Land Purchase and Sale

Question 1

What are the steps in the conveyance of real estate?

Answer 1

1) The land K, which endures UNITIL…

2) The closing, where the DEED becomes the operative document

Question 2

How is risk of loss apportioned in land sales?

NOTE: NY Distinction

Answer 2

Equitable Conversion = once the contract is signed, the buyer is the owner of he land (subject to the condition to pay purchase price at closing)

At signing, the risk of loss is on the BUYER, UNLESS the contract states otherwise

NY DISTINCTION: in NY so long as the buyer is without fault, the ROL remains with the SELLER until the buyer takes possession

Question 3

What are the requirements of the land contract?

Answer 3

1) The land contract must be in WRITING, signed by the would-be ∆ (pursuant to the SOF)

• • SOF EXCEPTION: the “doctrine of part performance”; if you have TWO of the following THREE elements, DON’T need a writing…
    
    • Buyer takes possession;
    • Buyer pays ALL or PART of the price;
    • Buyer makes substantial improvements

2) It must describe blackacre and state some consideration?

** When the amount of land recited in the contract is MORE than the actual size of the parcel, the REMEDY is specific performance with a pro rata reduction in price

Question 4

What are the implied promises in everyland contract?

Answer 4

1) Seller promises to provide MARKETABLE TITLE at the closing

** The standard = the title is free from reasonable doubt (i.e. free from litigation or the threat of litigation)

UNMARKETABLE TITLE = Title acquired by adverse possession BUT, if the seller brings a successful cause of action to quiet title, then CAN sell
Encumberances (no servitudes or mortgages UNLESS waived by buyer) [NOTE: seller has a right satisfy existing mortgage with sale proceeds]

Zoning violations (BUT not when blackacre is subject to an adverse zoning requirement)

2) Seller promises not to make any false statement of material fact

** Seller is liable for failure to disclose LATENT material defects

** Even if contract states a general disclaimer of liability, it wont relieve seller from liability for FRAUD or FAILURE to disclose

Question 5

Do land contracts contain implied warranties of fitness OR habitability?

Answer 5

At common law, NO! (caveat emptor)

EXCEPTION: the implied warranty of fitness and workmanlike construction APPLIES to sale of a NEW home by a BUILDER vendor

Question 6

What is the purpose of a deed?

Answer 6

At closing, the deed passes legal title from the seller to the buyer

Question 7

What are the requirements for a deed to pass legal title?

Answer 7

“L-E-A-D” = Lawfully Executed And Delivered

1) Lawful execution of the deed
2) Delivery of the deed

Question 8

What is the standard for the lawful execution of a deed?

Answer 8

The deed must be

(1) in WRITING (signed by the grantor); AND 
(2) have a DESCRIPTION of the land			

** The land description doesn’t have to be perfect, just UNAMBIGUOUS
YES: “All of O’s land”
NO: “Some of O’s land”

** NOTE: need not recite consideration, NOR must consideration pass to make a deed valid

Question 9

What is requirements for a deed to be properly delivered?

Answer 9

Delivery is accomplished…

1) When grantor PHYSICALLY transfers deed to the grantee (via the mail, agent OR messenger);
2) When the deed has been LEGALLY transfered (governed by grantor’s present INTENT); OR
3) When delivered by ESCROW (via an escrow agent once conditions are met); BUT
4) NOT when the grantee expressly REJECTS the deed

NOTE: if deed (absolute on its face) is transferred to grantee with an oral condition, the oral condition DROPS OUT (it’s not provable), BUT delivery is accomplished

Question 10

What are the types of deeds?

NOTE: NY Distinction

Answer 10

1) The quitclaim deed (no covenants)
2) The general warranty deed (all 6 covenants)
3) The statutory special warranty deed (2 covenants)
* * NY DISTINCTION: known as a bargain and sale deed

Question 11

What is a quitclaim deed?

Answer 11

A deed that conatins NO COVENANTS

Grantor isn’t even promising that the deed won’t have any post-closing issues (BUT the sales contract has an implied promise to deliver marketable title at CLOSING)

** The WORST possible deed for a buyer

Question 12

What is a general warranty deed AND its covenants?

Answer 12

The general warranty deed warrants against ALL defects in title, INCLUDING those due to grantors predecessors

3 present covenants whereSOL starts running from the instance of delivery at closing
1) Seisin = grantor owns this estate
2) Right to convey = grantor has the power to transfer
(he’s under no RESTRAINT or DISABILITY)
3) Against encumbrances = no servitudes or mortgages

3 future covenants where SOL for breach does not begin to run UNTIL the breach occurs

1) Quiet enjoyment = grantee won't be disturbed in possession by a 3rd party's lawful claim of title	
2) Warranty = grantor will defend grantee against lawful claims of title asserted by others (indemnification)	
3) For further assurances = grantor will do what's needed to perfect to the title in the future (post-closing)

Question 13

What is a statutory special warranty deed AND its covenants?

NOTE: NY Distinction

Answer 13

Deed that’s provided for by statute in many states, containing TWO promises that the grantor makes ONLY on behalf of himself (and NOT on behalf of his predecessors)

1) Grantor promises that he hasn’t conveyed this estate to anyone other than grantee
2) The estate is free from encumberances made by the grantor

** NY DISTINCTION: in NY this type of deed is called a bargain and sale deed

Question 14

What is the shelter rule?

Answer 14

Scenario:

O→A (does NOT record);
O→B, BFP (records);
B→C (C is B’s heir, and has knowledge of O→A transaction, so NOT a BFP)

Shelter rule says… C takes shelter in B’s BFP status (steps into B’s shoes). Protects B, and BFP’s right to transfer land.

Question 15

What are the types of recording statutes?

NOTE: NY Distinction

Answer 15

Race notice (NY RULE): If B is a BFP, B wins IF she records properly before A

Notice: the LAST BFP (B) wins regardless of who records first

Question 16

What is a bona fide purchaser (BFP)?

Answer 16

Bona Fide Purchaser (BFP) =

1) Purchases land for value; AND		
2) Does not have notice of another’s claim to land

Notice = A-I-R
- Actual;
- Inquiry (whatever examination of land would reveal);
OR - Record (properly recorded)

Question 17

How do you identify a notice statute vs. a race-notice statute?

Answer 17

1) Notice statute = “A conveyance of an interest in land shall NOT be valid against any subsequent purchaser for value, without notice thereof, unless the conveyance is recorded.”
2) Race-notice statute(NY!!) = “Any conveyance of an interest in land shall NOT be valid against any subsequent purchaser for value, without notice thereof, whose conveyance is 1st recorded.”

Question 18

What is estoppel by deed?

Answer 18

One who conveys property in which she has no interest, but subsequently acquires an interest is estopped from later denial of the validity of the initial transfer

Between 1960-1969 X is estopped from denying the transaction; A would win during this time…

BUT after 1970, when B is a BFP, he’d have title under both a race notice and notice jurisdiction because A’s recording in 1950 is a nullity (wild deed) as he recorded too early

--------------------

Question 19

What is a wild deed?

Answer 19

Scenario:

O→A (does NOT record);
A→ B (B records)

Wild deed is a recorded deed that has a grantor (here A) unconnected to the chain of title (b/c A never recorded O→A transfer)

A wild deed INCAPABLE of giving record notice to subsequent BFPs

B’s recording is VOID

Here, if O→C (BFP; records), then the A→B wild deed does NOT give C notice; C WINSin both race notice and notice jurisdictions

----------------