Land Transactions Review

Question 1

Who are the players in a land transaction?

Answer 1

Buyer
Seller
Escrow Agent
Title Insurers
Mortgagee [lends money to a borrower for the purpose of buying real estate]
[deed of trust definitely allows self-help without judicial intervention; most states with mortgagees allow that anyways]
Assignees from Mortgagee
Mortgage Backed Securities [secured by pools of these mortgages]
Brokers [Buyer broker + Seller Broker] each geta commission
Attorneys [In Commercial Real Estate, not typical in Residential]
An attorney representing both parties is more ideal

Question 2

What is the procedure for land transaction?

Answer 2

1: Contract Formation
2: Closing later

Question 3

Can a contract specify excusing conditions?

Answer 3

Yes, they may imply them as well.

Question 4

When can the buyer walk away without having breached the contract and get their down payment back and be excused from the contract?

Answer 4

Mortgage Contingency,
Inspections,
Attorney Review,
Marketable title

Question 5

What is a Mortgage contingency? What happens?

Answer 5

Buyer’s obligation to try and obtain a mortgage typically.

If Buyer doesn’t try to obtain in good faith buyer can be held in breach of K.

If buyer endeavors in good faith but just can’t that is typically an excusing condition

Question 6

What are Inspection conditions/contingencies?

Answer 6

Buyer has the right to inspect the premises and walk away if there are some material defects.

Could renegotiate the price with the seller.

Material defect allows you to walk away.

Question 7

What is Attorney review as an excusing condition?

Answer 7

Parties have the right to have their attorney look over the contract.

If dissatisfied, within 5 days usually, then can walk away from the contract. Attorney gets 5 days from when the contract is created to disaffirm.

Question 8

Does the attorney need good-faith legal reasons to walk away?

Answer 8

Some cases say yes, others say no.

Attorney is instructed by client to say they are dissatisfied because client found a better deal elsewhere.

Question 9

How can marketable title be used as an excusing condition?

Answer 9

Zoning, Convenants, Closing, Warranties of Title

Question 10

Does the zoning have to be perfect for marketable title issues to not exist?

Answer 10

Zoning ordinances do not create marketable title problems ordinarily.

Exceptions:
1. if violations of the laws exist [Lohmeyer case] due to the risk of litigation rather than the presence of the ordinances in and of themselves.

2. Where zoning regulations are imposed after the contract is entered into and where they would materially frustrate the buyer’s intended use of the property. Many courts will not enforce the contract.
3. Seller knows of relevant zoning laws that would interfere with the buyer’s intended use of the property but informs the buyer such use would be permitted, the courts will refuse to enforce the K.

Question 11

If the covenants are violated, could that affect marketable title and thus excusing conditions?

Answer 11

Yes, If the covenant says you can’t build a three story house and you have a three story house then that is a problem allowing the buyer to pull out.

Question 12

What is the timing for marketable title excusing condition

Answer 12

Between contract formed and the closing

Question 13

Where are warranties of title mentioned?

Answer 13

Could be the contract, usually the deed will specify some as well.

Question 14

What if the K makes more extravagant promises than the deed does or less extravagant than deed does?

Answer 14

Merger doctrine says that deed’s warranties trump over the K warranties.

Question 15

What are the different types of deeds?

Answer 15

General warranty deed, Special Warranty Deed, Quick Claim Deeds

Question 16

What is a general warranty deed?

Answer 16

Broadest.
Assurance that I have good title, nothing else in t
he record that has cluttered the title either

Question 17

What is a special warranty deed?

Answer 17

I the seller am warranting that I have not done anything to mess up the title. Not warranting that somebody else has not.

Question 18

What is a quitclaim deed?

Answer 18

Most minimal.

I don’t know whether I own the land or not, insofar as I might conceivably have the title I’m giving the land to you.

I won’t challenge your title, but somebody else could

Question 19

What is a Present Covenant?

Answer 19

Assurances.

If violated at all it would be immediately on the transfer of the land.

In other words:
It can only be violated at the time of the transfer of ownership of the property.

Question 20

What are future covenants? Where are they contained?

Answer 20

If somebody makes a claim to title I will protect you against that.

Only violated when someone comes to challenge.

Sometimes contained in Deed, Assurance of Quiet Enjoyment.

Question 21

What is the duty of quiet enjoyment?

Answer 21

If somebody were to come along 10 years later and try to kick you out and claim they are the owner of the land, I will defend your title of the land against theirs.

Future convenance.

Question 22

What is the affect of Future vs. Present Covenance?

Answer 22

It affects the statute of limitations.

For Present: SOL starts running immediately upon the transfer. [You have 5 years from transfer].

Future: Only when someone comes in to disturb then there is a violation of the covenants

Question 23

Does a real estate contract have to be in writing?

Answer 23

Yes, According to Statute of Frauds. MY LEGS. There are exceptions.

Writing that is signed by the party to be charged + has to contain essential terms [typically price + description of the property]

Exceptions: Part-Performance Doctrine, Promissory Estoppel, Duty to Disclose Defects

Question 24

What is the Part-Performance Doctrine?

Answer 24

When the buyer has moved onto the land and has started to construct a structure on the land. [Universally accepted as Part-Performance]

Question 25

What is Promissory Estoppel?

Answer 25

If you have a promise and a promisor could reasonably expect reliance + actual substantial reliance then maybe you have to live up to the promise even if there is no writing. Not all courts have embraced because it is potentially too broad [ Some embrace and some don't ] Reliance is common, courts may not feel comfortable creating a judicial exception to a statutory rule that applies in most cases.

Question 26

Is there a duty on the part of sellers to disclose material defects to the buyer? If yes, can the buyer get tort damages?

Answer 26

Traditional view: No, caveat emptor, except for fraud. Modern View: Yes For known, latent defects. All states say it excuses the contract. Can the buyer get tort damages? Some states say yes, some say no. CA excuses the contract + may enable tort damages.

Question 27

Can a misrepresentation by the Broker excuse the K?

Answer 27

If there is negligent or intentional misrepresentation it can excuse the K. Not if it is an innocent misrepresentation.

Question 28

What is risk of loss?

Answer 28

For example something bad happening to the property between time of K and closing.

Question 29

Who bears the burden of risk of loss?

Answer 29

Traditional View: Risk is put on the buyer AKA they can't get out of the contract. Rationale: Equitable ownership idea Modern View + Statute of Uniform Vendor/Vendee Act: Risk is on the seller. Rationale: Seller is in possession of the land between the K and the closing. If anyone can do anything it's the Seller.

Question 30

What are the remedies for breach of K if the seller breaches?

Answer 30

Specific performance, maybe expectation/restitution/reliance

Question 31

Why can the buyer receive specific performance?

Answer 31

B/c land is unique

Question 32

Explain expectation damages in the context of Seller breaching.

Answer 32

Difference between K price and Market Price: MP - KP. Not clear if awarded for good faith breaches of title. Flureou doctrine: 1. Codified by CA Civil Code. 2. If seller in good faith is unable to transfer title to you: 3. Buyers can not get difference in money damages/Expectation damages or specific performance for a good faith failure to produce title. 4. Can only get down payment back + reliance expenses.

Question 33

What remedies are available for the seller if the buyer breaches K?

Answer 33

Specific Performance, Expectation Damages

Question 34

Is Specific Performance likely when the buyer breaches? How does it work?

Answer 34

Order that the K go through. Turn over the money and receive the deed. Harder to justify SP on the seller side b/c K for something not unique.

Question 35

Can the seller receive expectation damages when the buyer breaches? If so what is the math?

Answer 35

Yes. KP - MP or KP - Resell Price [RP]

Question 36

What is the distinction between special and general warranty deeds?

Answer 36

Rockafellor v. Gray Case: When you're not in privity you can sue only to the amount of recital in consideration. General and Specific difference: Specific Warranty deeds protects the buyer against he seller buying the title. General: Assurance that the title is good, nobody has wrecked it.

Question 37

Does a general warranty extend to remote purchasers? For example. A -> gen. warr B -> special warr C. Can C sue all the way up to A?

Answer 37

Yes but perhaps only to the amount of money stated in the deed.

Question 38

What is the Estoppel by Deed Doctrine?

Answer 38

If I sold you land, and at the time I sold it I didn't own, but then I subsequently came to own it. AKA Don't own land title when I sell it but acquire title later. The rule is: Title flows through to the buyer.

Question 39

What were the significant changes in the mortgage market?

Answer 39

1. Secondary Market in Mortgages maintained by both private and government sponsored enterprises 2. Private entities or govmt. sponsored enterprises package and sell MBS to investors backed by pools of these mortgages 3. Don't run dry on credit in particular areas due to not enough money being deposited.

Question 40

PT 2 of significant changes: What were the 2008 events?

Answer 40

2008 Events: Mortgages that were extended where it was very unlikely that people would repay. Mortgages made to people unlikely to repay.

Question 41

What is the Dodd Frank Act, why was it passed?

Answer 41

Passed in response to 2008 events. Banks must investigate the credit worthiness of their debtors. Qualified mortgages are presumptively ok.

Question 42

What is predatory lending?

Answer 42

Wasn't a concept before 2008. Reverse redlining argument. Banks were at fault for making loans to people they should have known would be unable to pay them back.

Question 43

What is the California Mortgage Foreclosure Process?

Answer 43

1. You must inform the debtor of their right to seek renegotiation of a loan. 2. If the debtor so desires, no double tracking. 3. Notice of Default 90 days before the sale occurs 4. Notice of Sale says 30 days. 5. Redemption: Debtors given a right to redeem the loan 15 days until the sale or shortly before the sale, but not afterwards.

Question 44

What is the foreclosure subsidy system in CA?

Answer 44

Helps low income people in debt. Govmt. money that can help with back payments but also provides a 60 day moratorium on foreclosure by applying. As of 2/2024 still lots of money that has not been claimed.

Question 45

Is Predatory lending considered discrimination?

Answer 45

Can be turned into anti discrimination statute. Horne v. Harbour Portfolio: Court allowed the case to go forward. IF what you did was sell the houses on installment contracts to black people, not expecting them to repay, what you are doing is disparately impacting people on race, even if it is not your purpose.

Question 46

What is another type of K akin to a mortgage? [Not used very often]

Answer 46

Installment K's where seller retains title until the buyer pays all the money owed.

Question 47

How does an Installment K work?

Answer 47

Buyer has to pay in installments but seller retains the title until all the money is paid by the buyer. Might have paid 750 k and lose your land b/c you miss one monthly payment. Rest. extends mortgage protections: Right to insist that the land be sold and you are credited with anything above the surplus. However if it was just another mortgage you will likely get turned down anyways.

Question 48

How do you know you will get good title?

Answer 48

Public Recording System.

Question 49

How do you check to see if there is good title?

Answer 49

Standard Title Search

Question 50

How do standard title searches exist?

Answer 50

County Recorder Offices usually have grantor/grantee indexes. Take each deed and file twice. Once under each party name. States create an index for grantor and grantee. Makes it harder to search.

Question 51

You represent C who wants to buy land from B. How do you check if there is good title?

Answer 51

Look in Grantee Index under B's name. Ideally you find something for ex. A -> B. Then look in grantor index under B's name to make sure B didn't transfer title to somebody else. How do we know A had good title? Look under grantee index under A, find a deed from D to A. Make sure that A did not unload the property on someone else before they unloaded to B. Look in grantor index Under A.

Question 52

Do we have to look back for the entire chain of title?

Answer 52

No. Two factors: Custom or Marketable Title Statutes: deeds 40 years in the past not re-recorded are not valid anymore.

Question 53

What is the client held for constructive notice of?

Answer 53

Everything that could have been found if they conducted a standard title search.

Question 54

Which is stricter? Filing vs. Deed. Case?

Answer 54

Stricter for what has to be filed than for what has to be in the deed based on the cases. Case where they sold oil leases: Required specific listing of all properties to constitute notice for each. Were not considered to have given notice for specific oil leases not noted. Although this is perfectly good for the parties in the deed, the searchers of the record need to know. Therefore, obligation to list them more specifically.

Question 55

Can a deed be recorded without being notarized? Can it be used as a filing?

Answer 55

Yes, even if the notarization is fake it doesn't affect validity of deed vis-a-vi the parties, but it does affect the validity of filing. Ineffective as a filing. Could provide actual notice if someone saw it. Does not provide record notice or constructive notice.

Question 56

Who bears the risk of indexing mistakes?

Answer 56

It depends on if the mistake is by the filling parties or the clerk.

Question 57

Who bears the risk of mistakes by the filing parties?

Answer 57

The filer bears the risk. Its the filers job to spell the parties name correctly in general. Considered burdensome to imagine all of the bad spellings, whereas the person who knows who the parties are can spell their names right. Counter: Idem Sonans: if the word you wrote sounds the same as the correct name then that gives notice. [Not all courts embrace]. Orr v. Byers did not embrace.

Question 58

Who bears the risk of mistakes by the clerk?

Answer 58

Succeeding party bears the risk. Held to have constructive notice of what would have happened if the deed was filed correctly. Although original parties could double check to see if it got filed in the right place. Unfair to successors who have know way of knowing how it got misfiled. Could hold clerks liable but they are immune.

Question 59

What are deeds supposed to describe as to land?

Answer 59

Supposed to be in writing and a description of the land is supposed to be mentioned.

Question 60

How do you describe a parcel of land?

Answer 60

Plot number for Urban Land. Landmarks, metes + bounds landmarks are used for Rural Land. Jefferson system divides into a grid and creates sections and quarter sections. This solution helps immensely.

Question 61

What are the types of recording acts?

Answer 61

Pure Race, Pure Notice, Race-Notice [California Adopts]. For all these situations think what does it take to reverse CL rule?

Question 62

What is the common law rule on recording acts/ property as a whole?

Answer 62

First in time is first in right. But this is harsh to the B's of the world if A has not taken possession of the land. A should have put the world on notice.

Question 63

Pure Race. What does it take to reverse CL rule?

Answer 63

First to file has rights to the land.

Question 64

O -> A not filed O -> B filed, with notice of O-> A A files THis is in chronological order Under Pure Race, Who has superior title? Under Pure Notice who has superior title? Under Race-Notice who has superior title?

Answer 64

B has superior title under Pure race. Pure Notice: A wins. Subsequent party, B, had notice. Race-Notice: A wins. Subsequent party B filed first, but had notice.

Question 65

What is Pure Notice? What does it take to reverse the CL rule?

Answer 65

Subsequent party must lack notice, constructive or actual. [Recorded or physically seeing the deed].

Question 66

O -> A not filed O -> B, filed with notice of O-> A A files. Who wins under Pure Race, Pure Notice, Race-Notice?

Answer 66

Pure Race: B wins. A wins under pure notice because B knew of O->A transfer. Race Notice: A wins.

Question 67

O -> A not filed O-> B, no notice of O-> A A files B files Who wins under Pure Race, Pure Notice, Race-Notice?

Answer 67

Pure Race: A wins B wins under Pure Notice Race Notice: A wins

Question 68

What is Race-Notice? Who adopts it? What is required to reverse Common Law? What is the common law Rule?

Answer 68

Race-Notice says that you must be the first to file and lack notice to reverse the common law rule. California is the major state adopting this rule. Common law rule is first in time is first in right

Question 69

O -> A, not filed O -> B, no notice of O->A B files A files Who wins under Race, Notice, and Race-Notice?

Answer 69

Race: B Notice: B B wins under Race-Notice because they filed first and lacked notice of O-> A

Question 70

What are the types of Notice?

Answer 70

Constructive/Record, Actual, Inquiry

Question 71

What is the rule with Constructive Notice?

Answer 71

Only expected to discover those things you would have discovered through a standard title search

Question 72

What is a problem that comes up in Constructive/Record notice?

Answer 72

The Wild Deed problem. No constructive notice for a subsequent party if the only filing is a subsequent transaction not including the owner.

Question 73

What is an example of Wild Deed problem and what's the ruling?

Answer 73

1. O -> A not filed 2. A -> B filed 3. O -> C, C without notice of O-> A, filed 4. C or B? a. Does B’s filing put C on notice that someone else claims property in the land? i. No, C could not find through standard title search. If O->A was filed then they would have notice. 5. No constructive notice for C a. Could still have actual notice

Question 74

What is actual notice?

Answer 74

Someone showing you the deed, telling you, or you seeing it

Question 75

What is inquiry notice?

Answer 75

From certain facts that you know, it is your duty to inquire and discover other facts. 2 situations: 1. Case where parties filed a deed in real estate records that referenced an earlier deed and was meant to replace that deed. If you followed up and asked the parties, you would have learned it was life estate and not fee simple interest. Because of what was filed, you are on notice to require as to the things referenced in the document. 2. Possession, party in possession of the land, nevertheless the fact that they are in possession suggests that you should inquire. Duty to find out the interest that person has. Are they a squatter etc.

Question 76

Independent of Race, Notice, Race-Notice Statutes, who is protected by recording statues?

Answer 76

1. Subsequent Purchasers for value. Can't be donee or beneficiary of bequest If you paid for land we will protect you. Must be more than nominal value. Fair Market V not required. 2. Mortgagees [sometimes treated as purchasers or protected parties based on statutes] 3. Judgment Lien Creditors [probably in most states] If they filed an abstract of judgment creating a lien on the real estate, if they did that and there is nothing on record indicating the person did not own the land then they are protected. 4. Shelter Principle

Question 77

What is the shelter principle? Is it common law?

Answer 77

If a party is protected by the recording statutes, then his or her successor is also protected, even if they wouldn't be on their own initiative.

Question 78

CA Case Race-Notice O->A not filed O->B, no notice, filed A files B conveys to C Does C have good title under shelter principle?

Answer 78

C prevails because of the shelter principle even though they had no notice of A. B is protected party under the statute. We want B to have the ability to market the land. Unfair to say you own the land but can not sell it.

Question 79

Talk about Torrens Alternative vs. Title Insurance. Why don't we have the two etc.

Answer 79

8. Torrens Alternatives + Title Insurance [Quirky link between the two] a. Lets just create a single document that affects everything on the title for the property. Go to court and get declaratory judgment that you own the property. If you transfer or mortgage then that gets marked on the certificate too. Anything not marked on certificate doesn’t count. Official title document for the land. b. Some countries make it work like New Zealand c. Title Insurance i. Savior of American real estate transactions ii. Title Insurance companies maintain good records of title, issue insurance policies that insure nothing they know about. All they provide is a warranty of there being anything else. Do a good job of finding everything that is out there. d. Title Insurance companies are thought of to fight against the Torrens System. i. Title Insurance thrive on the system being complex. 1. Vested interest blocking Torrens Alternative 2. Titles tend to be clear in the U.S.