006 Lists Real Property

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Exceptions to the Statute of Frauds for Land Contracts

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Contracts for the sale of real estate, leases with a duration of more than one year, easements, mortgages, and fixtures fall within the Statute of Frauds. Exceptions:

(1) if an oral land contract is fully performed, the seller can enforce the buyer's promise to pay

(2) if at least two of the three following elements are satisfied: (i) payment of at least part of the payment price, or (ii) substantial improvements to the property, or (iii) occupation of the premises.

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Present Estates and Respective Future Interests

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(1) fee simple absolute ("to A" or "to A and his heirs")
(2) defeasible fee simple:

i. fee simple determinable (fee on limitation) - possibility of reverter in the grantor (automatic)
ii. fee simple subject to condition subsequent (fee on condition with the right of reacquisition) - right of entry in the grantor (not automatic)
iii. fee simple subject to executory interest (and shifting executory interest) - executory interest or shifting executory interest in someone other than the grantor (subject to the Rule Against Perpetuities

(3) life estates (can be made also defeasible) - reversion (grantor) or remainder (a third party)

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The Doctrine of Waste

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(applies to life estates only) Generally, a life tenant is entitled to all ordinary uses and profits. However, he must not do anything to prejudice the interests of the holder of a remainder or reversion. If he commits waste, the holder of a remainder or reversion has the right to sue for damages or injunction. Types of waste:

(1) voluntary or affirmative - through willful acts of destructiveness that cause a decrease in the value. Exceptions when a life tenant may consume or exploit the natural resources (unless restricted by the grantor):

i. if those resources were exploited before
ii. can mine if mining was performed before, but must limit to the already existing mines (the Open Mines Doctrine)
iii. can use reasonable amounts of natural resources for necessary repairs and maintenance of the premises
iv. if the land only suitable for exploitation
v. if expressly granted

(2) permissive waste or neglect - the failure to protect or to keep in reasonable condition. A life tenant has a duty to repair and to pay all ordinary taxes to the extent of income or profits from the land. Exception: if there is a further interest in the property, such as an easement, the life tenant is only responsible for the maintenance up to the interest in the property

(3) ameliorative - includes substantial changes that increase the value. Allowed if:

i. all future interest holders are aware and explicitly consent OR
ii. a permanent change in the surrounding area has deprived the property of its current form of usefulness

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Types of Deeds and Covenants

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(1) general warranty deed - warrants against all defects in the title, including those of the grantor's predecessors; includes:

(a) present covenants - breach occurs at the time the deed is delivered (for purposes of the SOL) and the grantee can sue for the value of consideration:
i. covenant of seisin - the grantor has title and possession of the property
ii. covenant of right to convey - the grantor has the power and authority to convey the property
iii. covenant against encumbrances - there are no visible or invisible encumbrances. Majority: the covenant is breached even if the grantee knew of the encumbrances;

(b) future covenants - breach occurs only upon third party interference with the possession of the grantee and his successors (run with the land) and the grantor can be sued for the value of the property, which can go up:
i. covenant for quiet enjoyment - a third party with a lawful claim of title will not interrupt the grantee's possession or enjoyment
ii. covenant of warranty - promise to defend the grantee against the lawful claims asserted by others (i.e., the grantor will pay for legal fees)
iii. covenant for further assistance - the grantor will perform all future acts that are reasonably necessary to perfect the grantee's title, if it is deemed imperfect

(2) quitclaim deed - no covenants

(3) statutory special warranty deed (a bargain and sale deed) - provided by state statute and contains two warranties:
i. the grantor has not conveyed the estate to a party other than the grantee
ii. the property is free from encumbrances made by the grantor

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Delivery of the Deed

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A deed is not effective until it has been delivered accompanied with the grantor's present intent that title pass immediately and irrevocably. Title passes upon delivery and cannot be cancelled; once delivered, returning the deed to the grantor has no effect. Methods of delivery:

(1) manual - physical delivery, can be accomplished by mail, by the grantor's agent or by a messenger
(2) presumed (rebuttable) - when the deed is handed to the grantor, acknowledged by the grantor before a notary, or recorded
(3) third parties - deposited with a third party who is to deliver the deed upon a happening of a specified performance. Title does not pass until the performance occurs

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Notices for Purposes of Title Assurance

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(1) actual
(2) inquiry - the purchaser must make a reasonable inquiry into the existence of a previous conveyance
(3) record - if the conveyance was recorded and in the chain of title so that the purchaser could reasonably find it

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Recording Acts

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(1) race statute ("first recorded") - the bona fide status does not matter: the grantee that records first wins
(2) notice statute ("without notice thereof") - a bona fide purchaser prevails (i.e., required that a previous grantee failed to record when the purchaser obtained the property)
(3) race-notice statute ("without notice thereof" + "first recorded) - a bona fide purchaser prevails if he records before a prior grantee (i.e., a prior grantee will prevail if he put the purchaser on notice before the purchase or if he recorded before the purchaser)