Land Sale Contracts Flashcards
(9 cards)
2 Step Process for conveying land
Step 1: Land Contract
Step 2: Closing
* Deed becomes operative instrument (legal title)
Statute of Frauds (Land Sale Contract)
Statute of frauds applicable
* Writing signed by the party to be bound
* Identify parties
* Describe property
* Include recitation of price
* Sometimes the land description in the contract will overstate or understate the amount of land being transferred = Specific Performance with a pro rata reduction in price
Exception to SOF: Doctrine of Part Performance (Land Sale Contract)
Allows buyer to enforce oral contract by specific performance
* Contract must be certain & clear; and
* Acts prove existence of contract
Need 2 of 3 for acts that prove existence of contract:
* Buyer took possession
* Buyer paid purchase price or significant portion
* Buyer made substantial improvements
Equitable Conversion
Land Contract = Equitable Title
* Risk of Loss
Deed = Legal Title
* Right to possess
Risk of Loss
Buyer bears risk of loss unless contract says otherwise
Marketable Title (Implied Promise; Land Contract)
Marketable Title = Seller’s implied promise to provide titile free from reasonable doubt / threat of litigation on closing.
Defects in record chain of title—most often, adverse possession
* If even a portion of the title rests on adverse possession, it is unmarketable. For title to be marketable, the seller must be able to provide Good record title. Unless a suit has been brought to quiet title, title acquired by adverse possession does not appear in the record.
Encumbrances (Generally, mortgages, liens, restrictive covenants, easements, options to purchase, and significant encroachments render title unmarketable unless the buyer has waived them)
* If an encroachment is very slight (a matter of inches) and doesn’t inconvenience the owner of the encroached-on parcel, the encroachment won’t render title unmarketable. But, an encroachment of a foot or more likely will. An easement that is beneficial (for example, a utility easement to service a property), visible, or known to the buyer does not impair the marketability of title. Purchasers are generally presumed to have contracted to accept the land subject to visible (obvious) easements.
Zoning violations
* Zoning restrictions do not affect marketability, but an existing violation of a zoning ordinance does render title unmarketable.
No False Statements of Material Fact (Implied Promise; Land Contract)
Seller liable for material omissions of latent defects or false statement of material fact
Failure to Disclose
* The seller must know or have reason to know of the defect;
* The seller must realize that the buyer is unlikely to discover the defect; and
* The defect must be serious enough that the buyer would probably reconsider the purchase.
No Implied Warranties of FItness or Habitability
Buyer beware
* Except sale of new home by builder
Disclaimers of Liability
Can the seller avoid liability for fraud or failure to disclose by including in the contract a general disclaimer of liability, such as “property sold as is” or “with all faults”? Of course not. Such clauses are generally enforceable but won’t excuse a seller for fraud or failure to disclose. If the disclaimer identifies specific types of defects (for example, “seller is not liable for any defects in the roof”), it will likely be upheld.
