Property Ii Review

Front 1

Contract of Sale:

Compliance with Statute of Frauds

Back 1

1) Writing
2) Identify buyer & seller
3) Promises - buyer to buy, seller to sell
4) Physical description of property
5) Price (or formula for determining)
6) Time for closing (or reas. time will be inferred)
7) Signatures of parties against whom K will be enforced

Front 2

Contract of Sale:

Exceptions to the Statute of Frauds

Equitable Estoppel

Back 2

1) oral agreement
2) justifiable reliance on oral K
3) serious/irreparable injury unless specific performance

Front 3

Contract of Sale:

Exceptions to the Statute of Frauds

Part Performance

Back 3

Buyer must...
1) take possession of the property AND
2) pay all or part of the purchase price AND
3) make improvements (if none, need facts = fraud if not enforced)

Front 4

Marketable Title:

What makes title unmarketable?

Back 4

1) Seller does not own the entire estate he purports to sell
2) Discrepancies in the chain of title create a reasonable uncertainty as to the quality of title
3) Encumbrances exist
E.g., mortgages, past due property taxes, liens, easements, covenants, leases, etc.

Front 5

What is equitable conversion?

Back 5

After sales K signed but before date of conveyance:
1) Buyer has equitable title
2) Seller has legal title

Front 6

Consequences of Equitable Conversion: Natural Disasters

Generally

Back 6

Common law: tough luck, buyer...still gotta buy and pay K price...seller has no duty to restore

NOW: UVPA and TX Form Residential Real Estate K "Casualy Loss"

Front 7

Consequences of Equitable Conversion: Natural Disasters

UVPA

Back 7

UVPA:
1) if no legal title or possession transferred: (a) vendor may not enforce K and (b) purchaser may recover any part of K price paid.
2) If either transferred: (a) purchaser still has duty to pay K price and (b) may not recover any portion of K price paid (E.g., K for deed, seller finance, seller rents post-closing)
NOTE = UVPA may be expressly waived

Front 8

Consequences of Equitable Conversion: Natural Disasters

TX Form Res. Real Estate Contract "Casualty Loss"

Back 8

1) Seller must restore as soon as reasonably possible (latest = closing date)
2) If seller cannot restore by closing, buyer may: (a) terminate K and get refund of $ paid; (b) extend time up to 15 days; (c) accept with an assignment of seller's insurance

Front 9

Seller's Duty to Disclose:

Common Law

Back 9

1) No remedy for buyer
2) Buyer had burden to investigate
3) Exceptions: (a) intentional misrepresentation; (b) fraudulent concealment
NOTE = silence was okay, lying was not

Front 10

Seller's Duty to Disclose:

Texas (majority)

What must be disclosed?

Back 10

Seller must disclose:
1) Material defects generally
2) Legal defects
3) Possibly, off-site conditions
Exceptions:
1) conveyance from one co-tenant to another
2) transfer b/w spouses at divorce
3) conveyance to/from government
4) "spec homes" (one-dwelling res. not previously occupied)

Front 11

Seller's Duty to Disclose:

Texas (majority)

When? & "as is"

Back 11

When?
1) Disclosure form complete on or before the effective date of the sales K
2) Disclosure based on knowledge at time the form is completed
3) No ongoing duty to disclose

"as is" defeats causation unless fraudulently obtained

Front 12

Buyer's Breach:

How can buyer terminate without defaulting?

Back 12

1) Exercise valid option
2) Can't get financing (if 3rd-party fin. add.)
3) Seller unable to deliver marketable title
4) Seller fails to provide disclosure form
5) Fraudulent misrepresentation/concealment of a physical condition

Front 13

Buyer's Breach:

Seller's Remedies

Back 13

1) Specific performance or "other relief by law" (or both)OR
2) Terminate K and keep earnest money as liquidated damages

Front 14

Seller's Breach:

When is seller in default?

Back 14

1) Fails to make non-casualty repairs by closing
2) Fails to make casualty repairs by closing
3) Fails to deliver title commitment (if in K0
4) Fails to deliver survey (if in K)

Exception = failure is beyond seller's control

NOTE = seller CANNOT terminate without defaulting

Front 15

Seller's Breach:

Buyer's Remedies

Back 15

If beyond seller's control:
1) Extend time up to 15 days (also extends closing) OR
2) Terminate K and get back earnest $

If within seller's control:
1) Specific performance or "other relief by law" (or both) OR
2) Terminate K and get back earnest $

Front 16

Breach of Sales Contract:

What is "other relief by law"?

Back 16

1) Compensatory damages (TX = "loss of bargain", KP-FMV at breach)
2) Special damages: (a) natural and probable consequence of breach AND (b) breaching party knew of should have anticipated
3) Punitive damages: (a) reckless disregard of K obligations OR (b) intent to harm non-breaching party

Front 17

What is the Doctrine of Merger?

Back 17

1) When the buyer accepts the deed buyer is deemed to be satisfied that all K obligations have been met (the final act of the parties)
2) ALL promises in the sales K "merge" into the deed [and the terms in the deed survive closing]
NOTE = title issues do not survive (but defects, etc do)

Front 18

Deed:

Requirements for a valid deed

Back 18

1) In writing
2) Identify grantor and grantee
3) Words of conveyance
4) Adequate description of the property
5) Signature of grantor

NOTE = forgery voids, fraud makes voidable

Front 19

Deed:

Rules of Construction

Back 19

1) If in doubt, then greatest estate possible
2) Construe most strongly against grantor and most favorably to grantee

Front 20

Types of Deeds

Back 20

1) General Warranty Deed
- protects against all title defects

2) Special Warranty Deed
- only protects against defects caused by grantor

3) Quitclaim Deed
- no protection against defects
- "I'm just giving you whatever interest, etc I MAY have"

Front 21

Warranties of Title (Covenants)

Back 21

1) Seisin (P)
2) Right to convey (P)
3) No prior conveyances (P)
4) Against encumbrances (P)
5) General/special quiet enjoyment (F)
6) Further assurances (F)

Front 22

Warranty Rules

Back 22

1) No covenants implied by common law
(but TX, "grants/conveys" = against encumbrances and no prior conveyances)
2) covenants only apply to the land described in the deed
3) injury must match a specific promise in the deed
4) only applies to defects that existed at the time the covenant was given

Front 23

Warranty Analysis

Back 23

1) What covenants are expressly/impliedly contained in the deed?
2) What type of covenants are they (P or F)?
3) What is required for breach?
4) When does the breach occur and the statute of limits begin?
5) Did the alleged defect exist at the time the covenant was given?
6) Does the alleged defect breach a covenant contained in the deed?

Front 24

Execution, Delivery & Acceptance:

Execution

Back 24

Execution = valid signature
1) Grantor signs OR
2) Grantor gives grantee permission to sign OR
3) Grantor gives some other person permission to sign OR
4) Grantor ratifies/adopts forged deed by another written, signed instrument

Front 25

Execution, Delivery & Acceptance:

Acceptance

Back 25

Grantee's Acceptance
1) Rarely an issue
2) Presumption that grantee will accept beneficial conveyance
3) Grantee can disclaim, but it must be within a reasonable time
4) If no acceptance, then deed is void (and no title passes)

Front 26

Execution, Delivery & Acceptance:

Delivery

Rule and Practical Issues

Back 26

Rule:
Grantor must be words or actions manifest an intent that the deed be immediately effective to transfer an interest in the land to the grantee

Practical Issues:
1) Rebuttable presumption grantor intended to convey according to the terms of the deed
2) To rebut, must show: (a) fraud/accident/mistake accompanies delivery/recording OR (b) grantor had no intent to divest himself of title

Front 27

Execution, Delivery & Acceptance:

Delivery

Conditional Delivery

Back 27

In a grantee:
1) Majority (TX) = if attempted, FSA transferred & condition has no effect
2) Minority = if attempted, no delivery & title remains with grantor
In a third party:
1) Valid if (a) grantor has intent to convey interest now and (b) not irrevocable
2) "Death escrow" okay if irrevocable

Front 28

Execution, Delivery & Acceptance:

Delivery

"Deed in a box"

Back 28

Rule:
No delivery (no intent was manifested)

BUT:
If grantor gives a key, some states (e.g. TX) may view as symbolic delivery

Front 29

The Foreclosure Process:

Typical Default Situations and Results

Back 29

Typical default situations:
1) non-payment of debt
2) failure to pay property taxes
3) failure to maintain insurance
4) failure to properly maintain the property
5) mortgagee's reasonable belief future payments will not be made

If default: (a) debt accelerated, (b) notice of foreclosure, and (c) public sale

Front 30

The Foreclosure Process:

Notice of Foreclosure - Steps

Back 30

1) Notice of default and acceleration of debt (20 days to cure)
2) If no cure, 21 days notice of foreclosure sale

Front 31

The Foreclosure Process:

Notice of Foreclosure - Procedure and Content

Back 31

Procedure:
1) Post notice at the courthouse door of each county where the property is located
2) File notice with the county clerk of each county where the property is located
3) Certified mail to each mortgagor

Content:
1) Location of sale
2) Earliest time sale will begin
3) Date of sale

Front 32

Validity of Foreclosure Sales

Back 32

1) Trustee has no authority to cancel after the sale is completed
2) In some jurisdictions (not TX), lender has a duty to help the debtor and get a fair price
3) Compliance with statute and terms of the deed of trust = valid foreclosure sale (unless affirmative steps to hurt debtor)

Front 33

Legal Implications of the Foreclosure Sale:

Rule

Back 33

First in time, first in right
1) Priority established when lien attached
2) Foreclosure extinguishes the lien and all junior to is
3) After sale, property still subject to liens senior to the one foreclosed

Front 34

Legal Implications of the Foreclosure Sale:

Deficiency Judgments

Back 34

1) If foreclosure price is less than the unpaid balance, the creditor may bring an action for the unpaid balance
2) BUT debtor may request a determination of the FMV at the time of the sale
3) If FMV is greater than the foreclosure price, debtor an offset

NOTE = in TX, creditor has 2-year SoL to bring action

Front 35

Contract for Deed:

Characteristics

Back 35

1) Like rent to own
2) No deed until final payment
3) If default, seller keeps property and $$

Front 36

Contract for Deed:

Protection of Equity

Back 36

Generally, must have foreclosure sale

TX 40/48 Rule:
1) If buyer has paid less than 40% or 48 monthly payments, seller may: (a) rescind; OR (b) enforce forfeiture and acceleration (only if buyer gets notice and 30 days to cure)
2) If buyer has paid more than 40% or 48 monthly payments: (a) seller must have a foreclosure sale; AND (b) buyer has 60 days to cure

Front 37

Priority:

Who has priority?

(and exceptions)

Back 37

First in time, first in right

Exceptions:
1) Equitable interest cannot be enforced against a subsequent good-faith purchaser or BFP (common law)
2) Recording statutes
3) Estoppel of Person First in Time = when first in time gives appearance that state of title is different than what it really is (common law, not for GFC)

Front 38

Three Types of Recording Statutes

Back 38

1) Notice = creditors and subsequent purchasers win if no notice of prior conveyance, transfer, mortgage, etc
2) Race-Notice = creditors and subsequent purchasers win if (a) no notice of prior conveyances and (b) they record first
3) Race = whoever records first wins

Front 39

Texas Recording Statute (Notice)

Back 39

1) Any conveyance of/interest in real property, mortgage, or deed of trust
2) is void as to a creditor or subsequent purchaser for valuable consideration
3) without notice
4) UNLESS acknowledged/sworn to/proved AND filed for record

Front 40

Texas Recording Statute:

What must be recorded?

Back 40

1) Deeds
2) Deeds of trust
3) Mortgages
4) Express Easements
5) Leases > 1 year
6) K for deed
7) Abstract of judgment
8) Government/homestead/mechanic's lien
9) Release of vendor's lien

Front 41

The Title Search Process

Back 41

1) Search grantee index and actual documents (start w/ current owner and go back & look at actual deed to determine if vendor's lien)
2) Search grantor index (search forward from date of instrument to date next person recorded, looking for adverse conveyances)
3) Additional searches regarding any adverse conveyances found

Front 42

Chain of Title Problems

Back 42

Rule: properly recorded deed = constructive notice
1) "wild deed" - outside chain, so no notice
2) Mother Hubbard clause - no constructive notice
3) Invalid/missing acknowledgment - not "properly" recorded, so no notice
4) Improper indexing - constructive notice (even though can't find)
5) Incorrect name - if significant, then outside chain (no notice)
6) Recording too late
7) Recording too early

Front 43

BFP and GFC Status

Back 43

BFP:
1) good faith
2) no notice
3) valuable consideration
GFC:
1) good faith
2) no notice

Front 44

Good faith and Quitclaim deeds

Back 44

Three views:
1) TX = no good faith if QC; therefore, not BFP as matter of law
2) QC puts buyer on inquiry notice
3) No impact; treat same as warranty deed

Front 45

Notice - Three Types

Back 45

1) Actual - subjective knowledge of prior conveyance
2) Constructive - a reasonable, prudent purchaser should have and could have found the document
3) Inquiry - purchaser put on notice to inquire further and conduct a reasonable investigation (e.g. (a) reference in a recorded document, (b) notice from possession of land)

NOTE - in TX, tenant in possession does not create duty to inquire

Front 46

Consideration:

Evidentiary Issues

Back 46

1) Is there something that qualifies as consideration? (legal q)
2) Was the consideration actually paid? (fact q)
3) Was the amount of consideration sufficient? (fact q)
4) Was there notice when the consideration was paid? (fact q)

Front 47

BFP's:

What qualifies as consideration?

Back 47

1) Cash
2) Labor
3) Goods
4) Other valuable property
5) Purchase money mortgage
6) Promise to pay with negotiable instrument

Front 48

BFP Consideration Issue:

What if buyer gets notice before making last payment in K for deed situation?

Back 48

Majority:
BFP to the extent of the payments made

Minority:
Never a BFP

Front 49

BFP's:

Sufficiency of Consideration

How much is enough?

Back 49

Generally, does not have to be FMV BUT nominal is insufficient

Texas - (unofficial) 20/50 Rule:
1) If purchaser paid less than 20% of FMV, probably insufficient
2) If purchaser paid more than 50% of FMV, probably sufficient

Front 50

Adverse Possession:

Elements

Back 50

1) Actual possession
2) Adverse or hostile
3) Open and notorious
4) Continuous
5) Exclusive
6) For the statutory period

Front 51

Actual Possession

Back 51

Majority:
Adverse possessor must physically use the land in the same manner as a reasonable owner would

Minority: defined by statute

Exception = Constructive possession (claim under "color of title" - (except Texas) based on a defective document)

Front 52

Adverse or Hostile Possession:

Three Views on AP's mental state

Back 52

Generally = non-permissive use

Three Views
1) Objective Test - AP must be (a) using land that is not his (b) without permission (mental state = irrelevant)
2) Good Faith Test - AP must in good faith believe he owns title to the land
3) Intentional Trespass (maybe TX) - AP must (a) know that he does not own the land and (b) subjectively intend to take title from the true owner by virtue of his possession

Front 53

Open & Notorious Possession:

Rule

Back 53

Rule:
Acts of the possessor must be so visible and obvious that a reasonable owner who inspects the land will receive notice of an adverse claim

Normally, true owner does not need actual notice of the adverse claim (except boundary disputes)

Front 54

Boundary Disputes:

What happens to the improvements?

Back 54

Common law = tough luck; true owner can do whatever

Modern = betterment / good-faith improver statutes (court may force sale)

Front 55

Continuous Possession:

How much is enough?

Back 55

Look at the character of the land

Example = if summer home, then seasonal summer use is continuous enough

Front 56

Continuous Possession:

Tacking

Back 56

Must be privity between successive occupants
1) Successive possessors need to establish a voluntary transfer between themselves
2) This can be accomplished by deed, will, or intestate succession

NOTES:
a) third-party forced removal and re-entry = tolling or ignore
b) adverse possessor only gets true owner's estate (if LE, then LE)

Front 57

Exclusive Possession

Back 57

Rule:
Possession may not be shared with the true owner or the general public

BUT absolute exclusivity is not required - it must only be as exclusive as would characterize a normal owner's use for such land

Front 58

Texas Adverse Possession:

3-year "Color of Title" Statute

Back 58

1) Must have deed describing the possessed property
2) Deed cannot be void on its face
3) Deed cannot be void ab initio
4) Can be no intrinsic fraud or unfairness
5) No missing acknowledgment
6) Deed must link up chain of title back to sovereign (no gaps)

Front 59

Texas Adverse Possession:

5-year Statute

Back 59

Elements:
1) Cultivates, uses or enjoys AND
2) Pays applicable taxes on the property AND
3) Claims the property under a duly registered deed
Effective writing:
1) cannot be void on its face
2) cannot be forgery or based on forged PoA
3) cannot be unrecorded
4) cannot be quitclaim

Front 60

Texas Adverse Possession:

10-year "Bare Possession" Statute

Back 60

1) Peaceable and adverse possession (cultivates, uses or enjoys)
2) Don't need paper or payment of taxes
3) Limited to 160 acres, unless more is enclosed or more specified in a duly registered deed

Front 61

Texas Adverse Possession:

25-year "Notwithstanding Disability" Statute

Back 61

1) Same as "Bare Possession"
2) 25-year limit regardless of tolling

NOTE
a) Disabilities do not tack (look at disability in place when adverse possession began)
b) unlike TX, some states do not limit tolling

Front 62

Requirement for a valid gift:

Inter vivos

Back 62

1) Donative intent - donor must intend to make an immediate transfer of ownership to donee
2) Delivery - (a) manual, (b) constructive, (c) symbolic
3) Acceptance

Front 63

Gift Causa Mortis

Back 63

1) A gift of personal property in anticipation of the donor's imminently approaching death
2) How imminent? - substantial certainty based on particular illness/affliction

Elements = same as inter vivos

Notes
1) revocable at any time before donor's death
2) automatically revoked if donor does not die

Front 64

Establishing a Homestead:

5 Steps

Back 64

1) Is it homestead property? (land with improvements thereon)
2) Who is claiming homestead protection? (single/family)
3) How much land may be claimed? (urban/rural)
4) Were the requisite steps taken? (Intent + use/occupation...or overt acts...)
5) Does the person have the requisite interest? (need present possessory)

Front 65

Homestead:

Single or family?

Back 65

Family:
1) Group living together subject to one domestic government
2) Legal/moral obligation of head of household to care for the rest of the family (and their corresponding...)

Examples = (a) divorcee and mother, (b) brother and sister, (c) father and minor son

Front 66

Homestead:

How much?

Urban or rural?

Back 66

Urban:
1) No more than 10 acres
2) 1 or more contiguous lots (no non-contiguous)
3) Home or both home and business (not just business)

Rural:
1) Family = 200 acres / Single = 100 acres
2) One or more parcels
3) Must to reside on at least part
4) If non-contiguous, additional parcels must be used in support of family

Front 67

Homestead:

Legal Consequences:
Rights to Possession and Debt Protection

Back 67

Rights to possession:
1) Surviving spouse (automatically)
2) Surviving minor child (petition court)
3) NOT adult children living at home

Debt Protection - Who keeps the shield up?
1) Surviving spouse
2) Surviving minor children
3) Surviving unmarried adult child living at home

Front 68

Homestead:

What liens may attach despite who survives?

Back 68

Unconditional:
1) Purchase money liens
2) Federal tax and property tax liens
3) Owelty of partition
4) Refinance of an otherwise permissible lien
5) Refinance of personal property lien on a manufactured home
Conditional:
1) Mechanic's lien
2) Home equity loans / line of credit
3) Reverse mortgage

Front 69

Conditional Liens:

Mechanic's Lien Requirements

Back 69

New improvements:
1) written K
2) meet joinder requirements
Repair/Renovation:
1) written K
2) meet joinder requirements
3) 5-day waiting for credit
4) 3-day rescission period
5) Signed at proper location (third-party lender, attorney, title company)
NOTE - meet all before work begins

Front 70

Conditional Liens:

Home Equity

Back 70

1) Equity = FMV - debt
2) 80% Rule (max debt = 80% of FMV)
3) Non-recourse loan
4) Foreclosure = judicial only
5) Loan fees (3% max)
6) Not open-ended
7) No prepay penalty
8) Proper location

Front 71

Conditional Liens:

Home Equity Closing Dates

Back 71

Cannot close the loan earlier than:
1) 12th day after later of either (a) date owner submits loan app to lender OR (b) the date the lender provides the owner with subsec. (g) disclosure
2) 1 business day after the date the owner final itemized disclosure of all fees, interest rate, etc. AND
3) One year after the date of any other home equity loan except a refinance of the home equity loan

Front 72

Conditional Liens:

Reverse Mortgages

Back 72

1) for age 62 or older
2) No payments made until: (a) all borrowers dead; (b) property sold/transferred; (c) borrowers cease occupying for more than 12 consec. months w/o approval; (d) borrower defaults

Front 73

Joinder Requirements

Back 73

Rule:
Cannot sell or abandon homestead property without the consent of each owner and the spouse of each owner

Exceptions:
Sale of separate/community homestead property:
1) After spouse judicially declared incapacitated
2) Under unusual circumstances

Front 74

Termination/Abandonment of Homestead:

What is not abandonment?

Back 74

1) Merely changing residences
2) Moving due to health reasons
3) Temporary renting of homestead
4) Intent to return
5) No consent of spouse

Front 75

Termination/Abandonment of Homestead:

Effect

Back 75

1) New homestead may be established elsewhere
2) Allows property to be subject to all creditors
3) Joinder requirements extinguished
4) No longer subject to division at divorce proceedings (if separate)
5) Would pass through intestate succession at death subject to all debts and partition by new owners

Front 76

Termination/Abandonment of Homestead:

How can abandonment occur?

Back 76

1) Homestead is sold
2) Death w/ no surviving shielders
3) Occupation of another property (if intent = permanent)
4) Renting of the homestead property (if not temporary...renting for $ to live elsewhere or to support family)

Front 77

Termination/Abandonment of Homestead:

Establishing Abandonment

Back 77

Rule:
Once established, presume homestead character continues to exist

Burden of establishing abandonment on the party alleging abandonment (look at surrounding circumstances)
NOTE - normally a jury question

Front 78

Termination/Abandonment of Homestead:

Estoppel Rule

Back 78

Lender cannot make estoppel argument on homestead property:
1) that is in actual use and possession of the homestead claimant OR
2) based solely on declarations, written or oral, which state to the contrary

Front 79

Termination/Abandonment of Homestead:

Estoppel Rule Exceptions

Back 79

When (a) physical facts open to observation (b) lead to a conclusion that the property in question is not the homestead
AND (c) the use of the property is not inconsistent with the claimant's representations
AND (d) the representations were intended to be and were actually relied upon by the lender

Front 80

Eminent Domain:

When does the law of eminent domain apply?

Back 80

When
1) Private property
2) it taken

NOTE - the taking must be a permanent physical occupation authorized by the government

Front 81

Eminent Domain:

When can the government take?

Back 81

1) for "public use" AND
2) then must pay "just compensation" to the owner

Front 82

Eminent Domain:

What is just compensation?

Back 82

FMV at the time the taking occurs

FMV = amount willing buyer would pay in cash to a willing seller

Front 83

Eminent Domain:

What is "public use"?

Back 83

New Test = Does it serve a public purpose?

Give deference to city's economic development plan

Front 84

Eminent Domain:

Texas Government Code

Back 84

Eminent domain is prohibited if:
1) It confers a private benefit on a particular private party;
2) Is for a public use that is merely a pretext to confer a private benefit on a particular private party; or
3) Is for economic development purposes, UNLESS the economic development is secondary resulting from urban renewal to eliminate blighted areas