property law MBE Flashcards
Steps of a land sale
- K is signed
- The K must satisfy or exclude the warranty of marketable title.
- Once the K is signed, legal and equitable title split.
- Closing occurs.
- Once delivery occurs, the buyer can only sue on the deed!
General requirements for real estate contracts
Part performance exception
(1) be in writing,
(2) be signed by the party to be charged, and
(3) contain essential terms (including the identity of the parties, price, and a description of land).
A part performance exception exists if the claimant does two of the following three: (1) takes possession, (2) makes payment in full of a substantial part of the price, or (3) substantially improves the land.
Negotiating Contracts
Negotiating a contract: persons such as brokers, real-estate agents, or attorneys can negotiate contracts so long as they are in an agency relationship and have legal capacity to do so.
Payment:
Exclusive agency agreement between broker and seller
Exclusive right to sell agreement between broker and seller
Payment: If a real-estate broker and seller enter into an exclusive agency agreement, the broker obtains a commission only if his agent is the procuring cause of the sale.
If the parties enter into an exclusive right to sell agreement, then the broker is paid no matter who finds the buyer—even if it is the seller herself.
Disclosure of defects
Disclosure: The seller of the home does not have to disclose defects unless they are not obvious, he knows or should know of them, and the defect is serious. However, the seller cannot actively conceal defects.
Warranty for new homes
Warranty: for new homes sold by a builder-seller, there is an implied warranty of fitness.
Marketable title
is one “reasonably free from defects.” It must be given on the day of closing (but one can pay off a mortgage with the proceeds of a sale)
What makes title unmarketable? (DEVA)
Defect in the chain of title
Encumbrance (mortgage or easement not mentioned in the contract)
Violation of a zoning ordinance
Title Acquired by adverse possession
Tip: a violation of a housing or building code does not render title unmarketable.
Once contract is signed, Equitable title passes to the buyer. The buyer’s interest is in the real property, so if something happens to the real property after the contract is signed (e.g., a tornado destroys the property), the risk of loss remains on the _______.
Legal title remains with the seller. The seller’s interest is?
buyer
The seller’s interest truly is the money (personal property) that the seller will get from the sale.
The deed must be executed and delivered! Execution means
Delivery means
When must marketable title be given?
Execution means that the deed identifies the parties, has granting language, is signed by the seller, and describes the land.
intent to pass title presently. Delivery is presumed to have occurred if the deed is in the grantee’s possession or if it is recorded.
on the closing date (not before).
A _________ deed gives no warranties.
quitclaim deed
A warranty deed gives six covenants: PRESENT:
future FEW:
PRESENT:
covenants of: Right to convey, Seisin, no Encumbrances,
future FEW: covenants of further assurances, quiet enjoyment, and warranty.
Merger occurs, so now the buyer can ONLY SUE on the deed! He can no longer sue on the _______.
contract
Recording Acts: Common law
Common law: First in time, first in right. One does not need to record one’s interest to have title. However, recording acts have the power to change the common law result.
Recording Acts Notice Jurisdiction
Notice act: a subsequent bona fide purchaser (BFP) for value without notice can obtain title that is superior to that of someone who received the property before him.
Race-notice act:
A subsequent BFP for value without notice who records first can obtain superior title. Tip: If you are given a statute to apply, look for the words “without notice” and “first records” to indicate a race-notice act. A notice act will look similar but will not have any language about recording first.
Notice can be (AIR):
Actual, Inquiry, or Record notice.
Purchasers defined
Purchasers: Mortgagees and those who pay consideration are purchasers.
Donees, heirs, and judgment lien creditors are NOT purchasers.
Shelter rule exception:
this allows traditional grantees who are not protected by the recording act to prevail by sheltering under the rights of those who conveyed the land to them.
Forged deed and defective documents: and effect on notice
forged deeds and defective documents do not give notice, so BFPs who receive these are not protected by recording acts.
Estoppel by deed:
if a grantor transfers property to a grantee (when he does not have title to the property) by warranty deed and then later acquires title, the title will automatically go to the grantee unless the grantor later gave the land to a BFP.
Title insurance
is the purchaser’s protection against unknown defects of record in the chain of title. It is not required unless contractually agreed upon.
Adverse Possession Elements
Mnemonic: CHANGE
Possession must be : Continuous, Hostile, Actual, open and Notorious, it must Go on for statutory period (20 years), and be exclusive.
note: tacking is permitted when transfer of possession transfers from one to the next
Transfer by will concepts
Ademption and its exception
what will happen to the gift if the beneficiary dies before the testator?
ademption : If property is specifically devised but the testator does not own it when he dies, the gift adeems (fails).
Exceptions (e.g., if insurance proceeds were paid after death, the beneficiary will take those).
the gift will lapse (unless the jurisdiction has an antilapse statute that saves the gift).
Exoneration: At common law: if a testator makes a specific devise of real estate that is subject to a lien, the devisee is able to
Exoneration: At common law,
have the lien exonerated and paid off by the testator’s residuary estate. (Most states have abolished this doctrine.)
A mortgage indicates the existence of a debt. The mortgagor is the debtor. The ________ usually is a bank who lends money. Tip: remember “It’s better to be the mortgagee” if you mix up these terms.
The mortgagor is the ________.
mortgagee
debtor
If the mortgagor gives away her interest “subject to” the mortgage who is liable on the mortgage?
the original mortgagor is liable on the mortgage.
If the new transferee “assumes” the interest who assumes liability?
both the original mortgagor and the new transferee are liable. Tip: remember the new party “assumes” liability as well.
If there is a _________, then only the new transferee is liable.
novation
due-on-sale clauses
state that if the mortgagor transfers the interest in land without the mortgagee’s consent, the full balance under the loan is due immediately are enforceable.
A majority of states follow the lien theory
Some states follow the title theory
lien theory- where the mortgagee only has a lien on the land.
title theory- where title is transferred to the bank right away upon loaning the money.
Foreclosure
: a bank can begin foreclosure proceedings upon default.
Equity right of redemption:
allows a debtor to redeem the property by paying everything due under the mortgage agreement prior to foreclosure.
This right cannot be waived in the mortgage or deed of trust but may be waived later for consideration.
Acceleration clauses:
states the entire balance is due if a payment is missed, and it is enforceable.
Other ways to discharge a mortgage:
full payment or the mortgagor can give a deed to the mortgagee in lieu of foreclosure.
Who gets paid first in a foreclosure proceeding:
The party that forecloses and anyone“junior” to it is paid off in order of priority. All junior parties must be parties to the proceeding.
between a purchase money mortgage (PMM) and a non-PMM which has priority?
a purchase money mortgage (PMM) (i.e., when the money loaned is used to purchase the property) is senior to a non-PMM.
If a mortgagee voluntarily Increases. the amount due under a mortgage, the increase in debt becomes?
If a mortgagee voluntarily increases the amount due under a mortgage, the increase in debt becomes junior to existing mortgages. (This does not apply if the increase was a mandatory future advance.)
Redemption after foreclosure—statutory right of redemption:
allows the debtor to get property back after the foreclosure sale by paying the full purchase price within a period of time (e.g., six months).
