Land Sale Contracts

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Land Sale Contracts (General Rule)

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The K for a conveyance of an interest in real estate typically governs the agreement until the time of closing, at which time the deed becomes the operative document governing the land transfer. The interim period is generally referred to as the escrow period where K law principles control. K law governs a contract for the sale of an interest in land.

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Statute of Frauds (Land Sale K)

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The Statute of Frauds requires a writing for a transfer of an interest in real property. The writing must be signed by the party to be charged and must include the following essential terms: (1) description of the property; (2) identify the parties; (3) price; and (4) any conditions of price or payment if agreed upon.

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SoF: Part Performance Exception (Land Sale K)

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The doctrine of part performance may be used to enforce an otherwise invalid oral K of sale, provided the acts of part performance unequivocally prove the existence of the K. A showing of some combination the following must be made: (a) payment of all/part of the purchase price; (b) taking possession; and (c) making substantial improvements.

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SoF: Promissory Estoppel Exception (Land Sale K)

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Modernly, equitable and promissory estoppel may be used to prove an oral contract for the sale of land. Equitable estoppel is based on an act or a representation. Promissory estoppel is based on a promise.

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Equitable Conversion

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When a land sale K is formed, at that point there is a bifurcation of title. Equitable title passes to the buyer upon formation and legal title remains with the seller until closing. Risk of loss follows equitable title and the risk of loss is on the buyer on execution of a binding K for the sale of real property.

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Marketable Title

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All Ks for the sale of real property include an implied promise to convey marketable title. Marketable title is not perfect title, rather it is title free from reasonable doubt about the seller’s ability to convey what he purports to convey. Title is not reasonably free from doubt if it contains any of the following defects:

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(1) defects in the chain of title; (2) encumbrances; (3) encroachments; and (4) zoning restriction violations.

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Time of Performance (Land Sale K)

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Generally, a K will specify the closing date and it is presumed that time is not of the essence unless the K states it or facts make clear parties intend time is of the essence. B must notify S of any defect in title and allow S reasonable time to cure (even if closing is postponed). If a party fails to perform, generally is no problem so long as performance is rendered w/in a reasonable time.

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Merger Doctrine (Land Sale K)

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Upon closing, the contract merges into the deed, all contract provisions are extinguished, at which time the deed becomes to operative document governing the land transfer. The buyer must sue on the deed based on what type of deed it is.

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Remedies for Breach (Land Sale K)

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The nonbreaching party to a land sale contract can sue for damages or specific performance. Specific performance is usually the preferred remedy because land is unique.

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Damages (Land Sale K)

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Difference between the contract price and the market value on the date of the breach

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Specific Performance

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A permanent injunction in contract where the court orders the defendant to perform on the contract as promised. The following six essential requirements must be met: (1) a valid contract; (2) contract conditions are satisfied; (3) inadequate legal remedy; (4) mutuality of performance; (5) feasibility of enforcement; and (6) no defenses.

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Types of Deeds

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There are three types of deeds: (1) quitclaim; (2) statutory special warranty deed; and (3) general warranty deed.

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Quitclaim Deed

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Releases whatever interest the grantor has (no covenants of title are implied or included)

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Statutory Special Warranty Deed

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Some states enforce promises by statute where the grantor promises (on behalf of himself only) that he hasn’t conveyed the property to others and that the estate is free from encumbrances

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General Warranty Deed

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Warrant against all defects in title and typically contains six covenants for title (aside from any additional covenants made between the parties). Three of the covenants are present and three are future.

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Covenants of Title

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There are two categories of covenants of title: present covenants and future covenants. A present covenant is breached at the time of sale. A future covenant runs with the land and breached, if ever, at the time the grantee is disturbed in possession.

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Present Covenants (Three types)

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A present covenant is breached at the time of sale and there are three. (1) Seisen: Grantor warrants he owns what he purports to own. (2) Right to Convey: Grantor warrants he has the power to make the conveyance. (3) Against Encumbrances: Grantor warrants there are no mortgages, liens, easements, or use restrictions on the land.

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Future Covenants (Three Types)

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A future covenant runs with the land and breached, if ever, at the time the grantee is disturbed in possession and there are three types. (1) Warranty of Title: Grantor promises to defend the grantee should there be any lawful claims of title asserted by 3rd parties. (2) Quiet Enjoyment: Grantor promises grantee he won’t be disturbed in possession by any 3rd parties’ lawful claims of title. (3) Further Assurances: Grantor will whatever future acts are reasonably necessary to perfect title.

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Deeds (General Rule)

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A deed is a document that serves to pass legal title from the grantor to the grantee. The requirements for a valid conveyance are: (1) a valid deed; (2) delivery of the deed; and (3) acceptance of the deed.

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Formality Requirements (Deeds)

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In order to satisfy the formalities of the Statute of Frauds, a deed must be in writing, signed by the grantor, a present intent to transfer, and an adequate description of the parties and land.

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Delivery (Deeds)

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Delivery exists if the grantor has the present intent that the property should transfer to the grantee. EE may be brought in to rebut presumption of present intent. Grantor will do one of three things with the deed: (1) physical transfer of the deed; (2) retain the deed, which creates a rebuttable presumption of no delivery; and (3) hand the deed to a 3rd party to effectuate delivery.

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Acceptance (Deeds)

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Acceptance is presumed if the conveyance is beneficial to the grantee (we don’t need proof because its presumed. However, this allows the grantee to refuse to accept. If the grantee refuses to accept the conveyance, which will negate the conveyance.