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49 Cards in this Set

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What is required to be included in a real estate contract?
1) Parties
2) Price
3) Allocation of risks
4) Description of property
5) Date of turnover
6) Responsibility for taxes, fees, closing costs, etc.
What kinds of contingencies does a real estate contract include?
1) Upon the buyer obtaining a loan.
2) Clean title
3) Inspection
4) Satisfactory appraisal
What must a buyer do during the escrow phase?
Buyer must:
1) Obtain financing
2) Transfer funds to escrow account
3) Obtain home owner's insurance
4) Carry out inspections
5) Termite inspections
6) Acknowledge disclosures
7) Do a final walkthrough to verify repairs and condition
What else needs to be done by either the buyer or seller during escrow?
1) Hire an escrow company or attorney to conduct the closing.
2) Perform a title search.
3) Buy title insurance
What will the lender require before giving loan?
1) Prepayment (or escrow) of homeowner's insurance and for property taxes to be paid.
2) Proof of a termite inspection.
What needs to be done upon closing?
1) Record the transaction.
2) Complete loan documents
3) Jdx have specific requirements.
1) What is a fiduciary duty?
2) What does that duty require?
1) A legal relationship b/t two parties.
2) An agent owes the highest level of care/loyalty to his client.

A real estateagent is required to exercise good faith: 1. Agent must NOT profit at client's expense, and 2. Agent has a duty to disclose material information to client.

If agent acts contrary to his client's interest, then he will be liable for whatever loss the client may suffer AND agent loses his commission.

Subagents of the agent are bound by the same duty as the agent.
What are the different types of agents, their roles, and where do their fiduciary duties lie?
1) Listing agent: Markets seller's property. Fiduciary duty owed to seller.

2) Selling agent: Deals with sales of seller's property. Fiduciary duty owed to seller.

3) Buyer's agent: Represents the buyer. Fiduciary duty owed to buyer. This agent is paid for through the seller's commission, so he's free to the buyer.
What kinds of title are available?
1) Record title: Requires continuous recorded documentation. Excludes title based on adverse possession unless so settled by court.

2) Marketable title:
* Implied in real estate contracts unless specified otherwise.
* Title need not be perfect, but be one that a reasonable person would be willing to buy.


3) Insurable title: Only requres a title that an insurance company would issue a policy for. May include any violations where risk of suit is acceptable.
1) When does a title become unmarketable?

2) When things do NOT make title unmarketable?
1) Title becomes unmarketable when it:
* Exposes buyer to the hazard of litigation,
* Substantial defects to the property,
* Violates public (zoning) or private restrictions.
* Contains private covenants or encumbrances.

2) Title remains marketable when:
* Easements that benefit the land.

* Municipal restrictions, e.g. zoning, are not a valid excuse for buyer to rescind the contract.
What defects must be cured by the seller before title becomes unmarketable? When must the seller do this by?
Seller must cure:
* any chain of title issues.
* unrecorded easements, covenants, and restrictions.
* Seller must deliver the property unencumbered (no outstanding mortgages or liens).
* A seller can adjust the purchase price to cure a lien. Any mortgages discharged by the seller before closing will keep title marketable.

2) All defects must be cured by closing.
What defenses are available to the contracting parties?
1) SoF (RE Ks must be in writing)
2) Risk of loss:
By default, rule of Equitable Conversion gives the buyer "equitable title" at the time of contract. Thus, any loss that results before closing (e.g. fire, earthquake) will fall on the buyer. If buyer does not have insurance, he will be liable for the entire amount.

Buyer can place the risk of loss on seller by explicitly placing the risk on the seller in the contract.
What damages are available for breach of contract?
* Restitution (for buyer) or Retention (for seller) of deposit/earnest money (CA has 3% of sale price ceiling for keeping money, 10% is a cap generally not exceeded)
* Expectation (standard remedy): Damages to put you in the position the you expected to be in had the deal gone through.
* Specific performance: Frequently used b/c real estate is considered unique.
1) What does the duty to disclose require?

2) What are the factors dictating a seller's duty to disclose?
Caveat emptor:
* General rule: non-disclosure is not actionable.
* NO active concealment
* NO affirmative misrepresentation

* BUT more may be required if there is a fiduciary relationship.

* Doctrine incentivizes the buyer to act prudently.

2) Seller's Duty to disclose:
* Fact materially affecting property value.
* Not readily observable by the buyer.
* Unknown to the buyer.
What types of nondisclosures are there?
* Fraud: An intentional misrepresentation of the facts.

* Fraudulent nondisclosure: Failure to disclose known facts where the LAW CREATES A DUTY to do so.

* Negligent misrepresentation: Failure to disclose facts that a party SHOULD HAVE KNOWN.
What types of fraudulent nondisclosure laws exist?
These apply only to residential property.

Federal statutory duty:
* Lead paint.
* Knowledge of house being on or near hazardous waste sites.
* Settlement costs?

State statutory duty (varies):
* Majority require written disclosures.
* Disclosures include all material defects known to seller.
* Some jdx permit "as is" or "non-reliance" disclaimers.

* Brokers required to disclose agency status

* Buyers – generally no duty to disclose future use (mining), unless special circumstances create a duty.
When can a buyer seek recission?
* Failure to meet contingencies.

* Title is not what was contracted for. (Unmarketable covenants/encumbrances.)

* Fraud, fraudulent nondisclosure, or negligent misrepresentation.
1) What is a title?

2) What is a deed?

3) What types of deeds are available?

4) Does lapse of SOL perfect title?
1) A title is a concept of ownership, which stands against the right of anyone else to claim the property.

2) A deed is a written document that transfers title in real property to another person.

3) Three types of deeds exist:
* General warranty deed: Warrants title against ALL defects.

* Special warranty deed: Warrants title against defects arising during the time the grantor has held the land. This warranty will defend against a mortgage foreclosure from grantor's debt but NOT claim resulting from a 3rd party.

* Quitclaim deed: No warranties of any kind. Deed only transfers GRANTOR'S interest. So if grantor does not have valid title, then you get NOTHING!

4) No. Due to "future covenants" invoked by warranty deeds, SOL by itself will not perfect title. The SOL for "future covenants" does not run until there is a breach.

Takeaways:
* Covenants can be important in litigation.
* Title issues can emerge well after SOL has run and adverse possession will not cure all problems.
* Always do a title search!
* Always buy title insurance!
1) What are the traditional requirements for a deed?

2) What does the deed require substantively?
* Signed
* Sealed (stamp, wax, gold, latin abbrev.) -- No longer required in most jdx.
* Delivered

2) Deed must include:
* Identify current title holder.
* Identify party receiving the title.
* Consideration (establishes BFP, need not specify the amount, not always needed b/c property can be willed)
* Description of the property
* Signature
* Notarization (usually only required for recording)
1) What is required for delivery of a deed?

2) What other ways can property be transferred?
1) Delivery requires:
* 1. Grantor's intent to make the deed effective.
* 2. the Grantor must make the transaction final.

* Once deeded, the grantor loses all interest and cannot take it back. It can only be deeded back to the original grantor.

* Estoppel: Even if there is no delivery, the grantor may be estopped from denying delivery to a BFP.

2) Re: Rosengrant--What could couple have done differently?

* Devise property through will.
* Deed a life estate with remainder to grantee.
* Establish a joint tenancy.

* Create a revocable trust:
-gives you equitable title, banker remains a trustee (fiduciary), property goes to grantee upon your death. This trust is revocable if you change your mind.
How does real estate financing work?
1. Buyer makes a small down payment and finances the rest.
2. The lender takes a note from the borrower as well as a mortgage.
3. The borrower is liable on the note, but the mortgage gives the lender the right to sell the property to pay off the note if the borrower defaults.
Note: Lender = mortgagee, buyer = mortgagor.
1) What happens when a buyer fails to pay for the property?

2) What are the modern foreclosure options?

3) In which order are debts paid from the money recovered from a foreclosure?

4) What duties does a mortgagee have upon foreclosure?
1)
* Buyers have an equitable right to redeem the property if they fail to make payments.

* However, this right of redemption could be foreclosed by the lender through a judicial foreclosure proceeding.

2) Types of foreclosure:
* Strict foreclosure: Title goes to creditor on default and creditor can sue debtor for deficiency + creditor has no obligation to refund surplus (CT & VT).

* Judicial foreclosure: Lien holder files suit and court orders sale of property if claim is established. This is available in all states, and the only option in about half of the states.

* Power of sale: Loan agreement grants lender the private right of sale. Lender can sell without judicial involvement. This is available in about half of the states.

* Deed of trust: Borrower conveys title to 3rd party as security for payment. Trustee, who holds temporary title until debt is paid, can sell property if payments not made. This is available in about half of the states.

3) Rule: Government (taxes) first, then first-in-time.
* First mortgage structured to be paid off first.
* If second mortgage forecloses , the house will be subject to first mortgage and other liens.


4) Majority only requires that the mortgagee comply with statutory requirements for advertisement and notice.
* Mortgagee's sale is unfair only if price "shocks the conscience"
--Thus mere inadequacy in price is insufficient to disturb the sale.

* Narrow holding from Murphy: Mortgagee has a duty to secure mortgagor's equity.

* Strategy: Borrower should sell the property themselves before foreclosure because the mortgagee has no duty to MAXIMIZE the sale.
See Foreclosure hypos.
1) Why have recording systems?

2) What are the steps to recording a deed?

3) How do you conduct a title search using a grantor-grantee index?
1) Reasons for recording:
* Recording affects the right of people who subsequently receive the property from the grantee.
* The purpose of recording is to give CONSTRUCTIVE notice to the public as to who has interest in the property.
* Consists of indexes and copies of documents; facilitates preservation of documents.
* Provides systematic research:
--Who has title to the property?
--Are there any mortgages and liens on the property?
--Any covenants, easements, private encumbrances?
* Recording protects BFPs.

2) To record:
1. Grantee files the deed with the county recorder.
2. The deed MUST be "acknowledged" (notarized)
3. Deed MUST be filed in one of two ways:

--1) Tract index
* Shows all docs relating to a specific property.
* Easiest to use but not widespread.

--2) Grantor-grantee index
* Conveyance is chronologically filed.
* Two books: One for grantor, one for grantee. Both organized alphabetically by name.
* Grantor index identifies transaction originator.
* Grantee index indentifies recipients.
* Tracing title through grantor-grantee index is laborious, especially if a date is missing.

3) Steps:
1. Start working backwards through the GRANTEE index within the requisite time span as determined by STATUTE or TITLE INSURER/GRANTEE'S RISK EVALUATION.
2. After finding GRANTOR's name, look for his name as GRANTEE.
3. Repeat until reaching the initial conveyance of the land.
4. Now, switch to GRANTOR index and move forward during entire period of ownership.
5. Identify all transfers/liens/encumbrances during entire period of ownership.
6. Read the docs identified in index to establish: title held by current owners, any restrictions on property use, any outstanding liens/judgments.
1) What are the different types of recording systems? What are their pros and cons?

2) What types of notice exist?
1) Three types:
* Race statutes:
--The first to record prevails.
--Efficient system but rewards injustice and is not flexible.

* Notice statutes:
--Notice prevents taking possession.
--A subsequent purchaser prevails ONLY if they had NO NOTICE of a previous purchase at the time of their transaction (BFP).
--System gives some incentive to record and is generally fair BUT is subject to proof.

* Race-notice statutes:
--Between successive purchasers, the first to record prevails UNLESS they had notice of prior transaction.
--Generally fair, incentivizes parties to record, and provides some race benefits but can complicate matters and thus lead to litigation.

2) Types of notice:
--1. Actual: Actual awareness.
--2. Constructive: A proper title search would reveal.
--3. Inquiry: Factual situation suggests need for investigation (e.g. property occupied by 3rd party).
What is chain of title?
* "Chain of title" refers to the title established by the grantor's predecessors up to the time of the conveyance to the grantee.

* Gives notice to subsequent would-be purchasers once instrument is recorded.
What happens when there are prior unrecorded deeds in the chain?
Remember Board of Education case.

* D was NOT on notice when P recorded. D's title was secured because he recorded BEFORE the P's grantor. p. 109.
What happens if the grantor conveys title when he does not have title at the time of conveyance but then subsequently acquires title and refuses to hand it over?
* Grantee can assert his right using ESTOPPEL BY DEED. Under the doctrine, the grantor must then convey the property to the grantee.
When will a subdivision restriction that is missing from the deed be enforced against the purchaser?
* Jdx split on whether subdivision restrictions contained in the deeds to the other lots in the subdivision are outside the chain of title.
--To hold that they are within chain of title imposes a would-be buyer the burden of searching all the deeds flowing from a common grantor.

* See Guillette
--It is expected for title examiner to search all deeds to a lot flowing from a common grantor.
--Note: D had constructive notice in 8/72.
What is title insurance needed for?
* Title insurance protects against problems with public records. It insures against any defects in these records.

* Title insurance does NOT run with the land.

* A mortgagee's policy does NOT insure the homeowner. Homeowner must purchase their own policy.
1) What roles does a title company have?

2) How can title be assured?

3) Why types of title insurance exist and what are their characteristics?

4) When are new policies needed?
1. Serve as settlement agents (Some states limit this role to attorneys.)
2. Perform title searches.
3. Issue title insurance.

2) Title assurance:
--1. Title search: careful review of chain of title.
--2. Title abstract: summarizes docs comprising chain of title.
--3. Title insurance: provides for defense against hostile claims/reimbursement for damages.

3) Two types:
--1. Lender's policy: Must have this policy. It protects the lien holder ONLY.
* Lender's policy covers life of the loan. It diminishes in value as loan pays off and is required by secondary loan market.

--2. Buyer's policy: Not mandatory, but recommended. Protects the buyer.
* Buyer makes a single payment, which is calculated upfront.
* Insurance lasts for duration of property of interest (does not run with the land).
* Buyer can collect on the policy AFTER selling the house IF held liable after sale for the warranties put on deed.

4) Need new policy when:
* New buyer
* Refinance (lender's policy is specific to that loan, so a refinance requires a new policy.)
1) How do title search and title insurance differ?

2) Who does a title searcher owe a duty to?

3) Who does a settlement agent owe a duty to?

4) How far does a title insurer's liability extend?

5) Does a title insurer have a duty perform a title search or a duty to disclose?

6) What can a buyer do to protect himself of unknown title defects?

7) Does marketability of title extend to property value? Why?

8) When will marketability of title be affected?

9) What are Marketable Title Acts?
1) Title insurance permits recovery ONLY for defects in TITLE.

2) Title searcher owes a duty of care to the purchaser. Thus, the purchaser can sue the entity for negligence for failing to discover the true acreage of the property (Walker Rogge).

3) A settlement agent owes duty of care to BOTH parties.


4) Title insurer only liable for information in public record. Thus no liability for incorrect measurements or missing information.

5) About 1/2 states say title insurer has duty to perform title search and duty to disclose. But no such duty exists in CA.

6) A buyer can hire a surveyor/lawyer before purchasing.

7) No. One can hold perfect title to land that is useless; one can have marketable title to land while the land itself is unmarketable.

8) Encumbrances are taxes, assessments, and all liens on real property. A mere order of clean up costs on property is not covered unless a lien is imposed to cover such costs. (See Lick Mill.)

9) Acts enacted in about 1/3 states. They can limit the timeframe in which some title defects can be raised.
1) In a race/race-notice jdx, what happens when neither party has recorded?

2) In a notice jdx, what happens when neither party is on notice?

3) What is a "wild deed?"
1) Revert to common law first-in-time rule.

2) The last party receiving the conveyance is a BFP and thus prevails.

3) When a party conveys an unrecorded deed, the subsequent party holds a wild deed.

* Recording a previously unrecorded deed does NOT make it valid. Thus, a wild deed does not count as a validly recorded deed and does NOT provide constructive notice.

* Those with wild deeds suffer but they should have conducted a proper title search, which would have revealed a gap in ownership indicating foul play.

* Courts generally favor a policy that rules against the party that could have protected itself.
Hypo:
O to A (A doesn't record.)
A to X (X records.)
X is recording a wild deed, which does NOT count as a validly recorded deed.
Hypo:
- O is negotiating to purchase Blackacre from X.
- O sells Blackacre to A before he closes.
- A records Feb 1.
- O closes on Mar 1 and decides to keep Blackare.
- O records his deed from X.

Who prevails over O and A?
Neither party is innocent. However, using Estoppel by Deed, O is estopped from claiming ownership by the deed they have already issued to A.
Hypo:
- O is negotiating to purchase Blackacre from X.
- O sells Blackacre to A before he closes.
- A records Feb 1.
- O closes on Mar 1 and records his deed from X.
- O conveys Blackacre to B on Apr 1.
- B records.

1) O v. A?
2) A v. B?
1) A, Estoppel by Deed
2) B, subsequent BFP
* Any subsequent purchaser would look forward from the date O closed (Mar 1) to determine valid claim, so B would never know of A recording his wild deed.
Hypo:
- O sells Blackare to A.
- A records but the county clerk indexes it under the wrong name.
- O sells Blackacre to B.
- B records.

A v. B?
Race: A
Notice: Jdx split.
Race-Notice: It depends.
Hypo:
- O conveys Blackacre to A. (A does not record.)
- O sells Blackacre to B. (B records.)
- B sells Blackacre to X who knows of O to A deed.

1) A v. B?
2) A v. X?
1) A v. B
Race: B,
Notice: B (BFP),
R-N: B (BFP)

2) A v. X
* Shelter Rule: X has the same rights as the grantor B.
Race: X
Notice: X, BFP via B
R-N: X
What should one always do when purchasing property in terms of title?
1) Research title.
2) Inspect
3) Record
4) Buy title insurance (Recommended)
1) What is required to show nuisance?

2) What remedies are available for nuisance?
1) An interference with the use and enjoyment of another's land.
* To be actionable, must be both SUBSTANTIAL and UNREASONABLE.

* Substantial: Person of normal sensitivities would consider the interference to be significant.

* Unreasonable:
-- 1. Harm to P outweighs social utility of D's conduct or the condition on his property.
--2. P is significantly harmed and D could avoid without undue hardship.
--3. D's use is inappropriate for the locality.

2) Remedies
* Monetary damages
--1. Compensation for the harm suffered.
--2. Compensation for loss of value (one-time payment).

* Injunctions
--Granted if:
---1. Harm to P greater than social benefit from D's acts.
---2. Ds can avoid harm without undue hardship.
---3. P's acts suited to location but D's are not.
---4. P must pay for the injunction he seeks.
1) What is a servitude?

2) What is an easement?

3) What is a restrictive covenant?

4) What is profit a prendre?

5) What is a license?
1) Servitudes are burdens imposed upon one estate for the benefit of another.

2) Easements are interests in land owned by another that entitles its holder to a specific limited use or enjoyment.

3) A covenant is a provision in a deed or lease that restricts the free use or occupancy of property.

4) Profit a prendre is a right to enter another's property to take a specific resource (e.g., oil, minerals, timer, or wild game)

5) A license is a revocable permission to enter another's property.
1) What is an affirmative easement?

2) What is a negative easement?

3) What is an appurtenant easement?

4) What is an in gross easement?

5) What is a dominant estate?

6) What is a servient estate?

7) What is a reservation?

8) What is an exception?

9) What is a quasi-easement?
1) An affirmative easement is a right to do something on the land of another.

2) A negative easement is the right to forbid landowner from doing something on his own property.

3) An appurtenant easement benefits owner of another specific parcel of land.
--Benefits and burdens of appurtenant easements pass to assignees of the land to which they are appurtenant IF the parties so intend AND the burdened party has notice.
-- Has both dominant and servient estates.

4) An in gross easement benefits a specific individual.
--Only has a servient estate because it benefits an individual, NOT land.

5) Dominant estate: land benefiting from the easement.

6) Servient estate: land burdened by the easement.

7) A reservation is when a grantor RESERVES an interest in the property after the conveyance.

8) An exception is a deed conveyance of property EXCEPT FOR the easement.

9) Where a landowner is making use of some of his land with another part for the benefit of his land. Legally, he cannot have an easement because he owns the land.
* Creates the foundation for finding an easement later on if something happens to the ownership of the land (e.g., Easement by Implication).
How can easements be created?
PINEE

* Prescription: Use of property belonging to another that is
--1. "open and notorious"
--2. continuous/uninterrupted
--3. lasting for the statutory period
--4. without actual permission
--See Miller

* Implication: Implication requires that the original owner had made the exact same use, a quasi easement, across the unified property.

* Necessity
--1. Unity of ownership of estates. (Unity b/t the property being sold and the property of which the easement is being created. Create easement over commonly held land, NOT 3rd party land.
--2. Roadway is a NECESSITY, not convenience.
--3. Necessity existed AT TIME OF SEVERANCE.
--The more necessary it is to have an easement, the more likely a court will find one.
--See Othen.

* Express grant
-- Majority rule: Cannot reserve an interest for a 3rd party.
--Minority rule: Look at the grantor's intent to allow reservation to a 3rd party. (See Willard, a discount in price due to easement.)


* Estoppel: Generally, licenses are revocable EXCEPT in the following situations:
--1. Estoppel: If the licensee has made substantial improvements, relied on the license, then the licensor may be estopped from revoking the license. (See Holbrook.)
--2. License coupled with an interest: If you O sells A a car located on O's land, A has an irrevocable license to enter and remove the car.
What's the difference between a prescriptive easement and adverse possession?

How do you decide which one applies?
* AP awards OWNERSHIP whereas prescription awards a continuing RIGHT to use.
--The use that you're making of it determines what rights you have to that easement. (e.g., using pavement as driveway implies right to use as driveway, NOT property where you can pitch tents.)

* If individual has made an EXCLUSIVE use, then individual has established AP.
Are easements assignable?
* Appurtenant easements are assignable.

* In gross easements benefit may not always be assignable.
--BUT, easement in gross is assignable when there is commercial value at stake. (See Miller.)
How do easements end?
PEACE MAN

* Prescription

* Estoppel

* Agreement

* Condemnation: Gov't takes by eminent domain.

* Expiration: If there is a time constraint on original conveyance, then the easement expires automatically.

* Merger: When estates merge and one person acquires all ownership, the easement terminates.

* Abandonment: See Presault (RR Takings case, Abandonment (removal of tracks), See Lecture Notes 8. Once you stop the use with the intention to abandon, the easement terminates at that point.

* Necessity: Easement ends when necessity ends.
What is a benefited estate?

What is a burdened estate?

What is an affirmative covenant?

What is a negative covenant?
Benefited Estate: entitled to enforce servitude. Like Dominant Estate

Burdened Estate: bound to comply w/ servitude. Like servient estate.

Affirmative Covenant: requires performance of specified act or payment of money.

Negative covenant: restricts use of property.
1) What is required for burden of real covenant to run at law?

2) What is required for a benefit of real covenant to run at law?

3) What are the majority/minority rules for covenant creation?

4) Is horizontal privity required for a covenant to run?
1) Burden requires:
--(1) Parties intended promise to run.

--(2) Promise “touches and concerns” the land

--(3) Privity of estate between original promisor and promisee AND privity of estate between the promisor and the assignee.

--(4) A subsequent purchaser of the promisor's land must have notice of the covenant.

--(5) Must be in writing (SoF).

2) Benefit requiresS:
--(1) intent
--(2) privity of estate
--(3) touch and concern
--(4) writing (SoF)

3) Majority limits covenant creation to transfers of interests in land. Minority does not have this limitation.

4) It depends. Majority still does. Minority now substitute notice (actual, constructive, inquiry) for horizontal privity.
1) Can real covenants be implied?

2) What remedies are available for real covenants?
1) No. Real covenants must be expressly created and require a writing.

2) Real covenants are enforceable by damages. Many jdx also allow injunctions.
How is an intention to bind parties to a real covenant shown?
* Original parties must intend covenant to benefit and/or burden successors in interest.

* “magic words” provide Rebuttable presumption that benefit was intended to run:
--“agree for self, heirs, and assigns…”
--“this covenant shall run with the land…”
--“this covenant is appurtenant to the land…”
* Must evaluate both benefit and burden.