Property: Conveyancing

Front 1

2 steps of conveyancing

Back 1

1) Contract of sale

2) Deed at closing

Front 2

SOF: Any contract of sale of interest in property must be in writing and signed by the one who is charged.

Back 2

Only need some kind of signed writing, with:

1) Description of property
2) Name of parties
3) Price

Front 3

Exception to Statute of Frauds requirement:
Doctrine of Part Performance

Back 3

Oral contract must be certain (no ambiguities) and parts of part performance must clearly prove a contract --> allows specific performance of oral contract

Must have a claimant in possession and:
1) Paying full purchase price (or close) OR
2) Erecting an improvement

Front 4

If property is damaged or destroyed before closing [and seller is NOT at fault], buyer loses.

Back 4

Once contract signed, it's buyer's land and risk because equitable conversion has taken place-- even if seller remains in possession/control.

TX: Risk of loss is on the person in possession at the time of loss.

Front 5

If a party dies before closing, contractual rights are unaffected.

Back 5

If seller dies, buyer closes with sellers' estate. Seller's interest is personal property.

If buyer dies, seller closes with buyers' estate. Buyer's interest is real property.

Front 6

Marketable title: Every land sale has implied warranty of this from seller.

Back 6

Doesn't have to be perfect, just one that a reasonable person would accept. Includes:

1) Proof of title (abstract or copy of all deeds recorded in title);
2) Title free of encumbrances (things unmentioned in contract)
3) Valid legal title on day of closing

Front 7

A valid option to purchase is an encumbrance on title.

Back 7

NOT encumbrances:

Zoning restriction (unless property violates restriction)
Housing and building code violations
Morgage (if to be paid w/sale proceeds)

Front 8

If seller's title is unmarketable, what are the buyer's remedies?

Back 8

1) Buyer must notify seller and give reasonable time to cure defect

2) If unfixed, 3 remedies: Rescission (buyer walks away); Sue (damages); Specific Performance (take what seller gives, lower price)

Front 9

If a buyer goes to closing and accepts a deed without curing problem, what then?

Back 9

No recourse against seller based on contract (contract disappears). Any action must then occur based on what's in the deed.

Front 10

If closing day specified in the land sale contract, is time of the essence?

Back 10

No, unless contract says so or the facts make clear that is what parties expected. Performance must be tendered within reasonable time after closing set in contract (2 months is okay!)

If time of essence clause violated, party who didn't perform on date can no longer enforce the contract.

Front 11

2 remedies for breach of sales contract

Back 11

1) Damages: measure is difference between K price and value of land on day of breach; liquidated damages- buyer's deposit can be forfeited if it's not more than 10% sales price

2) Specific performance of contract: always available to both sides

Front 12

If property defects (land not fit for ordinary purposes) and buyer wants to rescind, Buyer generally can't recover. (caveat emptor)

Back 12

2 exceptions:
1) Seller must disclose serious (woulda made you back out if you'd known) defects that he knows of and are not obvious to buyer. Cannot actively conceal defects.

2) Implied warranty of fitness or merchantability for new homes sold by builder-seller.

Front 13

Once a deed is accepted, contract merges into the deed.

Back 13

All contractual provisions are lost unless they're:

1) Included in the deed; or
2) Contract specifies they survive

Front 14

2 requirements for passage of legal title from seller to buyer

Back 14

Execution and delivery of deed.

Front 15

Execution

Back 15

Deed is subject to SOF. Description of land just has to identify property. If can't, void deed (vagueness) and nothing transferred. Minor discrepancy ok so long as property can still be identified. Can use parol evidence. Metes and bounds always controls over description.

Front 16

Delivery of deed.

Doesnt' have to be physical transfer. Legal test: intent to to pass title.

Back 16

1. If facts show intent to pass title, safeguarding of paper by grantor doesn’t show lack of delivery

2. Recording raises a presumption of delivery, even if grantee never sees deed and knows nothing about it

3. Upon delivery, title passes; returning/destroying deed has no effect

4. In showing intent of grantor regarding delivery, can use any parol evidence

5. If grantor dies and has deed in his possession, rebuttable presumption of no delivery

Front 17

Conditional delivery.

Grantor hands over deed but tries to condition delivery on some event

Back 17

1) Condition is in deed: If deed says it won’t be effective until death of grantor, this is a valid delivery of a future interest.

2) Oral condition: Disregard the condition.

3) Delivery conditional on grantee paying purchase price: Valid if grantor makes delivery to a third party in escrow, with instructions to deliver to grantee when condition is satisfied (oral instructions are okay). Once deed goes to third party agent, grantor can’t get deed back; so long as grantee satisfies the condition, grantee gets property.

Acceptance of deed by grantee presumed unless facts show otherwise. Only way a grantee cannot accept is to reject. No consideration needed for a deed

Front 18

Quitclaim deed: grantor makes no promises regarding title

Back 18

Get what grantor owns. Promises nothing.

Front 19

Covenants for titles: grantor's promises regarding title

Back 19

Deeds with 6 traditional covenants for title are called general warranty deeds.

Front 20

Present covenants

Can sue immediately on these. Personal to grantee and don't run with land.

Back 20

Covenant of Seisin (Right to Convey): seller's promise he has title and possession, and can validly convey both

Covenant against Encumbrances: no easements, restrictive covenants, liens, etc.

Front 21

What are future covenants?

Covenants not breached immediately, but only later when grantee is disturbed in possession. Runs with land and can be enforced against all subsequent purchasers.

Back 21

Covenant of Quiet Enjoyment (Warranty): Promise of seller that seller will protect buyer against anyone who later shows up and claims title.

Covenant of Further Assurance: "Mop Up" Covenant- if Seller forgot to do something to pass valid title, promises to do what's necessary

Front 22

Covenant breach damages

Back 22

Limited to purchase price received by warrantor, plus incidental damages. NOT full recovery!!

Front 23

Estoppel by deed

Back 23

1) If A deeds property to B that A doesn't own and A later acquires title, B gets title because grantor gave implied covenant of title transfer.

2) If grantor transfers to BFP after getting title, original grantee loses and can't rely on estoppel by deeds.

**Some states, including TX, calls estoppel by deed "doctrine of after-acquired title."

Front 24

Can't transfer a deed to a dead person --> invalid

Back 24

But, enforcement of contract of sale can be had by seller or buyer's estate. New deed made to buyer's estate.

Front 25

In situation where O grants to A, then grants same to B. Who wins?

Back 25

At common law, first in time, first in right

Recording statutes may give title to B-- ask: Can subsequent purchaser win because of recording act? Unless answer is yes, subsequent purchaser always loses.

Front 26

A recording act can also protect ___; not ___.

Back 26

Subsequent mortgagees.

Not judgment creditors

Front 27

Recording a deed is not needed to make it valid.

Back 27

Only gives notice.

Front 28

In TX, how do you record a deed?

Back 28

1) If it's signed and signature notarized; or

2) Deed signed by grantor and at least 2 witnesses

Front 29

3 types of recording acts.

Back 29

1) Notice acts: protects subsequent grantees who are BFPs (give value and take w/o notice of earlier transactions); recording irrelevant except as it might give notice ** TX has this**

2) Race-notice acts: Protects subsequent grantees who are BFPs AND are first to record

3) Pure-race: Notice irrelevant; whoever records first wins. Subsequent purchasr doesn't have to be a BFP.

Front 30

Bona fide purchaser: person who purchases for value, without notice

Back 30

"For value"

Bargain basement sale: subsequent purchaser pays absurdly low price. Without explicit fraud claim, any consideration that's out of pocket something is enough to be value. Irrelevant that amount paid doesn't meet or come close to fair market value. One dollar isn't enough ("sham")

Front 31

One who purports to take property as an heir, donee or devisee can/can't be a BFP.

Back 31

Can't be. Can never defeat claim of someone with prior conveyance. They haven't given out-of-pocket anything.

Front 32

Shelter rule exception

Back 32

Anyone (even heirs, donees, devisees) can shelter under rights of BFP.

Front 33

3 types of notice that can defeat a BFP

Back 33

1) Actual notice (knew about prior unrecorded conveyance; subject to Shelter Rule exception)

2) Record notice: constructive; deed must be recorded at courthouse and in chain of title. Title searching should disclose only what went on during periods of recorded ownership. Nothing before getting title or after passing title on to next link in chain.

3) Inquiry notice: Where reading of deeds on records discloses an unrecorded transaction, subsequent purchaser has to check it out. They're on notice of anything in a deed in chain of title. Subsequent purchaser must inquire about unexplained possessions or uses.

Front 34

Wild deed

Back 34

Deed recorded too late or too early.

They don't give notice.

Front 35

3 security interests (used to secure a loan on real property)

Back 35

Mortgages, deed of trust, installment land contract.

Front 36

Mortgage

Back 36

1) Given by debtor (mortgagor) to a creditor (mortgagee)

2) If not paid, sheriff sells land at court-ordered foreclosure

Front 37

2 special situations treated as mortgages

Back 37

1) Absolute deed with separate-promise-of-reconveyance situation (equitable mortgage). Doesn't need mention of word "mortgage"

2) Sale/Lease Back with Option to Purchase

** Both must be foreclosed like mortgages, get all other protections of mortgages.

Front 38

Deed of trust.

Back 38

1) Given by debtor to a third party trustee who holds it until load is paid off;

2) If loan unpaid, trustee may get court to order a sale OR trustee may sell property on own at public auction

Front 39

Installment land contract

[TX: contact for deed]

Back 39

Debtor signs contract promising to make payment and seller keeps title until loan is paid off.

Front 40

Mortgage or deed of trust --> Equity of redemption

Back 40

1) At any time up to foreclosure sale, debtor can redeem property

2) Normally, debtor just pays amount in arrears; if acceleration clause, must pay entire balance

3) Right of redemption can't be waived in mortgage or deed of trust; may be done later if separate consideration

4) Attempt to waive right of redemption is "clogging the equity of redemption" and prohibited

5) NOT statutory right of redemption (allowing mortgagor to get property back after foreclosure sale)

Front 41

Foreclosure must be at a public auction sale.

Back 41

Regardless of by court order or otherwise.

Front 42

If multiple mortgages, priorities are first in time, first in time; unless recording act changes that.

If mortgage not recorded or recorded late, may have to apply recording act to see what priority is.

Back 42

Later mortgages may take priorities over earlier ones if:
1) Subsequent mortgagee had no notice of earlier mortgage (notice act); or
2) Subsequent mortgagee had no notice of earlier mortgage and recorded subsequent mortgage first (race-notice act)

Mortgage priorities may be changed by contract

Front 43

Purchase money mortgages: mortgages taken out to buy the property.

Back 43

Given priority to other mortgages executed at roughly the same time, even if others recorded first.

PMM given by seller wins over third party lender (bank).

Front 44

If owner does anything to increase a senior mortgage, the mortgage loses priority over junior ones- but only to the extent of the change.

Back 44

TX only: Mechanic's and materialmen's lien has priority over mortgages or other liens.

Front 45

Foreclosure on mortgages wipes out all junior interests.

Back 45

Senior mortgages run with property. While senior mortgages do not get paid off when a later mortgage is foreclosed, they keep on going. Purchaser at foreclosure takes property subject to senior interests.

Front 46

Junior interests don't run with land.

Back 46

Paid off if there is enough money from foreclosure sale. All junior interests (easements, leases).

Front 47

Protections of holders of junior interests

Back 47

Right to pay off any mortgage being foreclosed in order to keep their junior interests from being wiped out, and thus they are necessary parties to any foreclosure.

If they're not made party to a foreclosure, their interests are not wiped out by it.

Front 48

What order should foreclosure sale proceeds be used in?

Back 48

1) Foreclosure costs (including expenses, attorneys' fees)

2) Foreclosed mortgage, including accrued interest

3) Junior interests in order (pay first one fully before second, etc.)

4) Anything left goes to mortgagor

Front 49

If mortgage is foreclosed and not enough money to pay off mortgage, mortgagee may sue debtor for balance due.

Back 49

TX only: Deficiency judgments limited to difference between debt and fair market value of the property (compare MBE: debt and sale price)

Front 50

Consequence of having an installment land contract--> look for forfeiture clauses

Back 50

FC: if debtor misses a payment, seller can cancel contract, keep all money paid to date, get property back. Enforceable clauses!!

TX only: 2001 statute protect buyers under contract for deed/installment land contract:

1) Sellers have to give buyers detailed notice of foreclosure
2) Buyers have 60 day period to cure default

Front 51

Security interests can be transferred by each party.

Back 51

Mortgagor can transfer property title; transferee takes subject to mortgage. Mortgagor continues to be personally liable on the note.

Unless grantee specifically assumes mortgage, he isn't personally liable-- but mortgage still has to be paid or foreclosure.

* If mortgagee freely transfers note, mortgage tags along with note.

Front 52

What happens if mortgagee/grantee modifies the obligation?

Back 52

Discharges original mortgagor of all liability.

Front 53

What are "due on sale" clauses?

Back 53

If mortgagor transfers without mortgagee's consent, full loan amount is immediately due and payable. Enforceable!!

Front 54

What is a fixture filing?

Back 54

If not made per UCC Article 9 within 20 days of attachment, then security interest in chattel is subordinate to earlier mortgage on the real property.

If properly done, supplier of chattel can remove it without regard to earlier mortgage or other security interest in the property.

Front 55

Notice Statute (TX has)

Back 55

"No conveyance or mortgage of an interest in land is valid against any subsequent purchaser for value without notice thereof, unless recorded"

Subsequent BFP prevails

Front 56

Race

Back 56

"No conveyance or mortgage of an interest in land is valid against any subsequent purchaser whose conveyance is first recorded"

Grantee who records first prevails

Front 57

Race-Notice

Back 57

"No conveyance or mortgage of an interest in land is valid against any subsequent purchaser for value without notice thereof whose conveyance is first recorded"

Subsequent BFP who records first prevails