Chapter 8 - Selling Real Property

Question 1

Purchase Contract Includes;

Answer 1

Statute of Frauds, Marketable Title, Equitable Conversion, and Duty to Disclose

Question 2

Selling Real Property Includes;

Answer 2

The purchase contract, the closing, title assurance

Question 3

Statute of Frauds

Answer 3

• writing with essential terms (3 p’s, parties, price, property) (not having these does not make it void, just unenforceable)
• signed by the parties to be bound

Question 4

Exception to Statute of Frauds: Part Performance

Answer 4

• pays some part
• takes possession
• makes improvement
• (most jurisdictions require at least two of the above)

Question 5

Exception to Statute of Frauds: Equitable Estoppel

Answer 5

• reasonable reliance + serious injury (substantial)

Question 6

Marketable Title: unmarketable if…

Answer 6

• seller has less than she purports to sell
• title is subject to an encumbrance
• reasonable doubt about the first two

Question 7

Private vs. Public encumbrances

Answer 7

Public encumbrances does not make title unmarketable, only private encumbrances

Question 8

Equitable Conversion

Answer 8

outside forces damages the property

• common law: buyer beware
• Modern Majority: seller as the legal owner
• Right of possession: party entitled to possession (leads to lawsuits)

Question 9

Duty to Disclose

Answer 9

Juris 1: caveat emptor (buyer beware)
- no duty to disclose unless; fiduciary duty, knowledge of concealed material facts, and affirmatively misrepresented the condition
Juris 2: modern rule
- duty to disclose defects seller knows about that; materially affect the value, and not readily known/discoverable

• professional seller/brokers have to tell about off-site conditions (superior knowledge/resources)
• stigma statutes: don’t have to disclose certain things in some jurisdictions (site of mass-murder, ghosts, etc.)

Question 10

Delivery of Deed/Title

Answer 10

• valid deed (meets S.O.F)
• delivery, intent to be immediately bound + objective manifestation
• acceptance
• Death escrow: deliver to third party who delivers upon death
• *Is the intent immediate? can be immediate of future interest!

Question 11

Title Assurance (3 types)

Answer 11

Title Covenants, public record, title insurance

Question 12

Types of Deeds (3 types)

Answer 12

General Warranty, Special Warranty, Quitclaim

Question 13

General Warranty Deed

Answer 13

grantor warrants title against ALL defects

Question 14

Special Warranty Deed

Answer 14

grantor warrants title against all defects during grantor’s holding of title

Question 15

Quitclaim Deed

Answer 15

No warranties!

Question 16

6 Standard Title Covenants

Answer 16

Present: Covenant of seisin, right to entry, against encumbrances
Future: Covenant of warranty, quiet enjoyment, further assurances

Question 17

Covenant of seisin

Answer 17

promise grantor owns the estate he is selling

Question 18

Covenant of right to entry

Answer 18

promise grantor has the right to convey title

Question 19

Covenant against encumbrances

Answer 19

promise that there are no encumbrances on the title

Question 20

Covenant of warranty

Answer 20

promise grantor will defend grantee against any claims of superior title

Question 21

Covenant of quiet enjoyment

Answer 21

promise grantee’s possession will not be disturbed by any superior title

Question 22

Covenant of further assurances

Answer 22

promise grantor will take reasonable steps necessary to cure title defects that exist at closing

Question 23

Recording system: General Rule

Answer 23

first-in-time has priority unless subsequent party gains protection from the recording system

Question 24

Subsequent bona fide purchaser (BFP)

Answer 24

• no notice

- pay consideration

Question 25

Types of Notice

Answer 25

- actual: knowledge of prior interest - record: notice that would be discovered by a standard search of public records - inquiry: investigating suspicious circumstances (someone on the land)

Question 26

Recordings Acts (3 jurisdictions)

Answer 26

- Race: whoever records first - Notice: sub BFP - Race/Notice: sub BFP AND records first

Question 27

Recording Acts exceptions; 2 kinds

Answer 27

- Shelter Rule: is the grantor a sub BFP? | - Zimmer Rule: recording is proper, only if everyone else properly recorded in the chain (minority)

Question 28

Chain of title search

Answer 28

- go to grantor/grantee index - search grantors name from the time she received her interest until the grantors conveyance of that interest to a third party

Question 29

Chain of Title language (notice)

Answer 29

In a notice jurisdiction, subsequent bona fide purchasers gain priority over earlier interests. Because the Ozzy-to-Alice deed was not recorded, Buffy would not discover the Alice-to-Claire deed when making her title search. Claire’s deed is a wild deed, not attached to the chain of title. Buffy is not on record notice of Claire’s interest and therefore wins as a subsequent bona fide purchaser. [In a standard search, Buffy would go to the grantee-grantor index and trace backwards from each prior grantor and develop a chain of title. Buffy would then trace forward in the grantor-grantee index under each grantor’s name from (i) the time when each grantor received her interest until (ii) the time of recording of that entire interest to someone else. Buffy would not see Claire’s interest since Claire’s deed was wild, unattached to the chain of title – the Ozzy-to-Alice deed was not recorded.]

Question 30

Chain of Title language (race-notice)

Answer 30

In a race-notice jurisdiction, the common law presumption of first-in-time is reversed by (i) a subsequent bona fide purchaser (ii) who properly records first. Doug paid valuable consideration and had no notice of Ellen (Ellen’s deed was wild and not tied to the chain of title). Doug was the first to properly record (Ellen’s recorded wild deed is not considered a proper recording). Therefore, Doug wins as a subsequent bona fide purchaser who was the first to properly record. . [In a standard search, Doug would go to the grantee-grantor index and trace backwards from each prior grantor and develop a chain of title. Doug would then trace forward in the grantor-grantee index under each grantor’s name from (i) the time when each grantor received her interest until (ii) the time of recording of that entire interest to someone else. Doug would not see Ellen’s interest since Ellen’s deed was wild, unattached to the chain of title – the Devin-to-Carla deed was not recorded.]

Question 31

Chain of Title language (another example)

Answer 31

Lisa takes Nickelacre subject to Colette’s fee because Colette obtained her interest first-in-time. Under a race-notice statute, the common law presumption of first-in-time can be reversed by (i) a subsequent bona fide purchaser (ii) who properly records first. If Lisa, the subsequent purchaser, were a bona fide purchaser who recorded before Colette, she could reverse the common law presumption. However, in an extended search jurisdiction, Lisa had notice of Colette’s interest. Therefore, she is not a bona fide purchaser and thus cannot meet the first requirement of the race-notice statute. Colette’s fee has priority. [In an extended search, Lisa would go to the grantee-grantor index and trace backwards from each prior grantor and develop the chain of title for this property interest. Lisa would then trace forward in the grantor-grantee index under each grantor’s name from the date of the patent to the present. In this case, Lisa would see the Marie-to-Colette mortgage in her chain of title.]