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32 Cards in this Set

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Three types of recording statutes:
1. Race -- title belongs to whoever records first.

2. Notice --- the last bona fide purchaser for value without notice wins.

3. Race/Notice - the first bona fide purchaser for value without notice, that records, wins.
What is a "notice" statute?
Under a notice statute, a subsequent bona fide purchaser prevails over a prior grantee who failed to record. Mortgagees are considered "purchasers."
What is a "race" jurisdiction?
In a pure race jurisdiction, whoever records first wins, and actual notice is irrelevant.
Three circumstances will render title unmarketable:
1. Adverse possession: If even a part of the title rests on adverse possession, it is unmarketable.

2. Encumbrances: Marketable title means an unencumbered fee simple. Thus, servitudes and mortgages render title unmarketable, unless buyer has waived them. NOTE: Seller has the right ot satisfy an outstanding mortgage or lien at the closing, with proceeds of the sale.

3. Zoning violations: Title is unmarketable when Blackacre violates a zoning scheme.
What is "title theory"?
Under title theory, title is in the mortgagee (lender) until the mortgage has been satisfied or foreclosed. Thus, the mortgagee is entitled to possession on demand at anytime (before foreclosure).
What is "lien theory"?
Under lien theory, title remains in the mortgagor (debtor) and the mortgagee holds only a security interest in the property. In these jurisdictions, the mortgagee (lender) may not have possession before foreclosure.
What is a "mortgage"?
A mortgage is a security interest in property.
What is a "note"?
A note is evidence of the underlying debt. Physical possession of the mortgage and note is not required for ownership.
Deed formalities:
1. in writing;
2. signed by the grantor;
3. reasonably identifying the parties and land.

NOTE: A deed is not effective to transfer an interest in realty unless it has been delivered, and there must be acceptance by the grantee to complete the conveyance.
What is an "encumbrance"?
An encumbrance is any interest in land that diminishes its value (e.g. a mortgage or a lien).
Does a seller of real property need to have marketable title before closing?
No, the seller of real property need not have marketable title until the closing; i.e., the buyer cannot rescind prior to that date on grounds that the seller's title is not marketable. In fact, the seller has the right to satisfy and eliminate title defects, such as a mortgage, at the closing with proceeds from the sale.
What is a bona fide purchaser for value?
To be a BFP, the purchaser must prove that real - not merely nominal - consideration was paid (generally past consideration is not valid).

Cannot have been on notice that someone else got there first.
Two implied promises in every land contract:
1. Seller promises to provide marketable title.

2. Seller promises not to make any false statements of material fact.
Deed delivery requirement:
Delivery can be satisfied when grantor physically or manually transfers deed to grantee.

It is permissible to use the mail, an agent or messenger. However, delivery does not necessarily require physical transfer of the instrument itself.

NOTE: If a grantor executes a deed but fails to deliver it during his lifetime, no conveyance of title has occurred. However, if grantor, puts deed in escrow before his death, without any conditions, delivery is complete.
What is a quitclaim deed?
A quitclaim deed transfers whatever right, title, or interest in the property the grantor has. The quitclaim contains no covenants. Grantor isn't even promising he has title to convey.
What is a "general warranty deed"?
The best deed a buyer could hope for. Warrants against all defects in title, including those due to grantor's predecessors. The typical warranty deed contains all six of the following:
1. The covenant of seisin;
2. The covenant of right to convey;
3. The covenant against encumbrances;
4. The covenant for quiet enjoyment;
5. The covenant of warranty;
6. The covenant for further assurances;
Notice statute:
If B is a BFP, in a notice jurisdiction, B wins regardless of whether or not she records before A does.
Race-notice:
If B is a BFP, in a race-notice jurisdiction, B wins if she records properly before A does.
May a debtor/mortgagor waive the right to redeem in the mortgage itself?
No, this is known as "clogging" the equity of redemption, it is not allowed.
Mistake in deed:
When there is a mistake or inconsistency in the description of property in the deed, one of the rules of construction is that the physical description takes precedence over the quantity description unless there are grounds for reformation of the deed.
What is reformation of a deed?
Reformation is an equitable action in which the court rewrites the deed to make it conform to the intention of the parties. It is granted when the deed does not express the agreement of the parties due to mutual mistake or a scrivener's error, and may also be granted when there is a unilateral mistake if misrepresentation is involved.
Equitable Mortgage factors:
1. the existence of a debt or promise of payment by the deed's grantor;
2. the grantee's promise to return the land if the debt is paid;
3. the fact that the amount advanced to the grantor/debtor was much lower than the value of the property;
4. the degree of the grantor's financial distress;
5. the parties' prior negotiations.
Time of performance in real estate contracts:
It is presumed that time is not "of the essence" in real estate contracts. Thus, the closing date is not absolutely binding and will be enforced within a reasonable time.
What is the doctrine of equitable conversion?
Under this doctrine, once a contract is signed, equity regards the buyer as the owner of the real property.

If property is destroyed (without fault), the risk is on the buyer.
Warranty Deed (covenant of seisin):
The grantor covenants that she has the estate she purports to convey. She must have both title and possession at the time of the grant.
Warranty Deed (covenant of right to convey):
The grantor covenants that she has the authority to make the grant. Title alone will satisfy this covenant.
Warranty Deed (covenant for quiet enjoyment):
The grantor covenants that the grantee will not be disturbed in possession by a third party's lawful claim of title.
Warranty Deed (Covenant of Warranty):
The grantor agrees to defend against reasonable claims of title by a third party, and to compensate the grantee for any loss sustained by the claim of superior title.
Warranty Deed (covenant for further assurances):
The grantor promises to perform acts reasonably necessary to perfect title conveyed.
Race-Notice Example:
O conveys to A on January 1. A does not record. O conveys to B on January 15 for valuable consideration. B has no notice of the conveyance to A. A records on January 18. B records on January 20. A prevails over B because B did not record first.
Notice Statute Example:
O conveys to A on January 1. A does not record. O conveys to B on January 15 for valuable consideration. B has no notice of the conveyance to A. B prevails over A. It is irrelevant whether A recorded after January 15 and before B recorded, because B had no notice at the time he took.
What is the effect of a foreclosure?
Foreclosure will terminate interests junior to the mortgage being foreclosed but will not affect senior interest, provided that subordinate parties are included in the foreclosure action.