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117 Cards in this Set
- Front
- Back
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Transfers of Land:
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A. Land Contracts
B. Title Assurance |
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A. Land Contracts:
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1. Brokers
2. Contract For Sale 3. The Deed |
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1. Brokers:
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& the agents that work under them owe their clients a fiduciary duty
a. A listings broker is the seller's agent & owes a duty of loyalty, fair dealing, & good faith to the seller. -The broker must diligently pursue a good faith purchaser |
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b. Broker's Duty to Disclose:
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May have a duty to disclose latent defects: Facts that would materially alter the property's value or desirability, when the broker, using reasonable diligence & making a reasonable inspection, discovered them, even though the purchaser did neither of those things
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Caveat Emptor:
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"Let the Buyer Beware":
-Still rule in many states. However, even in these states a broker can be held liable for intentional misrepresentation, negligent misrepresentation, & few states for innocent misrepresentations |
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Intentional Misrepresentations:
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Affirmative acts to mislead the buyer
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Negligent Misrepresentations:
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Knows or should know of matters underlying a false statement
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Latent Defects:
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Those not discoverable by the buyer upon reasonable inspection
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Material Defects:
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One that significantly affects the value
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Residential Property:
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If Caveat Emptor not the rule, Broker must disclose Latent & Material Defects for residential property
-Owes fewer duties to commercial property |
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2. Contract For Sale:
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Must identify parties, sale price, describe the property to be conveyed, set the closing date, arrange payment
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4 General Steps to Selling Real Estate:
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(1) Listing
(2) Negotiation & Offer (3) Transaction Process (4) Closing |
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Statute of Frauds:
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Sought to make people more secure in their property & their contracts by making deceitful claims unenforceable
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a. Elements of Statute of Frauds:
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(1) Must be in writing
(2) Signed by the party to be bound (3) Describe or at least identify the property (4) State a price: -Some states will infer a reasonable price if none is added -Some states require all material terms to be listed |
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Uniform Land Act 2-203:
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The parties may enter into a binding contract w/o having agreed on the price
-However, for it to be enforceable the parties must refer to a way to determine the price [Fair Market Price] |
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b. Exceptions to Statute of Frauds:
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The moving party must convince the court that an oral contract exists & must persuade the court to excuse the party's failure to produce a writing
(1) Part Performance (2) Estoppel |
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(1) Part Performance:
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Allows for the specific enforcement of oral agreements when a particular act or acts has been performed by 1 of the contracting parties
-Taking possession after payment, or making substantial improvements -This satisfies the SoF b/c it gives clear intent of the parties & prevents irreparable injury |
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(2) Estoppel:
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When unconscionable injury would result from denying enforcement of the oral contract after 1 party has been induced by the other, to change his position in reliance on the contract
-Also, check for unjust enrichment -This theory prevents unconscionable results in law or equity |
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Estoppel Elements:
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(a) A Certain & Definite Oral Contract
(b) Acts that refer to, result from, or are made in pursuance of the agreement, & (3) A refusal to execute the contract would operate as a fraud on, & place the moving party in, a situation not remediable at law |
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Negative Benefit:
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1 Party should not be able to induce another to alter their position in reliance, but then back out b/c the agreement was not written
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Affirmative Benefit:
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1 Party should not be able to unjustly enrich themselves by backing out of an agreement b/c it wasn't in writing
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c. Marketable Title:
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A title free from reasonable doubt as to the title's reliability
-A reasonable person, knowing all the facts, & the legal consequences flowing from those facts, would be willing to accept title -Generally, unmarketable title would be 1 that would subject the person to real risk of litigation |
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Minor Encumbrances:
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If the seller does not insure that the title is marketable before the closing date the purchaser may rescind (only allowed before closing)
-Unlikely occurrences do not make a title unmarketable Ex: Concurrent or Future Estates, Easements, Real Covenants or Equitable Servitudes, Leases, Mineral Rights, Options, Flaws in Deed Records, Erroneous Acreage Designations, & Adverse Possession |
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Disclosed Encumbrances:
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-Purchaser can usually rescind any of above if NOT disclosed
-Not an exhaustive list -Failure to disclose zoning laws, bldg codes, & other governmental regulations usually will not make a title unmarketable |
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Marketable Title:
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-Adverse Possession can equal marketable title
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Unmarketable Title:
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-"Landlocked" property is usually unmarketable
-To render title unmarketable, a defect must be of substantial character & 1 may suffer injury -Mere possibility of a defect is insufficient |
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Merchantable Title:
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Cannot be conveyed when there are violations of restrictive covenants & city zoning ordinances
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Equitable Conversion:
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Majority Rule: The purchaser is the equitable owner of the property
-The risk of loss during the executory period is on the purchase Minority Rule: The ownership interests retained by the seller is in the sales contract itself (which is considered to be personal property) -While the purchaser holds ownership interest in the actual property |
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(d) Duty to disclose Defects:
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If a condition is created by the seller, known by the seller, is unlikely to be discovered by a careful & prudent buyer, & impairs the value of the contract, then nondisclosure of this condition represents a basis for rescission under equity
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Fraudulent Misrepresentation Elements:
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(1) A representation of a material fact
(2) Made falsely (3) With the intent to mislead the purchaser into reliance on the misrepresentation (4) Which the purchaser relies on, & (5) Is harmed |
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Public Policy:
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The rule of Caveat Emptor (Buyer Beware) applies unless the defect would not be found by reasonable, prudent person otherwise is unjust enrichment
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Seller Duty:
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If the seller of a house knows of facts materially affecting the value of the property which are not readily observable & are not known by the buyer, the seller is under a duty to disclose them to the buyer
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Misfeasance:
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False statement or omission
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Nonfeasance:
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Failure to tell
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Implied Warranty of Quality:
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Permits a purchaser to recover from the contractor, developer, or other commercial vendor for defective construction not done in a workmanlike quality
-Exception to Caveat Emptor -Does NOT apply to used houses, only new or substantially remodeled houses |
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Privity:
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Purchasers of new homes or developments are said to be in privity w/ the original owners, & thus allowed relief
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Remedies for Breach of the Sales Contract:
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(1) Specific Performance of the sale & purchase
(2) Nominal Damages of out of pocket expenses (3) Actual Damages of the difference b/w the fair market value of the property at the time of the breach & the contract's sale price (4) Foreseeable Consequential Damages (5) Liquidated Damages |
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Liquidated Damages:
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Prevailing party may receive this if the amt. of damages proves too hard to calculate & the award is reasonable
-Most of the time this will equal the earnest money deposit |
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3. The Deed:
(Deed v. Property) |
Conceptually, title is not a piece of paper, whereas a deed is
-deed transfers title from 1 party to another |
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Warranty:
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Guarantee of promise
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Chain of Title:
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Proves that what you are getting is the actual title, that is unbroken
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a. Warranties of Title:
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(1) Types of Deeds
(2) 6 Express Warranties (3) Rules |
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(1) Types of Deeds:
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(a) General Warranty Deed
(b) Special Warranty Deed (c) Quitclaim Deed |
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(a) General Warranty Deed:
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Warrants title against all defects in title, whether they arose before or after the grantor took title
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(b) Special Warranty Deed:
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Contains warranties only against the grantor's own acts but not the acts of others
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(c) Quitclaim Deed:
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Contains no warranties
-It merely conveys w/e title the grantor has |
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(2) 6 Express Warranties:
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Statute of Limitations begins to run on present warranties at the time the deed is signed, the future covenants begin at breach of that warranty
(a) Covenant of Seisin (b) Covenant of Right to Convey (c) Covenant Against Encumbrances (d) Covenant of General Warranty (e) Covenant of Quiet Enjoyment (f) Covenant of Further Assurances |
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(a) Covenant of Seisin:
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The grantor warrants that he owns the estate that he purports to convey (Present)
-The grantor in this covenant does NOT warrant that no encumbrances affect the interest involved |
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(b) Covenant of Right to Convey:
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The grantor warrants that he has the right to convey the property, whether or not he owns it (Present)
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(c) Covenant Against Encumbrances:
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Grantor warrants that there are NO encumbrances on the property
-These include: mortgages, liens, easements, & covenants or any other specifically mentioned in the deed (Present) |
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(d) Covenant of General Warranty:
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Grantor warrants that he will defend against lawful claims & will compensate the grantee for any loss that the grantee may sustain by assertion of superior title (Future)
-Broader scope |
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(e) Covenant of Quiet Enjoyment:
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Grantor warrants that the grantee will NOT be disturbed in possession & enjoyment of the property by assertion of superior title (Future)
-Pretty much the same as the covenant of general warranty above |
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(f) Covenant of Further Assurances:
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Grantor promises that he will execute any other documents required to perfect the title conveyed & that he will defend the grantees title in any litigation that may ensue from the defect that existed at the time title was passed (Future)
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Show Superior Title:
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In all future warranties, a claim cannot be brought until a 3rd party has acted
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Damages:
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A grantee can receive monetary damages from the grantor for the breach of a deed covenant
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(3) Rules:
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The mere existence of paramount title does NOT constitute a breach of the covenant of quiet enjoyment
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Latent Violations of Land Use Regulations:
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That do not appear on the land records, that are unknown to the seller of property, that have NOT been acted upon by gov. officials at the time the deed was executed, & that have not ripened into an interest that can be recorded on land records DO NOT constitute an encumberance for the purpose of the deed warranty
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The Court Will NOT Expand Warranties:
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Against any latent violations of statute or gov. regulations that may arise, however, the original drafters of a contract may include any such warranties
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English Rule:
(Minority) |
The covenant of seisin runs w/ the land, & is broken the instant the conveyance is delivered, & then becomes a chose in action held by the covenantee in the deed, & that a deed by said 1st conveyance operates as an assignment of such chose in action to a remote grantee
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American Rule:
(Majority) |
Covenant of seisin does NOT run w/ the land
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(4) Estoppel By Deed:
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If a person conveys property in which they do NOT have legal title (perhaps waiting for it in the future) legal title does NOT go to the purchaser until the seller gets the title
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(b) Delivery:
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A deed transfers title only when:
(1) The grantor intends to presently convey an interest in the property, (2) The grantor delivers a deed to the grantee, & (3) The grantee accepts the deed |
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Immediate Delivery:
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2 people handing the deed to each other
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Delivery in Escrow:
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An agent, or 3rd person, makes delivery
-Someone who holds the money & the deed until all conditions are satisfied -Irrevocable once the deed or money is in the escrow agents hands |
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(c) The Mortgage:
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Explains the rights & responsibilities of the parties outside of the financial terms
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Mortgage Terms:
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(1) Note
(2) Mortgage (3) Equity (4) Promissory Note (5) Redemption (6) Foreclosure (7) Deed of Trust |
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(1) Note:
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An unconditional written promise, signed by the maker, to pay absolutely & in any event a certain sum of $ either to, or to the order of, the bearer of a designated person
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(2) Mortgage:
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A conveyance of title or lien against property that is given as a security for the payment of a debt or performance of a duty & that will become void upon payment or performance according to the stipulated terms
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(3) Equity:
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Fairness & impartiality
-Evenhanded dealings as they pertain to redemption |
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(4) Promissory Note:
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Financial party of the house purchase
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(5) Redemption:
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The act of taking back by the seller from the buyer a thing which had been sold subject to the right of repurchase
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(6) Foreclosure:
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A legal proceeding to terminate a mortgagor's interest in property, instituted by the lender wither to gain title or to force a sale in order to satisfy the unpaid debt secured by the property
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(7) Deed of Trust:
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A deed conveying title to real property to a trustee as security until the grantor repays a loan
-The trustee is given the power to sell the land w/o going to ct. if the borrower defaults |
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2 Theories of Titles under Mortgages:
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(1) Title Theory
(2) Lien Theory |
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(1) Title Theory:
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Mortgagor holds title
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(2) Lien Theory:
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Mortgagee holds legal title while the mortgagor holds equitable title
(Majority) |
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B. Title Assurance:
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1. Recording Systems
2. Title Insurance |
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1. Recording Systems:
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a. Types of Constructive Notice
b. Indexes c. Types of Recording Acts d. Chain of Title e. Persons Protected by the Recording Systems f. Inquiry Notice g. Marketable Title Acts |
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Recording Systems:
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Do NOT affect the validity of a deed, establishes a public record of land titles, preserves in a secure place important documents, & protects purchasers for value & lien creditors against prior unrecorded interests
-As a general rule record title holders prevail over legal title holders |
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a. Types of Constructive Notice:
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(1) Actual
(2) Record (3) Inquiry |
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(1) Actual Notice:
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Notice which has been expressly given by which knowledge of a fact or been brought home to a party directly
-It is opposed to constructive notice |
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(2) Record Notice:
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Recorded
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(3) Inquiry Notice:
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A purchaser will be required by law to make reasonable inquires under specified situations
-The requirement for reasonable inquire may be generated from quitclaim deeds, possession, from the neighborhood, or from unrecorded instruments |
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Wild Deeds:
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A recorded deed that is NOT in the chain of title
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b. Indexes:
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(1) Tract Index
(2) Grantor-Grantee Index (3) Rules |
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(1) Tract Index:
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Indexing documents by a parcel identification number assigned to a particular tract
-Not used in most states |
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(2) Grantor-Grantee Index:
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A bilateral index for both the grantor & grantee to which 1 could follow the conveyance of land by either name
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(3) Rules for Indexes:
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(a) Instrument
(b) Mother Hubbard Clause (c) Absence of Statutory Provision (d) Idem Sonans |
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(a) Instrument:
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Describes the property to be conveyed, as "all of the grantor's property in a certain property" is NOT effective against subsequent purchasers & mortgagees, unless they have actual knowledge of the transfer
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(b) Mother Hubbard Clause:
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"All of my land in X"
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(c) Absence of Statutory Provision:
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An index is NOT an essential part of the record
-A purchaser is charged w/ constructive notice of a record even though there is NO official index which will direct him to it |
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(d) Idem Sonans:
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A legal doctrine preventing a variant spelling of a name in a document from voiding the document if the misspelling is pronounced the same way as the true spelling
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c. Types of Recording Acts:
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Recording statutes: set up to protect the bona fide purchaser
-Purchasers & mortgagees are covered under these statutes |
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3 Types of Recording Acts:
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(1) Race
(2) Notice (3) Race/Notice |
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(1) Race:
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"First in time, First in right" by recorded deed
-Priority b/w successive grantees is determined solely y who records 1st -Notice is irrelevant -The party that records 1st prevails over party who subsequently records -Can leas to inequitable results |
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(2) Notice:
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A subsequent bona fide purchaser prevails over a prior grantee who fails to record
-The subsequent purchaser wins under a notice statute if he has NO actual or constructive notice or a prior claim at the time of conveyance |
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(3) Race/Notice:
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Operates just like notice statutes except they Protect a subsequent bona fide purchaser only if he records before the prior grantee
-The subsequent purchaser is protected if he is w/o notice & wins the race to record title -This notice must NOT be known at the time of purchase -It can be known at the time of recording |
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Rule of Recording Acts:
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-An improperly acknowledged deed does NOT qualify for recording, & its recording does NOT represent constructive notice to subsequent purchasers
-Quitclaim Deed: A deed that conveys a grantor's complete interest or claim in certain real property but that neither warrants nor professes that the title is valid |
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d. Chain of Title:
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(1) The ownership history of a piece of land, from its 1st owner to the present one
(2) The period of time for which records must be searched & the documents the must be examined w/in the time period -The series of documents affecting ownership of, rights to, & encumbrances on a parcel of land linked together in some manner |
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Chain of Title Rules:
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(a) No Name Deed
(b) Record From Stranger (c) Restrictions |
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(a) No Name Deed:
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A deed that does NOT name a grantee is a nullity & wholly inoperative as a conveyance, until the name of the grantee is legally inserted
-W/ the express or implied authority of the grantor, the grantee may insert his name in legal compliance |
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(b) Record From Stranger:
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A record of a deed from an apparent stranger to title does NOT represent notice to a prior unrecorded conveyance from the same grantor
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(c) Restrictions:
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A grantee is bound by restrictions contained in deeds to its neighbors from a common grantor when it took w/o knowledge of the restrictions under a deed which did not mention them
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e. Persons Protected by the Recording System:
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The statutes vary from state to state in who is protected, so 1 will need to be certain who is being covered, Purchaser or Donee
(1) Executory Stages (2) Bona Fide Purchaser (3) Constructive Notice (4) Creditors |
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(1) Executory Stages:
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During the executory stages of a real estate contract, the buyer cannot ignore actual notice of an outstanding unrecorded interest
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(2) Bona Fide Purchaser:
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Person who does NOT know of a seller's wrongful possession of property
-Must have a good faith belief that the seller has title & must pay valuable consideration for the property -Afforded protection against the rule that the seller can transfer only the title he has -May take good title from a seller w/ voidable title |
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(3) Constructive Notice:
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CANNOT operate to defeat a bona fide purchaser for value before the full purchase price is paid for property
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(4) Creditors:
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Some courts have interpreted some recording statutes to protect only creditors who have established a lien, such as by attachment or judgment
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f. Inquiry Notice:
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A purchaser will be required by law to make reasonable inquiries under specified situations
-May be generated from quitclaim deeds, possession, from the neighborhood, or from unrecorded instruments -Incumbent upon the 2nd party to ascertain through diligent inquiry the contents of the earlier deed & the interest conveyed therein |
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Chain of Title:
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Discovered by the investigator is constructive notive of all other deeds which were referred to in the deed discovered including an unrecorded plat in the deed discovered
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After a Contract to Convey Legal Title to Real Property Has Been Executed:
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Subsequent successors to the legal title take that title subject to all equitable interest of which they have either actual or constructive notice
-Possession is constructive notice of an interest in property |
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g. Marketable Title Acts:
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The purpose is to limit title searches to a reasonable period, typically the last 30/40 yrs
-All claimants of interest in land, to be safe, must file a notice of claim every 30-40 yrs after the recording of their instrument of acquisition |
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Example of A Marketable Title Act:
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"A title to Black Acre undergoes an automatic cleansing whenever 40 years elapse from the recording of a transaction that is capable of serving as a root of title."
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2. Title Insurance:
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Developed b/c of the inadequacies & inefficiencies of the public records in protecting private titles
-Opinion of the insurer concerning the validity of the title, backed by an agreement to make that opinion good if it should turn out mistaken & a loss results as a consequence -Guarantees that the insurance company has searched the public records & insures against any defects in the public records |
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a. Title Insurance Excludes:
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Losses arising from gov. regulations affecting use, occupancy, or enjoyment of land, unless notice of enforcement or violation is recorded in the public records
-Also, excludes claims of persons in possession not shown by public records, unrecorded easements, implied easements, & easements arising from prescription, & defects that would be revealed by a survey or inspection |
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b. Title Company's Liability:
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Limited to the police & that the company is NOT liabel in tort for negligence in searching records
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c. One Can Hold Perfect Title To Land That Is Valueless:
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One can have marketable title to land while the land itself is unmarketable
-The owner's inability to make economic use of the land due to the sub-divider's violations of law does NOT render the title defective or unmarketable w/in the terms of the insurance policy |
