[Essays] Flp F12

Front 1

July 1998 - Real Property

Back 1

July 1998 - Real Property

A seller (S) of existing land and building may be liable to the purchaser for defects in the improvements on any of several different theories:

(1) Misrepresentation / Fraud
(2) Active Concealment
(3) Failure to Disclose

*Also consider a tort action against ∆ for misrepresentation; and a tort action against ∆ for negligence.

Front 2

MISREPRESENTATION / FRAUD theory requires:

(1) Proof that S made a *false stmnt of fact* to the B;

(2) *B relied* on the stamnt; and

(3) It *materially affected value* of the property.

F-R-V

- The S must have either *known* that the stmnt was false; or made it *negligently*

Back 2

ACTIVE CONCEALMENT:

The seller (S) is liable if the seller took steps to conceal a defect in the property.

Front 3

FAILURE TO DISCLOSE:

Under this theory, a S may be held liable for his failure to disclose defects if:

(1) S *knows or has R2K* of the defect;

(2) Defect is *not obvious or apparent* and the S realizes B is *unlikely to discover* it by ordinary inspection; and

(3) Defect is *serious* and would probably cause the B to reconsider purchase if known.

- Cts are more likely to impose liability on the S if the property is a personal residence, the defect is dangerous, and the S personally created the defect or previously attempted to repair it but failed to do so.

Back 3

∆ Defense: Property was sold "AS IS" - Is this sufficient to overcome a Seller's liability for failure to disclose?

No. A general clause such as. "property is sold as is" is NOT sufficient to overcome a Seller's (∆) liability for failure to disclose.

FL SUPREME CT has held that a seller of real property has an affirmative duty to disclose facts materially affecting the value of the property that are not readily observable or known to the purchaser.

Front 4

Where a party is induced to enter into a transaction with another by the other person's Fraud/Misrepresentation, the transaction is VOIDABLE against the other party. Buyer could take action to RESCIND the agreement and seek RESTITUTION.


• OR Buyer could also seek the difference b/t what he *paid* for the property and what its *worth* w/ the defect.

• OR Buyer could seek the cost of *repair* to fix the defect.

Back 4

In addition to any type of K action, courts have increasingly shown a tendency to impose a tort duty with respect to K performance where there is a reasonably *foreseeable* risk of *harm* in connection w/ contractual performance.

In a TORT action for MISREPRESENTATION against Seller/∆, Buyer/π would have to establish: MISC JD
(1) Misrepresentation
(2) Intent (to induce B's reliance)
(3) Scienter
(4) Causation
(5) Justifiable (reliance by B)
(6) Damages

Front 5

Tort COAs with respect to contractual performance - NEGLIGENCE action in TORT - B would have to establish the following elements:

(1) The existence of a duty on the part of S to conform his conduct to a specific standard of care for the protection of the B against an unreasonable risk of injury;

(2) Breach of that duty by S;

(3) Actual and proximate cause of B's injury; and

(4) Damages to B's person or property.

• When a person engages in an activity, he is under a duty to act as an ordinary prudent reasonable person would in similar circumstances. - It is presumed that an OPR person will take precautions against creating unreasonable risks of injury to other persons.

Back 5

Possible Defenses to a Negligence action in Tort:

(1) Comparative Negligence
- Defect obvious?
- Common knowledge?

(2) Assumption of Risk
- FL has abolished implied AoR. Only "Traditional" AoR (2 categories).

Front 6

DAMAGES in addition to the K damages based on the value of the property, in a Tort COA (based upon the K performance) the Buyer would be able to recover COMPENSATORY damages and possibly PUNATIVE damages.

COMPENSATORY Damages - Compensation for past/future medical expenses, lost wages, future lost earning capacity, plus amounts for pain and suffering.

PUNATIVE Damages - Buyer could also seek punative damages if he can establish that the ∆/Seller's conduct was *wanton & willful, reckless or malicious.* (FL has restricted the recovery of punative damages based on negligence...)

Back 6

• FL has restricted the recovery of punative damages based on negligence: A π *may not* plead punative damages *unless* (clear and convincing) evidence in the *record* demonstrates a reasonable basis for their recovery.

• Subject to a few exceptions, punative damage awards *greater than 3x* compensatory damages are *presumed excessive*.



July 1998 - Real Property

Front 7

JULY 2010 - REAL PROPERTY

Buyer executed a contract to purchase from Seller a used residential house in Summer Haven, Florida in its "AS IS" condition. Seller previously occupied the house. The contract required Seller to convey marketable title.

The contract disclosed that the house and an adjacent lot owned by Seller are served by an underground private sewer line that traverses a Neighbor's land pursuant to a valid easement granted to Seller. No other statements were made regarding the sewer system. The sewer line extends from a connection point to the city's sewer system on the Neighbor's land, crosses the Neighbor's land and the land on which the house is located, and terminates in Seller's adjacent lot.

Pursuant to the contract, the house was conveyed to Buyer by a valid Special Warranty Deed that stated: "Seller reserves the right to use a sewer line in the conveyed land for the benefit of Seller's adjacent land.” The deed did not mention the easement on Neighbor's land.

Back 7

JULY 2010 - REAL PROPERTY

After the closing, Buyer first discovered that (a) the house is encumbered by a valid lien recorded prior to Seller's acquisition of title to the house, and (b) sewage periodically overflows in the house.

Buyer determined that the sewage problem existed since the initial installation of the line. Subsequent to Buyer's acquisition, the problem became worse when Seller purchased additional property and connected the house located thereon to the sewer line. The cost to fix the sewer problem is significant.

Because an alternative direct connection point to the city's sewer system is now available to Buyer, Neighbor refuses to allow Buyer to install upgrades to the sewer line on Neighbor's property. Neighbor has also threatened to block the line to prevent the acceptance of sewage flow from Buyer's house.

Buyer seeks your legal advice. Prepare a memorandum discussing Buyer’s rights and remedies against Seller only.

Front 8

The K required the Seller to convey MARKETABLE TITLE.

• "Marketable title" that is reasonably free from doubt (i.e., title that a reasonably prudent buyer would be willing to accept).

• In need not be "perfect" title, but the title must be free from Qs that might present an unreasonable risk of litigation.

• generally, this means an unencumbered fee simple with good record title.

• Mortgages, liens, easements, and covenants render title unmarketable unless the buyer waives them.

Back 8

• An easement that *reduces* the value of the property renders title unmarketable.

• However, most courts hold that a *beneficial* easement (such as utility easement) , that was visible or known the buyer, does not constitute an encumbrance.

- Buyer will probably not be able to successfully assert that the sewer line renders title unmarketable.

- The K disclosed that the house and the Seller's adjacent lot are served by a private underground sewer line, and the special warranty deed expressly stated that Seller reserved the right to use a sewer line in the conveyed land for the benefit of the Seller's adjacent land.

Front 9

- After the closing, B discovered that the house is encumbered by a valid lien recorded prior to the Seller's acquisition of the title to the house.

• A seller has a right to satisfy a mortgage or lien on the property at closing with the proceeds from the sale.

• In such a case, as long as the purchase price is sufficient and this is accomplished simultaneously with the transfer of title (usually through the use of escrows), the buyer cannot claim title is unmarketable; the closing will result in marketable title.

- In this case, however, it appears that the lien remains on the property after closing.

- Buyer would argue that Seller has therefore breached by failing to convey marketable title.

Back 9

• If a buyer determines that the seller's title is unmarketable, he must notify the seller and give them a reasonable time to sure the defects, even if this requires extension of the closing date.

• The notice must specify the nature of the defects.

• If the seller fails to cure the defects, the buyer may pursue several REMEDIES.

• In the absence of contractual stipulation to the contrary, if title is not marketable, the buyer can>> [a] Rescind and seek restitution, [b] Sue for damages for breach, [c] get Specific Performance (w/ abatement in the purchase price), or [d] require the seller to Quiet title (in some jx).

• The usual measure of DAMAGES for BREACH of SALES K is the <difference> b/t the *K price* and the land's *market value* on DoB.

• Incidental damages are also recoverable.

Front 10

• If the buyer permits the closing to occur, however, the K is said to MERGE with the deed and, in the absence of fraud, the seller is no longer liable on the contractual warranty of marketable title.

- Here, Buyer did not discover the valid lien until after closing. In this case, Buyer would bring an action for violation of promises made in the DEED.*

• There are 3 types of deeds characteristically used to convey property interests (other than leaseholds): GENERAL Warranty Deed; SPECIAL Warranty Deed (usually §) and QUITCLAIM Deed. The major difference b/t these deeds is the [[[scope]]] of assurances (covenants for title) they give the grantee (buyer) and the grantee's successors regarding title being conveyed.

- S conveys the property to the B by a valid SWD (Special Warranty Deed).

• A SWD contains [[[fewer]]] and [[[more limited]]] assurances than a GWD

Back 10

• In a GENERAL WARRANTY DEED, the grantor (seller) covenants against title defects created both by himself AND by all prior title holders. The 6 usual covenants of title found in a GWD are:

(1) Covenant of SEISEN (Grantor has the interest he purports to convey);

(2) Covenant of RIGHT TO CONVEY (Grantor has the power and authority to make the grant, usually satisfied by title alone);

(3) Covenant AGAINST ENCUMBRANCES (Assuring that there are neither visible encumbrances nor invisible encumbrances against the title or interest conveyed);

(4) Covenant of QUIET ENJOYMENT (Grantee will not be disturbed in his possession or enjoyment of the property by 3rd party's lawful claim of title);

(5) Covenant of WARRANTY (Wherein the Grantor agrees to defend on behalf of the Grantee any lawful or reasonable claims of title by a 3P and to compensate the Grantee for any loss sustained by the claim of superior title);

(6) Covenant for FURTHER ASSURANCES (Grantor agrees to perform whatever acts are reasonably necessary to perfect the title conveyed if it turns out to be imperfect).

• In a SPECIAL WARRANTY DEED, the Grantor (seller) covenants ONLY THAT HE HIMSELF did not create title defects; he represents nothing about what prior owners might have done.

Front 11

• The covenant AGAINST ENCUMBRANCES (Assuring that there are neither visible encumbrances nor invisible encumbrances against the title or interest conveyed) includes mortgages and liens, but can also include easements.

• If the property is encumbered, the covenant against encumbrances is breached and a cause of action arises at the time of conveyance.

- Buyer might asset that the valid lien encumbering the property breaches the covenant against encumbrances.

- Seller would respond that the lien was recorded prior to his acquisition of title tot he house and Buyer is deemed to have notice of the lien.

• This covenant, however, is breaches even if the grantee (buyer) knew of the encumbrance.

- So even if Buyer is deemed to have notice, he could still seek damages for breach of this covenant.

- However, Seller would probably prevail in his argument that he did not create the title defect and therefore has not breached any covenant created by the SWD.

Back 11

- Buyer might argue that the sewer line and Seller's reservation of the right to use the line for the benefit of his adjacent land breaches the Covenant AGAINST ENCUMBRANCES.

- Buyer will probably not prevail in this basis - Buyer will probably be deemed to have waived any COA based on the existence of the sewer line at the time of contracting and at closing.

- Because Seller conveyed the property by valid SWD, Seller would also have a defense if the sewer line was installed by a prior owner of the property.

Front 12

- Buyer might also assert that Seller's connection of a newly acquired house to the sewer line, which exacerbated the overflow problem, breached the covenant of QUIET ENJOYMENT.

• Most court hold that any disturbance of possession suffices to constitute breach.

• Any alleged breach based on a breach after the time of closing will require the buyer to give notice of the claim to the seller.

- Seller would defend on the ground that Buyer knew of the sewer line and his right to use the line at the time of contracting and closing.

- Buyer would respond that this defense does not relieve Seller of any liability resulting from his connection of Seller's subsequently purchased house to the sewer line.

- Buyer will probably by able to recover from Seller any actual and consequential damages resulting from the Seller's connection of the subsequently purchased home to the sewer line.

Back 12

• The common law rule is that contracts of sale and deeds of real property carry no implied warranties of quality or fitness for the purpose intended. - However, a seller of existing land and buildings may be liable to the purchaser for defects in the improvements on several different theories:

• One theory is MISREPRESENTATION or FRAUD - this requires proof that the seller made a false statement of fact (oral or written) to the buyer, that the buyer relied on the statement, and that it materially affect the value of the property.

• Under this theory, the seller must have either known that the statement was false, or have made it negligently (without taking reasonable care to determine its truth).

Front 13

• A second theory is ACTIVE CONCEALMENT - the seller is liable, even without making any statement, if the seller took steps to conceal defects in the property.

• A third theory is FAILURE TO DISCLOSE - the seller is liable for failure to disclose if the following 3 factors are present (i) the seller knows or has reason to know of the defect; (ii) the defect is not apparent or obvious, and the seller realized the buyer is unlikely to discover it upon ordinary inspection; and (iii) the defect is serious and would probably cause the buyer to reconsider the purchase if it were know.

• Courts are more likely to impose liability on the seller if the property is a personal residence, the defect is dangerous, and if the seller personally created the defect or previously attempted to repair it and failed to do so.

• The FL Supreme Court has held that a seller of real property has an AFFIRMATIVE DUTY to disclose facts that materially affecting the value of the property that are not readily observable or known to a purchaser.

Back 13

- Buyer would argue that Seller is liable based on the defect in the improvements on the property - it is undisputable that sewage periodically overflowing into the house is a defect.

- There is no indication that the Seller made a false stmnt of fact regarding the sewer system - the k disclosed the existence of the sewer line and the deed expressly reserved to Seller the right to use the line for be benefit of Seller's adjacent land.

- There is also no indication that Seller engaged in active concealment by taking special steps to conceal the defect. Buyer, however, presumably viewed the property and entered the house before purchasing the property. Unless damage from sewage overflow was apparent, Buyer may be able to establish that Seller make repairs to the property to conceal the defect.

- If not, buyer would probably be able to establish failure to disclose by Seller.

- The house Buyer purchased is a used residential house owned, and previously occupied by Seller. Sewage periodically overflowed in the house and the problem existed since the initial installation of the line. B/c sewage only overflowed periodically, rather than continuously, the defect is not one that would be obvious or apparent, and Buyer would argue that it would not have been disclosed by ordinary inspection. Buyer would also argue that the defect is serious and would have caused him to reconsider the purchase if he had know about it.

Front 14

- Seller would raise as a defense the fact that the property was sold "as is."

• A general clause such as "property sold as is" is not sufficient to overcome a seller's liability for failure to disclose.


• Where a party is induced to enter into a transaction with another by the other person's fraud or misrepresentation, the transaction is VOIDABLE against the other party.

- Buyer could take action to RESCIND the agreement and seek restitution; - Buyer could also seek the DIFFERENCE b/t what he paid for the property and what the property is actually worth with the defect; - Or Buyer could seek the COST OF REPAIR to fix the defect.

Back 14

- If B is unable to rescind the purchase or does not want to rescind the purchase, B would seek to prevent S from connecting his new home to the line.

• The duration and extent of an easement, if created by written grant, will depend upon the language of the easement and the reasonable intent of the original parties. If the language used was general, the parties are assumed to have intended a scope that would reasonably serve the purposes of the grant and to have foreseen reasonable changes in the use of the dominate estate.

Front 15

 • The property and house subsequently purchased by Seller were not connected to the sewer line @ the time of the K and deed.

- The facts also do not indicate if this subsequently purchased property by S was “adjacent” to the property purchased by B.

- B could asset that the deed only reserved to S the right to use the sewer line for the benefit of the adjacent land owned by S at the time of the K and deed, and that S does not have the right to connect additional property to the line.

Back 15

- B would also note that at the time the parties contracted for the sale/purchase, the sewer line terminated in Seller’s adjacent lot.

- Seller would argue that the deed reserves A sewer line for the benefit of the adjacent land owned by S, without any limitation.

- The court will have to determine whether extension of the benefit of the easement to the additional property burdens Neighbor’s servient estate to a greater extent than was contemplated by the original parties.

Front 16

- B could file an action based on TRESPASS, which is available if the land is invaded by a tangible physical object that interferes with the right of excusive possession, or an action for PRIVATE NUISANCE b/c the trespass is continuous.

• To establish a prima facie case for TRESPASS TO LAND, the following elements must be proved: (1) an ACT of [[[physical invasion]]] of B’s real property by S; (2) INTENT on the S’s part to bring about a physical invasion on to B’s land; and (3) CAUSATION.

• The trespass may occur on the surface of the land, below the surface, or above it; and it is not necessary that the ∆ personally come on to the land.

Back 16

- Accordingly,  Buyer will be able to an act of physical invasion of this property by S.

- Because S connected his new home to the sewer line, there was an intent on his part to bring about a physical invasion of B’s land.

- To establish causation, the physical invasion of Buyer's property must have been legally caused by Seller's act or something set in motion thereby.

- Again, Seller’s intentional connection to the sewer line will establish this element.

- Although there is no requirement of damages, Buyer will be able to establish damages b/c sewage overflows into the house and the cost to fix the problem is significant.

Front 17

- In defense, Seller would argue that Buyer consented to the Seller’s act based on his reservation of right to use the sewer line.

- Buyer would respond that consent by mistake (where S caused the mistake or knows of the mistake and takes advantage of it) and consent induced by fraud (where S knew that sewage periodically overflowed in to the house even before connecting an additional house to the line) is NOT a defense.

Back 17

- Seller would also argue that if liable, he is only liable for damages attributable to his connection of the new house to the line, but is not liable for damages resulting from sewage from Buyer's house.

- If successful, Buyer could recover actual and incidental damages, but will have a duty to mitigate damages.

Front 18

Real Property – July 1996

→ If C comes to you seeking advice on potential legal grounds to prevent something = PL may seek an injunction against D.

Lot 95 Analysis: Equitable Servitudes – Create by written lang. in a deed setting forth restrictions, or incorps. by ref. the restrs. in the recorded plat, or created by oral reps., or a ct my imply a covenant, a Reciprocal Neg. Servitude, using GSD→ Gen. Scheme Doc. – If Dev. Intended to create a RNS, each parcel w/in the rec. play or gs is both a dom. and serv. estate→ the restrs. in plat or gs are mutually enforce. by each l/o w/in the dev.

Back 18

• The diff b/t a Cov@Law and an ES is that to enforce against remote parties, a Cov@Law req priv of estate and is enforce. at law, while an ES only req notice and in enforce. in equity.
• Each B w/in the dev is the intended benef. of the ben&burd that accomp. the restriction. Existance of a building scheme has been used to show an intention that the restrs imposed on several lots are appurtenant to every other lot included in the scheme.

Front 19

o Notice to purchaser of real estate is essential to enforce against him. Notice→ ARI: Actual- Oral rep; Inquiry- Satisfied if the restr is incorp in deed by ref to the rec. plat Inquiry- Accomps the GSD→ Dev’s intent can be inferred (seen) f/ the gen sch of dev w/in subdiv, and a purchaser would be on notice to inquire about any restrs
o T&C→ For the US to be enforc. against successors in title, intent and notice is req, and also that the servitude t&c the land= Makes dom estate more val & useful to benefitted party while restricting the rts of the serv property owner’s rts in conn. w/ his enjoyment of the prop.

Back 19

• If no evid that deed to lots incl the restr limiting the use of the lot to 1famRes, the O of any lot would appear to be bound by an implied neg servitude.
• Dev’s intent to restr the dev to 1FamRes is shown by his oral reps and may be implied f/ the rec of the plat prior to sale of lots
• Successor in title f/ D and orig purchasers would be on inquiry notice and, the restr that the lots can be used for 1FRs T&C the land

Front 20

A ct in equity won’t enforce an ES if it can’t do so in good conscious so do…
• Unclean hands: Party seeking enforce of the restr while viol sim restr on own land
• Party have acquiesced to viols of the servitude or that they’ve otherwised abandoned the serv
• D (party wanting restr lifted) might argue changed conditions have rendered the restrs unenforceable.

Back 20

Fact that zonging permits use D wants to make of prop doesn’t necess render the restr invalid…
• If 1) parcel loc on outer edge of dev and 2) D shows that area next to lots has changed so dramatically that the restr hinders alienability→ then ct may lift restr
• But if evid of “entering wedge”→ Lifing restr on 1 parcel will produce CC for other parcels, then ct will likely not lift it.

Front 21

5 Acre Area Analysis: The SOF req. that any conveyance of land, incl. an easement interest, of duration > 1 yr. must be in writing.
• So if a party seeks to create and E orally, the result will be a creating of a license.

Back 21

Oral representations by Dev. To Buyers @ time lots were being sold may constitute an inducement to Bs to purch. Lots → and Bs may argue that a License has been granted pursuant to a K b/t Bs and Dev. And a termination of Bs’ privilege constitutes a breach of K.

Property 1996 (finish...)

Front 22

REAL PROPERTY - JULY 2007

(1) Sale to Buyer: General K principals require that there be MUTUAL ASSENT (offer and acceptance), CONSIDERATION (or some substitute therefore), and NO DEFENSE to creation of the K, and that the K contain the ESSENTIAL TERMS (description, parties and price). The SOF requires that an agreement for the sale of land must (1) Be in writing; (2) ID the parties to be charged; (3) ID the subject matter of the agreement; and (4) Contain the signatures of all parties to be charged. The writing need not be a formal K.

Back 22

It appears that the general K principles were satisfied – [Facts indicating offer and acceptance and consideration]. With regard to the SOF, although the initial agreement between S and B was oral and would not have been enforceable, there was a subsequent writing. [Facts that the receipt is a sufficient writing under the SOF]. The receipt is probably adequate to enforce the agreement to sell the property.

Front 23

If a K is held not to satisfy the SOF, it may be unenforceable at the option of the party to be charged. However, there are some exceptions. PART PERFORMANCE may take the K out of the SOF. Generally, Part Performance requires at lease 2 of the following: Payment (in whole or in part), Possession, and/or Valuable Improvements. In this case, B [facts].

Back 23

B could also argue PROMISSORY ESTOPPEL in order to avoid a SOF problem. B would argue that it would be inequitable to allow the SOF to defeat his claim. A promise is enforceable to the extent necessary to prevent injustice if the promisor should reasonably expect to induce action or forbearance or a definite and substantial character, and such action or forbearance is in fact induced. B can establish that he changed his position in reliance on an agreement with S. B [Facts].

Front 24

While the installment land sale K is enforceable, the facts state that S and B agreed that S would not deliver a deed to B until the final payment was made. In Florida, real estate may only be conveyed by a written instrument, signed in the presence of two subscribing witnesses. The receipt was not signed by any subscribing Ws and is therefore not valid as an actual conveyance of the property.

Back 24

An implied warranty in every land sale K is that at closing the seller will provide the buyer with MARKETABLE TITLE. Marketable title is title reasonably free from doubt. It need not be a perfect title, but the title must be free from questions that might present an unreasonable risk of litigation. If the seller has agreed to furnish title “at date of closing,” then the buyer cannot rescind prior to that date on the grounds that the seller’s title is not marketable. Where an installment land K is used, the seller’s obligation is to furnish marketable title when delivery is to occur, e.g., when the buyer has made his final payment. Therefore, a buyer generally cannot withhold payments or seek other remedies such as rescission on grounds that the seller’s title is unmarketable prior to the date of promised delivery. However, the buyer might get rescissionary relief before the date of delivery by showing that the seller cannot possibly cure the defects in time. Or, under compelling circumstances, a court might require the seller to quiet title during the K period. Generally, it title is not marketable, the buyer can rescind, sue for damages for breach, get specific performance with an abatement of the purchase price, or, in some jurisdictions, require the seller to quiet title.

Front 25

If the agreement to sell is enforceable, Seller breached the K when he signed a deed conveying the property to Investor. Buyer (or his estate) may bring action against Seller for breach of K. The standard measure of DAMAGES for breach of a land sale K is the difference between the K price and the FMV of the land. And may be able to recover for any expenses, loss he sustained that were the result of the breach by S. B will have an obligation to mitigate his damages.

Back 25

SPECIFIC PERFORMANCE (SP) is available if the remedy at law is inadequate, enforcement is feasible, and there is mutuality of remedy. Here, land is involved. Therefore, the remedy at law (damages) would be inadequate. Defenses available to S in an action for SP would include sale to a BFP. If it is determined that Investor (I) is a BFP and that (I) is the owner of the property by virtue of his recorded deed, SP would not be available. If it is determined that (I) is not a BFP, enforcement would be feasible- a court would order S to tender a deed to B.

Front 26

(2) Sale to Investor: FL is a PURE NOTICE state, protecting a subsequent BFP who pays value with no notice of a prior conveyance. To be BFP, the subsequent party must (i) give value, and have (ii) no actual or constructive notice of the prior conveyance at the time of his transaction. In Florida, there is a presumption of lack of notice of an unrecorded instrument by a subsequent purchaser. The burden of proving actual notice is on the claimant under the unrecorded instrument.

Back 26

Real Property - July 2007 (finish...)