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PROPERTY > Conveyancing - Purchase and Sale of Real Estate > Flashcards

Conveyancing - Purchase and Sale of Real Estate Flashcards

1
Q

if deed is invalid

A

check to see if adverse possession is relevant in the hypo

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2
Q

2 step process re: every conveyance of real estate

A

1) land K (conveys EQUITABLE TITLE)
2) closing (deed passes LEGAL TITLE and is operative doc)
legal title gives buyer right to possess

*before closing K rules apply
*after closing, we’re in real propery

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3
Q

before closing

A
  • period between signing of K and closing date -> escrow period
  • during this time, buyer does inspection re title; seller may also want to rescind K b/c they can get a better price
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4
Q

land sale contracts

A
  • as always, we need offer, acceptance, consideration; K must comply with S of F and there must not be defenses to enforcement
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5
Q

statute of frauds applicable

A
  • the S of F requires Ks for sale of land be evidenced by a writing and signed by party being sued
  • along with signature, writing must: identity parties, describe property, include the price (consideration)
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6
Q

doctrine of part performance (exception to S of F) in land sale K

A

permits buyer to enforce ORAL REAL ESTATE K by specific performance if:
- oral K is certain and clear
- buyer shows 2 of the 3 (possession, buyer has paid purchase price or a big portion, buyer has made big improvements to premises)

*if this applies, always state the general rule first

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7
Q

equitable conversion

A
  • under doctrine of equitable conversion, ONCE the K is signed, equity regards BUYER AS OWNER of the REAL PROPERTY (K conveys equitable title to buyer)
  • at closing, deed conveys LEGAL TITLE/possession to buyer

*this means seller is entitled to possession until closing

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8
Q

risk of loss

A

if between K and closing, the property is destroyed and no party is at fault… the BUYER bears risk of loss (instant the K is signed)

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9
Q

what happens at death?

A
  • b/c buyer owns prop after K is signed, a deceased buyer’s interest passes as real property to their estate
  • deceased seller’s interest (right to purchase price) goes to their estate as personal property
  • k remains enforceable
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10
Q

2 promises implied in EVERY LAND SALE K

A
  1. seller will provide marketable title at closing (marketable title: title free from doubt and threat of litigation)
  2. seller will not make false statements of material fact
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11
Q

defects in record chain of title

A
  • if even a portion of title rests on adverse possession (no suit for quiet title), it is unmarketable (seller has to provide good record title)
  • encumbrances: mortgages, restrictive covenants, etc and significant encroachments render title unmarketable unless buyer has waived
  • zoning violations: existing violation of a zoning ordinance does render title unmarketable
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12
Q

when title must be marketable

A
  • on the day of closing (seller has up until that time to clear up any defect - this means that conveyor can sell property he doesn’t even own yet…)
  • in installment land K, seller need not provide marketable title until buyer has made his last payment
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13
Q

can buyer (before closing) claim that title is unmarketable b/c it’s subject to a mortgage?

A

seller has right to satisfy a mortgage or lien at closing with proceeds of the transaction/sale

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14
Q

buyer’s remedies if title is not marketable

A
  • buyer must tell seller that it’s unmarketable and give seller time to CURE defects
  • if seller fails to cure, buyer’s remedies include: rescission, damages, specific performance with abatement, quiet title suit
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15
Q

seller won’t make false statements of material fact

A
  • seller can be liable to buyer after closing … for defects IF THEY KNOWINGLY made a false statement of material fact that buyer relied on, or failed to disclose known defects in property
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16
Q

remdies for beach of land sales contract

A

nonbreaching party entitled to damages (difference between K price and market value on date of breach) … or b/c land is unique, specific performance

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17
Q

liquidated damages

A
  • sales K’s usually make buyer to deposit earnest money with seller
  • if buyer defaults, seller can keep this money as liquidated damages
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18
Q

title insurance

A
  • title insurance policy insures that a good record title of property exists as of policy’s date and promises to defend record title if litigated
  • owner’s policy: protects only person who owns policy (usually owner of property and their successors to property such as devisees) - does not run to subsequent purchasers
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19
Q

the closing (deeds)

A
  • if buyer permits closing to occur, LAND SALE CONTRACT is said to MERGE with DEED and seller is no longer liable on K promises… only those in deed (LOOK AT THE DEED)!
  • deed transfers legal title from grantor to grantee
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20
Q

can the closing date be postponed?

A

YES

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21
Q

LEAD

A

to pass legal title from grantor to grantee, deed must be LEAD
Lawfully Executed and Delivered

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22
Q

lawful execution of deed
(4 requirements)
WDII

A

executing valid dead requires following:
- writing singed by grantor
- clear description of land (if insufficient, title isn’t transferred; grantor keeps title; parol evidence allowed to clear up the ambiguity)
- intention to convey land
- identify grantor AND grantee

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23
Q

delivery requirement

A
  • turns on grantor’s intent that title pass immediately, even if possession is postponed
  • can be satisfied when grantor physically/manually transfered deed to grantee (can use mail); delivery doesn’t require physical transfer
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24
Q

a deed is not effective to transfer intent unless…

A

it has been DELIVERED and there must be ACCEPTANCE by grantee

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25
Q

deeds forged, never delivered, or obtained by fraud

A

VOID - deed is set aside

26
Q

3 types of deeds used to convey property interests (other than leaseholds)

A
  1. quitclaim deed
  2. general warranty deed
  3. special warranty deed

*difference among these deeds is scope of TITLE ASSURANCE (covenants for title)

27
Q

quitclaim deed

A

no covenants included

transfers whatever interest grantor puports to have in property (grantor is not even promising he has title to convey)

*the worst deed buyer could hope for

28
Q

general warranty deed

A
  • warrants against all defects in title, including those attributable to grantor’s predecessors
  • contains SIX covenants (first three are present covenants; next three are future covenants)
29
Q

present covenants and future covenants

A

present covenants
- breached at time of delivery
- 1) seisin: grantor covenants that deed covers described land
- 2) right to convey: grantor convenants that he has right to convey
- 3) against encumbrances: grantor covenants that land is free from servitudes, mortgages, etc.

future covenants
- only breached when grantee is disturbed in possession
4) quiet enjoyment: grantor promises that grantee won’t be DISTURBED by a 3rd party’s lawful claim of title
5) warranty: grantor agrees to defend against lawful claim of title by another or pay defense costs to grantee
6) covenant for futher assurances: grantor promises to perform future acts necessary to fix title conveyed if not perfect

30
Q

special warranty deed

A

this deed contains same covenants as the general warranty deed, BUT HERE grantor makes those promises ONLY ON BEHALF OF HIMSELF (grantor makes no reps on behalf of his predecessors in interest)

31
Q

recording system and what it does

A
  • arises when grantor conveys same parcel to more than one grantee (O conveys Blackacre to A; later, O conveys Blackacre to B)
  • enacted to protect bona fide purchasers (BFPs) from certain prior interests they couldn’t know about
  • NOTE: BFPs are not protected by recording acts against interests that arise by operation of law – title by adverse possession – because no instrument to record
  • for express easements, recording systems protect subsequent purchasers — so subsequent purchaser will take land subject to easement unless he’s a BFP/if he’s a BFP, can take land without the easement! (e.g., race notice state: did not have notice of easement at time of purchase (he’s a BFP) and recorded his deed before the easement was recorded)

Example from essay question:
- Let’s say you acquire title to land through adverse possession
- there’s a subsequent purchaser
- EVEN IF subsequent purchaser didn’t have any notice of my claim to the land [through adverse possession], my title is superior because recording acts don’t protect subsequent purchasers against interests that arise by operation of law! There was nothing to record…

32
Q

why a buyer would want to record a deed after closing?

A
  • buyer records deed to PROTECT HER TITLE against a subsequent purchaser for value; it prevents a later taker from becoming a subsequent bona fide purchaser
33
Q

recording system hypo

A

O conveys Blackacre to A
Later, O conveys Blackacre to B

A v. B over who has superior title - who wins?

REMEMBER that if A records, then B cannot be a BFP and A protects his title…

34
Q

race jdx

A

B wins if he records properly before A does (doesn’t matter if buyer is a BFP)

“first” only

“whose conveyance is first recorded”

35
Q

notice jdx

A

B wins, if he was a BFP when he took

subsequent BFP (i.e., for value, without notice) wins

“without notice thereof”
“for value without notice thereof, unless it is recorded”

36
Q

race-notice jdx

A

B wins if (1) B is a BFP and (2) he records BEFORE A does

subsequent bona fide purchaser (i.e., for value, without notice) who records first wins

“without notice thereof whose conveyance is first recorded”

37
Q

bona fide purchaser

A
  • one who buys Blackacre for value without notice that someone else (A in our model) got there first
  • to be a BFP, grantee must:
  1. be a purchaser (not one who got the property by gift, will, etc) –> the recording statutes protect PURCHASERS, not donees, heirs, and devisees b/c they don’t give value
  2. pay valuable consideration
  3. take without notice (inquiry, record, actual notice) of the prior conveyance at time they paid consideration and got the interest / at the time of conveyance

if the subsequent grantee is not a BFP/subsequent purchaser HAS NOTICE… they aren’t protected by recording act and rule of first in time applies (whoever received interest first was entitled to the property)

38
Q

inquiry notice

A

B is on inquiry notice of whatever an inspection of Blackacre would’ve revealed

  • if another is in possession, B is charged with inquiry notice (regardless of whether B inspected or not); if A had taken possession, B would be on inquiry notice of that fact and therefore no longer be a BFP
39
Q

record notice (chain of title)

A

Knowledge from routine title search

  • B is on record notice of A’s deed if, at time B takes, A’s deed was properly recorded within the chain of title
40
Q

In order to give record notice to subsequent takers

A

deed must be recorded properly within the chain of title (chain of title = sequence of recorded docs capable of giving record notice to subsequent buyers!)

41
Q

shelter rule

(First discrete chain of title problem)

A
  • anyone who takes from a BFP will win against any interest the BFP would’ve won against (transferee takes shelter in status of her transferor and steps into shoes of BFP); this is true even if grantee had actual notice of prior unrecorded conveyance
  • protects donees/devisees of BFPs
  • example:
    O conveys to A (who does not record)
    O then conveys same parcel to B (BFP) who records
    B then conveys to C (who is a mere donnee or who has knowledge of the O to A transfer)

in contest b/w A and C, C WINS – C steps into B’s shoes, a BFP

42
Q

wild deed

(Second chain of title problem)

A
  • recorded deed that IS NOT CONNECTED to chain of title
  • wild deed can’t give record notice of its existence

example:
O sells Blackacre to A, who does not record
A sells Blackacre to B; B records the A to B deed

[A-B deed is NOT connected to chain of title (the O-A link is missing), so it’s a WILD DEED; IT DOESN’T IMPART NOTICE B/C SUBSEQUENT PURCHASER COULDN’T FIND IT]

O then sells Blackacre to C; C records

B v. C as to superior title over Blackacre, C wins!
- Notice state: C is last BFP to take (assume C has no actual or inquiry notice of the O-A or A-B conveyance)
- Race-notice state: C wins race to record (B’s recording is a nullity)

43
Q

estoppel by deed

(Third chain of title problem)

A

grantor who conveys title to land he doesn’t own is estopped from later acquiring the same land (prevents one from conveying land they don’t presently own and later getting it)

44
Q

mortgage

A
  • most ppl go to a bank for a loan; to secure the debt, the borrower gives the lender a mortgage (along with note) on the property
  • if loan is not paid, the lender can foreclose the mortgage (i.e., sell the property to pay the debt)
  • borrower is the mortgagor; lender is the mortgagee
45
Q

note and mortgage

A
  • note: mortgagor’s personal obligation (mortgagee is not limited to the land when seeking remedy for default!)
  • mortgage: agreement that says that if mortgagor quits paying, land can be sold to pay mortgagee (has to be in writing)
46
Q

purchase money v non-purchase money mortgage

A
  • purchase money mortgage: mortgage taken out to buy the actual property! (e.g., I borrow money from bank to finance purchase of a home, granting bank security interest in that new home to collateralize the loan)
  • non-purchase money mortgage: e.g., I paid off my mortgage; now I seek to borrow 10k from Valley Finance to help finance my children’s education, granting Valley a security interest in their home. Valley Finance’s loan did not enable me to buy the reality that is now SUBJECT of its lien
47
Q

transfer of interests

A
  • transfer by mortgagee (lender): creditor/mortgagee can transfer her interest by (1) indorsing note and giving it to transferee, OR (2) executing another doc of assignment
  • transfer by mortgagor (borrower): when mortgagor transfers property, the buyer assumes mortgage OR takes property subject to it
  • if buyer assumes mortgage, they’re agreeing to be liable on mortgage/mainly liable to lender (original mortgagor is secondarily liable as surety — mortgagee can sue buyer or original mortgagor on debt)
  • if buyer take property subject to mortgage… they’re not agreeing to personal liability, so mortgagee’s only recourse is (1) foreclosure if mortgagor defaults/mortgagor doesn’t make payments or (2) suing original mortgagor
48
Q

due on sale clauses

A
  • allow the lender to demand full payment of loan IF mortgagor/borrower sells property without lender’s consent
49
Q

recording statutes and mortgages

A
  • if debtor/mortgagor sells the land (which is now mortgaged), the mortgage REMAINS on the land if recorded
  • so while grantee is not personally liable on debt (if he takes subject to), if mortgagor/original borrower defaults and mortgage instrument was recorded properly, morgagee can FORECLOSE on the land
  • recording statutes protect MORTGAGEES/LENDERS // lenders want to record the mortgage because they want to foreclose if needed/protect their mortgage
50
Q

effect of recording acts

A
  • the main question is whether subsequent buyer of property will take it SUBJECT to MORTGAGE
  • all recording statutes apply to mortgages and deeds (lenders also need to RECORD their mortgages just like buyers) – a subsequent purchaser of the property will take “subject to a prior mortgage” (UNLESS recording act changes result)

e.g., race-notice: subsequent purchaser (1) did not have notice of the mortgage at time of purchase (so he’s a BFP) AND (2) recorded his deed BEFORE the mortgage was recorded (result: buyer does NOT take subject to bank’s mortgage!)

51
Q

FORECLOSURE

A
  • debtor-mortgagor has defaulted on loan and our mortgagee-creditor must look to land for satisfication
  • mortgagee must foreclose by judicial proceeding; at foreclosure, land is sold (sale proceeds go to satisfying debt)
52
Q

sale proceeds are less or more than amount owed

A
  • less than amount owed –> mortgagee/lender can bring a deficiency action against the debtor
  • surplus -> junior liens are paid off in order of their priority (banks will have different priority); any remaining goes to the debtor
53
Q

effect of foreclosure on various interests (priority among interests in foreclosure)

A
  • default rule: priority of a mortgage depends on when it was placed on the property
  • buyer at foreclosure sale takes title as it existed … when the foreclosed mortgage was placed on the property (all interests senior to that one remain on property, and all interests junior are extinguished)
  • senior interest - first security interest placed upon property to secure payment of debt
54
Q

junior interests

A
  • foreclosure terminates the interests JUNIOR to the mortgage being foreclosed but does not affect senior interests (junior lien holders/lenders are paid in descending order with proceeds from sale; they can proceed for a deficiency judgment against debtor)
  • necessary parties: junior interests/lienholders are necessary parties to foreclosure action; debtor-morgagor is also necessary party (especially if lender wants to proceed against debtor for a personal deficiency judgment)
55
Q

how can a junior interest protect itself BEFORE foreclosure sale takes places?

A

because foreclosure will destroy all interests that are junior to mortgage being foreclosed, the junior lender has right to pay off the foreclosing lender’s mortgage to avoid being wiped out (they are worried that there won’t be enough money at the foreclosure sale!)

56
Q

senior interests

A
  • foreclosure does not affect any interest SENIOR to the mortgage being foreclosed (buyer at the sale takes subject to such interest)
  • buyer isn’t personally liable for the senior debt
57
Q

priorities

A
  • creditor MUST record (once recorded, priority is determined by first in time, first in right) –> creditor who records first, takes first
  • once creditor records, priority is termined by first in time, first in right (if you record first, you are more senior)
58
Q

purchase money mortgagee always has

A

FIRST PRIORITY in the parcel it financed

***this is a situation where the debtor defaults on ALL outstanding obligations and there are 2 creditors …

59
Q

can purchase money mortgage priority be defeated?

A

PMM priority is subject to being defeated by SUBSEQUENT MORTGAGES due to the recording acts

e.g., creditor’s mortgage has priority over bank’s purchase money mortgage because it’s a notice jdx and creditor had NO NOTICE of bank’s interest at time of the loan (bank’s mortgage wasn’t properly recorded)

60
Q

subordination agreements

A

by private agreement, senior creditor may agree to subordinate its priority to a junior creditor

61
Q

redemption

A
  • equitable redemption - recognized up to date of foreclosure sale (at any time BEFORE foreclosure sale, debtor has right to redeem property by paying amount due)
  • statutory redemption - right of a mortgagor to recover land after foreclosure sale has occurred (usually by paying foreclosure sale price)
  • once valid foreclosure has occurred, right to equitable redemption is cut off
62
Q

acceleration clause in the note

A

permits lender to declare FULL balance due in event of default by borrower

PROPERTY (6 decks)

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