Management 3540 Test 4

Front 1

I. General Terms
A. Security Interest

Back 1

Interest in personal property or fixtures which secures payment or performance of an obligation

Front 2

I. General Terms
B. Fixtures

Back 2

Personal property permanently attached to real estate

Front 3

I. General Terms
C. Collateral

Back 3

Property subject to a security interest

Front 4

I. General Terms
D. Debtor

Back 4

Party owing money or an obligation secured by the security interest

Front 5

I. General Terms
E. Secured Party

Back 5

Person who holds (owns) security interest - usually promissory note (holder of notes has security interest)

Front 6

I. General Terms
F. Financing Statement

Back 6

Notice of security interest filed with a government office

Front 7

I. General Terms
G. Lien

Back 7

1. Right to sell property on default
2. Examples: mortgage, some judgments and security

artisan's lien: won't give back car at auto shop if you don't pay

Front 8

II. Types of Collateral Governed Under Article 9 of UCC
A. Goods

Back 8

Things tangible and moveable, or fixtures

Front 9

II. Types of Collateral Governed Under Article 9 of UCC
B. Quasi Tangibles

Back 9

Paper (instruments) which in themselves evidence a right (e.g., negotiable instruments

Ex. stock certificates --> transfer ownership rights

Front 10

II. Types of Collateral Governed Under Article 9 of UCC
C. Intangibles

Back 10

Property with no aspect of physical existence
1. Accounts receivable "putting on bill" at County Store
2. Goodwill of business right to use name

Front 11

II. Types of Collateral Governed Under Article 9 of UCC
D. Art. 9 - When Inapplicable

Back 11

Article 9 regulating security intrests does not apply to real estate OR to perfection (file application w/ title) of security interests in motor vehicles

Front 12

III. Creating a Security Interest by Attachment - Three Requirements

Back 12

A. Written security agreement (or possession of the collateral)
1. With language transferring a security interest in collateral
2. Signed by debtor (enforced against debtor)
3. Containing a description of collateral (attachment makes enforceable between me and you (specific))
4. EXCEPTION: no writing required if the secured party takes possession of the collateral
B. The secured party gives value (past or present consideration)(so want perfect)
C. Debtor has rights in the collateral (usually own it or have right to use other's stuff)(can't give brother's computer unless given right)

Front 13

IV. Perfecting a Security Interest
A. Perfection Defined

Back 13

Perfection is the process to make the security interest enforeceable against third parties (parties other than the secured party and the debtor) who take a later interest in the collateral

Front 14

IV. Perfecting a Security Interest
B. Three ways to perfect a security interest

Back 14

1. By possession
a. Common law pledge - ex. take friends iPod (attahced and perfected)
b. Pawn shop
2. By attachment of security interest - if the holder has a purchase, money, security, interest (PMSI) in consumer goods (for non-business use, ex. refrigerator for house), other than motor vehicles and fixtures

Loan money or secure credit used to buy collateral

Front 15

V. Financing Statements - Public Notice of Security Interest

Back 15

A. Contents
B. When required
Required mehtod of perfecting if no possession of collateral and the security interest is not a PMSI in consumer goods
C. Where to file
Generally, the Secretary of State's office

Front 16

IV. Perfecting a Security Interest
A. Contents

Back 16

1. Names and address of the debtor
2. Name and address of the secured party
3. Description of collateral (type of collateral enough - puts public on notice)

Front 17

VI. Floating Liens - A Security Agreement In:
A. Proceeds

Back 17

1. Whatever is received by the debtor in exchange for transferred collateral
2. Example: the debtor is granting the lender a security interest in proceeds. Rural banker and hog farmer exchange beans for hog feed, now have a security interest in hog feed.

Front 18

VI. Floating Liens - A Security Agreement In:
B. Future Advances

Back 18

1. Loans (advances) to be made by a secured party in the future, that is some time after the promissory note is signed (collateral is security for line of credit)
2. Example: this S.A. Covers: --> *Lien floats to covere new advance

Front 19

VI. Floating Liens - A Security Agreement In:
C. After acquired property

Back 19

1. Property of a type similiar to the collateral acquired by the debtor after the execution (signing) of the security agreement
2. Example: inventory --> loan money to finance inventory --> you know it will be sold

Front 20

VII. Priorities

Back 20

A. Buyer of goods in the ordinary course of business
B. Purchase Money Security Interest
C. Secondhand purchaser of consumer goods
D. First to Perfect or Become Lien Creditor
E. First to attach if no one perfected

Front 21

VII. Priorities
A. Buyer of goods in the ordinary course of business

Back 21

Takes free of security interests in seller's inventory

Front 22

VII. Priorities
B. Purchase Money Security Interest

Back 22

A non-inventory PMSI if perfected within ten days of attachment has first priority - priority date relates back to time of attachments to receive priority over other perfected secured parties

Front 23

VII. Priorities
C. Secondhand purchaser of consumer goods

Back 23

Takes free of security interest perfected by attachment

Garage sale rule

Front 24

VII. Priorities
D. First to Perfect or Become Lien Creditor

Back 24

1. Perfection of a security interest in any of the three ways - possession, attachment, or filing
2. Lien Creditor
a. Someone with judgement and execution (posting notice) lien
b. Trustee in bankruptcy

Front 25

VIII. Rights and Duties of Parties Upon Default

Back 25

A. Ignore the security interest
B. Repossession
C. Repossession Sale
D. Retaining Collateral

Front 26

VIII. Rights and Duties of Parties Upon Default
A. Ignore the security interest

Back 26

A secured party may obtain a judgement based upon the underlying obligation rather than enforcing teh security interest

Front 27

VIII. Rights and Duties of Parties Upon Default
B. Repossession

Back 27

1. A secured party may take possession of collateral convered by a security agreement
2. No breech of peace is allowed when repossesing collateral
3. Example

Front 28

VIII. Rights and Duties of Parties Upon Default
C. Repossession Sale

Back 28

Secured parties may dispose of collateral and apply the proceeds to the obligation

Front 29

VIII. Rights and Duties of Parties Upon Default
D. Retaining Collateral

Back 29

A secured party may sometimes keep the collateral as satisfaction (payment in full) of the obligation

Front 30

IX. Effect of Disposition of Collateral at a Repossession Sale

Back 30

A. Transfer of Good Title
B. Order of distribution of proceeds

Front 31

IX. Effect of Disposition of Collateral at a Repossession Sale
A. Transfer of Good Title

Back 31

A purchaser at a valid repossession sale takes title free of ownership claims of the debtor and the secured party

Front 32

IX. Effect of Disposition of Collateral at a Repossession Sale
B. Order of distribution of proceeds

Back 32

1. Expenses of the repossession sale (possessing, holding and preparing collateral for sale, including attorney fees)
2. Satisfaction of debt of 1st lien holder (perfected within 10 days)
3. Subordinate (lower priority) security interest holders (who gave written notification)(2nd lien, then 3rd lien, etc.)
4. Debtor is entitled to any surplus. (Usually a debtor is responsible for a deficiency)

Front 33

X. Termination

Back 33

When the debt is paid or other obligation satisfied, the secured party files a termination statement in the office where the original financing statement was filed.

Front 34

I. Process of Sale of Land
A. Marketing and listing agreements

Back 34

1. A listing agreement is an agreement with a realtor to be the seller's agent for the purpose of selling the property
2. Exclusing Listings: seller of real esate gives realtor teh exclusive right to sell the property. What if:
a. Seller finds buyer: agent still gets full comission
b. Seller changes minda after buyer found: agent still gets comission may want to enter in contract --> condition subsequent

Front 35

I. Process of Sale of Land
B. Two types of contracts

Back 35

1. Cash on Closing
2. Installment land contract

Front 36

I. Process of Sale of Land
B. Two types of contracts
1. Cash on Closing

Back 36

Purchase price is paid in full at closing; title is transferred immediately

Front 37

I. Process of Sale of Land
B. Two types of contracts
2. Installment Land Contract

Back 37

Also called contract for deed. Seller finances and retains title and deed until consideration is paid in full. (Favors seller) --> legal in MO

Front 38

II. Deeds
A. Parties

Back 38

1. Grantor: transfers interest in land
2. Grantee: receives interest in land

Front 39

II. Deeds
B. Types

Back 39

1. Warranty Deed - title is guaranteed by grantor
2. Quitclaim Deed - title is not guaranteed (not saying they have something)

Front 40

II. Deeds
C. Requirements

Back 40

1. Written deed transferring described property, signed, notarized and delivered

Front 41

III. Types of Ownership Interests
A. Fee Simple Absolute

Back 41

Entire ownership of the land

Front 42

III. Types of Ownership Interests
B. Fee Simple Defeasible

Back 42

1. Entire ownership, subject toa condition (subsequent)
2. Example: Client gave land to school district as long as it is used for school purposes. He got land back when they abandoned the school.

Front 43

III. Types of Ownership Interests
C. Partial Interests

Back 43

1. Easements: right to suse a portion of real estate without owning it.
a. Example: utility, roadway
2. Profits: right to enter land and remove something from it.
a. Example: mineral rights easement, must agree not to explore to get rid of
3. Licenses: revocable, temporary right to use real estate
a. Example: may be breech of contract but have right to revoke

Front 44

III. Types of Ownership Interests
D. Life Estate (Life Tenancy)

Back 44

1. Right to exclusive possession of real estate based on the life of a specified person
2. Example: Disabled child received life estate in house because set up for them

Front 45

III. Types of Ownership Interests
E. Future Interest (Reversionary Interest)
F. Tenancies

Back 45

1. An ownership interest in land which becomes tangible i the future
2. Example: After death, reverts back to grantor

Front 46

IV. Assuring Good Title
A. Abstract of Title and Title Opinion
B. Title Insurance

Back 46

A. Abstract of Title and Title Opinion
1. Summary of all transactions pertaining to the land since title came from the government
2. Title opinion: lawyer's opinion on title of the title after examining abstract
B. Title Insurance
1. Insurance company guarantees good title
2. Check exclusions carefully

Front 47

V. Real Estate Financing

Back 47

A. Parties
1. Mortgagor: assigns a mortgage (borrower)
2. Mortgagee: receives and holds a mortgage (lender)
B. History
1. Title Theory: Title and possession in Mortgagee-bank gets property (PAST)
2. Lien Theory: Title and possession in Mortgagor-bank sells property (PRESENT)

Front 48

VI. Chronology of Mortgage

Back 48

A. Selection of Financing Vehicle
B. Types of Financing Instruments
1. Mortgage - a lien on real estate where the mortgagee personally exercises foreclosure rights (Never in MO)
2. Deed of Trust - a lien on real estate where a third party, the trustee exercises foreclosure rights (Always)
3. Requirements for a valid mortgage: Signed, notarized, delivered writing, just as with deeds
C. Open-end Mortgage (line of credit)
Mortgage secures future advances
D. Second Mortgage
1. Lower in priority and usually later in time than the first
2. May also have third or fourth mortgage, etc.

Front 49

VII. Types of Clauses in Mortgages
A. Acceleration

Back 49

Allows declaration that entire balance is due if there is a default

Front 50

VII. Types of Clauses in Mortgages
B. Due on Sale

Back 50

Allows acceleration if interest in land is sold

Front 51

VII. Types of Clauses in Mortgages
C. Power of Sale

Back 51

Allows private foreclsure (non-judicial, without court)

Front 52

VII. Types of Clauses in Mortgages
D. Points

Back 52

Loan origination fees where one point equals one percent of the loan amount

Front 53

VII. Types of Clauses in Mortgages
E. Prepayment Privileges

Back 53

Allows early payment without penalty

Front 54

VIII. Default
A. Creditor's Rights

Back 54

1. Acceleration - must be in promissory note (always is)
2. Private or Judicial Foreclosure
3. Deficiency Judgment - allows to collect deficiency

Front 55

VIII. Default
B. Debtor's Rights

Back 55

1. Equity of Redemption - right to repurchase (pay off) th ereal estate prior to foreclosure (by paying the entire balance due to the mortgagee)
2. Statutory Redemption - right to repurchase after foreclosure.
a. Example: some states you have 1 year, MO if it is a tax sale
b. Right is very limited in Missouri. (give notice, post bond for damages to mortgagee, only if mortgagee bought at foreclosure)
3. Statutory Notice of Foreclosure Sale

Front 56

IX. Priorities of Mortgages/Deeds

Back 56

A. Race Statute
B. Notice Statute
C. Notice-Race

Front 57

IX. Priorities of Mortgages/Deeds
A. Race Statute

Back 57

1. First to record a mortgage or deed wins
a. Race to the courthouse
b. Record with the Recorder of Deeds for county. or city of St. Louis

Front 58

IX. Priorities of Mortgages/Deeds
B. Notice Statute

Back 58

1. One who has notice of another's interest prior to receiving an interest in the land cannot defeat the other's interest
2. Recording is one way to prove notice

Front 59

IX. Priorities of Mortgages/Deeds
C. Notice-Race

Back 59

1. First to record without notice of another's interest wins
2. Missouri
(Usually same result as Notice Statute)

Front 60

I. Types of Tenancies

Back 60

A. Tenancy for Years
B. Periodic Tenancy
C. Tenancy at Will
D. Tenancy at Sufferance
E. Missouri Rule

Front 61

I. Types of Tenancies
A. Tenancy for Years

Back 61

A tenancy for any specific period of time, even less than one year

Front 62

I. Types of Tenancies
B. Periodic Tenancy

Back 62

A tenancy for automatically renewable successive periods of time, such as month to month

Front 63

I. Types of Tenancies
C. Tenancy at Will

Back 63

A tenancy with no specific time frame - terminable by either party at any time

Front 64

I. Types of Tenancies
D. Tenancy at Sufferance

Back 64

Wrongful possession of land by a tenant - wrongful initial possession or a wrongful holding over aftera lease term
(Lease is up and you stay)

Front 65

I. Types of Tenancies
E. Missouri Rule

Back 65

A periodic tenancy, tenancy at will, tenancy at sufferance, or an oral lease are all converted to month to month unless the lease is for agricultural land, then they are converted to year to year

Front 66

II. Leases

Back 66

A. Temporary Exclusive Possession (not purchase)(landlord can't move in with you)
B. Covenants in Lease
1. Dependent Covenants - breach is material, non-breaching party is relased from the lease
2. Independent Covenants - breach is immaterial, non-breaching party is bound to the lease (more minor)
C. Conditions - Ex. no pets, no more than 3 unrelated --> breech leads to forefeiture
D. Remedies

Front 67

III. Possession (4 Areas of Concern)

Back 67

A. Landlord Must Give Possession
1. English Rule: Actual Possession
2. American Rule: Legal right to Possession
B. Landlord Must Prevent Interference
C. Landlord Has a Reversionary Interest
A future interest in the property in which the right of possession is returned to the landlord at the end of the lease
D. Eviction - removal of tenant by landlord

Front 68

IV. Eviction
A. Actual eviction

Back 68

Actual eviction occurs by eviction notice of legal action

Front 69

IV. Eviction

Back 69

A. Actual eviction
B. Constructive eviction - three step process
C. Retailiatory eviction
D. Causes of eviction

Front 70

IV. Eviction
B. Constructive Eviction - three step process

Back 70

1. Defect in premises cause substantial interference with ability to live there
2. Tenant notifies landlord who fails to remedy the defect
3. Tenant leaves the premises

Front 71

IV. Eviction
C. Retailiatory eviction

Back 71

1. Defined: an eviction as a response to a complaint to a housing authority

Front 72

IV. Eviction
D. Causes of eviction

Back 72

1. Non payment of rent
2. Waste (damaging property) or prohibited alterations
3. Unlawful use (housing one too many people) or nuisance (loud stereo all night)
4. Example

Front 73

V. Duty to Repair
A. Landlord's Duties

Back 73

1. Common Law - no duty of landlord to repair
2. Modern Rule - Missouri
a. Housing Codes - require landlords to meet certain standards
b. Implied Warranty of Habitability - requires residential landlord to keep the property fit for human habitation (occumpancy), that is the property must be free of defects which endanger life, health or safety
c. Duty to keep common areas safe
d. Contractual Duties - landlord may fix all major issues

Front 74

V. Duty to Repair
B. Landlord's Liability for Injuries

Back 74

1. Common Areas - landlord may be liable for maintenance in common areas
2. High Crime Areas - may be liability for inadequate security if reasonable foreseable

Front 75

VI. Tenant's Obligation to Repair
A. Commercial

Back 75

Entire obligation to repair often allocated to tenant

Front 76

VI. Tenant's Obligation to Repair
B. Residential

Back 76

1. Tenant's duty reduced by housing codes and the implied warranty of habitability
2. Tenant may contract to make certain repairs and is also responsible for intentional or negligent actions which damage the property

Front 77

VI. Tenant's Obligation to Repair
C. Areas in Tenant's Control

Back 77

1. Must be kept safe for invited guests
2. Example: guest gets hurt on swing you said to get on, may be liable

Front 78

VII. Lease Clauses as to Payment
A. Rent

Back 78

A dependent covenant

Front 79

VII. Lease Clauses as to Payment
B. Late Charges

Back 79

A type of liqudated damages - agree to damages in advance of breach

Front 80

VII. Lease Clauses as to Payment
C. Deposits

Back 80

Secure against non-payment of rent and against waste or damages

Front 81

VII. Lease Clauses as to Payment
D. Taxes and Insurance

Back 81

Usually landlord pays, but in commercial leases or leases with options to buy, the tenant frequently pays all or part of these expenses

Front 82

VIII. Assignment and Sublease

Back 82

A. Types
1. Assignment - transfer by tenant of all first tenant's rights to second tenant (assignor to assignee)
2. Sublease - transfer of part of tenant's rights to second tenant (sublessor or sublessee)
B. Missouri Rule
No sublease or assignment of a lease of less than two years duration without written approval of the landlord
C. Release
Agreement to release by landlord necessary to release first tenant from liability where sublease or assignment

Front 83

IX. Termination
A. Notice to Quit

Back 83

1. Month to Month
a. Notice must be given before the first day of the month to terminate the lease at the end of the month
b. Example: must give full calendar month notice
2. Year to Year - notice must be given 60 days prior to end of the lease year to terminate the lease at the end of the year

Front 84

IX. Termination
B. Holding Over after Lease Term

Back 84

1. With landlord's approval, the lease reverts to month to month (in city not agriculture)
2. Without approval of the landlord, the tenant is responsible for double rent

Front 85

X. Remedies

Back 85

A. Summary Procedures
B. Landlord's Lien
C. Duty to Mitigate

Front 86

X. Remedies
A. Summary Procedures

Back 86

Allow a landlord to evict tenant quicker by providing for an quicker trial date and fewer defenses

Front 87

X. Remedies
B. Landlord's Lien

Back 87

1. Allows a landlord to keep tenant's property as security for non-payment of rent or damages to the real estate
2. No landlord's lien in Missouri except for on crops

Front 88

X. Remedies
C. Duty to Mitigate

Back 88

1. Duty to lessen, tenant's damages, usually by seeking a new tenant
2. No duty of a landlord in Missouri to mitigate unless the landlord keeps the security deposit (Always Done)