Stops to convey real estate
- The land contract (endures until step 2).
2. The closing (where the deed becomes the operative contract).
Land contract: standard
The land contract must:
- Be in writing
- Be signed by the party to be bound (the ∆)
- Describe the land, and
- State some consideration.
- This is to satisfy the Statute of Frauds.
- Exception: Doctrine of part performance.
Land contract: when the amount of land in the contract is more than the actual size of the parcel:
Buyer gets specific performance with a pro rata reduction in the price.
Land contract: Doctrine of Part Performance
An exception to the Statute of Frauds: a court of equity will decree specific performance of an oral contract for the sale of land IF TWO of the following are satisfied by buyer:
- Possession
- Payment of all or part of the price
- Substantial improvement to the land.
Land contract: risk of loss
The doctrine of equitable conversion applies so that, in equity, once the contract is signed, the buyer owns the land (subject to the condition that he pay the purchase price at closing).
If, in the interim between the contract and closing, Blackacre is destroyed through no fault of either party, the buyer bears the risk of loss, unless the contract says otherwise.
- Doctrine of equitable conversion: equity regards as done that which ought to be done.
Implied promises in every land contract
- Seller promises to provide marketable title at the closing.
- Seller promises not to make any false statements of material fact.
- (No implied warranties of fitness or habitability.)
Implied promise of marketable title (general standard)
Seller promises to provide at closing: title free from reasonable doubt, lawsuits, and the threat of litigation.
- An unencumbered fee simple.
What will render title unmarketable?
- Adverse possession
- Encumbrances
- Zoning violations
Implied promise of marketable title: adverse possession
Adverse possession renders title unmarketable.
Even if part of the title rests on adverse possession, it is unmarketable.
Seller must be able to provide good record title.
Implied promise of marketable title: encumbrances
Encumbrances render title unmarketable (marketable title means an unencumbered fee simple).
Servitudes and mortgages render title unmarketable, unless buyer has waived them.
- But seller has the right to satisfy an outstanding mortgage or lien at the closing, with the proceeds of the sale.
Implied promise of marketable title: zoning violations
Zoning violations render title unmarketable.
Implied promise of no false statements of material fact (general standard)
Seller is liable for material lies.
- Majority of states also hold seller liable for failure to disclose latent material defects > seller is liable for material omissions and material lies.
Implied promise of no false statements of material fact: disclaimers of liability
If the contract contains a general disclaimer of liability (e.g., “property sold as is” or “with all faults”) WILL NOT relieve seller of liability for fraud or failure to disclose.
Implied warranty of fitness and workmanlike construction
Implied warranty that applies to contracts for the sale of a new home by a builder-vendor.
The closing
Passes legal title from seller to buyer.
The controlling document is the deed (the deed passes legal title).
The closing: how does a deed pass legal title?
To pass legal title, the deed must:
- Be lawfully executed, and
- Delivered.
Requirements for lawful execution of a deed
The deed must be:
- In writing
- Signed by the grantor, and
- Give and unambiguous description of the land and a good lead.
- Does NOT need to recite consideration—consideration is not required to pass to make a deed valid.
Lawful execution of a deed: description of the land
The description of the land does not have to be perfect—the law requires only an unambiguous description and a good lead.
- With research, should know what land is at issue.
The closing: delivery requirement
Delivery is a legal standard—it is the test solely of present intent.
- Ask: did the grantor have the present intent to be bound, irrespective of whether the deed was physically handed over.
The closing: how is the delivery requirement satisfied?
The delivery requirement could be satisfied when:
- The grantor physically transfers the deed to the grantee (permissible to use the mail, an agent, or a messenger).
- But physical delivery is not required—the present intent that the grantor be bound is sufficient.
- But the recipient’s express rejection of the deed defeats delivery.
What happens if a deed, absolute on its face, is transferred to a grantee with an oral condition?
The oral condition drops out—it is not provable and delivery is done.
- But could avoid this by giving the deed to an escrow agent with conditions for the agent delivering it to the grantee.
Delivery of deed by escrow
Delivery by escrow is ok.
I.e., grantor may deliver an executed deed to a 3d party (an escrow agent), with instructions that the deed be delivered to grantee once certain conditions are met. Once the conditions are met, title passes to grantee.
The advantage of delivery of deed by escrow
If grantor dies or becomes incompetent or is otherwise unavailable before the express conditions are met, title still passes from the escrow agent to grantee once the conditions are met.
Types of deed
- Quitclaim
- General warranty
- Statutory special warranty
