable Title-->effect of zoning/land use restrictions

Back 9

Generally zoning/land use restrictions do not affect the marketability of title, but an EXISTING violation does render the title unmarketable.

Front 10

K of Sale-Sale...Closing--Marketable Title-->B's remedies if title is unmarketable

Back 10

B must give S reasonable time to cure.

-if no cure B has 3 remedies:

1. Recission
2. Damages
3. Specific Performance

-if B accepts deed without problems being cured, then no record based on K of sale. Can only bring an action against the DEED

Front 11

K of Sale-Sale...Closing--Time of the Sale

Back 11

Generally time is not of the essence UNLESS K or facts make it clear that parties intended otherwise.

If time is not of the essence, performance must be tendered within a reasonable time (2 months ok)

If Time is of the essence must be performed on that date.

Front 12

K of Sale-Remedies for Breach

Back 12

1. Damages: difference b/t K price and value of land on day of breach

--earnest money as liquidated damages: buyer's deposit can be forfeited as liquidated damages so long as it is not more than 10% of the sales price

2. Specific Performance

Front 13

$ K of Sale-Defects

Back 13

Caveat Emptor.

EXCEPT:

1. S must disclose serious defects (i.e. B would have backed out) of which S knows and are not obvious to Buyer
-S can't conceal defects

2. Implied warranty of fitness or merchantibility for new homes sold by a BUILDER-SELLER

Front 14

Deed--Doctrine of Merger

Back 14

once deed is accepted, the K merges into the deed and is destroyed, and all K provisions (i.e. implied warranty of merchantable title) are lost

UNLESS included in deed (or K specifies that they survive)

-NO CONSIDERATION need for deed (unlike K of sale)

Front 15

Deed--Execution

Back 15

Deed subject to SOF i.e. S must sign the deed

-description of parties with sufficient particularity that it can be determined who will take the property .i.e. "nieces" OK
-description need only identify the property(minor discrepancies are ok)

-where stream is a boundary, each abutting owners each own one half of the stream bed.
-metes and bounds description of land controls over description of acreage or any other description.

-hen grantor gives deed to another with the expectation that the recipient will complete the deed by filling in the grantee's name, the instrument is usually valid when grantee's name is actually inserted.

Front 16

Deed-Delivery

Back 16

does not always mean physical delivery. Legal test is solely a question of INTENT to pass title.
-Parol evidence is admissible to establish intent wrt delivery

-title passes on delivery

-presumption that recordation shows valid delivery

--when one GRATUITOUSLY transfers land to another, acceptance of the deed is presumed (unless it is rejected promptly upon learning of the grant)

--presumption that a deed which the grantor has retained in his physical possession has NOT been delivered

Front 17

Deed-Delivery->Recorded Deed

Back 17

Recording of a deed raises a presumption of delivery, even if grantee never sees the deed or knows nothing about it.

Front 18

Deed-Delivery->Death of grantor while deed in possession

Back 18

rebuttable presumption of NO DELIVERY

Front 19

Deed--Conditional Delivery

Back 19

1. Condition is in deed
2. Oral Condition--disregard
3. Delivery conditional on grantee paying purchase price

Front 20

Deed--Conditional Delivery where Delivery conditional on grantee paying purchase price

Back 20

valid provided that grantor makes delivery to a third party in ESCROW with instructions to deliver to grantee once purchase price is paid

-Once deed recieved by Escrow agent, grantor cannot get the deed back unless grantee rejects

Front 21

Deed-Reformation

Back 21

A deed will be reformed (in equity) when it does not represent the intent of the parties' agreement because of:
1. mutual mistake
2. scrivener's error
OR
3. unilateral mistake caused by misrepresentation or other inequitable conduct.

Front 22

$ Covenants for Title-def/generally

Back 22

-if grantor makes no promises, grantee get a QUIT CLAIM DEED i.e. grantee gets whatever grantor owns and grantor promises nothing

-if grantor makes promises regarding title these promises are called COVENANTS FOR TITLE

-SPECIAL WARRANTY deed--Grantor warrants that he did not create any defects in title.

$ -Deeds with the 6 covenants for title are called GENERAL WARRANTY DEEDS

Front 23

Covenants for Title--Present Covenants

Back 23

-grantee can sue immediately. -personal guarantee to the grantee and DO NOT RUN WITH LAND
1. Covenant of Seisin
2. Covenant of right to convey
3. covenant against encumbrances

Front 24

Present Covenants--Covenant of Seisin & Covenant to Convey

Back 24

represent promise to S that S has title and possession can can validly convey both

Front 25

Present Covenants--Covenant against encumbrances

Back 25

Grantor promises no easements, no restrictive covenants, not liens, etc that ARE NOT STATED in the DEED

Front 26

Covenants for Title--Future Covenants

Back 26

-not breached immediately, but later i.e. future
-future covenants RUN WITH THE LAND and can be enforced by ALL subsequent purchasers

They are:
1. Covenant of Quiet Enjoyment
2. Covenant of Warranty
-these two are interchangeable
3. Covenant of Further Assurance

Front 27

Future Covenants--Quiet Enjoyment/Warranty

Back 27

represent the promise of S that S will protect B against anyone who later shows up and claims title

Front 28

Future Covenants--Further Assurance

Back 28

i.e. "mop up" covenant If S forgot to do something to pass title, S promises to do whatever is necessary i.e. sign deed

Front 29

Damages for breach of covenant

Back 29

if breach of warranty, damages are limited to purchase price rec'd by warrantor PLUS incidental damages

--no FULL RECOVERY

Front 30

Estoppel by Deed aka Doctrine of After-Acquired title

Back 30

if A deeds property to B that A does not own, and A later does acquire title, B will get title b/c grantor gave an IMPLIED COVENANT that title would be transferred to grantee

BUT

if grantor transfers to a BFP after getting title, then the original grantee loses and cannot rely on estoppel by deed.

Front 31

Deed to Dead Person

Back 31

Invalid; new deed must be made to B's estate

Front 32

Recording of INterests--how to answer

Back 32

1. Can a subsequent purchaser win because of the recording statute?

unless the answer is "YES" then subsequent purchasers always lose because CL rule is

first in time, first in right

Front 33

Recording process

Back 33

-recording a deed is not necessary to make it valid; it is only done to GIVE the WORLD NOTICE

-at recording office, clerk files coy of deed in book of deeds
-then, clerk indexes two indexes: grantor and grantee index
- clerk lists transaction alphabetically by grantor/grantee, notes the grantor/grantee, gives a description of the property, and cites volume and page of the book where the copy of the deed can be found.

Front 34

Recording Acts

Back 34

3 types:
1. Notice Acts
2. Race-Notice Acts
3. Pure Race Act

Front 35

Notice acts

Back 35

protect subsequent purchasers who are BFPs(those who 1. give value and 2. take without notice of earlier transaction

-recording is irrelevant except as it might give NOTICE

-protects subsequent purchaser who had no actual or constructive notice at the time of CONVEYANCE. thus, if a prior mortgagee, etc records after the conveyance before the purchaser records, then BFP wins.

Front 36

Race-Notice Acts

Back 36

protect BFPs who 1. give value who 2. take without notice, AND 3. are first to record.

Front 37

Pure Race Acts

Back 37

Notice is IRRELEVANT

subsequent purchaser need not even be a BFP i.e. can have notice and still win.

Front 38

Determining which recording act applies

Back 38

1. If contains words "without notice" or "in good faith"?

Yes-->either notice or race-notice. got to question #2.
No-->pure race

Are the words "first recorded" or recorded first" present?

Yes-->race-notice
No-->notice

Front 39

Bona Fide Purchaser

Back 39

purchaser 1. for value and 2. without notice

Front 40

BFP--"for value"

Back 40

2 situations:
1. Bargain Basement Sale--where purchaser pays an absurdly low price. In absence of explicit claim of fraud, ANY CONSIDERATION that is out-of-pocket something is enough to be considered value.

2. One who purports to be an HEIR, DONEE, or DEVISEE cannot be a BFP, and can never defeat a claim of someone who has a prior conveyance from O/grantor

Front 41

BFP--"for value"--Shelter Rule Exceptions

Back 41

anyone (inlcuding heirs, donees, devisees) can shelter under the rights of a BFP.

Front 42

BFP--"without notice"

Back 42

3 kinds that can defeat a subsequent purchaser:
1. Actual Notice BUT subject to SHELTER RULE

2. Record Notice--constructive notice that asrises from the record. Must actually be recorded in book of records.

3. INquiry Notice

Front 43

Record Notice--title searching

Back 43

1. construct chain of title
2. see if chain is strong enough by ADVERSING

Front 44

Title Searching--Constructing chain of title

Back 44

go to GRANTEE index and look up S and find name of S's grantor.

then look up S's gantor's grantor and so on, going backwards in time, for whatever period of time is required by the marketable title statute.

Front 45

Title Searching--ADVERSING

Back 45

go to grantee index and adverse each link in the chain.

start with last grantor in chainjust constructed.

see if that person recorded anything from time he got the property to the time he passed it to the next link in the chain

repeat for each link in the chain.

Look for:
1. if grantor placed any encumbrances on the property during that time

AND

2. if grantor conveyed property to anyone else before passing to next link in the chain.

Front 46

Title Searching--how a deed could be recorded, but be outside the chain of title

Back 46

1. recorded too late OR
2. recorded too early

deeds outside chain of title are called WILD DEEDS and do not give notice

Front 47

Inquiry Notice

Back 47

1. Subsequent purchasers are on notice of ANYTHING mentioned in a deed in the chain of title i.e. unrecorded transactions disclosed by reading a deed

2. Subsequent purchaser must make inquiry of unexplained possessions or uses

e.g. subsequent purchaser fails to go out and EXAMINE the LAND and an examination would have shown someone on the land under a prior recorded right i.e. horse shit.

Front 48

Security Interests

Back 48

3 devises used to secure a loan on real property.
3 types:
1. Mortgage
2. Deed of Trust
3. Installment Land K

Front 49

SI-Mortgage

Back 49

given by debtor (mortgagor) to crditor (mortgagee). If mortgage isnt paid, sheriff sells land at a foreclosure sale.

Special situations:
1. Absolute Deed with a separate-promise-of-reconveyance (equitable mortgage) i.e. no mention of word mortgage

2. Sale/Lease Back with option to repurchase

A sells land to B but immediately leases back with option to repurchase...courts treat as a mortgage

Front 50

SI--Mortgage--when is an absolute deed a mortgage?

Back 50

court considers:

1. existence of a debt or a promise of payment by the deed's grantor

2. grantee's promise to return the land if the debt is paid

3. fact that the amount advanced to the grantor/debtor was much lower than the value of the property

4. degree of grantor's financial distress

5. parties' prior negotiations.

Front 51

SI-Mortgage--Title/Lien Theory

Back 51

Title Theory--title is in mortgagee (lender) until the mortgage has been satisfied or foreclosed. Thus, mortgagee is entitled to possession on demand at any time.

Lien Theory MAJORITY--title remains in mortgagor (debtor) and the mortgagee holds only a security interest in property. Thus, mortgagee may not have possession before foreclosure.

Front 52

SI-Deed of Trust

Back 52

given by a debtor to a third party trustee who holds it until the loan is paid off

-if loan isnt paid, then trusteemay either 1. get the court to order a sale OR 2. may sell property on trustee's own, at public auction

Front 53

SI--Installment Land Contract

Back 53

Debtor signs K promising to make payment and seller keeps title until the loan is paid off.

Front 54

Legal Consequences of Mortgage or Deed of Trust

Back 54

1. Equity of Redemption
2. Foreclosure sale must be by PUBLIC AUCTION i.e. no midnight sales
3. Multiple mortgages
4. Foreclosures
5. Using proceeds of foreclosure sale
6. If mortgage foreclosed and not enough money to pay off mortgage, let mortgagee sue for the balance due

Front 55

Legal Consequences of Mortgage or Deed of Trust--Equity of Redemption

Back 55

at any time up to foreclosure sale, --Debtor can REDEEM the property by paying amount in arrears unless the mortgage has an ACCELERATION clause, then D has to pay off entire balance.

--right of redemption cannot be WAIVED in the mortgage/deed of trust, but may be done later if there is separate consideration

--attempts to waive the right of redemption i.e. "CLOGGING the equity of redemption" are prohibited

-equitable right of redemption does not affect bank's right to possession before foreclosure.

--completion of a foreclosure cuts off mortgagor's equitable right of redemption
BUT
some states provide a statutory redemption right where the buyer can redeem AFTER the foreclosure sale.

Front 56

Legal Consequences of Mortgage or Deed of Trust--Multiple mortgages

Back 56

1st in time, 1st in right UNLESS recording act changes it.

--mortgage priorities can be changed by contract e.g. a senior mortgagee may subordinate to that mortgage to a junior one.

Front 57

PMMs

Back 57

Purchase Money Mortgages (mortgages taken out to buy property) are given priority over other mortgages executed at about the same time, even if other mortgages get recorded first

Front 58

Future Increases

Back 58

If owner does anything to increase a senior mortgage (e.g. gets more money or increases interest rate) then that mortgage loses its priority over junior ones but only to extent of the change.

Front 59

Foreclosure

Back 59

wipe out all junior interests (those that come later in time) but do not wipe out senior interests (those that come earlier)

holders of junior mortgage interest have right to pay off any mortgage being foreclosed in order to keep their junior interests from being wiped out. thus they are necessary parties to any foreclosure sale.


-junior easements, or junior leases also wiped out.

Front 60

Use of proceeds at foreclosure sale

Back 60

1. pay costs of foreclosure, including expenses and attorney's fees
2. then, pay the mortgage that was foreclosed, including accrued interest
3. then pay off junior interest, in order (pay first one fully before paying second one, etc. )
4.anything left goes to mortgagor/debtor being foreclosed.

Front 61

Legal Consequences of Installment land contract

Back 61

FORFEITURE clause provides that if D misses a payment, S can cancel the contract, keep all money paid to date, adn get the property back.
-these clauses will be enforced on MBE

Front 62

Transferring SIs--Mortgagor transfers title to property

Back 62

-each party can freely transfer his interest in property
-Mortgagor can transfer TITLE to property and mortgage tags along; transferee takes subject to the mortgage.
-Mortgagor continues to be liable on the note

UNLESS grantee specifically assumes mortgage. the grantee is not personally liable, but the mortgage must still be paid to avoid foreclosure.

Front 63

Transferring SIs--modification by mortgagee and the grantee

Back 63

discharges the original mortgagor of all liability

Front 64

Transferring SIs--transfer of the note by mortgagee

Back 64

mortgagee can freely transfer the note.
mortgage tags along with note

Front 65

Transferring SIs--Due on Sale clauses

Back 65

ie.. "if mortgagor transfers without the mortgagee's consent, the full amount of the loan is immediately due and payable"

ARE ENFORCEABLE

Front 66

Fixture Filing

Back 66

must be made per Art. 9 within 20 DAYS of ATTACHMENT (physical not art. 9 speak) or the security interest in teh chattel is subordinate to the earlier mortgage on the real property.

-if filing done properly, then supplier of the chattel can remove it without regard to any earlier mortgage or other security interest in the property.

Front 67

Rights of Support

Back 67

1. Lateral
2. Subjacent

Front 68

Lateral Support

Back 68

Support from sides. Landowner has right to land supported by the adjoining landowners, and STRICT LIABILTY results if land is not supported.

-can release right to lateral support, but such agreements 1. are strictly construed against the party asserting waiver and 2. must ordinarily satisfy the SOF

Front 69

Subjacent Support

Back 69

Support of the surface from the bottom. STRICT LIABILITY results if surface is not supported.

Front 70

Subjacent Support--Mineral Rights

Back 70

Holder of mineral rights is SL for failure to support the surface of teh land

Right goes to land and to improvements existing at time when mineral rights were severed from fee simple

--thus building built after mineral rights were severed from surface rights get no strict liability protection

--if excavator was negligent, then π can sue under ordinary tort principles for building built after mineral rights were severed from surface rights

Front 71

Water Rights--Rivers and Lakes--Riparian

Back 71

Riparian (majority rule)--where property borders lake or stream

-owner can use all water needed for domstic purposes

if non-domestic, owner is limited to reasonable use--act reasonably to other owners downstream or on the lake (can't impair the quality or quantity)

Front 72

Water Rights--Rivers and Lakes--Prior Appropriation

Back 72

-minority rule in western states where water is scarce

-1st in time takes. anyone, not just riparian owner who makes beneficial use of water, has right to continue to use it

Front 73

Water Rights--Water Under Ground

Back 73

aka percolating water, well water, or ground water

-land owner is entitled to reasonable use of ground water
-use limited to property i.e. cant export elsewhere.

Front 74

Water Rights--Surface water

Back 74

2 competing approaches:
1. Natural Flow--courts allow reasonable steps to deal with flood water e.g. drainage pipes or ditches to divert are OK

2. Common Enemy--can do anything.

Front 75

Trespass

Back 75

Possessor or real property has the exclusive right to the use and possession of the surface, the air above the surface, and the land below the surface (including minerals).

A trespass is a tangible physical intrusion that interferes with the possessor's right to exclusive possession of the land, and the possessor will be entitled to relief upon the showing of an intentional, unprivileged physical intrusion

Front 76

Good Faith Trespasser

Back 76

The good faith trespasser, believing the land to be his own, normally intends annexation to be permanent. The true landowner can recover reasonable value for the landowner's use and possession of the property.

Front 77

Accretion

Back 77

Slow and imperceptible change in the course of a river serving as a boundary; any resulting deposit of soil belongs to the owner of the abutting(riparian) land.

Front 78

Private Nuisance

Back 78

∆ has caused or is responsible for a NONTRESPASSORY, substantial interference with π's use and enjoyment of her land.

Front 79

Judgment Liens

Back 79

run with the land and are thus binding on subsequent purchasers who have notice of it.

Front 80

K of Sale--Reformation

Back 80

remedy whereby the writing setting forth the agreement between the parties is changed to make it conform to the original intent of the parties.

Front 81

Foreclosure--failure to include a creditor at the sale

Back 81

If a lien senior to that of a mortgagee is in default, the junior mortgagee has a right to pay it off. And, thus are necessary parties to the foreclosure action.

Failure to include a party results in the preservation of that party's interest despite foreclosure and sale.

-if a senior creditor forecloses and purchases foreclosed land without including junior creditor then it preserves the junior creditor's mortgage and senior creditor will need to pay the junior creditor's mortgage to avoid being foreclosed.